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, 1997
OR
[ ] 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 1-8222
Central Vermont Public Service Corporation
(Exact name of registrant as specified in its charter)
Vermont 03-0111290
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
77 Grove Street, Rutland, Vermont 05701
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (802) 773-2711
________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on which
Title of each class registered
Common Stock $6 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 registrant's knowledge, in definitive proxy or information
statements or any amendment to this Form 10-K. [x]
Cover page
<PAGE>
State the aggregate market value of the voting stock held by non-
affiliates of the registrant: $152,074,026 based upon the closing price as of
January 30, 1998 of Common Stock, $6 Par Value, on the New York Stock Exchange
as reported in the Eastern Edition of the Wall Street Journal.
Indicate the number of shares outstanding of each of the registrant's
classes of Common Stock: As of January 31, 1998, there were outstanding
11,423,401 shares of Common Stock, $6 Par Value.
DOCUMENTS INCORPORATED BY REFERENCE
Specifically identified information on pages 5 through 19, inclusive of
the registrant's 1998 Proxy Statement for the Annual Meeting of Shareholders
to be held May 5, 1998 is incorporated as Part III hereof.
Cover page continued
<PAGE>
Form 10-K - 1997
TABLE OF CONTENTS
Page
PART I
Item 1. Business................................................ 2
Item 2. Properties.............................................. 20
Item 3. Legal Proceedings....................................... 21
Item 4. Submission of Matters to a Vote of Security Holders..... 22
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.................................... 22
Item 6. Selected Financial Data................................. 23
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 24
Item 8. Financial Statements and Supplementary Data............. 41
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................... 69
PART III
Item 10. Directors and Executive Officers of the Registrant...... 69
Item 11. Executive Compensation.................................. 69
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................. 69
Item 13. Certain Relationships and Related Transactions.......... 69
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K............................................ 69
Signatures........................................................ 90
<PAGE>
PART I
Item 1. Business.
Overview.
Central Vermont Public Service Corporation (the "Company"), incorporated
under the laws of Vermont on August 20, 1929, is engaged in the purchase,
production, transmission, distribution and sale of electricity. The Company
has various wholly and partially owned subsidiaries. These subsidiaries are
described below.
The Company is the largest electric utility in Vermont and serves 139,021
customers in nearly three-quarters of the towns, villages and cities in
Vermont. This represents about 50% of the Vermont population. In addition,
the Company supplies electricity to one municipal, one rural cooperative, and
one private utility.
The Company's sales are derived from a diversified customer mix. The
Company's sales to residential, commercial and industrial customers accounted
for 61% of total MWH sales for the year 1997. Sales to the five largest
retail customers receiving electric service from the Company during the same
period constituted about 4% of the Company's total electric revenues for the
year. The Company's requirements resale sales accounted for approximately 4%,
entitlement sales accounted for 11% and other resale sales which include
contract sales, opportunity sales and sales to NEPOOL accounted for
approximately 24% of total MWH sales for the year 1997.
Connecticut Valley Electric Company Inc. (Connecticut Valley), a wholly
owned subsidiary of the Company, incorporated under the laws of New Hampshire
on December 9, 1948, distributes and sells electricity in parts of
New Hampshire bordering the Connecticut River. It serves 10,355 customers in
13 communities in New Hampshire. About 2% of the New Hampshire population
resides in its service area. Connecticut Valley's sales are also derived from
a diversified customer mix. Connecticut Valley's sales to residential,
commercial and industrial customers accounted for 99.5% of total MWH sales for
the year 1997. Sales to its five largest retail customers during the same
period equaled about 19% of Connecticut Valley's total electric revenues for
the year.
The Company also owns 56.8% of the common stock and 46.6% of the
preferred stock of Vermont Electric Power Company, Inc. (VELCO). VELCO owns
the high voltage transmission system in Vermont. VELCO created a wholly owned
subsidiary, Vermont Electric Transmission Company, Inc. (VETCO), to finance,
construct and operate the Vermont portion of the 450 KV DC transmission line
connecting Quebec with Vermont and New England. In addition, the Company owns
31.3% of the common stock of Vermont Yankee Nuclear Power Corporation
(Vermont Yankee), a nuclear generating company. The Company also owns 2% of
the outstanding common stock of Maine Yankee Atomic Power Company, 2% of the
outstanding common stock of Connecticut Yankee Atomic Power Company and 3.5%
of the outstanding common stock of Yankee Atomic Electric Company.
The Company also owns a real estate company, C.V. Realty, Inc. and one
wholly owned subsidiary created for the purpose of financing and constructing
a hydroelectric facility in Vermont: Central Vermont Public Service
Corporation - East Barnet Hydroelectric, Inc. (East Barnet), which became
operational September 1, 1984. East Barnet has been leased and operated by
the Company since its in-service date.
In addition, the Company has the following wholly owned non-utility
subsidiaries: Catamount Energy Corporation whose primary purpose is to invest
in non-regulated, energy-supply projects, SmartEnergy Services, Inc. whose
purpose is to engage in the sale of or rental of electric water heaters,
energy efficient products and other related goods and services, and Catamount
Investment Corporation whose purpose is to invest in unregulated business
opportunities.
Catamount Energy Corporation currently has ten wholly owned subsidiaries:
(See "DIVERSIFICATION"); Catamount Rumford Corporation, Equinox Vermont
Corporation, Appomattox Vermont Corporation, Catamount Rupert Corporation,
Catamount Glenns Ferry Corporation, Catamount Thetford Corporation, Catamount
Heartlands Corporation, Catamount Heartlands Limited, Gauley River Management
Corporation and Summersville Hydro Corporation. For additional information of
the Company's diversification activities, see PART II, Item 8 herein.
REGULATION AND COMPETITION
State Commissions.
The Company is subject to the regulatory authority of the Vermont Public
Service Board (PSB) with respect to rates, and the Company and VELCO are
subject to PSB jurisdiction respecting securities issues, construction of
major generation and transmission facilities and various other matters. The
Company is subject to the regulatory authority of the New Hampshire Public
Utilities Commission as to matters pertaining to construction and transfers of
utility property in New Hampshire. Additionally, the Public Utilities
Commission of Maine and the Connecticut Department of Public Utility Control
exercise limited jurisdiction over the Company based on its joint-ownership
interest as a tenant-in-common of Wyman #4, a 619 MW generating plant and
Millstone #3, an 1149 MW nuclear generating facility, respectively.
Connecticut Valley is subject to the regulatory authority of the New
Hampshire Public Utilities Commission (NHPUC) with respect to rates,
securities issues and various other matters.
Federal Power Act.
Certain phases of the businesses of the Company and VELCO, including
certain rates, are subject to the jurisdiction of the Federal Energy
Regulatory Commission (FERC) as follows: the Company as a licensee of
hydroelectric developments under PART I, and the Company and VELCO as
interstate public utilities under Parts II and III of the Federal Power Act,
as amended and supplemented by the National Energy Act.
The Company has licenses expiring at various times under PART I of the
Federal Power Act for twelve of its hydroelectric plants. The Company has
obtained an exemption from licensing for the Bradford and East Barnet
projects.
Public Utility Holding Company Act of 1935.
Although the Company, by reason of its ownership of a utility subsidiary,
is a holding company, as defined in the Public Utility Holding Company Act of
1935, it is presently exempt, pursuant to Rule 2, promulgated by the
Commission under said Act, from all the provisions of said Act except Section
9(a)(2) thereof relating to the acquisition of securities of public utility
affiliates.
Environmental Matters.
In recent years, public concern for the physical environment has resulted
in increased governmental regulation of environmental matters. The Company is
subject to these regulations in the licensing and operation of the
generation, transmission, and distribution facilities in which it has
interest, as well as the licensing and operation of the facilities in which it
is a co-licensee. These environmental regulations are administered by local,
state and Federal regulatory authorities and concern the impact of the
Company's generation, transmission, distribution, transportation and waste
handling facilities on air, water, land and aesthetic qualities.
The Company cannot presently forecast the costs or other effects which
environmental regulation may ultimately have upon its existing and proposed
facilities and operations. The Company believes that any such costs related
to its utility operations would be recoverable through the rate-making
process. For additional information relating to Electric Industry
Restructuring see Item 7 herein and refer to Item 8 herein for disclosures
relating to environmental contingencies, hazardous substance releases and the
control measures related thereto.
Nuclear Matters.
The nuclear generating facilities of Vermont Yankee and the other nuclear
facilities in which the Company has an interest are subject to extensive
regulations by the Nuclear Regulatory Commission (NRC). The NRC is empowered
to regulate the siting, construction and operation of nuclear reactors with
respect to public health, safety, environmental and antitrust matters. Under
its continuing jurisdiction, the NRC may, after appropriate proceedings,
require modification of units for which operating licenses have already been
issued, or impose new conditions on such 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. Refer to Item 8 herein for disclosures
relating to the shut down of the Maine Yankee, Connecticut Yankee and Yankee
Atomic Nuclear Power plants.
Competition.
Competition now takes several forms. At the wholesale level, other
electric power providers compete as suppliers to resale customers. Another
competitive threat is the potential for customers to form municipally owned
utilities in the Company's service territory. At the retail level, customers
have long had energy options such as propane, natural gas or oil for heating,
cooling and water heating, and self-generation for larger customers. Changes
anticipated as a result of the National Energy Policy Act of 1992 and
potential future change in state regulatory policy may result in retail
customers being able to purchase electric power generated by competing
suppliers for delivery over the Company's transmission and distribution
facilities.
Pursuant to Vermont statutes (30 V.S.A. Section 249), the PSB has
established as the service area for the Company the area it now serves. Under
30 V.S.A. Section 251(b) no other company is legally entitled to serve any
retail customers in the Company's established service area except as follows:
An amendment to 30 V.S.A. Section 212(a) enacted May 28, 1987 authorizes
the Vermont Department of Public Service (Department) to purchase and
distribute power at retail to all customers of electricity in Vermont, subject
to certain preconditions specified in new sections 212(b) and 212(c). Section
212(b) provides that a review board consisting of the Governor and certain
other designated legislative officers review and approve any retail proposal
by the Department if they are satisfied that the benefits outweigh any
potential risk to the State. However, the Department may proceed to file the
retail proposal with the PSB either upon approval by the review board or the
failure of the board to act within sixty (60) days of the submission. Section
212(c) provides that the Department shall not enter into any retail sales
arrangement before the PSB determines and approves certain findings. Those
findings are (1) the need for the sale, (2) the rates are just and reasonable,
(3) the sale will result in economic benefit, (4) the sale will not adversely
affect system stability and reliability and (5) the sale will be in the best
interest of ratepayers.
Section 212(d) provides that upon PSB approval of the Department retail
sales proposal, Vermont utilities shall make arrangements for distributing
such electricity on terms and conditions that are negotiated. Failing such
negotiation, the PSB is directed to determine such terms as will compensate
the utility for all costs reasonably and necessarily incurred to provide such
arrangements.
In addition, Chapter 79 of Title 30 authorizes municipalities to acquire
the electric distribution facilities located within their boundaries. The
exercise of such authority is conditioned upon an affirmative three-fifths
vote of the legal voters in an election and upon the payment of just
compensation including severance damages. Just compensation is determined
either by negotiation between the municipality and the utility or, in the
event the parties fail to reach an agreement, by the Public Service Board
after a hearing. If either party is dissatisfied, the statute allows them to
appeal the Board's determination to the Vermont Supreme Court. Once the price
is determined, whether by agreement of the parties or by the PSB, a second
affirmative three-fifths vote of the legal voters is required.
There has been only one instance where Chapter 79 of Title 30 has been
invoked; the Town of Springfield acted to acquire the Company's distribution
facilities in that community pursuant to a vote in 1977. This action was
subsequently discontinued by agreement between Springfield and the Company in
1985.
In addition, in late 1994 the Select Board of the Town of Bennington
considered whether to publicly warn a vote to acquire the Company's facilities
located in Bennington pursuant to Chapter 79 of Title 30. By vote of the
Selectors taken on January 9, 1995, the Town decided not to pursue the vote at
this time.
In the summer of 1997, the City of Claremont (Claremont), New Hampshire
engaged a consulting firm to conduct a study to determine Claremont's options
under New Hampshire law including the possible municipalization of Connecticut
Valley's service area located within its jurisdiction. The City Council has
appropriated approximately $75,000 for purposes of the study.
No other municipality served by the Company, so far as is known to the
Company, has taken any formal steps in an attempt to establish a municipal
electric distribution system.
Competition in the energy services market exists between electricity and
fossil fuels. In the residential and small commercial sectors this
competition is primarily for electric space and water heating from propane and
oil dealers. Competitive issues are price, service, convenience, cleanliness
and safety.
In the large commercial and industrial sectors, cogeneration and self-
generation are the major competitive threats to electric sales. Competitive
risks in these market segments are primarily related to seasonal, one-shift
operations that can tolerate periodic power outages, and for industrial
customers with steady heat loads where the generator's waste heat can be used
in their manufacturing process. Competitive advantages for electricity in
those segments are the cost of back up power sources, space requirements,
noise problems, and maintenance requirements.
In Docket DE 94-163, Order No. 21,683 (reh'g denied, Order No. 21,776),
the New Hampshire Public Utilities Commission (NHPUC) ruled that Public
Service Company of New Hampshire's (PSNH) rights to its franchise territory
are not exclusive as a matter of law. Connecticut Valley was an intervenor in
that docket. PSNH appealed the NHPUC's decision to the State of New Hampshire
Supreme Court, and Connecticut Valley has filed a brief with the Court in
favor of PSNH's position. This matter is still pending.
For a discussion relating to Electric Industry Restructuring in Vermont
and New Hampshire see PART II, Items 7 and 8 herein.
For a discussion relating to the Company's wholesale electric business
see Wholesale Rates below.
RATE DEVELOPMENTS
Vermont Retail Rates.
On September 22, 1997, the Company filed for a 6.6% or $15.4 million
general rate increase to become effective June 6, 1998. For additional
information regarding recent rate increase requests see PART II, Item 7 "Rates
and Regulation" and Item 8 "Retail Rates" herein.
In May 1995 the Company filed a comprehensive retail rate redesign. On
March 17, 1997, the PSB issued an order approving the Company's rate redesign
effective April 1, 1997. The redesign narrows the seasonal rate differential
by reducing the higher winter charges and increasing the lower summer charges.
The rate redesign allocates the Company's total revenue requirement to the
different customer classes and then establishes the specific rate structure
within each class to fairly recover the cost allocated to that class.
New Hampshire Retail Rates.
Connecticut Valley's retail rate tariffs, approved by the New Hampshire
Public Utilities Commission (NHPUC), contain a fuel adjustment clause (FAC)
and a purchased power cost adjustment clause (PPCA). Under these clauses,
Connecticut Valley recovers its estimated annual costs for purchased energy
and capacity which are reconciled when actual data is available. On the basis
of estimates of costs for 1997 and reconciliations from 1996, the combined
PPCA and FAC resulted in an increase in revenues of approximately $1.6 million
for 1997. The NHPUC order allowing the increase in 1997 revenues also ordered
Connecticut Valley to file a letter showing whether a redesign of the RS-2
wholesale rate under which Connecticut Valley purchases power from the Company
would still be beneficial to ratepayers. See Wholesale Rates below for
additional discussion. Connecticut Valley has filed a letter showing that the
redesign is still beneficial to ratepayers, and added that filing or not
filing the redesign would not relieve Connecticut Valley of responsibility to
pay for the Company's stranded costs in the event of termination of the
present RS-2 wholesale rate. The letter further stated that neither the
Federal Energy Regulatory Commission (FERC) nor the NHPUC had the jurisdiction
to order the Company to open its transmission system to New Hampshire retail
open access. Connecticut Valley filed and the NHPUC approved effective April
1, 1997 a partial roll-back of such increase based on the expectation of a $1
million change from an undercollection to an overcollection at the end of
1996. The change was the result of the Company experiencing an annual system
peak in December 1997 and significantly lower load coincident with that peak
by Connecticut Valley. The ratio of the former to the latter is the basis for
the power cost charges from the Company to Connecticut Valley which are the
major basis for the FAC and PPCA. On the basis of estimates of costs for 1998
and reconciliations from 1997, the combined PPCA and FAC would have resulted
in an increase in revenues of approximately $2.1 million for 1997. Based on a
motion by the City of Claremont, an intervenor, the NHPUC, in its order dated
December 31, 1997, found that Connecticut Valley was imprudent not to have
terminated service from Central Vermont and froze Connecticut Valley's rates.
See PART II, Items 7 and 8 herein for additional information regarding
New Hampshire Electric Industry Restructuring.
Connecticut Valley's retail rate tariffs, approved by the NHPUC, also
provide for a Conservation and Load Management Percentage Adjustment (C&LMPA)
for residential and commercial/industrial customers in order to collect
forecast C&LM costs. The forecast costs are updated effective January 1 of
each year and are reconciled when actual data are available. In addition,
Connecticut Valley's earnings reflect the recovery of lost revenues related to
fixed costs which Connecticut Valley fails to otherwise recover as a result of
C&LM activities. However, the Company is not made whole because a portion of
the fixed costs of the wholesale transaction between the Company and
Connecticut Valley is not recovered when C&LM activities occur in Connecticut
Valley. The C&LMPA further provides for the future recovery of shareholder
incentives related to past C&LM activities.
In November 1996 Connecticut Valley filed its annual update of the 1996
C&LMPA rates. Connecticut Valley requested approval of the same level of
program spending as in 1996. Due to over/undercollections from the 1996
C&LMPA the filed increase is $163,000 or .8%. By stipulation approved by the
NHPUC, the C&LMPA rate change of $254,000 or 2.3% was delayed to April 1, 1997
and a total ramp-down of C&LM expenditures would occur by the end of 1997 in
response to the NHPUC order on Restructuring dated February 28, 1997 discussed
below. In November 1997 Connecticut Valley filed its annual update of the
1998 C&LMPA rates. Connecticut Valley requested approval of a zero level of
program spending for 1998. Due to overcollections from the 1997 C&LMPA and
zero program spending, the filed decrease is $287,000 or 1.5%. By agreement,
the schedule will result in a rate change no earlier than April 1, 1998.
Connecticut Valley also purchases power from several small power
producers who own qualifying facilities as defined by the Public Utility
Regulatory Policies Act of 1978. In 1997, under long-term contracts with
these qualifying facilities, Connecticut Valley purchased 40,129 MWH, of which
37,446 MWH were purchased from a New Hampshire/Vermont solid waste plant owned
by Wheelabrator Claremont Company, L.P., (Wheelabrator). Connecticut Valley
has filed a complaint with FERC stating its concern that Wheelabrator has not
been a qualifying facility since the plant began operation. On February 11,
1998, the FERC issued an Order denying Connecticut Valley's request of a
refund of past purchased power costs and lower future costs. The Company
filed a request for rehearing with the FERC on March 13, 1998.
In June 1995, the Legislature enacted House Bill 168 which directed the
NHPUC to establish a pilot program to "examine the implications of retail
competition in the electric industry" (RSA 374:26-a). In response to this
mandate, the NHPUC issued Order No. 22,033 on February 28, 1996 which
established statewide guidelines for a Retail Competition Pilot Program (Pilot
or Pilot Program). Under the Pilot Program, which began May 28, 1996,
approximately 17,000 retail customers gain the opportunity to purchase
electricity from competitive non-utility power suppliers for two years.
Connecticut Valley, as well as the other New Hampshire utilities, was ordered
to make available three percent of its retail customers for the Pilot. In
Connecticut Valley's case, this means approximately 350 retail customers
became Pilot participants.
The New Hampshire utilities were ordered to unbundle their prices for the
Pilot participants and state separately transmission, distribution, and
production prices. The NHPUC then determined a market price of production
that was subtracted from the utilities embedded production price. The
utilities are able to collect the difference between the embedded production
price and the market production price through a charge known as the "stranded
cost charge." As part of a proposal put forth to the NHPUC by Connecticut
Valley, Pilot participants who elect to buy power from a non-utility supplier
receive a discount on their bill known as a Participation Incentive Credit.
The credit is designed such that a participating Pilot customer receives
approximately ten percent off their combined non-power and power bills. These
credit dollars are not recovered from Connecticut Valley's general body of
customers.
House Bill 1392 (RSA Chapter 374-F) directed the NHPUC to undertake a
generic proceeding (Docket DR 96-150) to develop a statewide electric utility
restructuring plan and to issue a final order establishing such a plan no
later than February 28, 1997. The law directed the NHPUC to restructure
New Hampshire's electric utility industry in order to introduce competition
into the state's retail markets. RSA 374-F also authorized the NHPUC to
establish an interim stranded cost charge for each electric utility as part of
the aforementioned final order. RSA 374-F also requires all electric utilities
subject to the NHPUC's jurisdiction to submit compliance filings no later than
June 30, 1997 which shall be the subject of public hearings. The NHPUC is
required to implement retail choice for all customers of electric utilities
under its jurisdiction by January 1, 1998, or at the earliest date which the
NHPUC determines to be in the public interest, but no later than June 30, 1998
without prior legislative approval (RSA 374-F:4,I).
See PART II, Items 7 and 8 herein for additional information regarding
New Hampshire Electric Industry Restructuring.
By letter dated July 23, 1996 Connecticut Valley filed with the NHPUC (1)
for a permanent base rate increase of $1,592,000 or 8.8% effective
September 22, 1996, (2) for a temporary base rate increase of $924,000 or 5.4%
effective August 23, 1996, and (3) to reflect the permanent base rate increase
in tariffs for Pilot customers. The NHPUC allowed the temporary base rate
increase as filed effective October 1, 1996. A stipulation approved by the
NHPUC provided for a permanent base rate increase of $1,110,000 or 6.4%
effective April 1, 1997 which increased rates only 1% over the temporary base
rate increase already in effect. The stipulation also allowed recovery via a
Temporary Billing Surcharge (TBS) effective April 1, 1997 of (1) the rate case
expense incurred associated with the filing and (2) recoupment of revenues up
to an increase of 6.33% that were not recovered by the temporary base rate
increase during the October 1, 1996 through March 31, 1997 period. PART II,
Items 7 and 8 herein contain additional information regarding the permanent
base rate increase request.
Wholesale Rates.
The Company sells firm power to Connecticut Valley under a wholesale rate
schedule based on forecast data for each calendar year which is reconciled to
actual data annually. The rate schedule provides for an automatic update of
annual rates, as well as a subsequent reconciliation to actual data. The
Company filed and the FERC approved (1) a revenue increase of $918,000 or 8.8%
for 1997 power costs, (2) a reconciliation of 1996 revenues to actual costs
which resulted in a refund of $723,000, including interest, and (3) a revenue
increase of $281,000 or 2.4% for 1998 power costs. The NHPUC order dated
February 28, 1997 regarding New Hampshire Electric Industry Restructuring
ordered, among other things, Connecticut Valley to terminate the wholesale
rate schedule with the Company. See PART II, Items 7 and 8 herein for
additional information.
As ordered by the NHPUC in Connecticut Valley's 1994 C&LMPA docket, the
Company entered into negotiations with the NHPUC Staff to redesign the RS-2
wholesale rate under which Connecticut Valley purchases power from the
Company. The redesign features marginal cost based energy and capacity
charges for all energy and capacity purchases above or below a base level.
Such negotiations concluded in February 1995. A summary report was filed with
the NHPUC on February 13, 1995. The NHPUC issued an order approving the
summary report in June 1995. Connecticut Valley's costs of wholesale power
would be lower than they otherwise would be only if Connecticut Valley's
growth rate exceeds that of the Company's Vermont retail operations. In light
of the NHPUC order dated February 28, 1997 regarding New Hampshire Electric
Industry Restructuring the Company did not file the redesign with the FERC.
See PART II, Item 8 herein for additional information.
On June 25, 1997, the Company filed with the FERC an application for
recovery of stranded costs and a notice of cancellation of the rate schedule
under which the Company sells firm power to Connecticut Valley contingent upon
the recovery of stranded costs. The stranded cost obligation, expressed on a
net present value basis as of January 1, 1998, is $44,925,000, would be
authorized by the Company's open access Transmission Tariff No. 7, and
collected as a surcharge to the transmission charges of any customer that uses
the Company's transmission system to wheel power for ultimate delivery within
Connecticut Valley service area. The surcharge is expected to recover the
stranded costs over a ten-year period. By order dated December 18, 1997, the
FERC rejected the Company's filing on the grounds that the transmission tariff
was an inappropriate vehicle for recovery. Pursuant to the FERC request in
that order, the Company filed a letter stating its intention to refile the
stranded cost recovery as an exit fee to the rate schedule under which the
Company sells firm power to Connecticut Valley. The Company did so on
January 12, 1998.
On March 11, 1998, the FERC issued an order accepting for filing the
Company's request for an exit fee effective March 14, 1998, and set hearings
to determine: whether Connecticut Valley will become an unbundled
transmission customer of the Company, the Company's expectation as to the
period of time it would serve Connecticut Valley, and the allowable amount of
the exit fee. The FERC also rejected the Company's June 25, 1997 notice of
termination indicating that the notice can be resubmitted when the power
contract is proposed to be terminated.
One of the Company's requirements wholesale customers, New Hampshire
Electric Cooperative, Inc. (NHEC), with an average monthly peak of 2.8 MW gave
the Company notice of termination of service under FERC Electric Tariff,
effective in March 1995. The Company negotiated a interim temporary power
sale to NHEC commencing with the termination date and a long-term power sale
effective May 1, 1995.
On March 1, 1995, the Company filed a comprehensive, open access
transmission tariff (Tariff) with the FERC. The Tariff is designed to provide
firm and non-firm network transmission service, as well as firm point-to-point
service over the transmission systems of the Company and Connecticut Valley.
In addition, the Tariff would permit customers to make use of the Company's
contract rights to the transmission facilities of the Vermont Electric Power
Company, Inc. and New England Power Company. The Tariff would provide
transmission service that is comparable to that provided to native load
customers. Charges for such service would be based upon the Company's cost of
service for transmission.
The Company prepared and filed the Tariff in anticipation of developing
business opportunities in the area of electric transmission service. In
addition, recent FERC orders led the Company to believe that all electric
utilities owning transmission facilities would be required to prepare and file
such a Tariff in the near future. FERC issued a Notice Of Proposed Rulemaking
(NOPR) dated March 29, 1995, promoting wholesale competition in the electric
utility industry. The Company's Tariff complies with many requirements
proposed by the FERC in its NOPR.
Nine parties intervened in the Company's Tariff filing. On April 28,
1995, the FERC issued a deficiency letter asking for more information in a
number of areas. The Company filed a timely response to the deficiency letter
on June 14, 1995. Three parties filed protests in response to the Company
filing, and one additional party filed a request for late intervention. The
FERC accepted the Tariff for filing on August 14, 1995, suspended it and set
it for hearing. The order allowed the Tariff to become effective August 15,
1995, subject to refund and subject to the outcome of the Open Access NOPR
proceeding. The NHEC began taking transmission service under the Tariff as of
its effective date.
The Company entered into negotiations with FERC Staff and intervenors and
reached a settlement in principle in January 1996 on all rate issues contained
in the Tariff filing but one which was settled in August 1996. The settlement
provided for a fixed rate effective from August 15, 1995 through July 8, 1996.
The FERC has not taken action on the settlement.
On July 9, 1996 the Tariff was replaced by a pro forma transmission
tariff (Transmission Tariff) filed by the Company pursuant to FERC Order No.
888. The Transmission Tariff, which was approved by the FERC, embodied not
only the open access principles set forth in the FERC pro forma transmission
tariff, but also continued to embody the ratemaking and other Vermont and New
England specific non-rate terms and conditions. The Company has made a number
of filings to modify the Transmission Tariff in response to FERC orders
related to transmission tariffs of other utilities. All FERC orders received
have approved such modifications.
POWER RESOURCES
Overview.
The Company's and Connecticut Valley's energy production, which includes
generated and purchased power, required to serve their retail and firm
wholesale customers was 2,497,059 MWH for the year ended December 31, 1997.
The maximum one-hour integrated demand during that period was 399.9 MW, which
occurred on January 8, 1997. The Company's and Connecticut Valley's total
production in 1997, including production related to all resale customers, was
3,734,739 MWH.
The following tabulation shows the sources of such energy and capacity
available to the Company and Connecticut Valley for the year ended December
31, 1997 and at the time of the Company's own peak. For additional
information related to purchased power costs, refer to PART II, Item 7 herein.
<TABLE>
<CAPTION>
Year Ended December 31, 1997
Effective Generated and
Capability Purchased at
12 Month Generated Time of the
Average and Purchased Company's Peak
========== ============= ==============
MW MWH % MW %
<S> <C> <C> <C> <C> <C>
WHOLLY-OWNED PLANTS:
Hydro....................... 40.7 191,036 5.1 35.6 8.9
Diesel and Gas Turbine..... 28.9 719 - - -
JOINTLY OWNED PLANTS:
Millstone #3................ 16.4 - - - -
Wyman #4.................... 10.9 14,343 0.4 - -
McNeil...................... 10.5 30,967 0.8 10.2 2.5
EQUITY OWNERSHIP IN PLANTS:
(Purchased)
Vermont Yankee.............. 158.8 1,328,745 35.6 136.7 34.2
Maine Yankee-Retired 8/6/97. 9.4 - - - -
MAJOR LONG-TERM PURCHASES:
Hydro-Quebec................ 192.5 1,150,267 30.8 157.9 39.5
Merrimack #2... ............. 47.0 348,092 9.3 47.2 11.8
OTHER PURCHASES:
System and other purchases.. 35.1 85,711 2.3 0.5 .1
Small power producers....... 34.0 209,527 5.6 23.5 5.9
Unit purchases.............. 45.6 35,848 1.0 - -
Entitlement purchases....... 0.4 10,658 0.3 - -
Pumped storage hydro........ 4.2 2,725 0.1 3.1 0.8
NEPEX......................... - 326,101 8.7 38.2 9.5
NET WHOLESALE SALES and
miscellaneous at time of peak - - - (53.0) (13.2)
_____ _________ _____ _____ _____
TOTAL.................... 634.4 3,734,739 100.0 399.9 100.0
===== ========= ===== ===== =====
</TABLE>
Wholly Owned Plants.
The Company owns and operates 20 hydroelectric generating facilities in
Vermont which have an aggregate nameplate capability of 41.2 MW and two gas-
fired and one diesel-peaking units with a combined nameplate capability of
28.9 MW.
Jointly Owned Plants.
The Company has a joint-ownership interest in the following generating
and transmission plants:
<TABLE>
<CAPTION>
Net
Fuel MW Generation Load Net Plant
Name Location Type Ownership Entitlement MWH Factor Investment
- - ------------ ------------ ------- --------- ----------- ---------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Millstone #3 Waterford, Nuclear 1.73% 20 - - $53,591,379
Connecticut
Wyman #4 Yarmouth, Oil 1.78% 11 14,343 15% $ 1,470,193
Maine
Joseph C. McNeil Burlington, Various 20.00% 10.6 30,967 33% $ 8,014,634
Vermont
Highgate Trans- Highgate Springs, 47.35% N/A N/A N/A $ 9,467,704
mission Facility Vermont
</TABLE>
The Company receives its share of the output and capacity of Millstone
Unit #3 (Unit #3), an 1149 MW nuclear generating facility (see discussion
below); and Wyman #4 and Joseph C. McNeil, a 619 MW and a 53 MW respectively,
generating plants and is responsible for its share of the operating expenses
of each.
The Highgate Convertor, a 200 MW facility is directly connected to the
Hydro-Quebec System to the north of the Convertor and to the VELCO System for
delivery of power to Vermont Utilities. This facility can deliver power
either direction, but normally delivers power from Hydro-Quebec to Vermont.
Equity Ownership in Plants.
In 1966 the Company purchased 35% of the Vermont Yankee common stock and
was entitled to receive a like percentage of the output of the unit. In late
1969 and early 1970, the Company sold at cost a combined total of 3.7% of its
original equity investment and currently resells at cost 3.9% of its
entitlement. The Company's current equity ownership and net entitlement
percentages are 31.3 and 31.1, respectively.
The Atomic Energy Commission, now the NRC, granted a full-term (40-year),
full power operating license for the Vermont Yankee plant, which was to expire
in December 2007. On December 17, 1990 the NRC issued an amendment of the
operating license extending its term to March 2012.
Vermont Yankee's net capability is 514 MW of which about 160 MW (See
Note 1) is the Company's net entitlement. Vermont Yankee's plant performance
for the past five years is shown below:
Availability Capacity
Factor Factor
(See Note 2) (See Note 3)
------------ ------------
1993......................... 78.3 74.9
1994......................... 98.2 95.8
1995......................... 86.3 84.8
1996......................... 84.5 82.8
1997......................... 95.4 93.3
Vermont Yankee was down for scheduled refueling outages in 1993, 1995 and
1996.
As described in the overview section above, the Company is a stockholder,
together with other New England electric utilities, in the following three
nuclear generating companies: Maine Yankee Atomic Power Company, Connecticut
Yankee Atomic Power Company and Yankee Atomic Electric Company.
Net Company's
Company Capability Entitlement
------- ------------ ------------
Maine Yankee.................. (See Note 4) (See Note 4)
Connecticut Yankee............ (See Note 4) (See Note 4)
Yankee Atomic................. (See Note 4) (See Note 4)
The Company is obligated to pay its entitlement percentage of the
operating expenses of Vermont Yankee and the other Yankee companies, including
depreciation and a return on invested capital, whether or not the plant is
operating. The Company is obligated to contribute its entitlement percentage
of the capital requirements of Vermont Yankee and Maine Yankee and has a
similar, but more limited obligation to Connecticut Yankee. The Company's
entitlement percentages are identical to the ownership percentages except that
Vermont Yankee's entitlement percentage is 35%. For additional information
regarding Equity Ownership in Plants, refer to PART II, Item 8 herein.
Decommissioning Expense.
Each of the Yankee companies and Unit #3 has developed its own estimate
of the cost of decommissioning its nuclear generating unit. These estimates
vary depending upon the method of decommissioning, economic assumptions, site
and unit specific variables, and other factors. Each of the Yankee Companies
includes charges for decommissioning costs in the cost of capacity, as
approved by the FERC. Decommissioning costs for Unit #3 are included in
depreciation expenses.
_______________
Notes:
(1) Currently, the Company resells at cost, through VELCO, about 20 MW of its
original entitlement to other Vermont utilities.
(2) "Availability Factor" means the hours that the plant is capable of
producing electricity divided by the total hours in the period.
(3) "Capacity Factor" means the total net electrical generation divided by
the product of the maximum design electrical rating capacity of 514
through April 30, 1995 and 522 effective May 1, 1995, multiplied by the
total hours in the period.
(4) Maine Yankee, Connecticut Yankee and Yankee Atomic permanently ceased
power operations of their Nuclear Power Plants.
See Decommissioning Expense discussion below.
_________
The Company's entitlement percentage of decommissioning costs for Vermont
Yankee, Maine Yankee, Connecticut Yankee, Yankee Atomic and Unit #3 is as
follows (dollars in millions):
CVPS's
Total Share of
Date of Estimated CVPS's Funded
Study Obligation Obligation Obligation
------- ---------- ---------- ----------
Nuclear generating companies:
Vermont Yankee 1993 $312.7 $109.4 $60.1
Maine Yankee 1993 $398.8 $8.0 $4.0
Connecticut Yankee 1996 $426.7 $8.5 $5.2
Yankee Atomic 1994 $370.0 $13.0 $4.5
Millstone Unit #3 1996 $545.7 $9.4 $2.5
Although the estimated costs of decommissioning are subject to change due
to changing technologies and regulations, the Company expects that the nuclear
generating companies' liability for decommissioning, including any future
changes in the liability, will be recovered in their rates over their
operating or license lives. See PART II, Item 8 for information regarding the
premature shutdown of the Maine Yankee, Connecticut Yankee and Yankee Atomic
nuclear power plants.
The Company owns interests in two of the five nuclear plants operated by
Northeast Utilities (NU): 1) a 2% equity interest in the Connecticut Yankee
Atomic Power Company (Haddam Neck Plant), and 2) a 1.7303% joint-ownership
interest in the Unit #3 of the Millstone Nuclear Power Station.
On March 30, 1996, Unit #3 was shut down by the licensee due to numerous
technical and non-technical problems and is on the Nuclear Regulatory
Commission's (NRC) watch list. NU has restructured its nuclear organization
and comprehensive plans are currently being implemented to restart Unit #3.
The company was advised that NU anticipates returning Unit #3 to service by
the end of the second quarter of 1998. However, the actual date Unit #3
returns to service is dependent upon the completion of independent inspections
and reviews by the NRC and a vote by the NRC Commissioners. As such, the
company currently believes that Unit #3 will not return to service until
sometime after the second quarter of 1998. NU estimates that its total 1997
incremental operations and maintenance cost for Unit #3 is approximately $56.4
million. The company's share is about $1.0 million. In addition, the company
incurred incremental power costs during 1997 of about $1.6 million and
anticipates that 1998 incremental operations and maintenance costs will be
approximately $.3 million. Incremental power costs for 1998 are estimated to
be $130,000 per month.
The company remains actively involved with the other non-operating
minority joint-owners of Unit #3. This group is engaged in various activities
to monitor and evaluate NU and Northeast Utilities Service Co.'s efforts
relating to Unit #3. On August 7, 1997, the company and eight other non-
operating owners of Unit #3 filed a demand for arbitration with Connecticut
Light and Power Company and Western Massachusetts Electric Company and
lawsuits against NU and its trustees. The arbitration and lawsuits seek to
recover costs associated with replacement power, operation and maintenance
costs and other costs resulting from the shutdown of Unit #3. The non-
operating owners claim that NU and two of its wholly owned subsidiaries failed
to comply with NRC's regulations, failed to operate the facility in accordance
with good operating practice and attempted to conceal their activities from
the non-operating owners and the NRC.
The Design Basis Documentation project (Project) initiated by Vermont
Yankee during 1996 is expected to be complete by the end of 1999. The
Company's 35% share of the total cost for this Project is expected to be about
$6.3 million. Such costs will be deferred by Vermont Yankee and amortized
over the remaining license life of the plant.
In August 1997, Vermont Yankee received an unsolicited expression of
interest to purchase Vermont Yankee. At this time no sale of Vermont Yankee
appears likely.
In 1982 the State of Maine enacted legislation that requires the
development of a decommissioning trust fund for the Maine Yankee nuclear
plant. This statute also provides that, if the trust has insufficient funds
to decommission the plant, the licensee, Maine Yankee, is responsible for the
deficiency and, if the licensee is unable to provide the entire amount, the
owners of the licensee are jointly and severally responsible for the
remainder. The definition of owner under the statute includes the Company.
It is expected that any payments required by the Company under these
provisions would be recovered through rates.
Nuclear Fuel.
Vermont Yankee has several "requirements based" contracts for the four
components (uranium, conversion, enrichment and fabrication) used to produce
nuclear fuel. These contracts are executed only if the need or requirement
for fuel arises. Under these contracts, any disruption of operating activity
would allow Vermont Yankee to cancel or postpone deliveries until actually
required. The contracts extend through various time periods and contain
clauses to allow the option to extend the agreements. Negotiation of new
contracts or renegotiation of existing contracts routinely occurs, often
focusing on one of the four components at a time. The price of the 1996
reload was approximately $21 million. The 1998 reload will cost approximately
$22 million. Future reload costs will depend on market and contract prices.
On January 20, 1997, Vermont Yankee entered into an agreement with a
former uranium supplier whereby the supplier could opt to terminate a
production purchase agreement dated August 4, 1978. Although there had been
no transactions under the production purchase agreement for several years,
Vermont Yankee maintained certain financial rights. In consideration for the
option to terminate the production purchase agreement and the subsequent
exercise of the option, Vermont Yankee received $0.6 million in 1997 which was
recorded as an offset to nuclear fuel expense. The potential future payments
over a ten year period, range from $0.0 million to $2.4 million. Due to the
uncertainty of this transaction, the potential benefits will be recorded on a
cash basis.
Under the Nuclear Waste Policy Act of 1982, the United States Department
of Energy (DOE) is responsible for the selection and development of
repositories for and the disposal of spent nuclear fuel and high-level
radioactive waste. Vermont Yankee, as required by that Act, has signed a
contract with the DOE to provide for the disposal of spent nuclear fuel and
high-level radioactive waste from its nuclear generation station beginning no
later than January 31, 1998; however, this delivery schedule is expected to be
delayed significantly. It is not certain when the DOE will accept spent
nuclear fuel and high-level radioactive waste from Vermont Yankee and other
owners of nuclear power plants. Continued delays or a default by the DOE
would lead to consideration of costly alternatives involving serious siting
and environmental issues.
The DOE contract obligates Vermont Yankee to pay a one-time fee of
approximately $39.3 million for disposal costs for all spent fuel discharged
through April 6, 1983, and a fee payable quarterly equal to approximately
one mill per kilowatt-hour of nuclear generated and sold electricity after
April 6, 1983. Although the $39.3 million for the one-time fee has been
collected from the Sponsors in rates, Vermont Yankee has elected to defer
payment to the DOE as permitted by the DOE contract. The fee plus accrued
interest must be paid no later than the first delivery of spent fuel to the
DOE repository. Interest accrues on the unpaid obligation based on the
thirteen-week Treasury Bill rate and is compounded quarterly. Through 1997,
Vermont Yankee accumulated $92.0 million in an irrevocable trust to be used
exclusively for defeasing this obligation ($98.7 million including accrued
interest) at some future date, provided the DOE complies with the terms of the
aforementioned contract.
Vermont Yankee has primary responsibliity for the interim storage of its
spent nuclear fuel. The plant is currently able to operate with the ability
to discharge the entire reactor core to the spent fuel storage pool through
the 2001 refueling outage. Full core discharge capability through year 2008
refueling outage could be achieved with the installation of additional storage
racks in the spent fuel pool, subject to license amendment. Vermont Yankee is
investigating other options for additional storage capacity beyond the year
2001.
Vermont Yankee has been active in supporting legislation currently before
Congress that would create an interim spent fuel storage site to be used until
the proposed Yucca Mountain permanent storage site becomes available. The
bill passed the Senate in April 1996 and House in late 1997 and is awaiting
action by a joint House-Senate conference committee. Although the measure had
strong bipartisan support in both chambers, its future is uncertain due to the
threat of a Presidential veto.
In November 1997, as a result of a lawsuit filed by a coalition of State
regulators and nuclear utilities including Vermont Yankee, the U.S. Court of
Appeals for the District of Columbia ruled that delays in DOE's acceptance of
spent nuclear fuel from utilities after January 31, 1998 must be treated as
avoidable and therefore, subject to damages as provided by the delays clause
and other provisions of the DOE's Waste Contract. The court did not require
the DOE to develop a plan for meeting the January 1998 deadline.
The average energy and capacity costs to the Company of energy generated
at the Vermont Yankee plant was 5.34, 3.77, 4.68, 4.78 and 4.06 cents per KWH
for the years 1993 through 1997, respectively.
The Company has been advised by the companies operating other nuclear
generating stations in which the Company has an interest that they have
contracted for certain segments of the nuclear fuel production cycle through
various dates. Contracts for the remainder of the fuel cycle will be required
but their availability, prices and terms cannot be predicted.
Nuclear Liability and Insurance.
The Price-Anderson Act currently limits public liability from a single
incident at a nuclear power plant to $8.9 billion. Beyond that a licensee
maintains an indemnity agreement with the Nuclear Regulatory Commission, but
subject to Congressional approval. The first $200 million of liability
coverage is the maximum provided by private insurance. The Secondary
Financial Protection Program is a retrospective insurance plan providing
additional coverage up to $8.7 billion per incident by assessing $79.3 million
against each of the 110 reactor units that are currently subject to the
Program in the United States, limited to a maximum assessment of $10 million
per incident per nuclear unit in any one year. The maximum assessment is to
be adjusted at least every five years to reflect inflationary changes. The
Company's interests in the nuclear power units are such that it could become
liable for an aggregate of approximately $3.7 million of such maximum
assessment per incident per year.
Major long-term purchases.
Canadian Purchases - Under various contracts, the Company purchases from
Hydro-Quebec capacity and associated energy. Under the terms of these
contracts, the Company is required to pay certain fixed capacity costs whether
or not energy purchases above a minimum level described in the contracts are
made. Such minimum energy purchases must be made whether or not other less
expensive energy sources might be available.
The company will receive varying amounts of capacity and energy from
Hydro-Quebec under the Vermont Joint Owners (VJO) contract during the 1998 to
2016 period. Related contracts were negotiated between the Company and
Hydro-Quebec which in effect alter the terms and conditions contained in the VJO
contract, reducing the overall cost of the original contract.
The maximum net amount of capacity that the Company will purchase during
the term of the Hydro-Quebec agreements is 143 MW (except for 168 MW for one
six-month period in 2012). The obligation over the next five years to
purchase power under these contracts is approximately $294 million. In
February 1996, the Company reached an agreement with Hydro-Quebec which
lowered the delivered cost of power by approximately $5.7 million in 1997. As
part of this agreement, the Company delivers to NEPOOL under existing firm
energy contracts or joint marketing activities 54 MW of Phase II transmission
capacity for a five-year period which began July 1, 1996 through June 30,
2001.
In the early phase of the VJO contract, two sellback contracts were
negotiated, the first delaying the purchase of about 23 MW of capacity and
associated energy, the second reducing the net purchase of Hydro-Quebec
capacity and associated energy. In 1994, the company negotiated a third
sellback arrangement whereby the company receives an effective discount on up
to 70 MW of capacity starting in November 1995 for the 1996 contract year
(declining to 30 MW in the 1999 contract year). In exchange for this
sellback, Hydro-Quebec has the right to reduce capacity deliveries by up to 50
MW beginning as early as 2004 until 2015, including the use of a like amount
of the company's Phase I/II facility rights and the ability to reduce the
amounts of energy delivered during a five-year term beginning in 2000.
The PSB has recently issued an Order in a Green Mountain Power
Corporation (GMP) rate case. That Order found GMP's decision to lock-in the
Hydro-Quebec VJO contract in 1991 imprudent and further found that the
contract was not used and useful. As such, the PSB concluded that a large
portion of the contract's costs should not be imposed on consumers and were
disallowed.
The Company is one of the 13 participants in the VJO contract and has
pending before the PSB a 6.6% rate increase that is primarily intended to
recover increases in the cost of power the Company purchases pursuant to the
VJO contract. The Company cannot predict the outcome of this proceeding.
However, if the Company were to receive an order similar to that obtained by
GMP, such an order could have a material adverse effect on the Company's
financial condition.
Merrimack #2 - The Company, through Velco, purchases power from Merrimack #2,
a 320 MW capacity coal-fired steam unit located in Bow, New Hampshire, and
owned by NU under a thirty-year contract which expires April 30, 1998.
The Merrimack #2 unit is subject to air emission limits for sulfur
dioxide (SO2) and Nitrogen Oxides (NOx) mandated by the Clean Air Act
Amendments of 1990 (CAAA). The CAAA establishes SO2 allowances to reduce SO2
emissions. NU expects to have sufficient SO2 allowances to meet CAAA SO2
requirements. If any gains are realized from the sale of excess allowances,
the Company will receive its proportionate share from VELCO. Likewise, the
Company will pay its share of any allowances purchased.
NU complied with the Merrimack #2 NOx limits by installing Selective
Catalytic Reduction (SCR) equipment in 1995 at a cost of approximately
$19 million increasing operating costs by about $1.6 million annually. The
SCR equipment is expected to have a negligible effect on unit fuel efficiency.
The Company will share on a pro-rata basis the cost of the SCR equipment based
on its share of the VELCO contract. The total cost to the Company of energy
generated by the Merrimack #2 unit was 3.02 cents per KWH in 1997.
Under the Clean Air Act Amendment of 1990, the plant is required to
purchase allowances if its output of sulfur dioxide (SO2) exceeds about 21,400
tons of which the Company's share is about 3,200 tons. In 1997, Merrimack 2
emitted about 26,144 tons and the Company's share was about 3,840 tons. No
additional allowances were required to be purchased in 1997.
Other Purchases.
Cogeneration/Small Power Qualifying Facilities - A number of small
producers using hydroelectric, biomass, and refuse-burning generation are
currently producing energy that the Company is purchasing. For the year ended
December 31, 1997, the Company received 209,672 MWH from these sources for
which it paid $21,720,658.
The Company, through VELCO, is a participant in NEPOOL, which has been
open to all investor-owned, municipal, and cooperative utilities in New
England under an agreement in effect since 1971 and amended from time to time.
The Restated NEPOOL Agreement offers membership privileges to any entity
which is engaged or proposes to engage in the wholesale or retail electric
power business in New England. NEPOOL's function is changing in response to
the growing climate of competition and the FERC requirements for open access
transmission across systems. A new organization, an Independent System
Operator (ISO), has been formed to operate the bulk power generation and
transmission systems, to administer the regions open access transmission
tariff, and to operate the electric ISO wholesale power market for New
England. The bilateral market for transactions directly between NEPOOL
participants will continue as an alternative to the ISO wholesale spot market.
The ISO is governed by the principles put forth in the FERC Order 888
under rules defined by NEPOOL and approved by FERC. They include: to provide
independent, open and fair access to the regional transmission system, to
establish a non-discriminatory governance structure, to facilitate market-
based wholesale electric transactions, and to ensure the efficient management
and reliable operation of the regional bulk power system.
The ISO is establishing a bidding system for the newly defined generation
products; it will form the basis for the ISO's economic dispatch (based on bid
prices) of the generation products. It is expected to be phased in
throughout 1998. This system provides a settlement mechanism which will price
the residual of a given generation product that is excess to a participant's
own needs, and is offered to the ISO wholesale power market. A participant
will pay as before the actual costs for its generation products used to serve
its load or taken to market. A participant will submit a bid for its
generation products to the ISO, and if the bid is accepted and if the
participant supplies residual generation products to the ISO wholesale market,
the participant will receive the Market Clearing Price based on the highest
bids accepted for the residual product. If a participant needs to purchase
from the ISO wholesale market to serve its load, those purchases will be made
at Market Clearing Price.
The ISO will also provide the main market place for participants to
secure Open Access Transmission for transactions delivered on the Pool
Transmission Facilities (PTF). Over the next several years, the pricing
differences that had existed between transmission systems within NEPOOL will
disappear as a NEPOOL-wide transmission pricing arrangement for all PTF and
the Open Access Tariffs of Local Network providers will offer access to all
other transmission facilities (i.e. non-PTF).
The primary purposes of NEPOOL are to provide energy reliability for the
region, centralized economic dispatch and coordination of generation planning
and construction by the individual participants. The Company's peak demand
for 1997 occurred on January 8 and equaled 399.9 MW. At the time of this
peak, the Company had a reserve margin of 37%. NEPOOL's peak for the year
occurred on July 14, 1997 and totaled 20,569 MW. NEPOOL had a 30% reserve
margin at the time of its 1997 peak.
Power Resources - Future.
The Company has generally sufficient power under contract to supply its
current franchise obligations for the near-term prior to any advent of Retail
Wheeling. In addition, the Company will continue to utilize cost effective
demand side management programs where appropriate. The Company expects to
actively manage this portfolio of supply and demand side resources over the
near-term, as it has in the past, to minimize net power costs for its
ratepayers and shareholders. It is unclear what the Company's load
responsibilities will be upon the advent of Retail Wheeling. The certainty,
timing and nature of these events will be largely determined by legislative
and regulatory actions at the state and national levels.
TRANSMISSION
Vermont Electric Power Company, Inc.
VELCO engages in the operation of a high-voltage transmission system
which interconnects the electric utilities in the State including the areas
served by the Company. VELCO is also engaged in the business of purchasing
bulk power for resale, at cost, to the Company and the other electric
utilities (cooperative, municipal and investor-owned) in Vermont (the "Vermont
utilities") and transmitting such power for the Vermont utilities. Refer to
Item 8 herein for a discussion of the 1985 Four Party Agreement between the
Company, VELCO and two other major distribution companies in Vermont.
VELCO provides transmission services for the State of Vermont, acting by
and through the Department, and for all of the electric distribution utilities
in the State of Vermont. VELCO is reimbursed for its costs (as defined in the
agreements relating thereto) for the transmission of power for such entities.
The Company, as the largest electric distribution utility in Vermont, is the
major user of VELCO's transmission system.
The Company owns 34,083 shares (56.8%) of the Class B common stock of
VELCO, the balance being owned by other Vermont utilities. Each share of
Class B common stock has one vote. The Company also owns 46,624 shares
(46.6%) of the Class C preferred stock of VELCO, the balance being owned
by other Vermont utilities. Shares of Class C preferred stock have no voting
rights except the limited right to vote VELCO's shares of common stock in
Vermont Electric Transmission Company, Inc. (VETCO) if certain dividend
requirements are not met.
NEPOOL Arrangements.
VELCO participates for itself and as agent for the Company and twenty-one
other Vermont utilities in NEPOOL. See "Business-New England Power Pool" for
additional details.
Capitalization.
VELCO has authorized 92,000 shares of Class B common stock, $100 par
value, of which 60,000 shares were outstanding on December 31, 1997 and
125,000 shares of Class C preferred stock, of which 100,000 shares were
outstanding at December 31, 1997. On that date there were authorized and
outstanding three issues of First Mortgage Bonds, aggregating $26,969,000,
issued under an Indenture of Mortgage dated as of September 1, 1957, as
amended, between VELCO and Bankers Trust Company, as Trustee (the "VELCO
Indenture"). The issuance of bonds under the VELCO Indenture is unlimited in
amount but is subject to certain restrictions.
New transmission and associated facilities will be required by VELCO in
1998 to transmit power to Vermont utilities. The costs of such facilities are
presently estimated at $3,254,903 including allowance for funds used during
construction calculated at a rate of approximately 6.5%. For a description of
VELCO's properties, see "VELCO" under Item 2.
Management.
In 1957 VELCO entered into an agreement (the "Three-Party Agreement")
whereby the Company and Green Mountain agreed that, if VELCO transmits firm
power owned by it (which it does not now do), they would have the right to
purchase all such firm power not sold to others with their consent and the
obligation to pay (in agreed proportions) amounts sufficient, together with
VELCO's revenues from other sources, to pay all VELCO's operating expenses,
debt service and taxes. In connection with the transfer to VELCO of
entitlements of the output of the Vermont Yankee plant, the Company and Green
Mountain entered into a Three-Party Transmission Agreement, dated November 21,
1969, as amended, whereby they have agreed to pay transmission charges thereon
in an aggregate amount sufficient, with VELCO's other revenues, to pay all of
VELCO's expenses including capital costs. VELCO's Bonds are secured by a
first mortgage on the major part of VELCO's transmission properties and by the
assignment to the Trustee of the Three-Party Agreement, the Three-Party
Transmission Agreement and certain other contracts as specified in the VELCO
Indenture. See Item 8 herein for information relating to the 1985 Four-Party
Agreement.
Vermont Electric Transmission Company, Inc.
In connection with the importing of Canadian power, VELCO has created a
wholly owned subsidiary, VETCO, to construct, finance, own and operate the
Vermont portion of the transmission line which connects the Hydro-Quebec lines
at the Canadian border to the lines of New England Electric Transmission
Corporation, a subsidiary of New England Electric System, at the New Hampshire
border on the Connecticut River. VETCO entered into a Capital Funds Agreement
with VELCO pursuant to which VETCO may request up to $12,500,000 (of which
$10,000,000 was contributed as of December 31, 1997) of capital contributions
from VELCO and has entered into Transmission Line Support Agreements with 20
New England utilities, including VELCO as representative for 14 Vermont
utilities, pursuant to which those utilities have agreed to pay the
transmission line costs, whether or not the line is operational. VELCO, as
such representative, has entered into a similar agreement with New England
Electric Transmission Corporation with respect to the New Hampshire portion of
the DC transmission line and the DC/AC converter station. Pursuant to a
Vermont Participation Agreement and a Capital Funds Support Agreement with
Velco and 14 Vermont electric distribution utilities, including the Company,
assume their pro rata share (based upon 1980 sales) of the benefits and
obligations of VELCO under the Support Agreements and the VETCO Capital Funds
Agreement.
VETCO has authorized 10 shares of common stock, $100 par value, all of
which were outstanding on December 31, 1997 and owned by VELCO, with each
share having one vote. During 1986 VETCO paid off its construction financing
by issuing $37,000,000 of secured notes, maturing in 2006, and receiving a
$9,999,000 equity contribution from VELCO. The notes are secured by a First
Mortgage on the major part of VETCO's transmission properties and by the
assignment of its rights under the Support Agreements.
Phase I and Phase II.
The Company participated with other electric utilities in the
construction of the Phase I Hydro-Quebec transmission facilities in
northeastern Vermont, which were completed at a total cost of approximately
$140 million. Under a support agreement relating to the Company's
participation in the facilities, the Company is obligated to pay its 4.56% of
Phase I Hydro-Quebec capital costs over a 20 year recovery period through and
including 2006. The Company also participated in the construction of Phase II
Hydro-Quebec transmission facilities which began operation in November 1990.
This service increased the maximum capacity of the Hydro-Quebec 450 KV DC line
from 690 MW to 2000 MW and extended Phase I line from Comerford, New Hampshire
to Sandy Pond, Massachusetts. The Company uses this transmission path to
deliver a portion of the Company's long-term Hydro-Quebec firm power contract.
The project cost approximately $487 million. Under a similar support
agreement, the Company is obligated to pay its 5.132% share of Phase II
Hydro-Quebec capital costs over a 25-year recovery period through and including
2015. Under the support agreement, the Company is eligible for savings
associated with certain energy transactions by NEPOOL, which will offset the
Company's support cost obligations.
CONSERVATION AND LOAD MANAGEMENT
The primary purpose of Conservation and Load Management programs is to
offset the need for long-term power supply and delivery resources that are
more expensive to purchase or develop than customer-efficiency programs. For
additional information regarding C&LM programs see PART II, Item 7, "Liquidity
and Capital Resources" herein.
The Company provides information to customers to help them use
electricity more efficiently, first by ensuring that the customers are on the
correct rate and have incorporated efficiency and conservation measures;
secondly, by continually evaluating new energy management systems and other
technologies to identify and develop programs to address new market
opportunities and the competitive strengths of electricity.
DIVERSIFICATION
See PART II, Items 7 and 8 herein for information regarding the Company's
diversification activities.
The Company is continually assessing additional diversification
opportunities. Any new investments will be financed primarily through a
combination of debt and equity.
EMPLOYEE INFORMATION
A Local Union No. 300 affiliated with the International Brotherhood of
Electrical Workers represents operating and maintenance employees of the
Company and its wholly owned subsidiaries. At December 31, 1997 the Company
and its wholly owned subsidiaries employed 610 persons, of which 218 are
represented by the union. On January 26, 1996, the Company and its employees
represented by the union agreed to a three-year contract, which expires on
December 31, 1998. The new contract provides for general wage increases of
2.0%, 2.1% and 2.5% effective January 14, 1996, December 29, 1996 and
December 28, 1997, respectively. Under the terms of the new agreement,
effective in April 1996, Company's employees represented by the union will
contribute weekly premiums for medical coverage of two, three and four dollars
for the years 1996, 1997 and 1998, respectively.
SEASONAL NATURE OF BUSINESS
The Company experiences its heaviest loads in the colder months of the
year. Winter recreational activities, longer hours of darkness and heating
loads from cold weather usually cause the Company's peak of electric MWH sales
to occur in January or late December. For additional information regarding
the seasonal nature of business see PART II, Item 8 herein.
OFFICERS
The following sets forth the Executive Officers of the Company and a
wholly owned subsidiary. There are no family relationships among the
executive officers. Officers are normally elected annually.
Executive Officers of the Registrant:
Name and Age Office Officer Since
- - ------------ ------ -------------
Robert H. Young, 50 President and Chief
Executive Officer 1987
Francis J. Boyle, 52 Senior Vice President -
Principal Financial Officer
and Treasurer 1995
Kent R. Brown, 52 Senior Vice President -
Engineering and Operations 1996
Joseph M. Kraus, 42 Vice President, Secretary and
General Counsel 1987
Douglas D. Sinclair, 49 Vice President and General
Manager for Business Development 1997
William J. Deehan, 45 Vice President-Regulatory Affairs
and Strategic Analysis 1991
James M. Pennington, 42 Vice President, Controller
and Principal Accounting Officer 1993
L. Douglas Barba, 50 Senior Vice President and
General Manager-Catamount Energy
Corporation 1992
Robert E. Rogan, 38 Vice President, Public Affairs 1998
Mr. Young joined the Company in 1987. He was elected Director, President
and Chief Executive Officer in 1995. Prior to being elected to his present
position, he was elected Executive Vice President and Chief Operating Officer
in 1993.
Mr. Boyle joined the Company in October, 1995. Prior to being elected to
his current position in 1997, he was elected as Vice President - Finance and
Administration and Chief Financial Officer in 1995. From 1993 to 1995,
Mr. Boyle served as Chief Financial Officer of Westmoreland Coal Company
("Westmoreland") in Philadelphia, Pennsylvania. In November, 1994,
Westmoreland and several of its subsidiaries commenced Chapter 11 proceedings
to confirm a so-called "prepackaged" plan of reorganization under which the
court was asked to approve a sale of assets, the proceeds of which were to be
used to satisfy in full certain maturing obligations of Westmoreland. In
December, 1994, Westmoreland's plan of reorganization was confirmed, the asset
sale was consummated, the obligations in question were paid, and Westmoreland
emerged from Bankruptcy. On December 23, 1996, Westmoreland and four of its
subsidiaries commenced Chapter 11 proceedings. The Chapter 11 proceedings
were precipitated by large liabilities Westmoreland and four of its
subsidiaries have to retiree medical benefit plans for the benefit of retired
mine workers. From 1985 to 1992, Mr. Boyle was Chief Financial Officer of El
Paso Natural Gas Company, El Paso, Texas.
Mr. Brown joined the Company in September, 1996. Prior to being elected
to his present position in 1997, he was elected as Vice President -
Engineering and Operations in 1996. From 1992 to 1995 he served as Chairman,
President and Chief Executive Officer of Kansas Gas and Electric Company
("KG&E") and Group Vice President of KG&E from 1982 to 1992.
Mr. Kraus joined the Company in 1981. Prior to being elected to his
present position in 1996, he was elected Secretary and General Counsel in 1994
and Secretary and Senior Corporate Counsel in 1987.
Mr. Sinclair joined the Company in April 1997. Prior to joining the
Company, from 1994 to 1996 he served as President and Chief Executive Officer
at Noma International. In 1991 he joined Novatel Communications, Ltd. as
Chief Financial Officer and was President and Chief Executive Officer from
1992-1994.
Mr. Deehan joined the Company in 1985. Prior to being elected to his
present position in 1996, he was elected Assistant Vice President - Rates and
Economic Analysis in 1991.
Mr. Pennington joined the Company in 1989. Prior to being elected to his
present position in 1992, Mr. Pennington was designated Acting Controller in
1992 and was elected Controller and named Principal Accounting Officer in
1993.
Mr. Barba joined Catamount Energy Corporation, a wholly owned subsidiary
of the Company, in August 1992 as Senior Vice President and General Manager.
From 1990 to 1992, Mr. Barba served as Vice President, Project Finance of
Cogentrix, Inc., Charlotte, N. C.
Mr. Rogan joined the Company in February 1998 as Vice President, Public
Affairs. Prior to joining the Company, he served as Deputy Chief of Staff for
the Governor of Vermont from 1994 to 1998. He served as Director of External
Affairs for the Agency of Health Care Administration in Florida from 1992 to
August 1994 and as Deputy Director and Lobbyist in the Florida Governor's
Washington office from 1991 to 1992.
Note: Thomas J. Hurcomb, Vice President-Marketing and Public Affairs, retired
effective March 1, 1998.
Jonathan W. Booraem, Treasurer, retired effective December 31, 1997.
The term of each officer is for one year or until a successor is elected.
Item 2. Properties.
The Company. The Company's properties are operated as a single system
which is interconnected by transmission lines of VELCO, New England Power
Company and PSNH. The Company owns and operates 23 small generating stations
with a total current nameplate capability of 70,070 KW, has a 1.78% joint-
ownership interest in an oil generating plant in Maine, has a 20% joint-
ownership interest in a wood, gas and oil-fired generating plant in Vermont,
has a 1.73% joint-ownership interest in a nuclear generating plant in
Connecticut and has a 47.35% joint-ownership interest in a transmission
interconnection with Hydro-Quebec in Vermont.
The electric transmission and distribution systems of the Company include
about 614 miles of overhead transmission lines, about 7,266 miles of overhead
distribution lines and about 238 miles of underground distribution lines which
are located in Vermont except for about 23 miles of transmission lines which
are located in New Hampshire and about two miles of transmission lines which
are located in New York.
Connecticut Valley. Connecticut Valley's electric properties consist of
two principal systems in New Hampshire which are not interconnected with each
other but each of which is connected directly with facilities of the Company.
The electric systems of Connecticut Valley include about two miles of
transmission lines and about 427 miles of overhead distribution lines and
about 11 miles of underground distribution lines.
All the principal plants and important units of the Company and its
subsidiaries are held in fee. Transmission and distribution facilities which
are not located in or over public highways are, with minor exceptions, located
either on land owned in fee or pursuant to easements substantially all of
which are perpetual. Transmission and distribution lines located in or over
public highways are so located pursuant to authority conferred on public
utilities by statute, subject to regulation of state or municipal authorities.
VELCO. VELCO's properties consist of about 483 miles of high voltage
overhead transmission lines and associated substations. The lines connect on
the west at the Vermont-New York state line with the lines of Niagara Mohawk
Power Corporation near Whitehall, New York, and Bennington, Vermont and with
the submarine cable of NYPA near Plattsburg, New York; on the south and east
with lines of New England Power Company and PSNH; on the south with the
facilities of Vermont Yankee; and on the north with lines of Hydro-Quebec
through a converter station and tie line jointly owned by the Company and
several other Vermont utilities.
VETCO. VETCO has approximately 52 miles of high voltage DC transmission
line connecting at the Quebec-Vermont border in the Town of Norton, Vermont
with the transmission line of Hydro-Quebec and connecting at the Vermont-New
Hampshire border near New England Power Company's Moore hydro-electric
generating station with the transmission line of New England Electric
Transmission Corporation, a subsidiary of New England Electric System.
Item 3. Legal Proceedings.
On July 29, 1996, the Company filed a Declaratory Judgment action in the
United States District Court for the District of Vermont. The Complaint names
as defendants a number of insurance companies that issued policies to the
Company dating from the mid 1940s to the late 1980s. The Company asserts that
policies issued by defendants provide coverage for all defense and
remediation costs associated with the Cleveland Avenue property, the
Bennington Landfill site and the North Clarendon site. With the exception of
the North Clarendon site where no further remediation is anticipated, see
PART II, Item 8 "Environmental" for related disclosures.
On August 7, 1997, the company and eight other non-operating owners of
Unit #3 filed a demand for arbitration with Connecticut Light and Power
Company and Western Massachestts Electric Company and lawsuits against NU and
its trustees. The arbitration and lawsuits seek to recover costs associated
with replacement power, operation and maintenance costs and other costs
resulting from the shutdown of Unit #3. The non-operating owners claim that
NU and two of its wholly owned subsidiaries failed to comply with NRC's
regulations, failed to operate the facility in accordance with good operating
practice and attempted to conceal their activities from the non-operating
owners and the NRC.
Except as otherwise described under Management's Discussion and Analysis
of Financial Condition and Results of Operations, Item 7, there are no other
material pending legal proceedings, other than ordinary routine litigation
incidental to the business, to which the Company or any of its subsidiaries is
a party or to which any of their property is subject.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to security holders during the fourth
quarter of 1996.
PART II
Item 5. Market for Registrant's Common
Equity and Related Stockholder Matters.
(a) The Company's common stock is traded on the New York Stock Exchange
(NYSE) under the trading symbol CV.
The table below shows the high and low sales price of the Company's
common stock, as reported on the NYSE composite tape by The Wall Street
Journal, for each quarterly period during the last two years as follows:
Market Price
High Low
-------- --------
1997
First quarter.............. $ 13 1/8 $ 10 3/8
Second quarter............. 11 3/8 10 3/8
Third quarter.............. 13 15/16 11
Fourth quarter............. 15 3/8 13
1996
First quarter.............. $ 15 1/8 $ 13 1/4
Second quarter............. 15 1/8 12
Third quarter.............. 13 5/8 12
Fourth quarter............. 13 12
(b) As of December 31, 1997, there were 13,686 holders of the Company's
common stock, $6 par value.
(c) Common stock dividends have been declared quarterly. Cash dividends
of $.20 per share were paid for the first two quarters of 1996 and cash
dividends of $.22 per share were paid for the last two quarters of 1996.
Cash dividends of $.22 per share were paid for all quarters of 1997.
So long as any Senior Preferred Stock or Second Preferred Stock is
outstanding, except as otherwise authorized by vote of two-thirds of each such
class, if the Common Stock Equity (as defined) is, or by the declaration of
any dividend will be, less than 20% of Total Capitalization (as defined),
dividends on Common Stock (including all distributions thereon and
acquisitions thereof), other than dividends payable in Common Stock, during
the year ending on the date of such dividend declaration, shall be limited to
50% of the Net Income Available for Dividends on Common Stock (as defined) for
that year; and if the Common Stock Equity is, or by the declaration of any
dividend will be, from 20% to 25% of Total Capitalization, such dividends on
Common Stock during the year ending on the date of such dividend declaration
shall be limited to 75% of the Net Income Available for Dividends on Common
Stock for that year. The defined terms identified above are used herein in
the sense as defined in subdivision 8A of the Company's Articles of
Association; such definitions are based upon the unconsolidated financial
statements of the Company. As of December 31, 1997, the Common Stock Equity
of the Company was 58.2% of total capitalization.
For additional information regarding dividend payment level and dividend
restrictions see Item 8 herein.
<PAGE>
<TABLE>
<CAPTION>
Item 6. Selected Financial Data.
(Dollars in thousands, except per share amounts)
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
For the year
Operating revenues $304,732 $290,801 $288,277 $277,158 $279,389
Net income before extraordinary charge* $ 17,151 $ 19,442 $ 19,851 $ 14,800 $ 21,292
Extraordinary charge net of taxes $ 811 $ - $ - $ - $ -
Net income* $ 16,340 $ 19,442 $ 19,851 $ 14,800 $ 21,292
Earnings available for common stock* $ 14,312 $ 17,414 $ 17,823 $ 12,662 $ 18,634
Consolidated return on average
common stock equity* 7.5% 9.4% 10.0% 7.2% 11.0%
Earnings per diluted share of common
stock before extraordinary charge* $1.32 $1.51 $1.53 $1.08 $1.64
Earnings per diluted share of
common stock* $1.25 $1.51 $1.53 $1.08 $1.64
Cash dividends paid per share of
common stock $.88 $.84 $.80 $1.42 $1.42
Book value per share of common stock $16.38 $16.19 $15.51 $14.56 $15.03
Net cash provided by operating
activities $ 41,866 $ 42,688 $ 41,711 $ 49,426 $ 36,833
Dividends paid $ 12,630 $ 11,728 $ 11,350 $ 18,845 $ 18,112
Construction and plant expenditures $ 13,841 $ 18,952 $ 21,337 $ 22,621 $ 20,519
Deferred conservation and load
management expenditures $ 1,837 $ 1,589 $ 3,899 $ 6,159 $ 9,874
At end of year
Long-term debt $ 93,099 $117,374 $119,142 $120,157 $122,419
Long-term lease arrangements $ 17,223 $ 18,304 $ 19,385 $ 20,467 $ 21,553
Redeemable preferred stock $ 19,000 $ 20,000 $ 20,000 $ 20,000 $ 20,000
Total capitalization
(excluding current portion of
debt and preferred stock) $324,499 $350,201 $346,341 $339,462 $352,862
Total assets $531,940 $502,968 $489,213 $489,570 $479,373
* Net income and earnings per share of common stock reflect net of tax non-recurring charges and
non-recurring gains as follows and discussed in Management's Discussion and Analysis of Financial
Condition and Results of Operations:
Net income 1997 1996 1995 1994 1993
---------- ---- ---- ---- ---- ----
Charges $(3,575) $ - $(1,703) $(4,336) $ -
Gains 3,092 1,330 905 - -
------- ------ ------- ------- ------
$ (483) $1,330 $ (798) $(4,336) $ -
======= ====== ======= ======= ======
Earnings per share
------------------
Charges $ (.31) $ - $ (.15) $ (.37) $ -
Gains .28 .12 .08 - -
------ ----- ------ ------ ------
$ (.03) $ .12 $ (.07) $ (.37) $ -
====== ===== ====== ====== ======
</TABLE>
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Earnings Overview.
The company's 1997 net income was $16.3 million or $1.25 per share of
common stock, which equates to a 7.5% return on average common equity.
Net income and earnings per share of common stock for 1997 compare to
$19.4 million and $1.51 in 1996, and $19.9 million and $1.53 in 1995.
The return on average common equity was 9.4% for 1996 and 10.0% for 1995.
For 1997, net income and earnings per share of common stock for the
company's utility business reflect a net of tax extraordinary charge of
approximately $.8 million and $.07, respectively, associated with the
discontinued application of Statement of Financial Accounting Standards (SFAS)
No. 71, "Accounting for the Effects of Certain Types of Regulation," applied
to Connecticut Valley Electric Company Inc. (Connecticut Valley) the company's
wholly owned New Hampshire subsidiary. In addition, Connecticut Valley
incurred an after-tax charge of $3.6 million and $.31 per share of common
stock for an estimated loss on power contracts for the twelve months following
December 31, 1997. Both charge-offs are described in Notes 1 and 13 to the
Consolidated Financial Statements. Offsetting these charges is an after-tax
gain of approximately $1.3 million and $.12 per share of common stock from
sale of non-utility property.
Non-utility net income and earnings per share of common stock for 1997
reflect a gain of approximately $1.8 million and $.16, respectively, from the
sale by the company's wholly owned subsidiary, Catamount Energy Corporation
(Catamount) of its 8.1% partnership's interest in the NW Energy Williams Lake
L.P. Project.
Non-utility net income and earnings per share of common stock for 1996
were reduced by approximately $1.4 million and $.12, respectively, for
expenses incurred in connection with a project currently under development by
Catamount. These expenses would be reimbursed if this pending project reaches
financial closing.
The company filed for a 6.6% or $15.4 million general rate increase on
September 22, 1997 to become effective June 6, 1998, to offset the increasing
cost of providing service as more fully discussed in Rates and Regulation
below.
On April 30, 1996, the company received a rate order from the Vermont
Public Service Board (PSB). The PSB order generally approved an agreement
reached with the DPS that provided for a 5.5% increase in Vermont retail rates
effective with bills rendered on June 1, 1996 and an additional 2% increase
effective January 1, 1997. Combined, these rate increases produce annualized
revenues of approximately $16 million. The PSB order also capped the
company's allowed return on common equity in its Vermont retail business at
11% for 1996 and 1997.
Earnings for 1995 reflect a $.15 per common share charge pursuant to a
PSB Accounting Order requiring a write-off of 1994 restructuring costs, an
$.08 per share gain on the sale by Catamount of approximately half of its
limited partnership interest in the Appomattox Cogeneration project and the
5.07% retail rate increase.
Results of Operations.
The major elements of the Consolidated Statement of Income are discussed
below.
Operating revenues and megawatt-hour (MWH) sales A summary of MWH sales and
operating revenues for 1997, 1996 and 1995 is set forth below:
<TABLE>
<CAPTION>
MWH Sales Revenues (000's)
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Residential 945,199 957,733 946,342 $116,314 $108,603 $103,365
Commercial 916,311 900,590 876,735 104,460 98,890 93,950
Industrial 427,764 401,781 404,487 34,206 32,399 31,565
Other retail 7,138 7,229 7,361 1,937 1,856 1,794
--------- --------- --------- -------- -------- --------
Total retail sales 2,296,412 2,267,333 2,234,925 256,917 241,748 230,674
--------- --------- --------- -------- -------- --------
Resale sales:
Firm 1,051 1,717 4,860 46 81 223
Entitlement 378,273 470,760 895,409 18,925 24,781 39,802
Other 827,818 770,542 580,048 22,265 18,705 13,269
--------- --------- --------- -------- -------- --------
Total resale sales 1,207,142 1,243,019 1,480,317 41,236 43,567 53,294
--------- --------- --------- -------- -------- --------
Other revenues - - - 6,579 5,486 4,309
--------- --------- --------- -------- -------- --------
Total 3,503,554 3,510,352 3,715,242 $304,732 $290,801 $288,277
========= ========= ========= ======== ======== ========
</TABLE>
Year-to-year fluctuations in total retail MWH sales are primarily
affected by customer growth, Conservation and Load Management (C&LM) programs,
as well as relative prices of alternate energy sources, weather patterns and
conservation induced by price changes and income elasticity responses of
customers. Retail MWH sales for 1997 increased 1.3% compared to 1996
reflecting the improving Vermont economy. However, retail revenues increased
$15.2 million or 6.3% over last year due to a $12.8 million increase in
revenues resulting from a two-phase retail rate increase discussed above and
$2.4 million associated with a 1.3% increase in retail MWH sales.
Residential MWH sales decreased 1.3% reflecting moderate temperatures during
the 1997 winter months. Commercial MWH sales increased 1.7% while industrial
MWH sales increased 6.5% primarily due to increased megawatt-hour requirements
by ski area customers.
Retail MWH sales for 1996 increased 1.5% compared to 1995. Retail
revenues increased $11.1 million or 4.8% over 1995 due to a $7.5 million
increase in revenues resulting from the 5.5% retail rate increase effective
June 1, 1996 and $3.6 million associated with a 1.5% increase in retail MWH
sales. Residential and commercial MWH sales increased 1.2% and 2.7%,
respectively, reflecting the normal cold weather experienced during the first
quarter of 1996 while industrial MWH sales decreased .7% as a result of
increased natural snow fall during 1996 reducing ski areas' megawatt-hour
requirements for snow making.
Entitlement MWH sales and revenues decreased for 1997 compared to 1996
primarily due to the scheduled termination of several sales agreements in late
1996.
The decrease in entitlement MWH sales and revenues for 1996 is primarily
due to the expiration, in October 1995, of a five year sale of part of the
company's interest in the output of Vermont Yankee and Merrimack #2 and lower
sellback of Hydro-Quebec power.
Other resale sales and revenues for 1997 increased 7.4% and 19.0%,
respectively, due to increased sales to New England Power Pool (NEPOOL)
partially offset by a decrease in unit sales.
Other resale sales and revenues increased for 1996 due to increased
system capacity sales and sales to NEPOOL offset by a decrease in unit and
off-system sales.
The increases in other revenues for 1997 and 1996 resulted primarily from
an increase in transmission revenues related to various transmission
interconnection agreements.
The table below summarizes the components of increases or decreases in
revenues compared to the prior year (dollars in thousands):
1997 1996
Revenue increase (decrease) from:
Retail MWH sales $ 2,377 $ 3,557
Retail rates 12,792 7,517
Changes in firm resale sales (35) (142)
Changes in entitlement sales (5,856) (15,021)
Changes in other resale sales 3,560 5,436
Changes in other revenues 1,093 1,177
------- -------
Net increase over prior year $13,931 $ 2,524
======= =======
Purchased power The company purchases approximately 90% of its power needs
under several contracts of varying duration. Over 30% of these purchases are
from affiliated companies whereby the company receives its entitlement share
of the output. The company's purchased power portfolio assures that a
diversified mix of sources and fuel types are available to meet the company's
long-term load growth while providing short and intermediate term
opportunities to purchase or sell capacity and energy to reduce overall power
costs. A breakdown of the company's energy sources is shown below:
Year Ended December 31
1997 1996 1995
Nuclear generating companies 36% 36% 32%
Canadian imports 32 30 33
PSNH--coal 9 8 8
Company-owned hydro 5 6 4
Jointly owned units 1 2 4
Small power producers 6 6 5
Other sources 11 12 14
--- --- ---
100% 100% 100%
=== === ===
The company maintains a 1.7303% joint-ownership interest in Millstone
Unit #3 (Unit #3) of the Millstone Nuclear Power Station and owns a 2% equity
interest in Connecticut Yankee. These two plants are operated by Northeast
Utilities (NU). The company also maintains joint-ownership interests in
Joseph C. McNeil, a 53 MW wood, gas and oil-fired unit and Wyman #4, a 619 MW
oil-fired unit and owns a 31.3%, 2% and 3.5% equity interest in Vermont
Yankee, Maine Yankee and Yankee Atomic, respectively. The company's
entitlement percentage for Vermont Yankee is 35%. In addition, the company
owns 20 hydroelectric generating units with a total nameplate capability of
41.2 MW and two gas-fired and one diesel-peaking units with a combined
nameplate capability of 28.9 MW.
On March 30, 1996, Unit #3 was shut down by the licensee due to numerous
technical and non-technical problems and is on the Nuclear Regulatory
Commission's (NRC) watch list. NU has restructured its nuclear organization
and comprehensive plans are currently being implemented to restart Unit #3.
The company was advised that NU anticipates returning Unit #3 to service by
the end of the second quarter of 1998. However, the actual date Unit #3
returns to service is dependent upon the completion of independent inspections
and reviews by the NRC and a vote by the NRC Commissioners. As such, the
company currently believes that Unit #3 will not return to service until
sometime after the second quarter of 1998. NU estimates that its total 1997
incremental operations and maintenance cost for Unit #3 is approximately $56.4
million. The company's share is about $1.0 million. In addition, the company
incurred incremental power costs during 1997 of about $1.6 million and
anticipates that 1998 incremental operations and maintenance costs will be
approximately $.3 million. Incremental power costs for 1998 are estimated to
be $130,000 per month.
The company remains actively involved with the other non-operating
minority joint-owners of Unit #3. This group is engaged in various activities
to monitor and evaluate NU and Northeast Utilities Service Co.'s efforts
relating to Unit #3. On August 7, 1997, the company and eight other non-
operating owners of Unit #3 filed a demand for arbitration with Connecticut
Light and Power Company and Western Massachusetts Electric Company and
lawsuits against NU and its trustees. The arbitration and lawsuits seek to
recover costs associated with replacement power, operation and maintenance
costs and other costs resulting from the shutdown of Unit #3. The non-
operating owners claim that NU and two of its wholly owned subsidiaries failed
to comply with NRC's regulations, failed to operate the facility in accordance
with good operating practice and attempted to conceal their activities from
the non-operating owners and the NRC.
In December 1996 and August 1997 the Board of Directors of Connecticut
Yankee and Maine Yankee, respectively, decided to prematurely retire the
Connecticut Yankee and Maine Yankee nuclear power plants from commercial
operation and decommission the facilities.
The decision to prematurely retire these nuclear power plants was based
on economic analyses of the costs of operating them compared to the costs of
closing them and incurring replacement power costs over the remaining period
of the plants' operating licenses. Connecticut Yankee and Maine Yankee have
been off-line since July 1996 and December 1996, respectively.
In 1992, the Board of Directors of Yankee Atomic decided to permanently
discontinue operation of the Yankee Atomic Nuclear Power Plant, and to
decommission the facility.
For additional information in regard to the permanent shutdown of the
Connecticut Yankee, Maine Yankee and Yankee Atomic Nuclear Power Plants see
Note 2 to the Consolidated Financial Statements.
The Vermont Yankee Nuclear Power Plant, which provides approximately
one-third of the company's power supply, had no scheduled refueling outage in
1997
and had scheduled refueling outages from September 7 through November 5, 1996
and from March 17 through May 2, 1995.
The Design Basis Documentation project (Project) initiated by Vermont
Yankee during 1996 is expected to be complete by the end of 1999. The
Company's 35% share of the total cost for this Project is expected to be about
$6.3 million. Such costs will be deferred by Vermont Yankee and amortized
over the remaining license life of the plant.
During scheduled nuclear refueling outages, the company purchases more
costly replacement energy from other sources to satisfy energy needs. In
accordance with current rate-making treatment, the company defers and
amortizes to expense over their respective fuel cycles the incremental
replacement energy and maintenance costs associated with refueling outages for
the Yankee plants, three of which are permanently shutdown, and Unit #3
jointly owned nuclear generating unit. During 1996, the company deferred $1.5
million and $6.0 million of replacement energy and capacity costs,
respectively, for Vermont Yankee and for 1995 deferred $2.4 million and
$6.9 million of replacement energy and capacity costs, respectively, for
Vermont Yankee, Maine Yankee, Connecticut Yankee and Unit #3. For the 1998
Vermont Yankee refueling outage, the company expects to defer approximately
$1.2 million and $6.7 million for replacement energy and maintenance costs,
respectively.
In August 1997, Vermont Yankee received an unsolicited expression of
interest to purchase Vermont Yankee. At this time no sale of Vermont Yankee
appears likely.
Under various long-term purchase power contracts expiring in 2016, the
company receives varying amounts of capacity and energy from Hydro-Quebec.
See Note 14 to the Consolidated Financial Statements for further details
related to the Hydro-Quebec power contracts.
Under a 30-year contract, which expires in April 1998, the company,
through Vermont Electric Power Company, Inc., purchases 46.98 MW of capacity
from Merrimack #2, a coal-fired generating plant owned by NU.
The company, under long-term contracts, purchases power from a number of
small power producers who own qualifying facilities under the Public Utility
Regulatory Policies Act of 1978. These qualifying facilities produce energy
using hydroelectric, wood, biomass and refuse-burning generation. During
1997, the company purchased 209,672 MWH of which approximately 153,012 MWH is
associated with the Vermont Electric Power Producers and 37,446 MWH with a
New Hampshire/Vermont solid waste plant.
The company engages in purchases and sales with other electric utilities
and with NEPOOL to take advantage of immediate pricing and other market
conditions. These purchases are included in Other sources in the table above.
The net cost components of purchased power and production fuel costs for
the past three years were as follows (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
Units Amount Units Amount Units Amount
<S> <C> <C> <C> <C> <C> <C>
Purchased and produced:
Capacity (MW) 527 $ 99,513 526 $ 86,431 585 $ 85,758
Energy (MWH) 3,470,235 71,930 3,445,259 67,991 3,603,446 63,907
-------- -------- --------
Total purchased power costs 171,443 154,422 149,665
Production fuel (MWH) 237,064 1,820 295,802 1,570 348,528 2,358
-------- -------- --------
Total purchased power and
production fuel costs 173,263 155,992 152,023
Less entitlement and other
resale sales (MWH) 1,206,091 41,190 1,241,302 43,486 1,475,457 53,071
-------- -------- --------
Net purchased power and
production fuel costs $132,073 $112,506 $ 98,952
======== ======== ========
</TABLE>
The increase in purchased capacity cost of $13.1 million for 1997 over
1996 resulted from $7.4 million in higher prices, $.2 million increase in the
amount of MW purchased and $5.5 million representing Connecticut Valley's
estimated loss on power contracts for the twelve months following December 31,
1997 discussed in Note 13 to the Consolidated Financial Statements.
The increase in purchased capacity cost of $.7 million for 1996 over 1995
resulted from $9.3 million in higher prices offset by a 10%, or $8.6 million,
decrease in the amount of MW purchased.
Energy costs are directly related to the variable prices of oil, nuclear
fuel and coal but, more importantly, to the proportion of the company's
purchased energy that comes from each of these fuel sources. The increase in
energy costs for 1997 resulted from a 5.0% or $3.4 million increase in cost
per MWH purchased and a .7%, or $.5 million increase in the amount of MWH
purchased. The price increase results primarily from incremental replacement
power costs associated with Unit #3 discussed above and Maine Yankee and
Connecticut Yankee nuclear power plants discussed in Note 2 to the
Consolidated Financial Statements.
Pursuant to a PSB Accounting Order, during the first half of 1997,
the company reduced energy costs by approximately $5.8 million related to the
Hydro-Quebec agreement for which a payment of $5.8 million was received
from Hydro-Quebec on June 30, 1997.
The increase in energy costs for 1996 resulted from an 11% or
$6.9 million increase in cost per MWH purchased offset by a 4.4% or
$2.8 million decrease in the amount of MWH purchased. The price increase
results primarily from incremental replacement power costs associated with
Unit #3 discussed above.
The company is responsible for paying its entitlement percentage of
decommissioning costs for Vermont Yankee, Connecticut Yankee, Maine Yankee and
Yankee Atomic as well as its joint ownership percentage of decommissioning
costs for Unit #3. See Notes 2 and 14 to the Consolidated Financial
Statements. The staff of the Securities and Exchange Commission has
questioned certain current accounting practices of the electric utility
industry, including the company, regarding the recognition, measurement and
classification of decommissioning costs for nuclear generating stations in
financial statements of electric utilities. In response to these questions,
the Financial Accounting Standards Board has agreed to review the industry-
wide accounting for nuclear decommissioning costs. If current electric
utility industry accounting practices for such decommissioning costs are
changed, it is possible that annual expense provisions for decommissioning
costs could increase, the total estimated costs for decommissioning could be
recorded as a liability, and income from external decommissioning trusts could
be reported as investment income instead of a reduction to decommissioning
expense. The company does not believe that such changes, if required, would
have an adverse effect on results of operations due to its ability to recover
decommissioning costs through the regulatory process. See Liquidity and
Capital Resources - Competition, for related information.
Due to increased generation at the Wyman #4 and the Joseph C. McNeil
generating stations, production fuel costs increased for 1997 compared to
1996.
Production fuel costs decreased $.8 million for 1996 due primarily to
lower generation by Unit #3 discussed above.
In order to optimize its power mix for baseload, intermediate and peaking
power, the company engages in sales and purchases with other electric
utilities, primarily in New England and with NEPOOL. The profits from these
transactions are used to reduce purchased power costs.
Based on present commitments and contracts, the company expects that net
purchased power and production fuel costs will be approximately $134.2
million, $139.3 million and $143.8 million for the period 1998 through 2000.
PRODUCTION AND TRANSMISSION Due to increased production costs, primarily
related to Unit #3 and higher transmission costs, production and transmission
expenses increased $1.5 million compared to 1996.
OTHER OPERATION EXPENSES In accordance with a PSB Accounting Order issued in
January 1996, the company expensed, in December 1995, approximately
$2.9 million of deferred restructuring costs. This recognition combined with
reduced amortization of about $.8 million for 1996, decreased other operation
expenses approximately 9.5% compared to 1995.
MAINTENANCE EXPENSES Maintenance expenses associated with the company's joint
ownership interest in Unit #3 increased for 1997 compared to 1996. However,
this increase was partially offset by a decrease in maintenance expenses
related to the company's hydroelectric generating facilities.
The $2.1 million or 15.9% increase in maintenance expenses for 1996
compared to 1995 is primarily attributable to maintenance expenses associated
with Unit #3.
INCOME TAXES Federal and state income taxes fluctuate with the level of pre-
tax earnings. These taxes decreased for 1997 and 1996 as a result of lower
pre-tax earnings.
OTHER INCOME AND DEDUCTIONS Equity in earnings of affiliates was about the
same for all periods presented.
Allowance for equity and borrowed funds used during construction
decreased for 1997 compared to 1996 due to a lower level of construction
expenditures partially offset by higher rate used for capitalization of these
funds.
The 1996 increase is due to a higher level of construction expenditures
and higher rates used for capitalization of these funds.
The increase in other income, net for 1997 results from a $2.9 million
gain on sale of a non-utility investment discussed in Financing and
Capitalization, Diversification below and a $2.1 million gain from sale of
non-utility property.
The decrease in other income, net for 1996 compared to 1995 is primarily
due to approximately $2.3 million of expenses incurred in connection with a
non-utility project currently under development in Summersville,
West Virginia. These expenses would be reimbursed if this pending project
reaches financial closing. The decrease was offset by insurance proceeds of
$1.3 million recorded in the first quarter of 1996, higher income from
Catamount's operating investments and an increase in interest and dividend
income.
OTHER INTEREST EXPENSE Other interest expenses declined for 1997 and 1996 due
to a decrease in short-term debt levels.
EXTRAORDINARY CHARGE The extraordinary charge net of taxes of $.8 million
relates to the discontinued application of SFAS No. 71 for Connecticut Valley.
CASH DIVIDENDS PAID
Common
The increase in common dividends paid for 1997 results from the full year
impact of the 10% increase in the quarterly common dividend paid (from $.20 to
$.22 per share) on the company's outstanding common stock beginning in August
and November 1996.
The 1996 increase compared to 1995 results from the partial year impact
of the 10% increase in the quarterly common dividend paid discussed above.
LIQUIDITY AND CAPITAL RESOURCES
CONSTRUCTION The company's liquidity is primarily affected by the level of
cash generated from operations and the funding requirements of its ongoing
construction and C&LM programs. Net cash provided by operating activities
generated $41.8 million in 1997, $42.7 million in 1996 and $41.7 million in
1995.
The company ended the 1997 year with cash and cash equivalents of
$16.5 million, an increase of $10.1 million from the beginning of the year.
The increase in cash for 1997 was the result of $41.8 million provided by
operating activities, $8.9 million used for investing activities and
$22.8 million used for financing activities.
Operating Activities Net income, depreciation and deferred income taxes and
investment tax credits provided $26.7 million. About $15.1 million of cash
was provided from fluctuations in working capital and other operating
activities.
Investing Activities Construction and plant expenditures consumed
approximately $13.8 million while $4.0 million was used for C&LM programs and
non-utility investments. Approximately $8.9 million was provided by sale of
investment and non-utility property, investments in affiliates and by a
reduction in an escrow account to fund a non-utility investment.
Financing Activities Dividends paid on common stock were $10.1 million, while
preferred stock dividends were $2.5 million. Short-term obligations,
retirement of long-term debt, retirement of preferred stock and the repurchase
of common stock required $5.1 million, $3.0 million, $1.0 million and
$1.1 million, respectively.
Excluding allowance for funds used during construction, construction
expenditures are estimated at $18.8 million, $17.1 million and $15.4 million
for the years 1998 through 2000, respectively.
ELECTRIC INDUSTRY RESTRUCTURING
The electric utility industry is in a period of transition that may
result in a shift away from ratemaking based on cost of service and return on
equity to more market-based rates. Many states, including Vermont and
New Hampshire, where the Company does business, are exploring new mechanisms
to bring greater competition, customer choice and market influence to the
industry while retaining the public benefits associated with the current
regulatory system.
Vermont
On December 31, 1996, the PSB issued a Report and Order (the Report)
outlining a restructuring plan (the Plan), subject to legislative approval,
for the Vermont electric utility industry.
Due to uncertainty surrounding legislative schedules, the PSB, on
April 18, 1997, issued an Order which suspended, pending further legislative
action or future PSB Orders, certain filing deadlines for reports and plans to
be completed in connection with the Plan.
In an effort to achieve a negotiated resolution to the issues surrounding
the restructuring of the Vermont electric utility industry, the Company, Green
Mountain Power Corporation, the DPS and representatives of the Governor of the
State of Vermont developed a Memorandum of Understanding (MOU) in February
1997 establishing a plan for implementing restructuring in Vermont. Although
concepts of the MOU are still under consideration, no action has been taken on
the MOU by the Legislature.
On April 3, 1997, Senate bill 62 (S.62), an act relating to electric
industry restructuring was passed by the Vermont Senate. Pursuant to S.62,
electric utility customers would be entitled to purchase electricity in a
competitive market place and could choose their electricity supplier.
Incumbent investor-owned electric utilities, including the Company, would be
required to separate their regulated distribution and transmission operations
into affiliate entities that are functionally separate from competitive
generation and retail operations. S.62 provides for the recovery of a portion
of investor-owned utility's "above market costs" which may be stranded on
account of the introduction of competition within their service area. When
considering the recovery of such amounts, S.62 would require that the PSB
weigh the goal of sharing net prudently incurred, discretionary above-market
costs "evenly" between utilities and customers against other goals including
preserving the continuing financial integrity of the existing utility and
respecting the just interests of investors. The company believes that the
unmodified provisions of S.62 would not meet the criteria for continuing
application of SFAS No. 71. S.62 also creates an incentive for the Company to
take steps to close the Vermont Yankee Nuclear Power Station by conditioning
the recovery of certain plant-related stranded costs on the decision of its
owners to cease operations in 1998, unless the PSB agrees to allow the plant
to run for up to two more refuelings to avoid power shortages or for other
public interest reasons. To become law, S.62 would have to be passed by the
Vermont House of Representatives in its current session which began in January
1998 and runs through April 1998 and signed by the Governor of the State of
Vermont.
At this time, the Vermont House of Representatives is not considering
S.62 but instead convened a special committee of the Vermont House of
Representatives to study matters relating to the reform of Vermont's electric
utility system. That committee issued recommendations in a report and
legislation has been proposed that would provide for reform but not adopt the
recommendations concerning customer choice and competition set forth in the
PSB's Report and Order or the MOU. Other legislation intending to advance a
portion of the PSB Report and Order and the MOU have also been introduced.
Therefore, at this time, it cannot be determined whether future restructuring
legislation will be enacted in 1998 that would conform to the concepts
developed by the Report, the MOU, S.62 or the House Special Committee report.
New Hampshire
In New Hampshire, the New Hampshire Public Utilities Commission (NHPUC),
directed by the New Hampshire legislature, established a Pilot Program (Pilot)
to determine the implications of retail competition in the electric utility
industry. The Pilot is for a two-year period beginning in May 1996 and is
open to all electric utilities and to 3% of all classes of customers in
New Hampshire. The company competed as a competitive supplier to acquire
additional load currently served by other New Hampshire utilities and to
retain load currently served by Connecticut Valley. The company acquired new
customers with combined annual electric use totaling approximately 20,000
megawatt hours.
On February 28, 1997 the NHPUC published its detailed Final Plan to
restructure the electric utility industry in New Hampshire. Also on
February 28, 1997, the NHPUC, in a supplemental order specific to Connecticut
Valley, found that Connecticut Valley was imprudent for not terminating the
Federal Energy Regulatory Commission (FERC)- authorized power contract between
Connecticut Valley and the company, required Connecticut Valley to give notice
to cancel its contract with the company and denied stranded cost recovery
related to this power contract. Connecticut Valley filed for rehearing of the
February 28, 1997 NHPUC Order.
On April 7, 1997, the NHPUC issued an Order addressing certain threshold
procedural matters raised in motions for rehearing and/or clarification filed
by various parties, including Connecticut Valley, relative to the Final Plan
and interim stranded cost orders. The April 7, 1997 Order stayed those
aspects of the Final Plan that are the subject of rehearing or clarification
requests and also stayed the interim stranded cost orders for the various
parties, including Connecticut Valley. As such, those matters pertaining to
the power contract between Connecticut Valley and CVPS were stayed. The
suspension of these orders was to remain in effect until two weeks following
the issuance of any order concerning outstanding requests for rehearing and
clarification.
On March 20, 1998, the NHPUC issued an order which affirms, clarifies and
modifies various generic policy statements including the reaffirmation to
establish rates on the basis of a regional average announced previously in its
February 28, 1997 Final Plan. The March 20, 1998 order also addresses all
outstanding motions for rehearings or clarification relative to the policies
or legal positions articulated in the Final Plan and removes the stay covering
the Company's interim stranded cost order.
On November 17, 1997, the City of Claremont, New Hampshire (Claremont),
filed with the NHPUC a petition for a reduction in Connecticut Valley's
electric rates. Claremont based its request on the NHPUC's earlier finding
that Connecticut Valley's failure to terminate its wholesale power contract
with the company as ordered in the NHPUC Stranded Cost Order of February 28,
1997 was imprudent. Under the wholesale power purchase contract with the
company, Connecticut Valley may terminate service at the end of a service
year, provided it has given written notice of termination prior to the
beginning of that service year. Claremont alleges that if Connecticut Valley
had given written notice of termination to the company in 1996 when
legislation to restructure the electric industry was enacted in New Hampshire,
Connecticut Valley's obligation to purchase power from the company would have
terminated as of January 1, 1998.
On November 26, 1997, Connecticut Valley filed a request with the NHPUC
to increase the Fuel Adjustment Clause (FAC), Purchased Power Cost Adjustment
(PPCA) and short-term energy purchase rates effective on or after January 1,
1998. The requested increase in rates results from higher forecast energy and
capacity charges on power Connecticut Valley purchases from the company plus
removal of a credit effective during 1997 to refund overcollections from 1996.
Connecticut Valley objected to the NHPUC's notice of intent to consolidate
Claremont's petition into the FAC and PPCA docket, stating that Claremont's
complaint should be heard as part of the NHPUC restructuring docket. Over
Connecticut Valley's objection at the hearing on December 17, 1997, the NHPUC
consolidated Claremont's petition with Connecticut Valley's FAC and PPCA
proceeding.
In an Order dated December 31, 1997 in Connecticut Valley's FAC and PPCA
docket, the NHPUC found Connecticut Valley acted imprudently by not
terminating the wholesale contract between Connecticut Valley and the company,
notwithstanding the stays of its February 28, 1997 Orders. The NHPUC Order
further directed Connecticut Valley to freeze its current FAC and PPCA rates
(other than short term rates to be paid to certain Qualifying Facilities)
effective January 1, 1998, on a temporary basis, pending a hearing to
determine: 1) the appropriate proxy for a market price that Connecticut Valley
could have obtained if it had terminated its wholesale contract with the
Company; 2) the implications of allowing Connecticut Valley to pass on to its
customers only that market price; and 3) whether the NHPUC's final
determination on the FAC and PPCA rates should be reconciled back to
January 1, 1998 or some other date.
On January 12, 1998, Connecticut Valley filed a motion for rehearing
alleging, among other things, that the NHPUC failed to adequately notify
Connecticut Valley of the NHPUC's intent to consider the issues that were
addressed during the December 17, 1997 hearing and ultimately were ruled on in
Order No. 22,815. Connecticut Valley claimed that the NHPUC provided
"insufficient notice of an evidentiary hearing on prudence." Connecticut
Valley also claimed (a) the NHPUC exceeded its jurisdiction by using the
FAC/PPCA proceeding to advance its restructuring agenda, (b) the NHPUC's
prudence determination is preempted by Federal law, and (c) the NHPUC made an
imprudence finding without basic findings of fact or sufficient record
evidence.
On January 14, 1998, the City of Claremont filed an objection to
Connecticut Valley's rehearing request. It claimed that Connecticut Valley
was afforded sufficient notice and that the NHPUC properly exercised its
traditional rate making powers in Order No. 22,815.
On January 19, 1998, Connecticut Valley and the company filed with the
Federal District Court for a temporary restraining order to maintain the
status quo ante by staying NHPUC Order No. 22,815 and preventing the NHPUC
from taking any action that (i) compromises cost-based rate making for
Connecticut Valley or otherwise seeks to impose market price-based rate making
on Connecticut Valley; (ii) interferes with the FERC's exclusive jurisdiction
over the company's pending application to recover wholesale stranded costs
upon termination of its wholesale power contract with Connecticut Valley; or
(iii) prevents Connecticut Valley from recovering through retail rates the
stranded costs and purchased power costs that it incurs pursuant to its FERC-
authorized wholesale rate schedule with the company. The Federal Court has
not yet ruled on the company's filing.
On January 20, 1998, the NHPUC issued Order No. 22,838 which declined the
request to increase FAC and PPCA rates retroactive to January 1, 1998. All
other requests for relief in Connecticut Valley's motion for rehearing were
denied. The NHPUC did expand the scope of its hearing to take evidence
regarding the prudence of Connecticut Valley's decision to not unilaterally
terminate the wholesale power contract between Connecticut Valley and the
company. On February 23, 1998, the NHPUC announced from the bench that it
reaffirmed its finding of imprudence and would designate a proxy market price
for power at 4 cents per kwh in lieu of the actual amounts arising pursuant to
the wholesale power contract with the company. In addition, the NHPUC
indicated that it would permit Connecticut Valley to maintain its current
rates pending a decision in Connecticut Valley's appeal of the NHPUC Order to
the New Hampshire Supreme Court, provided Connecticut Valley can provide
financial assurance that it will be able to satisfy any ultimate refund
obligation. The company is awaiting the issuance of the NHPUC's written
order.
Based on the December 31, 1997 NHPUC Order as well as the NHPUC's
February 23, 1998 announcement from the bench, which results in the
establishment of Connecticut Valley's rates on a non cost-of-service basis,
Connecticut Valley no longer qualifies, as of December 31, 1997, for the
application of SFAS No. 71. As a result, Connecticut Valley wrote-off all of
its regulatory assets associated with its New Hampshire retail business for
the year ended December 31, 1997. This write-off amounted to approximately
$1.2 million on a pre-tax basis. In addition, Connecticut Valley recorded a
$5.5 million pre-tax loss as of December 31, 1997 under SFAS No. 5,
"Accounting for Contingencies," representing Connecticut Valley's estimated
loss on power contracts for the twelve months following December 31, 1997.
The company expects but cannot be certain that it will be able to recover
these costs beginning in 1999.
These write-offs result in a violation of certain financial covenants
associated with Connecticut Valley's loan with Citizens Bank of New Hampshire.
This loan with an outstanding balance of $3.75 million will be in default
30 days after notice from the bank of the violation of certain financial
covenants unless the default is otherwise cured or waived. The notice has not
yet been tendered by the bank. Under a default, the bank has the right to
accelerate the repayment of the outstanding loans. Connecticut Valley has
outstanding long-term debt of $3.75 million as well as $.25 million of short-
term debt currently outstanding under the committed line of credit with
Citizens Bank. A default in the $3.75 million loan would also cause a cross
default of the $.25 million of short-term debt outstanding. If these loans go
into default, there will be no cross defaults of any of the company's or its
other subsidiaries' loan agreements. Connecticut Valley has provided notice
to the bank of its violations and is currently discussing remedies with the
bank.
On June 25, 1997, the company filed with the FERC a notice of termination
of its power supply contract with Connecticut Valley, conditional upon the
company's request to impose a surcharge on the company's transmission tariff
to recover the stranded costs that would result from the termination of its
contract with Connecticut Valley. The amount requested was $44.9 million plus
interest at the prime rate to be recovered over a ten-year period. In its
Order dated December 18, 1997 in Docket No. ER97-3435-000, the FERC rejected
the company's proposed stranded cost surcharge mechanism but indicated that it
would consider an exit fee mechanism for collecting stranded costs. The FERC
also rejected the company's arguments concerning the applicability of stated
FERC policies regarding retail stranded costs, multi-state regulatory gaps and
the implications of state restructuring initiatives. The company has filed a
motion seeking rehearing of the FERC's December 18, 1997 Order. In addition,
and in accordance with the December 18, 1997 FERC Order, on January 12, 1998
the company filed a request with the FERC for an exit fee mechanism to collect
$44.9 million in a lump sum, or in installments with interest at the prime
rate over a ten-year period, to cover the stranded costs resulting from the
cancel-lation of Connecticut Valley's power contract with the company.
On March 11, 1998, the FERC issued an order accepting for filing the
Company's request for an exit fee effective March 14, 1998, and set hearings
to determine: whether Connecticut Valley will become an unbundled
transmission customer of the Company, the Company's expectation as to the
period of time it would serve Connecticut Valley, and the allowable amount of
the exit fee. The FERC also rejected the Company's June 25, 1997 notice of
termination indicating that the notice can be resubmitted when the power
contract is proposed to be terminated.
If the Company is unable to obtain an order authorizing the full recovery
amount of the exit fee, or other appropriate mechanism, the company would be
required to recognize a loss under SFAS No. 5 totaling approximately $75.0
million on a pre-tax basis. Furthermore, the company would be required to
write-off approximately $4.0 million in regulatory assets associated with its
wholesale business under SFAS No. 71 on a pre-tax basis. Conversely, even if
the company obtains a FERC order authorizing the requested exit fee,
Connecticut Valley would be required to recognize a loss under SFAS No. 5 of
approximately $40.0 million on a pre-tax basis unless Connecticut Valley has
obtained an order by the NHPUC or other appropriate body directing the
recovery of those costs in Connecticut Valley's retail rates. Either of these
reasonably possible outcomes could occur during calendar year 1998.
For further information on New Hampshire restructuring issues and other
regulatory events in New Hampshire affecting the company or Connecticut
Valley, see the company's form 8-K dated February 28, 1997, January 12, 1998
and January 28, 1998, Forms 10-Q for the quarters ended March 31, 1996, June
30, 1996, September 30, 1996, March 31, 1997, June 30, 1997 and September 30,
1997, and Item 1. Business-New Hampshire Retail Rates, Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations-
Liquidity and Capital Resources-Electric Industry Restructuring-New Hampshire
and Item 8. Financial Statements and Supplementary Data-Note 17, Subsequent
Event (Unaudited) in Central Vermont's 1996 Form 10-K.
The company has initiated and will continue to work for a negotiated
settlement with parties to the New Hampshire restructuring proceeding and the
NHPUC. The company cannot predict whether the ultimate outcome of this
matter. However, an adverse resolution could have a material adverse effect
on the company's results of operations, cash flows, and ability to obtain
capital at competitive rates.
Connecticut Valley constitutes approximately 7% of the company's total
retail MWH sales.
Competition-Risk Factors
If retail competition is implemented in Vermont or New Hampshire, the
company is unable to predict the impact of this competition on its revenues,
the company's ability to retain existing customers and attract new customers
or the margins that will be realized on retail sales of electricity.
Historically, electric utility rates have been based on a utility's
costs. As a result, electric utilities are subject to certain accounting
standards that are not applicable to other business enterprises in general.
SFAS No. 71 requires regulated entities, in appropriate circumstances, to
establish regulatory assets and liabilities, and thereby defer the income
statement impact of certain costs and revenues that are expected to be
realized in future rates.
As described in Note 1 of Notes to Consolidated Financial Statements,
included in the company's 1997 Annual Report on Form 10-K, the company
believes it currently complies with the provisions of SFAS No. 71 for its
regulated Vermont retail and FERC regulated wholesale businesses. In the
event the company determines that it no longer meets the criteria for
following SFAS No. 71, the accounting impact would be an extraordinary, non-
cash charge to operations of approximately $73.0 million on a pre-tax basis as
of December 31, 1997. Criteria that give rise to the discontinuance of SFAS
No. 71 include (1) increasing competition that restricts the company's ability
to establish prices to recover specific costs and (2) a significant change in
the manner in which rates are set by regulators from cost-based regulation to
another form of regulation.
The Securities and Exchange Commission has questioned the ability of
certain utility companies continuing the application of SFAS No. 71 where
legislation provides for the transition to retail competition. Deregulation
of the price of electricity issues related to the application of SFAS No. 71
and 101, as to when and how to discontinue the application of SFAS No. 71 by
utilities during transition to competition has been referred to the Financial
Accounting Standards Board's Emerging Issues Task Force (EITF).
The EITF has reached a tentative consensus, and no further discussion is
planned, that regulatory assets should be assigned to separable portions of
the company's business based on the source of the cash flows that will recover
those regulatory assets. Therefore, if the source of the cash flows is from a
separable portion of the company's business that meets the criteria to apply
SFAS No. 71, those regulatory assets should not be written off under SFAS
No. 101, "Accounting for the Discontinuation of Application of SFAS No. 71,"
but should be assessed under paragraph 9 of SFAS No. 71 for realizability.
SFAS No. 121, "Accounting for the Impairment of Long Lived Assets and for
Long-Lived Assets to Be Disposed Of," which was implemented by the company on
January 1, 1996, requires that any assets, including regulatory assets, that
are no longer probable of recovery through future revenues, be revalued based
upon future cash flows. SFAS No. 121 requires that a rate-regulated
enterprise recognize an impairment loss for the amount of costs excluded from
recovery. As of December 31, 1997, based upon the regulatory environment
within which the company currently operates, SFAS No. 121 did not have an
impact on the company's financial position or results of operations.
Competitive influences or regulatory developments may impact this status in
the future.
Because the company is unable to predict what form possible future
legislation will take, it cannot predict if or to what extent SFAS Nos. 71 and
121 will continue to be applicable in the future. In addition, if the company
is unable to mitigate or otherwise recover stranded costs that could arise
from any potentially adverse legislation or regulation, the company would have
to assess the likelihood and magnitude of losses incurred under SFAS No. 5.
As such, the company cannot predict whether any restructuring legislation
enacted in Vermont would have a material adverse effect on the company's
operations, financial condition or credit ratings. However, the company's
failure to recover a significant portion of its purchased power costs, would
likely have a material adverse effect on the company's results of operations,
cash flows and ability to obtain capital at competitive rates. It is possible
that stranded cost exposure associated with SFAS Nos. 5, 71, and 121, before
mitigation could exceed the company's current total common stock equity.
FINANCING AND CAPITALIZATION
UTILITY The level of short-term borrowings fluctuates based on seasonal
corporate needs, the timing of long-term financings and market conditions. On
November 7, 1997, the company implemented a 364 day committed Revolving Credit
and Competitive Advance Facility (Credit Facility) with a group of banks
providing for up to $50 million of Credit Facility which upon PSB regulatory
approval will become a three year revolving credit facility. This Credit
Facility will be used for general corporate purposes and replaced $31 million
of the committed and uncommitted lines of credit.
Short-term borrowings are supported by the committed Revolving Credit
and competitive Advance Facility. In the past, the company has been able to
finance its construction and C&LM programs out of net-cash generated by
operating activities and it expects to meet future commitments in the same
manner.
Connecticut Valley maintains a $.8 million committed line of credit for
its construction program and for other corporate purposes which expires on
May 31, 1998. Borrowings under this short-term debt arrangement are at
interest rates ranging from less than prime to the prime rate. Connecticut
Valley had $625,000 and $550,000 outstanding short-term debt at December 31,
1997 and 1996, respectively.
In regard to Connecticut Valley's long-term debt see Note 7 to the
Consolidated Financial Statements.
On June 3, 1996, the company's Board of Directors increased the quarterly
dividend rate from $.20 to $.22 payable August 15, 1996.
The company, through a common stock repurchase program initiated in 1994
and subsequently suspended in order to preserve capital for use in industry
restructuring and other business purposes, has purchased 362,447 shares of its
common stock in open market transactions at an average price of $13.04 per
share. These transactions are recorded as treasury stock, at cost, in the
company's Consolidated Balance Sheet.
The company's capital structure ratios (including amounts of long-term
debt due within one year) for the past three years were as follows:
December 31
1997 1996 1995
---- ---- ----
Common stock equity 54% 53% 52%
Preferred stock 8 8 8
Long-term debt 33 34 35
Long-term lease arrangements 5 5 5
--- --- ---
100% 100% 100%
=== === ===
Current credit ratings of the company's securities as reaffirmed by Duff
& Phelps and Standard & Poor's are as follows:
Duff & Standard
Phelps & Poor's
------ --------
First Mortgage Bonds BBB A-
Corporate Credit Rating BBB
Preferred Stock BBB- BBB-
On January 22, 1998, Standard & Poor's revised its ratings outlook on the
company to negative from stable stating that the revised outlook reflects the
adverse ruling by the NHPUC related to Connecticut Valley discussed above.
NON-UTILITY Catamount, a wholly owned subsidiary of the Company, implemented
a credit facility in July 1996 which provides for up to $8.0 million of
letters of credit and working capital loans. Currently, a $1.2 million letter
of credit is outstanding to support certain of Catamount's obligations in
connection with a debt reserve requirement in the Appomattox Cogeneration
project.
SmartEnergy, also a wholly owned subsidiary of the Company, maintained
$.5 million revolving line of credit with a bank to provide working capital
and financing assistance for investment purposes. SmartEnergy had no
outstanding borrowings under this facility at December 31, 1996 and $25,000 at
December 31, 1997. This line of credit was cancelled on February 9, 1998.
Financial obligations of the non-utility wholly owned subsidiaries are
non-recourse to the Company.
C&LM PROGRAMS The primary purpose of these programs is to offset the need for
long-term power supply and delivery resources that are more expensive to
purchase or develop than customer-efficiency programs. Total C&LM
expenditures in 1996 and 1997 were $3.5 million and $2.7 million,
respectively.
DIVERSIFICATION Catamount was formed for the purpose of investing in non-
regulated power plant projects. Currently, Catamount, through its wholly
owned subsidiaries, has interests in five operating independent power projects
located in Glenns Ferry and Rupert, Idaho; Rumford, Maine; East Ryegate,
Vermont; and Hopewell, Virginia. In addition, Catamount has interests in a
project under construction in Thetford, England, and under development in
Summersville, West Virginia, and Fort Dunlop, England. Catamount's after-tax
earnings were $4.1 million, $.5 million and $2.5 million for 1997, 1996 and
1995, respectively. Earnings for 1997 and 1995 include a net of tax gain of
approximately $1.8 million and $.9 million from the sale of NW Energy Williams
Lake L.P. and the partial sale of Appomattox Cogeneration Project,
respectively. Also, results of operation for 1997 and 1996 include
$.4 million and $2.3 million of pre-tax expenses related to the Gauley River
project in Summersville, West Virginia. These expenses would be reimbursed if
this pending project reaches financial closing.
SmartEnergy was formed to engage in the sale of or rental of electric
water heaters, energy efficient products and other related goods and services.
SmartEnergy incurred losses of $.7 million for 1997 and $.3 million for 1995,
and earnings of $.3 million for 1996.
RATES AND REGULATION The company recognizes that adequate and timely rate
relief is necessary if the company is to maintain its financial strength,
particularly since Vermont regulatory rules do not allow for changes in
purchased power and fuel costs to be passed on to consumers through automatic
rate adjustment clauses. The company's practice of reviewing costs
periodically will continue and rate increases will be requested when
warranted.
1997 Retail Rate Case: On September 22, 1997, the company filed for a 6.6% or
$15.4 million general rate increase to become effective June 6, 1998 to offset
increasing cost of providing service. Approximately $14.3 million or 92.9% of
the rate increase request is to recover contractual increases in the cost of
power the company purchases from Hydro-Quebec.
At the same time, the company also filed a request to eliminate the
winter-summer rate differential and price electricity the same year-round.
The change would be revenue-neutral within classes of customers and overall.
Over time, customers would see a leveling off of rates so they would pay the
same per kilowatt-hour during the winter and summer months.
The PSB has decided to appoint an independent investigator to examine the
company's decision to buy power from Hydro-Quebec. The company has filed a
motion with the PSB stating that the PSB already examined the company's
decision to buy power from Hydro-Quebec and, therefore, the PSB as well as
other parties should be barred from reviewing its past decision on Hydro-
Quebec. However, the company does not object to the independent investigator
or others looking at issues of management of the power supply since the
company's last rate case.
During February 1998, the Vermont Department of Public Service (DPS)
filed testimony in opposition to the company's 6.6% or $15.4 million retail
rate increase request. As a result of its testimony, the DPS is recommending
that the PSB instead reduce the company's current retail rates by
approximately 2.5% or $5.7 million. The company cannot predict whether the
PSB will adopt any or all of the DPS recommendation. As a result, the company
cannot predict whether the ultimate outcome of this matter would have a
material adverse effect on the company's results of operations, cash flows,
and ability to obtain capital at competitive rates.
The PSB has recently issued an Order in a Green Mountain Power
Corporation (GMP) rate case. That Order found GMP's decision to lock-in the
Hydro-Quebec VJO contract in 1991 imprudent and further found that the
contract was not used and useful. As such, the PSB concluded that a large
portion of the contract's costs should not be imposed on consumers and were
disallowed.
The Company is one of the 13 participants in the VJO contract and has
pending before the PSB a 6.6% rate increase that is primarily intended to
recover increases in the cost of power the Company purchases pursuant to the
VJO contract. The Company cannot predict the outcome of this proceeding.
However, if the Company were to receive an order similar to that obtained by
GMP, such an order could have a material adverse effect on the Company's
financial condition.
1996 Retail Rate Case: The company filed for a 14.6% or $31.0 million general
rate increase on October 17, 1995 to become effective July 1, 1996. On
February 13, 1996, the company reached an agreement with the DPS regarding
this rate increase request. On April 30, 1996, the company received a rate
order from the PSB generally approving the agreement.
Under the terms of the Agreement approved by the PSB, the company
increased its Vermont retail rates 5.5% effective June 1, 1996 and 2%
effective January 1, 1997. In addition, the Agreement capped the company's
allowed return on common equity in its Vermont retail business for 1996 and
1997 at 11%, by requiring the company to reduce deferred C&LM costs to the
extent its Vermont retail return on common equity would otherwise exceed 11%,
and prohibited the company from seeking any increase in Vermont retail rates
which would become effective before January 1, 1998, except for extraordinary
circumstances. The Agreement also required the company to recognize in 1997,
for accounting purposes, approximately $5.8 million in power cost reductions
associated with a Memorandum of Understanding with Hydro-Quebec and to file
for a rate reduction if the company was successful in negotiating any further
modifications to the Contract with Hydro-Quebec that resulted in a reduction
in the cost of power from Hydro-Quebec between February 12, 1996 and December
31, 1997. Pursuant to the common equity cap of 11%, the company recognized in
1996 approximately $147,000 C&LM costs that would have otherwise been
deferred.
In its April 30, 1996 Order, the PSB modified the February 13, 1996
Agreement reached with the DPS by removing only one of the two penalties
imposed in the PSB's October 31, 1994 Order. Although the PSB's April 30,
1996 Order supports the Agreement's removal of the penalty associated with the
company's efforts to acquire cost-effective energy efficiency resources, it
only suspends the penalty for the alleged mismanagement of power supply
options through the later of January 1, 1998 or the next investigation into
the company's rates. After this period, the rate consequences of the penalty,
a .75% reduction in the company's authorized Vermont retail return on common
equity, will be reimposed unless the company demonstrates in future
proceedings that it has adequately met the standards for removal as
established by the PSB in its Orders issued October 31, 1994 and April 30,
1996.
During proceedings related to the April 30, 1996 Order, certain
intervening parties petitioned the PSB for a management audit of the company.
In an Order dated April 10, 1996, the PSB severed the management audit issue
from the rate proceeding. The PSB held a status conference on May 6, 1996 to
address whether there should be such an audit as well as other related issues.
Hearings for the management audit issue were held on July 16, 1996 and
August 29, 1996 addressing issues related to management practices.
In an Order dated April 17, 1997, the PSB rejected the idea of a
traditional management audit of the company and instead ordered an independent
forward-looking analysis of three of the company's management policies and
practices focusing on three areas: 1) Transmission of information to the
company's Board of Directors by management. 2) Cost-benefit analyses for
major corporate decisions. 3) Implementation of the company's ethics and
conflict of interest policy. An independent analysis on these areas began
during the first quarter of 1998.
Connecticut Valley: On November 26, 1997, Connecticut Valley filed a request
with the NHPUC to increase the FAC, PPCA and short-term energy purchase rates
effective on or after January 1, 1998. The requested increase in rates
results from higher forecast energy and capacity charges on power Connecticut
Valley purchases from the company plus removal of credit effective during 1997
to refund overcollections from 1996.
In an order dated December 31, 1997, the NHPUC directed Connecticut
Valley to freeze its current FAC and PPCA rates (other than short-term rates
to be paid to certain Qualifying Facilities) effective January 1, 1998, on a
temporary basis pending a hearing to determine: 1) the appropriate proxy for a
market price that Connecticut Valley could have obtained if it had terminated
its wholesale contract with the company; 2) the implications of allowing
Connecticut Valley to pass on to its customers only that market price; and
3) whether the NHPUC's final determination on the FAC and PPCA rates should be
reconciled back to January 1, 1998 or some other date. See Electric Industry
Restructuring discussed above and in Note 13 to the Consolidated Financial
Statements for additional information.
On July 23, 1996, Connecticut Valley filed with the NHPUC for an 8.8%
or approximately $1.6 million base rate increase to become effective
September 22, 1996. The increase was to recover increased operating costs and
costs of improvements to the electric system. As part of the permanent rate
increase, Connecticut Valley also requested a temporary rate increase of 5.4%
or approximately $.9 million. The NHPUC granted Connecticut Valley a
temporary rate increase of 5.4% effective with bills rendered October 1, 1996.
On January 21, 1997, Connecticut Valley and the NHPUC Staff reached a
settlement in principle regarding the permanent rate increase. The
settlement, approved by the NHPUC, provided for a 6.4% permanent rate increase
and sets Connecticut Valley's allowed return on common equity at 10.2%.
Recoupment revenues for the period October 1, 1996 and March 30, 1997, and
rate case expenses were recovered through a temporary billing surcharge of
approximately 2.2% of total bill effective during the period April 1 through
November 30, 1997, when off-peak rates were in effect. As approved by the
NHPUC, this billing surcharge resumed on March 1, 1998 to recover expenses
incurred in connecion with the pilot program.
YEAR 2000 INFORMATION SYSTEMS MODIFICATIONS The company has assessed the
impact of the year 2000 issue on its computer systems and applications.
During 1997, the company incurred costs of approximately $.1 million and
estimates that about $2.5 million will be incurred in 1998 and $.2 million
will be incurred in 1999 to modify its existing computer systems and
applications which are expected to be completed during the second quarter of
1999. During the first quarter of 1998, the company requested an accounting
order from the PSB to defer approximately $2.1 million of associated
incremental operating and maintenance costs. The company believes that based
on the current regulatory process, these costs will be recovered through the
regulatory process and therefore they do not represent the potential for a
material adverse effect on its financial position or results of operations.
INFLATION The annual rate of inflation, as measured by the Consumer Price
Index, was 1.7% for 1997, 3.3% for 1996 and 2.5% for 1995. The company's
revenues, however, are based on rate regulation that generally recognizes only
historical costs. Although the rate of inflation has eased, it continues to
have an impact on most aspects of the business.
NEW ACCOUNTING PRONOUNCEMENTS In October 1995, the FASB issued SFAS No. 123,
"Accounting for Stock-Based Compensation," effective for fiscal years
beginning after December 15, 1995. The FASB issued SFAS No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities." SFAS No. 125 became effective January 1, 1997 for the company
due to an amendment of its receivables purchase agreement. See Note 9 to the
Consolidated Financial Statements. In February 1997, the FASB issued SFAS
No. 128, "Earnings per Share," effective for both interim and annual periods
ending after December 15, 1997. Earlier application was not permitted. Refer
to Notes 9 and 15 to the Consolidated Financial Statements for additional
information regarding these pronouncements.
FORWARD LOOKING STATEMENTS Statements in this report relating to future
financial conditions are forward looking statements. Such forward-looking
statements are not guarantees of future performance and involve known and
unknown risks, uncertainties and other factors, which may cause the actual
results, performances or achievements to differ materially from the future
forward-looking statements. Such factors include general economic and
business conditions, changes in industry regulation, weather and other factors
which are described in further detail in the company's filings with the
Securities and Exchange Commission.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements and Supplementary Data
Page No.
Report of Independent Public Accountants. . . . . . . . . . . 42
Financial Statements:
Consolidated Statement of Income for each of the
three years ended December 31, 1997 . . . . . . . . . . . 43
Consolidated Statement of Cash Flows for each of
the three years ended December 31, 1997 . . . . . . . . . 44
Consolidated Balance Sheet at December 31, 1997
and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . 45
Consolidated Statement of Capitalization at
December 31, 1997 and 1996 . . . . . . . . . . . . . . . . 46
Consolidated Statement of Changes in Common Stock
Equity for each of the three years ended
December 31, 1997 . . . . . . . . . . . . . . . . . . . . 47
Notes to Consolidated Financial Statements . . . . . . . . 48
<PAGE>
Report of Independent Public Accountants
To the Board of Directors of
Central Vermont Public Service Corporation:
We have audited the accompanying consolidated balance sheet and statement
of capitalization of Central Vermont Public Service Corporation and its wholly
owned subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of income, changes in common stock equity and cash
flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Central Vermont
Public Service Corporation and its wholly owned subsidiaries as of
December 31, 1997 and 1996 and the results of their operations and cash flows
for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 23, 1998
<PAGE>
<TABLE>
<CAPTIOM>
CONSOLIDATED STATEMENT OF INCOME
(Dollars in thousands, except per share amounts)
Year Ended December 31
1997 1996 1995
<S> <C> <C> <C>
Operating Revenues $304,732 $290,801 $288,277
-------- -------- --------
Operating Expenses
Operation
Purchased power 171,443 154,422 149,665
Production and transmission 22,417 20,941 20,883
Other operation 40,909 38,098 42,116
Maintenance 15,333 14,918 12,874
Depreciation 16,931 17,960 17,297
Other taxes, principally property
taxes 11,490 10,971 10,543
Taxes on income 7,573 10,216 10,662
-------- -------- --------
Total operating expenses 286,096 267,526 264,040
-------- -------- --------
Operating Income 18,636 23,275 24,237
-------- -------- --------
Other Income and Deductions
Equity in earnings of affiliates 3,214 3,302 3,292
Allowance for equity funds during
construction 75 347 243
Other income, net 6,522 2,447 2,493
Provision for income taxes (1,590) (4) (246)
-------- -------- --------
Total other income and deductions,
net 8,221 6,092 5,782
-------- -------- --------
Total Operating and Other Income 26,857 29,367 30,019
-------- -------- --------
Interest Expense
Interest on long-term debt 9,337 9,473 9,544
Other interest 400 615 798
Allowance for borrowed funds
during construction (31) (163) (174)
-------- -------- --------
Total interest expense, net 9,706 9,925 10,168
-------- -------- --------
Net Income Before Extraordinary Charge 17,151 19,442 19,851
Extraordinary Charge Net of Taxes 811 - -
-------- -------- --------
Net Income 16,340 19,442 19,851
Preferred Stock Dividends Requirements 2,028 2,028 2,028
-------- -------- --------
Earnings Available For Common Stock $ 14,312 $ 17,414 $ 17,823
======== ======== ========
Average Shares of Common Stock
Outstanding 11,458,735 11,543,998 11,648,981
Basic and Diluted Share of Common Stock:
Earnings before extraordinary charge $1.32 $1.51 $1.53
Extraordinary charge $ .07 - -
Earnings Per Basic and Diluted Share of Common
Stock $1.25 $1.51 $1.53
Dividends Paid Per Share of Common Stock $ .88 $ .84 $ .80
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Year Ended December 31
1997 1996 1995
<S> <C> <C> <C>
Cash Flows Provided (Used) By Operating
Activities
Net income $ 16,340 $ 19,442 $ 19,851
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation 16,931 17,960 17,297
Deferred income taxes and
investment tax credits (6,529) 464 2,707
Extraordinary charge 1,198 - -
Allowance for equity funds
during construction (75) (347) (243)
Net deferral and amortization
of nuclear replacement energy
and maintenance costs 4,913 (1,773) (3,299)
Amortization of conservation &
load management costs 7,018 5,651 3,362
Amortization of restructuring
costs - 327 3,937
Gain on sale of investment (2,891) - (1,517)
Gain on sale of property (2,095) (700) -
(Increase) decrease in accounts
receivable and unbilled revenues 855 (1,076) (1,280)
Increase in accounts payable 668 1,185 1,803
Increase (decrease) in accrued
income taxes 4,168 1,055 (2,500)
Change in other working capital
items 3,532 7,890 (1,576)
Other, net (2,167) (7,390) 3,169
-------- -------- --------
Net cash provided by operating
activities 41,866 42,688 41,711
-------- -------- --------
Investing Activities
Construction and plant
expenditures (13,841) (18,952) (21,337)
Deferred conservation and load
management expenditures (1,837) (1,589) (3,899)
Investments in affiliates 235 (91) 249
Proceeds from sale of investment 3,750 - 6,400
Proceeds from sale of property 2,624 1,050 -
Special deposit 2,283 (5,246) (2,686)
Non-utility investments (2,172) (2,900) (226)
Other investments, net 54 (293) (316)
-------- -------- --------
Net cash used for investing
activities (8,904) (28,021) (21,815)
-------- -------- --------
Financing Activities
Repurchase of common stock (1,072) (1,042) (1,892)
Short-term debt, net (5,100) (7,740) 1,994
Long-term debt, net (3,019) 232 (4,245)
Retirement of Preferred stock (1,000) - -
Common and preferred dividends
paid (12,630) (11,728) (11,350)
Other - 14 -
-------- -------- --------
Net cash used for financing
activities (22,821) (20,264) (15,493)
-------- -------- --------
Net Increase (Decrease) In Cash and Cash
Equivalents 10,141 (5,597) 4,403
Cash and Cash Equivalents at Beginning of Year 6,365 11,962 7,559
-------- -------- --------
Cash and Cash Equivalents at End of Year $ 16,506 $ 6,365 $ 11,962
======== ======== ========
Supplemental Cash Flow Information
Cash paid during the year for:
Interest (net of amounts
capitalized) $ 9,476 $ 9,920 $ 9,927
Income taxes (net of refunds) $ 10,654 $ 8,504 $ 7,721
Non-cash Operating, Investing and Financing
Activities
Receivables purchase agreement (Note 9)
Regulatory assets (Notes 1,2 and 12)
Long-term lease arrangements (Note 14)
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
December 31
1997 1996
<S> <C> <C>
Assets
Utility Plant, at original cost $461,482 $461,231
Less accumulated depreciation 151,250 146,539
-------- --------
310,232 314,692
Construction work in progress 10,450 9,302
Nuclear fuel, net 964 947
-------- --------
Net utility plant 321,646 324,941
-------- --------
Investments and Other Assets
Investments in affiliates, at equity 26,495 26,630
Non-utility investments 30,772 27,823
Non-utility property, less accumulated
depreciation 2,894 4,498
-------- --------
Total investments and other assets 60,161 58,951
-------- --------
Current Assets
Cash and cash equivalents 16,506 6,365
Special deposits 3,368 5,633
Accounts receivable, less allowance for
uncollectible accounts ($1,946 in 1997
and $1,132 in 1996) 23,166 21,878
Unbilled revenues 18,951 11,673
Materials and supplies, at average cost 3,779 3,690
Prepayments 1,464 2,423
Other current assets 4,970 3,840
-------- --------
Total current assets 72,204 55,502
-------- --------
Regulatory Assets 73,209 59,598
-------- --------
Other Deferred Charges 4,720 3,976
-------- --------
Total Assets $531,940 $502,968
======== ========
Capitalization And Liabilities
Capitalization
Common stock equity $187,123 $186,469
Preferred and preference stock 8,054 8,054
Preferred stock with sinking fund
requirements 19,000 20,000
Long-term debt 93,099 117,374
Long-term lease arrangements 17,223 18,304
-------- --------
Total capitalization 324,499 350,201
-------- --------
Current Liabilities
Short-term debt 12,650 5,750
Current portion of long-term debt and
preferred stock 24,271 3,015
Accounts payable 4,609 4,432
Accounts payable - affiliates 12,441 12,109
Accrued income taxes 6,631 2,552
Dividends declared 2,513 507
Nuclear decommissioning costs 6,010 4,950
Other current liabilities 21,646 19,234
-------- --------
Total current liabilities 90,771 52,549
-------- --------
Deferred Credits
Deferred income taxes 53,996 57,463
Deferred investment tax credits 7,222 7,612
Nuclear decommissioning costs 28,947 16,371
Other deferred credits 26,505 18,772
-------- --------
Total deferred credits 116,670 100,218
-------- --------
Commitments and Contingencies
Total Capitalization and Liabilities $531,940 $502,968
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CAPITALIZATION
(Dollars in thousands)
December 31
1997 1996
<S> <C> <C>
Common Stock Equity
Common stock, $6 par value, authorized
19,000,000 shares; outstanding 11,785,848
shares $ 70,715 $ 70,715
Other paid-in capital 45,295 45,273
Treasury stock (362,447 shares and
266,100 shares, respectively, at cost) (4,728) (3,656)
Retained earnings 75,841 74,137
-------- --------
Total common stock equity 187,123 186,469
-------- --------
Cumulative Preferred and Preference Stock
Preferred stock, $100 par value, authorized
500,000 shares
Outstanding:
Non-redeemable
4.15 % Series; 37,856 shares 3,786 3,786
4.65 % Series; 10,000 shares 1,000 1,000
4.75 % Series; 17,682 shares 1,768 1,768
5.375% Series; 15,000 shares 1,500 1,500
Redeemable
8.30 % Series; 190,000 shares 19,000 20,000
Preferred stock, $25 par value, authorized
1,000,000 shares
Outstanding - none - -
Preference stock, $1 par value, authorized
1,000,000 shares
Outstanding - none - -
-------- --------
Total cumulative preferred and preference
stock 27,054 28,054
Long-Term Debt
First Mortgage Bonds
9.20 % Series EE, due 1998 7,500 7,500
9.20 % Series FF, due 2000 7,500 7,500
9.26 % Series GG, due 2002 3,000 3,000
9.97 % Series HH, due 2003 21,000 24,000
8.91 % Series JJ, due 2031 15,000 15,000
5.30 % Series KK, due 1998 10,000 10,000
5.54 % Series LL, due 2000 5,000 5,000
6.01 % Series MM, due 2003 7,500 7,500
6.27 % Series NN, due 2008 3,000 3,000
6.90 % Series OO, due 2023 17,500 17,500
Vermont Industrial Development Authority Bonds
Variable, due 2013 (4.05% at December 31,
1997) 5,800 5,800
New Hampshire Industrial Development Authority
Bonds
6.40%, due 2009 5,500 5,500
Connecticut Development Authority Bonds
Variable, due 2015 (3.55% at December 31,
1997) 5,000 5,000
Other, various 4,070 4,089
-------- --------
117,370 120,389
Less current portion 24,271 3,015
-------- --------
Total long-term debt 93,099 117,374
-------- --------
Long-Term Lease Arrangements 17,223 18,304
-------- --------
Total Capitalization $324,499 $350,201
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCK EQUITY
(Dollars in thousands)
Other
Common Stock Paid-in Treasury Retained
Shares Amount Capital Stock Earnings Total
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 11,729,448 $70,715 $45,229 $ (735) $55,575 $170,784
Treasury stock at cost (138,700) (1,893) (1,893)
Net income 19,851 19,851
Cash dividends on capital stock:
Common stock - $.80 per share (6,976) (6,976)
Cumulative preferred stock:
Non-redeemable (368) (368)
Redeemable (1,660) (1,660)
Amortization of preferred stock
issuance expenses 22 22
---------- ------- ------- ------- ------- --------
Balance, December 31, 1995 11,590,748 70,715 45,251 (2,628) 66,422 179,760
Treasury stock at cost (71,000) (1,028) (1,028)
Net income 19,442 19,442
Cash dividends on capital stock:
Common stock - $.40 per share (4,630) (4,630)
Common stock - $.44 per share (5,069) (5,069)
Cumulative preferred stock:
Non-redeemable (368) (368)
Redeemable (1,660) (1,660)
Amortization of preferred stock
issuance expenses 22 22
---------- ------- ------- ------- ------- --------
Balance, December 31, 1996 11,519,748 70,715 45,273 (3,656) 74,137 186,469
Treasury stock at cost (96,347) (1,072) (1,072)
Net income 16,340 16,340
Cash dividends on capital stock:
Common stock - $.88 per share (12,608) (12,608)
Cumulative preferred stock:
Non-redeemable (368) (368)
Redeemable (1,660) (1,660)
Amortization of preferred stock
issuance expenses 22 22
---------- ------- ------- ------- ------- --------
Balance, December 31, 1997 11,423,401 $70,715 $45,295 $(4,728) $75,841 $187,123
---------- ------- ------- ------- ------- --------
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
Summary of significant accounting policies
CONSOLIDATION The consolidated financial statements include the accounts of
the company and its wholly owned subsidiaries.
REGULATION The company is subject to regulation by the Vermont Public Service
Board (PSB), The New Hampshire Public Utilities Commission (NHPUC) and the
Federal Energy Regulatory Commission (FERC), with respect to rates charged for
service, accounting and other matters pertaining to regulated operations.
Historically, the company has prepared its financial statements in accordance
with Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting
for the Effects of Certain Types of Regulation," for both Central Vermont
Public Service Corporation's (company) regulated Vermont service territory,
FERC regulated wholesale business and its wholly owned Connecticut Valley
Electric Company Inc.'s (Connecticut Valley) New Hampshire service territory.
In order for a company to report under SFAS No. 71, the company's rates must
be designed to recover its costs of providing service, and the company must be
able to collect those rates from customers. If rate recovery of these costs
becomes unlikely or uncertain, whether due to competition or regulatory
action, these accounting standards may no longer apply to the company's
regulated operations. In the event the company determines that it no longer
meets the criteria for applying SFAS No. 71, the accounting impact would be an
extraordinary non-cash charge to operations of an amount that could be
material. Criteria that give rise to the discontinuance of SFAS No. 71
include (1) increasing competition that restricts the company's ability to
establish prices to recover specific costs, and (2) a significant change in
the manner in which rates are set by regulators from cost-based regulation to
another form of regulation. Management periodically reviews these criteria to
ensure the continuing application of SFAS No. 71 is appropriate. Based on a
current evaluation of the various factors and conditions that are expected to
impact future cost recovery, management believes that its regulatory assets
are probable of future recovery in the state of Vermont for the company's
retail business. However, such future recovery of regulatory assets is not
probable in the state of New Hampshire for Connecticut Valley.
As a result of the NHPUC's Order dated December 31, 1997 and its
February 23, 1998 statement from the bench as described in Note 13 below,
management determined that application of regulatory accounting principles
applied to Connecticut Valley should be discontinued. As such, Connecticut
Valley has written off regulatory assets of approximately $1.2 million on a
pre-tax basis at December 31, 1997 as an extraordinary, non-cash charge to
operations. Additionally, an accrual of approximately $5.5 million on a pre-
tax basis has been charged to purchased power expense, representing
Connecticut Valley's estimated loss on power contracts for the twelve months
following December 31, 1997.
UNREGULATED BUSINESS The company's two wholly owned non-regulated
subsidiaries, Catamount Energy Corporation (Catamount) and SmartEnergy
Services, Inc. (SmartEnergy), results of operations are included in other
income, net in the Other Income and Deductions section of the Consolidated
Statement of Income. Catamount's policy is to expense all screening,
feasibility and development expenditures incurred prior to obtaining financing
commitments. Reimbursement of these costs is recorded as development
revenues.
REVENUES Estimated unbilled revenues are recorded at the end of accounting
periods. Gross unbilled revenues of approximately $18.9 million,
$18.8 million and $18.7 million for 1997, 1996 and 1995, respectively, are
included in revenues on the Consolidated Statement of Income. See Note 9
below.
MAINTENANCE Maintenance and repairs, including replacements not qualifying as
retirement units of property, are charged to maintenance expense.
Replacements of retirement units are charged to utility plant. The original
cost of units retired plus the cost of removal, less salvage, is charged to
the accumulated provision for depreciation.
DEPRECIATION The company uses the straight-line remaining life method of
depreciation. Total depreciation expense was approximately 3.59% of the cost
of depreciable utility plant for each of the years 1995 through 1997.
INCOME TAXES The company records income taxes in accordance with SFAS
No. 109, "Accounting for Income Taxes," which requires an asset and liability
approach to determine income tax liabilities. The standard recognizes tax
assets and liabilities for the cumulative effect of all temporary differences
between financial statement carrying amounts and the tax basis of assets and
liabilities, see Note 12. Investment tax credits associated with utility
plant are deferred and amortized ratably to income over the lives of the
related properties. Investment tax credits associated with non-utility plant
are recognized as income in the year realized.
ALLOWANCE FOR FUNDS DURING CONSTRUCTION Allowance for funds used during
construction (AFDC) is the cost, during the period of construction, of debt
and equity funds used to finance construction projects. The company
capitalizes AFDC as a part of the cost of major utility plant projects to the
extent that costs applicable to such construction work in progress have not
been included in rate base in connection with rate-making proceedings. AFDC
equity represents a current non-cash credit to earnings which is recovered
over the life of the property. The AFDC rates used by the company were 8.41%,
9.24%, and 9.38% for the years 1995 through 1997, respectively.
REGULATORY ASSETS Certain costs are deferred and amortized in accordance with
authorized or expected rate-making treatment. The major components of
regulatory assets reflected in the Consolidated Balance Sheet as of
December 31, are as follows (dollars in thousands):
1997 1996
Conservation and load management $16,236 $20,102
Income taxes 10,405 8,425
Dismantling costs:
Maine Yankee nuclear power plant 17,368 -
Connecticut Yankee nuclear power plant 12,778 15,256
Yankee Atomic nuclear power plant 4,810 6,065
Restructuring costs 7,379 -
Nuclear refueling outage costs 1,291 6,219
Unrecovered plant and regulatory study costs 2,042 2,200
Other regulatory assets 900 1,331
------- -------
$73,209 $59,598
======= =======
During regular nuclear refueling outages, the incremental costs
attributable to replacement energy purchased from NEPOOL and maintenance costs
are deferred and amortized ratably to expense until the next regularly
scheduled refueling shutdown.
The company earns a return on the unamortized C&LM and replacement energy
and maintenance costs. The net regulatory asset related to the adoption of
SFAS No. 109 is recovered through tax expense in the company's cost of service
generally over the remaining lives of the related property. Recovery for the
unamortized dismantling costs for Yankee Atomic, Connecticut Yankee and Maine
Yankee is provided without a return on investment through mid-2000, 2007 and
2008 respectively. Recovery of restructuring costs are subject to a
determination that these costs may be recovered in rates in the company's
current rate proceeding discussed in Note 13 below. See Note 2 below for
discussion of the costs associated with the discontinued operations of the
Yankee Atomic, Connecticut Yankee and Maine Yankee nuclear power plants. In
addition, the company is not earning a return on approximately $.9 million of
other unamortized regulatory assets which are being recovered over periods
ranging from two to 10 years.
PURCHASED POWER The company records the annual cost of power obtained under
long-term contracts as operating expenses. Since these contracts, as more
fully described in Note 14, do not convey to the company the right to use
property, plant, or equipment, they are considered executory in nature. This
accounting treatment is in contrast to the company's commitment with respect
to the Hydro Quebec Phase I and II transmission facilities which are
considered capital leases. As such, the company has recorded a liability for
its commitment under the Phase I and II arrangements and recognized an asset
for the right to use these facilities.
USE OF ESTIMATES The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
the disclosures of contingent assets and liabilities and revenues and
expenses. Actual results could differ from those estimates.
STATEMENT OF CASH FLOWS The company considers all highly liquid investments
with a maturity of three months or less when acquired to be cash equivalents.
RECLASSIFICATIONS Certain reclassifications have been made to prior year
Consolidated Financial Statements to conform with the 1997 presentation.
Note 2
Investments in affiliates
The company uses the equity method to account for its investments in the
following companies (dollars in thousands):
<TABLE>
<CAPTION>
<PAGE>
December 31
Ownership 1997 1996
<S> <C> <C> <C>
Nuclear generating companies:
Vermont Yankee Nuclear Power Corporation 31.3% $16,866 $17,017
Connecticut Yankee Atomic Power Company 2.0% 2,208 2,123
Maine Yankee Atomic Power Company 2.0% 1,560 1,420
Yankee Atomic Electric Company 3.5% 835 808
------- -------
21,469 21,368
Vermont Electric Power Company, Inc.:
Common stock 56.8% 3,518 3,508
Preferred stock 1,508 1,754
------- -------
$26,495 $26,630
======= =======
</TABLE>
Each sponsor of the nuclear generating companies is obligated to pay an
amount equal to its entitlement percentage of fuel, operating expenses
(including decommissioning expenses) and cost of capital and is entitled to a
similar share of the power output of the plants. The company's entitlement
percentages are identical to the ownership percentages except that Vermont
Yankee's entitlement percentage is 35%. The company is obligated to
contribute its entitlement percentage of the capital requirements of Vermont
Yankee and Maine Yankee and has a similar, but limited, obligation to
Connecticut Yankee. The company is responsible for paying its entitlement
percentage of decommissioning costs for Vermont Yankee, Connecticut Yankee,
Maine Yankee and Yankee Atomic as follows (dollars in millions):
<TABLE>
<CAPTION>
CVPS's
Total Share of
Date of Estimated CVPS's Funded
Study Obligation Obligation Obligation
<S> <C> <C> <C> <C>
Nuclear generating companies:
Vermont Yankee 1993 $312.7 $109.4 $60.1
Maine Yankee 1997 $398.8 $8.0 $ 4.0
Connecticut Yankee 1996 $426.7 $8.5 $ 5.2
Yankee Atomic 1994 $370.0 $13.0 $ 4.5
</TABLE>
Maine Yankee
On August 6, 1997, the Maine Yankee's Nuclear Power plant was prematurely
retired from commercial operation. The company relied on Maine Yankee for
less than 5% of its required system capacity. Maine Yankee has preliminarily
estimated the sum, in 1997 dollars, of future payments for the closing,
decommissioning and recovery of the remaining investment in Maine Yankee to be
approximately $929.9 million including a decommissioning obligation of
$398.8 million.
Connecticut Yankee
On December 4, 1996, the Connecticut Yankee Nuclear power plant was
prematurely retired from commercial operation. The company relied on
Connecticut Yankee for less than 3.0% of its required system capacity.
Yankee Atomic
In 1992, the Yankee Atomic Nuclear power plant was retired from
commercial operation. The company relied on Yankee Atomic for less than 1.5%
of its system capacity.
Presently, costs billed to the company by Maine Yankee, Connecticut
Yankee and Yankee Atomic including a provision for ultimate decommissioning of
the units, are being collected from the company's customers through existing
retail and wholesale rate tariffs. The company's share of remaining costs
with respect to Maine Yankee, Connecticut Yankee and Yankee Atomic's decisions
to discontinue operation, including the costs in the table above, is
approximately $17.4 million, $12.8 million and $4.8 million, respectively.
These amounts are subject to ongoing review and revisions and are reflected in
the accompanying balance sheet both as regulatory assets and deferred power
contract obligations (current and non-current). Although the estimated costs
of decommissioning are subject to change due to changing technologies and
regulations, the company expects that the nuclear generating companies'
liability for decommissioning, including any future changes in the liability,
will be recovered in their rates over their operating or license lives.
The decision to prematurely retire these nuclear power plants was based
on economic analyses of the costs of operating them compared to the costs of
closing them and incurring replacement power costs over the remaining period
of the plants' operating licenses. The company believes that based on the
current regulatory process, its proportionate share of Maine Yankee,
Connecticut Yankee and Yankee Atomic decommissioning costs will be recovered
through the regulatory process and, therefore, the ultimate resolution of the
premature retirement of the three plants has not and will not have a material
adverse effect on the company's earnings or financial condition.
Nuclear Insurance
The Price-Anderson Act currently limits public liability from a single
incident at a nuclear power plant to $8.9 billion. Beyond that a licensee
maintains an indemnity agreement with the Nuclear Regulatory Commission (NRC),
but subject to Congressional approval. The first $200 million of liability
coverage is the maximum provided by private insurance. The Secondary
Financial Protection Program is a retrospective insurance plan providing
additional coverage up to $8.7 billion per incident by assessing $79.3 million
against each of the 110 reactor units that are currently subject to the
Program in the United States, limited to a maximum assessment of $10 million
per incident per nuclear unit in any one year. The maximum assessment is
expected to be adjusted at least every five years to reflect inflationary
changes. The company's interests in the nuclear power units are such that it
could become liable for an aggregate of approximately $3.7 million of such
maximum assessment per incident per year.
Vermont Yankee
Summarized financial information for Vermont Yankee Nuclear Power
Corporation is as follows (dollars in thousands):
<TABLE>
<CAPTION>
Earnings 1997 1996 1995
<C> <C> <C> <C>
Operating revenues $173,106 $181,715 $180,437
Operating income $13,961 $14,705 $15,006
Net income $6,834 $6,985 $6,790
Company's equity in net income $2,144 $2,193 $2,111
</TABLE>
<TABLE>
<CAPTION>
December 31
Investment 1997 1996
<S> <C> <C>
Current assets $ 43,106 $ 38,587
Non-current assets 566,918 526,413
-------- --------
Total assets 610,024 565,000
Less:
Current liabilities 34,138 31,371
Non-current liabilities 521,597 478,831
-------- --------
Net assets $ 54,289 $ 54,798
-------- --------
Company's equity in net assets $ 16,866 $ 17,017
</TABLE>
Included in Vermont Yankee's revenues shown above are sales to the
company of $52.9 million, $53.1 million and $58.6 million for 1995 through
1997, respectively. These amounts are reflected as purchased power net of
deferrals and amortization in the accompanying Consolidated Statement of
Income.
VELCO
Vermont Electric Power Company, Inc. (Velco) and its wholly owned
subsidiary Vermont Electric Transmission Company, Inc. own and operate
transmission systems in Vermont over which bulk power is delivered to all
electric utilities in the state. Velco has entered into transmission
agreements with the state of Vermont and the electric utilities and under
these agreements bills all costs, including interest on debt and a fixed
return on equity, to the state and others using the system. These contracts
enable Velco to finance its facilities primarily through the sale of first
mortgage bonds. Included in Velco's revenues shown below are transmission
services to the company (reflected as production and transmission in the
accompanying Consolidated Statement of Income) amounting to $7.9 million,
$7.9 million and $8.7 million for 1995 through 1997, respectively.
Velco operates pursuant to the terms of the 1985 Four-Party Agreement (as
amended) with the company and two other major distribution companies in
Vermont. Although the company owns 56.8% of Velco's outstanding common stock,
the Four-Party Agreement effectively restricts the company's control of Velco.
Therefore, Velco's financial statements have not been consolidated. The Four-
Party Agreement continues in full force and effect until May 1999 and will be
extended for an additional two-year term in May 1999, and every two years
thereafter, unless at least ninety (90) days prior to any two-year anniversary
any party shall notify the other parties in writing that it desires to
terminate the agreement as of such anniversary. No such notification has been
filed by the parties. The company also owns 46.6% of Velco's outstanding
preferred stock, $100 par value.
Summarized financial information for Velco is as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Earnings 1997 1996 1995
<S> <C> <C> <C>
Transmission revenues $18,481 $16,298 $16,398
Operating income $ 2,773 $2,611 $2,767
Net income $ 1,213 $1,216 $1,297
Company's equity in net income $618 $657 $650
</TABLE>
<TABLE>
<CAPTION>
December 31
Investment 1997 1996
<S> <C> <C>
Current assets $22,268 $22,091
Non-current assets 48,298 51,974
------- -------
Total assets 70,566 74,065
Less:
Current liabilities 30,453 29,672
Non-current liabilities 30,709 34,487
------- -------
Net assets $ 9,404 $ 9,906
======= =======
Company's equity in net assets $ 5,026 $ 5,262
</TABLE>
Note 3
Non-utility investments
The company's wholly owned subsidiary, Catamount invests, through its
wholly owned subsidiaries, in non-regulated, energy-related projects.
Catamount's earnings were $2.5 million, $.5 million and $4.1 million for the
years 1995 through 1997, respectively. Earnings for 1995 and 1997 reflect a
net of tax gain of approximately $.9 million and $1.8 million from the partial
sale of Appomattox Cogeneration Project and the sale of NW Energy Williams
Lake L.P., respectively. Certain financial information for Catamount's
investments is set forth in the table that follows (dollars in thousands):
<TABLE>
<CAPTION>
Investment
Generating In Service December 31
Projects Location Capacity Fuel Date Ownership 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C>
Rumford Cogeneration Co. L.P. Maine 85MW Coal/Wood 1990 15.1% $11,638 $10,678
Ryegate Associates Vermont 20MW Wood 1992 33.1% 6,551 6,612
Appomattox Cogeneration L.P. Virginia 41MW Coal/Biomass 1982 25.3% 4,083 4,160
Black liquor
NW Energy Williams Lake L.P. British Columbia, 60MW Wood 1993 8.1% - 983
Canada
Rupert Cogeneration Partners,
Ltd. Idaho 10MW Gas 1996 50.0% 1,586 1,631
Glenns Ferry Cogeneration
Partners, Ltd. Idaho 10MW Gas 1996 50.0% 1,255 1,297
Fibrothetford Limited Thetford, England 38.5MW Biomass - 44.0% 5,238 2,462
Heartlands Power Limited Fort Dunlop, England 98MW Gas - 50.0% 421 -
------- -------
$30,772 $27,823
======= =======
</TABLE>
On August 5, 1997, Catamount sold its 8.1% partnership's interest in the
NW Energy Williams Lake L.P. project. The sale resulted in a $1.8 million
after-tax gain or approximately $.16 per share of common stock during the
third quarter of 1997.
Catamount has committed to invest $4.5 million to purchase approximately
44% of the common stock of Fibrothetford Limited. This partnership is
constructing a 38.5 MW biomass generating station in Thetford, England. In
addition, Catamount has funded $2.9 million in escrow in support of its future
equity commitment to the partnership. Catamount has also funded loans of
$3.1 million to the partnership.
Catamount has entered into an agreement to invest, subject to certain
conditions, approximately $1.2 million to purchase a 50% interest in
Heartlands Power Limited (Heartlands). Heartlands was formed by Rolls-Royce
Power Ventures to develop, construct and own a 98MW natural gas-fired power
station in Fort Dunlop, England. Catamount is also committed subject to
certain conditions to funding a loan to the project of approximately
$3.4 million.
SmartEnergy, also a wholly owned subsidiary of the company, whose purpose
is to engage in the sale of or rental of electric water heaters, energy
efficient products and other related goods and services. SmartEnergy incurred
losses of $.7 million and $.3 million for 1997 and 1995, respectively and
earnings of $.3 million for 1996.
Note 4
Common Stock
The company, through a common stock repurchase program initiated in 1994
and subsequently suspended, has purchased from time to time 362,447 shares of
its common stock in open market transactions at an average price of $13.04 per
share. These transactions are recorded as treasury stock, at cost, in the
company's Consolidated Balance Sheet.
Note 5
Redeemable preferred stock
The 8.30% Dividend Series Preferred Stock is redeemable at par through a
mandatory sinking fund in the amount of $1.0 million per annum, and at its
option, the company may redeem at par an additional non-cumulative
$1.0 million per annum.
Note 6
Stock Option Plans
The company granted stock options to key employees under the company's
1988 and 1997 stock option plans and to non-employee directors under the 1993
stock option plan. These plans were fully described in the company's
respective proxy statements. The company chose the Black-Scholes model
formula for options granted in 1995 and the Binomial model for options granted
in 1996 and 1997 to project an estimate of appreciation of the underlying
shares of the stock during the respective option term. The average
assumptions used were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Volatility .1808 .1756 .1776
Risk free rate of return 6.50% 6.25% 7.50%
Dividend yield 7.13% 6.93% 6.88%
</TABLE>
The company accounts for these plans under Accounting Principles Board
Opinion No. 25, under which no compensation cost has been recognized. Under
SFAS No. 123 all awards granted in fiscal years after December 15, 1995 must
be recognized in compensation cost. Had compensation cost for these plans
been determined consistent with SFAS No. 123, the company's net income and
earnings per share of common stock would have been reduced to the following
pro forma amounts as follows(dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C> <C>
Net Income As reported $16,340 $19,442 $19,851
Pro forma $16,308 $19,422 $19,841
Earnings per share
of common stock As reported $1.25 $1.51 $1.53
Pro forma $1.25 $1.51 $1.53
</TABLE>
Options granted under the 1997 Stock Option Plan for Key Employees will
become exercisable upon receipt of approval by the PSB. However, the above
pro forma effect assumes the 1997 options were exercisable.
Note 7
Long-term debt and sinking fund requirements
The company and its subsidiaries' long-term debt contains financial and
non-financial covenants. The company and its non-utility subsidiaries were in
compliance with all the debt covenants related to its various loan agreements.
However, due to the charge-offs discussed in Note 1 above, Connecticut Valley
is in violation of certain covenants in its loan agreement with Citizens Bank
of New Hampshire. This loan with an outstanding balance of $3.75 million will
be in default 30 days after notice from the bank of the violation of certain
financial covenants unless the default is otherwise cured or waived. The
notice has not yet been tendered by the bank. Accordingly, the company has
reclassified this debt as a current liability. If this loan ultimately goes
into default, there would be no cross defaults of any of the company's or its
subsidiaries' loan agreements except for an $.8 million line of credit
Connecticut Valley has with Citizens Bank of New Hampshire. See Note 10 below
for related information.
Based on issues outstanding at December 31, 1997, the aggregate amount of
long-term debt maturities and sinking fund requirements are approximately
$24.3 million, $6.75 million, $16.5 million, $4.0 million and $7.0 million for
the years 1998 through 2002, respectively. Substantially all property and
plant is subject to liens under the First Mortgage Bonds.
Note 8
Financial instruments
The estimated fair values of the company's financial instruments at
December 31, 1997 and 1996 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 14,773 $ 14,773 $ 6,365 $ 6,365
Short-term debt $ 12,650 $ 12,650 $ 5,750 $ 5,750
Sale of accounts receivable and
unbilled revenues (Note 9) $ - $ - $ 12,000 $ 12,000
Note receivable, non-utility $ 3,686 $ 3,888 $ 1,678 $ 1,845
Redeemable preferred stock $ 19,000 $ 21,191 $ 20,000 $ 19,976
Long-term debt $117,370 $124,251 $120,389 $117,025
</TABLE>
The carrying amount for cash and cash equivalents and short-term debt
approximates fair value because of the short maturity of those instruments.
The fair value of the company's redeemable preferred stock and long-term debt
is estimated based on the quoted market prices for the same or similar issues
or on the current rates offered to the company for debt of the same remaining
maturation.
The company believes that any excess or shortfall in the fair value
relative to the carrying value of the company's financial instruments, if they
were settled at amounts approximating those above, would not result in a
material impact on the company's financial position or results of operations.
The company's non-utility, wholly owned subsidiary, Catamount, utilized
foreign currency forward contracts to reduce exposure to exchange rate risks
associated with letters of credit issued to support foreign currency
commitments. The forward contracts establish the exchange rates at which
Catamount would purchase local currencies at a future date. Catamount had no
foreign currency contracts at December 31, 1997 and $2.3 million at
December 31, 1996. Any difference between the carrying amount and fair value
of these contracts was not significant.
Note 9
Receivables purchase agreement
At December 31, 1996, a total of $12 million of accounts receivable and
unbilled revenues had been previously sold under an accounts receivable
facility. Accounts receivable and unbilled revenues are reflected net of
sales of $4.8 million and $7.2 million, respectively, at December 31, 1996.
The FASB issued SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," effective for transfers
and servicing of financial assets and extinguishments of liabilities occurring
after December 31, 1996, which is to be applied prospectively. Pursuant to
SFAS No. 125, the Company reclassified to a secured borrowing those amounts
which had previously been netted against accounts receivable and unbilled
revenues, following the amendment and extension of its accounts receivable
facility during 1997. The facility matures on November 29, 1998, accordingly,
those amounts related to the accounts receivable facility are shown at
December 31, 1997 as short-term debt. Repayment of the facility will be made
from the ongoing collections of the underlying accounts receivable and
unbilled revenues immediately following the maturity date.
These accounts receivable and unbilled revenues were transferred with
limited recourse. A pool of assets of approximately 3% of the accounts
receivable and unbilled revenues sold are set aside for this potential
recourse liability.
Note 10
Short-term debt
Utility
The company had $12.6 million and $5.8 million of outstanding short-term
debt at December 31, 1997 and 1996, respectively, at average interest rates of
6.26% for 1997 and 6.49% for 1996.
In 1996, the company used committed and uncommitted lines of credit to
finance its construction and C&LM programs, on a short-term basis, and for
other corporate purposes. These lines of credit required annual fees ranging
from zero to .25% of an individual line. Borrowings under these short-term
debt arrangements were at interest rates ranging from less than prime to the
prime rate.
Connecticut Valley Electric Company Inc., the company's wholly owned
New Hampshire subsidiary, maintains a $.8 million committed line of credit for
its construction program and for other corporate purposes which expires on
May 31, 1998. Borrowings under this short-term debt arrangement are at
interest rates ranging from less than prime to the prime rate. Connecticut
Valley had $625,000 and $550,000 outstanding short-term debt at December 31,
1997 and 1996, respectively. As of February 25, 1998, Connecticut Valley had
$250,000 outstanding under this line of credit. It is probable that this debt
will be called for repayment in the next 30 days.
On November 7, 1997, the company implemented a 364 day committed
Revolving Credit and Competitive Advance Facility (Credit Facility) with a
group of banks providing for up to $50 million of Credit Facility which upon
PSB regulatory approval will become a three year revolving credit facility.
This Credit Facility will be used for general corporate purposes and replaced
$31 million of the committed and uncommitted lines of credit.
For the receivables purchase agreement in connection with the
reclassification of the $12 million sale of accounts receivable and unbilled
revenues see Note 9 herein.
Non-Utility
Catamount implemented a credit facility in July 1996 which provides for
up to $8 million of letters of credit and working capital loans. Currently, a
$1.2 million letter of credit is outstanding to support certain of Catamount's
obligations in connection with a debt reserve requirement in the Appomattox
Cogeneration project.
SmartEnergy maintained a $.5 million revolving line of credit with a bank
to provide working capital and financing assistance for investment purposes.
SmartEnergy had no outstanding short-term debt at December 31, 1996 and
$25,000 at December 31, 1997. This line of credit was cancelled on
February 9, 1998.
Financial obligations of the company's non-utility wholly owned
subsidiaries are non-recourse to the company.
Note 11
Pension and postretirement benefits
The company has a non-contributory trusteed pension plan covering all
employees (union and non-union). Under the terms of the pension plan,
employees are generally eligible for monthly benefit payments upon reaching
the age of 65 with a minimum of five years of service. The company's funding
policy is to contribute, at least, the statutory minimum to a trust. The
company is not required by its union contract to contribute to multi-employer
plans.
The projected unit credit actuarial cost method was used to compute net
pension costs and the accumulated and projected benefit obligations. The
following table sets forth the funded status of the pension plan and amounts
recognized in the company's Balance Sheet and Statement of Income (dollars in
thousands):
<TABLE>
<CAPTION>
December 31
1997 1996 1995
<S> <C> <C> <C>
Funded status of the plan
Vested benefit obligation $55,036 $45,763 $47,351
Non-vested benefit obligation 250 218 276
------- ------- -------
Accumulated benefit obligation $55,286 $45,981 $47,627
------- ------- -------
Projected benefit obligation $67,167 $58,503 $60,554
Market value of plan assets (primarily equity
and fixed income securities) 72,101 61,932 55,443
------- ------- -------
Projected benefit obligation more (less)
than market value of plan assets (4,934) (3,429) 5,111
Unrecognized net transition assets 1,019 1,286 1,447
Unrecognized prior service costs (2,466) (2,779) (2,978)
Unrecognized net gain 14,089 10,099 2,270
------- ------- -------
Net pension liability 7,708 5,177 5,850
Less regulatory asset for restructuring costs 2,583 245 346
------- ------- -------
Effective accrued pension costs $ 5,125 $ 4,932 $ 5,504
======= ======= =======
Net pension costs include the following components
Service cost $ 1,802 $ 2,024 $ 1,498
Interest cost 4,307 4,221 4,027
Actual return on plan assets (10,535) (6,461) (11,230)
Net amortization and deferral 5,818 2,215 7,393
------- ------- -------
Pension costs 1,392 1,999 1,688
Amortization of regulatory asset 101 101 1,628
------- ------- -------
Effective pension costs 1,493 2,100 3,316
Less amount allocated to other accounts 249 411 337
------- ------- -------
Net pension costs expensed $ 1,244 $ 1,689 $ 2,979
======= ======= =======
</TABLE>
Assumptions used in calculating pension cost were as follows:
<TABLE>
<CAPTION>
December 31
1997 1996 1995
<S> <C> <C> <C>
Weighted average discount rates 7.00% 7.50% 7.00%
Expected long-term return on assets 9.50% 9.50% 9.50%
Rate of increase in future compensation levels 4.00% 4.50% 4.50%
</TABLE>
The company sponsors a defined benefit postretirement medical plan that
covers all employees who retire with ten years or more of service after age
45. The company funds this obligation through a Voluntary Employees' Benefit
Association and 401(h) Subaccount in its Pension Plan.
The following table sets forth the plan's funded status and amounts
recognized in the company's Balance Sheet and Statement of Income in
accordance with SFAS No. 106 (dollars in thousands):
<TABLE>
<CAPTION>
December 31
1997 1996 1995
<S> <C> <C> <C>
Accumulated postretirement benefit obligation
Retirees $10,289 $ 7,593 $ 8,207
Fully eligible active plan participants 263 682 600
Other active plan participants 1,227 923 1,033
Less plan assets at fair value 2,326 2,085 1,663
------- ------- -------
Accumulated postretirement benefit
obligation in excess of plan assets 9,453 7,113 8,177
Unrecognized transition obligation (3,838) (4,876) (5,180)
Unrecognized net gain (loss) (862) 229 (428)
------- ------- -------
Accrued postretirement benefit cost 4,753 2,466 2,569
Less regulatory asset for restructuring costs 2,536 249 352
------- ------- -------
Effective accrued postretirement benefit
costs $ 2,217 $ 2,217 $ 2,217
======= ======= =======
Net postretirement benefit cost includes the
following components
Service cost $ 197 $ 208 $ 153
Interest cost 716 656 755
Actual return on plan assets (93) (82) (49)
Deferral of asset loss during the year (52) (30) (14)
Amortization of transition obligation over
a twenty-year period 305 305 305
------- ------- -------
Postretirement benefit cost 1,073 1,057 1,150
Amortization of regulatory asset 103 103 1,656
------- ------- -------
Effective postretirement benefit cost 1,176 1,160 2,806
Less amount allocated to other accounts 192 217 229
------- ------- -------
Net postretirement benefit cost expensed $ 984 $ 943 $ 2,577
======= ======= =======
</TABLE>
Assumptions used in the per capita costs of the accumulated
postretirement benefit obligation were as follows:
<TABLE>
<CAPTION>
December 31
1997 1996 1995
<S> <C> <C> <C>
Per capita percent increase in health care costs:
Pre-65 7.00% 7.00% 8.00%
Post-65 6.00% 6.00% 6.50%
Weighted average discount rates 7.00% 7.50% 7.00%
Rate of increase in future compensation levels 4.00% 4.50% 4.50%
Long-term return on assets 8.50% 8.50% 8.50%
</TABLE>
Health care trend rates are assumed to decrease to 5.0% for pre-65 and
4.5% for post-65 for the year 2001 and thereafter.
Increasing the assumed health care cost trend rates by one percentage
point in each year would have resulted in an increase of approximately
$686,000 in the accumulated postretirement benefit obligation as of
December 31, 1997, and an increase of about $40,000 in the aggregate of the
service cost and interest cost components of net periodic postretirement
benefit cost for 1997.
The company provides postemployment benefits consisting of long-term
disability benefits. The accumulated postemployment benefit obligation at
December 31, 1997 and 1996 of approximately $.9 million in each year is
reflected in the accompanying balance sheet as a current liability and is
offset by a corresponding regulatory asset of approximately $.6 million for
1997 and $.7 million for 1996. The PSB in its October 31, 1994 Rate Order
allowed the company to recover the regulatory asset over a 7-1/2 year period
beginning November 1, 1994 through April 30, 2002. Beginning in 1995, the
company paid premiums to insure the salary continuation portion of future
long-term disability obligations. The post-employment benefit costs charged
to expense in 1997, 1996 and 1995, including insurance premiums, were
$247,000, $177,000 and $100,000, respectively (pre-tax).
In the third quarter of 1997, the company offered voluntary retirement
and severance programs to employees. The estimated benefit obligation for the
retirement program as of December 31, 1997 is approximately $4.8 million.
This amount consists of pension benefits and post-retirement medical benefits
of $2.4 million and $2.4 million, respectively. The estimated benefit
obligation for the severance program, which includes termination pay as well
as other costs, is about $2.0 million. These obligations were recorded in the
fourth quarter of 1997. The company received an Accounting Order from the PSB
dated September 30, 1997, authorizing the company to defer program costs and
amortize them over a five-year period beginning January 1, 1998 through
December 31, 2002, subject to a determination that these costs may be
recovered in rates in the company's current rate proceeding. See Note 13
below. These obligations are reflected in the accompanying balance sheet both
as regulatory assets and deferred credits.
In January 1996, the PSB issued an Accounting Order authorizing the
company to effectively cap its Vermont retail after-tax return on equity at
10.75% and reduce the 1994 deferred restructuring costs through operating
expense recognition of approximately $2.9 million in 1995. On an after tax
basis, these costs represented a reduction of earnings of approximately
$1.7 million or $.15 per common share. The reduction of these additional
restructuring costs has and will continue to reduce future annual amortization
expense by approximately $.8 million per year through May 1999. The
unamortized balance of these costs was approximately $.3 million at
December 31, 1997.
Note 12
Income taxes
The components of Federal and state income tax expense are as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995
<S> <C> <C> <C>
Federal:
Current $12,277 $ 7,890 $ 6,703
Deferred (5,420) 795 2,610
Investment tax credits, net (391) (391) (391)
------- ------- -------
6,466 8,294 8,922
------- ------- -------
State:
Current 3,027 1,866 1,498
Deferred (718) 60 488
------- ------- -------
2,309 1,926 1,986
------- ------- -------
Total Federal and state income taxes $ 8,775 $10,220 $10,908
======= ======= =======
Federal and state income taxes charged to:
Operating expenses $ 7,573 $10,216 $10,662
Other income 1,590 4 246
Extraordinary item (388) - -
------- ------- -------
$ 8,775 $10,220 $10,908
======= ======= =======
</TABLE>
The principal items comprising the difference between the total income
tax expense and the amount calculated by applying the statutory Federal income
tax rate to income before tax are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995
<S> <C> <C> <C>
Income before income tax $25,115 $29,662 $30,759
Federal statutory rate 35% 35% 35%
Federal statutory tax expense $ 8,790 $10,382 $10,766
Increases (reductions) in taxes resulting
from:
Insurance settlement - (470) -
Dividend received deduction (884) (909) (903)
Deferred taxes on plant 324 324 324
State income taxes net of Federal tax
benefit 1,501 1,252 1,291
Investment credit amortization (391) (391) (391)
Other (565) 32 (179)
------- ------- -------
Total income tax expense provided $ 8,775 $10,220 $10,908
======= ======= =======
</TABLE>
The tax effects of temporary differences and tax carry forwards that give
rise to significant portions of the deferred tax assets and deferred tax
liabilities are presented below (dollars in thousands):
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995
<S> <C> <C> <C>
Deferred tax assets
Alternative minimum tax credit carry
forward $ - $ - $ 203
Non-deductible accruals and other 6,743 5,212 4,887
Deferred compensation and pension 3,655 3,562 3,546
Environmental costs accrual 1,805 2,089 2,205
------- ------- -------
Total deferred tax assets 12,203 10,863 10,841
------- ------- -------
Deferred tax liabilities
Property, plant and equipment 51,819 51,030 51,081
Net regulatory asset 4,301 3,358 3,673
Conservation and load management
expenditures 6,713 8,147 8,211
Nuclear refueling costs 534 2,510 1,782
Other 2,832 3,281 3,285
------- ------- -------
Total deferred tax liabilities 66,199 68,326 68,032
------- ------- -------
Net deferred tax liability $53,996 $57,463 $57,191
======= ======= =======
</TABLE>
The company received an accounting order (Order) from the PSB dated
September 30, 1997. The Order authorizes the company to defer and amortize
over a 20-year period beginning January 1, 1998, approximately $2.0 million to
reflect the revenue requirement level of additional deferred income tax
expense resulting from the recently enacted Vermont Corporate income tax
increase from 8.25% to 9.75%, subject to a determination that these costs may
be recovered in rates in the company's current rate proceedings. See Note 13
below.
A valuation allowance has not been recorded, as the company expects all
deferred income tax assets will be utilized in the future.
Note 13
Retail Rates
Vermont: The company's practice of reviewing costs periodically will
continue and rate increases will be requested when warranted. The company
filed for a 6.6% or $15.4 million general rate increase on September 22, 1997
to become effective June 6, 1998 to offset increasing cost of providing
service. Approximately $14.3 million or 92.9% of the rate increase request is
to recover scheduled contractual increases in the cost of power the company
purchases from Hydro-Quebec.
At the same time, the company also filed a request to eliminate the
winter-summer rate differential and price electricity the same year-round.
The change would be revenue-neutral within classes of customers and overall.
Over time, customers would see a leveling off of rates so they would pay the
same per kilowatt-hour during the winter and summer months.
During February 1998, the Vermont Department of Public Service (DPS)
filed testimony in opposition to the company's 6.6% or $15.4 million retail
rate increase request. As a result of its testimony, the DPS is recommending
that the PSB instead reduce the company's current retail rates by
approximately 2.5% or $5.7 million. The company cannot predict whether the
PSB will adopt any or all of the DPS recommendations. As a result, the
company cannot predict whether the ultimate outcome of this matter would have
a material adverse effect on the company's results of operations, cash flows,
and ability to obtain capital at competitive rates.
On October 17, 1995 the company filed for a 14.6% or $31.0 million
general rate increase to become effective July 1, 1996, to offset the
increasing cost of providing service. On February 13, 1996 the company
reached an agreement with the DPS regarding this rate increase request. On
April 30, 1996 the company received a rate order from the PSB generally
approving the agreement.
Under the terms of the Agreement approved by the PSB, the company
increased its Vermont retail rates 5.5% effective June 1, 1996 and 2%
effective January 1, 1997. In addition, the Agreement capped the company's
allowed return on common equity in its Vermont retail business for 1996 and
1997 at 11%, by requiring the company to reduce deferred C&LM costs to the
extent its Vermont retail return on common equity would otherwise exceed 11%,
and prohibited the company from seeking any increase in Vermont retail rates
which would become effective before January 1, 1998, except for extraordinary
circumstances. The Agreement also required the company to recognize in 1997,
for accounting purposes, approximately $5.8 million in power cost reductions
associated with a Memorandum of Understanding with Hydro-Quebec and to file
for a rate reduction if the company was successful in negotiating any further
modifications to the Contract with Hydro-Quebec that would have resulted in a
reduction in the cost of power from Hydro-Quebec between February 12, 1996 and
December 31, 1997. Pursuant to the common equity cap of 11%, the company
recognized, in 1996, approximately $147,000 C&LM costs that would have
otherwise been deferred.
In its April 30, 1996 Order, the PSB modified the February 13, 1996
Agreement reached with the DPS by removing only one of the two penalties
imposed in the PSB's October 31, 1994 Order. Although the PSB's April 30,
1996 Order supported the Agreement's removal of the penalty associated with
the company's efforts to acquire cost-effective energy efficiency resources,
it only suspended the penalty for the alleged mismanagement of power supply
options through the later of January 1, 1998 or the next investigation into
the company's rates. After this period, the rate consequences of the penalty,
a .75% reduction in the company's authorized Vermont retail return on common
equity, will be reimposed unless the company demonstrates in future
proceedings that it has adequately met the standards for removal as
established by the PSB in its Orders issued October 31, 1994 and April 30,
1996.
During proceedings related to the April 30, 1996 Order, certain
intervening parties petitioned the PSB for a management audit of the company.
In an Order dated April 10, 1996, the PSB severed the management audit issue
from the rate proceeding. Hearings were held on July 16 and August 29, 1996
addressing issues related to management practices. In an Order dated April
17, 1997, the PSB rejected the idea of a traditional management audit of the
company and instead ordered an independent forward-looking analysis of three
of the company's management policies and practices focusing on three areas:
1) Transmission of information to the company's Board of Directors by
management. 2) Cost-benefit analyses for major corporate decisions. 3)
Implementation of the company's ethics and conflict of interest policy. An
independent analysis on these areas began during the first quarter of 1998.
New Hampshire: On February 28, 1997 the NHPUC published its detailed Final
Plan to restructure the electric utility industry in New Hampshire. Also on
February 28, 1997, the NHPUC, in a supplemental order specific to Connecticut
Valley, found that Connecticut Valley was imprudent for not terminating the
FERC authorized power contract between Connecticut Valley and the company,
required Connecticut Valley to give notice to cancel its contract with the
company and denied stranded cost recovery related to this power contract.
Connecticut Valley filed for rehearing of the February 28, 1997 NHPUC Order.
On April 7, 1997, the NHPUC issued an Order addressing certain threshold
procedural matters raised in motions for rehearing and/or clarification filed
by various parties, including Connecticut Valley, relative to the Final Plan
and interim stranded cost orders. The April 7, 1997 Order stayed those
aspects of the Final Plan that are the subject of rehearing or clarification
requests and also stayed the interim stranded cost orders for the various
parties, including Connecticut Valley. As such, those matters pertaining to
the power contract between Connecticut Valley and the Company were stayed.
The suspension of these orders was to remain in effect until two weeks
following the issuance of any order concerning outstanding requests for
rehearing and clarification. The NHPUC has not yet issued any such order.
On November 17, 1997, the City of Claremont, New Hampshire (Claremont),
filed with the NHPUC a petition for a reduction in Connecticut Valley's
electric rates. Claremont based its request on the NHPUC's earlier finding
that Connecticut Valley's failure to terminate its wholesale power contract
with the company as ordered in the NHPUC Stranded Cost Order of February 28,
1997 was imprudent. Under the wholesale power purchase contract with the
company, Connecticut Valley may terminate service at the end of a service
year, provided it has given written notice of termination prior to the
beginning of that service year. Claremont alleges that if Connecticut Valley
had given written notice of termination to the company in 1996 when
legislation to restructure the electric industry was enacted in New Hampshire,
Connecticut Valley's obligation to purchase power from the company would have
terminated as of January 1, 1998.
On November 26, 1997, Connecticut Valley filed a request with the NHPUC
to increase the Fuel Adjustment Clause (FAC), Purchased Power Cost Adjustment
(PPCA) and short-term energy purchase rates effective on or after January 1,
1998. The requested increase in rates results from higher forecast energy and
capacity charges on power Connecticut Valley purchases from the company plus
removal of a credit effective during 1997 to refund overcollections from 1996.
Connecticut Valley objected to the NHPUC's notice of intent to consolidate
Claremont's petition into the FAC and PPCA docket, stating that Claremont's
complaint should be heard as part of the NHPUC restructuring docket. Over
Connecticut Valley's objection at the hearing on December 17, 1997, the NHPUC
consolidated Claremont's petition with Connecticut Valley's FAC and PPCA
proceeding.
In an Order dated December 31, 1997 in Connecticut Valley's FAC and PPCA
docket, the NHPUC found Connecticut Valley acted imprudently by not
terminating the wholesale contract between Connecticut Valley and the Company,
notwithstanding the stays of its February 28, 1997 Orders. The NHPUC Order
further directed Connecticut Valley to freeze its current FAC and PPCA rates
(other than short term rates to be paid to certain Qualifying Facilities)
effective January 1, 1998, on a temporary basis, pending a hearing to
determine: 1) the appropriate proxy for a market price that Connecticut Valley
could have obtained if it had terminated its wholesale contract with the
Company; 2) the implications of allowing Connecticut Valley to pass on to its
customers only that market price; and 3) whether the NHPUC's final
determination on the FAC and PPCA rates should be reconciled back to
January 1, 1998 or some other date.
On January 12, 1998, Connecticut Valley filed a motion for rehearing
alleging, among other things, that the NHPUC failed to adequately notify
Connecticut Valley of the NHPUC's intent to consider the issues that were
addressed during the December 17, 1997 hearing and ultimately were ruled on in
Order No. 22,815. Connecticut Valley claimed that the NHPUC provided
"insufficient notice of an evidentiary hearing on prudence." Connecticut
Valley also claims (a) the NHPUC exceeded its jurisdiction by using the
FAC/PPCA proceeding to advance its restructuring agenda, (b) the NHPUC's
prudence determination is preempted by Federal law, and (c) the NHPUC made an
imprudence finding without basic findings of fact or sufficient record
evidence.
On January 14, 1998, the City of Claremont filed an objection to
Connecticut Valley's rehearing request. It claimed that Connecticut Valley
was afforded sufficient notice and that the NHPUC properly exercised its
traditional rate making powers in Order No. 22,815.
On January 19, 1998, Connecticut Valley and the company filed with the
Federal District Court for a temporary restraining order to maintain the
status quo ante by staying NHPUC Order No. 22,815 and preventing the NHPUC
from taking any action that (i) compromises cost-based rate making for
Connecticut Valley or otherwise seeks to impose market price-based rate making
on Connecticut Valley; (ii) interferes with the FERC's exclusive jurisdiction
over the company's pending application to recover wholesale stranded costs
upon termination of its wholesale power contract with Connecticut Valley; or
(iii) prevents Connecticut Valley from recovering through retail rates the
stranded costs and purchased power costs that it incurs pursuant to its
FERC-authorized wholesale rate schedule with the company. The Federal Court has
not yet ruled on the company's filing.
On January 20, 1998, the NHPUC issued Order No. 22,838 which declined the
request to increase FAC and PPCA rates retroactive to January 1, 1998. All
other requests for relief in Connecticut Valley's motion for rehearing were
denied. The NHPUC did expand the scope of its hearing to take evidence
regarding the prudence of Connecticut Valley's decision to not unilaterally
terminate the wholesale power contract between Connecticut Valley and the
company. On February 23, 1998, the NHPUC announced from the bench that it
reaffirmed its finding of imprudence and would designate a proxy market price
for power at 4 cents per kwh in lieu of the actual amounts arising pursuant to
the wholesale power contract with the company. In addition, the NHPUC
indicated that it would permit Connecticut Valley to maintain its current
rates pending a decision in Connecticut Valley's appeal of the NHPUC Order to
the New Hampshire Supreme Court, provided Connecticut Valley can provide
financial assurance that it will be able to satisfy any ultimate refund
obligation. The company is awaiting the issuance of the NHPUC's written
order.
Based on the December 31, 1997 NHPUC Order as well as the NHPUC's
February 23, 1998 announcement from the bench, which results in the
establishment of Connecticut Valley's rates on a non cost-of-service basis,
Connecticut Valley no longer qualifies, as of December 31, 1997, for the
application of SFAS No. 71. As a result, Connecticut Valley wrote-off all of
its regulatory assets associated with its New Hampshire retail business for
the year ended December 31, 1997. This write-off amounted to approximately
$1.2 million on a pre-tax basis. In addition, Connecticut Valley recorded a
$5.5 million pre-tax loss as of December 31, 1997 under SFAS No. 5,
"Accounting for Contingencies," representing Connecticut Valley's estimated
loss on power contracts for the twelve months following December 31, 1997.
The company expects but cannot be certain that it will be able to recover
these costs beginning in 1999.
These write-offs result in a violation of certain financial covenants
associated with Connecticut Valley's loan with Citizens Bank of New Hampshire.
This loan with an outstanding balance of $3.75 million will be in default
30 days after notice from the bank of the violation of certain financial
covenants unless the default is otherwise cured or waived. The notice has not
yet been tendered by the bank. Under a default, the bank has the right to
accelerate the repayment of the outstanding loans. Connecticut Valley has
outstanding long-term debt of $3.75 million as well as $.25 million of short-
term debt currently outstanding under the committed line of credit with
Citizens Bank. A default in the $3.75 million loan would also cause a cross
default of the $.25 million of short-term debt outstanding. If these loans go
into default, there will be no cross defaults of any of the Company's or its
other subsidiaries' loan agreements.
On June 25, 1997, the company filed with the FERC a notice of termination
of its power supply contract with Connecticut Valley, conditional upon the
company's request to impose a surcharge on the company's transmission tariff
to recover the stranded costs that would result from the termination of its
contract with Connecticut Valley. The amount requested was $44.9 million plus
interest at the prime rate to be recovered over a ten-year period. In its
Order dated December 18, 1997 in Docket No. ER97-3435-000, the FERC rejected
the company's proposed stranded cost surcharge mechanism but indicated that it
would consider an exit fee mechanism for collecting stranded costs. The FERC
also rejected the company's arguments concerning the applicability of stated
FERC policies regarding retail stranded costs, multi-state regulatory gaps and
the implications of state restructuring initiatives. The company has filed a
motion seeking rehearing of the FERC's December 18, 1997 Order. In addition,
and in accordance with the December 18, 1997 FERC Order, on January 12, 1998
the company filed a request with the FERC for an exit fee mechanism to collect
$44.9 million in a lump sum, or in installments with interest at the prime
rate over a ten-year period, to cover the stranded costs resulting from the
cancellation of Connecticut Valley's power contract with the company.
If the Company is unable to obtain an order authorizing the full recovery
amount of the exit fee, or other appropriate mechanism, the company would be
required to recognize a loss under SFAS No. 5 totaling approximately
$75.0 million on a pre-tax basis. Furthermore, the company would be required
to write-off approximately $4.0 million in regulatory assets associated with
its wholesale business under SFAS No. 71 on a pre-tax basis. Conversely, even
if the company obtains a FERC order authorizing the requested exit fee,
Connecticut Valley would be required to recognize a loss under SFAS No. 5 of
approximately $40.0 million on a pre-tax basis unless Connecticut Valley has
obtained an order by the NHPUC or other appropriate body directing the
recovery of those costs in Connecticut Valley's retail rates. Either of these
reasonably possible outcomes could occur during calendar year 1998.
On July 23, 1996 Connecticut Valley filed with the NHPUC for an 8.8% or
approximately $1.6 million base rate increase to become effective
September 22, 1996. The increase was to recover increased operating costs and
costs of improvements to the electric system. As part of the permanent rate
increase, Connecticut Valley also requested a temporary rate increase of 5.4%
or approximately $.9 million. The NHPUC granted Connecticut Valley a
temporary rate increase of 5.4% effective with bills rendered October 1, 1996.
On January 21, 1997, Connecticut Valley and the NHPUC Staff reached a
settlement in principle regarding the permanent rate increase. The
settlement, approved by the NHPUC, provided for a 6.4% permanent rate increase
and set Connecticut Valley's allowed return on common equity at 10.2%. A 2.2%
temporary billing surcharge was also approved by the NHPUC to recover
recoupment revenues for the period October 1, 1996 and March 30, 1997 and to
recover rate case expenses. The temporary billing surcharge was effective
during the period April 1 through November 30, 1997, when off-peak rates were
in effect. As approved by the NHPUC, this billing surcharge resumed on
March 1, 1998 to recover expenses incurred in connection with the pilot
program.
Note 14
Commitments and contingencies
The company's power supply is acquired from a number of sources including
its own generating units, jointly owned units, long-term contracts and short-
term purchases. The cost of power obtained from sources other than wholly and
jointly owned units, including payments required to be made whether or not
energy is received by the company, is reflected as Purchased power in the
Consolidated Statement of Income.
Through its investments in four nuclear generating companies, three of
which (Maine Yankee, Connecticut Yankee and Yankee Atomic) are permanently
shut down, the company is entitled to receive power from those nuclear units.
See Note 2 for a discussion of the company's obligations related to its
investment in nuclear generating companies. The company is also a joint owner
of the Millstone Unit #3 (Unit #3) nuclear generating plant which is currently
shut down due to numerous technical and non-technical problems and is on the
NRC's Watch List.
Through Velco, the company purchases power from a coal-fired generating
plant owned by Northeast Utilities (NU) under a thirty-year contract which
expires April 30, 1998. Under this contract the company is obligated to make
capacity payments which amounted to approximately $4.2 million, $4.6 million
and $4.5 mllion for 1995 through 1997, respectively.
The company purchases power from several small power producers who own
qualifying facilities under the Public Utility Regulatory Policies Act of
1978. These qualifying facilities produce energy using hydroelectric, wood,
biomass, and refuse-burning generation. Under these long-term contracts, in
1997 the company purchased 209,672 MWH of which approximately 153,012 MWH is
associated with the Vermont Electric Power Producers and 37,446 MWH with the
New Hampshire/Vermont Solid Waste Plant owned by Wheelabrator Claremont
Company, L.P. The company expects to purchase approximately 205,960 MWH of
small power output in each year 1998 through 2002. Based on the forecast
level of production, the total commitment in the next five years to purchase
power from these qualifying facilities is estimated to be $112.6 million.
The company will receive varying amounts of capacity and energy from
Hydro-Quebec under the Vermont Joint Owners (VJO) contract during the 1998 to
2016 period. Related contracts were negotiated between the company and
Hydro-Quebec which in effect alter the terms and conditions contained in the VJO
contract, reducing the overall power requirements and cost of the original
contract.
The maximum net amount of capacity that the company will purchase during
the term of the Hydro-Quebec agreements is 143 MW. The total commitment in
the next five years to purchase power under these contracts is approximately
$357 million, less approximately $65 million of power sellbacks, yielding a
net cost of approximately $292 million. In February 1996, the company reached
an agreement with Hydro-Quebec which lowered the 1997 cost of power by
approximately $5.8 million. As part of this agreement, the company delivers
to NEPOOL under existing firm energy contracts or joint marketing activities
54 MW of Phase II transmission capacity for a five-year period which began
July 1, 1996 through June 30, 2001.
In the early phase of the VJO contract, two sellback contracts were
negotiated, the first delaying the purchase of about 24 MW of capacity and
associated energy, the second reducing the net purchase of Hydro-Quebec power.
In 1994, the company negotiated a third sellback arrangement whereby the
company receives an effective discount on up to 70 MW of capacity starting in
November 1995 for the 1996 contract year (declining to 30 MW in the 1999
contract year). In exchange for this sellback, Hydro-Quebec has the right to
reduce capacity deliveries by up to 50 MW beginning as early as 2004 until
2015, including the use of a like amount of the company's Phase I/II facility
rights and the ability to reduce the amounts of energy delivered during a
five-year term beginning in 2000.
JOINT-OWNERSHIP The company's ownership interests in jointly owned generating
and transmission facilities are set forth in the table that follows and
recorded in the company's Consolidated Balance Sheet (dollars in thousands):
<TABLE>
<CAPTION>
Fuel In Service MW December 31
Type Ownership Date Entitlement 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Generating plants:
Wyman #4 Oil 1.78% 1978 11 $ 3,344 $ 3,342
Joseph C. McNeil Various 20.00% 1984 11 15,014 15,002
Millstone Unit #3 Nuclear 1.73% 1986 20 75,365 75,329
Highgate transmission
facility 47.35% 1985 12,984 12,790
-------- --------
106,707 106,463
Accumulated depreciation 34,163 31,755
-------- --------
$ 72,544 $ 74,708
======== ========
</TABLE>
The company's share of operating expenses for these facilities is
included in the corresponding operating accounts on the Consolidated Statement
of Income. Each participant in these facilities must provide for its own
financing.
The company is responsible for paying its ownership percentage of decom-
missioning costs for Unit #3. Based on a 1996 study, the total estimated
obligation at December 31, 1997 was approximately $545.7 million and the
funded obligation was about $155.4 million. The company's share for the total
obligation and funded obligation was approximately $9.4 million and
$2.5 million, respectively.
ENVIRONMENTAL The company is engaged in various operations and activities
which subject it to inspection and supervision by both Federal and state
regulatory authorities including the United States Environmental Protection
Agency (EPA). It is company policy to comply with all environmental laws.
The company has implemented various procedures and internal controls to assess
and assure compliance. If non-compliance is discovered, corrective action is
taken. Based on these efforts and the oversight of those regulatory agencies
having jurisdiction, the company believes it is in compliance, in all material
respects, with all pertinent environmental laws and regulations.
Company operations occasionally result in unavoidable, inadvertent
releases of regulated substances or materials, for example the rupture of a
pole mounted transformer, or a broken hydraulic line. Whenever the company
learns of such a release, the company responds in a timely fashion and in a
manner that complies with all Federal and state requirements. Except as
discussed in the following paragraphs, the company is not aware of any
instances where it has caused, permitted or suffered a release or spill on or
about its properties or otherwise which will likely result in any material
environmental liabilities to the company.
The company is an amalgamation of more than 100 predecessor companies.
Those companies engaged in various operations and activities prior to being
merged into the company. At least two of these companies were involved in the
production of gas from coal to sell and distribute to retail customers at
three different locations. These activities were discontinued by the company
in the late 1940's or early 1950's. The coal gas manufacturers, other
predecessor companies, and the company itself may have engaged in waste
disposal activities which, while legal and consistent with commercially
accepted practices at the time, may not meet modern standards and thus
represent potential liability.
The company continues to investigate, evaluate, monitor and, where
appropriate, remediate contaminated sites related to these historic
activities. The company's policy is to accrue a liability for those sites
where costs for remediation, monitoring and other future activities are
probable and can be reasonably estimated. As part of that process, the
company also researches the possibility of insurance coverage that could
defray any such remediation expenses. For related information see Legal
Proceedings below.
Cleveland Avenue Property One such site is the company's Cleveland Avenue
property located in the City of Rutland, Vermont, a site where one of its
predecessors operated a coal-gasification facility and later the company sited
various operations functions. Due to the presence of coal tar deposits and
Polychlorinated Biphenyl (PCB) contamination and uncertainties as to potential
off-site migration of those contaminants, the company conducted studies in the
late 1980's and early 1990's to determine the magnitude and extent of the
contamination. After completing its preliminary investigation, the company
engaged a consultant to assist in evaluating clean-up methodologies and
provide cost estimates. Those studies indicated the cost to remediate the
site would be approximately $5 million. This was charged to expense in the
fourth quarter of 1992. Site investigation continued over the next several
years.
In January of 1995, the company was formally contacted by the EPA asking
for written consent to conduct a site evaluation of the Cleveland Avenue
property. That evaluation has been completed. The company does not believe
the EPA's evaluation changes its potential liability so long as the State
remains satisfied that reasonable progress continues to be made in remediating
the site and retains oversight of the process.
In 1995, as part of that process, the company's consultant completed its
risk assessment report and submitted it to the State of Vermont (State) for
review. The State generally agreed with that assessment but expressed a
number of concerns and directed the company to collect some additional data.
The company has addressed almost all of the concerns expressed by the State
and continues to work with the State in a joint effort to develop a mutually
acceptable solution.
The company selected a consulting/engineering firm to collect the
additional data requested by the State and develop and implement a remediation
plan for the site. That firm has begun work at the site. It has collected
the additional data requested by the State and will use all the data gathered
to date to formulate a comprehensive remediation plan. The additional data
gathered to date has not caused the company to alter its original estimate of
the likely cost of remediating the site.
PCB, Inc. In August 1995, the company received an Information Request from the
EPA pursuant to a Superfund investigation of two related sites, one in Kansas
and the other in Missouri (the Sites). During the mid-1980's, these Sites
received materials containing PCBs from hundreds of sources, including the
company. According to the EPA, more than 1,200 parties have been identified
as Potential Responsible Parties (PRPs). The company has complied with the
information request and will monitor EPA activities at the Sites.
In December 1996, the company received an invitation to join a PRP
steering committee. The company has not yet decided whether joining that
committee would be in its best interest. That committee has estimated the
company's pro rata share of the waste sent to the Sites to be .42%. The
committee estimates that the Sites' remediation will cost between $5 million
and $40 million. Based on this information, the company does not believe
that the Sites represent the potential for a material adverse effect on its
financial condition or results of operations.
The company also faces potential liability arising from the alleged
disposal of hazardous materials at two former municipal landfills: the Parker
Landfill and the Trafton-Hoisington Landfill.
PARKER AND TRAFTON-HOISINGTON LANDFILLS There have been no further
developments involving the company at these sites. The company's
investigations at the time it was originally contacted indicated that it
contributed little if any hazardous substances to the sites. The company has
not been contacted by the EPA, the State or any of the PRPs since 1994.
Therefore, the company believes that the likelihood that these sites will
cause the company to accrue significant liability has significantly
diminished. At this time, the company does not believe all landfill sites
represent the potential for a material adverse effect on its financial
condition or results of operations but it will continue to monitor activities
at the sites. The company is not subject to any pending or threatened
litigation with respect to any other sites that have the potential for causing
the company to incur material remediation expenses, nor has the EPA or other
Federal or state agency sought contribution from the company for the study or
remediation of any such sites.
In 1996, the company filed a lawsuit in Federal court against a number of
insurance companies. In its complaint, the company alleges that general
liability policies issued by the insurers provide coverage for all expenses
incurred or to be incurred by the company in conjunction with, among others,
the Cleveland Avenue Property. Settlements have been reached with most of the
defendants. Due to the uncertainties associated with the outcome of this
lawsuit related to the remaining defendants and the actual clean-up costs, no
income has been recognized, instead, the proceeds have been applied to the
environmental reserve.
DIVIDEND RESTRICTIONS The indentures relating to long-term debt and the
Articles of Association contain certain restrictions on the payment of cash
dividends on capital stock. Under the most restrictive of such provisions,
approximately $72.7 million of retained earnings was not subject to dividend
restriction at December 31, 1997.
LEASES AND SUPPORT AGREEMENTS The company participated with other electric
utilities in the construction of the Phase I Hydro-Quebec transmission
facilities in northeastern Vermont, which were completed at a total cost of
approximately $140 million. Under a support agreement relating to the
company's participation in the facilities, the company is obligated to pay its
4.42% share of Phase I Hydro-Quebec capital costs over a 20-year recovery
period through and including 2006. The company also participated in the
construction of Phase II Hydro-Quebec transmission facilities constructed
throughout New England, which were completed at a total cost of approximately
$487 million. Under a similar support agreement, the company is obligated to
pay its 5.132% share of Phase II Hydro-Quebec capital costs over a 25-year
recovery period through and including 2015. All costs under these support
agreements are recorded as purchased transmission expense in accordance with
the company's rate-making policies. Future minimum payments will be
approximately $3.0 million for each year from 1998 through 2015 and will
decline thereafter. The company's shares of the net capital cost of these
facilities, totaling approximately $18.3 million, are classified in the
accompanying Consolidated Balance Sheet as "Utility Plant" and "Long-term
Lease Arrangements" (current and non-current).
Minimum rental commitments of the company under non-cancelable leases as
of December 31, 1997, are not material. Total rental expense entering into
the determination of net income, consisting principally of vehicle and
equipment rentals, was approximately $3.3 million for 1995, $3.2 million for
1996 and $3.1 million for 1997.
LEGAL PROCEEDINGS As discussed above, on July 29, 1996, the company filed a
Declaratory Judgment action in the United States District Court for the
District of Vermont. The Complaint names as defendants a number of insurance
companies that issued policies to the company dating from the mid-1940s to the
late 1980s. The company asserts that policies issued by defendants provide
coverage for all defense and remediation costs associated with the Cleveland
Avenue property, the Bennington Landfill site and the North Clarendon site.
With the exception of the North Clarendon site where no further remediation is
anticipated, see Environmental above for related disclosures.
On August 7, 1997, the company and eight other non-operating owners of
Unit #3 filed a demand for arbitration with Connecticut Light and Power
Company and Western Massachusetts Electric Company and lawsuits against NU and
its trustees. The arbitration and lawsuits seek to recover costs associated
with replacement power, operation and maintenance costs and other costs
resulting from the shutdown of Unit #3. The non-operating owners claim that
NU and two of its wholly owned subsidiaries failed to comply with NRC's
regulations, failed to operate the facility in accordance with good operating
practice and attempted to conceal their activities from the non-operating
owners and the NRC.
In addition to the proceedings described herein, the company is involved
in litigation in the normal course of business which the company does not
believe will have a material adverse effect on the financial position or
results of operations.
Note 15
New Accounting Pronouncements
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-
Based Compensation," effective for fiscal years beginning after December 15,
1995. SFAS No. 123 requires that financial statements include certain
disclosures related to stock-based employee compensation arrangements
regardless of the method used to account for them. The company did not adopt
the accounting under this pronouncement but rather elected to adopt the
required audited pro forma disclosure.
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share,"
effective for both interim and annual periods ending after December 15, 1997.
Earlier application is not permitted. SFAS No. 128 establishes standards for
computing and presenting earnings per share(EPS) and applies to entities
with publicly held common stock or potential common stock. The adoption of
SFAS No. 128 did not have an impact on the company's computation and
presentation of basic EPS. The company does not have any potential common
stock or common stock equivalents that would result in the dilution of EPS.
Therefore there is no difference between basic and diluted earnings per share.
Note 16
Unaudited Quarterly Financial Information
The following quarterly financial information is unaudited and includes
all adjustments consisting of normal recurring accruals which are, in the
opinion of management, necessary for a fair statement of results of operations
for such periods. Variations between quarters reflect the seasonal nature of
the company's business (dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
Quarter Ended 12 Months
March June September December Ended
1997
<S> <C> <C> <C> <C> <C>
Operating revenues $88,494 $65,442 $67,990 $82,806 $304,732
Operating income (loss) $14,140 $ (885) $ 1,178 $ 4,203 $ 18,636
Net income (loss) $14,319 $(1,855) $ 2,065 $ 1,811 $ 16,340
Earnings (losses) per
share of common stock $1.20 $(.21) $ .14 $ .12 $1.25
1996
Operating revenues $84,246 $61,390 $63,833 $81,332 $290,801
Operating income $14,236 $ 1,396 $ 274 $ 7,369 $ 23,275
Net income (loss) $14,758 $ (447) $ (785) $ 5,916 $ 19,442
Earnings (losses) per
share of common stock $1.23 $(.08) $(.11) $.47 $1.51
</TABLE>
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required by this item concerning directors of the Company
is set forth in the sections entitled "Election of Directors" and "Section
16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement of the
Company for the 1998 Annual Meeting of Stockholders, which are being
incorporated herein by reference.
Item 11. Executive Compensation.
The information required by this item concerning executive compensation
and directors' compensation is set forth in the sections entitled "Executive
Compensation and Other Transactions", "Directors' Compensation", "Report of
the Compensation Committee on Executive Compensation" and "Five-Year
Shareholder Return Comparison Performance Graph" in the Proxy Statement of the
Company for the 1998 Annual Meeting of Stockholders, which are being
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item concerning security ownership is
set forth in the section entitled "Stock Ownership of Directors, Nominee,
Executive Officers and Certain Beneficial Owners" in the Proxy Statement for
the 1998 Annual Meeting of Stockholders, which is being incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions.
None.
Filed
Herewith
at Page
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.
(a)1. The following financial statements for Central
Vermont Public Service Corporation and its
wholly owned subsidiaries are filed as part
of this report: (See Item 8)
1.1 Consolidated Statement of Income, for
each of the three years ended
December 31, 1997
Consolidated Statement of Cash Flows,
for each of the three years ended
December 31, 1997
Consolidated Balance Sheet at December 31,
1997 and 1996
Consolidated Statement of Capitalization
at December 31, 1997 and 1996
Consolidated Statement of Changes in
Common Stock Equity for each of the
three years ended December 31, 1997
Notes to Consolidated Financial Statements
(a)2. Financial Statement Schedules:
2.1 Central Vermont Public Service Corporation and
its wholly owned subsidiaries:
Schedule II - Reserves for each of the
three years ended December 31, 1997
Schedules not included have been omitted because they
are not applicable or the required information is shown
in the financial statements or notes thereto. Separate
financial statements of the Registrant (which is primarily
an operating company) have been omitted since they are
consolidated only with those of totally held subsidiaries.
Separate financial statements of subsidiary companies not
consolidated have been omitted since, if considered in
the aggregate, they would not constitute a significant
subsidiary. Separate financial statements of 50% or less
owned persons for which the investment is accounted for
by the equity method by the Registrant have been omitted
since, if considered in the aggregate, they would not
constitute a significant investment.
(a)3. Exhibits (* denotes filed herewith)
Each document described below is incorporated by reference
to the appropriate exhibit numbers and the Commission file
numbers indicated in parentheses, unless the reference to
the document is marked as follows:
* - Filed herewith.
Exhibit 3 Articles of Incorporation and By-Laws
* 3-1 By-Laws, as amended June 2, 1997. (Exhibit 3-1, Form 10-Q
June 30, 1997, File No. 1-8222)
3-2 Articles of Association, as amended August 11, 1992.
(Exhibit No. 3-2, 1992 10-K, File No. 1-8222)
Exhibit 4 Instruments defining the rights of security holders, including
Indentures
Incorporated herein by reference:
4-1 Mortgage dated October 1, 1929, between the Company and Old
Colony Trust Company, Trustee, securing the Company's First
Mortgage Bonds. (Exhibit B-3, File No. 2-2364)
4-2 Supplemental Indenture dated as of August 1, 1936. (Exhibit B-4,
File No. 2-2364)
4-3 Supplemental Indenture dated as of November 15, 1943. (Exhibit B-3,
File No. 2-5250)
4-4 Supplemental Indenture dated as of December 1, 1943. (Exhibit No.
B-4, File No. 2-5250)
4-5 Directors' resolutions adopted December 14, 1943, establishing the
Series C Bonds and dealing with other related matters. (Exhibit
B-5, File No. 2-5250)
4-6 Supplemental Indenture dated as of April 1, 1944. (Exhibit No.
B-6, File No. 2-5466)
4-7 Supplemental Indenture dated as of February 1, 1945. (Exhibit
7.6, File No. 2-5615) (22-385)
4-8 Directors' resolutions adopted April 9, 1945, establishing
the Series D Bonds and dealing with other matters. (Exhibit 7.8,
File No. 2-5615 (22-385)
4-9 Supplemental Indenture dated as of September 2, 1947. (Exhibit
7.9, File No. 2-7489)
4-10 Supplemental Indenture dated as of July 15, 1948, and directors'
resolutions establishing the Series E Bonds and dealing with other
matters. (Exhibit 7.10, File No. 2-8388)
4-11 Supplemental Indenture dated as of May 1, 1950, and directors'
resolutions establishing the Series F Bonds and dealing with other
matters. (Exhibit 7.11, File No. 2-8388)
4-12 Supplemental Indenture dated August 1, 1951, and directors'
resolutions, establishing the Series G Bonds and dealing with other
matters. (Exhibit 7.12, File No. 2-9073)
4-13 Supplemental Indenture dated May 1, 1952, and directors'
resolutions, establishing the Series H Bonds and dealing with other
matters. (Exhibit 4.3.13, File No. 2-9613)
4-14 Supplemental Indenture dated as of July 10, 1953. (July, 1953 Form
8-K, File No. 1-8222)
4-15 Supplemental Indenture dated as of June 1, 1954, and directors'
resolutions establishing the Series K Bonds and dealing with other
matters. (Exhibit 4.2.16, File No. 2-10959)
4-16 Supplemental Indenture dated as of February 1, 1957, and directors'
resolutions establishing the Series L Bonds and dealing with other
matters. (Exhibit 4.2.16, File No. 2-13321)
4-17 Supplemental Indenture dated as of March 15, 1960. (March, 1960
Form 8-K, File No. 1-8222)
4-18 Supplemental Indenture dated as of March 1, 1962. (March, 1962
Form 8-K, File No. 1-8222)
4-19 Supplemental Indenture dated as of March 2, 1964. (March, 1964
Form 8-K, File No, 1-8222)
4-20 Supplemental Indenture dated as of March 1, 1965, and directors'
resolutions establishing the Series M Bonds and dealing with other
matters. (April, 1965 Form 8-K, File No. 1-8222)
4-21 Supplemental Indenture dated as of December 1, 1966, and directors'
resolutions establishing the Series N Bonds and dealing with other
matters. (January, 1967 Form 8-K, File No. 1-8222)
4-22 Supplemental Indenture dated as of December 1, 1967, and directors'
resolutions establishing the Series O Bonds and dealing with other
matters. (December, 1967 Form 8-K, File No. 1-8222)
4-23 Supplemental Indenture dated as of July 1, 1969, and directors'
resolutions establishing the Series P Bonds and dealing with other
matters. (Exhibit B.23, July, 1969 Form 8-K, File No. 1-8222)
4-24 Supplemental Indenture dated as of December 1, 1969, and directors'
resolutions establishing the Series Q Bonds January, and dealing
with other matters. (Exhibit B.24, January, 1970 Form 8-K, File No.
1-8222)
4-25 Supplemental Indenture dated as of May 15, 1971, and directors'
resolutions establishing the Series R Bonds and dealing with other
matters. (Exhibit B.25, May, 1971, Form 8-K, File No. 1-8222)
4-26 Supplemental Indenture dated as of April 15, 1973, and directors'
resolutions establishing the Series S Bonds and dealing with other
matters. (Exhibit B.26, May, 1973, Form 8-K, File No. 1-8222)
4-27 Supplemental Indenture dated as of April 1, 1975, and directors'
resolutions establishing the Series T Bonds and dealing with other
matters. (Exhibit B.27, April, 1975, Form 8-K, File No. 1-8222)
4-28 Supplemental Indenture dated as of April 1, 1977. (Exhibit 2.42,
File No. 2-58621)
4-29 Supplemental Indenture dated as of July 29, 1977, and directors'
resolutions establishing the Series U, V, W, and X Bonds and
dealing with other matters. (Exhibit 2.43, File No. 2-58621)
4-30 Thirtieth Supplemental Indenture dated as of September 15, 1978,
and directors' resolutions establishing the Series Y Bonds and
dealing with other matters. (Exhibit B-30, 1980 Form 10-K, File
No. 1-8222)
4-31 Thirty-first Supplemental Indenture dated as of September 1, 1979,
and directors' resolutions establishing the Series Z Bonds and
dealing with other matters. (Exhibit B-31, 1980 Form 10-K, File
No. 1-8222)
4-32 Thirty-second Supplemental Indenture dated as of June 1, 1981, and
directors' resolutions establishing the Series AA Bonds and dealing
with other matters. (Exhibit B-32, 1981 Form 10-K, File No. 1-8222)
4-45 Thirty-third Supplemental Indenture dated as of August 15, 1983,
and directors' resolutions establishing the Series BB Bonds and
dealing with other matters. (Exhibit B-45, 1983 Form 10-K, File No.
1-8222)
4-46 Bond Purchase Agreement between Merrill, Lynch, Pierce, Fenner &
Smith, Inc., Underwriters and The Industrial Development Authority
of the State of New Hampshire, issuer and Central Vermont Public
Service Corporation. (Exhibit B-46, 1984 Form 10-K, File No.
1-8222)
4-47 Thirty-Fourth Supplemental Indenture dated as of January 15, 1985,
and directors' resolutions establishing the Series CC Bonds and
Series DD Bonds and matters connected therewith. (Exhibit B-47,
1985 Form 10-K, File No. 1-8222)
4-48 Bond Purchase Agreement among Connecticut Development Authority and
Central Vermont Public Service Corporation with E. F. Hutton &
Company Inc. dated December 11, 1985. (Exhibit B-48, 1985 Form
10-K, File No. 1-8222)
4-49 Stock-Purchase Agreement between Vermont Electric Power
Company, Inc. and the Company dated August 11, 1986 relative
to purchase of Class C Preferred Stock. (Exhibit B-49, 1986
Form 10-K, File No. 1-8222)
4-50 Thirty-Fifth Supplemental Indenture dated as of December 15, 1989
and directors' resolutions establishing the Series EE, Series FF
and Series GG Bonds and matters connected therewith. (Exhibit 4-50,
1989 Form 10-K, File No. 1-8222)
4-51 Thirty-Sixth Supplemental Indenture dated as of December 10, 1990
and directors' resolutions establishing the Series HH Bonds and
matters connected therewith. (Exhibit 4-51, 1990 Form 10-K, File
No. 1-8222)
4-52 Thirty-Seventh Supplemental Indenture dated December 10, 1991 and
directors' resolutions establishing the Series JJ Bonds and matters
connected therewith. (Exhibit 4-52, 1991 Form 10-K, File No.
1-8222)
4-53 Thirty-Eight Supplemental Indenture dated December 10, 1993
establishing Series KK, LL, MM, NN, OO. (Exhibit 4-53, 1993 Form
10-K, File No. 1-8222)
* 4-54 Thirty-Ninth Supplemental Indenture Dated December 29, 1997.
* 4-55 Fortieth Supplemental Indenture Dated January 28, 1998.
Exhibit 10 Material Contracts (*Denotes filed herewith)
Incorporated herein by reference:
10.l Copy of firm power Contract dated August 29, 1958, and
supplements thereto dated September 19, 1958, October 7, 1958,
and October 1, 1960, between the Company and the State
of Vermont (the "State"). (Exhibit C-1, File No. 2-17184)
10.1.1 Agreement setting out Supplemental NEPOOL Understandings
dated as of April 2, 1973. (Exhibit C-22, File No.
5-50198)
10.2 Copy of Transmission Contract dated June 13, 1957, between Velco
and the State, relating to transmission of power. (Exhibit
10.2, 1993 Form 10-K, File No. 1-8222)
10.2.1 Copy of letter agreement dated August 4, 1961, between
Velco and the State. (Exhibit C-3, File No. 2-26485)
10.2.2 Amendment dated September 23, 1969. (Exhibit C-4, File
No. 2-38161)
10.2.3 Amendment dated March 12, 1980. (Exhibit C-92, 1982
Form 10-K, File No. 1-8222)
10.2.4 Amendment dated September 24, 1980. (Exhibit C-93, 1982
Form 10-K, File No. 1-8222)
10.3 Copy of subtransmission contract dated August 29, 1958, between
Velco and the Company (there are seven similar contracts between
Velco and other utilities). (Exhibit 10.3, 1993 Form 10-K,
Form No. 1-8222)
10.3.1 Copies of Amendments dated September 7, 196l, November 2,
1967, March 22, 1968, and October 29, 1968. (Exhibit
C-6, File No. 2-32917)
10.3.2 Amendment dated December 1, 1972. (Exhibit 10.3.2, 1993
Form 10-K, File No. 1-8222)
10.4 Copy of Three-Party Agreement dated September 25, 1957, between
the Company, Green Mountain and Velco. (Exhibit C-7, File No.
2-17184)
10.4.1 Superseding Three Party Power Agreement dated January 1,
1990. (Exhibit 10-201, 1990 Form 10-K, File No. 1-8222)
10.4.2 Agreement Amending Superseding Three Party Power
Agreement dated May 1, 1991. (Exhibit 10.4.2, 1991 Form
10-K, File No. 1-8222)
10.5 Copy of firm power Contract dated December 29, 1961, between the
Company and the State, relating to purchase of Niagara Project
power. (Exhibit C-8, File No. 2-26485)
10.5.1 Amendment effective as of January 1, 1980. (Exhibit
10.5.1, 1993 Form 10-K, File No. 1-8222)
10.6 Copy of agreement dated July 16, 1966, and letter supplement
dated July 16, 1966, between Velco and Public Service Company of
New Hampshire relating to purchase of single unit power from
Merrimack II. (Exhibit C-9, File No. 2-26485)
10.6.1 Copy of Letter Agreement dated July 10, 1968, modifying
Exhibit A. (Exhibit C-10, File No. 2-32917)
10.7 Copy of Capital Funds Agreement between the Company and Vermont
Yankee dated as of February 1, 1968. (Exhibit C-11, File No.
70-4611)
10.7.1 Copy of Amendment dated March 12, 1968. (Exhibit C-12,
File No. 70-4611)
10.7.2 Copy of Amendment dated September 1, 1993. (Exhibit
10.7.2, 1994 Form 10-K, File No. 1-8222)
10.8 Copy of Power Contract between the Company and Vermont Yankee
dated as of February 1, 1968. (Exhibit C-13, File No. 70-4591)
10.8.1 Amendment dated April 15, 1983. (10.8.1, 1993 Form
10-K, File No. 1-8222)
10.8.2 Copy of Additional Power Contract dated February 1,
1984. (Exhibit C-123, 1984 Form 10-K, File No. 1-8222)
10.8.3 Amendment No. 3 to Vermont Yankee Power Contract,
dated April 24, 1985. (Exhibit 10-144, 1986 Form 10-K,
File No. 1-8222)
10.8.4 Amendment No. 4 to Vermont Yankee Power Contract,
dated June 1, 1985. (Exhibit 10-145, 1986 Form 10-K,
File No. 1-8222)
10.8.5 Amendment No. 5 dated May 6, 1988. (Exhibit 10-179,
1988 Form 10-K, File No. 1-8222)
10.8.6 Amendment No. 6 dated May 6, 1988. (Exhibit 10-180,
1988 Form 10-K, File No. 1-8222)
10.8.7 Amendment No. 7 dated June 15, 1989. (Exhibit 10-195,
1989 Form 10-K, File No. 1-8222)
10.9 Copy of Capital Funds Agreement between the Company and Maine
Yankee dated as of May 20, 1968. (Exhibit C-14, File No.
70-4658)
10.9.1 Amendment No. 1 dated August 1, 1985. (Exhibit C-125,
1984 Form 10-K, File No. 1-8222)
10.10 Copy of Power Contract between the Company and Maine Yankee
dated as of May 20, 1968. (Exhibit C-15, File No. 70-4658)
10.10.1 Amendment No. 1 dated March 1, 1984. (Exhibit C-112,
1984 Form 10-K, File No. 1-8222)
10.10.2 Amendment No. 2 effective January 1, 1984. (Exhibit
C-113, 1984 Form 10-K, File No. 1-8222)
10.10.3 Amendment No. 3 dated October 1, 1984. (Exhibit
C-114, 1984 Form 10-K, File No. 1-8222)
10.10.4 Additional Power Contract dated February 1, 1984.
(Exhibit C-126, 1985 Form 10-K, File No. 1-8222)
10.11 Copy of Agreement dated January 17, 1968, between Velco and
Public Service Company of New Hampshire relating to purchase of
additional unit power from Merrimack II. (Exhibit C-16, File
No. 2-32917)
10.12 Copy of Agreement dated February 10, 1968 between the Company
and Velco relating to purchase by Company of Merrimack II unit
power. (There are 25 similar agreements between Velco and
other utilities.) (Exhibit C-17, File No. 2-32917)
10.13 Copy of Three-Party Power Agreement dated as of November 21,
1969, among the Company, Velco, and Green Mountain relating
to purchase and sale of power from Vermont Yankee Nuclear
Power Corporation. (Exhibit C-18, File No. 2-38161)
10.13.1 Amendment dated June 1, 1981. (Exhibit 10.13.1, 1993
Form 10-K, File No. 1-8222)
10.14 Copy of Three-Party Transmission Agreement dated as of
November 21, 1969, among the Company, Velco, and Green Mountain
providing for transmission of power from Vermont Yankee Nuclear
Power Corporation. (Exhibit C-19, File No. 2-38161)
10.14.1 Amendment dated June 1, 1981. (Exhibit 10.14.1, 1993
Form 10-K, File No. 1-8222)
10.15 Copy of Stockholders Agreement dated September 25, 1957,
between the Company, Velco, Green Mountain and Citizens
Utilities Company. (Exhibit No. C-20, File No. 70-3558)
10.16 New England Power Pool Agreement dated as of September 1, 1971,
as amended to November 1, 1975. (Exhibit C-21, File No.
2-55385)
10.16.1 Amendment dated December 31, 1976. (Exhibit 10.16.1
1993 Form 10-K, File No. 1-8222)
10.16.2 Amendment dated January 23, 1977. (Exhibit 10.16.2,
1993 Form 10-K, File No. 1-8222)
10.16.3 Amendment dated July 1, 1977. (Exhibit 10.16.3, 1993
Form 10-K, File No. 1-8222)
10.16.4 Amendment dated August 1, 1977. (Exhibit 10.16.4,
1993 Form 10-K, File No. 1-8222)
10.16.5 Amendment dated August 15, 1978. (Exhibit 10.16.5,
1993 Form 10-K, File No. 1-8222)
10.16.6 Amendment dated January 31, 1979. (Exhibit 10.16.6,
1993 Form 10-K, File No. 1-8222)
10.16.7 Amendment dated February 1, 1980. (Exhibit 10.16.7,
1993 Form 10-K, File No. 1-8222)
10.16.8 Amendment dated December 31, 1976. (Exhibit 10.16.8,
1993 Form 10-K, File No. 1-8222)
10.16.9 Amendment dated January 31, 1977. (Exhibit 10.16.9,
1993 Form 10-K, File No. 1-8222)
10.16.10 Amendment dated July 1, 1977. (Exhibit 10.16.10, 1993
Form 10-K, File No. 1-8222)
10.16.11 Amendment dated August 1, 1977. (Exhibit 10.16.11,
1993 Form 10-K, File No. 1-8222)
10.16.12 Amendment dated August 15, 1978. (Exhibit 10.16.12,
1993 Form 10-K, File No. 1-8222)
10.16.13 Amendment dated January 31, 1980. (Exhibit 10.16.13,
1993 Form 10-K, File No. 1-8222)
10.16.14 Amendment dated February 1, 1980. (Exhibit 10.16.14,
1993 Form 10-K, File No. 1-8222)
10.16.15 Amendment dated September 1, 1981. (Exhibit 10.16.15,
1993 Form 10-K, File No. 1-8222)
10.16.16 Amendment dated December 1, 1981. (Exhibit 10.16.16,
1993 Form 10-K, File No. 1-8222)
10.16.17 Amendment dated June 15, 1983. (Exhibit 10.16.17,
1993 Form 10-K, File No. 1-8222)
10.16.18 Amendment dated September 1, 1985. (Exhibit 10-160,
1986 Form 10-K, File No. 1-8222)
10.16.19 Amendment dated April 30, 1987. (Exhibit 10-172, 1987
Form 10-K, File No. 1-8222)
10.16.20 Amendment dated March 1, 1988. (Exhibit 10-178, 1988
Form 10-K, File No. 1-8222)
10.16.21 Amendment dated March 15, 1989. (Exhibit 10-194, 1989
Form 10-K, File No. 1-8222)
10.16.22 Amendment dated October 1, 1990. (Exhibit 10-203,
1990 Form 10-K, File No. 1-8222)
10.16.23 Amendment dated September 15, 1992. (Exhibit
10.16.23, 1992 Form 10-K, File No. 1-8222)
10.16.24 Amendment dated May 1, 1993. (Exhibit 10.16.24, 1993
Form 10-K, File No. 1-8222)
10.16.25 Amendment dated June 1, 1993. (Exhibit 10.16.25, 1993
Form 10-K, File No. 1-8222)
10.16.26 Amendment dated June 1, 1994. (Exhibit 10.16.26, 1994
Form 10-K, File No. 1-8222)
10.16.27 Thirty-Second Amendment dated September 1, 1995.
(Exhibit 10.16.27, Form 10-Q dated September 30, 1995,
File No. 1-8222 and Exhibit 10.16.27, 1995 Form 10-K,
File No. 1-8222)
10.17 Agreement dated October 13, 1972, for Joint Ownership,
Construction and Operation of Pilgrim Unit No. 2 among Boston
Edison Company and other utilities, including the Company.
(Exhibit C-23, File No. 2-45990)
10.17.1 Amendments dated September 20, 1973, and September 15,
1974. (Exhibit C-24, File No. 2-51999)
10.17.2 Amendment dated December 1, 1974. (Exhibit C-25, File
No. 2-54449)
10.17.3 Amendment dated February 15, 1975. (Exhibit C-26,
File No. 2-53819)
10.17.4 Amendment dated April 30, 1975. (Exhibit C-27, File
No. 2-53819)
10.17.5 Amendment dated as of June 30, 1975. (Exhibit C-28,
File No. 2-54449)
10.17.6 Instrument of Transfer dated as of October 1, 1974,
assigning partial interest from the Company to Green
Mountain Power Corporation. (Exhibit C-29, File No.
2-52177)
10.17.7 Instrument of Transfer dated as of January 17, 1975,
assigning a partial interest from the Company to the
Burlington Electric Department. (Exhibit C-30, File
No. 2-55458)
10.17.8 Addendum dated as of October 1, 1974 by which Green
Mountain Power Corporation became a party thereto.
(Exhibit C-31, File No. 2-52177)
10.17.9 Addendum dated as of January 17, 1975 by which the
Burlington Electric Department became a party thereto.
(Exhibit C-32, File No. 2-55450)
10.17.10 Amendment 23 dated as of 1975. (Exhibit C-50, 1975
Form 10-K, File No. 1-8222)
10.18 Agreement for Sharing Costs Associated with Pilgrim Unit No.2
Transmission dated October 13, 1972, among Boston Edison
Company and other utilities including the Company. (Exhibit
C-33, File No. 2-45990)
10.18.1 Addendum dated as of October 1, 1974, by which Green
Mountain Power Corporation became a party thereto.
(Exhibit C-34, File No. 2-52177)
10.18.2 Addendum dated as of January 17, 1975, by which
Burlington Electric Department became a party thereto.
(Exhibit C-35, File No. 2-55458)
10.19 Agreement dated as of May 1, 1973, for Joint Ownership,
Construction and Operation of New Hampshire Nuclear Units among
Public Service Company of New Hampshire and other utilities,
including Velco. (Exhibit C-36, File No. 2-48966)
10.19.1 Amendments dated May 24, 1974, June 21, 1974,
September 25, 1974, October 25, 1974, and January 31,
1975. (Exhibit C-37, File No. 2-53674)
10.19.2 Instrument of Transfer dated September 27, 1974,
assigning partial interest from Velco to the Company.
(Exhibit C-38, File No. 2-52177)
10.19.3 Amendments dated May 24, 1974, June 21, 1974, and
September 25, 1974. (Exhibit C-81, File No. 2-51999)
10.19.4 Amendments dated October 25, 1974 and January 31,
1975. (Exhibit C-82, File No. 2-54646)
10.19.5 Sixth Amendment dated as of April 18, 1979. (Exhibit
C-83, File No. 2-64294)
10.19.6 Seventh Amendment dated as of April 18, 1979.
(Exhibit C-84, File No. 2-64294)
10.19.7 Eighth Amendment dated as of April 25, 1979. (Exhibit
C-85, File No. 2-64815)
10.19.8 Ninth Amendment dated as of June 8, 1979. (Exhibit
C-86, File No. 2-64815)
10.19.9 Tenth Amendment dated as of October 10, 1979.
(Exhibit C-87, File No. 2-66334 )
10.19.10 Eleventh Amendment dated as of December 15, 1979.
(Exhibit C-88, File No.2-66492)
10.19.11 Twelfth Amendment dated as of June 16, 1980.
(Exhibit C-89, File No. 2-68168)
10.19.12 Thirteenth Amendment dated as of December 31, 1980.
(Exhibit C-90, File No. 2-70579)
10.19.13 Fourteenth Amendment dated as of June 1, 1982.(Exhibit
C-104, 1982 Form 10-K, File No. 1-8222)
10.19.14 Fifteenth Amendment dated April 27, 1984. (Exhibit
10-134, 1986 Form 10-K, File No. 1-8222)
10.19.15 Sixteenth Amendment dated June 15, 1984. (Exhibit
10-135, 1986 Form 10-K, File No. 1-8222)
10.19.16 Seventeenth Amendment dated March 8, 1985. (Exhibit
10-136, 1986 Form 10-K, File No. 1-8222)
10.19.17 Eighteenth Amendment dated March 14, 1986. (Exhibit
10-137, 1986 Form 10-K, File No. 1-8222)
10.19.18 Nineteenth Amendment dated May 1, 1986. (Exhibit
10-138, 1986 Form 10-K, File No. 1-8222)
10.19.19 Twentieth Amendment dated September 19, 1986.
(Exhibit 10-139, 1986 Form 10-K, File No. 1-8222)
10.19.20 Amendment No. 22 dated January 13, 1989. (Exhibit
10-193, 1989 Form 10-K, File No. 1-8222)
10.20 Transmission Support Agreement dated as of May 1, 1973, among
Public Service Company of New Hampshire and other utilities,
including Velco, with respect to New Hampshire Nuclear Units.
(Exhibit C-39, File No. 2-48966)
10.21 Sharing Agreement - 1979 Connecticut Nuclear Unit dated
September 1, 1973, to which the Company is a party. (Exhibit
C-40, File No. 2-50142)
10.21.1 Amendment dated as of August 1, 1974. (Exhibit C-41,
File No. 2-51999)
10.21.2 Instrument of Transfer dated as of February 28, 1974,
transferring partial interest from the Company to
Green Mountain. (Exhibit C-42, File No. 2-52177)
10.21.3 Instrument of Transfer dated January 17, 1975,
transferring a partial interest from the Company to
Burlington Electric Department. (Exhibit C-43, File
No. 2-55458)
10.21.4 Amendment dated May 11, 1984. (Exhibit C-110, 1984
Form 10-K, File No. 1-8222)
10.22 Preliminary Agreement dated as of July 5, 1974, with respect to
1981 Montague Nuclear Generating Units. (Exhibit C-44, File
No. 2-51733)
10.22.1 Amendment dated June 30, 1975. (Exhibit C-45, File
No. 2-54449)
10.23 Agreement for Joint Ownership, Construction and Operation of
William F. Wyman Unit No. 4 dated November 1, 1974, among
Central Maine Power Company and other utilities including the
Company. (Exhibit C-46, File No. 2-52900)
10.23.1 Amendment dated as of June 30, 1975. (Exhibit C-47,
File No. 2-55458)
10.23.2 Instrument of Transfer dated July 30, 1975, assigning
a partial interest from Velco to the Company.
(Exhibit C-48, File No. 2-55458)
10.24 Transmission Agreement dated November 1, 1974, among Central
Maine Power Company and other utilities including the Company
with respect to William F. Wyman Unit No. 4. (Exhibit C-49,
File No. 2-54449)
10.25 Copy of Power Contract between the Company and Yankee Atomic
dated as of June 30, 1959. (Exhibit C-61, 1981 Form 10-K,
File No. 1-8222)
10.25.1 Revision dated April 1, 1975. (Exhibit C-61, 1981
Form 10-K, File No. 1-8222)
10.25.2 Amendment dated May 6, 1988. (Exhibit 10-181, 1988
Form 10-K, File No. 1-8222)
10.25.3 Amendment dated June 26, 1989. (Exhibit 10-196, 1989
Form 10-K, File No. 1-8222)
10.25.4 Amendment dated July 1, 1989. (Exhibit 10-197, 1989
Form 10-K, File No. 1-8222)
10.25.5 Amendment dated February 1, 1992 (Exhibit 10.25.5,
1992 Form 10-K, File No. 1-8222)
10.26 Copy of Transmission Contract between the Company and Yankee
Atomic dated as of June 30, 1959. (Exhibit C-63, 1981 Form
10-K, File No. 1-8222)
10.27 Copy of Power Contract between the Company and Connecticut
Yankee dated as of June 1, 1964. (Exhibit C-64, 1981 Form
10-K, File No. 1-8222)
10.27.1 Supplementary Power Contract dated March 1, 1978.
(Exhibit C-94, 1982 Form 10-K, File No. 1-8222)
10.27.2 Amendment dated August 22, 1980. (Exhibit C-95,
1982 Form 10-K, File No. 1-8222)
10.27.3 Amendment dated October 15, 1982. (Exhibit C-96,
1982 Form 10-K, File No. 1-8222)
10.27.4 Second Supplementary Power Contract dated April 30,
1984. (Exhibit C-115, 1984 Form 10-K, File No.
1-8222)
10.27.5 Additional Power Contract dated April 30, 1984.
(Exhibit C-116, 1984 Form 10-K, File No. 1-8222)
10.28 Copy of Transmission Contract between the Company and
Connecticut Yankee dated as of July 1, 1964. (Exhibit C-65,
1981 Form 10-K, File No. 1-8222)
10.29 Copy of Capital Funds Agreement between the Company and
Connecticut Yankee dated as of July 1, 1964. (Exhibit C-66,
1981 Form 10-K, File No. 1-8222)
10.29.1 Copy of Capital Funds Agreement between the Company
and Connecticut Yankee dated as of September 1, 1964.
(Exhibit C-67, 1981 Form 10-K, File No. 1-8222)
10.30 Copy of Five-Year Capital Contribution Agreement between the
Company and Connecticut Yankee dated as of November 1, 1980.
(Exhibit C-68, 1981 Form 10-K, File No. 1-8222)
10.31 Form of Guarantee Agreement dated as of November 7, 1981, among
certain banks, Connecticut Yankee and the Company, relating to
revolving credit notes of Connecticut Yankee. (Exhibit C-69,
1981 Form 10-K, File No. 1-8222)
10.32 Form of Guarantee Agreement dated as of November 13, 1981,
between The Connecticut Bank and Trust Company, as Trustee, and
the Company, relating to debentures of Connecticut Yankee.
(Exhibit C-70, 1981 Form 10-K, File No. 1-8222)
10.33 Form of Guarantee Agreement dated as of November 5, 1981,
between Bankers Trust Company, as Trustee of the Vernon Energy
Trust, and the Company, relating to Vermont Yankee Nuclear Fuel
Sale Agreement. (Exhibit C-71, 1981 Form 10-K, File No.
1-8222)
10.34 Preliminary Vermont Support Agreement re Quebec Interconnection
between Velco and among seventeen Vermont Utilities dated
May 1, 1981. (Exhibit C-97, 1982 Form 10-K, File No. 1-8222)
10.34.1 Amendment dated June 1, 1982. (Exhibit C-98, 1982
Form 10-K, File No. 1-8222)
10.35 Vermont Participation Agreement for Quebec Interconnection
between Velco and among seventeen Vermont Utilities dated
July 15, 1982. (Exhibit C-99, 1982 Form 10-K, File No. 1-8222)
10.35.1 Amendment No. 1 dated January 1, 1986. (Exhibit
C-132, 1986 Form 10-K, File No. 1-8222)
10.36 Vermont Electric Transmission Company Capital Funds Support
Agreement between Velco and among sixteen Vermont Utilities
dated July 15, 1982. (Exhibit C-100, 1982 Form 10-K, File No.
1-8222)
10.37 Vermont Transmission Line Support Agreement, Vermont Electric
Transmission Company and twenty New England Utilities dated
December 1, 1981, as amended by Amendment No. 1 dated June 1,
1982, and by Amendment No. 2 dated November 1, 1982. (Exhibit
C-101, 1982 Form 10-K, File No. 1-8222)
10.37.1 Amendment No. 3 dated January 1, 1986. (Exhibit
10-149, 1986 Form 10-K, File No. 1-8222)
10.38 Phase 1 Terminal Facility Support Agreement between New England
Electric Transmission Corporation and twenty New England
Utilities dated December 1, 1981, as amended by Amendment No. 1
dated as of June 1, 1982 and by Amendment No. 2 dated as of
November 1, 1982. (Exhibit C-102, 1982 Form 10-K, File No.
1-8222)
10.39 Power Purchase Agreement between Velco and CVPS dated June 1,
1981. (Exhibit C-103, 1982 Form 10-K, File No. 1-8222)
10.40 Agreement for Joint Ownership, Construction and Operation of
the Joseph C. McNeil Generating Station by and between City of
Burlington Electric Department, Central Vermont Realty, Inc.
and Vermont Public Power Supply Authority dated May 14, 1982.
(Exhibit C-107, 1983 Form 10-K, File No. 1-8222)
10.40.1 Amendment No. 1 dated October 5, 1982. (Exhibit
C-108, 1983 Form 10-K, File No. 1-8222)
10.40.2 Amendment No. 2 dated December 30, 1983. (Exhibit
C-109, 1983 Form 10-K, File No. 1-8222)
10.40.3 Amendment No. 3 dated January 10, 1984. (Exhibit
10-143, 1986 Form 10-K, File No. 1-8222)
10.41 Transmission Service Contract between Central Vermont Public
Service Corporation and The Vermont Electric Generation &
Transmission Cooperative, Inc. dated May 14, 1984. (Exhibit
C-111, 1984 Form 10-K, File No. 1-8222)
10.42 Copy of Highgate Transmission Interconnection Preliminary
Support Agreement dated April 9, 1984. (Exhibit C-117, 1984
Form 10-K, File No. 1-8222)
10.43 Copy of Allocation Contract for Hydro-Quebec Firm Power dated
July 25, 1984. (Exhibit C-118, 1984 Form 10-K, File No.
1-8222)
10.43.1 Tertiary Energy for Testing of the Highgate HVDC
Station Agreement, dated September 20, 1985. (Exhibit
C-129, 1985 Form 10-K, File No. 1-8222)
10.44 Copy of Highgate Operating and Management Agreement dated
August 1, 1984. (Exhibit C-119, 1986 Form 10-K, File No.
1-8222)
10.44.1 Amendment No. 1 dated April 1, 1985. (Exhibit 10-152,
1986 Form 10-K, File No. 1-8222)
10.44.2 Amendment No. 2 dated November 13, 1986. (Exhibit
10-167, 1987 Form 10-K, File No. 1-8222)
10.44.3 Amendment No. 3 dated January 1, 1987. (Exhibit
10-168, 1987 Form 10-K, File No. 1-8222)
10.45 Copy of Highgate Construction Agreement dated August 1, 1984.
(Exhibit C-120, 1984 Form 10-K, File No. 1-8222)
10.45.1 Amendment No. 1 dated April 1, 1985. (Exhibit 10-151,
1986 Form 10-K, File No. 1-8222)
10.46 Copy of Agreement for Joint Ownership, Construction and
Operation of the Highgate Transmission Interconnection.
(Exhibit C-121, 1984 Form 10-K, File No. 1-8222)
10.46.1 Amendment No. 1 dated April 1, 1985. (Exhibit 10-153,
1986 Form 10-K, File No. 1-8222)
10.46.2 Amendment No. 2 dated April 18, 1985. (Exhibit
10-154, 1986 Form 10-K, File No. 1-8222)
10.46.3 Amendment No. 3 dated February 12, 1986. (Exhibit
10-155, 1986 Form 10-K, File No. 1-8222)
10.46.4 Amendment No. 4 dated November 13, 1986. (Exhibit
10-169, 1987 Form 10-K, File No. 1-8222)
10.46.5 Amendment No. 5 and Restatement of Agreement dated
January 1, 1987. (Exhibit 10-170, 1987 Form 10-K,
File No. 1-8222)
10.47 Copy of the Highgate Transmission Agreement dated August 1,
1984. (Exhibit C-122, 1984 Form 10-K, File No. 1-8222)
10.48 Copy of Preliminary Vermont Support Agreement Re: Quebec
Interconnection - Phase II dated September 1, 1984. (Exhibit
C-124, 1984 Form 10-K, File No. 1-8222)
10.48.1 First Amendment dated March 1, 1985. (Exhibit C-127,
1985 Form 10-K, File No. 1-8222)
10.49 Vermont Transmission and Interconnection Agreement between New
England Power Company and Central Vermont Public
Service Corporation and Green Mountain Power Corporation with
the consent of Vermont Electric Power Company, Inc., dated
May 1, 1985. (Exhibit C-128, 1985 Form 10-K, File No. 1-8222)
10.50 Service Contract Agreement between the Company and the State of
Vermont for distribution and sale of energy from St. Lawrence
power projects ("NYPA Power") dated as of June 25, 1985.
(Exhibit C-130, 1985 Form 10-K, File No. 1-8222)
10.50.1 Lease and Operating Agreement between the Company and
the State of Vermont dated as of June 25, 1985.
(Exhibit C-131, 1985 Form 10-K, File No. 1-8222)
10.51 System Sales & Exchange Agreement Between Niagara Mohawk Power
Corporation and Central Vermont Public Service Corporation
dated October 1, 1986. (Exhibit C-133, 1986 Form 10-K, File
No. 1-8222)
10.54 Transmission Agreement between Vermont Electric Power Company,
Inc. and Central Vermont Public Service Corporation dated
January 1, 1986. (Exhibit 10-146, 1986 Form 10-K, File No.
1-8222)
10.55 1985 Four-Party Agreement between Vermont Electric Power
Company, Central Vermont Public Service Corporation, Green
Mountain Power Corporation and Citizens Utilities dated July 1,
1985. (Exhibit 10-147, 1986 Form 10-K, File No. 1-8222)
10.55.1 Amendment dated February 1, 1987. (Exhibit 10-171,
1987 Form 10-K, File No. 1-8222)
10.56 1985 Option Agreement between Vermont Electric Power Company,
Central Vermont Public Service Corporation, Green Mountain
Power Corporation and Citizens Utilities dated December 27,
1985. (Exhibit 10-148, 1986 Form 10-K, File No. 1-8222)
10.56.1 Amendment No. 1 dated September 28, 1988. (Exhibit
10-182, 1988 Form 10-K, File No. 1-8222)
10.56.2 Amendment No. 2 dated October 1, 1991. (Exhibit
10.56.2, 1991 Form 10-K, File No. 1-8222)
10.56.3 Amendment No. 3 dated December 31, 1994. (Exhibit
10.56.3, 1994 Form 10-K, File No. 1-8222)
10.56.4 Amendment No. 4 dated December 31, 1996. (Exhibit
10.56.4, 1996 Form 10-K, file No. 1-8222)
10.57 Highgate Transmission Agreement dated August 1, 1984 by and
between the owners of the project and the Vermont electric
distribution companies. (Exhibit 10-156, 1986 Form 10-K, File
No. 1-8222)
10.57.1 Amendment No. 1 dated September 22, 1985. (Exhibit
10-157, 1986 Form 10-K, File No. 1-8222)
10.58 Vermont Support Agency Agreement re: Quebec Interconnection -
Phase II between Vermont Electric Power Company, Inc. and
participating Vermont electric utilities dated June 1, 1985.
(Exhibit 10-158, 1986 Form 10K, File No. 1-8222)
10.58.1 Amendment No. 1 dated June 20, 1986. (Exhibit 10-159,
1986 Form 10-K, File No. 1-8222)
10.59 Indemnity Agreement B-39 dated May 9, 1969 with amendments 1-16
dated April 17, 1970 thru April 16, 1985 between licensees of
Millstone Unit No. 3 and the Nuclear Regulatory Commission.
(Exhibit 10-161, 1986 Form 10-K, File No. 1-8222)
10.59.1 Amendment No. 17 dated November 25, 1985. (Exhibit
10-162, 1986 Form 10-K, File No. 1-8222)
10.62 Contract for the Sale of 50MW of firm power between
Hydro-Quebec and Vermont Joint Owners of Highgate Facilities
dated February 23, 1987. (Exhibit 10-173, 1987 Form 10-K,
File No. 1-8222)
10.63 Interconnection Agreement between Hydro-Quebec and Vermont
Joint Owners of Highgate facilities dated February 23, 1987.
(Exhibit 10-174, 1987 Form 10-K, File No. 1-8222)
10.63.1 Amendment dated September 1, 1993 (Exhibit 10.63.1,
1993 Form 10-K, File No. 1-8222)
10.64 Firm Power and Energy Contract by and between Hydro-Quebec and
Vermont Joint Owners of Highgate for 500MW dated December 4,
1987. (Exhibit 10-175, 1987 Form 10-K, File No. 1-8222)
10.64.1 Amendment No. 1 dated August 31, 1988. (Exhibit
10-191, 1988 Form 10-K, File No. 1-8222)
10.64.2 Amendment No. 2 dated September 19, 1990. (Exhibit
10-202, 1990 Form 10-K, File No. 1-8222)
10.64.3 Firm Power & Energy Contract dated January 21, 1993
by and between Hydro-Quebec and Central Vermont
Public Service Corporation for the sale back of 25 MW
of power. (Exhibit 10.64.3, 1992 Form 10-K, File No.
1-8222)
10.64.4 Firm Power & Energy Contract dated January 21, 1993
by and between Hydro-Quebec and Central Vermont Public
Service Corporation for the sale back of 50 MW of
power. (Exhibit 10.64.4, 1992 Form 10-K, File No.
1-8222)
10.66 Hydro-Quebec Participation Agreement dated April 1, 1988 for
600 MW between Hydro-Quebec and Vermont Joint Owners of
Highgate. (Exhibit 10-177, 1988 Form 10-K, File No. 1-8222)
10.67 Sale of firm power and energy (54MW) between Hydro-Quebec and
Vermont Utilities dated December 29, 1988. (Exhibit 10-183,
1988 Form 10-K, File No. 1-8222)
10.75 Receivables Purchase Agreement between Central Vermont Public
Service Corporation, Central Vermont Public Service Corporation
as Service Agent and The First National Bank of Boston dated
November 29, 1988. (Exhibit 10-192, 1988 Form 10-K)
10.75.1 Agreement Amendment No. 1 dated December 21, 1988
(Exhibit 10.75.1, 1993 Form 10-K, File No. 1-8222)
10.75.2 Letter Agreement dated December 4, 1989
(Exhibit 10.75.2, 1993 Form 10-K, File No. 1-8222)
10.75.3 Agreement Amendment No. 2 dated November 29, 1990
(Exhibit 10.75.3, 1993 Form 10-K, File No. 1-8222)
10.75.4 Agreement Amendment No. 3 dated November 29, 1991
(Exhibit 10.75.4, 1993 Form 10-K, File No. 1-8222)
10.75.5 Agreement Amendment No. 4 dated November 29, 1992
(Exhibit 10.75.5, 1993 Form 10-K, File No. 1-8222)
* 10.75.6 Agreement Amendment No. 5 dated November 29, 1993
* 10.75.7 Agreement Amendment No. 6 dated November 29, 1994
* 10.75.8 Agreement Amendment No. 7 dated November 29, 1995
* 10.75.9 Agreement Amendment No. 8 dated February 5, 1997
* 10.75.10 Agreement Amendment No. 9 dated February 2, 1998
* 10.83 Credit Agreement Dated As of November 5, 1997 among
Central Vermont Public Service Corporation, The Lenders
Named Herein and Toronto Dominion (Texas), Inc., as Agent.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
A 10.68 Stock Option Plan for Non-Employee Directors dated July 18,
1988. (Exhibit 10-184, 1988 Form 10-K, File No. 1-8222)
A 10.69 Stock Option Plan for Key Employees dated July 18, 1988.
(Exhibit 10-185, 1988 Form 10-K, File No. 1-8222)
A 10.70 Officers Supplemental Insurance Plan authorized July 9, 1984.
(Exhibit 10-186, 1988 Form 10-K, File No. 1-8222)
A 10.71 Officers Supplemental Deferred Compensation Plan dated
November 4, 1985. (Exhibit 10-187, 1988 Form 10-K, File
No. 1-8222)
A 10.71.1 Amendment dated October 2, 1995. (Exhibit 10.71.1,
1995 Form 10-K, File No. 1-8222)
A 10.72 Directors' Supplemental Deferred Compensation Plan dated
November 4, 1985. (Exhibit 10-188, 1988 Form 10-K, File No.
1-8222)
A 10.72.1 Amendment dated October 2, 1995. (Exhibit 10.72.1,
1995 Form 10-K, File No. 1-8222)
A 10.73 Management Incentive Compensation Plan as adopted September 9,
1985. (Exhibit 10-189, 1988 Form 10-K, File No. 1-8222)
A 10.73.1 Revised Management Incentive Plan as adopted
February 5, 1990. (Exhibit 10-200, 1989 Form 10-K,
File No. 1-8222)
A 10.73.2 Revised Management Incentive Plan dated May 2, 1995.
(Exhibit 10.73.2, 1995 Form 10-K, File No. 1-8222)
A 10.74 Officers' Change of Control Agreements as approved October 3,
1988. (Exhibit 10-190, 1988 Form 10-K, File No. 1-8222)
A 10.78 Stock Option Plan for Non-Employee Directors dated April 30,
1993 (Exhibit 10.78, 1993 Form 10-K, File No. 1-8222)
A 10.79 Officers Insurance Plan dated November 15, 1993
(Exhibit 10.79, 1993 Form 10-K, File No. 1-8222)
A 10.79.1 Amendment dated October 2, 1995. (Exhibit No.
10.79.1, 1995 Form 10-K, File No. 1-8222)
A 10.80 Directors' Supplemental Deferred Compensation Plan dated
January 1, 1990 (Exhibit 10.80, 1993 Form 10-K, File No. 1-8222)
A 10.80.1 Amendment dated October 2, 1995. (Exhibit No.
10.80.1, 1995 Form 10-K, File No. 1-8222)
A 10.81 Officers' Supplemental Deferred Compensation Plan dated
January 1, 1990 (Exhibit 10.81, 1993 Form 10-K, File No. 1-8222)
A 10.82 Management Incentive Plan for Executive Officers dated January 1,
1997. (Exhibit 10.82, 1996 Form 10-K, File No. 1-8222)
A - Compensation related plan, contract, or arrangement.
21. Subsidiaries of the Registrant
* 21.1 List of Subsidiaries of Registrant
23. Consents of Experts and Counsel
* 23.1 Consent of Independent Public Accountants
27. Financial Data Schedule (filed electronically only)
(b) Reports on Form 8-K:
The Company filed the following reports on Form 8-K during
the quarter ended December 31, 1997:
1. Item 5. Other Events, dated December 31, 1997 re:
Connecticut Valley Electric Company Inc. Order.
<PAGE>
Report of Independent Public Accountants
To the Board of Directors of
Central Vermont Public Service Corporation:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in Central Vermont
Public Service Corporation's annual report to shareholders, included in this
Form 10-K, and have issued our report thereon dated February 23, 1998. Our
audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index above is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly states, in all material respects, the
consolidated financial data required to be set forth therein in relation to
the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 23, 1998
<PAGE>
<TABLE>
<CAPTION>
Schedule II
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
AND ITS WHOLLY OWNED SUBSIDIARIES
Reserves
Year ended December 31, 1997
Additions
Balance at Charged to Charged Balance at
beginning costs and to other end of
of year expenses Accounts Deductions year
---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Reserves deducted from assets
to which they apply:
$ 91,909(1)
415,992(2)
770,496(3)
Reserve for uncollectible ----------
accounts receivable $1,132,195 $751,530 $1,278,397 $1,216,229(4) $1,945,893
========== ======== ========== ========== ==========
Accumulated depreciation of
miscellaneous properties:
Rental water heater program $3,553,149 $357,961 - $ 282,021(5) $3,629,089
320,811(6)
Other 731,892 106,248 - 152,195(7) 365,134
---------- -------- ---------- ----------
$4,285,041 $464,209 $ 755,027 $3,994,223
========== ======== ========== ==========
Reserve shown separately:
Injuries and damages reserve $ 225,580 - - - $ 225,580
========== ==========
(1) Amount due from collection agency.
(2) Collections of accounts previously written off.
(3) Transferred from miscellaneous receivables.
(4) Uncollectible accounts written off.
(5) Retirement/Sale of rental water heaters.
(6) Sale of non-utility Property.
(7) Amortization of Customer Information Systems.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule II
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
AND ITS WHOLLY OWNED SUBSIDIARIES
Reserves
Year ended December 31, 1996
Additions
Balance at Charged to Charged Balance at
beginning costs and to other end of
of year expenses Accounts Deductions year
---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Reserves deducted from assets
to which they apply:
$ 81,367(1)
299,244(2)
Reserve for uncollectible --------
accounts receivable $1,551,606 $670,083 $380,611 $1,470,105(3) $1,132,195
========== ======== ======== ========== ==========
Accumulated depreciation of
miscellaneous properties:
Rental water heater program $3,508,493 $356,274 - $ 311,618(4) $3,553,149
Other 295,765 436,127 - - 731,892
---------- -------- ---------- ----------
$3,804,258 $792,401 $ 311,618 $4,285,041
========== ======== ========== ==========
Reserve shown separately:
Injuries and damages reserve $ 225,580 - - - $ 225,580
========== ==========
(1) Amount due from collection agency.
(2) Collections of accounts previously written off.
(3) Uncollectible accounts written off.
(4) Retirements of rental water heaters.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Schedule II
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
AND ITS WHOLLY OWNED SUBSIDIARIES
Reserves
Year ended December 31, 1995
Additions
Balance at Charged to Charged Balance at
beginning costs and to other end of
of year expenses Accounts Deductions year
---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Reserves deducted from assets
to which they apply:
$ 80,978(1)
644,277(2)
200,000(3)
Reserve for uncollectible --------
accounts receivable $ 967,732 $1,074,327 $925,255 $1,415,708(4) $1,551,606
========== ========== ======== ========== ==========
Accumulated depreciation of
miscellaneous properties:
Rental water heater program $3,450,284 $ 350,522 - $ 292,313(5) $3,508,493
Other 213,287 82,478 - - 295,765
---------- ---------- --------- ----------
$3,663,571 $ 433,000 $ 292,313 $3,804,258
========== ========== ========= ==========
Reserve shown separately:
Injuries and damages reserve $ 225,580 - - - $ 225,580
========== ==========
(1) Amount due from collection agency.
(2) Collections of accounts previously written off.
(3) Transferred from miscellaneous receivables.
(4) Uncollectible accounts written off.
(5) Retirements of rental water heaters.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CENTRAL VERMONT PUBLIC SERVICE
CORPORATION
By /s/ Robert H. Young
Robert H. Young, President and
Chief Executive Officer
March 30, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
DATE NAME AND TITLE
March 30, 1998 /s/ Robert H. Young
Robert H. Young
President and Chief Executive Officer
and Director
March 30, 1998 /s/ Francis J. Boyle
Francis J. Boyle, Senior Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
March 30, 1998 /s/ James M. Pennington
James M. Pennington, Vice President,
Controller (Principal Accounting Officer)
March 30, 1998 /s/ Frederic H. Bertrand
Frederic H. Bertrand
Chairman of the Board and Director
March 30, 1998 /s/ Robert L. Barnett
Robert L. Barnett
Director
March 30, 1998 /s/ Rhonda L. Brooks
Rhonda L. Brooks
Director
March 30, 1998 /s/ Robert G. Clarke
Robert G. Clarke
Director
March 30, 1998 /s/ Luther F. Hackett
Luther F. Hackett
Director
March 30, 1998 /s/ Patrick J. Martin
Patrick J. Martin
Director
March 30, 1998 /s/ Mary Alice McKenzie
Mary Alice McKenzie
Director
March 30, 1998 /s/ Preston Leete Smith
Preston Leete Smith
Director
Exhibit 3-1
-------------
BY-LAWS
OF
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
ARTICLE I.
Articles of Agreement: Offices
Section 1. These By-Laws shall be subject to the Articles of
Association, and all references in these By-Laws to the Articles
of Association shall be construed to mean the Articles of
Association of the Corporation as from time to time amended.
Section 2. The Corporation shall maintain its principal
office in Rutland, Vermont, and may maintain offices at such other
places as the Board of Directors may, from time to time, appoint.
ARTICLE II.
Seal
The corporate seal shall be circular in form and shall have
inscribed thereon the name of the Corporation and the words and
figures: "Seal Vermont 1929".
ARTICLE III.
Capital Stock and Transfers
Section 1. The amount and classes of capital stock that may
be issued by the Corporation, and the designations, preferences,
rights, privileges, voting powers, restrictions, and
qualifications of each class thereof, shall be as set forth in the
Articles of Association, as the same shall at any time be duly
recorded in the office of the Secretary of State of Vermont in
original or amended form.
Section 2. Each holder of fully paid stock shall be entitled
to a certificate or certificates of stock as provided by law and
in a form approved by the Board of Directors. (As amended May 2,
1972)
Section 3. Shares of stock may be transferred by the owner
by a proper endorsement upon the back of the certificate or by a
separate instrument of assignment, and the assignee, upon
producing, and surrendering the former certificate so transferred
or the certificate accompanied by such instrument, shall be
entitled to a new certificate if no liens upon the stock against
the former owner have attached. The delivery of a properly
executed stock certificate to a bona fide purchaser or pledgee for
value to sell, assign and transfer the same, signed by the owner
of the certificate, shall be a sufficient delivery to transfer the
title against all persons except the Company; but no such transfer
shall affect the right of the Company to treat the stockholder of
record as the stockholder in fact until the old certificate is
surrendered and a new certificate is issued to the person entitled
thereto. Except as hereinafter provided, or as may be required by
law or by the order of a court in appropriate proceedings, shares
of stock shall be transferred on the books of the Company only
upon the proper assignment and surrender of the certificates
issued therefor. If an outstanding certificate of stock shall be
lost, destroyed or stolen, the holder thereof may have a
replacement certificate issued upon such terms as the Directors
may prescribe. (As amended May 2, 1972)
Section 4. If default shall be made in the prompt payment
when due of any sum payable to the Company upon any subscription
for stock of the Company, and if such default shall continue for a
period of twenty days, then all right under the subscription in
and to the stock subscribed for shall, upon the expiration of such
period, cease and determine and become and be forfeited to the
Company; provided that if at the expiration of such twenty day
period such right shall belong to the estate of a decedent, it may
be forfeited only by resolution of the Board of Directors
declaring forfeiture. (As amended May 2, 1972)
ARTICLE IV.
Meetings of Stockholders
Section 1. All meetings of the stockholders shall be held in
Vermont, either at the principal office of the Company or at such
other place as shall be designated in the call therefor. The
annual meeting shall be held on the first Tuesday of May in each
year, if not a legal holiday, and if a legal holiday, then on the
next succeeding business day, at the time designated in the call,
for the election of Directors, and the transaction of such other
business as may come before it. (As amended April 2, 1946)
Section 2. Special meetings of the stockholders may be
called by the Board of Directors, the President or the Secretary
upon written request of stockholders holding not less than one-tenth
of all the shares entitled to vote at the meeting. In case
an annual meeting shall be omitted through inadvertence or
otherwise, the business of such meeting may be transacted at a
special meeting duly called for the purpose. (As amended May 2,
1972)
Section 3. Written or printed notice stating the place, day
and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be
delivered not less than 10 nor more than 60 days before the date
of the meeting, either personally or by mail, by or at the
direction of the President or the Secretary, to each registered
holder entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United
States mail addressed to the registered holder at the address as
it appears on the stock transfer books of the Company, with
postage on it prepaid. (As amended May 2, 1972 and August
7, 1995)
Section 4. Unless otherwise provided in the Articles of
Association, a majority of the votes entitled to be cast,
represented in person or by proxy, shall constitute a quorum at a
meeting of stockholders. If a quorum is present, the action on a
matter (other than the election of directors) is approved if the
votes cast in favor of the action exceed the votes cast opposing
the action, unless the vote of a greater number or voting by
classes is required by law, by these By-Laws or by the Articles of
Association. A majority vote of whatever stock shall be
represented, even if less than a quorum, shall be sufficient (a)
to adjourn from time to time until a quorum is present or (b) to
adjourn sine die. (As amended May 2, 1972 and June 2, 1997)
Section 5. At all stockholders' meetings, holders of record
of stock then having voting power shall be entitled to one vote
for each share of stock held by them, respectively, upon any
question or at any election, and such vote may, in all cases, be
given by proxy, duly authorized in writing. But no proxy dated
more than eleven 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. (As amended May 1, 1973
and August 7, 1995)
Article V.
Directors
Section 1. The property and business of the Corporation
shall be managed by a Board of Directors, each of whom must be a
stockholder. The Directors shall be elected by ballot by a plurality
of the votes cast by the shares entitled to vote in the election at a
meeting at which a quorum is present, except as otherwise
provided in the Articles of Association or in these By-Laws.
(As amended October 16, 1944; May 7, 1963, February 17,
1987 and June 2, 1997)
No person shall be eligible for election or re-election as a
Director after his/her seventieth birthday, provided that any
Director whose term of office extends beyond his/her seventieth
birthday shall be entitled to serve the remainder of the full term
of the class of Directors to which he/she was elected. (As
amended June 13, 1983 and November 2, 1987)
A majority of the Directors shall at all times be persons who
are not employees of the Corporation. The provisions of this
paragraph shall not apply to the election of Directors by the
holders of preferred stock when, in accordance with the Articles
of Association, they shall be entitled to elect the smallest
number of Directors necessary to constitute a majority of the full
Board of Directors. (As amended April 6, 1953 and August 7, 1995)
Section 2. Subject to the provisions of Section 5 below, the
Board of Directors shall consist of not less than 9 nor more than
21 persons, the exact number to be fixed from time to time by
resolution of the Board of Directors. Such exact number may be
increased or decreased by the affirmative vote of the holders of
at least 80 percent of the combined voting power of the then-
outstanding shares of common stock and of any other class of stock
then being expressly entitled to vote with the common stock on the
question. The Directors shall be classified, with respect to the
time for which they severally hold office, into three classes, as
nearly equal in number as possible. Upon their initial election,
the members of the first class shall hold office for a term
expiring at the next annual meeting of stockholders after their
election, the members of the second class shall hold office for a
term expiring at the second annual meeting of stockholders after
their election, and the members of the third class shall hold
office for a term expiring at the third annual meeting of
stockholders after their election. (As amended February 17, 1987)
Section 3. Subject to the provisions of Section 5 below, any
vacancies in the Board of Directors 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. Any Director elected in accordance with this provision
shall hold office for the remainder of the full term of the class
of Directors in which the vacancy occurred and until such
Director's successor shall have been elected and qualified. No
decrease in the number of authorized Directors constituting the
entire Board of Directors shall shorten the term of any incumbent
Director. (As amended February 17, 1987)
Section 4. Except as otherwise provided in paragraph (e) of
subdivision 6 of the Articles of Association, a Director may be
removed from office only for cause and only by the affirmative
vote of the holders of at least 80 percent of the combined voting
power of the then-outstanding shares of common stock and of any
other class of stock then being expressly entitled to vote with
the common stock on the question. (As amended February 17, 1987)
Section 5. Nothing contained in Sections 2 through 4 of this
Article V shall be deemed to alter, amend or repeal the provisions
of paragraph (b) of subdivision 6, paragraph (b) of subdivision
10F, or paragraph (a) of subdivision 20F, of the Articles of
Association each of which confers, under the circumstances
described therein, on the holders of the classes of stock referred
to therein, the right to vote in the election of Directors.
During any period in which such rights may be exercised, the
provision or provisions conferring such rights shall prevail over
any provision of these By-Laws inconsistent therewith. (As
amended February 17, 1987)
Section 6. Notwithstanding any other provision of these By-Laws,
of the Articles of Association or of law, the affirmative
vote of the holders of at least 80 percent of the combined voting
power of the then-outstanding shares of common stock and of any
other class of stock then being expressly entitled to vote with
the common stock in the election of Directors shall be required to
alter, amend or repeal Sections 2, 3, 4, 5 or 6 of this Article V.
(As amended February 17, 1987)
Section 7. The Board of Directors may hold its meetings and
may have one or more offices, and may keep the books of the
Corporation (except such records and books as by laws of Vermont
are required to be kept within the State) within or outside of
Vermont, at such places as it may from time to time determine. In
addition to the powers and authorities by these By-Laws expressly
conferred upon them, the Board of Directors may exercise all such
powers of the Corporation, and do all such lawful acts and things
as are not by law, by the Articles of Association or by these By-Laws
required to be exercised or done by the incorporators or
stockholders.
Section 8. (Section 8 deleted in its entirety by amendment
dated August 7, 1995)
ARTICLE VI.
Meetings of the Board
Section 1. Regular meetings of the Board of Directors shall
be held at such place and time as may be designated from time to
time by the Board; and such meetings, and a regular meeting
immediately following and at the same place as each annual meeting
of the stockholders, may be held without notice. Special meetings
of the Board of Directors may be called by the President, or by
any two Directors, upon two days' notice to each Director, either
personally or by mail or by telegram; and they may be held at any
time without call or formal notice, provided all the Directors are
present or waive notice thereof in writing. (As amended May 1,
1962)
Section 2. A majority of the number of Directors fixed in
accordance with the By-Laws shall constitute a quorum for the
transaction of business, unless a greater number is required by
the Articles of Association. The act of the 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 act of a greater
number is required by the Articles of Association. (As amended
May 2, 1972)
Section 3. Directors who are not also officers or regular
employees of the Company may receive compensation for their
services as such or as a member of any committee of the Board of
Directors, as well as fixed sums and expenses for attendance at
Directors' or committee meetings, in such amounts as may be
provided from time to time by the Board of Directors, provided
that nothing herein contained shall be construed to preclude any
Director from serving the Company in any other capacity and
receiving compensation therefor. (As amended May 5, 1981)
Section 4. Directors and members of the Executive Committee
and any other committee designated by the Board of Directors may
participate in a meeting of such Board or committee by means of a
conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each
other, and participation in a meeting in such a manner shall
constitute presence in person at such meeting. (As amended May 3,
1977)
ARTICLE VII.
Officers
Section 1. In each year there shall be elected by the Board
of Directors, and if practicable, at its first meeting after the
annual election of Directors, a President, one or more Vice
Presidents, a Secretary, a Treasurer, and a Controller; and the
Board may provide for and elect a Chairperson, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such
other officers and prescribe such duties for them as in its
judgment may, from time to time, be required to conduct the
business of the Company. One of said Vice Presidents may be
designated Executive Vice President. Any two or more offices may
be held by the same person, except the offices of President and
Secretary. All officers shall hold their respective offices for
the term of one year, and until their successors, willing to
serve, shall have been elected and, in the case of the Secretary,
qualified, unless sooner removed; but they, and any of them, may
be removed from their respective offices at the pleasure of the
Board. Vacancies arising in any office from any cause shall be
filled by the Board of Directors; and the persons chosen to fill
vacancies shall serve for the balance of the unexpired term and
until their successors shall have been elected. (As amended May
1, 1962; May 7, 1963; May 5, 1964; May 2, 1972 and November 2,
1987)
Section 2. A Chairperson elected pursuant to Section 1 of
this Article VII shall advise with and make his/her counsel
available to the other officers of the Company and shall have such
other powers and duties as may at any time be prescribed by these
By-Laws and by the Board of Directors. He/She shall, when
present, preside at all meetings of the stockholders and of the
Board of Directors and of the Executive Committee. (As amended
May 5, 1964)
The President shall be the Chief Executive Officer of the
Company and, subject to the direction of the Board of Directors
and of the Chairperson (if one is elected), shall supervise the
administration of the business and affairs of the Company and
shall have such other powers and duties as may at any time be
prescribed by these By-Laws and by the Board of Directors. In the
absence of the Chairperson (or if no such Chairperson is elected),
the President shall, when present, preside at meetings of the
stockholders and of the Board of Directors and of the Executive
Committee. (As amended May 5, 1964 and November 2, 1987)
The Chairperson and the President shall be members of the
Executive Committee (if such Executive Committee is designated by
the Board of Directors) and each of them, in his/her discretion,
may attend any meeting of any committee of the Board, whether or
not he/she is a member of such committee. (As amended May 5, 1964)
Section 3. The President shall, subject to the control of
the Board of Directors, have charge of the business and affairs of
the Company, including the power to appoint and to remove and to
discharge any and all agents and employees of the Company not
elected or appointed directly by the Board of Directors, and such
other powers and duties as may at any time be prescribed by these
By-Laws and by the Board of Directors. (As amended May 5, 1964)
Section 4. The Vice President or Vice Presidents, if there
shall be more than one, shall have such powers and duties as may
from time to time be prescribed by the Board of Directors or by
the President, but any powers and duties prescribed by the
President shall not be inconsistent with any theretofore
prescribed by the Board of Directors. In case the President, from
absence or any other cause, shall be unable at any time to attend
to the duties of the office of President requiring attention, or
in case of his/her death, resignation or removal from office, the
powers and duties of the President shall, except as the Board of
Directors may otherwise provide, temporarily devolve upon the
Executive Vice President if one shall have been designated and is
able to serve, or in case of the latter's inability, upon the Vice
President designated by the Board of Directors and able to serve
and shall be exercised by such Vice President as acting President
during such inability of the President, or until the vacancy in
the office of President shall be filled. In case of the absence,
disability, death, resignation or removal from office of both the
President and such Vice President, the Board of Directors shall
elect one of its members to exercise the powers and duties of the
President during such absence or disability, or until the vacancy
in one of said offices shall be filled. (As amended May 1, 1951
and May 1, 1962)
Section 5. The Secretary shall reside in the State of
Vermont and shall have the duties prescribed by law and such other
duties as the By-Laws or the Board of Directors may prescribe.
(As amended May 2, 1972)
Section 6. The Treasurer shall have charge of, and be
responsible for the custody and, jointly with the Controller, the
receipt and disbursement of the funds of the Corporation, and
shall deposit its funds in the name of the Company, in such banks,
trust companies, or safe deposit vaults as the Board of Directors
may direct. The Treasurer shall have the custody of such books
and papers as in the practical business operations of the Company
shall naturally belong in the office or custody of the Treasurer,
or as shall be placed in his/her custody by the Board of
Directors, by the Executive Committee, or by the President. The
Treasurer shall also have charge of the safekeeping of all stocks,
bonds, mortgages, and other securities belonging to the Company,
but such stocks, bonds, mortgages, and other securities shall be
deposited for safekeeping in a safe deposit vault to be approved
by the Board of Directors or the Executive Committee, in a box or
boxes, access to which shall be had as may be provided by
resolution of the Board of Directors or by the Executive
Committee. The Treasurer shall have such other powers and duties
as are commonly incident to the office of Treasurer, or as may be
prescribed. The Treasurer may be required to give bond to the
Company for the faithful discharge of duties in such form and to
such amount and with such sureties as shall be determined by the
Board of Directors. (As amended November 2, 1987)
Section 7. The Controller shall have charge of, and be
responsible for the collection, and jointly with the Treasurer,
the receipt and disbursement of the funds of the Corporation. The
Controller shall maintain adequate records of all assets,
liabilities, and transactions of the Company; shall see that
adequate audits thereof are currently and regularly made and, in
conjunction with other officers and department heads, shall
initiate and enforce methods and procedures whereby the business
of the Company shall be conducted with maximum safety, efficiency
and economy. The Controller shall have the custody of such books,
receipted vouchers, and other books and papers as in the practical
business operations of the Company shall naturally belong in the
office or the custody of the Controller, or as shall be placed in
his/her custody by the Board of Directors, by the Executive
Committee, or by the President. The Controller shall have such
other powers and duties as are commonly incidental to the office
of Controller, or as may be prescribed. The Controller may be
required to give bond to the Company for the faithful discharge of
duties in such form and to such amount and with such sureties as
shall be determined by the Board of Directors. (As amended
November 2, 1987)
Section 8. Assistant Secretaries or Treasurers, when
elected, shall assist the Secretary or Treasurer, as the case may
be, in the performance of the respective duties assigned to such
principal officers; and the powers and duties of any such
principal officer, shall, except as otherwise ordered by the Board
of Directors, temporarily devolve upon his/her assistant in case
of the absence, disability, death, resignation or removal from
office of such principal officer. They shall perform such other
duties as may be assigned to them from time to time. (As amended
May 7, 1963)
ARTICLE VIII.
Executive Committee
Section 1. The Board of Directors may, by resolution passed
by a majority of the Board, designate from their number an
Executive Committee of such number, not less than three, as the
Board may fix from time to time. The Executive Committee may make
its own rules of procedure and shall meet where and as provided by
such rules, or by resolution of the Board of Directors. A
majority of the members of the Committee shall constitute a quorum
for the transaction of business. During the intervals between the
meetings of the Board of Directors, the Executive Committee shall
have all the powers of the Board in management of the business and
affairs of the Company except as may otherwise be provided by law,
including power to authorize the seal of the Company to be affixed
to all papers which may require it, and, by majority vote of all
its members, exercise any and all such powers in such manner as
such Committee shall deem best for the interest of the Company, in
all cases in which specific directions shall not have been given
by the Board of Directors, and in which the vote of a quorum of
the full Board of Directors is not required by law, the Articles
of Association, or by these By-Laws. (As amended May 2, 1972)
Section 2. The Executive Committee shall keep regular
minutes of its proceedings and report the same to the Board of
Directors when required. The Board of Directors shall have power
to rescind any vote or resolution of the Executive Committee, but
no such recision shall have retroactive effect.
ARTICLE IX.
Inspection of Books
All records, accounts, and papers of the Corporation shall be
open to the inspection of every stockholder at reasonable times
and for legitimate purposes; and, subject to such rights of
inspection as may be afforded the stockholders by law, the
Directors may make such reasonable regulations relative to such
inspection, and take such action to prevent an inspection of
corporate books or papers for illegitimate purposes as may be
consistent with law.
ARTICLE X.
(Article X deleted in its entirety by amendment dated
August 5, 1996)
ARTICLE XI
(As amended May 3, 1994)
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
Section 1. Permissive Indemnification. To the extent legally
permissible, the Company may indemnify any of its Directors,
officers and employees who, as a result of such position, was or
is a party or is threatened to be made a party to any
contemplated, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative and
whether formal or informal against expenses, actually and
reasonably incurred by him or her in connection with such action,
suit or proceeding. The term Expenses, as used in this Article,
includes reasonable attorney's fees, damages, judgments, fines,
amounts paid in settlement and costs including the costs of
investigation and defense. Such indemnification against Expenses
shall be payable only if (a) the Director, officer or employee
acted in good faith, (b) the Director reasonably believed: (A) in
the case of conduct in the Director's official capacity with the
Company, that the Director's conduct was in its best interests;
and (B) in all other cases, that the Director's conduct was at
least not opposed to its best interests; and (c) with respect to
any proceeding brought by a governmental entity, the Director had
no reasonable cause to believe his or her conduct was unlawful,
and the Director is not finally found to have engaged in a
reckless or intentional unlawful act. Notwithstanding the
foregoing and except as otherwise provided by law, the Company may
not indemnify any Director, officer, or employee for any Expenses
in any action by or in right of the Company in which such
individual is adjudged liable to the Company.
Any indemnification under this section (unless ordered by a
court) shall be made by the Company only upon a determination that
indemnification of the Director, officer or employee is proper
because he or she has acted in good faith in conformance with the
applicable standard of conduct as set forth herein. Such
determination shall be made (a) by the Board of Directors by a
majority vote of a quorum consisting of Directors who are not
parties to such action, suit or proceeding or (b) if such a quorum
is not obtainable, by majority vote of a committee duly designated
by the Board of Directors (in which designation Directors who are
parties to the action, suit or proceeding may participate),
consisting solely of two or more Directors not at the time parties
to the action, suit or proceeding; (c) by written opinion of
special legal counsel: (A) selected by the Board of Directors or
its committee in the manner prescribed in clause (a) or (b); or
(B) if a quorum of the Board of Directors cannot be obtained under
clause (a) and a committee cannot be designated under clause (b),
selected by majority vote of the full Board of Directors (in which
selection Directors who are parties to the action, suit or
proceeding may participate); or (d) by the shareholders, but
shares owned by or voted under the control of Directors who are at
the time parties to the action, suit or proceeding may not be
voted on the determination.
Authorization of indemnification and evaluation as to
reasonableness of Expenses shall be made in the same manner
provided above as the determination that indemnification is
permissible, except that if the determination is made by special
legal counsel, authorization of indemnification and evaluation as
to reasonableness of Expenses shall be made by those entitled
under clause (c) above to select such counsel.
The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea no nolo
contendere or its equivalent, shall not of itself create a
presumption that the person did not act in good faith in
conformance with the applicable standard of conduct as set forth
above.
Section 2. Mandatory Indemnification. To the extent that a
Director, officer or employee of the Company has been wholly
successful on the merits or otherwise in defense of any action,
suit, proceeding, claim, issue, or matter referred to in Section 1
of this Article, he or she shall be indemnified to the extent
legally permissible against Expenses reasonably incurred by him or
her in connection therewith.
Section 3. Right To Rely On Corporate Information. In
discharging his or her duty, any Director, when acting in good
faith in conformance with the applicable standard of conduct as
set forth above, may rely upon information, opinions, reports, or
statements, including financial statements and other financial
data, if prepared or presented by: (a) one or more officers or
employees of the Company whom the Director reasonably believes to
be reliable and competent in the matters presented; (b) legal
counsel, public accountants, or other persons as to matters the
Director reasonably believes are within the person's professional
or expert competence; or (c) a committee of the Board of Directors
of which the Director is not a member if the Director reasonably
believes the committee merits confidence.
Section 4. Advance Payment of Expenses. Expenses incurred by a
Director, officer or employee in connection with any of the
matters with respect to which indemnification may be sought
pursuant hereto may be paid from time to time by the Company in
advance of the final disposition of any such matter if the
following conditions are met: (a) the Director furnishes the
Company written affirmation of his or her good faith belief that
he or she has met the standard of conduct described in Section 1
of this Article; (b) the Director furnishes the Company a written
undertaking, executed personally or on the Director's behalf, to
repay the advance if it is ultimately determined that the Director
did not meet the standard of conduct; and (c) a determination is
made that the facts then known to those making the determination
would not preclude indemnification under this subchapter.
Determinations and authorizations of payments under this
Section 4 shall be made in the manner specified in Section 1 of
this Article.
The Board of Directors may authorize counsel (which may be
either Company counsel or outside counsel) to represent such
individual in any action, suit or proceeding, whether or not the
Company is a party to such action, suit or proceeding.
Section 5. Procedure For Indemnification. Subject to compliance
with any applicable procedures in Sections 1 or 4, as the case may
be, any indemnification of a Director, officer or employee of the
Company or advance of Expenses to such an individual under the
terms of this Article shall be made promptly. If the Company
unreasonably denies a written request for indemnity or the advance
payment of Expenses, either in whole or in part, or if payment in
full pursuant to such request is not made promptly, the right to
indemnification or advances as granted by this Article shall be
enforceable by such individual in any court of competent
jurisdiction. Such individual's costs and expenses including
reasonable attorney's fees incurred in connection with
successfully establishing his or her right to indemnification in
any such action shall also be indemnified by the Company.
Section 6. Non-Exclusivity of Indemnification Rights. The right
of indemnification hereby provided shall not be deemed exclusive
of or otherwise affect any other rights to which any individual
seeking indemnification may be entitled by law, or under any
agreement, vote of stockholders or otherwise, both as to action in
his or her official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who
has ceased to be a Director, officer or employee and shall inure
to the benefit of the heirs, executors and administrators of such
a person.
Section 7. Other Organizations. The indemnification provisions
of this Article shall extend to any Director, officer or employee
who serves at the Company's request as director, officer or
trustee of another organization, including, without limitation, an
employee benefit plan, in which the Company has or had an interest
as a stockholder, creditor, sponsor or otherwise. The right to
rely on corporate information conferred in Section 3 of this
Article shall also extend to the records, books of accounts and
reports of any such other organization of which the individual
serves as director, officer or trustee.
Section 8. Survival. The foregoing indemnification provisions
shall be deemed to be a contract between the Company and each
individual who serves in any capacity as a Director, officer or
employee of the Company at any time while these provisions are in
effect. Except as may otherwise be required as a result of
changes in the law governing indemnification of officers,
directors and employees of Vermont corporations, any repeal or
modification of the foregoing provisions shall not affect any
right or obligation then existing and such "contract rights" may
not be modified retroactively without the consent of such
Director, officer or employee.
ARTICLE XII.
(As amended May 3, 1988)
Miscellaneous
Section 1. The funds of the Company shall be deposited to
its credit in such banks or trust companies as the Board of
Directors may, from time to time, designate, and shall be drawn
out only for the purposes of the Company and only upon checks or
drafts signed in such manner as shall be authorized by the Board
of Directors in accordance with the power vested in them by these
By-Laws.
Section 2. No debts shall be contracted, except for current
expenses, unless authorized by the Board of Directors or the
Executive Committee.
Section 3. All dividends shall be payable at such time as
may be fixed by the Board of Directors. Before payment of any
dividend or making any distribution of profits, there shall be set
aside, out of the surplus or net profits of the Corporation such
sum or sums as the Board of Directors, from time to time, in their
absolute discretion, think proper as a reserve fund to meet
contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other
purpose as the Board of Directors think conducive to the interest
of the Corporation.
Section 4. The first fiscal year of the Corporation shall be
the period commencing September 1, 1929 and ending December 31,
1930, and thereafter each calendar year, commencing with the year
1931, shall be the fiscal year of the Corporation.
ARTICLE XIII
AMENDMENT
Except as set forth in subdivision 21 of the Company's
Articles of Association and in Article V of these By-Laws,
these By-Laws may be altered, amended or repealed at any annual or
special meeting of the stockholders called for the purpose, of
which the notice shall specify the subject matter of the proposed
alteration, amendment or repeal or the sections to be affected
thereby, by vote of the stockholders, or if there shall be two or
more classes or series of stock entitled to vote on the question,
by vote of each such class or series. These By-Laws may also be
altered, amended or repealed by vote of the majority of the number
of Directors fixed in accordance with the By-Laws at a meeting
called for that purpose of which the notice shall specify the
subject matter of the proposed alteration, amendment or repeal or
the sections to be affected thereby, except that the Directors
shall not take any action which provides for indemnification of
Directors or affects the powers of Directors or officers to
contract with the Company, nor any action to amend this Article
XIII, Sections 2, 3, 4, 5 or 6 of Article V, and
except that the Directors shall not take any action unless
permitted by law. Except as set forth in subdivision 21 of the
Company's Articles of Association and in Article V of these
By-Laws, any By-Law so altered, amended or repealed by the
Directors may be further altered or amended or reinstated by the
stockholder in the above manner. (As amended May 6, 1986, May
3, 1988 and August 5, 1996)
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
Fifth Amendment and Extension Agreement
to
Receivables Purchase Agreement
This Fifth Amendment and Extension Agreement (this "Amendment") dated as
of November 29, 1993, to Receivables Purchase Agreement dated as of November
29, 1988, as amended by Amendment Agreement No. 1 dated as of December 21,
1988, Letter Agreement dated November 27, 1989, Second Amendment and Extension
Agreement dated as of November 29, 1990, Third Amendment and Extension
Agreement dated as of November 29, 1991, and Fourth Amendment and Extension
Agreement dated as of November 29, 1992 (as so amended, the "Purchase
Agreement") between CENTRAL VERMONT PUBLIC SERVICE CORPORATION (the "Seller")
and THE FIRST NATIONAL BANK OF BOSTON (the "Bank"). Capitalized terms used
herein but not defined shall have the meanings assigned to them in the
Purchase Agreement.
WHEREAS, pursuant to 2.1(b) of the Purchase Agreement, the Purchase
Termination Date is scheduled to occur on the second anniversary of the
Closing Date, as extended for one-year periods from time to time, currently
extended to November 29, 1994; and
WHEREAS, by means of a letter dated October 15, 1993 from the Seller to
the Bank the Seller has requested that the Purchase Termination Date be
extended for an additional one-year period beyond November 29, 1994, and the
Bank is willing to so extend the Purchase Termination Date, on the terms and
conditions contained herein; and
WHEREAS, the Seller and the Bank wish to make certain other changes to
the Purchase Agreement, on the terms and conditions contained herein;
NOW, THEREFORE, the Bank and the Seller agree as follows:
<PAGE>
Section 1. Amendment to the Purchase Agreement. The Purchase Agreement
is hereby amended by deleting Schedule 1.1 thereto and substituting therefor a
new Schedule 1.1 in the form attached hereto as Schedule 1.1.
Section 2. Extension of the Purchase Termination Date. The Bank hereby
agrees that the Purchase Termination Date referred to in 2.1(b) of the
Purchase Agreement shall be extended for an additional one-year period, such
that the Purchase Termination Date shall now occur on November 29, 1995.
Section 3. Representations and Warranties.
The Seller represents and warrants as follows:
(a) The execution and delivery of this Amendment and the performance by
the Seller of the Purchase Documents as amended hereby are within the
corporate powers of the Seller and have been duly authorized by all requisite
corporate action by the Seller, do not contravene (i) the Seller's Articles of
Association or by-laws or (ii) any law, rule, order, regulation or contractual
restriction (including, without limitation, any restriction in the Indenture)
binding on or affecting the Seller, and do not result in or require the
creation of any lien, security interest or other charge or encumbrance upon or
with respect to any of its properties.
(b) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution and delivery of this Amendment or the performance by the Seller
of the Purchase Documents as amended hereby.
(c) This Amendment and the Purchase Documents as amended hereby are the
legal, valid and binding obligations of the Seller, enforceable against the
Seller in accordance with their respective terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
(d) The representations and warranties contained in Section 6 of the
Purchase Agreement are true and correct as of the date hereof as though made
on and as of the date hereof (except that references to financial statements
in Section 6.5 of the Purchase Agreement shall be deemed to refer to the most
recent financial statements delivered by the Seller thereunder).
(e) No Termination Event or event that, with the giving of notice or
passage of time or both would become a Termination Event, has occurred and is
continuing.
Section 4. Miscellaneous.
(a) This Amendment and the modifications to the Purchase Agreement set
forth herein shall be governed by and construed in accordance with the laws of
The Commonwealth of Massachusetts.
(b) On and after the date hereof, each reference in the Purchase
Agreement to "this Agreement" or words of like import shall mean and be deemed
to be a reference to the Purchase Agreement as amended hereby.
(c) Except as amended and modified hereby, the Purchase Agreement is in
all respects ratified and confirmed as of the date hereof, and the terms,
covenants and agreements therein shall remain in full force and effect.
(d) This Amendment may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the date and year first above written.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
By: /s/ Jonathan W. Booraem
Title: Treasurer
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Daniel G. Head, Jr.
Title: Vice President
Schedule 1.1
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
CERTAIN CUSTOMERS
General Electric Co.
SKI, Ltd.
Wyeth Group
Specialty Paperboard
Stratton Corp.
Mack Molding
E.H.V. Industries
Eveready Battery Co.
Vermont Castings Foundry
Goldman Group
Johnson Controls
C&S Wholesale
Rutland Hospital
Carris Reels
OMYA
Middlebury College
Cersosimo Lumber Co.
Polymers, Inc.
Moore Associates, Inc.
G.W. Plastics
November 29, 1993
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
Sixth Amendment and Extension Agreement
to
Receivables Purchase Agreement
This Sixth Amendment and Extension Agreement (this "Amendment") dated as
of November 29, 1994, to Receivables Purchase Agreement dated as of November
29, 1988, as amended by Amendment Agreement No. 1 dated as of December 21,
1988, Letter Agreement dated November 27, 1989, Second Amendment and Extension
Agreement dated as of November 29, 1990, Third Amendment and Extension
Agreement dated as of November 29, 1991, Fourth Amendment and Extension
Agreement dated as of November 29, 1992 and Fifth Amendment and Extension
Agreement dated as of November 29, 1993 (as so amended, the "Purchase
Agreement") between CENTRAL VERMONT PUBLIC SERVICE CORPORATION (the "Seller")
and THE FIRST NATIONAL BANK OF BOSTON (the "Bank"). Capitalized terms used
herein but not defined shall have the meanings assigned to them in the
Purchase Agreement.
WHEREAS, pursuant to 2.1(b) of the Purchase Agreement, the Purchase
Termination Date is scheduled to occur on the second anniversary of the
Closing Date, as extended for one-year periods from time to time, currently
extended to November 29, 1995; and
WHEREAS, by means of a letter dated September 23, 1994 from the Seller to
the Bank the Seller has requested that the Purchase Termination Date be
extended for an additional one-year period beyond November 29, 1995, and the
Bank is willing to so extend the Purchase Termination Date, on the terms and
conditions contained herein; and
WHEREAS, the Seller and the Bank wish to make certain other changes to
the Purchase Agreement, on the terms and conditions contained herein;
NOW, THEREFORE, the Bank and the Seller agree as follows:
Section 1. Amendment to the Purchase Agreement. The Purchase Agreement
is hereby amended by deleting Schedule 1.1 thereto and substituting therefor a
new Schedule 1.1 in the form attached hereto as Schedule 1.1.
Section 2. Extension of the Purchase Termination Date. The Bank hereby
agrees that the Purchase Termination Date referred to in 2.1(b) of the
Purchase Agreement shall be extended for an additional one-year period, such
that the Purchase Termination Date shall now occur on November 29, 1996.
Section 3. Representations and Warranties.
The Seller represents and warrants as follows:
(a) The execution and delivery of this Amendment and the performance by
the Seller of the Purchase Documents as amended hereby are within the
corporate powers of the Seller and have been duly authorized by all requisite
corporate action by the Seller, do not contravene (i) the Seller's Articles of
Association or by-laws or (ii) any law, rule, order, regulation or contractual
restriction (including, without limitation, any restriction in the Indenture)
binding on or affecting the Seller, and do not result in or require the
creation of any lien, security interest or other charge or encumbrance upon or
with respect to any of its properties.
(b) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution and delivery of this Amendment or the performance by the Seller
of the Purchase Documents as amended hereby.
(c) This Amendment and the Purchase Documents as amended hereby are the
legal, valid and binding obligations of the Seller, enforceable against the
Seller in accordance with their respective terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
(d) The representations and warranties contained in 6 of the Purchase
Agreement are true and correct as of the date hereof as though made on and as
of the date hereof (except that references to financial statements in 6.5 of
the Purchase Agreement shall be deemed to refer to the most recent financial
statements delivered by the Seller thereunder).
(e) No Termination Event or event that, with the giving of notice or
passage of time or both would become a Termination Event, has occurred and is
continuing.
Section 4. Miscellaneous.
(a) This Amendment and the modifications to the Purchase Agreement set
forth herein shall be governed by and construed in accordance with the laws of
The Commonwealth of Massachusetts.
(b) On and after the date hereof, each reference in the Purchase
Agreement to "this Agreement" or words of like import shall mean and be deemed
to be a reference to the Purchase Agreement as amended hereby.
(c) Except as amended and modified hereby, the Purchase Agreement is in
all respects ratified and confirmed as of the date hereof, and the terms,
covenants and agreements therein shall remain in full force and effect.
(d) This Amendment may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the date and year first above written.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
By: /s/ Jonathan W. Booraem
Title: Treasurer
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Daniel G. Head, Jr.
Title: Vice President
Schedule 1.1
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
CERTAIN CUSTOMERS
General Electric Co.
SKI, Ltd.
Grand Union Stores
Wyeth Nutritionals
Specialty Paperboard
Eveready Battery Co.
Stratton Corp.
Vermont Castings Foundry
Johnson Controls Inc.
C&S Wholesale Grocers
Mack Molding
Jonce & Lamson Corp
E.H.V. Industries
Tambrands Inc.
Rutland Hospital
Luzenac America
Zayre
Middlebury College
Price Chopper
Cerosimo Lumber Co.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
Seventh Amendment and Extension Agreement
to
Receivables Purchase Agreement
This Seventh Amendment and Extension Agreement (this "Amendment") dated
as of November 29, 1995, to Receivables Purchase Agreement dated as of
November 29, 1988, as amended by Amendment Agreement No. 1 dated as of
December 21, 1988, Letter Agreement dated November 27, 1989, Second Amendment
and Extension Agreement dated as of November 29, 1990, Third Amendment and
Extension Agreement dated as of November 29, 1991, Fourth Amendment and
Extension Agreement dated as of November 29, 1992, Fifth Amendment and
Extension Agreement dated as of November 29, 1993 and Sixth Amendment and
Extension Agreement dated as of November 29, 1994 (as so amended, the
"Purchase Agreement") between CENTRAL VERMONT PUBLIC SERVICE CORPORATION (the
"Seller") and THE FIRST NATIONAL BANK OF BOSTON (the "Bank"). Capitalized
terms used herein but not defined shall have the meanings assigned to them in
the Purchase Agreement.
WHEREAS, pursuant to 2.1(b) of the Purchase Agreement, the Purchase
Termination Date is scheduled to occur on the second anniversary of the
Closing Date, as extended for one-year periods from time to time, currently
extended to November 29, 1996; and
WHEREAS, by means of a letter dated September 8, 1995 from the Seller to
the Bank the Seller has requested that the Purchase Termination Date be
extended for an additional one-year period beyond November 29, 1996, and the
Bank is willing to so extend the Purchase Termination Date, on the terms and
conditions contained herein; and
WHEREAS, the Seller and the Bank wish to make certain other changes to
the Purchase Agreement, on the terms and conditions contained herein;
NOW, THEREFORE, the Bank and the Seller agree as follows:
Section 1. Amendments to the Purchase Agreement.
(a) Section 2.1(c) of the Purchase Agreement is hereby amended by
deleting said section in its entirety and substituting therefor the following:
"(c) The Seller may at any time prior to the Purchase Termination Date
terminate the Purchase Commitment in full, or at the end of any fiscal quarter
reduce the Purchase Commitment in part in integral multiples of $1,000,000, in
each case by giving 30 Business Days' prior written notice thereof to the
Bank. Subject to 3.2 hereof, any such termination or reduction may be
effected by the Seller without penalty. No termination of the Purchase
Commitment shall be subject to reinstatement without the prior written consent
of the Bank, which consent may be withheld in the Bank's sole discretion."
(b) Section 2.7(a)(iii) of the Purchase Agreement is hereby amended by
deleting the percentage "1/4 of 1%" and substituting therefor the percentage
".20 of 1%".
(c) The Purchase Agreement is hereby amended by deleting Schedule 1.1
thereto and substituting therefor a new Schedule 1.1 in the form attached
hereto as Schedule 1.1.
Section 2. Extension of the Purchase Termination Date. The Bank hereby
agrees that the Purchase Termination Date referred to in 2.1(b) of the
Purchase Agreement shall be extended for an additional one-year period, such
that the Purchase Termination Date shall now occur on November 29, 1997.
Section 3. Representations and Warranties.
The Seller represents and warrants as follows:
(a) The execution and delivery of this Amendment and the performance by
the Seller of the Purchase Documents as amended hereby are within the
corporate powers of the Seller and have been duly authorized by all requisite
corporate action by the Seller, do not contravene (i) the Seller's Articles of
Association or by-laws or (ii) any law, rule, order, regulation or contractual
restriction (including, without limitation, any restriction in the Indenture)
binding on or affecting the Seller, and do not result in or require the
creation of any lien, security interest or other charge or encumbrance upon or
with respect to any of its properties.
(b) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution and delivery of this Amendment or the performance by the Seller
of the Purchase Documents as amended hereby.
(c) This Amendment and the Purchase Documents as amended hereby are the
legal, valid and binding obligations of the Seller, enforceable against the
Seller in accordance with their respective terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
(d) The representations and warranties contained in 6 of the Purchase
Agreement are true and correct as of the date hereof as though made on and as
of the date hereof (except that references to financial statements in 6.5 of
the Purchase Agreement shall be deemed to refer to the most recent financial
statements delivered by the Seller thereunder).
(e) No Termination Event or event that, with the giving of notice or
passage of time or both would become a Termination Event, has occurred and is
continuing.
Section 4. Miscellaneous.
(a) This Amendment and the modifications to the Purchase Agreement set
forth herein shall be governed by and construed in accordance with the laws of
The Commonwealth of Massachusetts.
(b) On and after the date hereof, each reference in the Purchase
Agreement to "this Agreement" or words of like import shall mean and be deemed
to be a reference to the Purchase Agreement as amended hereby.
(c) Except as amended and modified hereby, the Purchase Agreement
respects ratified and confirmed as of the date hereof, and the terms,
covenants and agreements therein shall remain in full force and effect.
(d) This Amendment may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the date and year first above written.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
By: /s/ Jonathan W. Booraem
Title: Treasurer
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Rita M. Cahill
Rita M. Cahill
Title: Vice President
Schedule 1.1
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
CERTAIN CUSTOMERS
General Electric Co.
SKI, Ltd.
Grand Union Stores
Wyeth Nutritionals
Specialty Paperboard
Eveready Battery Co.
Stratton Corp.
Vermont Castings Foundry
Johnson Controls Inc.
C&S Wholesale Grocers
Mack Molding
Jones & Lamson Corp.
E.H.V. Industries
Tambrands Inc.
Rutland Hospital
Luzenac America
Zayre
Middlebury College
Price Chopper
Cerosimo Lumber Co.
EXHIBIT 21.1
------------
Subsidiaries of the Registrant
----------------------------------
State in Which
Incorporated
---------------
Connecticut Valley Electric Company Inc. (a) (F1) New Hampshire
Vermont Electric Power Company, Inc. (b) (F2) Vermont
C.V. Realty, Inc. (a) (F1) Vermont
*Catamount Investment Corporation Vermont
Central Vermont Public Service Corporation -
Bradford Hydroelectric, Inc. (a) (F1) Vermont
Catamount Energy Corporation (a) (F1) Vermont
SmartEnergy Services, Inc. (a) (F1) Vermont
- - - - - - - - - - - - - - - - - - - - - - - - - - - -
* Dissolved in February, 1998.
(FN)
(F1) (a) Included in consolidated financial statements
(F2) (b) Separate financial statements do not need to be filed
under Regulation S-X, Rule 1-02 (v) defining a
"significant subsidiary", and Rule 3-09, which sets
forth the requirement for filing separate financial
statements of subsidiaries not consolidated.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports dated February 3, 1997 included in this Form 10-K,
into Central Vermont Public Service Corporation's previously filed
Registration Statements on Form S-8, File No. 33-22741, Form S-8, File No.
33-22742, Form S-8, File No. 33-58102, Form S-8, File No. 33-62100, and Form
S-3,
File No. 33-39691.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 27, 1998
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This Financial Data Schedule contains summary financial information extracted
from the Consolidated Financial Statements included herein and is qualified in
its entirety by reference to such financial statements (dollars in thousands,
except per share amounts).
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 321,646
<OTHER-PROPERTY-AND-INVEST> 60,161
<TOTAL-CURRENT-ASSETS> 72,204
<TOTAL-DEFERRED-CHARGES> 77,929
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 531,940
<COMMON> 65,987
<CAPITAL-SURPLUS-PAID-IN> 45,295
<RETAINED-EARNINGS> 75,841
<TOTAL-COMMON-STOCKHOLDERS-EQ> 187,123
19,000
8,054
<LONG-TERM-DEBT-NET> 93,099
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 24,271
0
<CAPITAL-LEASE-OBLIGATIONS> 17,223
<LEASES-CURRENT> 1,094
<OTHER-ITEMS-CAPITAL-AND-LIAB> 182,076
<TOT-CAPITALIZATION-AND-LIAB> 531,940
<GROSS-OPERATING-REVENUE> 304,732
<INCOME-TAX-EXPENSE> 7,573
<OTHER-OPERATING-EXPENSES> 278,523
<TOTAL-OPERATING-EXPENSES> 286,096
<OPERATING-INCOME-LOSS> 18,636
<OTHER-INCOME-NET> 8,221
<INCOME-BEFORE-INTEREST-EXPEN> 26,857
<TOTAL-INTEREST-EXPENSE> 9,706
<NET-INCOME> 16,340
2,028
<EARNINGS-AVAILABLE-FOR-COMM> 14,312
<COMMON-STOCK-DIVIDENDS> 12,608
<TOTAL-INTEREST-ON-BONDS> 8,040
<CASH-FLOW-OPERATIONS> 41,866
<EPS-PRIMARY> 1.25
<EPS-DILUTED> 1.25
</TABLE>
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
Eighth Amendment and Extension Agreement
to
Receivables Purchase Agreement
This Eighth Amendment and Extension Agreement (this "Amendment") dated as
of February 5, 1997, to Receivables Purchase Agreement dated as of November
29, 1988, as amended by Amendment Agreement No. 1 dated as of December 21,
1988, Letter Agreement dated November 27, 1989, Second Amendment and Extension
Agreement dated as of November 29, 1990, Third Amendment and Extension
Agreement dated as of November 29, 1991, Fourth Amendment and Extension
Agreement dated as of November 29, 1992, Fifth Amendment and Extension
Agreement dated as of November 29, 1993, Sixth Amendment and Extension
Agreement dated as of November 29, 1994 and Seventh Amendment and Extension
Agreement dated as of November 29, 1995 (as so amended, the "Purchase
Agreement" between CENTRAL VERMONT PUBLIC SERVICE CORPORATION (the "Seller"
and THE FIRST NATIONAL BANK OF BOSTON (the "Bank". Capitalized terms used
herein but not defined shall have the meanings assigned to them in the
Purchase Agreement.
WHEREAS, the Seller and the Bank have executed the Purchase Agreement
providing for the purchase from time to time by the Bank of an Undivided
Interest in the Seller's right, title and interest in and to Eligible Accounts
of the Seller, in amounts up to $12,000,000; and
WHEREAS, pursuant to 2.1(b) of the Purchase Agreement, the Purchase
Termination Date is scheduled to occur on the second anniversary of the
Closing Date, as extended for one-year periods from time to time, currently
extended to November 29, 1997; and
WHEREAS, by means of a letter dated November 12, 1996 from the Seller to
the Bank the Seller has requested that the Purchase Termination Date be
extended for an additional one-year period beyond November 29, 1997, and the
Bank is willing to so extend the Purchase Termination Date, on the terms and
conditions contained herein; and
WHEREAS, the Seller and the Bank wish to make certain other changes to
the Purchase Agreement, on the terms and conditions contained herein;
NOW, THEREFORE, the Bank and the Seller agree as follows:
Section 1. Amendments to the Purchase Agreement.
(a) Section 2.3(a)(ii) of the Purchase Agreement is hereby amended by
deleting the percentage "1/2 of 1%" and substituting therefor the phrase "the
Applicable Margin".
(b) Section 2.7(a)(iii) of the Purchase Agreement is hereby amended by
deleting the percentage ".20 of 1%" and substituting therefor the phrase "the
Applicable Fee".
(c) Section 10(e) of the Purchase Agreement is hereby amended by
deleting said section in its entirety and substituting therefor the phrase
"Intentionally omitted".
(d) Exhibit A to the Credit Agreement is hereby amended by deleting the
definition of "Purchase Commitment Amount" set forth therein and substituting
therefor the following:
"Purchase Commitment Amount - From and after December 31, 1995,
$12,000,000."
(e) Exhibit A to the Credit Agreement is hereby amended by inserting the
following definitions where alphabetically appropriate:
"Applicable Fee. Applicable to the determination of the Purchase
Commitment Fee from time to time, the rate per annum set forth below based on
the ratings assigned to the senior debt of the Seller by Standard & Poor's
Corporation (or its successors and assigns) and by Duff & Phelps, Inc. (or its
successors and assigns). The Applicable Fee shall change on the date of any
public announcement of a change in rating by either ratings agency. If the
ratings of the ratings agencies shall fall within different categories, the
higher rating shall prevail for purposes of determining the Applicable Fee.
<TABLE>
<CAPTION>
LEVEL STANDARD & POOR'S APPLICABLE FEE
/DUFF & PHELPS
----- ----------------- --------------
<S> <C> <C>
I A- .10%
II BBB+ .125%
III BBB .15%
IV BBB- .20%
V BB .25%
VI below BB .30%
</TABLE>
"Applicable Margin. Applicable to the Undivided Interest owned by the
Bank from time to time, the rate per annum set forth below based on the
ratings assigned to the senior debt of the Seller by Standard & Poor's
Corporation (or its successors and assigns) and by Duff & Phelps, Inc. (or its
successors and assigns). The Applicable Margin shall change on the date of any
public announcement of a change in rating by either ratings agency. If the
ratings of the ratings agencies shall fall within different categories, the
higher rating shall prevail for purposes of determining the Applicable Margin.
<TABLE>
<CAPTION>
LEVEL STANDARD & POOR'S APPLICABLE FEE
/DUFF & PHELPS
----- ----------------- --------------
<S> <C> <C>
I A- .25%
II BBB+ .30%
III BBB .375%
IV BBB- .40%
V BB .75%
VI below BB 1.00%
</TABLE>
(f) The Purchase Agreement is hereby amended by deleting Schedule 1.1
thereto and substituting therefor a new Schedule 1.1 in the form attached
hereto as Schedule 1.1.
Section 2. Extension of the Purchase Termination Date. The Bank hereby
agrees that the Purchase Termination Date referred to in 2.1(b) of the
Purchase Agreement shall be extended for an additional one-year period, such
that the Purchase Termination Date shall now occur on November 29, 1998.
Section 3. Representations and Warranties.
The Seller represents and warrants as follows:
(a) The execution and delivery of this Amendment and the performance by
the Seller of the Purchase Documents as amended hereby are within the
corporate powers of the Seller and have been duly authorized by all requisite
corporate action by the Seller, do not contravene (i) the Seller's Articles of
Association or by-laws or (ii) any law, rule, order, regulation or contractual
restriction (including, without limitation, any restriction in the Indenture)
binding on or affecting the Seller, and do not result in or require the
creation of any lien, security interest or other charge or encumbrance upon or
with respect to any of its properties.
(b) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution and delivery of this Amendment or the performance by the Seller
of the Purchase Documents as amended hereby.
(c) This Amendment and the Purchase Documents as amended hereby are the
legal, valid and binding obligations of the Seller, enforceable against the
Seller in accordance with their respective terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
(d) The representations and warranties contained in 6 of the Purchase
Agreement are true and correct as of the date hereof as though made on and as
of the date hereof (except that references to financial statements in 6.5 of
the Purchase Agreement shall be deemed to refer to the most recent financial
statements delivered by the Seller thereunder).
(e) No Termination Event or event that, with the giving of notice or
passage of time or both would become a Termination Event, has occurred and is
continuing.
Section 4. Miscellaneous.
(a) This Amendment and the modifications to the Purchase Agreement set
forth herein shall be governed by and construed in accordance with the laws of
The Commonwealth of Massachusetts.
(b) On and after the date hereof, each reference in the Purchase
Agreement to "this Agreement" or words of like import shall mean and be deemed
to be a reference to the Purchase Agreement as amended hereby.
(c) Except as amended and modified hereby, the Purchase Agreement is in
all respects ratified and confirmed as of the date hereof, and the terms,
covenants and agreements therein shall remain in full force and effect.
(d) This Amendment may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the date and year first above written.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
By: /s/ Jonathan W. Booraem
Title: Treasurer
THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Virginia Ryan
Virginia Ryan
Vice President
Schedule 1.1
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
CERTAIN CUSTOMERS
General Electric Co.
Grand Union Stores
Wyeth Nutritionals
Specialty Paperboard
Eveready Battery Co.
Stratton Corp.
Vermont Castings
Killington Ltd.
C&S Wholesale
Mack Molding
Ben & Jerry's
EHV Industries
Tambrands Inc.
APC Paper
The Rutland Hospital
Fellows Cor
Middlebury College
Price Chopper
Cerosimo Lumber Co.
Hannaford Bros
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
Ninth Amendment and Extension Agreement
to
Receivables Purchase Agreement
This Ninth Amendment and Extension Agreement (this "Amendment") dated as
of February 2, 1998, to Receivables Purchase Agreement dated as of November
29, 1988, as amended by Amendment Agreement No. 1 dated as of December 21,
1988, Letter Agreement dated November 27, 1989, Second Amendment and Extension
Agreement dated as of November 29, 1990, Third Amendment and Extension
Agreement dated as of November 29, 1991, Fourth Amendment and Extension
Agreement dated as of November 29, 1992, Fifth Amendment and Extension
Agreement dated as of November 29, 1993, Sixth Amendment and Extension
Agreement dated as of November 29, 1994 and Seventh Amendment and Extension
Agreement dated as of November 29, 1995 and Eighth Amendment and Extension
Agreement dated as of February 5, 1997 (as so amended, the "Purchase
Agreement" between CENTRAL VERMONT PUBLIC SERVICE CORPORATION (the "Seller"
and BANKBOSTON, N.A., successor to THE FIRST NATIONAL BANK OF BOSTON (the
"Bank". Capitalized terms used herein but not defined shall have the meanings
assigned to them in the Purchase Agreement.
WHEREAS, the Seller and the Bank have executed the Purchase Agreement
providing for the purchase from time to time by the Bank of an Undivided
Interest in the Seller's right, title and interest in and to Eligible Accounts
of the Seller, in amounts up to $12,000,000; and
WHEREAS, pursuant to 2.1(b) of the Purchase Agreement, the Purchase
Termination Date is scheduled to occur on the second anniversary of the
Closing Date, as extended for one-year periods from time to time, currently
extended to November 29, 1998; and
WHEREAS, the Seller has requested that the Purchase Termination Date be
extended for an additional one-year period beyond November 29, 1998, and the
Bank is willing to so extend the Purchase Termination Date, on the terms and
conditions contained herein;
NOW, THEREFORE, the Bank and the Seller agree as follows:
Section 1. Extension of the Purchase Termination Date. The Bank hereby
agrees that the Purchase Termination Date referred to in 2.1(b) of the
Purchase Agreement shall be extended for an additional one-year period, such
that the Purchase Termination Date shall now occur on November 29, 1999.
Section 2. Representations and Warranties.
The Seller represents and warrants as follows:
(a) The execution and delivery of this Amendment and the performance by
the Seller of the Purchase Documents as amended hereby are within the
corporate powers of the Seller and have been duly authorized by all requisite
corporate action by the Seller, do not contravene (i) the Seller's Articles of
Association or by-laws or (ii) any law, rule, order, regulation or contractual
restriction (including, without limitation, any restriction in the Indenture)
binding on or affecting the Seller, and do not result in or require the
creation of any lien, security interest or other charge or encumbrance upon or
with respect to any of its properties.
(b) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution and delivery of this Amendment or the performance by the Seller
of the Purchase Documents as amended hereby.
(c) This Amendment and the Purchase Documents as amended hereby are the
legal, valid and binding obligations of the Seller, enforceable against the
Seller in accordance with their respective terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
(d) The representations and warranties contained in 6 of the Purchase
Agreement are true and correct as of the date hereof as though made on and as
of the date hereof (except that references to financial statements in 6.5 of
the Purchase Agreement shall be deemed to refer to the most recent financial
statements delivered by the Seller thereunder).
(e) No Termination Event or event that, with the giving of notice or
passage of time or both would become a Termination Event, has occurred and is
continuing.
Section 3. Miscellaneous.
(a) This Amendment and the modifications to the Purchase Agreement set
forth herein shall be governed by and construed in accordance with the laws of
The Commonwealth of Massachusetts.
(b) On and after the date hereof, each reference in the Purchase
Agreement to "this Agreement" or words of like import shall mean and be deemed
to be a reference to the Purchase Agreement as amended hereby.
(c) Except as amended and modified hereby, the Purchase Agreement is in
all respects ratified and confirmed as of the date hereof, and the terms,
covenants and agreements therein shall remain in full force and effect.
(d) This Amendment may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
(e) The effectiveness of this Amendment is subject to The Bank's receipt
of an amendment fee in the amount of one thousand dollars ($1,000).
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed as of the date and year first above written.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
By: /s/ Francis J. Boyle
Title: Senior Vice President
BANKBOSTON, N.A.
By: /s/ Virginia Ryan
Virginia Ryan
Vice President
Execution Copy
CREDIT AGREEMENT
Dated as of November 5, 1997
among
CENTRAL VERMONT PUBLIC SERVICE CORPORATION,
THE LENDERS NAMED HEREIN
and
TORONTO DOMINION (TEXAS), INC.,
as Agent
<PAGE>
CREDIT AGREEMENT, dated as of November 5, 1997, among CENTRAL VERMONT
PUBLIC SERVICE CORPORATION, a Vermont corporation (the "Borrower"), each of
the lenders that is a signatory hereto or which, pursuant to Section 10.6
hereof shall become a "Lender" hereunder (the "Lenders"), FLEET NATIONAL
BANK, as Syndication Agent, and TORONTO DOMINION (TEXAS), INC., as agent
for the Lenders hereunder (the "Agent").
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by each of the parties hereto, the parties
hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings:
"ABR" shall mean, for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greater of (a) the Prime
Rate in effect on such day or (b) the sum of (i) the Federal Funds
Effective Rate in effect on such day plus (ii) .50%. For purposes hereof,
"Prime Rate" shall mean the rate of interest per annum adopted from time to
time by The Toronto-Dominion Bank at its principal office in New York City
as the reference rate for the determination of interest rates for loans in
Dollars of varying maturities to customers of varying creditworthiness and
being quoted as its "prime rate" or "base rate" (the Prime Rate not being
intended to be the lowest rate of interest charged by The Toronto-Dominion
Bank in connection with extensions of credit), and "Federal Funds Effective
Rate" shall mean, for any day, the weighted average of the rates on
overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for the day of such transactions received by the
Agent from three federal funds brokers of recognized standing selected by
the Agent. Any change in the ABR due to a change in the Prime Rate or the
Federal Funds Effective Rate shall be effective as of the opening of
business on the effective day of such change in the Prime Rate or the
Federal Funds Effective Rate, respectively.
"ABR Loans" shall mean any Revolving Loan bearing interest at a rate
determined by reference to the ABR.
"Administrative Questionnaire" means, with respect to each Lender, an
administrative questionnaire in the form prepared by the Agent and
submitted to the Agent (with a copy to the Borrower and the Agent) duly
completed by such Lender.
"Affiliate" shall mean, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. For purposes of this definition,
"control" with respect to any Person means the power, directly or
indirectly, to direct or cause the direction of the management and policies
of such Person, whether by contract or otherwise.
"Agency Fee" shall mean the agency fee payable by the Borrower to the
Agent pursuant to the Fee Letter.
"Agent" shall mean Toronto Dominion (Texas), Inc., a Delaware
corporation, in its capacity as Agent hereunder, and any successor Agent
named pursuant to Section 9.9.
"Aggregate Commitment" shall mean as of any date, the aggregate
Commitment of all Lenders.
"Agreement" shall mean this Credit Agreement, as amended, supplemented
or otherwise modified from time to time.
"Applicable Lending Office" means, with respect to any Lender, (i) in
the case of its Domestic Loans, its Domestic Lending Office, (ii) in the
case of its Eurodollar Loans, its Eurodollar Lending Office, and (iii) in
the case of its Auction Borrowings its Domestic Lending Office.
"Applicable Margin" shall mean, for each Eurodollar Loan, the
applicable rate per annum set forth below based on the respective Debt
Rating:
Debt Rating Applicable Margin
----------- -----------------
BB (or lower) 0.75%
BB+ 0.50%
BBB- 0.30%
BBB 0.225%
BBB+ 0.185%
A- 0.15%
A (or higher) 0.125%
"Assignee" shall have the meaning specified in Section 10.6(c).
"Auction Advance" means an advance by a Lender to the Borrower as part
of an Auction Borrowing resulting from the auction bidding procedure
described in Section 3.1.
"Auction Borrowing" means a borrowing consisting of simultaneous
Auction Advances from each of the Lenders whose offer to make one or more
Auction Advances as part of such borrowing has been accepted by the
Borrower under the auction bidding procedure described in Section 3.1.
"Auction Note" means a promissory note of the Borrower payable to the
order of any Lender, in substantially the form of Schedule 7 hereto,
evidencing the indebtedness of the Borrower to such Lender resulting from
an Auction Advance made by such Lender.
"Available Commitment" shall mean, as to any Lender at any time, an
amount equal to the excess, if any, of (a) such Lender's Commitment over
(b) the aggregate principal amount of all Loans made by such Lender then
outstanding.
"Borrower" shall have the meaning specified in the first paragraph
hereof.
"Borrower's Senior Debt" shall mean the First Mortgage Bonds.
"Borrowing Date" shall mean any Business Day specified in a notice
pursuant to Section 2.2 or 3.1, as applicable, as a date on which the
Borrower requests the Lenders to make Loans hereunder.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in New York City or Houston, Texas are
authorized or required by law to close; provided, however, that, when used
in connection with a Eurodollar Loan, the term "Business Day" shall exclude
any day on which banks are not open for dealings in Dollar deposits in the
London interbank market.
"Change of Control" means any of the following:(a) any person or group
of persons (within the meaning of the Exchange Act) shall have the acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the
SEC under the Exchange Act) of 20% or more of the issued and outstanding
shares of capital stock of the Borrower having the right to vote for the
election of directors of the Borrower under ordinary circumstances; (b)
during any period of twelve consecutive calendar months, individuals who at
the beginning of such period constituted the board of directors of the
Borrower (together with any new directors whose nomination for election by
the stockholders of the Borrower was approved by a vote of at least two-
thirds of the directors then still in office who either were directors at
the beginning of such period or whose elections or nomination for election
was previously so approved) cease for any reason other than death or
disability to constitute a majority of the directors then in office; or (c)
the Borrower shall cease to own and control all of the economic and voting
rights associated with all of the outstanding capital stock (or the
equivalent equity interest) of each of its Subsidiaries (including
Catamount Energy Corporation), except any such capital stock (or the
equivalent equity interest) held directly or indirectly by Catamount Energy
Corporation.
"Closing Date" shall mean the date on which the conditions precedent
set forth in Section 5.1 shall be satisfied.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Commitment" shall mean, as to any Lender, the obligation of such
Lender to make Loans in an aggregate amount at any one time outstanding not
to exceed the amount set forth opposite such Lender's name on Schedule 1.
"Commitment Percentage" shall mean, as to any Lender at any time, the
percentage which such Lender's Commitment then constitutes of the Aggregate
Commitment(or, at any time after the Commitments shall have expired or
terminated, the percentage which the aggregate principal amount of such
Lender's Loans then outstanding constitutes of the aggregate principal
amount of the Loans then outstanding).
"Commitment Period" shall mean the period from and including the date
hereof to but not including the Maturity Date or such earlier date on which
the Commitments shall terminate as provided herein.
"Consolidated Leverage Ratio" shall mean the ratio of Total
Indebtedness to Total Capitalization of the Borrower and its Consolidated
Subsidiaries.
"Consolidated Subsidiaries" shall mean the wholly-owned Subsidiaries
of the Borrower.
"Debt Rating" shall mean the rating (or the equivalent) of the
Borrower's Senior Debt by any two of the Rating Agencies, so long as at
least one of the two is Standard & Poor's; provided that if a corporate
credit rating (CCR in the case of Standard & Poor's) or unsecured long term
debt rating is available from Standard & Poor's and at least one other
Rating Agency, then "Debt Rating" shall mean such rating (or the
equivalent) and the higher of such debt rating shall be used in determining
the fee set forth in Section 2.3.
"Default" shall mean any condition or event that constitutes an Event
of Default or that with notice or lapse of time or both would, unless cured
or waived, constitute an Event of Default.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"Domestic Lending Office" means, as to each Lender, its office located
at its address in the United States set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Domestic Lending Office) or such other office as such Lender may hereafter
designate as its Domestic Lending Office by notice to the Borrower and the
Agent.
"Domestic Loan" means ABR Loans.
"Duff & Phelps" shall mean Duff & Phelps, Inc. or any successor
thereto.
"Employee Benefit Plan" shall mean an employee benefit plan within the
meaning of ERISA Section 3(3) maintained, sponsored or contributed to by
the Borrower or any ERISA Affiliate.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" shall mean any corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b)
of the Code) as the Borrower, or is under common control (within the
meaning of Section 414(c) of the Code) with the Borrower.
"Eurocurrency Reserve Percentage" shall mean for any day as applied to
a Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities"
in Regulation D of such Board) maintained by a member bank of such System.
"Eurodollar Base Rate" shall mean, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded
upwards, if necessary, to the next 1/100 of 1%) equal to (a) LIBOR in
effect for such Interest Period divided by (b) one minus the Reserve
Percentage. For purposes hereof, the term "LIBOR" shall mean the rate per
annum determined by the Agent as follows: (i) two Business Days prior to
the commencement of such Interest Period, the Agent shall obtain the
offered quotation(s) for U.S. Dollar deposits for a period comparable to
such Interest Period that appear on the Reuter's Screen as of 11:00 a.m.,
London time, and if at least two such offered quotations appear on the
Reuter's screen, LIBOR shall be the arithmetic average (rounded up to the
nearest 1/100th of 1%) of such offered quotations, as determined by the
Agent; and (ii) if the Agent is not able to obtain quotations for the
determination of LIBOR pursuant to clause (i) above, LIBOR shall be the
rate per annum which the Agent in good faith determines to be the
arithmetic average (rounded as aforesaid) of the offered quotations for
U.S. Dollar deposits in an amount comparable to the Agent's share of the
relevant amount in respect to which LIBOR is being determined for a period
comparable to the relevant Interest Period that leading banks in New York
City selected by the Agent are quoting at 11:00 a.m., New York City time,
two Business Days prior to the commencement of such Interest period in the
New York interbank market to major international banks.
"Eurodollar Lending Office" shall mean, as to each Lender, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Eurodollar Lending Office) or such office, branch or affiliate of such
Lender as it may hereafter designate as Eurodollar Lending Office by notice
to the Borrower and the Agent.
"Eurodollar Loans" shall mean any Revolving Loan bearing interest at a
rate determined by reference to the Eurodollar Rate.
"Eurodollar Rate" shall mean with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, a rate per annum
determined for such day in accordance with the following formula (rounded
upward to the nearest 1/100th of 1%):
Eurodollar Base Rate
--------------------
1.00 - Eurocurrency Reserve Percentage
"Event of Default" shall mean any of the events specified in Article
VIII.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Existing Letter of Credit Agreements" shall mean (i) that certain
Letter of Credit and Reimbursement Agreement dated as of November 1, 1994
between the Borrower and the Agent, as amended; (ii) that certain Amended
and Restated Reimbursement Agreement, dated as of September 24, 1992
between the Borrower and the Agent, as amended; and (iii) that certain
Reimbursement Agreement dated as of April 29, 1993 between the Borrower and
the Agent as amended.
"Federal Funds Effective Rate" shall have the meaning specified in the
definition of "ABR".
"Fee Letter" shall mean the letter, dated the Closing Date, from the
Agent addressed to and accepted by the Borrower.
"Fees" shall mean, collectively, the fees referred to in Sections
2.3(a), 2.3(b) and 2.3(c).
"Financing Lease" shall mean any lease of property, real or personal,
the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the lessee.
"First Mortgage Bonds" means the first mortgage bonds of the Borrower
issued and delivered under (i) the Indenture of Mortgage dated as of
October 1, 1929, between the Borrower and State Street Bank and Trust
Company, as successor trustee to The First National Bank of Boston, as
successor trustee to Old Colony Trust Company, as heretofore and hereafter
amended and supplemented and (ii) any other mortgage, secured indenture or
deed of trust existing on the Closing Date as the same may be heretofore
and hereafter amended and supplemented.
"Fitch" shall mean Fitch Investors Service, L.P. or any successor
thereto.
"GAAP" shall mean generally accepted accounting principles in the
United States of America in effect from time to time.
"Governmental Approvals" shall mean an authorization, consent,
approval, license or exemptions of, registration, or filing with, or report
to, any Governmental Authority.
"Governmental Authority" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"Indebtedness" shall mean with respect to any Person at any date, the
aggregate of (i)(a) all indebtedness of such Person for borrowed money or
for the deferred purchase price of property or services (other than current
trade liabilities incurred in the ordinary course of business and payable
in accordance with customary practices), (b) any other indebtedness of such
Person which is evidenced by a note, bond, debenture or similar instrument,
and (c) all obligations of such Person under Financing Leases, less (ii)
any such Indebtedness that is non-recourse to the Borrower.
"Interest Payment Date" shall mean (a) as to any ABR Loan, the last
day of each March, June, September and December to occur while such Loan is
outstanding, (b) as to any Eurodollar Loan or Auction Borrowing having an
Interest Period of three months or less, the last day of such Interest
Period, and (c) as to any Eurodollar Loan or Auction Borrowing having an
Interest Period longer than three months, each day which is three months,
or a whole multiple thereof, after the first day of such Interest Period,
and the last day of such Interest Period.
"Interest Period" shall mean (i) with respect to any Eurodollar Loan:
(a) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such Eurodollar Loan and ending
one, two, three, six, nine and, if available, twelve months thereafter, as
selected by the Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect thereto; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and ending
one, two, three, six, nine and, if available, twelve months thereafter, as
selected by the Borrower by irrevocable notice to the Agent not less than
three Business Days prior to the last day of the then current Interest
Period with respect thereto;
provided that, the foregoing provisions relating to Interest Periods
are subject to the following:
(1) if any Interest Period would otherwise end on a day that is not a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless the result of such extension would be to carry such
Interest Period into another calendar month in which event such Interest
Period shall end on the immediately preceding Business Day;
(2) any Interest Period that would otherwise extend beyond the
Maturity Date shall end on the Maturity Date; and
(3) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of a calendar month.
"Lenders" shall have the meaning specified in the first paragraph
hereof.
"LIBOR" shall have the meaning specified in the definition of
"Eurodollar Base Rate."
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or
other security interest or any preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement and any Financing Lease having substantially the same
economic effect as any of the foregoing).
"Loan" shall mean as to any Lender the amount from time to time
advanced hereunder by such Lender to the Borrower pursuant to the
Commitments as either a Revolving Loan or an Auction Borrowing.
"Loan Borrowing Certificate" shall have the meaning specified in
Section 5.2(c).
"Loan Documents" shall mean this Agreement, the Notes, the Loan
Borrowing Certificates, the Fee Letter and any other document or agreement
executed in connection herewith or contemplated hereby.
"Maturity Date" shall mean 364 days from the Closing Date, unless
extended as provided in Section 2.6(b) or Section 2.6(c), in which case the
Maturity Date shall mean the third, fourth or fifth anniversary of the
Closing Date, as the case may be.
"Moody's" shall mean Moody's Investors Service, Inc. or any successor
thereto.
"Multiemployer Plan" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
"Notes" shall mean the Revolving Loan Notes or any Auction Notes.
"Notice of Auction Borrowing" shall have the meaning set forth in
Section 3.1(a)(i), and to the extent such notice is given in writing, shall
be in a form substantially similar to Schedule 5 hereto.
"Notice to Borrower of Auction Offer" shall have the meaning set forth
in Section 3.1(a)(ii).
"Participant" shall have the meaning specified in Section 10.6(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Pension Plan" shall mean, at any time, any Employee Benefit Plan
(including a Multiemployer Plan), the funding requirements of which (under
ERISA Section 302 or Code Section 412) are, or at any time within the six
years immediately preceding the time in question, were in whole or in part,
the responsibility of the Borrower or an ERIS Affiliate.
"Permitted Liens" shall mean:
(a) Liens securing the Borrower's Senior Debt;
(b) Purchase money Liens or purchase money security interests upon or
in any property acquired or held by the Borrower or any Subsidiary in the
ordinary course of business to secure the purchase price of such property
or to secure indebtedness incurred solely for the purpose of financing the
acquisition of such property;
(c) Liens or security interests existing on the property described in
the immediately preceding subsection (b) property at the time of its
acquisition;
(d) Liens, security interests, charges or encumbrances on or over the
Borrower's joint ownership interests in the Millstone #3 nuclear generating
facility, the Joseph C. McNeil Plant and the Highgate Interconnection
Facility or any portion thereof, or any facilities or properties associated
with such generating and transmission facilities or nuclear fuel or other
fuel, in any stage, for use in or with such facilities;
(e) Including those granted by the Borrower pursuant to that certain
Receivables Purchase Agreement dated as of November 29, 1988 between the
Borrower and BankBoston, N.A.,as successor to The First National Bank, as
now or hereafter amended from time to time (such being Permitted Liens
hereunder), security interests granted in, or sale of, the Borrower's
accounts receivable, provided that such security interests secure only new
debt incurred at substantially the same time as the creation of such
security interests and provided, further, that any such sale is made only
for new consideration given at substantially the same time as the making of
such sale;
(f) A second mortgage granted on the property subject to the
Borrower's Senior Debt;
(g) Sales or transfers of property by the Borrower and the subsequent
renting or leasing of such property; provided that the book value of all
such property in the aggregate does not exceed fifteen percent (15%) of the
book value of the Borrower's total assets;
(h) Liens on all or any part of the Borrower's or its Subsidiaries'
assets or undertakings employed wholly or primarily in, or arising directly
from, any individual energy-related investment or project to secure (A) an
obligation of the Borrower or (B) an obligation of a Subsidiary of the
Borrower which is non-recourse to the Borrower, as the case may be,
incurred for the purpose of financing all or any part of such energy-related
investment or project;
(i) Liens imposed by law, such as materialmen's, mechanics',
carriers', workmen's, and repairmen's Liens and other similar Liens arising
in the ordinary course of business securing obligations which are not
overdue for a period of more than thirty (30) days or which are being
contested in good faith in an appropriate forum the aggregate amounts of
which do not exceed $50,000;
(j) The interest of the Citizens Bank New Hampshire, formerly known as
First NH Bank, following approval of the New Hampshire Public Utilities
Commission, in a so-called restricted cash collateral account of the
Borrower's New Hampshire subsidiary, Connecticut Valley Electric Company,
Inc., upon the occurrence of an event of default under the $3.75 million
Loan Agreement, dated December 27, 1994, as amended pursuant to an
Amendment thereto dated as of June 17, 1996, each between Citizens Bank New
Hampshire, formerly known as First NH Bank and Connecticut Valley Electric
Company, Inc., and as the same may be extended or renewed.
"Person" shall mean an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, limited liability company, Governmental Authority or other entity
of whatever nature.
"Prime Rate" shall have the meaning specified in the definition of
"ABR".
"Rating Agencies" shall mean Duff & Phelps, Fitch, Moody's or Standard
& Poor's.
"Reportable Event" shall have the meaning set forth in Title IV of
ERISA.
"Required Lenders" shall mean, at any time, Lenders the Commitment
Percentages of which aggregate at least 64 1/2%, provided, however, that in
case any Lender shall have become a non-performing Lender as defined in
Section 2.5(b) hereof, such aggregate percentage shall be determined by
subtracting the Commitment Percentage of the Lender (the "Largest Lender")
having the largest Commitment Percentage from 99.5%. The foregoing
notwithstanding, however, if the Commitment Percentage of the Largest
Lender shall be greater than 50%, the Largest Lender alone may constitute
the Required Lenders.
"Requirement of Law" shall mean, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Responsible Officer" shall mean the Chief Financial Officer, the
President, the Treasurer, an Assistant Treasurer, any Vice President in
charge of financial or accounting matters or the principal accounting
officer of the Borrower or any employee authorized by the Chief Financial
Officer, the President or the Treasurer of the Borrower pursuant to a
letter to the Agent in substantially the form of Schedule 6 hereto.
"Revolving Loans" shall have the meaning specified in Section 2.1.
"Revolving Loan Note" shall have the meaning specified in Section 2.8.
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Standard & Poor's" shall mean Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc., or any successor thereto.
"Subsidiary" shall mean, as to any Person, any corporation or other
entity of which at least a majority of the securities or other ownership
interest having ordinary voting power (absolutely or contingently) for the
election of directors or other Persons performing similar functions are at
the time owned directly or indirectly by such Person.
"Taxes" shall have the meaning specified in Section 2.14.
"Termination Event" shall mean (a) a Reportable Event described in
Section 4043 of ERISA and the regulations issued thereunder (other than a
Reportable Event not subject to the provision for 30-day notice to the PBGC
under such regulations), or (b) the withdrawal of the Borrower or any of
its ERISA Affiliates from a Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c)
the filing of a notice of intent to terminate a Plan or the treatment of a
Plan amendment as a termination under Section 4041 of ERISA, or (d) the
institution of proceedings to terminate a Plan by the PBGC or to appoint a
trustee to administer any Plan.
"Total Capitalization" shall mean, at any date of determination, the
sum of (a) Total Indebtedness, (b) equity of the common stockholders of the
Borrower, (c) equity of the preference stockholders of the Borrower, if
any, and (d) equity of the preferred stockholders of the Borrower, if any,
in each case determined at such date.
"Total Indebtedness" shall mean, at any date of determination, the
aggregate Indebtedness of the Borrower and the Consolidated Subsidiaries.
"Transferee" shall have the meaning specified in Section 10.6(e).
"Type" shall mean, as to any Revolving Loan, its nature as an ABR Loan
or a Eurodollar Loan.
"Unfunded Pension Liabilities" shall mean with respect to any Pension
Plan at any time, the amount determined by taking the accumulated benefit
obligation, as disclosed in accordance with Statement of Accounting
Standards No. 87, "Employers' Accounting for Pensions", over the fair
market value of Pension Plan assets.
"Yield" shall mean for any Auction Advance, the effective rate per
annum at which interest on such Auction Advance is payable, computed on the
basis of a year of 360 days for the actual number of days (including the
first day but excluding the last day) occurring in the period for which
such interest is payable.
SECTION 1.2 Other Definitional Provisions. (a) Each definition of
an agreement or other document in this Article I shall include such
agreement or document as amended or otherwise modified from time to time.
(b) Unless otherwise specified therein, all terms defined in this
Agreement shall have their respective defined meanings when used in any
other Loan Documents or other document made or delivered pursuant hereto.
(c) As used herein and in any Notes or other document made or
delivered pursuant hereto, accounting terms not otherwise defined in
Section 1.1 shall have the respective meanings given to them under GAAP.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms; words of
the masculine gender shall mean and include correlative words of the
feminine and neuter genders.
(e) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision.
(f) Article, Section, Schedule and Exhibit references are to the
corresponding Article, Section, Schedule or Exhibit to this Agreement
unless otherwise specified.
(g) Any headings preceding the texts of the several Articles,
Sections and the table of contents of this Agreement shall be solely for
convenience of reference, and shall not constitute a part of this Agreement
nor affect its meaning.
ARTICLE II
AMOUNT AND TERMS OF COMMITMENTS
SECTION 2.1 Revolving Loans. (a) Subject to the terms and
conditions hereof, each Lender severally agrees to make revolving credit
loans ("Revolving Loans") to the Borrower from time to time during the
Commitment Period in an aggregate principal amount at any one time
outstanding, not to exceed the amount of such Lender's Commitment. During
the Commitment Period the Borrower may use the Commitments by borrowing,
prepaying in whole or in part, and reborrowing the Revolving Loans, all in
accordance with the terms and conditions hereof.
(b) The Revolving Loans may from time to time be (i) Eurodollar Loans,
(ii) ABR Loans or (iii) a combination thereof, as determined by the
Borrower and notified to the Agent in accordance with Sections 2.2 and
2.10; provided that no Revolving Loan shall be made as a Eurodollar Loan
after the day that is one month prior to the Maturity Date.
SECTION 2.2 Procedure for Revolving Loans. The Borrower may
borrow under the Commitments during the Commitment Period on any Business
Day; provided that the Borrower shall give the Agent irrevocable notice
(which notice must be received by the Agent prior to 12:00 Noon, New York
City time, (a) three Business Days prior to the requested Borrowing Date,
if all or any part of the requested Revolving Loans are to be initially
Eurodollar Loans, or (b) one Business Day prior to the requested Borrowing
Date, if all of the requested Revolving Loans are to be ABR Loans),
specifying (i) the amount to be borrowed, (ii) the requested Borrowing
Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR Loans
or a combination thereof and (iv) if the borrowing is to be entirely or
partly of Eurodollar Loans, the respective amounts of such Type of Loan and
the length of the initial Interest Periods therefor. Each borrowing under
the Commitments shall be in an amount equal to a minimum amount of $100,000
and integral multiples of $25,000 in excess thereof. Upon receipt of any
such notice from the Borrower, the Agent shall promptly notify each Lender
thereof. Each Lender will make the amount of its pro rata share of each
borrowing available to the Agent for the account of the Borrower at the
office of the Agent specified in Section 10.2 prior to 11:00 A.M., New York
City time, on the Borrowing Date requested by the Borrower in funds
immediately available to the Agent. Such borrowing will then be made
available to the Borrower by the Agent by wire transfer of immediately
available funds to the Borrower's account with the Agent and otherwise in
accordance with the wire transfer instructions specified in the applicable
Loan Borrowing Certificate.
Notwithstanding the provisions of clause (b) in the preceding
paragraph, in the event that the offered amounts set forth on each Notice
to Borrower of Auction Offer submitted by the Lenders pursuant to Section
3.1(a)(ii) below are, in the aggregate, in an amount less than the
principal amount requested by the Borrower in the related Notice of an
Auction Borrowing (whether given verbally or otherwise), then the Borrower
may request an ABR Loan in the amount of the difference between accepted
Auction Offers and the principal amount requested by Borrower in the
related Notice of Auction Borrowing, by giving the Agent notice as provided
above, no later than 12:00 Noon (New York City time) on the date of such
requested borrowing.
SECTION 2.3 Fees. (a) The Borrower agrees to pay to the Agent
for the account of each Lender a facility fee, computed at the per annum
rate indicated below based on the Debt Rating on the amount of the
Commitment of such Lender in effect on the first Business Day of the fiscal
quarter in which such fee is payable (or with respect to the first such
payment, as in effect on the date hereof), computed on the basis of the
actual number of days elapsed over a year of 365 or 366 days, as the case
may be, payable quarterly in arrears on the last day of each March, June,
September and December and on the Maturity Date or such earlier date as the
Commitments shall terminate as provided herein, commencing on the first of
such dates to occur after the date hereof:
Debt Rating Facility Fee
----------- ------------
BB (or lower) 0.375%
BB+ 0.300%
BBB- 0.200%
BBB 0.15%
BBB+ 0.125%
A- 0.100%
A (or higher) 0.075%
(b) The Borrower agrees to pay to the Agent for its own account on
the Closing Date and each anniversary thereof, the Agency Fee.
(c) If, and only for so long as, the aggregate principal amount of
all Loans outstanding shall exceed 50% of the Aggregate Commitment, the
Borrower shall pay to the Lenders a usage fee by increasing the rate of
interest otherwise payable hereunder and under the Notes in respect of such
Loans by 0.125% per annum.
(d) Except in the case of the fee described in Section 2.3(b), all
Fees shall be paid on the dates due, in immediately available funds, to the
Agent for distribution, if and as appropriate, on a prorata basis among the
Lenders. Once paid, none of the Fees shall be refundable under any
circumstances.
SECTION 2.4 Interest Rates and Payment Dates. (a) Subject to the
provisions of Sections 2.3(c) and 2.4(c), each ABR Loan shall bear interest
at a rate per annum (computed on the basis of the actual number of days
elapsed over a year of 365 or 366 days, as the case may be) equal to the
ABR.
(b) Subject to the provisions of Sections 2.3(c), 2.4(c) and 2.11,
each Eurodollar Loan shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 360 days) at a rate per annum
equal to the Eurodollar Rate for the Interest Period in effect for such
Eurodollar Loan plus the Applicable Margin.
(c) If all or a portion of the principal amount of any Loan, any
interest payable thereon or any Fee or other amount payable hereunder shall
not be paid when due (whether at the stated maturity, by acceleration or
otherwise), such overdue amount shall bear interest at a rate per annum
which is
(i) in the case of overdue principal, the rate that otherwise would
be applicable thereto pursuant to the foregoing provisions of Section
2.3(c) and this Section 2.4 plus 2%, or
(ii) in the case of overdue interest or Fees or other amounts, the
rate described in Section 2.4(a) plus 2%,
in each case from the date of such nonpayment until such amount is paid in
full (as well after as before judgment). Overdue interest shall be
compounded and bear interest on each date for payment of interest on ABR
Loans hereunder.
(d) Interest shall be payable in arrears on each Interest Payment
Date; provided that interest accruing on overdue amounts pursuant to
Section 2.4(c) shall be payable on demand.
(e) As soon as practicable, the Agent shall notify the Borrower and
the Lenders of (i) each determination of a Eurodollar Rate and (ii) the
effective date and the amount of each change in the interest rate on a
Revolving Loan. Each determination of an interest rate by the Agent
pursuant to any provision of this Agreement shall be conclusive and binding
on the Borrower and the Lenders in the absence of clearly demonstrable
error. At the request of the Borrower, the Agent shall deliver to the
Borrower a statement showing the quotations used by the Agent in
determining any interest rate pursuant to paragraph 2.4(a) or 2.4(b).
SECTION 2.5 Pro Rata Treatment. (a) Subject to the provisions of
Section 3.1 in respect of Auction Borrowings, each borrowing by the
Borrower from the Lenders hereunder and any reduction of the Commitments of
the Lenders shall be made pro rata according to the Lenders' respective
Commitment Percentages. Each payment (including each prepayment) by the
Borrower on account of principal of and interest on the Loans shall be made
pro rata according to the respective outstanding principal amounts of the
Loans then held by the Lenders.
(b) Unless the Agent shall have been notified in writing by any
Lender prior to a Borrowing Date in respect of a Revolving Loan that such
Lender will not make available to the Agent the amount that would
constitute its Commitment Percentage of the Revolving Loan to be made on
such date, the Agent may assume that such Lender has made such amount
available to the Agent on such Borrowing Date, and the Agent may, in
reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the Agent by
any Lender (a "non-performing Lender") at or before the required time on
such Borrowing Date, such non-performing Lender shall pay to the Agent, on
demand, such amount, with interest thereon at a rate equal to the daily
average Federal Funds Effective Rate for the period from and including such
Borrowing Date to the date such non-performing Lender makes such amount
immediately available to the Agent. A certificate of the Agent submitted
to any non-performing Lender with respect to any amounts owing under this
Section 2.5(b) shall be conclusive in the absence of clearly demonstrable
error. If such non-performing Lender's Commitment Percentage of such
borrowing is not made available to the Agent within three Business Days of
such Borrowing Date, the Agent also shall be entitled to recover such
amount from the Borrower, on demand, together with interest thereon from
the date such amount was made available to the Borrower at the interest
rate applicable to such borrowing, provided that in such event the Borrower
may request one or more additional borrowings from the other Lenders to
fund such payment from the Borrower to the Agent and, within the limits of
each such Lender's Available Commitment and subject to the breakdown set
forth in the provision to the first sentence of Section 2.1(a), the other
Lenders shall honor such request. If a non-performing Lender shall then
repay to the Agent such amount in full (including interest thereon as above
provided), (i) the Agent shall apply such corresponding amount and interest
to reduce the additional borrowings made by such other Lenders and (ii)
such amount so repaid shall be deemed to constitute such non-performing
Lender's advance made as part of such borrowing as if funded concurrently
with the funds provided by the other Lenders (and such Lender shall cease
to be a non-performing Lender). If and so long as a non-performing Lender
shall not repay such amount, all computations by the Agent with respect to
commitments and percentages hereunder shall be made without regard to the
unfunded Commitment of such non-performing Lender. The failure of any
Lender to fund its Commitment as part of any borrowing shall not relieve
any other Lender of its obligation, if any, to fund its own Commitment
hereunder, but no Lender shall be responsible for the failure of any other
Lender to fund its Commitment on the date of any borrowing hereunder.
Nothing contained herein shall in any way limit, waive or otherwise reduce
any claims that any party hereto may have against any non-performing
Lender.
SECTION 2.6 Repayment of Loans; Term. (a) The Borrower hereby
unconditionally promises to pay to the Agent for the account of each Lender
the then unpaid principal amount of each Loan of such Lender on the
Maturity Date (or such earlier date on which the Loans become due and
payable pursuant to Article VIII). The Borrower hereby further agrees to
pay interest on the unpaid principal amount of the Loans from time to time
outstanding until payment in full thereof at the rates per annum, and on
the dates, as provided in Section 2.4.
(b) If on or prior to the date which is 300 days following the
Closing Date, the Borrower has delivered to the Agent a request to extend
the Maturity Date to the third Anniversary of the Closing Date together
with evidence reasonably satisfactory to the Agent, including without
limitation an opinion of counsel to the Borrower (which opinion shall be
from counsel and in a form reasonably acceptable to the Agent), that the
Borrower has received all required Governmental Approvals to extend the
Maturity Date of this Agreement to the third anniversary of the Closing
Date and to provide for two one-year extensions as provided in subsection
(c) below, and the Agent acknowledges in writing its satisfaction to the
foregoing, the Maturity Date shall be automatically extended to the third
anniversary of the Closing Date.
(c) If the original Maturity Date is extended pursuant to subsection
(b) above, so long as (i) no Default or Event of Default has occurred and
is continuing and (ii) there has been no material adverse change in the
business or financial condition of the Borrower since the Closing Date, and
the Borrower has delivered to the Agent such evidence thereof as the Agent
may reasonably request, then upon each of the third and fourth
anniversaries of the Closing Date, the Borrower may, at its option, subject
to the approval of all of the Lenders, extend the Maturity Date for an
additional one-year period.
SECTION 2.7 Payments. (a) All payments (including prepayments)
made by the Borrower hereunder and under the Notes, whether on account of
principal, interest, Fees or otherwise, shall be made without set off or
counterclaim and shall be made prior to 3:00 P.M., New York City time, on
the due date thereof to the Agent, for the account of the Lenders, at the
Agent's office specified in Section 10.2, in Dollars and in immediately
available funds. The Agent shall distribute such payments to the Lenders
promptly upon receipt in like funds as received.
(b) If any principal payment hereunder (other than payments on
Eurodollar Loans) becomes due and payable on a day other than a Business
Day, such payment date shall be extended to the next succeeding Business
Day, and interest thereon shall be payable at the then applicable rate
during such extension. If any payment on a Eurodollar Loan becomes due and
payable on a day other than a Business Day, the maturity thereof shall be
extended to the next succeeding Business Day unless the result of such
extension would be to extend such payment into another calendar month, in
which event such payment shall be made on the immediately preceding
Business Day.
SECTION 2.8 Revolving Loan Note. The Revolving Loans made by each
Lender shall be evidenced by a promissory note of the Borrower payable to
the order of such Lender, substantially in the form of Schedule 2 hereto
appropriately completed (a "Revolving Loan Note"). Each Lender shall, and
is hereby authorized by the Borrower to, endorse on the schedule attached
to each Revolving Loan Note (or on a continuation of such schedule) or
otherwise to record in such Lender's internal records, an appropriate
notation evidencing the date and amount of each Revolving Loan from such
Lender, each payment and prepayment of principal of such Revolving Loan and
the other information provided for on such schedule; provided, however,
that the failure of any Lender to make such notation or any error therein
shall not affect any obligation of the Borrower to repay the Revolving
Loans made by such Lender in accordance with the terms of this Agreement
and the Notes or any other obligation of the Borrower hereunder.
SECTION 2.9 Optional Prepayments. (a) Subject to subsection (b)
hereof, the Borrower may at any time and from time to time prepay the
Loans, in whole or in part, without premium or penalty (other than as
provided in Section 2.15), upon at least five Business Days' irrevocable
notice to the Agent for Eurodollar Loans and two Business Days' irrevocable
notice to the Agent for ABR Loans, specifying the date and amount of
prepayment and whether the prepayment is of Eurodollar Loans, ABR Loans or
a combination thereof, and, if of a combination thereof, the amount
allocable to each. Upon receipt of any such notice the Agent shall
promptly notify each Lender thereof. If any such notice is given, the
amount specified in such notice shall be due and payable on the date
specified therein, together with any amounts payable pursuant to Section
2.15 and accrued interest to such date on the amount prepaid.
(b) The Borrower may not prepay any Auction Borrowing, except as set
forth in Section 3.l(d).
SECTION 2.10 Conversion and Continuation Options. The Borrower
shall have the right at any time upon prior irrevocable notice to the Agent
(i) not later than 12:00 Noon, New York City time, one Business Day prior
to conversion, to convert any Eurodollar Loan to an ABR Loan, (ii) not
later than 12:00 Noon, New York City time, three Business Days (provided
such Business Days are days on which dealings in foreign currencies and
exchanges between banks may be carried on in London) prior to conversion or
continuation, to convert any ABR Loan into a Eurodollar Loan or to continue
any Eurodollar Loan as a Eurodollar Loan for any additional Interest
Period, and (iii) not later than 12:00 Noon, New York City time, three such
Business Days prior to conversion, to convert the Interest Period with
respect to any Eurodollar Loan to another permissible Interest Period
subject in each case to the following:
(a) a Eurodollar Loan may not be converted at a time other than the
last day of the Interest Period applicable thereto;
(b) any portion of a Loan maturing or required to be repaid in less
than one month may not be converted into or continued as a Eurodollar Loan;
(c) no Eurodollar Loan may be continued as such and no ABR Loan may
be converted to a Eurodollar Loan when any Event of Default has occurred
and is continuing and the Agent or the Required Lenders have determined
that such a continuation is not appropriate (the Borrower shall provide, in
addition to the notice specified in Section 2.10, upon the request of the
Agent or the Required Lenders, certification that no such Event of Default
has occurred and is continuing);
(d) any portion of a Eurodollar Loan that cannot be converted into or
continued as a Eurodollar Loan by reason of Section 2.10(b) or 2.10(c)
automatically shall be converted at the end of the Interest Period in
effect for such Loan to an ABR Loan;
(e) on the last day of any Interest Period for Eurodollar Loans if
the Borrower has failed to give notice of conversion or continuation as
described in this Section 2.10 or if such conversion or continuation is not
permitted pursuant to Section 2.10(d), such Loans shall be converted to ABR
Loans on the last day of such then expiring Interest Period.
Accrued interest on a Loan (or portion thereof) being converted shall be
paid by the Borrower at the time of conversion. All borrowings,
conversions and continuations of Loans hereunder and all selections of
Interest Periods hereunder shall be in such amounts and be made pursuant to
such elections so that, after giving effect thereto, the aggregate
principal amount of the Eurodollar Loans shall be at least equal to
$100,000 or a whole multiple of $25,000 in excess thereof. In no event
shall there be Eurodollar Loans with more than six Interest Periods
outstanding at any time.
SECTION 2.11 Inability to Determine Interest Rate. If prior to
the first day of any Interest Period:
(a) the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist
for ascertaining the Eurodollar Rate for such Interest Period, or
(b) the Agent shall have received notice from the Required Lenders
that the Eurodollar Rate determined or to be determined for such Interest
Period will not adequately and fairly reflect the cost to such Lenders (as
conclusively certified by such Lenders) of making or maintaining their
affected Loans during such Interest Period, or
(c) Dollar deposits in the principal amounts of Eurodollar Loans to
which such Interest Period is to be applicable are not generally available
in the London Interbank Market,
the Agent shall give telecopy or telephonic notice thereof to the Borrower
and the Lenders as soon as practicable thereafter. If such notice is given
(x) any Eurodollar Loans requested to be made on the first day of such
Interest Period shall be made as ABR Loans, (y) any Loans that were to have
been converted on the first day of such Interest Period to Eurodollar Loans
shall be converted to or continued as ABR Loans and (z) any outstanding
Eurodollar Loans shall be converted, on the first day of such Interest
Period, to ABR Loans. Until such notice has been withdrawn by the Agent,
no further Eurodollar Loans shall be made or continued as such, nor shall
the Borrower have the right to convert Loans to Eurodollar Loans.
SECTION 2.12 Change in Legality. Notwithstanding any other
provision herein, if the adoption of or any change in any Requirement of
Law or in the interpretation or application thereof shall make it unlawful
for any Lender to make or maintain Eurodollar Loans or Auction Borrowing as
contemplated by this Agreement, (a) the commitment of such Lender hereunder
to make Eurodollar Loans, continue Eurodollar Loans as such and convert ABR
Loans to Eurodollar Loans shall forthwith be canceled and (b) such Lender's
Loans then outstanding as Eurodollar Loans, if any, shall be converted
automatically to ABR Loans on the respective last days of the then current
Interest Periods with respect to such Loans or within such earlier period
as required by law. If any such conversion of a Eurodollar Loan or Auction
Borrowing occurs on a day which is not the last day of the then current
Interest Period with respect thereto, the Borrower shall pay to such Lender
such amounts, if any, as may be required pursuant to Section 2.15.
SECTION 2.13 Increased Costs. (a) If the adoption of or any
change in any Requirement of Law or in the interpretation or application
thereof or compliance by any Lender with any request or directive (whether
or not having the force of law) from any central bank or other Governmental
Authority made subsequent to the date hereof:
(i) shall subject any Lender or any Participant to any tax of any
kind whatsoever with respect to this Agreement, any Note, any Auction
Borrowing, or any Eurodollar Loan, or change the basis of taxation of
payments to such Lender in respect thereof (except for Taxes covered by
Section 2.14 and changes in the rate of tax on the overall net income of
such Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition; and the result
of any of the foregoing is to increase the cost to such Lender or
Participant, by an amount which such Lender deems to be material, of
making, converting into, continuing or maintaining Eurodollar Loans or to
reduce any amount receivable hereunder in respect thereof,
then, in any such case, the Borrower shall promptly pay such Lender or such
Participant, as the case may be, upon its demand, such additional amount or
amounts as will compensate it for such increased cost or reduced amount
receivable.
(b) If any Lender or any Participant shall have determined that the
adoption of or any change in any Requirement of Law regarding capital
adequacy or in the interpretation or application thereof or compliance by
such Lender or such Participant, as the case may be, or any corporation
controlling such Person with any request or directive regarding capital
adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of
reducing the rate of return on such Person's or such corporation's capital
as a consequence of its obligations hereunder or to a level below that
which such Person or such corporation could have achieved but for such
adoption, change or compliance (taking into consideration such Person's or
such corporation's policies with respect to capital adequacy) by an amount
deemed by such Person to be material, then from time to time, the Borrower
shall promptly pay to such Person such additional amount or amounts as will
compensate such Person for such reduction.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this Section 2.13, it shall promptly notify the Borrower (with
a copy to the Agent) of the event by reason of which it has become so
entitled. A certificate as to any additional amounts payable pursuant to
this Section 2.13 submitted by such Lender to the Borrower (with a copy to
the Agent) shall be conclusive in the absence of clearly demonstrable
error. The agreements in this Section 2.13 shall survive the termination
of this Agreement and the payment of the Loans and all other amounts
payable hereunder, provided that no Lender shall be entitled to any
additional amount payable under this Section 2.13 to the extent that such
amount relates to any period of time more than 120 days prior to the date
on which such Lender first notified the Borrower of the occurrence of the
event entitling such Lender to such additional amount (unless, and to the
extent, that any such compensation so demanded shall relate to the
retroactive application of any event so notified to the Borrower).
(d) Within 15 days after receipt by Borrower of a written notice and
demand from any Lender (an "Affected Lender") for payment of additional
amounts or increased costs as provided in this Section 2.13 not generally
applicable to all Lenders, the Borrower may, at its option, notify the
Agent and such Affected Lender of its intention to replace such Affected
Lender. So long as no Default or Event of Default shall have occurred and
be continuing, Borrower, with the consent of Agent, may obtain, at the
Borrower's expense, a replacement Lender ("Replacement Lender") for the
Affected Lender, which Replacement Lender must be satisfactory to the
Agent. If Borrower obtains a Replacement Lender within sixty (60) days
following notice of its intention to do so, the Affected Lender must sell
and assign its Loans and Commitments to such Replacement Lender for an
amount equal to the principal balance of all Loans held by the Affected
Lender and all accrued interest and Fees with respect thereto through the
date of such sale, provided that Borrower should have reimbursed such
Affected Lender for the additional amounts or increased costs that it is
entitled to receive under this Agreement through the date of such sale and
assignment.
SECTION 2.14 Taxes. (a) All payments made by the Borrower under
this Agreement and any Notes shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority (excluding net income
taxes and franchise taxes imposed in lieu of net income taxes imposed on
the Agent or any Lender as a result of a present or former connection
between the Agent or such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising solely
from the Agent or such Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or any
Note)). If any such non-excluded taxes, levies, imposts, duties, charges,
fees deductions or withholdings (collectively, "Taxes") are required to be
withheld from any amounts payable to the Agent or any Lender hereunder or
under any Note, the amounts so payable to the Agent or such Lender shall be
increased to the extent necessary to yield to the Agent or such Lender
(after payment of all Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement;
provided, however, that the Borrower shall not be required to increase any
such amounts payable to any Lender that is not organized under the laws of
the United States of America or a state thereof if such Lender fails to
comply with the requirements of paragraph (b) of this Section 2.14.
Whenever any Taxes are payable by the Borrower, as promptly as possible
thereafter the Borrower shall send to the Agent for its own account or for
the account of such Lender, as the case may be, a certified copy of an
original official receipt received by the Borrower showing payment thereof.
If the Borrower fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the Agent the required receipts or other
required documentary evidence, the Borrower shall indemnify the Agent and
the Lenders for any incremental taxes, interest or penalties that may
become payable by the Agent or any Lender as a result of any such failure.
The agreements in this Section 2.14 shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable
hereunder.
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(i) deliver to the Borrower and the Agent (A) two duly completed
copies of United States Internal Revenue Service Form 1001 or 4224, or
successor applicable form, as the case may be, and (B) an Internal Revenue
Service Form W-8 or W-9, or successor applicable form, as the case may be;
(ii) deliver to the Borrower and the Agent two further copies of any
such form or certification on or before the date that any such form or
certification expires or becomes obsolete and after the occurrence of any
event requiring a change in the most recent form previously delivered by it
to the Borrower; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Borrower or
the Agent;
unless in any such case an event (including, without limitation, any change
in treaty, law or regulation) has occurred prior to the date on which any
such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises the
Borrower and the Agent. Such Lender shall certify (i) in the case of a
Form 1001 or 4224, that it is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal
income taxes and (ii) in the case of a Form W-8 or W-9, that it is entitled
to an exemption from United States backup withholding tax. Each Person
that shall become a Lender or a Participant pursuant to Section 10.6 shall,
upon the effectiveness of the related transfer, be required to provide all
of the forms and statements required pursuant to this Section 2.14,
provided that in the case of a Participant such Participant shall furnish
all such required forms and statements to the Lender from which the related
participation shall have been purchased.
SECTION 2.15 Indemnity. (a) The Borrower agrees to indemnify
each Lender and to hold each Lender harmless from any loss or expense which
such Lender may sustain or incur as a consequence of:
(i) default by the Borrower in payment when due of the principal
amount of or interest on any Eurodollar Loan or Auction Borrowing;
(ii) default by the Borrower in making a borrowing of, conversion
into or continuation of Eurodollar Loans or Auction Borrowing after the
Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement;
(iii) default by the Borrower in making any prepayment after the
Borrower has given a notice thereof in accordance with the provisions of
this Agreement; or
(iv) the making of a payment or a prepayment of Eurodollar Loans or
Auction Borrowing on a day which is not the last day of an Interest period
with respect thereto;
including, without limitation, in each case, any such loss (including,
without limitation, loss of margin) or expense arising from the
reemployment of funds obtained by it or from fees payable to terminate the
deposits from which such funds were obtained.
(b) For the purpose of calculation of all amounts payable to a Lender
under this Section 2.15, each Lender shall be deemed to have actually
funded its relevant Eurodollar Loan or Auction Borrowing, as the case may
be, through the purchase of a deposit bearing interest at the rate borne by
the respective Eurodollar Loan or Auction Borrowing, as the case may be, in
an amount equal to the amount of the respective Eurodollar Loan or Auction
Borrowing, as the case may be, and having a maturity comparable to the
relevant Interest Period; provided, however, that each Lender may fund each
of its Eurodollar Loans in any manner it sees fit, and the foregoing
assumption shall be utilized only for the calculation of amounts payable
under this subsection. This covenant shall survive the termination of this
Agreement and the payment of the Notes and all other amounts payable
hereunder.
ARTICLE III
AUCTION ADVANCES
SECTION 3.1 The Auction Advance. (a) Each Lender severally agrees
that the Borrower may request Auction Borrowings under this Section 3.1
from time to time on any Business Day during the period from the date
hereof until the date occurring seven days prior to the Maturity Date, in
the manner set forth below; provided, that, following the making of each
Auction Borrowing, the aggregate amount of the Auction Advance then
outstanding shall not exceed the lower of either (x) the aggregate
Available Commitment of all the Lenders and (y) $25,000,000.
(i) The Borrower may initiate an Auction Borrowing verbally or
otherwise by communicating to the Agent and to each of the Lenders a
request for an Auction Borrowing (a "Notice of Auction Borrowing"),
specifying the date and aggregate amount of the proposed Auction Borrowing,
the maturity date for repayment of each Auction Advance to be made as part
of such Auction Borrowing (which maturity date may not be later than the
earlier to occur of (A) 270 days after the date of such Auction Borrowing
and (B) the Maturity Date), the interest payment date or dates relating
thereto (which shall occur at least every 90 days), and any other terms to
be applicable to such Auction Borrowing. Such requests shall be made, if
possible, before 10:00 A.M., (New York City time) of the date of the
proposed Auction Borrowing.
(ii) Each Lender may, in its sole discretion, elect to irrevocably
offer to make one or more Auction Advances to the Borrower as part of such
proposed Auction Borrowing at a rate or rates of interest specified by such
Lender in its sole discretion, by notifying the Borrower verbally or
otherwise (a "Notice to Borrower of Auction Offer"), before 11:00 A.M. (New
York City time) or in any event within one hour of the receipt of the
Notice of an Auction Borrowing on the date of such proposed Auction
Borrowing of the minimum amount and maximum amount of each Auction Advance
that such Lender would be willing to make as part of such proposed Auction
Borrowing (which amounts may, subject to the proviso to the first sentence
of this Section 3.1(a), exceed such Lender's Commitment), the rate or rates
of interest therefor, the interest period relating thereto and such
Lender's Applicable Lending Office with respect to such Auction Advance.
The failure by any Lender to give such notice within such time period shall
be deemed to be an election not to participate in such Auction Borrowing
and shall not cause such Lender to be obligated to make any Auction Advance
as part of such proposed Auction Borrowing.
(iii) the Borrower shall, in turn, before 12:00 P.M. (New York City
time) or in any event within two hours of the initiation of an Auction
Borrowing on the date of such proposed Auction Borrowing, either
(A) cancel such Auction Borrowing by giving the Agent and each Lender
that has submitted or communicated a Notice to Borrower of Auction Offer
notice (verbally or otherwise) to that effect, or
(B) irrevocably accept one or more of the offers made by any Lender
or Lenders pursuant to paragraph (ii) above, in its sole discretion, in an
aggregate amount not in excess of the aggregate amount of the proposed
Auction Borrowing, subject only to the provisions of this paragraph (iii),
by giving verbal and written (by facsimile) notice to the applicable Lender
or Lenders, as the case may be, of the amount of each Auction Advance
(which amount shall be equal to or greater than each such Lender's minimum
amount, and equal to or less than each such Lender's maximum amount,
notified to the Borrower by such Lender or Lenders for such Auction
Advances pursuant to paragraph (ii) above) to be made by each such Lender
as part of such Auction Borrowing, and reject any remaining offers made by
other Lenders pursuant to paragraph (ii) above by giving each such Lender
notice to that effect; provided, however, that (x) the Borrower shall not
accept an offer made pursuant to paragraph (ii) above, at any Yield if the
Borrower shall have, or shall be deemed to have, rejected any other offer
made pursuant to paragraph (ii) above, at a lower Yield, (y) if the
Borrower declines to accept, or is otherwise restricted by the provisions
of this Agreement from accepting, the maximum aggregate principal amount of
Auction Borrowings offered at the same Yield pursuant to paragraph (ii)
above, then the Borrower shall accept a pro rata portion of each offer made
at such Yield, based as nearly as possible on the ratio of the aggregate
principal amount of such offers to be accepted by the Borrower to the
maximum aggregate principal amount of such offers made pursuant to
paragraph (ii) above (rounding up or down to the next higher or lower
multiple of $100,000), and (z) no offer made pursuant to paragraph (ii)
above shall be accepted unless the Auction Borrowing in respect of such
offer is in an integral multiple of $100,000 and the aggregate amount of
such offers accepted by the Borrower is equal to at least $500,000.
Any offer or offers made pursuant to paragraph (ii) above not
expressly accepted or rejected by the Borrower in accordance with this
paragraph (iii) shall be deemed to have been rejected by the Borrower.
(iv) If the Borrower accepts one or more of the offers made by any
Lender or Lenders pursuant to clause (B) of paragraph (iii) above, the
Borrower shall in turn promptly notify verbally and via facsimile (A) each
Lender that has submitted a Notice to Borrower of Auction Offer, of the
date and aggregate amount of such Auction Borrowing and whether or not any
offer or offers made by such Lender pursuant to paragraph (ii) above have
been accepted by the Borrower and (B) each Lender that is to make an
Auction Advance as part of such Auction Borrowing of the amount of each
Auction Advance to be made by such Lender as part of such Auction
Borrowing. The Borrower shall also provide the Agent with a summary of the
terms and amounts borrowed for each of the Lenders selected within 5
business days after each Auction Borrowing. Each Lender that is to make an
Auction Advance as part of such Auction Borrowing shall, on the date of
such Auction Borrowing, make available for the account of the Borrower such
Lender's portion of such Auction Borrowing, in same day funds.
(b) Each Auction Advance shall be in an amount not less than $500,000
or an integral multiple of $100,000 in excess thereof and, following the
making of each Auction Borrowing, the Borrower shall be in compliance with
the limitation set forth in the proviso to the first sentence of subsection
(a) above.
(c) Within the limits and on the conditions set forth in this Section
3.1, the Borrower may from time to time borrow under this Section 3.1,
repay or prepay pursuant to subsection (d) below, and reborrow under this
Section 3.1.
(d) The Borrower shall repay to each Lender that has made an Auction
Advance, or each other holder of an Auction Note, on the maturity date of
each Auction Advance (such maturity date being that specified by the
respective Lender for repayment of such Auction Advance in the related
Notice of an Auction Offer delivered pursuant to subsection (a)(ii) above
and provided in the Auction Note evidencing such Auction Advance), the then
unpaid principal amount of such Auction Advance. The Borrower shall have
no right to prepay any principal amount of any Auction Advance unless, and
then only on the terms, specified by the Borrower for such Auction Advance
in the related Notice of Auction Borrowing delivered pursuant to subsection
(a)(i) above (whether verbally or otherwise) and set forth in the
corresponding Notice of Auction Offer and further noted in the Auction Note
evidencing such Auction Advance. Within 5 business days of any such
repayment, the Borrower shall also provide notice to the Agent of the date
and amount of such prepayment by such Lender.
(e) The Borrower shall pay interest on the unpaid principal amount of
each Auction Advance from the date of such Auction Advance to the date the
principal amount of such Auction Advance is repaid in full, at the rate of
interest for such Auction Advance specified by the Lender making such
Auction Advance in its notice with respect thereto delivered pursuant to
subsection (a)(ii) above, payable on the interest payment date or dates
specified by the Lender for such Auction Advance in the related Notice of
an Auction Offer delivered pursuant to subsection (a)(ii) above, as
provided in the Auction Note evidencing such Auction Advance.
(f) The indebtedness of the Borrower resulting from each Auction
Advance made to the Borrower as part of an Auction Borrowing shall be
evidenced by an appropriate notation to the Auction Note of the Borrower
payable to the order of each Lender making such Auction Advance.
(g) Upon payment in full of the principal amount of any Auction Note
and interest accrued thereon, upon written request of the Borrower, the
holder of such Auction Note shall cancel and return such Auction Note to
the Borrower.
SECTION 3.2 Conditions Precedent to Each Auction Borrowing. The
obligation of each Lender that is to make an Auction Advance on the
occasion of an Auction Borrowing (including the initial Auction Borrowing)
to make such Auction Advance as part of such Auction Borrowing is subject
to the conditions precedent that(i)on the date of such Auction Borrowing,
but prior to such Auction Borrowing, the Borrower shall have received
confirmation that an appropriate notation has been or will be made in the
schedule to the Auction Note payable to the order of such Lender for each
of the Auction Advances to be made by such Lender as part of such Auction
Borrowing, in a principal amount equal to the principal amount of the
Auction Advance to be evidenced thereby and otherwise on such terms as were
agreed to for such Auction Advance in accordance with Section 3.1, and (ii)
except as otherwise waived in accordance with Section 10.01, on the date of
such Auction Borrowing the following statements shall be true, and each of
the giving of the applicable Notice of an Auction Borrowing (whether
verbally or otherwise) and the acceptance by the Borrower of the proceeds
of such Auction Borrowing shall constitute a representation and warranty by
the Borrower that on the date of such Auction Borrowing such statements are
true:
(A) The representations and warranties contained in Article IV are
correct on and as of the date of such Borrowing, before and after giving
effect to such Borrowing and to the application of the proceeds therefrom,
as though made on and as of such date, and
(B) No Default or Event of Default has occurred and is continuing, or
would result from such Borrowing or from the application of the proceeds
therefrom, which constitutes an Event of Default or which would constitute
an Event of Default but for the requirement that notice be given or time
elapse or both.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Agreement and
to make the Loans, the Borrower hereby represents and warrants to the Agent
and each Lender that:
SECTION 4.1 Incorporation and Good Standing. The Borrower is duly
incorporated, validly existing and in good standing under the laws of the
State of Vermont. The Borrower is duly qualified to do business in the
States of New Hampshire, New York, Maine and Connecticut and as a foreign
corporation and is in good standing in each other jurisdiction where the
character of its business, the nature of its properties or the transaction
of any material portion of its business (as now conducted and as currently
contemplated to be conducted) requires such qualification, if any.
SECTION 4.2 Corporate Power and Authority. The Borrower has the
requisite power and authority to own its properties and carry on its
business as now being conducted and as currently proposed to be conducted,
and to execute, deliver and perform its obligations under each Loan
Document.
SECTION 4.3 No Conflicts. The execution, delivery and performance
by Borrower of each of the Loan Documents are within the Borrower's
corporate powers and have been duly authorized by all necessary corporate
action and (i) do not violate any Requirement of Law, (ii) do not breach or
result in an event of default under any indenture or material agreement to
which the Borrower is a party or by which it or its property is bound,
(iii) will not result in or require the creation of any Lien upon or with
respect to any of its properties, and (iv) do not require any consent or
approval of any creditor of the Borrower.
SECTION 4.4 Governmental Approvals. No Governmental Approvals are
required for the due execution, delivery and performance by the Borrower of
any Loan Document, including, without limitation, any Governmental Approval
of or by the Vermont Public Service Board and the New Hampshire Public
Utilities Commission, the Connecticut Department of Public Utilities
Commission, the Public Service Commission of the State of New York, and the
Maine Public Utilities Commission.
SECTION 4.5 Legally Enforceable Agreements. This Agreement and
the other Loan Documents (except the Notes) are, and the Notes when
delivered hereunder will be, legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with their
respective terms, subject to (i) the effect of applicable bankruptcy,
insolvency, reorganization or moratorium or other similar laws affecting
the enforcement of creditors' rights generally, and (ii) the application of
general principles of equity (regardless of whether considered in a
proceeding in equity or at law).
SECTION 4.6 Financial Statements. The audited balance sheet of
the Borrower as at December 31, 1996, and the related statements of income
and retained earnings and statement of cash flows of the Borrower for the
fiscal year then ended, (copies of which have been furnished to the Agent),
and the unaudited balance sheet of the Borrower as of June 30, 1997 (copies
of which have been furnished to the Agent), fairly present the financial
condition of the Borrower as at such date and the results of operations of
the Borrower for the period ended on such date, all in accordance with
GAAP, and since June 30, 1997 there has been no material adverse change in
the business, operations, assets, liabilities, financial condition or
results of operations of the Borrower, taken as a whole, that would affect
the Borrower's ability to perform its obligations under any of the Loan
Documents, except as disclosed in writing to the Agent.
SECTION 4.7 Litigation. There is no pending or, to the best of
the Borrower's knowledge, threatened action or proceeding against the
Borrower before any court, governmental agency or arbitrator, which if
adversely determined, could reasonably be expected to materially adversely
affect the financial condition or results of operations of the Borrower or
that could otherwise materially adversely affect the Borrower's ability to
perform it obligations under any of the Loan Documents.
SECTION 4.8 Margin Stock. The Borrower is not engaged in the
business of extending credit for the purpose of buying or carrying margin
stock (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System), and no proceeds of any Loan will be used to buy or
carry any margin stock (within the meaning of Regulations G, T, U or X of
said Board of Governors) or to extend credit to others for the purpose of
buying or carrying any margin stock or otherwise used in violation of
Regulations G, T, U or X of said Board of Governors.
SECTION 4.9 ERISA. Each Employee Benefit Plan of the Borrower and
any ERISA Affiliate is in compliance with ERISA and the Code, where
applicable, in all material respects. At the date hereof (i) as of the
most recent annual actuarial report, there are no Unfunded Pension
Liabilities under the Pension Plan, and (ii) the amount of the aggregate
post-retirement medical benefits under all applicable employee Benefit
Plans does not exceed approximately $15,000,000. The Borrower and/or any
ERISA Affiliate has, as of the date hereof, made all contributions or
payments to or under each such Pension Plan required by law or the terms of
such Pension Plan or any contract or agreement. No material liability to
the PBGC has been, or is expected by the Borrower or any ERISA Affiliate to
be, incurred by the Borrower or any ERISA Affiliate. Liability, as
referred to in this Section, includes any joint and several liability.
Each Employee Benefit Plan which is a group health plan within the meaning
of Code Section 5000(b)(1) is in material compliance with the continuation
of health care coverage requirements of Code Section 4980B.
SECTION 4.10 Environmental Matters. To the best of the Borrower's
knowledge, there has not been a release, discharge or emission of any
hazardous substance which is prohibited, controlled or regulated under any
Requirement of Law, which have had, or which could reasonably be expected
to have, a material adverse effect on the financial condition of the
Borrower. Except as disclosed in the Borrower's most recent Form 10-K or
Form 10-Q, the Borrower has not received any notice of any violation,
alleged violation, non-compliance, liability or potential liability
regarding environmental Requirements of Law with regards to any of its
properties that would have a material adverse effect on the financial
condition of the Borrower, nor does the Borrower have knowledge that any
such notice is threatened.
SECTION 4.11 No Default; Compliance. No Default or Event of
Default has occurred and is continuing, and the Borrower is in compliance
in all material respects with all Requirements of Law. No defaults by the
Borrower exist under any contracts or judgments, decrees or orders except
for defaults that, singly or in the aggregate, have not had and will not
have a materially adverse effect on the business, operations, assets,
liabilities, financial condition, results of operations or business
prospects of the Borrower or a materially adverse effect on its ability to
perform its obligations under this Agreement or the Existing Letter of
Credit Agreements.
SECTION 4.12 Investment Company Act. The Borrower is not an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
SECTION 4.13 Taxes. All Federal, state and local tax returns and
other material reports required by applicable law to be filed by the
Borrower have been filed, and all material taxes, assessments and other
governmental charges imposed upon the Borrower or any of the respective
properties of the Borrower and which have become due and payable on or
prior to the date hereof have been paid except to the extent contested in
good faith by proper proceedings which stay the imposition of any penalty
fine or lien resulting form the non-payment thereof and with respect to
which adequate reserves have been set aside for payment thereof.
SECTION 4.14 No Material Adverse Effect. No fact is known to the
Borrower which has had or in the reasonable judgment of the Borrower may in
the future have a materially adverse effect on the business, operations,
assets, liabilities, financial condition, results of operations or business
prospects of the Borrower or on its ability to perform its obligations
under this Agreement or the Existing Letter of Credit Agreements which has
not been set forth in such reports or otherwise disclosed in writing to the
Agent prior to the Closing Date or any Borrowing Date. No document
furnished or other written statement made pursuant to the Existing Letter
of Credit Agreements in connection with the negotiation, preparation or
execution of this Agreement or the Existing Letter of Credit Agreements
contains or will contain any untrue statement of a fact material to the
creditworthiness of the Borrower or omits or will omit to state such a
material fact necessary in order to make the statements contained therein
not misleading.
SECTION 4.15 Statements; Certificates. All statements contained
in any certificate, financial statement or other instrument delivered by or
on behalf of the Borrower pursuant to or in connection with this Agreement
(including but not limited to any such made in or in connection with any
amendment hereto) shall constitute representations and warranties made
under this Agreement.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1 Conditions to Closing. Unless already satisfied by
the Borrower as of November 5, 1997, the agreement of each Lender to make
the initial Loans requested to be made by it is subject to the
satisfaction, immediately prior to or concurrently with the making of such
Loan of the following conditions precedent:
(a) each Lender shall have received a Revolving Loan Note and an
Auction Note, payable to such Lender and duly completed in accordance with
the terms hereof;
(b) the Agent shall have received the favorable written opinion,
dated the Closing Date and addressed to the Agent, of the General Counsel
of the Borrower, substantially in the form of Schedule 3 hereto;
(c) all legal matters incident to this Agreement and the transactions
contemplated hereby shall be satisfactory to the Agent, to the Lenders, and
to Paul, Hastings, Janofsky & Walker LLP, counsel for the Agent;
(d) each of the Loan Documents shall have been duly executed by each
of the parties thereto and delivered to the Agent and shall be in full
force and effect;
(e) the Borrower shall have duly paid the Fees that are payable on
the Closing Date in accordance with Section 2.3;
(f) the Agent shall have received certified copies of all
governmental approvals (including any approvals, or evidence in form and
substance satisfactory to the Agent that such approvals are not required,
of the Issuer and the Public Service Board of the State of Vermont and the
New Hampshire Public Utilities Commission) necessary for the Borrower to
enter into this Agreement and the transactions contemplated by this
Agreement;
(g) the Agent shall have received certified copies of the Borrower's
Articles of Association and By-Laws, and resolutions of the Board of
Directors of the Borrower's approving this Agreement and of all other
documents evidencing other necessary corporate action;
(h) the Agent shall have received a certificate of the Secretary or
an Assistant Secretary of the Borrower certifying the names and true
signatures of the officers of the Borrower authorized to sign this
Agreement and the other documents to be delivered by it hereunder;
(i) the Agent shall have received good standing and tax clearance
certificates with respect to the Borrower issued within a reasonable period
of time prior to the execution of this Agreement by the Secretary of State
of the States of Vermont and New Hampshire and the Tax Department or
Departments of Revenue of the States of Vermont and New Hampshire; and
(j) the Agent shall have received such other documents, instruments
and opinions as shall be reasonably requested by the Agent or Paul,
Hastings, Janofsky & Walker LLP, counsel for the Agent, and all legal
matters incident to this Agreement and the transactions contemplated hereby
shall be satisfactory to the Agent and Paul, Hastings, Janofsky and Walker
LLP, counsel for the Agent.
SECTION 5.2 Conditions to Each Loan. The agreement of each Lender
to make any Loan requested to be made by it on any Borrowing Date
(including its initial Loan) is subject to the satisfaction of the
following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by the Borrower in or pursuant to the Loan Documents shall
be true and correct on and as of such date as if made on and as of such
date.
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the Loans
requested to be made on such date.
(c) Borrowing Certificate. The Agent shall have received, with a
counterpart for each Lender, (i) with respect to any Revolving Loan,
evidence that the certificate of the Borrower, substantially in the form of
Schedule 4 hereto, has been issued or updated to reflect such borrowing and
(ii) with respect to any Auction Borrowing, evidence that a notice from the
Borrower to each Lender selected in any Auction Borrowing as set forth in
Section 3.1(a)(iii)(B) hereto, has been issued or updated to reflect such
borrowing, (in either case, a "Loan Borrowing Certificate") each with
appropriate insertions and attachments, satisfactory in form and substance
to the Agent, executed by a Responsible Officer.
(d) Additional Matters. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents
shall be satisfactory in form and substance to the Agent, and the Agent
shall have received such other documents and legal opinions in respect of
any aspect or consequence of the transactions contemplated hereby or
thereby as it shall reasonably request.
Each Borrowing by the Borrower hereunder shall constitute a representation
and warranty by the Borrower as of the date thereof that the conditions
contained in this Section 5.2 have been satisfied.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect or any amount is owing to any Lender or the Agent hereunder or under
any other Loan Document, the Borrower shall:
SECTION 6.1 Payment of Taxes, Etc. Pay and discharge before the
same shall become delinquent, (a) all taxes, assessments and governmental
charges or levies imposed upon it or upon its property, and (b) all lawful
claims which, if unpaid, might by law become a Lien upon its property;
provided, that the Borrower shall not be required to pay or discharge any
such tax, assessment, charge or claim (i) which is being contested by it in
good faith and by proper procedures, or (ii) the non-payment of which will
not materially adversely affect the financial condition or results of
operations of the Borrower.
SECTION 6.2 Maintenance of Insurance. Maintain insurance in such
amounts and covering such risks with respect to its business and properties
as is usually carried by companies located in the same general area as the
Borrower and engaged in similar businesses and owning similar properties,
with reputable insurance companies.
SECTION 6.3 Preservation of Corporate Existence, Etc. Preserve
and maintain its corporate existence, rights and franchises, and qualify
and remain qualified as a foreign corporation in each jurisdiction in which
such qualification is necessary in view of its business and operations or
the ownership of its properties; provided, that the Borrower shall not be
required to preserve any such right or franchise or to remain so qualified
unless the failure to do so would have a material adverse effect on the
financial condition or results of operations of the Borrower or the ability
of the Borrower to perform its obligations under any Loan Document.
SECTION 6.4 Compliance with Laws, Etc. Comply with all
Requirements of Law, the non-compliance with which could materially
adversely affect the financial condition or results of operations of the
Borrower or the ability of the Borrower to perform its obligations under
any Loan Document.
SECTION 6.5 Visitation Rights. At any reasonable time and from
time to time, permit the Agent, any of the Lenders or any agents or
representatives thereof, to examine and make copies of and abstracts from
its records and books of account, visit its properties and discuss its
affairs, finances and accounts with any of its officers and its independent
public accountants.
SECTION 6.6 Keeping of Books. Keep adequate records and books of
account, in which full and correct entries shall be made of all of its
financial transactions and its assets and business so as to permit the
Borrower to present financial statements in accordance with GAAP.
SECTION 6.7 Reporting Requirements. Furnish to the Agent, with
sufficient copies for each of the Lenders:
(a) as soon as practicable and in any event within five Business Days
after becoming aware of the occurrence of any Default or Event of Default
hereunder, a statement of a Responsible Officer as to the nature thereof,
and as soon as practicable and in any event within five Business Days
thereafter, a statement of a Responsible Officer as to the action which the
Borrower has taken, is taking or proposes to take with respect thereto;
(b) as soon as practicable and in any event within five Business Days
after becoming aware of the occurrence thereof, notice of any material
adverse change in the business, operations, property or condition
(financial or otherwise) of the Borrower, or any material damage to or
material destruction or material taking of the Borrower's assets;
(c) as soon as practicable and in any event within five Business Days
after becoming aware of the occurrence thereof, notice of any change in the
rating of the Borrower's Senior Debt credit rating by any Rating Agency;
(d) As soon as practicable and in any event, within 120 days after
the end of each fiscal year of the Borrower, a copy of the annual report of
the Borrower for such year on Form 10-K filed by the Borrower with the SEC
containing financial statements of the Borrower for such fiscal year,
including, but not limited to, a balance sheet of the Borrower as of the
close of such fiscal year and statements of income and retained earnings
and statement of cash flows for the fiscal year then ended, accompanied by
a report and opinion of the Borrower's independent accountants (who shall
be Arthur Andersen & Co. or other independent accountants of nationally
recognized standing), which report and opinion shall have been prepared in
accordance with generally accepted auditing standards. In addition, the
Borrower will deliver to the Agent within said period of 120 days a
certificate of a Responsible Officer stating that no Event of Default or
event which, with notice or lapse of time or both, would constitute an
Event of Default, has occurred and is continuing or, if an Event of Default
or such event has occurred and is continuing, a statement as to the nature
thereof and the action which the Borrower proposes to take with respect
thereto;
(e) As soon as practicable and in any event within 60 days after the
end of each of the first three quarterly fiscal periods in each fiscal year
of the Borrower, a copy of the quarterly report of the Borrower for such
quarter on Form 10-Q filed by the Borrower with the SEC containing
financial statements of the Borrower for such quarterly period, including,
but not limited to, a balance sheet of the Borrower as of the close of each
quarterly fiscal period and statements of income and retained earnings and
statement of cash flows for that portion of the fiscal year-to-date then
ended, together with (a) an affidavit of a Responsible Officer as to their
completeness and correctness subject to their changes resulting form year-
end adjustments, and as to their preparation in accordance with generally
accepted accounting principles consistently applied and (b) a certificate
of a principal financial officer of the Borrower stating that no Event of
Default or event which, with notice or lapse of time or both, would
constitute an Event of Default or such event has occurred and is
continuing, a statement as to the nature thereof and the action which the
Borrower proposes to take with respect thereto.
(f) as soon as practicable and in any event within 60 days after the
end of each of the first three quarterly fiscal periods in each fiscal year
of the Borrower and within 120 days after the end of each fiscal year of
the Borrower, a certificate of a Responsible Officer setting forth the
Borrower's computation of the financial ratio referred to in Section 7.6 as
of such fiscal quarter;
(g) as soon as possible and in any event (i) within 30 days after the
Borrower or any of its ERISA Affiliates knows or has reason to know that
any Termination Event described in clause (a) of the definition of
Termination Event with respect to any Plan has occurred, and (ii) within
ten days after the Borrower or any of its ERISA Affiliates knows or has
reason to know that any other Termination Event with respect to any Plan
has occurred, a statement of a Responsible Officer describing such
Termination Event and the action, if any, which the Borrower or such ERISA
Affiliate, as the case may be, proposes to take with respect thereto;
(h) as soon as practicable after becoming aware thereof, a statement
of a Responsible Officer of the existence of any Lien (other than security
interests created by the Loan Documents or Permitted Liens) on, or claim
asserted against, any of Borrower's property;
(i) within five days after the same are sent, copies of all financial
statements and reports which the Borrower sends to its stockholders, and
within five days after the same are filed, copies of all financial
statements and reports which the Borrower may make to, or file with, the
SEC or any successor or analogous Governmental Authority; and
(j) such other information respecting the business, properties, or
financial condition of the Borrower as the Agent or any Lender through the
Agent may from time to time reasonably request.
SECTION 6.8 Indemnification. At all times, indemnify the Lenders
as set forth in Section 2.15 herein.
ARTICLE VII
NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect or any amount is owing to any Lender or the Agent hereunder or under
any other Loan Document or any Letter of Credit, the Borrower shall not,
directly or indirectly:
SECTION 7.1 Liens. Create, incur, assume or suffer to exist any
Lien, upon or with respect to any of its properties or assets, except for
Permitted Liens.
SECTION 7.2 Sale of Assets. Except as otherwise permitted under
this Section 7.2 hereof, sell, lease, transfer, or otherwise dispose of a
substantial portion of its assets, except in the ordinary course of
business, without first obtaining the express prior written consent of the
Agent thereto; provided that such consent shall be required for any such
sale, lease, transfer or other disposition that may reasonably result in a
material adverse change in the business, operations, assets, liabilities,
financial condition, results of operations or business prospects of the
Borrower or its ability to perform its obligations under this Agreement or
any Letters of Credit or any other agreement or instrument relating thereto
and to the transactions contemplated thereby.
SECTION 7.3 Mergers, Etc. Merge with or into or consolidate with
or into, or convey, transfer, lease or otherwise dispose of (wether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to, or acquire all or
substantially all of the assets, other than utility assets, of, any Person
to the extent that such purchase materially changes the Borrower's
business, except that the Borrower may merge or consolidate with any Person
on condition in each case that, (i) immediately after giving effect
thereto, no event shall occur and be continuing which constitutes an Event
of Default or which with the giving of notice or lapse of time, or both,
would constitute an Event of Default, (ii) the consolidation or merger
shall not materially adversely affect the ability of the Borrower to
perform its obligations hereunder or under this Agreement or any Letters of
Credit or any other agreement or instrument relating thereto and to the
transactions contemplated thereby, and (iii) in the case of any merger or
consolidation to which the Borrower is a party, the corporation formed by
any such consolidation or into which the Borrower shall be merged shall
assume the Borrower's obligations and performance of the Borrower's
covenants hereunder and under this Agreement, or any other agreement or
instrument relating thereto and to the transactions contemplated thereby in
a writing satisfactory in form and substance to the Agent.
SECTION 7.4 Compliance with ERISA. Permit to exist any occurrence
of any Reportable Event, or any other event or condition, which presents a
material (in the reasonable opinion of the Required Lenders) risk of a
termination by the PBGC of any Plan of the Borrower or any ERISA Affiliate,
which termination will result in any material (in the reasonable opinion of
the Required Lenders) liability of the Borrower or such ERISA Affiliate to
the PBGC.
SECTION 7.5 Change in Nature of Business. Make any material
change in the nature of its business as carried on at the date hereof that
would or could reasonably have a material adverse effect on the financial
condition or results of operations of the Borrower or the ability of the
Borrower to perform its obligations under any Loan Document.
SECTION 7.6 Consolidated Leverage Ratio. Permit a Consolidated
Leverage Ratio to be greater than 0.50 to 1.0.
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1 Events of Default. If any of the following events
(each, an "Event of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Note when due
in accordance with the terms hereof or thereof; or the Borrower shall fail
to pay any interest on any Loan or Note, or any other amount payable
hereunder, within five days after the same shall become due and payable in
accordance with the terms hereof or thereof; or
(b) Any representation or warranty made or deemed made by the
Borrower herein or in any other Loan Document, or which is contained in any
certificate furnished by it at any time under or in connection with this
Agreement shall prove to have been incorrect in any material respect on or
as of the date made or deemed made; or
(c) The Borrower shall default in the performance or observance of
its covenant and agreement contained in Section 7.6; or
(d) The Borrower shall default in the performance or observance of
any other agreement contained in this Agreement (other than as provided in
paragraphs (a) through (c) of this Section 8.1), and such default shall
continue unremedied for a period of 30 days after notice thereof has been
given to the Borrower by the Agent; or
(e) The Borrower or any of its Consolidated Subsidiaries, shall:
(i) fail to pay any Indebtedness (other than the payment obligations
described in Section 8.1(a) above) in excess of $5,000,000 or any interest
or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure shall
continue after the applicable grace period, if any, specified in the
instrument or agreement relating to such Indebtedness; or (ii) fail to
perform or observe any term, covenant or condition on its part to be
performed or observed under any agreement or instrument relating to any
such Indebtedness, when required to be performed or observed, if the effect
of such failure to perform or observe is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness, unless the obligee
under or holder of such Indebtedness shall have waived in writing such
circumstance, or such circumstance has been cured, so that such
circumstance is no longer continuing; or (iii) have such Indebtedness
declared to be due and payable, or required to be prepaid (other than by
regularly scheduled required prepayment), in each case in accordance with
the terms of such agreement or instrument, prior to the stated maturity
thereof; or (iv) generally not, or shall admit in writing its inability to,
pay its debts as such debts become due; or
(f) (i) The Borrower shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, or the Borrower shall make a general assignment for the benefit of
its creditors; or (ii) there shall be commenced against the Borrower, any
case, proceeding or other action of a nature referred to in clause (i)
above which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against
the Borrower, any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all
or any substantial part of its assets which results in the entry of an
order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof; or
(iv) the Borrower shall take any action in furtherance of, or indicating
its consent to, approval of, or acquiescence in, any of the acts set forth
in clause (i), (ii), or (iii) above; or (v) the Borrower shall generally
not, or shall be unable to, or shall admit in writing its inability to, pay
its debts as they become due; or
(g) Any Termination Event with respect to a Plan of the Borrower
shall have occurred, and 30 days after notice thereof shall have been given
to the Borrower by the Agent, (i) such Termination Event (if correctable)
shall not have been corrected, and (ii) the then present value of such
Plan's vested benefits exceeds the then current value of the assets
accumulated in such Plan by more than the amount of $5,000,000 (or in the
case of a Termination Event involving the withdrawal of a "substantial
employer" (as defined in Section 4001(A)(2) of ERISA), the withdrawing
employer's proportionate share of such excess shall exceed such amount); or
(h) One or more judgments, decrees or orders for the payment of money
in excess of $5,000,000, in the aggregate shall be rendered against the
Borrower and either (i) enforcement proceedings shall have been commenced
by any creditor upon any such judgment or order or (ii) there shall be any
period of more than 30 consecutive days during which a stay of enforcement
of such judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; or
(i) any Change of Control shall occur; or
(j) any Event of Default under and as defined in the Existing Letter
of Credit Agreements shall occur and be continuing; or
(k) any Loan Document shall be or become invalid or otherwise
unenforceable;
then, and in any such event, (A) if such event is an Event of Default
specified in paragraph (f) of this Section, automatically the Commitments
shall immediately terminate and the Loans hereunder (with accrued interest
thereon) and all other amounts owing under this Agreement shall immediately
become due and payable, and (B) if such event is any other Event of
Default, either or both of the following actions may be taken: (i) with
the consent of the Required Lenders, the Agent may, or upon the request of
the Required Lenders, the Agent shall, by notice to the Borrower declare
the Commitments to be terminated forthwith, whereupon the Commitments shall
immediately terminate; and (ii) with the consent of the Required Lenders,
the Agent may, or upon the request of the Required Lenders, the Agent
shall, by notice to the Borrower, declare the Loans hereunder (with accrued
interest thereon) and all other amounts owing under this Agreement to be
due and payable forthwith, whereupon the same shall immediately become due
and payable.
ARTICLE IX
THE AGENT
SECTION 9.1 Appointment. Each Lender hereby irrevocably designates
and appoints, and hereby agrees that it will require any transferee of any
of its interest in the Loans and the other Loan Documents irrevocably to
designate and appoint, the Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes the Agent, in such capacity, to take such action on its behalf
under the provisions of this Agreement and the other Loan Documents and to
exercise such powers and perform such duties as are expressly delegated to
the Agent by the terms of this Agreement and the other Loan Documents,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement,
the Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender,
and no implied covenants, functions, responsibilities, duties, obligations
or liabilities shall be read into this Agreement or any other Loan Document
or otherwise exist against the Agent.
SECTION 9.2 Delegation of Duties. The Agent may execute any of
its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys
in-fact selected by it with reasonable care.
SECTION 9.3 Exculpatory Provisions. Neither the Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by
it or such Person under or in connection with this Agreement or any other
Loan Document (except for its or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Lenders
for any recitals, statements, representations or warranties made by the
Borrower or any officer thereof contained in this Agreement or any other
Loan Document or in any certificate, report, statement or other document
referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency
of this Agreement or any other Loan Document or for any failure of the
Borrower to perform its obligations hereunder or thereunder. The Agent
shall not be under any obligation to any Lender to ascertain or to inquire
as to the observance or performance of any of the agreements contained in,
or conditions of, this Agreement or any other Loan Document, or to inspect
the properties, books or records of the Borrower.
SECTION 9.4 Reliance by Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any Note, writing,
resolution, notice, consent, certificate, affidavit, letter or telecopy
message, statement, order or other document or conversation believed by it
to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower), independent
accountants and other experts selected by the Agent. The Agent may deem
and treat the payee of any Note as the owner thereof for all purposes
unless a written notice of assignment, negotiation or transfer thereof
shall have been filed with the Agent. The Agent shall be fully justified
in failing or refusing to take any action under this Agreement or any other
Loan Document unless it shall first receive such advice or concurrence of
the Required Lenders as it deems appropriate or it shall first be
indemnified to its satisfaction by the Lenders against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and
the other Loan Documents in accordance with a request of the Required
Lenders, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future holders of the
Loans.
SECTION 9.5 Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Agent has received notice from a Lender or the
Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the
event that the Agent receives such a notice, the Agent shall give notice
thereof to the Lenders. The Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by the
Required Lenders; provided that unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable in the best
interests of the Lenders.
SECTION 9.6 Non-Reliance on Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent
hereinafter taken, including any review of the affairs of the Borrower,
shall be deemed to constitute any representation or warranty by the Agent
to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, operations,
property, financial and other condition and creditworthiness of the
Borrower and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Lender also represents that it will,
independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan
Documents, and to make such investigation as it deems necessary to inform
itself as to the business, operations, property, financial and other
condition and creditworthiness of the Borrower. Except for notices,
reports and other documents expressly required to be furnished to the
Lenders by the Agent hereunder, the Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Borrower which may come
into the possession of the Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
SECTION 9.7 Indemnification. The Lenders agree to indemnify the
Agent in its capacity as such (to the extent not reimbursed by the Borrower
and without limiting the obligation of the Borrower to do so), ratably
according to their respective Commitment Percentages in effect on the date
on which indemnification is sought (or, if indemnification is sought after
the date upon which the Commitments shall have terminated and the Loans
shall have been paid in full, ratably in accordance with their Commitment
Percentages immediately prior to such date), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at
any time (including, without limitation, at any time following the payment
of the Loans) be imposed on, incurred by or asserted against the Agent in
any way relating to or arising out of, the Commitments, this Agreement, any
of the other Loan Documents or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by the Agent under or in connection with any of the
foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting
solely from the Agent's gross negligence or willful misconduct. The
agreements in this Section 9.7 shall survive the payment of the Loans and
all other amounts payable hereunder.
SECTION 9.8 Agent in Its Individual Capacity. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage in
any kind of business with the Borrower as though the Agent were not the
Agent hereunder and under the other Loan Documents. With respect to the
Loans made by it, the Agent shall have the same rights and powers under
this Agreement and the other Loan Documents as any Lender and may exercise
the same as though it were not the Agent, and the terms "Lender" and
"Lenders" shall include the Agent in its individual capacity.
SECTION 9.9 Successor Agent. The Agent may resign as Agent upon
10 days' notice to the Lenders. If the Agent shall resign as Agent under
this Agreement and the other Loan Documents, then the Required Lenders
shall appoint from among the Lenders a successor agent for the Lenders,
which successor agent shall be approved by the Borrower, whereupon such
successor agent shall succeed to the rights, powers and duties of the
Agent, and the term "Agent" shall mean such successor agent effective upon
such appointment and approval, and the former Agent's rights, powers and
duties as Agent shall be terminated, without any other or further act or
deed on the part of such former Agent or any of the parties to this
Agreement or any holders of the Loans. After any retiring Agent's
resignation as Agent, the provisions of this Section 9.9 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement and the other Loan Documents.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Amendments and Waivers. Neither this Agreement nor
any other Loan Document, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions of this
Section 10.1. The Required Lenders may, or, with the written consent of
the Required Lenders, the Agent may, from time to time, (a) enter into with
the Borrower written amendments, supplements or modifications hereto and to
the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights
of the Lenders or of the Borrower hereunder or thereunder or (b) waive, on
such terms and conditions as the Required Lenders or the Agent, as the case
may be, may specify in such instrument, any of the requirements of this
Agreement or the other Loan Documents or any Default or Event of Default
and its consequences; provided, however, that no such waiver and no such
amendment, supplement or modification shall (i) reduce the amount or extend
the scheduled date of maturity of any Loan or of any installment thereof,
or reduce the stated rate of any interest or fee payable hereunder or
extend the scheduled date of any payment thereof or increase the amount or
extend the expiration date of any Lender's Commitment, in each case without
the consent of each Lender affected thereby, or (ii) amend, modify or waive
any provision of this Section 10.1 or reduce the percentage specified in
the definition of Required Lenders or Majority Lenders, or consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement and the other Loan Documents or release all or
substantially all of the Collateral, in each case without the written
consent of all the Lenders, or (iii) amend, modify or waive any provision
of Article IX without the written consent of the then Agent. Any such
waiver and any such amendment, supplement or modification shall apply
equally to each of the Lenders and shall be binding upon the Borrower, the
Lenders, the Agent and all future holders of the Loans. In the case of any
waiver, the Borrower, the Lenders and the Agent shall be restored to their
former positions and rights hereunder and under the other Loan Documents,
and any Default or Event of Default waived shall be deemed to be cured and
not continuing; no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any right consequent thereon.
SECTION 10.2 Notices. (a) Except as otherwise expressly
provided herein, all notices and other communications under this Agreement
shall be in writing and shall be sufficiently given if made by hand
delivery, by overnight courier service, by facsimile, or by registered or
certified mail, postage-prepaid and return receipt requested, to the party
to which such notice is directed at its address as follows:
(i) If to the Borrower, to it at:
Central Vermont Public Service Corporation
77 Grove Street
Rutland, Vermont, 05701
Attn: Treasurer
Telephone: (802) 773-2711
Telecopy: (802) 747-2139
(ii) If to the Agent, to it at:
Toronto Dominion (Texas), Inc.
909 Fannin, Suite 1700
Houston, TX 77010
Attn: Manager, Agency
Telephone: (713) 653-8231
Telecopy: (713) 951-9921
(iii) If to the Lenders, to them at the addresses set forth opposite
their names on Schedule 1 hereto.
(b) Any notice or other communication under this Agreement shall be
deemed to have been duly given or made as of the date delivered, if by hand
delivery or overnight courier service; when receipt is confirmed, if by
facsimile; and five calendar days after mailing, if by registered or
certified mail as provided herein; provided that any notice, request or
demand to or upon the Agent or the Lenders pursuant to Section 2.2, 2.4,
2.5, 2.6, 2.7, 2.9, 2.10 or 2.11 shall not be effective until received.
(c) Any party hereto may designate additional or different addresses
to which notices hereunder shall be directed by giving written notice
thereof to the other parties as provided herein.
SECTION 10.3 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Agent or any
Lender, any right, remedy, power or privilege hereunder or under the other
Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
SECTION 10.4 Survival of Representations and Warranties. All
representations and warranties made hereunder, in the other Loan Documents
and in any document, certificate or statement delivered pursuant hereto or
in connection herewith shall survive the execution and delivery of this
Agreement and the making of the Loans hereunder.
SECTION 10.5 Expenses; Indemnity. (a) The Borrower agrees to
pay all reasonable out-of-pocket expenses incurred by the Agent in
connection with the preparation of this Agreement and the other Loan
Documents or in connection with any amendments, modifications or waivers of
the provisions hereof or thereof (whether or not the transactions hereby
contemplated shall be consummated) or incurred by the Agent in connection
with the administration of and performance of its obligations under the
Loan Documents or the enforcement or protection of the rights of the Agent
or the Lenders under the Loan Documents or in connection with the Loans
made or the Notes issued hereunder or the other transactions contemplated
hereby, including the fees and disbursements of Paul, Hastings, Janofsky &
Walker LLP, counsel for the Agent. The Borrower further agrees that it
shall indemnify the Lenders and the Agent from and hold them harmless
against any documentary taxes, assessments or charges made by any
Governmental Authority by reason of the execution and delivery of this
Agreement or any of the other Loan Documents.
(b) The Borrower agrees to indemnify each Lender and the Agent and
their directors, officers, employees and agents (each such Person being
called an "Indemnitee") against, and to hold each Indemnitee harmless from,
any and all actual (and not consequential) losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees and
expenses, incurred by or asserted against any Indemnitee arising out of, in
any way connected with, or as a result of (i) the execution or delivery of
this Agreement or any other Loan Document or any agreement or instrument
contemplated thereby, the performance by the parties thereto of their
respective obligations thereunder or the transactions contemplated thereby,
(ii) the use of the proceeds of the Loans or (iii) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or
not any Indemnitee is a party thereto, provided that such indemnity shall
not, as to any Indemnitee, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court
of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or wilful misconduct of such Indemnitee
or from the breach by such Indemnitee of its obligations hereunder.
(c) The provisions of this Section 10.5 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any
term or provision of this Agreement or any other Loan Document, or any
investigation made by or on behalf of any Indemnitee. All amounts due
under this Section 10.5 shall be payable on written demand therefor,
subject to the right of the indemnifying party to challenge such payment in
good faith as set forth in this Section 10.5.
SECTION 10.6 Successors and Assigns; Participations and
Assignments. (a) This Agreement shall be binding upon and inure to the
benefit of the Borrower, the Lenders, the Agent and their respective
successors and assigns, except that the Borrower may not assign or transfer
any of its rights or obligations under this Agreement without the prior
written consent of each Lender.
(b) Subject to the consent of the Borrower (except if the Borrower is
in default pursuant to Section 8(f)) and the Agent, which consent may not
be unreasonably withheld, any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable law, at any
time sell to one or more banks or other entities ("Participants")
participating interests in any Loan owing to such Lender, any Commitment of
such Lender or any other interest of such Lender hereunder and under the
other Loan Documents in an amount equal to the greater of $5,000,000 (or
any multiple thereof) and the entire amount of the then outstanding Loans
of such selling Lender. In the event of any such sale by a Lender of a
participating interest to a Participant, such Lender's obligations under
this Agreement to the other parties to this Agreement shall remain
unchanged, such Lender shall remain solely responsible for the performance
thereof, such Lender shall remain the holder of any such Loan for all
purposes under this Agreement and the other Loan Documents, and the
Borrower and the Agent shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement and the other Loan Documents. The Borrower agrees that if
amounts outstanding under this Agreement are due or unpaid, or shall have
been declared or shall have become due and payable upon the occurrence of
an Event of Default, each Participant shall, to the maximum extent
permitted by applicable law, be deemed to have the right of setoff in
respect of its participating interest in amounts owing under this Agreement
to the same extent as if the amount of its participating interest were
owing directly to it as a Lender under this Agreement. The Borrower also
agrees that each Participant shall be entitled to the benefits of Sections
2.12, 2.13, 2.14 and 2.15 with respect to its participation in the
Commitments and the Loans outstanding from time to time as if it was a
Lender; provided that, in the case of Section 2.14, such Participant shall
have complied with the requirements of said Section 2.14; and provided,
further, that no Participant shall be entitled to receive any greater
amount pursuant to any such Section than the transferor Lender would have
been entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such Participant had no such
transfer occurred.
(c) Subject to the consent of the Borrower (except if the Borrower is
in default pursuant to Section 8(f)) and the Agent, which consent may not
be unreasonably withheld, any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable law, at any
time and from time to time assign to any Lender or any affiliate thereof
or, with the reasonable consent of the Borrower and the Agent (which in
each case shall not be unreasonably withheld), to an additional bank or
financial institution (an "Assignee") all or any part of its rights and
obligations under this Agreement and the other Loan Documents pursuant to
an assignment and acceptance in form reasonably satisfactory to the Agent
and the Borrower (an "Assignment and Acceptance"), executed by such
Assignee, such assigning Lender (and, in the case of an Assignee that is
not then a Lender or an affiliate thereof, by the Agent) and delivered to
the Agent. Upon such execution, delivery, acceptance and recording, from
and after the effective date determined pursuant to such Assignment and
Acceptance, (x) the Assignee thereunder shall be a party hereto and, to the
extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder with a Commitment as set forth therein,
and (y) the assigning Lender thereunder shall, to the extent provided in
such Assignment and Acceptance, 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 assigning Lender shall cease to be a party hereto).
Notwithstanding any provision of this paragraph (c) and paragraphs (a) and
(e) of this subsection, the consent of the Borrower shall not be required,
and unless requested by the Assignee and/or the assigning Lender, new Notes
shall not be required to be executed and delivered by the Borrower, for any
assignment which occurs at any time when the events described in Section
8(f) shall have occurred and be continuing.
(d) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is
not then a Lender or an affiliate thereof, by the Agent), the Agent shall
(i) promptly accept such Assignment and Acceptance and (ii) on the
effective date determined pursuant thereto record the information contained
therein in its register and give notice of such acceptance and recordation
to the Lenders and the Borrower.
(e) The Borrower authorizes each Lender to disclose to any
Participant or Assignee (each, a "Transferee") and any prospective
Transferee any and all financial information in such Lender's possession
concerning the Borrower and its Affiliates which has been delivered to such
Lender by or on behalf of the Borrower pursuant to this Agreement or which
has been delivered to such Lender by or on behalf of the Borrower in
connection with such Lender's credit evaluation of the Borrower and its
Affiliates prior to becoming a party to this Agreement.
(f) Any Lender may at any time assign all or any portion of its
rights under this Agreement and any of its Notes to a Federal Reserve Bank.
No such assignment shall release the transferor Lender from its obligations
hereunder.
SECTION 10.7 Right of Setoff. If an Event of Default shall have
occurred and be continuing, each of the Lenders is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time
owing by such Lender to or for the credit or the account of the Borrower
against any and all the obligations, of the Borrower now or hereafter
existing under this Agreement and the other Loan Documents held by such
Lender, irrespective of whether or not such Lender shall have made any
demand under this Agreement, or such other Loan Document and although such
obligations may be contingent or unmatured. The rights of each of the
Lenders under this Section 10.7 are in addition to other rights and
remedies (including other rights of setoff) which it may have.
SECTION 10.8 Severability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
SECTION 10.9 Integration. This Agreement represents the agreement
of the Borrower, the Agent and the Lenders with respect to the subject
matter hereof, and there are no promises, undertakings, representations or
warranties by the Agent or any Lender relative to subject matter hereof not
expressly set forth or referred to herein or in the other Loan Documents.
SECTION 10.10 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
SECTION 10.11 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENT AND
THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
SECTION 10.12 Submission To Jurisdiction; Waivers. The Borrower
hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgement in
respect thereof, to the non-exclusive general jurisdiction of the federal
and state courts sitting in the State of New York, and the appellate courts
from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in Section 10.2 or at such other address
of which the Agent shall have been notified pursuant thereto; and
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction.
SECTION 10.13 Acknowledgments. The Borrower hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither the Agent nor any Lender has any fiduciary relationship
with or duty to the Borrower arising out of or in connection with this
Agreement or any of the other Loan Documents, and the relationship between
Agent and Lenders, on one hand, and the Borrower, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among the Borrower and the Lenders.
SECTION 10.14 Counterparts. This Agreement may be executed by one
or more of the parties to this Agreement on any number of separate
counterparts (including by facsimile transmission), and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed and delivered by their proper and duly authorized officers as of
the date first above written.
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
By: /s/ Jonathan W. Booraem
Name: Jonathan W. Booraem
Title: Treasurer
TORONTO DOMINION (TEXAS), INC.,
as Agent
By: /s/ Jano Mott
Name: Jano Mott
Title: Vice President
LENDERS:
TORONTO DOMINION (NEW YORK), INC.
By: /s/ Debbie A. Greene
Name: Debbie A. Greene
Title: Vice President
BANKBOSTON, N.A.
By: /s/ Virginia Ryan
Name: Virginia Ryan
Title: Vice President
FLEET NATIONAL BANK
By: /s/ Robert D. Lanigan
Name: Robert D. Lanigan
Title: Director
CITIZENS BANK NEW HAMPSHIRE
By: /s/ Vernon Studer
Name: Vernon Studer
Title: Vice President
<PAGE>
Schedule 1
COMMITMENTS OF THE LENDERS
<TABLE>
<CAPTION>
Lender Address Commitment Commitment
Percentage
- - ------ ------- ---------- ----------
<S> <C> <C> <C>
Toronto Dominion 909 Fannin, Houston,
(New York), Inc. TX 77010 $15,000,000 30%
BankBoston 100 Federal Street
Boston, MA 02110 10,000,000 20%
Citizens Bank 20 West Park Street
Lebanon, NH 03766 7,500,000 15%
Fleet National Bank One Federal Street
Boston, MA 02110 17,500,000 35%
Total $50,000,000 100%
</TABLE>
<PAGE>
Schedule 2
to
CREDIT AGREEMENT
FORM OF REVOLVING LOAN NOTE
November__, 1997
$XX,000,000 New York, New York
For value received, CENTRAL VERMONT PUBLIC SERVICE CORPORATION, a
Vermont corporation (the "Borrower"), hereby unconditionally promises to
pay on the Revolving Loan Maturity Date to the order of [each Lender], (the
"Lender"), in lawful money of the United States of America and in
immediately available funds, a principal sum equal to _____________________
Dollars ($XX,000,000.00) or, if less, the aggregate unpaid principal amount
of all Revolving Loans made by the Lender to the Borrower under and
pursuant to the Credit Agreement dated as of November __, 1997 (as amended
from time to time, the "Credit Agreement"), among the Borrower, the lenders
from time to time party thereto, including the Lender, and Toronto Dominion
(Texas), Inc., as Agent (together with its successors in such capacity, the
"Agent") and as Agent. The Borrower further agrees to pay interest in like
money on the unpaid principal amount hereof from time to time outstanding
at the rates and on the dates determined in accordance with the Credit
Agreement. All payments of principal and interest with respect to this
Note shall be made by the Borrower at the office of the Agent at 909
Fannin, Suite 1700, Houston, Texas 77010, or such other office as shall be
from time to time specified by the Agent to the Borrower.
The holder of this Note shall, and is hereby irrevocably authorized by
the Borrower to, endorse on the Loan Schedule attached hereto and forming a
part hereof (and on separate continuations of such Loan Schedule which
shall be attached hereto and form a part hereof), or otherwise to record on
the Lender's internal records, appropriate notations evidencing the date,
Type and amount of each Revolving Loan made under and pursuant to the
Credit Agreement, each continuation thereof, each conversion of all or a
portion thereof to another Type, the date and amount of each payment or
prepayment of principal of this Note which is received by the Lender and,
in the case of Eurodollar Loans, the length of each Interest Period with
respect thereto, which recordation shall constitute prima facie evidence of
the accuracy of the information so recorded; provided that failure by the
Lender to make any such notations or any error therein shall not affect any
of the Borrower's obligations in respect of this Note or obligate the
Borrower to pay any amounts in excess of the amounts otherwise payable by
the Borrower hereunder.
This Note is one of the Revolving Loan Notes referred to in the Credit
Agreement and any holder hereof is entitled to all of the rights, remedies,
benefits and privileges provided for in the Credit Agreement, which, among
other things, contains provisions for the repayment hereof and also for
optional and mandatory prepayments hereof under certain conditions. Upon
the occurrence of any one or more of the Events of Default specified in the
Credit Agreement, all amounts then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable, all as
provided in the Credit Agreement.
The Borrower waives presentment, demand, protest, notice of protest,
notice of nonpayment or dishonor and all other demands and notices in
connection with the delivery, acceptance, performance, default or
enforcement of this Note (other than such of the foregoing as are expressly
required by the terms of the Credit Agreement) and, to the fullest extent
permitted by applicable law, assents to any extension or postponement of
the time of payment or any other indulgence, to any substitutions, exchange
or release of collateral and to the addition or release of any other party
or person, primarily or secondarily liable.
Terms defined in the Credit Agreement are used herein as therein
defined.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK DETERMINED WITHOUT REFERENCE TO PRINCIPLES OF
CONFLICTS OF LAW.
IN WITNESS WHEREOF, the Borrower has caused this Revolving Loan Note
to be duly executed and delivered under seal by its officer thereunto duly
authorized as of the date hereof.
CENTRAL VERMONT PUBLIC
SERVICE CORPORATION
By:
Name:
Title:
<PAGE>
LOAN SCHEDULE TO REVOLVING LOAN NOTE
Loans, Conversions and Payments of ABR Loans
Date
Amount of ABR Loans
Amount of Principal Repaid
Amount of ABR Loans Converted to Eurodollar Loans
Amount of Eurodollar Loans Converted to ABR Loans
Unpaid Principal Balance of ABR Loans
Notation Made By
<PAGE>
LOAN SCHEDULE TO REVOLVING LOAN NOTE
Loans, Conversions and Payments of Eurodollar Loans
Date
Amount of Eurodollar Loans
Amount of Principal Repaid
Amount of Eurodollar Loans Converted to ABR Loans
Amount of ABR Loans Converted to Eurodollar Loans
Unpaid Principal Balance of Eurodollar Loans
Notation Made By
<PAGE>
Schedule 3
of the Credit Agreement
[Form of Opinion of Counsel to the Borrower]
November __, 1997
The Toronto-Dominion Bank
909 Fannin Street
Houston, Texas 77010
Ladies and Gentlemen:
I am [General Counsel] to Central Vermont Public Service Corporation,
a corporation organized and existing under the laws of the State of Vermont
(the "Company"). In that capacity I am familiar with the matters relating
to the preparation, execution and delivery of a Credit Agreement (the
"Credit Agreement") dated as of October __, 1997 among the Company and
Toronto-Dominion (Texas), Inc. (the "Bank") and the Lenders named therein.
This opinion is furnished to you pursuant to Section 5.1(b) of the
Credit Agreement. Terms used herein which are defined in the Credit
Agreement shall have the respective meanings set forth therein unless
otherwise defined herein.
I have examined copies of the following instruments and documents:
(i) the Articles of Association and By-laws of the Company; (ii) the Credit
Agreement; (iii) the resolutions dated October 6, 1997, of the Company's
Board of Directors; (iv) the Existing Letter of Credit; and (v) the other
Loan Documents. I have also reviewed, and to the extent I have deemed
appropriate relied upon, certificates of officers of the Company or of
government officials as to certain factual matters. In addition, I have
reviewed such other instruments and documents as I have deemed necessary or
appropriate as the basis for the opinion hereinafter expressed, and I have
conducted such other investigations of fact and law as I have considered
appropriate.
I have made no investigation with respect to the franchises, licenses
and permits of the company in the State of New Hampshire, or with respect
to the jurisdiction of the New Hampshire Public Utilities Commission over
the execution, delivery and performance by the Company of the Credit
Agreement, as to which matters I refer you to the opinion of Ransmeier &
Spellman of even date herewith, a copy of which has been furnished to me
and upon which I am relying with respect to such matters. I have made no
investigation with respect to the franchises, licenses and permits of the
Company in the State of Connecticut, or with respect to the jurisdiction of
the Connecticut Department of Business Regulation - Division of Public
Utility Control over the execution, delivery and performance by the Company
of the Credit Agreement, as to which matters I refer to the opinion of Day,
Berry & Howard of even date herewith, a copy of which has been furnished to
me and upon which I am relying with respect to such matters. I have made
no investigation with respect to the franchises, licenses and permits of
the Company in the State of Maine, or with respect to the jurisdiction of
the Maine Public Utilities Commission over the execution, delivery and
performance by the Company of the Credit Agreement, as to which matters I
refer you to the opinion of Verrill & Dana of even date herewith, a copy of
which has been furnished to me and upon which I am relying with respect to
such matters. I have made no investigation with respect to the franchises,
licenses and permits of the Company in the State of New York or with
respect to the jurisdiction of the New York Public Service Department -
Utilities Efficiency Division over the execution, delivery and performance
by the Company of the Credit Agreement, as to which matters I refer you to
the opinion of _____________ of even date herewith, a copy of which has
been furnished to me and upon which I am relying with respect to such
matters.
Based upon the foregoing I am of the opinion that:
1. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Vermont and is duly
qualified to do business in and is in good standing as a foreign
corporation under the laws of the States of New Hampshire, Connecticut,
Maine and New York and of any other state in which the ownership of its
properties or the conduct of its business makes such qualification
necessary.
2. The execution, delivery and performance by the Company of the
Loan Documents are within the Company's corporate power, has been duly
authorized by all necessary corporate action, and does not contravene (i)
the Company's Articles of Association or By-laws, (ii) any law, rule or
regulation applicable to the Company or (iii) any contractual or legal
restriction binding on or affecting the Company, and does not result in or
require the creation of any Lien, security interest or other charge or
encumbrance upon or with respect to any of its properties.
3. No authorization, approval or other action by, and no notice to
or filing or registration with, any Governmental Authority or regulatory
body including, without limitation, the Industrial Development Authority of
the State of Vermont, the Vermont Public Service Board, the New Hampshire
Public Utilities Commission, the Connecticut Department of Business
Regulation - Division of Public Utility Control, the New York Public
Service Department - Utilities Efficiency Division and the Maine Public
Utilities Commission is required for the due execution, delivery and
performance by the Company of the Loan Documents (other than approvals or
waivers, as the case may be, from appropriate governmental authorities or
regulatory bodies of each of the States of Vermont, New Hampshire,
Connecticut, Maine and New York, which may be necessary for extension of
the Maturity Date pursuant to Section 2.6(b) of the Credit Agreement, as to
which approvals or waivers I express no opinion herein).
4. Each of the Credit Agreement and the other Loan Documents to
which the Company is a party is a legally valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws or equitable principles affecting
creditors' rights generally.
5. There is no pending action or proceeding before any court,
governmental agency or arbitrator against or directly involving the Company
and, to the best of the Company's knowledge, there is no threatened action
or proceeding affecting the Company before any court, governmental agency
or arbitrator which, in any case, may materially and adversely affect the
financial condition or operations of the Company or which seeks to restrain
or would otherwise have a material adverse effect on the transactions
contemplated by the Loan Documents.
I express no opinion as to any question of law other than the law of
the State of Vermont and the law of the United States of America.
Very truly yours,
<PAGE>
Schedule 4
To Credit Agreement
BORROWING CERTIFICATE
This Borrowing Certificate is provided as of this ___ day of
__________, 199_ pursuant to Section 5.2(c) of the Credit Agreement, dated
as of November __, 1997 (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), among Central Vermont Public
Service Corporation (the "Borrower"), the Lenders named therein, and
Toronto Dominion (Texas), Inc., as Agent.
The undersigned Responsible Officer of the Borrower hereby certifies
that:
1. The undersigned Responsible Officer of the Borrower is familiar
with the terms of the Credit Agreement.
2. Each of the representations and warranties made by the Borrower
and set forth in the Credit Agreement and the other Loan Documents or
contained in any certificate, document or financial or other statement
furnished pursuant thereto or in connection therewith is true and correct
in all material respects on and as of the date hereof with the same effect
as if made on the date hereof.
3. Immediately prior to and immediately after the making of the Loans
requested hereby, no Default or Event of Default has or will have occurred
and be continuing.
4. Each of the conditions precedent for the making of the Loans
requested hereby set forth in Article V of the Credit Agreement have been
satisfied.
5. The Borrower hereby requests that Loans in the aggregate amount of
$____________ be made by the Lenders as follows:
Borrowing Date:
Term Loan:
Eurodollar Loan: $ Interest Period:
ABR Loan: $
Revolving Loan:
Eurodollar Loan: $ Interest Period:
ABR Loan: $
6. The Borrower hereby requests that the proceeds of such Loans be
made available to the Borrower by wiring such amount in immediately
available funds to the following account:
Bank:____________________________________
ABA No.:_________________________________
Account No.:_____________________________
Account Name:____________________________
Reference:_______________________________
7. The Borrower represents that the attached Schedule accurately
lists the date, the Lender, the amount and the status of each borrowing
heretofore made pursuant to the Credit Agreement, and has been updated upon
each such borrowing.
Capitalized items not otherwise defined herein shall have the meanings
ascribed thereto in the Credit Agreement.
IN WITNESS WHEREOF, the undersigned duly authorized officer of the
Borrower has hereunto set his or her hand as of the date first above
written.
CENTRAL VERMONT PUBLIC
SERVICE CORPORATION
By:_____________________________
Name:
Title:
<PAGE>
LOAN SCHEDULE TO BORROWING NOTICE NOTE
Date
Amount of Eurodollar Loans
Amount of Eurodollar Loans Converted to ABR Loans
Amount of ABR Loans Converted to Eurodollar Loans
Amount of Auction Advances
Notation Made By
<PAGE>
Schedule 5
To Credit Agreement
Notice to Borrower of Auction Offer
Central Vermont Public Service Corporation
77 Grove Street
Rutland, VT 05701
Attn: Cash Management Coordinator
In respect of your Notice of an Auction Borrowing of even date
herewith pursuant to Section 3.1(a)(i) of the Credit Agreement dated as of
November __, 1997 among Toronto Dominion (Texas), Inc., the Lenders named
therein and you, the undersigned proposes to make an Auction Offer with the
following terms:
Minimum Amount: $______________
Maximum Amount: S______________
Interest Rate: _______________
Interest Period: _______________
Applicable Lending Office: _______________
_______________
_______________
We await your response.
[Lender]_________________________
Name: ___________________________
Title: __________________________
Duly Authorized
<PAGE>
Schedule 6
To Credit Agreement
Responsible Officer Letter
Toronto Dominion (Texas), Inc.
909 Fannin, Suite 1700
Houston, TX 77010
Attn: Manager, Agency
Re: Responsible Officer/
Central Vermont Credit Facility
Dear Sirs:
Pursuant to the Terms of the Credit Agreement dated as of
_________________, 1997 (as amended, supplemented or otherwise modified
from time to time, the "Credit Agreement") among Central Vermont Public
Service Corporation, the Lenders named therein, and Toronto Dominion
(Texas), Inc., as Agent, the undersigned hereby designates the following
persons as "Responsible Officers" of the Borrower pursuant to the terms of
the Credit Agreement:
______________________
______________________
______________________
Very truly yours,
_____________________________
[Chief Financial Officer, President or Treasurer]
<PAGE>
Schedule 7
To Credit Agreement
Form of Auction Note
Up to U.S.$25,000,000 Dated: November __, 1997
FOR VALUE RECEIVED, the undersigned, Central Vermont Public Service
Corporation, a Vermont corporation (the "Borrower"), HEREBY PROMISES TO PAY
TO the order of _______________ (the "Lender") for the account of its
Applicable Lending Officer (as defined in the Credit Agreement dated as of
November 5, 1997 (the "Credit Agreement"), on or after November 7, 1997,
the principal amount of up to Twenty Five Million Dollars ($25,000,000).
The Borrower promises to pay interest on the unpaid principal amount
hereof from the date hereof until such principal amount is paid in full, at
the interest rate and payable on the interest payment date or dates
provided in the Notice to Borrower of Auction Offer.
Both principal and interest are payable in lawful money of the United
States of America to or the account of the Lender at its office, in same
day funds, free and clear of and without any deduction, with respect to the
payee named above, for any and all present and future taxes, deductions,
charges or withholdings (other than United States withholding taxes, if
applicable), and all liabilities with respect thereto.
The holder of this Note shall, and is hereby irrevocably authorized by
the Borrower to, endorse on the Loan Schedule attached hereto and forming a
part hereof (and on separate continuations of such Loan Schedule which
shall be attached hereto and form a part hereof), or otherwise to record on
the Lender's internal records, appropriate notations evidencing the date
and amount of each Auction Borrowing made under and pursuant to the Credit
Agreement, each continuation thereof, the date and amount of each payment
or prepayment of principal of this Note which is received by the Lender,
which recordation shall constitute prima facie evidence of the accuracy of
the information so recorded; provided that failure by the Lender to make
any such notations or any error therein shall not affect any of the
Borrower's obligations in respect of this Note or obligate the Borrower to
pay any amounts in excess of the amounts otherwise payable by the Borrower
hereunder.
This Note is the Auction Note referred to in the Credit Agreement, and
any holder hereof is entitled to all of the rights, remedies, benefits and
privileges provided for in the Credit Agreement. Upon the occurrence of
any one or more of the Events of Default specified in the Credit Agreement,
all amounts then remaining unpaid on this Note shall become, or may be
declared to be, immediately due and payable, all as provided in the Credit
Agreement.
The Borrower waives presentment, demand, protest, notice of protest,
notice of nonpayment or dishonor and all other demands and notices in
connection with the delivery, acceptance, performance, default or
enforcement of this Note (other than such of the foregoing as are expressly
required by the terms of the Credit Agreement) and, to the fullest extent
permitted by applicable law, assents to any extension or postponement of
the time of payment or any other indulgence, to any substitutions, exchange
or release of collateral and to the addition or release of any other party
or person, primarily or secondarily liable.
Terms defined in the Credit Agreement are used herein as therein
defined.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK DETERMINED WITHOUT REFERENCE TO PRINCIPLES OF
CONFLICTS OF LAW.
IN WITNESS WHEREOF, the Borrower has caused this Auction Note to be
duly executed and delivered under seal by its officer thereunto duly
authorized as of the date hereof.
CENTRAL VERMONT PUBLIC
SERVICE CORPORATION
By:______________________
Name:
Title:
<PAGE>
LOAN SCHEDULE TO AUCTION NOTE
Date
Amount of Auction Advance
Amount of Principal Repaid
Name of Lender
Unpaid Principal Balance of Auction Advance
Notation Made By
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1 Defined Terms 1
SECTION 1.2 Other Definitional Provisions 14
ARTICLE II
AMOUNT AND TERMS OF COMMITMENTS
SECTION 2.1 Revolving Loans 15
SECTION 2.2 Procedure for Revolving Loans 15
SECTION 2.3 Fees 16
SECTION 2.4 Interest Rates and Payment Dates 17
SECTION 2.5 Pro Rata Treatment 18
SECTION 2.6 Repayment of Loans; Term 19
SECTION 2.7 Payments 20
SECTION 2.8 Revolving Loan Note 20
SECTION 2.9 Optional Prepayments 21
SECTION 2.10 Conversion and Continuation Options 21
SECTION 2.11 Inability to Determine Interest Rate 22
SECTION 2.12 Change in Legality 23
SECTION 2.13 Increased Costs 23
SECTION 2.14 Taxes 25
SECTION 2.15 Indemnity 27
ARTICLE III
AUCTION ADVANCES
SECTION 3.1 The Auction Advance 28
SECTION 3.2 Conditions Precedent to Each Auction Borrowing 31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Incorporation and Good Standing 32
SECTION 4.2 Corporate Power and Authority 32
SECTION 4.3 No Conflicts 32
SECTION 4.4 Governmental Approvals 33
SECTION 4.5 Legally Enforceable Agreements 33
SECTION 4.6 Financial Statements 33
SECTION 4.7 Litigation 33
SECTION 4.8 Margin Stock 34
SECTION 4.9 ERISA 34
SECTION 4.10 Environmental Matters 34
SECTION 4.11 No Default; Compliance 35
SECTION 4.12 Investment Company Act 35
SECTION 4.13 Taxes 35
SECTION 4.14 No Material Adverse Effect 35
SECTION 4.15 Statements; Certificates 35
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1 Conditions to Closing 36
SECTION 5.2 Conditions to Each Loan 37
ARTICLE VI
AFFIRMATIVE COVENANTS
SECTION 6.1 Payment of Taxes, Etc 38
SECTION 6.2 Maintenance of Insurance 38
SECTION 6.3 Preservation of Corporate Existence, Etc 38
SECTION 6.4 Compliance with Laws, Etc 39
SECTION 6.5 Visitation Rights 39
SECTION 6.6 Keeping of Books 39
SECTION 6.7 Reporting Requirements 39
ARTICLE VII
NEGATIVE COVENANTS
SECTION 7.1 Liens 41
SECTION 7.2 Sale of Assets 41
SECTION 7.3 Mergers, Etc 42
SECTION 7.4 Compliance with ERISA 42
SECTION 7.5 Change in Nature of Business 42
SECTION 7.6 Consolidated Leverage Ratio 42
ARTICLE VIII
EVENTS OF DEFAULT
SECTION 8.1 Events of Default 43
ARTICLE IX
THE AGENT
SECTION 9.1 Appointment 45
SECTION 9.2 Delegation of Duties 46
SECTION 9.3 Exculpatory Provisions 46
SECTION 9.4 Reliance by Agent 46
SECTION 9.5 Notice of Default 47
SECTION 9.6 Non-Reliance on Agent and Other Lenders 47
SECTION 9.7 Indemnification 48
SECTION 9.8 Agent in Its Individual Capacity 48
SECTION 9.9 Successor Agent 48
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Amendments and Waivers 49
SECTION 10.2 Notices 50
SECTION 10.3 No Waiver; Cumulative Remedies 51
SECTION 10.4 Survival of Representations and Warranties 51
SECTION 10.5 Expenses; Indemnity 51
SECTION 10.6 Successors and Assigns; Participations
and Assignments 52
SECTION 10.7 Right of Setoff 54
SECTION 10.8 Severability 55
SECTION 10.9 Integration 55
SECTION 10.10 GOVERNING LAW 55
SECTION 10.11 WAIVERS OF JURY TRIAL 55
SECTION 10.12 Submission To Jurisdiction; Waivers 55
SECTION 10.13 Acknowledgments 56
SECTION 10.14 Counterparts 56
SCHEDULES:
Schedule 1 Commitments of the Lenders
Schedule 2 Form of Revolving Loan Note
Schedule 3 Form of Opinion of Counsel to Borrower
Schedule 4 Borrowing Certificate
Schedule 5 Notice of an Auction Borrowing
Schedule 6 Notice to Borrower of Auction Offer
Schedule 7 Responsible Officer Letter
Schedule 8 Form of Auction Note
CENTRAL VERMONT PUBLIC SERVICE
CORPORATION
__________
Thirty-Ninth Supplemental Indenture
Dated as of December 29, 1997
and
Resolutions Connected Therewith Adopted December 2, 1997
RECORDING INFORMATION
____________________________ Town Clerk's Office Received
this Supplemental Indenture for record on the ______ day of
__________, 19___, at _____ o'clock, _____. M., and filed
the bound copy as Book _____ in accordance with T 24 V.S.A.,
Section 1155, and cross-indexed in the Land Records in Book
_____ at Page _____.
Attest: _________________________
Town Clerk
</PAGE>
<PAGE>
THIS SUPPLEMENTAL INDENTURE, dated as of December 29,
1997, by and between Central Vermont Public Service
Corporation, a corporation duly organized and existing under
the laws of the State of Vermont (hereinafter generally
referred to as the Company), and The First National Bank of
Boston, a national banking association (hereinafter
generally referred to as the Trustee), as it is the first
successor Trustee under the Indenture of Mortgage next
hereinafter referred to, and State Street Bank and Trust
Company, a Massachusetts trust company (hereinafter
generally referred to as the Successor Trustee), as it is
the second Successor Trustee under said Indenture of
Mortgage,
WITNESSETH that:
Whereas the Company heretofore duly executed and
delivered to Old Colony Trust Company, as Trustee, or to its
successor as Trustee, an Indenture of Mortgage (hereinafter
generally referred to as the Original Indenture), dated as
of October 1, 1929, but actually executed on October 24,
1929 (the Original Indenture, with all indentures
supplemental thereto as therein provided, being hereinafter
generally referred to as the Mortgage), Liber 150 of
Mortgages, Page 51, Grafton County (New Hampshire) Registry
of Deeds, Liber 616, Folio 484, Sullivan County (New
Hampshire) Records, Vol. 234, Page 531, in the Office of the
Secretary of State of Connecticut, in the Office of the City
Clerk of Rutland, Vermont, in the offices of the clerks of
certain other towns and cities in the State of Vermont, and
in the Office of the Secretary of State of the State of
Vermont, to which Original Indenture this instrument is
supplemental, and thirty-eight duly recorded indentures
supplemental thereto and in modification and confirmation
thereof, whereby all the properties of the Company, whether
owned at the time of the execution thereof or thereafter
acquired, with certain exceptions and reservations therein
fully set forth, were granted, assigned, transferred,
mortgaged and pledged to the Trustee, in trust upon the
terms and conditions set forth therein, to secure bonds of
the Company issued and to be issued in accordance with the
terms of the Mortgage and for other purposes more
particularly set forth therein; and
Whereas on January 4, 1971, Old Colony Trust Company
was merged into The First National Bank of Boston which
thereupon succeeded to the trusts under the Mortgage; and
Whereas on September 29, 1995 The First National Bank
of Boston sold substantially all its corporate trust
business and assets to State Street Bank and Trust Company
which thereupon commenced to act as trustee under the
Mortgage (hereinafter referred to as the Succession); and
Whereas on November 6, 1995 the Board of Directors of
the Company confirmed State Street Bank and Trust Company as
Successor Trustee in case the automatic succession
provisions of the last paragraph of Section 12 of Article XV
of the Mortgage might be deemed inapplicable to the
Succession; and
Whereas as of June 5, 1996 a Resignation and
Appointment Agreement was executed and delivered by the
Company, the Trustee and the Successor Trustee upon notice
to the holders of all the bonds then outstanding and with
the consent of the holders of a majority in principal amount
of the bonds then outstanding given pursuant to instruments
in writing signed by or on behalf of such holders and
delivered to the Successor Trustee; and
Whereas in order to comply with the obligations of the
Company under the last sentence of the fourth paragraph of
Section 12 of Article XV of the Mortgage and for the purpose
of confirming the vesting of the trust estate in the
Successor Trustee under Section 13 of Article XV of the
Mortgage and of evidencing the Succession as permitted by
Section 1(k) of Article XVI of the Mortgage, the Company,
the Trustee and the Successor Trustee have duly and lawfully
determined to execute this instrument; and
Whereas in order to comply with the obligations of the
Company in Section 12 of Article III and elsewhere in the
Original Indenture, and the provisions of said section and
of Section 1 of Article XVI of the Original Indenture, it is
desirable and the Company is required and has duly and
lawfully determined, at the request of the Trustee, to
execute and deliver this instrument for the purpose of
complying with said obligations and provisions; and
Whereas the Company has caused to be paid or redeemed
all bonds issued under the Mortgage other than those now
outstanding as described below and has caused to be paid or
redeemed or has otherwise discharged the underlying bonds of
its predecessor corporations described in the Original
Indenture and the mortgages securing the same; and the
Company has also issued and there are outstanding on the
date of delivery hereof $97,000,000 in principal amount of
First Mortgage Bonds, Series EE, FF, GG, HH, JJ, KK, LL, MM,
NN and OO; and
Whereas this Supplemental Indenture has been duly and
legally authorized by the Board of Directors of the Company,
and the use of terms and expressions herein is in accordance
with the definitions, uses and constructions contained in
the Original Indenture as heretofore and hereby
supplemented, modified and confirmed.
Now Therefore, in confirmation of and supplementing the
Mortgage and pursuant to, in compliance with, and in
execution of, the powers, authorities and obligations
conferred, imposed and reserved therein and every other
power, authority and obligation appertaining thereto, in
consideration of the premises, and of the sum of one dollar
to it duly paid by said State Street Bank and Trust Company
and of other good and valuable consideration, the receipt
whereof is hereby acknowledged, said Central Vermont Public
Service Corporation has given, granted, bargained, sold,
transferred, assigned, pledged, mortgaged, warranted,
conveyed and confirmed to the Trustee, and by these presents
does give, grant, bargain, sell, transfer, assign, pledge,
mortgage, warrant, convey and confirm, unto said State
Street Bank and Trust Company as Successor Trustee as
aforesaid, and its successor or successors in the trusts
under the Mortgage and hereunder, and its and their assigns,
(a) all and singular the plants, rights, permits,
franchises, privileges, easements and property, real,
personal and mixed, described in the Original Indenture and
each of the preceding Supplemental Indentures, and thereby
or otherwise thereunder conveyed, pledged, assigned,
transferred and mortgaged, or intended so to be (said
descriptions in the Original Indenture and each of the
preceding Supplemental Indentures being hereby made a part
hereof to the same extent as if set forth herein at length),
whether then or now owned or thereafter or hereafter
acquired, except such of said properties or interests
therein as may have been released by the Trustee or
Successor Trustee or sold or disposed of in whole or in part
as permitted by the provisions of the Original Indenture as
heretofore supplemented and amended and (b) also, but
without in any way limiting the generality of the foregoing,
all of the right, title and interest of the Company in and
to the franchises, rights, titles, interests, easements and
properties described in Schedule A hereto attached and
hereby made a part hereof as fully as if set forth herein at
length.
Subject, however, as to all of the foregoing, to the
specific rights, privileges, liens, encumbrances,
restrictions, conditions, limitations, covenants, interests,
reservations, exceptions and otherwise as provided in the
Original Indenture and preceding Supplemental Indentures,
and in the descriptions in the schedules thereto and hereto
and in the deeds or grants in said schedules referred to.
But Specifically Reserving and Excepting (as the same
were reserved and excepted from the lien of the Original
Indenture and all preceding Supplemental Indentures) from
this instrument and the grant, conveyance, mortgage,
transfer and assignment herein contained (1) all right,
title and interest of the Company, now owned or hereafter
acquired, in and to the properties and rights specified in
subclauses (a) and (c), both inclusive, of the granting
clauses on page 11 of the Original Indenture, and (2) (as
the same, pursuant to the provisions of Section 18(b) of
Article 2 of the Fifth Supplemental Indenture, dated as of
February 1, 1945, were reserved from the lien of the
Original Indenture and the preceding Supplemental
Indentures) all telephone properties, whether heretofore or
now owned or hereafter acquired by the Company.
To Have and to Hold all said property hereby conveyed,
assigned, pledged or mortgaged, or intended so to be,
together with the rents, issues and profits thereof, as well
as all such after-acquired property, unto the Successor
Trustee, its successor or successors in the trusts under the
Mortgage and hereunder and its and their assigns forever;
But in Trust, Nevertheless, under and subject to the
provisions and conditions, with all the powers and authority
and for the trusts and purposes, herein and in the Mortgage
set forth, (1) for the equal and proportionate benefit and
security (except as provided in Section 3 of Article III and
elsewhere in the Original Indenture as heretofore and hereby
supplemented, modified and confirmed) of the holders of all
bonds and interest coupons heretofore, now and hereafter
issued under the Mortgage and from time to time outstanding,
pursuant to the provisions thereof, and for the enforcement
of the payment of said bonds and coupons when payable, and
the performance of and compliance with the covenants and
conditions of the Mortgage, without (except as aforesaid)
any preference, distinction or priority as to lien or
otherwise of any bond or coupon over any other bond or
coupon by reason of the difference in the series or time of
the actual issue, sale or negotiation thereof, or for any
other reason whatsoever, so that each and every bond
heretofore, now or hereafter issued under the Mortgage shall
have the same lien, and so that the interest and principal
of every such bond shall, subject to the terms of the
Original Indenture, be equally and proportionally secured
thereby and hereby, as if it had been made, executed,
delivered, sold and negotiated simultaneously with the
execution and delivery of the Original Indenture; and (2)
subject to the covenants, agreements, rights, privileges,
immunities, trusts and duties set forth in the Original
Indenture, as heretofore supplemented, modified and
confirmed, and in this Supplemental Indenture.
And it is Hereby Covenanted, Declared and Agreed, upon
the trusts and for the purposes aforesaid, as set forth in
the following covenants, agreements, conditions and
provisions:
ARTICLE 1.
Trustee Succession and Assignment.
Section 1. The Company, the Trustee and the
Successor Trustee hereby confirm that effective at the
opening of business on September 29, 1995 (the "Effective
Time") State Street Bank and Trust Company became Successor
Trustee under the Mortgage either by automatic succession to
The First National Bank of Boston under the last paragraph
of Section 12 of Article XV of the Mortgage or by the
resignation of The First National Bank of Boston as Trustee,
the acceptance of such resignation by the Company, the
Company's appointment of State Street Bank and Trust Company
as Successor Trustee and State Street Bank and Trust
Company's acceptance of such appointment, each of which are
hereby confirmed as of the Effective Time. The Successor
Trustee represents that it now meets and at all times since
the opening of business on September 29, 1995 has met the
requirements specified in Section 1(a) of Article XV of the
Mortgage. The Company, the Trustee and the Successor
Trustee agree that the notice to and consent by holders of
bonds outstanding described in the fifth recital of this
Supplemental Indenture are sufficient to authorize the
Succession to be confirmed as of the Effective Time by
execution of this Supplemental Indenture and without the
need for further notice to or actions by such holders, and
further agree that State Street Bank and Trust Company has
been acting as Trustee with their consent since the
Effective Time.
Section 2. The Company, the Trustee and the
Successor Trustee agree that their intent is and has been to
have the trust estate held by the Trustee as of the
Effective Time vest in the Successor Trustee as of the
Effective Time as provided in Section 13 of Article XV of
the Mortgage. In order more certainly to vest and confirm
the same in the Successor Trustee, the Trustee by these
presents as of the Effective Time does give, grant, bargain,
sell, transfer, assign, convey and confirm unto the
Successor Trustee the trust estate and all the estates,
properties, rights, powers, trusts, duties and obligations
of the Trustee as trustee under the Mortgage, and the
Successor Trustee by these presents as of the Effective Time
does acknowledge that it has accepted and holds the same as
Successor Trustee under the Mortgage.
ARTICLE 2.
Miscellaneous Provisions.
Section 1. The Successor Trustee shall be entitled
to, may exercise and shall be protected by, where and to the
full extent that the same are applicable, all the rights,
powers, privileges, immunities and exemptions provided in
the Mortgage as if the provisions concerning the same were
incorporated herein at length. Except in the case of the
Trustee as to actions taken by the Trustee and except in the
case of the Successor Trustee as to actions taken by the
Successor Trustee, the recitals and statements in this
Supplemental Indenture and in the bonds shall be taken as
statements by the Company alone, and shall not be considered
as made by or as imposing any obligation or liability upon
the Trustee or Successor Trustee, nor shall the Trustee or
Successor Trustee be held responsible for the legality or
validity of this Supplemental Indenture or of the bonds, and
the Trustee and Successor Trustee make no covenants or
representations, and shall not be responsible, as to and for
the effect, authorization, execution, delivery or recording
of this Supplemental Indenture.
Section 2. This Supplemental Indenture shall become
void when the Original Indenture as heretofore supplemented
and amended shall be void.
Section 3. The Mortgage as supplemented hereby is
ratified and confirmed in all respects.
Section 4.If and to the extent that any provision of
this Supplemental Indenture limits, qualifies or conflicts
with the duties imposed by any of Sections 310 and 317,
inclusive, of the Trust Indenture Act of 1939 as amended by
the Trust Indenture Reform Act of 1990, through operation of
Section 318(c), such imposed duties shall control.
Section 5. This Supplemental Indenture may be
simultaneously executed in any number of counterparts, and
all said counterparts executed and delivered, each as an
original, shall constitute but one and the same instrument.
In Witness Whereof, said Central Vermont Public Service
Corporation has caused this instrument to be signed, and its
corporate seal attested by its Assistant Corporate Secretary
to be hereunto affixed, by Jonathan W. Booraem, its
Treasurer and Agent in that behalf duly authorized, and said
The First National Bank of Boston has caused this instrument
to be executed in its corporate name and its corporate seal
to be hereto affixed by one of its Authorized Officers, and
State Street Bank and Trust Company has caused this
instrument to be executed in its corporate name and its
corporate seal
(This space intentionally left blank)
to be hereto affixed by one of its Assistant Vice
Presidents, all as of the day and year first above written.
Central Vermont Public Service Corporation,
By:__________________________
Jonathan W. Booraem
Its Treasurer and Agent
Attest:
______________________________
Carole L. Root
Assistant Secretary
Signed, sealed and delivered on
behalf of Central Vermont Public
Service Corporation in the presence of:
(Corporate Seal)
_______________________
Colleen A. Kelly
_______________________
Bonnie L. O'Rourke
The First National Bank of Boston,
as Trustee as aforesaid,
By:__________________________
E. Decker Adams
Authorized Officer
Signed, sealed and delivered on
behalf of The First National Bank
of Boston in the presence of:
(Corporate Seal)
_______________________
Brian J. Curtis
_______________________
Henry W. Seemore
State Street Bank and Trust Company
as Successor Trustee as aforesaid,
By:_________________________
Henry W. Seemore
Assistant Vice President
Signed, sealed and delivered on
behalf of State Street Bank and
Trust Company in the presence of:
(Corporate Seal)
_______________________
Brian J. Curtis
_______________________
E. Decker Adams
State of Vermont,
County of Rutland, SS.
On this 29th day of December, A.D. 1997, before me, a
Notary Public in and for said State, duly commissioned and
acting as such, personally came Jonathan W. Booraem,
Treasurer and Agent of said Central Vermont Public Service
Corporation, to me personally known and known to me to be
one of the persons named in and who executed the foregoing
instrument, and who being duly sworn by me deposed and said:
that he resides in Rutland, Vermont; that he is Treasurer of
Central Vermont Public Service Corporation, the Corporation
described in and which executed the foregoing instrument as
party of the first part; that he knows the seal of said
Corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the
Board of Directors of said Corporation, and that he signed
his name thereto by like order, and he acknowledged and
declared that he executed the foregoing instrument and
affixed the seal of said Central Vermont Public Service
Corporation thereto as its Agent by authority of the Board
of Directors of said Corporation, and acknowledged the same
to be his free act and deed, and the free act and deed of
said Corporation.
Witness my hand and official seal the day and year
aforesaid.
_________________________________
Bonnie L. O'Rourke, Notary Public
My commission expires February 10, 1999
(Notarial Seal)
The Commonwealth of Massachusetts,
County of Suffolk, SS.
On this day of January, A.D. 1998, before me, a
Notary Public in and for said Commonwealth, duly
commissioned and acting as such, personally came E. Decker
Adams, an Authorized Officer of The First National Bank of
Boston, to me known and known to me to be one of the persons
named in and who executed the foregoing instrument, and who
being duly sworn by me deposed and said: that he resides in
Hingham, Massachusetts; that he is an Authorized Officer of
The First National Bank of Boston, the corporation described
in and which executed the foregoing instrument as party of
the second part; that he knows the seal of said Bank; that
the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of
Directors of said Bank, and that he signed his name thereto
by like authority, and he acknowledged the same to be his
free act and deed, and the free act and deed of said Bank.
Witness my hand and official seal the day and year
aforesaid.
__________________________
Brian J. Curtis, Notary Public
My commission expires April 6, 2001
(Notarial Seal)
The Commonwealth of Massachusetts,
County of Suffolk, SS.
On this day of January, A.D. 1998, before me, a
Notary Public in and for said Commonwealth, duly
commissioned and acting as such, personally came Henry W.
Seemore, an Assistant Vice President of State Street Bank
and Trust Company, to me known and known to me to be one of
the persons named in and who executed the foregoing
instrument, and who being duly sworn by me deposed and said:
that he resides in Brockton, Massachusetts; the he is an
Assistant Vice President of State Street Bank and Trust
Company, the corporation described in and which executed the
foregoing instrument as party of the third part; that he
knows the seal of said Bank; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by
authority of the Board of Directors of said Bank, and that
he signed his name thereto by like authority, and he
acknowledged the same to be his free act and deed, and the
free act and deed of said Bank. And said Henry W. Seemore,
an Assistant Vice President of said State Street Bank and
Trust Company, further acknowledged that he accepted the
trust hereinbefore created for, and on behalf of, said State
Street Bank and Trust Company, Successor Trustee, upon the
terms therein named.
Witness my hand and official seal the day and year
aforesaid.
_____________________________
Brian J. Curtis, Notary Public
My commission expires April 6, 2001
(Notarial Seal)
SCHEDULE A
DESCRIPTION OF PROPERTIES
All land and premises, rights, privileges and easements
conveyed or purported to be conveyed to the Company in and
by the following described deeds and the records thereof are
hereby incorporated herein by reference:
Properties acquired after December 16, 1993 or not
previously described:
(1) Deed from Miller Holdings, dated November 3,
1993, recorded in Book 335, Pages 162-163 of the Rutland
City Land Records in the County of Rutland and State of
Vermont.
(2) Deed from Janet Geer, dated December 6, 1993,
recorded in Book 87, Pages 136 of the Fairfax Land Records
in the County of Franklin and State of Vermont.
(3) Deed from Springfield Regional Development
Corporation, dated December 29, 1993, recorded in Book 120,
Pages 202-204 of the Springfield Town Land Records in the
County of Windsor and State of Vermont.
(4) Deed from The City of Rutland, dated January
27, 1994, recorded in Book 335, Pages 164-165 of the Rutland
City Land Records in the County of Rutland and State of
Vermont.
(5) Deed from C & W Properties, Inc., dated August
11, 1994, recorded in Book 51, Pages 84-87 of the Sunderland
Town Land Records in the County of Bennington and State of
Vermont.
(6) Deed from Robert and Cynthia M. Bienieki, dated
September 15, 1994, recorded in Book 96, Page 65 of the
Pittsford Land Records in the County of Rutland and State of
Vermont.
(7) Deed from the Town of St. Johnsbury, dated
September 19, 1994, recorded in Book 227, Pages 281-282 of
the St. Johnsbury Land Records in the County of Caledonia
and State of Vermont.
(8) Deed from Judith M. Sanders and Willo R.
McCullough, dated April 6, 1995, recorded in Book 51, Page
495 of the Royalton Land Records in the County of Windsor
and State of Vermont.
(9) Deed from James H. Reynolds, dated April 17,
1995, recorded in Book 47, Pages 267-269 of the Chittenden
Land Records in the County of Rutland and State of Vermont.
(10) Deed from The Town of Chittenden, dated April
24, 1997, recorded in Book 50, Pages 77-78 of the Chittenden
Land Records in the County of Rutland and State of Vermont.
Also, all property of every kind whatsoever, including
land and premises, rights, privileges, easements,
transmission lines, substations and distribution lines, in
the following towns:
IN NEW LONDON COUNTY, STATE OF CONNECTICUT:
Waterford
IN HARTFORD COUNTY, STATE OF CONNECTICUT:
Berlin
IN CUMBERLAND COUNTY, STATE OF MAINE:
Yarmouth
IN SULLIVAN COUNTY, STATE OF NEW HAMPSHIRE:
Charleston Cornish Plainfield
Claremont Newport Unity
IN CHESHIRE COUNTY, STATE OF NEW HAMPSHIRE:
Chesterfield Hinsdale
IN GRAFTON COUNTY, STATE OF NEW HAMPSHIRE:
Bath Lyman Orford
Haverhill Lyme Piermont
IN WASHINGTON COUNTY, STATE OF NEW YORK:
Granville Hampton
IN RENSSELAER COUNTY, STATE OF NEW YORK:
Hoosick
IN ADDISON COUNTY, STATE OF VERMONT:
Addison Leicester Ripton
Bridport Lincoln Salisbury
Bristol Middlebury Shoreham
Cornwall Monkton Starksboro
Ferrisburg New Haven Vergennes
Goshen Orwell Weybridge
Granville Panton Whiting
Hancock
IN BENNINGTON COUNTY, STATE OF VERMONT:
Arlington Manchester Searsburg
Bennington Peru Shaftsbury
Dorset Pownal Sunderland
Glastenbury Rupert Winhall
Landgrove Sandgate Woodford
IN CALEDONIA COUNTY, STATE OF VERMONT:
Barnet Lyndon Walden
Danville Ryegate Waterford
Kirby St. Johnsbury Wheelock
IN CHITTENDEN COUNTY, STATE OF VERMONT:
Buels Gore Essex Milton
Burlington Huntington Underhill
Colchester Jericho Westford
IN ESSEX COUNTY, STATE OF VERMONT:
Concord Guildhall Victory
Granby Lunenburg
IN FRANKLIN COUNTY, STATE OF VERMONT:
Bakersfield Fletcher Richford
Berkshire Franklin Sheldon
Enosburg Georgia St. Albans City
Fairfax Highgate St. Albans Town
Fairfield Montgomery Swanton
IN LAMOILLE COUNTY, STATE OF VERMONT:
Belvidere Eden Johnson
Cambridge Hyde Park
IN ORANGE COUNTY, STATE OF VERMONT:
Bradford Fairlee Thetford
Braintree Newbury Tunbridge
Brookfield Randolph Vershire
Chelsea Strafford West Fairlee
IN ORLEANS COUNTY, STATE OF VERMONT:
Lowell Irasburg
IN RUTLAND COUNTY, STATE OF VERMONT:
Benson Middletown Springs Sherburne
Brandon Mt. Holly Shrewsbury
Castleton Mt. Tabor Sudbury
Chittenden Pawlet Tinmouth
Clarendon Pittsfield Wallingford
Danby Pittsford Wells
Fair Haven Poultney West Haven
Hubbardton Proctor West Rutland
Ira Rutland City
Mendon Rutland Town
IN WASHINGTON COUNTY, STATE OF VERMONT:
Northfield Roxbury
IN WINDHAM COUNTY, STATE OF VERMONT:
Athens Guilford Stratton
Brattleboro Jamaica Townshend
Brookline Londonderry Vernon
Dover Marlboro Wardsboro
Dummerston Newfane Westminster
Grafton Rockingham Windham
IN WINDSOR COUNTY, STATE OF VERMONT:
Andover Hartland Sharon
Baltimore Ludlow Springfield
Barnard Norwich Stockbridge
Bethel Plymouth Weathersfield
Bridgewater Pomfret Weston
Cavendish Reading West Windsor
Chester Rochester Windsor
Hartford Royalton Woodstock
Resolutions Adopted December 2, 1997, by the Board of
Directors of
Central Vermont Public Service Corporation
On motion duly made and seconded, the following
resolutions relating to the 39th Supplemental Indenture were
unanimously passed and adopted:
WHEREAS, by Section 12 of Article III of the Indenture of
Mortgage of this Company to State Street Bank and Trust
Company (successor trustee to The First National Bank of
Boston, successor trustee to Old Colony Trust Company),
Trustee, dated as of October 1, 1929 (the "Indenture"), this
Company covenanted "that it will, upon reasonable request,
execute and deliver such further instruments and do such
further acts as may be necessary or proper to carry out more
effectually the purposes of this Mortgage, especially to
make subject to the lien hereof any property now owned or
hereafter acquired by it, which it is herein provided shall
be subject to the lien hereof", and, by Section 1 of Article
XVI thereof, it is provided, among other things, that this
Company and the Trustee may enter into such indentures
supplemental thereto as may be deemed necessary or desirable
"to assign, convey, confirm, mortgage, pledge, transfer and
set over unto the Trustee, subject to such liens or other
encumbrances as shall be therein specifically described,
additional property or properties of the Company, for the
equal and proportionate benefit and security, except as
herein otherwise expressly provided, of the holders and
owners of all bonds at any time issued and outstanding under
this Mortgage", and "for any other purpose not inconsistent
with the terms of this Mortgage and which shall not impair
the security of the same", and by Section 12 of Article XV
thereof this Company covenanted to cause to be recorded "an
instrument evidencing each resignation, removal, incapacity,
appointment or acceptance of a Trustee", and by Section 13
of Article XV thereof, the retiring Trustee was authorized
to execute such instruments "as the successor Trustee shall
request and as may in the opinion of counsel be proper to
vest or confirm the trust estate in the successor Trustee",
and
WHEREAS, this Company has not executed a supplemental
indenture since the 38th Supplemental Indenture, dated as of
December 10, 1993, and
WHEREAS, since that date, this Company has acquired
properties which are subject to the lien of the Indenture
but which have not been specifically listed in any
supplemental indenture, and
WHEREAS, on September 26, 1995, The First National Bank
of Boston sold substantially all of its corporate trust
business and assets to State Street Bank and Trust Company,
which thereupon commenced to act as Trustee under the
Indenture and such succession of Trustee has not been
recorded in the land records of the various towns wherein
this Company owns property subject to the lien of the
Indenture, and
WHEREAS, in order to comply with the obligations of the
Company in Section 12 of Article III and elsewhere in the
Indenture, and the provisions of said section and of
Sections 12 and 13 of Article XV and Section 1 of Article
XVI of the Indenture, it is desirable and the Company is
permitted or required and has duly and lawfully determined,
at the request of the Trustee, to execute and deliver a
supplemental indenture for the purpose of complying with
said obligations and provisions, and
WHEREAS, by Section 11 of Article III of the Indenture,
this Company covenanted "that in order fully to preserve and
protect the security of the bondholders and all rights of
the Trustee, it will cause this Mortgage and every
additional instrument which shall be executed pursuant to
the terms hereof at all times to be recorded and filed in
such manner and in such places as may be required by the
laws of the state or states, in which the property subject
hereto is located",
NOW, THEREFORE, BE IT
RESOLVED: that this Board hereby approves the Thirty-Ninth
Supplemental Indenture to be dated as of December 29,
1997, setting forth the properties acquired by this Company
since December 10, 1993 or not previously described in any
supplemental indenture, also setting forth the succession of
State Street Bank and Trust Company as Successor Trustee to
The First National Bank of Boston, and also containing a
confirmatory assignment of the trust estate from The First
National Bank of Boston to State Street Bank and Trust
Company, and authorizes and directs the President or any
Vice President or the Treasurer of this Company for the time
being in office, each as such officer and as agent of this
Company, to execute and seal with the corporate seal of this
Company (which shall be attested by the Secretary or an
Assistant Secretary of this Company for the time being in
office), and deliver to State Street Bank and Trust Company,
Trustee, a Thirty-Ninth Supplemental Indenture to be dated
as of December 29, 1997, substantially in the form presented
to this meeting, subject to such changes, insertions and
omissions as may be determined and approved by the President
or any Vice President or the Treasurer of this Company
executing the same, that such determination and approval are
within the authority conveyed by this resolution to be
conclusively evidenced by the execution of said Supplemental
Indenture on behalf of this Company and such execution being
a sufficient identification thereof for all purposes as the
Supplemental Indenture hereby authorized, and
FURTHER
RESOLVED: that the President or any Vice President or
the Treasurer of this Company cause said Supplemental
Indenture to be recorded and filed in such a manner and in
such places as may be required to preserve and protect the
security of the bondholders and the rights of the Trustee,
and
FURTHER
RESOLVED: that the officers of this Company be, and
they are and each of them is hereby authorized in the name
and on behalf of this Company to execute and file with the
Vermont Public Service Board and with such other public
regulatory commissions, bodies or agencies which in their
opinion or in the opinion of counsel have jurisdiction in
the premises, all other applications, petitions, instruments
or documents, including any amendments thereto, which in
their opinion or the opinion of counsel are necessary or
expedient in order to consummate the transactions
contemplated by these resolutions, and to employ such
counsel and assistance as may be deemed necessary by any of
them to accomplish the purpose hereof, and that any and all
acts taken or to be taken by or under the authorization of
any officer of or counsel to this Company in connection with
the transactions contemplated in these resolutions are
hereby ratified, confirmed and approved as if authorized
hereby when taken.
And I further certify that the foregoing resolutions
have not since been amended or rescinded and are now in full
force and effect.
IN WITNESS WHEREOF I have hereunto set my hand as
Assistant Secretary and have affixed the corporate seal of
said Corporation this 29th day of December, 1997.
Attest:
______________________________
Carole L. Root
Assistant Secretary
CENTRAL VERMONT PUBLIC SERVICE
CORPORATION
____________________
Fortieth Supplemental Indenture
Dated as of January 28, 1998
and
Resolutions Connected Therewith Adopted January 13, 1998
___________________
RECORDING INFORMATION
____________________________ Town Clerk's Office Received this
Supplemental Indenture for record on the ______ day of
__________, 19___, at _____ o'clock, ___.M., and filed the bound
copy as Book _____ in accordance with T 24 V.S.A., Section 1155,
and cross-indexed in the Land Records in Book _____ at Page
_____.
Attest:_________________________
Town Clerk
</PAGE>
<PAGE>
THIS SUPPLEMENTAL INDENTURE, dated as of January 28, 1998,
by and between Central Vermont Public Service Corporation, a
corporation duly organized and existing under the laws of the
State of Vermont (hereinafter generally referred to as the
Company), and State Street Bank and Trust Company, a
Massachusetts trust company (hereinafter generally referred to as
the Trustee), as it is the second successor trustee under said
Indenture of Mortgage,
WITNESSETH that:
Whereas the Company heretofore duly executed and delivered
to Old Colony Trust Company, as trustee, or to its successor as
trustee, an Indenture of Mortgage (hereinafter generally referred
to as the Original Indenture), dated as of October 1, 1929, but
actually executed on October 24, 1929 (the Original Indenture,
with all indentures supplemental thereto as therein provided,
being hereinafter generally referred to as the Mortgage), Liber
150 of Mortgages, Page 51, Grafton County (New Hampshire)
Registry of Deeds, Liber 616, Folio 484, Sullivan County (New
Hampshire) Records, Vol. 234, Page 531, in the Office of the
Secretary of State of Connecticut, in the Office of the City
Clerk of Rutland, Vermont, in the offices of the clerks of
certain other towns and cities in the State of Vermont, and in
the Office of the Secretary of State of the State of Vermont, to
which Original Indenture this instrument is supplemental, and
thirty-nine duly recorded indentures supplemental thereto and in
modification and confirmation thereof, whereby all the properties
of the Company, whether owned at the time of the execution
thereof or thereafter acquired, with certain exceptions and
reservations therein fully set forth, were granted, assigned,
transferred, mortgaged and pledged to the trustee, in trust upon
the terms and conditions set forth therein, to secure bonds of
the Company issued and to be issued in accordance with the terms
of the Mortgage and for other purposes more particularly set
forth therein; and
Whereas on January 4, 1971, Old Colony Trust Company was
merged into The First National Bank of Boston which thereupon
succeeded to the trusts under the Mortgage; and
Whereas on September 29, 1995 The First National Bank of
Boston sold substantially all its corporate trust business and
assets to State Street Bank and Trust Company which thereupon
commenced to act as trustee (hereinafter referred to as the First
Successor Trustee) under the Mortgage (hereinafter referred to as
the Succession); and
Whereas on November 6, 1995 the Board of Directors of the
Company confirmed State Street Bank and Trust Company as Trustee
in case the automatic succession provisions of the last paragraph
of Section 12 of Article XV of the Mortgage might be deemed
inapplicable to the Succession; and
Whereas as of June 5, 1996 a Resignation and Appointment
Agreement was executed and delivered by the Company, the First
Successor Trustee and the Trustee upon notice to the holders of
all the bonds then outstanding and with the consent of the
holders of a majority in principal amount of the bonds then
outstanding given pursuant to instruments in writing signed by or
on behalf of such holders and delivered to the Trustee; and
Whereas as of December 29, 1997, the Company, the First
Successor Trustee and the Trustee executed and delivered the
Thirty-Ninth Supplement Indenture confirming the Succession and
making certain representations and agreements with respect
thereto; and
Whereas by Section 15 of Article III of the Mortgage, the
Company has covenanted, among other things, to cause each
subsidiary to pay when due all indebtedness for money borrowed by
such subsidiary and not to permit the occurrence of any event or
any condition to exist with respect to any such indebtedness or
under any agreement securing or relating to such indebtedness the
effect of which is to cause (or permit any holder of such
indebtedness or a trustee to cause) such indebtedness, or a
portion thereof, to become due prior to its stated maturity or
prior to its regularly scheduled dates of payment; and
Whereas by Article X of the Mortgage, the Company has agreed
to various remedies in the event of certain defaults specified in
Section 1 of such Article X, including without limitation, (1)
any default in the due observance or performance of any covenant
or condition in the Mortgage (other than the obligation to make
any payment when due of interest on, the principal of, or the
premium, if any, on any of the bonds issued under the Mortgage)
required to be kept or performed by the Company, and the
continuance of any such default for the applicable period
specified in the Mortgage, or (2) certain actions by the Company
or any subsidiary in respect of the bankruptcy or insolvency of
any subsidiary and certain other similar events; and
Whereas as of the date hereof, the Company owns all of the
issued and outstanding shares of capital stock of Connecticut
Valley Electric Company Inc., a New Hampshire corporation
(hereinafter generally referred to as CVEC); and
Whereas as described in the Current Report on Form 8-K dated
January 12, 1998 and filed with the Securities and Exchange
Commission, as a result of an order of the New Hampshire Public
Utilities Commission dated December 31, 1997, and if such order
remains in its present form or is not otherwise stayed, there or
may be is a substantial likelihood that CVEC will fail to pay
when due certain of its indebtedness for money borrowed and/or
that certain such indebtedness will become due prior to its
stated maturity or prior to its regularly scheduled dates of
payment and/or that CVEC may be required to take certain actions,
or certain events may occur, in respect of the bankruptcy or
insolvency of CVEC, or certain other similar events may occur;
and
Whereas the bankruptcy or insolvency of CVEC would not cause
an event of default by the Company under the Mortgage other than
the provisions with respect to subsidiaries, including CVEC; and
Whereas in order to preclude the foregoing events with
respect to CVEC from causing a default under Section 15 of
Article III of the Mortgage and/or the consequences set forth in
Article X of the Mortgage, the Company and the Trustee have duly
and lawfully determined to execute this instrument; and
Whereas in accordance with Section 4 of Article XVI, the
Company has duly and lawfully been authorized by resolution of
its Board of Directors, and by all other required corporate
actions, to execute and deliver this instrument; and
Whereas in accordance with said Section 4 of Article XVI,
the holders of not less than sixty-six and two-thirds per centum
(66-2/3%) in principal amount of all the bonds outstanding as of
the date hereof have consented to the execution and delivery of
this instrument; and
Whereas in accordance with said Section 4 of Article XVI,
none of the series of bonds outstanding as of the date hereof
will be materially and adversely affected by the execution and
delivery of this instrument unless all of the series of bonds so
outstanding are so affected; and
Whereas in accordance with said Section 4 of Article XVI,
the Company has requested the Trustee to join with the Company in
the execution of this instrument and such execution by the
Trustee does not affect the rights, duties or immunities of the
Trustee under the Mortgage or otherwise; and
Whereas the Company has caused to be paid or redeemed all
bonds issued under the Mortgage other than those now outstanding
as described below and has caused to be paid or redeemed or has
otherwise discharged the underlying bonds of its predecessor
corporations described in the Original Indenture and the
mortgages securing the same; and the Company has also issued and
there are outstanding on the date of delivery hereof $97,000,000
in principal amount of First Mortgage Bonds, Series EE, FF, GG,
HH, JJ, KK, LL, MM, NN and OO; and
Whereas the use of terms and expressions herein is in
accordance with the definitions, uses and constructions contained
in the Original Indenture as heretofore and hereby supplemented,
modified and confirmed;
Now Therefore, in confirmation of and supplementing the
Mortgage and pursuant to, in compliance with, and in execution
of, the powers, authorities and obligations conferred, imposed
and reserved therein and every other power, authority and
obligation appertaining thereto, in consideration of the
premises, and of the sum of one dollar to it duly paid by said
State Street Bank and Trust Company and of other good and
valuable consideration, the receipt whereof is hereby
acknowledged, said Central Vermont Public Service Corporation has
given, granted, bargained, sold, transferred, assigned, pledged,
mortgaged, warranted, conveyed and confirmed to the Trustee, and
by these presents does give, grant, bargain, sell, transfer,
assign, pledge, mortgage, warrant, convey and confirm, unto said
State Street Bank and Trust Company as Trustee as aforesaid, and
its successor or successors in the trusts under the Mortgage and
hereunder, and its and their assigns, (a) all and singular the
plants, rights, permits, franchises, privileges, easements and
property, real, personal and mixed, described in the Original
Indenture and each of the preceding Supplemental Indentures, and
thereby or otherwise thereunder conveyed, pledged, assigned,
transferred and mortgaged, or intended so to be (said
descriptions in the Original Indenture and each of the preceding
Supplemental Indentures being hereby made a part hereof to the
same extent as if set forth herein at length), whether then or
now owned or thereafter or hereafter acquired, except such of
said properties or interests therein as may have been released by
the Trustee or any previous trustee under the Mortgage or sold or
disposed of in whole or in part as permitted by the provisions of
the Original Indenture as heretofore supplemented and amended and
(b) also, but without in any way limiting the generality of the
foregoing, all of the right, title and interest of the Company in
and to the franchises, rights, titles, interests, easements and
properties described in Schedule A hereto attached and hereby
made a part hereof as fully as if set forth herein at length;
Subject, however, as to all of the foregoing, to the
specific rights, privileges, liens, encumbrances, restrictions,
conditions, limitations, covenants, interests, reservations,
exceptions and otherwise as provided in the Original Indenture
and preceding Supplemental Indentures, and in the descriptions in
the schedules thereto and hereto and in the deeds or grants in
said schedules referred to;
But Specifically Reserving and Excepting (as the same were
reserved and excepted from the lien of the Original Indenture and
all preceding Supplemental Indentures) from this instrument and
the grant, conveyance, mortgage, transfer and assignment herein
contained (1) all right, title and interest of the Company, now
owned or hereafter acquired, in and to the properties and rights
specified in subclauses (a) and (c), both inclusive, of the
granting clauses on page 11 of the Original Indenture, and (2)
(as the same, pursuant to the provisions of Section 18(b) of
Article 2 of the Fifth Supplemental Indenture, dated as of
February 1, 1945, were reserved from the lien of the Original
Indenture and the preceding Supplemental Indentures) all
telephone properties, whether heretofore or now owned or
hereafter acquired by the Company;
To Have and to Hold all said property hereby conveyed,
assigned, pledged or mortgaged, or intended so to be, together
with the rents, issues and profits thereof, as well as all such
after-acquired property, unto the Trustee, its successor or
successors in the trusts under the Mortgage and hereunder and its
and their assigns forever;
But in Trust, Nevertheless, under and subject to the
provisions and conditions, with all the powers and authority and
for the trusts and purposes, herein and in the Mortgage set
forth, (1) for the equal and proportionate benefit and security
(except as provided in Section 3 of Article III and elsewhere in
the Original Indenture as heretofore and hereby supplemented,
modified and confirmed) of the holders of all bonds and interest
coupons heretofore, now and hereafter issued under the Mortgage
and from time to time outstanding, pursuant to the provisions
thereof, and for the enforcement of the payment of said bonds and
coupons when payable, and the performance of and compliance with
the covenants and conditions of the Mortgage, without (except as
aforesaid) any preference, distinction or priority as to lien or
otherwise of any bond or coupon over any other bond or coupon by
reason of the difference in the series or time of the actual
issue, sale or negotiation thereof, or for any other reason
whatsoever, so that each and every bond heretofore, now or
hereafter issued under the Mortgage shall have the same lien, and
so that the interest and principal of every such bond shall,
subject to the terms of the Original Indenture, be equally and
proportionally secured thereby and hereby, as if it had been
made, executed, delivered, sold and negotiated simultaneously
with the execution and delivery of the Original Indenture; and
(2) subject to the covenants, agreements, rights, privileges,
immunities, trusts and duties set forth in the Original
Indenture, as heretofore supplemented, modified and confirmed,
and in this Supplemental Indenture;
And It is Hereby Covenanted, Declared and Agreed, upon the
trusts and for the purposes aforesaid, as set forth in the
following covenants, agreements, conditions and provisions:
ARTICLE 1.
AMENDMENT OF MORTGAGE
Section 1. The Original Indenture, as heretofore
supplemented and amended, is hereby further supplemented and
amended by adding the following paragraph in its entirety as the
sixth paragraph of Article XVII thereof:
For all purposes of this Mortgage, the term "subsidiary"
shall not include Connecticut Valley Electric Company Inc., a New
Hampshire corporation ("CVEC"), for any purpose, and CVEC shall
be deemed for all purposes of this Mortgage not to be a
subsidiary, including, without limitation, purposes of Section 15
of Article III and Section 1 of Article X. In the event the
Company's equity investment in CVEC shall exceed Twelve Million
Dollars ($12,000,000), then upon such event and thereafter, the
term "subsidiary" shall again include CVEC for all purposes of
this Mortgage.
Section 2. Except as expressly provided by Section 1 of
this Article 1, the Original Indenture, as heretofore
supplemented and amended, shall remain in full force and effect.
ARTICLE 2.
MISCELLANEOUS PROVISIONS
Section 1. The Trustee shall be entitled to, may exercise
and shall be protected by, where and to the full extent that the
same are applicable, all the rights, powers, privileges,
immunities and exemptions provided in the Mortgage as if the
provisions concerning the same were incorporated herein at
length. Except as to actions taken by the Trustee, the recitals
and statements in this Supplemental Indenture and in the bonds
shall be taken as statements by the Company alone, and shall not
be considered as made by or as imposing any obligation or
liability upon the Trustee, nor shall the Trustee be held
responsible for the legality or validity of this Supplemental
Indenture or of the bonds, and the Trustee makes no covenants or
representations, and shall not be responsible, as to and for the
effect, authorization, execution, delivery or recording of this
Supplemental Indenture.
Section 2. This Supplemental Indenture shall become void
when the Original Indenture as heretofore supplemented and
amended shall be void.
Section 3. The Mortgage as supplemented and amended hereby
is ratified and confirmed in all respects.
Section 4. If and to the extent that any provision of this
Supplemental Indenture limits, qualifies or conflicts with the
duties imposed by any of Sections 310 and 317, inclusive, of the
Trust Indenture Act of 1939 as amended by the Trust Indenture
Reform Act of 1990, through operation of Section 318(c), such
imposed duties shall control.
Section 5. This Supplemental Indenture may be
simultaneously executed in any number of counterparts, and all
said counterparts executed and delivered, each as an original,
shall constitute but one and the same instrument.
In Witness Whereof, said Central Vermont Public Service
Corporation has caused this instrument to be signed, and its
corporate seal attested by its Assistant Corporate Secretary to
be hereunto affixed, by Francis J. Boyle, its Treasurer and Agent
in that behalf duly authorized, and said State Street Bank and
Trust Company has caused this instrument to be executed in its
corporate name and its corporate seal to be hereto affixed by one
of its Assistant Vice Presidents, all as of the day and year
first above written.
Central Vermont Public Service Corporation,
By:__________________________
Francis J. Boyle
Its Treasurer and Agent
Attest:
______________________________
Carole L. Root
Assistant Corporate Secretary
Signed, sealed and delivered on
behalf of Central Vermont Public
Service Corporation in the presence of:
(Corporate Seal)
_______________________
Colleen A. Kelly
_______________________
Bonnie L. O'Rourke
State Street Bank and Trust Company
as Trustee as aforesaid,
By:_________________________
Henry W. Seemore
Assistant Vice President
Signed, sealed and delivered on
behalf of State Street Bank and
Trust Company in the presence of:
(Corporate Seal)
_______________________
Brian J. Curtis
_______________________
E. Decker Adams
State of Vermont,
SS.
County of Rutland,
On this __th day of __________, A.D. 1998, before me, a
Notary Public in and for said State, duly commissioned and acting
as such, personally came Francis J. Boyle, Treasurer and Agent of
said Central Vermont Public Service Corporation, to me personally
known and known to me to be one of the persons named in and who
executed the foregoing instrument, and who being duly sworn by me
deposed and said: that he resides in Rutland, Vermont; that he is
Treasurer of Central Vermont Public Service Corporation, the
Corporation described in and which executed the foregoing
instrument as party of the first part; that he knows the seal of
said Corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by order of the Board
of Directors of said Corporation, and that he signed his name
thereto by like order, and he acknowledged and declared that he
executed the foregoing instrument and affixed the seal of said
Central Vermont Public Service Corporation thereto as its Agent
by authority of the Board of Directors of said Corporation, and
acknowledged the same to be his free act and deed, and the free
act and deed of said Corporation.
Witness my hand and official seal the day and year
aforesaid.
________________________________
Bonnie L. O'Rourke, Notary Public
My commission expires February 10, 1999
(Notarial Seal)
The Commonwealth of Massachusetts,
SS.
County of Suffolk,
On this __th day of January, A.D. 1998, before me, a Notary
Public in and for said Commonwealth, duly commissioned and acting
as such, personally came Henry W. Seemore, an Assistant Vice
President of State Street Bank and Trust Company, to me known and
known to me to be one of the persons named in and who executed
the foregoing instrument, and who being duly sworn by me deposed
and said: that he resides in Brockton, Massachusetts; that he is
an Assistant Vice President of State Street Bank and Trust
Company, the corporation described in and which executed the
foregoing instrument as party of the third part; that he knows
the seal of said Bank; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by authority of
the Board of Directors of said Bank, and that he signed his name
thereto by like authority, and he acknowledged the same to be his
free act and deed, and the free act and deed of said Bank. And
said Henry W. Seemore, an Assistant Vice President of said State
Street Bank and Trust Company, further acknowledged that he
accepted the trust hereinbefore created for, and on behalf of,
said State Street Bank and Trust Company, Trustee, upon the terms
therein named.
Witness my hand and official seal the day and year
aforesaid.
_____________________________
Brian J. Curtis, Notary Public
My commission expires April 6, 2001
(Notarial Seal)
SCHEDULE A
DESCRIPTION OF PROPERTIES
All land and premises, rights, privileges and easements
conveyed or purported to be conveyed to the Company in and by the
following described deeds and the records thereof are hereby
incorporated herein by reference:
Properties acquired after December 29, 1997 or not
previously described:
Deed from Donald D. Brush and Christine L. Brush, dated
November 25, 1997, recorded in Book 44, pages 273-4 of the
Salisbury Town land records in the County of Addison and State of
Vermont.
Also, all property of every kind whatsoever, including land
and premises, rights, privileges, easements, transmission lines,
substations and distribution lines, in the following towns:
IN NEW LONDON COUNTY, STATE OF CONNECTICUT:
Waterford
IN HARTFORD COUNTY, STATE OF CONNECTICUT:
Berlin
IN CUMBERLAND COUNTY, STATE OF MAINE:
Yarmouth
IN SULLIVAN COUNTY, STATE OF NEW HAMPSHIRE:
Charleston Cornish Plainfield
Claremont Newport Unity
IN CHESHIRE COUNTY, STATE OF NEW HAMPSHIRE:
Chesterfield Hinsdale
IN GRAFTON COUNTY, STATE OF NEW HAMPSHIRE:
Bath Lyman Orford
Haverhill Lyme Piermont
IN WASHINGTON COUNTY, STATE OF NEW YORK:
Granville Hampton
IN RENSSELAER COUNTY, STATE OF NEW YORK:
Hoosick
IN ADDISON COUNTY, STATE OF VERMONT:
Addison Leicester Ripton
Bridport Lincoln Salisbury
Bristol Middlebury Shoreham
Cornwall Monkton Starksboro
Ferrisburg New Haven Vergennes
Goshen Orwell Weybridge
Granville Panton Whiting
Hancock
IN BENNINGTON COUNTY, STATE OF VERMONT:
Arlington Manchester Searsburg
Bennington Peru Shaftsbury
Dorset Pownal Sunderland
Glastenbury Rupert Winhall
Landgrove Sandgate Woodford
IN CALEDONIA COUNTY, STATE OF VERMONT:
Barnet Lyndon Walden
Danville Ryegate Waterford
Kirby St. Johnsbury Wheelock
IN CHITTENDEN COUNTY, STATE OF VERMONT:
Buels Gore Essex Milton
Burlington Huntington Underhill
Colchester Jericho Westford
IN ESSEX COUNTY, STATE OF VERMONT:
Concord Guildhall Victory
Granby Lunenburg
IN FRANKLIN COUNTY, STATE OF VERMONT:
Bakersfield Fletcher Richford
Berkshire Franklin Sheldon
Enosburg Georgia St. Albans City
Fairfax Highgate St. Albans Town
Fairfield Montgomery Swanton
IN LAMOILLE COUNTY, STATE OF VERMONT:
Belvidere Eden Johnson
Cambridge Hyde Park
IN ORANGE COUNTY, STATE OF VERMONT:
Bradford Fairlee Thetford
Braintree Newbury Tunbridge
Brookfield Randolph Vershire
Chelsea Strafford West Fairlee
IN ORLEANS COUNTY, STATE OF VERMONT:
Lowell Irasburg
IN RUTLAND COUNTY, STATE OF VERMONT:
Benson Middletown Springs Sherburne
Brandon Mt. Holly Shrewsbury
Castleton Mt. Tabor Sudbury
Chittenden Pawlet Tinmouth
Clarendon Pittsfield Wallingford
Danby Pittsford Wells
Fair Haven Poultney West Haven
Hubbardton Proctor West Rutland
Ira Rutland City
Mendon Rutland Town
IN WASHINGTON COUNTY, STATE OF VERMONT:
Northfield Roxbury
IN WINDHAM COUNTY, STATE OF VERMONT:
Athens Guilford Stratton
Brattleboro Jamaica Townshend
Brookline Londonderry Vernon
Dover Marlboro Wardsboro
Dummerston Newfane Westminster
Grafton Rockingham Windham
IN WINDSOR COUNTY, STATE OF VERMONT:
Andover Hartland Sharon
Baltimore Ludlow Springfield
Barnard Norwich Stockbridge
Bethel Plymouth Weathersfield
Bridgewater Pomfret Weston
Cavendish Reading West Windsor
Chester Rochester Windsor
Hartford Royalton Woodstock
<PAGE>
RESOLUTIONS ADOPTED JANUARY 13, 1998,
BY THE BOARD OF DIRECTORS OF
CENTRAL VERMONT PUBLIC SERVICE CORPORATION
On motion duly made and seconded, the following resolutions
relating to the Fortieth Supplemental Indenture were unanimously
passed and adopted:
WHEREAS, by Section 15 of Article III of the Indenture of
Mortgage of this Company to State Street Bank and Trust Company
(as successor trustee to The First National Bank of Boston, which
was successor trustee to Old Colony Trust Company), dated as of
October 1, 1929 (the "Original Indenture"), dated as of October
1, 1929, but actually executed on October 24, 1929 (the Original
Indenture, with all indentures supplemental thereto as therein
provided, being hereinafter generally referred to as the
"Mortgage"), this Company has covenanted, among other things, to
cause each subsidiary to pay when due all indebtedness for money
borrowed by such subsidiary and not to permit the occurrence of
any event or any condition to exist with respect to any such
indebtedness or under any agreement securing or relating to such
indebtedness the effect of which is to cause (or permit any
holder of such indebtedness or a trustee to cause) such
indebtedness, or a portion thereof, to become due prior to its
stated maturity or prior to its regularly scheduled dates of
payment, and
WHEREAS, by Article X of the Mortgage, this Company has agreed to
various remedies in the event of certain defaults specified in
Section 1 of such Article X, including without limitation, (1)
any default in the due observance or performance of any covenant
or condition in the Mortgage (other than the obligation to make
any payment when due of interest on, the principal of, or the
premium, if any, on any of the bonds issued under the Mortgage)
required to be kept or performed by this Company, and the
continuance of any such default for the applicable period
specified in the Mortgage, or (2) certain actions by this Company
or any subsidiary in respect of the bankruptcy or insolvency of
any subsidiary, and certain other similar events, and
WHEREAS, this Company has not executed a supplemental indenture
since the Thirty-Ninth Supplemental Indenture, dated as of
December 29, 1997, and
WHEREAS, as of the date hereof, this Company owns all of the
issued and outstanding shares of capital stock of Connecticut
Valley Electric Company Inc., a New Hampshire corporation
("CVEC"), and
WHEREAS, as described in the Current Report on Form 8-K dated
January 12, 1998 and filed with the Securities and Exchange
Commission, as a result of an order of the New Hampshire Public
Utilities Commission dated December 31, 1997, and if such order
remains in its present form or is not otherwise stayed, there is
or may be a substantial likelihood that CVEC will fail to pay
when due certain of its indebtedness for money borrowed and/or
that certain such indebtedness will become due prior to its
stated maturity or prior to its regularly scheduled dates of
payment and/or that CVEC may be required to take certain actions,
or certain events may occur, in respect of the bankruptcy or
insolvency of CVEC, or certain other similar events may occur,
and
WHEREAS, in order to preclude the foregoing events with respect
to CVEC from causing a default under Section 15 of Article III of
the Mortgage and/or the consequences set forth in Article X of
the Mortgage, it is necessary and desirable and desirable, and
this Company is permitted, and has duly and lawfully determined,
to execute and deliver a supplemental indenture, and
WHEREAS, by Section 11 of Article III of the Mortgage, this
Company covenanted "that in order fully to preserve and protect
the security of the bondholders and all rights of the Trustee, it
will cause the Mortgage and every additional instrument which
shall be executed pursuant to the terms thereof at all times to
be recorded and filed in such manner and in such places as may be
required by the laws of the state or states, in which the
property subject hereto is located",
NOW, THEREFORE, BE IT
RESOLVED: that this Board hereby approves the Fortieth
Supplemental Indenture to be dated as of January 28, 1998 (or
such other date as may be appropriate to carry out the intention
of these resolutions), amending and supplementing the Mortgage by
stipulating that CVEC shall be deemed for all purposes thereof
not to be a subsidiary of the Company, substantially in the form
presented to this meeting, subject to such changes, insertions
and omissions as may be determined and approved by the President
or any Vice President or the Treasurer of this Company executing
the same, that such determination and approval are within the
authority conveyed by this resolution to be conclusively
evidenced by the execution of said Supplemental Indenture on
behalf of this Company and such execution being a sufficient
identification thereof for all purposes as the Supplemental
Indenture hereby authorized, and
FURTHER
RESOLVED: that the President or any Vice President or the
Treasurer of this Company cause said Supplemental Indenture to be
recorded and filed in such a manner and in such places as may be
required to preserve and protect the security of the bondholders
and the rights of the Trustee, and
FURTHER
RESOLVED: that the officers of this Company be, and they are and
each of them is hereby authorized in the name and on behalf of
this Company to execute and file with the Vermont Public Service
Board and with such other public regulatory commissions, bodies
or agencies which in their opinion or in the opinion of counsel
have jurisdiction in the premises, all other applications,
petitions, instruments or documents, including any amendments
thereto, which in their opinion or the opinion of counsel are
necessary or expedient in order to consummate the transactions
contemplated by these resolutions, and to employ such counsel and
assistance as may be deemed necessary by any of them to
accomplish the purpose hereof, and that any and all acts taken or
to be taken by or under the authorization of any officer of or
counsel to this Company in connection with the transactions
contemplated in these resolutions are hereby ratified, confirmed
and approved as if authorized hereby when taken.
And I further certify that the foregoing resolutions have
not since been amended or rescinded and are now in full force and
effect.
IN WITNESS WHEREOF I have hereunto set my hand as Assistant
Corporate Secretary and have affixed the corporate seal of said
Corporation as of this 13th day of January, 1998.
Attest:
/s/ Carole L. Root
- - --------------------
Carole L. Root
Assistant Corporate Secretary
