PAGE 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549-1004
Form 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 2-1647
COMMONWEALTH GAS COMPANY
(Exact name of registrant as specified in its charter)
Massachusetts 04-1989250
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Main Street, Cambridge, Massachusetts 02142-9150
(Address of principal executive offices) (Zip Code)
(617) 225-4000
(Registrant's telephone number, including area code)
(Former name, address and fiscal year, if changed since last report.)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock May 1, 1994
Common Stock, $25 par value 2,857,000 shares
The Company meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q as a wholly-owned subsidiary and is therefore filing this
Form with the reduced disclosure format.
PAGE 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
COMMONWEALTH GAS COMPANY
CONDENSED BALANCE SHEETS
MARCH 31, 1994 AND DECEMBER 31, 1993
ASSETS
(Unaudited)
March 31, December 31,
1994 1993
(Dollars in Thousands)
PROPERTY, PLANT AND EQUIPMENT, at original cost $325 722 $323 607
Less - Accumulated depreciation 81 372 77 155
244 350 246 452
Add - Construction work in progress 2 190 400
246 540 246 852
CURRENT ASSETS
Cash 2 304 1 297
Accounts receivable 67 179 33 239
Unbilled revenues 22 649 29 068
Inventories, at average cost 12 404 27 789
Prepaid taxes -
Property 914 2 629
Income - 1 812
Other 807 992
106 257 96 826
DEFERRED CHARGES
Order 636 transition costs 21 439 21 938
Other 12 616 11 067
34 055 33 005
$386 852 $376 683
PAGE 3
COMMONWEALTH GAS COMPANY
CONDENSED BALANCE SHEETS
MARCH 31, 1994 AND DECEMBER 31, 1993
CAPITALIZATION AND LIABILITIES
(Unaudited)
March 31, December 31,
1994 1993
(Dollars in Thousands)
CAPITALIZATION
Common Equity -
Common stock, $25 par value -
Authorized and outstanding -
2,857,000 shares, wholly-owned by
Commonwealth Energy System (Parent) $ 71 425 $ 71 425
Amounts paid in excess of par value 27 739 27 739
Retained earnings 19 285 7 840
118 449 107 004
Long-term debt, less current sinking
fund requirements 95 400 95 400
213 849 202 404
CURRENT LIABILITIES
Interim Financing -
Notes payable to banks 7 725 40 975
Advances from affiliates 5 610 2 835
13 335 43 810
Other Current Liabilities -
Current sinking fund requirements 3 650 3 650
Accounts payable -
Affiliated companies 1 284 1 811
Other 33 274 32 944
Refundable gas costs 33 719 13 253
Accrued taxes -
Income 6 992 -
Local property and other 2 699 2 940
Other 7 383 6 661
89 001 61 259
102 336 105 069
DEFERRED CREDITS
Accumulated deferred income taxes 31 348 30 176
Unamortized investment tax credits and other 27 546 25 901
Order 636 transition costs 11 773 13 133
70 667 69 210
$386 852 $376 683
See accompanying notes.
PAGE 4
COMMONWEALTH GAS COMPANY
CONDENSED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(Unaudited)
1994 1993
(Dollars in Thousands)
GAS OPERATING REVENUES $135 558 $120 892
OPERATING EXPENSES
Cost of gas sold 73 824 62 373
Other operation and maintenance 23 539 21 676
Depreciation 4 081 3 700
Taxes -
Income 11 197 10 623
Local property 2 110 2 024
Payroll and other 960 916
115 711 101 312
OPERATING INCOME 19 847 19 580
OTHER INCOME 156 55
INCOME BEFORE INTEREST CHARGES 20 003 19 635
INTEREST CHARGES
Long-term debt 2 129 1 587
Other interest charges 435 671
Allowance for borrowed funds
used during construction (6) (5)
2 558 2 253
NET INCOME 17 445 17 382
RETAINED EARNINGS -
Beginning of period 7 840 6 994
Dividends on common stock (6 000) (5 224)
RETAINED EARNINGS -
End of period $ 19 285 $ 19 152
See accompanying notes.
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COMMONWEALTH GAS COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1994 AND 1993
(Unaudited)
1994 1993
(Dollars in Thousands)
OPERATING ACTIVITIES
Net income $ 17 445 $ 17 382
Effects of non-cash items -
Depreciation and amortization 5 696 4 454
Deferred income taxes and investment
tax credits, net 100 372
Change in working capital, exclusive of cash
and interim financing 19 318 3 240
All other operating items (1 002) (419)
Net cash provided by operating activities 41 557 25 029
INVESTING ACTIVITIES
Additions to property, plant and equipment
(exclusive of AFUDC) (4 069) (3 302)
Allowance for borrowed funds used
during construction (6) (5)
Net cash used for investing activities (4 075) (3 307)
FINANCING ACTIVITIES
Payment of dividends (6 000) (5 224)
Payment of short-term borrowings (33 250) (17 725)
Advances from affiliates 2 775 2 215
Net cash used for financing activities (36 475) (20 734)
Net increase in cash 1 007 988
Cash at beginning of period 1 297 10
Cash at end of period $ 2 304 $ 998
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest, net of amounts capitalized $ 1 810 $ 2 219
Income taxes $ 1 333 $ 2 283
See accompanying notes.
PAGE 6
COMMONWEALTH GAS COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(1) Accounting Policies
Commonwealth Gas Company (the Company) is a wholly-owned subsidiary
of Commonwealth Energy System. The parent company is referred to in this
report as the "System" and together with its subsidiaries is collectively
referred to as "the system."
The Company's significant accounting policies are described in Note
1 of Notes to Financial Statements included in its 1993 Annual Report on
Form 10-K filed with the Securities and Exchange Commission. For interim
reporting purposes, the Company follows these same basic accounting
policies but considers each interim period as an integral part of an
annual period and makes allocations of certain expenses to interim
periods based upon estimates of revenue from firm sales for the year.
The Company has established various regulatory assets in cases where
the DPU has permitted, or is expected to permit, recovery of specific
costs over time. At March 31, 1994, principal regulatory assets included
in deferred charges were $21.4 million for transition costs associated
with Federal Energy Regulatory Commission (FERC) Order No. 636 as further
discussed in Note 2 and $3.9 million for postretirement benefits costs.
Generally, expenses which relate to more than one interim period are
allocated to other periods to more appropriately match revenues and
expenses. Principal items of expense which are allocated other than on
the basis of passage of time are depreciation and property taxes. These
expenses are recorded for interim reporting purposes based upon projected
gas revenue. Income tax expense is recorded using the statutory rates in
effect applied to book income subject to tax recorded in the interim
period.
The unaudited financial statements for the periods ended March 31,
1994 and 1993 reflect, in the opinion of the Company, all adjustments
(consisting of only normal recurring accruals) necessary to summarize
fairly the results for such periods. In addition, certain prior period
amounts are reclassified from time to time to conform with the presenta-
tion used in the current period's financial statements.
The results for interim periods are not necessarily indicative of
results for the entire year because of variations in gas consumption due
to the heating season and also because of the Company's seasonal rate
structure.
(2) Commitments
(a) Construction Program
The Company is engaged in a continuous construction program
presently estimated at $112.4 million for the five-year period 1994
through 1998. Of that amount, $21.9 million is estimated for 1994. As
of March 31, 1994, the Company's actual construction expenditures
amounted to approximately $4.1 million, including an allowance for funds
used during construction. The Company expects to finance these
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COMMONWEALTH GAS COMPANY
expenditures on an interim basis with internally-generated funds and
short-term borrowings which are ultimately expected to be repaid with the
proceeds from the issuance of long-term debt and/or equity securities.
The program is subject to periodic review and revision because of
factors such as changes in business conditions, rates of growth, effects
of inflation, equipment delivery schedules, licensing delays, availabili-
ty and cost of capital and environmental regulations.
(b) FERC Order No. 636
On April 8, 1992, the FERC issued Order No. 636 (Order 636),
requiring interstate pipelines to unbundle (separate) existing gas sales
contracts into separate components (gas sales, transportation and storage
services). Order 636 provides mechanisms that will allow customers such
as the Company to reduce the level of firm services from pipelines and
permits the "brokering" of excess capacity on a temporary or permanent
basis. Order 636 also requires pipelines to provide transportation
services which allow customers to receive the same level of service they
had with bundled contracts. Pipelines were required to be operating
under Order 636 by November 1, 1993.
As a result of implementing Order 636, each pipeline company is
allowed to collect certain "transition costs" from their customers. The
Company has been billed a total of approximately $18.2 million from
Tennessee Gas Pipeline Company, Algonquin Gas Transmission Company and
Texas Eastern Transmission Company through March 31, 1994. It is
anticipated that as much as $45 million in transition costs could be
sought by these suppliers through a series of FERC filings over the 12 to
24 month period that began on June 1, 1993. The largest element of the
aforementioned transition costs results from the pipelines' need to buy
out gas supply contracts entered into prior to Order 636. The total
amount of such costs ultimately billed to the Company will vary depending
on the success of the pipelines in negotiating settlements with their
former suppliers, and final review by the FERC. The Company is actively
reviewing the prudency of transition costs billed in order to minimize
costs to its customers. The Company has recorded its estimated liability
based on amounts incurred by the respective pipelines as of March 31,
1994.
As of October 29, 1993, the Company received preliminary DPU
authorization to recover these costs, with carrying charges, through the
cost of gas adjustment (CGA) over a four-year period that began in
November 1993. As a result, a regulatory asset totaling $21.4 million is
reflected in deferred charges as of March 31, 1994. In addition, a
related liability of $11.8 million is reflected in deferred credits.
Also, approximately $7.9 million of the amount paid to the pipeline
companies relates to gas inventory costs being allocated new storage
services under Order 636. The Company will recover these inventory costs
through the CGA.
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COMMONWEALTH GAS COMPANY
Item 2. Management's Discussion and Analysis of Results of Operations
The following is a discussion of certain significant factors which have
affected operating revenues, expenses and net income during the periods
included in the accompanying condensed statements of income. This discussion
should be read in conjunction with the Notes to Condensed Financial Statements
appearing elsewhere in this report.
A summary of the period to period changes in the principal items included
in the condensed statements of income for the three months ended March 31,
1994 and 1993 is shown below:
Three Months
Ended March 31,
1994 and 1993
Increase (Decrease)
(Dollars in Thousands)
Gas Operating Revenues $14 666 12.1%
Operating Expenses -
Cost of gas sold 11 451 18.4
Other operation and maintenance 1 863 8.6
Depreciation 381 10.3
Taxes -
Federal and state income 574 5.4
Local property and other 130 4.4
14 399 14.2
Operating Income 267 1.4
Other Income 101 183.6
Income Before Interest Charges 368 1.9
Interest Charges 305 13.5
Net Income $ 63 0.4
Firm Unit Sales BBTU Increase 969 5.4
The following is a summary of unit sales for the periods indicated:
Three Months Ended Unit Sales - In Billions of British Thermal Units (BBTU)
Total Firm Interruptible
March 31, 1994 19 113 19 082 31
March 31, 1993 18 184 18 113 71
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COMMONWEALTH GAS COMPANY
Operating Revenues and Cost of Gas Sold
For the first three months of 1994, operating revenues increased $14.7
million or 12.1% due primarily to an increase in the cost of gas sold of $11.5
million, higher unit sales of 5.1% (reflecting record sendout in January) and
a higher level of conservation and load management (C&LM) costs of $1 million.
The Company has received approval from the DPU to recover in revenues current
costs associated with C&LM programs on a dollar-for-dollar basis through the
operation of a Conservation Charge decimal. To the extent that these expens-
es increase or decrease from period to period based on customer participation
a corresponding change will occur in revenues.
The cost of gas sold averaged $3.85 per MMBTU in the current quarter
compared to $3.43 per MMBTU for the first quarter of 1993. The higher cost of
gas is mainly attributable to the transition costs related to the implement-
ation of FERC Order 636.
Firm unit sales increased 5.4% due to improved sales in all sectors
resulting from the colder than normal weather conditions experienced through-
out the region during the quarter. The Company established all-time highs for
daily gas sendout on four different occasions in January, setting a new peak
day sendout on January 19 of 364,799 MMBTU. Prior to this period, the
previous all-time peak was 336,998 MMBTU set in January 1988. Although
interruptible sales decreased significantly during the first quarter of 1994,
fluctuations in the level of interruptible sales have little, if any, impact
on net income.
Operating Expenses
For the first quarter of 1994, other operation and maintenance expenses
increased $1.9 million or 8.6% due primarily to higher C&LM costs ($1 mil-
lion). Other significant items contributing to the increase were higher
distribution expenses mainly due to leak repair activities ($353,000), a
provision for potential environmental clean-up costs ($305,000), an increased
provision for bad debts due to higher unit sales ($176,000), higher pension
costs ($160,000) and costs associated with a new Gas Administration and Supply
System ($108,000). These increases were offset, in part, by a decline in the
cost of services rendered by affiliate COM/Energy Services Company due to a
second quarter 1993 work force reduction as well as lower postretirement
benefit costs. The change in federal and state income taxes was attributable
to a slightly higher level of pretax income as well as an increase in the
federal tax rate to 35%. The 4.4% increase in local property taxes was due to
higher tax rates and assessments in the Company's service territory.
Depreciation increased by 10.3% due to higher levels of depreciable plant-in-
service.
Other Income and Interest Charges
Other income increased during the first three months of 1994 due primarily
to interest income recorded in the current period related to a Massachusetts
sales tax abatement as well as carrying costs associated with Order 636
transition costs. The impact of these items was partially offset by lower
interest income on deferred gas costs.
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COMMONWEALTH GAS COMPANY
Total interest charges increased $305,000 or 13.5% due to the issuance of
$35 million in new long-term debt in December 1993 and, to a lesser extent,
interest to be refunded to the Company's customers in connection with the
aforementioned sales tax abatement. The impact of these items was offset
somewhat by a decrease in other interest charges reflecting a lower average
level of short-term borrowings that resulted from issuing the new long-term
debt.
Environmental Matters
The Company is participating in the assessment of a number of former
manufactured gas plant sites to determine if and to what extent such sites
have been contaminated and whether the Company may be responsible for remedial
actions.
The costs associated with the clean-up of these sites are recoverable in
rates through the cost of gas adjustment clause pursuant to a 1990 DPU order
that provides for recovery of such expenditures over a seven-year amortization
period without carrying costs. The Company has recorded an estimated $2.3
million liability that reflects its best estimate (based on current
information) of the costs to be incurred in connection with the various
activities to be undertaken at these sites. The Company has also recorded a
regulatory asset in anticipation of recovery of these costs in rates. The
Company is unable to predict the total cost to ultimately resolve these
matters due to significant uncertainty as to the actual site conditions and
extent of any associated remediation activities and the assignment of
responsibility. However, it is expected that all such costs will continue to
be recovered in rates as described above.
The Company is also involved in certain other known or potentially
contaminated sites with costs which may not be recoverable in rates. The
Company has recorded an estimated liability (and a charge to operations) of
$300,000 to cover the costs associated with assessment and remediation
activities. These estimates will be adjusted as further investigation and
assignment of responsibility occurs. As noted above, the Company is unable to
predict at this time the ultimate cost to resolve these matters due to the
uncertainties inherent in the site investigation and remediation process.
PAGE 11
COMMONWEALTH GAS COMPANY
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any pending material legal proceeding.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 4. Instruments defining the rights of security holders,
including indentures.
Filed herewith:
4.4.19 Eighteenth Supplemental Indenture dated December 1, 1993
to Indenture of Trust and First Mortgage Dated as of
February 1, 1949 (Filed herewith as Exhibit 1).
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the three months ended March
31, 1994.
PAGE 12
COMMONWEALTH GAS COMPANY
SIGNATURES
Pursuant to the requirements 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.
COMMONWEALTH GAS COMPANY
(Registrant)
Principal Financial Officer:
JAMES D. RAPPOLI
James D. Rappoli,
Financial Vice President
and Treasurer
Principal Accounting Officer:
JOHN A. WHALEN
John A. Whalen,
Comptroller
Date: May 13, 1994
PAGE 1
Exhibit 1
COMMONWEALTH GAS COMPANY
(formerly Worcester Gas Light Company)
TO
STATE STREET BANK AND TRUST COMPANY,
Trustee
Eighteenth Supplemental Indenture
Dated as of December 1, 1993
To
INDENTURE OF TRUST
And
FIRST MORTGAGE
Dated as of February 1, 1949
$35,000,000
First Mortgage 7.11% Bonds, Series K, Due 2033
PAGE 2
THIS EIGHTEENTH SUPPLEMENTAL INDENTURE dated as of December 1, 1993 by
and between COMMONWEALTH GAS COMPANY (formerly named Worcester Gas Light
Company), a corporation duly organized and existing under the laws of The
Commonwealth of Massachusetts (hereinafter sometimes called the "COMPANY"),
and STATE STREET BANK AND TRUST COMPANY (formerly named State Street Trust
Company and Second Bank-State Street Trust Company), a corporation duly
organized and existing under the laws of The Commonwealth of Massachusetts, as
Trustee (hereinafter sometimes called the "TRUSTEE"),
WITNESSETH that:
WHEREAS the Company has heretofore executed and delivered to the Trustee
an Indenture of Trust and First Mortgage dated as of February 1, 1949, as
amended (hereinafter called the "PRINCIPAL INDENTURE") and seventeen
indentures supplemental thereto dated as of March 1, 1950, November 14, 1952,
September 1, 1953, October 21, 1954, March 21, 1956, April 16, 1957,
June 1, 1959, September 28, 1961, August 1, 1962, July 1, 1970, June 1, 1972,
August 1, 1973, April 1, 1974, October 1, 1977, October 1, 1982,
October 1, 1986 and December 1, 1990, respectively (hereinafter collectively
called the "SUPPLEMENTAL INDENTURES"), said Principal Indenture and said
Supplemental Indentures having been duly recorded as set forth therein and
herein; and
WHEREAS the Seventeenth Supplemental Indenture was duly recorded and
filed as follows:
Date 1991 Book Page
February 21
Bristol County South District Registry 2603 155
of Deeds
February 21
Bristol County South Registry District 73 37
registered as Document #56786 and
noted on Certificate of Title No.
13509
February 21
Fall River District of Bristol County 2309 57
Registry of Deeds
February 21
Middlesex South District Registry of Deeds 21016 212
February 21
South Registry District of Middlesex 814 27
County registered as Document #838142 896 172
and noted on Certificates of Title
Nos. 136777 and 153322
February 21
Norfolk County Registry of Deeds 8856 364
February 21
Plymouth County Registry of Deeds 10157 236
February 21
Suffolk County Registry of Deeds 16720 78
February 21
Worcester District Registry of Deeds 13253 23
February 21
Worcester Registry District of Worcester 14 & 24
County registered as Document #51742 and
noted on Certificates of Title Nos. 2701
and 4618
PAGE 3
Date 1991 Book Page
February 21
Office of the Massachusetts Secretary of
State, An Amendment Form UCC-3, Amendment (Filing
to the Financing Statement originally No.
filed September 26, 1968 under No. 010349)
534945
WHEREAS Section I of Article XI of said Principal Indenture provides,
among other things, that without any action or consent by, or notice to the
holders of any of the bonds, the Company and the Trustee may enter into such
other and further indentures supplemental to the Principal Indenture as shall
be by them deemed necessary or desirable to add to the covenants and
agreements of the Company for the protection of the holders of the bonds or
for any other purpose not inconsistent with the terms of the Principal
Indenture and which shall not impair the security of the same; and
WHEREAS Section 2 of Article III of said Principal Indenture, as
amended, provides, among other things, that bonds of subsequent series in
addition to the Series A Bonds, when authorized as therein provided and
subject to the provisions and limitations therein set forth, may be executed
and delivered by the Company to the Trustee and thereupon shall be certified
and delivered by the Trustee to or upon the written order of the President or
Treasurer of the Company; and
WHEREAS the Company proposes to issue in accordance with the provisions
of said Section 2 of said Article III, as amended, and other applicable
provisions of said Principal Indenture and pursuant to and in execution of the
powers and authorities conferred and reserved therein and of every other power
and authority thereto appertaining or enabling a new series of bonds to be
designated First Mortgage 7.11% Bonds, Series K, Due 2033 (hereinafter
sometimes referred to as "SERIES K BONDS"); and
WHEREAS the Company deems it advisable to enter into an Indenture with
the Trustee supplemental to said Principal Indenture to further secure the
payment of the principal, premium, if any, and the interest on the bonds
issued and to be issued thereunder, and to confirm and renew the conveyances
made therein; and to grant, bargain, sell, release, convey, assign, transfer,
mortgage, pledge, set over and confirm unto the Trustee additional properties
of the Company as herein provided; and
WHEREAS the Company and the Trustee have authorized and approved this
Eighteenth Supplemental Indenture and the form and execution thereof in
accordance with the requirements of Article XI of said Principal Indenture,
and all requirements of law and said Principal Indenture necessary to the
authorization and validity of this Eighteenth Supplemental Indenture have been
complied with; and
WHEREAS the Series K Bonds are to be issued only as fully registered
bonds without coupons, and such bonds, the Trustee's certificate, and the
endorsement thereon are to be substantially in the following forms,
respectively:
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[FORM OF FULLY REGISTERED SERIES K BOND]
COMMONWEALTH GAS COMPANY
First Mortgage 7.11% Bond, Series K, Due 2033
REGISTERED
REGISTERED NO. Rk-1 $35,000,000
Commonwealth Gas Company (formerly named Worcester Gas Light Company), a
corporation organized and existing under the laws of THE COMMONWEALTH OF
MASSACHUSETTS (hereinafter called the "COMPANY"), for value received, hereby
promises to pay to , or registered assigns, the principal sum of
Thirty-five Million Dollars on December 30, 2033, and to pay interest thereon
at the rate of 7.11% per annum from the thirtieth day of June or December, as
the case may be, to which interest has been paid preceding the date hereof
(unless the date hereof is a June 30 or December 30 to which interest has been
paid, in which case from the date hereof, or unless the date hereof is prior
to the first payment of interest, in which case from the date of original
issuance of the bonds of Series K) semi-annually on June 30 and December 30,
until the principal hereof shall have become due and payable (whether at
maturity or at a date fixed for redemption or by declaration or otherwise),
and with interest on any overdue principal (including any overdue prepayment
of principal) and (to the extent permitted by applicable law) overdue premium,
if any, and (to the extent permitted by applicable law) on any overdue
installment of interest, at the rate of 9.11% per annum until paid, payable
semi-annually as aforesaid or, at the option of the registered owner hereof,
on demand, PROVIDED that in no event shall the amount payable by the Company
as interest and premium on this bond exceed the highest lawful rate
permissible under any law applicable hereto. The interest so payable on any
June 30 or December 30 will, subject to certain exceptions provided in the
Eighteenth Supplemental Indenture hereinafter referred to, be paid to the
person in whose name this bond is registered at the close of business on the
June 15 prior to such June 30 or the December 15 prior to such December 30,
unless such June 15 or December 15 shall not be a business day, in which event
on the next succeeding business day, the term "BUSINESS DAY" meaning for this
purpose a day which in the City of Boston is not a legal holiday or a day on
which banking institutions in the City of Boston are not authorized by law to
close. Principal, premium, if any, and interest on this bond shall be payable
in such coin or currency of the United States of America as at the time of
payment is legal tender for public and private debts, at the principal
corporate trust office of State Street Bank and Trust Company (hereinafter
called the "TRUSTEE," which term shall include its successors in the trusts
hereinafter referred to), in the City of Boston, Massachusetts, or of any
successor as such Trustee, or, at the option of the registered owner, at the
office of any other paying agent appointed by the Company, PROVIDED that
payment of principal, premium, if any, and interest on any bond of Series K
and any redemption price of all or a portion of the principal amount thereof
shall be made by the Trustee to the registered owner thereof without
presentation or surrender thereof to the Trustee if there shall be on file
with the Trustee (and not theretofore rescinded by written notice from such
registered owner to the Trustee) an agreement (or a conformed copy thereof)
between the Company and such registered owner or the person for whom such
registered owner is the nominee or a predecessor in interest of the registered
owner or the person for whom the registered owner is the nominee, to the
effect that (1) payments will be so made, and (2) such registered owner will
not sell, pledge, transfer or otherwise dispose of such bond of Series K
without first either (i) surrendering such bond of Series K to the Trustee in
exchange for a bond or bonds of Series K, aggregating the same principal
amount as the principal amount of the bond of Series K so surrendered which
shall remain unpaid, or (ii) making notation on such bond of Series K (or on a
schedule annexed thereto) of all portions of the principal amount thereof
which have been redeemed; it being understood that the Bond Purchase Agreement
dated as of December 1, 1993 pursuant to which the bonds of Series K were
PAGE 5
initially issued constitutes such an agreement on file with the Trustee for
purposes of this paragraph (until rescinded as provided above).
This bond shall not be valid or become obligatory for any purpose or
entitled to any security or benefit under the Indenture (as hereinafter
defined) unless or until the certificate endorsed hereon shall have been
executed by the Trustee under the Indenture.
This bond is one of a duly authorized issue of First Mortgage Bonds of
the Company to be issued in series with distinctive designations, the series
of which this bond is one being designated as Series K and limited to an
aggregate principal amount of thirty-five million dollars ($35,000,000), which
issue of bonds together with all other series which may now or hereafter be
outstanding are issued and are to be issued under and equally and ratably
secured by a certain Indenture of Trust and First Mortgage dated as of
February 1, 1949 (hereinafter, with all indentures stated to be supplemental
thereto, including an Eighteenth Supplemental Indenture dated as of December
1, 1993, to which the Trustee is a party, called the "INDENTURE") by and
between the Company and State Street Trust Company (now known as State Street
Bank and Trust Company) as Trustee, to which Indenture reference is hereby
made for a description of the mortgaged property, the nature and extent of the
security, the terms and conditions under which the bonds of Series K are
issued and under which bonds of any subsequent series may be issued, the
rights and limitations of the rights of the bondholders and the rights and
obligations of the Company and the rights, duties and immunities of the
Trustee.
Subject to certain conditions and restrictions, additional first
mortgage bonds of one or more series, equally and ratably secured by the
Indenture, may be issued under the Indenture.
This bond shall be treated as negotiable, subject to the provisions for
registration and transfer herein and in the Indenture contained, and the
Company and the registered owner hereof and every successive owner and
assignee of this bond, by accepting and holding the same, consent to the
foregoing provisions and each invites the others, and all persons, to rely
thereon.
The bonds of Series K are issuable only as fully registered bonds
without coupons in denominations of one-hundred thousand dollars ($100,000) or
integral multiples thereof. The holder of any Series K bond or bonds, may,
upon payment of the charges and subject to the conditions specified in the
Indenture, exchange the same at the principal corporate trust office of the
Trustee in the City of Boston, Massachusetts for a like aggregate principal
amount of fully registered Series K bonds of different authorized
denominations, PROVIDED, HOWEVER, that the Company and the Trustee shall not
be required (i) to transfer or exchange any bond of Series K during a period
beginning at the opening of business fifteen (15) days before the day of the
mailing of a notice of redemption of bonds of Series K and ending at the close
of business on the day of such mailing or (ii) to transfer or exchange any
bond of Series K so selected for redemption in whole or in part.
As provided in the Eighteenth Supplemental Indenture, this bond shall be
subject to redemption (i) at par, upon the concurrent payment of accrued
interest and the Make-Whole Amount (as defined in the Eighteenth Supplemental
Indenture), at the option of the Company, and (ii) at par, upon the concurrent
payment of accrued interest, under certain circumstances from the proceeds of
insurance for casualty or from the proceeds of taking by or sale to a public
authority.
If this bond is called for redemption in whole or in part and payment is
duly provided as specified in the Indenture, this bond, or the part thereof so
called, shall cease to be entitled to the security of the Indenture, and from
and after the date fixed in the call for such redemption, interest shall cease
to accrue on this bond, or on such part so called; and if less than the whole
principal amount hereof shall be called, the registered owner hereof shall, in
PAGE 6
addition to the sums payable on account of the part called, be entitled, at
his option, to receive on surrender hereof one or more bonds of this series,
of an aggregate principal amount equal to that part of the principal amount
hereof not called and paid, or to present this bond for the notation hereon by
the Trustee (or to make such notation in accordance with an agreement for
payment of principal filed with the Trustee as provided in this bond) of the
payment of the part of the principal amount hereof then called and paid.
The principal hereof may be declared and become due prior to maturity in
case of certain events of default specified in the Indenture.
The Indenture may be modified and amended in certain respects upon the
conditions and in the manner provided therein, if such modification is
approved and authorized by the Board of Directors of the Company and approved
by the holders of not less than a majority in principal amount of the bonds
then outstanding; PROVIDED, HOWEVER, that no such amendment or modification
shall (i) extend the time of payment of the principal, premium, if any, or
interest on this bond or change the principal amount, premium, if any, or rate
of interest payable on this bond or affect or impair the obligations of the
Company in respect of the principal or interest of this bond without the
written consent of the holder hereof, (ii) permit the creation by the Company
of any lien ranking prior to or on a parity with the lien of the Indenture
with respect to any property covered thereby, (iii) affect the rights of any
series of bonds in a manner differing from that of any other series except
with the consent, given as provided in the Indenture, of the owners of not
less than 66-2/3% in principal amount of the outstanding bonds of each series
so affected, (iv) change the percentages of the holders of bonds required for
any action or consent under the Indenture without the consent of the holders
of all of the bonds then outstanding, or (v) modify the rights, duties or
immunities of the Trustee without its written consent.
The Company and the Trustee may, without action or consent by or notice
to the bondholders, enter into supplemental indentures for the purposes of
conveying additional property, adding further limitations upon the issuance of
additional bonds, setting forth the form of additional bonds and the terms not
inconsistent with the Indenture under which they may be issued, establishing a
successor trustee, modifying the Indenture or the form of any bonds or coupons
in a manner not prejudicial to holders in order to facilitate listing of such
outstanding bonds on any stock exchange, curing ambiguities or remedying
defects or manifest errors in the Indenture or a supplemental indenture, or
for any other purpose not inconsistent with and not impairing the benefits of
the Indenture.
Any consent or waiver by the holder of this bond as aforesaid shall be
conclusive and binding upon such holder and upon all future holders and
registered owners of this bond or of any other bond issued in lieu hereof or
in substitution hereof (unless effectively revoked, as provided in the
Indenture) whether or not any notation of such consent or waiver is made upon
this bond.
This bond is transferable on the books of the Company at said principal
corporate trust office, upon surrender hereof, accompanied by a written
instrument of transfer in form satisfactory to the Trustee, duly executed by
the registered owner hereof in person or by his duly authorized
representative, or by his agent or attorney duly appointed in writing, and
thereupon a new fully registered bond or fully registered bonds of authorized
denominations of the same series for a like principal amount will be issued to
the transferee or transferees in exchange for this bond. The Company, the
Trustee, and any paying agents and registrars may deem and treat the person in
whose name this bond is registered as the absolute owner for the purpose of
receiving payment and for all other purposes.
No recourse upon any obligation contained in this bond or in the
Indenture or otherwise shall be had against any incorporator or any officer,
director or stockholder, past, present or future, of the Company or of any
successor corporation, such personal liability of every kind being expressly
waived.
PAGE 7
IN WITNESS WHEREOF, Commonwealth Gas Company has caused this bond to be
executed on its behalf by the facsimile signature of its President or one of
its Vice Presidents and its Treasurer or one of its Assistant Treasurers, and
a facsimile of its corporate seal to be imprinted hereon.
Dated
COMMONWEALTH GAS COMPANY
(Corporate Seal) By
President
By
Treasurer
PAGE 8
[FORM OF TRUSTEE'S CERTIFICATE]
This bond is one of the fully registered bonds of Series K referred to in
the within-mentioned Indenture.
STATE STREET BANK AND
TRUST COMPANY,
Trustee
By
Authorized Signature
PAGE 9
[Form of Endorsement]
FOR VALUE RECEIVED hereby sell(s), assign(s)
and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBERS OF ASSIGNEE
this bond, and all rights thereunder, hereby irrevocably constituting and
appointing attorney to transfer the said bond on the books
of the Company, with full power of substitution in the premises.
Dated:
Signature guaranteed by (not required
in case of the original purchaser or
other registered owners that are
institutional investors):
[Note: The signature to this assignment must correspond with the name of the
registered owner as written upon the within bond in every particular, without
alteration or enlargement or any change whatsoever.]
[END OF FORM OF SERIES K BOND]
PAGE 10
AND WHEREAS all things necessary to make the Series K Bonds when
executed by the Company, duly certified by the Trustee and delivered, all as
herein and in the Principal Indenture provided, valid, binding and legal
obligations of the Company and to make this Eighteenth Supplemental Indenture
a valid, binding and legal instrument for the security thereof have been done
and performed, and the issue of the Series K Bonds, as in this Eighteenth
Supplemental Indenture and in the Principal Indenture provided, have been in
all respects duly authorized;
NOW, THEREFORE, this Eighteenth Supplemental Indenture Witnesseth and it
is hereby covenanted and declared as follows:
That the Company in consideration of the premises and of the mutual
covenants herein contained and of the purchase and acceptance of the bonds by
the holders thereof and of one dollar ($1.00) to it duly paid by the Trustee,
at or before the ensealing and delivery of these presents, the receipt whereof
is hereby acknowledged, and in order to secure the payment of the principal,
premium, if any, and interest on the bonds issued and to be issued hereunder
and under the Principal Indenture according to their tenor and effect, and the
faithful performance and observance of all the covenants, obligations,
conditions and provisions in this Eighteenth Supplemental Indenture and in
said Principal Indenture contained, and in order to declare the terms and
conditions upon which the Series K Bonds are and are to be secured, certified,
transferred, delivered and exchanged, the Company has executed this Eighteenth
Supplemental Indenture and by these presents does hereby grant, bargain, sell,
convey, assign, transfer, mortgage, pledge, set over, and confirm unto the
Trustee, its successors and assigns in the trusts and upon the terms and
conditions in said Principal Indenture contained, but without restricting the
generality of the grant contained in said Principal Indenture, all of its
plants, properties, franchises, locations, rights and privileges in or over
public or private streets or ways and in or over private premises and all
other property real, personal or mixed of whatever kind and wherever situated
now owned or hereafter acquired by the Company and all easements, tenements,
hereditaments, rights, privileges, appurtenances belonging or in any way
appertaining to the aforesaid property or any part thereof with the reversions
and remainders and all rents, earnings, incomes, issues and profits thereof
and all the estate, right, title, interest and claim whatsoever whether at law
or in equity which the Company now has or may hereafter acquire in or to the
aforesaid property and every part or parcel thereof, hereby expressly
confirming the grant, assignment, transfer, mortgage and pledge, unto the
Trustee, its successors and assigns in the trusts and upon the terms and
conditions in said Principal Indenture contained, of all properties and
interests granted, assigned, transferred, mortgaged and pledged by said
Principal Indenture and said Supplemental Indentures or intended so to be,
including without limiting the generality of the foregoing, the following
described property acquired by the Company since the execution of the
Seventeenth Supplemental Indenture:
Two parcels of land located off Rafferty Road and Wilson Street in
Hopkinton, Middlesex County, Massachusetts described in a deed of
Tennessee Gas Pipeline Company dated November 5, 1993 and recorded
in the South Middlesex Registry of Deeds as Instrument No. 391 on
November 10, 1993.
Expressly excepting and reserving, however, the properties and interests
of the Company expressly excepted and reserved under the said Principal
Indenture, such of said properties or interests therein as may have been
released by the Trustee or sold or disposed of in whole or in part as
permitted by the provisions of the Principal Indenture and all cash on hand or
in banks; all shares of stock and other certificates or evidences of interest
and all bonds, notes and other evidences of indebtedness, and other securities
including bills, notes and accounts receivable now owned or hereafter acquired
or possessed by the Company, all property and franchises of any other
corporation of whatever character, securities whereof or obligations secured
upon the properties and franchises whereof, may be now owned or hereafter
acquired or possessed by the Company; the last day of the term of each
PAGE 11
leasehold estate (oral or written, and/or any agreement therefor) now or
hereafter enjoyed by the Company, and whether falling within a general or
particular description of property herein; and all materials, merchandise and
supplies now owned or hereafter acquired by the Company for the purpose of
resale in the ordinary course of business.
TO HAVE AND TO HOLD all of the aforesaid property and all property which
shall become subject to said Principal Indenture and to indentures
supplemental thereto unto the Trustee, its successors and assigns in the
trusts and upon the terms and conditions in said Principal Indenture contained
in its and their own use and benefit forever.
SUBJECT, HOWEVER, to any easements, rights-of-way, restrictions and
reservations, now existing by operation of law or otherwise, over, under, upon
or against the mortgaged property or any part thereof and which have existed
either from the date of delivery of the Principal Indenture or, as to any
property acquired thereafter, from the time of acquisition of such property by
the Company.
IN TRUST NEVERTHELESS for the equal and proportionate benefit and
security of all present and future holders of the bonds and coupons issued or
to be issued under and secured by said Principal Indenture and indentures
supplemental thereto in accordance with the provisions thereof without
preference, priority or distinction as to lien or otherwise, of any thereof
over any other by reason of priority in the issue, sale or negotiation thereof
or otherwise except as provided in Section 8 of Article II of said Principal
Indenture.
PROVIDED, HOWEVER, and these presents are upon the condition that if the
Company, its successors or assigns, shall pay or cause to be paid the
principal, premium, if any, and interest on the said bonds as they become due
at the times and in the manner stipulated therein and in said Principal
Indenture and indentures supplemental thereto, and shall perform and observe
all the terms, covenants and conditions in the bonds and coupons and in said
Principal Indenture and indentures supplemental thereto, expressed to be
performed and observed by or on the part of the Company, then this Eighteenth
Supplemental Indenture and the estate and rights hereby granted, shall cease,
determine and be void; otherwise to remain in full force and effect all as
more fully provided in Article XIV of said Principal Indenture.
AND IT IS HEREBY expressly covenanted and agreed between the parties
hereto that the protection and security of said Principal Indenture is hereby
extended to all bonds of Series K issued, certified and delivered hereunder
and under said Principal Indenture and that all such bonds of Series K are to
be issued, certified and delivered, and that the additional property hereby
mortgaged to and pledged with the Trustee is to be held subject to the
covenants, uses and trusts set forth herein and in said Principal Indenture,
as amended. And the Company for itself and its successors and assigns does
hereby further covenant, agree and declare to and with the Trustee and its
successors and assigns in said trust, for the benefit of said Series K Bonds,
or any of them, as follows:
ARTICLE I
SECTION 1. There is hereby created and established under the Principal
Indenture and hereunder a new series of bonds of the Company, limited in
aggregate principal amount to thirty-five million dollars ($35,000,000),
designated "FIRST MORTGAGE 7.11% BONDS, SERIES K, DUE 2033," which shall
mature December 30, 2033, and shall bear interest at the rate of 7.11% per
annum, payable semi-annually, on the thirtieth day of June and December in
each year until the principal of the Series K Bonds shall have become due and
payable (whether at maturity or at a date fixed for redemption or by
declaration or otherwise), and with interest on any overdue principal
(including any overdue prepayment of principal) and (to the extent permitted
by applicable law) overdue premium, if any, and (to the extent permitted by
applicable law) on any overdue installment of interest, at the rate of 9.11%
per annum until paid, payable semi-annually as aforesaid, or, at the option of
the registered owner of any Series K Bond, on demand. Forthwith upon and from
PAGE 12
time to time after the execution and delivery of this Eighteenth Supplemental
Indenture, the Company may execute and deliver to the Trustee and thereupon
the Trustee shall certify and deliver to or upon the written order of the
President or Treasurer of the Company, Series K Bonds to an aggregate
principal amount not exceeding thirty-five million dollars ($35,000,000) in
temporary or permanent form, being all the Series K Bonds authorized to be
issued hereunder, upon receipt by the Trustee in each case of the Votes,
Certificates, Opinions of Counsel, and a certified copy (or assurances
satisfactory to the Trustee that there will be delivered to the Trustee,
within a time deemed reasonable by it, a certified copy) of an order or orders
of each governmental agency having jurisdiction releasing, exempting,
authorizing or consenting to the issuance by the Company of a principal amount
of said bonds at least equal to the principal amount of bonds the
certification and delivery of which is requested by the written order or
orders of the President or Treasurer of the Company, all as required by
Section 2 of Article III of the Principal Indenture, as amended.
SECTION 2. The bonds of Series K are issuable only as fully registered
bonds without coupons in denominations of one-hundred thousand dollars
($100,000) or integral multiples thereof. Bonds of Series K may be
transferred and may be exchanged for one or more bonds of the same series in
authorized denominations, as provided in the Principal Indenture, PROVIDED,
HOWEVER, that the Company and the Trustee shall not be required (i) to
transfer or exchange any bond of Series K during a period beginning at the
opening of business fifteen (15) days before the day of the mailing of a
notice of redemption of bonds of Series K and ending at the close of business
on the day of such mailing or (ii) to transfer or exchange any bond of Series
K so selected for redemption in whole or in part. Notwithstanding any
provisions of the Indenture or the Series K Bonds to the contrary, no service
charge shall be made to the holder for any such transaction.
Except as hereinafter provided, each bond of Series K shall be dated the
date of certification and shall bear interest from the last preceding interest
payment date to which interest has been paid (unless the date thereof is an
interest payment date to which interest has been paid, in which case from the
date thereof, or unless the date thereof is prior to the first payment of
interest, in which case from the date of original issuance of the bonds of
such series).
The person in whose name any bond of Series K is registered at the close
of business on the record date (hereinafter defined) with respect to a semi-
annual interest payment date shall be entitled to receive the interest payable
on such interest payment date notwithstanding the cancellation of such bond
upon any transfer or exchange thereof subsequent to such record date and prior
to such interest payment date; PROVIDED, HOWEVER, that if and to the extent
the Company shall default in the payment of the interest due on such interest
payment date, such defaulted interest, together with interest thereon at the
rate set forth in Section 1 hereof to the extent permitted by applicable law,
shall be paid to the person in whose name such bond is registered at the close
of business on the business day immediately prior to the date of payment of
such defaulted interest. The term "RECORD DATE" as used with respect to a
semi-annual interest payment date shall mean the fifteenth day of the same
calendar month of such interest payment date unless such day shall not be a
business day, in which event the term "RECORD DATE" shall mean the next
succeeding business day, the term "BUSINESS DAY" meaning for this purpose a
day which in the City of Boston is not a legal holiday or a day on which
banking institutions in the City of Boston are not authorized by law to close.
Subject to the provisions of Section 4 of this Article I, the principal,
premium, if any, and interest on the Series K Bonds shall be payable in any
coin or currency of the United States of America which at the time of payment
is legal tender for the payment of public and private debts, at the principal
corporate trust office of the Trustee in the City of Boston, Massachusetts,
or, at the option of the registered owner, at the office of any other paying
agent appointed by the Company.
The Company may cause bonds of Series K to be executed on its behalf by
the facsimile signatures of its President or a Vice President and its
PAGE 13
Treasurer or an Assistant Treasurer, which may be imprinted or otherwise
reproduced on such bonds, and may cause a facsimile of its official seal to be
imprinted thereon. In case any officer whose facsimile signature has been so
imprinted or otherwise reproduced on any bond of Series K shall cease to be
such officer of the Company before such bond shall have been actually
certified and delivered by the Trustee, such bond may nevertheless be
certified and delivered and issued as though the person whose facsimile
signature has been so imprinted or otherwise reproduced had not ceased to be
an officer of the Company.
SECTION 3. The provisions of the Series K bonds relating to redemption
prior to maturity are as follows:
A. The Company may redeem Series K Bonds at par, plus accrued
interest, pursuant to Section 7(d) of Article VI of the Principal
Indenture, but any such redemption of the Series K Bonds pursuant to
such Section 7(d) of Article VI of the Principal Indenture shall be made
(i) only from money received by the Trustee as proceeds of property
taken by the power of eminent domain or acquired by public authority, or
as insurance money, (ii) only in principal amounts of one-hundred
thousand dollars ($100,000) or integral multiples thereof and (iii) only
if such redemption pursuant to such Section 7(d) of Article VI of the
Principal Indenture is made pro rata among all series of bonds then
outstanding under the Principal Indenture in proportion to their then
outstanding principal amounts, PROVIDED, HOWEVER, to the extent, but
only to the extent, that such prorating would involve the redemption of
the bonds of any series in any amount other than that permitted under
the terms of the bonds of such series, the Trustee may upon any such
redemption of such series, in its reasonable discretion, increase or
decrease the amount of bonds of such series to be redeemed in such
manner as the Trustee, in its reasonable discretion, shall deem
appropriate to maintain, in so far as possible, the principal of pro
rata redemption in any such redemption or in any series of successive
redemptions.
B. The Series K Bonds are redeemable prior to maturity at the
option of the Company, as a whole at any time, or in part from time to
time, in a minimum aggregate principal amount at any one time of not
less than one million dollars ($1,000,000), PROVIDED, that not less than
five million dollars ($5,000,000) in the aggregate principal amount of
the Series K Bonds remains outstanding after giving effect to any such
partial redemption, upon at least 30 days' but not more than 45 days'
prior notice, as set forth below, at the principal amount of Series K
Bonds so to be redeemed and accrued interest to the date fixed for
redemption, together with a premium equal to the Make-Whole Amount
(hereinafter defined) calculated as of three days prior to the date
fixed for such redemption, PROVIDED, that the Company shall, on the
second day preceding the date of any such redemption, deliver to the
Trustee and to the holders of the Series K Bonds so to be redeemed a
certificate of an officer of the Company stating the amount of the Make-
Whole Amount being paid upon such redemption and demonstrating the
calculation thereof. The term "PREMIUM" when used in the bonds of
Series K or the Indenture in conjunction with references to principal
and interest on the bonds of Series K, shall mean any amount due upon
any payment, redemption or prepayment of any of the bonds of Series K,
other than principal and interest, and shall include the Make-Whole
Amount.
C. For purposes of this Eighteenth Supplemental Indenture, the
term "MAKE-WHOLE AMOUNT" shall mean: to the extent that the Treasury
Rate (hereinafter defined) at the time of such redemption is lower than
7.11% per annum, the excess of (i) the present value of the principal
and interest payments on and in respect of the Series K Bonds being
redeemed, that would otherwise become due and payable (without giving
effect to such redemption), discounted semi-annually at a rate which is
equal to the Treasury Rate plus 50 basis points over (ii) the principal
amount of the Series K Bonds being redeemed. To the extent that the
Treasury Rate at the time of such redemption is equal to or higher than
PAGE 14
7.11% per annum, the Make-Whole Amount is zero.
For purposes of this Eighteenth Supplemental Indenture, the term
"TREASURY RATE" shall mean at the time of any redemption with respect
toany Series K Bonds being redeemed, the arithmetic average of the two
most recent yields to maturity on the United States Treasury obligation
with a constant maturity (as compiled by and published by the United
States Federal Reserve Statistical Release designated H.15(519) or its
successor publication for the two business days next preceding the date
of such redemption) most nearly equal to (by rounding to the nearest
month) the Remaining Life to Maturity (hereinafter defined) of the
Series K Bonds then being redeemed. If no maturity exactly
corresponding to such Remaining Life to Maturity of the Series K Bonds
shall appear therein, the yields for the two most closely corresponding
published maturities shall be calculated pursuant to the foregoing
sentence and the Treasury Rate shall be interpolated from such yields on
a straight-line basis (rounding, in the case of relevant periods, to the
nearest month).
For purposes of this Eighteenth Supplemental Indenture, the term
"REMAINING LIFE TO MATURITY" of the Series K Bonds shall mean, at any
date, the number of years obtained by dividing the then Remaining
Dollar-years (hereinafter defined) of such Series K Bonds by the then
outstanding principal amount of such Series K Bonds. For purposes of
this definition, the "REMAINING DOLLAR-YEARS" of any such Series K Bonds
shall mean, at any date, the product obtained by multiplying (i) the
aggregate outstanding principal amount of such Series K Bonds, by (ii)
the number of twelve-month periods (calculated to the nearest one-
twelfth) which will elapse between such date and December 30, 2033.
D. Notwithstanding the provisions of Section 2 of Article IV of
the Principal Indenture, the Company will cause the Trustee to give
irrevocable notice to each registered owner of the Series K Bonds of any
redemption of the Series K Bonds pursuant to the preceding paragraphs A
or B not less than 30 days nor more than 45 days before the date upon
which the redemption is to be made, specifying (i) the date upon which
redemption is to be made (the "PREPAYMENT DATE") and (ii) the principal
amount of the holder's Series K Bonds to be redeemed on such date.
Notice of redemption having been so given, the redemption price payable
with respect to the Series K Bonds to be so redeemed shall become due
and payable on the Prepayment Date.
SECTION 4. Notwithstanding the foregoing provisions of this Article, of
Sections 2, 3 and 6 of Article IV of the Principal Indenture and of any bond
of Series K:
A. Payment of principal, premium, if any, and interest on any bond of
Series K and any redemption price of all or a portion of the principal
amount thereof shall be made by the Trustee to the registered owner
thereof without presentation or surrender thereof to the Trustee if
there shall be on file with the Trustee (and not theretofore rescinded
by written notice from such registered owner to the Trustee) an
agreement (or a conformed copy thereof) between the Company and such
registered owner or the person for whom such registered owner is the
nominee or a predecessor in interest of such registered owner or the
person for whom the registered owner is the nominee, to the effect that
(1) payments will be so made, and (2) such registered owner will not
sell, pledge, transfer or otherwise dispose of such bond of Series K
without first either (i) surrendering such bond of Series K to the
Trustee in exchange for a bond or bonds of Series K aggregating the same
principal amount as the principal amount of the bond of Series K so
surrendered which shall remain unpaid, or (ii) making notation on such
bond of Series K (or on a schedule annexed thereto) of all portions of
the principal amount thereof which have been redeemed; it being
understood that the Bond Purchase Agreement dated as of December 1, 1993
pursuant to which the bonds of Series K were initially issued
constitutes such an agreement on file with the Trustee for purposes of
PAGE 15
this paragraph A (until rescinded as provided above). The Trustee shall
not be under any duty to determine that such notations have been made
nor be liable in any manner with respect thereto or with respect to any
failure to make such notations. In case any payment is made as provided
in this subparagraph A, the Trustee shall make an appropriate notation
of such payment on its records, which records shall, in the absence of
manifest error, be controlling and conclusive.
B. In case less than all of the outstanding bonds of Series K are
to be redeemed pursuant to paragraphs A or B of Section 3 of this
Article I, the Trustee shall, at the time of each such partial
redemption, prorate among the registered owners of the bonds of Series K
in proportion to their then respective holdings the amount of bonds of
Series K then to be redeemed and designate for redemption the particular
bonds of Series K, or the principal amount so prorated, in such manner
as the Trustee in its uncontrolled discretion may deem most practicable,
PROVIDED, HOWEVER, to the extent, but only to the extent, that such
prorating would involve the redemption of bonds of Series K from any
registered owner in any amount which would not be an integral multiple
of one-hundred thousand dollars ($100,000), the Trustee may, upon any
partial redemption, in its reasonable discretion, increase or decrease
the amount of bonds of Series K to be redeemed from any registered owner
in such manner as the Trustee, in its reasonable discretion, shall deem
appropriate to maintain, insofar as possible, the principal of pro rata
redemption in any partial redemption or in any series of successive
partial redemptions. The acceptance of bonds of Series K by the
registered owners thereof shall be deemed to constitute a consent to the
foregoing provisions of this subparagraph B with the same force and
effect as if the provisions of this subparagraph B had been set forth in
a written agreement duly executed by the registered owners of all the
bonds of Series K and an executed counterpart of said agreement had been
filed with the Trustee.
PAGE 16
ARTICLE II
SECTION 1. The Company covenants and agrees that, so long as any Series
K Bonds are outstanding, dividends (hereinafter defined) paid by the Company
subsequent to December 31, 1992 will not exceed net income and earned surplus
available for dividends accumulated subsequent to December 31, 1992 determined
in accordance with any system of accounts required by law to be followed by
the Company, or in the absence of such requirements, in accordance with
generally accepted accounting principles consistently applied and with
depreciation computed as set forth under Section 2 of Article III of the
Principal Indenture, plus an amount of six million nine-hundred and ninety-
four thousand dollars ($6,994,000) from earned surplus not appropriated,
representing the amount not restricted at December 31, 1992. For purposes of
this Section 1, "DIVIDENDS" shall include any distribution with respect to the
capital stock of the Company, including the purchase or redemption thereof.
SECTION 2. The Company covenants and agrees that, so long as any Series
K Bonds are outstanding, the Company will not create, assume, incur or suffer
to exist any mortgage, lien, pledge, charge, security interest or other
encumbrance of any kind in respect of any of the mortgaged property as
security for any bonds, debentures, notes or other evidences of indebtedness
which by their terms mature one year or less from the date of issue thereof.
SECTION 3. The Company covenants and agrees that, so long as any Series
K Bonds are outstanding, the Company will not, and will not permit any
Subsidiary (as defined in the Principal Indenture) to, sell, lease, transfer
or otherwise dispose of, in any transaction or series of related transactions,
any of its property or assets, including, without limitation, any shares of
capital stock of any Subsidiary, (except in the ordinary course of business)
unless:
A. In the case of all such sales, leases, transfers and
dispositions, at the time of and immediately after giving effect to such
sale, lease, transfer or disposition, no condition or event shall exist
which constitutes or, after notice or lapse of time or both, would
constitute a default or event of default (as defined in the Principal
Indenture) under the Principal Indenture;
B. In the case of any sale, transfer, lease or disposition of
property or assets by the Company or a Subsidiary, which together with
all other properties and assets sold, leased, transferred or otherwise
disposed of by the Company and its Subsidiaries (except in the ordinary
course of business) during the same fiscal year have an aggregate book
value of not more than 5% of the consolidated assets of the Company and
its Subsidiaries as shown by a consolidated balance sheet of the Company
and its Subsidiaries as at the end of the preceding fiscal year of the
Company prepared in accordance with any System of accounts required by
law to be followed by the Company, or in the absence of such
requirements, in accordance with generally accepted accounting
principles consistently applied, the Company either (x) at the time of
such sale, transfer, lease or disposition, shall be permitted to become
liable in respect of at least one dollar ($1.00) additional funded debt
under Section 17 of Article V of the Principal Indenture or (y) shall,
or shall cause such Subsidiary, promptly to apply the aggregate net
proceeds from such sales, leases, transfers or dispositions in such
fiscal year to (i) the acquisition of property or assets substantially
similar to the property or assets so disposed of, and/or (ii) the
repayment or redemption of bonds outstanding under the Principal
Indenture, as supplemented, in accordance with the terms thereof, upon
the concurrent payment of any premium due upon such repayment or
redemption, which in the case of any redemption of the Series K Bonds
pursuant to paragraph B of Section 3 of Article I of this Eighteenth
Supplemental Indenture shall include the Make-Whole Amount;
C. In the case of any sale, transfer, lease or disposition of
property or assets by the Company or a Subsidiary, which together with
PAGE 17
all other properties and assets sold, leased, transferred or otherwise
disposed of by the Company and its Subsidiaries (except in the ordinary
course of business) during the same fiscal year have an aggregate
bookvalue of more than 5% of the consolidated assets of the Company and
its Subsidiaries as shown by a consolidated balance sheet of the Company
and its Subsidiaries as at the end of the preceding fiscal year of the
Company prepared in accordance with any system of accounts required by
law to be followed by the Company, or in the absence of such
requirements, in accordance with generally accepted accounting
principles consistently applied, the Company shall at the time of such
sale, transfer, lease or disposition be permitted to become liable in
respect of at least one dollar ($l.00) additional funded debt under
Section 17 of Article V of the Principal Indenture;
D. In the case of any sale, transfer, lease or disposition of
property or assets by the Company or a Subsidiary, which together with
all other properties and assets sold, leased, transferred or otherwise
disposed of by the Company and its Subsidiaries (except in the ordinary
course of business) during the same fiscal year have an aggregate book
value of more than 10% of the consolidated assets of the Company and its
Subsidiaries as shown by a consolidated balance sheet of the Company and
its Subsidiaries as at the end of the preceding fiscal year of the
Company prepared in accordance with any system of accounts required by
law to be followed by the Company, or in the absence of such
requirements, in accordance with generally accepted accounting
principles consistently applied, the Company (x) at the time of such
sale, transfer, lease or disposition shall be permitted to become liable
in respect of at least one dollar ($l.00) additional funded debt under
Section 17 of Article V of the Principal Indenture and (y) shall, or
shall cause such Subsidiary, promptly to apply the amount by which the
aggregate net proceeds from such sales, leases, transfers or
dispositions in such fiscal year exceeds 10% of the consolidated assets
of the Company and its Subsidiaries as shown on such balance sheet to
(i) the acquisition of property or assets substantially similar to the
property or assets so disposed of, and/or (ii) the repayment or
redemption of bonds outstanding under the Principal Indenture in
accordance with the terms thereof, upon the concurrent payment of any
premium due upon such repayment or redemption, which in the case of any
redemption of the Series K Bonds pursuant to paragraph B of Section 3 of
Article I of this Eighteenth Supplemental Indenture shall include the
Make-Whole Amount; PROVIDED, HOWEVER, that nothing contained in this
Section 3 shall prohibit any Subsidiary from selling, leasing,
transferring or otherwise disposing of any of its property or assets to
the Company or another Subsidiary, and PROVIDED, FURTHER, that any
redemption of bonds outstanding under the Indenture required pursuant to
this Section 3 shall be made pro rata among all series of bonds then
outstanding under the Principal Indenture in proportion to their then
outstanding principal amounts, PROVIDED, HOWEVER, to the extent, but
only to the extent, that such prorating would involve the redemption of
bonds of any series in any amount other than that permitted under the
terms of the bonds of such series, the Trustee may, upon any such
redemption of such series, in its reasonable discretion, increase or
decrease the amount of bonds of such series to be redeemed in such
manner as the Trustee, in its reasonable discretion, shall deem
appropriate to maintain, in so far as possible, the principal of pro
rata redemption in any such redemption or in any series of successive
redemptions.
SECTION 4. The Company covenants and agrees that, so long as any Series
K Bonds are outstanding, the Company will not, and will not permit any
Subsidiary to, make or own any Investment (hereinafter defined) other than:
A. Investments in Wholly-Owned Subsidiaries (hereinafter defined)
(or in corporations which simultaneously therewith become Wholly-Owned
Subsidiaries) made by stock purchase, capital contribution, loan or
advance;
PAGE 18
B. readily marketable obligations of, or fully and unconditionally
guaranteed (as to both principal and interest) by, the United States of
America and having a maturity not in excess of 12 months from the date
of acquisition thereof;
C. negotiable certificates of deposit (having a maturity not in
excess of 12 months from the date of acquisition thereof) evidencing
direct obligations of any commercial bank or trust company organized and
operating in the United States of America and having capital, surplus
and undivided profits of at least one-hundred million dollars
($100,000,000);
D. accounts receivable arising from transactions in the ordinary
course of business;
E. contingent liabilities represented by endorsements of
negotiable instruments for collection or deposit in the ordinary course
of business;
F. advances, deposits, down payments and prepayments on account of
firm purchase orders made in the ordinary course of business;
G. property to be used in the ordinary course of business;
H. commercial paper having a maturity not in excess of 270 days
from the date of acquisition thereof and having a rating of "A-l" or
better from Standard & Poor's Corporation or "P-l" or better from
Moody's Investors Service, Inc.;
I. Investments pursuant to the COM/ENERGY Money Pool Agreement as
was approved in an order dated November 12, 1981 of the Massachusetts
Department of Public Utilities in D.P.U. 880, as said agreement may be
amended from time to time with the written approval of the Massachusetts
Department of Public Utilities; and
J. Investments not otherwise permitted under clauses A through I
above in an aggregate amount at any time, valued at the lower of cost
and fair market value, not in excess of five percent (5%) of the
Consolidated Net Worth of the Company and its Subsidiaries, as shown on
the consolidated balance sheet of the Company and its Subsidiaries as at
the end of the preceding fiscal year of the Company, prepared in
accordance with any system of accounts required by law to be followed by
the Company, or in the absence of such requirement, in accordance with
generally accepted accounting principles consistently applied.
SECTION 5. The Company covenants and agrees that, so long as any Series
K Bonds are outstanding, the Company will not, and will not permit any
Subsidiary to, engage in any transaction with an Affiliate (hereinafter
defined) of the Company (other than a Wholly-Owned Subsidiary) or of such
Subsidiary (other than the Company or a Wholly-Owned Subsidiary) which
materially and adversely affects the financial integrity of the Company or of
the Company and its Subsidiaries taken as a whole, PROVIDED, HOWEVER, all
transactions with Affiliates specifically approved or permitted by the
Massachusetts Department of Public Utilities shall be deemed not to materially
and adversely affect the financial integrity of the Company or of the Company
and its Subsidiaries taken as a whole.
SECTION 6. The Company covenants and agrees that, so long as any Series
K Bonds are outstanding, the Company will not permit the aggregate principal
amount of outstanding funded debt (as defined in the Indenture) of its
Subsidiaries to exceed at any time fifteen percent (15%) of the Consolidated
Net Worth (hereinafter defined) of the Company and its Subsidiaries.
SECTION 7. The Company covenants and agrees that so long as any Series K
Bonds are outstanding (i) not less than 75% of the Consolidated Adjusted Net
Income (hereinafter defined) of the Company and its Subsidiaries in each
PAGE 19
fiscal year shall have been derived directly from the Company's gas utility
operations and businesses related to gas utility operations or (ii) assets
representing not less than 75% of the book value of the assets of the Company
and its Subsidiaries (as shown on the consolidated balance sheet of the
Company and its Subsidiaries as at the end of such fiscal year) shall have
been assets used in the Company's gas utility operations and businesses
related to gas utility operations.
SECTION 8. For purposes of this Article II of this Eighteenth
Supplemental Indenture the following capitalized terms shall have the
following respective meanings:
"AFFILIATE" of any Person shall mean any Person which, directly or
indirectly, controls or is controlled by or is under common control with such
Person and, without limiting the generality of the foregoing, shall include
(a) any Person beneficially owning or holding 5% or more of any class of
voting securities of such Person or (b) any other Person of which such first-
mentioned Person owns or holds 5% or more of any class of voting securities.
For the purposes of this definition, "CONTROL" (including, with correlative
meanings, the terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH"), as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting securities or by
contract or otherwise; PROVIDED that the fact that a Person may be a member of
the Board of Directors or an officer of such Person shall not by itself be a
presumption of control, and PROVIDED, FURTHER, that in no event shall the fact
that a Person is a holder of indebtedness of such Person be considered to
enable such Person to direct or cause the direction of the management and
policies of such Person.
"CONSOLIDATED ADJUSTED NET INCOME" shall mean net earnings after income
taxes of the Company and each Subsidiary, determined on a consolidated basis
and (except as may be hereinafter provided) in accordance with any system of
accounts required by law to be followed by the Company, or in the absence of
such requirements, in accordance with generally accepted accounting
principles, excluding:
(1) any gain arising from any write-up of assets;
(2) net earnings of any Person in which the Company or any Subsidiary
has an ownership interest unless those net earnings have actually been
received by the Company or the Subsidiary in the form of cash distributions
or, to the extent of their fair market value, in the form of any other freely
transferable property; and
(3) any portion of the net earnings of any Subsidiary which for any
reason is unavailable to pay dividends to the Company or any other Subsidiary.
"CONSOLIDATED NET WORTH" of the Company and its Subsidiaries shall mean,
at any date, the sum of the capital stock (minus treasury stock and capital
stock subscribed and unissued) and surplus (including retained earnings,
additional paid-in capital and the balance of the current profit and loss
account not transferred to surplus) of the Company and its Subsidiaries,
prepared on a consolidated basis in accordance with generally accepted
accounting principles, and after giving appropriate effect to outside minority
interests, if any, in Subsidiaries.
"INVESTMENT" shall mean any investment made by stock purchase, capital
contribution, loan, advance, acquisition of indebtedness, guaranty, or
otherwise.
"PERSON" shall mean an individual, a corporation, a partnership, a
trust, an unincorporated organization or a government or any agency or
political subdivision thereof.
"WHOLLY-OWNED SUBSIDIARY" shall mean any Subsidiary all of the
outstanding shares of which, other than directors qualifying shares, shall at
PAGE 20
the time be owned by the Company or by one or more Wholly-Owned Subsidiaries
or by the Company and one or more Wholly-Owned Subsidiaries and the accounts
of which are consolidated with those of the Company in accordance with
generally accepted accounting principles.
ARTICLE III
SECTION 1. All the trusts, terms, conditions, provisions and powers
conferred and set forth in the Principal Indenture and the Supplemental
Indentures (except as expressly amended hereby and except insofar as they
shall apply and relate solely to the bonds of any series issued prior to the
Series K Bonds, or are not fully consistent with the terms and provisions
hereof and of the bonds of Series K issued hereunder) apply and relate to the
Series K Bonds, as fully in all respects as if they had been specifically
contained and set forth herein.
SECTION 2. 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 and shall be subject
to the duties and liabilities of the Trustee provided in the Principal
Indenture as if the provisions concerning the same were incorporated herein at
length. The remedies and provisions of the Principal Indenture applicable in
case of any default by the Company thereunder are hereby adopted and made
applicable in case of any default with respect to the properties hereby
mortgaged and pledged to and with the Trustee. Without limiting the
generality of the foregoing, there are hereby conferred upon the Trustee the
same powers of sale and other powers over the properties described herein as
are by the Principal Indenture expressed to be conferred.
SECTION 3. The recitals and statements in this Eighteenth Supplemental
Indenture 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 Eighteenth Supplemental Indenture, and the Trustee makes no covenants
or representations, and shall not be responsible as to or for the effect,
authorization, execution, delivery, recording or filing of this Eighteenth
Supplemental Indenture, except as expressly set forth herein and in the
Principal Indenture.
SECTION 4. This Eighteenth Supplemental Indenture is expressly made
supplemental to said Principal Indenture, and the use of terms and expressions
herein is in accordance with the definitions and constructions contained
therein which Principal Indenture is hereby in all respects ratified, approved
and confirmed, except as expressly amended hereby.
SECTION 5. Any term used in this Eighteenth Supplemental Indenture, not
otherwise defined herein or in the Principal Indenture, which is defined in
the Trust Indenture Act of 1939, directly or by reference to the Securities
Act of 1933, shall have the meaning prescribed in said Trust Indenture Act of
1939.
SECTION 6. This Eighteenth Supplemental Indenture may be simultaneously
executed in any number of counterparts, and all of said counterparts executed
and delivered each as an original, shall constitute but one and the same
instrument.
IN WITNESS WHEREOF said Commonwealth Gas Company has caused its official
seal to be hereto affixed and attested and these presents to be signed in its
name and behalf by its officer thereunto duly authorized by vote of its Board
of Directors and its Stockholder, and State Street Bank and Trust Company, in
token of its acceptance of the trusts herein set forth, has caused its
corporate seal to be hereto affixed and attested and these presents to be
PAGE 21
signed by its duly authorized officers as of the day and year first above
written.
COMMONWEALTH GAS COMPANY
(CORPORATE SEAL)
By
Financial Vice President and
Treasurer
Attest
Assistant Clerk
STATE STREET BANK AND
TRUST COMPANY, Trustee
(CORPORATE SEAL)
By
Assistant Vice President
Attest
Assistant Secretary
PAGE 22
THE COMMONWEALTH OF MASSACHUSETTS
Middlesex County, ss.
On this day of December in the year 1993 before me personally
came James D. Rappoli to me personally known and being duly sworn did depose
and say that he is the Financial Vice President and Treasurer of Commonwealth
Gas Company, one of the corporations described in and which executed the
foregoing Eighteenth Supplemental Indenture; that said instrument was signed
on behalf of said corporation by authority and order of its board of directors
and by authority of its stockholders; that he signed his name thereto by like
authority and order; and he acknowledged said instrument to be his free act
and deed as such officer, and the free act and deed of said Commonwealth Gas
Company.
(Notary Seal)
Notary Public
for The Commonwealth of
Massachusetts
My Commission expires:
PAGE 23
THE COMMONWEALTH OF MASSACHUSETTS
Norfolk County, ss.
On this day of December in the year 1993 before me personally
came Daniel Golden to me personally known and being duly sworn did depose and
say that he is Assistant Vice President of State Street Bank and Trust
Company, one of the corporations described in and which executed the foregoing
Eighteenth Supplemental Indenture; that said instrument was signed on behalf
of said corporation by authority of its board of directors; and said officer
acknowledged said instrument to be his free act and deed as such officer and
the free act and deed of said State Street Bank and Trust Company.
(Notary Seal)
Notary Public
for The Commonwealth of
Massachusetts
My Commission expires:
