UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 June 30, 1995
---------------------
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 1-7727
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CONNECTICUT NATURAL GAS CORPORATION
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(Exact name of registrant as specified in its charter)
Connecticut 06-0383860
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Columbus Boulevard, Hartford, Connecticut 06103
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(Address of principal executive offices) (Zip Code)
(203) 727-3000
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(Registrant's telephone number, including area code)
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(Former name, former address and former 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 (applicable only
to Corporate Issuers). Number of shares of common stock outstanding as of
the close of business on July 25, 1995: 9,931,279.
<PAGE>
FINANCIAL STATEMENTS
CONNECTICUT NATURAL GAS CORPORATION
The condensed financial statements included herein have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Although the Company believes that
the disclosures are adequate to make the information presented not
misleading, it is suggested that these condensed financial statements be
read in conjunction with the financial statements and the notes thereto
included in the Company's latest annual report on Form 10-K. In the opinion
of the Company, all adjustments necessary to present fairly the consolidated
financial position of the Connecticut Natural Gas Corporation as of June 30,
1995 and 1994 and the results of its operations and its cash flows for the
three months, nine months and twelve months ended June 30, 1995 and 1994
have been included. The results of operations for such interim periods are
not necessarily indicative of the results for the full year.
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
<S> <C> <C> <C>
June 30, Sept. 30, June 30,
ASSETS 1995 1994 1994
------ --------- --------- ---------
Plant and Equipment:
Regulated energy $ 380,001 $ 365,638 $ 354,554
Nonregulated energy 63,636 62,728 62,481
Construction work in progress 2,233 2,762 1,305
--------- --------- ---------
445,870 431,128 418,340
Less-Allowance for depreciation 130,445 119,392 116,478
--------- --------- ---------
315,425 311,736 301,862
--------- --------- ---------
Investments, at equity 5,761 5,147 5,154
--------- --------- ---------
Current Assets:
Cash and cash equivalents 18,003 1,126 1,093
Accounts and notes receivable 30,203 28,393 43,110
Allowance for doubtful accounts (5,604) (4,017) (5,188)
Accrued utility revenue 2,595 3,714 2,668
Inventories 10,973 18,326 15,989
Prepaid expenses 2,209 10,107 2,101
Recoverable purchased gas costs - 3,769 -
--------- --------- ---------
58,379 61,418 59,773
--------- --------- ---------
Deferred Charges and Other Assets:
Unrecovered future taxes 53,018 46,759 53,181
Recoverable transition costs 5,128 6,925 14,903
Other assets 29,919 26,569 25,267
--------- --------- ---------
88,065 80,253 93,351
--------- --------- ---------
$ 467,630 $ 458,554 $ 460,140
========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED BALANCE SHEETS (Concluded)
(Thousands of Dollars)
<S> <C> <C> <C>
June 30, Sept. 30, June 30,
CAPITALIZATION AND LIABILITIES 1995 1994 1994
------------------------------ --------- --------- ---------
Capitalization:
Common Stock $ 31,045 $ 29,820 $ 29,820
Capital in excess of par value 74,018 66,657 66,700
Retained Earnings 50,577 43,264 49,915
--------- --------- ---------
155,640 139,741 146,435
Unearned compensation -
Restricted stock awards (337) (157) (402)
Treasury stock (103) (103) (103)
--------- --------- ---------
Common stock equity 155,200 139,481 145,930
Preferred stock, not subject to
mandatory redemption 906 909 939
Long-term debt 153,119 154,193 136,497
--------- --------- ---------
309,225 294,583 283,366
--------- --------- ---------
Notes Payable Under Revolving Credit
Agreements 1,000 - -
--------- --------- ---------
Current Liabilities:
Current portion of long-term debt 3,886 3,791 4,006
Notes payable and commercial paper - 18,500 20,800
Accounts payable and accrued expenses 37,595 37,906 35,111
Refundable purchased gas costs 8,741 - 10,002
Accrued liabilities 1,864 7,779 3,682
--------- --------- ---------
52,086 67,976 73,601
--------- --------- ---------
Deferred Credits:
Deferred income taxes 41,539 36,916 33,902
Unfunded deferred income taxes 53,018 46,759 55,339
Investment tax credits 3,479 3,644 3,699
Refundable taxes 3,367 3,275 3,943
Accrued transition costs 128 1,925 3,229
Other 3,788 3,476 3,061
--------- --------- ---------
105,319 95,995 103,173
--------- --------- ---------
$ 467,630 $ 458,554 $ 460,140
========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars except for per share data)
Three Months Ended
June 30,
-----------------------------
1995 1994
---------- ----------
<S> <C> <C>
Operating Revenues $ 50,147 $ 50,003
Less: Cost of Energy 26,191 26,669
State Gross Receipts Tax 1,681 1,851
---------- ----------
Operating Margin 22,275 21,483
---------- ----------
Other Operating Expenses:
Operations & maintenance expenses 13,297 14,031
Depreciation 4,324 4,073
Income taxes 65 (835)
Other taxes 1,799 1,772
---------- ----------
19,485 19,041
---------- ----------
Operating Income 2,790 2,442
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 13 4
Equity in partnership earnings 298 184
Other income (deductions) 165 (73)
Income Taxes (222) (109)
---------- ----------
254 6
---------- ----------
Interest and Debt Expense 3,669 3,356
---------- ----------
Net Loss (625) (908)
Less-Dividends on Preferred Stock 15 16
---------- ----------
Net Loss Applicable to Common Stock $ (640) $ (924)
========== ==========
Loss Per Average Share of
Common Stock $ (0.06) $ (0.10)
========== ==========
Dividends Per Share of Common Stock $ 0.37 $ 0.37
========== ==========
Average Common Shares Outstanding
During the Period 9,931,279 9,539,078
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars except for per share data)
Nine Months Ended
June 30,
-----------------------------
1995 1994
---------- ----------
<S> <C> <C>
Operating Revenues $ 232,218 $ 252,708
Less: Cost of Energy 124,647 136,766
State Gross Receipts Tax 9,121 10,326
---------- ----------
Operating Margin 98,450 105,616
---------- ----------
Operating Expenses:
Operations & maintenance expenses 39,146 42,438
Depreciation 12,825 11,438
Income taxes 12,147 15,500
Other taxes 5,507 5,622
---------- ----------
69,625 74,998
---------- ----------
Operating Income 28,825 30,618
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 76 34
Equity in partnership earnings 832 636
Other deductions (343) (977)
Income Taxes (355) 79
---------- ----------
210 (228)
---------- ----------
Interest and Debt Expense 10,652 9,582
---------- ----------
Net Income 18,383 20,808
Less-Dividends on Preferred Stock 46 49
---------- ----------
Net Income Applicable to Common Stock $ 18,337 $ 20,759
========== ==========
Income Per Average Share of
Common Stock $ 1.85 $ 2.18
========== ==========
Dividends Per Share of Common Stock $ 1.11 $ 1.11
========== ==========
Average Common Shares Outstanding
During the Period 9,925,531 9,539,903
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONNECTICUT NATURAL GAS CORPORATION "UNAUDITED"
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars except for per share data)
Twelve Months Ended
June 30,
-----------------------------
1995 1994
---------- ----------
<S> <C> <C>
Operating Revenues $ 270,172 $ 292,830
Less: Cost of Energy 143,428 160,787
State Gross Receipts Tax 10,658 11,737
---------- ----------
Operating Margin 116,086 120,306
---------- ----------
Operating Expenses:
Operations & maintenance expenses 52,752 54,111
Depreciation 16,894 14,590
Income taxes 10,000 13,171
Other taxes 7,321 7,459
---------- ----------
86,967 89,331
---------- ----------
Operating Income 29,119 30,975
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 62 10
Equity in partnership earnings 1,064 1,090
Other deductions (373) (1,095)
Income Taxes (547) (248)
---------- ----------
206 (243)
---------- ----------
Interest and Debt Expense 14,047 12,688
---------- ----------
Net Income 15,278 18,044
Less-Dividends on Preferred Stock 63 66
---------- ----------
Net Income Applicable to Common Stock $ 15,215 $ 17,978
========== ==========
Income Per Average Share of
Common Stock $ 1.55 $ 1.88
========== ==========
Dividends Per Share of Common Stock $ 1.48 $ 1.48
========== ==========
Average Common Shares Outstanding
During the Period 9,828,124 9,540,506
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Three Months Ended
June 30,
----------------------
1995 1994
---- ----
<S> <C> <C>
Cash Flows from Operations $ 16,691 $ 6,541
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (6,289) (5,802)
Other investing activities (2,023) (1,262)
-------- --------
Net cash used in investing activities (8,312) (7,064)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (3,690) (3,545)
Issuance of common stock - 74
Principal retired on long-term debt (163) (512)
Short-term debt - 4,200
-------- --------
Net cash provided/(used) by
financing activities (3,853) 217
-------- --------
Increase/(Decrease) in Cash and
Cash Equivalents 4,526 (306)
Cash and Cash Equivalents at
Beginning of Period 13,477 1,399
-------- --------
Cash and Cash Equivalents at
End of Period $ 18,003 $ 1,093
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Thousands of Dollars)
Three Months Ended
June 30,
----------------------
1995 1994
---- ----
<S> <C> <C>
Schedule Reconciling Earnings to
Cash Flows from Operations:
Income $ (625) $ (908)
-------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 4,502 4,173
Deferred income taxes, net (2,654) (3,744)
Undistributed affiliate earnings (298) (184)
Change in assets and liabilities:
Accounts receivable 20,919 18,759
Accrued utility revenue 8,909 9,908
Inventories (2,302) (8,659)
Unrecovered/(refundable)
purchased gas costs (3,628) (5,857)
Prepaid expenses 1,241 387
Accounts payable and accrued expenses (9,495) (7,448)
Other assets/liabilities 122 114
-------- --------
Total adjustments 17,316 7,449
-------- --------
Cash flows from operations $ 16,691 $ 6,541
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 4,006 $ 4,099
======== ========
Income taxes $ 5,421 $ 5,618
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Nine Months Ended
June 30,
----------------------
1995 1994
---- ----
<S> <C> <C>
Cash Flows from Operations $ 57,992 $ 27,656
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (16,216) (14,695)
Other investing activities (3,933) (6,375)
-------- --------
Net cash used in investing activities (20,149) (21,070)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (11,070) (10,637)
Issuance of common stock 8,586 147
Other stock activity, net (3) (715)
Principal retired on long-term debt (979) (2,134)
Short-term debt (17,500) 6,300
-------- --------
Net cash used by
financing activities (20,966) (7,039)
-------- --------
Increase/(Decrease) in Cash and
Cash Equivalents 16,877 (453)
Cash and Cash Equivalents at
Beginning of Period 1,126 1,546
-------- --------
Cash and Cash Equivalents at
End of Period $ 18,003 $ 1,093
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Thousands of Dollars)
Nine Months Ended
June 30,
----------------------
1995 1994
---- ----
<S> <C> <C>
Schedule Reconciling Earnings to
Cash Flows from Operations:
Income $ 18,383 $ 20,808
-------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 12,980 11,752
Deferred income taxes, net 4,510 8,405
Undistributed affiliate earnings (832) (636)
Cash distributions received from
investments 168 -
Change in assets and liabilities:
Accounts receivable (223) (16,011)
Accrued utility revenue 1,119 1,964
Inventories 7,353 4,424
Unrecovered/(refundable)
purchased gas costs 12,510 6,244
Prepaid expenses 7,898 1,278
Accounts payable and accrued expenses (6,226) (7,819)
Other assets/liabilities 352 (2,753)
-------- --------
Total adjustments 39,609 6,848
-------- --------
Cash flows from operations $ 57,992 $ 27,656
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 9,760 $ 8,924
======== ========
Income taxes $ 7,667 $ 8,324
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Twelve Months Ended
June 30,
----------------------
1995 1994
---- ----
<S> <C> <C>
Cash Flows from Operations $ 55,127 $ 31,834
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (29,380) (26,508)
Other investing activities 552 (14,239)
-------- --------
Net cash used in investing activities (28,828) (40,747)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (14,617) (14,185)
Issuance of common stock 8,577 436
Other stock activity, net (51) (724)
Issuance of long-term debt 20,000 35,100
Principal retired on long-term debt (3,498) (4,624)
Short-term debt (19,800) (7,300)
-------- --------
Net cash provided/(used) by
financing activities (9,389) 8,703
-------- --------
Increase/(Decrease) in Cash and
Cash Equivalents 16,910 (210)
Cash and Cash Equivalents at
Beginning of Period 1,093 1,303
-------- --------
Cash and Cash Equivalents at
End of Period $ 18,003 $ 1,093
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Thousands of Dollars)
Twelve Months Ended
June 30,
----------------------
1995 1994
---- ----
<S> <C> <C>
Schedule Reconciling Earnings to
Cash Flows from Operations:
Income $ 15,278 $ 18,044
-------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 17,386 15,007
Deferred income taxes, net 4,643 1,617
Undistributed affiliate earnings (1,064) (1,090)
Cash distributions received from
investments 408 251
Change in assets and liabilities:
Accounts receivable 13,323 (7,382)
Accrued utility revenue 73 618
Inventories 5,016 (2,435)
Unrecovered/(refundable)
purchased gas costs (1,261) (650)
Prepaid expenses (108) (1,088)
Accounts payable and accrued expenses 666 11,725
Other assets/liabilities 767 (2,783)
-------- --------
Total adjustments 39,849 13,790
-------- --------
Cash flows from operations $ 55,127 $ 31,834
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 10,974 $ 10,100
======== ========
Income taxes $ 9,316 $ 8,372
======== ========
</TABLE>
<PAGE>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1995
(Thousands of Dollars)
(1) Investments
In April, 1995 the Board of Directors approved the Company's 33 1/3%
participation in KBC Energy Services of New England (KBC), a joint
venture partnership with Bay State Gas Company and Koch Gas Services
Company. KBC plans to market natural gas supplies and energy
management related services on an unregulated basis to commercial and
industrial end users, primarily in New England. KBC is expected to
begin operations in the coming quarter.
(2) Reclassifications
Certain prior year amounts have been reclassified to conform with
current year classifications.
<PAGE>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 1995
(Thousands of Dollars Except Per Share Amounts)
RESULTS OF OPERATIONS
The three months ended June, 1995 loss per share of $(.06) is less than the
$(.10) loss per share recorded in the three months ended June 30, 1994. The
Company earned $1.85 per share in the nine months ended June 30, 1995 as
compared to $2.18 per share earned in the first nine months of fiscal 1994.
Twelve months ended June earnings were $1.55 in fiscal 1995 and $1.88 in
1994. This is the third consecutive reporting period in which the earnings
reported for year-to-date and twelve months ended fiscal 1995 periods are
lower than 1994. Fiscal 1995 earnings have been significantly impacted by
the warmer winter weather and the resulting decline in average use per
customer. Higher interest costs have also added to lower earnings. These
factors were partially offset by lower gas costs and additional firm
customers.
Operating Margin
Gas operating margin, equal to gas revenues less the cost of gas and
Connecticut gross revenues tax, was slightly higher in the third quarter of
1995 and 1994 and lower in 1995 for both the nine and twelve months ended
periods. The following table presents the changes in revenues, gas
operating margin and gas throughput for all periods presented in the
statements of income:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
June 30, June 30, June 30,
<S> <C> <C> <C> <C> <C> <C>
1995 1994 1995 1994 1995 1994
-------- -------- -------- -------- -------- --------
Gas Revenues $ 50,147 $ 50,003 $232,218 $252,708 $270,172 $292,830
======== ======== ======== ======== ======== ========
Gas Operating Margin $ 22,275 $ 21,483 $ 98,450 $105,616 $116,086 $120,306
======== ======== ======== ======== ======== ========
Gas Throughput (mmcf)
Firm Sales 3,228 3,017 19,426 22,316 21,371 24,213
Interruptible Sales 1,734 2,026 7,020 7,171 8,311 8,777
Off-System Sales 4,598 3,759 9,523 6,477 12,190 11,108
Transportation
Services 1,923 1,589 5,888 5,331 7,882 7,430
------ ------ ------ ------ ------ ------
Total System
Throughput 11,483 10,391 41,857 41,295 49,754 51,528
====== ====== ====== ====== ====== ======
</TABLE>
Lower nine and twelve months ended operating margins are primarily the
result of warmer weather experienced in the Company's service area during
the annual peak heating season, resulting in lower gas volumes sold to firm
customers. Lower sales more than offset the beneficial impacts to operating
margin from an increase in the number of firm customers and higher
interruptible margins resulting from lower gas costs. Higher third quarter
operating margins are primarily the result of higher interruptible margins.
Interruptible margins exceeded the Connecticut Department of Public Utility
Control (DPUC) prescribed target level related to sharing mechanisms for the
measurement period which ended in the first quarter of fiscal 1995, making a
portion of these margins subject to refund to firm customers.<PAGE>
Income Taxes
The change in income taxes reflects higher taxable income between the
comparable three months ended periods and lower taxable income between 1995
and 1994 for the nine and twelve months ended periods. In 1995 the Company
has also recognized increased income tax benefits from allowed deductions of
current and certain prior incurred cost of removal expenses associated with
retirements of plant and equipment, as approved by the Internal Revenue
Service in October, 1994. A benefit to earnings from this item of $.02,
$.10 and $.10 per share, respectively, was recorded in the three, nine and
twelve months ended June 30, 1995.
Operations and Maintenance Expenses
Operating and maintenance expenses are lower in fiscal 1995 between all
comparable periods. Lower uncollectibles expense recorded in 1995 is
primarily the result of lower customer receivables recorded in the winter
months because of the warmer weather. Environmental cleanup costs,
conservation program expenses and several other expense items are less in
fiscal 1995 because of the absence in 1994 of certain previously deferred
expenses recognized in the first quarter of fiscal 1994 in response to a
rate decision received from the DPUC. Costs related to computer rentals and
maintenance are lower because of renegotiated agreements. Total labor costs
are lower in fiscal 1995, reflecting the impact of an overall ten percent
reduction in the nonunion workforce accomplished during the fourth quarter
of fiscal 1994 through a voluntary early retirement program (VERO) and
attrition. This more than offset the impact of higher employee benefits and
pensions expenses and higher union wages resulting from newly negotiated
labor contracts.
Other Income (Deductions)
Higher interest and dividend income from investments of temporary cash
balances and reduced promotional advertising expenses are the primary
reasons for benefits to earnings from other income in the three, nine and
twelve months ended June, 1995, compared to 1994. Lower income from
merchandise sales and increases in other expenses have somewhat offset the
impact of these benefits in all periods.
Interest and Debt Expense
Higher interest and debt expense recorded throughout fiscal 1995, as
compared to 1994, is the result of additional long-term debt interest,
recognizing the effect of additional issues of medium term notes during the
last quarter of fiscal 1994. In contrast, many factors reduced the need for
short-term borrowings during this time, including lower working capital
requirements due to the warmer weather, refunds received from gas pipeline
companies and retained by the Company to offset future FERC Order 636
transition costs and the proceeds from fourth quarter, 1994 issues of medium
term notes and the first quarter, 1995 issue of Common Stock.
Earnings from Nonregulated Operations
Nonregulated operations contributed earnings of $.03, $.17 and $.31 per
share, respectively, for the quarter, year-to-date and twelve months ended
June 30, 1995, compared to $.05, $.21 and $.34 per share for the three, nine
and twelve months ended June 30, 1994. The reduced contribution to earnings
throughout fiscal 1995 reflects the combined impacts of lower steam and
chilled water customer load, lower winter steam sales, because of warmer
winter weather, and lower spring, 1995 chilled water sales from cooler
spring weather. These are partially offset by higher hot water sales
because of additional customer load and the benefits of lower fuel costs for
the production of steam. <PAGE>
MATERIAL CHANGES IN FINANCIAL CONDITION
Both investing and financing activities were funded by cash flows from
operations during all periods in fiscal 1995, and a significantly higher
level of cash and cash equivalents is on hand at June 30, 1995 when compared
to 1994. Off-season purchases of gas inventories, timed annually in
anticipation of coming needs and expected gas prices, have been postponed to
the fourth quarter in fiscal 1995, delaying this seasonal third quarter use
of working capital in 1995. The cost of gas has also been lower in the
third quarter of fiscal 1995. The proceeds from the October, 1994 issue of
Common Stock were used by the regulated operations to reduce short-term debt
and for working capital in fiscal 1995. These needs would otherwise have
been met by cash from operations or by additional short-term financing. The
warmer winter weather in fiscal 1995 reduced sales and the corresponding
purchased gas requirements, easing this need for cash during the nine and
twelve months ended periods. The Company has received refunds from gas
pipelines during the first six months of fiscal 1995. A portion of these
were retained by the Company to offset FERC 636 transition costs, as allowed
by the DPUC. The remainder are being returned to customers as reductions to
their bills through purchased gas adjustment provisions.
Cash flows from operations were also sufficient to fund both investing and
financing activities during the nine months ended June, 1994. In the three
and twelve months ended June, 1994 cash flows from operations together with
financing activities funded construction and other investing activities. In
fiscal 1994 cash flows were impacted by higher operating margins, the timing
and receipt of cash payments from customers and the amount and timing of
payments of invoices for volumes of gas purchased to serve customers.
Investing Activities
During the third quarter of fiscal 1995 the Company positioned itself to
expand its existing energy management services activities and to build on
its existing energy marketing expertise by establishing two wholly-owned
nonregulated subsidiaries of ENI, ENServe Corporation and ENI Gas Services,
Inc. Although the overall invested amounts, either individually or
together, are not material, these investments make it possible for the
Company to participate in expanded geographic areas and in additional
nonregulated energy markets.
ENI's energy services operating group was formed in 1994 to gather together
ENI's energy system operating and maintenance services offered to district
heating and cooling customers. In the third quarter of 1995 this group was
organized into a new Company, ENServe Corporation. ENServe has purchased
the assets of a Connecticut residential and light commercial heating and air
conditioning contractor and now offers residential, commercial and
industrial energy management services throughout Connecticut.
In April, 1995 the Board of Directors approved the Company's 33 1/3%
participation in KBC Energy Services of New England (KBC), a joint venture
partnership with Bay State Gas Company and Koch Gas Services Company. The
Company has formed ENI Gas Services, Inc. to own its interest in this
partnership, and the Board of Directors has authorized a capital
contribution of up to $1,700. KBC plans to market natural gas supplies and
energy management related services on an unregulated basis to commercial and
industrial end users, primarily in New England. KBC is expected to begin
operations in the coming quarter.
<PAGE>
Regulatory Matters
In April, 1995 the Company filed a notice of intent to seek a potential rate
increase of 12.8%, or approximately $33,500, with the DPUC. The Company has
also requested the recovery of certain costs which are currently deferred,
pending the outcome of these proceedings, as directed by the DPUC in its
December, 1993 rate decision. These items include energy assistance costs,
postretirement benefits other than pensions, economic development expenses
and conservation program costs above levels allowed in current rates.
Although management cannot predict the outcome of these proceedings, a
decision is expected to be received and potential new rates to be in effect
during the first quarter of fiscal 1996.
On June 30, 1995 the DPUC issued a decision related to a reopened docket
having to do with regulated propane service provided by natural gas
utilities (LDC) in Connecticut. The purpose of this proceeding was to end
LDCs' rate subsidies to certain propane customers. The Company has 377
customers that are affected by this decision. These customers have been
served under the Company's Gas Roots program since the late 1960's and early
1970's, buying propane at natural gas prices pending the extension of
natural gas distribution mains to their areas.
As a result of this DPUC decision these customers will be given the option
to become natural gas customers, purchase propane from other vendors,
convert to alternate fuels or purchase propane from the Company at natural
gas rates. The Company is obligated to expend up to two thousand dollars
per customer, along with certain other costs related to equipment on
customers' premises, to facilitate the execution of this DPUC decision.
These costs will not be passed on to ratepayers. The Company is in the
process of determining the total estimated expenditures related to this
decision. The implementation of the requirements of this decision is not
expected to have a material adverse effect on the Company's financial
condition or results of operations.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
10(lxxi) Service Agreement #86006 (Rate Schedule AFT-1), dated
September 1, 1994, between the Company and Algonquin Gas
Transmission Company
10(lxxii) Service Agreement #93005 (Rate Schedule AFT-1), dated
September 1, 1994, between the Company and Algonquin Gas
Transmission Company
10(lxxiii) Service Agreement #9B103 (Rate Schedule AFT-1), dated
September 1, 1994, between the Company and Algonquin Gas
Transmission Company
10(lxxiv) Service Agreement #9W005 (Rate Schedule AFT-1), dated
September 1, 1994, between the Company and Algonquin Gas
Transmission Company
10(lxxv) KBC Energy Services Partnership Agreement, dated June 19,
1995, By and Among Bay State Energy Enterprises, Inc., ENI
Gas Services, Inc., and Koch Energy Alliance Company
27 Financial Data Schedule
99(i) Exhibit Index
(b) No reports on Form 8-K were filed during the quarter ending June 30,
1995.
<PAGE>
SIGNATURE
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.
CONNECTICUT NATURAL GAS CORPORATION
Date 08/01/95 By: S/ Andrew H. Johnson
-------------------- -----------------------------------
(Andrew H. Johnson)
Treasurer and Chief Accounting Officer
(On behalf of the registrant and as
Chief Accounting Officer)
<PAGE>
Exhibit 99(i)
CONNECTICUT NATURAL GAS CORPORATION
Quarterly Report on Form 10-Q
Exhibit Index
Quarter Ended June 30, 1995
Document
Item Description Description
------------ ----------- ------------
99(i) Exhibit Index Ex-99.1
10(lxxi) Service Agreement #86006 between Ex-10.71
the Company and Algonquin Gas
Transmission Company
10(lxxii) Service Agreement #93005 between Ex-10.72
the Company and Algonquin Gas
Transmission Company
10(lxxiii)Service Agreement #9B103 between Ex-10.73
the Company and Algonquin Gas
Transmission Company
10(lxxiv) Service Agreement #9W005 between Ex-10.74
the Company and Algonquin Gas
Transmission Company
10(lxxv) KBC Energy Services Partnership Ex-10.75
Agreement By and Among Bay State
Energy Enterprises, Inc., ENI Gas
Services, Inc., and Koch Energy
Alliance Company
27 Financial Data Schedule Ex-27
<PAGE>
86006
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
This Agreement ("Agreement") is made and entered into this 1st day of
September, 1994, by and between Algonquin Gas Transmission Company, a
Delaware Corporation (herein called "Algonquin"), and Connecticut
Natural Gas Corporation (herein called "Customer" whether one or more
persons).
WHEREAS, Algonquin and its customers entered into a settlement
agreement in Algonquin's Docket Nos. RP93-14-000, et al. which
provided, among other things, for Algonquin's assignment of 1,702 MMBtu
per day of service entitlements on Texas Eastern Transmission
Corporation's system to Customer, and for Algonquin to provide an
equivalent quantity of service under Rate Schedule AFT-1 on the
Algonquin system; and
WHEREAS, the Federal Energy Regulatory Commission issued an order on
July 8, 1994, approving the settlement in Docket Nos. RP93-14-000, et
al.; and
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties do agree as follows:
ARTICLE I
---------
SCOPE OF AGREEMENT
------------------
1.1 Subject to the terms, conditions and limitations hereof and of
Algonquin's Rate Schedule AFT-1, Algonquin agrees to receive from
or for the account of Customer for transportation on a firm basis
quantities of natural gas tendered by Customer on any day at the
Point(s) of Receipt; provided, however, Customer shall not tender
without the prior consent of Algonquin, at any Point of Receipt on
any day a quantity of natural gas in excess of the applicable
Maximum Daily Receipt Obligation for such Point of Receipt plus
the applicable Fuel Reimbursement Quantity; and provided further
that Customer shall not tender at all Point(s) of Receipt on any
day or in any year a cumulative quantity of natural gas, without
the prior consent of Algonquin, in excess of the following
quantities of natural gas plus the applicable Fuel Reimbursement
Quantities:
Maximum Daily Transportation Quantity 1,702 MMBtu
Maximum Annual Transportation Quantity 459,540 MMBtu
1.2 Algonquin agrees to transport and deliver to or for the account of
Customer at the Point(s) of Delivery and Customer agrees to accept
or cause acceptance of delivery of the quantity received by
Algonquin on any day, less the Fuel Reimbursement Quantities;
provided, however, Algonquin shall not be obligated to deliver at
any Point of Delivery on any day a quantity of natural gas in
excess of the applicable Maximum Daily Delivery Obligation.
<PAGE>
86006
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
ARTICLE II
----------
TERM OF AGREEMENT
-----------------
2.1 This Agreement shall become effective as of the date set forth
hereinabove and shall continue in effect for a term ending on and
including April 30, 1999 ("Primary Term") and shall remain in
force from year to year thereafter unless terminated by either
party by written notice one year or more prior to the end of the
Primary Term or any successive term thereafter. Algonquin's right
to cancel this Agreement upon the expiration of the Primary Term
hereof or any succeeding term shall be subject to Customer's
rights pursuant to Sections 8 and 9 of the General Terms and
Conditions.
2.2 This Agreement may be terminated at any time by Algonquin in the
event Customer fails to pay part or all of the amount of any bill
for service hereunder and such failure continues for thirty days
after payment is due; provided Algonquin gives ten days prior
written notice to Customer of such termination and provided
further such termination shall not be effective if, prior to the
date of termination, Customer either pays such outstanding bill or
furnishes a good and sufficient surety bond guaranteeing payment
to Algonquin of such outstanding bill; provided that Algonquin
shall not be entitled to terminate service pending the resolution
of a disputed bill if Customer complies with the billing dispute
procedure currently on file in Algonquin's tariff.
ARTICLE III
-----------
RATE SCHEDULE
-------------
3.1 Customer shall pay Algonquin for all services rendered hereunder
and for the availability of such service under Algonquin's Rate
Schedule AFT-1 as filed with the Federal Energy Regulatory
Commission and as the same may be hereafter revised or changed.
The rate to be charged Customer for transportation hereunder shall
not be more than the maximum rate under Rate Schedule AFT-1, nor
less than the minimum rate under Rate Schedule AFT-1.
3.2 This Agreement and all terms and provisions contained or
incorporated herein are subject to the provisions of Algonquin's
applicable rate schedules and of Algonquin's General Terms and
Conditions on file with the Federal Energy Regulatory Commission,
or other duly constituted authorities having jurisdiction, and as
the same may be legally amended or superseded, which rate
schedules and General Terms and Conditions are by this reference
made a part hereof.
<PAGE>
86006
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
3.3 Customer agrees that Algonquin shall have the unilateral right to
file with the appropriate regulatory authority and make changes
effective in (a) the rates and charges applicable to service
pursuant to Algonquin's Rate Schedule AFT-1, (b) Algonquin's Rate
Schedule AFT-1, pursuant to which service hereunder is rendered or
(c) any provision of the General Terms and Conditions applicable
to Rate Schedule AFT-1. Algonquin agrees that Customer may
protest or contest the aforementioned filings, or may seek
authorization from duly constituted regulatory authorities for
such adjustment of Algonquin's existing FERC Gas Tariff as may be
found necessary to assure that the provisions in (a), (b), or (c)
above are just and reasonable.
ARTICLE IV
----------
POINT(S) OF RECEIPT
-------------------
Natural gas to be received by Algonquin for the account of Customer
hereunder shall be received at the outlet side of the measuring
station(s) at or near the Primary Point(s) of Receipt set forth in
Exhibit A of the service agreement, with the Maximum Daily Receipt
Obligation and the receipt pressure obligation indicated for each such
Primary Point of Receipt. Natural gas to be received by Algonquin for
the account of Customer hereunder may also be received at the outlet
side of any other measuring station on the Algonquin system, subject to
reduction pursuant to Section 6.2 of Rate Schedule AFT-1.
ARTICLE V
---------
POINT(S) OF DELIVERY
--------------------
Natural gas to be delivered by Algonquin for the account of Customer
hereunder shall be delivered on the outlet side of the measuring
station(s) at or near the Primary Point(s) of Delivery set forth in
Exhibit B of the service agreement, with the Maximum Daily Delivery
Obligation and the delivery pressure obligation indicated for each such
Primary Point of Delivery. Natural gas to be delivered by Algonquin
for the account of Customer hereunder may also be delivered at the
outlet side of any other measuring station on the Algonquin system,
subject to reduction pursuant to Section 6.4 of Rate Schedule AFT-1.
<PAGE>
86006
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
ARTICLE VI
----------
ADDRESSES
---------
Except as herein otherwise provided or as provided in the General Terms
and Conditions of Algonquin's FERC Gas Tariff, any notice, request,
demand, statement, bill or payment provided for in this Agreement, or
any notice which any party may desire to give to the other, shall be in
writing and shall be considered as duly delivered when mailed by
registered, certified, or first class mail to the post office address
of the parties hereto, as the case may be, as follows:
(a) Algonquin: Algonquin Gas Transmission Company
1284 Soldiers Field Road
Boston, MA 02135
Attn: John J. Mullaney
Vice President, Marketing
(b) Customer: Connecticut Natural Gas Corporation
100 Columbus Boulevard
P. O. Box 1500
Hartford, CT 06144-1500
Attn: Harry Kraiza, Jr.
Vice President, Energy Services
or such other address as either party shall designate by formal written
notice.
ARTICLE VII
-----------
INTERPRETATION
--------------
The interpretation and performance of the Agreement shall be in
accordance with the laws of the Commonwealth of Massachusetts,
excluding conflicts of law principles that would require the
application of the laws of a different jurisdiction.
<PAGE>
86006
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
ARTICLE VIII
------------
AGREEMENTS BEING SUPERSEDED
-----------------------------
When this Agreement becomes effective, it shall supersede the following
agreements between the parties hereto, except that in the case of
conversions from former Rate Schedules F-2 and F-3, the parties'
obligations under Article II of the service agreements pertaining to
such rate schedules shall continue in effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective agents thereunto duly authorized, the day
and year first above written.
ALGONQUIN GAS TRANSMISSION COMPANY
By: /s/ John J. Mullaney
Title: /s/ Vice President, Marketing
CONNECTICUT NATURAL GAS CORPORATION
By: /s/ Edna M. Karanian
Title: /s/ Ass't Vice Pres. Energy Planning & Procurement
<PAGE>
86006
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
Exhibit A
---------
Point(s) of Receipt
-------------------
Dated: September 1, 1994
To the service agreement under Rate Schedule AFT-1
between Algonquin Gas Transmission Company (Algonquin)
and Connecticut Natural Gas Corporation (Customer) concerning Point(s) of
Receipt
Primary Maximum Daily Maximum
Point of Receipt Obligation Receipt Pressure
Receipt (MMBtu) (Psig)
-------- ------------------ ----------------
At any pressure requested
by Algonquin not in excess
of 750 Psig.
Signed for Identification
Algonquin: /s/ John J. Mullaney
Customer: /s/ Edna M. Karanian <PAGE>
86006
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
Exhibit B
---------
Point(s) of Delivery
---------------------
Dated: September 1, 1994
To the service agreement under Rate Schedule AFT-1
between Algonquin Gas Transmission Company (Algonquin) and
Connecticut Natural Gas Corporation(Customer) concerning Point(s)of Delivery
Primary Maximum Daily Minimum
Point of Delivery Obligation Delivery Pressure
Delivery (MMBtu) (Psig)
-------- ------------------- -----------------
Signed for Identification
Algonquin: /s/ John J. Mullaney
Customer: /s/ Edna M. Karanian
FTS/cl
<PAGE>
93005
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
This Agreement ("Agreement") is made and entered into this 1st day of
September, 1994, by and between Algonquin Gas Transmission Company, a
Delaware Corporation (herein called "Algonquin"), and Connecticut
Natural Gas Corporation (herein called "Customer" whether one or more
persons).
WHEREAS, Algonquin and Customer entered into a Service Agreement dated
June 1, 1993, for service under Rate Schedule AFT-1; and
WHEREAS, Algonquin and its customers entered into a settlement
agreement in Algonquin's Docket Nos. RP93-14-000, et al. which
provided, among other things, for revised daily and annual contract
entitlements under Rate Schedules AFT-1, AFT-E, AFT-1S and AFT-ES; and
WHEREAS, the Federal Energy Regulatory Commission issued an order on
July 8, 1994, approving the settlement in Docket Nos. RP93-14-000, et
al; and
WHEREAS, Algonquin and Customer desire to execute a superseding service
agreement under Rate Schedule AFT-1 in accordance with the terms of the
settlement as approved by the Commission's July 8, 1994 order;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties do agree as follows:
ARTICLE I
---------
SCOPE OF AGREEMENT
------------------
1.1 Subject to the terms, conditions and limitations hereof and of
Algonquin's Rate Schedule AFT-1, Algonquin agrees to receive from
or for the account of Customer for transportation on a firm basis
quantities of natural gas tendered by Customer on any day at the
Point(s) of Receipt; provided, however, Customer shall not tender
without the prior consent of Algonquin, at any Point of Receipt on
any day a quantity of natural gas in excess of the applicable
Maximum Daily Receipt Obligation for such Point of Receipt plus
the applicable Fuel Reimbursement Quantity; and provided further
that Customer shall not tender at all Point(s) of Receipt on any
day or in any year a cumulative quantity of natural gas, without
the prior consent of Algonquin, in excess of the following
quantities of natural gas plus the applicable Fuel Reimbursement
Quantities:
<PAGE>
93005
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
ARTICLE I
---------
SCOPE OF AGREEMENT
------------------
(Continued)
Maximum Daily Transportation Quantity (MMBtu)
---------------------------------------------
Nov 16 - Apr 15 23,016*
Apr 16 - May 31 22,114
Jun 1 - Sep 30 20,310
Oct 1 - Nov 15 22,114
*MDTQ to be utilized in applying monthly Reservation Charge
Maximum Annual Transportation Quantity 7,987,724 MMBtu
1.2 Algonquin agrees to transport and deliver to or for the account of
Customer at the Point(s) of Delivery and Customer agrees to accept
or cause acceptance of delivery of the quantity received by
Algonquin on any day, less the Fuel Reimbursement Quantities;
provided, however, Algonquin shall not be obligated to deliver at
any Point of Delivery on any day a quantity of natural gas in
excess of the applicable Maximum Daily Delivery Obligation.
ARTICLE II
----------
TERM OF AGREEMENT
-----------------
2.1 This Agreement shall become effective as of the date set forth
hereinabove and shall continue in effect for a term ending on and
including March 31, 2000 ("Primary Term") and shall remain in
force from year to year thereafter unless terminated by either
party by written notice one year or more prior to the end of the
Primary Term or any successive term thereafter. Algonquin's right
to cancel this Agreement upon the expiration of the Primary Term
hereof or any succeeding term shall be subject to Customer's
rights pursuant to Sections 8 and 9 of the General Terms and
Conditions.<PAGE>
93005
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
----------------------------------
ARTICLE II
----------
TERM OF AGREEMENT
-----------------
(Continued)
2.2 This Agreement may be terminated at any time by Algonquin in the
event Customer fails to pay part or all of the amount of any bill
for service hereunder and such failure continues for thirty days
after payment is due; provided Algonquin gives ten days prior
written notice to Customer of such termination and provided
further such termination shall not be effective if, prior to the
date of termination, Customer either pays such outstanding bill or
furnishes a good and sufficient surety bond guaranteeing payment
to Algonquin of such outstanding bill; provided that Algonquin
shall not be entitled to terminate service pending the resolution
of a disputed bill if Customer complies with the billing dispute
procedure currently on file in Algonquin's tariff.
ARTICLE III
-----------
RATE SCHEDULE
-------------
3.1 Customer shall pay Algonquin for all services rendered hereunder
and for the availability of such service under Algonquin's Rate
Schedule AFT-1 as filed with the Federal Energy Regulatory
Commission and as the same may be hereafter revised or changed.
The rate to be charged Customer for transportation hereunder shall
not be more than the maximum rate under Rate Schedule AFT-1, nor
less than the minimum rate under Rate Schedule AFT-1.
3.2 This Agreement and all terms and provisions contained or
incorporated herein are subject to the provisions of Algonquin's
applicable rate schedules and of Algonquin's General Terms and
Conditions on file with the Federal Energy Regulatory Commission,
or other duly constituted authorities having jurisdiction, and as
the same may be legally amended or superseded, which rate
schedules and General Terms and Conditions are by this reference
made a part hereof.
<PAGE>
93005
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
ARTICLE III
-----------
RATE SCHEDULE
-------------
(Continued)
3.3 Customer agrees that Algonquin shall have the unilateral right to
file with the appropriate regulatory authority and make changes
effective in (a) the rates and charges applicable to service
pursuant to Algonquin's Rate Schedule AFT-1, (b) Algonquin's Rate
Schedule AFT-1, pursuant to which service hereunder is rendered or
(c) any provision of the General Terms and Conditions applicable
to Rate Schedule AFT-1. Algonquin agrees that Customer may
protest or contest the aforementioned filings, or may seek
authorization from duly constituted regulatory authorities for
such adjustment of Algonquin's existing FERC Gas Tariff as may be
found necessary to assure that the provisions in (a), (b), or (c)
above are just and reasonable.
ARTICLE IV
----------
POINT(S) OF RECEIPT
-------------------
Natural gas to be received by Algonquin for the account of Customer
hereunder shall be received at the outlet side of the measuring
station(s) at or near the Primary Point(s) of Receipt set forth in
Exhibit A of the service agreement, with the Maximum Daily Receipt
Obligation and the receipt pressure obligation indicated for each such
Primary Point of Receipt. Natural gas to be received by Algonquin for
the account of Customer hereunder may also be received at the outlet
side of any other measuring station on the Algonquin system, subject to
reduction pursuant to Section 6.2 of Rate Schedule AFT-1.
ARTICLE V
---------
POINT(S) OF DELIVERY
--------------------
Natural gas to be delivered by Algonquin for the account of Customer
hereunder shall be delivered on the outlet side of the measuring
station(s) at or near the Primary Point(s) of Delivery set forth in
Exhibit B of the service agreement, with the Maximum Daily Delivery
Obligation and the delivery pressure obligation indicated for each such
Primary Point of Delivery.
<PAGE>
93005
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
Natural gas to be delivered by Algonquin for the account of Customer
hereunder may also be delivered at the outlet side of any other
measuring station on the Algonquin system, subject to reduction
pursuant to Section 6.4 of Rate Schedule AFT-1.
ARTICLE VI
----------
ADDRESSES
---------
Except as herein otherwise provided or as provided in the General Terms
and Conditions of Algonquin's FERC Gas Tariff, any notice, request,
demand, statement, bill or payment provided for in this Agreement, or
any notice which any party may desire to give to the other, shall be in
writing and shall be considered as duly delivered when mailed by
registered, certified, or first class mail to the post office address
of the parties hereto, as the case may be, as follows:
(a) Algonquin: Algonquin Gas Transmission Company
1284 Soldiers Field Road
Boston, MA 02135
Attn: John J. Mullaney
Vice President, Marketing
(b) Customer: Connecticut Natural Gas Corporation
100 Columbus Boulevard
P. O. Box 1500
Hartford, CT 06144
Attn: Harry Kraiza, Jr.
Senior Vice President, Energy Services
or such other address as either party shall designate by formal written
notice.
<PAGE>
93005
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
ARTICLE VII
-----------
INTERPRETATION
--------------
The interpretation and performance of the Agreement shall be in
accordance with the laws of the Commonwealth of Massachusetts,
excluding conflicts of law principles that would require the
application of the laws of a different jurisdiction.
ARTICLE VIII
------------
AGREEMENTS BEING SUPERSEDED
---------------------------
When this Agreement becomes effective, it shall supersede the following
agreements between the parties hereto, except that in the case of
conversions from former Rate Schedules F-2 and F-3, the parties'
obligations under Article II of the service agreements pertaining to
such rate schedules shall continue in effect.
Service Agreement No. 93005 executed by Customer and Algonquin under
Rate Schedule AFT-1 dated June 1, 1993.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective agents thereunto duly authorized, the day
and year first above written.
ALGONQUIN GAS TRANSMISSION COMPANY
By: /s/ John J. Mullaney
Title: /s/ Vice President, Marketing
CONNECTICUT NATURAL GAS CORPORATION
By: /s/ Edna M. Karanian
Title: /s/ Ass't Vice Pres. Energy Planning & Procurement
<PAGE>
93005
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
Exhibit A
---------
Point(s) of Receipt
-------------------
Dated: September 1, 1994
To the service agreement under Rate Schedule AFT-1 between
Algonquin Gas Transmission Company (Algonquin) and
Connecticut Natural Gas Corporation(Customer) concerning Point(s) of Receipt
Primary Maximum Daily Maximum
Point of Receipt Obligation Receipt Pressure
Receipt (MMBtu) (Psig)
-------- ------------------ ----------------
Hanover, NJ (TETCO) At any pressure requested
Nov 16 - Apr 15 8,776 by Algonquin but not in
Apr 16 - May 31 8,432 excess of 750 Psig.
Jun 1 - Sep 30 7,744
Oct 1 - Nov 15 8,432
Lambertville, NJ At any pressure requested
Nov 16 - Apr 15 14,240 by Algonquin but not in
Apr 16 - May 31 13,682 excess of 750 Psig.
Jun 1 - Sep 30 12,566
Oct 1 - Nov 15 13,682
Signed for Identification
Algonquin: /s/ John J. Mullaney
Customer: /s/ Edna M. Karanian
<PAGE>
93005
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
Exhibit B
---------
Point(s) of Delivery
--------------------
Dated: September 1, 1994
To the service agreement under Rate Schedule AFT-1 between
Algonquin Gas Transmission Company (Algonquin) and
Connecticut Natural Gas Corporation (Customer) concerning Point(s) of
Delivery
Primary Maximum Daily Minimum
Point of Delivery Obligation Delivery Pressure
Delivery (MMBtu) (Psig)
-------- ------------------- -----------------
On the outlet side
of meter stations
located at:
Cromwell, CT 230
Nov 16 - Apr 15 23,016
Apr 16 - May 31 22,114
Jun 1 - Sep 30 20,310
Oct 1 - Nov 15 22,114
Farmington
(Southington), CT 50
Nov 16 - Apr 15 1,119
Apr 16 - May 31 1,075
Jun 1 - Sep 30 987
Oct 1 - Nov 15 1,075
Signed for Identification
Algonquin: /s/ John J. Mullaney
Customer: /s/ Edna M. Karanian
<PAGE>
93005
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
Exhibit B
---------
Point(s) of Delivery
--------------------
Dated: September 1, 1994
To the service agreement under Rate Schedule AFT-1 between
Algonquin Gas Transmission Company (Algonquin) and
Connecticut Natural Gas Corporation (Customer) concerning Point(s) of
Delivery
Primary Maximum Daily Minimum
Point of Delivery Obligation Delivery Pressure
Delivery (MMBtu) (Psig)
-------- ------------------- -----------------
Glastonbury, CT 150
Nov 16 - Apr 15 9,872
Apr 16 - May 31 9,485
Jun 1 - Sep 30 8,711
Oct 1 - Nov 15 9,485
Mansfield, CT 100
Nov 16 - Apr 15 102
Apr 16 - May 31 98
Jun 1 - Sep 30 90
Oct 1 - Nov 15 98
Cheshire
(Kensington), CT -
Nov 16 - Apr 15 305
Apr 16 - May 31 293
Jun 1 - Sep 30 269
Oct 1 - Nov 15 293
Signed for Identification
Algonquin: /s/ John J. Mullaney
Customer: /s/ Edna M. Karanian
FMH/cl
93005.New
<PAGE>
9B103
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
This Agreement ("Agreement") is made and entered into this 1st day of
September, 1994, by and between Algonquin Gas Transmission Company, a
Delaware Corporation (herein called "Algonquin"), and Connecticut
Natural Gas Corporation (herein called "Customer" whether one or more
persons).
WHEREAS, Algonquin and Customer entered into a Service Agreement dated
June 1, 1993, for service under Rate Schedule AFT-1; and
WHEREAS, Algonquin and its customers entered into a settlement
agreement in Algonquin's Docket Nos. RP93-14-000, et al. which
provided, among other things, for revised daily and annual contract
entitlements under Rate Schedules AFT-1, AFT-E, AFT-1S and AFT-ES; and
WHEREAS, the Federal Energy Regulatory Commission issued an order on
July 8, 1994, approving the settlement in Docket Nos. RP93-14-000, et
al; and
WHEREAS, Algonquin and Customer desire to execute a superseding service
agreement under Rate Schedule AFT-1 in accordance with the terms of the
settlement as approved by the Commission's July 8, 1994 order;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties do agree as follows:
ARTICLE I
---------
SCOPE OF AGREEMENT
------------------
1.1 Subject to the terms, conditions and limitations hereof and of
Algonquin's Rate Schedule AFT-1, Algonquin agrees to receive from
or for the account of Customer for transportation on a firm basis
quantities of natural gas tendered by Customer on any day at the
Point(s) of Receipt; provided, however, Customer shall not tender
without the prior consent of Algonquin, at any Point of Receipt on
any day a quantity of natural gas in excess of the applicable
Maximum Daily Receipt Obligation for such Point of Receipt plus
the applicable Fuel Reimbursement Quantity; and provided further
that Customer shall not tender at all Point(s) of Receipt on any
day or in any year a cumulative quantity of natural gas, without
the prior consent of Algonquin, in excess of the following
quantities of natural gas plus the applicable Fuel Reimbursement
Quantities:
<PAGE>
9B103
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
ARTICLE I
---------
SCOPE OF AGREEMENT
------------------
(Continued)
Maximum Daily Transportation Quantity (MMBtu)
---------------------------------------------
Nov 16 - Apr 15 4,230*
Apr 16 - May 31 2,820
Jun 1 - Sep 30 0
Oct 1 - Nov 15 2,820
*MDTQ to be utilized in applying monthly Reservation Charge
Maximum Annual Transportation Quantity 898,170 MMBtu
1.2 Algonquin agrees to transport and deliver to or for the account of
Customer at the Point(s) of Delivery and Customer agrees to accept
or cause acceptance of delivery of the quantity received by
Algonquin on any day, less the Fuel Reimbursement Quantities;
provided, however, Algonquin shall not be obligated to deliver at
any Point of Delivery on any day a quantity of natural gas in
excess of the applicable Maximum Daily Delivery Obligation.
ARTICLE II
----------
TERM OF AGREEMENT
-----------------
2.1 This Agreement shall become effective as of the date set forth
hereinabove and shall continue in effect for a term ending on and
including April 15, 2000 ("Primary Term") and shall remain in
force from year to year thereafter unless terminated by either
party by written notice one year or more prior to the end of the
Primary Term or any successive term thereafter. Algonquin's right
to cancel this Agreement upon the expiration of the Primary Term
hereof or any succeeding term shall be subject to Customer's
rights pursuant to Sections 8 and 9 of the General Terms and
Conditions.
<PAGE>
9B103
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
ARTICLE II
----------
TERM OF AGREEMENT
-----------------
(Continued)
2.2 This Agreement may be terminated at any time by Algonquin in the
event Customer fails to pay part or all of the amount of any bill
for service hereunder and such failure continues for thirty days
after payment is due; provided Algonquin gives ten days prior
written notice to Customer of such termination and provided
further such termination shall not be effective if, prior to the
date of termination, Customer either pays such outstanding bill or
furnishes a good and sufficient surety bond guaranteeing payment
to Algonquin of such outstanding bill; provided that Algonquin
shall not be entitled to terminate service pending the resolution
of a disputed bill if Customer complies with the billing dispute
procedure currently on file in Algonquin's tariff.
ARTICLE III
-----------
RATE SCHEDULE
-------------
3.1 Customer shall pay Algonquin for all services rendered hereunder
and for the availability of such service under Algonquin's Rate
Schedule AFT-1 as filed with the Federal Energy Regulatory
Commission and as the same may be hereafter revised or changed.
The rate to be charged Customer for transportation hereunder shall
not be more than the maximum rate under Rate Schedule AFT-1, nor
less than the minimum rate under Rate Schedule AFT-1.
3.2 This Agreement and all terms and provisions contained or
incorporated herein are subject to the provisions of Algonquin's
applicable rate schedules and of Algonquin's General Terms and
Conditions on file with the Federal Energy Regulatory Commission,
or other duly constituted authorities having jurisdiction, and as
the same may be legally amended or superseded, which rate
schedules and General Terms and Conditions are by this reference
made a part hereof.
<PAGE>
9B103
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
ARTICLE III
-----------
RATE SCHEDULE
-------------
(Continued)
3.3 Customer agrees that Algonquin shall have the unilateral right to
file with the appropriate regulatory authority and make changes
effective in (a) the rates and charges applicable to service
pursuant to Algonquin's Rate Schedule AFT-1, (b) Algonquin's Rate
Schedule AFT-1, pursuant to which service hereunder is rendered or
(c) any provision of the General Terms and Conditions applicable
to Rate Schedule AFT-1. Algonquin agrees that Customer may
protest or contest the aforementioned filings, or may seek
authorization from duly constituted regulatory authorities for
such adjustment of Algonquin's existing FERC Gas Tariff as may be
found necessary to assure that the provisions in (a), (b), or (c)
above are just and reasonable.
ARTICLE IV
----------
POINT(S) OF RECEIPT
-------------------
Natural gas to be received by Algonquin for the account of Customer
hereunder shall be received at the outlet side of the measuring
station(s) at or near the Primary Point(s) of Receipt set forth in
Exhibit A of the service agreement, with the Maximum Daily Receipt
Obligation and the receipt pressure obligation indicated for each such
Primary Point of Receipt. Natural gas to be received by Algonquin for
the account of Customer hereunder may also be received at the outlet
side of any other measuring station on the Algonquin system, subject to
reduction pursuant to Section 6.2 of Rate Schedule AFT-1.
ARTICLE V
---------
POINT(S) OF DELIVERY
--------------------
Natural gas to be delivered by Algonquin for the account of Customer
hereunder shall be delivered on the outlet side of the measuring
station(s) at or near the Primary Point(s) of Delivery set forth in
Exhibit B of the service agreement, with the Maximum Daily Delivery
Obligation and the delivery pressure obligation indicated for each such
Primary Point of Delivery.
<PAGE>
9B103
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
----------------------------------
Natural gas to be delivered by Algonquin for the account of Customer
hereunder may also be delivered at the outlet side of any other
measuring station on the Algonquin system, subject to reduction
pursuant to Section 6.4 of Rate Schedule AFT-1.
ARTICLE VI
----------
ADDRESSES
---------
Except as herein otherwise provided or as provided in the General Terms
and Conditions of Algonquin's FERC Gas Tariff, any notice, request,
demand, statement, bill or payment provided for in this Agreement, or
any notice which any party may desire to give to the other, shall be in
writing and shall be considered as duly delivered when mailed by
registered, certified, or first class mail to the post office address
of the parties hereto, as the case may be, as follows:
(a) Algonquin: Algonquin Gas Transmission Company
1284 Soldiers Field Road
Boston, MA 02135
Attn: John J. Mullaney
Vice President, Marketing
(b) Customer: Connecticut Natural Gas Corporation
100 Columbus Boulevard
P. O. Box 1500
Hartford, CT 06144
Attn: Harry Kraiza, Jr.
Senior Vice President, Energy Services
or such other address as either party shall designate by formal written
notice.
<PAGE>
9B103
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
ARTICLE VII
-----------
INTERPRETATION
--------------
The interpretation and performance of the Agreement shall be in
accordance with the laws of the Commonwealth of Massachusetts,
excluding conflicts of law principles that would require the
application of the laws of a different jurisdiction.
ARTICLE VIII
------------
AGREEMENTS BEING SUPERSEDED
---------------------------
When this Agreement becomes effective, it shall supersede the following
agreements between the parties hereto, except that in the case of
conversions from former Rate Schedules F-2 and F-3, the parties'
obligations under Article II of the service agreements pertaining to
such rate schedules shall continue in effect.
Service Agreement No. 9B103 executed by Customer and Algonquin under
Rate Schedule AFT-1 dated June 1, 1993.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective agents thereunto duly authorized, the day
and year first above written.
ALGONQUIN GAS TRANSMISSION COMPANY
By: /s/ John J. Mullaney
Title: /s/ Vice President, Marketing
CONNECTICUT NATURAL GAS CORPORATION
By: /s/ Edna M. Karanian
Title: /s/ Ass't Vice Pres. Energy Planning & Procurement
<PAGE>
9B103
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
Exhibit A
---------
Point(s) of Receipt
-------------------
Dated: September 1, 1994
To the service agreement under Rate Schedule AFT-1 between
Algonquin Gas Transmission Company (Algonquin) and
Connecticut Natural Gas Corporation(Customer) concerning Point(s) of Receipt
Primary Maximum Daily Maximum
Point of Receipt Obligation Receipt Pressure
Receipt (MMBtu) (Psig)
-------- ------------------ ----------------
Lambertville, NJ At any pressure requested
Nov 16 - Apr 15 4,230 by Algonquin but not in
Apr 16 - May 31 2,820 excess of 750 Psig.
Jun 1 - Sep 30 0
Oct 1 - Nov 15 2,820
Signed for Identification
Algonquin: /s/ John J. Mullaney
Customer: /s/ Edna M. Karanian
<PAGE>
9B103
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
Exhibit B
--------
Point(s) of Delivery
---------------
Dated: September 1, 1994
To the service agreement under Rate Schedule AFT-1 between
Algonquin Gas Transmission Company (Algonquin) and
Connecticut Natural Gas Corporation (Customer) concerning Point(s) of
Delivery
Primary Maximum Daily Minimum
Point of Delivery Obligation Delivery Pressure
Delivery (MMBtu) (Psig)
-------- ------------------- -----------------
On the outlet side
of meter station
located at:
Glastonbury, CT 150
Nov 16 - Apr 15 4,230
Apr 16 - May 31 2,820
Jun 1 - Sep 30 0
Oct 1 - Nov 15 2,820
Signed for Identification
Algonquin: /s/ John J. Mullaney
Customer: /s/ Edna M. Karanian
FMH/cl
9B103.New
<PAGE>
9W005
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
This Agreement ("Agreement") is made and entered into this 1st day of
September, 1994, by and between Algonquin Gas Transmission Company, a
Delaware Corporation (herein called "Algonquin"), and Connecticut
Natural Gas Corporation (herein called "Customer" whether one or more
persons).
WHEREAS, Algonquin and Customer entered into a Service Agreement dated
June 1, 1993, for service under Rate Schedule AFT-1; and
WHEREAS, Algonquin and its customers entered into a settlement
agreement in Algonquin's Docket Nos. RP93-14-000, et al. which
provided, among other things, for revised daily and annual contract
entitlements under Rate Schedules AFT-1, AFT-E, AFT-1S and AFT-ES; and
WHEREAS, the Federal Energy Regulatory Commission issued an order on
July 8, 1994, approving the settlement in Docket Nos. RP93-14-000, et
al; and
WHEREAS, Algonquin and Customer desire to execute a superseding
service agreement under Rate Schedule AFT-1 in accordance with the
terms of the settlement as approved by the Commission's July 8, 1994
order;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties do agree as follows:
ARTICLE I
---------
SCOPE OF AGREEMENT
------------------
1.1 Subject to the terms, conditions and limitations hereof and of
Algonquin's Rate Schedule AFT-1, Algonquin agrees to receive from
or for the account of Customer for transportation on a firm basis
quantities of natural gas tendered by Customer on any day at the
Point(s) of Receipt; provided, however, Customer shall not tender
without the prior consent of Algonquin, at any Point of Receipt
on any day a quantity of natural gas in excess of the applicable
Maximum Daily Receipt Obligation for such Point of Receipt plus
the applicable Fuel Reimbursement Quantity; and provided further
that Customer shall not tender at all Point(s) of Receipt on any
day or in any year a cumulative quantity of natural gas, without
the prior consent of Algonquin, in excess of the following
quantities of natural gas plus the applicable Fuel Reimbursement
Quantities:
<PAGE>
9W005
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
ARTICLE I
---------
SCOPE OF AGREEMENT
------------------
(Continued)
Maximum Daily Transportation Quantity (MMBtu)
---------------------------------------------
Nov 16 - Apr 15 23,712*
Apr 16 - May 31 15,808
Jun 1 - Sep 30 0
Oct 1 - Nov 15 15,808
*MDTQ to be utilized in applying monthly Reservation Charge
Maximum Annual Transportation Quantity 5,034,848 MMBtu
1.2 Algonquin agrees to transport and deliver to or for the account
of Customer at the Point(s) of Delivery and Customer agrees to
accept or cause acceptance of delivery of the quantity received
by Algonquin on any day, less the Fuel Reimbursement Quantities;
provided, however, Algonquin shall not be obligated to deliver at
any Point of Delivery on any day a quantity of natural gas in
excess of the applicable Maximum Daily Delivery Obligation.
ARTICLE II
----------
TERM OF AGREEMENT
-----------------
2.1 This Agreement shall become effective as of the date set forth
hereinabove and shall continue in effect for a term ending on and
including April 15, 2004 ("Primary Term") and shall remain in
force from year to year thereafter unless terminated by either
party by written notice one year or more prior to the end of the
Primary Term or any successive term thereafter. Algonquin's
right to cancel this Agreement upon the expiration of the Primary
Term hereof or any succeeding term shall be subject to Customer's
rights pursuant to Sections 8 and 9 of the General Terms and
Conditions.
<PAGE>
9W005
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
ARTICLE II
----------
TERM OF AGREEMENT
-----------------
(Continued)
2.2 This Agreement may be terminated at any time by Algonquin in the
event Customer fails to pay part or all of the amount of any bill
for service hereunder and such failure continues for thirty days
after payment is due; provided Algonquin gives ten days prior
written notice to Customer of such termination and provided
further such termination shall not be effective if, prior to the
date of termination, Customer either pays such outstanding bill
or furnishes a good and sufficient surety bond guaranteeing
payment to Algonquin of such outstanding bill; provided that
Algonquin shall not be entitled to terminate service pending the
resolution of a disputed bill if Customer complies with the
billing dispute procedure currently on file in Algonquin's
tariff.
ARTICLE III
-----------
RATE SCHEDULE
-------------
3.1 Customer shall pay Algonquin for all services rendered hereunder
and for the availability of such service under Algonquin's Rate
Schedule AFT-1 as filed with the Federal Energy Regulatory
Commission and as the same may be hereafter revised or changed.
The rate to be charged Customer for transportation hereunder
shall not be more than the maximum rate under Rate Schedule
AFT-1, nor less than the minimum rate under Rate Schedule AFT-1.
3.2 This Agreement and all terms and provisions contained or
incorporated herein are subject to the provisions of Algonquin's
applicable rate schedules and of Algonquin's General Terms and
Conditions on file with the Federal Energy Regulatory Commission,
or other duly constituted authorities having jurisdiction, and as
the same may be legally amended or superseded, which rate
schedules and General Terms and Conditions are by this reference
made a part hereof.
<PAGE>
9W005
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
ARTICLE III
-----------
RATE SCHEDULE
--------------
(Continued)
3.3 Customer agrees that Algonquin shall have the unilateral right to
file with the appropriate regulatory authority and make changes
effective in (a) the rates and charges applicable to service
pursuant to Algonquin's Rate Schedule AFT-1, (b) Algonquin's Rate
Schedule AFT-1, pursuant to which service hereunder is rendered
or (c) any provision of the General Terms and Conditions
applicable to Rate Schedule AFT-1. Algonquin agrees that
Customer may protest or contest the aforementioned filings, or
may seek authorization from duly constituted regulatory
authorities for such adjustment of Algonquin's existing FERC Gas
Tariff as may be found necessary to assure that the provisions in
(a), (b), or (c) above are just and reasonable.
ARTICLE IV
----------
POINT(S) OF RECEIPT
-------------------
Natural gas to be received by Algonquin for the account of Customer
hereunder shall be received at the outlet side of the measuring
station(s) at or near the Primary Point(s) of Receipt set forth in
Exhibit A of the service agreement, with the Maximum Daily Receipt
Obligation and the receipt pressure obligation indicated for each such
Primary Point of Receipt. Natural gas to be received by Algonquin for
the account of Customer hereunder may also be received at the outlet
side of any other measuring station on the Algonquin system, subject
to reduction pursuant to Section 6.2 of Rate Schedule AFT-1.
ARTICLE V
---------
POINT(S) OF DELIVERY
--------------------
Natural gas to be delivered by Algonquin for the account of Customer
hereunder shall be delivered on the outlet side of the measuring
station(s) at or near the Primary Point(s) of Delivery set forth in
Exhibit B of the service agreement, with the Maximum Daily Delivery
Obligation and the delivery pressure obligation indicated for each
such Primary Point of Delivery.
<PAGE>
9W005
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
Natural gas to be delivered by Algonquin for the account of Customer
hereunder may also be delivered at the outlet side of any other
measuring station on the Algonquin system, subject to reduction
pursuant to Section 6.4 of Rate Schedule AFT-1.
ARTICLE VI
----------
ADDRESSES
---------
Except as herein otherwise provided or as provided in the General
Terms and Conditions of Algonquin's FERC Gas Tariff, any notice,
request, demand, statement, bill or payment provided for in this
Agreement, or any notice which any party may desire to give to the
other, shall be in writing and shall be considered as duly delivered
when mailed by registered, certified, or first class mail to the post
office address of the parties hereto, as the case may be, as follows:
(a) Algonquin: Algonquin Gas Transmission Company
1284 Soldiers Field Road
Boston, MA 02135
Attn: John J. Mullaney
Vice President, Marketing
(b) Customer: Connecticut Natural Gas Corporation
100 Columbus Boulevard
P. O. Box 1500
Hartford, CT 06144
Attn: Harry Kraiza, Jr.
Senior Vice President, Energy Services
or such other address as either party shall designate by formal
written notice.
<PAGE>
9W005
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
ARTICLE VII
-----------
INTERPRETATION
--------------
The interpretation and performance of the Agreement shall be in
accordance with the laws of the Commonwealth of Massachusetts,
excluding conflicts of law principles that would require the
application of the laws of a different jurisdiction.
ARTICLE VIII
------------
AGREEMENTS BEING SUPERSEDED
----------------------------
When this Agreement becomes effective, it shall supersede the
following agreements between the parties hereto, except that in the
case of conversions from former Rate Schedules F-2 and F-3, the
parties' obligations under Article II of the service agreements
pertaining to such rate schedules shall continue in effect.
Service Agreement No. 9W005 executed by Customer and Algonquin under
Rate Schedule AFT-1 dated June 1, 1993.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed by their respective agents thereunto duly authorized, the
day and year first above written.
ALGONQUIN GAS TRANSMISSION COMPANY
By: /s/ John J. Mullaney
Title: /s/ Vice President, Marketing
CONNECTICUT NATURAL GAS CORPORATION
By: /s/ Edna M. Karanian
Title: /s/ Ass't Vice Pres. Energy Planning & Procurement
<PAGE>
9W005
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
Exhibit A
-------------
Point(s) of Receipt
------------------------
Dated: September 1, 1994
To the service agreement under Rate Schedule AFT-1 between
Algonquin Gas Transmission Company (Algonquin) and
Connecticut Natural Gas Corporation(Customer) concerning Point(s) of
Receipt
Primary Maximum Daily Maximum
Point of Receipt Obligation Receipt Pressure
Receipt (MMBtu) (Psig)
-------- ------------------ ----------------
Hanover, NJ (TETCO) At any pressure requested
Nov 16 - Apr 15 14,696 by Algonquin but not in
Apr 16 - May 31 9,797 excess of 750 Psig.
Jun 1 - Sep 30 0
Oct 1 - Nov 15 9,797
Lambertville, NJ At any pressure requested
Nov 16 - Apr 15 9,016 by Algonquin but not in
Apr 16 - May 31 6,011 excess of 750 Psig.
Jun 1 - Sep 30 0
Oct 1 - Nov 15 6,011
Signed for Identification
Algonquin: /s/ John J. Mullaney
Customer: /s/ Edna M. Karanian
<PAGE>
9W005
SERVICE AGREEMENT
(APPLICABLE TO RATE SCHEDULE AFT-1)
---------------------------------
Exhibit B
---------
Point(s) of Delivery
--------------------
Dated: September 1, 1994
To the service agreement under Rate Schedule AFT-1 between
Algonquin Gas Transmission Company (Algonquin) and
Connecticut Natural Gas Corporation (Customer) concerning Point(s) of
Delivery
Primary Maximum Daily Minimum
Point of Delivery Obligation DeliveryPressure
Delivery (MMBtu) (Psig)
-------- ------------------- ----------------
On the outlet side
of meter stations
located at:
Cromwell, CT 230
Nov 16 - Apr 15 9,464
Apr 16 - May 31 6,309
Jun 1 - Sep 30 0
Oct 1 - Nov 15 6,309
Glastonbury, CT 150
Nov 16 - Apr 15 14,248 (Not to exceed
Apr 16 - May 31 9,499 2,350 MMBtu/hr
Jun 1 - Sep 30 0 under all Service
Oct 1 - Nov 15 9,499 Agreements)
Signed for Identification
Algonquin: /s/ John J. Mullaney
Customer: /s/ Edna M. Karanian
FMH/cl
9W005.New
<PAGE>
KBC ENERGY SERVICES
PARTNERSHIP AGREEMENT
BY AND AMONG
BAY STATE ENERGY ENTERPRISES, INC.,
ENI GAS SERVICES, INC., AND
KOCH ENERGY ALLIANCE COMPANY
1<PAGE>
INDEX
-----
Section No. Page No.
----------- --------
1. Definitions. 2
2. Formation and Purpose of the General Partnership. 10
3. Capital Contributions. 15
4. Capital Accounts; Allocation of Profits and Losses. 25
5. Distributions. 32
6. Accounting and Taxation. 33
7. Management of the Partnership. 41
8. Limitation of Liabilities. 49
9. Transfer or Pledge of Partnership Interests;
Admission of New Partners 51
10. References to Money. 59
11. Termination and Right of Withdrawal. 60
12. Arbitration. 67
13. General. 69
Schedule A - Percentage Interests
Schedule B - Form of Promissory Note
2<PAGE>
KBC ENERGY SERVICES
-------------------
PARTNERSHIP AGREEMENT
---------------------
PARTNERSHIP AGREEMENT (this "Agreement") made this 19th day of JUNE,
1995, by and among Bay State Energy Enterprises, Inc. ("BSEE") with offices
at 300 Friberg Parkway, Westborough, Massachusetts 01581-5039, ENI Gas
Services, Inc. ("ENIG") with offices at P. O. Box 1500, Hartford,
Connecticut 06144-1500, and Koch Energy Alliance Company ("KEAC") with
offices at 600 Travis St., Houston, Texas 77253-3327 (each of BSEE, ENIG and
KEAC being sometimes herein referred to individually as a "Partner" and
collectively as the "Partners").
RECITALS:
WHEREAS, the Partners or their Affiliates, have conducted certain
feasibility studies and undertaken certain other activities with respect to
determining the feasibility of developing and operating a business to
provide energy services; and
WHEREAS, the Partners have determined that development and operation
of a business to provide energy services is feasible and desirable, and
wish to create a partnership for purposes of further pursuing the
development and operation of such a business.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth below, and for other good and valuable consideration,
the receipt and sufficiency of which are acknowledged, the Partners,
intending to be legally bound, agree as follows:
3<PAGE>
1. DEFINITIONS. Unless otherwise required by the context, the terms
defined in this Section 1 shall, for all purposes of this Agreement, have
the respective meanings set forth below:
1.1 ADDITIONAL PARTNER. A Partner under this Agreement admitted in
accordance with the provisions of Section 9.8.
1.2 AFFILIATE. Any Person which, directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with any Person, including, but not limited to: A Parent of a Partner; such
Parent's general or limited partners if the Parent is a limited partnership,
and any corporation which owns directly or indirectly more than 50% of the
voting stock of such a general or limited partner; a corporation more than
50% of the outstanding voting stock of which is owned directly or indirectly
by a Partner or a Parent of a Partner; or a corporation more than 50% of the
outstanding voting stock of which is owned directly or indirectly by a
corporation more than 50% of the outstanding voting stock of which is owned
directly or indirectly by a Partner or by a Parent of a Partner.
1.3 ASSOCIATE. (a) Any natural person who is an Affiliate of a Partner,
as defined in Section 1.2, (b) any officer, director or key employee of a
Partner or an Affiliate of a Partner, (c) any trust or other estate in which
any natural person specified in clause (a) or (b) of this Section 1.3 has a
substantial beneficial interest or as to which such person serves as
trustee, and (d) any relative or spouse of a natural person specified in
4<PAGE>
clause (a) or (b) of this Section 1.3, or any relative of such spouse, who
has the same home as such person.
1.4 CAPITAL ACCOUNT. A Partner's Capital Account shall consist of the
total Capital Contributions credited to the Capital Account of a Partner in
accordance with Section 4, plus any profits of the Partnership and less any
losses of the Partnership determined in accordance with Required Accounting
Practice and allocated to such account in accordance with Section 4, less
any distribution to such Partner pursuant to Sections 5 or 11.5.1, and other
adjustments provided for herein or incorporated herein by reference
including adjustments consistent with the provisions of Section 1.704-1(b)
(2) (iv) of the Regulations. For purposes of measuring a Partner's Capital
Account, adjustments to Capital Accounts in accordance with the provisions
Sections 1.704-1(b) (2) (iv) (f) and (g) of the Regulations shall be made
where provided for in this Agreement, unless the Management Committee, by
100% Vote, decides otherwise.
1.5 CAPITAL CONTRIBUTION. In accordance with Regulation Section 1.704-1,
the amount of cash or the fair market value of other property contributed to
the Partnership by a Partner with respect to the interest in the Partnership
held by that Partner, made pursuant to this Agreement, and any other capital
contributions pursuant to Section 3.
1.6 CERTIFIED PUBLIC ACCOUNTANTS. A firm of independent certified public
accountants selected from time to time by the Management Committee.
5<PAGE>
1.7 CODE. The Internal Revenue Code of 1986, as amended from time to
time, or any successor law.
1.8 DEFAULTING PARTNER. A Partner which is in default of its obligation
to make Capital Contributions when due hereunder and has received notice of
such default pursuant to Section 3.3.4(a).
1.9 DEFAULTED CONTRIBUTION. As defined in Section 3.5.3.
1.10 FORMATION DATE. The date as of which the Partnership is formed and
effective, as provided in Section 2.1.
1.11 GENERAL MANAGER. Person hired by the Management Committee who shall
be responsible for overseeing Partnership's day to day operations.
1.12 HOLDING COMPANY ACT. The Public Utility Holding Company Act of 1935,
as amended from time to time, or any successor or replacement statute.
1.13 MANAGEMENT COMMITTEE. The Management Committee as provided for in
Section 7.
1.14 NATURAL GAS ACT. The Natural Gas Act, 15 U.S.C. Sections 717-717w.
1.15 NATURAL GAS POLICY ACT. The Natural Gas Policy Act, 15 U.S.C.
Sections 3301-3432.
6<PAGE>
1.16 NECESSARY GOVERNMENTAL APPROVALS. All licenses, certificates,
permits, filings, approvals and determinations (all of which must be final
and nonappealable) as may be necessary from federal, state and local
authorities having jurisdiction as may be required in connection with (a)
the formation and operation of the Partnership or the participation of a
Partner therein and (b) the purchase, export, import, transportation and
resale, if any, of the gas or services to be sold by the Partnership.
1.17 NONRECOURSE DEDUCTIONS. The definition set forth in Section 1.704-
2(b)(1) of the Regulations. The amount of Nonrecourse Deductions for a
Partnership fiscal year equals the excess, if any, of the net increase, if
any, in the amount of Partnership Minimum Gain during that fiscal year over
the aggregate amount of any distributions during that fiscal year of
proceeds of a Nonrecourse Liability that are allocable to an increase in
Partnership Minimum Gain, determined according to the provisions of Section
1.704-2(c) of the Regulations.
1.18 NONRECOURSE LIABILITY. The meaning set forth in Section 1.704-
2(b)(3) of the Regulations.
1.19 PARENT. Any Person which owns directly or indirectly more than 50%
of the outstanding voting stock of a Partner, or any general partners of
such a Person if that Person is a partnership and any corporation which owns
directly or indirectly more than 50% of the voting stock of such a general
partner.
7<PAGE>
1.20 PARTNER. Each of the Persons executing this Agreement, and any
Person substituted for an original Partner and any Additional Partner which
is admitted to the Partnership pursuant to Section 9, excluding any
Withdrawn Partner or any Person for whom another Person has been substituted
as a Partner in the Partnership pursuant to this Agreement.
1.21 PARTNER NONRECOURSE DEDUCTIONS. The definition set forth in Section
1.704-2(i)(2) of the Regulations. The amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership
fiscal year equals the excess, if any, of the net increase, if any, in the
amount of Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt during that fiscal year over the aggregate amount of any
distributions during the fiscal year to the Partner that bears the economic
risk of loss for such Partner Nonrecourse Debt to the extent such
distributions are from the proceeds of such Partner Nonrecourse Debt and are
allocable to an increase in Partner Nonrecourse Debt Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Section 1.704-2(i)(2) of the Regulations.
1.22 PARTNER NONRECOURSE DEBT. The meaning set forth in Section 1.704-
2(b)(4) of the Regulations.
1.23 PARTNER NONRECOURSE DEBT MINIMUM GAIN. An amount, with respect to
each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that
would result if such Partner Nonrecourse Debt were treated as a Nonrecourse
8<PAGE>
Liability, determined in accordance with Section 1.704-2(i) of the
Regulations.
1.24 PARTNERSHIP. The partnership created by this Agreement.
1.25 PARTNERSHIP MINIMUM GAIN. The definition set forth in Section 1.704-
2(d) of the Regulations.
1.26 PERCENTAGE INTEREST. The percentage interest in the Partnership for
each Partner as initially set forth on Schedule A hereto and as modified
from time to time in accordance with the provisions of this Agreement.
1.27 PERSON. An individual or legal entity with the capacity to contract,
including without limitation a corporation, joint stock company, business
trust or general or limited partnership.
1.28 PRE-FORMATION DATE EXPENDITURES. Expenditures made by any Partner
or any of its Affiliates prior to the Formation Date, if subsequently
approved by the Management Committee, incurred in the course of activities
reasonably related to planning, obtaining governmental approvals for,
negotiating the terms of and obtaining office space with other Persons, or
financing Partnership creation or operation. The Management Committee shall
not unreasonably withhold any approvals.
1.29 REGULATION(S). The Income Tax Regulations promulgated under the
Code, as such Regulations may be amended from time to time (including
9<PAGE>
corresponding provisions of succeeding Regulations).
1.30 REPRESENTATIVE. The individual designated by a Partner or Partners
to serve as a member of the Management Committee.
1.31 REQUIRED ACCOUNTING PRACTICE. Generally accepted accounting
principles as practiced in the United States at the time prevailing for
companies engaged in a business similar to that of the Partnership.
1.32 SECURITIES AND EXCHANGE COMMISSION. The United States Securities and
Exchange Commission or any successor thereto.
1.33 100% VOTE/UNANIMOUS VOTE. The affirmative vote, written approval or
written consent of the Representatives of Partners, having 100% of the
Percentage Interests of the Partners, or in the case of the words "Partners"
or "members of the Management Committee" preceded by any qualifying term
such as "remaining" or "non-defaulting", the affirmative vote, written
approval or written consent of such Persons, or representatives of such
persons, having 100% of the Percentage Interests of all such Persons so
referred to.
1.34 STARTUP COSTS OF PARTNERSHIP. All costs and expenses, incurred,
assumed or paid by the Partners for the acquisition, planning, financing,
construction and start-up of the Partnership, and securing Necessary
Governmental Approvals therefor determined in accordance with Required
Accounting Practice.
10<PAGE>
1.35 65% VOTE. The affirmative vote, written approval or written consent
of the Representatives of Partners, having 65% or more of the Percentage
Interests of the Partners, or in the case of the words "Partners" or
"members of the Management Committee" preceded by any qualifying term such
as "remaining" or "non-defaulting", the affirmative vote, written approval
or written consent of such Persons or representatives of such Persons,
having 65% or more of the Percentage Interests of all such persons so
referred to.
1.36 WITHDRAWN PARTNER. A person who (a) has withdrawn from the
Partnership pursuant to Section 11.4 or (b) is deemed to have withdrawn from
the Partnership pursuant to sections 3.3.4 or 11.3 of this Agreement.
1.37 WITHDRAWN PARTNER FORMER CAPITAL ACCOUNT. A contingent obligation of
the Partnership to a Withdrawn Partner equal to such Withdrawn Partner's
Capital Account (as of the date immediately prior to its withdrawal),
increased by the amount of any liabilities of the Partnership paid by such
Withdrawn Partner after withdrawal pursuant to section 3.5.2, and decreased
by all payments made to such Withdrawn Partner after its withdrawal pursuant
to Section 3.5.
11<PAGE>
2. FORMATION AND PURPOSE OF THE GENERAL PARTNERSHIP.
------------------------------------------------
2.1 FORMATION. The parties hereby form a general partnership pursuant to
the Uniform Partnership Act of the Commonwealth of Massachusetts to be
effective as of 12:01 A.M. on JUNE 19, 1995 ("Formation Date"). The
Partnership shall continue from and after the Formation Date until
terminated in accordance with Section 11 hereof.
2.2 NAME. The name of the Partnership shall be KBC Energy Services.
2.3 PURPOSE. The purpose of the Partnership will be to provide a full
range of energy services to its customers in a manner that satisfies
customers' physical and financial requirements while creating profit
opportunities for the Partnership. In particular, the services that the
Partnership will provide may include, but are not limited to, the provision
of peak, swing and/or interruptible services relating to the acquisition of
natural gas, fuel oil, propane and electricity. Also, transportation
related services may be provided including, but not limited to, interstate
pipeline service and local and intrastate delivery service. In addition,
other services which may be offered include balancing, load management,
energy management, coordinating and nominating energy products for the
customer, investment in customer energy projects, provision of negotiating
services on behalf of customer with energy providers, provision of financial
products and services, provision of storage services for customers, pricing
customization, and various administrative and agency functions. The
Partnership will also have the authority to undertake all other activities
12<PAGE>
related, necessary, appropriate or incidental to the provision of the
services referenced above.
2.4 EMPLOYEE SELECTION AND DEVELOPMENT. The Management Committee shall
select a General Manager of the Partnership and such individual will be
qualified to manage the Partnership's day to day to operations, and other
functions including but not limited to preparation of operational budgets,
forecasts, and marketing plans. The General Manager shall also be
responsible, with Management Committee approval, for hiring account
representatives, support staff analysts and other personnel as needed.
The selection of the General Manager will require the Unanimous Vote of the
Management Committee. The Management Committee shall determine the number
of employees to be employed by the Partnership and the Management Committee
shall determine the rates of compensation for the General Manger and the
other employees of the Partnership. The General Manager shall report to the
Management Committee on a pre-determined basis, as directed by the
Management Committee. The Management Committee will be responsible for the
overall direction of the Partnership's activities including, but not limited
to, establishing and/or approving operational policies and strategies, day
to day operational methods, risk limits, long-term contracts entered into
by the Partnership and investments made by the Partnership.
2.5 GOVERNMENTAL APPLICATION. The Partners shall cooperate in securing
all Necessary Governmental Approvals.
13<PAGE>
2.6 REPRESENTATIONS AND WARRANTIES CONCERNING FORMATION OF THE
PARTNERSHIP.
2.6.1 GENERAL REPRESENTATIONS AND WARRANTIES. Each Partner, at the time of
its admission to the Partnership, represents and warrants that the execution
and delivery of this Agreement, the formation or continuation of the
Partnership, as the case may be, and the performance of its obligations
hereunder will not contravene or conflict with any provision of law or of
the charter or other organizing document of such Partner or the bylaws of
such Partner if a corporation, or contravene, conflict with or constitute a
default under, any indenture, mortgage, instrument or other agreement of
such Partner or any order of any court, commission or governmental agency
applicable to such Partner. Each Partner further represents, warrants and
covenants that (a) it is, and for so long as it is a Partner hereunder it
will do or cause to be done all things necessary to continue to be, a Person
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, (b) it will not, without the prior consent of
the Management Committee, incur any indebtedness (direct or contingent) of
any kind (except indebtedness incurred to meet obligations hereunder and
owing to an Affiliate or incurred as a result of being a Partner and except
indebtedness of the Partnership, for which such Partner, as a Partner, may
be deemed liable under applicable law), acquire any assets or enter into or
conduct any business or activity of any kind, except to the extent necessary
or appropriate in connection with the performance by it of the terms of this
Agreement or incidental to its status as a Partner, (c) the execution and
14<PAGE>
delivery of this Agreement has been duly authorized, and this Agreement,
when executed and delivered by such Partner, will be its valid and binding
agreement, enforceable in accordance with the terms hereof.
2.6.2 REPRESENTATIONS AND WARRANTIES CONCERNING THE HOLDING COMPANY ACT.
(a) All Partners represent and warrant that they are not holding
companies, or subsidiaries or affiliates of holding companies which
are required to be registered with the Securities and Exchange
Commission under the Holding Company Act and the rules and
regulations promulgated thereunder, within the meaning of the Holding
Company Act.
(b) All Partners represent and warrant that no interests will be
transferred and no other actions will be taken which would result in
50% or more of the Percentage Interests in the Partnership being held
by entities which are registered holding companies under the Holding
Company Act, or subsidiaries or affiliates of registered holding
companies under the Holding Company Act.
(c) All Partners represent and warrant that no actions of any kind will
be taken by the Partnership or a Partner that will require the
Partnership, a Partner or an Affiliate of a Partner to be registered
as a Holding Company under the Holding Company Act unless approved by
100% vote of the Management Committee or the Person to be subject to
the Holding Company Act consents to such actions.
2.7 OFFICES. The principal offices of the Partnership shall be at such
place as the Management Committee may from time to time determine. Written
notice of any change in such offices shall be given to each Partner.
15<PAGE>
2.8 DEVELOPMENT OF THE PARTNERSHIP.
2.8.1 Subject to 13.10, each Partner shall devote such efforts as shall be
reasonable and necessary to develop and promote the Partnership.
2.8.2 The Management Committee shall, by 100% Vote, approve a budget for
the operation of the Partnership and shall from time to time determine the
amounts and timing of Capital Contributions to be made to the Partnership by
or on behalf of each Partner in accordance with such Partner's respective
Percentage Interest.
16<PAGE>
3. CAPITAL CONTRIBUTIONS.
---------------------
3.1 INITIAL CAPITAL CONTRIBUTIONS.
3.1.1 The initial Capital Contribution of each Partner to the Partnership
shall be as determined by the Management Committee in accordance with this
Section 3.
3.1.2 Capital Contributions made by each Partner shall, as provided in this
Section 3 and in Section 2.8.2, be credited to its respective Capital
Account as of the date received.
3.1.3 The assets, if any, acquired by means of the Pre-Formation Date
Expenditures of the Partners shall be and are hereby contributed to the
Partnership:
(a) The valuation by the Partnership of the Pre-Formation Date
Expenditures credited to each Partner shall be subject to the
determination of the Management Committee, prior to such crediting by
100% Vote; provided however, that the valuation of all Pre-Formation
Date Expenditures shall be finally determined by the Management
Committee no later than thirty (30) days after the Formation Date;
(b) Each Partner may have reasonable access to the books and records of
the other Partners and any Affiliate which has incurred expenditures
to be credited to a Partner, as appropriate and only to the extent
necessary, to verify the accuracy of such expenditures; and
(c) The expenditures credited to each Partner shall be supported in
reasonable detail by an audited statement or by a verified statement
17<PAGE>
signed by an officer of the Partner with the knowledge or information
and authority to make such verification.
3.1.4 If any Partner or Affiliate thereof has incurred Pre-Formation Date
Expenditures, as finally determined in accordance with section 3.1.3, each
Partner shall, no later than sixty (60) days after the Formation Date, make a
cash Capital Contribution to the Partnership, as appropriate, in order to as-
sure that the ratio of such Partner's Capital Account balance to the aggre-
gate of all Partners' Capital Account balances, after taking into effect the
Pre-Formation Date Expenditures credited to the Capital Accounts of the Part-
ners in accordance with sections 3.1.2 and 3.1.3, will be equal to the Per-
centage Interest of such Partner set forth on Schedule A to this Agreement
(subject to any prior adjustment to such Partner's Percentage Interest effec-
ted in accordance with the provisions of this Agreement). Unless otherwise
agreed by 100% Vote of the remaining members of the Management Committee,
in the event, after the Formation Date, of (a) the withdrawal of a Partner or
(b) a transfer of a Partner's interest or (c) payment of a Capital Contribu-
tion as provided in Section 3.5.3, the Percentage Interests set forth on
Schedule A as such Percentage Interests have been adjusted from time to time
pursuant to this Agreement, shall be further adjusted so that the Percentage
Interest of each remaining Partner shall be equal to a fraction, the numera-
tor of which is such Partner's Capital Account and the denominator of which
is the sum of all the Partners' Capital Accounts, rounded to the nearest ten-
thousandth of one percent. The Percentage Interests set forth on Schedule
A, as they may be adjusted from time to time in accordance with the
provisions of this Agreement, shall govern the obligations to make Capital
Contributions as specified in this Section 3. For purposes of determining
18<PAGE>
adjustments to Partners' Percentage Interests pursuant to this Section
3.1.4, the latest monthly statement of Capital Accounts delivered to the
Partners shall be controlling.
3.2 FORMATION DATE CAPITAL CONTRIBUTIONS.
3.2.1 On or after the Formation Date, each Partner shall contribute to the
capital of the Partnership in the form of a note payable to the Partnership,
an amount equal to its Percentage Interest multiplied by the aggregate
amount as designated by a 100% Vote of the Management Committee in
substantially the form attached hereto as Schedule B. The note payable
shall be credited to the respective Partner's Capital Account as of the
specified date. Each Partner shall at all times while the Partnership
exists maintain liquid assets sufficient to pay the outstanding balance of
any note payable to the Partnership.
3.3 PAYMENT OF CAPITAL CONTRIBUTIONS.
3.3.1 The Management Committee shall issue, or cause to be issued, a
written request to each Partner for payment of cash or other tangible
Capital Contributions against a respective Partner's note payable to the
Partnership, to be made by a specific date. The payments shall be
consistent with the Partnership operating budget most recently approved by
the Management Committee as provided in this Agreement, subject only to such
variation in the timing of such payments as may be necessitated by the cash
requirements of the Partnership. All amounts received by the Partnership
from a Partner pursuant to this section 3.3 shall reduce the balance of the
Partner's note payable to the Partnership. All amounts received from a
19<PAGE>
Partner after the date specified shall be accompanied by interest on such
overdue amounts, which interest shall be payable to the Partnership and
shall accrue from and after such specified date at a rate equal to the
lesser of 2% over the prime rate announced as in effect by First National
Bank of Boston from time to time, or the maximum interest rate allowed for
this purpose pursuant to the laws of the Commonwealth of Massachusetts. Any
such interest paid shall be credited to the respective obligations, if any,
of all of the Partners to make Capital Contributions and to the Capital
Accounts of the Partners on a pro rata basis in accordance with their
respective Percentage Interests as of the date such payment is made to the
Partnership after giving effect to the payment of the Capital Contribution
with respect to which such interest accrued.
3.3.2 Each written request issued pursuant to Section 3.3.1 shall contain
the following information:
(a) The total amount of Capital Contributions requested from all
Partners;
(b) The amount of Capital Contributions requested from each Partner, such
amounts to be in accordance with the Percentage Interests of the
Partners;
(c) The purpose for which the funds are to be applied in such reasonable
detail as the Management Committee shall direct; and
(d) The date on which payments of the Capital Contributions shall be made
(which date shall be not less than thirty (30) days following the
date the request is given) and the method of payment, provided that
such date and method shall be the same for each of the Partners.
20<PAGE>
3.3.3 Each Partner agrees that it shall make payments of its respective
Capital Contributions in accordance with requests issued pursuant to
Section 3.3.1.
3.3.4 (a) In the event a Partner shall default in the performance of any
of its obligations to make any Capital Contribution to the
Partnership in accordance with the terms of this Agreement and such
default shall continue uncured for a period of thirty (30) days after
the giving of notice to all of the Partners or their Representatives
of such default by any of the other Partners or for such extended
cure period as may be approved by 65% Vote of the Management
Committee exclusive of Representatives of Defaulting Partners, then
such Partner shall be deemed to have withdrawn from the Partnership
effective as of the 31st day after such notice or the day after
expiration of the extended cure period, as the case may be, and such
Defaulting Partner shall thereafter be a Withdrawn Partner.
Subsequent to any such event of default and unless and until such
default shall be cured as provided in Section 3.3.4(c), the
Defaulting Partner shall have no right to receive any allocations
which are attributable to its interest in the Partnership and made in
accordance with Section 4 and no distribution shall be made to the
Defaulting Partner under Section 5. Notwithstanding the above, the
allocation and distributive shares of a Defaulting Partner shall be
retained by the Partnership until such time as (i) the Defaulting
Partner has timely cured the default, at which time the Partnership
shall make such allocation to the Defaulting Partners and shall
21<PAGE>
distribute the retained funds, without interest, or (ii) the
Defaulting Partner has become a Withdrawn Partner, at which time the
allocations and the funds so retained shall remain Partnership
property.
(b) After the receipt of such notice of default pursuant to Section
3.3.4(a) and prior to the curing of any such default as provided in
Section 3.3.4(c) of this Agreement or the withdrawal of the
Defaulting Partner as provided in Section 3.3.4(a), a Defaulting
Partner shall continue to be a Partner and shall continue to be
obligated to make all Capital Contributions as provided in this
Section 3.3; provided however, that until such default is cured, such
Defaulting Partner's Representative shall not have any vote in
matters to be acted upon by the Management Committee, and such
Defaulting Partner's Percentage Interest shall not be considered in
determining the total Percentage Interests of the Partners for the
purpose of any vote of the Management Committee.
(c) A Defaulting Partner shall be deemed to have cured all defaults under
this Section 3.3 when it has fulfilled its obligations to make all
payments then due under Section 3.3 prior to the end of the period
for cure as provided in Section 3.3.4(a).
(d) Notwithstanding any other provision hereof, the obligation of a
Partner to make any Capital Contribution hereunder shall not be
22<PAGE>
reduced because of the Partner's previous failure to make any Capital
Contribution.
3.4 VOLUNTARY CONTRIBUTIONS. No Partner shall make any Capital
Contributions to the Partnership except pursuant to Section 2.8.2 and this
Section 3.
3.5 WITHDRAWN PARTNER.
3.5.1 CONSEQUENCES OF WITHDRAWAL.
(a) A Withdrawn Partner which has withdrawn from the Partnership pursuant
to Section 3.3.4, Section 11.3 or Section 11.4 shall be entitled to
receive payment from the Partnership, at a time or times when the
Management Committee determines in good faith that such payment may
be made without undue hardship to the Partnership or any Partner, of
an amount equal to its Capital Account on the date of withdrawal
(increased by the amount of any liability paid by such Withdrawn
Partner after the date of withdrawal pursuant to Section 3.5.2),
payable either in a lump sum or in installments as determined by the
Management Committee, in its sole discretion. To the extent that the
Management Committee does not determine to make such a payment, a
Withdrawn Partner which has involuntarily withdrawn from the
Partnership pursuant to Section 3.3.4 or Section 11.3 or has
voluntarily withdrawn pursuant to Section 11.4 shall be entitled only
to such amounts as may be distributed pursuant to Section 11.5.
23<PAGE>
Notwithstanding the foregoing, where a Partner voluntarily withdraws
from the Partnership pursuant to Section 11.4, in the absence of an
intervening event requiring the dissolution and winding up of the
Partnership, it shall be entitled to receive such payment no later
than three (3) years from the date of its withdrawal. From and after
the date of its withdrawal, the Capital Account balance of such a
Withdrawn Partner shall be a contingent obligation of the Partnership
and be recorded in its Withdrawn Partner Former Capital Account, and
the Withdrawn Partner's Capital Account shall be reduced to zero and
eliminated.
(b) The rights of a Withdrawn Partner set forth in Section 3.5.1(a) shall
(i) be subordinate to the rights of any other creditor of the
Partnership, (ii) not impair in any way the rights of continuing
Partners to receive distributions pursuant to Section 5, (iii) not
include any right on the part of the Withdrawn Partner to receive any
interest or other amounts with respect thereto, (iv) not be a
personal obligation of any Partner and (v) be paid as provided for in
Section 11.5 in the event of dissolution.
3.5.2 FURTHER EFFECT. Any Partner that shall have (a) elected to withdraw
or been deemed to have withdrawn from the Partnership pursuant to sections
3.3.4, 11.3 or 11.4 or (b) withdrawn in contravention of this Agreement,
shall have only those rights specifically set forth in this Agreement and
such Partner's status as a Partner shall automatically terminate. Except as
provided in Section 11.2.3, withdrawal by a Partner as described in the
24<PAGE>
preceding sentence shall not effect a dissolution and winding up of the
Partnership. A Withdrawn Partner shall remain obligated for all liabilities
attributable to its respective interest in the Partnership accruing prior to
the date of its withdrawal, including any such liabilities maturing after
such withdrawal but originating from actions taken prior thereto. Upon a
Partner's election to withdraw or where a Partner is deemed to have
withdrawn, all of such Withdrawn Partner's rights, title and interests in or
related to the Partnership shall revert to the remaining Partners in
accordance with the terms of this Agreement, so that they may continue to
operate the Partnership which shall be their sole and exclusive right.
3.5.3 CONSEQUENCES OF WITHDRAWAL TO REMAINING PARTNERS.
(a) PERCENTAGE INTEREST. If a Partner becomes, or is deemed to have
become, a Withdrawn Partner in accordance with any provision of this
Agreement, the Percentage Interest of such Withdrawn Partner shall be
allocated among the Partners on the basis agreed to by Unanimous Vote
of such remaining Partners; provided however, that if the remaining
Partners are unable to reach such agreement, the Percentage Interest
of the Withdrawn Partner shall be allocated among the remaining
Partners pro rata on the basis of their Percentage Interests. Either
such allocation must be made within seven (7) days of a Partner's
withdrawal.
(b) Capital Contributions. In the event any Partner shall have withdrawn
from the Partnership or be deemed to have withdrawn from the
Partnership pursuant to the provisions of this Agreement, if the
Management Committee determines that an amount equal to the whole or
25<PAGE>
any portion of the amount of the Capital Contributions which such
Withdrawn Partner failed to pay when due or had been requested to pay
pursuant to Section 3.3.1 (which amount shall be herein called the
"Defaulted Contribution") should be contributed to the Partnership by
remaining Partners in order to meet the cash needs of the
Partnership, it shall promptly provide written notice of such
determination to each remaining Partner, which notice shall state the
amount of the Defaulted Contribution. Each remaining Partner shall
have the right to elect (by written notice to the other Partners
within ten (10) days of the date of the notice from the Management
Committee of the Defaulted Contribution) to contribute any percentage
of the Defaulted Contribution not in excess of the percentage
determined by dividing the Percentage Interest of such remaining
Partner by the sum of the Percentage Interests of all remaining
Partners who so elect to contribute a portion of the Defaulted
Contribution (any percentage so elected being hereafter called an
"Elected Percentage"); provided however, that (a) those Partners who
so elect to satisfy a portion of the Defaulted Contribution may agree
to allocate the amounts of their contributions among such Partners in
a manner other than that provided for in this Section 3.5.3 and (b)
the sum of the Elected Percentages of the Partners who so elect to
satisfy the Defaulted Contribution must be equal to 100% of the
Defaulted Contribution. In the event that such Partners do not elect
to contribute an amount equal to 100% of the Defaulted Contribution
in accordance with the preceding portions of this Section 3.5.3(b)
and the Management Committee does not alter its determination that
26<PAGE>
the cash needs of the Partnership should be met by Capital
Contributions, then within ten (10) days of the date of a written
request therefor from the Management Committee, each Partner shall
contribute to the Partnership an amount equal to its pro rata share
(based on the ratio of such Partner's Percentage Interest to the sum
of the Percentage Interests of all the remaining Partners) of the
part of the Defaulted Contribution not otherwise elected by the
Partners in accordance with the procedures set forth herein;
provided, however, that nothing herein shall be construed as
preventing admission of a new Partner or Partners to the Partnership
in accordance with Section 9.8 in order to meet the cash needs of the
Partnership resulting from the withdrawal of a Partner or Partners.
To the extent that any Partner contributes any portion of a Capital
Contribution pursuant to this Section 3.5.3, that Partner's
Percentage Interest shall immediately be adjusted to reflect the
contribution (due account being given to the contributions of other
Partners and the termination of the Withdrawn Partner's status as a
Partner).
27<PAGE>
4. CAPITAL ACCOUNTS; ALLOCATION OF PROFITS AND LOSSES.
--------------------------------------------------
4.1 MAINTENANCE OF PARTNERS' CAPITAL ACCOUNTS. A separate Capital
Account for each Partner shall be established with respect to such Partner
and maintained throughout the term of the Partnership in accordance with
Regulations Section 1.704-1 as follows:
4.1.1 The Capital Account of each Partner shall (i) be credited with the
amount of cash and the fair market value, as determined by the Management
Committee, in writing, or in accordance with Section 3.1.3, as the case may
be, of any property contributed to the Partnership by such Partner, and with
any income and gain allocated to such Partner pursuant to this Agreement,
and (ii) be debited with the amount of cash and the fair market value, as
determined by the Management Committee as aforesaid, of any property
distributed to such Partner by the Partnership, and with any deductions and
losses allocated to such Partner pursuant to this Agreement.
4.1.2 In the event any interest in the Partnership is transferred in
accordance with the terms of this Agreement, the transferee shall succeed to
the Capital Account, if any, of the transferor to the extent it related to
the transferred interest.
4.1.3 In order to determine (i) the amounts payable to a Partner
withdrawing from the Partnership, or (ii) each Partner's Percentage Interest
upon the transfer of any interest in the Partnership in accordance with the
28<PAGE>
terms of this Agreement, the Capital Accounts of all Partners shall be
adjusted pursuant to Sections 1.704-1(b)(2)(iv)(f) and (g) of the
Regulations including the allocation and distributive share requirements
therein in order to reflect the substantial economic effect of the
transaction. Such adjustment shall reflect the revaluation of each
Partner's interest in the Partnership.
4.2 TAX ALLOCATION. All income, gain, loss, deduction or credits of the
Partnership shall be allocated between the Partners in accordance with their
respective Percentage Interests in the Partnership. The determination of
each Partner's distributive share of any Partnership income, gain, loss,
deduction, credits and tax preference items shall be made in accordance with
and in proportion to such Partner's Percentage Interest as of the date of
allocation, except as otherwise provided in this Section 4. Such
allocations shall be made for each calendar month based upon the weighted
average of each Partner's Percentage Interest during such month. The
provisions of Section 704(c) of the Code shall apply to contributed property
for the purpose of computing gain or loss and for other purposes to the
extent required by future tax regulations. Net income or net losses,
determined in accordance with Regulations 1.704-1, from the sale of
Partnership assets, including gains attributable only to prior depreciation
deductions, shall be allocated to the Partners in proportion to the
Partners' respective Percentage Interests during the period in which such
appreciation or depreciation in value took place or during the period such
depreciation deductions were taken. For purposes of determining the period
during which such appreciation or depreciation in value took place and the
29<PAGE>
amount of such appreciation or depreciation, the values assigned to total
Partnership capital at the time of admitting any Additional Partner or at
the time of any Capital Contribution by an existing Partner which is not in
proportion to the Partners' then existing Percentage Interests, shall be
used and shall be controlling.
4.2.1 The losses allocated pursuant to Section 4.2 hereof shall not exceed
the maximum amount of loss that can be so allocated without causing any
Partner to have an Adjusted Capital Account Deficit at the end of any Fiscal
Year. In the event some but not all of the Partners would have Adjusted
Capital Account Deficits as a consequence of an allocation of losses
pursuant to Section 4.2 hereof, the limitation set forth in this Section
4.2.1 shall be applied on a Partner by Partner basis so as to allocate the
maximum permissible loss to each Partner under Section 1.704(b)(2)(ii)(d) of
the Regulations. All losses in excess of the limitation set forth in this
Section 4.2.1 shall be allocated to the remaining Partners in proportion to
their Percentage Interests in the Partnership.
4.2.2 "Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Capital Account as
of the end of the relevant Fiscal Year, after giving effect to the following
adjustments;
(i) Credit to such Capital Account any amounts which such Partner is
obligated to restore pursuant to the Uniform Partnership Act of
the Commonwealth of Massachusetts, any provision of this
30<PAGE>
Agreement, or is deemed to be obligated to restore pursuant to
the next to last sentences of Regulation Sections 1.704-2(g)(1)
and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), (1.704-1(b)(2)(ii)(d)(5), and 1.704-
1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the
Regulations and shall be interpreted consistently therewith.
4.3 SPECIAL TAX ALLOCATIONS. The following special allocations shall,
except as otherwise provided, be made in the following order:
4.3.1 MINIMUM GAIN CHARGEBACK. Notwithstanding any other provision of this
Section 4, if there is a net decrease in Partnership Minimum Gain during any
Partnership fiscal year, each Partner shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent
years) in an amount equal to the portion of such Partner's share of the net
decrease in Partnership Minimum Gain, determined in accordance with
Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to
be allocated to each Partner pursuant thereto. The items to be so allocated
shall be determined in accordance with Section 1.704-2(f)(6) of the
Regulations. This Section 4.3.1 is intended to comply with the minimum gain
31<PAGE>
chargeback requirement in such Section of the Regulations and shall be
interpreted consistently therewith.
4.3.2 PARTNER NONRECOURSE DEBT MINIMUM GAIN CHARGEBACK. Notwithstanding
any other provision of this Section 4 except this Section 4.3.2, if there is
a net decrease in Partner Nonrecourse Debt Minimum Gain attributable to a
Partner Nonrecourse Debt during any Partnership fiscal year, each Partner
which has a share of the Partner Nonrecourse Debt Minimum Gain attributable
to such Partner Nonrecourse Debt, determined in accordance with Section
1.704-2(i)(5), shall be specially allocated items of Partnership income and
gain for such year (and, if necessary, subsequent years) in an amount equal
to the portion of such Partner's share of the net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant
thereto. The items to be so allocated shall be determined in accordance
with Section 1.704-2(i)(4) of the Regulations. This Section 4.3.2 is
intended to comply with the minimum gain chargeback requirement in such
Section of the Regulations and shall be interpreted consistently therewith.
4.3.3 QUALIFIED INCOME OFFSET. In the event any Partner unexpectedly
receives any adjustments, allocations, or distributions described in
Sections 1.704(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-
1(b)(2)(ii)(d)(6) of the Regulations, items of Partnership income and gain
shall be specially allocated to each such Partner in an amount and manner
32<PAGE>
sufficient to eliminate, to the extent required by the Regulations, the
Adjusted Capital Account Deficit of such Partner as quickly as possible,
provided that an allocation pursuant to this Section 4.3.3 shall be made
only if and to the extent that such Partner would have an Adjusted Capital
Account Deficit after all other allocations provided for within Section 4.3
have been tentatively made as if this Section 4.3.3 were not in this
Agreement.
4.3.4 GROSS INCOME ALLOCATION. In the event any Partner has a deficit
Capital Account at the end of any Fiscal Year which is in excess of the sum
of (i) the amount such Partner is obligated to restore pursuant to the
Uniform Partnership Act of the Commonwealth of Massachusetts or any
provision of this Agreement, and (ii) the amount such Partner is deemed to
be obligated to restore pursuant to the next to last sentences of Sections
1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations, each such Partner shall
be specially allocated items of Partnership income and gain in the amount of
such excess as quickly as possible, provided that an allocation pursuant to
this Section 4.3.4 shall be made only if and to the extent that such Partner
would have a deficit Capital Account in excess of such sum after all other
allocations provided for within Section 4.3 have been made as if Section
4.3.3 hereof and this Section 4.3.4 were not in this Agreement.
4.3.5 NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any Fiscal Year
or other period shall be specially allocated to the Partners in accord with
their respective Percentage Interests.
33<PAGE>
4.3.6 Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions
for any Fiscal Year or other period shall be specially allocated to the
Partner who bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable in accordance with Regulations Section 1.704-2(i)(1).
4.3.7 CODE SECTION 754 ADJUSTMENTS. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code Sections 734(b)
or 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such gain or loss shall be specially allocated to
the Partners in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to such Section of the
Regulations.
4.4 CURATIVE ALLOCATIONS. Any special allocation of items pursuant to
Section 4.3, other than Section 4.3.7, shall be taken into account under
Section 4.2 in computing allocations of gain or loss on each sale of
Partnership assets or an interest therein so that the net amount of income,
gains, losses or deductions and all other items allocated to each Partner
pursuant to this Section 4 shall, to the extent possible, be equal to the
net amount that would have been allocated to each Partner if the above
specified special allocations had not been made. In addition, the
34<PAGE>
Management Committee shall have reasonable discretion, on behalf of the
Partnership, to seek a waiver of the Minimum Gain Chargeback or the Partner
Nonrecourse Debt Minimum Gain Chargeback from the Commissioner of the
Internal Revenue Service to the extent permitted by Section 1.704-2(f)(4) of
the Regulations. The Partners are aware of the income tax consequences of
the allocations made by this Section 4 and hereby agree to be bound by the
provisions of this section 4 in reporting their shares of the Partnership
income or loss for income tax purposes.
4.5 Each Partner shall have reasonable access to the books and records of
the other Partner, as appropriate, to verify that the Partner has sufficient
assets to pay its Partnership obligations.
35<PAGE>
5. DISTRIBUTIONS. Distributions to the Partners shall be made only to
all Partners (other than a Defaulting Partner) simultaneously in proportion
to their respective Percentage Interests (at the time the amounts of such
distributions are determined) and in such aggregate amounts and at such
times as shall be determined by a 65% Vote of the Management Committee;
provided, however, that if for any fiscal year the Partnership shall have
earned a net profit, as determined under Required Accounting Practice, then
such net profit shall be distributed out of available cash (unless the
Management Committee, by 65% Vote, determines otherwise, or unless such
distribution would violate, or result in a default under any agreement of
the Partnership or applicable law) within sixty (60) days following the end
of such fiscal year to the Partners in proportion to their respective
Percentage Interest at the time the amount of such distribution is
determined. All amounts withheld pursuant to the Code or any provision of
any state or local tax law with respect to any payment or distribution to
the Partnership or the Partners shall be treated as amounts distributed to
the Partners pursuant to this Section 5 for all purposes under this
Agreement. The Management Committee may allocate any such amounts among the
Partners in any manner that is in accordance with applicable law.
36<PAGE>
6. ACCOUNTING AND TAXATION.
-----------------------
6.1 FISCAL YEAR. The fiscal year of the Partnership shall be the calendar
year.
6.2 LOCATION OF RECORDS. The books of account for the Partnership shall
be kept and maintained at the principal office of the Partnership or at such
other place as the Management Committee shall determine.
6.3 BOOKS OF ACCOUNT. The books of account for the Partnership shall be:
6.3.1 Maintained on an accrual basis in accordance with Required Accounting
Practice; and consistent with Regulation 1.704-1 (b) (2)(iv) (f) and (g)
where provided for herein.
6.3.2 Audited by the Certified Public Accountants at the end of each fiscal
year.
6.4 Annual Financial Statements And Tax Information. As soon as
practicable following the end of each fiscal year of the Partnership, the
Management Committee shall cause to be prepared and delivered, or cause the
General Manager to have prepared and delivered, to each Partner:
6.4.1 A profit and loss statement and a statement of changes in financial
position for such fiscal year, a balance sheet and a statement of each
Partner's Capital Account as of the end of such fiscal year, together with a
37<PAGE>
report thereon of the Certified Public Accountants; and
6.4.2 Such federal, state(s) and local (if any) income tax returns and such
other accounting, tax information and schedules as provided for in Section
6.11 of this Agreement.
6.5 INTERIM FINANCIAL STATEMENTS. As soon as practicable after the end
of each calendar month, and in any event not later than thirty (30) days
thereafter, the Management Committee shall cause to be prepared and
delivered, or cause the General Manager to have prepared and delivered to
each Partner:
6.5.1 A profit and loss statement and a statement of changes in financial
position for such month (including sufficient information to permit the
Partners to calculate their tax accruals), for the portion of the fiscal
year then ended and for the twelve (12) month period then ended;
6.5.2 A balance sheet and a statement of each Partner's Capital Account as
of the end of such month; and
6.5.3 A statement comparing the actual financial status and results of the
Partnership as of the end of or for such month and the portion of the fiscal
year then ended with the budgeted or forecasted status and results as of the
end of or for such respective periods.
6.6 TAXATION. The Parties intend that the Partnership shall be treated
38<PAGE>
as a "partnership" for all purposes. The Partners agree to take all actions
and execute and deliver such other documents as is necessary and
appropriate, including an amendment to this Agreement, to qualify and
maintain the Partnership as a partnership for tax purposes. The
Partnership's federal, state(s) and local (if any) income tax returns shall
be approved by the Partners. Unless otherwise agreed in writing by the
Partners, or the Code or other applicable law does not allow such elections,
the following elections shall be made in preparing Partnership income tax
returns and other returns for taxes measured by income:
(a) To adopt the calendar year as the taxable year of the Partnership;
(b) To adopt the accrual method of accounting;
(c) To use the maximum allowed accelerated depreciation method;
(d) To expense research and experimental expenditures;
(e) To amortize leasehold, start-up and organization expenses over the
shortest period allowable; and
(f) Such other elections as shall maximize and accelerate all available
deductions and defer and minimize the recognition of taxable income.
6.7 GOVERNMENTAL REPORTS. Under the direction of the Management
Committee, the Partnership shall prepare and file, or cause to be prepared
and filed, all reports or filings prescribed by any governmental authority
39<PAGE>
having jurisdiction.
6.8 RECORD RETENTION. The Management Committee shall cause all records
that are required hereunder or under any agreement entered into pursuant to
this Agreement to be retained by the General Manager, or other Persons it
may designate, for such period of time as required by law, or longer, as
determined by the Management Committee, but in no event for less than three
(3) years.
6.9 INSPECTION OF FACILITIES. Each Partner shall have the right at all
reasonable times during usual business hours to inspect any property and
facilities of the Partnership and to audit, examine and make copies of the
books of account and other records of the Partnership. Such right may be
exercised through any agent or employee of such Partner designated in
writing by it or by an independent certified public accountant, petroleum
engineer, attorney or other consultant so designated. The Partner making
the request shall bear all costs and expenses incurred in any inspection,
examination or audit made at such Partner's behest.
6.10 DEPOSIT AND WITHDRAWAL OF FUNDS. Funds of the Partnership shall be
deposited in such banks or other depositories as shall be designated from
time to time by 100% Vote of the Management Committee. All withdrawals from
any such depository shall be made only as authorized by the Management
Committee and shall be made only by check, wire transfer, debit memorandum
or other written instruction.
40<PAGE>
6.11 RETURN PREPARATION. The Partnership's tax returns and reports shall
be prepared by tax professionals approved by a 100% Vote of the Management
Committee, and the General Manager shall be responsible for overseeing the
preparation and filing of such returns and reports. The Partners shall
furnish the General Manager with any information necessary to prepare such
returns and reports and the General Manager shall submit copies of such
returns and reports to the Partners at least fourteen (14) Days in advance
of their due date, as extended, to permit review and approval.
6.12 PARTNERSHIP LEVEL TAX AUDIT. The Management Committee, by Unanimous
Vote, will select the tax matters partner for the Partnership pursuant to
Section 6231(a)(7) of the Code (the "Tax Matters Partner"). The Tax Matters
Partner shall inform the other Partners of all matters which may come to its
attention in its capacity as Tax Matters Partner by giving the other
Partners notice thereof within ten (10) days after becoming informed. The
duties of the Tax Matters Partner and all of the Partners individually with
respect to tax matters shall be as follows; provided, however, that nothing
herein shall prevent any Partner, including the Tax Matters Partner, from
taking in its individual capacity any action which is left to the
determination of an individual Partner under Sections 6221 through 6233 of
the Code:
(a) The Partners shall furnish the Tax Matters Partner with such
information, including, without limitation, information specified in
Section 6230(e) of the Code, as it may reasonably request to permit
the Tax Matters Partner to provide the Internal Revenue Service with
41<PAGE>
sufficient information to allow proper notice to the Partners in
accordance with Section 6223 of the Code. The Partners shall also
furnish to each other copies of all correspondence with the Internal
Revenue Service or the Department of the Treasury regarding any
aspect of Partnership items or the Partnership tax return.
(b) No Partner shall knowingly treat a partnership item on its federal
income tax return in a manner inconsistent with the treatment of such
partnership item on the Partnership's federal income tax return
without first giving reasonable advance notice of such intended
action (including the proposed treatment of such partnership item) to
the other Partners.
(c) The Tax Matters Partner shall not enter into any extension of the
period of limitations as provided under Section 6229 of the Code
except with the prior written consent of all of the Partners.
(d) No Partner shall file, pursuant to Section 6227 of the Code, a
request for an administrative adjustment of partnership items for any
Partnership taxable year without first giving reasonable advance
notice to all other Partners. If all of the Partners agree with the
requested adjustment, the Tax Matters Partner shall file the request
for administrative adjustment on behalf of the Partnership. If all
of the Partners do not agree with the requested adjustment within
thirty (30) days after notice to the Partners, or within the period
required to timely file the request for administrative adjustment, if
42<PAGE>
shorter, any Partner, including the Tax Matters Partner, may file a
request for administrative adjustment on its own behalf.
(e) Any Partner intending to file a petition under any section of the
Code, including, without limitation, Sections 6226 and 6228 thereof,
with respect to any tax matters involving the Partnership, including,
without limitation, any matter with respect to a Partnership item,
shall give reasonable advance notice to the other Partners of such
intention and the nature of the contemplated proceeding. In the case
where the Tax Matters Partner is the Partner intending to file such
petition, such notice shall be given within a reasonable time to
allow the other Partners to participate in the choosing of the forum
in which such petition will be filed. If the Partners do not agree
on the appropriate forum, then the appropriate forum shall be chosen
by the Management Committee. If any Partner intends to seek review
of any court decision rendered as a result of a proceeding instituted
under this Section, such Partner shall notify all of the other
Partners of such intended action.
(f) The Tax Matters Partner and the other Partners shall not enter into
settlement negotiations with respect to the tax treatment of
partnership items without first giving reasonable advance notice of
such intended action (including any proposal for settlement) to the
other Partners. The Tax Matters Partner shall not bind any other
Partner to a settlement agreement without obtaining the written
concurrence of any such Partner. Any other Partner who enters into a
43<PAGE>
settlement agreement with the Internal Revenue Service or the
Secretary of the Treasury with respect to any partnership items, as
defined in Section 6231(a)(3) of the Code, shall notify the other
Partners of such settlement agreement and its terms within thirty
(30) days from the date of settlement; provided, that such Partner
shall not enter into any settlement agreement which binds or purports
to bind the Partnership or the other Partners.
(g) The Tax Matters Partner shall have the right to engage on behalf of
the Partnership legal counsel, certified public accountants, or other
experts only with the Unanimous Vote of the other Partners or their
Representatives. Any reasonable item of expense with respect to such
matters, including but not limited to fees and expenses for legal
counsel, certified public accountants, and others which the Tax
Matters Partner incurs in connection with any Partnership level
audit, assessment, litigation, or other proceedings regarding any
partnership item, shall be borne by the Partnership. The Tax Matters
Partner shall not be liable for any neglect, omission or action taken
by or attributable to any such expert provided reasonable care was
exercised by the Tax Matters Partner in the selection of such
expert.
(h) The provisions of this Section 6.12, including but not limited to the
obligation to pay fees and expenses contained in subsection (g),
shall survive the termination of this Agreement, the Partnership or
the termination of any Partner's interest in the Partnership and
44<PAGE>
shall remain binding on the Partners for a period of time necessary
to resolve with the Internal Revenue Service or the Department of the
Treasury any and all matters regarding the federal income taxation of
the Partnership for the applicable tax year.
(i) The provisions of this Section 6.12 shall apply for state income tax
purposes (and for other taxes computed with respect to income) to the
extent rules similar to Code Sections 6221 through 6233 are
applicable to such taxes.
(j) The Tax Matters Partner shall not be liable to any Partner for any
action taken by or attributable to the Tax Matters Partner, except
for any liability arising out of its willful misconduct.
45<PAGE>
7. MANAGEMENT OF THE PARTNERSHIP.
-----------------------------
7.1 GENERAL MANAGEMENT STRUCTURE.
7.1.1 The management policies of the Partnership shall be established by
the Management Committee in accordance with this Agreement which, except as
otherwise provided in this Agreement, shall have exclusive authority with
respect to the affairs of the Partnership. Except as otherwise provided in
the Agreement, no Partner shall have authority to act for, or assume any
obligation or responsibility on behalf of, the Partnership without the prior
written approval of the Management Committee.
7.1.2 The day to day management of the affairs of the Partnership,
including maintenance of the financial and other records and books of
account of the Partnership, and activities reasonably related thereto, shall
be the responsibility of the General Manager, subject to the supervision and
approval of the Management Committee. Unless otherwise specified herein,
the Management Committee may establish or approve day to day operating
policies and procedures based upon a 65% Vote.
7.2 MANAGEMENT COMMITTEE.
7.2.1 The members of the Management Committee shall consist of one
Representative of each Partner designated from time to time by such Partner
by written notice to each other Partner and the Partnership. By like
notice, each Partner may designate an Alternate Representative (the
"Alternate Representative") who shall have authority to act in the absence
46<PAGE>
of its Representative. Any Partner may at any time, by written notice to
all other Partners and to the Partnership, remove its Representative or
Alternate Representative on the Management Committee and designate a new
Representative or Alternate Representative. Each Representative shall serve
on the Management Committee until his successor shall be duly appointed or
until his death, resignation or removal by the Partner which appointed him.
Any action taken by the Partnership in compliance with the direction of the
Management Committee pursuant to its authority hereunder shall be binding on
the Partnership and each Partner, whether such direction was approved by the
regular members of the Management Committee in accordance with the
provisions hereof or one or more of the Alternate Representatives, and the
participation and acts (including the execution of any documents) by any
Alternate Representative of a Partner shall be deemed to be the act of the
Representative for which such Alternate Representative is acting without, in
the case of any written document, any evidence of the absence or
unavailability of such Representative.
7.2.2 The General Manager shall preside at all meetings of the Management
Committee, which shall meet at least quarterly subject to less frequent
meetings upon approval of the Management Committee by 100% Vote.
Reasonable notice of and an agenda for all Management Committee meetings
shall be provided by the General Manager to all Representatives prior to
the date of such meetings. Special meetings of the Management Committee may
be called at such times and places, and in such manner, as any Partner deems
necessary. Any Partner, through its Representative, calling for any such
special meeting shall provide reasonable notice to the General Manager and
47<PAGE>
all other Representatives of the date and agenda for such meeting(s) prior
to the date of such meeting(s). Members of the Management Committee, or any
subcommittee designated by the Management Committee, may participate in any
meeting of the Management Committee or any such subcommittee, as the case
may be, by means of conference telephone or similar communications equipment
by means of which all individuals participating in the meeting can hear one
another at the same time. Any action required or permitted to be taken at
any meeting of, the Management Committee, or of any subcommittee thereof,
may be taken without a meeting if all members of the Management Committee or
subcommittee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the
Management Committee or subcommittee. Written minutes of all meetings and
the record of all actions by written approval or written consent shall be
prepared by General Manager and a copy thereof shall be submitted to each
member of the Management Committee or subcommittee not more than thirty (30)
days following each meeting or the execution of a written approval or
written consent.
7.2.3 The Management Committee may, by 65% Vote, create such subcommittees
as it may deem necessary or appropriate, provided that the Management
Committee shall retain ultimate decisional power over any subject matter
delegated to the said created subcommittees for study or consultation.
7.2.4 The approval of the Management Committee by 65% Vote shall be
necessary as provided elsewhere in this Agreement and before any of the
following actions can be taken on behalf of the Partnership:
48<PAGE>
(a) Extension of period to cure defaults concerning Capital Contributions
- - Section 3.3.4;
(b) Timing and amounts of distributions -- Section 5;
(c) Approval of day to day operating policies and procedures - - Section
7.1.2;
(d) Creation of subcommittees -- Section 7.2.3;
(e) Selection of chairman of audit committee - - Section 7.3.1;
(f) Removal of audit committee member - - Section 7.3.1;
(g) Approval of transfers of Partnership interests - - sections 9.1.1,
9.2.1;
(h) Dissolution of Partnership - - Section 11.6
(i) Payment by the Partnership of any amounts to a Withdrawn Partner
pursuant to this Agreement;
(j) Any change in the authority and responsibility delegated in this
Agreement to any committee of the Management Committee; and
(k) Any other action for which the approval of the Management Committee
by 100% Vote is not expressly required by this Agreement.
49<PAGE>
7.2.5 The approval of the Management Committee by 100% Vote is required
with respect to the following:
(a) Selection of the initial location of the Partnership's principal
office;
(b) Timing and amounts of Capital Contributions - - Sections 2.8.2,
3.2.1;
(c) Approval and/or establishment of methods and procedures regarding the
withdrawal of Partnership funds from banks or other depositories;
(d) Selection and retention of legal counsel, the certified public
accountants;
(e) Selection and retention of Partnership tax return preparers, the Tax
Matters Partner and other tax professionals- - Sections 6.11,
6.12(a),(g);
(f) Selection or Dismissal of General Manager, and any change in the
authority and responsibilities delegated in this Agreement to the
General Manager - - Section 2.4;
(g) Approval and/or establishment of policies and procedures regarding
the execution, amendment or termination of any contracts or
agreements entered into by Partnership and the execution, amendment
or termination of any successor agreements related thereto;
50<PAGE>
(h) Approval and/or establishment of policies and procedures regarding
the execution, amendment or termination of any lease of personal or
real property and any related agreements;
(i) Approval and/or establishment of policies and procedures regarding
the execution amendment or termination of financing agreements and
commitments relating to the Partnership;
(j) Filing of all applications by the Partnership for Necessary
Governmental Approvals and other governmental approvals, or any
amendments to such applications, or any applications for amendments
to such Necessary Governmental Approvals or other approvals.
(k) Acceptance of any Necessary Governmental Approvals and amendments
thereto;
(l) Approval of an operating budget - - Section 2.8.2;
(m) Valuation of Pre-Formation Date Expenditure Section 3.1.3(a);
(n) Adjustment of Percentage Interests - - Section 3.1.4;
(o) Selection of financial institution(s) in which to deposit Partnership
funds - - Section 6.10;
51<PAGE>
(p) Approval and/or establishment of policies and procedures regarding
the withdrawal/payment of Partnership funds - - Section 6.10;
(q) Reduction in frequency of Management Committee meetings - - Section
7.2.2;
(r) Reduction in frequency of audit committee meetings -- Section 7.3.2;
(s) Approval of material Partnership leases, notes, and other obligations
which do not limit the claims of all parties to the assets of the
Partnership - - Section 8.5;
(t) Release of Partner which is transferring its Percentage Interest from
Partnership obligations - - Section 9.1.1;
(u) Approval of the creation of security interests in all or a portion of
a Partner's Percentage Interest - - Section 9.2.2;
(v) Admission of certain Additional Partners - - Section 9.8;
(w) Delay of automatic termination of this Agreement and Partnership - -
Section 11.1.2;
(x) Sale or abandonment of substantially all of Partnership's business or
assets - - Section 11.2.1;
52<PAGE>
(y) Approval of withdrawal of a Partner - - Section 11.4; and
(z) Amendment of this Agreement - - Section 13.1
(aa) Adjustment to Capital Accounts - - Section 1.4
7.3 AUDIT COMMITTEE.
---------------
7.3.1 An audit committee shall be formed which shall consist of a member
and alternate member designated by each Partner. The Management Committee,
by 65% Vote, shall designate one member of the audit committee to serve as
chairman of the audit committee; provided, however, the General Manager
shall not be the chairman of the audit committee. Decisions of the audit
committee shall be by 65% Vote of its members. Each member shall serve on
the audit committee until his successor shall be duly appointed or until his
death, resignation or removal by a 65% Vote of the Management Committee.
7.3.2 The audit committee shall meet quarterly subject to less frequent
meetings upon approval by 100% Vote of the Management Committee, and at such
other times as called by its chairman. The chairman of the audit committee
shall designate the time, place and the manner of all audit committee
meetings. Written minutes of each meeting shall be maintained and provided
to the Management Committee not more than thirty (30) days following each
meeting of the audit committee.
7.3.3 The audit committee shall, on behalf of the Partnership:
(a) Consult with external auditors;
53<PAGE>
(b) Establish internal operating controls;
(c) Review and monitor the internal controls and recommend improvement in
controls to Management Committee;
(d) Review the results of all financial audits;
(e) Review actual financial results versus budget forecasts (at least
quarterly); and
(f) Review all recommendations for corrective action, and the results of
any recommendations acted on.
7.3.4 The audit committee shall report to the Management Committee at such
times and places as the Management Committee deems advisable.
7.4 PARTNERSHIP OPERATIONS. The Management Committee may cause the
Partnership to enter into all manner of contracts and other agreements as it
shall deem appropriate with any Person including, without limitation, any
Partner or Affiliate of any Partner in order to carry out the purposes and
objectives of the Partnership.
7.5 LIMITATION OF AUTHORITY. The Management Committee, the committees'
appointed as provided in section 7.2.4 and 7.3, and the General Manager
shall not have authority to take any action inconsistent with the terms of
this Agreement.
7.6 INDEMNIFICATION. The Partnership shall indemnify and save harmless
the members of the Management Committee, the members of any committee
appointed as provided in section 7.2.4 and 7.3 and the General Manager
54<PAGE>
against all actions, claims, demands, costs and liabilities arising out of
the acts (or failure to act) of such Persons within the scope of their
authority in the course of the Partnership's business except any acts or
failures to act which constitute willful misconduct, and such Persons shall
not be liable for any obligations, liabilities or commitments incurred by or
on behalf of the Partnership as a result of any such acts (or failure to
act) in the absence of willful misconduct. Furthermore, such
indemnification shall be limited to the extent of Partnership assets.
7.7 OTHER POSITIONS OR REPRESENTATIONS. Except as otherwise provided for
herein, any member of the Management Committee and the committees provided
for in section 7.2.4 and 7.3 may also be an officer, director or employee of
a Partner or one or more Affiliates of a Partner.
55<PAGE>
8. LIMITATION OF LIABILITIES.
-------------------------
8.1 LIMITATION ON LIABILITY OF PARTNERS. Subject to the provisions of
applicable law, no Partner shall be liable to third Persons for Partnership
losses, deficits, liabilities or obligations, except as otherwise expressly
agreed to in writing by such Partner, unless the assets of the Partnership
shall first be exhausted.
8.2 LIMITATION OF AUTHORITY OF PARTNERS. No Partner shall have the
authority to act for, or assume any obligation or responsibility on behalf
of, any other Partner, without the prior written approval of such other
Partner.
8.3 CROSS INDEMNIFICATION. Each Partner (for purposes of this section 8.3
the "indemnitor") shall indemnify and hold harmless each other Partner, the
Partnership and the Affiliates, directors, officers, partners (other than
the Partners to this Agreement), employees, agents and representatives of
each such other Partner (for purposes of this Section 8.3, collectively the
"indemnitees") from and against any costs, losses, claims, damages and
liabilities arising out of any act of the indemnitor or any of its
Affiliates, directors, officers, partners (other than the Partners to this
Agreement), employees, agents or representatives undertaken so as to bind
the indemnitees, or which has the effect of making the indemnitees liable
without their consent, or arising out of any assumption of any obligation or
responsibility by the indemnitor or any of its Affiliates, directors,
officers, partners (other than the Partners to this Agreement), employees,
agents or representatives undertaken so as to bind the indemnitees, or which
56<PAGE>
has the effect of making the indemnitees liable without their consent
(including, without limitation, sales or other acts entirely on its part
which may give rise to product liability claims); provided however, that
this 8.3 shall have no application with respect to any actions taken (a) on
behalf of the Partnership by, or on behalf of, the Management Committee in
conformance with this Agreement, or (b) on behalf of one Partner by another
Partner in conformance with this Agreement.
8.4 RIGHT OF PARTNER TO CONTRIBUTION. In order to provide for just and
equitable contribution in circumstances in which the indemnity agreement
provided for in Section 8.3 is for any reason held to be unavailable to a
Partner, then each Partner shall contribute to the damages incurred by any
indemnitee named in Section 8.3 in the proportion that the contributing
Partner's Percentage Interest in the Partnership bears to the Percentage
Interests of all contributing Partners. The Partners' obligations to
contribute hereunder are several and not joint.
8.5 THIRD PARTY CONTRACTS. No contract, lease, sublease, note, loan
agreement, deed of trust or other obligation on behalf of the Partnership
which is material to the Partnership shall be entered into unless there is
contained therein an appropriate provision limiting the claims of all
parties to such instruments and other beneficiaries thereunder to the assets
of the Partnership and expressly waiving any rights of such parties and
other beneficiaries to proceed against the Partners individually; provided
however, that the exclusion of such provision may be approved by the
Unanimous Vote of the Management Committee.
57<PAGE>
9. TRANSFER OR PLEDGE OF PARTNERSHIP INTERESTS; ADMISSION OF NEW
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PARTNERS.
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9.1 LIMITATION ON RIGHT TO TRANSFER PARTNER'S INTEREST.
9.1.1 Subject to (i) the right of first offer provided for in Sections
9.1.2 and 9.1.3, (ii) the prior approval of the Management Committee by 65%
Vote, as set forth in this Section 9.1.1, and (iii) the satisfaction of the
requirements set forth in Section 9.1.4, a Partner ("Transferring Partner")
may sell, assign or otherwise transfer all or any part of its Percentage
Interest to any other Person or Persons (including, without limitation, a
Partner) ("Transferee"). The Management Committee's approval may be
withheld only if it is determined that the transfer of the interest will
adversely affect the financial or operating integrity of the Partnership.
Such approval shall not be unreasonably withheld. No such approval for
transfer of all or part of the Percentage Interest of a Partner shall
release the Transferring Partner from Partnership obligations accrued or
accruing out of actions, occurrences or events taken or transpiring during
the period the Transferring Partner was a Partner except upon the Unanimous
Vote of the remaining Partners' Representatives. The Management Committee
may pre-approve the transfer by a Partner to another entity (a "Pre-Approved
Transfer") of all or any part of the Partner's Percentage Interest, subject
to the full satisfaction of the requirements set forth in Section 9.1.2
through Section 9.1.4.
9.1.2 Any Partner which seeks to transfer all or part of its Percentage
Interest (the portion to be transferred being hereinafter referred to as a
58<PAGE>
"Transferred Interest") to any other Person or Persons (including, without
limitation, a Partner) shall first make an offer in writing to all of the
other Partners specifying the Transferred Interest sought to be sold by it
and all the terms and conditions on which the Transferred Interest is
offered, including the amount and form of the purchase price and the terms
of payment. After the offer for Transferred Interest is made, each of the
other Partners shall notify the Transferring Partner, within thirty (30)
days of receipt of such offer, of the maximum percentage of Transferred
Interest it would be willing to purchase on the terms and conditions offered
by the Transferring Partner.
The Transferred Interest shall be awarded in the following manner:
(1) If a Partner makes an offer for Transferred Interest up to its pro
rata share (determined by dividing each such Partner's Percentage
Interest by the sum of the Percentage Interests of all of the
Partner's Percentage Interest of the Partners other than the
Transferring Partner), the Partner shall be awarded the total amount
of Transferred Interest requested subject, however, to the provisions
of Section 9.1.3.
(2) If a Partner makes an offer for Transferred Interest in excess of its
pro rata share, the Partner shall be awarded its pro rata share plus
any additional Transferred Interest available, subject, however, to
Section 9.1.3 hereof, determined by prorating (based on actual offers
to purchase the Transferred Interest) the remaining available
Transferred Interest among those Partners that offered to purchase
Transferred Interest in excess of their pro rata share, until an
offer's maximum Transferred Interest is obtained or all remaining
59<PAGE>
available Transferred Interest is exhausted. The Transferring
Partner shall provide each Partner written notice of the aggregate
portion of the Transferred Interest elected within seven (7) days
after receipt of all offers. In the event that Partners commit to
purchase the Transferred Interest in accordance with this Section
9.1.2, the transfer shall promptly be effectuated upon satisfaction
of the conditions set forth in Section 9.3.
9.1.3 If the Partners other than the Transferring Partner have not elected
to purchase the entire Transferred Interest after compliance with the
procedures specified in Section 9.1.2 and if the Management Committee has
given its approval of a proposed transferee (a "Transferee") as specified in
Section 9.1.1, the Transferring Partner shall thereafter be free to sell all
(but not less than all) of the Transferred Interest to a Transferee on terms
and conditions no more favorable to the prospective purchaser than offered
by the Transferring Partner in its notice to the other Partners in
accordance with Section 9.1.2, provided that prior to effecting such sale
the Transferring Partner shall give written notice thereof to all the other
Partners describing all terms and conditions on which the Transferred
Interest is to be sold, including the amount and form of the purchase price
and the terms of payment. During a period of seven (7) days following the
date of the Transferring Partner's notice in accordance with the preceding
sentence, any other Partner may object to the proposed sale, but only on the
ground that the terms and conditions thereof are more favorable to the
prospective purchaser than offered by the Transferring Partner in its notice
to the other Partners in accordance with Section 9.1.2, by giving written
60<PAGE>
notice of such objection to the Transferring Partner. In the event of any
such objection, the proposed sale shall not be consummated unless such
objection shall have been resolved.
9.1.4 Each transfer of a Transferred Interest pursuant to Section 9.1.3 and
the related admission to the Partnership of a substituted Partner shall be
subject to the performance and satisfaction of the following conditions in
full as reasonably determined by the Management Committee:
(a) The Transferee shall have executed and delivered to the Management
Committee a written assignment in form and substance satisfactory to
the Management Committee setting forth the intention of the
Transferring Partner and the Transferee that the Transferee becomes a
substituted Partner in its place to the extent of the Transferred
Interest.
(b) The Transferee shall have assumed by operation of law or by express
agreement with the Partnership (in form and substance satisfactory to
the Management Committee) all of the obligations of the Transferring
Partner under this Agreement to the extent of the Transferred
Interest.
(c) The Transferring Partner and the Transferee shall have executed and
acknowledged such other instruments (in form and substance
satisfactory to the Management Committee) as reasonably necessary to
effect such substitution.
(d) Prior to substitution, the Transferring Partner and/or the Transferee
shall have paid all expenses, including attorneys' fees, incurred by
the Partnership in connection with such substitution.
61<PAGE>
(e) An opinion of counsel (in form and substance satisfactory to the
Management Committee) to the Transferee, which counsel shall be
reasonably acceptable to the Management Committee, shall have been
furnished to the Partnership stating that, in the opinion of such
counsel, such substitution will not (i) cause the Partnership to be
classified other than as a partnership for federal income tax
purposes; (ii) cause a termination of the Partnership for federal
income tax purposes; (iii) cause the Partnership to become a
"Publicly Traded Partnership" or the Percentage Interests to be
considered to be "publicly traded," within the meaning of 7704 of the
Code; (iv) violate, or cause the Partnership to violate, any
applicable law or governmental rule or regulation, including, without
limitation, any applicable federal or state securities law; or (v)
cause the Partnership, the Partners or any Affiliate to be required
to register as a public utility holding company, or otherwise to
become subject to regulation, under the Holding Company Act.
9.1.5 If the transfer of the Transferred Interest to a Transferee in
accordance with Section 9.1.3 is not consummated within six (6) months after
the expiration of the last election-round referred to in Section 9.1.2,
above, no transfer by the Transferring Partner to any Person may be made
without again complying with this Section 9.1.
9.2 PERMITTED TRANSFERS. Notwithstanding the foregoing provisions of
this Section 9, compliance with the first offer provisions of Section 9.1.2
and Section 9.1.3 hereof shall not be required in connection with:
62<PAGE>
9.2.1 The transfer by any Partner of all or any part of its Percentage
Interest in the Partnership to another entity which is (i) its successor by
merger or consolidation, or (ii) an Affiliate of such Partner, including,
without limitation, a limited partnership of which such Partner is the
general partner.
9.2.2 An assignment, pledge or other transfer creating a security interest
in all or a portion of a Partner's Percentage Interest to an assignee,
pledgee, mortgagee, trustee or secured party, if such assignment, pledge or
transfer creating a security interest is approved by a 100% Vote of the
Management Committee; provided however, that, except as expressly provided
for in Section 11, (1) the assignee, pledgee, mortgagee, trustee or secured
party shall hold the same subject to all of the terms of this Agreement and
(2) such assignee, pledgee, mortgagee, trustee or secured party shall not
have any voice in the management of the Partnership as a result of such
transfer and shall not become a substituted Partner without the approval of
the Management Committee in accordance with Section 9.1.1.
9.3 CERTAIN LIMITATIONS ON TRANSFERABILITY. Notwithstanding any other
provision of this Section 9, the following additional limitations shall
apply to all transfers of Percentage Interests:
9.3.1 No Partner may assign or agree to assign, directly or indirectly, all
or any part of its respective Percentage Interest, if the effect of such
assignment would be to cause the Partnership, the Partners or any Affiliate
to be required to register as a public utility holding company, or otherwise
63<PAGE>
to become subject to regulation under the Holding Company Act;
9.3.2 No Partner may assign or agree to assign, directly or indirectly, all
or any part of its respective Percentage Interest, if the effect of such
assignment would be to (i) cause the Partnership to be classified other than
as a partnership for federal income tax purposes; (ii) cause a termination
of the Partnership's status as a partnership for federal income tax
purposes; or (iii) cause the Partnership to be considered a "publicly traded
partnership" under the Code.
9.3.3 No Partner may assign or agree to assign, directly or indirectly, all
or any part of its respective Percentage Interest, if such assignment would
be in contravention of any financing arrangement to which such Partner (or
its Affiliate) is a party.
9.4 PROHIBITED AFFILIATE TRANSACTIONS.
9.4.1 Any transaction in which the Parent of any Partner as of the date of
this Agreement would cease to own or unconditionally control, directly or
indirectly, more than 50% of the capital stock of such Partner having the
right to vote on the election of directors of such Partner, shall be deemed
to be a transfer of such Partner's Percentage Interest in the Partnership
and accordingly shall be subject to the provisions of section 9.1 and
Section 9.3 of this Agreement; provided, however, that the foregoing shall
not apply to a transfer of capital stock of a Partner by its Parent to an
Affiliate of such Parent, and provided that the provisions of this Section
9.4.1 shall thereafter apply to such Affiliate of such Parent; and provided
64<PAGE>
further, that the provisions of this Section 9.4.1 shall apply to the Parent
of any Affiliate of a Partner to which such Partner transfers its Percentage
Interest pursuant to Section 9.2.1(ii) hereof, from and after the effective
date of any such transfer.
9.4.2 No portion of the capital stock or any other evidence of equity
ownership in a Partner or in any Affiliate of a Partner may be assigned,
sold or otherwise transferred, directly or indirectly, to any Person whose
ownership thereof would cause the Partnership or any other Partner or
Affiliate (other than the Partner or Affiliate the capital stock of which or
other evidence of equity ownership in which has been assigned or its
Affiliates) to be required to register as a public utility holding company
or otherwise to become subject to regulation under the Holding Company Act,
nor may any Partner, or any Affiliate of such Partner, acquire any
investment in, or undertake any new business activity after the date of this
Agreement, which would have such an effect.
9.5 ADMISSION OF NEW PARTNER. Upon any transfer permitted by this
Section 9, the transferee shall be automatically admitted as a Partner in
substitution for, or in the case of a partial transfer, in addition to, the
Transferring Partner, upon execution of a counterpart of this Agreement.
Except as provided in this Section 9.5, no such sale, assignment, pledge or
other transfer shall give rise to a right in any transferee to become a
Partner in the Partnership.
65<PAGE>
9.6 ASSIGNEE'S RIGHTS. Any purported assignment of a Percentage Interest
(or a portion thereof) which, is not in compliance with this Agreement is
hereby declared to be null and void and of no force or effect whatsoever.
The "effective date" of an assignment of a Percentage Interest under the
provisions of this Section 9 shall be the last day of the quarter of the
Fiscal Year of the Partnership in which the final condition precedent to
such assignment has been fulfilled.
9.7 ALLOCATION OF PROFITS, LOSSES AND DISTRIBUTIONS SUBSEQUENT TO
ASSIGNMENT. All income, gain, credit, deduction, profit and loss of the
Partnership attributable to any Partner's Percentage Interest acquired by
reason of a permitted assignment and any distributions made with respect
thereto shall be allocated (i) in respect of the portion of the Fiscal Year
of the Partnership ending on the effective date of the assignment, to the
assignor, and (ii) in respect of subsequent periods, to the assignee.
9.8 ADMISSION OF ADDITIONAL PARTNERS. Except as otherwise provided in
this Section 9, a Unanimous Vote of the Management Committee shall be
required for the admission of an Additional Partner and for the approval of
the terms of admittance of such an Additional Partner to the Partnership.
9.9 TAX ELECTION. In the event that all or any portion of a Partner's
Percentage Interest is transferred with the consent of the Management
Committee, or otherwise as permitted by this Section 9, the Partnership may,
but shall not be required to, at the request of the Transferee, make an
election pursuant to Section 754 of the Code.
66<PAGE>
9.10 EFFECT OF PROHIBITED TRANSFERS. Any transfer of any ownership
interest in the Partnership by a Partner in violation of the terms of this
Agreement shall be void and shall not be recognized by the Partnership. Any
such transfer shall not cause a dissolution of the Partnership but shall
result in the loss by the Partner making such transfer of the right to vote
with respect to Partnership matters until such Partner shall have rescinded
such transfer to the satisfaction of all other Partners; provided however,
that nothing herein shall be deemed to limit any right or remedies that such
Partnership or any other Partner may have against such violating Partner.
10. REFERENCES TO MONEY.
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10.1 All references in this Agreement to, and transactions hereunder in,
money shall be to or in Dollars of the United States of America.
67<PAGE>
11. TERMINATION AND RIGHT OF WITHDRAWAL.
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11.1 TERM OF PARTNERSHIP; TERMINATION FOR FAILURE TO ACHIEVE MILESTONES.
11.1.1 Subject to the other terms and conditions of this Agreement,
including, without limitation, the provisions of Sections 11.1.2 and 11.2,
the Partnership and this Agreement shall continue in existence from the
Formation Date unless and until terminated in accordance with this Section
11.
11.1.2 This Agreement shall automatically terminate and be of no further
force or effect, and the Partnership shall automatically dissolve without
notice, unless otherwise Unanimously Voted by the Partners or their
Representatives on the Management Committee, in the event that on or before
AUGUST 1, 1995, one or more of the following shall not have occurred:
(a) Appointment of Representatives to a Management Committee;
(b) Partnership's hiring of a General Manager; and
(c) The Board of Directors of each of the Partners or, if required by the
corporate policies applicable to any Partner, the Board of Directors
of any Parent of any such Partner, shall have approved this Agreement
and the transactions contemplated hereby.
11.2 This Agreement shall automatically terminate and be of no further
force or effect, and the Partnership shall be automatically and without
notice dissolve upon the happening of any of the following events:
11.2.1 The sale or abandonment of all or substantially all of the
Partnership's business or assets; provided however, that any such sale or
68<PAGE>
abandonment may only be made pursuant to the Unanimous Vote of the Partners
or their Representatives on the Management Committee;
11.2.2 Any event which shall make it unlawful for the business of the
Partnership to be carried on; or
11.2.3 Any event which, under the partnership law of the Commonwealth of
Massachusetts, requires a dissolution and winding up of the Partnership.
11.3 AUTOMATIC WITHDRAWAL. In addition to those instances where
withdrawal is permitted or deemed to occur under Sections 3.3.4 or 11.4, a
Partner, upon the happening of any of the following events described in this
Section 11.3, shall be deemed to be a Withdrawn Partner, shall have its
Capital Account, if any, be recorded in its Withdrawn Partner Former Capital
Account, shall have its Capital Account reduced to zero and eliminated, and
shall be entitled to receive payment only as specified in Section 3.5.1 and
Section 11.5.1 of this Agreement:
11.3.1 The entry by a court of competent jurisdiction of a decree or order
for relief, unstayed on appeal or otherwise and in effect for ninety (90)
days, in respect of such Partner in an involuntary case under the federal
bankruptcy laws, or any such order adjudicating such Partner as bankrupt or
insolvent under any other applicable bankruptcy, insolvency or liquidation
law;
11.3.2 The entry by a court of competent jurisdiction of a decree or order
69<PAGE>
appointing a receiver, custodian, assignee, trustee, liquidator,
sequestrator or other similar official of such Partner or of any substantial
part of the property of such Partner, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or order
unstayed on appeal or otherwise and in effect for ninety (90) days, or the
commencement by such Partner of a voluntary case under the federal
bankruptcy laws, or under any other bankruptcy or insolvency law, seeking
reorganization, liquidation, arrangement, adjustment or composition of such
Partner under the bankruptcy laws or any similar statute;
11.3.3 The making by such Partner of an assignment for the benefit of
creditors; or the failure of such Partner generally to pay its debts as they
become due; or the consenting by such Partner to the appointment of or
taking possession by a receiver, assignee, custodian, trustee, liquidator,
sequestrator or other similar official of it or of any substantial part of
its property, or the taking of corporate or Partnership action by such
Partner in furtherance of any such action;
11.3.4 The filing by a Partner for dissolution under the laws of the
jurisdiction of its incorporation or the entering of a final order
dissolving that Partner by any court of competent jurisdiction; or
11.3.5 A Partner's failure to perform any of its material obligations
including, but not limited to, good faith participation in the management or
operations of the Partnership, under this Agreement where such failure
continues uncured for a period of thirty (30) days after such Partner has
70<PAGE>
been given notice of such failure by the other Partners or their
Representatives on the Management Committee.
11.3.6 Any event (other than an event of the nature specified in Section
11.2.2) which shall make it unlawful for that Partner to carry on the
business of the Partnership in the form of a partnership.
11.4 OTHER VOLUNTARY WITHDRAWALS. Except as provided in this Section 11.4
and in Sections 3.3.4 and 11.3 of this Agreement, or upon the admission of a
substitute Partner in accordance with the provisions of Section 9, no
Partner shall be entitled to withdraw from the Partnership except (i) upon
the Unanimous Vote of the Representatives of the remaining Partners; or (ii)
where a Partner elects to withdraw after making a sufficient showing, to the
reasonable satisfaction of the Management Committee, of its having made a
good faith, diligent effort to sell or convey all of its Percentage Interest
in the Partnership, but is unable to reach a definitive agreement with a
third party (including another Partner) that meets the transfer requirements
set forth in Section 9 or if such withdrawal would result in a loss to such
Partner on the sale or conveyance; or (iii) where a Partner elects to
withdraw after a federal, state or local government entity conclusively
enacts or modifies a law, rule, regulation or ordinance after the effective
date of this Agreement which changes a Partner's obligations under this
Agreement or affects how the business activities of the Partnership must be
lawfully conducted, and such enactment or modification adversely and
materially affects the financial or operational integrity of the Partnership
or; (iv) where a Partner elects to withdraw not sooner than one (1) year
71<PAGE>
after any non-conclusive enactment or modification, which, if it were
conclusive, would entitle such Partner to withdraw under subsection
11.4(iii), above.
11.5 WINDING UP AND LIQUIDATION. After the Partnership shall be dissolved
pursuant to the provisions of Section 11.l or 11.2, the Management Committee
shall continue to exercise its powers under this Agreement for the purpose
of winding up the business of the Partnership and liquidating its assets in
an orderly manner, but the Partnership shall engage in no new business
during the period of such winding up.
11.5.1 Upon dissolution of the Partnership under circumstances in which the
Partnership is required under the terms of this Agreement or by law to be
wound up, the assets of the Partnership remaining after the payment, or
provision for payment, of all the liabilities of the Partnership (other than
any Special Contingent Obligations as hereinafter defined) shall be
distributed (a) if there is any Partner who is deemed to have become a
Withdrawn Partner pursuant to sections 3.3.4, 11.3, or 11.4, to the
Partners and any such Withdrawn Partner(s) in the ratio that the Capital
Account of each Partner (as of the date of dissolution) or the Withdrawn
Partner Former Capital Account of each such Withdrawn Partner bears to the
aggregate of (1) all Capital Accounts of the Partners (as of the date of
dissolution) and (2) all Withdrawn Partner Former Capital Accounts of any
such Withdrawn Partners, but only to the extent of the balance of each
Partner's Capital Account (as of the date of dissolution) and each such
Withdrawn Partner's Withdrawn Partner Former Capital Account, or (b) if
72<PAGE>
there is no such Withdrawn Partner, to the Partners in the ratio and to the
extent of each Partner's Capital Account and (c) finally, to the extent that
there are any assets of the Partnership remaining after the distributions
made pursuant to clause (a) or (b) above, to the Partners in accordance with
their respective Percentage Interests as of the date immediately prior to
any distribution pursuant to this Section 11.5.1 As used in this Section
11.5.1, "Special Contingent Obligations" shall mean all contingent
obligations of the Partnership with respect to any Withdrawn Partner in the
amount of its Withdrawn Partner Former Capital Accounts under Section 3.5.
11.5.2 No termination or dissolution of the Partnership or withdrawal from
the Partnership shall relieve a Partner from any obligation, including but
not limited to, obligations to the Partnership or other Partners accrued as
of the date of such termination, dissolution or withdrawal or that shall
thereafter accrue out of actions, occurrences or events taken or transpiring
prior to the effective date of such termination, dissolution or withdrawal
or the complete winding up of the Partnership, as applicable.
11.5.3 Except as otherwise required by operation of law or by virtue of any
Capital Contributions called pursuant to the terms of this Agreement, no
Partner shall be obligated to contribute capital to the Partnership to
satisfy a deficit in the Partner's Capital Account.
11.6 CONTINUANCE OF PARTNERSHIP. Except as provided in Sections 11.l and
11.2, it is understood and agreed by each of the Partners that the
relationship of partnership among them is intended to continue without
73<PAGE>
interruption until such relationship is either specifically dissolved and
wound up by 65% Vote of the Management Committee or by the occurrence of any
event specified in Sections 11.l or 11.2, and each Partner waives and
releases, to the extent permitted by law, its right to dissolve and wind up
or obtain dissolution and the winding up of the Partnership in any other
manner or for any other reason. In this connection, the Partners agree and
intend that the Partnership shall not be dissolved and wound up by the
admission of a new Partner pursuant to Section 9 or by the withdrawal of a
Partner from the Partnership for any reason, voluntary or involuntary. If,
notwithstanding the foregoing understanding, agreements and intentions of
the Partners, the Partnership may at any time or from time to time be deemed
by operation of law to be dissolved and in circumstances other than Sections
11.l or 11.2.1 or 11.2.2 (for example, upon the bankruptcy or withdrawal of
a Partner), each of the Partners hereby covenants and agrees with the other
Partners as follows:
11.6.1 The business and affairs of the Partnership shall continue without
interruption and be carried out by a new partnership (the "Successor
Partnership");
11.6.2 The Partners of the Successor Partnership shall be the Persons who
were Partners hereunder at the time of such dissolution other than any
Person whose actions or any action with respect to its membership in the
Partnership shall have been the sole cause of its dissolution;
74<PAGE>
11.6.3 The Successor Partnership and the Partners thereof shall be governed
by the terms of this Agreement as if the Successor Partnership were the
Partnership;
11.6.4 Each of the Partners covenants and agrees to execute such further
agreements, including (without limitation) notes, novations and
accommodations, as may be necessary to continue the business of the
Partnership and to protect and perfect any lien or security interest granted
by the Partnership;
11.6.5 Each of the Partners waives and releases, to the full extent it may
lawfully do so, all rights to a winding up or liquidation of the business of
the Partnership, notwithstanding that the dissolution of the Partnership may
be caused wrongfully or otherwise in contravention of this Agreement by such
Partner or any other Partner, and further notwithstanding that, at the time
of such dissolution, such Partner shall be, or be deemed to be or thereby
become, a Withdrawn Partner pursuant to this Agreement; and
11.6.6 As used in this 11.6, the term "Partnership," at any point in time,
shall mean the Partnership originally formed pursuant to this Agreement or
the Successor Partnership which at such time is continuing the business and
affairs of the Partnership originally so formed.
75<PAGE>
12. ARBITRATION.
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12.1 OPTIONAL ARBITRATION. In the event that the Partners who are parties
to a dispute are unable to agree on any matter arising under this Agreement,
such Partners may, but shall not be obligated, to have such dispute resolved
pursuant to binding arbitration. Any Partner may request binding
arbitration of any dispute arising hereunder by giving written notice to
each of the other Partners that it wishes to invoke the arbitration
provisions of this Agreement. The Partner requesting arbitration shall set
forth in such notice in adequate detail the issues to be arbitrated, and
within ten (10) days from receipt of such notice any other Partner may set
forth in adequate detail additional related issues to be arbitrated. If
arbitration is requested by any Partner, and agreed to by the other Partners
which are party to the matter in dispute, the decision of the arbitrators
shall be final and binding upon all the Partners involved, and the decision
of the arbitrators may be entered in any court having jurisdiction.
12.2 CONDUCT OF ARBITRATION. The arbitration shall be conducted by a
panel of three individuals knowledgeable and experienced in the type of
matter that is the subject of the dispute who have not previously been
employed or retained by any Partner involved in the dispute or an Affiliate
and do not have a direct or indirect interest in any Partner or the subject
matter of the dispute. In the event the Partners are unable to agree upon
all three of the individuals, then such remaining individuals shall be
selected by the American Arbitration Association ("AAA"). The Arbitration
shall be conducted in Boston, Massachusetts in accordance with the
commercial arbitration rules of the AAA.
76<PAGE>
12.3 COSTS. Upon the determination of any such dispute, the arbitrators
shall bill the costs attributable to such binding arbitration to the party
whose position they determine is most inconsistent with the actual decision
rendered; provided, however, that the arbitrators shall be empowered to
apportion such costs among the parties if they deem it appropriate.
12.4 OPTIONAL ARBITRATION TO BE BINDING. It is the intent of the Partners
that once arbitration is requested by a Partner and agreed to by the other
Partners which are party to the dispute in question, the matter(s) set for
arbitration shall be decided as set forth herein and they shall not seek to
have this Section 12 rendered unenforceable or to have such matter decided
in any other way; provided, however, that nothing herein shall prevent the
Partners which are parties to any such arbitration from negotiating a
settlement of any issue at any time.
77<PAGE>
13. GENERAL.
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13.1 EFFECT OF AGREEMENT. From and after the Formation Date, this
Agreement, including Schedules A and B, reflects the whole and entire
agreement among the Partners and supersedes all contemporaneous and/or prior
written or oral agreements between or among the Partners as a group or
individually related to the subject matter hereof. This Agreement may be
amended, restated or supplemented only by the Unanimous Vote of all Partners
or their Representatives on the Management Committee acting individually and
not as members of any block; provided, however, that any Additional Partner
may be admitted to the Partnership in accordance with the provisions of
Section 9 (and any appropriate adjustment in the Percentage Interests of the
Partners on Schedule A hereto as a result of such admission may be effected)
by the execution of a counterpart of this Agreement by such Additional
Partner; and provided further, that no amendment which would adversely
affect the rights of any Withdrawn Partner(s) under Section 2.10 shall be
effective against such Withdrawn Partner(s) unless the same is expressly
agreed to in writing by such Withdrawn Partner(s).
13.2 NOTICES. Notice to all Partners shall be deemed to be notice to the
Partnership. If any Partner receives a notice to or on behalf of the
Partnership, such Partner shall immediately transmit such notice to all
Partners. Any written notice or other communication shall be sufficiently
given or shall be deemed given (a) on the date transmitted by facsimile
transmission provided that the sender shall have a written record generated
by the receiving electronic device of the receipt thereof, and provided
further that a copy of such notice is sent promptly thereafter by certified
78<PAGE>
mail, return receipt requested, first class postage prepaid, or (b) on the
first business day after the sending of such notice by nationally recognized
overnight courier service, in each case addressed as follows:
13.2.1 To each of the Partners at the address set forth below or at such
other address as may be designated from time to time by any Partner by
written notice to each other Partner and the Partnership:
Bay State Energy Enterprises, Inc.
300 Friberg Parkway
Westborough, Massachusetts 01581-5039
Attn: Thomas A. Sacco
Title: Vice President
Phone: (508) 836-7250
Fax: (508) 836-7072
ENI Gas Service, Inc.
P. O. Box 1500
Hartford, CT 06144-1500
Attn: Harry Kraiza, Jr.
Title: Senior V.P.
Phone: (203) 727-3245
Fax: ( 203) 727-3064
Koch Energy Alliance Company
600 Travis Street
Houston, TX 77253-3327
Attn: Joseph A. Blount, Jr.
Title: President
Phone: (713) 229-4609
Fax: (713) 229-5210
and
13.2.2 To the Partnership at its principal office specified by the
Management Committee in accordance with Section 2.7 or such other address as
may be designated from time to time by written notice to each of the
Partners. Any Partner may request that copies of notices be given to any
Affiliate at such address designated by such Partner by written notice to
each other Partner and to the Partnership, provided that any failure to give
79<PAGE>
such notice shall not affect the validity of any notice given to any Partner
or the Partnership in accordance with this Section 13.2. Each of the
Partners agrees to give such notice to any such Affiliate.
13.3 FURTHER ASSURANCES. Each of the Partners and Withdrawn Partners
agrees to execute and deliver all such other and additional instruments and
documents and to do such other acts and things as may be reasonably
necessary more fully to effectuate this Partnership and carry on the
Partnership business in accordance with this Agreement.
13.4 APPLICABLE LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the Commonwealth of Massachusetts without
regard to the principles of conflicts of laws. In the event that any
provision of this Agreement shall be deemed to conflict with any provision
of the Massachusetts Uniform Partnership Act (the "Act"), the provisions of
the Act shall to the extent required by the Act, be controlling.
13.5 COUNTERPARTS. This Agreement may be executed in counterparts
(including counterparts provided for execution by an Additional Partner),
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
13.6 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
80<PAGE>
13.7 Waiver. No waiver by any Person of any default by any Partner or
Partners in the performance of any provision, condition or requirement
herein shall be deemed to be a waiver of, or in any manner release, the said
Partner or Partners from performance of any other provision, condition or
requirement herein; nor shall such waiver be deemed to be a waiver of, or in
any manner a release of, said Partner or Partners from future performance of
the same provision, condition or requirement. Any delay or omission of any
Partner to exercise any right hereunder shall not impair the exercise of any
such right, or any like right, accruing to it thereafter. No waiver of a
right created by this Agreement by one or more Partners shall constitute a
waiver of such right by the other Partners except as may otherwise be
required by law with respect to Persons not parties hereto. The failure of
one or more Partners to perform its or their obligations hereunder shall not
release the other Partners from the performance of such obligations.
13.8 PARTITION. The Partners expressly waive and release any right to
have their interest, individually or collectively, in the Partnership
partitioned or sold for the purpose of dividing the proceeds of such sale
for the period during which the Partnership or any Successor Partnership
shall remain in existence.
13.9 LAWS AND REGULATORY BODIES. This Agreement and the obligations of
the Partners hereunder are subject to all applicable laws, rules, orders and
regulations of governmental authorities having jurisdiction and, in the
event of conflict, such laws, rules, orders and regulations of governmental
authorities having jurisdiction shall control.
81<PAGE>
13.10 PARTNERSHIP OPPORTUNITY. Participation in the Partnership shall in
no way restrain a Partner, an Affiliate or the officers, directors,
shareholders, or employees of the Partner or Affiliate from the pursuit of
present or future business activities, whether or not any such activity is
competitive with the business of the Partnership, or in any way preclude or
restrict any of them from entering into a joint venture, partnership or
other business arrangement with the Partnership. None of any Partner's or
its Affiliate's officers, directors, shareholders, employees shall under any
circumstances be obligated or bound to offer or present to the Partnership
any business opportunity offered to such officers, directors, shareholders,
employees, as a prerequisite to the acquisition of or investment in such
business opportunity by any of them. The parties agree and acknowledge that
the provisions of this Section 13.10 are not applicable to the General
Manager or any employee of the Partnership.
13.11 SECTION NUMBERS. Unless otherwise indicated, references to section
numbers are to sections of this Agreement.
13.12 CONFIDENTIALITY. Except as hereinafter provided, the Partnership and
each Partner shall treat as confidential, and not disclose to any third
party not authorized by the Management Committee to receive confidential
information, any information obtained either directly or indirectly from any
other Partner pursuant to this Agreement and designated by such Partner as
confidential, or other confidential information developed or acquired by the
Management Committee, or by the General Manager or those under his
supervision during performance of their obligations on behalf of the
82<PAGE>
Partnership, unless such confidential information (a) was already in the
possession of the receiving Partner, or an Affiliate thereof, at the time it
obtained such confidential information hereunder, (b) was or is published or
otherwise is or becomes generally available to the public through no fault
of such receiving Partner or its Affiliate, (c) is developed independently
by the receiving Partner or its Affiliates or (d) was or is made available
to such Partner or its Affiliate without restriction by any Person or entity
which is not bound by, and does not impose, an obligation of confidentiality
or use with respect thereto. Further, neither the Partnership nor any
Partner shall (a) use any such confidential information (other than its own)
for any purpose other than in connection with the activities of the
Partnership pursuant to this Agreement or (b) disclose, reveal or otherwise
make any such confidential information (other than its own) available to any
unauthorized third party without the prior written consent of the other
Partners hereunder, unless such disclosure is required by operation of law
or regulation. The Partners and the Management Committee shall establish
and enforce reasonable procedures for the protection of confidential
information and shall restrict disclosure of such information to as few as
possible of the employees, officers, agents and Affiliates of each Partner
and the Partnership, and only to those who need to know such information in
connection with the purposes of the Partnership as set forth herein. Each
Partner and the Management Committee shall take such reasonable and prudent
steps and precautionary measures as are required to ensure compliance with
this section 13.12 by such of their employees, officers, agents, Affiliates
and other Persons as shall be given access to such confidential information
and shall be responsible for compliance by their employees, officers, agents
83<PAGE>
and Affiliates. The obligations of the Partners and Withdrawn Partners pur-
suant to this Section 13.12 shall survive the term of this Agreement for a
period of five (5) years. The Partners agree that no adequate remedy at law
exists for a material breach or threatened material breach of any of the pro-
visions of this Section 13.12, the continuation of which unremedied will
cause the injured Partners to suffer irreparable harm. Accordingly, the Par-
tners agree that the injured Partners shall be entitled, in addition to other
remedies which may be available to them, to immediate injunctive relief from
any material breach of any of the provisions of this Section 13.12 and to
specific performance of their rights hereunder, as well as to any other
remedies available at law or in equity.
13.13 SEVERABILITY. Should any provision of this Agreement be deemed in
contradiction with the laws of any jurisdiction in which it is to be
performed or unenforceable for any reason, such provision shall be deemed
null and void, but this Agreement shall remain in force in all other
respects. Should any provision of this Agreement be or become ineffective
because of changes in applicable laws or interpretations thereof, or should
this Agreement fail to include a provision that is required as a matter of
law, the validity of the other provisions of this Agreement shall not be
affected thereby. If such circumstances arise, the parties hereto shall
negotiate in good faith appropriate modifications to this Agreement to
reflect those changes that are required by law.
13.14 THIRD PERSONS. Except as expressly provided in this Agreement,
nothing herein expressed or implied is intended or shall be construed to
84<PAGE>
confer upon or to give any Person not a party hereto any rights or remedies
under or by reason of this Agreement.
13.15 DRAFTING. This Agreement shall not be interpreted either more or
less favorably towards any Partner by virtue of the fact that such Partner
or its counsel was responsible or principally responsible for the drafting
of all or a portion hereof.
85<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed and sealed by their duly authorized representatives as of the date
first set forth above.
BAY STATE ENERGY ENTERPRISES,
INC.
By: Thomas A. Sacco
---------------------------
Its: Vice President
--------------------------
Antonio D. Augiar
-------------------------------------
ATTEST
KOCH ENERGY ALLIANCE
COMPANY
By: Joseph A. Blount Jr.
-------------------------
Its: President
-------------------------
Donna J. Worley
--------------------------------------
ATTEST
ENI GAS SERVICES, INC.
By: Harry Kraiza, Jr.
--------------------------
Its: Senior Vice President
--------------------------
Edna M. Karanian
---------------------------------------
ATTEST
86<PAGE>
SCHEDULE A
-----------
Partner Name Percentage Interest
------------ -------------------
BSEE 33 1/3%
ENIG 33 1/3%
KEAC 33 1/3%
87<PAGE>
SCHEDULE B
----------
[FORM OF] PROMISSORY NOTE
-------------------------
[ Location]
---------
[Date]
----
In consideration of becoming a partner in KBC Energy Services ("KBC"), a
general partnership, formed pursuant to the partnership agreement entered
into by Koch Energy Alliance Company, Bay State Energy Enterprises, Inc.,
and ENI Gas Services, Inc., dated June ___, 1995 (the "Partnership
Agreement"), [Name of Partner] promises to pay to KBC, in accordance with
---------------
the terms and conditions of the Partnership Agreement, any Capital
Contribution requested, pursuant to such agreement, by the KBC Management
Committee, up to a cumulative total of $ 1,700,000. Any failure to pay any
such amount shall be governed by the terms of the Partnership Agreement.
[Name of Partner] shall not be liable under this promissory note for any
---------------
cash payments resulting from a cash call made by the Management Committee
after the effective date of said Partner's withdrawal from the Partnership.
The capitalized terms in this promissory note shall have the same meaning as
the terms are used in the Partnership Agreement.
[NAME OF PARTNER]
---------------
By:________________________________
Title:_______________________________
88<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND> THIS SCHEDULE CONTAINS
SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM
THE CONSOLIDATED BALANCE
SHEETS, STATEMENTS OF
INCOME, STATEMENTS OF
CASHFLOWS AND STATEMENTS OF
CAPITALIZATION AND IS
QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-START> OCT-01-1994
<PERIOD-END> JUN-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 268,665
<OTHER-PROPERTY-AND-INVEST> 52,521
<TOTAL-CURRENT-ASSETS> 58,379
<TOTAL-DEFERRED-CHARGES> 88,065
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 467,630
<COMMON> 30,605
<CAPITAL-SURPLUS-PAID-IN> 74,018
<RETAINED-EARNINGS> 50,577
<TOTAL-COMMON-STOCKHOLDERS-EQ> 155,200
0
906
<LONG-TERM-DEBT-NET> 153,119
<SHORT-TERM-NOTES> 1,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 3,886
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 153,519
<TOT-CAPITALIZATION-AND-LIAB> 467,630
<GROSS-OPERATING-REVENUE> 232,218
<INCOME-TAX-EXPENSE> 12,502
<OTHER-OPERATING-EXPENSES> 190,891
<TOTAL-OPERATING-EXPENSES> 203,393
<OPERATING-INCOME-LOSS> 28,825
<OTHER-INCOME-NET> 210
<INCOME-BEFORE-INTEREST-EXPEN> 29,035
<TOTAL-INTEREST-EXPENSE> 10,652
<NET-INCOME> 18,383
46
<EARNINGS-AVAILABLE-FOR-COMM> 18,337
<COMMON-STOCK-DIVIDENDS> 11,024
<TOTAL-INTEREST-ON-BONDS> 2,562
<CASH-FLOW-OPERATIONS> 57,992
<EPS-PRIMARY> 1.85
<EPS-DILUTED> 1.85
<PAGE>
</TABLE>
