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 December 31, 1994
---------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
-------------------- -------------------
Commission file number 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 January 24, 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 December
31, 1994 and 1993 and the results of its operations and its cash flows for
the three months and twelve months ended December 31, 1994 and 1993 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)
Dec. 31, Sept. 30, Dec. 31,
ASSETS 1994 1994 1993
------ --------- --------- ---------
<S> <C> <C> <C>
Plant and Equipment:
Regulated energy $ 369,485 $ 365,638 $ 345,801
Nonregulated energy 62,767 62,728 61,459
Construction work in progress 2,379 2,762 1,046
--------- --------- ---------
434,631 431,128 408,306
Less-Allowance for depreciation 122,934 119,392 109,633
--------- --------- ---------
311,697 311,736 298,673
--------- --------- ---------
Investments, at equity 5,304 5,147 4,749
--------- --------- ---------
Current Assets:
Cash and cash equivalents 1,145 1,126 668
Accounts and notes receivable 36,967 28,393 43,502
Allowance for doubtful accounts (3,573) (4,017) (3,685)
Accrued utility revenue 17,138 3,714 16,828
Inventories 17,833 18,326 18,769
Prepaid expenses 2,637 10,107 1,895
Recoverable purchased gas costs - 3,769 -
--------- --------- ---------
72,147 61,418 77,977
--------- --------- ---------
Deferred Charges and Other Assets:
Unrecovered future taxes 46,759 46,759 53,181
Recoverable transition costs 6,281 6,925 15,000
Other assets 27,221 26,569 19,949
--------- --------- ---------
80,261 80,253 88,130
--------- --------- ---------
$ 469,409 $ 458,554 $ 469,529
========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED BALANCE SHEETS (Concluded)
(Thousands of Dollars)
Dec. 31, Sept. 30, Dec. 31,
CAPITALIZATION AND LIABILITIES 1994 1994 1993
------------------------------ --------- --------- ---------
<S> <C> <C> <C>
Capitalization:
Common Stock $ 31,045 $ 29,820 $ 29,820
Capital in excess of par value 73,906 66,657 66,948
Retained Earnings 45,658 43,264 42,878
--------- --------- ---------
150,609 139,741 139,646
Unearned compensation -
Restricted stock awards (130) (157) (803)
Treasury stock (103) (103) (103)
--------- --------- ---------
Common stock equity 150,376 139,481 138,740
Preferred stock, not subject to
mandatory redemption 909 909 943
Long-term debt 153,604 154,193 137,088
--------- --------- ---------
304,889 294,583 276,771
--------- --------- ---------
Notes Payable Under Revolving Credit
Agreements 2,000 - -
--------- --------- ---------
Current Liabilities:
Current portion of long-term debt 3,884 3,791 4,437
Notes payable and commercial paper 16,000 18,500 41,891
Accounts payable and accrued expenses 40,818 37,906 41,018
Refundable purchased gas costs - - 1,403
Accrued liabilities 5,712 7,779 919
--------- --------- ---------
66,414 67,976 89,668
--------- --------- ---------
Deferred Credits:
Deferred income taxes 37,492 36,916 31,313
Unfunded deferred income taxes 46,759 46,759 53,181
Investment tax credits 3,589 3,644 3,809
Refundable taxes 3,275 3,275 3,984
Accrued transition costs 1,281 1,925 5,014
Other 3,710 3,476 5,789
--------- --------- ---------
96,106 95,995 103,090
--------- --------- ---------
$ 469,409 $ 458,554 $ 469,529
========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars except for per share data)
Three Months Ended
December 31,
-----------------------------
1994 1993
---------- ----------
<S> <C> <C>
Operating Revenues $ 76,531 $ 80,140
Less: Cost of Energy 41,883 43,971
State Gross Receipts Tax 3,225 3,021
---------- ----------
Operating Margin 31,423 33,148
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Other Operating Expenses:
Operations & maintenance expenses 11,863 13,356
Depreciation 4,214 3,363
Income taxes 4,180 4,709
Other taxes 1,789 1,800
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22,046 23,228
---------- ----------
Operating Income 9,377 9,920
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 30 13
Equity in partnership earnings 375 226
Other deductions (153) (387)
Income Taxes (118) 55
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134 (93)
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Interest and Debt Expense 3,427 3,147
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Net Income 6,084 6,680
Less-Dividends on Preferred Stock 15 17
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Net Income Applicable to Common Stock $ 6,069 $ 6,663
========== ==========
Income Per Average Share of
Common Stock $ 0.61 $ 0.70
========== ==========
Dividends Per Share of Common Stock $ 0.37 $ 0.37
========== ==========
Average Common Shares Outstanding
During the Period 9,914,226 9,541,526
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONNECTICUT NATURAL GAS CORPORATION "UNAUDITED"
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of dollars except for per share data)
Twelve Months Ended
December 31,
-----------------------------
1994 1993
---------- ----------
<S> <C> <C>
Operating Revenues $ 287,053 $ 268,926
Less: Cost of Energy 153,459 147,891
State Gross Receipts Tax 12,067 10,761
---------- ----------
Operating Margin 121,527 110,274
---------- ----------
Operating Expenses:
Operations & maintenance expenses 54,551 49,236
Depreciation 16,358 12,848
Income taxes 12,824 12,339
Other taxes 7,425 6,861
---------- ----------
91,158 81,284
---------- ----------
Operating Income 30,369 28,990
---------- ----------
Other Income (Deductions):
Allowance for equity funds used
during construction 38 593
Equity in partnership earnings 1,017 1,031
Other income (deductions) (773) (972)
Income Taxes (286) (457)
---------- ----------
(4) 195
---------- ----------
Interest and Debt Expense 13,258 11,796
---------- ----------
Net Income 17,107 17,389
Less-Dividends on Preferred Stock 64 67
---------- ----------
Net Income Applicable to Common Stock $ 17,043 $ 17,322
========== ==========
Income Per Average Share of
Common Stock $ 1.77 $ 1.82
========== ==========
Dividends Per Share of Common Stock $ 1.48 $ 1.47
========== ==========
Average Common Shares Outstanding
During the Period 9,633,636 9,542,022
========== ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Three Months Ended
December 31,
----------------------
1994 1993
---- ----
<S> <C> <C>
Cash Flows from Operations $ 1,119 $(15,295)
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (4,156) (4,006)
Other investing activities (732) (3,593)
-------- --------
Net cash used in investing activities (4,888) (7,599)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (3,690) (3,546)
Issuance of common stock 8,474 -
Other stock activity, net - (717)
Principal retired on long-term debt (496) (1,112)
Short-term debt (500) 27,391
-------- --------
Net cash provided by
financing activities 3,788 22,016
-------- --------
Increase/(decrease) in Cash and
Cash Equivalents 19 (878)
Cash and Cash Equivalents at
Beginning of Period 1,126 1,546
-------- --------
Cash and Cash Equivalents at
End of Period $ 1,145 $ 668
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Thousands of Dollars)
Three Months Ended
December 31,
----------------------
1994 1993
---- ----
<S> <C> <C>
Schedule Reconciling Earnings to
Cash Flows from Operations:
Income $ 6,084 $ 6,680
-------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 4,352 3,471
Deferred income taxes, net 521 3,768
Undistributed affiliate earnings (375) (226)
Cash distributions received from
investments 168 -
Change in assets and liabilities:
Accounts receivable (9,018) (12,906)
Accrued utility revenue (13,424) (12,196)
Inventories 493 1,644
Unrecovered/(refundable)
purchased gas costs 3,769 (2,355)
Prepaid expenses 7,470 1,484
Accounts payable and accrued expenses 845 (4,675)
Other assets/liabilities 234 16
-------- --------
Total adjustments (4,965) (21,975)
-------- --------
Cash flows from operations $ 1,119 $(15,295)
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 4,075 $ 3,673
======== ========
Income taxes $ 928 $ 5,202
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
Twelve Months Ended
December 31,
----------------------
1994 1993
---- ----
<S> <C> <C>
Cash Flows from Operations $ 41,358 $ 19,731
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (28,009) (24,868)
Other investing activities 971 (18,546)
-------- --------
Net cash used in investing activities (27,038) (43,414)
-------- --------
Cash Flows from Financing Activities:
Dividends paid (14,328) (14,093)
Issuance of common stock 8,464 239
Other stock activity, net (51) (728)
Issuance of long-term debt 20,000 35,100
Principal retired on long-term debt (4,037) (18,617)
Short-term debt (23,891) 22,191
-------- --------
Net cash provided/(used) by
financing activities (13,843) 24,092
-------- --------
Increase in Cash and
Cash Equivalents 477 409
Cash and Cash Equivalents at
Beginning of Period 668 259
-------- --------
Cash and Cash Equivalents at
End of Period $ 1,145 $ 668
======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(Thousands of Dollars)
Twelve Months Ended
December 31,
----------------------
1994 1993
---- ----
<S> <C> <C>
Schedule Reconciling Earnings to
Cash Flows from Operations:
Income $ 17,107 $ 17,389
-------- --------
Adjustments to reconcile income
to net cash:
Depreciation and amortization 17,192 13,235
Deferred income taxes, net 5,291 3,655
Undistributed affiliate earnings (1,017) (1,031)
Cash distributions received from
investments 408 1,154
Change in assets and liabilities:
Accounts receivable 1,423 (306)
Accrued utility revenue (310) (1,951)
Inventories 936 (7,645)
Unrecovered/(refundable)
purchased gas costs (1,403) (1,564)
Prepaid expenses (742) (1,279)
Accounts payable and accrued expenses 4,593 (2,042)
Other assets/liabilities (2,120) 116
-------- --------
Total adjustments 24,251 2,342
-------- --------
Cash flows from operations $ 41,358 $ 19,731
======== ========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest (net of amount capitalized) $ 10,541 $ 9,581
======== ========
Income taxes $ 5,699 $ 11,484
======== ========
</TABLE>
<PAGE>
"UNAUDITED"
CONNECTICUT NATURAL GAS CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1994
(Thousands of Dollars)
(1) Short-term Debt
In December, 1994 the Company entered into a $5,000 commercial
revolving credit agreement for use by the nonregulated operations.
This line of credit is unsecured and expires in 1997. There is a 1/5
of 1% annual facility fee on the line of credit. The interest rate is
based upon the Certificate of Deposit, Eurodollar or Cost of Funds rate
plus a variable margin and is determined at the time of each borrowing.
(2) Steam Supply
During the fourth quarter of fiscal 1994 the nonregulated operations
primary steam supplier indicated a desire to negotiate a termination of
its long-term steam supply contract with The Hartford Steam Company, a
wholly-owned subsidiary of Energy Networks, Inc., a wholly-owned
nonregulated subsidiary of the Company. Accordingly, management
entered into discussions with this supplier, and these discussions are
still in progress at this time. Management does not believe that the
resolution of this matter will have any adverse effect on the Company's
financial condition or results of operations. However, the ultimate
impact will depend upon a number of factors including the final terms
of any settlement agreed to with the supplier and the terms of any new
steam supply.
(3) 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
DECEMBER 31, 1994
(Thousands of Dollars Except Per Share Amounts)
RESULTS OF OPERATIONS
Lower fiscal 1995 earnings were recorded for both the three months and
twelve months ended comparable periods. First quarter, 1995 earnings per
share were $.61, compared to $.70 for the first quarter of fiscal, 1994.
Twelve months ended December earnings were $1.77 in fiscal 1995 and $1.82 in
1994. Warmer winter weather is the primary reason for lower earnings in the
quarter. Higher interest costs are the main reason for lower earnings in
the twelve months ended results. Results for all periods, however, are the
product of many offsetting factors.
Operating Margin
Lower operating margin was recorded in the first quarter of fiscal, 1995 as
compared to fiscal, 1994. Warmer weather experienced in December, 1994, in
the earlier part of the annual peak heating season, resulted in lower gas
volumes sold to both firm and interruptible customers. Lower sales more
than offset the impact of higher firm gas rates effective December, 1993 as
a result of a rate decision received from the Connecticut Department of
Public Utility Control (DPUC). Interruptible margins earned during this
quarter in fiscal 1995 exceeded the DPUC prescribed target level related to
sharing mechanisms, making a portion of them subject to refund to firm
customers.
Operating margin for the twelve months ended December, 1994 is higher than
that recorded for the twelve months ended December, 1993 primarily because
of higher firm gas rates effective December, 1993. The impact of higher
firm rates, augmented by higher firm sales during a colder 1994 winter, more
than offset lower sales in all other gas customer classes during this same
period. Late payment fees, also allowed by this decision, and greater
interruptible margins retained by the Company supported this increase in
operating margin.
The contribution to operating margin from nonregulated district heating and
cooling operations (DHC) is greater in fiscal 1995 for both the three months
and twelve months ended periods. During the warmer first quarter of fiscal
1995 DHC recorded higher hot water sales, attributed to additional customer
load. Higher chilled water sales and lower steam sales recorded during the
quarter reflect the impact of the warmer weather. The variable cost factor
in DHC rates, which allows anticipated changes in the cost of service to be
passed on to customers, was higher than the actual expenses incurred during
the three months ended December, 1994, also contributing to operating
margin. However, this contribution is temporary as the variable cost factor
is adjusted regularly to ensure that by the end of the fiscal year customers
have only been billed for actual costs incurred. All periods reflect the
benefits of lower fuel costs for the production of steam and hot or chilled
water. The twelve months ended December, 1994 also benefit from colder
weather.
<PAGE>
Income Taxes
In October, 1994 the Company received formal approval from the Internal
Revenue Service to deduct for current tax purposes present as well as
certain prior incurred cost of removal expenses associated with retirements
of plant and equipment. A benefit to earnings from this item of $.06 and
$.15 per share was recorded in the three months and twelve months ended
December, 1994, respectively.
Operations and Maintenance Expenses
Uncollectibles are lower in the first quarter of fiscal 1995. This is
primarily related to lower customer receivables recorded because of the
warmer weather. Several other expense items, including environmental
cleanup costs and conservation expenses, are less in fiscal 1995 because of
the absence of certain previously deferred expenses recognized in the
quarter ended December, 1993. Although newly negotiated labor contracts
resulted in higher union wages, total labor costs are lower, 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. Expenses related to employee
benefits, outside purchased services and computer rentals, because of
renegotiated agreements, are also lower in the three months ended December,
1994.
Operations and maintenance expenses are higher in the twelve months ended
December, 1994 as compared to 1993. Increases occurred in labor, employee
benefits, uncollectibles, regulatory expenses and outside purchased
services, reflecting newly negotiated labor contracts and higher levels of
expenses allowed by the DPUC since December, 1993. Higher employee benefits
during the twelve months ended December, 1994 also include the one-time
fourth quarter fiscal 1994 costs related to the VERO. These increases are
greater than offsetting reductions in computer rentals and environmental
expenses.
Other Income (Deductions)
The first quarter fiscal 1995 increase in other income reflects additional
income from merchandise sales and lower promotional advertising expenses
offset somewhat by increases in various other expenses.
Other income declined from fiscal 1994 to fiscal 1995 between the comparable
twelve months ended periods. Higher promotional advertising expenses, less
income from merchandise sales and a substantially lower allowance for equity
funds used during construction, reflecting the fiscal 1994 completion of the
long-term development of a customer information system, were offset somewhat
by the benefits of lower insurance costs and higher interest income related
to Federal Energy Regulatory Commission (FERC) Order No. 636 Transition
Costs.
Interest and Debt Expense
In the three months ended December, 1994 as compared to 1993 the Company
recorded additional long-term debt interest, recognizing the effect of
additional issues of medium term notes. This was offset somewhat by lower
short-term debt interest costs as a result of lower average outstanding
borrowings. Fourth quarter fiscal 1994 issues of medium term notes and the
first quarter fiscal 1995 issue of common stock were used to refinance
outstanding short-term debt and for working capital during this time.
Refunds received from gas pipeline companies and retained by the Company to
offset future FERC Order 636 transition costs also were available for<PAGE>
working capital during this time, and less working capital was required to
fund the purchase of gas because of warmer winter weather. Together, these
factors reduced the need for short-term borrowings.
The increase in interest expense between the twelve months ended December,
1994 and 1993 is primarily because of the lower fiscal 1995 allowance for
borrowed funds used during construction.
MATERIAL CHANGES IN FINANCIAL CONDITION
Cash flows from operations and net cash flows provided by financing
activities together met the Company's needs for construction funds during
the first quarter of fiscal 1995. In the first quarter of fiscal 1994, net
cash provided by financing activities satisfied the needs for both working
capital and construction funds. Cash flows from operations are generally
lower in the first quarter of the fiscal year when high winter heating
season out-going cash requirements for natural gas must be satisfied in
advance of cash payments from customer receivables. This lag between when
gas is consumed and when payment for it is received is the primary reason
for the lower cash flows from operations recorded in fiscal 1994 when
weather was colder and gas volumes sold for heating were higher. In
contrast, the warmer weather in fiscal 1995 reduced purchased gas
requirements, easing this seasonal need for cash. Cash flows from
operations during the quarter ending December, 1994 have also benefited from
the receipt of refunds from gas pipelines. These have been retained by the
Company to offset FERC 636 transition costs, as allowed by the DPUC.
During the twelve months ended December, 1994, cash flows from operations
satisfied the Company's needs for construction funds and net financing
activities, while the Company's cash requirements for construction funds
were met by both cash from operations and from net financing activities in
the twelve months ended December, 1993.
Financing Activities
In October, 1994 the Company sold 392,200 shares of its $3.125 par value
Common Stock in a public offering at $22.75 per share. The net proceeds of
approximately $8,500 were used by the regulated operations to retire
existing short-term borrowings and for working capital purposes.
In December, 1994 the Company entered into a $5,000 commercial revolving
credit agreement for use by the nonregulated operations. This line of
credit is unsecured and expires in 1997. There is a 1/5 of 1% annual
facility fee on the line of credit. The interest rate is based upon the
Certificate of Deposit, Eurodollar or Cost of Funds rate plus a variable
margin and is determined at the time of each borrowing.
Regulatory Matters
During the second quarter of fiscal, 1995 the Company plans to submit to the
Connecticut Department of Public Utility Control (DPUC) a preliminary notice
of its intention to file amended rate schedules proposing an increase in its
rates. The Company cannot predict the outcome of its request. New rates,
if allowed, could be in effect as early as September, 1995.
Steam Supply
During fiscal 1994 the nonregulated operations primary steam supplier
indicated a desire to negotiate a termination of its long-term steam supply
contract with The Hartford Steam Company, a wholly-owned subsidiary of
Energy Networks, Inc., a wholly-owned nonregulated subsidiary of the<PAGE>
Company. Accordingly, management entered into discussions with this
supplier, and these discussions are still in progress at this time.
Management does not believe that the resolution of this matter will have any
adverse effect on the Company's financial condition or results of
operations. However, the ultimate impact will depend upon a number of
factors including the final terms of any settlement agreed to with the
supplier and the terms of any new steam supply.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
10 (lxx) Commercial Revolving Credit Agreement by and between Fleet
Bank, National Association, and Energy Networks, Inc., dated
December 21, 1994.
27 Financial Data Schedule
99 (i) Exhibit Index
(b) A report on Form 8-K, dated November 22, 1994, was filed on November
22, 1994 to file with the Commission, under Item 5. Other Information,
the contents of a press release issued by the Company on November 22,
1994 to announce earnings data for the fiscal year ended September 30,
1994 and to file unaudited financial statements for the fiscal year
ended September 30, 1994.
<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 01/31/95 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 December 31, 1994
Document
Item Description Description
------------ ----------- ------------
99(i) Exhibit Index Ex-99.1
10(lxx) Commercial Revolving Credit Ex-10.70
Agreement By and Between Fleet
Bank, National Association, and
Energy Networks, Inc.
27 Financial Data Schedule Ex-27
<PAGE>
$5,000,000 COMMERCIAL REVOLVING CREDIT AGREEMENT
------------------------------------------------
AGREEMENT made as of the 21st day of December, 1994, by and
between FLEET BANK, NATIONAL ASSOCIATION, a national banking
association with its principal place of business at One
Constitution Plaza, Hartford, Connecticut 06115 (the "Lender"),
and ENERGY NETWORKS, INC., a Connecticut corporation with a
mailing address at P.O. Box 1500, Hartford, Connecticut
06114-1500 (the "Borrower").
I. GENERAL TERMS
-------------
Section 1.01. Amount of the Loan.
------------- -------------------
Subject to the terms and conditions of this Agreement, the
Lender will lend to the Borrower up to Five Million and 00/100
Dollars ($5,000,000) (the "Loan Amount"), from time to time, on
a revolving loan basis (the "Revolving Loan"), the repayment of
which is evidenced by a Revolving Credit Note of even date
herewith (the "Note"), substantially in the form attached
hereto as Exhibit A.
Section 1.02. Revolving Loan.
------------- ---------------
a. Repayment of the Revolving Loan.
-------------------------------
If not sooner paid, the outstanding principal balance of the
Revolving Loan shall be due and payable in full on December 15,
1997 (the "Revolver Maturity Date"), together with all accrued
interest and other amounts owing from the Borrower under the
Note.
b. The Note.
--------
The advances made by the Lender pursuant to this Section
1.02 shall be evidenced by the Note in substantially the form
attached hereto as Exhibit A with all blanks therein
appropriately completed, payable to the order of the Lender,
which Note is hereby incorporated herein by reference and made
a part hereof.
c. Interest on the Note; Prepayment.
--------------------------------
The aggregate principal amount outstanding under the Note <PAGE>
shall bear interest, commencing from the date of each advance
thereunder and continuing until payment in full thereof, at the
option of the Borrower at a CD Rate, a Eurodollar Rate, or a
Cost of Funds Rate, each as defined and as described in the
Note. The Borrower may borrow, repay and borrow again
hereunder, provided, however, that certain prepayment premiums
may be due and payable as provided in the Note in the event
that Borrower seeks to prepay amounts prior to the expiration
of the applicable Interest Period, as provided for and defined
in the Note.
Section 1.03. Use of Proceeds.
------------ ---------------
The proceeds of the Revolving Loan shall be used for
short-term working capital and general corporate purposes.
Section 1.04. Capital Adequacy.
------------ ----------------
The Borrower hereby agrees that if after the date hereof,
any law or regulation, or any interpretation thereof by any
court or administrative agency shall have the effect of
increasing the capital adequacy requirements of banks or bank
holding companies and compliance by the Lender has or would
have the effect of reducing the rate of return on the Lender's
capital as a consequence of the Lender's obligations hereunder,
the Borrower will, on 90 days notice from the Lender, pay to
the Lender from time to time as specified by the Lender such
additional amounts as shall be sufficient to compensate the
Lender for such reduced return.
II. REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower represents and warrants to the Lender (which
representations and warranties shall survive the delivery of
the Note and the making of any advances under the Revolving
Loan) that:
Section 2.01. Fiscal Year; Financial Statements, Etc.
------------ --------------------------------------
The Borrower's fiscal year ends on September 30 of each
year. The Borrower has heretofore furnished to the Lender (a)
unqualified financial statements of the Borrower as of
September 30, 1992 and 1993, together with supporting
schedules, all prepared by certified public accountants, and
(b) audited financial statements of the Borrower as of
September 30, 1994, together with supporting schedules,
prepared by the Borrower. Said financial statements have been
prepared in accordance with generally accepted principles of
accounting applied on a basis consistent with that of preceding
periods and are complete and correct and fairly present the<PAGE>
financial condition of the Borrower as at said dates, and the
results of its operations for the year or other period ended on
said dates. To the best of the Borrower's knowledge and
belief, the Borrower does not have any contingent obligations,
liabilities for taxes or unusual forward or long-term
commitments except as in the foregoing financial statements
specifically mentioned. Since September 30, 1994, there has
been no material adverse change in the financial condition of
the Borrower, and since that date no dividends or other
distributions have been declared or paid or made to The
Connecticut Natural Gas Company, the sole stockholder of the
Borrower ("CNG"), except as may be have been disclosed to the
Lender in writing.
Section 2.02. Incorporation.
------------ -------------
The Borrower (a) is duly organized, validly existing and in
good standing under the laws of its state of incorporation, (b)
has the corporate power and authority to own its properties and
to carry on business as now being conducted and is qualified to
do business in every jurisdiction where such qualification is
necessary, and (c) has the corporate power to execute and
deliver, and perform its obligations under this Agreement and
the Note.
Section 2.03. Authorization; Compliance, Etc.
------------ ------------------------------
The execution and delivery of, and performance by the
Borrower of its obligations under, this Agreement and the Note
have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court
or other agency of government, the corporate charter or by-laws
of the Borrower or any indenture, agreement or other instrument
to which it is a party, or by which it is bound, or be in
conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under, or except as
may be provided by this Agreement, result in the creation or
imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the property or assets of the Borrower
pursuant to, any such indenture, agreement or instrument. The
Borrower is not required to obtain any consent, approval or
authorization from, or to file any declaration or statement
with, any governmental instrumentality or other agency in
connection with or as a condition to the execution, delivery or
performance of this Agreement or the Note, except as may be
required to be disclosed pursuant to the Securities and
Exchange Act of 1934.
<PAGE>
Section 2.04. Litigation.
------------ ----------
Except as disclosed to the Lender in Schedule 1 hereto,
there is no action, suit or proceeding at law or in equity or
by or before any governmental instrumentality or other agency
now pending or, to the knowledge of the Borrower, threatened
against or affecting the Borrower which, if adversely
determined, would have a material adverse effect on the
business, operations, properties, assets or condition,
financial or otherwise, of the Borrower.
Section 2.05. Compliance with Laws and Agreements.
------------ -----------------------------------
The Borrower is not a party to any agreement or instrument
or subject to any charter or other corporate restriction
adversely affecting its business, properties or assets,
operations or conditions, financial or otherwise. The Borrower
is not in default in the performance, observance or fulfillment
of any of the obligations, covenants or conditions contained in
any agreement or instrument to which it is a party.
Section 2.06. Title to Properties.
------------ -------------------
Except as disclosed in Schedule 2 hereto, the Borrower has
good title to all of its properties and assets, free and clear
of all mortgages, security interests, restrictions, liens and
encumbrances of any kind, except liens permitted hereunder and
restrictions, easements and minor irregularities in title which
do not and will not interfere with the occupation, use and
enjoyment by the Borrower of such properties and assets in the
normal course of its business as presently conducted or
materially impair the value of such properties and assets for
the purpose of such business.
Section 2.07. Corporate Organization.
------------ ----------------------
Exhibit B attached hereto sets forth the name and
jurisdiction of incorporation or organization of each business
corporation, firm or other entity, if any, at least fifty
percent (50%) of the voting stock or control of which is owned
by the Borrower and also sets forth the percentage amount of
such voting stock owned by the Borrower and the names and
percentages owned by any other owners of such stock. Except as
set forth in said Exhibit B, the Borrower does not own more
than one percent (1%) of the issued and outstanding capital
stock of any corporation, firm or entity.
Section 2.08. No Insolvency.
------------ -------------
Any borrowings made by the Borrower under this Agreement do<PAGE>
not and will not render the Borrower insolvent; the Borrower is
not contemplating either the filing of a petition by it under
any state or federal bankruptcy or insolvency laws or the
liquidating of all or a major portion of its property, and the
Borrower has no knowledge of any person contemplating the
filing of any such petition against it, including the
properties and assets reflected in the financial statements
referred to in Section 2.01 hereof.
Section 2.09. Full Disclosure.
------------ ---------------
No statement of fact made by or on behalf of the Borrower in
this Agreement or in any certificate or schedule furnished to
the Lender pursuant hereto, contains any untrue statement of a
material fact or omits to state any material fact necessary to
make statements contained therein or herein not misleading.
There is no fact presently known to the Borrower which has not
been disclosed to the Lender which materially affects adversely
nor as far as the Borrower can foresee, will materially affect
adversely the property, business, operations or conditions
(financial or otherwise) of the Borrower.
Section 2.10. Investment Company.
------------ ------------------
The Borrower is not an "investment company", or a company
"controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended.
Section 2.11. Margin Stock.
------------ ------------
The Borrower does not own and has no present intention of
acquiring, any "margin security" within the meaning of
Regulation G (12 CFR Part 207), or any "margin stock" within
the meaning of Regulation U (12 CFR Part 221), of the Board of
Governors of the Federal Reserve System (herein called "margin
security" and "margin stock"). None of the proceeds of the
Advances will be used, directly or indirectly, by the Borrower
for the purpose of purchasing or carrying, or for the purpose
of reducing or retiring any indebtedness which was originally
incurred to purchase or carry, any margin security or margin
stock or for any other purpose which might constitute the
transactions contemplated hereby a "purpose credit" within the
meaning of said Regulation G or Regulation U, or cause this
Agreement to violate any other regulation of the Board of
Governors of the Federal Reserve System or the Securities
Exchange Act of 1934, as amended, or any rules or regulations
promulgated under such statutes.
<PAGE>
Section 2.12. Tax Returns.
------------ -----------
The Borrower has filed all federal, state and local tax
returns required to be filed, and has paid or made adequate
provision for the payment of all federal, state and local
taxes, charges and assessments.
Section 2.13. Pension Plans, Etc.
The Borrower does not have a pension, profit sharing or
other similar plan providing for a program of deferred
compensation to any employee except as incorporated and
disclosed in the financial statements of the Borrower. With
respect to such plan(s), if any, Borrower covenants and agrees
to cause to be paid when due all amounts necessary to fund in
accordance with its terms all such plan(s) and will take no
action which could result in liability to the Pension Benefit
Guaranty Corporation, or any of its successors or assigns, or
to the entity which provides funds for such plan(s).
Section 2.14. Environmental Matters.
------------ ---------------------
The Borrower:
(a) has obtained all permits, licenses and other
authorizations which are required under all
environmental laws and regulations, including laws
relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances
or wastes into the environment (including, without
limitation, air, surface water, ground water, or land),
or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants,
chemicals, or industrial, toxic or hazardous substances
or wastes, except to the extent failure to have any
such permit, license or authorization does not have a
material adverse effect on the financial condition,
operations, prospects, or businesses of the Borrower;
(b) except as described in Schedule 2 hereto, is
in material compliance with all terms and conditions of
the required permits, licenses and authorizations, and
are also in compliance with all other limitations,
restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables
contained in those laws or contained in any regulation,
code, plan, order, decree, judgment,<PAGE>
injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the
extent failure to comply does not have a material
adverse effect on the financial condition, operations,
prospects, or businesses of the Borrower.
III. CONDITIONS OF MAKING THE LOAN
-----------------------------
Section 3.01.
------------ The obligation of the Lender to make the
initial advance under the Revolving Loan hereunder is
subject to the following conditions:
(a) The representations and warranties set forth
in Article II hereof shall be true and correct on and
as of the date hereof and the date the initial advance
is made.
(b) The Borrower shall have executed and
delivered to the Lender, upon the execution of this
Agreement, the following:
(i) The Note.
(ii) A certificate of the Secretary or
Assistant Secretary of the Borrower certifying to
the votes of the Borrower's Board of Directors
authorizing the execution and delivery of this
Agreement and the Note.
(iii) A certificate of the Secretary or
Assistant Secretary of the Borrower which shall
certify the names of the officers of the Borrower
authorized to sign this Agreement and the Note and
any other documents or certificates to be
delivered pursuant to this Agreement by the
Borrower or any of its officers, together with the
true signatures of such officers. The Lender may
conclusively rely on such certificate until it
shall receive a further certificate of the
Secretary or an Assistant Secretary of the
Borrower cancelling or amending the prior
certificate and submitting the signatures of the
officers named in such further certificate.
(iv) Certificate of the Secretary of
State, dated reasonably near the date of the
initial advance under the Revolving Loan, of the
state of incorporation or organization of the
Borrower stating that the Borrower is duly<PAGE>
incorporated and in good standing in such state
and has filed all annual reports.
(v) Such other supporting documents and
certificates as the Lender may request.
(c) All legal matters incident to the transactions
hereby contemplated shall be satisfactory to counsel for the
Lender.
(d) No Event of Default as specified in Article VI
hereof, nor any event which upon notice or lapse of time or
both would constitute such an Event of Default, shall have
occurred.
(e) The Borrower shall have paid to the Lender a
one-time processing fee of $2,500.
(f) The Lender shall have received a Letter of Comfort
from CNG in form and content satisfactory to the Lender.
Section 3.02.
------------ The obligation of the Lender to make any
subsequent advances under the Revolving Loan is subject to the
following conditions precedent:
(a) All warranties and representations set forth in
Article II hereof shall be true and accurate as of the date
such advance is requested to be made.
(b) No Event of Default as specified in Article VI
hereof, nor any event which upon notice or lapse of time or
both would constitute such an Event of Default, shall have
occurred and be continuing.
(c) The Borrower shall have paid all Facility Fees
then due and owing pursuant to Section 4.12.
IV. AFFIRMATIVE COVENANTS
---------------------
The Borrower covenants and agrees that, from the date hereof
and until payment in full of the principal of, and interest on,
the Note and any other indebtedness of the Borrower to the
Lender, whether now existing or arising hereafter, the Borrower
will, and cause each subsidiary, if any, to:
Section 4.01.
------------ Preservation of Assets; Compliance with Law.
(a) Do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its<PAGE>
corporate existence, rights, licenses, permits and
franchises and comply with all laws and regulations
applicable to it; at all times maintain, preserve and
protect all franchises and trade names and preserve all the
remainder of its property used or useful in the conduct of
its business and keep the same in good repair, working order
and condition, and from time to time, make, or cause to be
made, all needful and proper repairs, renewals,
replacements, betterments and improvements thereto, so that
the business carried on in connection therewith may be
properly and advantageously conducted at all times; and keep
its insurable properties adequately insured at all times by
financially sound and reputable insurers, to such extent and
against such risks, including fire and other risks insured
against by extended coverage, and maintain liability and
such other insurance as is customarily maintained by
companies engaged in similar businesses.
(b) Comply with all applicable laws and regulations,
whether now in effect or hereafter enacted or promulgated by
any governmental authority having jurisdiction in the
premises.
Section 4.02. Taxes, Etc.
------------ ----------
Pay and discharge or cause to be paid and discharged all
taxes, assessments and governmental charges or levies imposed
upon it or upon its respective income and profits or upon any
of its property, real, personal or mixed, or upon any part
thereof, before the same shall become in default, as well as
all lawful claims for labor, materials and supplies or
otherwise, which, if unpaid, might become a lien or charge upon
such properties or any part thereof; provided that the Borrower
shall not be required to pay and discharge or cause to be paid
and discharged any such tax, assessment, charge, levy or claim
so long as the validity thereof shall be contested in good
faith by appropriate proceedings and it shall have set aside on
its books adequate reserves with respect to any such tax,
assessment, charge, levy or claim, so contested; and provided,
further, that payment with respect to any such tax, assessment,
charge, levy or claim shall be made before any of its property
shall be seized or sold in satisfaction thereof.
Section 4.03. Notice of Proceedings.
------------ ---------------------
Give prompt written notice to the Lender of any proceedings
instituted against it by or in any Federal or state court or
before any commission or other regulatory body, whether
Federal, state or local, which, if adversely determined, would
have a negative financial impact in excess of $150,000.<PAGE>
Section 4.04. Financial Reporting.
------------ -------------------
Furnish to the Lender the following which shall be in form
and substance satisfactory to the Lender:
(a) Within ninety (90) days of the end of each fiscal
year, audited consolidated and consolidating balance sheets
and statements of income and surplus, together with
supporting schedules, prepared by independent certified
public accountants selected by the Borrower and acceptable
to the Lender showing the financial condition of the
Borrower at the close of such fiscal year, the results of
operations during such year and containing a statement to
the effect that such accountants have examined the
provisions of this Agreement and that none of the Events of
Default, as specified in Article VI hereof, nor any event
which upon notice or lapse of time or both would constitute
such an Event of Default, has occurred.
(b) Within forty-five (45) calendar days after the end
of each fiscal quarter in each such fiscal year, quarterly
consolidated and consolidating balance sheets and statements
of income and surplus, together with supporting schedules,
internally prepared, showing the financial condition of the
Borrower at the end of such quarter, internally prepared and
certified by Borrower's President or other authorized
officer.
(c) Concurrently with the delivery of any and all
quarterly and annual financial statements required by this
Section 4.04, a certificate of covenant compliance by the
President or other authorized officer of the Borrower in the
form of Exhibit C hereto (i) calculating, setting forth and
certifying as to the accuracy of the amounts required to be
calculated under this Section 4.04, and (ii) certifying as
to the fact that he/she has examined the provisions of this
Agreement and that none of the Events of Default, as
specified in Article VI hereof, nor any event which upon
notice or lapse of time, or both, would constitute such an
Event of Default, has occurred and is continuing.
(d) Promptly, from time to time, such other
information regarding its operations, assets, business,
affairs and financial condition, as the Lender may
reasonably request.
Section 4.05. Inspection; Audit Rights.
------------ ------------------------
The Borrower will permit Lender and its representatives to<PAGE>
visit and inspect any of the properties of the Borrower, to
examine all their books of account, records, reports and other
papers, to make copies and extracts therefrom, and, upon
reasonable advance notice to Borrower, to discuss their
respective affairs, finances and accounts with their respective
officers and independent public accountants, and by this
provision, the Borrower authorizes said accountants to discuss
the finances and affairs of the Borrower and its Subsidiaries
all at such reasonable times and as often as may be reasonably
requested by Lender. If Lender exercises this right, and
Borrower is not in default under this Agreement, Lender will be
responsible for all accounting fees.
Section 4.06. Notice of Event of Default.
------------ --------------------------
Promptly advise the Lender of any material adverse change in
its condition, financial or otherwise, or of the occurrence of
any Event of Default by the Borrower of the type described in
Article VI hereof, or of the occurrence of any event which upon
notice or lapse of time or both would constitute such an Event
of Default.
Section 4.07. GAAP Accounting.
------------ ---------------
Maintain a standard system of accounting in accordance with
generally accepted accounting principles.
Section 4.08. Debt to Tangible Net Worth.
------------ --------------------------
Maintain a ratio of (x) total long-term debt to (y) its
Tangible Net Worth of 3:1, determined in accordance with
generally accepted accounting principles, consistently applied.
Section 4.09. Interest Coverage Ratio.
------------ -----------------------
Maintain a ratio of (x) earnings before interest, taxes and
dividends to (y) the sum of interest expense, of 2:0,
determined in accordance with generally accepted accounting
principles, consistently applied.
Section 4.10. Measurement of Financial Covenants.
------------ ----------------------------------
The Borrower's financial covenants will be measured as of
the end of each of the Borrower's quarters. The Borrower shall
not change its fiscal year more than once in any twelve (12)
month period without the prior written consent of the Lender.
<PAGE>
Section 4.11. Facility Fee for Revolving Loan.
------------ -------------------------------
Borrower shall pay to the Lender an annual facility fee (the
"Facility Fee") on the Revolving Loan equal to .20% of the Loan
Amount, regardless of usage, payable quarterly in arrears,
commencing March 15, 1995; provided, however that in the event
that either of the ratings on CNG's unsecured debt, or its
reasonable equivalent, given by Moody's Investors Service and
the Standard & Poor's Corporation shall fall below "Baa1" or
"BBB+", respectively, then such Facility Fee shall be
calculated at the rate of .50% per annum for the quarter or
quarters during which such lower rating applies, and further
that in the event that either of the ratings on CNG's unsecured
debt, or its reasonable equivalent, given by Moody's Investors
Service and the Standard & Poor's Corporation shall fall below
"Baa3" or "BBB-", respectively, then such Facility Fee shall be
calculated at the rate of .95% per annum for the quarter or
quarters during which such lower rating applies.
V. NEGATIVE COVENANTS
------------------
The Borrower covenants and agrees that, until payment in
full of the principal of, and interest on, the Note and any
other indebtedness of the Borrower to the Lender, whether now
existing or arising hereafter, unless the Lender shall
otherwise consent in writing, it will not, directly or
indirectly:
Section 5.01. Disposition of Assets.
------------ ---------------------
Sell, lease, transfer or otherwise dispose of its
properties, assets, rights, licenses and franchises to any
person, except in the ordinary course of its business, or turn
over the management of, or enter a management contract with
respect to, such properties, assets, rights, licenses and
franchises, excepting property on Old Track Road in Greenwich,
Connecticut and 71 Columbus Boulevard in Hartford, Connecticut.
Section 5.02. Change in Business.
------------ ------------------
Engage, directly or indirectly, in a business substantially
different from the business now being conducted.
Section 5.03. Accounts Receivable.
------------ -------------------
Sell, assign, discount or dispose in any way of any accounts
receivable, promissory note or trade acceptances held by the
Borrower, with or without recourse, except for collection
(including endorsements) in the ordinary course of business.<PAGE>
Section 5.04. Permitted Liens and Encumbrances.
------------ --------------------------------
Notwithstanding Sections 5.01 and 5.03 hereof, Borrower and
or its properties may, without violating this Agreement, be
subject to:
(a) liens securing taxes, assessments or governmental
charges or levies or the claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and other like
Persons, provided the payment thereto is not at the time
required by Section 4.02;
(b) liens incurred or deposits made in the ordinary
course of business (i) in connection with workmen's
compensation, unemployment insurance, social security and
other like laws, or (ii) to secure the performance of
letters of audit, bids, tenders, sales contracts, leases,
statutory obligations, surety, appeal and performance bonds
and similar obligations, in each case not incurred in
connection with the borrowing of money, the obtaining of
advances or the payment of the deferred purchase price of
property;
(c) attachments, judgments and other similar liens
arising in connection with court proceedings, provided the
execution or other enforcement of such liens is effectively
stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
(d) reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions,
restrictions, leases and other similar time exceptions or
encumbrances affecting real property; PROVIDED that they do
not in the aggregate materially detract from the value of
said properties or materially interfere with their use in
the ordinary conduct of the Borrower's business;
(e) liens or rights setoff by the Lender or the right
of setoff by banks which have extended credit to the
Borrower.
VI. DEFAULTS
--------
Section 6.01. Events of Default.
------------ -----------------
In each case of happening of any of the following events
(each of which is herein and in the Note sometimes called an
"Event of Default"):
(a) any representation or warranty made herein, or in<PAGE>
any report, certificate, financial statement or other
instrument furnished in connection with this Agreement, or
the borrowing hereunder, shall prove to be false or
misleading in any material respect;
(b) default in the payment of any installment of the
principal of, or interest on, the Note or any other
indebtedness of the Borrower to the Lender for more than ten
(10) days after the date when the same shall become due and
payable, whether at the due date thereof or at a date fixed
for prepayment or by acceleration or otherwise;
(c) default in the due observance or performance of
any covenant, condition or agreement contained in Articles
IV or V hereof or in the Note;
(d) default in the due observance or performance of
any other covenant, condition or agreement, on the part of
the Borrower to be observed or performed pursuant to the
terms hereof, and such default shall continue unremedied for
thirty (30) days after written notice thereof by the Lender
to the Borrower;
(e) default with respect to any evidence of
indebtedness of the Borrower (other than to the Lender), in
excess of One Hundred Fifty Thousand Dollars ($150,000) if
the effect of such default is to accelerate the maturity of
such indebtedness or to permit the holder thereof to cause
such indebtedness to become due prior to the stated maturity
thereof;
(f) the Borrower shall (i) apply for or consent to the
appointment of a receiver, trustee, custodian or liquidator
of it or any of its property, (ii) admit in writing its
inability to pay its debts as they mature, (iii) make a
general assignment for the benefit of creditors, (iv) be
adjudicated a bankrupt or insolvent or be the subject of an
order for relief under Title 11 of the United States Code,
or (v) file a voluntary petition in bankruptcy, or a
petition or an answer seeking reorganization or an
arrangement with creditors or to take advantage of any
bankruptcy, reorganization, insolvency, readjustment of
debt, dissolution or liquidation law or statute, or an
answer admitting the material allegations of a petition
filed against it in any proceeding under any such law or if
corporate action shall be taken for the purpose of effecting
any of the foregoing;
(g) an order, judgment or decree shall be entered,
without the application, approval or consent of the Borrower
by any court of competent jurisdiction, approving a petition<PAGE>
seeking reorganization of the Borrower or appointing a
receiver, trustee, custodian or liquidator of the Borrower
or of all or a substantial part of the assets of the
Borrower, and such order, judgment or decree shall continue
unstayed and in effect for any period of sixty (60) days;
(h) final judgment for the payment of money in excess
of an aggregate of One Hundred Fifty Thousand Dollars
($150,000) shall be rendered against the Borrower, and the
same shall remain undischarged for a period of thirty (30)
consecutive days, during which execution shall not be
effectively stayed;
(i) the occurrence of any attachment of any deposits
or other property of the Borrower in the hands or possession
of the Lender, or the occurrence of any attachment of any
other property of the Borrower in an amount exceeding One
Hundred Fifty Thousand Dollars ($150,000) which shall not be
discharged within thirty (30) days of the date of such
attachment;
then and in every such Event of Default and at any time
thereafter during the continuance of such event, the Note and
any and all other indebtedness of the Borrower to the Lender
shall become immediately due and payable, both as to principal
and interest, without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived, anything
contained herein or in the Note or other evidence of such
indebtedness to the contrary notwithstanding.
Section 6.02. Remedies.
------------ --------
Upon the occurrence of any Event of Default, the rights,
powers, privileges and other remedies available to the Lender
under this Agreement or at law or in equity may be exercised by
the Lender at any time and from time to time, whether or not
the indebtedness evidenced by the Note shall have been declared
due and payable.
Section 6.03. Default Rate.
------------ ------------
Without regard to whether the Lender has exercised any other
rights or remedies hereunder, if an Event of Default shall have
occurred and be continuing, the applicable interest rate under
the Note shall at the Lender's option, but only to the extent
permitted by law, be increased to a rate per annum equal to the
rate set forth in the Note, plus five percent (5%).<PAGE>
VII. MISCELLANEOUS
-------------------
Section 7.01. Survival.
------------ --------
This Agreement and all covenants, agreements (including the
Commitment Letter dated December 16, 1994), the representations
and warranties made herein and in the certificates delivered
pursuant hereto, shall survive the making by the Lender of any
advances under the Revolving Loan, and shall continue in full
force and effect so long as the Note and any other indebtedness
of the Borrower to the Lender is outstanding and unpaid.
Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the
successors and assigns of such party; and all covenants,
promises and agreements in this Agreement contained, by or on
behalf of the Borrower, shall inure to the benefit of the
respective successors and assigns of the Lender.
Section 7.02. Expenses.
------------ --------
The Borrower will reimburse the Lender upon demand for all
reasonable out-of-pocket costs, charges and expenses of the
Lender (including reasonable fees and disbursements of counsel
to the Lender) in connection with any enforcement of this
Agreement or the Note.
Section 7.03. Governing Law.
------------ -------------
This Agreement and the Note shall be construed in accordance
with and governed by the laws of the State of Connecticut.
Section 7.04. Amendment; Modifications.
------------ ------------------------
No modification or waiver of any provision of this
Agreement, or of the Note, nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless the
same shall be in writing, and then such waiver or consent shall
be effective only in the specific instance, and for the
purpose, for which given. No notice to, or demand, on the
Borrower, in any case, shall entitle the Borrower to any other
or future notice or demand in the same, similar or other
circumstances.
Section 7.05. No Waiver.
------------ ---------
Neither any failure nor any delay on the part of the Lender
in exercising any right, power or privilege hereunder, or under
the Note, or any other instrument given as security therefor,
shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or future exercise,
or the exercise of any other right, power or privilege.<PAGE>
Section 7.06. Notices.
------------ -------
All notices, requests, demands and other communications
provided for hereunder shall be in writing (including
telegraphic communication) and mailed or telegraphed or
delivered to the applicable party at the addresses indicated
below.
If to the Lender:
Fleet Bank, National Association
One Constitution Plaza
Hartford, Connecticut 06115
Fax No.: (203) 244-5391
Attn: Suresh V. Chivukula, Vice President
With a copy to:
Justin M. Sullivan, Esq.
Edwards & Angell
750 Main Street
Hartford, Connecticut 06103
Fax No.: (203) 527-4198
If to the Borrower:
Mr. Donald Ludington
Executive Vice President
Energy Networks, Inc.
100 Columbus Boulevard
Hartford, Connecticut 06144
Fax No.: (203) 727-3064
With a copy to:
Barbara A. Sarrantonio, Esq.
Murtha, Cullina, Richter & Pinney
185 Asylum Street
Hartford, Connecticut 06103-3469
Fax No.: (203) 240-6150
or, as to each party, at such other address as shall be
designated by such parties in a written notice to the other
party complying as to delivery with the terms of this Section.
All such notices, requests, demands and other communication
shall, when mailed or telegraphed, respectively, be effective
when deposited in the mails or delivered to the telegraph
company, respectively, addressed as aforesaid.<PAGE>
Section 7.07. Successors and Assigns.
------------ ----------------------
This Agreement shall be binding upon and inure to the
benefit of the Borrower and the Lender and their respective
successors and assigns, except that the Borrower shall not have
the right to assign its rights hereunder or any interest herein
without the prior written consent of the Lender.
Section 7.08. Consent to Jurisdiction.
------------ -----------------------
The Borrower, to the extent that it may lawfully do so,
hereby consents to the jurisdiction of the courts of the State
of Connecticut and the United States District Court for the
District of Connecticut, as well as to the jurisdiction of all
courts from which an appeal may be taken from such courts, for
the purpose of any suit, action or other proceeding arising out
of any of its obligations arising hereunder or with respect to
the transactions contemplated hereby, and expressly waives any
and all objections it may have as to venue in any of such
courts.
SECTION 7.9. WAIVER OF RIGHT TO JURY TRIAL.
----------- -----------------------------
THE BORROWER HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT OR THE NOTE
OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH.
NEITHER THE BORROWER, NOR ANY ASSIGNEE OF OR SUCCESSOR TO THE
BORROWER, SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM, OR ANY OTHER LITIGATION OR PROCEDURE BASED UPON,
OR ARISING OUT OF, THIS AGREEMENT, THE NOTE OR ANY OF THE OTHER
LOAN DOCUMENTS, INSTRUMENTS AND AGREEMENTS ENTERED INTO IN
CONNECTION HEREWITH OR THEREWITH OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN THE PARTIES HERETO, OR ANY OF THEM. NO
PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY
TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY
TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS
SECTION 7.10 HAVE BEEN DISCUSSED BY THE PARTIES HERETO, AND
THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NO PARTY
HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY
THAT THE PROVISIONS OF THIS SECTION 7.10 WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
SECTION 7.10. WAIVER OF RIGHT TO NOTICE AND HEARING OF
------------ ----------------------------------------
PREJUDGMENT REMEDIES, ETC.
-------------------------
THE BORROWER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS
AGREEMENT IS A PART IS A COMMERCIAL TRANSACTION, AND TO THE
EXTENT ALLOWED UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL
STATUTES, OR BY OTHER APPLICABLE LAW, HEREBY WAIVES ITS<PAGE>
RESPECTIVE RIGHTS TO NOTICE AND HEARING, BOND, PRIOR COURT
ORDER AND, TO THE BROADEST EXTENT POSSIBLE, ALL DUE PROCESS
RIGHTS GUARANTEED BY THE CONSTITUTION OF THE UNITED STATES AND
THE CONSTITUTION OF THE STATE OF CONNECTICUT WITH RESPECT TO
ANY PREJUDGMENT REMEDY WHICH THE LENDER MAY DESIRE TO USE.
Section 7.11. Severability.
------------ ------------
Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
Section 7.12. Headings.
------------ --------
Any Article and Section headings in this Agreement are
included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose. As
used in this Agreement the term "person" shall include any
individual, corporation, partnership, joint venture, trust, or
unincorporated organization, or a government or any agency or
political subdivision thereof.
<PAGE>
IN WITNESS WHEREOF, the Lender and the Borrower have caused
this Agreement to be duly executed by their duly authorized
officers, all as of the day and year first above written.
LENDER:
WITNESS: FLEET BANK, NATIONAL ASSOCIATION
Deborah L. Henderson By: Suresh V. Chivukula
----------------------------- ---------------------------
Suresh V. Chivukula
Its Vice President
Justin M. Sullivan Duly Authorized
-----------------------------
BORROWER:
ENERGY NETWORKS, INC.
Barbara A. Sarrantonio By: Donald H. Ludington
----------------------------- --------------------------
Name: Donald H. Ludington
Its: Exec. Vice Pres
James P. Bolduc Duly Authorized
-----------------------------<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A: $5,000,000 Revolving Credit Note
Exhibit B: Corporate Organization of Borrower
Exhibit C: Certificate of Compliance
<PAGE>
EXHIBIT A
COPY of $5,000,000 REVOLVING CREDIT NOTE
PROMISSORY NOTE
$5,000,000 December 21, 1994
FOR VALUE RECEIVED, ENERGY NETWORKS, INC., a Connecticut
corporation with an address of P.O. Box 1500, Hartford,
Connecticut 06144-1500 (the "Borrower"), promises to pay to
FLEET BANK, NATIONAL ASSOCIATION, a national banking
association (the "Lender"), or to its order, at its principal
office at One Constitution Plaza, Hartford, Connecticut
06115-1600, the principal sum of up to Five Million Dollars
($5,000,000) or so much thereof as is then outstanding under
this Note, together with interest in arrears on the unpaid
principal balance from time to time outstanding from the date
hereof until the entire principal amount due hereunder is paid
in full at the rates hereinafter provided.
So long as no Event of Default (as hereinafter defined)
occurs as a result of which the Lender declares this Note due
and payable, the unpaid principal amount due hereunder and any
interest then owing shall be payable on December 15, 1997 (the
"Maturity Date").
Interest shall be payable monthly in arrears on the first
day of each month, or the next business day thereafter if such
day is not a business day, commencing January 15, 1995, and
continuing monthly thereafter until this Note is paid in full.
Except as otherwise provided below, each advance under this
Note shall bear interest on the basis of the actual number of
days elapsed over a year of 360 days and shall be at an annual
rate (whether before or after maturity) equal to one of the
following rates selected by an Authorized Representative (as
hereinafter defined) in accordance with the procedure
hereinafter set forth:
(a) the Eurodollar Rate (as hereinafter defined);
(b) the CD Rate (as hereinafter defined); or
(c) the Cost of Funds Rate (as hereinafter defined).
<PAGE>
Requests for Advances
---------------------
The only manner in which a request for an advance may be
made is by Borrower's Authorized Representative telephoning
Lender (i) not later than 1:00 p.m. New York time on the day
prior to the date such advance is to be made, which telephone
requests are to be confirmed by Borrower's Authorized
Representative by the end of the day on which it is made by
telex or facsimile, which request shall specify: (a) the
remaining amount of availability under this Note; (b) the
business day upon which the advance is to be made; and (c) the
duration of the Interest Period (as hereinafter defined).
Advances hereunder shall be made on a revolving basis upon
the request of an Authorized Representative as set forth above,
and as principal is repaid to Lender, such sums may be
readvanced to the Borrower in accordance with the provisions of
that certain $5,000,000 Commercial Revolving Credit Agreement
between Borrower and Lender of even date herewith (the "Loan
Agreement") provided no Event of Default has occurred under the
Loan Agreement or hereunder. Advances hereunder shall not be
in an amount less than $100,000 each.
Lender shall, as soon as practicable after receiving a
request for an advance determine the Eurodollar Rate, CD
Rate and Cost of Funds Rate applicable for the Interest
Period chosen by the Borrower and inform Borrower of the
same, whereupon the Borrower shall have the option to
choose which rate will apply to said advance and such rate
shall be the applicable interest rate for such advance
during such Interest Period. Lender shall be under no
duty to notify Borrower that the applicable rate on any
advance is about to rollover to a new Interest Period of
the same duration as such expiring Interest Period for
failure to select a new Interest Period.
Prior to the end of an applicable Interest Period the
Borrower shall select the same or a new Interest Period,
effective as of the Due Date (as defined below) of the
then expiring Interest Period, subject to the following
conditions:
1. Such selection shall be made by an Authorized
Representative telephoning Lender not later than 1:00
p.m. New York time on the business day prior to the Due
Date of the then expiring Interest Period, such
selection to be confirmed by Borrowers' Authorized
Representative by the end of the day on which it is
made by telex or facsimile;
<PAGE>
2. The Authorized Representative may select any
Interest Period provided that the Due Date shall occur
on or prior to the Maturity Date; and
3. In the absence of an Interest Period selection
by an Authorized Representative pursuant to the terms
hereof prior to the Due Date of the expiring Interest
Period, such advance shall accrue interest based on an
Interest Period of the same duration as the expiring
Interest Period.
If Lender determines (which determination shall be
conclusive and binding upon Borrower) that (i) dollar
deposits in an amount approximately equal to the amount of
the advance requested where the Eurodollar Rate has been
selected for the relevant Interest Period are not
generally available at such time in the New York interbank
eurodollar market for deposits in eurodollars, or (ii) the
rate at which such deposits are being offered will not
adequately and fairly reflect the cost to Lender of
maintaining a Eurodollar Rate on such advance or of
funding the same in such market for such Interest Period,
or (iii) a Eurodollar Rate would be in excess of the
maximum interest rate which Borrower may by law pay, then
in any such event Lender shall so notify Borrower and such
advance shall bear interest at the Prime Rate.
No Interest Period shall commence other than on a
business day. If any Interest Period shall end on a day
which is not a business day, such Interest Period shall be
extended to the next succeeding business day, unless the
next such succeeding business day would fall in the next
calendar month, in which event such Interest Period shall
end on the next preceding business day.
Interest shall be calculated for the actual number of
days elapsed on the basis of a 360-day year. Each
determination of the Eurodollar Rate, CD Rate and Cost of
Funds Rate shall be made by Lender and shall be conclusive
and binding upon Borrower absent manifest error.
If the introduction of or any change in any law,
regulation or treaty, or in the interpretation thereof by
any governmental authority charged with the administration
or interpretation thereof, shall make it unlawful for
Lender to maintain the applicable interest rate at a
Eurodollar Rate with respect to any advance, or to fund
any advance in the New York interbank eurodollar market,
or to give effect to its obligations regarding the
Eurodollar Rate as contemplated by this Note, then the<PAGE>
Eurodollar Rate shall immediately terminate and the
applicable interest rate for any advance for which the
applicable interest rate is then a Eurodollar Rate shall
automatically be converted to the Prime Rate and Borrower
shall pay to Lender the amount (if any) which would be due
if Borrower had prepaid such advance bearing interest at a
Eurodollar Rate. Notwithstanding the foregoing, in the
event of any such conversion to the Prime Rate, the
Borrower shall have the option on the day of conversion
and thereafter to elect a new Interest Period and choose
either the CD Rate or Cost of Funds Rate offered by the
Bank and no prepayment premiums shall apply to said
election.
Increased Costs and Capital Adequacy
------------------------------------
In the event that applicable law or governmental
regulation or any change therein or in the interpretation
or application thereof, or compliance by Lender with any
request or directive (whether or not having the force of
law) from any central bank or other financial, monetary or
other authority, shall, with respect to any applicable
interest rate hereunder:
(a) subject Lender to any change in taxes now existing
or any new tax of any kind whatsoever with respect to any
advance or change the tax basis or taxation of payments to
Lender of principal, fees, interest or any other amount
payable hereunder (except for changes in the rate of tax on
the overall net income of Lender);
(b) impose, modify or hold applicable any reserve,
special deposit or similar requirements against assets held
by, or deposits in or for the account of, advances or loans
by, or other credit extended by, any office of Lender,
including (without limitation) pursuant to Regulations of
the Board of Governors of the Federal Reserve System; or
(c) impose on Lender any other condition with respect
to the loan hereunder;
and the result of any of the foregoing is to increase the cost
to Lender of making, renewing or maintaining the loan evidenced
hereby (or any part hereof) by an amount that Lender deems to
be material, then, in any case, Borrower shall promptly pay
Lender, upon its demand, such additional amount as will
compensate Lender for such additional cost. Lender shall
certify the amount of such additional cost to Borrower, and
such certification shall be conclusive absent manifest error.
<PAGE>
Definitions
-----------
As used herein, the following terms shall have the meanings
set forth below:
(a) "EURODOLLAR RATE" means, with respect to each
Interest Period, the rate per annum (i) (rounded upward, if
necessary, to the nearest 1/16 of 1%) shown on the display
referred to as the "LIBO page" (or any display substituted
therefor) of the Reuters U.S. Domestic Money Service
transmitted through the Reuters monitor system as being the
respective rates at which U.S. dollar deposits would be
offered at the beginning of the relevant Interest Period by
the principal London offices of each of the banks named
thereon to major banks in the London interbank Eurodollar
market at the relevant local time for delivery on the first
day of such Interest Period for the number of days comprised
therein and in the amount of the requested advance, plus 50
basis points (.50%) or (ii) if no LIBO quote is available
for the Interest Period, the Eurodollar Base shall be the
base designated as such by Lender for the principal balance
under this Note of a duration equal to the requested
Interest Period, plus 50 basis points (.50%).
(b) "CD RATE" shall mean (i) the rate of interest
which Lender is offering to pay, as determined by Lender's
treasury desk, for a certificate of deposit with a maturity
equal to the Interest Period selected by Borrower plus (ii)
60 basis points (0.60%).
(c) "COST OF FUNDS RATE" shall mean the rate of
interest which Lender is required to pay (or is offering to
pay), as determined by Lender's treasury desk as adjusted
for reserve requirements and such other requirements as may
be imposed by federal, state and/or local government and
regulatory agencies together with any fees assessed by
Lender's treasury desk.
(d) "PRIME RATE" shall mean the rate of interest
announced from time to time by Lender as its "prime rate".
Such rate is not necessarily the lowest or most favorable
rate offered by Lender.
(e) "INTEREST PERIOD" shall mean, (a) for purposes of
the Eurodollar Rate and the CD Rate, a period selected by an
Authorized Representative in accordance with the provisions
hereof equal to 30, 60 or 90 days, or such longer period in
a multiple of thirty (30) days at the discretion of Lender
and (b) for purposes of the Cost of Funds Rate, a mutually
acceptable period agreed to by both<PAGE>
the Borrower and Lender, and in any case having a Due Date
later than the Maturity.
(f) "DUE DATE" shall mean last day of an Interest
Period.
(g) "AUTHORIZED REPRESENTATIVE" shall mean Julie P.
Lou or Monique McCurley or any other person authorized and
set forth in a writing signed by such person(s).
Prepayment
----------
Any advance may be prepaid in whole or in part without
premium or penalty at the end of any Interest Period upon
written notice to Lender received at least one (1) day prior
to the end of the applicable Interest Period. If, however,
this Note is prepaid in whole or in part at any time other
than at the end of an Interest Period, whether as a result of
acceleration or otherwise, a prepayment premium (the
"Prepayment Premium") shall be due and payable. The
Prepayment Premium shall be calculated by subtracting the
latest published rate preceding the date of prepayment for
United States Treasury Notes or Bills (Bills on a discounted
basis shall be converted to a bond equivalent) as published
weekly in the Federal Reserve Statistical Release with a
maturity date closest to the end of the applicable Interest
Period, from the "Eurodollar Rate", "CD Rate" or "Cost of
Funds Rate" applicable to the advance being prepaid. If the
result is zero or a negative number, there shall be no
Prepayment Premium. If the result is a positive number, then
the resulting percentage shall be multiplied by the amount of
the principal balance being prepaid. The resulting amount
will be divided by 360 and multiplied by the number of days
remaining to the end of the applicable Interest Period. Said
amount shall be reduced to present value calculated by using
the number of days remaining until the expiration of the
applicable Interest Period and the above-referenced United
States Treasury Note or Bill rate with regard to such number
of days and using Lender's customary method of computing
present value. The resulting amount shall be the Prepayment
Premium due to Lender upon prepayment.
All payments shall be applied first to fees and charges due
and payable to Lender, then to accrued but unpaid interest and
lastly to outstanding principal. Each prepayment shall be
accompanied by the interest accrued on the principal amount so
prepaid through the date of prepayment. Borrower shall pay to
Lender all costs and expenses incurred by Lender in connection
with such prepayment; these charges will be paid by Borrower
whether payment is made voluntarily at Borrower's option or <PAGE>
involuntarily after Lender has made demand for payment.
Default
-------
Upon the occurrence of any of the following (each of which
events shall be an Event of Default hereunder):
(i) the failure to make any payment of principal
or interest hereunder within ten (10) days of the date
that the same is due, or
(ii) an Event of Default as described and defined
in the Loan Agreement, or any other instrument
evidencing any indebtedness of the Borrower to the
Lender and the expiration of any period provided in
such instrument to cure such default,
then the Lender may declare the entire unpaid principal balance
hereunder immediately due and payable without notice, demand or
presentment and may exercise any of its rights under the Loan
Agreement. In the event that the Lender or any subsequent
holder of this Note shall exercise or endeavor to exercise any
of its remedies hereunder or under the Loan Agreement, the
Borrower shall pay on demand all reasonable costs and expenses
incurred in connection therewith, including, without
limitation, reasonable attorney's fees and the Lender may take
judgment for all such amounts in addition to all other sums due
hereunder.
Default Rate of Interest
------------------------
Irrespective of the exercise or non-exercise of any of the
aforesaid rights, if any payment of principal or interest
hereunder is not paid in full within fifteen (15) days after
the same is due, the Borrower shall pay to the Lender a
processing fee on such unpaid amount equal to the five percent
(5%) of such late payment. Irrespective of the exercise or
nonexercise of any of the aforesaid rights, if any Event of
Default occurs hereunder, from and after the date of such
occurrence interest rate charges hereunder shall be increased
to the lesser of (i) the then applicable interest rate charges
plus five percent (5%) or (ii) the maximum rate then permitted
by law, until the Lender is satisfied that the Event of Default
has been cured.
Miscellaneous
-------------
The Borrower waives presentment for payment, protest and
demand, and notice of protest, demand and/or dishonor and
nonpayment of this Note, notice of any event of default under <PAGE>
the Loan Agreement except as specifically provided therein, and
all other notices or demands otherwise required by law that
such Borrower may lawfully waive.
BORROWER HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS NOTE, THE LOAN
AGREEMENT OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION HEREWITH
OR THEREWITH. NEITHER BORROWER NOR ANY ASSIGNEE OF OR SUCCESSOR
TO BORROWER, SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM, OR ANY OTHER LITIGATION OR PROCEEDING BASED UPON,
OR ARISING OUT OF, THIS NOTE, THE LOAN AGREEMENT OR ANY OF THE
OTHER DOCUMENTS, INSTRUMENTS AND AGREEMENTS ENTERED INTO IN
CONNECTION HEREWITH OR THEREWITH OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN THE PARTIES HERETO, OR ANY OF THEM. NO
PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION, IN WHICH A JURY
TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A JURY
TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS
WAIVER OF RIGHT TO JURY TRIAL HAVE BEEN DISCUSSED BY THE PARTIES
HERETO, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS.
NO PARTY HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER
PARTY THAT THE PROVISIONS OF THIS WAIVER OF RIGHT TO JURY TRIAL
WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
Borrower expressly agrees that this Note, or any payment
hereunder, may be extended from time to time, without in any way
affecting the liability of Borrower. No unilateral consent or
waiver by the Lender with respect to any action or failure to act
which, without consent, would constitute a breach of any
provision of this Note shall be valid and binding unless in
writing and signed by the Lender.
The rights and obligations of Borrower and all provisions
hereof shall be governed by and construed in accordance with the
laws of the State of Connecticut.
All agreements between Borrower and the Lender are hereby
expressly limited so that in no contingency or event whatsoever,
whether by reason of acceleration of maturity of the indebtedness
evidenced hereby or otherwise, shall the amount paid or agreed to
be paid to the Lender for the use, forebearance or detention of
the indebtedness evidenced hereby exceed the maximum permissible
under applicable law. As used herein, the term "applicable law"
shall mean the law in effect as of the date hereof, provided,
however, that in the event there is a change in the law which
results in a higher permissible rate of interest, then this Note
shall be governed by such new law as of its effective date. In
this regard, it is expressly agreed that it is the intent of
Borrower and Lender in the execution, delivery and acceptance of
this Note to contract in strict compliance with the laws of the
State of Connecticut from time to time in effect. If, from any <PAGE>
circumstance whatsoever, fulfillment of any provision hereof or
of the Loan Agreement at the time performance of such provision
shall be due, shall involve transcending the limit of validity
prescribed by law, then the obligation to be fulfilled shall
automatically be reduced to the limit of such validity, and if
from any circumstances the Lender should ever receive as interest
an amount which would exceed the highest lawful rate, such amount
which would be excessive interest shall be applied to the
reduction of the principal balance evidenced hereby and not to
the payment of interest. This provision shall control every
other provision of all agreements between the Borrower and the
Lender.
BORROWER ACKNOWLEDGES THAT THE LOAN EVIDENCED BY THIS NOTE IS
A COMMERCIAL TRANSACTION AND HEREBY VOLUNTARILY AND KNOWINGLY
WAIVE ANY RIGHTS TO NOTICE AND HEARING UNDER CHAPTER 903a OF THE
CONNECTICUT GENERAL STATUTES OR OTHER STATUTES AFFECTING
PREJUDGMENT REMEDIES AND AUTHORIZE LENDER'S ATTORNEY TO ISSUE A
WRIT FOR A PREJUDGMENT REMEDY WITHOUT COURT ORDER, PROVIDED THE
COMPLAINT SHALL SET FORTH A COPY OF THIS WAIVER.
IN WITNESS WHEREOF, the Borrower has caused this Note to be
executed by its duly authorized officer as of the day and year
first above written.
ENERGY NETWORKS, INC.
By:
----------------------------
Name: Donald Ludington
Title: Executive Vice
President
Duly Authorized
<PAGE>
EXHIBIT B
---------
THE COMPANY'S AFFILIATES AND THE NATURE OF THEIR
RESPECTIVE RELATIONSHIPS WITH THE COMPANY ARE AS FOLLOWS:
Name of Jurisdiction of Nature of
Affiliate Incorporation Affiliation
--------- --------------- -----------
CNG Connecticut Owns 100% of the
Company
The Hartford Steam Connecticut Owned 100% by the
Company Company
Energy Networks Connecticut To be formed and to
Services, Inc. be owned 100% by the
Company
CNG Realty Corp. Connecticut CNG owns 100% of
stock of CNG Realty
Corp.
ENI Transmission Connecticut CNG owns 100% of
Company stock of CNG Trans-
mission Company
<PAGE>
EXHIBIT C
---------
Certificate of Compliance
-------------------------
The undersigned being an duly authorized officer of ENERGY
NETWORKS, INC. (the "Borrower") HEREBY CERTIFIES as follows:
1.This certificate is being delivered pursuant to Section 4.04(c)
of that certain $5,000,000 Commercial Revolving Credit Agreement
between the Borrower and Fleet Bank, N.A. dated December 21, 1994
(the "Agreement");
2. Set forth below are the true and accurate calculations for
the period ended _______________, _____ required by Sections 4.08,
and 4.09 of the Agreement:
(A)Section 4.08. Debt to Tangible Net Worth.
------------ --------------------------
Maintain a ratio of (x) total long-term debt to (y) its Tangible
Net Worth of 3:1, determined in accordance with generally accepted
accounting principles, consistently applied.
ACTUAL:____________________
(B)Section 4.09. Interest Coverage Ratio.
------------ -----------------------
Maintain a ratio of (x) earnings before interest, taxes and
dividends to (y) the sum of interest expense, of 2:0, determined in
accordance with generally accepted accounting principles,
consistently applied.
ACTUAL:____________________
3. The above calculations have been made in accordance with the
terms and provisions of the Agreement. I have examined the
provisions of the Agreement and no Event of Default, as defined
thereunder, nor any event which upon notice or lapse of time, or
both, would constitute such an Event of Default, has occurred and is
continuing.
Signed this _____day of _________, ____
______________________________
_________________________
Duly authorized Officer
<PAGE>
SCHEDULE 1
----------
1. MANAGEMENT OF CONTAMINANTS. In September, 1988, in the
course of performing geotechnical borings prior to construction of a
cogeneration project to be built on land on Columbus Boulevard in
Hartford, subsurface contaminants were encountered. Those
contaminants appear to be historic residues from a discontinued coal
gasification process previously conducted in the area. Following
discussions with the Connecticut Department of Environmental
Protection ("DEP"), the Company agreed to analyze the entire site,
determine the location and distribution of any coal gasification
residues and contaminants and, if remedial measures are required, to
do so in a manner approved by the DEP. The hydrogeological analysis
of the site was performed, and the results were reported to the DEP
in April and May of 1989. DEP provided comments on the report in
late may 1989. The Company anticipates that additional
investigation will be pursued by it, but it does not appear at this
time that substantial excavation and removal of contaminants will be
required. No determination has been made as to what costs might be
associated with managing contaminants.
2. POSSIBLE CONTAMINATION. CNG has been advised by Richard
Gordon that he believes CNG to be liable for contamination found on
property which he purchased at 34 Potter Street in Hartford,
Connecticut. The property is located to the north and east of land
owned by CNG and its affiliates. The contaminants discovered on Mr.
Gordon's property are claimed to be similar to residues from coal
gasification activities. CNG has denied liability based upon
preliminary technical evaluations which indicate that contaminants
from the CNG property are not likely to have migrated in the
direction of the 35 Potter Street property and evidence that there
were other possible sources of contamination in the vicinity.
During discussions with Mr. Gordon, CNG also argued that the
contamination on the site would not materially interfere with its
use or development and, therefore, that Mr. Gordon has not been
significantly damaged. Counsel for Mr. Gordon has claimed that Mr.
Gordon has been damaged by contamination because he has been unable
to market the property. According to Mr. Gordon's counsel, Mr.
Gordon purchased the property for $5 million, and had spent as of
early 1991 approximately $1 million in debt service and on-site
improvements. Mr. Gordon has threatened to bring a lawsuit against
CNG if it doesn't reach a satisfactory settlement with Mr. Gordon.
In recent months, Mr. Gordon and CNG had held additional discussions
concerning the conditions of the site and whether it can be
developed. It is not possible for us to predict whether these
discussions will resolve this matter and, if not, whether a claim by
Mr. Gordon would be deemed valid and, if so, what, if any, damages
he would be found to have incurred.
<PAGE>
3. ROBERT CALVER V. ENERGY NETWORKS, INC. 3:93CV 1974 (JAC).
Plaintiff, a former ENI employee, filed this suit in federal court
on September 3, 1993, claiming that ENI discriminated against him on
the basis of his age (55 years) when it eliminated his position
effective April 1, 1993. In a second count, plaintiff claims that
he was promised that his 26 and 1/2 years of service with F. fox and
Co. prior to his employment with ENI beginning in April, 1986, would
be credited for purposes of determining his pension benefits. He
claims ENI breached its promise and he should now receive a pension
commensurate with the alleged promise. ENI has filed a motion for
summary judgement, which is pending with the court. We are unable,
at this time, to predict the outcome of this case or the ultimate
liability, if any, to the Company.
<PAGE>
1. UCC-1 Financing Statement No. 818035 naming Energy Networks,
In. as Debtor and Shawmut Bank Connecticut, National Association as
Secured Party filed with the Connecticut Secretary of State.
2. UCC-1 Financing Statement No. 688737 naming Energy Networks,
Inc. as Debtor and The First National Bank of Boston, Trustee, as
Secured Party filed with the Connecticut Secretary of State.
3. UCC-1 Financing Statement No. 819834 naming Energy Networks,
Inc. as Debtor and Fleet Credit Corporation as Secured Party filed
with the Connecticut Secretary of State.
4. An Open-End Mortgage and Security Agreement from Energy
Networks, Inc. to The Connecticut National Bank, now Shawmut Bank
Connecticut, N.A. dated as of March 1, 1989 and recorded in Volume
2916, Page 24, as amended from time to time.
5. A Collateral Assignment of Leases and Rentals from
Affiliated Resources Corporation (now Energy Networks, Inc.) to The
Connecticut National Bank now Shawmut Bank Connecticut, N.A. dated
as of March 1, 1989 and recorded in Volume 2916, Page 56, as amended
from time to time.
6. A Notice of Lease and Supplemental Notice of Lease from
Energy Networks, Inc. to O'Brien (Hartford) Cogeneration Limited
Partnership, both dated as of March 1, 1989 and recorded in Volume
2916, Pages 62 and 67, respectively.
7. Agreements contained in two Subordination Nondisturbance and
Attornment Agreements among O'Brien (Hartford) Cogeneration Limited
Partnership, The Connecticut National Bank now Shawmut Bank
Connecticut, N.A., and Energy Networks, Inc., both dated as of March
1, 1989, and recorded in Volume 2916, at Pages 73 and 157,
respectively, as amended by Amendment to Subordination,
Nondisturbance and Attornment Agreement dated January 9, 1990 and
recorded in Volume 3025, Page 57 and Volume 3027 Page 57,
respectively.
8. In connection with 1986 an 1988 Bond financing with The
Connecticut Development Authority for the Capital District Energy
Center Project in the aggregate principal amount of $16,300,000: a
Mortgage and Security Agreement from Affiliated Resources
Corporation (now Energy Networks, Inc.) to The First National Bank
of Boston dated as of December 1, 1986 and recorded in the Hartford
<PAGE>
Land Records on February 18, 1987 in Volume 2555 at Page 170 as
amended from time to time.
9. Pledge and Security Agreement dated as of October 14, 1994,
made by the Borrower to The Bank of Nova Scotia pursuant to a Letter
of Credit and Reimbursement Agreement dated as of October 14, 1994
between the Borrower and The Bank of Nova Scotia.
<PAGE>
EXISTING INDEBTEDNESS
1. Indebtedness of The Hartford Steam Company ("Hartford
Steam") to Shawmut Bank Connecticut, N.A. in the aggregate principal
amount of $10 million comprised of a $5 million term loan and a $5
million revolving line of credit secured by a mortgage of real
property owned by Hartford Steam and the Borrower and personal
property of Hartford Steam.
2. Indebtedness of the Borrower pursuant to a certain first
amended and restated reimbursement agreement by and between the
Borrower and Shawmut Bank Connecticut, N.A., pursuant to which
Shawmut Bank Connecticut, N.A. has issued an irrevocable letter of
credit in the aggregate amount of $2 million in favor of the
Connecticut Light & Power Company.
3. Indebtedness of the Borrower pursuant to a Letter of Credit
and Reimbursement Agreement between the Borrower and the Bank of
Nova Scotia pursuant to which the Bank of Nova Scotia issued an
irrevocable letter of credit in the aggregate amount of #13,767,123
in favor of The Connecticut Development Authority.
4. Bond financing with The Connecticut Development Authority
for the Capital District Energy Center Project in the original
principal amount of $16,300,000 pursuant to a 1986 issuance and a
1988 issuance.
<PAGE>
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<PAGE>
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