File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION-DECLARATION WITH RESPECT TO
THE ISSUANCE OF COMMON SHARES IN CONNECTION WITH
THE ACQUISITION OF AN ENERGY SERVICES BUSINESS
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
EASTERN UTILITIES ASSOCIATES
P.O. Box 2333, Boston, Massachusetts 02107
EUA COGENEX CORPORATION
P.O. Box 2333, BOSTON, MASSACHUSETTS 02107
(Name of companies filing this statement
and address of principal executive office)
EASTERN UTILITIES ASSOCIATES
(Name of top registered holding company parent of
applicant or declarant)
CLIFFORD J. HEBERT, JR., TREASURER
EASTERN UTILITIES ASSOCIATES
P.O. Box 2333, BOSTON, MASSACHUSETTS 02107
(Name and address of agent for service)
The Commission is requested to mail signed copies
of all orders, notices and communications to:
ARTHUR I. ANDERSON, P.C.
McDermott, Will & Emery
75 State Street
Boston, MA 02109
ITEM 1. DESCRIPTION OF THE PROPOSED TRANSACTION.
I. Overview of Application/Declaration. Eastern Utilities Associates
("EUA"), a Massachusetts business trust and a registered holding company
under the Public Utility Holding Company Act of 1935 ("Act") and EUA
Cogenex Corporation ("Cogenex"), a Massachusetts corporation and a wholly-
owned subsidiary of EUA (collectively, the "Applicants"), jointly file this
application-declaration with the Securities and Exchange Commission
("Commission"). The Applicants seek Commission approval: (i) for EUA to
issue common shares to fund the acquisition by Cogenex of Highland Energy
Group, Inc., a Colorado corporation, located at 2970 Wilderness Place #110,
Boulder, Colorado 80301 ("Highland Energy"); and (ii) to acquire Highland
Energy. Highland Energy owns a 50% general partnership interest in
EUA/Highland Energy Partners, L.P.
The Applicants request Commission approval for EUA to issue common
shares of EUA (par value $5.00 per share) in connection with Cogenex's
acquisition of Highland Energy as described below and for Cogenex to effect
that acquisition.
Cogenex will acquire Highland Energy in a transaction structured as a
statutory merger and qualifying as a tax-free reorganization under Section
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended. The
consideration paid to Highland Energy, as further described below, will
include an amount to be paid at Closing in EUA common shares plus a
deferred, contingent earn-out amount also to be paid in EUA common shares.
The earn-out is based on the cumulative operating income of the Highland
Energy business over the three year period following the Closing.
The acquisition will be accounted for under the purchase method of
accounting, and will result in an increase in the equity to debt ratio of
Cogenex and EUA.
Highland Energy is actively involved in one or more of Cogenex's
principal business areas. The acquisition of Highland Energy will provide
synergies which will enable Cogenex to provide its services in a more
efficient and cost-effective manner and thereby enhance Cogenex's
competitive position and profitability. The acquisition of Highland Energy
will also allow Cogenex to expand its customer base and will provide a new
outlet for the services and products of EUA NOVA and EUA Day (both
divisions of Cogenex) and for engineering services of Cogenex.
II. Description of Highland Energy Business. Highland Energy is a
national energy services company that has extensive experience in the
energy efficiency industry. The company's mission is to provide energy
savings programs designed to assist large energy consumers and energy
suppliers in reducing energy demand, use, and costs. Highland Energy
designs, executes, finances, monitors, maintains, and guarantees energy
savings programs for public consumers, such as schools and hospitals, and
for private energy consumers, such as office buildings and businesses,
under multi-year contracts. Highland Energy has completed projects in
Ohio, Texas and North Carolina and has recently been awarded demand side
management contracts with Texas Utilities for 9 Megawatts and Duke Power
for 4.5 megawatts.
III. The Highland Energy Acquisition Plan. The Highland Energy acquisition
will be a tax-free reorganization under Section 368(a)(2)(D) of the
Internal Revenue Code structured as a statutory merger of Highland Energy
into Cogenex. In the merger, common shares of EUA will be issued in
exchange for the transfer to Cogenex of the outstanding common stock of
Highland Energy, which will be cancelled by operation of law. The common
shares to be issued by EUA have been registered under the Securities Act of
1933 (the "'33 Act") by a registration statement on Form S-4 (File No. 33-
50099) filed with the Commission on August 27, 1993 and made effective by
order of the Commission dated November 22, 1993.
As set out in detail in the Highland Energy Agreement referred to
below, payment will be made to the stockholders of Highland Energy in
common shares, taken at their average Closing market price over a 5-day
period before the relevant payment date. The Highland Energy stockholders
will receive $4,200,000 at Closing plus a deferred earn-out amount ranging
from zero up to $3,800,000 depending on the level of cumulative operating
income (as defined) of the purchased business for a three year period from
the Closing. A credit shall be awarded toward the earn-out amount for the
"income" impact of the net operating loss of the Highland Energy business
as determined on an annual basis by a firm of independent auditors.
Assuming an EUA common share price of $22.00 per share, up to 363,636
common shares of EUA could be issued in the acquisition. The actual number
of shares to be issued will be determined in accordance with the formula to
be included in the definitive agreement. Cogenex will pay cash in lieu of
common shares for any fractional shares which otherwise would be issued by
EUA. By operation of the merger, Cogenex will acquire all of the
liabilities of Highland Energy.
Cumulative income is defined in the Highland Energy Agreement as
sales attributable to the Highland Energy business, less: (i) general and
administrative expenses allocated to Highland Energy operations (including
a general and administrative charge of five percent (5%) for Cogenex
overhead); and (ii) any liabilities incurred by Cogenex on account of the
acquisition or any breach of representations and warranties made by
Highland Energy's shareholders, and (iii) all other expenses allocated to
Highland Energy's operations in accordance with generally accepted
accounting principles, and (iv) amortization of transaction costs incurred
by Cogenex in connection with the acquisition. Certain contracts of
Highland Energy are subject to contract deferred terms (such as true shared
savings contracts). The proforma anticipated cumulative income
attributable to such contracts shall be calculated as if such contracts
were sold to a third party during the earn-out period.
EUA's obligation to issue common shares under the earn-out is capped
at the number of common shares issued at the initial Closing, regardless of
whether the value of those shares equals the dollar earn-out amount.
Cogenex and Highland Energy have executed a letter agreement (Exhibit
B-1), the terms of which will be more fully set forth in a definitive
agreement and plan of merger which will be filed as an Exhibit to this
application-declaration. The obligation of EUA and Cogenex to effect the
acquisition will be subject to various closing conditions, including the
approval of the Commission under the Act.
IV. Request For Authority For Financing The Acquisitions By The
Applicants. The common shares to be issued by EUA have been registered
under the '33 Act by a registration statement on Form S-4, filed by EUA on
August 27, 1993, with respect to the issuance and sale of one million five
hundred thousand (1,500,000) of its common shares. The registration
statement was made effective by order of the Commission dated November 22,
1993. The maximum number of shares issued by EUA in connection with the
acquisition of Highland Energy will be based upon the various factors
described above and will be less than the number of shares registered
pursuant to the S-4. The additional shares which were registered have
either been used in previous Cogenex acquisitions, or are for possible use
in connection with future transactions. At such time as EUA and Cogenex
wish to effect further acquisitions, whether in consideration for the
issuance of common shares of EUA or otherwise, they will seek further
Commission approval for such acquisitions. If additional EUA shares are to
be issued, EUA will file with the Commission on Form U-1 for authorization
to issue said shares.
Cogenex is currently restricted to earning less than 50% of its
revenues from outside New England and New York (the "50% Restriction").
Revenues from Highland Energy will be subject to the 50% Restriction just
like any other aspect of Cogenex's business other than revenues from QF
projects and consulting revenues, which revenues are not included in the
calculation for the 50% Restriction.
Cogenex does not now, and will not in the future, without prior
Commission approval, own or operate or be an equity participant in any
exempt wholesale generator or foreign utility company, as such terms are
defined in the Energy Policy Act of 1992.
ITEM 2. FEES, COMMISSIONS, AND EXPENSES.
The fees, commissions and expenses of the Applicants expected to be
paid or incurred, directly or indirectly, in connection with the
transactions described will be filed by amendment.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
The sections of the Act and rules or exemptions thereunder that the
applicants believe are or may be applicable to the transactions proposed
are set forth below:
Acquisition of Highland Energy Sections 9(a) and 10.
by Cogenex and indirectly by EUA.
Issuance and sale of common Sections 6(a), 7 and
shares by EUA to or on behalf 12(b) and 12(f); Rules
its Cogenex subsidiary. 43(a) and 45(a).
ITEM 4. REGULATORY APPROVALS.
No state commission and no Federal commission, other than the
Commission, has jurisdiction over the proposed transactions.
ITEM 5. PROCEDURE.
(a) In order to be in a position to carry out the proposed
transactions at the most advantageous time, the Applicants request that the
Commission issue its order hereon on the earliest practical date.
(b) It is not considered necessary that there be a recommended
decision by a hearing officer or by any other responsible officer of the
Commission. The Office of Public Utility Regulation may assist in the
preparation of the decision of the Commission, and it is believed that a
thirty (30) day waiting period between the issuance of the order of the
Commission and the day on which the order is to become effective would not
be appropriate.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS (* Filed herewith)
(a) Exhibits.
Exhibit A-1 Declaration of Trust of EUA, dated
April 2, 1928, as amended (Exhibit
A-3, File No. 70-3188; Exhibit 1 to
EUA's 8-K reports for April in each
of the years 1957, 1962, 1966,
1968, 1972, and 1973, File No.
1-5366; Exhibit A-1(a), Amendment
No. 2 to Form U-1, File No.
70-5997, Exhibit 4-3, Registration
No. 2-72589; Exhibit 1 to
Certificate of Notification, File
No. 70-6713; Exhibit 1 to
Certificate of Notification, File
No. 70-7084; Exhibit 3-2, Form 10-K
of EUA for 1987, File No. 1-5366).
Exhibit B-1 Letter Agreement: Highland Energy, Inc. (to
be filed by amendment).
Exhibit B-2 Agreement and Plan of Merger: Highland
Energy Group, Inc. (to be filed by
amendment).
Exhibit F Opinion of counsel (to be filed by
amendment).
*Exhibit G Proposed Form of Notice.
(b) Financial Statements.
To be filed by amendment.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
The transactions described in Item 1. do not involve major federal
actions significantly affecting the quality of the human environment. No
Federal agency has prepared or is preparing an environmental impact
statement with respect to the proposed transactions.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned Applicants have duly caused this statement to be
signed on their behalf by the undersigned duly authorized individuals.
EASTERN UTILITIES ASSOCIATES
By: /s/ Clifford J. Hebert, Jr.
Clifford J. Hebert, Jr.
Treasurer
EUA COGENEX CORPORATION
By: /s/ Basil G. Pallone
Basil G. Pallone
Vice President
Dated November 14, 1994
Exhibit G
(PROPOSED FORM OF NOTICE)
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- , 70- )
Eastern Utilities Associates ("EUA"), a registered holding company,
and its wholly-owned subsidiary, EUA Cogenex Corporation ("Cogenex") have
filed an application-declaration with this Commission pursuant to Sections
6(a), 7, 9(a), 10, 12(b) and 12(f) of the Public Utility Holding Company
Act of 1935 (the "Act") and Rules 43(a) and 45(a) promulgated thereunder.
EUA and Cogenex request Commission approval for EUA to issue common
shares of EUA (par value $5.00 per share) in connection with Cogenex's
acquisition of Highland Energy Group, Inc. ("Highland Energy") as
described below and for Cogenex to effect that acquisition.
Cogenex will acquire Highland Energy in a transaction structured as a
statutory merger and qualifying as a tax-free reorganization under Section
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended. The
consideration paid to Highland Energy, as further described below, will
include an amount to be paid at Closing in EUA common shares plus a
deferred, contingent earn-out amount also to be paid in EUA common shares.
The earn-out is based on the cumulative operating income of the Highland
Energy business over the three year period following the Closing.
The acquisition will be accounted for under the purchase method of
accounting, and will result in an increase in the equity to debt ratio of
Cogenex and EUA.
Highland Energy is actively involved in one or more of Cogenex's
principal business areas. The acquisition of Highland Energy will provide
synergies which will enable Cogenex to provide its services in a more
efficient and cost-effective manner and thereby enhance Cogenex's
competitive position and profitability. The acquisition of Highland Energy
will also allow Cogenex to expand its customer base and will provide a new
outlet for the services and products of EUA NOVA and EUA Day (both
divisions of Cogenex) and for engineering services of Cogenex.
Highland Energy is a national energy services company that has
extensive experience in the industry of energy efficiency. The company's
mission is to provide energy savings programs designed to assist large
energy consumers and energy suppliers in reducing energy demand, use, and
costs. Highland Energy designs, executes, finances, monitors, maintains,
and guarantees energy savings programs for public consumers, such as
schools and hospitals, and for private energy consumers, such as office
buildings and businesses, under multi-year contracts. Highland Energy has
completed projects in Ohio, Texas and North Carolina and has recently been
awarded demand side management contracts with Texas Utilities for 9
Megawatts and Duke Power for 4.5 megawatts.
The Highland Energy acquisition will be a tax-free reorganization
under Section 368(a)(2)(D) of the Internal Revenue Code structured as a
statutory merger of Highland Energy into Cogenex. In the merger, common
shares of EUA will be issued in exchange for the transfer to Cogenex of the
outstanding common stock of Highland Energy, which will be cancelled by
operation of law. The common shares to be issued by EUA have been
registered under the Securities Act of 1933 (the "'33 Act") by a
registration statement on Form S-4 (File No. 33-50099) filed with the
Commission on August 27, 1993 and made effective by order of the Commission
dated November 22, 1993.
As set out in detail in the Highland Energy Agreement referred to
below, payment will be made to the stockholders of Highland Energy in
common shares, taken at their average Closing market price over a 5-day
period before the relevant payment date. The Highland Energy stockholders
will receive $4,200,000 at Closing plus a deferred earn-out amount ranging
from zero up to $3,800,000 depending on the level of cumulative operating
income (as defined) of the purchased business for a three year period from
the Closing. A credit shall be awarded toward the earn-out amount for the
"income" impact of the net operating loss of the Highland Energy business
as determined on an annual basis by a firm of independent auditors.
Assuming an EUA common share price of $22.00 per share, up to 363,636
common shares of EUA could be issued in the acquisition. The actual number
of shares to be issued will be determined in accordance with the formula to
be included in the definitive agreement. Cogenex will pay cash in lieu of
common shares for any fractional shares which otherwise would be issued by
EUA. By operation of the merger, Cogenex will acquire all of the
liabilities of Highland Energy.
Cumulative income is defined in the Highland Energy Agreement as sales
attributable to the Highland Energy business, less: (i) general and
administrative expenses allocated to Highland Energy operations (including
a general and administrative charge of five percent (5%) for Cogenex
overhead); and (ii) any liabilities incurred by Cogenex on account of the
acquisition or any breach of representations and warranties made by
Highland Energy's shareholders, and (iii) all other expenses allocated to
Highland Energy's operations in accordance with generally accepted
accounting principles, and (iv) amortization of transaction costs incurred
by Cogenex in connection with the acquisition. Certain contracts of
Highland Energy are subject to contract deferred terms (such as true shared
savings contracts). The proforma anticipated cumulative income
attributable to such contracts shall be calculated as if such contracts
were sold to a third party during the earn-out period.
EUA's obligation to issue common shares under the earn-out is capped
at the number of common shares issued at the initial Closing, regardless of
whether the value of those shares equals the dollar earn-out amount.
Cogenex and Highland Energy have executed a letter agreement (Exhibit
B-1), the terms of which will be more fully set forth in a definitive
agreement and plan of merger which will be filed as an Exhibit to the
application-declaration. The obligation of EUA and Cogenex to effect the
acquisition will be subject to various closing conditions, including the
approval of the Commission under the Act.
The common shares to be issued by EUA have been registered under the
'33 Act by a registration statement on Form S-4, filed by EUA on August 27,
1993, with respect to the issuance and sale of one million five hundred
thousand (1,500,000) of its common shares. The registration statement was
made effective by order of the Commission dated November 22, 1993. The
maximum number of shares issued by EUA in connection with the acquisition
of Highland Energy will be based upon the various factors described above
and will be less than the number of shares registered pursuant to the S-4.
The additional shares which were registered have either been used in
previous Cogenex acquisitions, or are for possible use in connection with
future transactions. At such time as EUA and Cogenex wish to effect
further acquisitions, whether in consideration for the issuance of common
shares of EUA or otherwise, they will seek further Commission approval for
such acquisitions. If additional EUA shares are to be issued, EUA will
file with the Commission on Form U-1 for authorization to issue said
shares.
NOTICE IS FURTHER GIVEN that any interested person may, not later than
_________, 1994, request in writing that a hearing be held on such matter,
stating the nature of his interest, the reasons for such request, and the
issues of fact or law raised by said application/declaration which he
desires to controvert; or he may request that he be notified if the
Commission should order a hearing thereon. Any such request should be
addressed: Secretary, Securities and Exchange Commission, 450 5th Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. A copy of such request
should be served personally or by mail upon the applicant/declarant at the
above-stated address and proof of service (by affidavit or, in case of an
attorney at law, by certificate) should be filed with the request. At any
time after said date the application/declaration, as filed or as it may be
amended, may be granted and permitted to become effective as provided in
Rule 23 of the General Rules and Regulations promulgated under the Act, or
the Commission may grant exemption from such rules as provided in Rules
20(a) and 100 thereof or take such other action as it may deem appropriate.
Persons who request a hearing or advice as to whether a hearing is ordered
will receive any notices and orders issued in this matter, including the
date of the hearing (if ordered) and any postponements thereof.
For the Commission, by the Division of Corporate Regulation, pursuant
to delegated authority.
Secretary
