File No. 70-8523
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
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.
Item 1 of the Application-Declaration is hereby amended and restated
in its entirety as follows:
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 of Highland Energy Group, Inc.,
a Colorado corporation, located at 2970 Wilderness Place #110, Boulder,
Colorado 80301 ("Highland Energy"); (ii) to acquire Highland Energy through
a merger with a to-be-formed subsidiary of EUA ("Newco"); and (iii) for EUA
to transfer ownership of Newco to Cogenex immediately following such
merger.
The Applicants request Commission approval for EUA to issue common
shares of EUA (par value $5.00 per share) in connection with the
acquisition of Highland Energy as described below and for EUA and Cogenex
to effect that acquisition by a merger of Highland Energy with and into
Newco.
Highland Energy will be acquired in a transaction structured as a
statutory merger with Newco 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 the shareholders of 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 or EUA common shares and cash. The earn-out is
based on the adjusted cumulative net income of the business for which Newco
is to be responsible 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 Newco. At the time of merger, Newco will be a wholly-owned subsidiary
of EUA in order to preserve the tax-free nature of the transaction.
Immediately following the merger, EUA will transfer its ownership of Newco
to Cogenex. By virtue of the merger, Newco shall change its name to EUA
Highland Corporation. In the merger, common shares of EUA will be issued
in exchange for the transfer to EUA 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.
Payment will be made to the stockholders of Highland Energy in common
shares, taken at their average closing sale price over the 5 trading days
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 performance of the
purchased business for a three year period from the Closing (the "Earn-Out
Period"). The definitive agreement to be entered into by the parties shall
provide for a calculation of net income during the Earn-Out Period which
will determine the earn-out amount, if any. 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.
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. In
the event that the dollar earn-out amount exceeds the value of the number
of common shares EUA is able to issue, EUA shall pay the difference in
cash.
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 Authorization to Form and to Finance a New Subsidiary.
EUA requests commission approval to incorporate Newco, a Massachusetts
business corporation. The initial authorized capitalization of Newco shall
be 200,000 shares of Common Stock, $.01 par value, of which 10,000 shares
will be issued to EUA for $100. EUA further requests authority to sell its
Newco stock to Cogenex, and Cogenex requests authority to buy such stock,
for a purchase price of $100, immediately following the merger of Highland
Energy into Newco. Cogenex further requests approval for the period ending
December 31, 1997 to make investments in Newco in an aggregate amount not
to exceed $10,000,000 for working capital, repayment of short-term loans,
capital expenditures, and other corporate purposes. Such investments in
Newco by Cogenex may take the form of any combination of capital
contributions by Cogenex and short-term loans by Cogenex which will be
effected upon the same terms as Cogenex borrows funds under the EUA system
credit lines. The effective cost of borrowings under such lines,
commitment fees and/or compensatory balance requirements will be set forth
on Exhibit H hereto. If it becomes necessary in order to obtain more
favorable terms, Cogenex hereby requests authorization to guaranty
performance obligations of Newco in connection with ongoing operations in
an aggregate amount not to exceed $10,000,000. Forms of Articles of
Organization and Bylaws of Newco will be filed with this Application-
Declaration (Exhibits A-2 and A-3, respectively).
V. 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.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
Item 3 is hereby amended and restated in its entirety as follows:
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 Newco and indirectly by EUA
and Cogenex.
Issuance and sale of common Sections 6(a), 7 and
shares by EUA to or on behalf 12(b) and 12(f); Rules
its Newco subsidiary. 43(a) and 45(a).
Issuance and sale by Newco to Sections 6(a), 7 and 12(f) and
EUA and by EUA to Cogenex of Rule 43(a).
Newco common stock.
Purchase by EUA and Cogenex of Sections 9(a), 10 and 12(b);
Newco Common Stock. Rule 45(a)
Issuance of loans by Cogenex Sections 12(a) and 12(f); Rule
to Newco and of notes to Cogenex 45(a).
by Newco.
Capital Contributions by Cogenex Section 12(b); Rule 45(a).
to, and receipt thereof by, Newco.
Guaranty of obligations of Newco Section 12(b); Rule 45(a).
by Cogenex.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
(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 A-2 Form of Articles of Organization of Newco (to
be filed by amendment).
Exhibit A-3 Form of By-laws of Newco (to be filed by
amendment).
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.
Exhibit H Bank Lines of Credit.
(b) Financial Statements.
To be filed by amendment.
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: Clifford J. Hebert, Jr.
Treasurer
EUA COGENEX CORPORATION
By: Basil G. Pallone
Vice President
Dated February 17, 1995
