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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended September 30, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File Number 0-449
FALL RIVER GAS COMPANY
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(Exact name of Registrant as specified in its charter)
MASSACHUSETTS 04-1298780
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
155 NORTH MAIN STREET, FALL RIVER, MASSACHUSETTS 02720
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(Address or principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 675-7811
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Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock Par Value $.83 1/3 Per Share American Stock Exchange
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Securities registered pursuant to Section 12 (g) of the Act:
Common Stock Par Value $.83 1/3 Per Share
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(Title of Class)
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 .
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Indicate by check mark if disclosures of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by references in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant (1,933,161) shares was $41,079,671 as of December 14, 1999 of
$21.25.
Indicate the number of shares outstanding of each of the Registrant's
classes of the latest practicable date.
Class Outstanding at December 14, 1999
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Common Stock, $.83 1/3 par value 2,208,145
Documents incorporated by reference:
Definitive Proxy Statement dated December 17, 1999 (Part III)
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FALL RIVER GAS COMPANY
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1999 FORM 10-K ANNUAL REPORT
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Table of Contents
PART I
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<TABLE>
<CAPTION>
Page
<S> <C> <C>
Item 1. Business 3
General 3
Sales And Transportation 4
Rates and Regulation 6
Gas Supply And Storage 9
Competition 12
Employees 14
Item 2. Properties 15
Item 3. Legal Proceedings/Environmental Matters 15
Item 4. Submission of Matters to a Vote of Security Holders 17
PART II
Item 5. Market for the Registrant's Common Stock and 20
Related Stockholder Matters
Item 6. Selected Financial Data 21
Item 7. Management's Discussion and Analysis of Financial 22
Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data 28-37
Item 9. Disagreements on Accounting and Financial Disclosure 37
PART III
Item 10. Directors and Executive Officers of the Registrant 37
Item 11. Executive Compensation 38
Item 12. Security Ownership of Certain Beneficial Owners and 38
Management
Item 13. Certain Relationships and Related Transactions 38
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports 39
of Form 8-K
</TABLE>
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PART I
ITEM 1. BUSINESS
GENERAL
The Company, organized as a Massachusetts corporation on September
25, 1880, is an investor-owned public utility company that sells, distributes
and transports natural gas (mixed with propane and liquefied natural gas during
winter months) at retail through a pipeline distribution system in the City of
Fall River and the towns of Somerset, Swansea and Westport, all located within
the southeastern portion of the Commonwealth of Massachusetts. The principal
markets served by the Company are (1) residential customers using gas for
heating, cooking and water heating, (2) industrial customers using gas for
processing items such as textile and metal goods, (3) commercial customers using
gas for cooking and heating, and (4) federal and state housing projects using
gas for heating, cooking and water heating.
The Company is engaged in only one line of business as described
above, and in activities incidental thereto. The Company has one wholly-owned
subsidiary, Fall River Gas Appliance Company, Inc., a Massachusetts corporation,
which rents water heaters and conversion burners (primarily for residential use)
in the Company's gas service area. Earnings from the Appliance Company are
primarily the result of revenues from the rental of water heaters and conversion
burners. As of September 30, 1999, the water heater program had 14,063 rentals
in service and the conversion burner program had 4,399 rentals in service. The
Appliance Company also derives revenues from the sale of central heating and
air-conditioning systems and water heaters.
This Annual Report contains forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the
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Exchange Act, particularly in the "Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and Capital Resources"
and "Business" sections. Forward-looking statements are generally identified
with the following phrases: "believes", "expects", and "anticipates", or words
of similar import. Actual results could differ materially from those expressed
or implied in such forward-looking statements as a result of the risk factors
set forth below and other information contained elsewhere in the Annual Report.
In addition to the other information contained and incorporated by reference in
this Annual Report, the following factors should be carefully considered in
evaluating the Company and its business.
SALES AND TRANSPORTATION
The Company's service territory is approximately 50 square miles
in the area surrounding the City of Fall River, Massachusetts. The Company had
an average of 47,843 sales customers during the twelve months ended September
30, 1999, of which approximately 94% were residential and 6% were commercial and
industrial. For the twelve months ended September 30, 1999 approximately 73% of
the Company's gas operating revenues were derived from sales to residential
customers and 27% were derived from sales or transportation to commercial and
industrial customers. At September 30, 1999 the Company had 46 commercial and
industrial transportation customers, which, in the aggregate, accounted for 24%
of the total gas carried over the Company's pipeline system ("throughput") and
approximately 4% of gas operating revenues for the twelve months ended September
30, 1999. The Company's tariffs currently do not allow for residential
transportation service. The Company's residential customers take service only
under firm sales tariffs and use natural gas for heating, cooking and water
heating, of which heating use constitutes most of such consumption. Commercial
customers (such as stores, restaurants and offices) generally use gas for
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cooking and heating. Under currently effective tariffs, commercial customers may
take the Company's transportation service and purchase their own gas. At this
time, however, most commercial customers take firm sales service from the
Company. Industrial customers primarily use natural gas in manufacturing and
processing applications, such as for metal or textile goods. Such firm
industrial sales and transportation load is fairly level throughout the year
because generally a small part of those customers' usage is for heating. Certain
of the Company's industrial customers also take interruptible service either on
a sales or transportation basis. These customers are subject to service
discontinuance on short notice as system firm requirements may demand. Such
customers generally use interruptible natural gas service for boiler or plant
heating and are able to change to an alternate fuel when there are supply
constraints (generally during the heating season). Also, the prices of
alternative sources of energy impact the interruptible markets. Prices for these
customers are based on the price of the customers' alternative fuel.
The following table shows the Company's throughput during each of
the periods shown below in millions of cubic feet ("MMcf"):
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For the Fiscal
Year Ended
September 30,
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
Residential.............. 3,738 3,823 4,063 4,351 3,858
Commercial............... 1,250 1,302 1,400 1,454 1,262
Industrial-firm.......... 148 261 383 418 443
Industrial-interruptible. 38 32 15 71 430
Special Contracts........ 0 0 0 498 441
Transportation........... 1,626 1,523 1,701 1,101 818
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TOTAL.................... 6,800 6,941 7,562 7,893 7,252
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</TABLE>
The Company's utility sales business is seasonal. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Seasonality".
RATES AND REGULATION
The Company is subject to the regulatory authority of the
Massachusetts Department of Telecommunications and Energy ("MDTE") with respect
to various matters, including the rates it charges for services, financings,
certain gas supply contracts and planning and safety matters.
The Company's principal firm sales rate classifications are
residential, commercial and industrial. The Company also provides transportation
service and, from time to time subject to specific MDTE
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approval, may provide service under special contracts. As of and after October
1, 1997, the Company had no special contracts. The Company's rate structure is
based on the cost of providing service to each class of customer. The Company's
firm rate structure is based on generally seasonal rates, whereby base rates are
higher in the winter (November through April) and lower in the summer (May
through October). In addition to its base rates, the Company has a seasonal cost
of gas adjustment rate schedule (the "CGAC"), which provides for the recovery
from firm customers of all purchased gas costs. Through the CGAC, the Company
also imposes charges, subject to MDTE approval, that are estimated semi-annually
and include credits for gas pipeline refunds and profit margins applicable to
interruptible sales. Actual gas costs are reconciled semi-annually and any
difference is included as an adjustment in the calculation of the CGAC charges.
Charges under the CGAC rate schedule are added to the base rates and are
designed generally to recover higher costs in the winter and refund lower gas
costs in the summer. Pursuant to MDTE approvals, the Company has collected all
Federal Energy Regulatory Commission ("FERC") Order 636 transition costs billed
to it.
On May 17, 1996 the Company filed revised tariffs with the MDTE
to unbundle its commercial and industrial service classes and to increase annual
revenues. By order dated October 16, 1996, the MDTE authorized the Company to
increase its rates for sales of gas effective December 1, 1996. The amount of
this increase on an annualized basis was $3,200,000. That MDTE order also
approved various changes to the Company's commercial and industrial rates to
facilitate the ability of customers on such rates to choose between purchasing
their gas supplies from the Company on a "bundled" basis or purchasing from
third parties and having the Company transport and deliver such supplies. Such
rates were also designed to make the Company economically indifferent to a
customer's choice of bundled sales service or transportation service. Such
transition to local
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distribution companies ("LDC's"), such as the Company, providing more service by
transporting, as opposed to selling, natural gas has continued. Over the past
year, LCDs, unregulated gas marketers, customer groups and the Massachusetts
Attorney General have worked together to address a variety of issues relating to
restructuring the natural gas industry. This effort, known as the Massachusetts
Gas Collaborative has led to further unbundling by several Massachusetts LDCs
and an agreement by such industry participants on the basic rules governing the
relationships and transactions between LDCs and marketers. In February 1999, the
MDTE issued an order establishing a three year transition period for industry
restructuring. Specifically, the MDTE ruled that with the exceptions of
marketers' existing customers, natural gas marketers or customers MUST accept
portions of the LDC's supply and transportation contract capacity rights when
customers shift from purchasing their gas supplies from LDCs to marketers. The
MDTE also required exploration of issues such as LDCs outsourcing management of
their supply portfolio or sale thereof by auction and exiting the business of
selling natural gas generally. Such developments will over time lead to
increased activity by marketers and a greater percentage of LDCs' (including the
Company's) throughput being transportation rather than sales. Also the MDTE is
currently considering other issues that are central to the structure and extent
of composition within the natural gas industry in Massachusetts, including the
structure and mechanics of assigning (and where applicable, recalling) capacity
to marketers of LDCs; providing "default service' (i.e., where the customer
returns to the LDC as its source of supply); and provision of peaking service to
marketers.
The regulation of prices, terms and conditions of interstate
pipeline transportation and sales of natural gas is subject to the jurisdiction
of FERC. Although the Company is not under the direct jurisdiction of FERC, the
Company monitors, and periodically participates in, proceedings before
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FERC that affect the Company's pipeline gas transporters, the Company's
operations and other matters pertinent to the Company's business.
The Company is also subject to standards prescribed by the
Secretary of Transportation under the Natural Gas Pipeline Safety Act of 1968
with respect to the design, installation, testing, construction and maintenance
of pipeline facilities. The enforcement of these standards has been delegated to
the MDTE.
GAS SUPPLY AND STORAGE
For several decades, until 1993, the Company primarily relied
upon a single supplier, Algonquin Gas Transmission Company ("Algonquin"), for
its gas supply needs. In its merchant role, Algonquin provided all the Company's
pipeline-supplied natural gas and storage, as well as transported such pipeline
and storage supplies to the Company's system. This supply paradigm changed,
however, in 1993 following FERC's issuance of Order 636. Order 636 was intended
to encourage more competition among natural gas suppliers and required
interstate pipelines to unbundle or separate gas sales, transportation and
storage services. With the implementation of Order 636, most pipeline companies
(including Algonquin) discontinued their traditional merchant function. Order
636 allowed pipeline companies to recover from their customers, gas distribution
companies such as the Company, costs associated with the service unbundling and
discontinuation of merchant service. This resulted in each local distribution
company becoming responsible for obtaining all of its gas supply in the open
market. While unbundling of these services allows a local distribution company,
such as the Company, more flexibility in selecting and managing the type of
services required to provide its customers with the lowest possible priced gas
while maintaining a reliable gas supply, it also places additional
responsibility on a distribution company to obtain its natural gas supply in the
open market on a timely basis to fulfill commitments
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during peak demand periods.
With the advent of FERC Order 636, which was implemented on June
1, 1993, the Company assumed the full responsibility for aggregating, gathering
and arranging for the transmission of all required pipeline gas supplies to its
distribution system.
The pipelines serving the Company, Algonquin and its affiliate
Texas Eastern Transmission Company ("Texas Eastern"), have made the required
compliance filings of tariff sheets and have fully implemented the provisions of
Order 636. The primary related issue of the billing by Algonquin and Texas
Eastern of transition costs has been resolved. The Company has made appropriate
arrangements for supplies to replace the sales service formerly provided by
Algonquin, or "Conversion Supplies".
The Company is required to obtain the approval of the MDTE for
gas supplies that are to be purchased over a period in excess of one year,
including any Conversion Supplies. Through its arrangements for the Conversion
Supplies, the Company has contracted for a "city gate management service", which
includes the provision of transportation, sales and storage services by a third
party. The Company has maintained reliability and flexibility of service through
this arrangement at a cost very competitive with any other combination of
unbundled services, but with much less administrative risk and costs than would
pertain to alternatives. Approximately 90% of the Company's Conversion Supplies
are provided under a multi-year contract with SEMPRA Energy Trading (formerly
CNG Energy Services Corporation) ("SEMPRA") in quantities described below. Such
contract remains effective through October,2000. In June 1995, the MDTE approved
the Company's contract with SEMPRA and in November 1999 the MDTE approved an
extension thereof. The Company also has short-term arrangements in place for
supplemental supplies for the 1999-2000 winter heating season. The Company is
currently analyzing the proper amount of such supply for future years and has
filed a "Forecast and Supply Plan" with the MDTE,
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along with a request for approval thereof and certain supplemental gas supplies.
The MDTE's decision is pending.
The Company has contracted with SEMPRA for the purchase of all
pipeline commodity supplies for delivery to the Company's distribution system,
as well as storage services, management of Company-owned pipeline and storage
capacity and provision of significant amounts of back-up deliveries from a
different gas production area. SEMPRA's firm, year-round contract deliveries to
the Company provide for an annual contract quantity of 5,219,255 Mcf delivered
to the Company's facilities ("City Gate") on a 365-day basis and for deliveries
into storage for the Company in an annual amount of 841,355 Mcf. The maximum
daily quantity ("MDQ") of City Gate deliveries are 17,461 Mcf and the storage
MDQ is 11,441 Mcf with 7,124 Mcf of that total MDQ available for City Gate
deliveries from November 16 through April 15 as winter service supplies
delivered via Algonquin.
The remainder of the MDQ is available each day of the year. All
commodity deliveries are priced at an index price reflective of the market
price. This type of pricing mechanism is designed to allow the Company to obtain
its gas supply at competitive prices. The SEMPRA supply contract includes a
mechanism whereby alternative market indices may be used in conjunction with the
futures market to fix the price of all or part of the gas supplied if the market
is such that additional price security is deemed prudent. The SEMPRA contract
commenced on June 1, 1993 and has been extended until October 31, 2000. The
Company, along with the informal buying group with whom it arranged the original
SEMPRA contract, has been discussing with SEMPRA and other suppliers, potential
arrangements for supply after October 31, 2000.
In addition to the supplemental gas supplies described below, the
Company has requirements for a supply of approximately (1,479,000) Mcf during
the 1999-2000 heating season (November through March). To fulfill this portion
of its supply portfolio, the Company obtained bids from
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several potential suppliers and has entered into supply contracts for a three
year term with Distrigas of Massachusetts Corporation ("DOMAC") and a separate
one year contract with SEMPRA. Supplies are currently being provided under the
DOMAC contracts, though the MDTE must approve the contract. The Company has made
the necessary filing with the MDTE and awaits action on its request for
approval.
The Company has a renewable one-year Firm Liquid Contract with
DOMAC for 200,000 MMBTU of liquefied natural gas ("LNG"), to be delivered by
truck to the Company's storage tank for use in "peak shaving" operations which
supplement pipeline volumes in peak requirement situations.
In addition to the LNG peak shaving facilities, the Company also
maintains storage and send out facilities for liquefied propane gas ("LPG") that
provide an additional 88,000 MMBTU of sendout capacity when needed. The
Company's projected peak day requirements are 68,598 Mcf for the 1999-2000
heating season compared to the Company's peak day capacity of 70,000 Mcf.
The Company's peak day capacity is comprised of 29,859 Mcf of
pipeline deliveries pursuant to the SEMPRA contracts to the City Gate; 13,000
Mcf of supplemental DOMAC and SEMPRA gas supplies, delivered by pipeline;
vaporization of Company stored liquid propane ("LP") into gas for injection (all
by Company-owned equipment) into the Company's distribution system in daily
amounts of about 10,000 Mcf; and vaporization of Company-stored LNG and
injection into the distribution system in daily amounts of about 20,000 Mcf.
COMPETITION
Historically, the Company was not subject to competition from any
other gas public utility or gas marketers with respect to sales of the natural
gas commodity, but rather only from electricity, oil, coal and other fuels for
heating, water heating, cooking, air conditioning and other
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purposes. Generally, the Company does not face competition relative to its
delivery of natural gas. As discussed above, however, the status of competition
among suppliers of natural gas sales service has significantly increased with
the level of marketer activity and tariff and regulatory changes that facilitate
competition. As a result, marketers are currently selling natural gas to several
large volume end-users to whom the Company has historically made sales.
Marketers can be expected to seek to provide an increasing volume of sales
services to end-users located within the Company's service territory. At the
current time, for all third-party commodity sales that are occurring in the
Company's service territory, the Company transports those gas supplies within
the Company's service territory and delivers the supplies to the customers. The
margins earned by the Company for such transportation services are the same as
margins earned on bundled supply/delivery sales to the same end-users. Similar
opportunities may exist for the Company to broker gas to new or existing
customers, whether or not located within the Company's service territory,
although the Company has not done so to date and strict affiliate transaction
rules would apply.
The principal considerations in the competition between the
Company and suppliers of other fuel or energy include price, equipment
operational efficiencies and ease of delivery. In addition, the type of
equipment already installed in the businesses and residences significantly
affects the customer's choice of fuel or energy source, and in some cases
whether a customer will choose to transport gas supplied by marketers, or to
purchase from the Company.
The price of natural gas currently compares favorably to
electricity but is generally higher than fuel oil, especially the grade of oil
used by certain commercial and industrial customers. As price is generally
considered the most significant factor affecting competition among the various
energy sources, there is always uncertainty in the continuing
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competition among such energy sources, due to variations in price. Equipment
operational efficiencies and ease of delivery give natural gas advantages over
oil and also makes natural gas comparable to electricity in these respects.
Because of the environmental advantages associated with natural gas and the
efficiency and security of its supply, the demand for natural gas is expected to
continue to increase. Also, manufacturing, processing and other equipment
requirements are such that the use of gas rather than another fuel is virtually
a necessity for certain large commercial and industrial customers. Heating,
water heating and other domestic or commercial equipment is generally designed
for a particular energy source, and especially with respect to heating
equipment, the cost of conversion is a disincentive for individuals and
businesses to change their energy source. Currently, the Company estimates that
its gas heating saturation in areas in which it has been in active service is
approximately 89%.
The regulatory initiatives now under consideration pursuant to
which gas distribution companies in Massachusetts, such as the Company, would
restrict their sales activities, will also have a significant impact on the role
of the Company in an increasingly competitive market.
For all of these reasons, the Company believes that competition
in the area of natural gas sales from natural gas brokers and marketers, as well
as from other fuel sources, will intensify in the future.
EMPLOYEES
The Company employed 171 full-time and 7 part-time employees as
of September 30, 1999. Of those employees, 73 are represented by the Utility
Workers Union of America, AFL-CIO, Local No. 431. The Company and its union
employees currently have a contract through April 30, 2002. The Company believes
that it enjoys generally good labor relations.
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ITEM 2. PROPERTIES
The Company owns approximately 635 miles of distribution mains,
the major portion of which are constructed of coated steel, plastic or cast
iron. The Company owns and operates LP vaporizing equipment with an approximate
daily capacity of 14,000 Mcf and six LP storage tanks with a total capacity of
approximately 320,000 gallons. The Company also owns and operates an LNG storage
tank with a capacity of 45,000 barrels, equivalent to approximately 157,000 Mcf
of vaporized gas, and LNG vaporization equipment with a daily vaporization rate
of approximately 20,000 Mcf. The Company has three gate stations receiving gas
from the Algonquin pipeline. The Company also owns four office and operations
buildings in the service area.
All of the principal properties of the Company are owned in fee, subject to
the lien of the mortgage securing the Company's First Mortgage Bonds (the
"Indenture of First Mortgage"), and further subject to covenants, restrictions,
easements, leases, rights-of-way and other similar minor encumbrances common to
properties of comparable size and character, and none of which, in the opinion
of the Company's management, materially interferes with the Company's use of its
properties for the conduct of its business. The Company's gas mains are
primarily located under public highways and streets. Where they are under
private property, the Company has obtained easements or rights-of-way from the
record holders of title. These easements and rights are deemed by the Company to
be adequate for the purpose for which they are being used.
ITEM 3. LEGAL PROCEEDINGS/ENVIRONMENTAL MATTERS
In January 1990 the Company received notification from the
Massachusetts Department of Environmental Protection ("MDEP") that it is one of
numerous "potentially responsible parties" under Massachusetts laws in
connection with two sites in Massachusetts which were the subject of
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alleged releases of hazardous materials, including lead, by a company which had
purchased scrap meters from various utilities including the Company. The Company
has entered into an agreement with a group of other potentially responsible
parties (the "Group") to respond jointly and to share costs associated with the
MDEP's investigation. The Group negotiated an agreement with the MDEP to conduct
limited response actions at one of the sites without admission of liability, at
a cost of about $100,000 to the entire Group, pursuant to which members of the
Group would be released from any further liability at the site. Remedial actions
were commenced September 5, 1995 and have been completed. Though final MDEP
approval of the actions taken has not been issued, the Group considers the issue
closed. Efforts regarding the second site are in the early stages and potential
remediation costs at the second site and the Company's degree of responsibility
has not been determined, but the Group has made an offer to the MDEP for the
Group to undertake to do some remidiation work at the Main Street site, but not
to assume full responsibility for performing response actions with respect to
either debris at that site or contamination in wetlands of surface water. This
offer would be in exchange for a release from all other past of future response
costs. The MDEP has not yet responded to this offer. The Company does not expect
its allocated share of costs of any response actions which it may take or which
may be required at the second site to be significant.
On July 12, 1999, the suit, Louis Andrade, Donald P. Rodrigues
and Dawn C. Rodrigues v. Fall River Gas Company, United States District Court of
Massachusetts, C.A. No. 99-11669CAO, against the Company was filed with the
United States District Court of the District of Massachusetts. The Plaintiffs
are the mortgagee and owners, respectively, of 12 acres of land located in
Tiverton, Rhode Island. The Plaintiffs have asserted claims against the Company
pursuant to the Federal Comprehensive Environment Response, Compensation and
Liability Act ("CERCLA") and the Rhode Island
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Industrial Remediation and Refuse Act seeking to recover from the Company the
costs of remediation of alleged lead and coal gas waste contamination on the
property. The site of the contamination is within the 12 acres but does not
comprise the full 12 acres. The Plaintiffs have made a settlement demand in the
amount of $300,000 on October 22, 1999. The Company has refused that demand.
The Plaintiffs allege that the Company is responsible for the
presence of the hazardous materials found at the property. The only support the
Plaintiffs have for their allegations is the eyewitness testimony of a single
witness and his recollections from the 1930's, who has provided inconsistent
testimony.
The Company intends to contest the Plaintiffs' claims vigorously.
The Company believes it will ultimately prevail and thus has not provided for
any loss relative to this matter in its financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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ADDITIONAL ITEM - EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers:
RAYMOND H. FAXON*
Age 92, currently Vice Chairman of the Board of Directors and
assistant Treasurer of the Registrant. His current business function is Vice
Chairman of the Board of Directors and Assistant Treasurer. He is the father of
Bradford J. Faxon. Positions held for the past five years are as follows:
1/1/88 - 12/31/93 - Chairman of the Board of Directors and
Assistant Treasurer
1/1/94 - to Present - Vice Chairman of the Board of Directors
and Assistant Treasurer
His principal occupation for the past five years has been
employment with the Registrant.
BRADFORD J. FAXON*
Age 61, currently chairman of the Board of Directors, President
and a Director of the Registrant. His current business function is Chief
Executive Officer. Positions held with the Registrant for the past five years
are as follows:
12/1/78 to Present - Director
8/1/86 to Present - President
1/1/94 to Present - Chairman of the Board of Directors
He is the son of Raymond H. Faxon. His principal occupation for
the past five years has been employment with the Registrant.
PETER H. THANAS
Age 55, currently Senior Vice President and Treasurer of the
Registrant. His current business function is Chief Financial and Accounting
Officer of the Registrant. Positions held for the past five years are as
follows:
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8/ 1/86 to 9/19/94 - Financial Vice President and Treasurer
9/20/94 to Present - Senior Vice President and Treasurer
His principal occupation for the past five years has been
employment with the Registrant.
JOHN F. FANNING
Age 53, currently Vice President of Production and Gas Supply.
His current business function is Vice President of Production and Gas Supply of
the Registrant. Positions held with the Registrant for the past five years are
as follows:
7/ 1/87 - 12/31/89 - Manager of Gas Supply
1/ 1/90 - 9/20/93 - Superintendent of Production and Gas Supply
9/21/93 to Present - Vice President of Production and Gas Supply
His principal occupation for the past five years has been
employment with the Registrant.
WALLACE E. FLETCHER
Age 66, currently Comptroller and Assistant Treasurer. His
current business function is Comptroller and Assistant Treasurer of the
Registrant. Positions held with the Registrant for the past five years are as
follows:
5/27/92 to Present - Comptroller and Assistant Treasurer
His principal occupation for the past five years has been
employment with the Registrant.
All officers are either elected or appointed at the Directors'
Meeting following the annual Stockholders' meeting. Their terms of office are to
be for one year or until their successors have been duly elected or appointed.
*Members of the Executive Committee.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCK-
Holders Matters
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(a) Common Stock Quotations
AMEX
3 Months
Ended 9/30/99 6/30/99 3/31/99 12/31/98 9/30/98 6/30/98 3/31/98 12/31/97
(See Note)
High 22 19-7/8 18-1/4 17-1/2 16-3/8 16-3/4 17-1/4 16-5/8
Low 18-3/4 17-1/8 16-7/8 15-1/8 14-3/8 14-1/4 14-7/8 13
Because of the infrequency of trading of the Registrant's Common Stock, such
quotations may reflect inter-dealer prices, not actual transactions.
(b) Number of Stockholders at September 30, 1999 is 789.
(c) Dividends:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C>
November 15, 1998 - $.24 November 15, 1997 - $.24
February 15, 1999 - .24 February 15, 1998 - .24
May 15, 1999 - .24 May 15, 1998 - .24
August 15, 1999 - .24 August 15, 1998 - .24
</TABLE>
As of September 30, 1999 the Registrant had retained earnings
totaling $10,661,885 of which $6,865,649 was restricted against payment of cash
dividends under the terms of the Registrant's Indenture of Trust.
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes certain consolidated financial data
and is qualified in its entirety by the more detailed Consolidated Financial
Statements included herein.
20
<PAGE>
Selected Financial Data
Fall River Gas Company and Subsidiary
The following table summarizes certain consolidated financial data
and is qualified in its entirety by the more detailed Consolidated Financial
Statements included herein.
<TABLE>
<CAPTION>
Twelve Months Ended September 30,
---------------------------------
1999 1998 1997 1996 1995
----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Assets (in thousands)
Utility plant-net................... $39,766 $39,650 $39,340 $38,653 $36,209
Non-utility plant-net............... 4,182 4,248 2,924 2,762 2,613
Current assets...................... 11,298 11,269 10,154 9,088 9,934
Other assets........................ 437 472 2,517 2,688 2,201
-------- --------- ------- ------ -------
Total......................... $55,683 $55,639 $54,935 $53,191 $50,957
======= ======= ======= ======= =======
Capitalization and liabilities
Capitalization
Common equity....................... $17,584 $17,430 $12,618 $12,637 $12,922
Long-term debt (less current
maturities)........................ 19,500 19,500 13,500 13,500 6,500
------- -------- ------- ------- -------
Total.......................... 37,084 36,930 26,118 26,137 19,422
Current Liabilities................... 10,616 10,915 21,390 20,014 24,692
Other Liabilities..................... 7,983 7,794 7,427 7,040 6,843
-------- -------- ------ ------- ------
Total.......................... $55,683 $55,639 $54,935 $53,191 $50,957
======= ======= ======= ======= =======
Income Statement Data:
Gas operating revenues................... $42,081 $42,671 $45,261 $48,966 $44,418
Operating expenses:
Cost of gas sold....................... 22,491 22,921 25,315 31,133 28,097
Other operation and maintenance........ 12,561 12,601 13,314 12,257 10,992
Depreciation........................... 2,104 2,050 1,935 1,609 1,499
Taxes-other than Federal income taxes.. 1,602 1,434 1,408 1,283 1,053
Federal income......................... 607 687 428 342 471
------- ------ ------ ------ ------
Total........................... 39,365 39,693 42,400 46,624 42,112
------- ------ ------ ------ ------
Operating income......................... 2,716 2,978 2,861 2,342 2,306
Other income-net of tax.................. 1,019 871 850 790 772
Total interest charges................... 1,635 1,769 2,086 1,708 1,461
------ ------ ------ ------ ------
Net income............................... $2,100 $2,080 $1,625 $1,424 $1,617
====== ====== ====== ====== ======
Shares outstanding-average............... 2,196,938 2,146,119 1,784,993 1,780,542 1,780,542
Earnings per share....................... $0.96 $0.97 $0.91 $0.80 $0.91
Dividends declared per share............. $0.96 $0.96 $0.96 $0.96 $0.96
Appliance Company net income............. $1,007 $851 $825 $779 $753
</TABLE>
21
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERVIEW
Operating results are derived from two major classifications - utility and
non-utility. Utility revenues are generated from the operations of the regulated
natural gas distribution company and include the sale and distribution, as well
as the transportation, of natural gas to firm and interruptible customers.
Non-utility revenues are almost entirely from the rental of water heaters and
conversion burners.
The sale and distribution, as well as the transportation, of natural gas to
customers on a year-round basis for heating, water heating, cooking and
processing are the sources of firm utility revenues, as described below. Firm
customers can be residential, commercial or industrial. The revenues from firm
sales customers are determined by regulated tariff schedules and through
Massachusetts Department of Telecommunications and Energy ("MDTE") approved
commodity charge factors. These factors include the Cost of Gas Adjustment
Clause ("CGAC"), which allows the Company to collect from or return to customers
changes in gas cost from those included in the regulated tariffs. The CGAC also
provides for collection of: (i) carrying costs on gas purchases; (ii) pipeline
transition costs; (iii) costs, incentives and lost base revenues associated with
demand side management (DSM) programs; and (iv) certain costs of compliance with
environmental regulations. In accordance with the Company's approved CGAC,
increases or decreases in the cost of gas sold continue to be passed directly to
firm customers, dollar for dollar.
Sales to other utilities ("off-system sales") and to dual-fuel customers
("interruptible sales") are made when excess gas supplies are available and
prices are competitive. Interruptible sales are generally made in non-winter
months and can be interrupted by the Company at any time.
Transportation, the delivery of gas purchased to customers from marketers and
other third parties through the Company's distribution system, has recently
become a growing portion of the Company's business. With the restructuring of
the natural gas pipeline industry and the development of the state-level policy
of unbundling of delivery and commodity sales functions, the Company's largest
customers have moved first from firm tariffed sales service to firm sales
service under special contracts and more recently to transportation service. The
movement to the Company's transportation service occurred primarily after
implementation of new rates on December 1, 1996. Under these rates, the Company
earns the same margins on transportation service as it does on bundled commodity
sales and delivery. Accordingly, the Company is generally indifferent as to
whether customers take bundled sales and delivery or unbundled transportation
service only. Such movement to transportation results in reduced gas operating
revenues, because no commodity is bought by the Company for such customers.
Correspondingly, cost of gas sold is reduced. Consequently, there is no impact
on earnings because the Company earns no margin on the sale of natural gas
itself.
The Appliance Company generates non-utility revenues primarily from the rental
of water heaters and conversion burners. The Appliance Company also sells such
equipment and other gas-burning appliances such as central heating and air
conditioning systems and water heaters. Such rentals and sales are made to the
Company's gas customers and thereby assist the utility sales efforts. For income
statement purposes, the net earnings of the Appliance Company are shown under
"Other Income." A breakdown of the revenue and expenses of the Appliance Company
is found in the Notes to Consolidated Financial Statements.
22
<PAGE>
SEASONALITY
The nature of the Company's business is highly seasonal and
temperature-sensitive. As a result, the Company's operating results in any given
period reflect, in addition to other matters, the impact of the weather, with
colder temperatures resulting in increased sales and transportation by the
Company. The substantial impact of this sensitivity to seasonal conditions is
reflected in the Company's results of operations and the Company anticipates
that it will continue to be so reflected in future periods.
Short-term borrowing requirements vary according to the seasonal nature of sales
and expense activities of the Company. Accordingly, there is a greater need for
short-term borrowings during periods when internally generated funds are not
sufficient to cover all capital and operating requirements, particularly in the
fall and winter. Short-term borrowings utilized for construction expenditures
generally are replaced by permanent financing when it becomes economical and
practical to do so and where appropriate to maintain an acceptable relationship
between borrowed and equity resources.
RESULTS OF OPERATION
FISCAL 1999 VERSUS FISCAL 1998
Operating revenues in fiscal 1999 totalled $42,081,000 a decrease of 1.4% from
fiscal 1998. The decrease was attributable to a weather related decline in firm
sales and transportation, and a decrease in gas costs recovered through the
Company's CGAC. As discussed earlier, fluctuations in the cost of gas do not
impact the profitability of the Company as these changes are recovered or
returned to customers through the CGAC.
Firm gas sales and transportation services was 6,761,000 Mcf in fiscal 1999, a
decrease of 2.1% from fiscal 1998. The primary factor for the decline in firm
gas sales was weather, which was 9.2% warmer than a normal year and 2.1% warmer
than the prior year.
Cost of gas sold includes costs for gas operation including supplemental fuels,
such as, liquefied natural gas (LNG), propane (LPG), and storage, which are used
to augment the Company's primary supply of natural gas during periods of peak
usage. During fiscal 1999, gas costs decreased $430,000, 1.9%, to $22,491,000,
due to reduced firm gas sales. The average cost per Mcf of gas distributed in
fiscal 1999 and 1998 was $4.25 and $4.39, respectively.
Other operations expense in fiscal 1999 totalled $11,033,000, a 0.7% decrease
from the prior period. A decrease in overtime hours associated with the warmer
weather caused this decline.
Maintenance expenses increased in fiscal 1999 by 2.8% over the prior fiscal
period to $1,528,000. The slight increase was a result of normal wage and
material costs.
Earnings of Fall River Gas Appliance Company, Inc., the Company's wholly-owned
subsidiary, totaled $1,007,000 in fiscal 1999, an increase of $156,000 over
fiscal 1998. This increase was a result of increased rental revenues from water
heaters and conversion burners, as a result of a higher rental rate, and
increased merchandise sales.
Fiscal 1999 interest expense was $1,636,000, a 7.5% decrease from the prior
fiscal period as a result of decreased short-term interest expense offset by
increased interest expense on long-term debt. The net proceeds of the Company's
long-term debt and equity offerings during the first quarter of fiscal 1998 were
used to reduce the short-term borrowing for utility operations resulting in the
decrease interest expense.
<PAGE>
Fiscal 1998 versus Fiscal 1997
Operating revenues in fiscal 1998 totalled $42,671,000, a decrease of 5.7% from
fiscal 1997. The decrease in revenues from the prior fiscal period was
attributable to a weather related decline in firm sales and a decrease in gas
costs recovered through the Company's CGAC. Firm gas sales volume, firm sales
and firm transportation, was 6,910,000 Mcf in fiscal 1998, a decrease of 6.1%
from fiscal 1997. This decrease was a result of warmer weather, which was 8.4%
warmer than normal and 6.5% warmer than the prior fiscal period.
Cost of gas sold includes the costs of all commodity, storage, transportation
and peak shave fuel requirements to serve utility sales customers. The average
cost per Mcf of gas distributed in fiscal 1998 and fiscal 1997 was $4.39 and
$4.46, respectively.
Other operations expense in fiscal 1998 totaled $11,113,000, a 2.0% decrease
from the prior fiscal period. A reduction in the costs associated with employee
benefit programs and pension expense were primarily responsible for this
decrease.
Maintenance expense totaled $1,487,000 in fiscal 1998, a 24.8% decrease from the
prior fiscal period. More efficient use of Company labor with a strict cost
cutting program generated substantial savings compared to fiscal year 1997.
Earnings of the Company's appliance company totaled $850,000 in fiscal 1998
compared to $824,000 in fiscal 1997. This increase was the result of increased
revenues from water heater and conversion burner rentals.
Fiscal year 1998 interest was $1,769,000, a 15.2% decrease from the prior fiscal
period as a result of the issuance of equity totaling approximately $5,000,000
and long-term debt totaling $6,000,000 during the first quarter of fiscal 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's major capital requirements result from upgrading the efficiency of
existing plant and expanding plant to serve additional customers. Such capital
expenditures are primarily for expansion and improvements of the Company's
distribution system. For the 1999 fiscal year, capital expenditures totalled
approximately $2,150,000 compared to $2,289,000 in fiscal 1998 and $2,468,000 in
fiscal year 1997.
Capital expenditures and other cash requirements were financed by internally
generated funds and supplemented by short-term borrowings. During fiscal 1999
and fiscal year 1998 gas cost billings were lower than the Company's cost of
gas, thereby having a negative impact on cash flow of approximately $10,000 and
$1,837,000 in fiscal years 1999 and 1998, respectively. Lower gas cost billings
also increased the Company's deferred gas balance to $3,627,000 in fiscal year
1999 from $3,617,000.
The Company's net cash generated from operating activities in fiscal year 1999
was $3,581,000 compared to $4,253,000 and $3,289,000 in fiscal years 1998, and
1997, respectively. The Company had capital expenditures for utility and
non-utility operations in the amounts of $2,413,000, $2,672,000, and $2,894,000
in fiscal years 1999, 1998, and 1997, respectively.
As is customary in the utility industry, cash for construction requirements in
excess of internally generated funds are provided through short-term borrowings
under existing lines of credit, then from time to time repaid with the proceeds
24
<PAGE>
from equity and long-term financing as deemed appropriate by management. On
September 30, 1999 the Company had $14,200,000 of available borrowings under its
lines of credit. While these lines are reviewed annually by our lending banks,
management believes they will be renewed or replaced. Management believes the
available lines of credit are sufficient to meet cash requirements for the
foreseeable future.
Cash flow patterns reflect the seasonality of the Company's business. The sales
of natural gas are seasonal, generating approximately seventy percent of the
Company's annual revenues between November 1 and March 31. The greatest demand
for cash is in the late fall and winter as construction projects are brought to
completion and accounts receivable balances rise.
The Company anticipates annual utility construction expenditures over the next
fiscal year to be approximately $2,300,000 and non-utility capital expenditures
to be approximately $400,000 over the same period. It is anticipated that such
expenditures will be financed from internally generated sources supplemented, as
required, by short-term borrowing.
YEAR 2000 ISSUES
Software applications currently in use by the Company are certified to be Year
2000 compliant by the software vendors from whom the applications were
purchased. The Company has modified, replaced or upgraded those applications
which were not Year 2000 compliant and based on its testing of its systems,
management believes its systems are Year 2000 compliant. The Company compiled
cost estimates of the effort involved to perform those modifications,
replacements and upgrades and to date Year 2000 related costs have not been
material to the Company.
The Company has inquired of third parties; i.e., vendors, suppliers and
customers, which have a material relationship with the Company as to the status
of their Year 2000 readiness. The Company continues to work with critical
vendors, suppliers and customers to gain assurance of their readiness for Year
2000 and has developed contingency plans to mitigate anticipated shortcomings in
their readiness. The Company cannot guarantee that the systems of other on which
the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's, would not have a material adverse impact on the Company.
The Company expects that its Year 2000 plan will be adequate to address its Year
2000 issues and has developed contingency plans to further assure that the vital
functions of the Company dependent on third parties will continue uninterrupted.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The private Securities Litigation Reform Act of 1995 encourages the use of
cautionary statements accompanying forward-looking statements. The preceding
Management's Discussion and Analysis of Financial Condition and Results of
Operations includes forward-looking statements concerning the impact of changes
in the cost of gas and of the CGAC mechanism on total margin; projected capital
expenditures and sources of cash to fund expenditures; and estimated costs of
environmental remediation and anticipated regulatory approval of recovery
mechanisms. The Company's future results generally and with respect to such
forward-looking statements, may be affected by many factors, among which are
uncertainty as to the regulatory allowance of recovery of changes in the cost of
gas; uncertain demands for capital expenditures and the availability of cash
from various sources; uncertainty as to whether transportation rates will be
reduced to future regulatory proceedings with resulting decreases in
transportation margins; and uncertainty as to environmental costs and as to
regulatory approval of the full
25
<PAGE>
recovery of environmental costs, transition costs and other regulatory assets.
NEW ACCOUNTING STANDARD
In June 1998, the FASB issued SFAS No. 133,":Accounting for Derivative
Instruments and Hedging Activities". SFAS 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. It
also requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting. The new standard, as amended by
SFAS No. 137, is effective for fiscal years beginning after June 15, 2000.
Adoption of SFAS No. 133 is not expected to effect the Company's financial
condition or results of operation.
26
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Fall River Gas Company:
We have audited the accompanying consolidated balance sheets of FALL RIVER GAS
COMPANY (a Massachusetts corporation) and subsidiary as of September 30, 1999
and 1998 and the related consolidated statements of income, retained earnings
and cash flows for each of the three years in the period ended September 30,
1999. These financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Fall River Gas Company and
subsidiary as of September 30, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1999, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The financial statement
schedule under part IV, Item 14, presented for purposes of additional analysis
and is not a required part of the basic consolidated financial statements. This
information has been subject to the auditing procedures applied in our audit of
the basic consolidated financial statements and, in our opinion, is fairly
stated, in all material respects, in relation to the basic consolidated
financial statements taken as a whole.
/S/ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 12, 1999
27
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
Fall River Gas Company and Subsidiary
For the Years Ended September 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
GAS OPERATING REVENUES....................... $42,081,629 $42,670,838 $45,261,249
OPERATING EXPENSES:
Operations -
Cost of gas sold.......................... 22,491,345 22,920,783 25,314,769
Other..................................... 11,033,098 11,113,369 11,337,000
Maintenance................................ 1,527,715 1,487,345 1,977,172
Depreciation .............................. 2,103,801 2,050,207 1,934,959
Taxes -
Local property and other.................. 1,602,272 1,433,887 1,408,507
Federal and state income (Note 3)......... 607,212 686,909 427,768
----------- ----------- -----------
39,365,443 39,692,500 42,400,175
----------- ----------- -----------
OPERATING INCOME.............................. 2,716,186 2,978,338 2,861,074
OTHER INCOME (EXPENSE):
Earnings of Fall River Gas Appliance
Company Inc.(Note 2)...................... 1,006,938 850,517 824,724
Interest income............................ 13,723 13,661 13,775
Other...................................... (1,364) 6,836 11,375
------------ ----------- -----------
INCOME BEFORE INTEREST EXPENSE................ 3,735,483 3,849,352 3,710,948
----------- ----------- -----------
INTEREST EXPENSE:
Long-term debt............................ 1,607,300 1,534,900 1,172,900
Other..................................... 28,342 234,390 913,405
----------- ----------- -----------
1,635,642 1,769,290 2,086,305
----------- ----------- -----------
NET INCOME.................................... $ 2,099,841 $ 2,080,062 $ 1,624,643
=========== =========== ===========
AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING-Basic and Diluted.................... 2,196,938 2,146,119 1,784,993
=========== =========== ===========
EARNINGS PER AVERAGE COMMON SHARE-Basic and Diluted $ 0.96 $ 0.97 $ 0.91
=========== =========== ===========
</TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
For the Years Ended September 30, 1999, 1998, and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
BALANCE AT BEGINNING OF YEAR................. $10,672,783 $10,693,309 $10,865,648
Net Income................................... 2,099,841 2,080,062 1,624,643
----------- ----------- -----------
Total.................................... 12,772,624 12,773,371 12,490,291
Dividends declared........................... 2,110,739 2,100,588 1,796,982
----------- ----------- -----------
BALANCE AT END OF YEAR....................... $10,661,885 $10,672,783 $10,693,309
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
CONSOLIDATED BALANCE SHEETS
Fall River Gas Company and Subsidiary
September 30, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
---- ----
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT, at original cost:
Gas................................................... $ 62,319,207 $ 60,448,647
Nonutility, principally rented gas appliances......... 6,069,442 6,288,100
------------ ------------
68,388,649 66,736,747
Less-Accumulated depreciation......................... 24,440,265 22,839,053
------------ ------------
43,948,384 43,897,694
------------ ------------
CURRENT ASSETS:
Cash.................................................. 279,079 356,005
Accounts receivable, less allowance for doubtful accounts
of $1,065,000 in 1999 and $957,000 in 1998............. 1,617,328 1,807,487
Inventories, at average cost -
Liquefied natural gas, propane, and natural gas in storage 3,574,562 3,148,311
Materials and supplies................................ 1,345,614 1,273,772
Deferred gas costs.................................... 3,627,483 3,617,512
Prepaid taxes......................................... 143,478 401,160
Prepayments and other................................. 710,005 665,243
------------ ------------
11,297,549 11,269,490
------------ ------------
DEFERRED CHARGES:
Regulatory asset (Note 5)............................. 426,313 453,471
Other................................................. 10,702 18,885
------------ ------------
437,015 472,356
------------ ------------
$ 55,682,948 $ 55,639,540
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statement.
29
<PAGE>
CONSOLIDATED BALANCE SHEETS(Cont.)
Fall River Gas Company and Subsidiary
September 30, 1999 and 1998
<TABLE>
<CAPTION>
CAPITALIZATION: 1999 1998
---- ----
<S> <C> <C>
Stockholders' investment-
Common stock, par value $.83-1/3 per share, 2,951,334
shares authorized, 2,201,827 issued in 1999 and
2,201,334 in 1998................................. $ 1,836,109 $ 1,834,445
Premium paid-in on common stock..................... 5,085,540 4,954,532
Retained earnings (Note 4).......................... 10,661,885 10,672,783
----------- -----------
17,583,534 17,461,760
Less zero shares in 1999 and 9,326 in 1998 of
common stock held in treasury, at cost.............. 0 31,443
----------- -----------
17,583,534 17,430,317
Long-term debt (Note 4) 19,500,000 19,500,000
----------- ----------
Total capitalization.............................. 37,083,534 36,930,317
----------- -----------
CURRENT LIABILITIES:
Notes payable to banks (Note 4)....................... 5,800,000 5,100,000
Dividends payable..................................... 528,567 526,173
Accounts payable...................................... 1,798,662 3,074,673
Other................................................. 2,488,776 2,214,022
----------- -----------
10,616,005 10,914,868
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 6)
DEFERRED CREDITS:
Accumulated deferred income taxes (Note 3)............ 4,532,790 4,462,626
Unamortized investment tax credits (Note 3)........... 441,169 485,453
Other................................................. 2,625,687 2,390,716
Regulatory liability (Note 3)......................... 383,763 455,560
----------- -----------
7,983,409 7,794,355
----------- -----------
$55,682,948 $55,639,540
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fall River Gas Company and Subsidiary
For the Years Ended September 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash Provided by (Used for)
Operating Activities:
Net Income ....................................... $ 2,099,841 $ 2,080,062 $ 1,624,643
Items not requiring (providing) cash:
Depreciation ................................... 2,347,615 2,292,374 2,121,759
Deferred income taxes .......................... 70,164 188,786 149,854
Investment tax credits, net .................... (44,284) (44,284) (37,958)
Change in working capital ...................... (1,106,243) (1,278,188) (939,194)
Other sources, net ............................. 213,624 1,013,970 370,037
------------ ------------ ------------
Net cash provided by operating activities ..... 3,580,717 4,252,720 3,289,141
------------ ------------ ------------
Investing Activities:
Additions to utility property, plant and equipment (2,149,649) (2,288,562) (2,467,988)
Additions to nonutility property ................. (263,764) (383,801) (426,502)
------------ ------------ ------------
Net cash used for investing activities ......... (2,413,413) (2,672,363) (2,894,490)
------------ ------------ ------------
Financing Activities:
Cash dividends paid on common stock .............. (2,108,345) (2,086,070) (1,712,657)
Retirement of long-term debt through sinking fund 0 0 0
Common stock transactions ........................ 164,115 4,832,318 153,471
Proceeds from long-term debt issue ................ 0 6,000,000 0
Increase(decrease) in notes payable to banks, net 700,000 (10,300,000) 1,100,000
------------ ------------ ------------
Net cash used for financing activities .......... (1,244,230) (1,553,752) (459,186)
Increase (decrease) in cash .............................. (76,926) 26,605 (64,535)
Cash, beginning of year .................................. 356,005 329,400 393,935
------------ ------------ ------------
Cash, end of year ........................................ $ 279,079 $ 356,005 $ 329,400
============ ============ ============
Changes in Components of Working Capital(excluding
cash): (Increase) decrease in current assets:
Accounts receivable ............................. $ 190,159 $ 164,814 $ 704,021
Inventories ..................................... (498,093) 28,371 179,311
Prepayments and other ........................... 212,919 554,694 (434,175)
Deferred gas cost ............................... (9,971) (1,836,714) (1,579,533)
Increase (decrease) in current liabilities:
Accounts payable ................................ (1,276,012) (470,971) (8,980)
Gas supplier refunds due customers .............. 0 0 0
Accrued taxes ................................... 0 0 0
Other ........................................... 274,755 281,618 200,162
------------ ------------ ------------
Change in working capital ...................... $ (1,106,243) $ (1,278,188) $ (939,194)
============ ============ ============
Supplemental Disclosure of Cash Flow Information:
Cash paid for:
Interest ........................................ $ 1,770,762 $ 1,745,556 $ 2,015,215
Income taxes .................................... 1,156,500 593,588 1,131,624
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fall River Gas Company and Subsidiary
September 30, 1999
1) ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The Consolidated financial statements include the accounts of Fall River Gas
Company (the Company) and subsidiary, Fall River Gas Appliance Company, Inc.,
(the Appliance Company). The Company's principal business is the operation of a
regulated gas distribution company in southeastern Massachusetts, while its
wholly-owned subsidiary rents gas appliances. All significant intercompany
accounts and transactions have been eliminated in consolidation.
REGULATION
The Company's rates, operations, accounting and certain other practices
are subject to the regulatory authority of the Massachusetts Department of
Telecommunications & Energy (MDTE). The Company's accounting policies conform to
generally accepted accounting principles applicable to rate regulated
enterprises and the reported amounts of revenues and expenses during the
reported period.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company to make estimates and
assumptions that affect the reporting and disclosure of assets and liabilities,
including those that are of a contingent nature, at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
DEPRECIATION & AMORTIZATION
Depreciation of property, plant and equipment is provided using the
straight-line method at rates designed to amortize the cost of these assets over
their estimated useful lives. The composite depreciation rate for gas plant is
3.5%. Rented gas appliances have estimated useful lives of 10 to 20 years.
Installation costs of rented appliances are amortized over the estimated life of
the lease period.
GAS OPERATING REVENUES AND COST OF GAS SOLD
Gas operating revenues are recorded based on meter readings made on a
cycle basis throughout the month. Accordingly, in any period, the actual volume
of gas supplied to customers may be more or less than the usage for which the
customers have been billed.
The Company's approved rate tariffs include a cost of gas adjustment
(CGAC) factor allowing dollar-for-dollar recovery of the cost of gas sendout to
firm customers. Actual costs incurred at the end of any period may differ from
amounts recovered through application of the CGAC. Any excess or deficiency in
amounts billed as compared to costs is deferred and either refunded to, or
recovered from, the customers over a subsequent period.
REGULATORY ASSETS
Regulatory assets relate to unrecovered expense from the adoption of
Statement of Financial Accounting Standards No. 106, "Employers", " Accounting
for Posretirement Benefits other than Pensions" (SFAS)106. These regulatory
assets do not earn a return on investment.
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (cont.)
2) FALL RIVER GAS APPLIANCE COMPANY, INC.
The earnings of the Fall River Gas Appliance Company, Inc. are shown as
Other Income in the accompanying Consolidated Statements of Income. Condensed
operating information of the Appliance Company for the years ended September 30,
1999, 1998, and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Operating revenues ........... $4,170,646 $3,409,506 $3,176,526
Costs and expenses ........... 2,475,830 1,976,501 1,786,944
---------- ---------- ----------
Income before income taxes 1,694,816 1,433,005 1,389,582
Income tax expense ........... 687,878 582,488 564,858
---------- ---------- ----------
Net income ........... $1,006,938 $ 850,517 $ 824,724
========== ========== ==========
</TABLE>
3) INCOME TAXES
The Company and its subsidiary file a consolidated Federal income tax
return. Each company provides Federal income taxes on a separate company basis.
The following is a summary of the provision for Federal and State income taxes:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------- -------------------------- --------------------------
FEDERAL STATE FEDERAL STATE FEDERAL STATE
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Current ............................... $ 999,764 $ 266,532 $ 891,431 $ 235,811 $ 693,858 $ 194,129
Deferred .............................. 57,443 12,721 155,731 33,056 123,690 26,164
Investment tax credits ................ (44,284) -- (44,284) -- (37,958) --
----------- ----------- ----------- ----------- ----------- -----------
Total provision ................ $ 1,012,923 $ 279,253 $ 1,002,878 $ 268,867 $ 779,590 $ 220,293
=========== =========== =========== =========== =========== ===========
Provision for income taxes included in:
Operating expenses .................. $ 496,616 $ 110,596 $ 562,784 $ 124,125 $ 348,708 $ 79,060
Other income-
Fall River Gas
Appliance Company ............ 518,726 169,152 438,145 144,343 424,858 140,001
Other ............................... (2,419) (495) 1,949 399 6,024 1,232
----------- ----------- ----------- ----------- ----------- -----------
Total provision ............... $1,012,923 $ 279,253 $ 1,002,878 $ 268,867 $ 779,590 $ 220,293
=========== =========== =========== =========== =========== ===========
</TABLE>
On October 1, 1993, the Company adopted Statement of Financial Accounting
Standards ("SFAS") 109, "Accounting for Income Taxes". SFAS 109 requires
adjustments of deferred tax assets and liabilities to reflect the future tax
consequences, at currently enacted tax laws and rates, of items already
reflected in the financial statements. The implementation of SFAS 109 resulted
in the recognition of a regulatory liability of approximately $412,000 for the
tax benefit of unamortized investment tax credits, which SFAS 109 requires to be
treated as a temporary difference. This benefit is being passed on to customers
over the lives of the property giving rise to the investment tax credit.
The tax effect of the cumulative differences that gave rise to the
deferred tax liabilities and deferred tax assets for the year ended September
30, 1999 and 1998 are detailed on the following page (in thousands):
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Deferred Tax Assets:
Allowance for doubtful accounts ...... $ 379,607 $ 362,311
Unamortized investment tax credits . 172,019 189,326
Contributions in aid of construction 261,493 226,199
Unbilled revenue ................... 377,378 340,971
Deferred pension ................... 313,044 253,461
Deferred compensation .............. 268,175 257,323
Regulatory liability ............... 195,035 195,035
Other .............................. 916,711 903,024
---------- ----------
Total Deferred Tax Assets ..................... $2,883,462 2,727,650
Deferred Tax Liabilities:
Property related ................... 5,365,346 5,272,976
Deferred gas costs ................. 1,416,336 1,410,829
Other .............................. 634,570 513,494
---------- ----------
Total Deferred Tax Liabilities ................ 7,416,252 7,197,299
---------- ----------
Net Deferred Tax Liability .................... $4,532,790 $4,469,649
========== ==========
</TABLE>
The combined Federal and State income tax provision set forth above
represents approximately 38% of income taxes in 1999, 1998 and 1997. The
combined statutory rate for Federal and State income tax was approximately 39%
in 1999, 1998, and 1997. The difference between the effective income tax rate
and statutory rate results primarily from the amortization of investment tax
credits
Investment tax credits are amortized over the life of the property giving
rise to the credits.
4)CAPITALIZATION
Common Stock Issuance
During 1999 the Company issued the remaining 9,326 shares of Treasury stock
bringing the treasury stock balance to zero. The Company also issued 493 shares
from the previously authorized but unissued shares. All shares issued were the
result of the Company's Dividend Reinvestment Plan (DRIP).
Long-Term Debt And Notes Payable to Banks
The Company has three issues of first-mortgage bonds outstanding with
maturities from 2020 through 2027. Under the most restrictive terms of the
indenture securing the bonds, retained earnings of $6,865,648 were restricted
against payment of dividends at September 30, 1999. The Company's ability to pay
dividends is not restricted by these terms. There are no aggregate maturities or
sinking fund requirements for the next five years applicable to the issues
outstanding at September 30, 1999.
The fair value amounts disclosure below have been reported to meet the
disclosure requirements of SFAS No. 107 "Disclosures About Fair Values of
Financial Instruments" and are not necessarily indicative of amounts that the
Company could realize in a current market exchange.
At September 30, 1999 and 1998 the fair value of the Company's long-term
debt is estimated to be $21,350,207 and $24,669,399, respectively, These amounts
were calculated based on market rates of similar instruments.
34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
The Company maintains lines of credit with various banks under
which it may borrow up to $20,000,000. These lines are reviewed periodically by
the various banks and may be renewed or cancelled. The Company pays a commitment
fee on the lines of credit at rates ranging from 5/16 of 1% to 1/2 of 1%. At
September 30, 1999, there were $5,800,000 borrowings under these lines of
credit.
The following table summarizes certain information related to the Company's
short-term borrowings for the years ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
Average daily balance outstanding for the period .................. $ 4,799,000 $ 6,917,000
Weighted average interest rate for the period ..................... 5.4% 6.2%
Maximum amount outstanding during the
period based on month-end balances .................. $ 9,000,000 $ 16,900,000
Weighted average interest rate at end of period ................... 5.5% 6.0%
</TABLE>
5) Disclosures about Pension and Other Postretirement Benefit Plans
The Company has defined benefit plans covering substantially all
of its employees. The benefits under these plans are based on years of service
and employees' compensation levels. The Company's policy is to fund pension
costs accrued including amortization of past service costs. In addition to
providing pension benefits, the Company provides certain health care and life
insurance benefits to qualified retired employees. In 1994, the Company adopted
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" (SFAS 106). Prior to 1994, expense was recognized when benefits were
paid. In accordance with SFAS 106, the Company began recording the cost for this
plan on an accrual basis for 1994. As permitted by SFAS 106, the Company is
recording the transition obligation over a twenty year period.
The following tables set forth the status of the Pension and other
Postretirement Benefit Plans in a format as amended by SFAS No. 132 "Employers'
Disclosures about Pensions and Other Postretirement Benefits":
<TABLE>
<CAPTION>
PENSION BENEFITS PENSION BENEFITS
------------------------ ------------------------
UNION NON-UNION & SALARIED
---------- ------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year 7,342,996 6,450,299 7,516,071 6,897,893
Service cost 155,964 144,154 302,328 278,465
Interest cost 587,440 516,024 601,286 551,831
Plan participants' contributions 0 0 0 0
Amendments 0 0 0 0
Acturial gain/(loss) (346,984) 779,051 294,284 74,297
Acqusition 0 0 0 0
Benefits paid (548,282) (546,532) (302,835) (286,415)
---------- ---------- ---------- ----------
Benefit obligation at end of year 7,191,134 7,342,996 8,411,134 7,516,071
---------- ---------- ---------- ----------
Fair value of plan assets at beginning of year 7,888,434 7,075,403 7,619,218 6,382,236
Actual return on plan assets 693,426 1,225,217 511,618 1,106,497
Acquisition 0 0 0 0
Employer contribution 154,128 134,346 306,135 416,900
Plan participants' contributions 0 0 0 0
Benefits paid (548,282) (546,532) (302,835) (286,415)
---------- ---------- ---------- ----------
Fair value of plan assets at end of year ..................... 8,187,706 7,888,434 8,134,136 7,619,218
---------- ---------- ---------- ----------
Funded status ................................................ 996,572 545,438 (276,998) 103,147
Unrecognized net actuarial loss .............................. (1,459,195) (1,070,741) (1,149,006) (1,745,402)
Unrecognized net obligation .................................. 224,712 299,616 84,664 112,883
Unrecognized transition obligation ........................... 0 0 0 0
Unrecognized prior service cost .............................. 193,070 231,684 944,988 1,063,112
---------- ---------- ---------- ----------
Prepaid (accrued) benefit cost ............................... (44,841) 5,997 (396,352) (466,260)
---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
OTHER BENEFITS
--------------
1999 1998
---------- ----------
<S> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year 1,798,569 1,868,988
Service cost 152,282 155,425
Interest cost 130,706 132,889
Plan participants' contributions (105,495) (106,080)
Amendments 0 0
Acturial gain/(loss) (59,773) (163,092)
Acqusition 0 0
Benefits paid (86,222) (89,561)
---------- ----------
Benefit obligation at end of year 1,830,067 1,798,569
---------- ----------
Fair value of plan assets at beginning
of year 220,940 210,528
Actual return on plan assets 10,405 10,413
Acquisition 0 0
Employer contribution 0 0
Plan participants' contributions 0 0
Benefits paid 0 0
---------- ----------
Fair value of plan assets at end of year 231,345 220,941
---------- ----------
Funded status (1,598,722) (1,577,628)
Unrecognized net actuarial loss (1,390,117) (1,445,572)
Unrecognized net obligation 0 0
Unrecognized transition obligation 1,979,423 2,120,800
Unrecognized prior service cost 90,177 101,283
---------- ----------
Prepaid (accrued) benefit cost (919,239) (801,117)
---------- ----------
</TABLE>
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
<TABLE>
<CAPTION>
PENSION BENEFITS-UNION PENSION BENEFITS-NON-UNION OTHER BENEFITS
---------------------- -------------------------- --------------
Weighted-average assumptions as of
December 31 1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Discount rate 8 8 8 8 8 8
Expected return on plan assets 8 8 9 9 8 8
Rate of compensation increase 3 3 3 3 0 0
</TABLE>
For measurement purposes, a 7 percent annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1999. The rate was assumed
to decrease gradually to 4 percent by fiscal 2009 and remain at that level
thereafter.
<TABLE>
<CAPTION>
PENSION BENEFITS-UNION PENSION BENEFITS-NON-UNION OTHER BENEFITS
---------------------- -------------------------- --------------
Components of net periodic benefit cost 1999 1998 1999 1998 1999 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Service cost 155,964 144,154 302,328 278,465 46,787 49,345
Interest cost 587,440 516,024 601,286 551,831 130,706 132,889
Expected return on plan assets (615,309) (549,937) (685,878) (580,282) (15,059) 0
Amortization of prior service cost 38,614 38,614 118,124 118,124 11,106 11,106
Unrecognized transition obligation 0 0 0 0 141,377 141,377
Recognized net actuarial loss (36,647) (69,631) (127,852) (90,222) (115,228) (88,898)
Amortization of net obligation 74,904 74,904 28,219 28,219 0 0
-------- -------- -------- -------- -------- --------
Net periodic benefit cost 204,966 154,128 236,227 306,135 199,689 245,819
-------- -------- -------- -------- -------- --------
</TABLE>
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A one-percent-point change in assumed health
care cost trend would have the following effects:
<TABLE>
<CAPTION>
1- 1-
PERCENTAGE- PERCENTAGE-
POINT POINT
INCREASE DECREASE
-------- --------
<S> <C> <C>
Effect on total of service and
interest cost components 15,070 12,737
Effect on postretirement benefit
obligation 127,272 109,978
</TABLE>
September 30, 1999, the Company has a regulatory asset amounting to $426,313
related to unrecovered SFAS 106 expenses. On October 16, 1996, the MDTE approved
a settlement agreement between the Company and intervenors for an increase in
rates effective December 1, 1996. As part of the settlement agreement, the
Company was allowed recovery of annual SFAS 106 expenses, as well as, amounts
recorded as regulatory assets prior to December 1, 1996.
6) COMMITMENTS AND CONTINGENCIES
The Company and certain of its predecessors owned or operated facilities for
the manufacture of gas from coal, a process used through the mid-1900's that
produced by-products that may be considered contaminated or hazardous under
current law, and some of which may still be present at such facilities. The
Company accrues environmental investigation and clean-up costs with respect to
former manufacturing sites and other environmental matters when it is probable
that a liability exists and the amount or range of amounts is reasonably
certain.
Under current MDTE regulatory practive, environmental remediation
and other costs related to former manufactured gas plant sites and recoverable
in rates over periods of seven years, without a return on the unrecovered
balance. The Company had no significant accrued environmental liabilities as of
September 30, 1999.
36
<PAGE>
7) UNAUDITED QUARTERLY FINANCIAL INFORMATION
The following is unaudited quarterly information for the fiscal years ended
September 30, 1999 and 1998. Quarterly variations between periods are caused
primarily by the seasonal nature of the gas distribution business.
<TABLE>
<CAPTION>
FISCAL 1999 FISCAL 1998
------------------------------------ -----------------------------------
QUARTER ENDED QUARTER ENDED
------------------------------------ -----------------------------------
(Thousands except per share amounts) DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30
------------------------------------ -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues............... $10,495 $20,260 $7,909 $3,417 $11,273 $18,513 $8,582 $4,303
Operating Income................. 509 1,935 339 (67) 791 1,791 429 (33)
Net Income....................... 341 1,744 182 (167) 548 1,512 249 (229)
Net Income per Share............. 0.16 0.79 0.08 (0.07) 0.27 0.69 0.11 (0.10)
</TABLE>
8) NEW ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board
(FASB) issued SFAS No. 133 (SFAS133), "Accounting for Derivative Instruments
and Hedging Activities". This statement establishes accounting and reporting
standards for derivative instruments and for hedging activities. In June
1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities-Deferral of the Effective Date of SFAS No. 133" to
amend the implementation date of SFAS No. 133. Adoption of SFAS No. 133 for
the Company is now required beginning with the first quarter of fiscal 2001.
The Company is aware of certain provisions which may impact the gas industry
but has not yet reviewed these provisions in detail against its existing
accounting practices and disclosures. At this time, the Company cannot
predict what impact, if any, the adoption of SFAS No. 133 will have on its
financial condition or results of operations.
9) MERGER WITH SOUTHERN UNION
On October 5, 1999 the Company and Southern Union Company
(Southern Union) announced that their boards of directors have unanimously
approved a definitive merger agreement. The agreement calls for Southern Union
to acquire the Company in a transaction valued at approximately $75 million,
including assumption of debt. Under the terms of agreement, the Company
shareholders will receive $23.50 per Fall River Gas share in Southern Union
common stock or cash. The Company's shareholders can elect to receive Southern
Union common stock, cash, or a combination of stock and cash, subject to
proration and an adjustment formula.
The transaction will require the approval of the holders of
two-thirds of the Company's outstanding shares, the Massachusetts Department of
Telecommunications and Energy, the Pennsylvania Public Utility Commission, as
well as regulators in Missouri, where Southern Union currently has operation.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Information required under this item regarding directors and
compliance with Section 16(A) of the Exchange Act is contained in the
Registrant's 1999 Proxy Statement, to be filed with the commission pursuant to
Regulation 14A, and is incorporated herein by reference, pursuant to Form 10-K
General Instruction G(3). See also Additional Item - Executive Officers of
Registrant in above.
37
<PAGE>
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS
Information required under this item is contained in the
Registrant's 1999 Proxy Statement, filed with the commission pursuant to
Regulation 14A, and is incorporated herein by reference, pursuant to Form 10-K
General Instruction G(3).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required under this item is contained in the
Registrant's 1999 Proxy Statement, filed with the commission pursuant to
Regulation 14A, and is incorporated herein by reference, pursuant to Form 10K
General Instruction G(3).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
38
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) The response to this portion if Item 14 is
submitted in the following pages.
(b) The Registrant was not required to file a Form 8-K during
fiscal year 1999.
The Registrant does note that it did file a report on Form
8-K on October 20, 1999 with respect the proposed merger of
the Registrant into Southern Union Company.
39
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
FALL RIVER GAS COMPANY
BY /S/ Peter H. Thanas
----------------------
Senior Vice President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
President, Chairman of
the Board and Director
/s/ Bradford J. Faxon (Chief Executive Officer) 12/16/99
- ----------------------------
Vice Chairman of the
/s/ Raymond H. Faxon Board and Director 12/16/99
- ----------------------------
Senior Vice President
and Treasurer
(Chief Financial and
/s/ Peter H. Thanas Accounting Officer) 12/16/99
- ----------------------------
/s/ Cindy L.J. Audette Director 12/16/99
- ----------------------------
/s/ Thomas K. Barry Director 12/16/99
- ----------------------------
/s/ Thomas H. Bilodeau Director 12/16/99
- ----------------------------
/s/ Ronald J. Ferris Director 12/16/99
- ----------------------------
/s/ Jack R. McCormick Director 12/16/99
- ----------------------------
/s/ Gilbert C. Oliveira Jr. Director 12/16/99
- ----------------------------
/s/ Donald R. Patnode Director 12/16/99
- ----------------------------
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION OR
NUMBERS DESCRIPTION REFERENCE TO
- ------- ----------- ------------------
<S> <C> <C>
(3) Articles of Incorporation and Exhibit 3 to Report
By-Laws on Form 10-K for
calender year ended
December 31, 1982
(3a) A copy of an Amendment to the Exhibit 3a to Report
Articles of Incorporation to on Form 10-K for
increase the number of Common calendar year ended
Shares from 366,889 to 1,100,667 December 31, 1987
and to change the Par Value from
$5.00 to $1 2/3
(3b) A copy of an Amendment to the By-Laws Exhibit 3b to Report
on Form 10-K for
calendar year ended
December 31, 1990
(3c) A copy of an Amendment to the By-Laws Exhibit 3c to Report
on Form 10-K for
calendar year ended
December 31, 1991
(3d) A copy of an Amendment to the Articles To report on Form 10-K
of Incorporation, dated December 31, 1993 for calendar year ended
to increase the number of Common Shares September 30, 1997
from 1,100,667 to 2,201,334 and to change
the Par Value from $1 2/3 to $0.83 1/3
(3e) A copy of an Amendment to the Articles of Exhibit3e to Report
Incorporation, dated February 19, 1998 to on Form 10-K for
increase the number of Common Shares fiscal year ended
from 2,201,334 to 2,951,334 September 30, 1998
(4) Instruments defining the rights Exhibit 4 to Report
of security holders, including on Form 10-K for
indentures calendar year ended
December 31, 1982
(4a) Thirteenth Supplemental Indenture Exhibit 4a to Report
between the Registrant and on form 10-K for
State Street Bank and Trust Co. fiscal year ended
December 31, 1997
(10a) Purchase of F-1 from Algonquin Exhibit 10a to Report
Gas Transmission Company on Form 10-K for
calendar year ended
December 31, 1982
(10b) Purchase of SNG from Algonquin Exhibit 10b to Report
Gas Transmission Company on Form 10-K for
calendar year ended
December 31, 1982
(10c) A copy of the contract between Exhibit 10c to Report
the Registrant and Utility on Form 10-K for
Workers Union of America, AFL-CIO calendar year ended
and Local No. 431, dated May 1, 1984 December 31, 1984
(10d) A copy of an Employment and Con- Exhibit 10d to Report
sulting Agreement dated as of on Form 10-K for
September 18, 1984, between the calendar year ended
Registrant and Jack R. McCormick December 31, 1984
(10e) A copy of an Employment and con- Exhibit 10e to Report
sulting Agreement dated as of on Form 10-K for
September 18, 1984, between the calendar year ended
Registrant and Bradford J. Faxon December 31, 1984
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION OR
NUMBERS DESCRIPTION REFERENCE TO
- ------- ----------- ------------------
<S> <C> <C>
(10f) A copy of an Employment and Con- Exhibit 10f to Report
sulting Agreement dated as of on Form 10-K for
September 18, 1984 calendar year ended
Registrant and Norman J. Meyer December 31, 1984
(10g) A copy of the Restatement of Con- Exhibit 10g to Report
sulting Agreement dated as of on Form 10-K for
December 13, 1983, between the calendar year ended
Registrant and Thomas H. Bilodeau December 31, 1984
(10h) A copy of an Agreement, Combined Sup- Exhibit 10h to Report
plementary Agreement, and Amendment on Form 10-K for
to Agreement for Employment and calendar year ended
Consulting Services between the December 31, 1984
Registrant and Raymond H. Faxon
(10i) A copy of an Amendment to Employment Exhibit 10i to Report
and Consulting Agreement dated on Form 10-K for
January 1, 1987 between the Regi- calendar year ended
strant and Bradford J. Faxon December 31, 1986
(10j) A copy of an Amendment to Employment Exhibit 10j to Report
and Consulting Agreement dated on Form 10-K for
January 1, 1987 between the Regi- calendar year ended
strant and Norman J. Meyer December 31, 1986
(10k) A copy of an Employment and Consulting Exhibit 10k to Report
Agreement dated as of August 1, 1986 on Form 10-K for
between the Registrant and Peter H. calendar year ended
Thanas December 31, 1986
(10L) A copy of an Amendment to Employment Exhibit 10L to Report
and Consulting Agreement dated on Form 10-K for
January 1, 1987 between the Regi- calendar year ended
strant and Peter H. Thanas December 31, 1986
(10m) A copy of the Contract between the Exhibit 10m to Report
Registrant and Utility Workers on Form 10-K for
Union of America, AFL-CIO and calendar year ended
Local, 431, dated May 31, 1987 December 31, 1987
(10n) A copy of Precedent Agreement for Exhibit 10n to Report
Firm Sales Service under Rate on Form 10-K for
Schedule F-4 calendar year ended
December 31, 1987
(10o) Settlement Agreement between DOMAC Exhibit 10o to Report
and Registrant to terminate and on Form 10-K for
abandon GS-1 and TS-1 Service calendar year ended
Agreements December 31, 1988
(10p) A copy of Service Agreement for Firm Exhibit 10p to Report
Liquid Service between Distrigas on Form 10-K for
and Registrant calendar year ended
December 31, 1988
(10q) A copy of Service Agreement for Exhibit 10q to Report
Interruptible Vapor Service be- on Form 10-K for
tween Distrigas and Registrant calendar year ended
December 31, 1988
(10r) A copy of Service Agreement for Firm Exhibit 10r to Report
Vapor Service between Distrigas on Form 10-K for
and Registrant calendar year ended
December 31, 1988
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION OR
NUMBERS DESCRIPTION REFERENCE TO
`------- ----------- ------------------
<S> <C> <C>
(10s) A copy of a Deferred Compensation Exhibit 10s to Report
Agreement with Bradford J. Faxon on Form 10-K for
calendar year ended
December 31, 1989
(10t) A copy of a Deferred Compensation Exhibit 10t to Report
Agreement with Peter H. Thanas on Form 10-K for
calendar year ended
December 31, 1989
(10u) A copy of the Contract between the Exhibit 10u to Report
Registrant and Utility Workers on Form 10-K for
Union of America, AFL-CIO and calendar year ended
Local 431, dated May 1, 1990 December 31, 1990
(10v) A copy of an Employment Contract Exhibit 10v to Report
with Bradford J. Faxon on Form 10-K for
calendar year ended
December 31, 1991
(10w) A copy of an Employment Contract Exhibit 10w to Report
with Peter H. Thanas on Form 10-K for
calendar year ended
December 31, 1991
(10x) A copy of the Contract between the Exhibit 10x to Report
Registrant and Utility Workers on Form 10-K for
Union of America, AFL-CIO and fiscal year ended Local
431, dated May 1, 1995 September 30, 1995
(10y) A copy of Gas Sales Agreement Exhibit 10y to Report
between CNG Gas Service Corporation on Form 10-K for
and Fall River Gas Company fiscal year ended
September 30, 1995
(10z) A copy of the Contract between the Exhibit 10z to Report
Registrant and Utility Workers on Form 10-K for fiscal
Union of America, AFL-CIO and September 30, 1998
Local 431, dated May 1, 1998
(10aa) A copy of Employment Agreement Attached hereto as
Amendment with Bradford J. Faxon Exhibit 10(aa)
(10bb) A copy of Employment Agreement Attached hereto as
Amendment with Peter H. Thanas Exhibit 10(bb)
(10cc) A copy of Employment Agreement Attached hereto as
Amendment with John F. Fanning Exhibit 10(cc)
(10dd) A copy of Severance Agreement Attached hereto as
Bradford J. Faxon Exhibit 10(dd)
(10ee) A copy of Severance Agreement Attached hereto as
with Peter H. Thanas Exhibit 10(ee)
(10ff) A copy of severance Agreement Attached hereto as
John F. Fanning Exhibit 10(ff)
(10gg) A copy of an Amendment to Attached hereto as
Employment and Severance Agreement Exhibit 10(gg)
with Bradford J. Faxon
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
PAGE NUMBER OR
EXHIBIT INCORPORATION OR
NUMBERS DESCRIPTION REFERENCE TO
- ------- ----------- ------------------
<S> <C> <C>
(10hh) A copy of an Amendment to Attached hereto as
Employment and Severance Agreement Exhibit 10(hh)
with Peter H. Thanas
(10ii) A copy of an Amendment to Attached hereto as
Employment and Severance Agreement Exhibit 10(ii)
with John F. Fanning
(22) The Registrant has one Subsidiary,
Fall River Gas Appliance Company, Inc.,
that is incorporated in Massachusetts,
and does business under said name
(23) Consent of Independent Public Accountants Attached
To the Stockholders and Board of Directors
of Fall River Gas Company
</TABLE>
44
<PAGE>
FALL RIVER GAS COMPANY AND SUBSIDIARY
INDEX TO FINANCIAL STATEMENTS
(Submitted in Answer to Item 14 of Form 10-K,
Securities and Exchange Commission)
<TABLE>
<CAPTION>
REFERENCE
---------
<S> <C>
Report of independent public accountants Page 27
Fall River Gas Company and Subsidiary
Consolidated balance sheets - As of
September 30, 1999 and September 30, 1998 Page 29 & 30
Consolidated statements for the years ended
September 30, 1999, 1998, and 1997
Income Page 28
Retained earnings Page 28
Cash flows Page 31
Notes to consolidated financial statements Page 32-37
</TABLE>
SCHEDULES
<TABLE>
<S> <C>
VIII - Valuation and Qualifying Accounts and
Reserves for the years ended September 30,
1999, 1998, and 1997 Attached
</TABLE>
Schedules, other than the one listed to above, are either not required or not
applicable or the required information is shown in the financial statements or
notes thereto.
45
<PAGE>
FALL RIVER GAS COMPANY AND SUBSIDIARY SCHEDULE VII
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR YEAR ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
--------- ----------
BALANCE AT CHARGES TO CHARGES CHARGES FOR BALANCE AT
BEGINNING COSTS AND TO OTHER WHICH RESERVES END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS WERE CREATED OTHER PERIOD
- ----------- --------- -------- -------- ------------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts $957,148 $481,500 - $397,420 ($23,268) $1,064,496
--------- --------- --------- --------- --------- ----------
</TABLE>
FOR YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
--------- ----------
BALANCE AT CHARGES TO CHARGES CHARGES FOR BALANCE AT
BEGINNING COSTS AND TO OTHER WHICH RESERVES END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS WERE CREATED OTHER PERIOD
- ----------- --------- -------- -------- ------------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts $907,357 $473,500 - $472,625 ($48,916) $957,148
--------- --------- --------- --------- --------- ---------
</TABLE>
FOR YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
--------- ----------
BALANCE AT CHARGES TO CHARGES CHARGES FOR BALANCE AT
BEGINNING COSTS AND TO OTHER WHICH RESERVES END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS WERE CREATED OTHER PERIOD
- ----------- --------- -------- -------- ------------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts $670,038 $761,500 - $563,691 ($39,510) $907,357
--------- --------- -------- --------- ---------- ---------
</TABLE>
46
<PAGE>
AMENDMENT NO.1
TO
EMPLOYMENT AGREEMENT
This Amendment dated as of January 1, 1999 to that certain
Employment Agreement entered into as of September 30, 1991 by and between Fall
River Gas Company, a Massachusetts corporation with an office at 155 North Main
Street, Fall River, Massachusetts 02722 (hereinafter called the "Company") and
Bradford J. Faxon of Westport, Massachusetts (hereinafter called the
"Executive").
RECITALS
Whereas, the Executive and the Company are parties to an
employment agreement entered into as of September 30, 1991 (the "Employment
Agreement"); and
Whereas, the Company desires to assure the continued service of
Executive, and Executive is desirous of committing himself to continued service
to the Company; and
Whereas, the Executive and the Company desire to amend certain
provisions of the Employment Agreement;
AGREEMENTS
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is acknowledged by the Company and the Executive, the
Company and the Executive hereby agree as follows:
1. Section 7 shall be amended by the addition of a new
Section 7(f) which shall read as follows:
"(f) CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. Company
shall pay to the Executive, on a monthly basis, an amount (the "Medicare Tax
Reimbursement") equal to the hospital insurance tax (the "Medicare Tax") imposed
upon the Executive pursuant to Section 3101(b) of the Internal Revenue Code of
1986, as amended (the "Code") with respect to all wages received by the
Executive from the Company. In addition, the Company shall pay the Executive an
additional payment (the "Gross-Up Payment") in an amount such that after payment
by the Executive of all taxes imposed upon the Medicare Tax Reimbursements and
the Gross-Up Payment, the Executive retains from the Medicare Tax Reimbursements
and the Gross-Up Payment an amount equal to the Medicare Tax imposed upon the
Executive for the tax year."
2. Section 7 shall be amended by the addition of a new
Section 7(g), which shall read as follows:
"(g) EXCESS PENSION BENEFIT.
(i) COMMENCEMENT OF EXCESS PENSION BENEFIT AT
RETIREMENT. The Executive shall be entitled to receive an excess pension
benefit (as determined pursuant to Section 7(g)(iii) hereof) (the "Excess
Pension Benefit"), commencing as of the date the Executive terminates employment
and first becomes eligible to receive benefits under the Pension Plan for
Salaried and Non-Union Hourly Employees of Fall River Gas Company
("Pension Plan") (the "Commencement Date"), even if such Executive elects not to
commence receiving such Pension Plan benefits at that time.
(ii) FORM OF PAYMENT. The Executive will receive
his Excess Pension Benefit hereunder in the same form as the Executive receives
or has elected to receive, as the case may be, his retirement benefit under the
Pension Plan. The company shall have the right to deduct from all benefits
accrued and/or from payments made under this Section 7(g) any taxes required by
law to be paid or withheld.
<PAGE>
(iii) AMOUNT OF BENEFIT. The Excess Pension Benefit
shall be an amount equal to the following:
(A) the Executive's annual retirement benefit
calculated under Section V of the Pension Plan,
and payable in accordance with Section VI of
the Pension Plan, notwithstanding any
restrictions imposed by Sections XXI and XXII
of the Pension Plan and notwithstanding the
limitations provided in Section 415(b), 415(e),
and/or 401(a)(17) of the code, less
(B) the actual amount of annual retirement
benefit calculated under Section V of the
Pension Plan, and payable to the Executive in
accordance with Section VI of the Pension Plan
after application of any restrictions imposed
by Sections XXI and XXII of the Pension Plan
and the limitations provided in Sections
415(b), 415(e), and/or 401(a)(17) of the Code.
(iv) ACCRUED EXCESS PENSION BENEFIT. The
Executive's accrued Excess Pension Benefit (the "Accrued Excess Pension
Benefit") on any date prior to retirement shall equal the amount determined
under Section 7(g)(i) hereof based upon his "Compensation" (as defined in
Section I of the Pension Plan) and "Year of Service" (as defined in Section I of
the Pension Plan as of such date.
(v) EXCESS PENSION PRE-RETIREMENT DEATH BENEFIT. If
the Executive dies prior to the Commencement Date, any Accrued Excess Pension
Benefit shall be paid to the Executive's surviving spouse or, if there is no
surviving spouse, to the beneficiary, if any, designated pursuant to the terms
of the Pension Plan by the Executive to receive the Executive's retirement
benefits under the Pension Plan (the "Designated Beneficiary") (and if no such
beneficiary is designated, to the Executive's estate). Such benefits shall be
paid at the same time and in the same form as the death benefit provided under
the Pension Plan.
(vi) DEATH ON OR AFTER RETIREMENT. If the Executive
dies on or after the commencement Date, the Executive's surviving spouse or, if
there is no surviving spouse, the Designated Beneficiary (and if there is no
Designated Beneficiary, the Executive's estate) shall receive the Excess Pension
Benefit that the Executive would have received. Such benefit shall be paid at
the same time and in the same form as the payments the Executive would have
received.
(vii) SUSPENSION OF EXCESS PENSION BENEFIT. The
payment of an Excess Pension Benefit otherwise due on behalf of the Executive
shall be suspended for any calendar month in which his Pension Benefit under the
Pension Plan is suspended, provided that payment of an Excess Pension Benefit
which has been so suspended shall commence or resume when the Pension Benefits
under the Pension Plan resume. Notice of suspension of payment of any Excess
Pension Benefit shall be given to the Executive and such suspension of payment
shall be governed by procedures established by the administrator of the Pension
Plan.
3. Section 7 shall be amended by the addition of a new Section
7(h), which shall read as follows:
"(h) CONTINUATION OF WELFARE BENEFITS. For a period
commencing with the month in which termination of
employment for other than Cause (as defined in the
Agreement) shall have occurred, and ending the later of the
date of the Executive's or the Executive's spouse's death,
the Executive, his spouse and any dependents shall
continue to be entitled to receive all health and dental
care benefits under the company's welfare benefit plans
(within the meaning of Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended), at no
cost to the Executive and at the same level that the
Executive, his spouse and his dependents were receiving or
were entitled to receive at the time of termination of
employment (if and to the extent that such benefits shall
not
2
<PAGE>
be payable or provided under any Company plan, the
Company shall pay or provide equivalent benefits on an
individual basis)."
4. Section 10 shall be deleted in its entirety, and in its
place shall be added the following:
"10. CHANGE IN CONTROL. If, and only if, the
Executive's employment is terminated following a Change in
Control of the Company (as that term is defined in the
Severance Agreement between the Executive and the Company,
dated the 1st day of January, 1999 (the "Severance
Agreement")), the provisions in this Section shall be
superceded by the terms of the Severance Agreement and any
other applicable Company plan, policy, arrangement or
agreement (other than this Agreement)."
5. Section 12 shall be deleted in its entirety.
6. A new Section 12 shall be added, which shall read as
follows:
"12. SOURCE OF PAYMENTS. All payments provided for
in this Agreement shall be paid in cash from the general
funds of the Company; provided, however, such payments shall
be reduced by the amount of any payments made to the
Executive or the Executive's dependents, beneficiaries, or
estate from any trust or special or separate fund
established by the Company to assure such payments. The
Company shall not be required to establish a special or
separate fund or other segregation of assets to assure such
payments, and, if the company shall make any investments to
aid it in meeting its obligations hereunder, the Executive
shall have no right, title, or interest whatsoever in or to
any such investments except as may otherwise be expressly
provided in a separate written instrument relating to such
investments. Nothing contained in this Agreement, and no
action taken pursuant to its provisions, shall create or be
construed to create a trust of any kind or a fiduciary
relationship between the Company and the Executive or any
other person. To the extent that any person acquires a right
to receive payments from the Company pursuant to this
Agreement, such right shall be no greater than the right of
an unsecured creditor of the Company."
All the provisions of the Agreement not specifically mentioned in
this First Amendment shall be considered modified to the extent necessary to be
consistent with the changes made in this First Amendment.
Date: ______________________________ The Company
By __________________________
Its
The Executive
_____________________________
3
<PAGE>
Exhibit 10(bb)
AMENDMENT NO.1
TO
EMPLOYMENT AGREEMENT
This Amendment dated as of January 1, 1999 to that certain
Employment Agreement entered into as of September 30, 1991 by and between Fall
River Gas Company, a Massachusetts corporation with an office at 155 North Main
Street, Fall River, Massachusetts 02722 (hereinafter called the "Company") and
Peter H. Thanas of Cumberland, Rhode Island (hereinafter called the
"Executive").
RECITALS
Whereas, the Executive and the Company are parties to an
employment agreement entered into as of September 30, 1991 (the "Employment
Agreement"); and
Whereas, the Company desires to assure the continued service of
Executive, and Executive is desirous of committing himself to continued service
to the Company; and
Whereas, the Executive and the Company desire to amend certain
provisions of the Employment Agreement;
AGREEMENTS
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is acknowledged by the Company and the Executive, the
Company and the Executive hereby agree as follows:
1. Section 7 shall be amended by the addition of a new Section
7(d) which shall read as follows:
"(d) CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. The Company
shall pay to the Executive, on a monthly basis, an amount (the "Medicare Tax
Reimbursement") equal to the hospital insurance tax (the "Medicare Tax") imposed
upon the Executive pursuant to Section 3101(b) of the Internal Revenue Code of
1986, as amended (the "Code") with respect to all wages received by the
Executive from the Company. In addition, the Company shall pay the Executive an
additional payment (the "Gross-Up Payment") in an amount such that after payment
by the Executive of all taxes imposed upon the Medicare Tax Reimbursements and
the Gross-Up Payment, the Executive retains from the Medicare Tax Reimbursements
and the Gross-Up Payment an amount equal to the Medicare Tax imposed upon the
Executive for the tax year."
2. Section 7 shall be amended by the addition of a new Section
7(e), which shall read as follows:
"(e) EXCESS PENSION BENEFIT.
(i) COMMENCEMENT OF EXCESS PENSION BENEFIT AT
RETIREMENT. The Executive shall be entitled to receive an excess pension benefit
(as determined pursuant to Section 7(e)(iii) hereof) (the "Excess Pension
Benefit"), commencing as of the date the Executive terminates employment and
first becomes eligible to receive benefits under the Pension Plan for Salaried
and Non-Union Hourly Employees of Fall River Gas Company ("Pension Plan") (the
"Commencement Date"), even if such Executive elects not to commence receiving
such Pension Plan benefits at that time.
(ii) FORM OF PAYMENT. The Executive will receive his
Excess Pension Benefit hereunder in the same form as the Executive receives or
has elected to receive, as the case may be, his retirement benefit under the
Pension Plan. The company shall have the right to deduct from all benefits
accrued and/or from payments made under this Section 7(e) any taxes required by
law to be paid or withheld.
4
<PAGE>
(iii) AMOUNT OF BENEFIT. The Excess Pension Benefit
shall be an amount equal to the following:
(A) the Executive's annual retirement benefit
calculated under Section V of the Pension Plan,
and payable in accordance with Section VI of the
Pension Plan, notwithstanding any restrictions
imposed by Sections XXI and XXII of the Pension
Plan and notwithstanding the limitations provided
in Section 415(b), 415(e), and/or 401(a)(17) of
the code, less
(B) the actual amount of annual retirement benefit
calculated under Section V of the Pension Plan,
and payable to the Executive in accordance with
Section VI of the Pension Plan after application
of any restrictions imposed by Sections XXI and
XXII of the Pension Plan and the limitations
provided in Sections 415(b), 415(e), and/or
401(a)(17) of the Code.
(iv) ACCRUED EXCESS PENSION BENEFIT. The Executive's
accrued Excess Pension Benefit (the "Accrued Excess Pension Benefit") on any
date prior to retirement shall equal the amount determined under Section 7(e)(i)
hereof based upon his "Compensation" (as defined in Section I of the Pension
Plan) and "Year of Service" (as defined in Section I of the Pension Plan as of
such date.
(v) EXCESS PENSION PRE-RETIREMENT DEATH BENEFIT. If the
Executive dies prior to the Commencement Date, any Accrued Excess Pension
Benefit shall be paid to the Executive's surviving spouse or, if there is no
surviving spouse, to the beneficiary, if any, designated pursuant to the terms
of the Pension Plan by the Executive to receive the Executive's retirement
benefits under the Pension Plan (the "Designated Beneficiary") (and if no such
beneficiary is designated, to the Executive's estate). Such benefits shall be
paid at the same time and in the same form as the death benefit provided under
the Pension Plan.
(vi) DEATH ON OR AFTER RETIREMENT. If the Executive
dies on or after the commencement Date, the Executive's surviving spouse or, if
there is no surviving spouse, the Designated Beneficiary (and if there is no
Designated Beneficiary, the Executive's estate) shall receive the Excess Pension
Benefit that the Executive would have received. Such benefit shall be paid at
the same time and in the same form as the payments the Executive would have
received.
(vii) SUSPENSION OF EXCESS PENSION BENEFIT. The payment
of an Excess Pension Benefit otherwise due on behalf of the Executive shall be
suspended for any calendar month in which his Pension Benefit under the Pension
Plan is suspended, provided that payment of an Excess Pension Benefit which has
been so suspended shall commence or resume when the Pension Benefits under the
Pension Plan resume. Notice of suspension of payment of any Excess Pension
Benefit shall be given to the Executive and such suspension of payment shall be
governed by procedures established by the administrator of the Pension Plan.
3. Section 7 shall be amended by the addition of a new Section
7(f), which shall read as follows:
"(f) CONTINUATION OF WELFARE BENEFITS. For a period
commencing with the month in which termination of employment for other than
Cause (as defined in the Agreement) shall have occurred, and ending the later of
the date of the Executive's or the Executive's spouse's death, the Executive,
his spouse and any dependents shall continue to be entitled to receive all
health and dental care benefits under the company's welfare benefit plans
(within the meaning of Section 3(1) of the Employee Retirement Income Security
Act of 1974, as amended), at no cost to the Executive and at the same level that
the Executive, his spouse and his dependents were receiving or were entitled to
receive at the time of termination of employment (if and to the extent that such
benefits shall not
5
<PAGE>
be payable or provided under any Company plan, the Company shall pay or provide
equivalent benefits on an individual basis)."
4. Section 10 shall be deleted in its entirety, and in its place
shall be added the following:
"10. CHANGE IN CONTROL. If, and only if, the
Executive's employment is terminated following a Change in Control of the
Company (as that term is defined in the Severance Agreement between the
Executive and the Company, dated the 1st day of January, 1999 (the "Severance
Agreement")), the provisions in this Section shall be superceded by the terms of
the Severance Agreement and any other applicable Company plan, policy,
arrangement or agreement (other than this Agreement)."
5. Section 12 shall be deleted in its entirety.
6. A new Section 12 shall be added, which shall read as follows:
"12. SOURCE OF PAYMENTS. All payments provided for in
this Agreement shall be paid in cash from the general funds of the Company;
provided, however, such payments shall be reduced by the amount of any payments
made to the Executive or the Executive's dependents, beneficiaries, or estate
from any trust or special or separate fund established by the Company to assure
such payments. The Company shall not be required to establish a special or
separate fund or other segregation of assets to assure such payments, and, if
the company shall make any investments to aid it in meeting its obligations
hereunder, the Executive shall have no right, title, or interest whatsoever in
or to any such investments except as may otherwise be expressly provided in a
separate written instrument relating to such investments. Nothing contained in
this Agreement, and no action taken pursuant to its provisions, shall create or
be construed to create a trust of any kind or a fiduciary relationship between
the Company and the Executive or any other person. To the extent that any person
acquires a right to receive payments from the Company pursuant to this
Agreement, such right shall be no greater than the right of an unsecured
creditor of the Company."
All the provisions of the Agreement not specifically mentioned in
this First Amendment shall be considered modified to the extent necessary to be
consistent with the changes made in this First Amendment.
Date: ______________________ The Company
By __________________________
Its
The Executive
_____________________________
6
<PAGE>
Exhibit 10(cc)
AMENDMENT NO.1
TO
EMPLOYMENT AGREEMENT
This Amendment dated as of January 1, 1999 to that certain
Employment Agreement entered into as of November 15, 1998 by and between Fall
River Gas Company, a Massachusetts corporation with an office at 155 North Main
Street, Fall River, Massachusetts 02722 (hereinafter called the "Company") and
John F. Fanning of Swansea, Massachusetts (hereinafter called the "Executive").
RECITALS
Whereas, the Executive and the Company are parties to an
employment agreement entered into as of November 15, 1998 (the "Employment
Agreement"); and
Whereas, the Company desires to assure the continued service of
Executive, and Executive is desirous of committing himself to continued service
to the Company; and
Whereas, the Executive and the Company desire to amend certain
provisions of the Employment Agreement;
AGREEMENTS
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is acknowledged by the Company and the Executive, the
Company and the Executive hereby agree as follows:
1. Section 7 shall be amended by the addition of a new Section
7(c), which shall read as follows:
"(c) EXCESS PENSION BENEFIT.
(i) COMMENCEMENT OF EXCESS PENSION BENEFIT AT
RETIREMENT. The Executive shall be entitled to receive an excess pension benefit
(as determined pursuant to Section 7(c)(iii) hereof) (the "Excess Pension
Benefit"), commencing as of the date the Executive terminates employment and
first becomes eligible to receive benefits under the Pension Plan for Salaried
and Non-Union Hourly Employees of Fall River Gas Company ("Pension Plan") (the
"Commencement Date"), even if such Executive elects not to commence receiving
such Pension Plan benefits at that time.
(ii) FORM OF PAYMENT. The Executive will receive his
Excess Pension Benefit hereunder in the same form as the Executive receives or
has elected to receive, as the case may be, his retirement benefit under the
Pension Plan. The company shall have the right to deduct from all benefits
accrued and/or from payments made under this Section 7(c) any taxes required by
law to be paid or withheld.
(iii) AMOUNT OF BENEFIT. The Excess Pension Benefit
shall be an amount equal to the following:
(A) the Executive's annual retirement benefit
calculated under Section V of the Pension
Plan, and payable in accordance with Section
VI of the Pension Plan, notwithstanding any
restrictions imposed by Sections XXI and XXII
of the Pension Plan and notwithstanding the
limitations provided in Section 415(b),
415(e), and/or 401(a)(17) of the code, less
7
<PAGE>
(B) the actual amount of annual retirement
benefit calculated under Section V of the
Pension Plan, and payable to the Executive
in accordance with Section VI of the Pension
Plan after application of any restrictions
imposed by Sections XXI and XXII of the
Pension Plan and the limitations provided in
Sections 415(b), 415(e), and/or 401(a)(17)
of the Code.
(iv) ACCRUED EXCESS PENSION BENEFIT. The Executive's
accrued Excess Pension Benefit (the "Accrued Excess Pension Benefit") on any
date prior to retirement shall equal the amount determined under Section 7(c)(i)
hereof based upon his "Compensation" (as defined in Section I of the Pension
Plan) and "Year of Service" (as defined in Section I of the Pension Plan as of
such date.
(v) EXCESS PENSION PRE-RETIREMENT DEATH BENEFIT. If
the Executive dies prior to the Commencement Date, any Accrued Excess Pension
Benefit shall be paid to the Executive's surviving spouse or, if there is no
surviving spouse, to the beneficiary, if any, designated pursuant to the terms
of the Pension Plan by the Executive to receive the Executive's retirement
benefits under the Pension Plan (the "Designated Beneficiary") (and if no such
beneficiary is designated, to the Executive's estate). Such benefits shall be
paid at the same time and in the same form as the death benefit provided under
the Pension Plan.
(vi) DEATH ON OR AFTER RETIREMENT. If the Executive
dies on or after the commencement Date, the Executive's surviving spouse or, if
there is no surviving spouse, the Designated Beneficiary (and if there is no
Designated Beneficiary, the Executive's estate) shall receive the Excess Pension
Benefit that the Executive would have received. Such benefit shall be paid at
the same time and in the same form as the payments the Executive would have
received.
(vii) SUSPENSION OF EXCESS PENSION BENEFIT. The
payment of an Excess Pension Benefit otherwise due on behalf of the Executive
shall be suspended for any calendar month in which his Pension Benefit under the
Pension Plan is suspended, provided that payment of an Excess Pension Benefit
which has been so suspended shall commence or resume when the Pension Benefits
under the Pension Plan resume. Notice of suspension of payment of any Excess
Pension Benefit shall be given to the Executive and such suspension of payment
shall be governed by procedures established by the administrator of the Pension
Plan.
2. Section 7 shall be amended by the addition of a new Section
7(d), which shall read as follows:
"(d) CONTINUATION OF WELFARE BENEFITS. For a period
commencing with the month in which termination of employment
for other than Cause (as defined in the Agreement) shall have
occurred, and ending the later of the date of the Executive's
or the Executive's spouse's death, the Executive, his spouse
and any dependents shall continue to be entitled to receive
all health and dental care benefits under the company's
welfare benefit plans (within the meaning of Section 3(1) of
the Employee Retirement Income Security Act of 1974, as
amended), at no cost to the Executive and at the same level
that the Executive, his spouse and his dependents were
receiving or were entitled to receive at the time of
termination of employment (if and to the extent that such
benefits shall not be payable or provided under any Company
plan, the Company shall pay or provide equivalent benefits on
an individual basis)."
3. Section 10 shall be deleted in its entirety, and in its place
shall be added the following:
"10. CHANGE IN CONTROL. If, and only if, the
Executive's employment is terminated following a Change in
Control of the Company (as that term is defined in the
Severance Agreement between the Executive and the Company,
dated the 1st day of January, 1999 (the
8
<PAGE>
"Severance Agreement")), the provisions in this Section shall
be superceded by the terms of the Severance Agreement and any
other applicable Company plan, policy, arrangement or
agreement (other than this Agreement)."
4. Section 12 shall be deleted in its entirety.
5. A new Section 12 shall be added, which shall read as follows:
"12. SOURCE OF PAYMENTS. All payments provided for in
this Agreement shall be paid in cash from the general funds of
the Company; provided, however, such payments shall be reduced
by the amount of any payments made to the Executive or the
Executive's dependents, beneficiaries, or estate from any
trust or special or separate fund established by the Company
to assure such payments. The Company shall not be required to
establish a special or separate fund or other segregation of
assets to assure such payments, and, if the company shall make
any investments to aid it in meeting its obligations
hereunder, the Executive shall have no right, title, or
interest whatsoever in or to any such investments except as
may otherwise be expressly provided in a separate written
instrument relating to such investments. Nothing contained in
this Agreement, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of
any kind or a fiduciary relationship between the Company and
the Executive or any other person. To the extent that any
person acquires a right to receive payments from the Company
pursuant to this Agreement, such right shall be no greater
than the right of an unsecured creditor of the Company."
All the provisions of the Agreement not specifically mentioned in
this First Amendment shall be considered modified to the extent necessary to be
consistent with the changes made in this First Amendment.
Date: ______________________________ The Company
By __________________________
Its
The Executive
___________________________
9
<PAGE>
Exhibit 10(dd)
SEVERANCE AGREEMENT
BETWEEN
FALL RIVER GAS CONPANY
AND
BRADFORD J. FAXON
THIS AGREEMENT, effective this first day of January, 1999, by and between Fall
River Gas Company, a Massachusetts Corporation (the "Company") and Bradford J.
Faxon (the "Executive").
WITNESSETH:
WHEREAS, the Executive is a valuable employee of Fall River Gas
Company, an integral part of its management, and a key participant in the
decision-making process relative to short-term and long-term planning and policy
for the Company; and
WHEREAS, the Company wishes to encourage the Executive to continue the
Executive's career and services with the Company for the period during and after
an actual or threatened Change in Control; and
WHEREAS, the Board of Directors of the Company, at a meeting on
February 10, 1998, determined that it would be in the best interests of the
Company and its shareholders to better assure continuity in the management of
the Company's administration and operations in the event of a Change in Control
by entering into this Severance Agreement (the "Agreement") with the Executive;
NOW THEREFORE, it is hereby agreed by and between the parties hereto as
follows:
1. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Cause" shall have the same meaning as is provided in the
Executives Employment Agreement.
(c) Change in Control" shall mean:
(i) any person (as such term is used in Section 13(d) of the
Securities Exchange Act of 1934 (the "Act"), excluding a
corporation at least 90% of the ownership of which after
acquiring its interest is owned directly by the holder
of common shares of the Company immediately prior to
such acquisition ("Person"), is the beneficial owner,
directly or indirectly, of twenty (20) percent or more
of the outstanding common shares of the Company (other
than the Savings Plan) requiring the filing of a report
with the Securities and Exchange Commission under
Section 13(d) of the 1934 Act;
(ii) a purchase by any Person of shares pursuant to a tender
or exchange offer to acquire any common shares of the
Company (or securities convertible into common shares)
for cash, securities, or any other consideration
provided that, after consummation of the offer, such
Person is the beneficial owner (as defined in Rule l3d-3
under the 1934 Act), directly or indirectly, of twenty
(20) percent or more of the outstanding common shares of
the Company (calculated as provided in paragraph (d) of
Rule 13d-3 under the 1934 Act in the case of rights to
acquire common shares);
(iii) approval by the shareholders of the Company of (a) any
consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation
or
10
<PAGE>
pursuant to which common shares of the Company would
be converted into cash, securities, or other
property, other than a consolidation or merger of the
Company in which holders of its common shares
immediately prior to the consolidation or merger own
at least 90% of the common shares of the surviving
corporation immediately after the consolidation or
merger, or (b) any consolidation or merger in which
the Company is the continuing or surviving
corporation but in which the common shareholders of
the Company immediately prior to the consolidation or
merger do not hold at least 90% of the outstanding
common shares of the continuing or surviving
corporation (except where such holders of common
stock hold at least 90% of the common shares of the
corporation which owns all of the common shares of
the Company), or (c) any sale, lease, exchange, or
other transfer (in one transaction or a series of
related transactions) of all or substantially all the
assets of the Company, or (d) any merger or
consolidation of the Company where, after the merger
or consolidation, one Person owns 100% of the common
shares of the Company (except where the common
holders of the Company's common shares immediately
prior to such merger or consolidation own at least
90% of the outstanding common shares of such Person
immediately after such merger or consolidation) (upon
the Board's determination that the transaction
subject to shareholder approval hereunder will not be
consummated, a Change in Control shall not be deemed
to have occurred from such date forward and this
Agreement shall continue in effect as if no Change in
Control had occurred, except to the extent
termination requiring Severance Benefits under
paragraph 3 hereof has occurred prior to such Board's
determination); or
(iv) a change in the majority of the members of the Board
within a 24-month period unless the election or
nomination for election or nomination for election by
the Company's common shareholders of each new director
was approved by the vote of at least two-thirds of the
Directors then still in office who were in office at the
beginning of the 24-month period.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Compensation" shall mean the sum of (i) the Executive's annual
rate of base salary on the last day the Executive was an employee of the
Company (or if higher, the annual rate in effect on the date of the Change
in Control), including any elective contributions made by the Company on
behalf of the Executive that are not includible in the gross income of the
Executive under Sections 125 or 402(a)(8) of the Code or any successor
provision thereto, and (ii) the average of the annual incentive payments
paid to the Executive by the Company, if any, for the three consecutive
calendar years immediately preceding employment termination (or a lesser
period if the Executive was not eligible to receive annual incentive
payments during such three year period).
(f) "Coverage Period" means the period beginning on the Starting
Date and ending on the Ending Date.
(g) "Disability" means the Executive's incapacity due to physical or
mental illness, which incapacity causes the Executive to be absent from
his duties on a full time basis for 90 consecutive business days.
(h) "Employment Agreement" shall mean the employment agreement
between the Company and the Executive, entered into on October 7, 1991,
together with any amendments thereto.
(i) "Ending Date" means the earlier of (i) the date of the Board's
determination that the transaction which was approved by the Company's
shareholders, thus constituting a Change in Control pursuant to paragraph
1(c)(iii), will not be consummated, or (ii) the date which is 36 full
calendar months following the date on which a Change in Control occurs or,
if a Change in Control is based on shareholder approval pursuant to
paragraph 1(c)(iii) hereof, the date which is 36 full calendar months
following the date of the consummation of the transaction which was the
subject of shareholder approval.
11
<PAGE>
(j) "Good Reason" shall mean any of the following:
(i) material change by the Company of the Executive's
functions, duties or responsibilities which change would cause the
Executive's position with the Company to become of less dignity,
responsibility, importance, prestige or scope, including, without
limitation, a change from being a senior officer of a publicly held
company;
(ii) assignment or reassignment by the Company of the
Executive without the Executive's consent to another place of
employment more than 50 miles from the Executive's current place of
employment; or
(iii) a reduction which is more than de minimis in the
Executive's base pay or bonus opportunity except if such reduction
is part of a reduction for all executive officers of the Company and
any parent Company thereof.
No such event described above shall constitute Good Reason unless
the Executive gives written notice to the Company, specifying the
event relied upon for such termination and given at any time within
one year after the occurrence of such event and the Company has not
remedied such within 30 days of the notice. The Company and
Executive, upon mutual written agreement may waive any of the
foregoing provisions which would otherwise constitute a Good Reason.
(k) "Single Trigger Period" means the eighteen month period which
(i) begins on the date on which a Change in Control occurs, or if a
Change in Control is based on shareholder approval pursuant to
paragraph 1(c)(iii) hereof, the date of the consummation of the
termination which was the subject of shareholder approval, and (ii)
ends eighteen months thereafter.
(1) "Starting Date" means the date on which a Change in Control
occurs.
2. TERM. This Agreement shall be effective as of the date above
written and shall continue thereafter for 36 full calendar months
following the date of an occurrence of a Change in Control or, if the
Change in Control event is based on shareholder approval pursuant to
paragraph 1(c)(iii), 36 full calendar months following the date of the
consummation of the transaction which was the subject of shareholder
approval.
3. SEVERANCE BENEFIT. If (i) at any time during the Coverage Period,
the Executive's employment hereunder is terminated by the Company for any
reason other than Cause, death or Disability, or by the Executive for Good
Reason, or (ii) during the Single Trigger Period, the Executive terminates
his employment for any reason, then,
(a) within five business days after such termination, the
Company shall pay to the Executive (or, if the Executive
has died before receiving all payments to which the
Executive has become entitled hereunder, to the estate
of the Executive) (i) accrued but unpaid salary and
accrued but unused vacation, if any, and (ii) severance
pay in a lump sum cash amount equal to three (3) times
the Executive's Compensation;
(b) to the extent not paid or payable under such plans
and/or arrangements, the Company shall pay to the
Executive the present value of the benefits (calculated
assuming the Executive will begin receiving benefits at
the earliest retirement date under such plans and/or
arrangements, or if later, at the end of the term of
this Agreement, based on the actuarial assumptions used
for purposes of the qualified defined benefit plan) that
would have accrued, but did not accrue, under the
Company's qualified defined benefit retirement plan, the
Fall River Gas Company Survivor Benefit Deferred
Compensation Agreement, and the excess pension benefit
provision in the Employment Agreement and/or any
successor or similar plan(s) or arrangements in place
and operational on the date of termination and/or the
Change in Control, as if (for vesting, benefit accrual,
eligibility for early retirement, subsidized early
retirement factors, actuarial
12
<PAGE>
equivalence, and any other purposes) the Executive had
continued to be employed and had continued to
participate in such plans and arrangements through the
end of the term of this Agreement; it being understood
by all parties hereto that payments made under this
Agreement and the deemed additional credited service
shall not be considered for purposes of determining the
actual benefit payable under the terms of such plans and
arrangements and shall not be considered part of the
relevant payroll records for purposes of such plans and
arrangements; and
(c) to the extent not already provided under the terms of
the Employment Agreement, for a period commencing with
the month in which termination of employment, as
described in paragraph 3 hereof, shall have occurred,
and ending the later of the date of the Executive's or
the Executive's spouse's death, the Executive, his
spouse and any dependents shall continue to be entitled
to receive all health and dental care benefits under the
Company's welfare benefit plans (within the meaning of
Section 3(l) of the Employee Retirement Income Security
Act of 1974, as amended), at no cost to the Executive
and at the same level of benefits that the Executive,
his spouse and his dependents were receiving or were
entitled to receive at the time of termination of
employment or, if it would result in greater benefits,
at the date of the Change in Control (if and to the
extent that such benefits shall not be payable or
provided under any Company plan, the Company shall pay
or provide equivalent benefits on an individual basis).
4. CERTAIN ADDITIONAL PAYMENTS.
(a) If Independent Tax Counsel shall determine that the
aggregate payments made to the Executive pursuant to this
Agreement and any other payments to the Executive from the
Company which constitute "parachute payments" as defined in
Section 280G of the Code (or any successor provision thereto)
("Parachute Payments") would be subject to the excise tax
imposed by Section 4999 of the Code (the "Excise Tax"), then
the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount (determined by
Independent Tax Counsel) such that after payment by the
Executive of all taxes (including any Excise Tax) imposed upon
the Gross-Up Payment and any interest or penalties imposed
with respect to such taxes, the Executive retains from the
Gross-Up Payment an amount equal to the Excise Tax imposed
upon the payments. For purposes of this paragraph 4(a),
"Independent Tax Counsel" shall mean a lawyer, a certified
public accountant with a nationally recognized accounting
firm, or a compensation consultant with a nationally
recognized actuarial and benefits consulting firm, with
expertise in the area of executive compensation tax law, who
shall be selected by the Executive and shall be reasonably
acceptable to the Company, and whose fees and disbursements
shall be paid by the Company.
(b) If Independent Tax Counsel shall determine that no
Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that the Executive has
substantial authority not to report any Excise Tax on the
Executive's Federal income tax return. If the Executive is
subsequently required to make a payment of any Excise Tax,
then the Independent Tax Counsel shall determine the amount
(the amount of such additional payments are referred herein as
"Gross-Up Underpayment") of such payment and any such Gross-Up
Underpayment shall be promptly paid by the Company to or for
the benefit of the Employee. The fees and disbursements of the
Independent Tax Counsel shall be paid by the Company.
(c) The Executive shall notify the Company in writing
within 15 days of any claim by the Internal Revenue Service
that, if successful, would require the payment by the Company
of a Gross-Up Payment. If the Company notifies the Executive
in writing that it desires to contest such claim and that it
will bear the costs and provide the indemnification as
required by this sentence, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including, without
limitation, accepting
13
<PAGE>
legal representation with respect to such claim by an
attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in
order to effectively contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim; provided, however,
that the Company shall bear and pay directly all costs
and expenses (including additional interest and
penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax,
including interest and penalties with respect thereto,
imposed as a result of such representation and payment
of costs and expenses. The Company shall control all
proceedings taken in connection with such contest;
provided, however, that if the Company directs the
Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify
and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to
such advance or with respect to any imputed income with
respect to such advance.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to paragraph 4(c)(iv), the
Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall, within 10 days, pay to the Company
the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto).
5. NO MITIGATION REQUIRED. In the event of any termination of the
Executive's employment described in paragraph 3, the Executive shall be
under no obligation to seek other employment, and there shall be no offset
against amounts due the Executive under this Agreement on account of any
remuneration attributable to any subsequent employment; provided, however,
to the extent the Executive receives medical and health benefits from a
subsequent employer, medical and health benefits under paragraph 3(c)
shall be secondary to those received from the subsequent employer..
6.SOURCE OF PAYMENTS. All payments provided for in this Agreement
shall be paid in cash from the general funds of the Company; provided,
however, such payments shall be reduced by the amount of any payments made
to the Executive or the Executive's dependents, beneficiaries, or estate
from any trust or special or separate fund established by the Company to
assure such payments. The Company shall not be required to establish a
special or separate fund or other segregation of assets to assure such
payments, and, if the Company shall make any investments to aid it in
meeting its obligations hereunder, the Executive shall have no right,
title, or interest whatever in or to any such investments except as may
otherwise be expressly provided in a separate written instrument relating
to such investments. Nothing contained in this Agreement, and no action
taken pursuant to its provisions, shall create or be construed to create a
trust of any kind, or a fiduciary relationship between the Company and the
Executive or any other person. To the extent that any person acquires a
right to receive payments from the Company, such right shall be no greater
than the right of an unsecured creditor of the Company.
7. LITIGATION EXPENSES: ARBITRATION.
(a) Full Settlement, Litigation Expenses; Arbitration. The
Company's obligation to make the payments provided for
in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have
against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of
this Agreement. The Company agrees to pay, upon written
demand therefor by the Executive, all legal fees and
expenses which the Executive may reasonably incur as a
result of any dispute or contest by or
14
<PAGE>
with the Company or others regarding the validity or
enforceability of, or liability under, any provision of
this Agreement (except to the extent it is determined by
a court of competent jurisdiction, mediator or
arbitrator, as the case may be, that the Executive's
material claim is, or claims are, frivolous or without
merit in which case the Executive shall bear all such
fees and expenses), together with interest on any
delayed payments at the applicable Federal rate provided
for in Section 7872(f)(2) of the Code. In any such
action brought by the Executive for damages or to
enforce any provisions of this Agreement, the Executive,
in his sole discretion, shall be entitled to seek both
legal and equitable relief and remedies, including,
without limitation, specific performance of the
Company's obligations hereunder. If the parties hereto
so agree in writing, any disputes under this Agreement
may be settled by arbitration. The obligation of the
Company under this paragraph 7 shall survive the
termination for any reason of this Agreement (whether
such termination is by the Company, by the Executive,
upon the expiration of this Agreement or otherwise).
(b) In the event of any dispute or difference between
the Company and the Executive with respect to the subject
matter of this Agreement and the enforcement of rights
hereunder, the Executive may, in the Executive's sole
discretion by written notice to the Company, require such
dispute or difference to be submitted to arbitration. The
arbitrator or arbitrators shall be selected by agreement of
the parties or, if they cannot agree on an arbitrator or
arbitrators within 30 days after the Executive has notified
the Company of Executive's desire to have the question settled
by arbitration, then the arbitrator or arbitrators shall be
selected by the American Arbitration Association (the "AAA")
in Boston, Massachusetts upon the application of the
Executive. The determination reached in such arbitration shall
be final and binding on both parties without any right of
appeal or further dispute. Execution of the determination by
such arbitrator may be sought in any court of competent
jurisdiction. The arbitrators shall not be bound by judicial
formalities and may abstain from following the strict rules of
evidence and shall interpret this Agreement as an honorable
engagement and not merely as a legal obligation. Unless
otherwise agreed by the parties, any such arbitration shall
take place in Boston, Massachusetts, and shall be conducted in
accordance with the Rules of the AAA.
8. INCOME TAX WITHHOLDING. The Company may withhold from any
payments made under this Agreement all federal, state, or
other taxes as shall be required pursuant to any law or
governmental regulation or ruling.
9. ENTIRE UNDERSTANDING. This Agreement contains the entire
understanding between the Company and the Executive with respect to
the subject matter hereof and supersedes any similar agreement
between the Company and the Executive, except that this Agreement
shall not affect or operate to reduce any benefit or compensation
inuring to the Executive of any kind elsewhere provided and not
expressly provided for in this Agreement including, without
limitation, any benefit or compensation under the Employment
Agreement and/or the Fall River Gas Company Survivor Benefit
Deferred Compensation Agreement.
10. SEVERABILILY. If, for any reason, any one or more of the
provisions or part of a provision contained in this Agreement
shall be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall
not affect any other provision or part of a provision of this
Agreement not held so invalid, illegal or unenforceable, and
each other provision or part of a provision shall to the full
extent consistent with law continue in full force and effect.
11. CONSOLIDATION, MERGER. OR SALE OF ASSETS. If the Company
consolidates or merges into or with, or transfers all or
substantially all of its assets to, another entity the term "the
Company" as used herein shall mean such other entity and this
Agreement shall continue in full force and effect.
12. NOTICES. All notices, requests, demands and other
communications required or permitted hereunder shall be given in
writing and shall be deemed to have been duly given if delivered or
mailed, postage prepaid, first class as follows:
a. to the Company;
15
<PAGE>
Fall River Gas Company
155 North Main Street
Fall River, Massachusetts 02722
Attention:
--------------
b. to the Executive:
------------------------
------------------------
------------------------
or to such other address as either party shall have
previously specified in writing to the other.
13. NO ATTACHMENT. Except as required by law, no right to
receive payments under this Agreement shall be subject to
anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge or hypothecation or to execution,
attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such
action shall be null, void and of no effect.
14. BINDING AGREEMENT. This Agreement shall be binding upon,
and shall inure to the benefit of, the Executive and the Company and
their respective permitted successors and assigns.
15. MODIFICATION AND WAIVER. Prior to the date of a Change in
Control, this Agreement may be terminated, modified, amended
or terminated by action of a majority of the members of the
Board. After a Change in Control, this Agreement may not be
modified or amended except by an instrument in writing signed
by the parties hereto. No term or condition of this Agreement
shall be deemed to have been waived, nor shall there be any
estoppel against the enforcement of any provision of this
Agreement, except by written instrument signed by the party
charged with such waiver or estoppel. No such written waiver
shall be deemed a continuing waiver unless specifically stated
therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a
waiver of such term or condition for the future or as to any
act other than that specifically waived.
16. HEADING OF NO EFFECT. The paragraph headings contained in
this Agreement are included solely for convenience of reference and
shall not in any way affect the meaning or interpretation of any of
the provisions of this Agreement.
17. GOVERNING LAW. This Agreement and its validity,
interpretation, performance, and enforcement shall be governed by
the laws of the Commonwealth of Massachusetts without giving effect
to the choice of law provisions in the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
officers thereunto duly authorized, and the Executive has signed this Agreement,
all effective as of the date first above written.
Witness: Fall River Gas Company:
By:
- ------------------------------- ------------------------------
Title:
---------------------------
Witness:
By:
- ------------------------------- ------------------------------
Title:
---------------------------
Witness: Executive:
- ------------------------------- ---------------------------------
16
<PAGE>
Exhibit 10(ee)
SEVERANCE AGREEMENT
BETWEEN
FALL RIVER GAS COMPANY
AND
PETER H. THANAS
THIS AGREEMENT, effective this first day of January, 1999, by and between Fall
River Gas Company, a Massachusetts Corporation (the "Company") and Peter H.
Thanas (the "Executive").
WITNESSETH:
WHEREAS, the Executive is a valuable employee of Fall River Gas
Company, an integral part of its management, and a key participant in the
decision-making process relative to short-term and long-term planning and policy
for the Company; and
WHEREAS, the Company wishes to encourage the Executive to continue the
Executive's career and services with the Company for the period during and after
an actual or threatened Change in Control; and
WHEREAS, the Board of Directors of the Company, at a meeting on
February 10, 1998, determined that it would be in the best interests of the
Company and its shareholders to better assure continuity in the management of
the Company's administration and operations in the event of a Change in Control
by entering into this Severance Agreement (the "Agreement") with the Executive;
NOW THEREFORE, it is hereby agreed by and between the parties hereto as
follows:
1. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Cause" shall have the same meaning as is provided in the
Executives Employment Agreement.
(c) "Change in Control" shall mean:
(i) any person (as such term is used in Section 13(d) of the
Securities Exchange Act of 1934 (the "Act"), excluding a corporation
at least 90% of the ownership of which after acquiring its interest
is owned directly by the holder of common shares of the Company
immediately prior to such acquisition ("Person"), is the beneficial
owner, directly or indirectly, of twenty (20) percent or more of the
outstanding common shares of the Company (other than the Savings
Plan) requiring the filing of a report with the Securities and
Exchange Commission under Section 13(d) of the 1934 Act;
(ii) a purchase by any Person of shares pursuant to a tender or
exchange offer to acquire any common shares of the Company (or
securities convertible into common shares) for cash, securities, or
any other consideration provided that, after consummation of the
offer, such Person is the beneficial owner (as defined in Rule l3d-3
under the 1934 Act), directly or indirectly, of twenty (20) percent
or more of the outstanding common shares of the Company (calculated
as provided in paragraph (d) of Rule 13d-3 under the 1934 Act in the
case of rights to acquire common shares);
(iii) approval by the shareholders of the Company of (a) any
consolidation or merger of the Company in which the Company is not
the continuing or surviving corporation or
17
<PAGE>
pursuant to which common shares of the Company would be converted
into cash, securities, or other property, other than a consolidation
or merger of the Company in which holders of its common shares
immediately prior to the consolidation or merger own at least 90% of
the common shares of the surviving corporation immediately after the
consolidation or merger, or (b) any consolidation or merger in which
the Company is the continuing or surviving corporation but in which
the common shareholders of the Company immediately prior to the
consolidation or merger do not hold at least 90% of the outstanding
common shares of the continuing or surviving corporation (except
where such holders of common stock hold at least 90% of the common
shares of the corporation which owns all of the common shares of the
Company), or (c) any sale, lease, exchange, or other transfer (in
one transaction or a series of related transactions) of all or
substantially all the assets of the Company, or (d) any merger or
consolidation of the Company where, after the merger or
consolidation, one Person owns 100% of the common shares of the
Company (except where the common holders of the Company's common
shares immediately prior to such merger or consolidation own at
least 90% of the outstanding common shares of such Person
immediately after such merger or consolidation) (upon the Board's
determination that the transaction subject to shareholder approval
hereunder will not be consummated, a Change in Control shall not be
deemed to have occurred from such date forward and this Agreement
shall continue in effect as if no Change in Control had occurred,
except to the extent termination requiring Severance Benefits under
paragraph 3 hereof has occurred prior to such Board's
determination); or
(iv) a change in the majority of the members of the Board within
a 24-month period unless the election or nomination for election or
nomination for election by the Company's common shareholders of each
new director was approved by the vote of at least two-thirds of the
Directors then still in office who were in office at the beginning
of the 24-month period.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Compensation" shall mean the sum of (i) the Executive's annual
rate of base salary on the last day the Executive was an employee of
the Company (or if higher, the annual rate in effect on the date of the
Change in Control), including any elective contributions made by the
Company on behalf of the Executive that are not includible in the gross
income of the Executive under Sections 125 or 402(a)(8) of the Code or
any successor provision thereto, and (ii) the average of the annual
incentive payments paid to the Executive by the Company, if any, for
the three consecutive calendar years immediately preceding employment
termination (or a lesser period if the Executive was not eligible to
receive annual incentive payments during such three year period).
(f) "Coverage Period" means the period beginning on the Starting
Date and ending on the Ending Date.
(g) "Disability" means the Executive's incapacity due to physical or
mental illness, which incapacity causes the Executive to be absent from
his duties on a full time basis for 90 consecutive business days.
(h) "Employment Agreement" shall mean the employment agreement
between the Company and the Executive, entered into on October 7, 1991,
together with any amendments thereto.
(i) "Ending Date" means the earlier of (i) the date of the Board's
determination that the transaction which was approved by the Company's
shareholders, thus constituting a Change in Control pursuant to
paragraph 1(c)(iii), will not be consummated, or (ii) the date which is
36 full calendar months following the date on which a Change in Control
occurs or, if a Change in Control is based on shareholder approval
pursuant to paragraph 1(c)(iii) hereof, the date which is 36 full
calendar months following the date of the consummation of the
transaction which was the subject of shareholder approval.
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(j) "Good Reason" shall mean any of the following:
(i) material change by the Company of the Executive's functions,
duties or responsibilities which change would cause the Executive's
position with the Company to become of less dignity, responsibility,
importance, prestige or scope, including, without limitation, a
change from being a senior officer of a publicly held company;
(ii) assignment or reassignment by the Company of the Executive
without the Executive's consent to another place of employment more
than 50 miles from the Executive's current place of employment; or
(iii) a reduction which is more than de minimis in the
Executive's base pay or bonus opportunity except if such reduction
is part of a reduction for all executive officers of the Company and
any parent Company thereof.
No such event described above shall constitute Good Reason unless
the Executive gives written notice to the Company, specifying the
event relied upon for such termination and given at any time within
one year after the occurrence of such event and the Company has not
remedied such within 30 days of the notice. The Company and
Executive, upon mutual written agreement may waive any of the
foregoing provisions which would otherwise constitute a Good Reason.
(k) "Single Trigger Period" means the eighteen month period which
(i) begins on the date on which a Change in Control occurs, or if a
Change in Control is based on shareholder approval pursuant to
paragraph 1(c)(iii) hereof, the date of the consummation of the
termination which was the subject of shareholder approval, and (ii)
ends eighteen months thereafter.
(1) "Starting Date" means the date on which a Change in Control
occurs.
2. TERM. This Agreement shall be effective as of the date above written
and shall continue thereafter for 36 full calendar months following the date of
an occurrence of a Change in Control or, if the Change in Control event is based
on shareholder approval pursuant to paragraph 1(c)(iii), 36 full calendar months
following the date of the consummation of the transaction which was the subject
of shareholder approval.
3. SEVERANCE BENEFIT. If (i) at any time during the Coverage Period,
the Executive's employment hereunder is terminated by the Company for any reason
other than Cause, death or Disability, or by the Executive for Good Reason, or
(ii) during the Single Trigger Period, the Executive terminates his employment
for any reason, then,
(a) within five business days after such termination, the Company
shall pay to the Executive (or, if the Executive has died before
receiving all payments to which the Executive has become entitled
hereunder, to the estate of the Executive) (i) accrued but unpaid
salary and accrued but unused vacation, if any, and (ii) severance pay
in a lump sum cash amount equal to three (3) times the Executive's
Compensation;
(b) to the extent not paid or payable under such plans and/or
arrangements, the Company shall pay to the Executive the present value
of the benefits (calculated assuming the Executive will begin receiving
benefits at the earliest retirement date under such plans and/or
arrangements, or if later, at the end of the term of this Agreement,
based on the actuarial assumptions used for purposes of the qualified
defined benefit plan) that would have accrued, but did not accrue,
under the Company's qualified defined benefit retirement plan, the Fall
River Gas Company Survivor Benefit Deferred Compensation Agreement, and
the excess pension benefit provision in the Employment Agreement and/or
any successor or similar plan(s) or arrangements in place and
operational on the date of termination and/or the Change in Control, as
if (for vesting, benefit accrual, eligibility for early retirement,
subsidized early retirement factors, actuarial
19
<PAGE>
equivalence, and any other purposes) the Executive had continued to be
employed and had continued to participate in such plans and
arrangements through the end of the term of this Agreement; it being
understood by all parties hereto that payments made under this
Agreement and the deemed additional credited service shall not be
considered for purposes of determining the actual benefit payable under
the terms of such plans and arrangements and shall not be considered
part of the relevant payroll records for purposes of such plans and
arrangements; and
(c) to the extent not already provided under the terms of the
Employment Agreement, for a period commencing with the month in which
termination of employment, as described in paragraph 3 hereof, shall
have occurred, and ending the later of the date of the Executive's or
the Executive's spouse's death, the Executive, his spouse and any
dependents shall continue to be entitled to receive all health and
dental care benefits under the Company's welfare benefit plans (within
the meaning of Section 3(l) of the Employee Retirement Income Security
Act of 1974, as amended), at no cost to the Executive and at the same
level of benefits that the Executive, his spouse and his dependents
were receiving or were entitled to receive at the time of termination
of employment or, if it would result in greater benefits, at the date
of the Change in Control (if and to the extent that such benefits shall
not be payable or provided under any Company plan, the Company shall
pay or provide equivalent benefits on an individual basis).
4. CERTAIN ADDITIONAL PAYMENTS.
(a) If Independent Tax Counsel shall determine that the aggregate
payments made to the Executive pursuant to this Agreement and any other
payments to the Executive from the Company which constitute "parachute
payments" as defined in Section 280G of the Code (or any successor
provision thereto) ("Parachute Payments") would be subject to the
excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount (determined by Independent Tax
Counsel) such that after payment by the Executive of all taxes
(including any Excise Tax) imposed upon the Gross-Up Payment and any
interest or penalties imposed with respect to such taxes, the Executive
retains from the Gross-Up Payment an amount equal to the Excise Tax
imposed upon the payments. For purposes of this paragraph 4(a),
"Independent Tax Counsel" shall mean a lawyer, a certified public
accountant with a nationally recognized accounting firm, or a
compensation consultant with a nationally recognized actuarial and
benefits consulting firm, with expertise in the area of executive
compensation tax law, who shall be selected by the Executive and shall
be reasonably acceptable to the Company, and whose fees and
disbursements shall be paid by the Company.
(b) If Independent Tax Counsel shall determine that no Excise Tax is
payable by the Executive, it shall furnish the Executive with a written
opinion that the Executive has substantial authority not to report any
Excise Tax on the Executive's Federal income tax return. If the
Executive is subsequently required to make a payment of any Excise Tax,
then the Independent Tax Counsel shall determine the amount (the amount
of such additional payments are referred herein as "Gross-Up
Underpayment") of such payment and any such Gross-Up Underpayment shall
be promptly paid by the Company to or for the benefit of the Employee.
The fees and disbursements of the Independent Tax Counsel shall be paid
by the Company.
(c) The Executive shall notify the Company in writing within 15 days
of any claim by the Internal Revenue Service that, if successful, would
require the payment by the Company of a Gross-Up Payment. If the
Company notifies the Executive in writing that it desires to contest
such claim and that it will bear the costs and provide the
indemnification as required by this sentence, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to
time, including, without limitation, accepting
20
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legal representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order to
effectively contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim; provided, however, that the Company shall
bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. The Company shall
control all proceedings taken in connection with such contest;
provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis
and shall indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance
or with respect to any imputed income with respect to such advance.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to paragraph 4(c)(iv), the Executive becomes
entitled to receive any refund with respect to such claim, the
Executive shall, within 10 days, pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto).
5. NO MITIGATION REQUIRED. In the event of any termination of the
Executive's employment described in paragraph 3, the Executive shall be under no
obligation to seek other employment, and there shall be no offset against
amounts due the Executive under this Agreement on account of any remuneration
attributable to any subsequent employment; provided, however, to the extent the
Executive receives medical and health benefits from a subsequent employer,
medical and health benefits under paragraph 3(c) shall be secondary to those
received from the subsequent employer..
6.SOURCE OF PAYMENTS. All payments provided for in this Agreement shall
be paid in cash from the general funds of the Company; provided, however, such
payments shall be reduced by the amount of any payments made to the Executive or
the Executive's dependents, beneficiaries, or estate from any trust or special
or separate fund established by the Company to assure such payments. The Company
shall not be required to establish a special or separate fund or other
segregation of assets to assure such payments, and, if the Company shall make
any investments to aid it in meeting its obligations hereunder, the Executive
shall have no right, title, or interest whatever in or to any such investments
except as may otherwise be expressly provided in a separate written instrument
relating to such investments. Nothing contained in this Agreement, and no action
taken pursuant to its provisions, shall create or be construed to create a trust
of any kind, or a fiduciary relationship between the Company and the Executive
or any other person. To the extent that any person acquires a right to receive
payments from the Company, such right shall be no greater than the right of an
unsecured creditor of the Company.
7. LITIGATION EXPENSES: ARBITRATION.
(a) Full Settlement, Litigation Expenses; Arbitration. The Company's
obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by
any set-off, counterclaim, recoupment, defense or other claim, right or
action which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to
the Executive under any of the provisions of this Agreement. The
Company agrees to pay, upon written demand therefor by the Executive,
all legal fees and expenses which the Executive may reasonably incur as
a result of any dispute or contest by or
21
<PAGE>
with the Company or others regarding the validity or enforceability of,
or liability under, any provision of this Agreement (except to the
extent it is determined by a court of competent jurisdiction, mediator
or arbitrator, as the case may be, that the Executive's material claim
is, or claims are, frivolous or without merit in which case the
Executive shall bear all such fees and expenses), together with
interest on any delayed payments at the applicable Federal rate
provided for in Section 7872(f)(2) of the Code. In any such action
brought by the Executive for damages or to enforce any provisions of
this Agreement, the Executive, in his sole discretion, shall be
entitled to seek both legal and equitable relief and remedies,
including, without limitation, specific performance of the Company's
obligations hereunder. If the parties hereto so agree in writing, any
disputes under this Agreement may be settled by arbitration. The
obligation of the Company under this paragraph 7 shall survive the
termination for any reason of this Agreement (whether such termination
is by the Company, by the Executive, upon the expiration of this
Agreement or otherwise).
(b) In the event of any dispute or difference between the Company
and the Executive with respect to the subject matter of this Agreement
and the enforcement of rights hereunder, the Executive may, in the
Executive's sole discretion by written notice to the Company, require
such dispute or difference to be submitted to arbitration. The
arbitrator or arbitrators shall be selected by agreement of the parties
or, if they cannot agree on an arbitrator or arbitrators within 30 days
after the Executive has notified the Company of Executive's desire to
have the question settled by arbitration, then the arbitrator or
arbitrators shall be selected by the American Arbitration Association
(the "AAA") in Boston, Massachusetts upon the application of the
Executive. The determination reached in such arbitration shall be final
and binding on both parties without any right of appeal or further
dispute. Execution of the determination by such arbitrator may be
sought in any court of competent jurisdiction. The arbitrators shall
not be bound by judicial formalities and may abstain from following the
strict rules of evidence and shall interpret this Agreement as an
honorable engagement and not merely as a legal obligation. Unless
otherwise agreed by the parties, any such arbitration shall take place
in Boston, Massachusetts, and shall be conducted in accordance with the
Rules of the AAA.
8. INCOME TAX WITHHOLDING. The Company may withhold from any payments
made under this Agreement all federal, state, or other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
9. ENTIRE UNDERSTANDING. This Agreement contains the entire
understanding between the Company and the Executive with respect to the subject
matter hereof and supersedes any similar agreement between the Company and the
Executive, except that this Agreement shall not affect or operate to reduce any
benefit or compensation inuring to the Executive of any kind elsewhere provided
and not expressly provided for in this Agreement including, without limitation,
any benefit or compensation under the Employment Agreement and/or the Fall River
Gas Company Survivor Benefit Deferred Compensation Agreement.
10. SEVERABILILY. If, for any reason, any one or more of the provisions
or part of a provision contained in this Agreement shall be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or part of a provision of
this Agreement not held so invalid, illegal or unenforceable, and each other
provision or part of a provision shall to the full extent consistent with law
continue in full force and effect.
11. CONSOLIDATION, MERGER. OR SALE OF ASSETS. If the Company
consolidates or merges into or with, or transfers all or substantially all of
its assets to, another entity the term "the Company" as used herein shall mean
such other entity and this Agreement shall continue in full force and effect.
12. NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be given in writing and shall be deemed to
have been duly given if delivered or mailed, postage prepaid, first class as
follows:
a. to the Company;
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Fall River Gas Company
155 North Main Street
Fall River, Massachusetts 02722
Attention: ______________
b. to the Executive:
-----------------------
-----------------------
-----------------------
or to such other address as either party shall have previously
specified in writing to the other.
13. NO ATTACHMENT. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge or hypothecation or to
execution, attachment, levy or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
14. BINDING AGREEMENT. This Agreement shall be binding upon, and shall
inure to the benefit of, the Executive and the Company and their respective
permitted successors and assigns.
15. MODIFICATION AND WAIVER. Prior to the date of a Change in Control,
this Agreement may be terminated, modified, amended or terminated by action of a
majority of the members of the Board. After a Change in Control, this Agreement
may not be modified or amended except by an instrument in writing signed by the
parties hereto. No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument signed by the party
charged with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
16. HEADING OF NO EFFECT. The paragraph headings contained in this
Agreement are included solely for convenience of reference and shall not in any
way affect the meaning or interpretation of any of the provisions of this
Agreement.
17. GOVERNING LAW. This Agreement and its validity, interpretation,
performance, and enforcement shall be governed by the laws of the Commonwealth
of Massachusetts without giving effect to the choice of law provisions in the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
officers thereunto duly authorized, and the Executive has signed this Agreement,
all effective as of the date first above written.
Witness: Fall River Gas Company:
By:
- --------------------------------- ---------------------------
Title:
------------------------
Witness:
By:
- --------------------------------- ---------------------------
Title:
------------------------
Witness: Executive:
- --------------------------------- ------------------------------
23
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Exhibit 10(ff)
SEVERANCE AGREEMENT
BETWEEN
FALL RIVER GAS CONPANY
AND
JOHN F. FANNING
THIS AGREEMENT, effective this first day of January, 1999, by and
between Fall River Gas Company, a Massachusetts Corporation (the "Company") and
John F. Fanning (the "Executive").
WITNESSETH:
WHEREAS, the Executive is a valuable employee of Fall River Gas
Company, an integral part of its management, and a key participant in the
decision-making process relative to short-term and long-term planning and policy
for the Company; and
WHEREAS, the Company wishes to encourage the Executive to continue the
Executive's career and services with the Company for the period during and after
an actual or threatened Change in Control; and
WHEREAS, the Board of Directors of the Company, at a meeting on
February 10, 1998, determined that it would be in the best interests of the
Company and its shareholders to better assure continuity in the management of
the Company's administration and operations in the event of a Change in Control
by entering into this Severance Agreement (the "Agreement") with the Executive;
NOW THEREFORE, it is hereby agreed by and between the parties hereto as
follows:
1. Definitions.
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Cause" shall have the same meaning as is provided in
the Executives Employment Agreement.
(c) Change in Control" shall mean:
(i) any person (as such term is used in Section
13(d) of the Securities Exchange Act of 1934
(the "Act"), excluding a corporation at
least 90% of the ownership of which after
acquiring its interest is owned directly by
the holder of common shares of the Company
immediately prior to such acquisition
("Person"), is the beneficial owner,
directly or indirectly, of twenty (20)
percent or more of the outstanding common
shares of the Company (other than the
Savings Plan) requiring the filing of a
report with the Securities and Exchange
Commission under Section 13(d) of the 1934
Act;
(ii) a purchase by any Person of shares pursuant
to a tender or exchange offer to acquire any common
shares of the Company (or securities convertible into
common shares) for cash, securities, or any other
consideration provided that, after consummation of
the offer, such Person is the beneficial owner (as
defined in Rule l3d-3 under the 1934 Act), directly
or indirectly, of twenty (20) percent or more of the
outstanding common shares of the Company (calculated
as provided in paragraph (d) of Rule 13d-3 under the
1934 Act in the case of rights to acquire common
shares);
(iii) approval by the shareholders of the Company
of (a) any consolidation or merger of the
Company in which the Company is not the
continuing or surviving corporation or
pursuant to which common shares of the
Company would be converted into cash,
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securities, or other property, other than a
consolidation or merger of the Company in
which holders of its common shares
immediately prior to the consolidation or
merger own at least 90% of the common shares
of the surviving corporation immediately
after the consolidation or merger, or (b)
any consolidation or merger in which the
Company is the continuing or surviving
corporation but in which the common
shareholders of the Company immediately
prior to the consolidation or merger do not
hold at least 90% of the outstanding common
shares of the continuing or surviving
corporation (except where such holders of
common stock hold at least 90% of the common
shares of the corporation which owns all of
the common shares of the Company), or (c)
any sale, lease, exchange, or other transfer
(in one transaction or a series of related
transactions) of all or substantially all
the assets of the Company, or (d) any merger
or consolidation of the Company where, after
the merger or consolidation, one Person owns
100% of the common shares of the Company
(except where the common holders of the
Company's common shares immediately prior to
such merger or consolidation own at least
90% of the outstanding common shares of such
Person immediately after such merger or
consolidation) (upon the Board's
determination that the transaction subject
to shareholder approval hereunder will not
be consummated, a Change in Control shall
not be deemed to have occurred from such
date forward and this Agreement shall
continue in effect as if no Change in
Control had occurred, except to the extent
termination requiring Severance Benefits
under paragraph 3 hereof has occurred prior
to such Board's determination); or
(iv) a change in the majority of the members of
the Board within a 24-month period unless
the election or nomination for election or
nomination for election by the Company's
common shareholders of each new director was
approved by the vote of at least two-thirds
of the Directors then still in office who
were in office at the beginning of the
24-month period.
(d) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(e) "Compensation" shall mean the sum of (i) the
Executive's annual rate of base salary on the last
day the Executive was an employee of the Company (or
if higher, the annual rate in effect on the date of
the Change in Control), including any elective
contributions made by the Company on behalf of the
Executive that are not includible in the gross income
of the Executive under Sections 125 or 402(a)(8) of
the Code or any successor provision thereto, and
(ii) the average of the annual incentive payments
paid to the Executive by the Company, if any, for
the three consecutive calendar years immediately
preceding employment termination (or a lesser
period if the Executive was not eligible to receive
annual incentive payments during such three year
period).
(f) "Coverage Period" means the period beginning on the
Starting Date and ending on the Ending Date.
(g) "Disability" means the Executive's incapacity due to
physical or mental illness, which incapacity causes
the Executive to be absent from his duties on a full
time basis for 90 consecutive business days.
(h) "Employment Agreement" shall mean the employment
agreement between the Company and the Executive,
entered into on October 7, 1991, together with any
amendments thereto.
(i) "Ending Date" means the earlier of (i) the date of
the Board's determination that the transaction which
was approved by the Company's shareholders, thus
constituting a Change in Control pursuant to
paragraph 1(c)(iii), will not be consummated, or
(ii) the date which is 36 full calendar months
following the date on which a Change in Control
occurs or, if a Change in Control is based on
shareholder approval pursuant to paragraph 1(c)(iii)
hereof, the date which is 36 full calendar months
following the date of the consummation of the
transaction which was the subject of shareholder
approval.
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(j) "Good Reason" shall mean any of the following:
(i) material change by the Company of the
Executive's functions, duties or responsibilities
which change would cause the Executive's position
with the Company to become of less dignity,
responsibility, importance, prestige or scope,
including, without limitation, a change from being a
senior officer of a publicly held company;
(ii) assignment or reassignment by the Company
of the Executive without the Executive's consent to
another place of employment more than 50 miles from
the Executive's current place of employment; or
(iii) a reduction which is more than de minimis
in the Executive's base pay or bonus opportunity
except if such reduction is part of a reduction for
all executive officers of the Company and any parent
Company thereof.
No such event described above shall constitute Good
Reason unless the Executive gives written notice to
the Company, specifying the event relied upon for
such termination and given at any time within one
year after the occurrence of such event and the
Company has not remedied such within 30 days of the
notice. The Company and Executive, upon mutual
written agreement may waive any of the foregoing
provisions which would otherwise constitute a Good
Reason.
(k) "Single Trigger Period" means the eighteen month
period which (i) begins on the date on which a
Change in Control occurs, or if a Change in Control
is based on shareholder approval pursuant to
paragraph 1(c)(iii) hereof, the date of the
consummation of the termination which was the
subject of shareholder approval, and (ii) ends
eighteen months thereafter.
(1) "Starting Date" means the date on which a
Change in Control occurs.
2. TERM. This Agreement shall be effective as of the date above
written and shall continue thereafter for 36 full calendar months
following the date of an occurrence of a Change in Control or, if the
Change in Control event is based on shareholder approval pursuant to
paragraph 1(c)(iii), 36 full calendar months following the date of the
consummation of the transaction which was the subject of shareholder
approval.
3. SEVERANCE BENEFIT. If (i) at any time during the Coverage
Period, the Executive's employment hereunder is terminated by the
Company for any reason other than Cause, death or Disability, or by the
Executive for Good Reason, or (ii) during the Single Trigger Period,
the Executive terminates his employment for any reason, then,
(a) within five business days after such termination, the
Company shall pay to the Executive (or, if the
Executive has died before receiving all payments to
which the Executive has become entitled hereunder, to
the estate of the Executive) (i) accrued but unpaid
salary and accrued but unused vacation, if any, and
(ii) severance pay in a lump sum cash amount equal to
three (3) times the Executive's Compensation;
(b) to the extent not paid or payable under such plans
and/or arrangements, the Company shall pay to the
Executive the present value of the benefits
(calculated assuming the Executive will begin
receiving benefits at the earliest retirement date
under such plans and/or arrangements, or if later, at
the end of the term of this Agreement, based on the
actuarial assumptions used for purposes of the
qualified defined benefit plan) that would have
accrued, but did not accrue, under the Company's
qualified defined benefit retirement plan, the Fall
River Gas Company Survivor Benefit Deferred
Compensation Agreement, and the excess pension
benefit provision in the Employment Agreement and/or
any successor or similar plan(s) or arrangements in
place and operational on the date of termination
and/or the Change in Control, as if (for vesting,
benefit accrual, eligibility for early retirement,
subsidized early retirement factors, actuarial
equivalence, and any other purposes) the Executive
had continued to be employed and had
26
<PAGE>
continued to participate in such plans and
arrangements through the end of the term of this
Agreement; it being understood by all parties hereto
that payments made under this Agreement and the
deemed additional credited service shall not be
considered for purposes of determining the actual
benefit payable under the terms of such plans and
arrangements and shall not be considered part of the
relevant payroll records for purposes of such plans
and arrangements; and
(c) to the extent not already provided under the terms of
the Employment Agreement, for a period commencing
with the month in which termination of employment, as
described in paragraph 3 hereof, shall have occurred,
and ending the later of the date of the Executive's
or the Executive's spouse's death, the Executive, his
spouse and any dependents shall continue to be
entitled to receive all health and dental care
benefits under the Company's welfare benefit plans
(within the meaning of Section 3(l) of the Employee
Retirement Income Security Act of 1974, as amended),
at no cost to the Executive and at the same level of
benefits that the Executive, his spouse and his
dependents were receiving or were entitled to receive
at the time of termination of employment or, if it
would result in greater benefits, at the date of the
Change in Control (if and to the extent that such
benefits shall not be payable or provided under any
Company plan, the Company shall pay or provide
equivalent benefits on an individual basis).
4. CERTAIN ADDITIONAL PAYMENTS.
(a) If Independent Tax Counsel shall determine that the
aggregate payments made to the Executive pursuant to this
Agreement and any other payments to the Executive from the
Company which constitute "parachute payments" as defined in
Section 280G of the Code (or any successor provision thereto)
("Parachute Payments") would be subject to the excise tax
imposed by Section 4999 of the Code (the "Excise Tax"), then
the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount (determined by
Independent Tax Counsel) such that after payment by the
Executive of all taxes (including any Excise Tax) imposed upon
the Gross-Up Payment and any interest or penalties imposed
with respect to such taxes, the Executive retains from the
Gross-Up Payment an amount equal to the Excise Tax imposed
upon the payments. For purposes of this paragraph 4(a),
"Independent Tax Counsel" shall mean a lawyer, a certified
public accountant with a nationally recognized accounting
firm, or a compensation consultant with a nationally
recognized actuarial and benefits consulting firm, with
expertise in the area of executive compensation tax law, who
shall be selected by the Executive and shall be reasonably
acceptable to the Company, and whose fees and disbursements
shall be paid by the Company.
(b) If Independent Tax Counsel shall determine that no
Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that the Executive has
substantial authority not to report any Excise Tax on the
Executive's Federal income tax return. If the Executive is
subsequently required to make a payment of any Excise Tax,
then the Independent Tax Counsel shall determine the amount
(the amount of such additional payments are referred herein as
"Gross-Up Underpayment") of such payment and any such Gross-Up
Underpayment shall be promptly paid by the Company to or for
the benefit of the Employee. The fees and disbursements of the
Independent Tax Counsel shall be paid by the Company.
(c) The Executive shall notify the Company in writing
within 15 days of any claim by the Internal Revenue Service
that, if successful, would require the payment by the Company
of a Gross-Up Payment. If the Company notifies the Executive
in writing that it desires to contest such claim and that it
will bear the costs and provide the indemnification as
required by this sentence, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including,
without limitation, accepting legal representation
with respect to such claim by an attorney reasonably
selected by
27
<PAGE>
the Company,
(iii) cooperate with the Company in good faith
in order to effectively contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim; provided,
however, that the Company shall bear and pay directly
all costs and expenses (including additional interest
and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax
or income tax, including interest and penalties with
respect thereto, imposed as a result of such
representation and payment of costs and expenses. The
Company shall control all proceedings taken in
connection with such contest; provided, however, that
if the Company directs the Executive to pay such
claim and sue for a refund, the Company shall advance
the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any
Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect
to such advance or with respect to any imputed income
with respect to such advance.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to paragraph 4(c)(iv), the
Executive becomes entitled to receive any refund with respect
to such claim, the Executive shall, within 10 days, pay to the
Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto).
5. NO MITIGATION REQUIRED. In the event of any termination of
the Executive's employment described in paragraph 3, the
Executive shall be under no obligation to seek other
employment, and there shall be no offset against amounts
due the Executive under this Agreement on account of any
remuneration attributable to any subsequent employment;
provided, however, to the extent the Executive receives
medical and health benefits from a subsequent employer,
medical and health benefits under paragraph 3(c) shall be
secondary to those received from the subsequent employer..
6. SOURCE OF PAYMENTS. All payments provided for in this
Agreement shall be paid in cash from the general funds of
the Company; provided, however, such payments shall be
reduced by the amount of any payments made to the
Executive or the Executive's dependents, beneficiaries,
or estate from any trust or special or separate fund
established by the Company to assure such payments. The
Company shall not be required to establish a special or
separate fund or other segregation of assets to assure
such payments, and, if the Company shall make any
investments to aid it in meeting its obligations
hereunder, the Executive shall have no right, title, or
interest whatever in or to any such investments except as
may otherwise be expressly provided in a separate written
instrument relating to such investments. Nothing
contained in this Agreement, and no action taken pursuant
to its provisions, shall create or be construed to create
a trust of any kind, or a fiduciary relationship between
the Company and the Executive or any other person. To the
extent that any person acquires a right to receive
payments from the Company, such right shall be no greater
than the right of an unsecured creditor of the Company.
7. LITIGATION EXPENSES: ARBITRATION.
(a) Full Settlement, Litigation Expenses; Arbitration.
The Company's obligation to make the payments
provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the
Company may have against the Executive or others. In
no event shall the Executive be obligated to seek
other employment or take any other action by way of
mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement. The
Company agrees to pay, upon written demand therefor
by the Executive, all legal fees and expenses which
the Executive may reasonably incur as a result of any
dispute or contest by or with the Company or others
regarding the validity or enforceability of, or
liability under, any
28
<PAGE>
provision of this Agreement (except to the extent it
is determined by a court of competent jurisdiction,
mediator or arbitrator, as the case may be, that the
Executive's material claim is, or claims are,
frivolous or without merit in which case the
Executive shall bear all such fees and expenses),
together with interest on any delayed payments at the
applicable Federal rate provided for in Section
7872(f)(2) of the Code. In any such action brought by
the Executive for damages or to enforce any
provisions of this Agreement, the Executive, in his
sole discretion, shall be entitled to seek both legal
and equitable relief and remedies, including, without
limitation, specific performance of the Company's
obligations hereunder. If the parties hereto so agree
in writing, any disputes under this Agreement may be
settled by arbitration. The obligation of the Company
under this paragraph 7 shall survive the termination
for any reason of this Agreement (whether such
termination is by the Company, by the Executive, upon
the expiration of this Agreement or otherwise).
(b) In the event of any dispute or difference between the
Company and the Executive with respect to the subject matter
of this Agreement and the enforcement of rights hereunder, the
Executive may, in the Executive's sole discretion by written
notice to the Company, require such dispute or difference to
be submitted to arbitration. The arbitrator or arbitrators
shall be selected by agreement of the parties or, if they
cannot agree on an arbitrator or arbitrators within 30 days
after the Executive has notified the Company of Executive's
desire to have the question settled by arbitration, then the
arbitrator or arbitrators shall be selected by the American
Arbitration Association (the "AAA") in Boston, Massachusetts
upon the application of the Executive. The determination
reached in such arbitration shall be final and binding on both
parties without any right of appeal or further dispute.
Execution of the determination by such arbitrator may be
sought in any court of competent jurisdiction. The arbitrators
shall not be bound by judicial formalities and may abstain
from following the strict rules of evidence and shall
interpret this Agreement as an honorable engagement and not
merely as a legal obligation. Unless otherwise agreed by the
parties, any such arbitration shall take place in Boston,
Massachusetts, and shall be conducted in accordance with the
Rules of the AAA.
8. INCOME TAX WITHHOLDING. The Company may withhold from any
payments made under this Agreement all federal, state, or
other taxes as shall be required pursuant to any law or
governmental regulation or ruling.
9. ENTIRE UNDERSTANDING. This Agreement contains the entire
understanding between the Company and the Executive with
respect to the subject matter hereof and supersedes any
similar agreement between the Company and the Executive,
except that this Agreement shall not affect or operate to
reduce any benefit or compensation inuring to the Executive of
any kind elsewhere provided and not expressly provided for in
this Agreement including, without limitation, any benefit or
compensation under the Employment Agreement and/or the Fall
River Gas Company Survivor Benefit Deferred Compensation
Agreement.
10. SEVERABILILY. If, for any reason, any one or more of the
provisions or part of a provision contained in this Agreement
shall be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall
not affect any other provision or part of a provision of this
Agreement not held so invalid, illegal or unenforceable, and
each other provision or part of a provision shall to the full
extent consistent with law continue in full force and effect.
11. CONSOLIDATION, MERGER. OR SALE OF ASSETS. If the Company
consolidates or merges into or with, or transfers all or
substantially all of its assets to, another entity the term
"the Company" as used herein shall mean such other entity and
this Agreement shall continue in full force and effect.
12. NOTICES. All notices, requests, demands and other
communications required or permitted hereunder shall be given
in writing and shall be deemed to have been duly given if
delivered or mailed, postage prepaid, first class as follows:
a. to the Company;
29
<PAGE>
Fall River Gas Company
155 North Main Street
Fall River, Massachusetts 02722
Attention:
--------------
b. to the Executive:
-----------------------
-----------------------
-----------------------
or to such other address as either party shall
have previously specified in writing to the
other.
13. NO ATTACHMENT. Except as required by law, no right to receive
payments under this Agreement shall be subject to
anticipation, commutation, alienation, sale, assignment,
encumbrance, charge, pledge or hypothecation or to execution,
attachment, levy or similar process or assignment by operation
of law, and any attempt, voluntary or involuntary, to effect
any such action shall be null, void and of no effect.
14. BINDING AGREEMENT. This Agreement shall be binding upon, and
shall inure to the benefit of, the Executive and the Company
and their respective permitted successors and assigns.
15. MODIFICATION AND WAIVER. Prior to the date of a Change in
Control, this Agreement may be terminated, modified, amended
or terminated by action of a majority of the members of the
Board. After a Change in Control, this Agreement may not be
modified or amended except by an instrument in writing signed
by the parties hereto. No term or condition of this Agreement
shall be deemed to have been waived, nor shall there be any
estoppel against the enforcement of any provision of this
Agreement, except by written instrument signed by the party
charged with such waiver or estoppel. No such written waiver
shall be deemed a continuing waiver unless specifically stated
therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a
waiver of such term or condition for the future or as to any
act other than that specifically waived.
16. HEADING OF NO EFFECT. The paragraph headings contained in this
Agreement are included solely for convenience of reference and
shall not in any way affect the meaning or interpretation of
any of the provisions of this Agreement.
17. GOVERNING LAW. This Agreement and its validity,
interpretation, performance, and enforcement shall be governed
by the laws of the Commonwealth of Massachusetts without
giving effect to the choice of law provisions in the
Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
officers thereunto duly authorized, and the Executive has signed this Agreement,
all effective as of the date first above written.
<TABLE>
<CAPTION>
<S> <C>
Witness: Fall River Gas Company:
By:
--------------------------------- -----------------------------------
Title:
Witness:
By:
--------------------------------- -----------------------------------
Title:
-----------------------------------
Witness: Executive:
</TABLE>
30
Exhibit 10(gg)
AMENDMENT TO
EMPLOYMENT AND SEVERANCE
AGREEMENTS
This Agreement dated October 4, 1999 between fall River Gas Company
(the "Company") and Bradford J. Faxon (the "Executive") shall be effective upon
the consummation of the merger (the "Merger") of the Company into Southern Union
Company ("SUG").
RECITALS
Whereas, the Executive and the Company are parties to an
employment agreement entered into as of September 30, 1991 and amended as of
January 1, 1999, (the "Employment Agreement") and a Severance Agreement dated as
of January 1, 1999 (the "Severance Agreement"); and
Whereas, the Company desires to assure the continued service of
Executive following the Merger, and Executive is desirous of committing himself
to such service; and
Whereas, the Executive and the Company desire to amend certain
provisions of the Employment Agreement and the Severance Agreement effective
upon consummation of the Merger;
AGREEMENTS
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is acknowledged by the Company and the Executive, the
Company and the Executive hereby agree as follows:
1 .Section 2 of the Employment Agreement shall be amended to read
in its entirety as follows:
"Executive shall have decision making authority, subject to the
control of the board of directors and chief operating officer of the Company,
over the employees and operations that constitute the Fall River Gas Company
business immediately prior to consummation of the Merger (as such business may
be modified by SUG). The Executive shall perform his duties hereunder faithfully
and to the best of his abilities and in furtherance of the business of the
Company and shall devote his full business time, energy, attention and skill to
the business of the Company and to the promotion of its interests. Executive's
title and duties shall be those of a division president of SUG. Executive agrees
that his duties as described in this paragraph shall not constitute "Good
Reason" under the Severance Agreement."
2. Section 3 of the Employment Agreement shall be amended to read
in its entirety as follows:
"The term of the Executive's employment hereunder shall be for a
three-year period beginning on the date of consummation of the Merger."
3. Section 4 of the Employment Agreement shall be amended to read
in its entirety as follows:
"The Company agrees to pay and the Executive agrees
to accept, in accordance with the provisions contained herein, as
compensation for performance of his duties and obligations to the
Company hereunder, a salary at an annual rate as established by
the Executive Committee of the Board of Directors of the Company
from time to time, but in no event less than the annual rate in
effect for the then immediately preceding twelve-month period.
4. Section 5 of the Employment Agreement is amended by adding the
following as a new paragraph (b) thereof:
31
<PAGE>
"(b) In addition to the foregoing, the Executive
shall be paid a cash bonus of $55,555.56 for each full month of
the eighteen (18) months following consummation of the Merger
($1,000,000 in the aggregate) during which the Executive shall
remain in the employment of the Company. In the event that
Executive's employment is terminated by Executive or the Company
for any reason during the 36-month period following consummation
of the Merger, the Company may set off against any payments due
Executive under the Severance Agreement one hundred percent
(100%) of the cash bonuses received by Executive under this
subsection. Amounts paid under this subsection or under the
Severance Agreement shall not be taken into account (i) as wages
for purposes of the Medicare Tax Reimbursement and related
Gross-Up Payment under subsection 7(f) of the Employment
Agreement, or (ii) as compensation for purposes of any pension or
other benefit plan or program."
5. Subsection 7(a) of the Employment Agreement shall be amended
by replacing the term "Company" with the term "Division" in each place it
appears, and by adding the following to the end of such subsection:
"For this purpose, the term 'Division' shall mean
the Fall River Gas Company Division of SUG. In addition, the
Executive shall be eligible to participate in the Southern Union
Company Supplemental Deferred Compensation Plan and shall be
eligible to be granted awards under the Southern Union 1992 Long
Term Stock Incentive Plan, as amended, in the discretion of the
committee administering such plan, in each case in accordance
with the terms and conditions of the respective plan."
6. Subsection 7(h) of the Employment Agreement shall be amended
to read in its entirety as follows:
"For a period commencing with the month in which
termination of employment for other than Cause shall have
occurred, and ending upon the later of the date of the
Executive's or the Executive's spouse's death, or such earlier
date as the Executive becomes covered by another employer's group
health plan, the Executive, his spouse, and any eligible
dependents (to the extent they continue to be eligible) shall
continue to be entitled to receive all health and dental care
benefits provided from time to time to active employees of the
Fall River Gas Company Division of SUG, at no cost to the
Executive. Benefits under this subsection shall be provided
either under this Agreement or the Severance Agreement, but not
both."
7. Section 9 of the Employment Agreement shall be amended by
adding the following to the end
thereof:
"Notwithstanding the foregoing provisions of this
Section 9, in the event Executive's employment is terminated (by
Executive or the Company) for any reason within 36 months
following consummation of the Merger, Executive shall be entitled
to receive either (but not both) of:
(I) the benefits he is entitled to under the
Severance Agreement (offset by the amount of the bonus payments received under
subsection 5(b) of the Employment Agreement); or
(ii) the benefits he is entitled to under Section 9
of the Employment Agreement.
As a condition to receiving payments under the
Severance Agreement or Section 9 of the Employment Agreement, the
Executive shall execute SUG's standard form of waiver and release
of all claims."
8. The last sentence of Section 15 of the Employment Agreement
shall be amended to read as follows:
"The Parties further agree that all arbitration
costs and expenses, including attorneys' fees for counsel
representing the Executive and counsel representing the Company,
shall be paid by the Company, except that attorneys' fees for
counsel representing the Executive shall not be paid by the
Company in the event the Arbitrator determines that the
employment of the Executive hereunder was properly terminated for
Cause or that Executive's material claim is, or claims are,
frivolous or without merit, in which event the Executive shall
bear all such fees, costs, and expenses."
32
<PAGE>
9. Section 3(c) of the Severance Agreement shall be amended to
read in its entirety as follows:
"For a period commencing with the month in which
termination of employment as described in paragraph 3 hereof shall
have occurred, and ending upon the later of the date of the
Executive's or Executive's spouse's death, or such earlier date as
the Executive becomes covered by another employer's group health
plan, the Executive, his spouse, and any eligible dependents (to
the extent they continue to be eligible) shall continue to be
entitled to receive all health and dental care benefits provided
from time to time to active employees of the Fall River Gas Company
Division of SUG, at no cost to the Executive. Benefits under this
subsection shall be provided either under this Agreement or the
Employment Agreement, but not both."
10. Section 3 of the Severance Agreement shall be amended by adding
a new subparagraph (d) to the end thereof, which shall read as follows:
"(d) Any payments due to the Executive under this
Severance Agreement shall be reduced by the amount of any bonus
payments made to the Executive under subsection 5(b) of the
Employment Agreement (as amended by the Amendment to Employment and
Severance Agreements dated October 4, 1999). As a condition to
receiving payments under this Severance Agreement, the Executive
shall execute SUG's standard form of waiver and release of all
claims. Amounts paid under this Severance Agreement shall not be
taken into account (i) as wages for purposes of the Medicare Tax
Reimbursement and related Gross-Up Payment under subsection 7(f) of
the Employment Agreement, or (ii) as compensation for purposes of
any pension or other benefit plan or program."
11. The first sentence of Section 7(a) of the Severance Agreement
shall be amended to read as follows:
"Except for the set-off provided for in subsection
5(b) of the Employment Agreement (as amended by the Amendment to
Employment and Severance Agreements dated October 4, 1999), the
Company's obligation to make the payments provided for in this
Severance Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the
Company may have against the Executive or others."
12. Section 11 of the Severance Agreement shall be amended by
adding the following to the end thereof:
"Notwithstanding the foregoing, the definition of Change in
Control shall only apply to the merger of Fall River Gas Company into SUG."
13. The provisions of this Amendment to Employment and Severance
Agreements shall be effective only upon consummation of the Merger. Except as
amended by this document, the provisions of the Employment Agreement and the
Severance Agreement shall remain in effect.
Dated: October 4, 1999 The Executive:
_____________________________
Bradford J. Faxon
President
FALL RIVER GAS COMPANY
By:_______________________
Peter H. Thanas
Senior Vice President and Treasurer
33
<PAGE>
Exhibit 10(hh)
AMENDMENT TO
EMPLOYMENT AND SEVERANCE
AGREEMENTS
This Agreement dated October 4, 1999 between Fall River Gas Company
(the "Company") and Peter H. Thanas (the "Executive") shall be effective upon
the consummation of the merger (the "Merger") of the Company into Southern Union
Company ("SUG").
RECITALS
Whereas, the Executive and the Company are parties to an employment
agreement entered into as of September 30, 1991 and amended as of January 1,
1999, (the "Employment Agreement") and a Severance Agreement dated as of January
1, 1999 (the "Severance Agreement"); and
Whereas, the Company desires to assure the continued service of
Executive following the Merger, and Executive is desirous of committing himself
to such service; and
Whereas, the Executive and the Company desire to amend certain
provisions of the Employment Agreement and the Severance Agreement effective
upon consummation of the Merger;
AGREEMENTS
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which is acknowledged by the Company and the Executive, the Company and the
Executive hereby agree as follows:
1. Section 2 of the Employment Agreement shall be amended to read in
its entirety as follows:
"Executive's title and duties shall be those of a division chief
financial officer of SUG. Executive agrees that his duties as described
in this paragraph shall not constitute "Good Reason" under the
Severance Agreement. The Executive shall perform his duties hereunder
faithfully and to the best of his abilities and in furtherance of the
business of the Company and shall devote his full business time,
energy, attention and skill to the business of the Company and to the
promotion of its interests."
2. Section 3 of the Employment Agreement shall be amended to read in
its entirety as follows:
"The term of the Executive's employment hereunder shall be for a
three-year period beginning on the date of consummation of the Merger."
3. Section 4 of the Employment Agreement shall be amended to read its
entirety as follows:
"The Company agrees to pay and the Executive agrees to accept, in
accordance with the provisions contained herein, as compensation for
performance of his duties and obligations to the Company hereunder, a
salary at an annual rate as established by the Executive Committee of
the Board of Directors of the Company from time to time, but in no
event less than the annual rate in effect for the then immediately
preceding twelve-month period."
4. Section 5 of the Employment Agreement is amended by adding the
following as a new paragraph (b) thereof:
34
<PAGE>
"(b) In addition to the foregoing, the Executive shall be paid a
cash bonus of $38,888.89 for each full month of the eighteen months
following consummation of the Merger ($700,000 in the aggregate) during
which the Executive shall remain in the employment of the Company. In
the event that Executive's employment is terminated by Executive or the
Company for any reason during the 36-month period following
consummation of the Merger, the Company may set off against any
payments due Executive under the Severance Agreement one hundred
percent (100%) of the cash bonuses received by Executive under this
subsection. Amounts paid under this subsection or under the Severance
Agreement shall not be taken into account (i) as wages for purposes of
the Medicare Tax Reimbursement and related Gross-Up Payment under
subsection 7(f) of the Employment Agreement, or (ii) as compensation
for purposes of any pension or other benefit plan or program."
5. Subsection 7(a) of the Employment Agreement shall be amended by
replacing the term "Company" with the term "Division' in each place it appears,
and by adding the following to the end of such subsection:
"For this purpose, the term 'Division' shall mean the Fall River Gas
Company Division of SUG. In addition, the Executive shall be eligible
to participate in the Southern Union Company Supplemental Deferred
Compensation Plan and shall be eligible to be granted awards under the
Southern Union 1992 Long Term Stock Incentive Plan, as amended, in the
discretion of the committee administering such plan, in each case in
accordance with the terms and conditions of the respective plan."
6. Subsection 7(f) of the Employment Agreement shall be amended to read
in its entirety as follows:
"For a period commencing with the month in which termination of
employment for other than Cause shall have occurred, and ending upon
the later of the date of the Executive's or the Executive's spouse's
death, or such earlier date as the Executive becomes covered by another
employer's group health plan, the Executive, his spouse, and any
eligible dependents (to the extent they continue to be eligible) shall
continue to be entitled to receive all health and dental care benefits
provided from time to time to active employees of the Fall River Gas
Company Division of SUG, at no cost to the Executive. Benefits under
this subsection shall be provided either under this Agreement or the
Severance Agreement, but not both."
7. Section 9 of the Employment Agreement shall be amended by adding the
following to the end thereof:
"Notwithstanding the foregoing provisions of this Section 9, in the
event Executive's employment is terminated (by Executive or the
company) for any reason within 36 months following consummation of the
Merger, Executive shall be entitled to receive either (but not both)
of:
(i) the benefits he is entitled to under the Severance Agreement
(offset by the amount of the bonus payments received under
subsection 5(b) of the Employment Agreement); or
(ii) the benefits he is entitled to under Section 9 of the
Employment Agreement.
As a condition to receiving payments under the Severance Agreement
or Section 9 of the Employment Agreement, the Executive shall execute
SUG's standard form of waiver and release of all claims."
8. The last sentence of Section 15 of the Employment Agreement shall be
amended to read as
35
<PAGE>
follows:
"The Parties further agree that all arbitration costs and expenses,
including attorneys'fees for counsel representing the Executive and
counsel representing the Company, shall be paid by the Company, except
that attorneys' fees for counsel representing the Executive shall not
be paid by the Company in the event the Arbitrator determines that the
employment of the Executive hereunder was properly terminated for Cause
or that Executive's material claim is, or claims are, frivolous or
without merit, in which event the Executive shall bear all such fees,
costs and expenses."
9. Section 3(c) of the Severance Agreement shall be amended to read in
its entirety as follows:
"For a period commencing with the month in which termination of
employment as described as described in paragraph 3 hereof shall have
occurred, and ending upon the later of the date of the Executive's
spouse's death, or such earlier date as the Executive becomes covered
by another employer's group health plan, the Executive, his spouse, and
any eligible dependents (to the extent they continue to be eligible)
shall continue to be entitled to receive all health and dental care
benefits provided from time to time to active employees of the Fall
River Gas Company Division of SUG, at no cost to the Executive.
Benefits under this subsection shall be provided either under this
Agreement or the Employment Agreement, but not both."
10. Section 3 of the Severance Agreement shall be amended by adding a
new subparagraph (d) to the end thereof, which shall read as follows:
"(d) Any payments due to the Executive under this Severance
Agreement shall be reduced by the amount of any bonus payments made to
the Executive under subsection 5(b) of the Employment Agreement (as
amended by the Amendment to Employment and Severance Agreements dated
October 4, 1999). As a condition to receiving payments under this
Severance Agreement, the Executive shall execute SUG's standard form of
waiver and release of all claims. Amounts paid under this Severance
Agreement shall not be taken into account (I) as wages for purposes of
the Medicare Tax Reimbursement and related Gross-UP Payment under
subsection 7(f) of the Employment Agreement, or (ii) as compensation
for purposes of any pension or other benefit plan or program."
11. The first sentence of Section 7(a) of the Severance Agreement shall
be amended to read as follows:
"Except for the set-off provided for in subsection 5(b) of the
Employment Agreement (as amended by the Amendment to Employment and
Severance Agreements dated October 4, 1999), the Company's obligation
to make the payments provided for in this Severance Agreement and
otherwise to perform its obligations hereunder shall not be affected by
any set-off, counterclaim, recoupment, defense or other claim, right or
action which the Company may have against the Executive or others."
12. Section 11 of the Severance Agreement shall be amended by adding
the following to the end thereof:
"Notwithstanding the foregoing, the definition of Change in Control
shall only apply to the merger of Fall River Gas into SUG."
36
<PAGE>
13. The provisions of this Amendment to Employment and severance
Agreements shall be effective only upon consummation of the Merger. Except as
amended by this document, the provisions of the Employment Agreement and the
Severance Agreement shall remain in effect.
Dated: October 4, 1999 The Executive:
----------------------------------
Peter H. Thanas
Senior Vice President and Treasurer
FALL RIVER GAS COMPANY
By:
-------------------------------
Bradford J. Faxon
President
37
<PAGE>
Exhibit 10(ii)
AMENDMENT TO
EMPLOYMENT AND SEVERANCE
AGREEMENTS
This Agreement dated 9/30/99 between Fall River Gas Company (the
"Company") and John F. Fanning (the "Executive") shall be effective upon the
consummation of the merger (the "Merger") of the Company into Southern Union
Company ("SUG").
RECITALS
Whereas, the Executive and the Company are parties to an employment
agreement entered into as of November 30, 1998 and amended as of January 1,
1999, (the "Employment Agreement") and a Severance Agreement dated as of January
1, 1999 (the "Severance Agreement"); and
Whereas, the Company desires to assure the continued service of
Executive following the Merger, and Executive is desirous of committing himself
to such service; and
Whereas, the Executive and the Company desire to amend certain
provisions of the Employment Agreement and the Severance Agreement effective
upon consummation of the Merger;
AGREEMENTS
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency
of which is acknowledged by the Company and the Executive, the Company and the
Executive hereby agree as follows:
1. Section 2 of the Employment Agreement shall be amended to read
in its entirety as follows:
"Executive's title and duties shall be those of a division vice
president of SUG. Executive agrees that his duties as described in
this paragraph shall not constitute "Good Reason" under the Severance
Agreement. The Executive shall perform his duties hereunder faithfully
and to the best of his abilities and in furtherance of the business of
the Company and shall devote his full business time, energy, attention
and skill to the business of the Company and to the promotion of its
interests."
2. Section 3 of the Employment Agreement shall be amended to read
in its entirety as follows:
"The term of the Executive's employment hereunder shall be for a
one- year period beginning on the date of consummation of the Merger."
3. Section 4 of the Employment Agreement shall be amended to read
in its entirety as follows:
"The Company agrees to pay and the Executive agrees to accept, in
accordance with the provisions contained herein, as compensation for
performance of his duties and obligations to the Company hereunder, a
salary at an annual rate as established by the Executive Committee of
the Board of Directors of the Company from time to time, but in no
event less than the annual rate in effect for the then immediately
preceding twelve-month period."
4. Section 5 of the Employment Agreement is amended by adding
the following as a new paragraph (b) thereof:
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"(b) In addition to the foregoing, the Executive shall be paid a
cash bonus of $16,666.67 for each full month of the eighteen (18)
months following consummation of the Merger ($300,000 in the
aggregate) during which the Executive shall remain in the employment
of the Company. In the event that Executive's employment is terminated
by Executive or the Company for any reason during the 36-month period
following consummation of the Merger, the Company may set off against
any payments due Executive under the Severance Agreement one hundred
percent (100%) of the cash bonuses received by Executive under this
subsection. Amounts paid under this subsection or under the Severance
Agreement shall not be taken into account as compensation for purposes
of any pension or other benefit plan or program."
5. Subsection 7(a) of the Employment Agreement shall be amended
by replacing the term "Company" with the term "Division" in each place
it appears, and by adding the following to the end of such subsection:
"For this purpose, the term `Division' shall mean the Fall River
Gas Company Division of SUG. In addition, the Executive shall be
eligible to participate in the Southern Union Company Supplemental
Deferred Compensation Plan and shall be eligible to be granted awards
under the Southern Union 1992 Long Term Stock Incentive Plan, as
amended, in the discretion of the committee administering such plan,
in each case in accordance with the terms and conditions of the
respective plan."
6. Subsection 7(d) of the Employment Agreement shall be amended
to read in its entirety as follows:
"For a period commencing with the month in which termination of
employment for other than Cause shall have occurred, and ending upon
the later of the date of the Executive's or the Executive's spouse's
death, or such earlier date as the Executive becomes covered by
another employer's group health plan, the Executive, his spouse, and
any eligible dependents (to the extent they continue to be eligible)
shall continue to be entitled to receive all health and dental care
benefits provided from time to time to active employees of the Fall
River Gas Company Division of SUG, at no cost to the Executive.
Benefits under this subsection shall be provided either under this
Agreement or the Severance Agreement, but not both."
7. Section 9 of the Employment Agreement shall be amended by
adding the following to the end thereof:
"Notwithstanding the foregoing provisions of this Section 9, in
the event Executive's employment is terminated (by Executive or the
Company) for any reason within 36 months following consummation of the
Merger, Executive shall be entitled to receive either (but not both)
of:
(I) the benefits he is entitled to under the Severance
Agreement (offset by the amount of the bonus payments received
under subsection 5(b) of the Employment Agreement); or
(ii) the benefits he is entitled to under Section 9 of the
Employment Agreement.
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As a condition to receiving payments under the Severance Agreement or
Section 9 of the Employment Agreement, the Executive shall execute SUG's
standard form of waiver and release of all claims."
8. The last sentence of Section 15 of the Employment Agreement shall
be amended to read as follows:
"The Parties further agree that all arbitration costs and expenses,
including attorneys' fees for counsel representing the Executive and
counsel representing the Company, shall be paid by the Company, except that
attorneys' fees for counsel representing the Executive shall not be paid by
the Company in the event the Arbitrator determines that the employment of
the Executive hereunder was properly terminated for Cause or that
Executive's material claim is, or claims are, frivolous or without merit,
in which event the Executive shall bear all such fees, costs, and
expenses."
9. Section 3(c) of the Severance Agreement shall be amended to read in
its entirety as follows:
"For a period commencing with the month in which termination of
employment as described in paragraph 3 hereof shall have occurred, and
ending upon the later of the date of the Executive's or the Executive's
spouse's death, or such earlier date as the Executive becomes covered by
another employer's group health plan, the Executive, his spouse, and any
eligible dependents (to the extent they continue to be eligible) shall
continue to be entitled to receive all health and dental care benefits
provided from time to time to active employees of the Fall River Gas
Company Division of SUG, at no cost to the Executive. Benefits under this
subsection shall be provided either under this Agreement or the Employment
Agreement, but not both."
10. Section 3 of the Severance Agreement shall be amended by adding a
new subparagraph (d) to the end thereof, which shall read as follows:
"(d) Any payments due to the Executive under this Severance Agreement
shall be reduced by the amount of any bonus payments made to the Executive
under subsection 5(b) of the Employment Agreement (as amended by the
Amendment to Employment and Severance Agreements dated 9/30/99). As a
condition to receiving payments under this Severance Agreement, the
Executive shall execute SUG's standard form of waiver and release of all
claims. Amounts paid under this Severance Agreement shall not be taken into
account as compensation for purposes of any pension or other benefit plan
or program."
11. The first sentence of Section 7(a) of the Severance Agreement
shall be amended to read as follows:
"Except for the set-off provided for in subsection 5(b) of the
Employment Agreement (as amended by the Amendment to Employment and
Severance Agreements dated 9/30/99), the Company's obligation to make the
payments provided for in this Severance Agreement and otherwise to perform
its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Executive or others."
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12. Section 11 of the Severance Agreement shall be amended by adding
the following to the end thereof:
"Notwithstanding the foregoing, the definition of Change in Control
shall only apply to the merger of Fall River Gas Company into SUG."
13. The provisions of this Amendment to Employment and Severance
Agreements shall be effective only upon consummation of the Merger. Except
as amended by this document, the provisions of the Employment Agreement and
the Severance Agreement shall remain in effect.
Dated: FALL RIVER GAS COMPANY
------------------------
By
---------------------------------
Title:
The Executive
------------------------------------
John F. Fanning
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Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of Fall River Gas Company
As independent public accountants, we hereby consent to the incorporation
by reference in the registration statement on Form S-3, File No. 333-13995 of
our reports dated November 12, 1999, included in Fall River Gas company Form
10-K for the year ended September 30, 1999, and to all references to our firm
included in this registration statement.
/S/ARTHUR ANDERSEN LLP
Boston, Massachusetts
December 21, 1999
