FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 1997
Commission File Number 1-11441
ENERGYNORTH, INC.
(Exact name of registrant as specified in its charter)
New Hampshire 02-0363755
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1260 Elm Street, P.O. Box 329, Manchester, New Hampshire 03105
(603-625-4000)
(Address, zip code and telephone number of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock - $1.00 Par Value
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,
and (2) has been subject to such filing requirements for the past
90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure 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
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
At October 21, 1997, nonaffiliates held 3,141,157 shares of the
registrant's $1.00 par value common stock. On December 2, 1997, the
aggregate market value of those shares was $73,424,545.
At the close of business on December 22, 1997, the registrant had
3,246,258 outstanding shares of its $1.00 par value common
stock.
DOCUMENTS INCORPORATED BY REFERENCE
Incorporated Document Location in Form 10-K
Portions of the Proxy Statement furnished Part III
to Shareholders in connection with Annual
Meeting to be held February 4, 1998.
Page 1 of 49 pages.
Exhibit Index appears on Pages 45 through 48.
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TABLE OF CONTENTS
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Part I Page No(s).
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Item 1. Business
General 4-5
The Utility Gas Distribution Business 5-6
The Retail Propane Business 6
Summary of Revenues 6
Deregulation 6-7
Competition 7
Gas Supply
General 7
Supply Contracts and Storage 8
Cost of Purchased and Produced Gas 8-9
Supervision and Regulation 9
Employees 9
Executive Officers of the Registrant 10
Item 2. Properties 11
Item 3. Legal Proceedings 11-13
Item 4. Submission of Matters to a Vote of Security Holders 13
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 13
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14-21
Item 8. Financial Statements and Supplementary Data 22-40
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 40
Part III
Item 10. Directors and Executive Officers of the Registrant 40
Item 11. Executive Compensation 40
Item 12. Security Ownership of Certain Beneficial Owners and Management 41
Item 13. Certain Relationships and Related Transactions 41
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TABLE OF CONTENTS (continued)
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Part IV Page No(s).
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Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 41-43
Signatures 44
Exhibit Index 45-48
Exhibit 23 - Consent of Independent Public Accountants 49
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ENERGYNORTH, INC.
FORM 10-K
PART I
ITEM 1. BUSINESS
General
The business of EnergyNorth, Inc., incorporated in the state of
New Hampshire in 1982, is the ownership of 100% of the
outstanding common stock of EnergyNorth Natural Gas, Inc.
("ENGI"), EnergyNorth Propane, Inc. ("ENPI"), and EnergyNorth
Realty, Inc. EnergyNorth, Inc. ("ENI" or the "Registrant") and
its subsidiaries, collectively referred to as the "Company," are
headquartered at 1260 Elm Street, Manchester, New Hampshire,
except for ENPI, which is headquartered at 75 Regional Drive,
Concord, New Hampshire. All subsidiaries are incorporated in the
state of New Hampshire.
The business of ENGI, the Registrant's principal subsidiary, is
the purchase, transportation and sale of natural gas for
residential, commercial and industrial use in New Hampshire.
ENPI is a retailer of liquefied petroleum gas ("propane" or "LP")
and serves customers in central and southern New Hampshire.
During 1996, ENPI entered into a joint venture with Northern New
England Gas Corporation, creating a limited liability company to
provide LP gas sales and service in the state of Vermont.
In general, the senior management of ENI serves as the senior
management of all subsidiaries. ENI provides for the
subsidiaries' administrative support and services and establishes
policies, plans and goals.
The service territory of ENGI has a population of approximately
470,000 in 27 communities situated in southern and central New
Hampshire, which includes the communities of Nashua, Manchester,
Concord and Laconia. The service area encompasses approximately
922 square miles. Located within 30 to 85 miles of Greater
Boston, ENGI's service territory offers a favorable business
climate with no general sales or personal income taxes, a productive
labor force and a comfortable, safe and clean environment
for residents and tourists.
The state of New Hampshire's nonfarm job growth continues to be
significantly above average, ranking first among New England
states with a 2.4% growth rate in 1997. This compares to a 2.1% average
growth rate nationally and a 2% average rate for New England for the
same period. New housing permits are expected to increase 8.7% in 1998
over 1997. While the New Hampshire unemployment rate for 1998 is forecasted
at 2.3% compared to 2.6% in 1997, the labor force is forecasted
to increase by 2% in 1998. Job growth and low unemployment in
the Company's service area tend to result in an increase in
volumes transported and sold and numbers of customers. (All
employment and housing statistics are taken from The New England
Economic Project's October 1997 Economic Outlook for New Hampshire.)
In fiscal 1997, the Company experienced net growth of over
<PAGE> 5
2.9% in natural gas and transportation customers and approximately 8% in
propane customers over 1996.
ENGI's marketing focus continues to stress low cost growth by
concentrating on adding new customers along the Company's more
than 1,000 miles of gas mains and adding load from the existing
customer base, while also expanding its system of mains into
areas in which there is a significant demand for natural gas
service. ENGI has an approximate 28% share of the home heating
market (based on households) within its service territory,
creating a potential for increased sales where the natural gas
pipeline is located and alternative fuels are used. In New
Hampshire, fuel oil has a penetration of over 57% of the home
heating market. Currently, the price of natural gas for heating
is comparable to the full-service price of fuel oil. From a total
energy perspective, natural gas is a stronger competitor with a
complete line of gas appliances and uses, including ranges, water
heaters, clothes dryers, fireplaces and gas logs, outdoor lights
and natural gas heat pumps for heating and cooling. While these
multiple uses provide opportunities to be the total energy
provider to new customers, they also provide opportunities for
expansion within the existing customer base. Due to continued
customer conversions from other energy sources and expansion of
its service territory, ENGI has an opportunity for growth in the
retail sales market. During the past five years, ENGI has
experienced an annual average customer growth rate of about 2%.
This compares to an approximate 1.6% national average for local
distribution companies, according to the American Gas
Association. Additional growth in distribution operations may
also occur as industrial and commercial customers turn to natural
gas for electric generation because of a price advantage and as a
means to ensure compliance with the provisions of the Clean Air
Act. As the electric industry continues to move toward
deregulation, this option may become more attractive. The
development of new gas-burning technologies for industry has
provided opportunities for increased gas usage in market sectors
that are not sensitive to the weather.
The Utility Gas Distribution Business
ENGI distributes natural gas as a regulated utility pursuant to
franchise authority granted by the State of New Hampshire Public
Utilities Commission (the "Commission"). No operations are
outside New Hampshire. While the franchise area of ENGI is
primarily residential in character, 58% of sales volumes are
commercial and industrial. As of September 30, 1997,
the Company's utility business served nearly 68,000 customers,
of which approximately 88% were residential and 12% were
commercial and industrial. During fiscal 1997, no ENGI customer
purchased more than 4% of the total ENGI annual sales and
transportation volume.
ENGI offers firm and interruptible transportation service to its
commercial and industrial customers. Transportation service
allows a customer to purchase a natural gas supply directly from
a third-party marketer. The marketer delivers the gas supply
to one of ENGI's interstate pipeline take stations. The
customer contracts with ENGI to transport the gas from the take
station to its facility. To ensure a continual, uninterrupted
supply, ENGI also provides an optional, separate standby service
as a backup to the gas supplies of transportation customers.
As of September 30, 1997, ENGI had 45 firm transportation customers.
<PAGE> 6
ENGI distributes gas to substantially all of its utility
customers through a system of underground pipelines connected
with its three operations centers in Manchester, Nashua and
Tilton, six take stations located in Manchester, Londonderry,
Windham, Concord, Hooksett and Suncook and four production plant
facilities in Manchester, Nashua, Concord and Tilton. The pipelines
are generally located in public ways and are subject to
licenses granted by municipalities. ENGI serves over 75% of New
Hampshire's natural gas customers.
The Retail Propane Business
ENPI sells propane to more than 13,000 customers, of which
approximately 91% are residential and 9% are commercial and industrial.
ENPI's service territory includes more than 100 communities primarily
located within a 50-mile radius of Concord. Propane distribution
does not require a regulatory franchise. Propane is delivered to
customers by trucks from ENPI's liquid propane storage facilities located
in communities within ENPI's service territory. ENPI purchases the
majority of its liquid propane requirements on a firm contractual
basis. The remaining liquid propane requirement is purchased in
the spot market. During 1996, ENPI entered into a joint venture
with Northern New England Gas Corporation to provide LP gas sales
and service in Vermont. ENPI holds a 49% interest and will
provide planning and management expertise to the joint venture.
Summary of Revenues
Revenues, in thousands of dollars, attributable to various
categories of gas distribution and related operations (unaudited)
during the last three fiscal years are as follows:
September 30,
------------------------------
1997 1996 1995
------------------------------
Utility (natural gas) sales service $ 91,670 $76,007 $69,067
Utility transportation service 1,308 1,503 749
Propane gas sales 12,893 11,444 8,990
Service and appliance sales 2,185 1,917 1,794
Rentals 937 987 964
------------------------------
$108,993 $91,858 $81,564
==============================
During the winter period, November 1 through March 31, the
Company's natural gas and propane revenues are substantially higher than
during the summer months. The increase in natural gas and propane revenues
during the winter, and the concomitant increase in gas supply requirements,
occurs because approximately 90% of ENGI's and ENPI's customers use natural
gas and propane for heating.
Deregulation
The implementation of Federal Energy Regulatory Commission
("FERC") Order 636 provided for the unbundling and deregulation
of the interstate pipeline system and led to the beginning of
unbundling of the intrastate pipeline system in New Hampshire.
In late 1993, the Commission approved gas
<PAGE> 7
transportation rates and separate standby and balancing services for
commercial and industrial customers.
Gas transportation services have allowed customers to utilize
ENGI's distribution system for the transportation of gas
purchased from third-party gas marketers, creating competition
from gas marketers for the sale of gas to end users. At September 30, 1997,
ENGI had 45 firm transportation customers. These customers are,
for the most part, large commercial and industrial customers.
The volume transported for transportation customers in fiscal 1997
was 673,000 Mcf, approximately 5% of ENGI's total
gas delivered. ENGI expects the number of transportation
customers and the volume of gas transported to increase.
ENGI is the sole distributor and transporter of natural gas in
its franchise area. The Tennessee Gas Pipeline Company
("Tennessee") is the only interstate pipeline to serve ENGI's
franchise area. For that reason, and because installation of
private transmission mains would typically be impractical,
customers have not attempted to bypass ENGI's distribution
system.
Competition
Natural gas competes mainly with electricity and fuel oil. The
principal competitive factors between natural gas and alternative
fuels are the price of the fuel and the conversion costs from one
fuel to another. Competition is greatest among ENGI's commercial
and industrial customers who have the capability to use
alternative fuels. ENGI provides flexible rates for users with
dual-fuel capabilities in order to better compete with the
alternative fuels.
Under current market conditions, natural gas has a significant
price advantage over electricity in New Hampshire. Natural gas
heating costs are currently less than one-third of electric
heating costs. At the present time, the price of natural gas
for heating is comparable to the full-service price of fuel oil.
ENGI continues to add customers who might otherwise elect to use
oil, because energy decisions are also based on factors other
than cost, such as service, cleanliness and environmental impact.
Demand for natural gas is expected to continue to increase as
national attention remains focused on its environmental
advantages, efficiency and security of supply. Commercial and
industrial customers continue to find gas technologies and
equipment attractive as they deal with the requirements of the
Clean Air Act Amendments of 1990 and other federal environmental
legislation.
The retail propane market is very competitive, and numerous other
retail propane operations exist within the communities served by
ENPI. The principal competitive factors in the industry are
price, dependability of delivery and service.
Gas Supply
General. The Company's gas supply goal is to maintain a balanced
portfolio of supply that will continue to minimize the overall
cost of gas while providing the necessary security to meet demand
requirements.
<PAGE> 8
Supply Contracts and Storage. ENGI's gas supply is principally
natural gas transported by the interstate pipeline system. ENGI
has contracted with Tennessee to deliver 56,833 Dekatherms
("Dths," a unit of heating value equivalent to one million
British Thermal Units) per day on a firm transportation basis and
up to 8,000 Dths per day on an interruptible basis. Natural gas
supplies are purchased both on a long-term contract and short-
term spot market basis. During fiscal 1997, ENGI purchased
approximately 3% of its annual natural gas requirements in the
spot market. ENGI's long-term contracts, under which it has firm
supply for approximately 40,529 Dths per day, have remaining
terms of two to nine years.
In fiscal 1997, approximately 61% of the gas delivered by ENGI
came from domestic pipeline sources, 20% from Canadian pipeline
supplies and approximately 12.5% from supplemental pipeline
supplies. LP and liquefied natural gas ("LNG") purchases from
both domestic and foreign sources made up approximately 1% of
the gas delivered by ENGI. Supplemental supplies of gas
are produced from plants owned and operated by ENGI. Third-party
marketer supply to end users on ENGI's system accounted for 5.5%.
All pipeline volumes are transported by Tennessee under FERC
tariffed rate schedules. The supply from Canada is transported
to Tennessee's system using the TransCanada and the Iroquois Gas
transmission systems.
In addition to long-term supply sources, ENGI stores gas during
the summer months under long-term contracts with the owners of
storage facilities located in Pennsylvania and New York. Gas
from these storage facilities, up to 24,304 Dths per day on a
firm basis, is delivered to ENGI during the winter months through
the Tennessee system. ENGI owns other on-site storage facilities
capable of holding 115,660 Dths of LP and 13,057 Dths of LNG.
ENGI has contracted for 552,000 Dths of supplemental gas vapor,
75,000 Dths of LNG and an additional 1 million gallons of LP for
the winter of 1997 - 1998.
The Company expects to be able to secure the gas supply required
to meet existing customer and forecasted new customer demands
through long-term commitments and purchases in the spot market.
Cost of Purchased and Produced Gas. The average unit cost of gas
purchased and produced during the twelve months ended September
30, 1997 was approximately $4.28 per Mcf compared to $3.96 per
Mcf for the same period last year. The 1997 average unit cost
reflects the higher cost of gas supply in the marketplace. The
cost of gas adjustment ("CGA") clause authorized by the
Commission permits recovery by ENGI from its customers (or
requires refunds to its customers) of gas costs (including
pipeline, LP, LNG and storage) that are higher (or lower) than
the cost of gas included in base rates. The CGA is determined
twice annually, for summer and winter periods.
ENGI instituted a Natural Gas Price Risk Management Program,
effective September 3, 1997. The program is designed to protect
customers from sharp increases in the commodity cost of gas.
Under the program, ENGI has purchased call options for the 1997 - 1998
winter period. The options provide
<PAGE> 9
the right, but not the obligation, to purchase gas at a predetermined
price by a certain date. All program costs and benefits will be
passed on to customers through the CGA.
Margins earned on interruptible, 280-day sales and capacity
release are passed on to firm customers through the CGA. In
addition, costs associated with a fuel inventory trust, including
administration fees and carrying costs, are recovered through the
CGA.
ENGI is subject to payment of transition costs associated with
FERC Order 636 restructuring. Tennessee began billing these costs
late in fiscal 1993. ENGI has incurred $7.9 million in
transition costs through September 30, 1997 and is recovering
these costs through the CGA. As of September 30, 1997, ENGI has
recorded additional transition costs of approximately $1.3
million that will be billed over a period of 15 months.
Meanwhile, ENGI's customers are benefiting from the restructuring,
realizing long-term savings in gas costs.
Supervision and Regulation
ENI is generally exempt from regulation under the Public Utility
Holding Company Act of 1935, because its utility operations are
predominantly intrastate in character.
ENGI is subject to regulation by the Commission, which has
authority over accounting, rates and charges, the issuance of
securities and certain operating matters. Changes in utility
rates and charges cannot be made without a 30-day notice to the
Commission, which has the power to suspend, investigate and
change any proposed increase in rates and charges.
The natural gas and propane distribution businesses of ENGI and ENPI
are subject to extensive safety regulations and reporting requirements
promulgated by the United States Department of Transportation,
but are not otherwise subject to direct regulation by federal
agencies except as to environmental matters. These subsidiaries
are also subject to zoning and other regulations by local
authorities. Their capital expenditures, earnings and
operations have not been materially affected by environmental and
local regulation.
Employees
At September 30, 1997, the Company had 252 full-time employees, of
whom 137 were represented by four contracts with Local 12012 of
the United Steelworkers of America. The contracts expire in 2001
and 2002.
<PAGE> 10
Executive Officers of the Registrant
The executive officers of the Registrant are listed below,
together with age at December 22, 1997, position and other
information as to each. The term of office of each executive
officer terminates when his or her successor has been duly
elected and qualified.
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Served as Principal Occupations and Employment
Name and Position Officer During Last Five Years Other Than
with the Registrant Age Since with the Registrant
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Robert R. Giordano 59 1982 President and Chief Executive Officer of
President and Chief ENGI; Chairman and Chief Executive Officer
Executive Officer of ENPI.
Michelle L. Chicoine 41 1990 Senior Vice President (since 1997), Treasurer
Senior Vice President, and Chief Financial Officer (since 1996), formerly
Treasurer and (1993-1997) Vice President of ENGI.
Chief Financial Officer
Frank L. Childs 53 1995 Senior Vice President (since 1997), formerly
Senior Vice President (1995-1997) Vice President of ENGI; formerly
(1992-1994) Executive Vice President and
Chief Administrative Officer of UNITIL
Corporation, a registered public utility holding
company; formerly (until 1994) President and
(until 1992) Chief Operating Officer of Fitchburg
Gas and Electric Light Company, a public utility.
Albert J. Hanlon (1) 56 1988 Senior Vice President of ENGI.
Senior Vice President
Richard P. Demers 61 1988 President of ENPI and Vice President
Vice President of ENGI.
David A. Skrzysowski 51 1983 Vice President and Controller of ENGI.
Stephen W. Smith 50 1997 Vice President of ENGI (since 1997);
Vice President formerly (1993-1996) Director of Human
Resources of Hampshire Chemical Corporation;
formerly (until 1993) Manager of Human
Resources of W.R. Grace & Co. - Conn.
__________________
(1) Mr. Hanlon has announced his intention to retire on December 31, 1997.
</TABLE>
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ITEM 2. PROPERTIES
The Company's utility gas distribution facilities constitute the
majority of its physical assets. As of September 30, 1997, ENGI
had approximately 1,050 miles of mains and 660 miles of service
connections. The utility's mains and service connections are
adequate to meet service requirements and are maintained through
a regular program of inspection and repair. Offices and
operations centers located in Nashua, Manchester, Concord and
Tilton are adequate for the needs of the Company and are
regularly maintained and in good condition. Substantially all of
the Company's properties are fully utilized.
Substantially all of the Company's utility properties are subject
to the liens of the indentures securing the ENGI First Mortgage
Bonds. In some cases, motor vehicles and nonutility assets are
subject to purchase money security interests held by banks. The
Manchester office building and substantially all of ENPI's assets
are subject to first mortgages. The Company also has long-term
leases for computer equipment.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party in several proceedings of the sort that
arise in the ordinary course of its business. Such actions, for
the most part, are covered by insurance and, to the extent that
they are not fully covered, the damages sought are not material
in amount. The Company is a party to various routine Commission
proceedings relating to operations, none of which is expected to
have a material impact on the Company's earnings or assets.
The Company and certain of its predecessors owned or operated
several facilities for the manufacture of gas from coal, a
process used through the mid-1900s 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 can be reasonably estimated.
In 1995, the Company completed the disposal of the contents of
the gasholder situated on a former gas manufacturing site in
Concord, New Hampshire. Total remediation costs amounted to
approximately $3.5 million and were recorded in deferred charges.
Recovery of these costs from customers began on July 1, 1995 and
extends over a seven-year period. The unamortized balance of $2.4
million at September 30, 1997 is excluded from rate base. The
Company may not earn a return or charge rates to customers based
on amounts not included in rate base.
The New Hampshire Department of Environmental Services ("NHDES")
has required remedial action for a portion of the Concord site at
which wastes were disposed from approximately 1852 through 1952.
The estimated cost of this remedial action ranges from $1.5
million to $2.6 million, and the Company has recorded $1.5
million at September 30, 1997 in deferred charges. The Company
has petitioned the Commission for approval of the Company's
proposed five-year recovery from ratepayers of $1.9 million of
investigation, remediation and recovery effort costs plus carrying
costs.
<PAGE> 12
The Company has instituted several lawsuits to recover the costs
of investigation and remediation of the Concord site. On
September 12, 1995, the Company filed a complaint in the United
States District Court for the District of New Hampshire against
UGI Utilities, Inc., as the successor to United Gas Improvement
Company. The Company seeks contribution for expenses incurred at
the Concord site based upon the operation of the manufactured gas
plant by the United Gas Improvement Company during a period of
time the manufactured gas plant was in operation. On December 8,
1995, the Company filed suit in the United States District Court
for the District of New Hampshire against Associated Electric and
Gas Insurance Services, Ltd., American Home Assurance Company,
CIGNA Specialty Insurance Company, International Insurance
Company, Lloyd's, Underwriters at London, Lexington Insurance
Company and National Union Fire Insurance Company, later adding
Columbia Casualty Company as a defendant, seeking declaratory
judgment that they owe the Company a defense and/or
indemnification for environmental claims associated with the
Concord facility. The Company filed suit in the New Hampshire
(Hillsborough County) Superior Court on December 8, 1995 against
the Continental Insurance Company and Netherlands Insurance
Company seeking a declaratory judgment that they owe the Company
a defense and/or indemnification for environmental claims
associated with the Concord facility. Through November 1997, the
Company reached settlements with certain of the defendants in
those suits in an aggregate amount of $1.6 million and further
payment to the Company of a portion of future Concord site
remediation costs. The Company expects that such settlement
amounts will reduce the amount that it will be permitted by the
Commission to recover from its ratepayers.
The Company and Public Service Company of New Hampshire ("PSNH"),
an electric utility company, conducted an environmental site
characterization of a former manufactured gas plant in Laconia,
New Hampshire. The Laconia manufactured gas plant operated
between approximately 1887 and 1952, and the Company owned and
operated the facility for approximately the last seven years of
its active life. Without admitting liability, the Company and
PSNH have entered into an agreement under which the costs of the
site characterization are shared. The Company's share of the
costs of the site characterization and a report to the NHDES
totaled $276,000 and has been recorded in deferred charges as of
September 30, 1997. The report describes conditions at the site,
including the presence of by-products of the manufactured gas
process in site soils, groundwater and sediments in an adjacent
water body. Based upon its review of the report, the NHDES has
directed PSNH and the Company to prepare and submit a remedial
action plan. The Company expects to incur further costs but is
currently unable to predict the magnitude of any liability that
may be imposed on it for the cost of additional studies or the
performance of a remedial action in connection with the Laconia
site. The Company commenced proceedings in New Hampshire
Superior Court and Federal District Court on February 2, 1997
against eighteen of its present and former insurers seeking
recovery of expenses that have been and will be incurred in
connection with the investigation and remediation of
contamination from the Laconia plant. Through November 1997, the
Company reached a settlement with a defendant in that suit in the
amount of $100,000.
The Company is pursuing and intends to pursue recovery from
insurance carriers and claims against any other responsible
parties seeking to ensure that they contribute appropriately to
reimburse the Company for any costs incurred with respect to
environmental matters. The Company intends to seek and expects
to receive approval of rate recovery methods with respect to
environmental matters after it
<PAGE> 13
has determined the extent of contamination, received recommendations
with regard to remediation and commenced remediation efforts.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders in the
fourth quarter of fiscal 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Outstanding shares of the Company's common stock are listed and
traded on the New York Stock Exchange with the symbol "EI." High
and low sales prices during 1997 and 1996 were as follows:
Fiscal 1997 Fiscal 1996
High Low High Low
- ------------------------------------------------------------------------
First Quarter $22 1/8 $19 $18 3/8 $16 5/8
Second Quarter 22 1/4 20 3/4 20 17
Third Quarter 22 5/8 21 1/4 19 7/8 18 1/4
Fourth Quarter 23 1/4 22 19 3/4 18 1/8
As of December 2, 1997, there were approximately 2,100 holders
of record of common stock.
Quarterly cash dividends paid were as follows:
Fiscal 1997 Fiscal 1996
- -------------------------------------------------------------------
First Quarter $.305 $.29
Second Quarter .305 .29
Third Quarter .32 .305
Fourth Quarter .32 .305
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ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per share amounts)
1997 1996 1995 1994 1993*
----------------------------------------------------
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Total operating revenues $105,871 $ 88,954 $ 78,806 $ 97,050 $ 86,197
Net income 6,518 6,078 4,104 5,422 5,368
Earnings per share 2.01 1.89 1.30 1.74 1.74
Cash dividends per share 1.25 1.19 1.12 1.08 1.06
Total assets 138,527 132,003 121,337 121,019 113,569
Capitalization:
Common stockholders' equity 47,722 45,167 42,114 40,778 38,054
Long-term debt (including capital lease obligations) 45,242 29,571 30,103 33,501 35,588
----------------------------------------------------
Total capitalization $ 92,964 $ 74,738 $ 72,217 $ 74,279 $ 73,642
====================================================
Short-term debt (including current portion of
long-term debt) $ 1,078 $ 11,854 $ 5,501 $ 2,308 $ 4,998
_______________
Reclassifications are made periodically to previously issued financial data to
conform to the current presentation.
* Results include a credit to earnings for previously disallowed gas costs,
net of tax, of $959.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Earnings and Dividends
Earnings per share for 1997 were $2.01 on net income of $6.6
million, which represents a 6.3% increase from the $1.89 per
share earned in 1996. Return on average common equity for 1997
was 14% compared to 13.9% in 1996. The 1997 increase in earnings
was primarily due to successful efforts to contain operating
costs. In addition, the Company earned $649,000, after taxes, as
a result of a favorable net property tax settlement. Partially
offsetting this increase was the impact on operations of the
significantly warmer weather during the 1996 - 1997 heating
season. While the weather was 1.5% warmer than the prior year,
it was 7.3% warmer during the November - March period.
The Company's Board of Directors increased the quarterly dividend
5% during the fiscal year. The current quarterly dividend of 32
cents per share is equal to an annual dividend of $1.28 per
share. Cash dividends paid to common shareholders in 1997 were
more than $4 million, representing a payout ratio of 62% of 1997
earnings.
<PAGE> 15
Utility Sales and Revenues
The Company's rates charged to customers are regulated by the
Commission. The Commission is required by New Hampshire law to
allow the Company to charge rates that are just and reasonable,
such that the Company is compensated for the cost of providing
service and allowed a reasonable rate of return on its
investment. The Company regularly assesses whether it is earning
a reasonable return and files for rate increases when it
determines that it is not being permitted to earn a reasonable
return.
The Company generates revenues primarily through the sale and
transportation of natural gas. The Company's gas sales are
divided into two categories: firm, whereby the Company must
supply gas to customers on demand; and interruptible, whereby the
Company may, generally during cooler months, discontinue service
to high-volume commercial and industrial customers. Sales of gas
to interruptible customers do not materially affect the Company's
operating income because all margin on such sales is returned to
the Company's firm customers.
The Company's tariff includes CGA rates that provide for
increases and decreases in the rates charged for gas to reflect
estimated changes in the cost of gas. Although changes in CGA
rates affect revenues, they do not affect total margin because
the CGA is a tariff mechanism designed to provide dollar-for-
dollar recovery of gas costs. Amounts recovered through CGA
rates are reconciled semiannually against actual costs, and
future CGA rates are adjusted accordingly.
The Company's sales are responsive to colder weather because the
majority of its firm customers use natural gas for space heating
purposes. The Company measures weather through the use of degree
days. A degree day is calculated by subtracting the average
temperature for the day from 65 degrees Fahrenheit. The "normal"
number of degree days during any period is calculated based upon
a rolling approximate 30-year average number of degree days
during such period. The table below discloses degree day data as
recorded at the U.S. weather station in Concord, New Hampshire,
comparing actual degree days to the previous period and to
normal. Because of the size and topographical variations of
the Company's service territory, weather conditions within such
territory often vary. The Company considers Concord, New
Hampshire weather data to be representative of weather conditions
within its service territory.
<TABLE>
<CAPTION>
Degree days
----------------------------
Prior Change vs. Change vs.
Actual period Normal prior period normal
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fiscal year ended September 30, 1997 7,373 7,482 7,506 (1.5)% (1.8)%
Fiscal year ended September 30, 1996 7,482 6,834 7,549 9.5% (.9)%
Fiscal year ended September 30, 1995 6,834 7,877 7,525 (13.2)% (9.2)%
</TABLE>
Utility gas service operating revenues were $93 million in 1997,
compared to $77.5 million in 1996. The increase resulted
primarily from increased CGA rates to cover gas costs deferred in
the prior year and increases in the cost of gas. In addition,
the growth in the average number of customers in 1997 was approximately
2.2%. The volume of firm gas sendout was slightly less than 1996. The
weather in 1997 was 1.5% warmer than in 1996, although the November - March
<PAGE> 16
winter heating season was 7.3% warmer. Revenues from gas transported
for customers under firm transportation service rates increased more than
21% to $1.2 million, due to a more than 37% increase in volumes transported.
This increase included a shift of 132,000 Mcf from firm commercial and
industrial sales customers, representing a decrease of $591,000 in operating
revenue attributable to the commodity cost of gas.
Shifts between transportation and sales gas will cause variations
in natural gas revenues since the transportation rate does not
include the commodity cost of gas, which is billed directly to
the customer by its marketer. Prior to August 1, 1997, the
Company's rate structure provided approximately the same margin
for sales service and transportation service. Effective August
1, 1997, transportation rates were reduced by approximately 2.4%.
The Company cannot predict the impact, if any, that the results
of this reduction in transportation rates will have on customers'
decisions to switch to transportation service or the resulting
impact decisions to switch would have on operating income. The
Company will seek an adjustment in overall rates, if it
determines that reductions in transportation rates and increases
in the number of transportation customers impair its ability to
earn its allowed return. At September 30, 1997, the Company had
45 firm transportation customers compared to 27 customers the previous
year.
Utility Cost of Gas Sold
The cost of gas sold was $54.6 million in 1997 and $39.1 million
in 1996. The increase was primarily due to higher prices from suppliers
($4 million) and timing differences related to the recovery of
gas costs through the CGA ($11.5 million). The average unit cost
of gas sold in 1997 was $4.28 per Mcf compared to $3.96 per Mcf
in 1996. Increases or decreases in purchased gas costs from
suppliers have no significant impact on margin, as they are
passed on to customers through the CGA.
Retail Propane Operations
Retail propane operations contributed $465,000 to net earnings of
the Company, a decrease of $181,000 compared to 1996. Included in
the 1997 results is the after-tax loss of more than $75,000 from the
first year of operation of the Company's propane joint venture in Vermont.
While 1997 operating revenues increased $1.4 million to $12.9 million,
gross margin increased only slightly as the unit cost of gas
increased more than 25%. The warmer weather, especially during the
November - March winter period, offset substantial customer growth
of more than 8% and resulted in a decrease in propane gallons sold of
approximately 1.4%. Operations and maintenance expense increased more
than 8% as a result of increases in labor, transportation and other
delivery-related expenses necessary to support an expanding customer base.
Operating Expenses
Operations and maintenance expense was about the same as the
prior year. Reductions in the work force, other cost saving
initiatives and workers' compensation insurance refunds helped
<PAGE> 17
offset the increases from liability insurance, uncollectible
accounts and other administrative expenses.
Depreciation and amortization expense increased from $5.8 million
to almost $6.2 million in 1997, consistent with the Company's
continued investment in the expansion and upgrading of its
distribution system and facilities and amortization of
environmental remediation costs. Net additions to property,
plant and equipment were $13.3 million and $8.8 million in 1997
and 1996, respectively.
Taxes other than income taxes decreased $1.1 million to $2.9
million, primarily due to a favorable property tax settlement,
net of adjustments, of more than $1 million, which offset property
tax rate increases and additions to taxable property.
Capital Resources and Liquidity
Because of the seasonal nature of the Company's operations, a
substantial portion of cash receipts is generated during the
November - March heating season, which results in the highest
cash inflow during late winter and early spring. However, cash
requirements for capital expenditures, dividends, long-term debt
retirement and working capital do not track this pattern of cash
receipts. The greatest demand for cash is in the fall and early
winter to support the completion of the annual construction
program and to fund gas inventories and other working capital
requirements.
Cash provided by operations and financing activities was
sufficient to fund investing activities in 1997. Borrowings
against lines of credit during 1997 ranged from zero to a high of
$14.7 million. The Company issued $22 million in First Mortgage
Bonds in September 1997. The proceeds were used to retire all
existing First Mortgage Bonds designated as 8.67% Series A
General and Refunding Mortgage Bonds Due 2002 and to repay
borrowings against lines of credit. At September 30, 1997,
deferred gas cost was in an overcollected position resulting from
winter and summer period activity. The overcollected amounts
will be returned to customers during the next corresponding
periods through the CGA mechanism. The Company's major uses of
cash were capital expenditures of $13.3 million, environmental
remediation of $1.6 million and retirement of $8.3 million of
long-term debt. The cost to issue First Mortgage Bonds was
recorded in deferred charges and will be amortized over the
life of the bonds. Included in 1997 construction expenditures
was a major main extension project to serve the town of Milford,
New Hampshire. In addition, dividend payments to shareholders
totaled $4.1 million in 1997.
Capital expenditures for 1998 are currently projected at
approximately $12.8 million. Additional cash requirements will
be necessary for the payment of dividends, environmental
remediation, annual sinking fund requirements and maturities of
long-term debt and working capital. Cash to fund these
requirements is expected to be provided principally by internally
generated funds and short-term bank borrowings under the
Company's lines of credit. At September 30, 1997, the Company
had available lines of credit aggregating $15.2 million, $100,000
of which was outstanding. In addition, a credit line of $9.5
million was available at September 30, 1997 under
<PAGE> 18
the Company's fuel inventory trust financing plan. At September 30, 1997,
the Company's fuel inventory in trust in the consolidated balance
sheet was $7.8 million with an outstanding purchase obligation of
$7.9 million.
On September 30, 1997, the Company's capitalization ratio
consisted of 50.7% common equity and 49.3% debt, including short-
term debt. Return on average common equity was 14%.
Environmental Matters
The Company and certain of its predecessors owned or operated
several facilities for the manufacture of gas from coal, a
process used through the mid-1900s 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 can be reasonably estimated.
In 1995, the Company completed the disposal of the contents of
the gasholder situated on a former gas manufacturing site in
Concord, New Hampshire. Total remediation costs amounted to
approximately $3.5 million and were recorded in deferred charges.
Recovery of these costs from customers began on July 1, 1995 and
extends over a seven-year period. The unamortized balance of $2.4
million at September 30, 1997 is excluded from rate base. The
Company may not earn a return or charge rates to customers based
on amounts not included in rate base.
The New Hampshire Department of Environmental Services ("NHDES")
has required remedial action for a portion of the Concord site at
which wastes were disposed from approximately 1852 through 1952.
The estimated cost of this remedial action ranges from $1.5
million to $2.6 million, and the Company has recorded $1.5
million at September 30, 1997 in deferred charges. The Company
has petitioned the Commission for approval of the Company's
proposed five-year recovery from ratepayers of $1.9 million of
investigation, remediation and recovery effort costs plus carrying
costs.
The Company has instituted several lawsuits to recover the costs
of investigation and remediation of the Concord site. On
September 12, 1995, the Company filed a complaint in the United
States District Court for the District of New Hampshire against
UGI Utilities, Inc., as the successor to United Gas Improvement
Company. The Company seeks contribution for expenses incurred at
the Concord site based upon the operation of the manufactured gas
plant by the United Gas Improvement Company during a period of
time the manufactured gas plant was in operation. On December 8,
1995, the Company filed suit in the United States District Court
for the District of New Hampshire against Associated Electric and
Gas Insurance Services, Ltd., American Home Assurance Company,
CIGNA Specialty Insurance Company, International Insurance
Company, Lloyd's, Underwriters at London, Lexington Insurance
Company and National Union Fire Insurance Company, later adding
Columbia Casualty Company as a defendant, seeking declaratory
judgment that they owe the Company a defense and/or
indemnification for environmental claims associated with the
Concord facility. The Company filed suit in the New Hampshire
(Hillsborough County) Superior Court on December 8, 1995 against
the Continental Insurance Company and Netherlands Insurance
Company seeking a declaratory
<PAGE> 19
judgment that they owe the Company a defense and/or indemnification
for environmental claims associated with the Concord facility.
Through November 1997, the Company reached settlements with certain
of the defendants in those suits in an aggregate amount of $1.6 million
and further payment to the Company of a portion of future Concord site
remediation costs. The Company expects that such settlement amounts
will reduce the amount that it will be permitted by the Commission to
recover from its ratepayers.
The Company and Public Service Company of New Hampshire ("PSNH"),
an electric utility company, conducted an environmental site
characterization of a former manufactured gas plant in Laconia,
New Hampshire. The Laconia manufactured gas plant operated
between approximately 1887 and 1952, and the Company owned and
operated the facility for approximately the last seven years of
its active life. Without admitting liability, the Company and
PSNH have entered into an agreement under which the costs of the
site characterization are shared. The Company's share of the
costs of the site characterization and a report to the NHDES
totaled $276,000 and has been recorded in deferred charges as of
September 30, 1997. The report describes conditions at the site,
including the presence of by-products of the manufactured gas
process in site soils, groundwater and sediments in an adjacent
water body. Based upon its review of the report, the NHDES has
directed PSNH and the Company to prepare and submit a remedial
action plan. The Company expects to incur further costs but is
currently unable to predict the magnitude of any liability that
may be imposed on it for the cost of additional studies or the
performance of a remedial action in connection with the Laconia
site. The Company commenced proceedings in New Hampshire
Superior Court and Federal District Court on February 2, 1997
against eighteen of its present and former insurers seeking
recovery of expenses that have been and will be incurred in
connection with the investigation and remediation of
contamination from the Laconia plant. Through November 1997, the
Company reached a settlement with a defendant in that suit in the
amount of $100,000.
The Company is pursuing and intends to pursue recovery from
insurance carriers and claims against any other responsible
parties seeking to ensure that they contribute appropriately to
reimburse the Company for any costs incurred with respect to
environmental matters. The Company intends to seek and expects
to receive approval of rate recovery methods with respect to
environmental matters after it has determined the extent of
contamination, received recommendations with regard to
remediation and commenced remediation efforts.
Results of Operations 1996 Compared to 1995
Net income increased to $6.1 million in 1996 from 1995 net income
of $4.1 million. Earnings per share in 1996 were $1.89 compared
to $1.30 in 1995. The 1996 increase in earnings was primarily due
to greater margins resulting mostly from growth in volumes
delivered. In 1995, earnings were reduced by approximately $.50
per share, after taxes, as a result of warmer temperatures. In
addition, 1995 earnings included a $215,000 after-tax gain ($.07
per share) on the sale of railcars.
Operating revenues were more than $88.9 million in 1996, an increase
of 12.9% from 1995. The total volume of gas delivered to utility
customers increased 13.1% and propane gallons sold increased
almost 21% in 1996. Weather in the Company's service area was
near normal in 1996,
<PAGE> 20
but 9.5% colder than the prior year. The average number of utility
customers increased 1.7% to almost 66,500 in 1996. Utility gas service
revenues, which represented more than 87% of total operating revenues,
increased by $7.7 million or 11%.
The average unit cost of gas sold in 1996 was $3.96 per Mcf
compared to $3.44 per Mcf in 1995.
Propane operations recorded $11.4 million in total operating
revenues in 1996, an increase over 1995 of $2.4 million. The
increase was primarily due to a 10% increase in the average
number of propane customers and a 21% increase in propane gallons
sold due to the effect of colder weather.
Operations and maintenance expense increased less than 3% in
1996. Reductions in the work force, other cost saving initiatives
and workers' compensation and health insurance refunds helped
offset most of the increases from liability insurance,
uncollectible accounts and other administrative expenses.
A gain of $350,000 from the sale of railcars formerly used to
transport liquid propane is included in other income for 1995.
Fiscal 1996 interest expense decreased 12.9% from 1995, due
mainly to the repayment of $3.8 million of long-term debt and a
decrease in average short-term borrowings and average short-term
interest rates.
Total federal and state income taxes increased $1.7 million in
1996. The higher level of pretax income was the main reason for
the increase. In addition, as a result of the resolution of
certain tax issues, the Company reduced federal income taxes by
$200,000 in 1995.
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 CGA 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 in future regulatory proceedings with resulting
decreases in transportation margins; and uncertainty as to the regulatory
approval of the full recovery of environmental costs, transition
costs and other regulatory assets.
<PAGE> 21
New Accounting Standards and Pronouncements
The Financial Accounting Standards Board issued new accounting
standards that the Company will adopt in future periods.
Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share," establishes standards for computing and
presenting earnings per share, effective fiscal 1998. SFAS No.
130, "Reporting Comprehensive Income," establishes standards for
reporting and the disclosure of comprehensive income and its
components, effective fiscal 1999. It is not expected that the
adoption of SFAS Nos. 128 and 130 will have a material impact on
the Company's financial reporting.
SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information," establishes standards for the way public
business enterprises report information about operating segments,
including disclosures about products and services, geographic
areas and major customers, effective fiscal 1998. The Company is
currently evaluating the impact of SFAS No. 131.
The American Institute of Certified Public Accountants issued a
Statement of Position ("SOP") 96-1, "Environmental Remediation
Liabilities." The SOP's objective is to make the timing of the
recognition of environmental obligations more uniform by
discussing the estimation process and providing benchmarks to aid
in determining when to recognize environmental liabilities. The
SOP is effective for the Company in fiscal 1998. The Company
does not expect that the adoption of the SOP will have a material
impact on the Company's financial position or results of
operations.
The "Year 2000" Issue
Many computer systems are currently based on storing two digits
to identify the year of a transaction (for example, "97" for
"1997"), rather than a full four digits, and are not programmed
to consider the start of a new century. Significant processing
inaccuracies and even inoperability could result in the year 2000
and thereafter. The Company's principal computer systems are
currently capable of processing the year 2000, or are in the
process of being upgraded or replaced by systems that are
similarly capable. The Company does not expect that the costs of
addressing the "Year 2000" issue will have a material impact on
the Company's financial position or results of operations.
<PAGE> 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) Financial Statements required by Regulation S-X
Consolidated Statements of Income EnergyNorth, Inc.
(In thousands, except per share amounts)
For the years ended September 30, 1997 1996 1995
- -------------------------------------------------------------------------
Operating revenues:
Utility gas service $ 92,978 $77,510 $69,816
Propane gas service 12,893 11,444 8,990
------------------------------
Total operating revenues 105,871 88,954 78,806
------------------------------
Operating expenses:
Cost of gas sold 61,829 44,941 39,961
Operations and maintenance 21,658 21,660 21,046
Depreciation and amortization 6,153 5,825 5,071
Taxes other than income taxes 2,876 3,946 3,753
Federal and state income taxes 3,808 3,635 1,972
------------------------------
Total operating expenses 96,324 80,007 71,803
------------------------------
Operating income 9,547 8,947 7,003
------------------------------
Other income 956 907 1,434
Interest expense:
Interest on long-term debt 2,917 3,004 3,161
Other interest 1,068 772 1,172
------------------------------
Total interest expense 3,985 3,776 4,333
------------------------------
Net income $ 6,518 $ 6,078 $ 4,104
==============================
Weighted average shares outstanding 3,243 3,216 3,166
==============================
Earnings per share $ 2.01 $ 1.89 $ 1.30
==============================
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 23
<TABLE>
<CAPTION>
Consolidated Balance Sheets EnergyNorth, Inc.
(In thousands)
September 30, 1997 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Property:
Utility plant, at cost $146,830 $136,229
Accumulated depreciation and amortization 47,815 44,683
--------------------
Net utility plant 99,015 91,546
Net nonutility property, at cost 7,430 7,748
--------------------
Net property 106,445 99,294
--------------------
Current assets:
Cash and temporary cash investments 1,998 770
Note receivable 111 39
Accounts receivable (net of allowances of $1,357 in 1997 and $1,211 in 1996) 3,430 2,029
Unbilled revenues 602 582
Deferred gas costs - 3,783
Materials and supplies 1,756 1,590
Supplemental gas supplies 9,120 9,039
Prepaid and deferred taxes 1,305 1,603
Recoverable FERC 636 transition costs 1,261 1,733
Prepaid expenses and other 1,340 1,304
--------------------
Total current assets 20,923 22,472
--------------------
Deferred charges:
Regulatory asset - income taxes 2,401 2,401
Recoverable environmental costs 6,546 6,840
Other deferred charges 2,212 996
--------------------
Total deferred charges 11,159 10,237
--------------------
Total assets $138,527 $132,003
====================
Stockholders' equity and liabilities
Capitalization (see accompanying statements) $ 92,964 $ 74,738
--------------------
Current liabilities:
Notes payable to banks 100 9,535
Current portion of long-term debt 932 2,090
Current portion of capital lease obligations 46 229
Inventory purchase obligation 7,852 7,867
Accounts payable 6,046 6,189
Deferred gas costs 1,300 -
Accrued interest 311 838
Accrued and deferred taxes 111 1,642
Accrued FERC 636 transition costs 1,261 1,733
Customer deposits, environmental and other 3,927 5,062
--------------------
Total current liabilities 21,886 35,185
--------------------
Commitments and contingencies
Deferred credits:
Deferred income taxes 18,302 16,525
Unamortized investment tax credits 1,734 1,870
Regulatory liability - income taxes 1,254 1,374
Contributions in aid of construction and other 2,387 2,311
--------------------
Total deferred credits 23,677 22,080
--------------------
Total stockholders' equity and liabilities $138,527 $132,003
====================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 24
<TABLE>
<CAPTION>
Consolidated Statements of Capitalization EnergyNorth, Inc.
(In thousands, except share information)
September 30, 1997 1996
- -------------------------------------------------------------------------------------
<S> <C> <C>
Capitalization:
Common stockholders' equity:
Common stock - par value of $1 per share, 10,000,000
shares authorized; 3,243,543 and 3,239,148 shares
issued and outstanding in 1997 and 1996, respectively $ 3,244 $ 3,239
Amount in excess of par 30,428 30,342
Retained earnings 14,050 11,586
------------------
Total common stockholders' equity 47,722 45,167
------------------
Long-term debt:
First Mortgage Bonds
Due 2002 8.67% - 7,088
Due 2009 8.44% 4,000 4,333
Due 2019 9.70% 7,000 7,000
Due 2020 9.75% 10,000 10,000
Due 2027 7.40% 22,000 -
Mortgage notes payable
Due 1999 8.75% 1,400 1,425
Due 2008 8.75% 959 1,013
Notes payable
Due through 2002 prime plus .50% 815 756
------------------
46,174 31,615
Less current portion 932 2,090
------------------
Total long-term debt 45,242 29,525
------------------
Capital lease obligations 46 275
Less current portion 46 229
------------------
Total capital lease obligations - 46
------------------
Total capitalization $92,964 $74,738
==================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 25
<TABLE>
<CAPTION>
Consolidated Statements of Common Stockholders' Equity EnergyNorth, Inc.
Common stock
------------------------- Total common
$1.00 Amount in Retained stockholders'
(In thousands, except per share amounts) par value excess of par earnings equity
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, September 30, 1994 $3,142 $28,860 $ 8,776 $40,778
Net income - - 4,104 4,104
Common stock - cash dividend ($1.12 per share) - - (3,545) (3,545)
Issuance of common stock under the Dividend
Reinvestment and Stock Purchase Plan and the
Key Employee Performance and Equity Incentive Plan 54 723 - 777
-------------------------------------------------
Balance, September 30, 1995 3,196 29,583 9,335 42,114
Net income - - 6,078 6,078
Common stock - cash dividend ($1.19 per share) - - (3,827) (3,827)
Issuance of common stock under the Dividend
Reinvestment and Stock Purchase Plan 43 759 - 802
-------------------------------------------------
Balance, September 30, 1996 3,239 30,342 11,586 45,167
Net income - - 6,518 6,518
Common stock - cash dividend ($1.25 per share) - - (4,054) (4,054)
Issuance of common stock under the Dividend
Reinvestment and Stock Purchase Plan and the
Key Employee Performance and Equity Incentive Plan 5 86 - 91
-------------------------------------------------
Balance, September 30, 1997 $3,244 $30,428 $14,050 $47,722
=================================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 26
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows EnergyNorth, Inc.
(In thousands)
For the years ended September 30, 1997 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 6,518 $ 6,078 $ 4,104
Noncash items:
Depreciation and amortization 6,869 6,606 5,841
Deferred taxes and investment tax credits, net 1,521 1,081 1,106
Changes in:
Accounts receivable, net (1,401) 142 90
Unbilled revenues (20) 4 (42)
Inventories (247) (931) (1)
Prepaid expenses and other (36) 37 (115)
Deferred gas costs 5,083 (9,428) 909
Accounts payable (143) 1,421 (80)
Accrued liabilities 191 (287) (253)
Accrued/prepaid taxes (1,233) 1,495 (403)
Payments for environmental costs and other (3,104) (823) (2,550)
------------------------------
Net cash provided by operating activities 13,998 5,395 8,606
------------------------------
Cash flows from investing activities:
Additions to property (13,262) (8,783) (7,915)
Changes in note receivable, net (72) (39) -
------------------------------
Net cash used by investing activities (13,334) (8,822) (7,915)
------------------------------
Cash flows from financing activities:
Issues of common stock 91 802 777
Issues of long-term debt 22,616 1,827 412
Change in notes payable to banks (9,435) 7,785 1,750
Increase in inventory purchase obligation 8,025 9,284 6,770
Change in customer deposits and other (355) 89 13
Cash dividends on common stock (4,054) (3,827) (3,545)
Refunding requirements:
Repayment of long-term debt (8,055) (3,536) (2,095)
Repayment of capital lease obligations (229) (256) (272)
Repayment of inventory purchase obligation (8,040) (8,546) (6,974)
------------------------------
Net cash provided by (used for) financing activities 564 3,622 (3,164)
------------------------------
Net increase (decrease) in cash and temporary cash investments 1,228 195 (2,473)
Cash and temporary cash investments, beginning of year 770 575 3,048
------------------------------
Cash and temporary cash investments, end of year $ 1,998 $ 770 $ 575
==============================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE> 27
ENERGYNORTH, INC.
Notes to Consolidated Financial Statements
Note 1. Accounting Policies
The significant accounting policies followed by EnergyNorth, Inc.
and subsidiaries (the "Company") are set forth below.
Principles of Consolidation
The accompanying financial statements of the Company include the
accounts of all subsidiaries. All significant intercompany
accounts and transactions have been eliminated in the
accompanying consolidated financial statements.
Business Organization
The Company's principal business activity is the management and
operation of a regulated gas distribution subsidiary located in
southern and central New Hampshire. The rates and accounting
practices followed by the gas distribution subsidiary are
regulated by the State of New Hampshire Public Utilities
Commission (the "Commission"). The Company's accounting policies
conform to generally accepted accounting principles applicable to
rate-regulated enterprises and reflect the effects of the
rate-making process in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 71, "Accounting for Certain
Types of Regulation."
The Company also operates a nonregulated propane distribution
subsidiary and provides service and sells appliances through its
utility subsidiary.
Revenue Recognition
Utility revenues derived from the sale and transportation of
natural gas are based on rates authorized by the Commission.
Customers' meters are read and bills are rendered on a cycle
basis throughout the month. The Company records unbilled
revenues related to gas delivered but not billed at the end of the
accounting period.
Cost of Gas Adjustment Clause
The Company's tariff includes a cost of gas adjustment ("CGA")
clause that permits billings to customers for changes in its cost
of gas over a base period cost. The tariff provides for a CGA
calculation for a summer period and a winter period. Any
difference between the cost of gas incurred and amounts billed to
customers is deferred for rate-making and accounting purposes to
the next corresponding period. Interest accrues on these amounts
at the prime rate, adjusted quarterly.
Inventories
Inventories are valued on the basis of the lower of average cost
or market.
<PAGE> 28
Depreciation
The Company provides for depreciation on the straight-line basis.
The rates applied by the regulated subsidiary are approved by the
Commission. Such rates were equivalent to a composite rate of
3.4% for each of the years ended September 30, 1997, 1996 and
1995. The depreciation rates for nonregulated property, plant
and equipment were 8%, 8.2% and 7.8% for the years ended
September 30, 1997, 1996 and 1995, respectively. Under
depreciation practices required by the Commission, when gas
utility assets under the composite method are retired from
service, the cost of the retired assets is removed from the
property accounts and charged, together with any cost of removal,
to the accumulated depreciation accounts. For all other assets,
when assets are sold or retired, the cost of the assets and their
related accumulated depreciation are removed from the respective
accounts, net removal costs are recorded and any gain or loss is
included in income.
Deferred Charges
Total deferred charges consist primarily of regulatory assets and
the cost of issuing debt. The Company has established various
regulatory assets in cases where the Commission has permitted, or
is expected to permit, recovery of specific costs over a period
of time. At September 30, 1997, regulatory assets include $6.5
million for environmental investigation and remediation costs and
$2.4 million of unrecovered deferred state income taxes (see Note
7).
The unamortized cost of issuing debt at September 30, 1997 is
$2.1 million. Deferred financing costs are amortized over the
life of the related security. Other deferred charges are
amortized over the recovery period specified by the Commission.
Investment Tax Credits
Investment tax credits are being amortized over the estimated
useful life of the property that gave rise to the credit.
Fair Value of Financial Instruments
Because of the short maturity of certain assets, which include
cash, temporary cash investments and accounts receivable, and
certain liabilities, which include accounts payable and notes
payable to banks, these instruments are stated at amounts that
approximate fair value.
If long-term debt outstanding at September 30, 1997 had been
refinanced using new issue debt rates of interest that on average
are lower than the outstanding rates, the present value of those
obligations would have increased from the amounts outstanding in the
September 30, 1997 balance sheet by 9.9%.
<PAGE> 29
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions that affect assets and liabilities, the
disclosure of contingent assets and liabilities, and revenues and
expenses. Actual amounts could differ from those estimates.
Reclassifications
Reclassifications are made periodically to previously issued
financial statements to conform to the current year's
presentation.
Note 2. Cash Flows
Supplemental disclosures of cash flow information are as follows
(in thousands):
1997 1996 1995
- --------------------------------------------------------------------
Cash paid during the year for:
Interest (net of amount capitalized) $4,080 $3,642 $4,415
Income taxes 3,972 899 1,074
In preparing the accompanying consolidated statements of cash
flows, all highly liquid investments having maturities of three
months or less when acquired were considered to be cash
equivalents and classified as cash and temporary cash
investments.
Note 3. Inventory Financing
The Company finances gas inventory purchases through the use of a
single purpose trust, which purchases gas with funds loaned to it
by a bank. As the Company requires gas to service customers, gas
is repurchased from the trust at original product cost plus
financing costs and trust fees. The cost of gas and related
financing are recoverable through the CGA.
The bank credit agreement provides for a .375% commitment fee on
the credit line and interest at prime (8.5% at September 30,
1997) with a fixed-rate interest option at less than prime on the
outstanding balance. The trust agreement provides for a
management fee of $8,000 annually. The credit agreement between
the trust and the bank provides for a total commitment of up to
$9.5 million through February 1998.
As of September 30, 1997 and 1996, the gas inventories under the
trust agreement and controlled by the Company totaled $7.8
million and are included in inventories in the accompanying
consolidated balance sheets. Inventory purchase obligations
under this financing agreement are reflected as a current
liability in the accompanying consolidated balance sheets.
<PAGE> 30
Note 4. Notes Payable to Banks
As of September 30, 1997, the Company had available $15.2 million
under various unsecured bank lines of credit that are renewed
annually, $100,000 of which was outstanding. The weighted
average interest rate on borrowings outstanding on September 30,
1997 was 8.5%. The lines bear interest at prime, or less than
prime on certain of the lines for fixed periods of time, and are
due on demand. For some lines, the terms of the credit
agreements require annual commitment fees of .25% to .35% of the
lines.
Note 5. Long-Term Debt
In September 1997, the Company issued $22 million of 7.40% First
Mortgage Bonds. The proceeds were used to retire all existing
First Mortgage Bonds designated as 8.67% Series A General and
Refunding Mortgage Bonds Due 2002 and to repay the Company's
short-term debt.
Interest payments for the First Mortgage Bonds are due semiannually.
The First Mortgage Bonds are collateralized by first
mortgage liens on substantially all real property and operating
plant facilities of the Company's gas utility operations.
The aggregate amounts of principal due for all long-term debt for
each of the five years subsequent to September 30, 1997 are as
follows (in thousands):
Fiscal year Amount
- -----------------------------------------------------------------
1998 $ 933
1999 1,821
2000 564
2001 491
2002 439
Note 6. Common Stock
On June 6, 1990, the Board of Directors declared a dividend
distribution of one Right for each outstanding share of common
stock of the Company. The Rights will not be exercisable until a
person ("Acquiring Person") or group of affiliated or associated
persons acquires 10% or more of the Company's outstanding common
stock or announces an intention to make a tender offer that would
result in ownership by such person or persons of 20% or more of
the Company's outstanding common stock. Following such an event
and unless earlier redeemed or expired, each Right entitles its
holder to purchase from the Company one share of common stock for
$48.00.
In the event the Company is acquired in a merger or other
business combination, 50% or more of its consolidated assets or
earning power is sold or transferred, any person acquires 15% or
more of the Company's outstanding common stock, or an Acquiring
Person engages in one or more self-dealing transactions with the
Company, each Right will entitle its holder to purchase, at the
Right's exercise price, a number of shares of common stock of the
Company or of the acquiring company having a
<PAGE> 31
value of twice such exercise price. Any Rights held by an
Acquiring Person or its affiliate or associate become null and void upon
the occurrence of any such events.
Prior to expiration of the Rights and except in certain instances
following acquisitions of 10% or more of the Company's common
stock, the Company may redeem all of the Rights for one cent per
Right. The Rights do not carry voting or dividend rights and have
no dilutive effect or effect on the earnings of the Company.
The distribution of the Rights was made on June 18, 1990 to
shareholders of record on that date and attach to all common
shares issued at and after that date. The Rights will expire on
June 18, 2000 unless such date is extended or unless the Rights
are earlier redeemed by the Company.
Note 7. Income Taxes
At September 30, 1997 and 1996, the SFAS No. 109 regulatory
liability amounted to $960,000 and $1 million, respectively, for
the tax benefit of unamortized investment tax credits, and
$294,000 and $339,000, respectively, for the excess reserves for
deferred taxes as a result of pre-July 1, 1987 deferred income
taxes that were recorded in excess of the current federal
statutory income tax rate.
A deferred state income tax liability and a corresponding
regulatory asset of approximately $2.4 million, representing
revenues the Company expects to recover from utility gas service
customers, were established at September 30, 1994 as a result of
recording deferred state income taxes on the cumulative temporary
differences due to a change in New Hampshire tax law. Effective
June 2, 1994, the 1% franchise tax assessed on sales of natural
gas was repealed. Prior to the change in tax law, the franchise
tax was permitted as a credit against the New Hampshire Business
Profits Tax ("NHBPT"). Because franchise tax payments exceeded
the NHBPT, the Company's gas distribution subsidiary never
incurred a NHBPT liability; therefore, no deferred state income
taxes related to temporary differences were recorded.
<PAGE> 32
The tax effects of cumulative differences that gave rise to the deferred
tax liabilities and deferred tax assets for the years ended September 30,
1997 and 1996 were as follows (in thousands):
1997 1996
- ------------------------------------------------------------------------
Deferred tax assets:
Contributions in aid of construction $ 726 $ 696
Unamortized investment tax credits 590 636
Allowance for doubtful accounts 524 468
Deferred gas costs 240 -
Other 1,044 910
------------------
Total deferred tax assets 3,124 2,710
------------------
Deferred tax liabilities:
Property-related 16,873 15,650
Deferred gas costs - 1,773
Environmental costs 1,936 1,499
Other 1,880 1,461
------------------
Total deferred tax liabilities 20,689 20,383
------------------
Net deferred tax liability $17,565 $17,673
==================
Deferred income taxes were classified in the accompanying consolidated
balance sheets at September 30, 1997 and 1996 as follows (in thousands):
1997 1996
- ------------------------------------------------------------------------
Current $ (737) $ 1,148
Long-term 18,302 16,525
------------------
Total $17,565 $17,673
==================
The components of federal and state income taxes reflected in the
accompanying consolidated statements of income for the years ended
September 30, 1997, 1996 and 1995 were as follows (in thousands):
1997 1996 1995
- ------------------------------------------------------------------------
Federal:
Current $3,649 $ (32) $ 1,090
Deferred (383) 3,165 625
Investment tax credits (136) (140) (141)
------------------------------
Total federal 3,130 2,993 1,574
------------------------------
State:
Current 756 (65) 254
Deferred (78) 707 144
------------------------------
Total state 678 642 398
------------------------------
Total provision for income taxes $3,808 $ 3,635 $ 1,972
==============================
<PAGE> 33
The total federal and state income tax provision, as a percentage
of income before federal and state income taxes, was 36.9%, 37.4%
and 32.5% for the years ended September 30, 1997, 1996 and 1995,
respectively. The following table reconciles the income tax
provision calculated using the federal statutory tax rate of 34%
to the book provision for federal and state income taxes (in thousands):
1997 1996 1995
- -------------------------------------------------------------------------------
Tax calculated at statutory rate $3,511 $3,302 $2,066
Increase (reduction) in effective tax resulting from:
Amortization of investment tax credit (136) (140) (141)
Adjustment due to change in tax rates (28) (28) (28)
State taxes, net of federal tax benefit 447 424 266
Other, net 14 77 (191)
------------------------
Total provision for income taxes $3,808 $3,635 $1,972
========================
Note 8. Employee Benefit Plans
Pension Plans
The Company has noncontributory defined benefit plans covering
substantially all employees. Benefits are based on years of
credited service and average earnings during the five highest
consecutive years of earnings prior to the normal retirement
date.
The Company's funding policy is to annually contribute to the
plans an amount that is not less than the minimum amount required
by the Employee Retirement Income Security Act of 1974 and not
more than the maximum amount deductible for income tax purposes.
The Company also has a Supplemental Executive Retirement Plan
("SERP") for certain management employees. Benefits are based on
the employee's service and earnings as defined in the SERP. The
SERP is a nonqualified plan under the Internal Revenue Code and
has no advance funding. Benefit payments are made directly by the
Company to retired employees or their beneficiaries.
Net periodic pension cost included the following components (in thousands):
1997 1996 1995
- -----------------------------------------------------------------------------
Service cost for benefits earned $ 663 $ 624 $ 614
Interest cost on projected benefit obligations 1,316 1,193 1,138
Actual return on plan assets (4,526) (1,230) (2,085)
Net amortization and deferral 3,101 (103) 885
-----------------------------
Net periodic pension cost $ 554 $ 484 $ 552
=============================
<PAGE> 34
<TABLE>
<CAPTION>
The following table sets forth the funded status of the plans at
September 30, 1997 and 1996 (in thousands):
1997 1996
- -----------------------------------------------------------------------------------
Accumulated Accumulated
Assets benefits Assets benefits
exceed exceed exceed exceed
accumulated assets accumulated assets
benefits (unfunded) benefits (unfunded)
------------------------------------------------
<S> <C> <C> <C> <C>
Vested benefit obligation $13,502 $ 1,112 $12,807 $ 1,017
================================================
Accumulated benefit obligation $14,015 $ 1,271 $13,336 $ 1,127
================================================
Projected benefit obligation $16,965 $ 2,001 $16,239 $ 1,645
Plan assets at fair value 21,018 - 16,584 -
------------------------------------------------
Funded status 4,053 (2,001) 345 (1,645)
Unrecognized transition
(asset) obligation (440) 312 (522) 375
Unrecognized prior service cost 535 6 622 7
Unrecognized net (gain) loss (2,588) 540 777 280
Additional minimum liability - (128) - (144)
------------------------------------------------
Prepaid pension (pension liability) $ 1,560 $(1,271) $ 1,222 $(1,127)
================================================
</TABLE>
<TABLE>
<CAPTION>
Assumptions used to determine the projected benefit obligation were as follows:
1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.5% 7.5% 7.5%
Rate of increase in future compensation levels 4.0% - 5.5% 4.0% - 5.5% 4.5% - 5.5%
Expected long-term rate of return on assets 9.0% 9.0% 9.0%
</TABLE>
Plan assets are invested in common stocks and bonds.
The Company has employee 401(k) savings and investment plans
covering substantially all employees. The Company made
contributions of $242,000, $216,000 and $210,000 for the years
ended September 30, 1997, 1996 and 1995, respectively.
Other Postemployment Benefits
In addition to providing pension benefits, the Company provides
certain health care and life insurance benefits to qualified
retired employees.
<PAGE> 35
The expense recorded in fiscal 1997, 1996 and 1995 for providing
postretirement benefits, including amortization of the
accumulated projected benefit obligation over a 20-year period,
was $542,000, $588,000 and $646,000, respectively.
The Company has funded these benefit costs by making cash
contributions, at the same level of expense recorded, to
voluntary employee benefit association ("VEBA") trusts
established separately for salaried and hourly paid employees.
<TABLE>
<CAPTION>
The following table sets forth the funded status of the plans at September 30,
1997 and 1996 (in thousands):
1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation as of July 31:
Retirees $ 2,477 $ 2,383
Fully eligible active plan participants 1,130 933
Other active participants 1,606 1,686
----------------
5,213 5,002
Plan assets at fair market value (2,555) (1,704)
Unrecognized transition obligation (4,183) (4,445)
Unrecognized net gain 1,697 1,319
----------------
Accrued postretirement benefit cost at July 31 172 172
Contributions for the two-month period ending September 30 133 144
----------------
Accrued postretirement benefit cost at September 30 $ 39 $ 28
================
</TABLE>
<TABLE>
<CAPTION>
The components of net periodic postretirement benefit cost at September 30,
1997 and 1996 are as follows (in thousands):
1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Service cost - benefits attributed to services during the year $ 133 $ 143
Interest cost on accumulated postretirement benefit obligation 367 358
Actual asset return (462) (104)
Net amortization and deferral 504 191
----------------
Net periodic postretirement benefit cost $ 542 $ 588
================
</TABLE>
A 10% average annual rate of increase in the per capita costs of
covered health care benefits was assumed for fiscal 1997,
reduced in steps of 1% to a level of 5% at 2002 and thereafter.
This decrease results from changes in estimates of future health
care inflation, assumed changes in health care utilization and
related effects. Increasing the assumed health care cost trend
rates by one percentage point in each year would have resulted in
a $453,000 increase in the accumulated postretirement benefit
obligation as of July 31, 1997 and an increase in the aggregate
of the service cost and interest cost components of net periodic
postretirement benefit cost for fiscal 1997 of $37,000. A
discount rate of 7.5% was used to determine the accumulated
postretirement benefit obligation. The expected long-term rate
of return on plan assets is 9%. Plan assets are invested in
common stocks and bonds.
<PAGE> 36
Note 9. Commitments and Contingencies
Contracts
The Company has various contractual agreements covering the
transportation of natural gas, underground storage facilities and
the purchase of natural gas, which are recoverable under the
Company's CGA. These contracts expire at various times from 1997
to 2011.
Litigation
The Company and its subsidiaries have been named in certain
lawsuits arising from normal operations. In the opinion of
management, the outcome of these lawsuits will not have a
material adverse effect on the financial position or results of
operations of the Company.
Environmental Issues
The Company and certain of its predecessors owned or operated
several facilities for the manufacture of gas from coal, a
process used through the mid-1900s 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 can be reasonably estimated.
In 1995, the Company completed the disposal of the contents of
the gasholder situated on a former gas manufacturing site in
Concord, New Hampshire. Total remediation costs amounted to
approximately $3.5 million and were recorded in deferred charges.
Recovery of these costs from customers began on July 1, 1995 and
extends over a seven-year period. The unamortized balance of $2.4
million at September 30, 1997 is excluded from rate base. The
Company may not earn a return or charge rates to customers based
on amounts not included in rate base.
The New Hampshire Department of Environmental Services ("NHDES")
has required remedial action for a portion of the Concord site at
which wastes were disposed from approximately 1852 through 1952.
The estimated cost of this remedial action ranges from $1.5
million to $2.6 million, and the Company has recorded $1.5
million at September 30, 1997 in deferred charges. The Company
has petitioned the Commission for approval of the Company's
proposed five-year recovery from ratepayers of $1.9 million of
investigation, remediation and recovery effort costs plus carrying
costs.
The Company has instituted several lawsuits to recover the costs
of investigation and remediation of the Concord site. On
September 12, 1995, the Company filed a complaint in the United
States District Court for the District of New Hampshire against
UGI Utilities, Inc., as the successor to United Gas Improvement
Company. The Company seeks contribution for expenses incurred at the
Concord site based upon the operation of the manufactured gas plant
by the United Gas Improvement Company during a period of time the
manufactured gas plant was in operation. On December 8, 1995, the
Company filed suit in the United States District Court
for the District of New Hampshire against
<PAGE> 37
Associated Electric and Gas Insurance Services, Ltd., American
Home Assurance Company, CIGNA Specialty Insurance Company,
International Insurance Company, Lloyd's, Underwriters at London,
Lexington Insurance Company and National Union Fire Insurance Company,
later adding Columbia Casualty Company as a defendant, seeking
declaratory judgment that they owe the Company a defense and/or
indemnification for environmental claims associated with the
Concord facility. The Company filed suit in the New Hampshire
(Hillsborough County) Superior Court on December 8, 1995 against
the Continental Insurance Company and Netherlands Insurance
Company seeking a declaratory judgment that they owe the Company
a defense and/or indemnification for environmental claims
associated with the Concord facility. Through November 1997, the
Company reached settlements with certain of the defendants in
those suits in an aggregate amount of $1.6 million and further
payment to the Company of a portion of future Concord site
remediation costs. The Company expects that such settlement
amounts will reduce the amount that it will be permitted by the
Commission to recover from its ratepayers.
The Company and Public Service Company of New Hampshire ("PSNH"),
an electric utility company, conducted an environmental site
characterization of a former manufactured gas plant in Laconia,
New Hampshire. The Laconia manufactured gas plant operated
between approximately 1887 and 1952, and the Company owned and
operated the facility for approximately the last seven years of
its active life. Without admitting liability, the Company and
PSNH have entered into an agreement under which the costs of the
site characterization are shared. The Company's share of the
costs of the site characterization and a report to the NHDES
totaled $276,000 and has been recorded in deferred charges as of
September 30, 1997. The report describes conditions at the site,
including the presence of by-products of the manufactured gas
process in site soils, groundwater and sediments in an adjacent
water body. Based upon its review of the report, the NHDES has
directed PSNH and the Company to prepare and submit a remedial
action plan. The Company expects to incur further costs but is
currently unable to predict the magnitude of any liability that
may be imposed on it for the cost of additional studies or the
performance of a remedial action in connection with the Laconia
site. The Company commenced proceedings in New Hampshire
Superior Court and Federal District Court on February 2, 1997
against eighteen of its present and former insurers seeking
recovery of expenses that have been and will be incurred in
connection with the investigation and remediation of
contamination from the Laconia plant. Through November 1997, the
Company reached a settlement with a defendant in that suit in the
amount of $100,000.
The Company is pursuing and intends to pursue recovery from
insurance carriers and claims against any other responsible
parties seeking to ensure that they contribute appropriately to
reimburse the Company for any costs incurred with respect to
environmental matters. The Company intends to seek and expects
to receive approval of rate recovery methods with respect to
environmental matters after it has determined the extent of
contamination, received recommendations with regard to
remediation and commenced remediation efforts.
<PAGE> 38
Transition Costs
Federal Energy Regulatory Commission Order 636 allows interstate
pipeline companies to recover transition costs created as they
buy out of long-term, fixed-price gas contracts. Since the
Company's pipeline supplier, Tennessee Gas Pipeline Company,
began billing these costs to the Company on September 1, 1993
as a component of demand charges, $7.9 million has been
billed through September 30, 1997. The Company has recorded
additional transition costs of approximately $1.3 million that
are expected to be billed over a period of 15 months. The
Company is recovering transition costs through the CGA.
<PAGE> 39
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and the Shareholders of EnergyNorth, Inc.:
We have audited the accompanying consolidated balance sheets and
statements of capitalization of EnergyNorth, Inc. (a New
Hampshire corporation) and subsidiaries as of September 30, 1997
and 1996, and the related consolidated statements of income,
common stockholders' equity and cash flows for each of the three
years in the period ended September 30, 1997. These consolidated
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 EnergyNorth, Inc. and subsidiaries as of September 30, 1997
and 1996, and the results of their operations and their cash
flows for each of the three years in the period ended September
30, 1997, 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, is presented
for purposes of additional analysis and is not a required part of
the basic consolidated financial statements. This information has
been subjected 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.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 4, 1997
<PAGE> 40
(b) Supplementary Financial Information
<TABLE>
<CAPTION>
Selected Quarterly Financial Data (Unaudited) EnergyNorth, Inc.
(In thousands, except per Operating Operating Net income Earnings (loss) Cash dividend
share amounts) revenues income (loss) (loss) per share paid per share
- -------------------------------------------------------------------------------------------------------
First Quarter
<C> <C> <C> <C> <C> <C>
1997 $29,454 $ 4,434 $ 3,618 $1.12 $.305
1996 25,976 4,653 3,751 1.17 .29
- -------------------------------------------------------------------------------------------------------
Second Quarter
1997 48,898 7,295 6,581 2.03 .305
1996 39,661 7,379 6,671 2.07 .29
- -------------------------------------------------------------------------------------------------------
Third Quarter
1997 18,085 (853) (1,576) (.49) .32
1996 14,901 (1,104) (1,693) (.53) .305
- -------------------------------------------------------------------------------------------------------
Fourth Quarter
1997 9,434 (1,329) (2,105) (.65) .32
1996 8,416 (1,981) (2,651) (.82) .305
- -------------------------------------------------------------------------------------------------------
Note: Earnings (loss) per share is based on the weighted average shares
outstanding at the end of the quarter. In the opinion of the Company, the
quarterly financial data include all adjustments, consisting of normal
recurring adjustments and reclassifications, necessary for a fair presentation
of such information. Quarterly amounts vary significantly due to seasonal
weather conditions.
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There were no such matters during the fiscal year ended September 30, 1997.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by this Item is incorporated by
reference to pages 3 and 4 of the Registrant's Proxy Statement
for its Annual Meeting to be held February 4, 1998, except for
information relating to identification of Executive Officers of
the Registrant which is contained in Part I of this Report.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this Item is incorporated by
reference to "Compensation of Directors," "Executive
Compensation" and "Noncontributory Retirement Plan" on pages 5
through 7 of the Registrant's Proxy Statement for its Annual
Meeting to be held February 4, 1998.
<PAGE> 41
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information called for by this Item is incorporated by
reference to pages 2 and 3 of the Registrant's Proxy Statement
for its Annual Meeting to be held February 4, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this Item is incorporated by
reference to "Compensation Committee Interlocks and Insider
Participation" on page 5 of the Registrant's Proxy Statement for
its Annual Meeting to be held February 4, 1998.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) List of documents filed as part of this Report
(1) Financial Statements
The following financial statements are included herein
under Part II, Item 8:
Page No(s).
in this Report
--------------
Consolidated Statements of Income for the years ended
September 30, 1997, 1996 and 1995 22
Consolidated Balance Sheets at September 30, 1997 and 1996 23
Consolidated Statements of Capitalization at September 30,
1997 and 1996 24
Consolidated Statements of Common Stockholders' Equity
for the years ended September 30, 1997, 1996 and 1995 25
Consolidated Statements of Cash Flows for the years ended
September 30, 1997, 1996 and 1995 26
Notes to Consolidated Financial Statements 27-38
Report of Independent Public Accountants 39
<PAGE> 42
(2) Financial Statement Schedules
The following supplementary financial statement schedules
required by Rule 5-04 of Regulation S-X, and report thereon,
are filed as part of this Form 10-K on the page indicated below:
Schedule Page No. in
Number Description this Report
-------- ----------- -----------
II Consolidated Valuation and Qualifying Accounts for
the three years ended September 30, 1997 43
Report of Independent Public Accountants 39
Schedules other than the one listed above are either
not required or not applicable, or the required
information is shown in the financial statements or
notes thereto.
(3) Exhibits Required by Item 601 of Regulation S-K
See Exhibit Index on pages 45 through 48.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the
quarter ended September 30, 1997.
(c) Exhibits - See Exhibit Index on pages 45 through 48
(d) Financial Statement Schedules
<PAGE> 43
SCHEDULE II
ENERGYNORTH, INC.
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Reserves that are deducted in the balance sheets
from assets to which they apply:
<TABLE>
<CAPTION>
Additions
-----------------------
Balance at Charged to Charged to Balance
Year Ended beginning costs and other at end
September 30, Description of period expenses accounts(1) Deductions of period
- --------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
1997 Allowance for
doubtful accounts $1,211 $1,232 $140 $1,226 $1,357
1996 Allowance for
doubtful accounts 950 1,137 143 1,019 1,211
1995 Allowance for
doubtful accounts 1,050 982 172 1,254 950
_____________________
(1) Represents recoveries on accounts previously written off
</TABLE>
<PAGE> 44
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.
ENERGYNORTH, INC.
Date: December 22, 1997 by: /s/ Robert R. Giordano
Robert R. Giordano
President & Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities indicated on
December 22, 1997.
/s/ Robert R. Giordano Director, President and Chief
Robert R. Giordano Executive Officer (principal
executive officer)
/s/ Michelle L. Chicoine Senior Vice President, Treasurer and
Michelle L. Chicoine Chief Financial Officer (principal
financial officer)
/s/ David A. Skrzysowski Vice President & Controller
David A. Skrzysowski (principal accounting officer)
/s/ Edward T. Borer Director
Edward T. Borer
/s/ N. George Mattaini Director
N. George Mattaini
/s/ John E. Tulley II Director
John E. Tulley II
/s/ Richard B. Couser Director
Richard B. Couser
/s/ Sylvio L. Dupuis Director
Sylvio L. Dupuis
<PAGE> 45
EXHIBIT INDEX
The exhibits listed below are filed herewith, or are
incorporated herein by reference to other filings.
Exhibit
Number Description
3.1 Articles of Incorporation of EnergyNorth, Inc.
are incorporated by reference to Exhibit 3.1 to
EnergyNorth, Inc.'s Quarterly Report on Form 10-Q (File
No. 1-11441) for the quarter ended March 31, 1996.
3.2 By-Laws of EnergyNorth, Inc., as amended, are incorporated
by reference to Exhibit 4 to EnergyNorth, Inc.'s Post-Effective
Amendment No. 2 to Registration Statement on Form S-3,
No. 33-58127, dated November 21, 1996.
4.1 Gas Service, Inc. General and Refunding Mortgage
Indenture, dated as of June 30, 1987, as amended and
supplemented by a First Supplemental Indenture, dated as
of October 1, 1988, and by a Second Supplemental
Indenture, dated as of August 31, 1989, is incorporated
by reference to Exhibit 4.1 to EnergyNorth, Inc.'s Form
10-K (File No. 0-11035) for the fiscal year ended
September 30, 1989.
4.2 Third Supplemental Indenture, dated as of
September 1, 1990, to Gas Service, Inc. General and
Refunding Mortgage Indenture, dated as of June 30, 1987,
is incorporated by reference to Exhibit 4.2 to
EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for
the fiscal year ended September 30, 1990.
4.3 Fourth Supplemental Indenture, dated as of
January 10, 1992, to Gas Service, Inc. General and
Refunding Mortgage Indenture, dated as of June 30, 1987,
is incorporated by reference to Exhibit 4.3 to
EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for
the fiscal year ended September 30, 1992.
4.4 Fifth Supplemental Indenture, dated as of
February 1, 1995, to Gas Service, Inc. General and
Refunding Mortgage Indenture, dated as of June 30, 1987, is
incorporated by reference to EnergyNorth, Inc.'s Form
10-K (File No. 1-11441) for the fiscal year ended
September 30, 1996.
4.5 Sixth Supplemental Indenture, dated as of
September 15, 1997, to Gas Service, Inc. General and
Refunding Mortgage Indenture, dated as of June 30, 1987,
is incorporated by reference to Exhibit 4.5 to EnergyNorth
Natural Gas, Inc.'s Amendment No. 1 to Registration
Statement on Form S-1, No. 333-32949, dated September
10, 1997.
<PAGE> 46
4.6 Copies of credit agreements defining the rights
of holders of long-term debt of certain subsidiaries of
EnergyNorth, Inc., under which the amounts of the debt
issued do not exceed 10% of the consolidated assets of
EnergyNorth, Inc., will be furnished to the Securities
and Exchange Commission upon request.
4.7 Rights Agreement, dated as of June 18, 1990,
between the Registrant and State Street Bank & Trust
Company as Rights Agent is incorporated by reference to
Exhibit I-2 to EnergyNorth, Inc.'s Registration
Statement on Form 8-A, dated June 18, 1990.
10.1 Gas transportation agreement (FT-A), dated as
of September 1, 1993, between Tennessee Gas Pipeline
Company and EnergyNorth Natural Gas, Inc. is
incorporated by reference to Exhibit 10.1 to
EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for
the fiscal year ended September 30, 1993.
10.2 Gas transportation agreement (contract No.
632), dated as of September 1, 1993, between Tennessee
Gas Pipeline Company and EnergyNorth Natural Gas, Inc.
is incorporated by reference to Exhibit 10.2 to
EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the
fiscal year ended September 30, 1995.
10.3 Supplemental Executive Retirement Plan of
EnergyNorth, Inc., as amended, is incorporated by
reference to Exhibit 10.3 to EnergyNorth, Inc.'s Form 10-
K (File No. 1-11441) for the fiscal year ended September
30, 1996.
10.4 Deferred Compensation Agreement, dated as of
October 1, 1997, between Robert R. Giordano and the
Registrant.
10.5 Deferred Compensation Agreement, dated as of
November 30, 1993, between Albert J. Hanlon and the
Registrant, as amended, is incorporated by reference to
Exhibit 10.5 to EnergyNorth, Inc.'s Form 10-K (File No.
0-11035) for the fiscal year ended September 30, 1993.
10.6 Amendment to Deferred Compensation Agreement,
dated as of October 1, 1996, between Albert J. Hanlon
and the Registrant is incorporated by reference to
Exhibit 10.7 to EnergyNorth, Inc.'s Form 10-K (File No.
1-11441) for the fiscal year ended September 30, 1996.
10.7 Deferred Compensation Agreement, dated as of
October 1, 1997, between Richard P. Demers and the
Registrant.
10.8 Deferred Compensation Agreement, dated as of
October 1, 1997, between Frank L. Childs and the
Registrant.
10.9 Deferred Compensation Agreement, dated as of
October 1, 1997, between Michelle L. Chicoine and the
Registrant.
<PAGE> 47
10.10 EnergyNorth, Inc. 1992 Directors' Deferred
Compensation Plan, as amended.
10.11 Consulting Agreement, dated as of October 12,
1990, between N. George Mattaini and the Registrant is
incorporated by reference to Exhibit 10.17 to
EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for
the fiscal year ended September 30, 1990.
10.12 Amendment No. 1 to Consulting Agreement dated
as of February 7, 1996 between N. George Mattaini and
the Registrant is incorporated by reference to Exhibit
10.13 to EnergyNorth, Inc.'s Form 10-K (File No. 1-
11441) for the fiscal year ended September 30, 1996.
10.13 Employment Agreement, dated as of December 1,
1995, between Robert R. Giordano and the Registrant is
incorporated by reference to Exhibit 10.9 to
EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the
fiscal year ended September 30, 1995.
10.14 Employment Agreement, dated as of December 1,
1995, between Albert J. Hanlon and the Registrant is
incorporated by reference to Exhibit 10.11 to
EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for the
fiscal year ended September 30, 1995.
10.15 Management Continuity Agreement, dated as of
December 7, 1995, between Robert R. Giordano and the
Registrant is incorporated by reference to Exhibit 10.12
to EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for
the fiscal year ended September 30, 1995.
10.16 Management Continuity Agreement, dated as
of December 7, 1995, between Albert J. Hanlon and the
Registrant is incorporated by reference to Exhibit 10.14
to EnergyNorth, Inc.'s Form 10-K (File No. 0-11035) for
the fiscal year ended September 30, 1995.
10.17 Management Continuity Agreement, dated as
of December 2, 1996, between Michelle L. Chicoine and
the Registrant is incorporated by reference to Exhibit
10.18 to EnergyNorth, Inc.'s Form 10-K (File No. 1-
11441) for the fiscal year ended September 30, 1996.
10.18 Management Continuity Agreement, dated as
of December 2, 1996, between Frank L. Childs and the
Registrant is incorporated by reference to Exhibit 10.19
to EnergyNorth, Inc.'s Form 10-K (File No. 1-11441) for
the fiscal year ended September 30, 1996.
10.19 Management Continuity Agreement, dated as
of December 7, 1995, between Richard P. Demers and the
Registrant is incorporated by reference to Exhibit 10.20
to EnergyNorth, Inc.'s Form 10-K (File No. 1-11441) for
the fiscal year ended September 30, 1996.
<PAGE> 48
10.20 EnergyNorth, Inc. Key Employee Performance
and Equity Incentive Plan, as amended, is incorporated
by reference to Exhibit 10.15 to EnergyNorth, Inc.'s
Form 10-K (File No. 0-11035) for the fiscal year ended
September 30, 1995.
10.21 Consulting Agreement, dated as of December 1,
1997, between Albert J. Hanlon and the Registrant.
10.22 EnergyNorth, Inc. Directors' Incentive
Compensation Plan is incorporated by reference to
Exhibit 10 to EnergyNorth Inc.'s Quarterly Report on
Form 10-Q (File No. 1-11441) for the quarter ended March
31, 1997.
21 Subsidiaries of the Registrant.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule of the Registrant.
99 EnergyNorth, Inc.'s Dividend Reinvestment and
Stock Purchase Plan, as amended, is incorporated by
reference to Exhibit 99 of EnergyNorth Inc.'s Post-
Effective Amendment No. 2 to Registration Statement on
Form S-3, No. 33-58127, dated November 21, 1996.
<PAGE> 49
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT, made as of October 1, 1997, by and between
ENERGYNORTH, INC. ("ENI") a New Hampshire corporation with a
principal place of business in Manchester, New Hampshire, and
Robert R. Giordano of Bedford, New Hampshire ("Employee").
W I T N E S S E T H
WHEREAS, Employee is employed by ENI in an executive
position and performs valuable services to ENI in such position;
and
WHEREAS, Employee possesses great ability in the gas
distribution business, an intimate knowledge of ENI, its
operating methods, personnel and goals; and
WHEREAS, ENI desires further to compensate Employee for past
services, to secure Employee's future services, to secure
Employee's commitment to furnish advisory services to ENI
following Employee's termination of employment by ENI and to
compensate Employee therefor;
NOW, THEREFORE, ENI and Employee mutually agree as follows:
1. ENI agrees to continue to employ Employee and Employee
agrees to continue to serve ENI devoting Employee's normal
working time to the interests and activities of ENI in the
capacity of President and CEO, or such other capacity as the
Board of Directors of ENI from time to time may assign for the
period agreed between Employee and ENI consistent with an
Employment Agreement entered into between Employee and ENI.
<PAGE> 2
2. During the term of Employee's employment, Employee
shall devote substantially all of Employee's time, attention,
skill and efforts to the performance of Employee's duties for ENI
as provided in Employee's Employment Agreement.
3. ENI shall pay Employee during the term of Employee's
employment such salary as the Board of Directors shall from time
to time determine consistent with Employee's Employment
Agreement, together with the deferred compensation payable as
provided in paragraph 4 below.
4. (a) ENI, on the last day of each month, commencing as
of January 1998, shall credit to a book reserve (the
"Deferred Compensation Account" or the "Account") in
Employee's name established for this purpose, the
amount stated on the Deferred Compensation Election
Form; the amounts credited under this Section 4(a)
shall continue to be credited monthly during the
continuance of the Employee's employment hereunder.
In addition, EnergyNorth, Inc. shall credit to the
account a percentage or an amount of any cash
incentive award paid to Employee pursuant to the
EnergyNorth, Inc. Key Employee Performance and
Equity Incentive Plan earned in connection with
the 1998 Plan Year and subsequent Plan Years.
<PAGE> 3
a. ENI shall credit to the Deferred Compensation Account at the
end of each month during which any balance remains in the
Account, whether before or after payments from the
Account have commenced, an amount which shall be the
equivalent of interest on the amounts credited to the
Account throughout the previous month computed at the
thirty-year U.S. treasury bond yield as of the
last day of each calendar quarter, plus 400 basis points,
adjusted quarterly; provided, however, the rate shall not
be less than nine percent (9%) or greater than sixteen
percent (16%).
(b) In addition, ENI shall pay to Employee, monthly over the
same period as specified in Section 6 below, an additional amount
of money equal to the monthly increase in the qualified pension
plan benefits to which Employee would then have been entitled had
the amount that was credited to the Deferred Compensation Account
under Section 4(a) above been paid to Employee and had it
qualified as "earnings" as defined in ENI's qualified pension
plan. Such additional payment shall be payable only to the
extent that such deferred
<PAGE> 4
compensation hereunder does not qualify
as "earnings" under ENI's qualified pension plan and shall be
payable only to the extent Employee would otherwise have received
greater pension benefits from ENI's qualified pension plan. Such
payments shall commence at the same time as the other payments
hereunder. The amount due shall be computed actuarially using
the same assumptions as used in the qualified pension plan.
(c) ENI is not required to fund this Agreement in any way, but
if it chooses to set aside funds for the Account, any such funds
may be kept in cash, or invested in mutual funds, stocks, bonds,
securities, or any other assets as may be selected by the Board
of Directors, in its discretion, and also may be utilized by ENI
from time to time for any other purpose. Title to and beneficial
ownership of any funds, whether cash or investments, which ENI
may earmark to pay the contingent deferred compensation
obligation hereunder, at all times shall remain in ENI, and the
Employee and Employee's designated beneficiary shall not have any
property interest whatsoever in any such funds or in any specific
assets of ENI.
<PAGE> 5
5. Employee may change the amounts of Employee's salary to
be deferred under Section 4(a) above for the ensuing calendar
year by filing in writing with the Board of Directors of ENI not
less than thirty (30) days prior to the end of the prior calendar
year, the amount of Employee's salary not yet earned or paid that
is to be deferred and credited to Employee's Deferred
Compensation Account. Employee may change the amounts of
Employee's Cash Incentive Award to be deferred under Section 4(a)
above for ensuing plan years by filing in writing with the Board
of Directors of ENI not less than thirty (30) days prior to the
end of that Plan year, the percentage or amount of Employee's
cash incentive award not yet paid that is to be deferred and
credited to the Employee's Deferred Compensation Account.
6. The benefits to be paid as deferred compensation are as
follows:
(a) If the Employee's employment hereunder is terminated on or
after the Employee shall have reached the age of 65, ENI shall
pay to Employee in 15 annual installments the amount in
Employee's Deferred Compensation Account as of such date together
with the interest added pursuant to Section 4(b). The Account
shall be valued as of the date the first payment is to be made,
one fifteenth (1/15th) of that amount shall be paid in the first
year and that same amount shall be paid
<PAGE> 6
in the succeeding fourteen (14) years. In addition, in each
of the succeeding fourteen (14) years, any interest credited
to the Account with respect to the previous year shall be
paid with each annual payment. If the Employee should die on
or after Employee's 65th birthday and before the 15 annual
payments are made, the unpaid balance will continue to be paid
in installments for the unexpired portion of such 15 year
period to Employee's designated beneficiary in the same
amount as set forth above.
(b) If the Employee's employment by ENI is terminated for any
reason other than death and disability but before the Employee
shall have reached the age of 65, no payments shall be made until
the Employee shall have reached the age of 65 at which time
payments shall be made in the same manner and to the same extent
as set forth in Section 6(a) above. Notwithstanding the
foregoing, if prior to reaching age 65 the Employee should die,
or if prior to reaching age 65 Employee should become disabled,
then payments shall be made in the same manner and to the same
extent as set forth in Section 6(c), below.
<PAGE> 7
(c) If the Employee's employment is terminated because of
disability or death before the Employee has reached the age of 65
and while in the employ of ENI, then ENI, during Employee's
disability, shall make annual payments not to exceed fifteen (15)
to the Employee or, in the event of Employee's death, make
fifteen (15) annual payments to Employee's designated
beneficiary, all in the same manner and to the same extent as
provided herein.
(d) If both the Employee and Employee's designated beneficiary
should die before a total of fifteen (15) annual payments are
made by ENI, then the remaining amount in the Deferred
Compensation Account shall be determined as of the date of the
death of the designated beneficiary and shall be paid, with
interest accrued to the date of payment, as promptly as possible
in one lump sum to the Employee's estate.
(e) The designated beneficiary (which may include alternate
beneficiaries) referred to in this paragraph may be designated or
changed by the Employee (without the consent of any prior
beneficiary) on a form provided by ENI and delivered by Employee
to ENI before Employee's death. If no such beneficiary shall
have been
<PAGE> 8
designated, or if no designated beneficiary shall
survive the Employee, the installment payments payable under this
paragraph shall be payable to the Employee's estate.
(f) For purposes of Section 6(c) above, disability is defined as
provided in any long-term disability plan of ENI covering
Employee, or, if none, as defined under the EnergyNorth Inc.
Retirement Plan for Salaried Employees.
(g) The installment payments to be made to the Employee under
Sections 6(a) and 6(c) above shall commence on the first day of
the month next following the date of the termination of
Employee's employment, and the installment payments to be made to
the Employee under Section 6(b) above shall commence on the first
day of the month next following the date on which Employee shall
have reached the age of 65. The installment payments to be made
to the designated beneficiary under the provisions of this
Section 6 shall commence on a date to be selected by ENI but
within six months from the date of death of the Employee.
(h) Notwithstanding anything herein contained to the contrary,
the Board shall have the right, with the
<PAGE> 9
written consent of Employee, to vary the manner and
time of making the installment distributions provided
in this paragraph and may make such distributions in lump
sums or over a shorter period of time than 15 years as
it may find appropriate, but not over a longer period
of time than fifteen (15) years or less frequently
then once per year.
(i) The Board may, in its sole discretion, permit a withdrawal
of funds from a Participant's Account to meet a severe financial
hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or of a
dependent of the Participant, loss of the Participant's property
due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of
the Participant (an "Unforeseen Emergency") at such time and
under such circumstances as deemed by the Board to be an
Unforeseen Emergency. Distribution of funds from the
Participant's Account shall be in an amount sufficient only to
meet the Unforeseen Emergency presented by the Participant to the
Board, and under no circumstances may a participant's
<PAGE> 10
withdrawal of funds exceed the amount required to
satisfy the Unforeseen Emergency.
7. Employee is accorded the right by this Agreement to
defer receipt of compensation and earnings that, but for the
Employee's election, would be paid currently. The right to
receive payment of the amounts accrued shall vest absolutely and
become nonforfeitable on the crediting of such amount at the end
of each month. The obligation of ENI to make the payments shall
not be excused by any breach of this Agreement or of any other
agreement between Employee and ENI.
8. Nothing contained in this Agreement and no action taken
pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary
relationship between ENI and the Employee, Employee's designated
beneficiary or any other person. Any funds that may be invested
under the provision of this Agreement shall continue for all
purposes to be part of the general funds of ENI and no person
other than ENI shall by virtue of the provisions of this
Agreement have any interest in such funds. To the extent that
any person acquires a right to receive payments from ENI under
this Agreement, such right shall be no greater than the right of
any unsecured general creditor of ENI.
9. The right of the Employee or any other person to the
payment of deferred compensation or other benefits under this
Agreement shall not be assigned, transferred, pledged
<PAGE> 11
or encumbered except by will or by the laws of descent and
distribution.
10. If the Board shall find that any person to whom any
payment is payable under this Agreement is unable to care for his
or her affairs because of illness or accident, or is a minor, any
payment due (unless a prior claim therefore shall have been made
by a duly appointed guardian, committee or other legal
representative) may be paid to the spouse, a child, a parent, or
a brother or sister, or to any person deemed by the Board to have
incurred expense for such person otherwise entitled to payment,
in such manner and proportions as the Board may determine. Any
such payment shall be a complete discharge of the liabilities of
ENI under this Agreement.
11. Nothing contained herein shall be construed as
conferring upon the Employee the right to continue in the employ
of ENI other than as stated in Section 1; provided, however, this
Agreement shall be construed to be consistent with an employment
agreement entered into between Employee and ENI.
12. Any deferred compensation payable under this Agreement
shall be deemed salary or other compensation to the Employee for
the purpose of computing benefits to which the Employee may be
entitled under any pension plan, life insurance plan, or other
arrangement of ENI for the benefit of its employees, to the
extent allowable under the Internal Revenue Code or other
applicable laws and regulations, and the other plans and
<PAGE> 12
arrangements; provided, however, the payments under Section 4(c)
shall be made only to the extent the deferred compensation may
not be deemed salary or "earnings" or other compensation under
the qualified pension plan.
13. This Deferred Compensation Agreement constitutes the
entire agreement between the Employee and ENI with respect to its
subject matter and supercedes all previous agreements with
respect to such subject matter provided that all amounts deferred
by Employee pursuant to a Deferred Compensation Agreement dated
as of November 30, 1983 plus any interest credited on such
amounts shall constitute a portion of the Account and otherwise
be governed by this Agreement.
14. This Agreement shall be binding upon and inure to the
benefit of ENI, its successors and assigns, and Employee and
Employee's heirs, executors, administrators and legal
representatives.
IN WITNESS WHEREOF, ENI has caused this Agreement to be
executed and its seal to be affixed hereto by its agent thereunto
duly authorized, and Employee has signed this Agreement, all as
of the day and year first above written.
/s/ Patricia L. Sowa /s/ Robert R. Giordano
Witness Robert R. Giordano
ENERGYNORTH, INC.
/s/ Patricia L. Sowa By: /s/ Michelle L. Chicoine
Witness Senior Vice President
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT, made as of October 1, 1997, by and between
ENERGYNORTH, INC. ("ENI") a New Hampshire corporation with a
principal place of business in Manchester, New Hampshire, and
Richard P. Demers of Manchester, New Hampshire ("Employee").
W I T N E S S E T H
WHEREAS, Employee is employed by ENI in an executive
position and performs valuable services to ENI in such position;
and
WHEREAS, Employee possesses great ability in the gas
distribution business, an intimate knowledge of ENI, its
operating methods, personnel and goals; and
WHEREAS, ENI desires further to compensate Employee for past
services, to secure Employee's future services, to secure
Employee's commitment to furnish advisory services to ENI
following Employee's termination of employment by ENI and to
compensate Employee therefor;
NOW, THEREFORE, ENI and Employee mutually agree as follows:
1. ENI agrees to continue to employ Employee and Employee
agrees to continue to serve ENI devoting Employee's normal
working time to the interests and activities of ENI in the
capacity of Vice President, or such other capacity as the Board
of Directors of ENI from time to time may assign for the period
agreed between Employee and ENI.
<PAGE> 2
2. During the term of Employee's employment, Employee
shall devote substantially all of Employee's time, attention,
skill and efforts to the performance of Employee's duties for
ENI.
3. ENI shall pay Employee during the term of Employee's
employment such salary as the Board of Directors shall from time
to time determine, together with the deferred compensation
payable as provided in paragraph 4 below.
4. (a) ENI, on the last day of each month,
commencing as of January 1998, shall credit to a book reserve
(the "Deferred Compensation Account" or the "Account") in
Employee's name established for this purpose, the amount stated
on the Deferred Compensation Election Form; the amounts credited
under this Section 4(a) shall continue to be credited monthly
during the continuance of the Employee's employment hereunder.
In addition, EnergyNorth, Inc.
shall credit to the account a percentage or an
amount of any cash incentive award paid to
Employee pursuant to the EnergyNorth, Inc. Key
Employee Performance and Equity Incentive Plan
earned in connection with the 1998 Plan Year and
subsequent Plan Years.
<PAGE> 3
a. ENI shall credit to the Deferred Compensation
Account at the end of each month during which any balance
remains in the Account, whether before or after payments
from the Account have commenced, an amount which shall
be the equivalent of interest on the amounts credited to
the Account throughout the previous month computed at
the thirty-year U.S. treasury bond yield as of the last
day of each calendar quarter, plus 400 basis points,
adjusted quarterly; provided, however, the rate shall not
be less than nine percent (9%) or greater than sixteen
percent (16%).
(b) In addition, ENI shall pay to Employee, monthly
over the same period as specified in Section 6 below, an
additional amount of money equal to the monthly increase in the
qualified pension plan benefits to which Employee would then have
been entitled had the amount that was credited to the Deferred
Compensation Account under Section 4(a) above been paid to
Employee and had it qualified as "earnings" as defined in ENI's
qualified pension plan. Such additional payment shall be payable
only to the extent that such
<PAGE> 4
deferred compensation hereunder does not qualify as
"earnings" under ENI's qualified pension plan and
shall be payable only to the extent Employee would otherwise have
received greater pension benefits from ENI's qualified pension
plan. Such payments shall commence at the same time as the other
payments hereunder. The amount due shall be computed actuarially
using the same assumptions as used in the qualified pension plan.
(c) ENI is not required to fund this Agreement in any way,
but if it chooses to set aside funds for the Account, any such
funds may be kept in cash, or invested in mutual funds, stocks,
bonds, securities, or any other assets as may be selected by the
Board of Directors, in its discretion, and also may be utilized
by ENI from time to time for any other purpose. Title to and
beneficial ownership of any funds, whether cash or investments,
which ENI may earmark to pay the contingent deferred compensation
obligation hereunder, at all times shall remain in ENI, and the
Employee and Employee's designated beneficiary shall not have any
property interest whatsoever in any such funds or in any specific
assets of ENI.
<PAGE> 5
5. Employee may change the amounts of Employee's salary to
be deferred under Section 4(a) above for the ensuing calendar
year by filing in writing with the Board of Directors of ENI not
less than thirty (30) days prior to the end of the prior calendar
year, the amount of Employee's salary not yet earned or paid that
is to be deferred and credited to Employee's Deferred
Compensation Account. Employee may change the amounts of
Employee's Cash Incentive Award to be deferred under Section 4(a)
above for ensuing plan years by filing in writing with the Board
of Directors of ENI not less than thirty (30) days prior to the
end of that Plan year, the percentage or amount of Employee's
cash incentive award not yet paid that is to be deferred and
credited to the Employee's Deferred Compensation Account.
6. The benefits to be paid as deferred compensation are as
follows:
(a) If the Employee's employment hereunder is
terminated on or after the Employee shall have reached the age of
65, ENI shall pay to Employee in 15 annual installments the
amount in Employee's Deferred Compensation Account as of such
date together with the interest added pursuant to Section 4(b).
The Account shall be valued as of the date the first payment is
to be made, one fifteenth (1/15th) of that amount shall be paid
in the first year and that same amount shall be paid
<PAGE> 6
in the succeeding fourteen (14) years. In addition, in each
of the succeeding fourteen (14) years, any interest
credited to the Account with respect to the previous
year shall be paid with each annual payment. If the Employee
should die on or after Employee's 65th birthday
and before the 15 annual payments are made, the
unpaid balance will continue to be paid in installments
for the unexpired portion of such 15 year period to Employee's
designated beneficiary in the same amount as set forth above.
(b) If the Employee's employment by ENI is terminated for
any reason other than death and disability but before the
Employee shall have reached the age of 65, no payments shall be
made until the Employee shall have reached the age of 65 at which
time payments shall be made in the same manner and to the same
extent as set forth in Section 6(a) above. Notwithstanding the
foregoing, if prior to reaching age 65 the Employee should die,
or if prior to reaching age 65 Employee should become disabled,
then payments shall be made in the same manner and to the same
extent as set forth in Section 6(c), below.
<PAGE> 7
(c) If the Employee's employment is terminated because of
disability or death before the Employee has reached the age of 65
and while in the employ of ENI, then ENI, during Employee's
disability, shall make annual payments not to exceed fifteen (15)
to the Employee or, in the event of Employee's death, make
fifteen (15) annual payments to Employee's designated
beneficiary, all in the same manner and to the same extent as
provided herein.
(d) If both the Employee and Employee's designated
beneficiary should die before a total of fifteen (15) annual
payments are made by ENI, then the remaining amount in the
Deferred Compensation Account shall be determined as of the date
of the death of the designated beneficiary and shall be paid,
with interest accrued to the date of payment, as promptly as
possible in one lump sum to the Employee's estate.
(e) The designated beneficiary (which may include alternate
beneficiaries) referred to in this paragraph may be designated or
changed by the Employee (without the consent of any prior
beneficiary) on a form provided by ENI and delivered by Employee
to ENI before Employee's
<PAGE> 8
death. If no such beneficiary shall have been
designated, or if no designated beneficiary shall
survive the Employee, the installment payments payable under this
paragraph shall be payable to the Employee's estate.
(f) For purposes of Section 6(c) above, disability is
defined as provided in any long-term disability plan of ENI
covering Employee, or, if none, as defined under the EnergyNorth
Inc. Retirement Plan for Salaried Employees.
(g) The installment payments to be made to the Employee
under Sections 6(a) and 6(c) above shall commence on the first
day of the month next following the date of the termination of
Employee's employment, and the installment payments to be made to
the Employee under Section 6(b) above shall commence on the first
day of the month next following the date on which Employee shall
have reached the age of 65. The installment payments to be made
to the designated beneficiary under the provisions of this
Section 6 shall commence on a date to be selected by ENI but
within six months from the date of death of the Employee.
<PAGE> 9
(h) Notwithstanding anything herein contained to the
contrary, the Board shall have the right, with the written
consent of Employee, to vary the manner and time of making the
installment distributions provided in this paragraph and may make
such distributions in lump sums or over a shorter period of time
than 15 years as it may find appropriate, but not over a longer
period of time than fifteen (15) years or less frequently then
once per year.
(i) The Board may, in its sole discretion, permit a
withdrawal of funds from a Participant's Account to meet a severe
financial hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or of a
dependent of the Participant, loss of the Participant's property
due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of
the Participant (an "Unforeseen Emergency") at such time and
under such circumstances as deemed by the Board to be an
Unforeseen Emergency. Distribution of funds from the
Participant's Account shall be in an amount sufficient only to
meet the Unforeseen Emergency
<PAGE> 10
presented by the Participant to the Board, and under
no circumstances may a participant's withdrawal of funds
exceed the amount required to satisfy the Unforeseen
Emergency.
7. Employee is accorded the right by this Agreement to
defer receipt of compensation and earnings that, but for the
Employee's election, would be paid currently. The right to
receive payment of the amounts accrued shall vest absolutely and
become nonforfeitable on the crediting of such amount at the end
of each month. The obligation of ENI to make the payments shall
not be excused by any breach of this Agreement or of any other
agreement between Employee and ENI.
8. Nothing contained in this Agreement and no action taken
pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary
relationship between ENI and the Employee, Employee's designated
beneficiary or any other person. Any funds that may be invested
under the provision of this Agreement shall continue for all
purposes to be part of the general funds of ENI and no person
other than ENI shall by virtue of the provisions of this
Agreement have any interest in such funds. To the extent that
any person acquires a right to receive payments from ENI under
this Agreement, such right shall be no greater than the right of
any unsecured general creditor of ENI.
<PAGE> 11
9. The right of the Employee or any other person to the
payment of deferred compensation or other benefits under this
Agreement shall not be assigned, transferred, pledged or
encumbered except by will or by the laws of descent and
distribution.
10. If the Board shall find that any person to whom any
payment is payable under this Agreement is unable to care for his
or her affairs because of illness or accident, or is a minor, any
payment due (unless a prior claim therefore shall have been made
by a duly appointed guardian, committee or other legal
representative) may be paid to the spouse, a child, a parent, or
a brother or sister, or to any person deemed by the Board to have
incurred expense for such person otherwise entitled to payment,
in such manner and proportions as the Board may determine. Any
such payment shall be a complete discharge of the liabilities of
ENI under this Agreement.
11. Nothing contained herein shall be construed as
conferring upon the Employee the right to continue in the employ
of ENI other than as stated in Section 1; provided, however, this
Agreement shall be construed to be consistent with an employment
agreement entered into between Employee and ENI.
12. Any deferred compensation payable under this Agreement
shall be deemed salary or other compensation to the Employee for
the purpose of computing benefits to which the Employee may be
entitled under any pension plan, life insurance plan, or other
<PAGE> 12
arrangement of ENI for the benefit of its employees, to the
extent allowable under the Internal Revenue Code or other
applicable laws and regulations, and the other plans and
arrangements; provided, however, the payments under Section 4(c)
shall be made only to the extent the deferred compensation may
not be deemed salary or "earnings" or other compensation under
the qualified pension plan.
13. This Deferred Compensation Agreement constitutes the
entire agreement between the Employee and ENI with respect to its
subject matter and supercedes all previous agreements with
respect to such subject matter.
14. This Agreement shall be binding upon and inure to the
benefit of ENI, its successors and assigns, and Employee and
Employee's heirs, executors, administrators and legal
representatives.
IN WITNESS WHEREOF, ENI has caused this Agreement to be
executed and its seal to be affixed hereto by its agent thereunto
duly authorized, and Employee has signed this Agreement, all as
of the day and year first above written.
/s/ Patricia L. Sowa /s/ Richard P. Demers
Witness Richard P. Demers
ENERGYNORTH, INC.
/s/ Patricia L. Sowa By: /s/ Robert R. Giordano
Witness President & Chief Executive Officer
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT, made as of October 1, 1997, by and between
ENERGYNORTH, INC. ("ENI") a New Hampshire corporation with a
principal place of business in Manchester, New Hampshire, and
Frank L. Childs of Manchester, New Hampshire ("Employee").
W I T N E S S E T H
WHEREAS, Employee is employed by ENI in an executive
position and performs valuable services to ENI in such position;
and
WHEREAS, Employee possesses great ability in the gas
distribution business, an intimate knowledge of ENI, its
operating methods, personnel and goals; and
WHEREAS, ENI desires further to compensate Employee for past
services, to secure Employee's future services, to secure
Employee's commitment to furnish advisory services to ENI
following Employee's termination of employment by ENI and to
compensate Employee therefor;
NOW, THEREFORE, ENI and Employee mutually agree as follows:
1. ENI agrees to continue to employ Employee and Employee
agrees to continue to serve ENI devoting Employee's normal
working time to the interests and activities of ENI in the
capacity of Vice President, or such other capacity as the Board
of Directors of ENI from time to time may assign for the period
agreed between Employee and ENI.
<PAGE> 2
2. During the term of Employee's employment, Employee
shall devote substantially all of Employee's time, attention,
skill and efforts to the performance of Employee's duties for
ENI.
3. ENI shall pay Employee during the term of Employee's
employment such salary as the Board of Directors shall from time
to time determine, together with the deferred compensation
payable as provided in paragraph 4 below.
4. (a) ENI, on the last day of each month,
commencing as of January 1998, shall credit to a book reserve
(the "Deferred Compensation Account" or the "Account") in
Employee's name established for this purpose, the amount stated
on the Deferred Compensation Election Form; the amounts credited
under this Section 4(a) shall continue to be credited monthly
during the continuance of the Employee's employment hereunder.
In addition, EnergyNorth, Inc.
shall credit to the account a percentage or an amount of any
cash incentive award paid to Employee pursuant to the
EnergyNorth, Inc. Key Employee Performance and Equity Incentive Plan
earned in connection with the 1998 Plan Year and subsequent Plan
Years.
<PAGE> 3
a. ENI shall credit to the Deferred Compensation
Account at the end of each month during which any balance
remains in the Account, whether before or after payments
from the Account have commenced, an amount which shall be
the equivalent of interest on the amounts credited to the
Account throughout the previous month computed at the
thirty-year U.S. treasury bond yield as of the last day of each
calendar quarter, plus 400 basis points, adjusted quarterly;
provided, however, the rate shall not be less than nine percent
(9%) or greater than sixteen percent (16%).
(b) In addition, ENI shall pay to Employee, monthly
over the same period as specified in Section 6 below, an
additional amount of money equal to the monthly increase in the
qualified pension plan benefits to which Employee would then have
been entitled had the amount that was credited to the Deferred
Compensation Account under Section 4(a) above been paid to
Employee and had it qualified as "earnings" as defined in ENI's
qualified pension plan. Such additional payment shall be payable
only to the extent that such
<PAGE> 4
deferred compensation hereunder does not qualify as
"earnings" under ENI's qualified pension plan and
shall be payable only to the extent Employee would otherwise have
received greater pension benefits from ENI's qualified pension
plan. Such payments shall commence at the same time as the other
payments hereunder. The amount due shall be computed actuarially
using the same assumptions as used in the qualified pension plan.
(c) ENI is not required to fund this Agreement in any way,
but if it chooses to set aside funds for the Account, any such
funds may be kept in cash, or invested in mutual funds, stocks,
bonds, securities, or any other assets as may be selected by the
Board of Directors, in its discretion, and also may be utilized
by ENI from time to time for any other purpose. Title to and
beneficial ownership of any funds, whether cash or investments,
which ENI may earmark to pay the contingent deferred compensation
obligation hereunder, at all times shall remain in ENI, and the
Employee and Employee's designated beneficiary shall not have any
property interest whatsoever in any such funds or in any specific
assets of ENI.
<PAGE> 5
5. Employee may change the amounts of Employee's salary to
be deferred under Section 4(a) above for the ensuing calendar
year by filing in writing with the Board of Directors of ENI not
less than thirty (30) days prior to the end of the prior calendar
year, the amount of Employee's salary not yet earned or paid that
is to be deferred and credited to Employee's Deferred
Compensation Account. Employee may change the amounts of
Employee's Cash Incentive Award to be deferred under Section 4(a)
above for ensuing plan years by filing in writing with the Board
of Directors of ENI not less than thirty (30) days prior to the
end of that Plan year, the percentage or amount of Employee's
cash incentive award not yet paid that is to be deferred and
credited to the Employee's Deferred Compensation Account.
6. The benefits to be paid as deferred compensation are as
follows:
(a) If the Employee's employment hereunder is
terminated on or after the Employee shall have reached the age of
65, ENI shall pay to Employee in 15 annual installments the
amount in Employee's Deferred Compensation Account as of such
date together with the interest added pursuant to Section 4(b).
The Account shall be valued as of the date the first payment is
to be made, one fifteenth (1/15th) of that amount shall be paid
in the first year and that same amount shall be paid
<PAGE> 6
in the succeeding fourteen (14) years. In addition, in
each of the succeeding fourteen (14) years, any interest
credited to the Account with respect to the previous year shall
be paid with each annual payment. If the Employee should die on
or after Employee's 65th birthday and before the 15 annual
payments are made, the unpaid balance will continue to be paid
in installments for the unexpired portion of such 15 year period
to Employee's designated beneficiary in the same amount as set
forth above.
(b) If the Employee's employment by ENI is terminated for
any reason other than death and disability but before the
Employee shall have reached the age of 65, no payments shall be
made until the Employee shall have reached the age of 65 at which
time payments shall be made in the same manner and to the same
extent as set forth in Section 6(a) above. Notwithstanding the
foregoing, if prior to reaching age 65 the Employee should die,
or if prior to reaching age 65 Employee should become disabled,
then payments shall be made in the same manner and to the same
extent as set forth in Section 6(c), below.
<PAGE> 7
(c) If the Employee's employment is terminated because of
disability or death before the Employee has reached the age of 65
and while in the employ of ENI, then ENI, during Employee's
disability, shall make annual payments not to exceed fifteen (15)
to the Employee or, in the event of Employee's death, make
fifteen (15) annual payments to Employee's designated
beneficiary, all in the same manner and to the same extent as
provided herein.
(d) If both the Employee and Employee's designated
beneficiary should die before a total of fifteen (15) annual
payments are made by ENI, then the remaining amount in the
Deferred Compensation Account shall be determined as of the date
of the death of the designated beneficiary and shall be paid,
with interest accrued to the date of payment, as promptly as
possible in one lump sum to the Employee's estate.
(e) The designated beneficiary (which may include alternate
beneficiaries) referred to in this paragraph may be designated or
changed by the Employee (without the consent of any prior
beneficiary) on a form provided by ENI and delivered by Employee
to ENI before Employee's
<PAGE> 8
death. If no such beneficiary shall have been
designated, or if no designated beneficiary shall
survive the Employee, the installment payments payable under this
paragraph shall be payable to the Employee's estate.
(f) For purposes of Section 6(c) above, disability is
defined as provided in any long-term disability plan of ENI
covering Employee, or, if none, as defined under the EnergyNorth
Inc. Retirement Plan for Salaried Employees.
(g) The installment payments to be made to the Employee
under Sections 6(a) and 6(c) above shall commence on the first
day of the month next following the date of the termination of
Employee's employment, and the installment payments to be made to
the Employee under Section 6(b) above shall commence on the first
day of the month next following the date on which Employee shall
have reached the age of 65. The installment payments to be made
to the designated beneficiary under the provisions of this
Section 6 shall commence on a date to be selected by ENI but
within six months from the date of death of the Employee.
<PAGE> 9
(h) Notwithstanding anything herein contained to the
contrary, the Board shall have the right, with the written
consent of Employee, to vary the manner and time of making the
installment distributions provided in this paragraph and may make
such distributions in lump sums or over a shorter period of time
than 15 years as it may find appropriate, but not over a longer
period of time than fifteen (15) years or less frequently then
once per year.
(i) The Board may, in its sole discretion, permit a
withdrawal of funds from a Participant's Account to meet a severe
financial hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or of a
dependent of the Participant, loss of the Participant's property
due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of
the Participant (an "Unforeseen Emergency") at such time and
under such circumstances as deemed by the Board to be an
Unforeseen Emergency. Distribution of funds from the
Participant's Account shall be in an amount sufficient only to
meet the Unforeseen Emergency
<PAGE> 10
presented by the Participant to the Board, and under no
circumstances may a participant's withdrawal of funds
exceed the amount required to satisfy the Unforeseen Emergency.
7. Employee is accorded the right by this Agreement to
defer receipt of compensation and earnings that, but for the
Employee's election, would be paid currently. The right to
receive payment of the amounts accrued shall vest absolutely and
become nonforfeitable on the crediting of such amount at the end
of each month. The obligation of ENI to make the payments shall
not be excused by any breach of this Agreement or of any other
agreement between Employee and ENI.
8. Nothing contained in this Agreement and no action taken
pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary
relationship between ENI and the Employee, Employee's designated
beneficiary or any other person. Any funds that may be invested
under the provision of this Agreement shall continue for all
purposes to be part of the general funds of ENI and no person
other than ENI shall by virtue of the provisions of this
Agreement have any interest in such funds. To the extent that
any person acquires a right to receive payments from ENI under
this Agreement, such right shall be no greater than the right of
any unsecured general creditor of ENI.
<PAGE> 11
9. The right of the Employee or any other person to the
payment of deferred compensation or other benefits under this
Agreement shall not be assigned, transferred, pledged or
encumbered except by will or by the laws of descent and
distribution.
10. If the Board shall find that any person to whom any
payment is payable under this Agreement is unable to care for his
or her affairs because of illness or accident, or is a minor, any
payment due (unless a prior claim therefore shall have been made
by a duly appointed guardian, committee or other legal
representative) may be paid to the spouse, a child, a parent, or
a brother or sister, or to any person deemed by the Board to have
incurred expense for such person otherwise entitled to payment,
in such manner and proportions as the Board may determine. Any
such payment shall be a complete discharge of the liabilities of
ENI under this Agreement.
11. Nothing contained herein shall be construed as
conferring upon the Employee the right to continue in the employ
of ENI other than as stated in Section 1; provided, however, this
Agreement shall be construed to be consistent with an employment
agreement entered into between Employee and ENI.
12. Any deferred compensation payable under this Agreement
shall be deemed salary or other compensation to the Employee for
the purpose of computing benefits to which the Employee may be
entitled under any pension plan, life insurance plan, or other
<PAGE> 12
arrangement of ENI for the benefit of its employees, to the
extent allowable under the Internal Revenue Code or other
applicable laws and regulations, and the other plans and
arrangements; provided, however, the payments under Section 4(c)
shall be made only to the extent the deferred compensation may
not be deemed salary or "earnings" or other compensation under
the qualified pension plan.
13. This Deferred Compensation Agreement constitutes the
entire agreement between the Employee and ENI with respect to its
subject matter and supercedes all previous agreements with
respect to such subject matter.
14. This Agreement shall be binding upon and inure to the
benefit of ENI, its successors and assigns, and Employee and
Employee's heirs, executors, administrators and legal
representatives.
IN WITNESS WHEREOF, ENI has caused this Agreement to be
executed and its seal to be affixed hereto by its agent thereunto
duly authorized, and Employee has signed this Agreement, all as
of the day and year first above written.
/s/ Patricia L. Sowa /s/ Frank L. Childs
Witness Frank L. Childs
ENERGYNORTH, INC.
/s/ Patricia L. Sowa By: /s/ Robert R. Giordano
Witness President & Chief Executive Officer
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT, made as of October 1, 1997, by and between
ENERGYNORTH, INC. ("ENI") a New Hampshire corporation with a
principal place of business in Manchester, New Hampshire, and
Michelle L. Chicoine of Bedford, New Hampshire ("Employee").
W I T N E S S E T H
WHEREAS, Employee is employed by ENI in an executive
position and performs valuable services to ENI in such position;
and
WHEREAS, Employee possesses great ability in the gas
distribution business, an intimate knowledge of ENI, its
operating methods, personnel and goals; and
WHEREAS, ENI desires further to compensate Employee for past
services, to secure Employee's future services, to secure
Employee's commitment to furnish advisory services to ENI
following Employee's termination of employment by ENI and to
compensate Employee therefor;
NOW, THEREFORE, ENI and Employee mutually agree as follows:
1. ENI agrees to continue to employ Employee and Employee
agrees to continue to serve ENI devoting Employee's normal
working time to the interests and activities of ENI in the
capacity of Vice President, Treasurer and Chief Financial
Officer, or such other capacity as the Board of Directors of ENI
from time to time may assign for the period agreed between
Employee and ENI.
<PAGE> 2
2. During the term of Employee's employment, Employee
shall devote substantially all of Employee's time, attention,
skill and efforts to the performance of Employee's duties for
ENI.
3. ENI shall pay Employee during the term of Employee's
employment such salary as the Board of Directors shall from time
to time determine, together with the deferred compensation
payable as provided in paragraph 4 below.
4. (a) ENI, on the last day of each month,
commencing as of January 1998, shall credit to a book reserve
(the "Deferred Compensation Account" or the "Account") in
Employee's name established for this purpose, the amount stated
on the Deferred Compensation Election Form; the amounts credited
under this Section 4(a) shall continue to be credited monthly
during the continuance of the Employee's employment hereunder.
In addition, EnergyNorth, Inc.
shall credit to the account a percentage or an
amount of any cash incentive award paid to
Employee pursuant to the EnergyNorth, Inc. Key
Employee Performance and Equity Incentive Plan
earned in connection with the 1998 Plan Year and
subsequent Plan Years.
<PAGE> 3
a. ENI shall credit to the Deferred Compensation
Account at the end of each month during which any balance
remains in the Account, whether before or after payments
from the Account have commenced, an amount which shall
be the equivalent of interest on the amounts credited to
the Account throughout the previous month computed at
the thirty-year U.S. treasury bond yield as of the last
day of each calendar quarter, plus 400 basis
points, adjusted quarterly; provided, however, the rate
shall not be less than nine percent (9%) or greater than
sixteen percent (16%).
(b) In addition, ENI shall pay to Employee, monthly
over the same period as specified in Section 6 below, an
additional amount of money equal to the monthly increase in the
qualified pension plan benefits to which Employee would then have
been entitled had the amount that was credited to the Deferred
Compensation Account under Section 4(a) above been paid to
Employee and had it qualified as "earnings" as defined in ENI's
qualified pension plan. Such additional payment shall be payable
only to the extent that such
<PAGE> 4
deferred compensation hereunder does not qualify as
"earnings" under ENI's qualified pension plan and
shall be payable only to the extent Employee would otherwise have
received greater pension benefits from ENI's qualified pension
plan. Such payments shall commence at the same time as the other
payments hereunder. The amount due shall be computed actuarially
using the same assumptions as used in the qualified pension plan.
(c) ENI is not required to fund this Agreement in any way,
but if it chooses to set aside funds for the Account, any such
funds may be kept in cash, or invested in mutual funds, stocks,
bonds, securities, or any other assets as may be selected by the
Board of Directors, in its discretion, and also may be utilized
by ENI from time to time for any other purpose. Title to and
beneficial ownership of any funds, whether cash or investments,
which ENI may earmark to pay the contingent deferred compensation
obligation hereunder, at all times shall remain in ENI, and the
Employee and Employee's designated beneficiary shall not have any
property interest whatsoever in any such funds or in any specific
assets of ENI.
<PAGE> 5
5. Employee may change the amounts of Employee's salary to
be deferred under Section 4(a) above for the ensuing calendar
year by filing in writing with the Board of Directors of ENI not
less than thirty (30) days prior to the end of the prior calendar
year, the amount of Employee's salary not yet earned or paid that
is to be deferred and credited to Employee's Deferred
Compensation Account. Employee may change the amounts of
Employee's Cash Incentive Award to be deferred under Section 4(a)
above for ensuing plan years by filing in writing with the Board
of Directors of ENI not less than thirty (30) days prior to the
end of that Plan year, the percentage or amount of Employee's
cash incentive award not yet paid that is to be deferred and
credited to the Employee's Deferred Compensation Account.
6. The benefits to be paid as deferred compensation are as
follows:
(a) If the Employee's employment hereunder is
terminated on or after the Employee shall have reached the age of
65, ENI shall pay to Employee in 15 annual installments the
amount in Employee's Deferred Compensation Account as of such
date together with the interest added pursuant to Section 4(b).
The Account shall be valued as of the date the first payment is
to be made, one fifteenth (1/15th) of that amount shall be paid
in the first year and that same amount shall be paid
<PAGE> 6
in the succeeding fourteen (14) years. In addition,
in each of the succeeding fourteen (14) years, any interest
credited to the Account with respect to the previous
year shall be paid with each annual payment. If the
Employee should die on or after Employee's 65th
birthday and before the 15 annual payments are
made, the unpaid balance will continue to be paid in installments
for the unexpired portion of such 15 year period to Employee's
designated beneficiary in the same amount as set forth above.
(b) If the Employee's employment by ENI is terminated for
any reason other than death and disability but before the
Employee shall have reached the age of 65, no payments shall be
made until the Employee shall have reached the age of 65 at which
time payments shall be made in the same manner and to the same
extent as set forth in Section 6(a) above. Notwithstanding the
foregoing, if prior to reaching age 65 the Employee should die,
or if prior to reaching age 65 Employee should become disabled,
then payments shall be made in the same manner and to the same
extent as set forth in Section 6(c), below.
<PAGE> 7
(c) If the Employee's employment is terminated because of
disability or death before the Employee has reached the age of 65
and while in the employ of ENI, then ENI, during Employee's
disability, shall make annual payments not to exceed fifteen (15)
to the Employee or, in the event of Employee's death, make
fifteen (15) annual payments to Employee's designated
beneficiary, all in the same manner and to the same extent as
provided herein.
(d) If both the Employee and Employee's designated
beneficiary should die before a total of fifteen (15) annual
payments are made by ENI, then the remaining amount in the
Deferred Compensation Account shall be determined as of the date
of the death of the designated beneficiary and shall be paid,
with interest accrued to the date of payment, as promptly as
possible in one lump sum to the Employee's estate.
(e) The designated beneficiary (which may include alternate
beneficiaries) referred to in this paragraph may be designated or
changed by the Employee (without the consent of any prior
beneficiary) on a form provided by ENI and delivered by Employee
to ENI before Employee's
<PAGE> 8
death. If no such beneficiary shall have been
designated, or if no designated beneficiary shall
survive the Employee, the installment payments payable under this
paragraph shall be payable to the Employee's estate.
(f) For purposes of Section 6(c) above, disability is
defined as provided in any long-term disability plan of ENI
covering Employee, or, if none, as defined under the EnergyNorth
Inc. Retirement Plan for Salaried Employees.
(g) The installment payments to be made to the Employee
under Sections 6(a) and 6(c) above shall commence on the first
day of the month next following the date of the termination of
Employee's employment, and the installment payments to be made to
the Employee under Section 6(b) above shall commence on the first
day of the month next following the date on which Employee shall
have reached the age of 65. The installment payments to be made
to the designated beneficiary under the provisions of this
Section 6 shall commence on a date to be selected by ENI but
within six months from the date of death of the Employee.
<PAGE> 8
(h) Notwithstanding anything herein contained to the
contrary, the Board shall have the right, with the written
consent of Employee, to vary the manner and time of making the
installment distributions provided in this paragraph and may make
such distributions in lump sums or over a shorter period of time
than 15 years as it may find appropriate, but not over a longer
period of time than fifteen (15) years or less frequently then
once per year.
(i) The Board may, in its sole discretion, permit a
withdrawal of funds from a Participant's Account to meet a severe
financial hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or of a
dependent of the Participant, loss of the Participant's property
due to casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of
the Participant (an "Unforeseen Emergency") at such time and
under such circumstances as deemed by the Board to be an
Unforeseen Emergency. Distribution of funds from the
Participant's Account shall be in an amount sufficient only to
meet the Unforeseen Emergency
<PAGE> 10
presented by the Participant to the Board, and under
no circumstances may a participant's withdrawal
of funds exceed the amount required to satisfy the Unforeseen
Emergency.
7. Employee is accorded the right by this Agreement to
defer receipt of compensation and earnings that, but for the
Employee's election, would be paid currently. The right to
receive payment of the amounts accrued shall vest absolutely and
become nonforfeitable on the crediting of such amount at the end
of each month. The obligation of ENI to make the payments shall
not be excused by any breach of this Agreement or of any other
agreement between Employee and ENI.
8. Nothing contained in this Agreement and no action taken
pursuant to the provisions of this Agreement shall create or be
construed to create a trust of any kind, or a fiduciary
relationship between ENI and the Employee, Employee's designated
beneficiary or any other person. Any funds that may be invested
under the provision of this Agreement shall continue for all
purposes to be part of the general funds of ENI and no person
other than ENI shall by virtue of the provisions of this
Agreement have any interest in such funds. To the extent that
any person acquires a right to receive payments from ENI under
this Agreement, such right shall be no greater than the right of
any unsecured general creditor of ENI.
<PAGE> 11
9. The right of the Employee or any other person to the
payment of deferred compensation or other benefits under this
Agreement shall not be assigned, transferred, pledged or
encumbered except by will or by the laws of descent and
distribution.
10. If the Board shall find that any person to whom any
payment is payable under this Agreement is unable to care for his
or her affairs because of illness or accident, or is a minor, any
payment due (unless a prior claim therefore shall have been made
by a duly appointed guardian, committee or other legal
representative) may be paid to the spouse, a child, a parent, or
a brother or sister, or to any person deemed by the Board to have
incurred expense for such person otherwise entitled to payment,
in such manner and proportions as the Board may determine. Any
such payment shall be a complete discharge of the liabilities of
ENI under this Agreement.
11. Nothing contained herein shall be construed as
conferring upon the Employee the right to continue in the employ
of ENI other than as stated in Section 1; provided, however, this
Agreement shall be construed to be consistent with an employment
agreement entered into between Employee and ENI.
12. Any deferred compensation payable under this Agreement
shall be deemed salary or other compensation to the Employee for
the purpose of computing benefits to which the Employee may be
entitled under any pension plan, life insurance plan, or other
<PAGE> 12
arrangement of ENI for the benefit of its employees, to the
extent allowable under the Internal Revenue Code or other
applicable laws and regulations, and the other plans and
arrangements; provided, however, the payments under Section 4(c)
shall be made only to the extent the deferred compensation may
not be deemed salary or "earnings" or other compensation under
the qualified pension plan.
13. This Deferred Compensation Agreement constitutes the
entire agreement between the Employee and ENI with respect to its
subject matter and supercedes all previous agreements with
respect to such subject matter.
14. This Agreement shall be binding upon and inure to the
benefit of ENI, its successors and assigns, and Employee and
Employee's heirs, executors, administrators and legal
representatives.
IN WITNESS WHEREOF, ENI has caused this Agreement to be
executed and its seal to be affixed hereto by its agent thereunto
duly authorized, and Employee has signed this Agreement, all as
of the day and year first above written.
/s/ Patricia L. Sowa /s/ Michelle L. Chicoine
Witness Michelle L. Chicoine
ENERGYNORTH, INC.
/s/ Patricia L. Sowa By: /s/ Robert R. Giordano
Witness President & Chief Executive Officer
<PAGE> 1
ENERGYNORTH, INC.
1992 DIRECTORS' DEFERRED COMPENSATION PLAN
(As amended, as of October 1, 1997)
<PAGE> 2
1. Name and Purpose. The name of this Plan is the "1992
Directors' Deferred Compensation Plan" (the "Plan"). The purpose
of the Plan is to provide Directors who are not employees of
EnergyNorth, Inc. (the "Company") or any of its subsidiaries the
opportunity to defer receipt of retainer or meeting income earned
for services rendered. The Plan is an unfunded deferred
compensation arrangement for purposes of federal taxation and for
purposes of Title I of the Employee Retirement Income Security Act
of 1974.
2. Definitions. For purposes of this Plan, the following
definitions shall be applicable:
a. The term "Board of Directors" shall mean the Board of
Directors of the Company.
b. The term "Committee" shall mean the Compensation Committee
of the Company's Board of Directors whose responsibility it
shall be to administer the Plan.
c. The term "Deferral Account" shall mean the cumulative amount
of a Participant's deferred compensation plus accumulated
interest and earnings.
d. The term "Directors' Compensation" shall mean the annual
retainer, meeting and committee fee income earned by the
Participant for the Plan Year.
e. The term "Minimum Deferral Amount" shall mean $2,500.
f. The term "Participant" shall mean any Director of the
Company who is not in an employee of the Company or any of its
subsidiaries, and who has elected to defer
<PAGE> 3
part of his or her Directors' Compensation for any year during
which this Plan is in effect.
g. The term "Plan Year" shall mean the calendar year concluding
December 31.
h. The term "Separation Date" shall mean the date of the
Participant's severance from the Company, its affiliates, or
successor organizations, by reason of the Participant's death,
retirement, disability, resignation, discharge, expiration of
term without reelection or otherwise.
i. The term "Unforeseen Emergency" shall mean severe financial
hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or of a
dependent of the Participant, loss of the Participant's
property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events
beyond the control of the Participant.
j. The term "Unforseen Emergency Payout" shall mean a
withdrawal of funds from a Deferred Account to meet an
Unforeseen Emergency to a Participant in the Plan, with the
amount of such withdrawal being limited to the amount required
to satisfy the emergency need.
3. Administration. The Board of Directors designates the
Committee to administer, construe and interpret this Plan. The
construction and interpretation by the Committee of any
provisions of this Plan shall be final, conclusive and binding
upon all parties, including the Company and the Participants.
No member of the Committee shall be
<PAGE> 4
liable for any action taken or omitted or determination made in good
faith in connection with the administration of this Plan.
4. Deferred Compensation Account. The Company shall establish
a Deferral Account for each Participant, which shall be a
bookkeeping account for purposes of recording the amounts
deferred according to the provisions of Section 5 and interest
and earnings thereon as set forth below.
The Company shall credit each Participant's Deferral
Account in the amount of the portion of the Director's
Compensation designated in the Participant's written
election described in Section 5. Such credit shall be
made at the time the payment to the Participant of the
current compensation would have been made if the
Participant had not elected deferral under this Plan.
Additionally, the Company shall credit each
Participant's Deferral Account at the end of each month
during which any balance remains in the Deferral Account,
whether before or after payments from the Deferral Account
have commenced, an amount equal to the balance in the
Participant's Deferral Account multiplied by the thirty-
year U.S. treasury bond yield, as of the last day of each
calendar quarter, plus 400 basis points, adjusted
quarterly; provided, however, the rate shall not be less
than nine percent (9%) or greater than sixteen percent
(16%).
<PAGE> 5
The Company shall provide each Participant with an annual
statement setting forth the balance in his or her Deferral Account
as soon as practical following the close of the Plan Year.
5. Participant's Election.
a. For each Plan Year beginning in 1993, a Participant may elect
to defer payment of all or a portion of his or her
Directors' Compensation that would have otherwise been paid
for services performed by the Participant during such Plan Year,
by filing a written election with the Committee at any time
prior to 30 days prior the end of previous Plan Year.
However, the amount of Directors' Compensation a Participant may
elect to defer during any such Plan Year shall not be less than
the Minimum Deferral Amount nor will an amount greater than 100
percent of the Participant's Director's Compensation for such
Plan Year be credited to the Director's Deferral Account.
Notwithstanding the above, in the year in which
the Plan is first implemented, a Participant may make
a written election to defer compensation, for
services to be performed subsequent to the written
election, within thirty (30) days after the effective
date of the Plan. Further, in the first Plan Year in
which a Participant becomes eligible to participate in the
Plan, the newly eligible Participant may make a written
election to defer compensation, for services to be
<PAGE> 6
performed subsequent to the written election, within thirty
(30) days after the Participant becomes eligible.
b. A Participant's written election shall not be effective
unless the Participant also specifies the deferral term, by
reference to either a specific future date or the
Participant's Separation Date from the Company on which date
Deferral Account distributions will commence. The Participant
shall also designate on the written election whether amounts
in the Participant's Deferral Account shall be payable in a
lump sum or in annual or monthly installments for ten (10)
years in the manner provided in Section 6.
c. Any election by a Participant to defer compensation under
this Section 5 shall be irrevocable except in the event of
an Unforeseen Emergency Payout pursuant to Section 6.
6. Distribution of Deferral Account. Upon the earlier of a
Participant's Separation Date or attainment of the specified
date indicated by the Participant on the Participant's written
election form, the Company shall pay the amount in the
Participant's Deferral Account to the Participant in a lump sum
or in annual or monthly installments for ten (10) years.
Payments made in installments shall be calculated by dividing
the value of the Deferral Account or portion of a Deferral
Account to be distributed as of the date that the first payment
is to be made by the number of installments, and distributing
such amount at the
<PAGE> 7
date of each installment plus all interest credited to
such Deferral Account portion of such Deferral Account from
the date of the previous installment.
The Committee may, in its sole discretion, permit an
Unforeseen Emergency Payout to a Participant at such time
and under such circumstances as deemed by the Committee to
be an Unforeseen Emergency. Distribution of funds from
the Participant's Deferral Account shall be in an amount
sufficient only to meet the Unforeseen Emergency presented
by the Participant to the Committee. Under no
circumstances may a Participant's withdrawal of funds
exceed the amount required to satisfy the Unforeseen
Emergency.
7. Nature of Accounts and Plan Funding. The Deferral Account
shall exist only for the purpose of facilitating the
computation of benefits hereunder and nothing contained in this
Plan and no action taken pursuant to the provisions of this
Plan shall create or be construed to create a trust or escrow
of any kind, or a fiduciary relationship between the Company
and the Participant, a Participant's designated beneficiary or
any other person. To the extent that any person acquires a
right to receive payments from the Company under this Plan,
such rights shall be no greater than the right of any unsecured
general creditor of the Company.
The Company is not required to fund this Plan but may
choose to set aside funds for payment of amounts deferred,
in its sole discretion. Any such funds may be kept in
cash, or invested in mutual funds, stocks, bonds,
securities, or any other assets as may be
<PAGE> 8
selected by the Committee, in its discretion, and such funds may be
utilized by the Company from time to time for any other
purpose. Title to and beneficial ownership of any funds,
whether cash or investments, which the Company may set
aside to make payments pursuant to this Plan shall at all
times remain in the Company, no Participant shall have any
property interest whatsoever in any such funds or in any specific
assets of the Company.
8. Beneficiary Designation. A Participant may designate a
primary beneficiary or primary beneficiaries to receive all
amounts that are payable under Section 4 in the event of the
Participant's death and an alternate beneficiary or alternate
beneficiaries to receive such amounts in the event of the
deaths of all primary beneficiaries. If the Participant
designates such beneficiaries, payments of amounts due under
Section 4 shall be made to the beneficiaries in accordance with
the Participant's written election form described in Section 5.
Such beneficiary designation and any subsequent changes to it
shall be made in writing and delivered to the Committee. In
the event the Participant dies prior to receipt of the total
Deferral Account or Accounts and without so designating a
beneficiary or if there are no surviving beneficiaries, the
balance of the Participant's Deferral Account shall be paid to
the Participant's spouse, if living, otherwise to the
Participant's estate.
9. Non-Transferability. No right to payment under this Plan
shall be subject to anticipation, alienation, sale, assignment,
pledge, encumbrance or charge and any attempt to anticipate,
alienate, sell, assign, pledge, encumber, attach or charge the
same shall be void.
<PAGE> 9
If, at the time when payments are to be made under this
Plan, the Participant or the Participant's beneficiaries are
indebted to the Company, any payments remaining to be made
may, at the discretion of the Company, be reduced by the
amount of such indebtedness. An election by the Company not to
reduce such payments shall not constitute a waiver of its claim
for such indebtedness.
10. Plan Interpretation. The Committee shall have full power
and authority to interpret, construe and administer this Plan and
the Committee's interpretations and construction of the Plan and
actions taken under the Plan, including any valuation of the
Deferral Account or the amount or recipient of the payment to
be made from a Deferral Account, shall be binding and
conclusive on all persons for all purposes. No member of the
Committee shall be liable to any person for any action taken or
omitted in connection with the interpretation and
administration of this Plan unless attributable to their own
willful misconduct or lack of good faith.
11. Successors and Assigns. This Plan shall be binding upon and
inure to the benefit of the Company, its successors and
assigns, and the Participants and the Participants' heirs,
executors, administrators and legal representatives.
12. Amendment and Termination. The Committee may, at its sole
discretion at any time, amend or terminate this Plan with
respect to any future period, and no such amendment or
termination shall reduce the Participant's benefits which had
accrued prior to such
<PAGE> 10
amendment or termination. Notice of any such amendment or
termination shall be given to the Participants ninety (90)
days before the effective date(s) thereof.
13. Applicable Law. This Plan shall be construed in accordance
with and governed by the laws of the State of New Hampshire.
14. Effective Date. The Plan shall be effective as of the third
day of February, 1993.
IN WITNESS WHEREOF, the Company has caused this Plan to be
executed by its duly Authorized officer, as of the 18th day
of November, 1992.
ENERGYNORTH, INC.
By:/s/ Robert R. Giordano
(Duly Authorized Officer)
<PAGE> 11
ENERGYNORTH, INC.
1992 DIRECTORS' DEFERRED COMPENSATION PLAN
ELECTION FORM
Participant's Name ______________________________
I hereby elect to have EnergyNorth, Inc. (the Company) defer my
Directors' Compensation for the 199_ Plan (calendar) Year by:
A. $____________________;
B. __________% of all amounts earned;
C. All amounts in excess of $___________ per _________; or
(period)
D. Other ______________________
______________________
______________________
This amount is to be credited to a "Deferral Account" in my
name under the 1992 Directors' Deferred Compensation Plan (the
Plan).
I designate the following individual(s) as my beneficiary(s) of
this Plan pursuant to Section 8:
Primary Beneficiaries
_____________________ _________________________ ____________
(Name) (Relationship) (Percentage)
_____________________ _________________________ ____________
(Name) (Relationship) (Percentage)
Alternate Beneficiaries:
_____________________ _________________________ ____________
(Name) (Relationship) (Percentage)
_____________________ _________________________ ____________
(Name) (Relationship) (Percentage)
I elect to receive distribution of my "Deferral Account"
balance beginning (Select only one):
Upon my Separation Date (Check if chosen) as defined in Section 2,
On __________, 199___.
<PAGE> 12
I request that the "Deferral Account" be paid to me on the aforementioned
distribution time as: (Select only one)
a. Lump-sum amount equal to my accrued "Deferral Account"
balance as of the distribution date, or
b. A _____________________ installments for 10 years.
(monthly/annual)
______________________________ ____________________
Participant's Signature Date
CONSULTING AGREEMENT
Agreement dated as of December l, 1997 between ENERGYNORTH,
INC. of 1260 Elm Street, Manchester, New Hampshire ("ENI") and
ALBERT J. HANLON of Concord, New Hampshire ("Consultant").
In consideration of the mutual promises and obligations
contained in this Agreement, the Consultant and ENI agree as
follows:
1. General Description and Scope of Services
1.1. ENI agrees to retain the services of the
Consultant, acting in the capacity of an independent
contractor, to perform services in the areas of
environmental investigation and remediation and related
matters as designated by ENI, to which the Consultant
shall apply his substantial knowledge, experience and
resources.
1.2. The Consultant agrees to devote such time, not to
exceed an average of eight hours per week, and best
efforts as may be necessary to perform his duties and
responsibilities pursuant to the terms and conditions
of this Agreement. Duties and responsibilities
hereunder may be performed by the Consultant through
the use of mail services, telephone,electronic mail,
facsimile or other means of telecommunication.
1.3. Unless otherwise agreed to in writing, the
Consultant agrees not to hire, solicit the employment,
or retain the services of any personnel of ENI while
the Consultant is performing services for ENI under
this Agreement.
1.4. The Consultant is not, and shall not be construed
to be an employee, executive, officer or director of
ENI or any of its subsidiaries under this Agreement.
Consultant may perform services for other clients which
do not conflict with his obligations under this
Agreement.
2. Terms of Consulting Services
The Consultant is retained by ENI for the two-year
period beginning January 1, 1998 through December 31,
1999, unless earlier terminated as provided in Section
6 of this Agreement.
3. Compensation
3.1. The Consultant shall be paid by ENI at the rate of
$2,500.00 per month for the services provided under
this Agreement. The Consultant's services shall be
<PAGE> 2
billed by the Consultant at the end of each month and
shall be immediately due and payable.
3.2. ENI shall pay or reimburse or cause to be
reimbursed to the Consultant, in addition to the
payment for services described in Section 3.1, all
reasonable expenses incurred by the Consultant in
performing his services pursuant to this Agreement,
including telephone toll charges, travel expenses
(excluding travel to and from ENI offices), and
disbursements made on behalf on ENI or its
subsidiaries.
4. Facilities and Access to Records and Premises
4.1. ENI shall provide access to its facilities and
such workspace as is reasonably required by Consultant
to perform services pursuant to this Agreement.
Consultant shall maintain his own office facilities,
and ENI shall provide electronic connection between its
facilities and Consultant's facilities.
4.2. ENI agrees to disclose to and permit access of the
Consultant all information as may be reasonably
necessary to the performance of his obligations under
the terms of this Agreement.
4.3. Unless otherwise agreed to by the parties, the
Consultant, while working on the premises of ENI or its
subsidiaries, shall observe the working hours, working
rules and holiday schedules of ENI applicable to such
company's premises.
5. Non-Disclosure Covenant
5.1. Non-Disclosure. Except as may be required in the
performance of his duties under the terms of this
Agreement, unless this Agreement is terminated by ENI
without cause or is terminated by the Consultant by
reason of a breach of this Agreement by ENI, during the
term of this Agreement and for a period of three (3)
years thereafter, the Consultant will not, without
prior written consent of ENI, disclose, use, or permit
the use at any time either during or subsequent to his
retention under this Agreement any trade secret or
confidential information of ENI of which the Consultant
may become informed during his association with ENI.
For the purposes of this Section 5.1, "trade secret or
confidential information of ENI" means information
conspicuously treated as a secret and not generally
known about ENI's or any of its subsidiaries' or
affiliates' financial information, market information,
or business information such as products, processes,
<PAGE> 3
research, development, manufacturing techniques, or
customers and marketing plans. This non-disclosure
covenant does not release the Consultant from or
supersede any non-disclosure obligations that exist
under any other agreements between him and ENI.
5.2. The Consultant acknowledges that breach of the
covenants contained in Section 5.1 of this Agreement
cannot be adequately remedied by the award of monetary
damages and agrees that his obligations under Section
5.1 shall be specifically enforceable.
6. Termination
6.1. In the event of any material breach of this
Agreement by either party, the other party may
terminate this Agreement upon seven (7) days' written
notice, unless during such period the breach has been
remedied or cured, which termination shall not preclude
the terminating party from any other remedies it may
have at law or in equity.
6.2. ENI may terminate this Agreement, upon seven (7)
days' written notice, for good cause, which termination
shall not preclude ENI from any other remedies it may
have at law or in equity. "Good cause" shall be
limited to conviction of a felony or a crime involving
an act of moral turpitude, dishonesty, misfeasance
which substantially interferes with the orderly
business of ENI or any of its subsidiaries, action that
directly or indirectly causes ENI or any of its
subsidiaries to suffer substantial loss or damage,
refusal to follow or materially neglecting the
reasonable requests of ENI made pursuant to this
Agreement, and conduct that substantially interferes
with or damages the standing or reputation of ENI or
any of its subsidiaries.
6.3. The Consultant may terminate this Agreement, upon
thirty (30) days' written notice, at his election.
6.4. This Agreement shall be terminated in the event of
the death or total disability of the Consultant.
6.3. If this Agreement is terminated as provided herein
for any reason other than by Consultant's breach of the
Agreement as provided in Section 6.1, good cause as
provided in Section 6.2, Consultant's termination of
the Agreement as provided in Section 6.3, or
Consultant's death or total disability as provided in
Section 6.4, the monthly payments specified in Section
3.1 shall continue until the expiration of this
Agreement on December 31, 1999.
<PAGE> 4
7. Termination on Change of Control
This Agreement shall continue upon the change of
control or ownership of ENI. In the event ENI or its
successors terminate this Agreement for any reason
(including those designated in Sections 6.1 and 6.2) or
materially breach this Agreement, ENI or its successor
shall continue to make the same monthly payments
specified in Section 3.1 until the expiration of this
Agreement on December 31, 1999. A "change of control
or ownership of ENI" for purposes of this paragraph
means that at least forty percent (40%) of the
outstanding stock of ENI, or such lesser amount as the
Board shall deem necessary to obtain effective control
of ENI, has been obtained by a corporation, person or
entity through a merger, consolidation or tender or
exchange offer not initiated, supported or endorsed by
the Board of ENI.
8. Other Agreements
This Agreement contains the entire understanding
between the parties and supersedes all prior agreements
between them except to the extent specified in Section
5 of this Agreement and neither party shall have any
rights against the other pursuant to or in connection
with such prior agreements or their previous
relationship as employer and employee; provided,
however, that this Agreement shall not affect any
benefits that may have accrued or vested to the
Consultant under the Deferred Compensation Agreement
dated November 30, 1993 (as amended) between ENI and
the Consultant, ENI's qualified Pension Plan, the ENI
Supplemental Executive Retirement Plan, or the ENI Key
Employee Performance and Equity Incentive Plan. In
addition, this Agreement shall not affect any health or
insurance benefits available to Consultant by virtue of
his status as a retired employee of ENI.
9. Arbitration
Any dispute or controversy between the parties
relating to this Agreement shall be settled by binding
arbitration in the City of Manchester, State of New
Hampshire, pursuant to the governing rules of the
American Arbitration Association and shall be subject
to the provisions of New Hampshire Revised Statutes
Annotated Ch. 542. Judgment upon the award may be
entered in any court of competent jurisdiction.
<PAGE> 5
10. General Provisions
10.1. Nonassignability. Neither this Agreement nor
any right or interest hereunder shall be assigned by
the Consultant, his beneficiaries, or legal representative,
without ENI's prior written consent; provided, however
that Consultant may assign his right to continued payments
in the event of his termination as provided under
Section 6.5 and 7.
10.2. Indemnification. ENI shall indemnify and hold
Consultant harmless from all claims and expenses for loss
or damages, including costs of defense and attorneys fees,
related to his performance of services pursuant to this
Agreement.
10.3. 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 of assignment
by operation of law, and any attempt, voluntary or
involuntary, to effect any such action shall be
null, and of no effect.
10.4. Waiver of Breach. The waiver by either party
of a breach or any provision of this agreement
shall not operate as a waiver of a subsequent
breach of the same or any other provision.
10.5. Notices. Any notice required to be given
under this Agreement shall be deemed sufficient if
in writing and sent by mail to the parties at the
addresses shown above, or such other address as
either party may designate from time to time.
Notices shall be effective in the order they are
received or, if received the same day, as of the
time of postmark.
10.6. Binding Effect. This Agreement shall be
binding upon and inure to the benefit of the
Consultant and his successors and assigns, heirs,
executors, administrators and legal
representatives, and shall be binding upon and
inure to the benefit of ENI, its successors and
assigns, including, without limitation, any
person, partnership, company or corporation which
may acquire substantially all of ENI's assets or
business or with or into which ENI may be
liquidated, consolidated, merged or otherwise
combined.
<PAGE> 7
10.7. Amendment of Agreement. This Agreement may
not be modified or amended except by an instrument
in writing signed by the parties.
10.8 Headings. The headings in this Agreement
herein are included solely for convenience of
reference and shall not control the meaning or
interpretation of any of the provisions of this
Agreement.
10.9 Governing Law. This Agreement has been
executed and delivered in the State of New
Hampshire and its validity, interpretation,
performance and enforcement shall be governed by
the laws of the State of New Hampshire.
IN WITNESS WHEREOF, ENI has caused this Agreement to be
executed, and the Consultant has signed this Agreement, all as of
the day and year first above written.
ENERGYNORTH, INC.
/s/ Patricia L. Sowa By:/s/ Robert R. Giordano
Witness Robert R. Giordano, President
and Chief Executive Officer
/s/ Patricia L. Sowa By:/s/ Albert J. Hanlon
Witness Albert J. Hanlon
EXHIBIT 21
Subsidiaries of EnergyNorth, Inc.
EnergyNorth, Inc., incorporated in the state of New Hampshire,
has 100% ownership of the common stock of the following:
Broken Bridge Corporation, 1260 Elm Street, Manchester, New Hampshire.
EnergyNorth Natural Gas, Inc., 1260 Elm Street, Manchester, New Hampshire.
EnergyNorth Propane, Inc., 75 Regional Drive, Concord, New Hampshire.
EnergyNorth Realty, Inc., 1260 Elm Street, Manchester, New Hampshire.
ENI Resources, Inc., 1260 Elm Street, Manchester, New Hampshire.
_______________
All of the above companies are incorporated in the state of New Hampshire.
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of EnergyNorth, Inc.:
As independent public accountants, we hereby consent to the
incorporation by reference in the registration statement on Form
S-3, File No. 33-58127 of our reports dated November 4, 1997,
included in EnergyNorth, Inc.'s Form 10-K for the year ended
September 30, 1997, and to all references to our firm included in
this registration statement.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
December 22, 1997
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
EnergyNorth, Inc. consolidated balance sheet and the consolidated statement of
capitalization at September 30, 1997 and from the consolidated statement of
income and statement of cash flows for the twelve months ended September 30,
1997 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 99,015<F1>
<OTHER-PROPERTY-AND-INVEST> 7,403<F2>
<TOTAL-CURRENT-ASSETS> 20,923
<TOTAL-DEFERRED-CHARGES> 11,159
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 138,527
<COMMON> 3,244
<CAPITAL-SURPLUS-PAID-IN> 30,428
<RETAINED-EARNINGS> 14,050
<TOTAL-COMMON-STOCKHOLDERS-EQ> 47,722
0
0
<LONG-TERM-DEBT-NET> 45,242
<SHORT-TERM-NOTES> 100
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 932
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 46
<OTHER-ITEMS-CAPITAL-AND-LIAB> 44,485
<TOT-CAPITALIZATION-AND-LIAB> 138,527
<GROSS-OPERATING-REVENUE> 105,871
<INCOME-TAX-EXPENSE> 3,808
<OTHER-OPERATING-EXPENSES> 92,516
<TOTAL-OPERATING-EXPENSES> 96,324
<OPERATING-INCOME-LOSS> 9,547
<OTHER-INCOME-NET> 956
<INCOME-BEFORE-INTEREST-EXPEN> 10,503
<TOTAL-INTEREST-EXPENSE> 3,985
<NET-INCOME> 6,518
0
<EARNINGS-AVAILABLE-FOR-COMM> 6,518
<COMMON-STOCK-DIVIDENDS> 4,054
<TOTAL-INTEREST-ON-BONDS> 2,625
<CASH-FLOW-OPERATIONS> 13,998
<EPS-PRIMARY> $2.01
<EPS-DILUTED> 0
<FN>
<F1>Net of accumulated depreciation of $47,815
<F2>Net of accumulated depreciation of $ 9,485
</FN>
</TABLE>
