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, 1999
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.)
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1260 Elm Street, P.O. Box 329, Manchester, New Hampshire 03105-0329
(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 8, 1999, nonaffiliates held 3,206,137 shares of the registrant's $1.00 par value common
stock. On December 2, 1999, the aggregate market value of those shares was $175,536,001.
At the close of business on December 2, 1999, the registrant had 3,322,903 outstanding shares of its
$1.00 par value common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Incorporated Document Location in Form 10-K
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NONE
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Page 1 of 60 pages.
Exhibit Index appears on Pages 56 through 59.
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TABLE OF CONTENTS
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Part I Page No(s).
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Item 1. Business
General 4-6
Utility Gas Distribution Business 6
Retail Propane Business 6-7
Mechanical Contracting Business 7
Summary of Revenues 7-8
Deregulation 8
Competition 8-9
Gas Supply
General 9
Supply, Pipeline Transportation and Underground Storage Contracts 9-10
Cost of Purchased and Produced Gas 10
Supervision and Regulation 10-11
Employees 11
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 14
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 15-20
Item 7A. Quantitative and Qualitative Disclosures about Market Risk 20
Item 8. Financial Statements and Supplementary Data 21-43
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 43
Part III
Item 10. Directors and Executive Officers of the Registrant 44-45
Item 11. Executive Compensation 46-51
Item 12. Security Ownership of Certain Beneficial Owners and Management 51
Item 13. Certain Relationships and Related Transactions 52
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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 52-54
Signatures 55
Exhibit Index 56-59
Exhibit 23 - Consent of Independent Public Accountants 60
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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), ENI Mechanicals, Inc. (ENMI)
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. ENPI is headquartered at 75 Regional
Drive, Concord, New Hampshire. ENMI's wholly owned subsidiaries,
Northern Peabody, Inc. (NPI) and Granite State Plumbing and
Heating, Inc. (GSPH), are headquartered at 25 Depot Street,
Manchester New Hampshire and 546 Mast Road, Goffstown, New
Hampshire, respectively. All subsidiaries are incorporated in
the state of New Hampshire.
On July 14, 1999, the Company and Eastern Enterprises (Eastern),
a Massachusetts business trust, entered into an Agreement and
Plan of Reorganization (Agreement) which provides for the merger
of the Company with a subsidiary of Eastern, as a result of which
the Company's subsidiaries would become wholly owned subsidiaries
of Eastern. On November 4, 1999, Eastern entered into an
agreement to merge with KeySpan Corporation and, as a result, the
Company and Eastern amended the Agreement. Under the amended
Agreement, holders of outstanding shares of the Company's common
stock will be paid entirely in cash and the closing will take
place simultaneously with the Eastern merger with KeySpan
Corporation. If the Eastern/KeySpan Corporation merger is not
completed, the Company and Eastern would nonetheless merge, and
holders of outstanding shares of the Company's common stock can
elect to receive cash, Eastern common stock or a combination of
cash and stock as set forth in the Agreement. Completion of the
merger is subject to approval by the Company's stockholders and
receipt of satisfactory regulatory approvals, including approval
by the State of New Hampshire Public Utilities Commission
(Commission) and the Securities and Exchange Commission.
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 LPG)
and serves customers in central and southern New Hampshire. ENPI
is a member of VGS Propane, LLC (VGSP), a joint venture with
Northern New England Gas Corporation. VGSP is a Vermont limited
liability company which provides LPG sales and service in the
state of Vermont.
In May 1998, ENI acquired NPI and GSPH. Both are mechanical
contractors engaged in the design, construction and service of
plumbing, heating, ventilation, air conditioning and process
piping systems. They serve commercial, industrial and
institutional customers in northern New England. NPI has an
operating location in Portland, Maine.
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In general, the senior management of ENI serves as the senior
management of all subsidiaries, other than NPI and GSPH. 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
482,000 in 28 communities situated mostly in southern and central
New Hampshire, which includes the communities of Nashua,
Manchester, Concord and Laconia. In 1999, ENGI was awarded the
franchise for the city of Berlin, New Hampshire. Berlin is
situated in the northern part of New Hampshire approximately 100
miles from the rest of the service area. The remaining service
area encompasses approximately 922 square miles and is 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 New Hampshire nonfarm employment growth rate was 2.1% in
1999. This compares to a 2.0% average growth rate nationally and
a 1.6% average rate for New England for the same period. New
Hampshire employment growth in 2000 is forecasted to be 1.7%. New
housing permits increased 16.6% in 1999 compared to 1998, and are
expected to decrease by 5.2% in 2000. The New Hampshire
unemployment rate for 2000 is forecasted at 2.7% compared to 2.5%
in 1999, and the labor force is forecasted to increase by 1.7% in
2000. Job growth and low unemployment in the Company's service
area tend to result in an increase in gas volumes transported and
sold and numbers of customers. (All employment and housing
statistics are taken from The New England Economic Project's
October 1999 Economic Outlook for New Hampshire.) In fiscal
1999, the Company experienced net growth of 2.9% in natural gas
and transportation customers and 8.3% in propane customers over
1998.
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. In 1999, ENGI expanded into Berlin, New Hampshire and
began providing natural gas service in early fiscal year 2000.
ENGI has more than a 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 55% of the home heating market. Currently,
the price of natural gas for heating is higher than 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 four years, ENGI has
experienced an annual average customer growth rate of 2.7%. This
compares to an approximate 1.1% national average for local
distribution companies, according to the American Gas
Association. Additional growth in distribution operations also
occurs 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
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electric industry continues to move toward deregulation, this
option has 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.
Utility Gas Distribution Business
ENGI distributes natural gas as a regulated utility pursuant to
franchise authority granted by the Commission. No operations are
outside New Hampshire. While ENGI's franchise area is primarily
residential in character, 51% of sales volumes are commercial and
industrial. As of September 30, 1999, the Company's utility
business served nearly 72,000 customers, of which approximately
88% were residential and 12% were commercial and industrial.
During fiscal 1999, no ENGI customer purchased more than 2.5% 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, 1999, ENGI had 89 firm transportation customers.
ENGI distributes gas to its utility customers through a system of
underground pipelines connected with its three operations centers
in Manchester, Nashua and Tilton, seven take stations located in
Manchester, Londonderry, Windham, Concord, Hooksett, Suncook and
Berlin 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 more than 75% of New Hampshire's
natural gas customers.
On September 7, 1999, the Commission approved a petition filed by
ENGI for authority to operate in the city of Berlin, New
Hampshire. Berlin is a community of approximately 12,000
inhabitants in the northern tier of the state. At the request of
the State of New Hampshire Department of Corrections, ENGI is
providing natural gas service to a new prison complex being
constructed in Berlin. The prison is located approximately one-
half mile from the Portland Natural Gas Transmission System. ENGI
anticipates additional development in the vicinity of the prison
complex, as well as interest from other energy users in the city
of Berlin.
Retail Propane Business
ENPI sells propane to more than 15,300 customers, of which
approximately 90% are residential and 10% are commercial and
industrial. ENPI's service territory includes more than 150
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
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propane requirement is purchased in the spot market. ENPI utilizes
fixed price contracts with certain suppliers to cover its retail
fixed price program, as well as to reduce price volatility during
the winter months. ENPI holds a 49% interest in VGSP, a joint
venture, and provides planning and management expertise through
its representation on the VGSP Board of Managers. VGSP is the
largest Vermont-based propane company and services more than 10,000
customers throughout the state of Vermont.
On August 26, 1999, ENPI exercised its option under the VGSP
Operating Agreement to offer to sell its share of VGSP to
Northern New England Gas Corporation, the 51% member of VGSP. In
accordance with the terms of the Operating Agreement, an
appraisal is underway to determine the fair value of each
member's ownership interest. ENPI anticipates its withdrawal as
a member of VGSP will be completed in early 2000.
Mechanical Contracting Business
NPI and GSPH are mechanical contractors engaged in the design,
construction and service of plumbing, heating, ventilation, air
conditioning and process piping systems. Both companies serve
commercial, industrial and institutional customers in northern
New England and Massachusetts from operating locations in
Manchester and Goffstown, New Hampshire and Portland, Maine.
Most mechanical systems are constructed on the site of each
project. NPI performs some fabrication work, mostly for
industrial customers, at its fabrication shop in Manchester, New
Hampshire. The total backlog of orders for NPI and GSPH at
September 30, 1999 was $18.5 million compared to $16.2 million
last year, and approximately $13 million of the 1999 backlog is
expected to be completed in fiscal year 2000.
Summary of Revenues
Revenues attributable to various categories of gas distribution
and related operations during the last three fiscal years and
mechanical contracting operations for the fiscal year ended
September 30, 1999 and for the five-month period ended September
30, 1998 are as follows (in thousands, unaudited):
September 30,
--------------------------------
1999 1998 1997
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Utility (natural gas) sales service $ 72,891 $ 82,686 $ 91,670
Utility transportation service 3,726 2,610 1,308
Propane gas sales 11,164 11,204 12,893
Service and appliance sales 2,275 2,128 2,185
Rentals 854 899 937
Mechanical contract sales 31,391 13,426 -
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$122,301 $112,953 $108,993
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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
83% of ENGI's and ENPI's customers use natural gas and propane
for heating.
Deregulation
ENGI has been providing gas transportation service, including
standby and balancing services for commercial and industrial
customers since late 1993. Gas transportation service allows
customers to utilize ENGI's distribution system for the
transportation of gas purchased from third-party suppliers,
creating competition from gas marketers for the sale of gas to
end users. At September 30, 1999, ENGI had 89 firm
transportation customers. These customers are, for the most
part, large commercial and industrial customers. The volume
transported for firm transportation customers in fiscal 1999 was
2.0 Bcf, 26% of the Company's total commercial and industrial
load and 15.8% of ENGI's total gas delivered. ENGI is
participating in a proceeding at the Commission to examine
further unbundling of the natural gas industry in New Hampshire.
The purpose of the proceeding is to determine whether and to what
extent unbundling provides benefits to customers and to make
recommendations to the Commission as to the advisability of
further unbundling to other classes of customers. A full report
of recommendations by the participants, along with model terms
and conditions, is expected to be filed with the Commission in
late 1999. ENGI cannot predict the outcome of the proceeding, or
the impact on transportation volumes or customers.
ENGI is the sole distributor and transporter of natural gas in
its franchise area. The Tennessee Gas Pipeline Company
(Tennessee) serves all of ENGI's franchise area, except the city
of Berlin, which is served by the Portland Natural Gas
Transmission System. 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, some of whom 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 higher than 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
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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.
The mechanical contracting market is very competitive. Most
contracts are awarded through a bid process in which there are,
usually, at least three bidders. The principal competitive
factors are price and the quality and reliability of the
construction work.
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.
Supply, Pipeline Transportation and Underground Storage
Contracts. ENGI's gas supply is principally natural gas,
transported on interstate pipelines. The primary pipeline ENGI
uses to bring natural gas to its distribution territory is the
Tennessee Gas Pipeline (TGP). ENGI contracts for 56,833
Dekatherms (Dth) of primary firm and 8,000 Dth of interruptible
capacity on TGP. ENGI also has a long-term contract with a New
England supplier for additional firm city gate delivery of 8,000
Dth per day (151 day service).
ENGI's natural gas supply contracts are a mix of long and short-
term agreements. ENGI's firm supply contracts for fiscal year
1999, with terms of one to seven years, totaled 40,529 Dth per
day. During fiscal year 1999, approximately 4.7% of ENGI's
natural gas supply portfolio was firm delivered winter
supplemental supply. One percent of ENGI's annual supply in
fiscal year 1999 was purchased in the spot market.
In fiscal year 1999, approximately 61% of the gas delivered by
ENGI came from domestic pipeline sources, 24% from Canadian
pipeline sources, and 14% from supplemental pipeline sources.
LPG and liquefied natural gas (LNG) purchases from both domestic
and foreign sources made up approximately 1% of the gas delivered
by ENGI. LPG and LNG are vaporized at ENGI's peakshaving
(production) plants as needed to supplement pipeline natural gas
supplies. Unbundled end-user customers that are supplied by
third-party marketers accounted for nearly 15.8% of total load on
ENGI's system during fiscal year 1999.
All pipeline volumes to ENGI's city gates are transported via the
TGP, except for volumes which are transported to the city gate at
Berlin, New Hampshire by the Portland Natural Gas Transmission
System. Canadian supplies are also transported by the suppliers
on the TransCanada Pipeline to the U.S. border, where ENGI takes
possession in this country and transports these supplies on the
Iroquois Gas Transmission System, the Portland Natural Gas
Transmission System and the TGP. All domestic pipelines operate
under FERC approved tariffs.
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ENGI has underground storage agreements with four storage field
operators in the Pennsylvania-New York area. ENGI fills these
storage fields each summer for use during the following winter.
Total combined storage controlled by ENGI equals 2,579,431 Dth
with daily withdrawal rights of 30,833 Dth. All underground
storage fields operate under FERC approved tariffs. ENGI also
owns on-site storage facilities capable of holding 115,660 Dth of
LPG and 13,057 Dth of LNG. ENGI has contracted for 450,000 Dth
of supplemental pipeline supply, 100,000 Dth of LNG and 1,000,000
gallons of LPG for the upcoming winter (1999/2000).
The Company expects to be able to secure the gas supply required
to meet existing customer and forecasted new customer demands
through long and short-term commitments and through spot
purchases when needed.
Cost of Purchased and Produced Gas. The average unit cost of gas
purchased and produced during the twelve months ended September
30, 1999 was approximately $3.78 per Mcf compared to $4.09 per
Mcf for the same period last year. The 1999 average unit cost
reflects the lower cost of gas supply in the marketplace. The
cost of gas rate authorized by the Commission permits recovery by
ENGI from its customers (or requires refunds to its customers) of
gas costs (including pipeline, storage, LPG and LNG) that are
higher (or lower) than the cost of gas included in base rates.
ENGI may adjust the approved cost of gas rate upward or downward
on a monthly basis. The monthly accumulative adjustments may not
exceed 10% of the approved unit cost of gas sold. Amounts
recovered through cost of gas charges are reconciled twice
annually against actual costs, for summer and winter periods, and
future cost of gas rates are adjusted accordingly.
ENGI has a Natural Gas Price Risk Management Program designed to
protect customers from sharp increases in the commodity cost of
gas. Under the program, ENGI has purchased call and sold put
options for the 1999/2000 winter period. The call options
provide the right, but not the obligation, to purchase gas at a
predetermined price by a certain date. The purchase of call
options and the sale of put options create a collar mechanism.
The collar establishes a maximum and minimum price at which the
Company will buy gas contracts on the commodities market. All
program costs and benefits are passed on to customers through the
cost of gas charge.
Margins earned on interruptible service, 280 day service and
capacity releases are passed on to firm customers through the
cost of gas charge. In addition, costs associated with the fuel
inventory trust, including administrative fees and carrying
costs, are recovered through the cost of gas charge.
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.
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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.
The mechanical contracting businesses of NPI and GSPH are subject
to OSHA regulations and local, state and federal building codes
but are not otherwise subject to direct regulation by federal,
state and local agencies.
Employees
At September 30, 1999, the Company had 459 full-time employees,
of whom 135 were represented by four contracts with Local 12012
of the United Steelworkers of America. The contracts expire in
2001 and 2002. Various locals of the United Association of
Plumbers and Pipefitters represent 134 employees under a contract
that expires in 2000.
ITEM 2. PROPERTIES
The Company's utility gas distribution facilities constitute the
majority of its physical assets. As of September 30, 1999, ENGI
had approximately 1,113 miles of mains and 702 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 and vehicles.
Office/operating locations for NPI and GSPH in Manchester and
Goffstown, New Hampshire and Portland, Maine are leased until
2002-2003 with options to renew. The locations are adequate and
are regularly maintained and in good condition. Substantially
all vehicles and other equipment are leased or are subject to
purchase money security interests held by banks.
ITEM 3. LEGAL PROCEEDINGS
In addition to the matters described below, 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
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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, own or owned
several facilities at which manufactured gas plants (MGP)
operated. MGPs were used to manufacture gas prior to the
introduction of natural gas to the Company's service area.
Generally, MGPs operated from the late 1800s to the early 1950s.
The MGPs produced wastes and by-products that may be considered
contaminated or hazardous under current law, and some of which
may still be present at such facilities. Relevant environmental
laws can be used by the state and federal government to hold the
Company strictly liable for the costs of studying and remedying
discarded by-products from MGPs owned and operated by its
predecessors. The Company accrues environmental investigation
and cleanup costs with respect to former MGPs and other
environmental matters when it is probable that a liability exists
and the amount or range of amounts can be reasonably estimated.
The New Hampshire Department of Environmental Services (NHDES)
has required the Company to undertake remedial investigation
and/or remedial action at MGPs located in Concord, Laconia,
Nashua, and Dover, New Hampshire. At each MGP, the Company is
responding to the NHDES's requirements as described below.
In September 1992, the NHDES required the Company to undertake a
remedial investigation of the former MGP in Concord, New
Hampshire. Study and remediation associated with the Concord MGP
is ongoing. The estimated cost to complete this remedial action
ranges from $690,000 to $1.6 million, and the Company has
recorded $690,000 at September 30, 1999 in deferred charges. The
Company received an order from the Commission approving recovery
from customers, over a seven-year period, of substantially all
costs, excluding carrying costs, incurred for the Concord MGP.
The total unamortized balance for the Concord site, including the
gas holder site, was $4.4 million as of September 30, 1999.
At the direction of the NHDES, the Company and Public Service
Company of New Hampshire (PSNH), an electric utility company,
conducted a remedial investigation of a former MGP in Laconia,
New Hampshire, and in January 1999 prepared a Remedial Action
Plan for that site. Without admitting any liability, on
September 3, 1999, the Company entered into a Site
Responsibilities and Indemnity Agreement (SRIA) with PSNH.
Pursuant to the SRIA, the Company will pay $4.2 million to PSNH
over a twenty-four (24) month period. In exchange, PSNH will
assume responsibility for all future site study and remediation,
and PSNH will indemnify the Company against such costs. The
Company's legal liability under state and federal laws is
unaffected by the SRIA. Through September 30, 1999, the Company
has paid $1 million under the SRIA. The estimated costs
associated with work undertaken prior to the SRIA ranges from
$117,000 to $517,000, and the Company has recorded $3.3 million
in deferred charges at September 30, 1999.
During 1998, the Company and PSNH received Notice of Potential
Responsibility from the Environmental Protection Agency (EPA) for
the so-called Nashua River Asbestos Site. The EPA contends that
wastes released from the former MGP in Nashua, New Hampshire are
commingled with asbestos wastes from a former Johns Manville
facility located adjacent to the former MGP.
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The Company's share of costs to complete the disposal of
contaminants that are the subject of EPA claims are estimated
to range from $375,000 to $450,000. The Company and PSNH
subsequently received a notice from the NHDES requiring the
investigation of the former MGP site in Nashua. The Company
estimates the cost of site investigation and characterization at
the Nashua MGP to range from $250,000 to $325,000. The Company
recorded $625,000 in deferred charges at September 30, 1999.
In April 1999, the Company received notice from the NHDES to
investigate the former MGP site in Dover, New Hampshire. PSNH
and another utility company, Northern Utilities, received similar
notices concerning the Dover MGP from the NHDES. The Company
estimates its cost of that investigation and characterization to
range from $200,000 to $400,000. The Company has recorded
$200,000 in deferred charges at September 30, 1999.
The Commission has approved a generic recovery mechanism for
costs incurred at all MGP sites, except recovery for the Concord
site noted above, which provides for a seven-year recovery period
of substantially all costs, excluding carrying costs. The
recovery mechanism provides that the environmental surcharge to
customers will not exceed 5% of total gross gas revenues in any
given year but that amounts in excess of 5% will be deferred to
future periods with recovery of applicable carrying costs.
The Company intends to pursue insurance recovery as well as
recovery from other responsible parties to ensure that such third
parties contribute appropriately to reimburse the Company for any
costs incurred with respect to environmental matters. All
recoveries serve to reduce the seven-year environmental surcharge
period to customers. The Company has instituted suits in the
United States Federal District Court for New Hampshire and in New
Hampshire superior courts against one third party, as well as the
Company's insurers and insurers of its predecessors to recover
the costs of investigation and remediation of the Concord,
Nashua, Dover and Laconia MGP sites. In each litigation, the
Company is seeking declaratory judgment that its insurers owe the
Company a defense and/or indemnification for environmental claims
associated with each respective MGP. Through September 30, 1999,
the Company has recovered a total of $4.3 million in settlement
of third-party MGP litigation.
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 1999.
<PAGE>
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 1999 and 1998 were as follows:
Fiscal 1999 Fiscal 1998
High Low High Low
- -------------------------------------------------------------------
First Quarter $29 5/8 $26 3/16 $28 13/16 $22 3/4
Second Quarter 30 1/8 27 1/2 29 1/16 27 5/8
Third Quarter 29 1/4 26 5/8 29 3/4 26 3/8
Fourth Quarter 43 3/4 28 7/8 27 5/8 25 1/4
As of December 2, 1999, there were 1,839 holders of record of common
stock.
Quarterly cash dividends paid were as follows:
Fiscal 1999 Fiscal 1998
- -----------------------------------------------------------------
First Quarter $.335 $.32
Second Quarter .335 .32
Third Quarter .35 .335
Fourth Quarter .35 .335
<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per share amounts)
September 30, 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<C> <S> <S> <S> <S> <S>
Total operating revenues $119,172 $109,926 $105,871 $ 88,954 $ 78,806
Net income 4,537 5,378 6,518 6,078 4,104
Earnings per share 1.37 1.64 2.01 1.89 1.30
Cash dividends per share 1.37 1.31 1.25 1.19 1.12
Total assets 168,325 154,394 138,800 132,098 120,678
Capitalization:
Common stockholders' equity 50,943 50,890 47,722 45,167 42,114
Long-term debt (including capital lease obligations) 45,679 44,390 45,242 29,571 30,103
------------------------------------------------------------
Total capitalization $ 96,622 $ 95,280 $ 92,964 $ 74,738 $ 72,217
============================================================
Short-term debt (including current portion of
long-term debt) $ 16,069 $ 5,585 $ 1,078 $ 11,854 $ 5,501
- -------------------------
Reclassifications are made periodically to previously issued financial data to conform to the current presentation.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Earnings and Dividends
Earnings per share for 1999 were $1.37 on net income of $4.5
million, which represents a 16.5% decrease from the $1.64 per
share earned in 1998. Impacting 1999 financial results were
reorganization costs of $1.2 million, or $.35 per share, incurred
as a result of the pending merger with Eastern. Although the
weather was colder in 1999, it was warmer than normal and also
had a significant impact on financial results, reducing 1999
utility margin by approximately $.36 per share, after taxes. In
1998, utility margin was reduced approximately $.51 per share,
after taxes, as a result of warmer than normal temperatures. The
1999 earnings were favorably impacted by continued customer
growth and successful efforts to contain operating costs. The
earnings achieved represent a return on average common equity of
11.2% before the impact of reorganization costs. Cash dividends
paid on common stock were $1.37 representing a payout ratio of
100% of 1999 earnings. The current quarterly dividend of $.35 per
share is equal to an annual dividend of $1.40 per share. The
quarterly dividend increased 4.5% in 1999, from $.335 to $.35 per
share.
Utility Sales and Revenues
The rates charged to utility customers are regulated by the
Commission. The Commission is required by New Hampshire law to
allow ENGI to charge rates that are just and reasonable, such
that ENGI is compensated for the cost of providing service and
allowed a reasonable rate of return on its investment. ENGI
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.
ENGI generates revenues primarily through the sale and
transportation of natural gas. ENGI's gas sales are divided into
two categories: firm, whereby ENGI must supply gas to customers
on demand; and interruptible, whereby ENGI may, generally during
colder months, temporarily discontinue service to high-volume
commercial and industrial customers. Sales of gas to
interruptible customers do not materially affect ENGI's operating
income because all margin on such sales is returned to the
Company's firm customers.
ENGI's tariff includes cost of gas 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 cost
of gas rates affect revenues, they do not affect total margin
because the cost of gas charge is a tariff mechanism designed to
provide dollar-for-dollar recovery of gas costs. Amounts
recovered through cost of gas charges are reconciled at least
semiannually against actual costs, and future cost of gas rates
are adjusted accordingly.
ENGI's sales are responsive to colder weather because the
majority of firm customers use natural gas for space heating
purposes. ENGI 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
<PAGE>
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
ENGI's service territory, weather conditions within such territory
often vary. ENGI 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
-------------------------------------------------------
<C> <S> <S> <S> <S> <S>
Fiscal year ended September 30, 1999 6,698 6,532 7,452 2.5 % (10.1)%
Fiscal year ended September 30, 1998 6,532 7,373 7,499 (11.4)% (12.9)%
Fiscal year ended September 30, 1997 7,373 7,482 7,506 (1.5)% (1.8)%
</TABLE>
Operating revenues for ENGI were $76.6 million in 1999 compared
to $85.3 million in 1998. The decrease resulted primarily from
lower cost of gas rates due to reductions in the cost of gas.
Partially offsetting the impact of lower cost of gas charges was
the 2.4% growth in the average number of customers in 1999.
Customer growth combined with temperatures that were 2.5% colder
than the prior year resulted in a 4.6% increase in firm sendout.
The weather in 1999 was 10.1% warmer than normal. Revenues from
gas transported for customers under firm transportation service
rates increased 45% to $3.4 million, due to a more than 46%
increase in volumes transported. This increase included a shift
of 174,000 Mcf from firm commercial and industrial sales
customers, representing a decrease of $615,000 in operating
revenues attributable to the commodity cost of gas.
Utility Cost of Gas
The cost of gas sold was $36.6 million in 1999 compared to $46.7
million in 1998 The decrease was primarily due to timing
differences related to the recovery of gas costs through cost of
gas charges ($5.4 million), lower volumes of gas sold ($1.3
million) and a decline in the unit cost ($3.4 million). The
average unit cost of gas sold in 1999 was $3.78 per Mcf compared
to $4.09 per Mcf in 1998. Decreases or increases in purchased
gas costs from suppliers have no significant impact on margin,
because they are passed on to customers through the cost of gas
charge.
Retail Propane Operations
ENPI contributed $203,000 to net earnings of the Company, a
slight increase over 1998 results. Significantly impacting net
earnings were reorganization costs of $95,000. In addition,
ENPI's share of VGSP's loss was $266,000 after taxes compared to
a loss of $244,000 last year. The average number of propane
customers increased more than 8% and propane gallons sold
increased 6.5% in 1999. The substantial customer growth and
weather that was colder than the prior year accounted for the
increase in gallons sold. While 1999 operating revenues of $11.1
million were slightly less than 1998, gross margin increased
6.5%. The cost of gas sold was favorably impacted by market
prices and was 7.5% less than 1998. The Company was able to
maintain a competitive price while the unit cost of gas sold
decreased 13.2%. Operations and maintenance expense increased
approximately 5.7%. Increases in labor, transportation and other
delivery related
<PAGE>
expenses necessary to support an expanding customer base were partially
offset by cost control measures in other areas.
Mechanical Contracting Operations
Contract revenues and net income for 1999 were $31.4 million and
$422,000 compared to $13.4 million and $194,000 in 1998,
respectively. The Company's mechanical contracting operations
were acquired under the purchase method of accounting in May
1998. Consequently, only five months of ENMI are included in
1998 results.
Operating Expenses
Operation and maintenance expenses of the mechanical contracting
business and increases in wages were the primary reasons for the
9.3% increase in operations and maintenance in 1999. The 1999
results include the first full year of ENMI operational expenses.
Higher depreciation and amortization charges were a direct result
of plant additions and amortization of environmental remediation
costs. Net additions to property, plant and equipment were $13.8
million and $14.7 million in 1999 and 1998, respectively.
Total interest expense increased $210,000 in 1999 due primarily
to the increased level of short-term debt outstanding during the
fiscal year.
Reorganization costs are not currently tax deductible. The
higher level of income before reorganization costs was the reason
for the $120,000 increase in federal and state income taxes in
1999.
Capital Resources and Liquidity
Because of the seasonal nature of the Company's gas 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. Cash
requirements for capital expenditures, dividends, long-term debt
retirement, environmental remediation 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.
The Company's major uses of cash in 1999 were capital
expenditures of $13.8 million, environmental remediation of $4.9
million, and retirement of $2.3 million of long-term debt. In
addition, dividend payments to shareholders totaled $4.5 million
in 1999. These expenditures were funded primarily through cash
generated from current operations and short-term borrowings.
Borrowings against lines of credit during 1999 ranged from
$181,000 to a high of $15.3 million. In addition, at September
30, 1999, deferred gas cost was in an undercollected position
resulting from winter and summer activity. The undercollected
amounts will be recovered from customers through cost of gas
charges.
<PAGE>
Capital expenditures for fiscal year 2000 are currently projected
at approximately $14.3 million. Additional cash requirements
will be necessary for the payment of dividends, environmental
remediation, annual sinking fund requirements, maturities of long-
term debt, working capital and costs related to the proposed
merger with Eastern. 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, 1999, the Company had available lines of credit
aggregating $27.7 million, $15.3 million of which was
outstanding. In addition, a credit line of $10.5 million was
available at September 30, 1999, under the Company's fuel
inventory trust financing plan. At September 30, 1999, the
Company's fuel inventory in trust was $8.3 million with an
outstanding purchase obligation of $8.3 million.
On September 30, 1999, the Company's capitalization ratio
consisted of 45% common equity and 55% debt, including short-term
debt.
Environmental Matters
The Company continues to work with federal and state
environmental agencies to assess the extent and environmental
impact of contaminants that may exist at or near former gas
manufacturing sites. The costs of such assessments and any
related remediation determined to be necessary is expected to be
funded from traditional sources of capital, recoveries from
insurance carriers and responsible third parties and customers.
For further information, see Note 12 to the consolidated
financial statements.
Results of Operations 1998 Compared to 1997
Net income decreased to $5.4 million in 1998 from 1997 net income
of $6.5 million. Earnings per share in 1998 were $1.64 compared
to $2.01 in 1997. Warmer weather in the Company's service
territory significantly impacted net income. Temperatures were
12.9% warmer than normal and 11.4% warmer than the prior year.
The effect of weather, when compared to normal, reduced 1998
utility margin by $.51 per share after taxes; whereas, warmer
temperatures in 1997 decreased utility margin by $.14 per share
after taxes. In addition, 1997 earnings were $.20 per share
higher than 1998 as a result of a favorable net property tax
settlement that was recorded in 1997.
Operating revenues were $109.9 million in 1998, an increase of
3.9% from 1997. Mechanical contracting operations acquired in
1998 added $13.4 million to operating revenues. Utility gas
service revenues, which represented more than 77% of total
operating revenues, decreased by $7.7 million, or 8.3%. The unit
cost of gas sold in 1998 was $4.09 per Mcf compared to $4.28 per
Mcf in 1997. Although the weather in the Company's service
territory was 12.9% warmer than normal and 11.4% warmer than
1997, the total volume of gas delivered to utility customers
increased slightly. Partially offsetting the impact of the
warmer temperatures was the 2.4% growth in the average number of
utility customers.
Propane operations recorded $11.2 million in total operating
revenues in 1998, a decrease over 1997 of $1.7 million. Propane
gallons sold were slightly less than 1997 due to the warmer
weather, and the unit cost of propane gallons sold decreased 22%.
<PAGE>
Operations and maintenance expense for 1998 included the expenses
of the mechanical contracting operations that were acquired
in May. The increase from 1997 was due mostly to this
acquisition. Taxes other than income taxes increased $1.2
million to $4.1 million in 1998. The 1997 results include a
favorable property tax settlement, net of adjustments, of more
than $1 million.
New Accounting Standards and Pronouncements
During fiscal year 1999, the Company implemented a number of
Statements of Financial Accounting Standards (SFAS). SFAS No.
130, "Reporting Comprehensive Income," establishes standards for
reporting and the disclosure of comprehensive income and its
components. SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," requires disclosure of
operating segments, including disclosures about products and
services, geographic areas and major customers. SFAS No. 132,
"Employer's Disclosures about Pensions and Other Postretirement
Benefits," revises employer's disclosures about pension and other
postretirement benefit plans. It does not change the measurement
or recognition of those plans. None of the above standards had a
material impact on the Company's financial reporting.
The Financial Accounting Standards Board issued new accounting
standards which the Company will adopt in future periods. SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities," establishes standards for recording all derivative
instruments as assets and liabilities measured at fair value.
The standard was to be effective in the first quarter of fiscal
year 2000, but was amended by SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133" - an amendment of FASB
Statement 133. As such, SFAS No. 133 will be effective in the
first quarter of fiscal year 2001. The Company has not yet
quantified the impacts of adopting SFAS No. 133 in the financial
statements and has not determined the timing of or method of
adoption of SFAS No. 133. However, the statement could increase
volatility in earnings and other comprehensive income.
The American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed and Obtained for Internal Use," and
SOP 98-5, "Reporting on the Costs of Start-up Activities." Both
are effective in fiscal year 2000 and adoption is not expected to
have a material impact on the Company's financial position.
Year 2000 Readiness
The Company has evaluated its principal computer systems and
noninformation technology systems including, but not limited to,
telecommunication systems, automated meter reading systems,
SCADA, regulator stations, plant remote control systems and
security systems to determine readiness for the year 2000. At
September 30, 1999, all Company systems critical to the delivery
of gas to customers are year 2000 compliant. All necessary
program modifications and system upgrades and testing have been
completed. Costs incurred to date and costs expected to be
incurred to complete the year 2000 readiness are not material and
will not have a material impact on the Company's financial
position or results of operations.
<PAGE>
The Company is currently assessing year 2000 issues with third
parties with whom it has a material relationship. Although this
assessment is ongoing, critical vendors contacted to date have
indicated that interruption to service due to year 2000 problems
is unlikely. Due to the complexity of the problem and the
reliance on certain important vendors and suppliers, there can be
no guarantee that year 2000 compliance for all computer systems
and other systems will be achieved or that critical and important
vendors and suppliers will achieve compliance. The successful
upgrade of the Company's systems on a timely basis is critical to
enable the Company to avoid business disruption and the loss of
essential information or data in the year 2000. In addition, a
disruption of the transmission of gas due to year 2000 problems
experienced by the Company's gas supplier or other significant
vendors and service providers could prevent the delivery of a
sufficient amount of gas to enable the Company to serve certain
customer segments.
Because of the difficulty of accessing year 2000 readiness of
others outside the control of the Company, the Company considers
potential disruptions by these third parties to present the
"reasonably likely worst case scenario." The Company's inability
to serve its customers could result in increased costs, loss of
business and other similar risks. In an effort to reduce the
risks of non-compliance, the Company has updated its Emergency
Plan to consider any foreseeable year 2000 contingencies.
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 discussion of the Company's business
and Management's Discussion and Analysis of Financial Condition
and Results of Operations include forward-looking statements
concerning the impact of changes in the cost of gas and cost of
gas rates on total margin; projected capital expenditures and
sources of cash to fund expenditures; the impact of regulatory
proceedings on unbundling; year 2000 readiness; estimated costs
of environmental remediation and regulatory approval of recovery;
competition with other forms of energy; expansion of service in
Berlin; the merger with Eastern; and customer bypass. 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; uncertainty as to environmental costs
and as to regulatory approval of the full recovery of
environmental costs and other regulatory assets; weather; results
of regulatory proceedings on unbundling; impact of new pipeline
supplies; costs of other sources of energy; expansion of service
in Berlin; consummation of the merger with Eastern; customer
bypass; and success of the Company's year 2000 readiness efforts
and those of its vendors and customers.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The Company does not enter into material market risk sensitive transactions.
<PAGE>
<TABLE>
<CAPTION>
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, 1999 1998 1997
- -----------------------------------------------------------------------------
<C> <S> <S> <S>
Operating revenues $119,172 $109,926 $105,871
Operating expenses:
Cost of sales 69,321 64,124 61,829
Operations and maintenance 25,219 23,073 21,658
Depreciation and amortization 7,647 6,604 6,153
Taxes other than income taxes 4,142 4,072 2,876
Federal and state income taxes 3,222 3,102 3,808
----------------------------------
Total operating expenses 109,551 100,975 96,324
----------------------------------
Operating income 9,621 8,951 9,547
Other income 1,056 1,173 956
Reorganization cost 1,184 - -
Interest expense:
Interest on long-term debt 3,885 3,897 2,917
Other interest 1,071 849 1,068
----------------------------------
Total interest expense 4,956 4,746 3,985
----------------------------------
Net income $ 4,537 $ 5,378 $ 6,518
==================================
Earnings per share:
Basic $ 1.37 $ 1.64 $ 2.01
Diluted 1.36 1.64 2.01
Weighted average shares outstanding:
Basic 3,319 3,273 3,243
Diluted 3,333 3,273 3,243
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets EnergyNorth, Inc.
(In thousands)
September 30, 1999 1998
- ------------------------------------------------------------------------------------------------------
<C> <S> <S>
Assets
Property:
Utility plant, at cost $169,856 $158,595
Accumulated depreciation and amortization 56,126 51,313
---------------------
Net utility plant 113,730 107,282
Net nonutility property, at cost 8,049 7,771
---------------------
Net property 121,779 115,053
---------------------
Current assets:
Cash and temporary cash investments 853 1,231
Accounts receivable (net of allowances of $1,115 in 1999 and $1,127 in 1998) 9,810 9,727
Unbilled revenues 559 516
Deferred gas costs 1,524 -
Materials and supplies 2,047 2,086
Supplemental gas supplies 9,723 9,653
Prepaid and deferred taxes 2,235 1,804
Recoverable FERC 636 transition costs - 252
Prepaid expenses and other 1,669 1,496
---------------------
Total current assets 28,420 26,765
---------------------
Deferred charges and other assets:
Regulatory asset - income taxes 2,465 2,401
Recoverable environmental costs 11,646 6,113
Other deferred charges 2,156 1,941
Other assets 1,859 2,121
---------------------
Total deferred charges and other assets 18,126 12,576
---------------------
Total assets $168,325 $154,394
=====================
Stockholders' equity and liabilities
Capitalization (see accompanying statements) $ 96,622 $ 95,280
---------------------
Current liabilities:
Notes payable to banks 15,278 3,524
Current portion of long-term debt 791 2,061
Inventory purchase obligation 8,329 8,712
Accounts payable 11,983 10,431
Deferred gas costs - 3,841
Accrued interest 251 272
Accrued and deferred taxes 571 342
Accrued FERC 636 transition costs - 252
Accrued environmental remediation costs 4,132 2,345
Customer deposits and other 3,108 3,005
---------------------
Total current liabilities 44,443 34,785
---------------------
Commitments and contingencies
Deferred credits:
Deferred income taxes 21,254 18,828
Unamortized investment tax credits 1,487 1,610
Regulatory liability - income taxes 1,027 1,141
Long-term environmental remediation costs 700 -
Contributions in aid of construction and other 2,792 2,750
---------------------
Total deferred credits 27,260 24,329
---------------------
Total stockholders' equity and liabilities $168,325 $154,394
=====================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Capitalization EnergyNorth, Inc.
(In thousands, except share information)
September 30, 1999 1998
- ------------------------------------------------------------------------------------
<C> <S> <S>
Capitalization:
Common stockholders' equity:
Common stock - par value of $1 per share; 10,000,000
shares authorized; 3,319,718 and 3,317,498 shares
issued and outstanding in 1999 and 1998, respectively $ 3,320 $ 3,317
Amount in excess of par value 32,506 32,445
Retained earnings 15,117 15,128
---------------------
Total common stockholders' equity 50,943 50,890
---------------------
Long-term debt:
First Mortgage Bonds
Due 2009 8.44% 3,333 3,667
Due 2019 9.70% 7,000 7,000
Due 2020 9.75% 10,000 10,000
Due 2027 7.40% 21,955 21,975
Mortgage notes payable
Due 1999 8.75% - 1,300
Due 2008 8.00% 833 899
Promissory note
Due 2009 LIBOR plus 1.50% 2,463 -
Notes payable
Due 2000 prime - 700
Due through 2001 prime plus 1.00% 13 26
Due through 2003 .90% - 10.90% 228 279
Due through 2004 prime plus .50% 645 605
--------------------
46,470 46,451
Less current portion 791 2,061
--------------------
Total long-term debt 45,679 44,390
--------------------
Total capitalization $96,622 $95,280
====================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<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
- -------------------------------------------------------------------------------------------------------------------
<C> <S> <S> <S> <S>
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 2 29 - 31
Issuance of common stock under the Key Employee
Performance and Equity Incentive Plan 3 57 - 60
----------------------------------------------------------
Balance, September 30, 1997 3,244 30,428 14,050 47,722
Net income - - 5,378 5,378
Common Stock - cash dividend ($1.31 per share) - - (4,300) (4,300)
Issuance of common stock under the Key Employee
Performance and Equity Incentive Plan 4 95 - 99
Issuance of common stock for acquisition 69 1,922 - 1,991
----------------------------------------------------------
Balance, September 30, 1998 3,317 32,445 15,128 50,890
Net income - - 4,537 4,537
Common Stock - cash dividend ($1.37 per share) - - (4,548) (4,548)
Issuance of common stock under the Key Employee
Performance and Equity Incentive Plan 3 61 - 64
----------------------------------------------------------
Balance, September 30, 1999 $3,320 $32,506 $15,117 $50,943
==========================================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows EnergyNorth, Inc.
(In thousands)
For the years ended September 30, 1999 1998 1997
- ------------------------------------------------------------------------------------------------------
<C> <S> <S> <S>
Cash flows from operating activities:
Net income $ 4,537 $ 5,378 $ 6,518
Noncash items:
Depreciation and amortization 8,238 7,152 6,869
Deferred taxes and investment tax credits, net 2,098 345 1,521
Changes in:
Accounts receivable, net (83) 1,066 (1,401)
Unbilled revenues (43) 86 (20)
Inventories (31) (472) (247)
Prepaid expenses and other 585 784 434
Deferred gas costs (5,365) 2,541 5,083
Accounts payable 1,552 (728) (143)
Accrued liabilities (202) 460 366
Accrued/prepaid taxes (202) (400) (1,233)
Payments for environmental costs and other (4,132) (1,242) (3,104)
-----------------------------------
Net cash provided by operating activities 6,952 14,970 14,643
-----------------------------------
Cash flows from investing activities:
Additions to property (13,834) (14,716) (13,262)
Change in note receivable, net - 131 (72)
Other investing activities - 249 -
-----------------------------------
Net cash used for investing activies (13,834) (14,336) (13,334)
-----------------------------------
Cash flows from financing activities:
Issuance of common stock 64 99 91
Cash dividends on common stock (4,548) (4,300) (4,054)
Issuance of long-term debt 2,296 646 22,616
Repayment of long-term debt (2,277) (1,338) (8,055)
Repayment of capital lease obligations - (46) (229)
Change in notes payable to banks 11,754 3,392 (9,435)
Change in inventory purchase obligation (383) 860 (15)
Change in other financing activities (402) (714) (1,000)
-----------------------------------
Net cash provided by (used for) financing activities 6,504 (1,401) (81)
-----------------------------------
Net (decrease) increase in cash and temporary cash investments (378) (767) 1,228
Cash and temporary cash investments, begining of year 1,231 1,998 770
-----------------------------------
Cash and temporary cash investments, end of year $ 853 $ 1,231 $ 1,998
===================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
ENERGYNORTH, INC.
Notes to Consolidated Financial Statements
Note 1. Accounting Policies
The significant accounting policies followed by EnergyNorth, Inc.
and subsidiaries (Company) are set forth below.
Principles of Consolidation
- ---------------------------
The accompanying consolidated 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, EnergyNorth
Natural Gas, Inc., primarily 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 (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, EnergyNorth Propane, Inc., and provides service and
sells appliances through its utility subsidiary.
During fiscal year 1998, the Company acquired two mechanical
contracting operations and, through a nonregulated subsidiary,
ENI Mechanicals, Inc., provides design, construction and service
of plumbing, heating, ventilation, air conditioning and process
piping systems to commercial, industrial and institutional
customers (see Note 10).
Business Segments
- -----------------
Effective October 1, 1998, the Company adopted SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related
Information." Pursuant to SFAS No. 131, the Company's three
reportable segments are natural gas distribution, propane gas
distribution and mechanical contracting. The adoption of this
statement by the Company did not have a material effect on the
Company's financial statements. In accordance with this
statement, the Company is presenting the required information for
the three segments. Because this is the initial year of
application of this statement, comparative information for prior
years was restated.
<PAGE>
<TABLE>
<CAPTION>
Segment information including operating results and other financial data is presented below:
(In thousands) 1999 1998 1997
- -----------------------------------------------------------------------------------------------
<C> <S> <S> <S>
Revenues:
Natural gas distribution $ 76,617 $ 85,296 $ 92,978
Propane gas distribution 11,164 11,204 12,893
Mechanical contracting 31,391 13,426 -
----------------------------------
$119,172 $109,926 $105,871
==================================
Operating income, before income taxes:
Natural gas distribution $ 11,380 $ 11,039 $ 12,389
Propane gas distribution 764 631 793
Mechanical contracting 509 231 -
Other 190 152 173
----------------------------------
$ 12,843 $ 12,053 $ 13,355
==================================
Identifiable assets, net of depreciation and reserves:
Natural gas distribution $150,757 $136,775 $131,261
Propane gas distribution 8,543 8,695 7,069
Mechanical contracting 9,012 8,391 -
Other 13 534 470
----------------------------------
$168,325 $154,395 $138,800
==================================
Capital expenditures:
Natural gas distribution $ 12,081 $ 13,152 $ 11,977
Propane gas distribution 1,604 1,295 1,281
Mechanical contracting 142 142 -
Other 7 127 4
----------------------------------
$ 13,834 $ 14,716 $ 13,262
==================================
Depreciation and amortization:
Natural gas distribution $ 6,322 $ 5,381 $ 4,969
Propane gas distribution 1,064 1,042 1,107
Mechanical contracting 185 104 -
Other 76 77 77
----------------------------------
$ 7,647 $ 6,604 $ 6,153
==================================
Interest expense:
Natural gas distribution $ 4,606 $ 4,425 $ 3,718
Propane gas distribution 230 214 178
Mechanical contracting 49 30 -
Other 71 77 89
----------------------------------
$ 4,956 $ 4,746 $ 3,985
==================================
Income tax provision:
Natural gas distribution $ 2,740 $ 2,812 $ 3,478
Propane gas distribution 187 124 288
Mechanical contracting 237 123 -
Other 58 43 42
----------------------------------
$ 3,222 $ 3,102 $ 3,808
==================================
</TABLE>
<PAGE>
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 each month. The Company records unbilled
revenues related to gas delivered but not billed at the end
of the accounting period.
Mechanical contracting work is performed under cost-plus-fee
contracts, fixed-price contracts and time and material contracts.
The Company follows the percentage-of-completion method of
accounting for contracts that extend for periods in excess of one
year. Revenues and related costs for time and material contracts
are recognized as the work is performed.
Cost of Gas Rates
- -----------------
The Company's tariff includes a cost of gas rate that permits
billings to customers to recover its cost of gas. The tariff
provides for a cost of gas rate calculation for a summer period
and a winter period. The Company may adjust the approved cost of
gas rate upward or downward on a monthly basis. The monthly
cumulative adjustments may not exceed 10% of the approved unit
cost of gas sold. Any difference remaining between the cost of
gas incurred and amounts billed to customers at the end of each
summer or winter period is deferred for rate-making and
accounting purposes to the next corresponding summer or winter
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.
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
3.5% for the year ended September 30, 1999, and 3.4% for each of
the years ended September 30, 1998 and 1997. The depreciation
rates for nonregulated property, plant and equipment were 7.4%,
7.5% and 8% for the years ended September 30, 1999, 1998 and
1997, 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.
<PAGE>
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, 1999, regulatory assets included $11.6
million for environmental investigation and remediation costs and
$2.5 million of unrecovered deferred state income taxes (see Note 7).
The unamortized cost of issuing debt at September 30, 1999 is
$1.9 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 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, 1999 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, 1999 accompanying consolidated balance sheet by 2%.
Stock-Based Compensation
- ------------------------
The Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB
25) and related interpretations in accounting for its employee
stock options. Under APB 25, because the exercise price of
employee stock options equals the market price of the underlying
stock on the date of grant, no compensation expense is recorded.
The Company has adopted the disclosure-only provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation" (see Note 9).
Comprehensive Income
- --------------------
Effective October 1, 1998, the Company adopted SFAS No. 130,
"Reporting Comprehensive Income." This statement establishes
standards for reporting and the disclosure of comprehensive
income and its components. It did not have a material impact on
the Company's financial reporting.
<PAGE>
Earnings per Share
- ------------------
SFAS No. 128, "Earnings per Share," requires the computation of
basic and diluted earnings per share. Basic earnings per share
is computed by dividing net income by the weighted average number
of shares of common stock outstanding during the year. Diluted
earnings per share is determined by giving effect to the exercise
of stock options using the treasury stock method (see Note 9).
(In thousands, except per share amounts)
For the years ended September 30, 1999 1998 1997
- -------------------------------------------------------------------------
Net income $4,537 $5,378 $6,518
============================
Weighted average shares 3,319 3,273 3,243
Dilutive effect of options 14 - -
----------------------------
Adjusted weighted average shares 3,333 3,273 3,243
============================
Basic earnings per share $ 1.37 $ 1.64 $ 2.01
Diluted earnings per share $ 1.36 $ 1.64 $ 2.01
Derivative Instruments and Hedging Activities
- ---------------------------------------------
The Company utilizes call and put option contracts to manage
market risk associated with a portion of anticipated gas supply
requirements. The Company's policy prohibits utilization of
derivatives for trading purposes.
Gains or losses on derivatives associated with forecasted
transactions are recognized when such forecasted transactions
affect earnings. If a derivative instrument is terminated early
because it is probable that a transaction or forecasted
transaction will not occur, any gain or loss as of such date is
immediately recognized in earnings. If such derivative is
terminated early for other economic reasons, any gain or loss as
of the termination date is deferred and recorded when the
associated transaction or forecasted transaction affects
earnings.
Although options traded on the NYMEX are included in the table
below, they are not financial instruments since physical delivery
of natural gas may be made pursuant to these contracts. They are
a major part of the commodity risk management program.
The following table summarizes the types of hedges used and the
related financial information as of September 30, 1999:
Notional volumes Hedges of NYMEX contracts
- -----------------------------------------------------------------
Calls - MMBtu Purchases 105
Puts - MMBtu Sales 105
$ Amount (In thousands)
- -----------------------------------------------------------------
Deferred losses, net $(16)
<PAGE>
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 were as follows
(in thousands):
1999 1998 1997
- -----------------------------------------------------------------------
Cash paid during the year for:
Interest (net of amount capitalized) $4,683 $4,269 $4,080
Income taxes 981 3,246 3,972
Noncash investing and financing activities:
Acquisition investment (see Note 10) - 1,991 -
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
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 cost of gas charge.
The bank credit agreement provides for a .375% commitment fee on
the credit line and interest at prime (8.25% at September 30,
1999) 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
$10.5 million through March 31, 2001.
As of September 30, 1999 and 1998, the gas inventories under the
trust agreement and controlled by the Company totaled $8.3
million and $8.7 million, respectively, 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>
Note 4. Notes Payable to Banks
As of September 30, 1999, the Company had $27.7 million available
under various unsecured bank lines of credit that are renewed
annually, $15.3 million of which was outstanding. The weighted
average interest rate on borrowings outstanding on September 30,
1999 was 6.1%. 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% of the lines.
Note 5. Long-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, 1999 are as
follows (in thousands):
Fiscal year Amount
- -----------------------------------------------------------------
2000 $791
2001 666
2002 563
2003 505
2004 459
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
Rights' exercise price, a number of shares of common stock of the
Company or of the acquiring company having a 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
<PAGE>
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, 1999 and 1998, a SFAS No. 109 related regulatory
liability amounted to $824,000 and $892,000, respectively, for
the tax benefit of unamortized investment tax credits, and
$203,000 and $249,000, 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 $2.5 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.
The tax effects of cumulative differences that gave rise to the
deferred tax liabilities and deferred tax assets for the years
ended September 30, 1999 and 1998 were as follows (in thousands):
1999 1998
- -------------------------------------------------------------
Deferred tax assets:
Deferred gas costs $ - $ 1,450
Contributions in aid of construction 794 759
Unamortized investment tax credits 506 545
Allowance for doubtful accounts 429 434
Deferred compensation 367 280
VEBA 175 119
Other 365 886
--------------------
Total deferred tax assets 2,636 4,473
====================
Deferred tax liabilities:
Property-related 19,110 18,035
Environmental costs 2,645 1,455
Other 2,067 2,073
---------------------
Total deferred tax liabilities 23,822 21,563
---------------------
Net deferred tax liability $21,186 $17,090
=====================
<PAGE>
Deferred income taxes were classified in the accompanying consolidated
balance sheets at September 30, 1999 and 1998 as follows (in thousands):
1999 1998
- -----------------------------------------------------------------------
Current $ (68) $(1,738)
Long-term 21,254 18,828
--------------------
Total $21,186 $17,090
====================
The components of federal and state income taxes reflected in the accompanying
consolidated statements of income for the years ended September 30, 1999, 1998
and 1997 were as follows (in thousands):
1999 1998 1997
- -----------------------------------------------------------------------
Federal:
Current $ (213) $2,939 $3,649
Deferred 2,983 (265) (383)
Investment tax credits (123) (124) (136)
------------------------------
Total federal 2,647 2,550 3,130
------------------------------
State:
Current (196) 601 756
Deferred 771 (49) (78)
------------------------------
Total state 575 552 678
------------------------------
Total provision for income taxes $3,222 $3,102 $3,808
==============================
The total federal and state income tax provision, as a percentage of
income before federal and state income taxes, was 41.5%, 36.6% and
36.9% for the years ended September 30, 1999, 1998 and 1997, respectively.
The significant increase in the effective federal and state income tax
rate is due to reorganization costs that are not tax deductible. 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):
<TABLE>
1999 1998 1997
- --------------------------------------------------------------------------------------
<C> <S> <S> <S>
Tax calculated at statutory rate $2,638 $2,883 $3,511
Increase (reduction) in effective tax resulting from:
Amortization of investment tax credit (123) (124) (136)
Adjustment due to change in tax rates (28) (28) (28)
State taxes, net of federal tax benefit 380 364 447
Reorganization costs 403 - -
Other, net (48) 7 14
----------------------------
Total provision for income taxes $3,222 $3,102 $3,808
============================
</TABLE>
<PAGE>
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.
In addition to providing pension benefits, the Company provides certain health
care and life insurance benefits to qualified retired employees.
The expense recorded in fiscal 1999, 1998 and 1997 for providing postretirement
benefits, including amortization of the accumulated projected benefit obligation
over a 20-year period, was $413,000, $486,000 and $542,000, 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>
(In thousands) Pension Medical and life
------------------------------------------
For the years ended 1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------
<C> <S> <S> <S> <S>
Change in benefit obligation:
Benefit obligation at beginning of year $22,446 $18,966 $5,279 $5,213
Service cost 822 684 132 123
Interest cost 1,543 1,397 362 385
Participant contributions - - - -
Plan amendments 242 - - -
Benefits paid (923) (809) (267) (210)
Actuarial (gain) or loss (1,776) 2,208 (514) (232)
---------------------------------------------
Benefit obligation at end of year $22,354 $22,446 $4,992 $5,279
=============================================
Change in plan assets:
Fair value of plan assets at beginning of year $21,316 $21,018 $3,013 $2,555
Actual return on plan assets 2,058 442 225 180
Employer contributions 681 665 421 488
Participant contributions - - - -
Benefits paid (923) (809) (267) (210)
---------------------------------------------
Fair value of plan assets at end of year $23,132 $21,316 $3,392 $3,013
=============================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(In thousands) Pension Medical and life
----------------------------------------------
For the years ended September 30, 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------
<C> <S> <S> <S> <S>
Reconciliation of funded status:
Funded status $ 778 $(1,129) $(1,600) $(2,266)
Contributions between 7/31 and 9/30 - 78 101 118
Unrecognized actuarial (gain) or loss (577) 1,362 (2,224) (1,826)
Unrecognized transition (asset) of obligation (87) (107) 3,661 3,922
Unrecognized prior service cost 607 453 - -
-------------------------------------------------
Net amount recognized at year end $ 721 $ 657 $ (62) $ (52)
=================================================
Amounts recognized in the statements of
financial position consist of:
Prepaid benefit cost $ 2,355 $ 2,014 $ 1 $ 1
Accrued benefit liability (1,880) (1,686) (63) (53)
Intangible asset 161 256 N/A N/A
Accumulated other comprehensive income 85 73 N/A N/A
-------------------------------------------------
Net amount recognized at year end $ 721 $ 657 $ (62) $ (52)
=================================================
Additional year-end information for plans
with benefit obligations in excess of plan
assets:
Benefit obligation $ 2,503 $ 2,326 $ 4,992 $ 5,279
Fair value of plan assets - - 3,392 3,013
Additional year-end information for pension
plans with accumulated benefit obligations
in excess of plan assets:
Projected benefit obligation $ 2,506 $ 2,326 N/A N/A
Accumulated benefit obligation 1,880 1,686 N/A N/A
Fair value of plan assets - - N/A N/A
Components of net periodic benefit cost:
Service cost $ 822 $ 684 $ 132 $ 123
Interest cost 1,543 1,397 362 385
Expected return on plan assets (1,939) (1,684) (240) (199)
Amortization of prior service cost 88 88 - -
Amortization of transitional (asset) or obligation (20) (20) 261 261
Recognized actuarial (gain) or loss 45 31 (102) (84)
--------------------------------------------------
Net period benefit cost $ 539 $ 496 $ 413 $ 486
==================================================
Weighted-average assumptions:
Discount rate 7.50% 7.00% 7.50% 7.00%
Expected long-term rate of return on plan assets 9.50% 9.50% 9.50% 9.50%
Rate of compensation increase - salaried 5.50% 5.50% 5.50% 5.50%
Rate of compensation increase - hourly 4.00% 4.00% 4.00% 4.00%
</TABLE>
The prior service cost is amortized on a straight-line basis over
the average remaining service period for active participants.
The gain or loss in excess of the greater of 10% of the benefit
obligation or the market value of assets is amortized on a
straight-line basis over the average remaining service period for
active participants.
<PAGE>
Assumed Health Care Cost Trend
For measurement purposes, an 8% annual rate of increase in the
per capita cost of covered health care benefits was assumed for
1999. The rate is assumed to decrease gradually to 5% for 2002
and remain at that level thereafter. For 1999, the annual rate
of increase for age post 65 was changed to 10% , decreasing
gradually to 5% for 2004 and thereafter.
Assumed health care cost trend rates have a significant effect on
the amounts reported for the health care plan. A one-percentage-
point change in assumed health care costs trend rates would have
the following effects for 1999:
One percentage One percentage
point increase point decrease
-------------------------------
Total of service and interest cost components $ 18,913 $ (17,309)
Postretirement benefit obligation 188,473 (174,449)
The Company has employee 401(k) savings and investment plans covering
substantially all employees. The Company made contributions of
$263,000, $254,000 and $242,000 for the years ended September 30, 1999,
1998 and 1997, respectively.
The Company is a participating employer in a defined contribution
profit sharing plan and trust covering certain employees who meet
specific age and service requirements. No profit sharing
contributions were made to the plan in 1999. The plan includes a
salary reduction provision with a matching discretionary employer
contribution. The company contributed $34,000 in 1999.
The Company is also a contributing employer to various area-wide,
union-negotiated, multi-employer defined pension plans covering
certain employees by craft. Contributions totaled $551,000 in
1999.
Note 9. Stock Option Plan
During fiscal year 1999, the EnergyNorth, Inc. 1998 Stock Option
Plan (Plan) was adopted. The Plan provides for grants of either
incentive stock options or nonqualified stock options to
purchase shares of the Company's common stock. Stock options may
be granted to officers, directors and key employees responsible
for the direction and management of the Company. At September
30, 1999, 200,000 shares of common stock were reserved for
issuance under the Plan. Information related to stock options
during 1999 is as follows:
Number Option exercise
of shares price per share Total price
- -----------------------------------------------------------------------------
Shares under option at 9/30/98 - $ - $ -
Granted 44,000 28.00 1,232,000
Exercised - - -
Forfeited - - -
-----------------------------------------
Shares under option at 9/30/99 44,000 $28.00 $1,232,000
=========================================
<PAGE>
Outstanding options were incentive options and non-qualified
options. No compensation expense related to stock option grants
was recorded in 1999 as the option exercise prices were equal to
fair market value on the date of grant.
Pro forma information regarding net income and earnings per share
is required by SFAS No. 123, "Accounting for Stock-Based
Compensation," and has been determined as if the Company had
accounted for its employee stock options under the fair value
method of that statement. The fair value for these options was
estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted average assumptions for
1999:
1999
- ----------------------------------------------------------------
Risk-free interest rate 4.45%
Dividend yield 3.30%
Volatility factor .2353
Weighted average expected life 4 years
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective
assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of
the fair value of its employee stock options. For purposes of
pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting periods. The
Company's pro forma net earnings (in thousands) and earnings per
share were as follows:
1999
- ----------------------------------------------------------------
Net earnings - as reported $4,537
Net earnings - pro forma 4,504
Earnings per share - as reported 1.37
Earnings per share - pro forma 1.36
Weighted average fair value of options 5.04
granted during the year
Because the statement provides for pro forma amounts for options
granted beginning in 1999, the pro forma expense will likely
increase in future years as new option grants become subject to
the pricing model.
Note 10. Acquisition
In May 1998, the Company acquired Northern Peabody, Inc. (NPI)
and Granite State Plumbing and Heating, Inc. (GSPH). Both NPI
and GSPH are mechanical contractors engaged in the design,
construction and service of plumbing, heating, ventilation, air
conditioning and process piping systems in northern New England.
They became wholly owned subsidiaries of ENI Mechanicals, Inc., a
subsidiary of the Company. For financial statement purposes, the
acquisition was recorded
<PAGE>
as a purchase. Accordingly, the results of operations of NPI
and GSPH are included in the accompanying consolidated financial
statements since May 1, 1998.
Note 11. Operating Leases
The Company leases certain facilities and equipment under long-
term, noncancelable operating lease agreements having terms
greater than one year. Future minimum rental commitments for
these leases, at September 30, 1999, are approximated as follows
(in thousands):
Fiscal year Amount
- -----------------------------------------------------------------
2000 $322
2001 257
2002 223
2003 95
2004 9
The total rental expense charged to operations for the years
ended September 30, 1999, 1998 and 1997 was approximately
$611,000, $557,000 and $574,000, respectively.
Note 12. 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 cost of gas rates. These contracts expire at various
times from 1999 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, own or owned
several facilities at which manufactured gas plants (MGP)
operated. MGPs were used to manufacture gas prior to the
introduction of natural gas to the Company's service area.
Generally, MGPs operated from the late 1800s to the early 1950s.
The MGPs produced wastes and by-products that may be considered
contaminated or hazardous under current law, and some of which
may still be present at such facilities. Relevant environmental
laws can be used by the state and federal government to hold the
Company strictly liable for the costs of studying and remedying
discarded by-products from MGPs owned and operated by its
predecessors. The Company accrues environmental investigation
and cleanup costs with respect to former MGPs and other
environmental matters when it is probable that a liability exists
and the amount or range of amounts can be reasonably estimated.
<PAGE>
The New Hampshire Department of Environmental Services (NHDES)
has required the Company to undertake remedial investigation
and/or remedial action at MGPs located in Concord, Laconia,
Nashua, and Dover, New Hampshire. At each MGP, the Company is
responding to the NHDES's requirements as described below.
In September 1992, the NHDES required the Company to undertake a
remedial investigation of the former MGP in Concord, New
Hampshire. Study and remediation associated with the Concord MGP
is ongoing. The estimated cost to complete this remedial action
ranges from $690,000 to $1.6 million, and the Company has
recorded $690,000 at September 30, 1999 in deferred charges. The
Company received an order from the Commission approving recovery
from customers, over a seven-year period, of substantially all
costs, excluding carrying costs, incurred for the Concord MGP.
The total unamortized balance for the Concord site, including the
gas holder site, was $4.4 million as of September 30, 1999.
At the direction of the NHDES, the Company and Public Service
Company of New Hampshire (PSNH), an electric utility company,
conducted a remedial investigation of a former MGP in Laconia,
New Hampshire, and in January 1999 prepared a Remedial Action
Plan for that site. Without admitting any liability, on September
3, 1999, the Company entered into a Site Responsibilities and
Indemnity Agreement (SRIA) with PSNH. Pursuant to the SRIA, the
Company will pay $4.2 million to PSNH over a twenty-four (24)
month period. In exchange, PSNH will assume responsibility for
all future site study and remediation, and PSNH will indemnify
the Company against such costs. The Company's legal liability
under state and federal laws is unaffected by the SRIA. Through
September 30, 1999, the Company has paid $1 million under the
SRIA. The estimated costs associated with work undertaken prior
to the SRIA ranges from $117,000 to $517,000, and the Company has
recorded $3.3 million in deferred charges at September 30, 1999.
During 1998, the Company and PSNH received Notice of Potential
Responsibility from the Environmental Protection Agency (EPA) for
the so-called Nashua River Asbestos Site. The EPA contends that
wastes released from the former MGP in Nashua, New Hampshire are
commingled with asbestos wastes from a former Johns Manville
facility located adjacent to the former MGP. The Company's share
of costs to complete the disposal of contaminants that are the
subject of EPA claims are estimated to range from $375,000 to
$450,000. The Company and PSNH subsequently received a notice
from the NHDES requiring the investigation of the former MGP site
in Nashua. The Company estimates the cost of site investigation
and characterization at the Nashua MGP to range from $250,000 to
$325,000. The Company recorded $625,000 in deferred charges at
September 30, 1999.
In April 1999, the Company received notice from the NHDES to
investigate the former MGP site in Dover, New Hampshire. PSNH
and another utility company, Northern Utilities, received similar
notices concerning the Dover MGP from the NHDES. The Company
estimates its cost of that investigation and characterization to
range from $200,000 to $400,000. The Company has recorded
$200,000 in deferred charges at September 30, 1999.
<PAGE>
The Commission has approved a generic recovery mechanism for
costs incurred at all MGP sites, except recovery for the Concord
site noted above, which provides for a seven-year recovery period
of substantially all costs, excluding carrying costs. The
recovery mechanism provides that the environmental surcharge to
customers will not exceed 5% of total gross gas revenues in any
given year but that amounts in excess of 5% will be deferred to
future periods with recovery of applicable carrying costs.
The Company intends to pursue insurance recovery as well as
recovery from other responsible parties to ensure that such third
parties contribute appropriately to reimburse the Company for any
costs incurred with respect to environmental matters. All
recoveries serve to reduce the seven-year environmental surcharge
period to customers. The Company has instituted suits in the
United States Federal District Court for New Hampshire and in New
Hampshire superior courts against one third party, as well as the
Company's insurers and insurers of its predecessors to recover
the costs of investigation and remediation of the Concord,
Nashua, Dover and Laconia MGP sites. In each litigation, the
Company is seeking declaratory judgment that its insurers owe the
Company a defense and/or indemnification for environmental claims
associated with each respective MGP. Through September 30, 1999
the Company has recovered a total of $4.3 million in settlement
of third-party MGP litigation.
Note 13. Merger
On July 14, 1999, the Company and Eastern Enterprises (Eastern),
a Massachusetts business trust, entered into an Agreement and
Plan of Reorganization (Agreement) which provides for the merger
of the Company with a subsidiary of Eastern, as a result of which
the Company's subsidiaries would become wholly owned subsidiaries
of Eastern. On November 4, 1999, Eastern entered into an
agreement to merge with KeySpan Corporation and, as a result, the
Company and Eastern amended the Agreement. Under the amended
Agreement, holders of outstanding shares of the Company's common
stock will be paid entirely in cash and the closing will take
place simultaneously with the Eastern merger with KeySpan
Corporation. If the Eastern/KeySpan Corporation merger is not
completed, the Company and Eastern would nonetheless merge, and
holders of outstanding shares of the Company's common stock can
elect to receive cash, Eastern common stock or a combination of
cash and stock as set forth in the Agreement. Completion of the
merger is subject to approval by the Company's stockholders and
receipt of satisfactory regulatory approvals, including approval
by the Commission and the Securities and Exchange Commission.
Reorganization costs incurred as a result of the impending merger
were $1.2 million in 1999.
<PAGE>
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, 1999
and 1998, 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, 1999. 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, 1999
and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended September
30, 1999, in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the
basic consolidated financial statements taken as a whole. The
financial statement schedule under part IV, Item 14, 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 5, 1999
<PAGE>
<TABLE>
<CAPTION>
(b) Supplementary Financial Information
Selected Quarterly Financial Data (Unaudited) EnergyNorth, Inc.
(In thousands, except Operating Operating Net income Earnings (loss) Cash dividend
per share amounts) revenues income (loss) (loss) per share paid per share
- ---------------------------------- ---------------------------------------------------------------
<S> <S> <S> <S> <S> <S>
First Quarter
1999 $31,471 $ 4,226 $ 3,219 $ .97 $.335
1998 30,892 4,801 4,142 1.28 .32
- --------------------------------------------------------------------------------------------------
Second Quarter
1999 $47,985 $ 7,856 $ 7,115 $ 2.14 $.335
1998 42,032 6,658 5,836 1.80 .32
- --------------------------------------------------------------------------------------------------
Third Quarter
1999 $21,655 $ (781) $(1,821) $ (.55) $.35
1998 20,498 (823) (1,758) (.54) .335
- --------------------------------------------------------------------------------------------------
Fourth Quarter
1999 $18,061 $(1,680) $(3,976) $(1.19) $.35
1998 16,504 (1,685) 2,842 (.86) .335
</TABLE>
Note: Earnings (loss) per share are 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.
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, 1999.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors of the Registrant
The directors and executive officers who are directors of the Registrant are
listed below, together with position, age at December 31, 1999, business
experience, and other information as to each.
<TABLE>
<CAPTION>
Name and position Director Officer Principal occupation or employment
with the Registrant Age since since during last five years
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <S> <S> <S>
Roger C. Avery 60 1984 President and Chief Executive Officer,
Illinois Gas Company; Adjunct Associate
Professor, Brown University
Edward T. Borer (1) 61 1982 Retired; formerly (until 1999) Chairman
Chairman of the Board (and, until 1996, Chief Executive Officer;
and, until 1995, President) of Philadelphia
Corporation for Investment Services, a
registered securities broker/dealer and
investment advisor
Michelle L. Chicoine 43 1999 1990 President and Chief Operating Officer of ENGI;
Executive Vice President formerly (1998) Senior Vice President, Treasurer
and Chief Financial Officer, (1997-1998) Vice
President, Treasurer and Chief Financial Officer
and (1993-1997) Vice President and Treasurer of
ENGI
Richard B. Couser 58 1985 Attorney with Orr & Reno, Professional Association
Joan P. Cudhea 67 1984 Certified Financial Planner and Registered
Investment Advisor
Sylvio L. Dupuis 65 1982 Optometrist; President, Notre Dame College;
formerly (until 1999) Executive Director of McLane,
Graf, Raulerson & Middleton, Professional Association
law firm; formerly (until 1996) Commissioner of
Insurance - State of New Hampshire
Robert R. Giordano 61 1988 1982 Chairman and Chief Executive Officer of ENGI;
President and Chief formerly (until 1998) President and Chief Executive
Executive Officer Officer of ENGI; Chairman of ENPI; Chairman,
President and Chief Executive of ENMI
Constance B. Girard-diCarlo 52 1994 President, Healthcare Support Services,
a division of ARAMARK Corporation, which
manages support service departments in
the healthcare industry
Andrew E. Lietz (2) 61 1998 President, Chief Executive Officer and Director
(until 1995, Vice President and Chief Operating
Officer) of Hadco Corporation, a manufacturer of
printed circuit boards
N. George Mattaini 74 1982 Retired President and Chief Executive Officer
Vice Chairman of the Board of the Company
John E. Tulley II 45 1997 President and Chief Executive Officer,
Tulley Buick Pontiac Company, Inc.
</TABLE>
(1) Mr. Borer is a director of Philadelphia Corporation for Investment
Services and Chester Valley Bancorp Inc., a NASDAQ traded company.
Chester Valley Bancorp, Inc. is a 100% owner of Philedelphia Corporation
for Investment Services.
(2) Mr. Leitz is a director of the Wyman-Gordon Company.
<PAGE>
<TABLE>
<CAPTION>
Executive Officers of the Registrant
The executive officers of the Registrant, except those listed as directors,
are listed below, together with position, age at December 31, 1999, 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.
Principal occupation or employment
Name and position Officer during last five years other than
with the Registrant Age since with the Registrant
- ------------------------------------------------------------------------------------------------------
<C> <S> <S> <S>
Frank L. Childs 55 1995 Senior Vice President and Chief Financial
Senior Vice President and Officer of ENGI; formerly (1998) Senior
Chief Financial Officer Vice President and (1995-1997) Vice
President of ENGI
David A. Skrzysowski 53 1983 Vice President and Controller of ENGI
Vice President and
Controller
Stephen W. Smith 52 1997 Vice President of ENGI; formerly
Vice President (1993-1996) Director of Human Resources
of Hampshire Chemical Corporation
Scott W. Braly 45 1999 Vice President and Chief Information
Vice President Officer of ENGI; formerly (until 1998)
Account Manager of Northeast Utilities,
a public utility holding company
Allen F. Pattee 49 1999 Treasurer of ENGI; formerly (until 1998)
Treasurer Vice President of Bell Atlantic Corporation,
a public utility holding company; formerly
(until 1997) Corporate Director of Investor
and Shareowner Relations of NYNEX Corporation,
a public utility holding company
</TABLE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires
that each director and certain officers of the Company file
reports of initial beneficial ownership and changes in beneficial
ownership of the Company's common stock with the Securities and
Exchange Commission. To the Company's knowledge, during 1999,
all directors and officers filed all such required notices except
that Mr. Margossian, a former Senior Vice President, filed a Form
5 with respect to the acquisition of 200 shares four days late.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Compensation of the Directors
The Chairman of the Board of Directors receives an annual retainer of
$40,000 and the Vice Chairman receives an annual retainer of $20,000.
All other directors receive annual retainers of $10,500. Committee
chairmen receive additional annual retainers of $2,500. Incentive
compensation in the amount of 100 shares of the Company's $1.00 par
value Common Stock is awarded to each director annually, provided
that the Company has achieved certain fiscal year earnings and
shareholder return objectives. The Chairman and directors receive
fees of $750 for each board meeting attended and $650 for each
committee meeting attended. The Vice Chairman and committee chairmen
receive fees of $750 for each board and committee meeting attended.
Multiple meetings of the board of directors held on the day of the
annual meeting of the board of directors are considered one meeting.
Directors who are employees receive no annual retainers, director
incentive compensation, or meeting fees.
Directors may elect to have portions of their retainers and fees
credited each year to a deferred compensation account pursuant to a
plan that provides for accrual of interest and distribution of the
deferral accounts in lump sum amounts or in equal installments over
ten years, at the option of each director, beginning on a date
designated by the director.
In fiscal 1999, each non-employee director was granted an option to
purchase 1,000 shares of the Company's Common Stock in accordance
with the 1998 Stock Option Plan.
<PAGE>
Executive Compensation
The following Summary Compensation Table shows compensation paid by
the Company for services rendered in all capacities during the fiscal
years ended September 30, 1999, 1998 and 1997 to the Chief Executive
Officer and the four other executive officers of the Company whose
salary and cash incentive and bonus award for the 1999 fiscal year
exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------
Long-term
Annual compensation compensation
-------------------------------------- ---------------- All other
Cash incentive Restricted stock compensation
Name and principal position Year Salary (1) & bonus awards Other awards (2) (3)
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <S> <S> <S> <S> <S>
Robert R. Giordano 1999 $266,738 $109,543 (4) $2,864 $ - $18,254
President and CEO 1998 229,902 56,832 2,656 55,136 (5) 16,170
1997 210,797 61,217 2,234 20,403 12,132
Michelle L. Chicoine 1999 $175,000 $ 62,023 (4) $ - $ - $ 7,687
Executive Vice President 1998 126,667 34,342 (5) 1,593 8,078 7,303
1997 111,595 26,832 1,350 8,932 6,013
Frank L. Childs 1999 $140,000 $ 38,417 (4) $ - $ - $ 8,569
Senior Vice President 1998 115,883 44,342 (5) - 8,078 7,260
and CFO 1997 107,417 25,695 - 8,563 3,571
Kenneth M. Margossian (6) 1999 $132,123 $ 38,417 (4) $ - $ - $ 7,372
Senior Vice President 1998 115,853 29,085 (5) - 8,023 1,499
David A. Skrzysowski 1999 $ 90,946 $ 24,014 (4) $1,494 $ - $ 6,063
Vice President and 1998 87,227 16,538 1,681 5,513 5,245
Controller 1997 82,424 18,133 1,531 6,024 4,693
</TABLE>
(1) Includes amounts earned and deferred without election by the
officer and amounts deferred pursuant to Deferred Compensation
Agreements and the Company's 401(k) plan.
(2) There are no shares of restricted stock holdings of the above-
named officers as of September 30, 1999.
(3) All other compensation paid in 1999 includes: Employer
contributions to the Company's 401(k) plan for Mr. Giordano ($5,063),
Ms. Chicoine ($5,287), Mr. Childs ($6,213), Mr. Margossian ($5,187),
and Mr. Skrzysowski ($4,438); value of term life insurance premiums
paid for Mr. Giordano ($2,400), Ms. Chicoine ($2,400), Mr. Childs
($2,356), Mr. Margossian ($2,185), and Mr. Skrzysowski ($1,625);
portion of interest earned in a deferred compensation account by Mr.
Giordano in excess of 120% of federal long-term rate ($10,791).
(4) Includes cash and stock incentive awards.
(5) Includes an award of 1,350 shares of restricted stock that are
subject to forfeiture and nontransferability until July 16, 2000 for
Mr. Giordano ($36,197) and cash bonus award for Ms. Chicoine
($10,000), Mr. Childs ($20,000) and Mr. Margossian ($5,000) for 1998
acquisition activities.
(6) Mr. Margossian joined the Company on September 29, 1997 and
resigned on November 19, 1999.
<PAGE>
Other Compensation Arrangements
Stock Options
In November 1998, the Company adopted the EnergyNorth, Inc. 1998
Stock Option Plan (Plan) to provide for grants of options to
officers, directors and key employees to purchase common stock of the
Company. The maximum exercise period for any option is ten years.
Options granted under the Plan have been entirely incentive stock
options with the exception of options granted to directors. The
option price per share for options granted under the Plan was
determined at 100% of the fair market value of the average closing
price for the common stock, as reported on the New York Stock
Exchange, during the ten trading days immediately preceding the date
of grant. All options that have been granted under the Plan become
exercisable over a four-year period beginning in 1999, except for
options granted to Mr. Giordano, which become exercisable over five
years.
The following table sets forth certain information regarding stock options
granted under the Plan during the fiscal year ended September 30, 1999.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
- -------------------------------------------------------------------------------------------------------------
Number of % of options
securities granted to Exercise Grant
underlying employees/directors price Expiration date
Name options granted in fiscal year per share date value
- -------------------------------------------------------------------------------------------------------------
<C> <S> <S> <S> <S> <S>
Robert R. Giordano 15,000 34.1 $28.00 11/19/2008 $ 75,532
Michelle L. Chicoine 10,000 22.7 28.00 11/19/2008 50,355
Frank L. Childs 5,000 11.4 28.00 11/19/2008 25,177
Kenneth M. Margossian 5,000 11.4 28.00 11/19/2008 25,177
All directors as a group 9,000 20.4 28.00 11/19/2008 221,560
</TABLE>
The following table provides information with respect to options to
purchase shares of the Company's common stock exercised in fiscal
1999 and the value of unexercised options granted during the fiscal
year under the Plan to the named executive officers in the Summary
Compensation Table and all directors as a group and held by them as
of September 30, 1999. The Company has no compensation plan under
which SARs are granted.
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Number of securities Value of unexercised in-
Shares Underlying unexercised the-money options at fiscal
Acquired options at fiscal year end year end (1)
on Value ------------------------------------------------------------
Name exercise realized Exercisable Unexercisable Exercisable Unexercisable
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <S> <S> <S> <S> <S>
Robert R. Giordano - - 3,571 11,429 $48,208 $154,292
Michelle L. Chicoine - - 2,500 7,500 33,750 101,250
Frank L. Childs - - 1,250 3,750 16,875 50,625
Kenneth M. Margossian - - 1,250 3,750 16,875 50,625
All directors as a group - - 2,250 6,750 30,375 91,125
</TABLE>
(1) Represents the difference between the exercise price of the
options and the closing price of $41.50 for the Company's common
stock as quoted by the New York Stock Exchange on September 30, 1999
times the number of options held.
Noncontributory Retirement Plan
The following Pension Plan table sets forth estimated combined annual
benefits payable under the Company's Retirement Plan and Supplemental
Executive Retirement Plan (SERP) at age 65 to persons in specified
compensation and years of service classifications. The combined
annual benefits shown in the table do not reflect offsets for
benefits of Social Security and for retirement benefits received from
other employers.
PENSION PLAN TABLE
- ----------------------------------------------------------------------
Average annual earnings 15 years of 25 years of 35 years of
during highest five years service service service
- ----------------------------------------------------------------------
$125,000 $ 93,750 $ 93,750 $ 93,750
150,000 112,500 112,500 112,500
175,000 131,250 131,250 131,250
200,000 150,000 150,000 150,000
250,000 187,500 187,500 187,500
300,000 225,000 225,000 225,000
350,000 262,500 262,500 262,500
400,000 300,000 300,000 300,000
All full-time salaried employees, including officers and certain part-
time employees, are eligible to participate in the Company's
Retirement Plan, provided an employee has reached the age of 21 and
has completed one year of service. The SERP is a noncontributory
plan intended to supplement benefits of the Retirement Plan for
certain named executive officers, effective January 1, 1985. Under
both plans normal retirement is at age 65 with a provision for early
retirement. Benefits under the Retirement Plan vest after five years
of service and under the SERP vest after ten years of service.
Earnings under the plans for the executive officers named in the
Summary Compensation Table consist of regular annual compensation,
excluding bonuses or severance pay, and are the same, except for
bonuses and "Other", as the Annual Compensation and Long-Term
Compensation shown in the
<PAGE>
Summary Compensation Table. Mr. Giordano has 34 credited years of
service under the plans, Ms. Chicoine 9 years, Mr. Childs 4 years,
Mr. Margossian 2 years and Mr. Skrzysowski 22 years.
Funding of the Retirement Plan is based on actuarial computations and
results in a pool of assets held in trust that is unallocated with
respect to any particular individual. Benefits payable under the
Retirement Plan are calculated on the basis of straight life annuity
amounts, accrued over a 25-year period and are not subject to any
deduction for Social Security Benefits or other offset.
Benefits under the SERP are unfunded, accrue over a 15-year period
and once they are fully vested do not vary with years of service,
except that SERP participants who are included in the plan after
September 30, 1995 will have benefits reduced if they retire prior to
the normal retirement date under the Retirement Plan. For an
individual retiring at age 65, benefits are calculated on the basis
of 75% of the average of the five highest consecutive years'
earnings, less any amounts receivable for benefits of Social
Security, the Retirement Plan, and other qualified plans of the
Company and other employers.
Employment Agreements
The Company has employment agreements with Mr. Giordano and Ms.
Chicoine under which the Company has agreed to employ Mr. Giordano
through March 31, 2003 and Ms. Chicoine for a two-year period, which
may be extended annually for an additional year. If the Company
terminates the employment of either of these individuals other than
for breach of the agreement or misconduct, it is required to continue
salary payments including average or target incentive compensation,
deferred compensation and amounts the employee has elected to defer,
through the term of the agreement. Such termination payments will
not be made following any termination of employment that gives rise
to payments under the management continuity agreements described
below.
Management Continuity Agreements
The Company has Management Continuity Agreements (Continuity
Agreements) with Mr. Giordano, Ms. Chicoine, Messrs. Childs,
Margossian, and Skrzysowski. Mr. Margossian terminated his
employment, and his rights under his continuity agreement terminated
on November 19, 1999. The Continuity Agreements provide that in the
event of termination of employment or a reduction in compensation,
position or other conditions of employment within a specified period
following a Change in Control of the Company, as defined in the
Continuity Agreements, or termination by the employee for Good
Reason, as defined in the Continuity Agreements, following a Change
in Control, the Company shall pay to the employee a lump-sum
severance benefit and certain other benefits. The severance benefit
payable to Mr. Giordano and Ms. Chicoine is three times his or her
annual salary and incentive and deferred compensation, a prorated
incentive payment for the year in which termination occurs,
continuation of benefits or a payment equal to the present value of
those benefits and, for Mr. Giordano, the present value of the
additional amount he would have received under the Retirement Plan
and the SERP if he had continued to be employed for three years from
termination. In addition, the Company is required to make additional
payments to Mr. Giordano and Ms. Chicoine sufficient on an after-tax
basis to satisfy any tax liability incurred under the "parachute" tax
rules of the Internal Revenue Code. The severance benefit payable to
Mr. Childs is 2.95 times his annual salary
<PAGE>
and incentive and deferred compensation. The severance benefit payable
to Mr. Skrzysowski is the greater of two times his annual salary or 2.75
times his five-year average taxable compensation. In each continuity
agreement, except for Mr. Giordano's and Ms. Chicoine's, no severance
benefits are paid to the extent that such benefits, aggregated with other
benefits paid to the employee, constitute "excess parachute payments"
within the meaning of Section 280G of the Internal Revenue Code.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information regarding beneficial
ownership of the Company's $1.00 par value Common Stock, its only
class of securities, by each director and certain executive officers
(Messrs. Childs, Margossian and Skrzysowski), and all directors and
executive officers as a group, as of October 8, 1999. No person is
known to the Company to own more than 5% of the Company's stock.
PRINCIPAL STOCKHOLDERS
- --------------------------------------------------------------------------------
Number of shares Percentage of
Name of individual beneficially owned (6) common stock
- --------------------------------------------------------------------------------
Roger C. Avery (1) 34,727 1.046
Edward T. Borer (2) 15,539 *
Michelle L. Chicoine 5,371 *
Frank L. Childs 2,592 *
Richard B. Couser 656 *
Joan P. Cudhea (3) 14,302 *
Sylvio L. Dupuis 1,295 *
Robert R. Giordano (4) 21,267 *
Constance B. Girard-diCarlo 597 *
Andrew E. Lietz 1,352 *
Kenneth M. Margossian 1,551 *
N. George Mattaini (5) 11,812 *
David A. Skrzysowski 1,720 *
John E. Tulley II 800 *
All directors and executive officers as a
group (14 in number at October 8, 1999) 113,581 3.421
_______________
* Less than 1%.
(1) Includes 12,879 shares held by Mr. Avery solely in a fiduciary
capacity and in which he disclaims beneficial ownership.
(2) Includes 963 shares held by Mr. Borer's spouse, in which he
disclaims beneficial ownership.
(3) Includes 1,690 shares held by Ms. Cudhea's daughter-in-law, in
which she disclaims beneficial ownership and over which she shares
investment power only.
(4) Includes 430 shares held by Mr. Giordano's spouse, in which he
disclaims beneficial ownership.
(5) Includes 7,404 shares held by Mr. Mattaini's spouse, in which
he disclaims beneficial ownership.
(6) Beneficial ownership includes shares that the following persons
have a right to acquire upon exercise of options: Mr. Giordano,
3,571; Ms. Chicoine, 2,500; Mr. Childs, 1,250; Mr. Margossian, 1,250;
and each director who is not also an employee, 250.
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no relationships or related transactions that require
disclosure.
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, 1999, 1998 and 1997 21
Consolidated Balance Sheets at September 30, 1999 and 1998 22
Consolidated Statements of Capitalization at September 30,
1999 and 1998 23
Consolidated Statements of Common Stockholders' Equity
for the years ended September 30, 1999, 1998 and 1997 24
Consolidated Statements of Cash Flows for the years ended
September 30, 1999, 1998 and 1997 25
Notes to Consolidated Financial Statements 26-41
Report of Independent Public Accountants 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.
Number Description in this Report
-------- ----------- --------------
II Consolidated Valuation and Qualifying Accounts for the
three years ended September 30, 1999 54
Report of Independent Public Accountants 42
<PAGE>
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 56 through 59.
(b) Reports on Form 8-K
A current report on Form 8-K reporting the occurrence of
an event covered by Item 5 was filed on July 20, 1999 by
the Company regarding the Company's plan to merge with
Eastern Enterprises.
(c) Exhibits - See Exhibit Index on pages 56 through 59.
(d) Financial Statement Schedules
<PAGE>
<TABLE>
<CAPTION>
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:
Additions
------------------------
Balance at Charged to Charged Balance
Year ended beginning costs and to other at end
September 30, Description of period expenses accounts(1) Deductions of period
- -------------------------------------------------------------------------------------------------------
<C> <S> <S> <S> <S> <S> <S>
1999 Allowance for
doubtful accounts $1,127 $ 916 $179 $1,107 $1,115
1998 Allowance for
doubtful accounts 1,357 1,095 125 1,450 1,127
1997 Allowance for
doubtful accounts 1,211 1,232 140 1,226 1,357
__________________
(1) Represents recoveries on accounts previously written off.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ENERGYNORTH, INC.
Date: December 17, 1999 by: /s/ Robert R. Giordano
----------------------
Robert R. Giordano
President and 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 17, 1999.
/s/ Robert R. Giordano Director, President and
- ------------------------ Chief Executive Officer
Robert R. Giordano (principal executive officer)
/s/ Frank L. Childs Senior Vice President and
- ------------------------ Chief Financial Officer
Frank L. Childs (principal financial officer)
/s/ David A. Skrzysowski Vice President and Controller
- ------------------------ (principal accounting officer)
David A. Skrzysowski
/s/ Edward T. Borer Director
- ------------------------
Edward T. Borer
/s/ N. George Mattaini Director
- ------------------------
N. George Mattaini
/s/ Michelle L. Chicoine Director
- ------------------------
Michelle L. Chicoine
/s/ Richard B. Couser Director
- ------------------------
Richard B. Couser
/s/ Sylvio L. Dupuis Director
- ------------------------
Sylvio L. Dupuis
<PAGE>
EXHIBIT INDEX
The exhibits listed below are filed herewith, or are incorporated
herein by reference to other filings.
Exhibit
Number Description
- ------- -----------
2.0 Agreement and Plan of Reorganization dated July 14, 1999
among Eastern Enterprises, EE Acquisition Company, and
EnergyNorth, Inc. Schedules described in the Agreement
will be furnished supplementally to the SEC upon request.
2.1 Amendment No. 1 to Agreement and Plan of Reorganization,
dated November 4, 1999.
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
Exhibit 4.4 to EnergyNorth, Inc.'s Form 10-K (File No. 1-11441)
for the fiscal year ended September 30, 1996.
<PAGE>
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.
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.
4.8 Amendment to Rights Agreement (undated - 1999).
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 Contract Restructuring Letter Agreement between Tennessee Gas
Pipeline Company and EnergyNorth Natural Gas, Inc. effective
November 1, 1999.
10.4 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.
10.5 Deferred Compensation Agreement, dated as of October 1, 1997,
between Robert R. Giordano and the Registrant is incorporated
by reference to Exhibit 10.4 to EnergyNorth, Inc.'s Form 10-K
(File No. 1-11441) for fiscal year ended September 30, 1997.
10.6 Deferred Compensation Agreement, dated as of October 1, 1997,
between Richard P. Demers and the Registrant is incorporated
by reference to Exhibit 10.7 to EnergyNorth, Inc.'s Form 10-K
(File No. 1-11441) for fiscal year ended September 30, 1997.
<PAGE>
10.7 Deferred Compensation Agreement, dated as of October 1, 1997,
between Frank L. Childs and the Registrant is incorporated
by reference to Exhibit 10.8 to EnergyNorth, Inc.'s Form 10-K
(File No. 1-11441) for fiscal year ended September 30, 1997.
10.8 Deferred Compensation Agreement, dated as of October 1, 1997,
between Michelle L. Chicoine and the Registrant is incorporated
by reference to Exhibit 10.9 to EnergyNorth, Inc.'s Form 10-K
(File No. 1-11441) for fiscal year ended September 30, 1997.
10.9 EnergyNorth, Inc. 1992 Directors' Deferred Compensation Plan,
as amended is incorporated by reference to Exhibit 10.10 to
EnergyNorth, Inc.'s Form 10-K (File No. 1-11441) for fiscal
year ended September 30, 1997.
10.10 Amended and Restated Employment Agreement, dated as of
July 14, 1999, between Robert R. Giordano and the Registrant.
10.11 Amended and Restated Employment Agreement, dated as of
July 14, 1999, between Michelle L. Chicoine and the Registrant.
10.12 Amended and Restated Management Continuity Agreement, dated as
of July 14, 1999, between Robert R. Giordano and the Registrant.
10.13 Amended and Restated Management Continuity Agreement, dated as
of July 14, 1999, between Michelle L. Chicoine and the Registrant.
10.14 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.
10.15 Management Continuity Agreement, dated as of December 12, 1995,
between David A. Skrzysowski and the Registrant.
10.16 Consulting Agreement, dated as of July 1999, among EnergyNorth,
Inc., Eastern Enterprises, and Robert R. Giordano.
10.17 Employment and Related Matters Agreement, dated July 14, 1999,
between Eastern Enterprises and Robert R. Giordano.
10.18 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.
<PAGE>
10.19 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.
10.20 EnergyNorth, Inc. 1998 Stock Option Plan is incorporated by reference
to Exhibit 10.18 to EnergyNorth, Inc.'s Annual Report on Form 10-K
(File No. 1-11441) for the year ended September 30, 1998.
21 Subsidiaries of the Registrant is incorporated by reference to
Exhibit 21 to EnergyNorth, Inc.'s Annual Report on Form 10-K
(File No. 1-11441) for the year ended September 30, 1998.
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.
Annex A
-------
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement")
dated as of July 14, 1999 is by and among Eastern Enterprises
(the "Parent"), EE Acquisition Company, Inc., a New Hampshire
corporation ("Merger Sub"), and EnergyNorth, Inc. (the
"Company"), a New Hampshire corporation.
RECITALS
A. Upon the terms and subject to the conditions of this
Agreement and in accordance with the laws of the State of New
Hampshire, the Parent and the Company will enter into a business
combination transaction pursuant to which the Company will merge
with and into Merger Sub, a wholly-owned subsidiary of Parent.
B. The Board of Trustees of the Parent (i) has determined
that the Merger is consistent with and in furtherance of the long-
term business strategy of the Parent and fair to, and in the best
interests of, the Parent and its stockholders, and (ii) has
approved this Agreement, the Merger and the other transactions
contemplated by this Agreement.
C. The Board of Directors of the Company (i) has determined
that the Merger is consistent with and in furtherance of the long-
term business strategy of the Company and fair to, and in the
best interests of, the Company and its stockholders, and (ii) has
approved this Agreement, the Merger and the other transactions
contemplated by this Agreement, subject to approval of the Merger
by the stockholders of the Company.
D. The Parent and the Company and Merger Sub desire to make
certain representations and warranties and other agreements in
connection with the Merger.
E. The parties intend, by executing this Agreement, to adopt
a plan of reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, promises
and representations set forth herein, and for other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. THE MERGER
<PAGE>
1. The Merger. At the Effective Time (as defined in
Section 1.2) and subject to and upon the terms and conditions of
this Agreement and the applicable provisions of New Hampshire
law, the Company shall be merged with and into Merger Sub, the
separate corporate existence of the Company shall cease and
Merger Sub shall continue as the surviving corporation. Merger
Sub as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "Surviving Corporation."
2. Effective Time; Closing. Subject to the provisions of
this Agreement, the parties hereto shall cause the Merger to be
consummated by filing the Articles of merger (the "Articles of
Merger") with the Secretary of the State of New Hampshire in
accordance with the relevant provisions of New Hampshire law (the
time of such filing, or such later time as may be agreed in
writing by the parties and specified in the Articles of Merger,
being the "Effective Time," and the date on which the Effective
Time occurs being the "Effective Date") as soon as practicable on
the Closing Date (as herein defined). Unless the context
otherwise requires, the term "Agreement" as used herein refers
collectively to this Agreement and the Articles of Merger. The
closing of the Merger (the "Closing") shall take place at the
offices of Ropes & Gray, at a time and date to be specified by
the parties, which shall be no later than the 35th day after the
satisfaction or waiver of the conditions set forth in Article 6
(other than delivery of items to be delivered at Closing), or at
such other time, date and location as the parties hereto agree in
writing (the "Closing Date"). At the Closing, (a) the Company
shall deliver to the Parent the various Articles and instruments
required under Article 6, (b) the Parent and Merger Sub shall
deliver to the Company the various Articles and instruments
required under Article 6, and (c) the Company and Merger Sub
shall execute and file with the Secretary of the State of New
Hampshire the Articles of Merger.
3. Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in this Agreement and
the applicable provisions of New Hampshire law. Without limiting
the generality of the foregoing, and subject thereto, at the
Effective Time all the estate, property, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and
obligations of the Company and Merger Sub shall become the debts,
liabilities and obligations of the Surviving Corporation.
4. Articles of Incorporation; Bylaws.
1. At the Effective Time, the Articles of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time,
shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such
Articles of Incorporation; provided, however, that at the
Effective Time the Articles of Incorporation of the Surviving
Corporation shall be amended so that the name of the Surviving
Corporation shall be "EnergyNorth, Inc." Subject to the
foregoing, the additional effects of the Merger shall be as
provided in NH RSA 293-A: 11.06 (the "NHBCA").
PAGE>
2. The Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be, at the Effective Time, the
Bylaws of the Surviving Corporation until thereafter amended.
<PAGE>
5. Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation, to serve until their
respective successors are duly elected or appointed and
qualified. The officers of Merger Sub immediately prior to the
Effective Time shall be the initial officers of the Surviving
Corporation, to serve until their successors are duly elected or
appointed or qualified.
6. Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of Merger
Sub, the Company or the holders of any of the following
securities:
1. Conversion of Company Common Stock. Each share of
Common Stock, $1.00 par value, of the Company (the "Company
Common Stock") issued and outstanding immediately prior to the
Effective Time (other than any shares of Company Common Stock to
be canceled pursuant to Section 1.6(c)) will be canceled and
extinguished and automatically converted (subject to Section
1.6(f) and (h)) into the right to receive the following (the
"Merger Consideration") at the Effective Time:
1. (A) $47.00 in cash, without interest (the "Per Share
Cash Amount"), (B) a number of shares of Common Stock, $1.00 par
value, of the Parent (the "Parent Common Stock") equal to the Per
Share Cash Amount divided by the Market Value (as defined below)
of Parent Common Stock (the "Exchange Ratio"), or (C) a
combination of cash and shares of Parent Common Stock determined
in accordance with this Section 1.6. For purposes of this
Agreement, "Market Value" of Parent Common Stock means the
average of the Daily Per Share Prices (as hereinafter defined) of
Parent Common Stock for the ten consecutive trading days ending
on the third trading day prior to the Effective Date. The "Daily
Per Share Price" for any trading day means the weighted average
of the per share selling prices of the Parent Common Stock on the
New York Stock Exchange (the "NYSE"), as reported in the NYSE
Composite Transactions, for that day. Notwithstanding the
foregoing, if the Market Value of Parent Common Stock is less
than $36.00 per share, Market Value for purposes of this Section
1.6(a)(i) shall mean $36.00 and if the Market Value of Parent
Common Stock is greater than $44.00 per share, Market Value for
purposes of this Section 1.6(a)(i) shall mean $44.00.
2. The number of shares of Company Common Stock to be
converted into the right to receive cash in the Merger will,
subject to Section 1.6(a)(vii), be 49.9% of outstanding shares
(the "Cash Election Number"). The remaining shares of Company
Common Stock outstanding immediately prior to the Effective Time
(the "Stock Election Number") will be converted into the right to
receive Parent Common Stock in the Merger.
3. Subject to the allocation and election procedures set
forth in this Section 1.6, each record holder of shares of
Company Common Stock immediately
<PAGE>
prior to the Effective Time will be entitled in respect of each
such share (i) to elect to receive cash for such share (a "Cash
Election"), (ii) to elect to receive Parent Common Stock for
such share (a "Stock Election"), or (iii) to indicate that such
record holder has no preference as to the receipt of cash or
Parent Common Stock for such share (a "Non-Election"). All such
elections will be made on a form designed for that purpose
(a "Form of Election").
4. If the aggregate number of shares covered by Cash
Elections (the "Cash Election Shares") exceeds the Cash Election
Number, all shares of Company Common Stock covered by Stock
Elections (the "Stock Election Shares") and all shares of Company
Common Stock covered by Non-Elections (the "Non-Election Shares")
will be converted into the right to receive Parent Common Stock,
and the Cash Election Shares will be converted into the right to
receive Parent Common Stock and cash in the following manner:
Each Cash Election Share will be converted into
the right to receive (A) an amount in cash,
without interest, equal to the product of (x) the
Per Share Cash Amount and (y) a fraction (the
"Cash Fraction"), the numerator of which will be
the Cash Election Number and the denominator of
which will be the total number of Cash Election
Shares, and (B) a number of shares of Parent
Common Stock equal to the product of (x) the
Exchange Ratio and (y) a fraction equal to one
minus the Cash Fraction.
5. If the aggregate number of Stock Election Shares
exceeds the Stock Election Number, all Cash Election Shares and
all Non-Election Shares will be converted into the right to
receive cash, and all Stock Election Shares will be converted
into the right to receive Parent Common Stock and cash in the
following manner:
Each Stock Election Share will be converted into
the right to receive (A) a number of shares of
Parent Common Stock equal to the product of (x)
the Exchange Ratio and (y) a fraction (the "Stock
Fraction"), the numerator of which will be the
Stock Election Number and the denominator of
which will be the total number of Stock Election
Shares, and (B) an amount in cash, without
interest, equal to the product of (x) the Per
Share Cash Amount and (y) a fraction equal to one
minus the Stock Fraction.
6. In the event that neither subparagraph (iv) nor
subparagraph (v) above is applicable, all Cash Election Shares
will be converted into the right to receive cash, all Stock
Election Shares will be converted into the right to receive
Parent Common Stock, and all Non-Election Shares will be
converted into the right to receive Parent Common Stock and the
right to receive cash on a proportionate basis so that the Stock
<PAGE>
Election Number and the Cash Election Number equal
their respective percentages of the number of shares of Company
Common Stock outstanding as closely as possible.
7. In the event that the Parent Common Stock (excluding
fractional shares to be paid in cash pursuant to Section 1.6(f))
to be issued in the Merger in exchange for shares of Company
Common Stock, valued at the lesser of (i) the Market Value and
(ii) the average of the high and low trading prices as reported
on the NYSE for the Effective Date, minus the aggregate discount,
if any, due to trading restrictions on the Parent Common Stock to
be issued in the Merger (the "Parent Common Stock Value") is less
than 45% of the total consideration to be paid in exchange for
the shares of Company Common Stock (including without limitation
the amount of cash to be paid in lieu of fractional shares
pursuant to Section 1.6(f), plus the number of Dissenting Shares
(as defined below) multiplied by the Per Share Cash Consideration
and any other payments required to be considered in determining
whether the continuity of interest requirement applicable to
reorganizations under Section 368 of the Code has been satisfied)
(the "Total Consideration"), then the Cash Election Number shall
be reduced, and the Stock Election Number shall be
correspondingly increased, to the extent necessary so that the
Parent Common Stock Value is 45% of the Total Consideration.
2. Cash Election Procedure.
1. The Parent and the Company will each use its reasonable
best efforts to cause a Form of Election to be mailed not less
than thirty (30) days prior to the anticipated Effective Time to
all holders of record of shares of Company Common Stock as of the
record date for the Company Stockholders' Meeting (as hereinafter
defined) and to all persons who become holders of Company Common
Stock during the period between the record date for the Company
Stockholders' Meeting and 5:00 p.m., New York time, on the date
seven calendar days prior to the anticipated Effective Time and
to make the Form of Election available to all persons who become
holders of Company Common Stock subsequent to such time.
Elections will be made by holders of Company Common Stock by
mailing to the Exchange Agent a Form of Election. Holders of
record of shares of Company Common Stock who hold such shares as
nominees, trustees or in other representative capacities (a
"Representative") may submit multiple Forms of Election, provided
that such Representative certifies that each such Form of
Election covers all the shares of Company Common Stock held by
each Representative for a particular beneficial owner. To be
effective, a Form of Election must be properly completed, signed
and submitted to the Exchange Agent and accompanied by the
certificates representing the shares of Company Common Stock as
to which the election is being made (or by an appropriate
guarantee of delivery of such certificates as set forth in such
Form of Election from a member of any registered national
securities exchange or of the National Association of Securities
<PAGE>
Dealers, Inc. ("NASD") or a bank, trust company, credit union,
savings association, broker, dealer or other entity that is a
member in good standing of the Securities Transfer Agent's
Medallion Program, the NYSE Medallion Signature Guaranty Program
or the Stock Exchange Medallion Program). The Parent will have
the discretion, which it may delegate in whole or in part to the
Exchange Agent, to determine whether Forms of Election have been
properly completed, signed and submitted or revoked and to
disregard immaterial defects in Forms of Election. The decision
of the Parent (or the Exchange Agent) in such matters will be
conclusive and binding. Neither the Parent nor the Exchange Agent
will be under any obligation to notify any person of any defect
in a Form of Election submitted to the Exchange Agent. The
Exchange Agent will also make computations contemplated by this
Section 1.6 and all such computations will be conclusive and
binding on the holders of Company Common Stock.
2. For the purposes hereof, a holder of Company Common
Stock who does not submit a Form of Election which is received by
the Exchange Agent prior to the Election Deadline (as defined
herein) will be deemed to have made a Non-Election. If the Parent
or the Exchange Agent determine that any purported Cash Election
or Stock Election was not properly made, such purported Cash
Election or Stock Election will be deemed to be of no force and
effect and the stockholder making such purported election will
for purposes hereof be deemed to have made a Non-Election.
3. A Form of Election must be received by the Exchange
Agent by the close of business on the last business day prior to
the Effective Time (the "Election Deadline") in order to be
effective. All elections may be revoked until the Election
Deadline in writing by holders submitting the Forms of Election.
3. Cancellation of Certain Shares. Each share of Company
Common Stock held in the treasury of the Company or owned by
Merger Sub, the Parent or any direct or indirect wholly owned
subsidiary of the Company or of the Parent immediately prior to
the Effective Time shall be canceled and extinguished without any
conversion thereof.
4. Capital Stock of Merger Sub. Each share of Common
Stock, no par value, of Merger Sub issued and outstanding
immediately prior to the Effective Time shall continue to be
outstanding following, and shall be unaffected by, the Merger.
5. Adjustment of Exchange Ratio. The Exchange Ratio shall
be adjusted to reflect fully the effect of any stock split,
reverse split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock),
reorganization, recapitalization or other like change with
respect to Parent Common Stock, occurring after the date hereof
and having a record date prior to the Effective Time.
<PAGE>
6. Fractional Shares. No fraction of a share of Parent
Common Stock will be issued by virtue of the Merger, but in lieu
thereof each holder of shares of Company Common Stock who would
otherwise be entitled to a fraction of a share of Parent Common
Stock (after aggregating all fractional shares of Parent Common
Stock to be received by such holder) shall receive from the
Parent an amount of cash (rounded to the nearest whole cent),
without interest thereon, equal to the product of (i) such
fraction, multiplied by (ii) the Average Closing Price. The
"Average Closing Price" shall mean the average of the per share
closing prices of Parent Common Stock as reported on the NYSE for
the ten trading days ending on and including the Effective Date.
7. At the Effective Time, all options to purchase Company
Common Stock then outstanding under the EnergyNorth, Inc. 1998
Stock Option Plan shall be assumed by Parent in accordance with
Section 5.20 hereof.
8. Dissenting Shares. Each outstanding share of Company
Common Stock the holder of which has perfected his right to
dissent under applicable law and has not effectively withdrawn or
lost such right as of the Effective Time (the "Dissenting
Shares") shall not be converted into or represent a right to
receive the Merger Consideration, and the holder thereof shall be
entitled only to such rights as are granted by applicable law;
provided, however, that any Dissenting Share held by a person at
the Effective Time who shall, after the Effective Time, withdraw
the demand for payment for shares or lose the right to payment
for shares, in either case pursuant to the NHBCA, shall be deemed
to be converted into, as of the Effective Time, the right to
receive cash pursuant to Section 1.6(a) in the same manner as if
such shares were Cash Election Shares. The Company shall give
Parent prompt notice upon receipt by the Company of any such
written demands for payment of the fair value of such shares of
Company Common Stock and of withdrawals of such notice and any
other instruments provided pursuant to applicable law. Any
payments made in respect of Dissenting Shares shall be made by
the Surviving Corporation.
7. Surrender of Certificates.
1. Exchange Agent. The Parent shall select a bank or
trust company reasonably acceptable to the Company, which may be
the Parent's existing transfer agent, to act as the exchange
agent (the "Exchange Agent") in the Merger.
2. The Parent to Provide Merger Consideration. Promptly
after the Effective Time, the Parent shall make available to the
Exchange Agent for exchange in accordance with this Article 1,
certificates for the shares of Parent Common Stock issuable, and
cash payable, pursuant to Section 1.6(a) in exchange for
outstanding shares of Company Common Stock and cash in an amount
sufficient for payment in lieu of fractional shares pursuant to
Section 1.6(f) and any dividends or distributions to which
holders of shares of Company Common Stock may be entitled
pursuant to Section 1.7(d).
<PAGE>
3. Exchange Procedures. Promptly after the Effective
Time, the Parent shall cause the Exchange Agent to mail to each
holder of record (as of the Effective Time) of a certificate or
certificates (the "Certificates") that immediately prior to the
Effective Time represented outstanding shares of Company Common
Stock whose shares were converted into the right to receive the
Merger Consideration, together with any cash payable pursuant to
Section 1.6(f) and Section 1.7(d), (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery
of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as the Parent may reasonably
specify, provided that risk of loss and title shall already have
passed with respect to Certificates previously surrendered in
connection with Section 1.6(b)(i)) and (ii) instructions for
effecting the exchange of the Certificates for the Merger
Consideration, together with any cash payable pursuant to Section
1.6(f) and Section 1.7(d). Upon surrender of a Certificates for
cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by the Parent, together with such
letter of transmittal duly completed and validly executed in
accordance with the instructions thereto, the holder of such
Certificates shall be entitled to receive in exchange therefor
the Merger Consideration, together with any cash payable pursuant
to Section 1.6(f) and Section 1.7(d), and the Certificates so
surrendered shall forthwith be canceled. Until so surrendered,
each outstanding Certificates will be deemed from and after the
Effective Time, for all corporate purposes, subject to Section
1.7(d) as to the payment of dividends, to evidence only the
ownership of the number of full shares of Parent Common Stock and
the aggregate Per Share Cash Amount into which such shares of
Company Common Stock shall have been so converted and the right
to receive an amount in cash in lieu of the issuance of any
fractional shares in accordance with Section 1.6(f) and any
dividends or distributions payable pursuant to Section 1.7(d).
4. Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date
of this Agreement with respect to Parent Common Stock with a
record date after the Effective Time will be paid to the holder
of any unsurrendered Certificates with respect to the shares of
Parent Common Stock represented thereby until the holder of
record of such Certificates shall surrender such Certificates.
Subject to applicable law, following surrender of any such
Certificates, there shall be delivered to the record holder
thereof Certificates representing whole shares of Parent Common
Stock and the aggregate Per Share Cash Amount issuable and
payable in exchange therefor, without interest, along with
payments of the amount of dividends or other distributions with a
record date after the Effective Time then payable with respect to
such whole shares of Parent Common Stock and cash in lieu of any
fractional shares in accordance with Section 1.6(f).
5. Transfers of Ownership. If any Certificates for shares
of Parent Common Stock is to be issued in a name other than that
in which the Certificates surrendered in exchange therefore is
registered or if any of the other Merger Consideration is
is to be payable to a person other than the person to whom
such Certificates is registered, it will be a condition of
the issuance and
<PAGE>
payment thereof that the Certificates so surrendered will
be properly endorsed, accompanied by any documents required
to evidence and effect such transfer and otherwise in
proper form for transfer and that the person requesting
such exchange will have paid to the Parent or any agent
designated by it any applicable transfer taxes required by
reason of the issuance of a Certificates for shares of Parent
Common Stock in any name other than that of the registered holder
of the Certificates surrendered, or shall provide evidence that
any applicable transfer taxes have been paid.
6. No Liability. Notwithstanding anything to the
contrary in this Section 1.7, neither the Exchange Agent, the
Parent, the Surviving Corporation nor any other party hereto
shall be liable to a holder of shares of Parent Common Stock or
Company Common Stock for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat
or similar law.
7. Termination of Exchange Agent. Any Merger
Consideration made available to the Exchange Agent pursuant to
Section 1.7(b) and not exchanged within six months after the
Effective Time pursuant to this Section 1.7 shall be returned by
the Exchange Agent to Parent, which shall thereafter act as
Exchange Agent, and thereafter any holder of unsurrendered
Certificates shall look as a general creditor only to Parent for
payment of any funds to which such holder may be due, subject to
applicable law.
8. No Further Ownership Rights in Company Common Stock.
---------------------------------------------------
The Merger Consideration, together with any cash payable pursuant
to Sections 1.6(f) and 1.7(d) issued and paid in exchange for
shares of Company Common Stock in accordance with the terms
hereof shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to such shares of Company
Common Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares
of Company Common Stock that were outstanding immediately prior
to the Effective Time. If after the Effective Time, Certificates
are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article 1.
9. Lost, Stolen or Destroyed Certificates. In the event
--------------------------------------
any Certificates shall have been lost, stolen or destroyed, the
Exchange Agent shall deliver in exchange for such lost, stolen or
destroyed Certificates, upon the making of an affidavit of that
fact by the holder thereof, the Merger Consideration; provided,
however, that the Parent may, in its discretion and as a
condition precedent to such delivery, require the owner of such
lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim
that may be made against the Parent or the Exchange Agent with
respect to the Certificates alleged to have been lost, stolen or
destroyed.
10. Tax Consequences. It is intended by the parties
----------------
hereto that the Merger shall constitute a reorganization within
the meaning of Section 368 of the Code. The parties hereto adopt
this Agreement as a "plan of reorganization" within the meaning
of Sections 1.368-2(g) and 1.368-3(a) of the United States Income
Tax Regulations.
<PAGE>
11. Taking of Necessary Action; Further Action. If, at
------------------------------------------
any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right,
title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and Merger Sub, the officers
and directors of the Company and Merger Sub are fully authorized
in the name of their respective corporations or otherwise to
take, and will take, all such lawful and necessary action, so
long as such action is consistent with this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent, subject
to the exceptions set forth in the disclosure schedule supplied
by the Company to the Parent (the "Company Disclosure Schedule"),
as follows:
1. Organization of the Company. The Company and each of
---------------------------
its Subsidiaries and joint ventures (as defined below) is a
corporation or other legal entity duly organized, validly
existing and in good standing under the laws of the jurisdiction
of its incorporation or organization, has the requisite corporate
or similar power to own, lease and operate its property and to
carry on its business as now being conducted, and is duly
qualified to do business and in good standing as a foreign
corporation or other legal entity in each jurisdiction in which
the failure to be so qualified, when taken with all other such
failures, would have a Company Material Adverse Effect (as
defined below). Included in the Company Disclosure Schedule is a
true and complete list of all of the Company's Subsidiaries and
joint ventures, together with the jurisdiction of incorporation
or organization of each Subsidiary and joint venture and the
Company's equity interest therein. The Company has delivered or
made available to the Parent a true and correct copy of the
Articles of Incorporation and Bylaws of the Company and similar
governing instruments of each of its Subsidiaries and joint
ventures, each as amended to date. The minute books of the
Company and its Subsidiaries and joint ventures made available to
the Parent are the only minute books of the Company and its
Subsidiaries and joint ventures in the Company's possession, and
such minutes contain a reasonably accurate record of all actions
taken in all meetings of directors (or committees thereof) and
stockholders or actions by written consent since January 1, 1994.
The term "Company Material Adverse Effect" means, for purposes of
this Agreement, any change, event or effect that is materially
adverse to the business, assets (including intangible assets),
prospects, financial condition or results of operations of the
Company and its Subsidiaries taken as a whole (other than changes
that are the effect of economic factors (other than interest rate
changes) affecting the economy as a whole or changes that are the
effect of factors generally affecting the specific markets in
which the Company and its Subsidiaries compete); provided,
however, that a Company Material Adverse Effect shall not include
any adverse effect primarily attributable to the Merger or the
announcement thereof or the transactions contemplated by this
Agreement (other than effects arising out of or resulting from
actions by any state or federal regulatory authority with respect
to this Agreement and the transactions contemplated hereby).
"Subsidiary" means, with respect to any party, any corporation or
other organization, whether incorporated or
<PAGE>
unincorporated, of which (i) such party or any other Subsidiary
of such party is a general partner (excluding partnerships, the
general partnership interests of which held by such party or any
Subsidiary of such party do not have a majority of the voting
interest in such partnership) or (ii) at least 50% of the
securities or other interests having by their terms ordinary
voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such
corporation or other organization are directly or indirectly
owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its
Subsidiaries. The term "joint venture" of a party shall mean any
corporation or other entity (including partnerships and other
business associations) that is not a Subsidiary of such party,
in which such party or one or more of its Subsidiaries owns an
equity interest (other than money market accounts and other short
term investments), other than equity interests held for passive
investment purposes which are less than 10% of any class of the
outstanding voting securities or equity of any such entity.
Except as set forth in the Company Disclosure Schedule, none
of the Company's Subsidiaries is a "public utility company,"
a "holding company," a "subsidiary company" or an "affiliate"
of any public utility company within the meaning of Section
2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of the Public Utility
Holding Company Act of 1935, as amended ("PUHCA").
2. The Company Capital Structure.
-----------------------------
1. The authorized capital stock of the Company consists of
10,000,000 shares of Common Stock, $1.00 par value, of which, as
of June 30, 1999, there were 3,319,718 shares issued and
outstanding and no shares in treasury. No shares of Company's
capital stock have been issued since that date except shares of
Company Common Stock issued in the normal course and consistent
with past practice pursuant to the (i) 1998 Stock Option Plan,
(ii) Employee Performance and Equity Incentive Plan, (iii)
Director Incentive Compensation Plan, and (iv) Dividend
Reinvestment and Stock Purchase Plan (the "Company Stock Plans").
All outstanding shares of Company Common Stock are duly
authorized, validly issued, fully paid and non-assessable and are
not subject to preemptive rights created by statute, the Articles
of Incorporation or Bylaws of the Company or any agreement or
document to which the Company is a party or by which it is bound.
As of June 30, 1999, an aggregate of 520,000 shares of Company
Common Stock were reserved for issuance pursuant to the Company
Stock Plans. All shares of Company Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable,
would be duly authorized, validly issued, fully paid and
nonassessable.
2. The Company Disclosure Schedule includes a true and
complete list of all outstanding rights, subscriptions, warrants,
calls, preemptive rights, options or other agreements of any kind
to purchase or otherwise receive from the Company any shares of
the capital stock or any other security of the Company, and all
outstanding securities of any kind convertible into or
exchangeable for such securities. True and complete copies of all
instruments (or other forms of such instruments) referred to in
this Section 2.2(b) have been previously furnished to the Parent.
There are no stockholder agreements, voting trusts, proxies or
other agreements,
<PAGE>
instruments or understandings with respect to the outstanding
shares of capital stock of the Company to which the Company is
a party.
3. Except for securities the Company owns directly or
indirectly through one or more Subsidiaries, there are no equity
securities of any class of any Subsidiary of the Company, or any
security exchangeable or convertible into or exercisable for such
equity securities, issued, reserved for issuance or outstanding.
3. Authority.
---------
1. Subject to approval by its stockholders, the Company
has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of
the Company, subject only to the approval of this Agreement and
the Merger by the Company's stockholders and any necessary or
requested review or approval of this Agreement and the Merger by
the State of New Hampshire Public Utilities Commission ("NHPUC")
and the filing and recording of the Articles of Merger pursuant
to the laws of the State of New Hampshire. This Agreement has
been duly executed and delivered by the Company. Assuming the due
authorization, execution and delivery by the Parent and Merger
Sub, upon execution by the Company this Agreement constitutes the
valid and binding obligation of the Company, enforceable in
accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors'
rights and to general principles of equity. The execution and
delivery of this Agreement by the Company does not, and the
performance of this Agreement by the Company will not, (i)
conflict with or violate the Articles of Incorporation or Bylaws
of the Company or the equivalent organizational documents of any
of its Subsidiaries or joint venture, (ii) subject to obtaining
the approval by the Company's stockholders of this Agreement as
contemplated in Section 5.2 and of the NHPUC in accordance with
New Hampshire law and compliance with the other requirements set
forth in Section 2.3(b) below, conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to the
Company or any of its Subsidiaries or joint venture or by which
its or any of their respective properties is bound, or (iii)
subject to obtaining any third party consents referred to in the
final sentence of this Section 2.3(a), result in any breach of or
constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or impair the rights
of the Company or any Subsidiary or joint venture or alter the
rights or obligations of any third party under, or give to others
any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company or
any of its Subsidiaries or joint venture pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or its or any of their
respective properties are
<PAGE>
bound or affected, except, with respect to clauses (ii) and
(iii), for any such conflicts, violations, defaults or other
occurrences that would not have a Company Material Adverse
Effect. The Company Disclosure Schedule lists all consents,
waivers and approvals under any of the Company's or any of its
Subsidiaries' agreements, contracts, licenses or
<PAGE>
leases required to be obtained in connection with the
consummation of the transactions contemplated hereby,
except for those the absence of which would not have
a Company Material Adverse Effect.
2. No consent, approval, order or authorization of, or
registration, declaration or filing with any court,
administrative agency or commission or other governmental or
regulatory body or authority or instrumentality ("Governmental
Entity") is required by or with respect to the Company in
connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except
for (i) the filing of the Articles of Merger with the Secretary
of State of New Hampshire, (ii) the filing of the Proxy Statement
(as defined in Section 2.18) with the United States Securities
and Exchange Commission (the "SEC") in accordance with the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
(iii) the filing of a Current Report on Form 8-K with the SEC,
(iv) the filing with the Antitrust Division of the United States
Department of Justice (the "Antitrust Division") and the Federal
Trade Commission (the "FTC") of such forms as may be required by
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act") and the termination or expiration of all applicable
waiting periods thereunder, (v) approval of the Merger and the
related transactions contemplated hereunder by NHPUC in
accordance with New Hampshire law and any required filing thereof
with the Secretary of State of New Hampshire, (vi) the approval
of the Merger by the SEC pursuant to PUHCA, (vii) such consents,
approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable federal and state
securities laws and the laws of any foreign country and (viii)
such other consents, authorizations, filings, approvals and
registrations that, if not obtained or made, would not have a
Company Material Adverse Effect or a material adverse effect on
the ability of the parties to consummate the Merger.
4. Takeover Laws; Rights Plans.
---------------------------
1. The Company has taken all action required to be taken
by it in order to exempt this Agreement and the transactions
contemplated hereby from, and this Agreement and the transactions
contemplated hereby are exempt from, the requirements of any
"moratorium," "control share," "fair price" or other anti-
takeover laws and regulations (collectively, "Takeover Laws") of
the State of New Hampshire, including NH RSA 421-A and under any
similar provisions included in the Company's charter and by-laws.
2. The Company has (1) duly entered into an appropriate
amendment to the Company's Rights Agreement dated as of June 18,
1990 (the "Rights Agreement") between the Company and State
Street Bank and Trust Company, which amendment has been provided
to Parent, and (2) taken all other action necessary or
appropriate so that the entering into of this Agreement does not
and will not result in the ability of any person to exercise any
Rights under the Rights Agreement or enable or require the Rights
issued thereunder to separate
<PAGE>
from the shares of Company Common Stock to which they are attached
or to be triggered or become exercisable or redeemable.
3. No "Distribution Date" or "Triggering Event"
(as such terms are defined in the Rights Agreement) has
occurred.
5. SEC Filings; Company Financial Statements.
-----------------------------------------
1. Each of the Company and EnergyNorth Natural Gas, Inc.
has filed all forms, reports and documents required to be filed
by it with the SEC since January 1, 1996. All such required
forms, reports and documents (including those that the Company or
EnergyNorth Natural Gas, Inc. may file after the date hereof
until the Closing) are referred to herein as the "Company SEC
Reports." As of their respective dates, the Company SEC Reports
(i) were or will be prepared in compliance in all material
respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act") or the Exchange Act, as the case
may be, and the rules and regulations of the SEC thereunder
applicable to such Company SEC Reports, and (ii) did not or will
not at the time they were or are filed (or if amended or
superseded by a filing prior to the Closing, then on the date of
such filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light
of the circumstances in which they were made, not misleading.
None of the Company's Subsidiaries, other than EnergyNorth
Natural Gas, Inc., is required to file any forms, reports or
other documents with the SEC.
2. Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in
the Company SEC Reports (the "Company Financials"), including any
Company SEC Reports filed after the date hereof until the
Closing, (i) complied or will comply as to form in all material
respects with the published rules and regulations of the SEC with
respect thereto, (ii) was or will be prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may
be indicated in the notes thereto or, in the case of unaudited
interim financial statements, as may be permitted by the SEC on
Form 10-Q under the Exchange Act) and (iii) fairly presented or
will fairly present, in all material respects, the consolidated
financial position of the Company and its Subsidiaries at the
respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, consistent
with the books and records of the Company, except that the
unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not, or are
not expected to be, material in amount. The balance sheet of the
Company contained in the Company's SEC Report as of March 31,
1999 is hereinafter referred to as the "Company Balance Sheet."
Except as disclosed in the Company Disclosure Schedule and except
for obligations under this Agreement, neither the Company nor any
of its Subsidiaries has any liabilities (absolute, accrued,
contingent or otherwise) of a nature required to be disclosed on
a balance sheet or in the related notes to the consolidated
financial statements prepared in accordance with GAAP that are,
individually or in the aggregate, material to the business,
<PAGE>
results of operations or financial condition of the Company and
its Subsidiaries taken as a whole, except liabilities (i)
provided for in the Company Balance Sheet and the related notes
or (ii) incurred since the date of the Company Balance Sheet in
the ordinary course of business consistent with past practices or
(iii) incurred in connection with the transactions contemplated
hereby.
6. Absence of Certain Changes or Events. Since March 31,
------------------------------------
1999, there has not occurred any Company Material Adverse Effect
and there has not been, occurred or arisen any:
1. transaction by the Company or its Subsidiaries except
in the ordinary course of business as conducted on the date of
the Company Balance Sheet and consistent with past practices;
2. except as permitted by this Agreement, amendments or
changes to the Articles of Incorporation or Bylaws of the
Company;
3. individual capital expenditure or commitment, or series
of related capital expenditure or commitments, by the Company or
its Subsidiaries outside the ordinary course of business
exceeding $150,000;
4. destruction of, damage to or loss of any assets
material to the business of the Company and its Subsidiaries
taken as a whole (whether or not covered by insurance);
5. any cancellation or termination or written notice of
cancellation or termination by any customer that is material to
the Company and its Subsidiaries, taken as a whole, of its
relationship or a portion of its relationship with the Company or
any of its Subsidiaries that is material to the Company and its
Subsidiaries, taken as a whole, or any decrease, not in the
ordinary course of business, in the usage or purchase of the
products or services of the Company or any of its Subsidiaries by
any such customer that is material to the Company and its
Subsidiaries, taken as a whole, or any by-pass transaction
involving any such customer of the Company, other than any of the
foregoing that is primarily the result of weather factors;
6. labor trouble or claim of wrongful discharge or other
unlawful labor practice or action that is reasonably likely to
have a Company Material Adverse Effect;
7. material change in accounting methods or practices
(including any change in depreciation or amortization policies or
rates) by the Company;
8. material revaluation by the Company or its Subsidiaries
of any of its significant assets;
9. except as permitted by this Agreement, declaration,
setting aside or payment of a dividend or other distribution with
respect to the capital stock of the Company (other than
<PAGE>
regular quarterly dividends in accordance with past practice),
or any direct or indirect redemption, purchase or other acquisition
by the Company of any of its capital stock;
10. except as permitted by this Agreement, increase in the
salary or other compensation payable or to become payable to any
of its officers or directors or, other than in the ordinary
course of business and consistent with past practices, any of its
employees or advisors, or the declaration, payment or
contractually binding commitment or obligation of any kind for
the payment of a bonus or other additional salary or compensation
to any such person except for increases, payments or commitments
in the ordinary course of business and consistent with past
practices;
11. sale, lease, license or other disposition of any assets
or properties material to the Company and its Subsidiaries,
taken as a whole, except in the ordinary course of business;
12. except as would not reasonably be expected to result in
a Company Material Adverse Effect, amendment or termination of
any material contract, agreement or license to which the Company
or any of its Subsidiaries is a party or by which it is bound
except for amendments in the ordinary course of business or
scheduled expiration pursuant to the terms of the contract,
agreement or license and not as a result of any breach;
13. except in the ordinary course of business and
consistent with past practices or as permitted by this Agreement,
loan by the Company or any of its Subsidiaries to any person or
entity, incurring by the Company or any Subsidiary of any
indebtedness (except for indebtedness incurred in the ordinary
course under existing credit lines or arrangements set forth in
the Company Disclosure Schedule), guaranteeing by the Company or
any Subsidiary of any indebtedness, issuance or sale of any debt
securities of the Company or any Subsidiary or guaranteeing of
any debt securities of others;
14. waiver or release of any right or claim material to the
Company and its Subsidiaries, taken as a whole, including any
write-off or other compromise of any account receivable of the
Company or any Subsidiary, other than in the ordinary course of
business and consistent with past practices;
15. adoption, material amendment or modification, or
termination of any Plan (as defined in Section 2.14) by the
Company or any of its Subsidiaries;
16. regulatory decision by the NHPUC that would have a
material adverse impact on the Surviving Corporation; or
17. contractually binding commitment, understanding or
agreement by the Company or any of its Subsidiaries thereof to do
any of the things described in the preceding clauses (a) through
(o) (other than this Agreement).
<PAGE>
7. Tax Matters.
-----------
1. The Company and its Subsidiaries have filed all
material tax reports and returns required to be filed by them and
have paid or will timely pay all material taxes and other charges
shown as due on such reports and returns. Neither the Company nor
any of its Subsidiaries is delinquent in the payment of any
material tax assessment or other governmental charge (including
without limitation applicable withholding taxes). Any provision
for taxes reflected in the Company Balance Sheet has been
properly reflected in accordance with GAAP. There are no tax
liens on any assets of the Company or its Subsidiaries except for
current taxes not yet due and other non-material tax amounts.
2. There has not been any audit of any tax return filed by
the Company or any of its Subsidiaries for any period beginning
on or after January 1, 1994 and no audit of any tax return filed
by the Company or any of its Subsidiaries is in progress and
neither the Company nor any Subsidiary has been notified by any
tax authority that any such audit is contemplated or pending.
Neither the Company nor any Subsidiary has received any claim in
writing from any tax authority concerning any tax liability for
any period for which tax returns have been filed. No extension
of time with respect to any date on which a tax return was or is
to be filed by the Company or any of its Subsidiaries is in
force, and no waiver or agreement by the Company or any of its
Subsidiaries is in force for the extension of time for the
assessment or payment of any tax. For purposes of this Agreement,
the term "tax" includes all federal, state, local and foreign
taxes or assessments, including income, sales, gross receipts,
excise, use, value added, royalty, franchise, payroll,
withholding, property and import taxes and any interest or
penalties applicable thereto.
3. Neither the Company nor any of its Subsidiaries has any
liability for any taxes of any person other than the Company and
its Subsidiaries (i) under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local or foreign law), (ii)
as a transferee or successor, (iii) by contract or (iv)
otherwise. Neither the Company nor any of its Subsidiaries has
engaged in any intercompany transactions within the meaning of
Treasury Regulations Section 1.1502-13, or its predecessors, for
which any income or gain will remain unrecognized as of the close
of the last taxable year prior to the Closing Date.
4. Neither the Company nor any of its Subsidiaries has
agreed to, or is required to, make any adjustments under Section
481(a) of the Code by reason of a change in accounting method or
otherwise.
5. Each agreement, contract or arrangement to which the
Company or any of its Subsidiaries is a party that could result,
on account of the transactions contemplated hereunder, separately
or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code is set
forth in Section 2.7 of the Company Disclosure Schedule.
<PAGE>
6. No indebtedness of the Company or any of its
Subsidiaries is "corporate acquisition indebtedness" within the
meaning of Section 279(b) of the Code. To the best knowledge of
the Company, no foreign person owns or has owned beneficially
more than five percent of the total fair market value of Company
Common Stock during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
7. Neither the Company nor any of its Subsidiaries has
constituted a "distributing corporation" in a distribution of
stock qualifying for tax-free treatment under Section 355 of the
Code in the past 24 month period or in a distribution which could
otherwise constitute part of a "plan" or a series of "related
transactions" (within the meaning of Code Section 355(e)).
8. Section 2.7 of the Company Disclosure Schedule lists
all examination reports and statements of deficiencies asserted,
assessed against or agreed to by or on behalf of the Company or
any Subsidiary received or agreed to with respect to any tax
period beginning on or after January 1, 1994. No claim has ever
been made by any tax authority that the Company or any Subsidiary
is or may be subject to taxation in a jurisdiction where it does
not file tax returns.
8. Regulation as a Utility.
-----------------------
1. The Company is a "holding company" exempt from
registration under Section 3(a)(1) of PUHCA.
2. The Company is not subject to regulation as a natural
gas distribution utility by the State of New Hampshire. The
Company's subsidiary, EnergyNorth Natural Gas, Inc., is subject
to regulation as a natural gas distribution utility by the NHPUC.
3. Neither the Company nor any of its Subsidiaries is
currently subject to regulation by the Federal Energy Regulation
Commission under the Federal Power Act or as a "natural gas
company" under the Natural Gas Act or is subject to regulation as
a public utility or public service company (or similar
designation) by any state in the United States other than New
Hampshire or in any foreign country.
9. Title to Properties; Absence of Liens and Encumbrances.
------------------------------------------------------
1. The Company and its Subsidiaries have good and valid
title to, or have a valid and enforceable right to use or a valid
and enforceable leasehold interest in, all real property
(including all buildings, fixtures and other improvements
thereto) owned by them and material to the conduct of the
business of the Company and its Subsidiaries, taken as a whole,
as such business is now being conducted, except for easements
granted in the ordinary course of business. Neither the Company's
nor any of its Subsidiaries' ownership of or leasehold interest
<PAGE>
in any such property is subject to any mortgage, pledge, lien,
option, conditional sale agreement, encumbrance, security
interest, title exception or restriction or claim or charge of
any kind ("Encumbrances"), except for such Encumbrances as are
set forth in the Company Disclosure Schedule or the Company
Financials or are not in the aggregate reasonably likely to have
a Company Material Adverse Effect. Such property is, in the
aggregate, in condition and repair, normal wear and tear
excepted, adequate in all material respects for the continued
conduct of the business of the Company and its Subsidiaries,
taken as whole, in the manner in which it is currently conducted,
except to the extent that the condition of any property is not in
the aggregate reasonably likely to have a Company Material
Adverse Effect.
2. The Company and its Subsidiaries have good and valid
title to, or, in the case of leased properties and assets, valid
leasehold interests in, all of their tangible personal properties
and assets, used or held for use in their business, and such
properties and assets, as well as all other properties and assets
of the Company and its Subsidiaries, whether tangible or
intangible, are free and clear of any Encumbrances, except for
such Encumbrances as are set forth in the Company Disclosure
Schedule or the Company Financials or are not in the aggregate
reasonably likely to have a Company Material Adverse Effect. Such
property is, in the aggregate, in condition and repair, normal
wear and tear excepted, adequate in all material respects for the
continued conduct of the business of the Company and its
Subsidiaries, taken as a whole, in the manner in which it is
currently conducted, except to the extent that the condition of
any property is not in the aggregate reasonably likely to have a
Company Material Adverse Effect.
10. Intellectual Property. The Company and its
---------------------
Subsidiaries own, or are licensed or otherwise possess legally
enforceable rights to use, all patents, trademarks, trade names,
service marks, copyrights, and any applications therefor,
schematics, technology, know-how, computer software programs or
applications, and tangible or intangible proprietary information
or material that are required for the conduct of business of the
Company or its Subsidiaries as currently conducted, the absence
of which would have a Company Material Adverse Effect
(collectively, the "Company Intellectual Property Rights"). All
of the Company Intellectual Property Rights are owned or licensed
by the Company or one of its Subsidiaries, free and clear of any
and all Encumbrances, except for those Encumbrances under or set
forth in applicable license agreements or that would not,
individually or in the aggregate, have a Company Material Adverse
Effect, and, to the knowledge of the Company, neither the Company
nor any of its Subsidiaries has forfeited or otherwise
relinquished any Company Intellectual Property Rights which
forfeiture would have a Company Material Adverse Effect. To the
knowledge of the Company, the use of the Company Intellectual
Property Rights by the Company and its Subsidiaries does not, in
any material respect, conflict with, infringe upon, violate or
interfere with or constitute an appropriation of any right,
title, interest or goodwill (including, without limitation, any
intellectual property right, trademark, trade name, patent,
service mark, brand mark, brand name, computer program, database,
industrial design, copyright or any pending application therefor)
of any other person, and neither the Company nor any of its
Subsidiaries has received notice of any claim or otherwise knows
that any of the Company Intellectual Property Rights is invalid,
<PAGE>
conflicts with the asserted rights of any other person, has not
been used or enforced or has failed to be used or enforced in a
manner that would result in the abandonment, cancellation or
unenforceability of any of the Company Intellectual Property
Rights, except for such conflicts, infringements, violations,
interferences, claims, invalidity, abandonments, cancellations or
unenforceability that would not, individually or in the
aggregate, have a Company Material Adverse Effect.
11. Compliance; Permits; Restrictions.
---------------------------------
1. Neither the Company nor any of its Subsidiaries is in
conflict with, or in default or violation of, (i) any law, rule,
regulation, order, judgment or decree applicable to the Company
or any of its Subsidiaries or by which its or any of their
respective properties is bound or affected, or (ii) any note,
bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or its or any of their
respective properties is bound or affected, except for any
conflicts, defaults or violations that are not reasonably likely
to have a Company Material Adverse Effect.
2. The Company and its Subsidiaries hold all consents,
permits, licenses, variances, exemptions, orders and approvals
from governmental authorities that are material to the operation
of the business of the Company and its Subsidiaries taken as a
whole (collectively, the "Company Permits"). The Company and its
Subsidiaries are in compliance with the terms of the Company
Permits, except where the failure to so comply is not reasonably
likely to have a Company Material Adverse Effect.
12. Litigation. There is no action, suit or proceeding
----------
of any nature pending or to the Company's knowledge threatened
against the Company or any of its Subsidiaries, or any of their
respective properties, officers or directors, in their respective
capacities as such (i) in which injunctive or other equitable
relief or damages in excess of $150,000 are or are reasonably
likely to be sought against the Company or any Subsidiary or that
otherwise are reasonably likely to result in a Company Material
Adverse Effect or (ii) that in any manner challenges or seeks to
prevent, enjoin, alter or delay any of the transactions
contemplated by this Agreement. To the Company's knowledge, there
is no investigation pending or threatened against the Company or
any of its Subsidiaries, their respective properties or any of
their respective officers or directors by or before any
Governmental Entity that is reasonably likely to have a Company
Material Adverse Effect.
13. Brokers' and Finders' Fees. Except for fees payable
--------------------------
to Salomon Smith Barney Inc. and disclosed to the Parent, the
Company has not incurred, nor will it incur, directly or
indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby.
<PAGE>
14. Employee Benefit Plans. The Company Disclosure
----------------------
Schedule sets forth a complete list of all pension, profit
sharing, retirement, deferred compensation, employment, welfare,
insurance, disability, incentive bonus, stock option, restricted
stock, stock incentive, phantom stock, vacation pay, severance
pay, fringe benefits and similar plans, programs, agreements or
arrangements, benefiting more than one individual, including
without limitation all employee benefit plans as defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), maintained by the Company or its
Subsidiaries or to which Company or any of its Subsidiaries are
parties or are required to contribute or under which the Company
or any of its Subsidiaries is or may be required to provide
benefits other than any multiemployer plan as defined in Section
4001(a)(3) of ERISA or any other plans or arrangements sponsored
and maintained by a union (and not by the Company or its
Subsidiaries) (the "Plans"). The Company has delivered or made
available to the Parent current, accurate and complete copies of
(i) each Plan that has been reduced to writing, together with all
amendments; (ii) a summary of the material terms of each Plan
that has not been reduced to writing, as amended; (iii) the
summary plan description for each Plan subject to ERISA and, in
the case of each other Plan, any similar employee summary
(including employee handbook description) of the Plan; (iv) for
each Plan intended to be qualified and each Plan-related funding
arrangement intended to be exempt under Section 401(a), Section
501(a) or Section 501(c)(9) of the Code, the most recent
determination letter or exemption determination issued by the
Internal Revenue Service ("IRS"); (v) for each Plan with respect
to which a Form 5500 series annual report is required to be
filed, the most recently filed such annual report and the annual
report for the two preceding years, together with all schedules
and exhibits; (vi) all insurance contracts, administrative
services contracts, trust agreements, investment management
agreements or similar agreements maintained in connection with
the Plans or any of them; and (vii) copies of any correspondence
with the IRS, the Department of Labor ("DOL") or other U.S.
government agency or department relating to an audit or an
asserted or assessed penalty with respect to a Plan or relating
to requested relief from any liability or penalty (including, but
not limited to, any correspondence relating to the IRS's EPRSC,
VCR or CAP programs, or the DOL's amnesty programs for late
filers and non-filers). No employee benefit handbook or similar
employee communication relating to any Plan nor any communication
of benefits under such Plan from an administrator thereof
describes the terms of such Plan in a manner that is materially
inconsistent with the documents and summary plan descriptions
relating to such Plan that have been delivered pursuant to the
foregoing sentence. The Company Disclosure Schedule identifies
each "multiemployer plan" as defined in Section 4001(a)(3) of
ERISA and any arrangement sponsored and maintained by a union
(and not by the Company or its subsidiaries) which the Company or
any Subsidiary maintains or is obligated to maintain or to which
the Company or any Subsidiary contributes or is obligated to
contribute. No deficiency in funding levels or other
circumstance exists and no event has occurred that has resulted
or that could result in a liability to Company or any Subsidiary
under Subtitle E of Title IV of ERISA, except for such
liabilities which, individually and in the aggregate, would not
result in a Company Material Adverse Effect, and the consummation
of the transactions contemplated by this Agreement will not
result in any withdrawal liability under such Subtitle. Except
for PBGC premiums paid in the ordinary course, neither the
Company nor any Subsidiary has incurred any liability under Title
IV of ERISA which has not been satisfied in full nor, except for
such liabilities which, individually and in the aggregate, would
not result in a Company
<PAGE>
Material Adverse Effect has any event occurred that could result
in any such liability. Each Plan maintained by the Company or a
Subsidiary and each related fund which is intended to be qualified
or exempt under Section 401(a), Section 501(a) or 501(c)(9) of
the Code is so qualified or exempt except where the failure to be so
qualified or exempt would not result in a Company Material Adverse
Effect. Without limiting the generality of the immediately preceding
sentence, each Plan, if any, containing an account described in Section
401(h) of the Code has been maintained in accordance with Section
401(h) of the Code and the limitations described therein and in
applicable regulations. Each Plan has been administered in all
material respects in accordance with the terms of such Plan and the
provisions of all applicable statutes, orders or governmental
rules or regulations, and nothing has been done or omitted to be
done with respect to any Plan or related fund that has resulted
or could result in any material liability on the part of the
Company or a Subsidiary under Title I of ERISA or Chapter 43 of
the Code. All reports required to be filed with respect to each
Plan, including without limitation Form 5500 series annual
reports, have been timely filed. No "reportable event" as
defined in Section 4043 of ERISA, other than any such event for
which the notice period has been waived, has occurred with
respect to any Plan subject to Title IV of ERISA. Except to the
extent specified in the Company Disclosure Schedule, each Plan
that is subject to Title IV of ERISA is fully funded on a
termination basis. All contributions required to be made to any
Plan by applicable law or regulation or by any Plan document or
other contractual undertaking, and all premiums due or payable
with respect to insurance policies funding any Plan, have been
timely made or paid in full or, to the extent not required to be
made or paid on or before the date hereof, have been fully
reflected on the Company Financials. All claims for welfare
benefits incurred by employees and their eligible dependents on
or before the Closing are or prior to the Closing will be fully
insured under fully paid up third-party insurance policies or, if
self-funded, have been adequately reserved for on the Company
Financials. Except for benefit claims in the ordinary course,
there are no pending or, to the best knowledge of the Company,
threatened claims with respect to any Plan. Except for
continuation of health coverage to the extent required under
Section 4980B of the Code or Part 6 of Subtitle B of Title I of
ERISA or applicable state law or as otherwise set forth in the
Company Disclosure Schedule, no Plan that is a "welfare plan" as
defined in Section 3(1) of ERISA provides for any benefits
following retirement or other termination of employment. Except
as set forth in the Company Disclosure Schedule, each Plan can be
amended, terminated or modified prospectively on and after the
Effective Time without advance notice to or consent by any
employee, former employee or beneficiary, except as required by
law. Except as set forth in the Company Disclosure Schedule,
neither the execution and delivery of this Agreement nor the
consummation of any of the transactions contemplated hereby will
(either alone or in conjunction with any other event) result in,
cause the accelerated funding, vesting or delivery of, or
increase the amount or value of, any payment or benefit to any
employee, officer or director of the Company or any of its
Subsidiaries.
15. Employment Matters.
------------------
1. The Company and each of its Subsidiaries (i) is in
compliance in all material respects with all applicable foreign,
federal, state and local laws, rules and regulations that are
material to the Company and its Subsidiaries, taken as a whole,
respecting employment, employment
<PAGE>
practices, terms and conditions of employment and wages and hours,
in each case, with respect to employees; (ii) has withheld all
amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to employees; (iii) is not
liable for any arrears of wages or any taxes or any penalty for
failure to comply with any of the foregoing; and (iv) is not
liable for any payment to any trust or other fund or to any
Governmental Entity, with respect to unemployment compensation
benefits, social security or other benefits or obligations for
employees (other than routine payments to be made in the normal
course of business and consistent with past practice).
2. No material work stoppage or labor strike against the
Company or any of its Subsidiaries is pending or, to the
knowledge of the Company, threatened. Neither the Company nor any
of its Subsidiaries is involved in or, to the knowledge of the
Company, threatened with, any labor dispute, grievance, or
litigation relating to labor, safety or discrimination matters
involving any employee, including without limitation charges of
unfair labor practices or discrimination complaints, that have a
Company Material Adverse Effect. Neither the Company nor any of
its Subsidiaries has engaged in any unfair labor practices within
the meaning of the National Labor Relations Act that is
reasonably likely to, in the aggregate, have a Company Material
Adverse Effect. Neither the Company nor any of its Subsidiaries
is presently a party to or bound by any collective bargaining
agreement or union contract with respect to employees other than
as set forth in the Company Disclosure Schedule and no collective
bargaining agreement is being negotiated by the Company or any of
its Subsidiaries. To the knowledge of the Company, no union
organizing campaign or activity with respect to non-union
employees of the Company or any of its Subsidiaries is ongoing,
pending or threatened.
16. Environmental Matters.
---------------------
1. Except as would not have a Company Material Adverse
Effect, no amount of any substance that has been designated by
any Governmental Entity or by applicable federal, state or local
law to be radioactive, hazardous or otherwise to pose an
unreasonable danger to human health or the environment, including
without limitation all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, or defined
as a hazardous waste pursuant to the United States Resource
Conservation and Recovery Act of 1976, as amended, and the
regulations promulgated pursuant to said laws, (a "Hazardous
Material"), is present as a result of the actions of the Company
or any of its Subsidiaries in, on or under any property,
including the land and the improvements, ground water and surface
water thereof, that the Company or any of its Subsidiaries has at
any time owned, operated, occupied or leased, and to the
knowledge of the Company, no Hazardous Materials are present in,
on or under such property, including the improvements, ground
water and surface water thereof, as a result of the conduct of
other parties. To the knowledge of the Company, the Company
Disclosure Schedule lists all locations that the Company or any
of its Subsidiaries formerly owned or
<PAGE>
leased where Hazardous Materials are present in a volume or
concentration that would reasonably be expected to have a Company
Material Adverse Effect.
2. Except as would not have a Company Material
Adverse Effect, (i) neither the Company nor any of its
Subsidiaries has generated, transported, stored, used,
manufactured, disposed of, released or exposed its employees or
others to Hazardous Materials in violation of, or in a manner
which could give rise to liabilities under, any law in effect
prior to or as of the date hereof, nor (ii) has the Company or
any of its Subsidiaries disposed of, transported, sold, or
manufactured any product containing a Hazardous Material
(collectively "Hazardous Materials Activities") in violation of
any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof
to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
3. The Company and its Subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and
consents (the "Company Environmental Permits") necessary for the
conduct of the Company's and its Subsidiaries' Hazardous Material
Activities and other businesses of the Company and its
Subsidiaries, taken as a whole, as such activities and businesses
are currently being conducted, except where the failure to so
hold would not have a Company Material Adverse Effect.
4. No action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending, or to the
Company's knowledge, threatened concerning any Company
Environmental Permit, Hazardous Material in, on or under any
property owned or leased at any time by the Company or any of its
Subsidiaries or any Hazardous Materials Activity of the Company
or any of its Subsidiaries, in which injunctive or other
equitable relief or damages in excess of $150,000 is or is
reasonably likely to be sought against the Company or any
Subsidiary or that otherwise would have a Company Material
Adverse Effect.
17. Agreements, Contracts and Commitments. Except as
-------------------------------------
identified in the Company Disclosure Schedule or listed in the
Exhibit Index to the Company's Form 10-K for the year ended
September 30, 1998 (the "Company 10-K"), neither the Company nor
any of its Subsidiaries is a party to or is bound by:
1. any agreement, contract or contractually binding
commitment containing any covenant materially limiting the
freedom of the Company or any of its Subsidiaries to engage in
any line of business or compete with any person;
2. any agreement, contract or contractually binding
commitment relating to capital expenditures and involving future
obligations in excess of $150,000 and not cancelable without
penalty;
<PAGE>
3. any agreement, contract or contractually binding
commitment currently in force relating (i) to the disposition or
acquisition of assets material to the Company and its
Subsidiaries, taken as a whole, not in the ordinary course of
business or (ii) any ownership
<PAGE>
interest in any corporation, partnership, joint venture or
other business enterprise (other than the Company's wholly-
owned subsidiaries and money market accounts and other short
term investments);
4. any mortgages, indentures, loans or credit agreements
or security agreements relating to assets material to the Company
and its Subsidiaries, taken as a whole, or other agreements or
instruments relating to the borrowing of money or extension of
credit involving more than $150,000;
5. any other agreement, contract, binding commitment or
lease which requires annual payments by the Company or any of its
Subsidiaries of $150,000 or more in the aggregate and is not
cancelable without penalty within thirty (30) days.
6. any consulting arrangements and contracts for
professional, advisory and other services involving payments of
more than $150,000 in any year, including contracts under which
the Company or any of its Subsidiaries performs services for
others;
7. any material contracts relating to the source or supply
of gas, propane and other raw materials essential to the conduct
of the business of the Company and its Subsidiaries, taken as a
whole, and any financial derivatives master agreements,
confirmations, or futures account opening agreements and/or
brokerage statements evidencing financial hedging or other
trading activities with respect to the foregoing;
8. any contracts, agreements or contractually binding
commitments relating to the employment, engagement, compensation
or termination of directors, officers, employees or agents of the
Company or any of its Subsidiaries not included under Plans (as
defined in Section 2.14);
9. any collective bargaining agreements;
10. any agreement, contract or instrument (including
amendments thereto) to which the Company or any of its
Subsidiaries is a party or by which any of them is bound that is
required to be included in the Company 10-K; and
11. any other contracts made other than in the usual or
ordinary course of business of the Company or any of its
Subsidiaries to which the Company or any of its Subsidiaries is a
party or under which the Company or any of its Subsidiaries is
obligated and material to the Company and its Subsidiaries, taken
as a whole.
Neither the Company nor any of its Subsidiaries, nor to the
Company's knowledge any other party to a Company Contract (as
defined below), has breached, violated or defaulted under, or
received notice that it has breached violated or defaulted under,
any of the terms or conditions of any of the
<PAGE>
agreements, contracts or commitments to which the Company or any
Subsidiary is a party or by which it is bound of the type described
in clauses (a) through (k) above (any such agreement, contract or
commitment, a "Company Contract") in such a manner as would
permit any other party to cancel or terminate any such Company
Contract, or would permit any other party to seek damages, in
either case, which would have a Company Material Adverse Effect.
18. Statements; Proxy Statement/Prospectus. The
--------------------------------------
information to be supplied by the Company for inclusion in the
Registration Statement on Form S-4 to be filed to register under
the Securities Act Parent Common Stock issuable pursuant to
Section 1.6 (the "Registration Statement") shall not at the time
the Registration Statement is filed with the SEC or at the time
it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The information supplied by the
Company for inclusion in the proxy statement/prospectus to be
sent to the stockholders of the Company in connection with the
meeting of the Company's stockholders to consider the approval of
this Agreement (the "Company Stockholders' Meeting") (such proxy
statement/prospectus as amended or supplemented, including any
joint proxy statement, is referred to herein as the "Proxy
Statement") shall not, on the dates the Proxy Statement is first
mailed to the Company's stockholders and at the time of the
Company Stockholders' Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not false or misleading, or omit to state any material fact
necessary to correct any statement in any earlier written
communication with respect to the solicitation of proxies for the
Company Stockholders' Meeting which has become false or
misleading. The Proxy Statement utilized by the Company will
comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder. If at
any time prior to the Effective Time, any event relating to the
Company or any of its affiliates, officers or directors should be
discovered by the Company which is required to be set forth in an
amendment to the Registration Statement or a supplement to the
Proxy Statement, or which is required to be disclosed to the
Company's stockholders so that the information made available to
them in connection with electing the form of Merger Consideration
is not false or misleading in any material respect, the Company
shall promptly inform the Parent. Notwithstanding the foregoing,
the Company makes no representation or warranty with respect to
any information supplied by the Parent or Merger Sub that is
contained in any of the foregoing documents.
19. Fairness Opinion. The Company has received an opinion
----------------
from Salomon Smith Barney Inc. dated as of the date hereof, to
the effect that as of the date hereof, the consideration to be
received by the Company's stockholders in the Merger is fair from
a financial point of view and will deliver to the Parent a copy
of such written opinion.
20. Insurance. The Company and each of its Subsidiaries
---------
are, and have been continuously since January 1, 1994, insured
for a minimum amount of $25,000,000 (subject to deductibles
stated in such policies) against such risks and losses as are
customary in all material
<PAGE>
respects for companies conducting the business as conducted by the
Company and its Subsidiaries during such time period. Neither the
Company nor any of its Subsidiaries has received any notice of
cancellation or termination with respect to any insurance policy
material to the Company and its Subsidiaries, taken as a whole.
The insurance policies material to the Company and its Subsidiaries
are, taken as a whole, to the Company's knowledge, valid and
enforceable policies in all material respects.
21. Year 2000. The Company Disclosure Schedule identifies
---------
each "Year 2000" audit, report or investigation that has been
performed by or on behalf of the Company with respect to its
business and operations. Except as set forth in such audits,
reports and investigations, (i) the Company has not been informed
by any customer, vendor or service provider with which the
Company or any of its Subsidiaries transacts business of an
inability on the part of such third party to be Year 2000
Compliant and (ii) to the knowledge of the Company, there is and
will be no failure of the Company's computer hardware or software
systems to be Year 2000 Compliant, which inability or failure is
reasonably likely to have a Company Material Adverse Effect. For
purposes of this Agreement, "Year 2000 Compliant" means, with
respect to each system referred to in the prior sentence that is
intended to perform date-related functions, that such system,
when used properly in accordance with its documentation, is
capable of correctly receiving, processing and providing date
data before, on, between and after December 31, 1999 and January
1, 2000; provided that all applications, hardware and other
systems used in conjunction with such system correctly exchange
data with or provided data to such system.
22. Commodity Derivatives and Credit Exposure Matters. The
-------------------------------------------------
Company has provided the Parent copies of the Company's and its
Subsidiaries' natural gas and propane price risk management
policies listed in Schedule 2.22 of the Company Disclosure
Schedules. At all times since March 31, 1999, the Company and
its Subsidiaries taken as a whole have been in material
compliance with such policies, and no failure to comply with such
policies by the Company and its Subsidiaries taken as a whole has
resulted in a Company Material Adverse Effect.
3. REPRESENTATIONS AND WARRANTIES OF THE PARENT
The Parent represents and warrants to the Company, subject
to the exceptions set forth in the disclosure schedule supplied
by the Parent to the Company (the "Parent Disclosure Schedule"),
as follows:
1. Organization of the Parent. The Parent and each of
--------------------------
its Subsidiaries is a corporation or other legal entity duly
organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or organization, has the
requisite corporate or similar power to own, lease and operate
its property and to carry on its business as now being conducted
and as proposed to be conducted, and is duly qualified to do
business and in good standing as a foreign corporation or other
legal entity in each jurisdiction in which the failure to be so
qualified would have a Parent Material Adverse Effect (as defined
below). The Parent has delivered or made
<PAGE>
available a true and correct copy of the Declaration of Trust and
Bylaws of the Parent, each as amended to date, to the Company.
The term "Parent Material Adverse Effect" means, for purposes of
this Agreement, any change, event or effect that is materially
adverse to the business, assets (including intangible assets),
prospects, financial condition or results of operations of the
Parent and its Subsidiaries taken as a whole (other than changes
that are the effect of economic factors (other than interest rate
changes) affecting the economy as a whole or changes that are the
effect of factors generally affecting the specific markets in
which the Parent and its Subsidiaries compete); provided,
however, that a Parent Material Adverse Effect shall not include
any adverse effect primarily attributable to the Merger or the
announcement thereof or the transactions contemplated by this
Agreement (other than effects arising out of or resulting from
actions by any state or federal regulatory authority with respect
to this Agreement and the transactions contemplated hereby)..
2. The Parent Capital Structure. The authorized capital
----------------------------
stock of the Parent consists of 50,000,000 shares of Common
Stock, $1.00 par value, of which there were 22,638,996 shares
issued and outstanding as of June 30, 1999. As of the date
hereof, except for an aggregate of 1,142.410 shares of Parent
Common Stock reserved for issuance under various stock option and
other stock plans of the Parent, there is no outstanding right,
subscription, warrant, call, preemptive right, option or other
agreement of any kind to purchase or otherwise to receive from
the Parent any shares of the capital stock or any other security
of the Parent and there is no outstanding security of any kind
convertible into or exchangeable for such capital stock. Since
March 31, 1999, no shares of Parent Common Stock have been issued
except pursuant to the stock option and other stock plans of the
Parent. All outstanding shares of Parent Common Stock are duly
authorized, validly issued, and fully paid and non-assessable and
are not subject to preemptive rights created by statute, the
Declaration of Trust or Bylaws of the Parent or any agreement or
document to which the Parent is a party or by which it is bound.
All of the shares of Parent Common Stock to be issued in the
Merger will be, when issued in accordance with this Agreement,
duly authorized, validly issued, fully paid and nonassessable.
3. Merger Sub.
----------
1. Merger Sub is duly organized, validly existing and in
good standing as a New Hampshire corporation, with the requisite
corporate power to own, lease and operate the property and carry
on the business as now being conducted by the Company.
2. All of the capital stock of Merger Sub has been duly
authorized, and is validly issued, fully paid and nonassessable
and owned of record and beneficially by the Parent.
3. Merger Sub has been formed solely for the purpose of
engaging in the transactions contemplated by this Agreement and
has not engaged in any other business activities.
<PAGE>
4. Authority.
---------
1. The Parent and Merger Sub have all requisite corporate
power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Parent and Merger
Sub, respectively. This Agreement has been duly executed and
delivered by the Parent and Merger Sub, respectively, and,
assuming the due authorization, execution and delivery of this
Agreement by the Company, this Agreement constitutes and will
constitute the valid and binding obligation of the Parent and
Merger Sub, respectively, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to
general principles of equity. The execution and delivery of this
Agreement by the Parent and Merger Sub do not, and the
performance of this Agreement by the Parent and Merger Sub will
not, (i) conflict with or violate the charter or bylaws of the
Parent or Merger Sub, (ii) subject to obtaining the approval of
the NHPUC in accordance with New Hampshire law and compliance
with the other requirements set forth in Section 3.4(b) below,
conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Parent or any of its
Subsidiaries or by which its or any of their respective
properties is bound or affected, or (iii) subject to obtaining
the third party consents referred to in the final sentence of
this Section 3.4(a), result in any breach of or constitute a
default (or an event that with notice or lapse of time or both
would become a default) under, or impair the Parent's rights or
alter the rights or obligation of any third party under, or give
to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Parent or
any of its Subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which the Parent or any of
its Subsidiaries is a party or by which the Parent or any of its
Subsidiaries or its or any of their respective properties are
bound or affected, except, with respect to clauses (ii) and
(iii), for any such conflicts, violations, defaults or other
occurrences that would not have a Parent Material Adverse Effect.
The Parent Disclosure Schedule lists all consents, waivers and
approvals under any of the Parent's or any of its Subsidiaries'
agreements, contracts, licenses or leases required to be obtained
in connection with the consummation of the transactions
contemplated hereby, except for those the absence of which would
not have a Parent Material Adverse Effect.
2. No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity
is required by or with respect to the Parent or Merger Sub in
connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby, except
for (i) the filing and effectiveness of the Registration
Statement with the SEC in accordance with the Securities Act,
(ii) the filing of the Articles of Merger with the Secretary of
State of New Hampshire, (iii) the filing of a Current Report on
Form 8-K with the SEC, (iv) the filing with the Antitrust
Division and the FTC of such forms
<PAGE>
as may be required by the HSR Act and the termination or
expiration of all applicable waiting periods thereunder,
(v) the listing of Parent Common Stock issuable pursuant
to Section 1.6 on the NYSE, the Pacific Exchange and the
Boston Stock Exchange, (vi) the approval of the Merger,
the related transactions contemplated hereunder by the
NHPUC and any required filing thereof with the Secretary
of State of New Hampshire; (vii) the approval of the Merger
by the SEC pursuant to PUHCA; (viii) such consents, approvals,
orders, authorizations, registrations, declarations and filings
as may be required under applicable federal and state securities
laws and the laws of any foreign country; and (ix) such other
consents, authorizations, filings, approvals and registrations
that, if not obtained or made, would not have a Parent Material
Adverse Effect or a material adverse effect on the ability of the P
Parent to consummate the Merger.
5. SEC Filings; the Parent Financial Statements.
--------------------------------------------
1. Each of the Parent and each of its Subsidiaries has
filed all forms, reports and documents required to be filed by it
with the SEC since January 1, 1996. All such required forms,
reports and documents (including those that the Parent or its
Subsidiaries may file after the date hereof until the Closing)
are referred to herein as the "Parent SEC Reports." As of their
respective dates, the Parent SEC Reports (i) were or will be
prepared in compliance in all material respects with the
requirements of the Securities Act or the Exchange Act, as the
case may be, and the rules and regulations of the SEC thereunder
applicable to such Parent SEC Reports, and (ii) did not and will
not at the time they were or are filed (or if amended or
superseded by a filing prior to the date of this Agreement, then
on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading.
2. Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in
the Parent SEC Reports (the "Parent Financials"), including any
Parent SEC Reports filed after the date hereof until the Closing,
(i) complied or will comply as to form in all material respects
with the published rules and regulations of the SEC with respect
thereto, (ii) was or will be prepared in accordance with GAAP
applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto or, in the case
of unaudited interim financial statements, as may be permitted by
the SEC on Form 10-Q under the Exchange Act) and (iii) fairly
presented or will fairly present, in all material respects, the
consolidated financial position of the Parent and its
Subsidiaries as at the respective dates thereof and the
consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end
adjustments which were not, or are not expected to be, material
in amount. The balance sheet of the Parent contained in the
Parent SEC Reports as of March 31, 1999 is hereinafter referred
to as the "Parent Balance Sheet." Except as disclosed in the
Parent Disclosure Schedule and except for obligations under this
Agreement, neither the Parent nor
<PAGE>
any of its Subsidiaries has any liabilities (absolute,
accrued, contingent or otherwise) of a nature required to be
disclosed on a balance sheet or in the related notes to the
consolidated financial statements prepared in accordance with
GAAP that are, individually or in the aggregate, material to
the business, results of operations or financial condition
of the Parent and its Subsidiaries taken as a whole, except
liabilities (i) provided for in the Parent Balance Sheet or
the related notes , (ii) incurred since the date of the
Parent Balance Sheet in the ordinary course of business
consistent with past practices, or (iii) incurred in connection
with the transactions contemplated hereby.
6. Absence of Certain Changes and Events. Since March
-------------------------------------
31, 1999, there has not occurred, and no fact or condition exists
which would have or, insofar as reasonably can be foreseen, could
have any Parent Material Adverse Effect and there has not been,
occurred or arisen any:
1. material damage, destruction, or loss to the business
or properties of the Parent and its Subsidiaries taken as a whole
(whether or not covered by insurance);
2. declaration, setting aside, or payment of any dividend
or other distribution in respect of the Parent's capital stock
(other than regular quarterly dividends in accordance with past
practice); or
3. change in the capital stock or in the number of shares
or classes of the Parent's authorized capital stock as described
in Section 3.2.
7. Litigation. There is no action, suit, proceeding or
----------
investigation pending or to the Parent's knowledge, threatened
against the Parent or any of its Subsidiaries that would have a
Parent Material Adverse Effect or that in any manner challenges
or seeks to prevent, enjoin, alter or delay any of the
transactions contemplated by this Agreement.
8. Registration Statement; Proxy Statement/Prospectus.
----------------------
The information supplied by the Parent for inclusion in the
Registration Statement (as defined in Section 2.18) shall not at
the time the Registration Statement is filed with the SEC and at
the time it becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading. The information
supplied by the Parent for inclusion in the Proxy Statement to be
sent to the stockholders of the Company in connection with the
Company Stockholders' Meeting, and the information made available
to the Company's stockholders in connection with their election
as to the form of Merger Consideration, shall not, on the date
the Proxy Statement is first mailed to the Company's stockholders
and at the time of the Company Stockholders' Meeting, as the case
may be, and at the time such information is made available to the
Company's stockholders in connection with such election, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they are made, not false or misleading, or omit to
<PAGE>
state any material fact necessary to correct any statement in any
earlier written communication with respect to the solicitation of
proxies for the Company Stockholders' Meeting which has become
false or misleading. The Registration Statement and the Proxy
Statement used by the Parent will comply as to form in all
material respects with applicable provisions of the Securities
Act and the Exchange Act, respectively, and the rules and
regulations thereunder. If at any time prior to the Effective
Time, any event relating to the Parent or any of its affiliates,
officers or directors should be discovered by the Parent that
should be set forth in an amendment to the Registration Statement
or a supplement to the Proxy Statement or as part of the
information made available to the Company's stockholders so that
the information made available to them in connection with
electing the form of Merger Consideration is not false or
misleading in any material respect, the Parent shall promptly
inform the Company. Notwithstanding the foregoing, the Parent
makes no representation or warranty with respect to any
information supplied by the Company that is contained in any of
the foregoing documents.
9. Compliance; Permits; Restrictions.
---------------------------------
1. Neither the Parent nor any of its Subsidiaries is in
conflict with, or in default or violation of, (i) any law, rule,
regulation, order, judgment or decree applicable to the Parent or
any of its Subsidiaries or by which its or any of their
respective properties is bound or affected, or (ii) any note,
bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the
Company or any of its Subsidiaries is a party or by which the
Parent or any of its Subsidiaries or its or any of their
respective properties is bound or affected, except for any
conflicts, defaults or violations that would not have a Parent
Material Adverse Effect.
2. The Parent and its Subsidiaries hold all consents,
permits, licenses, variances, exemptions, orders and approvals
from governmental authorities that are material to the operation
of the business of the Parent and its Subsidiaries taken as a
whole (collectively, the "Parent Permits"). The Parent and its
Subsidiaries are in compliance with the terms of the Parent
Permits, except where the failure to so comply would not have a
Parent Material Adverse Effect.
10. Regulation as a Utility. As of the date of this
-----------------------
Agreement, the Parent is a holding company exempt from
registration under Section 3(a)(1) of the PUHCA.
11. Ownership of the Company Common Stock. As of the date
-------------------------------------
of this Agreement, the Parent does not "beneficially own" (as
such term is defined for purposes of Section 13(d) of the
Exchange Act) any shares of Company Common Stock.
<PAGE>
12. Environmental Matters.
---------------------
1. Except as would not have a Parent Material Adverse
Effect, no amount of any Hazardous Material is present as a
result of the actions of the Parent or any of its Subsidiaries
in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that the
Parent or any of its Subsidiaries has at any time owned,
operated, occupied or leased, and the Company is not aware that
any Hazardous Materials are present in, on or under such property
as a result of the conduct of other parties. To the knowledge of
the Parent, the Parent Disclosure Schedule lists all locations
that the Parent or any Subsidiary formerly owned or leased where
Hazardous Materials are present in a volume or concentration that
would reasonably be expected to have a Parent Material Adverse
Effect.
2. Except as would not have a Parent Material Adverse
Effect, (i) neither the Parent nor any of its Subsidiaries has
generated, transported, stored, used, manufactured, disposed of,
released or exposed its employees or others to Hazardous
Materials in violation of, or in a manner which could give rise
to liabilities under, any law in effect prior to or as of the
date hereof, nor (ii) has the Parent or any of its Subsidiaries
engaged in Hazardous Materials Activities in violation of any
rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof
to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
3. The Parent and its Subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and
consents ("Parent Environmental Permits") necessary for the
conduct of the Parent's and its Subsidiaries' Hazardous Material
Activities and other businesses of the Parent and its
Subsidiaries, taken as a whole, as such activities and businesses
are currently being conducted, except where the failure to so
hold would not have a Parent Material Adverse Effect.
4. No actions, proceedings, revocation proceeding,
amendment procedure, writ, injunction or claim is pending, or to
the Parent's knowledge, threatened concerning any Parent
Environmental Permit, Hazardous Material in, and or under any
property owned or leased at any time by the Parent or any of its
Subsidiaries or any Hazardous Materials Activity of the Parent or
any of its Subsidiaries, in which injunction or other equitable
relief or damages in excess of $1,000,000 is or is reasonably
likely to be sought against the Parent or any Subsidiary or that
otherwise would have a Parent Material Adverse Effect.
4. CONDUCT PRIOR TO THE EFFECTIVE TIME
1. Conduct of Business by the Company and the Parent.
-------------------------------------------------
During the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement or the
Effective Time, the Company (which for the purposes of this
Article 4 shall include the Company and each of its Subsidiaries)
and the Parent (which for the purposes of this Article 4 shall include
<PAGE>
the Parent and each of its Subsidiaries) agree, except (i) in the case
of the Company as provided in Article 4 of the Company Disclosure Schedule,
(ii) in the case of the Parent (x) as provided in Article 4 of the Parent
Disclosure Schedule or (y) as would not have a material adverse
effect on the ability of the Parent to consummate the Merger or
materially delay the Effective Date, (iii) as otherwise contemplated
by this Agreement, or (iv) to the extent that the other party shall
otherwise consent in writing, to carry on its business in the usual,
regular and ordinary course, in substantially the same manner as
heretofore conducted and use its commercially reasonable efforts
consistent with past practices and policies to preserve intact its
present business organization, keep available the services of its p
present officers and employees, maintain its properties and assets, in
the aggregate, in good condition and repair, normal wear and tear
excepted, and preserve its relationships with customers,
suppliers, distributors, and others with which it has business
dealings.
2. Certain Actions by the Company. In addition, except
------------------------------
as is set forth in Article 4 of the Company Disclosure Schedules
notwithstanding Section 4.1 above, without the prior written
consent of the Parent, which consent will not be unreasonably
withheld or delayed, the Company shall not do any of the
following, nor shall the Company permit its Subsidiaries to do
any of the following:
1. Enter into any partnership arrangements, joint
development agreements or strategic alliances;
2. Grant any severance or termination pay to any officer
or employee except payments pursuant to written agreements
outstanding, or policies existing, on the date hereof and as
previously disclosed in writing to the Parent, or adopt any new
severance plan;
3. Make any filings with any government authority
regarding its rates or charges, standards of service, accounting
matters or services it provides, except in the ordinary course of
business consistent with past practices or as required by law;
4. Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of
any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for any capital
stock, other than the declaration and payment of regular
quarterly cash dividends on the Company Common Stock with record
and payment dates consistent with past practice and at rates not
in excess, in any fiscal year, of the dividends for the prior
fiscal year increased at a rate consistent with past practice,
and dividends payable by a Subsidiary to the Company, other than
a dividend or distribution in connection with the adoption of a
replacement shareholders rights plan or in connection with any
redemption under the Rights Plan;
5. Repurchase or otherwise acquire, directly or
indirectly, any shares of capital stock;
6. Issue, deliver, sell, authorize or propose the issuance,
delivery or sale of, any shares of Company capital stock or any
securities convertible into shares of Company capital stock, or
<PAGE>
subscriptions, rights, warrants or options to acquire any shares
of Company capital stock or any securities convertible into shares
of Company capital stock, or enter into other agreements or
commitments of any character obligating it to issue any such
shares or convertible securities, other than pursuant to the
Company Plans consistent with past practice;
7. Cause, permit or propose any amendments to its Articles
of Incorporation or Bylaws, except as contemplated by this
Agreement and in connection with adopting a new shareholder
rights plan;
8. Acquire or agree to acquire by merging or consolidating
with, or by purchasing any equity interest (other than money
market accounts and other short-term investments) in or a
material portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire
or agree to acquire any material amount of operating assets;
9. Sell, lease, encumber or otherwise dispose of any
properties or assets that are material, individually or in the
aggregate, to the business of the Company, except for easements
granted in the ordinary course of business;
10. Incur any indebtedness for borrowed money or guarantee
any such indebtedness (or enter any other guarantee, keep-well,
capital maintenance or other similar agreement) or issue or sell
any debt securities or warrants or rights to acquire debt
securities of the Company or guarantee any debt securities of
others;
11. Adopt or amend any employee benefit or stock purchase
or option plan, or enter into any employment contract, pay any
special bonus or special remuneration to any director, officer or
employee other than pursuant to existing agreements, plans and
arrangements identified in the Company Disclosure Schedule, or
increase the salaries or wage rates, other than in the ordinary
course of business and consistent in timing and amount with past
practice or as required by law, of its officers or employees;
12. Pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than payment, discharge or satisfaction in
the ordinary course of business or in an amount, in any
individual case, of less than $150,000, other than any payments
made under any of the contracts, agreements or binding
commitments listed in the Company Disclosure Schedule, in
accordance with their respective terms;
13. Make any individual capital expenditure or commitment,
or series of related capital expenditures or commitments, outside
the ordinary course of business, exceeding $150,000;
<PAGE>
14. Take any action that would cause the transactions
contemplated by this Agreement to be subject to requirements
imposed by any Takeover Law or fail to take all necessary steps
within its control to exempt (or ensure the exemption of) the
transactions contemplated by this Agreement from any applicable
Takeover Law, including NH RSA 421-A; or
15. Agree in writing or otherwise to take any of the
actions described in this Section.
5. ADDITIONAL AGREEMENTS
1. Proxy Statement/Prospectus; Registration Statement;
--------------------------------------------------
Other Filings. As promptly as practicable after the execution
of this Agreement, the Company will prepare and file with the SEC
the Proxy Statement, and the Parent will prepare and file with
the SEC the Registration Statement in which the Proxy Statement
will be included as a prospectus. Each of the Company and the
Parent will respond to any comments of the SEC and will use its
best efforts to have the Registration Statement declared
effective under the Securities Act as promptly as practicable
after such filing. The Company will cause the Proxy Statement to
be mailed to its stockholders at the earliest practicable time.
As promptly as practicable after the date of this Agreement, the
Company and the Parent will prepare and file any other filings
required under the Exchange Act, the Securities Act or any other
Federal, foreign or state securities laws relating to the Merger
and the transactions contemplated by this Agreement (the "Other
Filings"). Each party will notify the other party promptly upon
the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff or any other government officials
for amendments or supplements to the Registration Statement, the
Proxy Statement or any Other Filing or for additional information
and will supply the other party with copies of all correspondence
between such party or any of its representatives, on the one
hand, and the SEC or its staff or any other government officials,
on the other hand, with respect to the Registration Statement,
the Proxy Statement, the Merger or any Other Filing. From and
after the date of this Agreement until the Effective Time, the
Parent and the Company shall file with the SEC when due all
reports required to be filed pursuant to Section 13 or 15(d) of
the Exchange Act, and the Parent shall make available to the
Company's stockholders such information as may be required in
connection with their election as to the form of Merger
Consideration. Whenever any event occurs that is required to be
set forth in an amendment or supplement to the Proxy Statement,
the Registration Statement or any Other Filing or to be made
available to the Company's stockholders in connection with such
election, the Company or the Parent, as the case may be, will
promptly inform the other party of such occurrence and cooperate
in filing with the SEC or its staff or any other government
officials, and/or mailing to stockholders of the Company, such
amendment, supplement or information. The Proxy Statement will
also include the recommendations of the Board of Directors of the
Company in favor of approval of this Agreement (except that the
Board of the Company may withdraw,
<PAGE>
modify or refrain from making such recommendation to the extent
that the Board determines in good faith, after consulting with
outside legal counsel, that the Board's fiduciary duties under
applicable law require it to do so).
2. Meetings of Stockholders.
------------------------
The Company will take all action necessary in accordance
with applicable New Hampshire law and its Articles of
Incorporation and Bylaws to convene the Company Stockholders'
Meeting to be held as promptly as practicable, and in any event
within 60 days after the declaration of effectiveness of the
Registration Statement , and in any event will use all
commercially reasonable efforts to convene the Company
Stockholders' Meeting prior to December 31, 1999, for the purpose
of considering the approval of this Agreement. Unless otherwise
required by the fiduciary duties of the Company's Board of
Directors, the Company will use its best efforts to solicit from
its stockholders proxies in favor of the approval of this
Agreement, and will take all other action necessary or advisable
to secure the vote or consent of its stockholders required to
obtain such approval.
3. Access to Information; Confidentiality.
--------------------------------------
1. Each party will afford the other party and its
accountants, counsel and other representatives reasonable access
during normal business hours to the properties, books, records
and personnel of the other party during the period prior to the
Effective Time to obtain all information concerning the business,
including properties, results of operations and personnel of such
party, as the other party may reasonably request. No information
or knowledge obtained in any investigation pursuant to this
Section 5.3 will affect or be deemed to modify or waive any
representation or warranty contained herein or the conditions to
the obligations of the parties to consummate the Merger.
2. The parties acknowledge that the Company and the Parent
have previously executed Confidentiality Agreements dated June 9
and June 11, 1999 (the "Confidentiality Agreements"), which
Confidentiality Agreements will continue in full force and effect
in accordance with its terms, except as is necessary to comply
with the terms of this Agreement.
4. No Solicitation.
---------------
1. From and after the date of this Agreement until the
earlier of the Effective Time or termination of this Agreement,
the Company and its Subsidiaries will not, and will instruct
their respective directors, officers, employees, representatives,
investment bankers, agents and affiliates not to, directly or
indirectly, (i) solicit or encourage or facilitate submission of,
any proposals or offers (or anything that is reasonably likely to
lead to a proposal or offer) by any person, entity or group
(other than the Parent and its affiliates, agents and
representatives), or (ii) participate in any discussions or
negotiations with, or disclose any non-public information
concerning the Company or any of its Subsidiaries to, or afford
any access to the properties,
<PAGE>
books or records of the Company or any of its Subsidiaries to,
or otherwise assist or facilitate, or enter into any agreement
or understanding with, any person, entity or group (other than
the Parent and its affiliates, agents and representatives), in
connection with any Acquisition Proposal, or that constitute
or may reasonably be expected to lead to an Acquisition Proposal,
with respect to the Company. For the purposes of this Agreement,
an "Acquisition Proposal" means (x) any proposal or offer relating
to (i) any merger, consolidation, sale of substantial assets of the
Company or similar transactions involving the Company or any Subsidiary
(other than sales of assets or inventory in the ordinary course
of business or permitted under the terms of this Agreement), (ii)
sale of 20% or more of the outstanding shares of capital stock of
the Company (including without limitation by way of a tender
offer or an exchange offer), or (iii) the acquisition by any
person of beneficial ownership or a right to acquire beneficial
ownership of, or the formation of any "group" (as defined under
Section 13(d) of the Exchange Act and the rules and regulations
thereunder) that beneficially owns, or has the right to acquire
beneficial ownership of, 20% or more of the then outstanding
shares of capital stock of the Company (except for acquisitions
for passive investment purposes only in circumstances where the
person or group qualifies for and files a Schedule 13G with
respect thereto); or (y) any public announcement of a proposal,
plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing. The Company will immediately
cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect
to any of the foregoing and will use reasonable efforts to obtain
the return of any confidential information furnished to any such
parties. The Company will (i) notify the Parent promptly if any
inquiry or proposal is made or any information or access is
requested in connection with an Acquisition Proposal or potential
Acquisition Proposal and (ii) notify the Parent within one
business day of the receipt thereof of the identity of the person
making the Acquisition Proposal and the applicable terms and
conditions of such Acquisition Proposal and of any modification
thereof or any proposed agreement. In addition, subject to the
other provisions of this Section 5.4, from and after the date of
this Agreement until the earlier of the Effective Time and
termination of this Agreement, the Company and its Subsidiaries
will not, and will instruct their respective directors, officers,
employees, representatives, investment bankers, agents and
affiliates not to, directly or indirectly, make or authorize any
public statement, recommendation or solicitation in support of
any Acquisition Proposal made by any person, entity or group
(other than the Parent); provided, however, that nothing herein
shall prohibit the Company's Board of Directors from taking and
disclosing to the Company's stockholders a position with respect
to a tender offer pursuant to Rules 14d-9 and 14e-2 promulgated
under the Exchange Act or any other disclosure required by law.
2. Notwithstanding the provisions of paragraph (a) above
but subject to compliance with the notification requirements
thereof, the Company may, to the extent the Board of Directors of
the Company determines, in good faith, after consultation with
its outside legal counsel and financial advisors, that the
Board's fiduciary duties under applicable law require it to do
so, participate in discussions or negotiations with, and, subject
to the requirements of paragraph (c) below, furnish information
to any person, entity or group after such person, entity or group
<PAGE>
has delivered to the Company in writing an Acquisition Proposal
that the Board of Directors of the Company determines in good
faith, (i) would result in a transaction more favorable to the
stockholders of the Company than the Merger and (ii) has been
made by a person, entity or group that is financially capable of
consummating the Acquisition Proposal. In addition,
notwithstanding the provisions of paragraph (a) above, in
connection with a possible Acquisition Proposal, the Company
shall refer any third party to this Section 5.4 or make a copy of
this Section 5.4 available to a third party. In the event the
Company receives an Acquisition Proposal, nothing contained in
this Agreement (but subject to the terms hereof) will prevent the
Board of Directors of the Company from approving such Acquisition
Proposal, or recommending such Acquisition Proposal to the
Company's stockholders, if the Board determines in good faith,
after consultation with its outside legal counsel and financial
advisors, that such action is required by its fiduciary duties
under applicable law; in such case, the Board of Directors of the
Company may withdraw, modify or refrain from making its
recommendation concerning the approval of this Agreement,
provided that the Company provides Parent with at least three
business days' prior notice thereof, during which time the Parent
may make, and in such event the Company shall consider, a
counterproposal to such Acquisition Proposal, and shall itself
and shall cause its financial and legal advisors to negotiate on
its behalf with the Parent with respect to the terms and
conditions of such counterproposal. Nothing in this Section 5.4
shall (x) permit the Company to terminate this Agreement (except
as specifically provided in Section 7.1 hereof), (y) permit the
Company to enter into any agreement with respect to an
Acquisition Proposal during the term of this Agreement (it being
agreed that during the term of this Agreement, the Company shall
not enter into any agreement with any person that provides for,
or in any way facilitates, an Acquisition Proposal (other than a
confidentiality agreement of the type referred to below)) or (z)
affect any other obligation of the Company under this Agreement.
3. Notwithstanding anything to the contrary in this
Section 5.4, the Company will not provide any non-public
information to a third party unless (i) the Company provides such
non-public information pursuant to a nondisclosure agreement with
terms comparable to the terms in the Confidentiality Agreement
dated June 9, 1999 protecting confidential information of the
Company and (ii) such non-public information has previously been
delivered or made available to the Parent.
5. Public Disclosure. The Parent will consult with the
-----------------
Company, and the Company will consult the Parent, and each will
get the approval of the other (which will not be unreasonably
withheld or delayed), before issuing any press release or
otherwise making any public statement with respect to the Merger
or this Agreement and will not issue any such press release or
make any such public statement prior to such consultation and
approval, except as may be required by law or any listing
agreement with or rule of a national securities exchange.
6. Legal Requirements.
------------------
<PAGE>
1. Each of the Parent, Merger Sub and the Company will
take all reasonable actions necessary or desirable to comply
promptly with all legal requirements that may be imposed on them
with respect to the consummation of the transactions contemplated
by this Agreement (including furnishing all information required
in connection with approvals of or filings with any Governmental
Entity) and will promptly cooperate with and furnish information
to any party hereto necessary in connection with any such
requirements imposed upon any of them or their respective
Subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement. The Parent will use
its commercially reasonable efforts to take such steps as may be
necessary to comply with the securities and blue sky laws of all
jurisdictions which are applicable to the issuance of Parent
Common Stock pursuant hereto. The Company will use its
commercially reasonable efforts to assist the Parent as may be
necessary to comply with the securities and blue sky laws of all
jurisdictions that are applicable in connection with the issuance
of Parent Common Stock pursuant hereto.
2. As soon as practicable after execution of this
Agreement or as otherwise mutually agreed by the parties, each of
the Parent and the Company shall file with the Antitrust Division
and the FTC a premerger notification form and any supplemental
information (other than privileged information) which may be
requested in connection therewith pursuant to the HSR Act, which
filings and supplemental information will comply in all material
respects with the requirements of the HSR Act. Each of the Parent
and the Company shall cooperate fully with the other in
connection with the preparation of such filings and shall use its
best efforts to respond to any requests for supplemental
information from the Antitrust Division or the FTC and to obtain
early termination of any waiting period applicable to the Merger
under the HSR Act without any materially burdensome conditions or
any divestiture. Filing fees required to be paid in connection
with the premerger notification pursuant to the HSR Act shall be
borne and paid by the Parent.
3. As soon as practicable after execution of this
Agreement, to the extent applicable, the Parent shall file with
the SEC an application for approval under Section 9(a)(2) of
PUHCA and such other applications and information (other than
privileged information) which may be requested by the SEC in
connection therewith pursuant to PUHCA and the rules of the SEC
thereunder, which filings and information will comply in all
material respects with the requirements of PUHCA and such rules.
The Parent will diligently prosecute such applications and,
subject to the understanding set forth in clause (ii) of Section
6.1(d) below, take such actions as may reasonably be necessary
to obtain the requisite SEC approval under PUHCA.
7. Third Party Consents. As soon as practicable
following the date hereof, each of the Company and the Parent
will use its commercially reasonable efforts to obtain all
material consents, waivers and approvals under any of its or its
Subsidiaries' agreements, contracts, licenses, leases or
franchises required to be obtained in connection with the
consummation of the transactions contemplated hereby, it being
understood that neither Company nor Parent shall be required to make
<PAGE>
materially burdensome payments in connection with fulfillment
of its obligations under this Section 5.7.
8. Notification of Certain Matters. The Parent will give
-------------------------------
prompt notice to the Company, and the Company will give prompt
notice to the Parent, of the occurrence, or failure to occur, of
any event, which occurrence or failure to occur would be
reasonably likely to cause (a) any representation or warranty
contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date of this Agreement to
the Effective Time, or (b) any material failure of the Parent and
Merger Sub or the Company, as the case may be, or of any officer,
director, employee or agent thereof, to comply with or satisfy
any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement. Notwithstanding the above,
the delivery of any notice pursuant to this section will not
limit or otherwise affect the remedies available hereunder to the
party receiving such notice or the conditions to such party's
obligation to consummate the Merger.
9. Best Efforts and Further Assurances. Subject to the
-----------------------------------
respective rights and obligations of the Parent and the Company
under this Agreement, each of the parties to this Agreement will
and the Parent will cause Merger Sub to, use its best efforts to
effectuate the Merger and the other transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to
closing under this Agreement. Each party hereto, at the
reasonable request of another party hereto, will, and the Parent
will cause Merger Sub to, execute and deliver such other
instruments and do and perform such other acts and things as may
be necessary or desirable for effecting completely the
consummation of the transactions contemplated hereby.
Notwithstanding the foregoing, nothing in this Agreement shall
require the Parent to agree to any materially burdensome
condition or any divestiture in order to obtain any clearance for
the Merger under the HSR Act or in connection with any other
regulatory order or approval.
10. Certain Employee Agreements. Parent and the Surviving
---------------------------
Corporation and its Subsidiaries shall honor in accordance with
their terms all contracts, agreements, collective bargaining
agreements and commitments of the Company and its Subsidiaries
prior to the date hereof which apply to any current or former
employee or current or former director of the Company and which
are disclosed in the Company Disclosure Schedule; provided,
however, that the foregoing shall not prevent Parent or the
Surviving Corporation from administering and enforcing such
contracts, agreements, collective bargaining agreements and
commitments in accordance with their terms, including without
limitation, any reserved right to amend, modify, suspend, revoke
or terminate any such contract, agreement, collective bargaining
agreement or commitment. It is the present intention of Parent
and the Company that following the Effective Time, if any
reductions in workforce in respect of employees of the Company or
any of its Subsidiaries become necessary they shall be made on a
fair and equitable basis, in light of the circumstances and the
objectives to be achieved, giving consideration to previous work
history, job experience, and qualifications, without regard to
whether employment prior to the Effective Time was with the
Company or its Subsidiaries or Parent or its Subsidiaries, and
that any employees whose employment is terminated or jobs are
eliminated by Parent, the Surviving Corporation or any of their
respective Subsidiaries during such period shall be
<PAGE>
entitled to participate on a fair and equitable basis in the job
opportunity and employment placement programs offered by Parent, the
Surviving Corporation or any of their respective subsidiaries,
subject in each case to the provisions of any labor agreements
that may be applicable. Any workforce reductions carried out
following the Effective Time by Parent or the Surviving
Corporation and their respective subsidiaries shall be done in
accordance with all applicable collective bargaining agreements,
and all laws and regulations governing the employment
relationship and termination thereof including, without
limitation, the Worker Adjustment and Retraining Notification Act
and regulations promulgated thereunder, to the extent applicable,
and any comparable applicable state or local law.
11. Corporate Offices. The corporate headquarters of the
-----------------
Surviving Corporation shall initially be located in Manchester,
New Hampshire.
12. Community Involvement. Subsequent to the Effective
---------------------
Time, Parent will, or will cause the Surviving Corporation to,
continue to make charitable contributions to the communities
served by the Company and its Subsidiaries and otherwise maintain
a level of involvement in community activities in the State of
New Hampshire at a level as generous as established practice
carried on in recent years by the Company and its Subsidiaries.
13. Advisory Board. Following the Effective Time,
--------------
EnergyNorth Natural Gas, Inc. shall maintain an advisory board
(the "Advisory Board") consisting of not less than five members
and to be chaired by Mr. Giordano, for a period of at least three
years following the Closing Date. Membership on the Advisory
Board shall be offered to Mr. Giordano and all current members of
the Company's Board of Directors who are residents of the State
of New Hampshire and who are not employees of the Surviving
Corporation and all such persons who join the Advisory Board
shall be referred to as "Company Designees". Any vacancy on the
Advisory Board which arises after the Effective Time (including
any shortfall in Advisory Board membership arising from the
failure of at least five eligible members of the Company's Board
of Directors to elect to join the Advisory Board) shall be
filled by Parent with the advice of the then remaining Company
Designees (and such replacement person shall be deemed a "Company
Designee" for all purposes hereunder). Meetings of the Advisory
Board shall be called by EnergyNorth Natural Gas, Inc. and shall
be held no less frequently than quarterly, and EnergyNorth
Natural Gas, Inc. shall consult with the Advisory Board with
respect to regulatory and legislative matters and community
affairs of EnergyNorth Natural Gas, Inc. in EnergyNorth Natural
Gas, Inc.'s current service area (including consultations with
the Advisory Board in which the Advisory Board may review and
make recommendations consistent with Section 5.12 with respect to
the civic, charitable and business and customer development
activities of EnergyNorth Natural Gas, Inc. in such area).
Company Designees shall receive a fee of $1,500 per meeting
attended for serving on the Advisory Board, and shall be
reimbursed for reasonable out-of-pocket expenses incurred in
connection with their service on the Advisory Board. The members
of the Advisory Board shall be committed to the advancement of
the affairs of the Surviving Corporation, EnergyNorth Natural
Gas, Inc., and the Parent in the State of New Hampshire. The
Surviving Corporation shall provide to Company
<PAGE>
Designees indemnification rights to the same extent as provided
to Surviving Corporation's directors pursuant to the Surviving
Corporation's Articles of Incorporation and bylaws.
14. Representation on Parent Board. The Parent shall
------------------------------
take such action as may be necessary to cause the number of Trustees
comprising of the Parent's Board of Trustees at the Effective
Time to be sufficient to permit one director of the Company to
serve thereon and shall elect Edward T. Borer or another director
of the Company designated by the Board of Directors of the
Company who is reasonably satisfactory to the Parent. The Parent
shall, as of the Effective Time, appoint such director to serve
on the Parent 's Board of Trustees for an initial term ending at
the 2003 Annual Meeting of Shareholders of the Parent.
15. Employee Benefit Matters.
------------------------
1. For a period of 12 months after the Closing Date, and
subject to applicable law, the Parent shall provide to continuing
employees who were employees of the Company and its Subsidiaries
immediately prior to the Effective Time (for purposes of this
Section 5.15, "affected employees") benefits under welfare plans
(as that term is defined in Section 3(1) of ERISA) and tax-
qualified pension plans (as that term is defined in Section 3(2)
of ERISA) that are substantially comparable in the aggregate to
the welfare and tax-qualified pension benefits provided under the
Company's Plans (as defined in Section 2.14), other than
individual agreements, disclosed in the Company Disclosure
Schedule as in effect on the Closing Date. Such employee
benefits shall be made available to such employees without regard
to preexisting condition limitations other than any such
condition or limitation (including without limitation preexisting
condition exclusions, waiting periods, actively-at-work
requirements and other similar exclusions and conditions) as to
which the relevant corresponding Plan of the Company or its
Subsidiaries provided only a conditional waiver and as to which
the employee (or his or her spouse or dependents) had not, as of
the Closing Date, satisfied the relevant conditions for such
waiver. For purposes of each employee benefits plan of the
Parent or its Subsidiaries (a "Parent plan") that determines an
individual's eligibility to become a participant in the Parent
plan (an "eligibility requirement") or the extent of a
participant's nonforfeitable right to benefits otherwise accrued
under the Parent plan (a "vesting requirement") by reference to
service for the Parent and its Subsidiaries, the Parent plan's
eligibility and vesting requirements shall be applied to the
extent permitted by law by taking into account for each affected
employee such services of such employee for the Company or its
subsidiaries prior to the Effective Time as would have been taken
into account for purposes of the Parent's plan's eligibility and
vesting requirements had such services been performed for the
Parent and its Subsidiaries. The provisions of this Section 5.15
shall not apply to affected employees whose terms and conditions
of employment are governed by a collective bargaining agreement.
2. The Company may establish a retention pool
of up to a maximum of $650,000 in order to retain the services of
certain officers and employees through and following the
Effective Date. A listing of the individuals proposed to be
covered and their respective
<PAGE>
retention amounts shall be provided by the Company to the Parent
for its approval within 90 days following the date of this Agreement,
such approval not to be unreasonably withheld. The amounts shall be
payable to the individuals, as approved by the Parent pursuant to the
immediately preceding sentence, 90 days following the Closing if
such individuals have remained employed with the Surviving
Corporation or its Subsidiaries through such date, except as set
forth in Schedule 5.15(b) of the Parent Disclosure Schedules.
16. Indemnification; D&O Insurance.
------------------------------
1. In the event of any threatened or actual claim, action,
suit, proceeding or investigation, whether civil, criminal or
administrative, including without limitation any such claim,
action, suit, proceeding or investigation in which any person who
is now, or has been at any time prior to the date of this
Agreement, or who becomes prior to the Effective Time, a director
or officer of the Company or any of its Subsidiaries (the
"Indemnified Parties") is, or is threatened to be, made a party
based in whole or in part on, or arising in whole or in part out
of, or pertaining to (i) the fact that he is or was a director or
officer of the Company, any of its Subsidiaries or any of their
respective predecessors or (ii) this Agreement or any of the
transactions contemplated hereby, whether in any case asserted or
arising before or after the Effective Time, the parties hereto
agree to cooperate and use their best efforts to defend against
and respond thereto. It is understood and agreed that after the
Effective Time, to the extent, if any, not provided by an
existing right of indemnification or other agreement or policy,
the Parent shall indemnify and hold harmless, as and to the
fullest extent permitted by law and the charter and by-laws of
the relevant entity, each such Indemnified Party against any
losses, claims, damages, liabilities, costs, expenses (including
reasonable attorney's fees and expenses in advance of the final
disposition of any claim, suit, proceeding or investigation to
each Indemnified Party to the fullest extent permitted by law
upon receipt of any undertaking required by applicable law),
judgments, fines and amounts paid in settlement in connection
with any such threatened or actual claim, action, suit,
proceeding or investigation. In the event of any such threatened
or actual claim, action, suit, proceeding or investigation
(whether asserted or arising before or after the Effective Time),
the Indemnified Parties may retain counsel reasonably
satisfactory to them after consultation with the Parent;
provided, however, that (i) the Parent shall have the right to
assume the defense thereof and upon such assumption the Parent
shall not be liable to any Indemnified Party in connection with
the defense thereof, except that if the Parent elects not to
assume such defense or counsel for the Indemnified Parties
reasonably advises the Indemnified Parties that there are issues
which raise conflicts of interest between the Parent and the
Indemnified Parties, the Indemnified Parties may retain counsel
reasonably satisfactory to them after consultation with the
Parent, and the Parent shall pay the reasonable fees and expenses
of such counsel for the Indemnified Parties, (ii) the Parent
shall be obligated pursuant to this paragraph to pay for only one
counsel in any jurisdiction for all Indemnified Parties, (iii)
the Parent shall not be liable for any settlement effected
without its prior written consent (which consent shall not be
unreasonably withheld) and (iv) the Parent shall have no
obligation hereunder to any Indemnified Party when and if a court
of competent jurisdiction
<PAGE>
shall ultimately determine, and such determination shall have
become final and nonappealable, that indemnification of such
Indemnified Party in the manner contemplated hereby is prohibited
by applicable law. Any Indemnified Party wishing to claim
indemnification under this Section 5.16 upon learning of any such
claim, action, suit, proceeding or investigation shall notify the
Parent thereof, provided that the failure to so notify shall not
affect the obligations of the Parent under this Section 5.16 except
to the extent such failure to notify materially prejudices the Parent.
The Company's obligations under this Section 5.16(a) shall continue
in full force and effect for a period of six (6) years from the
Effective Time, provided, however, that all rights to indemnification
in respect of any claim asserted or made within such period shall
continue until the final disposition of such claim.
2. From and after the Effective Time, the Surviving
Corporation will fulfill and honor in all respects the
indemnification obligations of the Company pursuant to the
provisions of the Articles of Incorporation and the Bylaws of the
Company as in effect immediately prior to the Effective Time.
3. For a period of six (6) years after the Effective Time,
the Parent shall cause the Surviving Corporation to maintain (to
the extent available in the market) in effect a directors' and
officers' liability insurance policy covering those persons who
are currently covered by the Company's directors' and officers'
liability insurance policy (a copy of which has been heretofore
delivered to the Parent) with coverage in amount and scope at
least as favorable as the Company's existing coverage (which
coverage may be an endorsement extending the period in which
claims may be made under such existing policy); provided that in
no event shall the Parent or the Surviving Corporation be
required to expend per year under this Section 5.16(c) more than
an aggregate of 150% of the current annual premium expended by
the Company to provide such coverage; and, further provided that
if the premium for such coverage exceeds such amount, the Parent
or the Surviving Corporation shall purchase a policy with the
greatest coverage available for such 150% of the current annual
premium.
4. In the event the Parent or any of its successors or
assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers or conveys all or
substantially all of its assets to any person, then, and in each
such case, to the extent necessary, proper provision shall be
made so that the successors and assigns of the Parent assume the
obligations set forth in this Section 5.16.
5. The provisions of this Section 5.16 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified
Party and his or her heirs and representatives, and nothing
herein shall affect any indemnification rights that any
Indemnified Party and his or her heirs and representatives may
have under the Bylaws of the Company or any of its Subsidiaries,
any contract or applicable law.
<PAGE>
17. Tax-Free Reorganization. The Parent and the Company
-----------------------
will each use its best efforts to cause the Merger to be treated
as a reorganization within the meaning of Section 368 of the
Code, and neither party will take any action that would cause the
Merger to fail to qualify as a reorganization within the meaning
of Section 368(a) of the Code. Each of the parties shall report
the Merger for income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code (and any comparable state
or local tax statute). The Parent and the Company will each make
available to the other party and their respective legal counsel
copies of all tax returns as may be requested by the other party.
Each of the Parent and the Company will make and will use its
best efforts to obtain from its affiliates such reasonable
representations as may be requested by legal counsel for the
purpose of rendering the opinions contemplated by Section 6.1(f).
18. Listing. The Parent shall use its best efforts to
-------
cause the shares of Parent Common Stock to be issued in the
Merger to be approved for listing on the NYSE, the Pacific
Exchange and the Boston Stock Exchange prior to the Effective
Time.
19. Dividend Record Date. The Company agrees to
--------------------
coordinate with the Parent in establishing the record date for
the payment of any dividends on the Company Common Stock in order
to assure that the holders of record of Company Common Stock (i)
are entitled to receive a dividend on either Company Common Stock
or Parent Common Stock received in the Merger in the quarter in
which the Closing occurs, and (ii) are not entitled to receive a
dividend on both Company Common Stock and Parent Common Stock
received in the Merger in the quarter in which the Closing
occurs.
20. Stock Options and Employee Benefits.
-----------------------------------
1. At the Effective Time, each outstanding option to
purchase shares of the Company Common Stock (each a "Company
Stock Option") under the Company Stock Option Plans, whether or
not exercisable, will be assumed by Parent. Each Company Stock
Option so assumed by Parent under this Agreement will continue to
have, and be subject to, the same terms and conditions set forth
in the applicable Company Stock Option Plan and option
certificate immediately prior to the Effective Time (including,
without limitation, any existing repurchase rights or vesting
provisions other than any provision providing for accelerated
vesting in connection with the Merger, which provisions shall not
apply with respect to the Merger), except that (i) each Company
Stock Option will be exercisable for that number of whole shares
of Parent Common Stock as the holder would have been entitled to
receive pursuant to the Merger had such holder exercised such
option in full immediately prior to the Effective Time, without
taking into account whether or not such option is in fact then
exercisable and all shares of Company Common Stock issuable upon
the exercise of such option were converted into Parent Common
Stock pursuant to Section 1.6, rounded down to the nearest whole
number of shares of Parent Common Stock and (ii) the per share
exercise price for the shares of Parent Common Stock issuable
upon exercise of such assumed Company Stock Option will be equal
to the quotient determined by dividing the exercise price
<PAGE>
per share of Company Common Stock at which such Company Stock
Option was exercisable immediately prior to the Effective Time
by the number of shares of Parent Common Stock deemed purchasable,
in accordance with the terms of this Section, pursuant to such
Company Common Stock Option, rounded up to the nearest whole
cent. Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent
Common Stock for delivery upon exercise of options assumed by
Parent pursuant to this Section. As soon as practicable after
the Effective Time, Parent shall deliver to each holder of a
Company Stock Option an appropriate notice setting forth such
holder's rights pursuant thereto.
2. It is intended that the Company Stock Options assumed
by Parent shall qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Code to the extent
the Company Stock Options qualified as incentive stock options
immediately prior to the Effective Time and the provisions of
this Section 5.20 shall be applied consistent with such intent.
3. Parent agrees to file a registration statement on Form
S-8 for the shares of Parent Common Stock issuable with respect
to assumed Company Stock Options within 10 business days after
the Effective Time and shall use its reasonable efforts to
maintain the effectiveness of such registration statement
thereafter for so long as any of such options or other rights
remain outstanding.
21. Rights Plan Redemption. Not later than immediately
----------------------
prior to the Effective Time, the Company shall redeem all
outstanding rights under the Rights Agreement so that the Rights
Agreement will not apply to the consummation of the transactions
contemplated hereby.
6. CONDITIONS TO THE MERGER
1. Conditions to Obligations of Each Party to Effect the Merger.
------------------------------------------------------------
The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction or waiver at or prior to the
Effective Time of the following conditions:
1. Stockholder Approval. This Agreement shall have been
approved by the requisite vote under the Company's charter and
bylaws, applicable laws of the State of New Hampshire and the
rules and regulations of the NYSE, as and to the extent required.
<PAGE>
2. NHPUC Approval. The Merger, the Merger Agreement and
the related transactions contemplated hereunder shall have
received all required or requested approvals or reviews from the
NHPUC pursuant to applicable New Hampshire law on terms and
conditions which (i) with respect to rates and recovery of costs,
including without limitation transaction, premium and integration
costs, associated with the Merger, are not less favorable to the
Surviving Corporation or EnergyNorth Natural Gas, Inc. or Parent
than those contained in the order of the NHPUC, dated July 20,
1998, In Re Northern Utilities, Inc. (DF-040, Order No. 22,983),
and (ii) do not otherwise have or constitute a material adverse
effect on the business, assets (including intangible assets),
prospects, financial condition or results of operations of the
Surviving Corporation or EnergyNorth Natural Gas, Inc. or the
other gas distribution Subsidiaries of the Parent, and such
approval shall be final, nonappealable and not under appeal.
3. Registration Statement Effective. The SEC shall have
declared the Registration Statement effective, and no stop order
suspending the effectiveness of the Registration Statement or any
part thereof shall have been issued and no proceeding for that
purpose, and no similar proceeding in respect of the Proxy
Statement, shall have been initiated or threatened in writing by
the SEC.
4. PUHCA Approval. The requisite approval of the SEC
under PUHCA shall have been obtained on terms and conditions that
(i) do not have and cannot reasonably be expected to have a
Parent Material Adverse Effect and (ii) are not otherwise
materially burdensome to the Parent, it being understood that any
requirement that the Parent register as a non-exempt "holding
company" under PUHCA or divest any of its or the Surviving
Corporation's operations shall be deemed to be materially
burdensome for purposes of this provision unless such requirement
arises as a result of any other transaction or transactions
engaged in by Parent or its Subsidiaries after the date of this
Agreement and not solely as a result of the transactions
contemplated by this Agreement.
5. No Order. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect
and which has the effect of making the Merger illegal, otherwise
prohibiting consummation of the Merger or having a material
adverse effect on the Merger.
6. Tax Opinions. The Parent and the Company shall each
have received substantially identical written opinions from their
counsel, Ropes & Gray and Hale and Dorr LLP, respectively, in
form and substance reasonably satisfactory to them, to the effect
that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code; provided that if the
respective counsel to the Parent or the Company does not render
such opinion, this condition shall nonetheless be deemed
satisfied with respect to such party if counsel to the other
party renders such opinion to such party.
<PAGE>
7. HSR and Similar Compliance. Any applicable waiting
period relating to the consummation of Merger under the HSR Act
shall have expired or been terminated by the reviewing agency.
8. Required Approvals. All consents and approvals
referred to in Section 6.1(h) of the Company Disclosure Schedule
(or in the applicable Disclosure Schedule with respect thereto)
shall have been obtained.
2. Additional Conditions to Obligations of the Company.
---------------------------------------------------
The obligations of the Company to consummate and effect the
Merger shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by the Company:
1. Representations and Warranties. The representations
and warranties of the Parent and Merger Sub contained in this
Agreement shall be true and correct on and as of the Effective
Time (without regard to any updates to the Parent Disclosure
Schedule, unless otherwise agreed by the Company), except for
changes contemplated by this Agreement and except for those
representations and warranties that address matters only as of a
particular date (which shall remain true and correct as of such
particular date), with the same force and effect as if made on
and as of the Effective Time, except, in all such cases, where
the failure to be so true and correct (without regard to any
materiality or knowledge qualifications contained therein) would
not have a Parent Material Adverse Effect, and the Company shall
have received a certificate to such effect signed on behalf of
the Parent by the Chief Executive Officer, Chief Operating
Officer or Chief Financial Officer of the Parent.
2. Agreements and Covenants. The Parent and Merger Sub
shall have performed or complied in all material respects with
all agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the Effective
Time, and the Company shall have received a certificate to such
effect signed on behalf of the Parent by the Chief Executive
Officer, Chief Operating Officer or Chief Financial Officer of
the Parent.
3. Listing. The shares of Parent Common Stock issuable
to stockholders of the Company pursuant to this Agreement shall
have been authorized for listing on the NYSE, the Pacific
Exchange and the Boston Stock Exchange.
3. Additional Conditions to the Obligations of the Parent
------------------------------------------------------
and Merger Sub. The obligations of the Parent and Merger Sub to
- --------------
consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing,
exclusively by the Parent:
<PAGE>
1. Representations and Warranties. The representations
and warranties of the Company contained in this Agreement shall
be true and correct on and as of the Effective Time (without
regard to any updates to the Company Disclosure Schedule, unless
otherwise agreed by the Parent), except for changes contemplated
by this Agreement and except for those representations and
warranties that address matters only as of a particular date
(which shall remain true and correct as of such particular date),
with the same force and effect as if made on and as of the
Effective Time, except, in all such cases, where the failure to
be so true and correct (without regard to any materiality or
knowledge qualifications contained therein) would not have a
Company Material Adverse Effect, and the Parent and Merger Sub
shall have received a certificate to such effect signed on behalf
of the Company by the Chief Executive Officer, Chief Operating
Officer or Chief Financial Officer of the Company.
2. Agreements and Covenants. The Company shall have
performed or complied in all material respects with all
agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective
Time, and the Parent shall have received a certificate to such
effect signed on behalf of the Company by the Chief Executive
Officer, Chief Operating Officer or Chief Financial Officer of
the Company.
7. TERMINATION
1. Termination. This Agreement may be terminated at any
time prior to the Effective Time of the Merger, whether before or
after approval of the Merger by the stockholders of the Company
or the NHPUC:
1. by mutual written consent duly authorized by the Board
of Trustees of the Parent and the Board of Directors of the
Company;
2. by either the Company or the Parent if the Merger shall
not have been consummated by July 14, 2000 (which date may be
extended at the written request of either the Parent or the
Company to January 14, 2001 to the extent necessary to satisfy
the condition set forth in Section 6.1(b), (d) or (g) and so long
as all other conditions have been or shall be capable of being
fulfilled); provided, however, that the right to terminate this
Agreement under this Section 7.1(b) shall not be available to any
party whose action or failure to act has been a principal cause
of or resulted in the failure of the Merger to occur on or before
such date if such action or failure to act constitutes a breach
of this Agreement;
3. by either the Company or the Parent if a court of
competent jurisdiction or governmental, regulatory or
administrative agency or commission shall have issued an order,
decree or ruling or taken any other action (an "Order"), in any
case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger, which order is final,
nonappealable and not under appeal;
<PAGE>
4. by either the Company or the Parent if the required
approval of the stockholders of the Company contemplated by this
Agreement shall not have been obtained on or before March 1, 2000
or by reason of the failure to obtain the required vote upon a
vote taken at a duly held meeting of the Company's stockholders
duly convened therefor or at any adjournment thereof (a "Company
Stockholder Approval Failure Event"); provided, however, that the
right to terminate this Agreement under this Section 7.1(d) shall
not be available to the Company where the failure to obtain
Company stockholder approval shall have been caused by the action
or failure to act of the Company in breach of this Agreement and
shall not be available to Parent where such failure is caused by
a breach of this Agreement by Parent;
5. by either the Company or the Parent, if the Company
shall have accepted or approved an Acquisition Proposal or if the
Company's Board of Directors recommends an Acquisition Proposal
to the stockholders of the Company as permitted by Section
5.4(b);
6. by the Parent, if the Board of Directors of the Company
shall have (i) failed to convene the Company Stockholders'
Meeting, as required by Section 5.2, (ii) failed to recommend
approval of this Agreement in the Proxy Statement or withheld,
withdrawn or modified in a manner adverse to the Parent such
recommendation or resolved to do so, or (iii) approved or
recommended an Acquisition Proposal;
7. by the Company, upon a breach of any representation,
warranty, covenant or agreement on the part of the Parent set
forth in this Agreement, if (i) as a result of such breach the
conditions set forth in Section 6.2(a) or Section 6.2(b) would
not be satisfied as of the time of such breach and (ii) such
breach shall not have been cured by the Parent within ten (10)
business days following receipt by the Parent of written notice
of such breach from the Company;
8. by the Parent, upon a breach of any representation,
warranty, covenant or agreement on the part of the Company set
forth in this Agreement, if (i) as a result of such breach the
conditions set forth in Section 6.3(a) or Section 6.3(b) would
not be satisfied as of the time of such breach and (ii) such
breach shall not have been cured by the Company within ten (10)
business days following receipt by the Company of written notice
of such breach from the Parent;
9. by the Parent, if there shall have occurred any event
or condition that constitutes a Company Material Adverse Effect
since the date of this Agreement which condition or event shall
not have been ameliorated such that it is no longer a Company
Material Adverse Effect within ten (10) business days following
receipt by the Company of notice from the Parent; or
<PAGE>
10. by the Company, if there shall have occurred any event
or condition that constitutes a Parent Material Adverse Effect
since the date of this Agreement, which condition or event shall
not have been ameliorated such that it is no longer a Parent
Material Adverse Effect within ten (10) business days following
receipt by the Parent of notice from the Company.
2. Notice of Termination; Effect of Termination. Any
--------------------------------------------
termination of this Agreement under Section 7.1 above will be
effective immediately upon the delivery of written notice of the
terminating party to the other parties hereto. In the event of
the termination of this Agreement as provided in Section 7.1,
this Agreement shall be of no further force or effect, except (i)
as set forth in this Section 7.2, Section 7.3 and Article 8
(General Provisions), each of which shall survive the termination
of this Agreement. No termination of this Agreement shall affect
the obligations of the parties contained in the Confidentiality
Agreements, all of which obligations shall survive termination of
this Agreement in accordance with their terms.
3. Fees and Expenses.
1. Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such expenses, whether or not the Merger is
consummated; provided, however, that the Parent and the Company
shall share equally all fees and expenses, other than attorneys'
and accountants' fees and expenses, incurred in relation to the
printing and filing of the Proxy Statement (including any
preliminary materials related thereto) and the Registration
Statement (including financial statements and exhibits) and any
amendments or supplements thereto.
2. The Company shall pay to the Parent an amount equal to
all out-of-pocket expenses and fees incurred by the Parent,
including without limitation fees and expenses payable to all
legal, accounting, financial and other professional advisors,
relating to the Merger or the transactions contemplated by this
Agreement not exceeding $2,000,000 in the aggregate upon the
termination of this Agreement by the Parent pursuant to 7.1(h) or
upon any termination of this Agreement as to which subparagraph
(i), (ii) or (iii) of Section 7.3(c) is applicable.
3. The Company shall pay the Parent a termination fee of
$5,500,000 (plus all amounts payable pursuant to Section 7.3(b)),
upon the earliest to occur of the following events:
1. the termination of this Agreement pursuant to Section
7.1(e) or (f);
2. the termination of this Agreement pursuant to Section
7.1(d) if, at the time of the Seller Stockholder Approval Failure
Event;
(1) there shall have been announced, commenced or
occurred an Alternative Transaction (as defined in Section
7.3(g)) and the Company shall have either (x) executed an
agreement to engage in the same or (y) the
<PAGE>
Company's Board of Directors shall not have recommended
against such Alternative Transaction affirmatively or,
if the Company's Board of Directors has recommended against
such Alternative Transaction, the Company's Board of
Directors shall have withdrawn such recommendation against
such Alternative Transaction or modified such recommendation
in a manner adverse to the Parent; or
(2) there shall have been announced, commenced
or occurred an Alternative Transaction with a Third Party
(as defined in Section 7.3(g)) and (x) the Company shall
have engaged in, or entered into an agreement to engage in,
an Alternative Transaction with such Third Party or any
affiliate thereof or with a Competing Party (as defined
in Section 7.3(g)) within 12 months of the date of the
Company Stockholder Approval Failure Event or (y) the
Company's Board of Directors shall have recommended an
Alternative Transaction with such Third Party or any
affiliate thereof or with a Competing Party within 12
months after the date of the Company Stockholder Approval
Failure Event; or
3. the termination of this Agreement by the Parent
pursuant to Section 7.1(h) after a willful breach by the Company
of this Agreement, if before such termination or within twelve
months thereafter the Company shall have entered into an
agreement to engage in or shall have engaged in an Alternative
Transaction.
4. The Parent shall pay to the Company an amount equal to
all out-of-pocket expenses and fees incurred by the Company,
including without limitation fees and expenses payable to all
legal, accounting, financial and other professional advisors,
relating to the Merger or the transactions contemplated by this
Agreement not exceeding $2,000,000 in the aggregate upon the
termination of this Agreement by the Company pursuant to Section
7.1(g).
5. The amounts payable pursuant to Section 7.3(b), (c) or
(d) shall be paid by wire transfer within three business days
after the event giving rise to such payment; provided that in no
event shall the Company or the Parent be required to pay any
expenses or termination fees to the other party if, immediately
prior to the termination of this Agreement, the other party was
in material breach of any of its material obligations under this
Agreement. If one party fails to promptly pay to the other any
fee due hereunder, the defaulting party shall pay the costs and
expenses (including legal fees and expenses) in connection with
any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the
amount of any unpaid fee at the publicly announced prime rate of
BankBoston, N.A. from the date such fee was required to be paid.
6. As used in this Agreement, (A) "Alternative
Transaction" means either (i) a transaction pursuant to which any
person (or group of persons) other than the Parent or its
Affiliates (a "Third Party"), acquires 33% or more of the
outstanding shares of Company Common Stock,
<PAGE>
pursuant to a tender offer or exchange offer or otherwise, (ii)
a merger, consolidation or combination involving the Company in
which the holders of Company Common Stock do not own at least a
majority of the equity of the surviving entity, or (iii) any other
transaction pursuant to which any Third Party acquires control of
assets (including for this purpose the outstanding equity
securities of Subsidiaries of the Company, and the entity
surviving any merger or business combination including any of
them) of the Company having a fair market value (as determined by
the Board of Directors of the Company in good faith) equal to
more than 33% of the fair market value of all the assets of the
Company immediately prior to such transaction, or (iv) any public
announcement by the Company of a proposal, plan or intention to
do any of the foregoing or any agreement to engage in any of the
foregoing, and (B) "Competing Party" shall mean any person other
than the Parent or its affiliates who announces or commences an
Alternative Transaction, or with whom an Alternative Transaction
occurs, while an Alternative Transaction with a Third Party is
pending.
7. If this Agreement is terminated by a party as a result
of a willful breach by the other party (other than under the
circumstances described in Section 7.3(c)(iii) above, provided
that under such circumstances Parent may exercise and enforce its
rights and remedies under this paragraph (g) until and unless the
Company engages in an Alternative Transaction, in which event the
provisions of Section 7.3(c)(iii) shall thereupon apply), the
terminating party may pursue any remedies available to it at law
or in equity and shall, in addition to its out-of-pocket expenses
(which shall be paid as specified above and shall not be limited
to $2,000,000), be entitled to retain such additional amounts as
the terminating party may be entitled to receive at law or in
equity; provided, however, no party shall be responsible for any
special, consequential or incidental damages hereunder, it being
understood and agreed that no party shall be entitled to payment
under both this Section 7.3(g) and Section 7.3(c)(iii).
8. GENERAL PROVISIONS
1. Non-Survival of Representations and Warranties. The
----------------------------------------------
representations and warranties of the Company, the Parent and
Merger Sub contained in this Agreement shall terminate at the
Effective Time, and only the covenants that by their terms
survive the Effective Time shall survive the Effective Time.
2. Notices. All notices and other communications
-------
hereunder shall be in writing and shall be deemed given if
delivered personally or by commercial delivery service, or sent
via telecopy (receipt confirmed) to the parties at the following
addresses or telecopy numbers (or at such other address or
telecopy numbers for a party as shall be specified by like
notice):
1. if to the Parent or Merger Sub, to:
Eastern Enterprises
9 Riverside Road
Weston, Massachusetts 02493
<PAGE>
Attention: J. Atwood Ives
Chairman and Chief Executive Officer
Telephone: (781) 647-2302
Facsimile: (781) 647-2350
with a copy to:
Eastern Enterprises
9 Riverside Road
Weston, Massachusetts 02493
Attention: L. William Law, Jr., Esq.
Senior Vice President and General Counsel
Telephone: (781) 647-2313
Facsimile: (781) 647-2398
2. if to the Company, to:
EnergyNorth, Inc.
1260 Elm Street
Manchester, New Hampshire 03101
Attention: Robert R. Giordano
President and Chief Executive Officer
Telephone: (603) 668-3779
Facsimile: (603) 621-2982
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Attention: David E. Redlick, Esq.
Telephone: (617) 526-6484
Facsimile: (617) 526-5000
3. Interpretation; Knowledge. When a reference is made
-------------------------
in this Agreement to Exhibits, such reference shall be to an
Exhibit to this Agreement unless otherwise indicated. The words
"include," "includes" and "including" when used herein shall be
deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Agreement. When
reference is made herein to "business of" an entity, such
reference shall be deemed to include the business of all direct
and indirect subsidiaries of such entity. Reference to the
<PAGE>
Subsidiaries of an entity shall be deemed to include all direct
and indirect subsidiaries of such entity. References to the
"knowledge of the Company," or any similar expression shall mean
the actual knowledge of any executive officer of the Company.
4. Counterparts. This Agreement may be executed in one
------------
or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties and
delivered to the other party, it being understood that all
parties need not sign the same counterpart.
5. Entire Agreement. This Agreement and the documents
----------------
and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company
Disclosure Schedule and the Parent Disclosure Schedule (i)
constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with
respect to the subject matter hereof, it being understood that
the Confidentiality Agreements shall continue in full force and
effect until the Closing and shall survive any termination of
this Agreement; and (ii) are not intended to confer upon any
other person any rights or remedies hereunder, except as set
forth herein.
6. Severability. In the event that any provision
------------
of this Agreement or the application thereof, becomes or is declared
by a court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Agreement will continue in
full force and effect and the application of such provision to
other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The
parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or
unenforceable provision.
7. Amendment. Subject to applicable law, this Agreement
---------
may be amended by the parties hereto at any time by execution of
an instrument in writing signed on behalf of each of the parties
hereto.
8. Extension; Waiver. At any time prior to the Effective
-----------------
Time any party hereto may, to the extent legally allowed, (i)
extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant
hereto and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
9. Other Remedies; Specific Performance.
------------------------------------
Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law
or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The
parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not
<PAGE>
performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties
shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms
and provisions hereof in any court of the United States or any
state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
10. Governing Law. This Agreement shall be governed by
-------------
and construed in accordance with the laws of the State of New
Hampshire, regardless of the laws that might otherwise govern
under applicable principles of conflicts of law thereof.
11. Assignment. No party may assign either this Agreement
----------
or any of its rights, interests, or obligations hereunder without
the prior written approval of the of the other parties.
12. Parties in Interest. Except for rights of Indemnified
-------------------
Parties as set forth in Sections 5.13, 5.14 and 5.16, nothing in
this Agreement, express or implied, is intended to confer upon
any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement.
13. Waiver of Jury Trial. EACH OF THE PARENT, MERGER SUB
--------------------
AND COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE ACTIONS OF THE PARENT, THE MERGER SUB OR THE
COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT HEREOF.
14. Reference is hereby made to the declaration of trust
establishing Eastern Enterprises (formerly Eastern Gas and Fuel
Associates) dated July 18, 1929, as amended, a copy of which is
on file in the office of the Secretary of the Commonwealth of
Massachusetts. The name "Eastern Enterprises" refers to the
trustees under said declaration as trustees and not personally;
and no trustee shareholder, officer or agent of Eastern
Enterprises shall be held to any personal liability in connection
with the affairs of said Eastern Enterprises, but the trust
estate only is liable.
<PAGE>
IN WITNESS WHEREOF, Eastern Enterprises, EE Acquisition
Company, Inc. and EnergyNorth, Inc. have caused this Agreement to
be signed as a sealed instrument by their duly authorized
respective officers, all as of the date first written above.
EASTERN ENTERPRISES
By: /s/ J. Atwood Ives
--------------------------------------
Chairman and Chief Executive Officer
EE ACQUISITION COMPANY, INC.
By: /s/ Walter J. Flaherty
-------------------------------------
President
ENERGYNORTH, INC.
By: /s/ Robert R. Giordano
-------------------------------------
President and Chief Executive Officer
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF REORGANIZATION
This is AMENDMENT NO. 1 dated as of November 4, 1999 (the
"Amendment") to the AGREEMENT AND PLAN OF REORGANIZATION (the
"Agreement") dated as of July 14, 1999 by and among Eastern
Enterprises (the "Parent"), EE Acquisition Company, Inc., a New
Hampshire corporation ("Merger Sub"), and EnergyNorth, Inc., a
New Hampshire corporation (the "Company").
1. The parties entered into the Agreement to provide for a
business combination pursuant to which the Company would
merge with and into Merger Sub. On the date of this
Amendment, Parent entered into an Agreement and Plan of
Merger (the "Parent Merger Agreement") with KeySpan
Corporation, a New York corporation (the "Parent Acquiror"),
providing for a business combination (the "Parent Merger")
pursuant to which ACJ Acquisition LLC, a wholly-owned
subsidiary of Parent Acquiror and a Massachusetts limited
liability company, would merge with and into Parent, with
the Parent as the survivor of the Parent Merger. The
purpose of this Amendment is to set forth certain agreements
by and among Parent, Merger Sub and the Company to amend the
Agreement as a consequence of the execution and delivery of
the Parent Merger Agreement by Parent. Accordingly, Parent,
Merger Sub and the Company agree as set forth below in this
Amendment. Capitalized terms used in this Amendment that
are not defined herein shall have the respective meanings
ascribed to them in the Agreement. Capitalized terms used
in this Amendment that are not defined in the Agreement
shall be deemed included in the Agreement with the
respective meanings ascribed to them in this Amendment.
2. Recital A of the Agreement is hereby amended to read in its
entirety as follows:
"A. Upon the terms and subject to the conditions of this
Agreement and in accordance with the laws of the State of
New Hampshire, the Parent and the Company will enter into a
business combination transaction (the "Merger") pursuant to
which Merger Sub will merge with and into the Company with
the Company as the surviving corporation of the Merger or,
if the Parent Merger Agreement is terminated or has expired
prior to the Effective Time of the Merger, the Company will
merge with and into Merger Sub with Merger Sub as the
surviving corporation of the Merger."
3. Recital E of the Agreement is hereby amended to read in its
entirety as follows:
"E. If the Parent Merger Agreement is terminated prior to
the Effective Time, the parties intend, by executing this
Agreement, to adopt a plan of reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986,
as amended (the "Code")."
<PAGE>
4. Article I of the Agreement is hereby amended by inserting
the following new Section 1.12:
"1.12 Alternative Merger Structure.
----------------------------
(1) If the Parent Merger Agreement has not been terminated
prior to the Effective Time, then the Merger shall be
effected as provided in this Section 1.12 (the "Alternative
Merger").
(2) The following provisions shall apply to the Alternative
Merger:
(l) Section 1.1 of this Agreement shall be deemed to
read in its entirety as follows:
"1.1 The Merger. At the Effective Time (as
----------
defined in Section 1.2) and subject to and upon
the terms and conditions of this Agreement and the
applicable provisions of New Hampshire law, the
Merger Sub shall be merged with and into the
Company, the separate corporate existence of the
Merger Sub shall cease and the Company shall
continue as the surviving corporation. The
Company as the surviving corporation after the
Merger is hereinafter sometimes referred to as the
"Surviving Corporation."
(2) Sections 1.4(a) and (b) of this Agreement shall be
deemed to read in their entirety as follows:
"(a) At the Effective Time, the Articles of
Incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be
the Articles of Incorporation of the Surviving
Corporation until thereafter amended as provided
by law and such Articles of Incorporation.
Subject to the foregoing, the additional effects
of the Merger shall be as provided in NH RSA
293-A: 11.06 (the "NHBCA").
"(b) The Bylaws of the Company, as in effect
immediately prior to the Effective Time, shall be,
at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended."
(3) Section 1.6(a) of this Agreement shall be
deemed to read in its entirety as follows:
"(a) Conversion of Company Common Stock. Each
share of Common Stock, $1.00 par value, of the
Company (the "Company Common Stock") issued and
outstanding immediately prior to the Effective
Time (other than any shares of Company Common
Stock to be canceled pursuant to
<PAGE>
Section 1.6(c)) will be canceled and extinguished
and automatically converted into the right to
receive $61.13 in cash, without interest (the
"Merger Consideration") at the Effective Time."
(4) Section 1.6(b) of this Agreement shall be
deemed to be deleted.
(5) Section 1.6(d) of this Agreement shall be
deemed to read in its entirety as follows:
"(d) Capital Stock of Merger Sub. Each share of
Common Stock, no par value, of Merger Sub issued
and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one
validly issued, fully paid and non assessable
share of Common Stock, $1.00 par value, of the
Surviving Corporation."
(6) Section 1.6(f) of this Agreement shall be deemed
to be deleted.
(7) Section 1.6(g) of this Agreement shall be
amended to add the following sentence at the end
thereof:
"If the Parent Merger shall have closed prior
to or simultaneously with the Effective Time,
all options to purchase Company Common Stock
then outstanding under the EnergyNorth, Inc.
1998 Stock Option Plan shall be assumed by
Parent Acquiror pursuant to Section 5.20(b)."
(8) Section 1.10 of this Agreement shall be
deemed to be deleted.
(9) The provisions of Sections 5.14, 5.17 and
5.18 of this Agreement shall not be applicable to the
Alternative Merger.
(10) Section 5.19 of this Agreement shall be
deemed to read in its entirety as follows:
"If the Effective Time occurs on a date other
than the record date for a regular quarterly
dividend on the Company Common Stock, the
Company shall, unless prohibited by law,
declare and establish a record date, set
aside funds for payment of a dividend and pay
or cause to be paid a dividend for the period
commencing on the most recent record date for
the payment of a regular quarterly dividend
by the Company on the Company Common Stock
and ending on the Effective Date (the
"Partial Period"). The amount of the
dividend (the "Partial Dividend") per share
of Company Common
<PAGE>
Stock for the Partial Period shall equal a
fraction (x) the numerator of which equals
(a) $.35, multiplied by (b) the number of days
comprising the Partial Period and (y) the
denominator of which is 90."
(11) Section 5.20 of this Agreement shall be deemed to
read in its entirety as follows:
"5.20 Stock Options and Employee Benefits.
(1) If the Parent Merger shall not have been closed prior
to or simultaneously with the Effective Time, then at
the Effective Time each outstanding option to purchase
shares of the Company Common Stock (each a "Company Stock
Option") under the Company Stock Option Plans, whether
or not exercisable, will be assumed by Parent. Each
Company Stock Option so assumed by Parent under this
Agreement will continue to have, and be subject to, the
same terms and conditions set forth in the applicable
Company Stock Option Plan and option agreement immediately
prior to the Effective Time, except that each Company Stock
Option will be exercisable for that number of whole shares of
Parent Common Stock determined by multiplying the number
of shares of Company Common Stock subject to such Company
Stock Option by 1.175, at a purchase price per share of
Parent Common Stock determined by dividing the option
exercise price per share of Company Common Stock provided
in such Company Stock Option by 1.175. The number of
shares of Parent Common Stock that may be purchased on
the exercise of such Company Stock Option shall not include
any fractional shares but shall be rounded down to the next
lower whole share of Parent Common Stock. Parent shall take
all corporate action necessary to reserve for issuance a
sufficient number of shares of Parent Common Stock for delivery
upon exercise of options assumed by Parent pursuant to this
Section 5.20(a). As soon as practicable after the Effective
Time, Parent shall deliver to each holder of a Company Stock
Option an appropriate notice setting forth such holder's rights
pursuant hereto. Any Company Stock Options assumed by the
Parent pursuant to this Section 5.20(a) shall be treated in
the same manner as other "Company Stock Options" (as defined
in the Parent Merger Agreement) under Section 7.10 of the
Parent Merger Agreement.
<PAGE>
(2) If the Parent Merger shall have been closed prior to or
simultaneously with the Effective Time, then at the Effective
Time, each outstanding Company Stock Option under the Company
Stock Option Plans, whether or not exercisable, will be assumed
by Parent Acquiror. Each Company Stock Option so assumed by
Parent Acquiror under this Agreement will continue to have and be
subject to, the same terms and conditions set forth in the
applicable Company Stock Option Plan and option agreement
immediately prior to the Effective Time, except that each Company
Stock Option will be exercisable for that number of whole shares
of Parent Acquiror common stock determined by multiplying the
number of shares of Company Common Stock subject to such Company
Stock Option by a fraction the numerator of which is the product
of (x) 1.175 times (y) $64.00 and the denominator of which is the
average closing price per share of Parent Acquiror's common stock
on the NYSE, as report in The Wall Street Journal, for the 10
NYSE trading days immediately preceding the Effective Time, at a
purchase price per share of common stock of Parent Acquiror
determined by dividing the quotient of (I) such option exercise
price per share of Company Common Stock provided in such Company
Stock Option and (II) 1.175 by the quotient of (x) $64.00 and (y)
the average closing price per share of Parent Acquiror's common
stock on NYSE, as reported in The Wall Street Journal, for the 10
NYSE trading days immediately preceding the Effective Time. The
number of shares of Parent Acquiror common stock that may be
purchased on the exercise of such Company Stock Option shall not
include any fractional shares but shall be rounded down to the
next lower whole share of Parent Acquiror common stock. Parent
Acquiror shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Acquiror common
stock for delivery upon exercise of options assumed by Parent
Acquiror pursuant to this Section 5.20(b). As soon as
practicable after the Effective Time, Parent Acquiror shall
deliver to each holder of a Company Stock Option an appropriate
notice setting forth such holder's rights pursuant hereto.
(3) It is intended that the Company Stock Options assumed by
Parent under Section 5.20(a) or the Parent Acquiror under Section
5.20(b) shall qualify following the Effective Time as incentive
stock options as defined in Section 422 of the Code to the extent
the Company Stock Options qualified as incentive stock options
<PAGE>
immediately prior to the Effective Time. The provisions of this
Section 5.20 shall be applied consistent with such intent.
(4) (i) Parent agrees to file a registration statement on Form S-8
for the shares of Parent Common Stock issuable with respect to
assumed Company Stock Options, and (ii) Parent Acquiror agrees to
file a registration statement on Form S-8 for the shares of
Parent Acquiror common stock issuable with respect to assumed
Company Stock Options, in each case within 10 business days after
the Effective Time, and to use its reasonable efforts to maintain
the effectiveness of such registration statement thereafter for
so long as any of such options or other rights remain
outstanding."
(12) The conditions set forth in Section 6.1(f)
and 6.2(c) of this Agreement shall not be applicable to
the Alternative Merger.
(13) All references in this Agreement to the Surviving
Corporation shall be deemed references to the Company
as the Surviving Corporation in the Alternative Merger.
(14) All references in this Agreement to the
Merger shall be deemed references to the Alternative
Merger as provided in this Section 1.12.
(15) All other provisions of this Agreement shall
be deemed amended as appropriate to reflect that the
Alternative Merger is being effected as the Merger so
that, among other things, neither the Company nor the
Parent shall be deemed to have breached its
representations, warranties or covenants set forth in
this Agreement solely by reason of effecting the
Alternative Merger".
5. Section 8.11 of the Agreement is hereby amended to read in
its entirety as follows:
"8.11 Assignment. Except as hereinafter set forth, no
----------
party may assign either this Agreement or any of its rights,
interests or obligations hereunder without the prior written
approval of the other parties. Upon the closing of the
Parent Merger, the Parent Acquiror agrees to cause Parent to
consummate the Alternative Merger in accordance with the
terms and conditions of this Agreement and in such event the
Parent Acquiror will be a third party beneficiary of this
Agreement."
6. Parent shall not agree to any amendment or modification of
Section 7.10 of the Parent Merger Agreement which adversely
affects holders of Company Stock Options (including the
rights that they would have as holders of options to
purchase Parent Common Stock upon the effectuation of
Section 5.20(a) of the Agreement at the Effective Time)
without the Company's prior written consent. If the per
share merger consideration set forth in
<PAGE>
the Parent Merger Agreement (the "Parent Merger Consideration")
or any amendment or modification thereof is increased for any
reason above $64.00 (including any increase in the "Merger
Consideration" in the Parent Merger Agreement pursuant to
the last sentence of Section 2.01(c) of the Parent Merger
Agreement and disregarding for this purpose the reduction
set forth in the proviso at the end of such sentence), (i)
the amounts set forth in Paragraph 4 of this Amendment with
reference to Section 1.12(b)(iii) of the Agreement (which
amends Section 1.6(a) of the Agreement) will be increased by
an amount equal to (x) the per share amount of the increase
in the Parent Merger Consideration times (y) 0.589 and (ii)
the amounts set forth in Paragraph 4 of this Amendment with
reference to the $64.00 amounts in Section 1.12(b)(xi) of
the Agreement (which adds new Section 5.20(b) of the
Agreement) will be increased by the full amount of the per
share increase in the Parent Merger Consideration.
7. Section 5.20(a) of the Agreement shall be amended to delete
the parenthetical contained in the second sentence thereof.
8. All per share amounts in this Amendment and the exchange
ratios set forth herein of 1.175 and .589 shall be subject
to appropriate adjustment in the case of stock splits, stock
dividends or other similar events affecting the common stock
of the Company, Parent or the Parent Acquiror, as
applicable.
9. Section 7.1(b) of this Agreement shall be amended to provide
for the substitution of the dates March 31, 2001 and
September 30, 2001 for July 14, 2000 and January 14, 2001,
respectively. If the dates set forth in Section 9.01(b) of
the Parent Merger Agreement are extended, Parent shall
promptly notify the Company and the Company shall have the
option of either (x) extending the dates set forth in
Section 7.1(b) of the Agreement to be coterminous with the
analogous dates in Section 9.01(b) of the Parent Merger
Agreement (as so extended) or (y) terminating the Agreement
pursuant to Section 7.1(b) of the Agreement.
10.If the Parent Merger Agreement has not been terminated prior
to the Effective Time, Section 1.2 of this Agreement shall
be amended (x) to provide for the substitution of the words
"the second business day" for the words "the thirty-fifth
day" in the third sentence thereof, and (y) to add "but in
no event sooner than simultaneously with the Closing
provided for in the Parent Merger Agreement" immediately
after the second parenthetical thereof.
11.The parties acknowledge that the reference to "Company
Plans" contained in Section 4.2(f) of the Agreement means
"Company Stock Plans".
12.Parent and Parent Acquiror represent that they have
presented the Company with a true copy of the Parent Merger
Agreement in connection with the execution of this
Amendment.
<PAGE>
IN WITNESS WHEREOF, Eastern Enterprises, EE Acquisition
Company, Inc. and EnergyNorth, Inc. have caused this Amendment to
be signed as a sealed instrument by their duly authorized
respective officers, all as of the date first written above.
EASTERN ENTERPRISES
By:/s/ J. Atwood Ives
--------------------------------------
Chairman and Chief Executive
Officer
EE ACQUISITION COMPANY, INC.
By:/s/ Walter J. Flaherty
--------------------------------------
President
ENERGYNORTH, INC.
By:/s/ Robert R. Giordano
--------------------------------------
President and Chief Executive Officer
The undersigned agrees to its obligations set forth in
Sections 5.20 and 8.11 of the Agreement.
KEYSPAN CORPORATION
By:/s/ Robert B. Catell
--------------------------------------
Chairman and Chief Executive Officer
AMENDMENT TO RIGHTS AGREEMENT
WHEREAS, EnergyNorth, Inc., a New Hampshire corporation (the
"Company") and BankBoston N.A., a national banking association
(the "Rights Agent"), acting as successor rights agent under the
Rights Agreement, dated as of June 18, 1990, between the Company
and State Street Bank and Trust Company (the "Rights Agreement")
are parties to the Rights Agreement; and
WHEREAS, the Board of Directors of the Company has adopted a
resolution pursuant to Section 27 of the Rights Agreement in
order to cure an ambiguity in the Rights Agreement to correct and
supplement the provisions of the Rights Agreement and to make
certain provisions in regard to questions and matters arising
under the Rights Agreement.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged that parties agree as
follows:
1. The definition of "Beneficial Owner" and "beneficially own"
contained in Section 1(c)(ii) shall be amended by adding the
following clarifying language to the fourth line of such
section:
"[;] provided, however, that a Person or any
of such Person's Affiliates or Associates
shall not be deemed to have the right to
acquire securities under this section where
such right to acquire is subject to the
satisfaction of conditions outside the
control of the Person or any of such Person's
Affiliates or Associates as to whom or to
which the determination of beneficial
ownership is being applied . . ."
so that, as so amended, Section 1(c)(ii) reads in its entirety:
(ii) which such person or any of such Person's
Affiliates or Associates has (a) the right to acquire
(whether such right is exercisable immediately or only after
the passage of time); provided, however, that a Person or
any of such Person's Affiliates or Associates shall not be
deemed to have the right to acquire securities under this
section where such right to acquire is subject to the
satisfaction of conditions outside the control of the Person
or any of such Person's Affiliates or Associates as to whom
or to which the determination of beneficial ownership is
being applied . . . pursuant to any agreement, arrangement
or understanding (other than customary agreements with and
between underwriters and selling group members with respect
to a bona fide public offering of securities), or upon the
exercise of conversion rights, exchange rights, rights
(other than these Rights), warrants or options or otherwise;
provided, however, that a Person shall not be deemed the
Beneficial
Owner of, or to beneficially own, securities tendered pursuant
to a tender or exchange offer made by or on behalf of such
Person or any of such Person's Affiliates or associates until
such tendered securities are accepted for purchase or exchange;
or (B) the right to vote pursuant to any agreement, arrangement
or understanding; provided, however, that a
-----------------
<PAGE>
Person shall not be deemed the beneficial owner of,
or to beneficially own, any security if the agreement,
arrangement or underwriting to vote such security
(1) arises solely from a revocable proxy or consent given to
such Person in response to a public proxy or consent
solicitation made pursuant to, an in accordance with, the
applicable rules and regulations of the Exchange Act and (2)
is not also then reportable on Schedule 13D under the
exchange Act ( or any comparable or successor report); or
2. A new Section 23(d) shall be added to the end of Section
23(d) of the Rights Agreement so that Section 23(d) reads in its
entirety as follows
"(d) Upon deposit of the aggregate amount of
the Redemption Price with the Rights Agent,
together with irrevocable instructions to pay
the Redemption Price to the holders of the
Rights, the Rights shall be deemed to be
redeemed under this Section 23."
The Rights Agreement, as amended, remains in full force and
effect.
ENERGYNORTH, INC.
By:_____________________
Its:________________________
BANKBOSTON N.A.
(as successor Rights Agent)
By:________________________
Its:________________________
August 3, 1999
EnergyNorth Natural Gas Inc.
1260 Elm Street
Manchester, NH 03105-0329
Attention: Mr. Donald E. Carroll via facsimile: (603) 623-4644
RE: CONTRACT RESTRUCTURING LETTER AGREEMENT
Dear Don:
This Contract Restructuring Letter Agreement ("Letter
Agreement") is entered into by and between Tennessee Gas
Pipeline Company ("Tennessee"), and EnergyNorth Natural Gas
Inc. ("EnergyNorth"). Whereas, Tennessee and EnergyNorth
(being hereinafter individually referred to as a "Party" and
collectively referred to as the "Parties"), have agreed upon
the terms and conditions under which to extend and amend
certain Firm Transportation and Storage Service Agreements
("Firm Agreement(s)") to restructure the firm services
received by EnergyNorth from Tennessee (hereinafter referred
to as "Contract Restructuring"), the Parties wish to proceed
with the Contract Restructuring based on the following terms
and principles subject to the execution and regulatory
approval of final agreements effectuating the provisions
described herein:
1. FT-A Transportation Agreement No. 8587 ("K #8587")
(a) EnergyNorth shall elect to extend a Transportation
Quantity ("TQ") of 25,407 Dth/d (i.e., 100% of the
currently existing Maximum Daily Quantity) of K
#8587 pursuant to Article III, Section 10.5 of the
General Terms and Conditions of Tennessee's FERC
Gas Tariff for a period of three years such that
the subsequent expiration date of K #8587 is
October 31, 2003. This extension shall constitute
the Primary Extended Term as outlined in Section
10.5.
(b) Subject to EnergyNorth's election to extend the
Firm Agreement as described in Section 1(a) and
participation in an open season to change primary
points in accordance with Article XXVIII, Section
5.7 of the General Terms and Conditions of
Tennessee's FERC Gas Tariff, Tennessee shall allow
EnergyNorth to amend K #8587 to effectuate a
change in primary receipt points from meters
located in Zones 00, 0L, and 01 to meter number 07-
0018, Tennessee's Northern Storage Withdrawal
(located in Tennessee's Zone 4) to be effective on
November 1, 1999;
PAGE>
provided, however, EnergyNorth's rights shall be
limited to 3,811 Dth/d (i.e., 15% of the TQ).
The reduction of primary firm receipt meter TQ
by 3,811 Dth/d from the current primary receipt
points in Zones 00, 0L, and 01 shall be implemented
pro rata across K #8587. Thus, the currently
existing Zones 00, 0L and 01 primary receipt points
on K #8587 shall each be reduced by 15% and meter
number 07-0018 shall be increased by the like
quantity so that the receipt quantity of K #8587
is thereby preserved.
(c) Subject to EnergyNorth's successful primary
receipt point amendment as described in Section
1(b), EnergyNorth shall remit a cash payment to
Tennessee no later than November 1, 1999 which
shall be equivalent to 60% of the applicable Base
Reservation Rates for a one year period
apportioned as follows:
Zone 00 - Zone 04 1,242 Dth/d
Zone 0L - Zone 04 2,476 Dth/d
Zone 01 - Zone 04 93 Dth/d
d) Subject to EnergyNorth's compliance with Sections 1(a),
(b) and (c), for the period commencing on November 1, 1999
and extending through the Primary Extended Term, EnergyNorth
shall pay a negotiated rate for service under K #8587
comprised of the following: (1) Tennessee's Base
Reservation Rate effective as of November 1, 1999; and (2)
Tennessee's Base Commodity Rate effective as of November 1,
1999. In addition, EnergyNorth shall pay all then-effective
surcharges and applicable fuel (The rates are therefore
fixed, but the surcharges and fuel charges are not). During
the period defined above, this Letter Agreement shall be the
sole agreement between the Parties affecting the rates.
2. FT-A Transportation Agreement No. 632 ("K #632")
(a) EnergyNorth shall elect to extend a TQ of 15,265
Dth/d (i.e., 100% of the currently existing
Maximum Daily Quantity) of K #632 pursuant to
Article III, Section 10.5 of the General Terms and
Conditions of Tennessee's FERC Gas Tariff for a
period of four years such that the subsequent
expiration date of K #632 is October 31, 2004.
This extension shall constitute the Primary
Extended Term as outlined in Section 10.5.
(b) Subject to EnergyNorth's compliance with Section
2(a), for the period commencing on November 1,
1999 and extending through the Primary Extended
Term, EnergyNorth shall pay a negotiated rate for
service under K #632 comprised of the following:
(1) Tennessee's Base Reservation Rate effective
as of November 1, 1999; and (2) Tennessee's Base
<PAGE>
Commodity Rate effective as of November 1, 1999.
In addition, EnergyNorth shall pay all then-
effective surcharges and applicable fuel (The
rates are therefore fixed, but the surcharges and
fuel charges are not). During the period defined
above, this Letter Agreement shall be the sole
agreement between the Parties affecting the rates.
3. FS-MA Firm Storage Agreement No. 523 ("K #523")
(a) EnergyNorth shall elect to extend 100% of the
currently existing Maximum Storage Quantity
("MSQ") of K #523 pursuant to Article III, Section
10.5 of the General Terms and Conditions of
Tennessee's FERC Gas Tariff for a period of four
years such that the subsequent expiration date of
K #523 is October 31, 2004. This extension shall
constitute the Primary Extended Term as outlined
in Section 10.5. Unless otherwise expressly
agreed by Tennessee, EnergyNorth's currently
existing Maximum Daily Injection Quantity, Maximum
Daily Withdrawal Quantity and ratchet levels under
K #523 shall remain in effect through the Primary
Extended Term.
(b) Subject to EnergyNorth's compliance with Section
3(a), for the period commencing on November 1,
1999 and extending through the Primary Extended
Term, EnergyNorth shall pay a negotiated rate for
service under K #523 comprised of the following:
(1) Tennessee's Tariff Rate effective as of
November 1, 1999 for deliverability, space,
injection, withdrawal and overrun. In addition,
EnergyNorth shall pay all then-effective
surcharges and applicable fuel (The rates are
therefore fixed, but the surcharges and fuel
charges are not).
4. Letter Agreement
(a) This Letter Agreement shall be treated as
confidential and the Parties agree not to disclose
any information concerning this Letter Agreement
including, without limitation, the existence of
this Letter Agreement without the prior written
consent of the other Party except to employees,
consultants, agents and advisors who must be aware
of the Letter Agreement to perform the Party's
obligations hereunder if these persons have agreed
to be bound by the Parties' confidentiality
obligations; provided, however, either Party may
disclose the terms of this Letter Agreement if:
one, such disclosure is required in a judicial or
administrative process in connection with any
action, suit, proceeding, investigation, audit or
claim or otherwise by applicable law and two, the
Party requests confidential treatment of the
disclosure in the judicial or administrative
process.
<PAGE>
(b) Notwithstanding anything herein to the contrary,
this Letter Agreement and the execution of any
agreements to effectuate the arrangements proposed
in this Letter Agreement shall be in accordance
with and subject to the terms of Tennessee's FERC
Gas Tariff and to all valid laws, orders, rules
and regulations of duly constituted authorities
having jurisdiction as amended from time to time
and to the receipt and acceptance of all
regulatory authorizations necessary on terms
acceptable to Tennessee; provided further, if the
regulatory authorizations are not received in time
to implement all of the terms of this Letter
Agreement by November 1, 1999, Tennessee shall
have the right to terminate this Letter Agreement
at any time prior to November 1, 1999.
(c) EnergyNorth and Tennessee agree to cooperate in
the preparation and filing of all necessary
applications for authorizations and to support
such filings in their entirety to effectuate the
arrangements proposed in this Letter Agreement.
(d) If either Party is deprived of any right or
benefit that is the subject matter of this Letter
Agreement, and if the deprivation is not caused by
the action or inaction of the deprived Party
(including any actions required to perform a
condition precedent) then this Letter Agreement
shall be and is terminated ab initio, and any
other agreements entered into to effectuate the
provisions of this Letter Agreement shall be
deemed null and void. To the extent any benefits
have been extended, one Party to the other, prior
to the termination, then the recipient of those
benefits shall return them to the other Party so
that the Parties will be returned to a position
equal to that as if this Letter Agreement had
never been executed.
If this Letter Agreement accurately represents your
understanding of the agreement among Tennessee and
EnergyNorth, please have the appropriate party execute the
facsimile copy of this Letter Agreement and return same to
the undersigned. Upon execution by Tennessee, I will fax
one (1) fully executed original of the Letter Agreement for
your retention. If you have any questions, please do not
hesitate to contact me at (713) 420-3627.
Sincerely,
James R. Eckert
Account Manager
Marketing Northern Accounts
<PAGE>
AGREED TO AND ACCEPTED AGREED TO AND ACCEPTED
THIS _____ DAY OF __________, 1999. THIS _____ DAY OF __________, 1999.
TENNESSEE GAS PIPELINE COMPANY ENERGYNORTH NATURAL GAS, INC.
By: _________________________ By: _________________________
Name: _______________________ Name: ______________________
Title: ______________________ Title: _____________________
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AGREEMENT dated as of July 14, 1999, between ENERGYNORTH,
INC., a New Hampshire corporation (the "Company") and ROBERT R.
GIORDANO, residing in Bedford, New Hampshire (the "Executive").
WHEREAS, the Executive has been employed by the Company or
its subsidiaries for thirty (30) years in various executive
positions and has performed valuable services to the Company; and
WHEREAS, the Company and the Executive wish to amend and
restate the terms of that certain Employment Agreement dated as
of December 1, 1998 between the Company and the Executive; and
WHEREAS the Executive is willing to continue in the employ
of the Company, and the Company desires to retain the services of
the Executive;
NOW, THEREFORE, in consideration of the foregoing and the
respective covenants and agreements of the Executive and the
Company herein contained, the parties hereto agree as follows:
1. Employment.
----------
2. The Company agrees to employ the Executive and,
subject to Section 2, may assign the Executive to work for it and
for any subsidiary or affiliated company, and the Executive
agrees to perform the duties assigned to him upon the terms and
conditions herein provided.
3. Position and Responsibilities.
-----------------------------
4. The Company shall employ the Executive and the
Executive agrees to serve, as President & Chief Executive Officer
with such duties and responsibilities as are customarily assigned
to an individual serving in such capacity or any other comparable
executive office to which he is elected that does not represent a
material diminution from the title, duties and responsibilities
of the office of President & Chief Executive Officer for the term
and on the conditions hereinafter set forth. The Executive
agrees to perform such services not inconsistent with his
position as shall be assigned to him by the Board of Directors of
the Company (the "Board"). If elected, the Executive shall also
serve as an officer of any of the Company's subsidiary or
affiliated corporations as may be requested by the Board.
5. Term of Employment:
------------------
<PAGE>
6. The period of the Executive's employment
under this Agreement shall be deemed to have commenced
as of December 1, 1998 and shall continue through March 31, 2003.
7. Compensation.
------------
For all services to be rendered by the Executive in any
capacity during the period of his employment under this
Agreement, including, without limitation, services as an
executive, officer, director, or member of any committee of the
Company or of any subsidiary, affiliate or division thereof, the
Company will pay or cause to be paid to the Executive and will
provide or cause to be provided to the Executive the following:
(a) Salary. The Executive shall be compensated by the
------
Company for his services in such capacities at the aggregate base
salary rate of two hundred seventy thousand dollars ($270,000)
per year or such higher rate as the Board may, in its discretion,
determine, payable in equal installments no less frequently than
monthly. In addition, the Executive shall be compensated by the
Company crediting to his Deferred Compensation Account,
maintained in accordance with the Deferred Compensation Agreement
between the Executive and the Company, as amended or replaced,
such amount as the Board may, in its discretion, determine,
payable in equal installments no less frequently than monthly.
Incentive Compensation. The Executive shall be
----------------------
entitled to participate in any existing or future incentive
compensation, stock option, stock purchase or other bonus plans
covering the employees of the Company (or any subsidiary or
affiliate) on the same basis as other officers, but in any event,
no less favorable than that in effect on December 1, 1998 and
where applicable, in any such plans of any subsidiary, affiliate
or division thereof from which he receives compensation.
Deferred Compensation. The Executive shall have the
---------------------
right to defer what would otherwise be current compensation in
accordance with a Deferred Compensation Agreement entered into
between the Executive and the Company effective as of November
30, 1993, as amended or replaced. The Executive, may, in
addition, be compensated by the Company crediting amounts to his
Deferred Compensation Account, maintained in accordance with such
Deferred Compensation Agreement, as such intervals during each
year as the Company may determine.
<PAGE>
(d) Automobile. The Company shall provide to the Executive
----------
an automobile for his exclusive use in accordance with Company
policy, and in any event on a basis no less favorable than that
enjoyed by him at the date of this Agreement.
(e) Vacations. The Executive shall be entitled to vacation
---------
pursuant to that policy applicable to other employees of similar
rank and stature at the Company.
(f) Expenses.
--------
The Company (or its subsidiaries or affiliates, as the
case may be) shall reimburse the Executive for all reasonable
expenses, including travel, and other disbursements incurred by
him for or on behalf of the Company (or its subsidiaries or
affiliates) in the performance of his duties hereunder consistent
with the current reimbursement policies of the Company, but in no
event less favorable than the reimbursement policies in existence
on the effective date of this Agreement.
1. Participation in Benefit and Incentive Plans.
--------------------------------------------
2. The Executive shall participate in any retirement,
pension, group life, health or accident insurance, stock option,
stock purchase, restricted stock, bonus or any other employee
benefit or incentive plans generally available to the executives
and employees of the Company (or any subsidiary or affiliate),
whether now in force or hereafter adopted, in accordance with
their terms. In the event the Executive is employed by the
Company pursuant to this Agreement and elects to retire under the
provisions of the EnergyNorth, Inc. Retirement Plan for Salaried
Employees ("Pension Plan"), the Executive shall be entitled to
the same post-retirement medical, life and other applicable
benefits that other officer level executives at the Company
receive upon retirement in accordance with the Company's then
existing administrative policies; and further, the Executive
shall be entitled to receive post-retirement medical, life and
other applicable benefits that other officer level executives at
the Company receive upon retirement in accordance with the
Company's then existing administrative policies if within five
years after a Change of Control of the Company, the Executive is
discharged without Cause or resigns for Good Reason as each of
those terms is defined in the Amended and Restated Management
Continuity Agreement ("MCA") between the Executive and the
Company, dated as of the date hereof.
3. Termination of Employment
-------------------------
<PAGE>
(a) Discharge for Cause. Notwithstanding any of the
-------------------
foregoing provisions of this Agreement, the Board may, subject to
this Section 7(a), discharge the Executive for Cause at any time
during the term of this Agreement. For the purposes of this
Section 7 cause shall mean: (i) conviction of a felony or crime
involving an act of moral turpitude, dishonesty or misfeasance,
in each case that substantially interferes with the orderly
business of the Company or any of its subsidiaries, (ii) refusal
of the Executive to follow or material neglect by the Executive
of reasonable requests of the Company made pursuant to this
Agreement (other than any such refusal or neglect resulting from
incapacity due to physical or mental illness), and (iii)
willfully engaging in conduct that substantially interferes with
or damages the standing or reputation of the Company or any of
its subsidiaries; provided, however, no termination for Cause
pursuant to either clause (ii) or (iii) hereof shall be effective
unless the Company shall have first provided the Executive (A) 30
days written notice in the manner contemplated by Section 15
setting forth in reasonable detail the Company's basis for such
termination, including the manner in which the Board believes the
Executive has not substantially performed his duties and (B) an
opportunity to cure any deficiencies noted by the Company in such
notice that the Executive shall not have reasonably addressed
(and if so reasonably addressed, shall be deemed cured) prior to
the expiration of such 30-day period (the "For Cause Termination
Date"). In the event of termination of employment for Cause,
this Agreement and all of the rights and obligations of the
parties hereto shall forthwith terminate, except where this
Agreement expressly provides that any provisions survive
termination of this Agreement. For purposes of this Section
7(a), no act or failure to act by the Executive shall be
considered "willful" unless it is done, or omitted to be done, in
bad faith and without reasonable belief that the Executive's
action or omission was in the best interests of the Company.
(b) Termination by the Company. If the Company terminates
--------------------------
the Executive prior to termination of this Agreement (except for
Cause), the Company shall pay semi-monthly to the Executive, or
if he is not living, to his estate or to his beneficiary
designated hereunder, as the case may be, as severance pay and as
liquidated damages an amount equal to one-half the average
monthly rate of the Executive's salary paid and accrued including
any amount the Executive has elected to defer during the 12
months immediately prior to his termination of employment plus
one-twenty-fourth (1/24) of the
<PAGE>
greater of (A) the previous three years' annual average total
incentive compensation award earned under the EnergyNorth, Inc.
Key Employee Performance and Equity Incentive Plan (the
"Incentive Plan") to the Executive, including any amounts the
Executive has elected to defer and (B) the target level of
incentive compensation under the Incentive Plan for the
year in which such termination occurs. Such payments shall
commence on the last day of the month during which such
termination occurs and shall continue through the end of the term
of this Agreement. The Executive shall continue to receive
medical, dental, vision and life insurance benefits paid by the
Company which shall continue through the end of the term of this
Agreement and at the time the Executive elects to retire under
the provisions of the Pension Plan, the Executive shall receive
post-retirement medical benefits and life insurance in accordance
with the Company's administrative policies in effect at the date
of termination.
(c) The Executive shall not be required to mitigate the
amount of any payment or benefits provided by this Section 7 by
seeking other employment or otherwise, and if the Executive does
accept other employment, any payment or benefits hereunder shall
not be reduced by any compensation earned or benefits received by
the Executive as a result of such employment.
(d) In addition to the severance payment described in the
first paragraph of this Section 7(b), if the Company terminates
the Executive prior to the termination of this Agreement (except
for Cause), the Company shall pay to the Executive in one
payment, within ten days of the Date of Termination (as defined
below), an amount of cash equal to the product of (1) the number
of shares of Company Common Stock forfeited by the Executive
pursuant to Section 9.1 of the EnergyNorth, Inc. Key Employee
Performance and Equity Incentive Plan and (2) the average closing
prices of Company Common Stock on the New York Stock Exchange on
the five trading days ending on the Date of Termination (as
defined below).
(e) If the Company terminates the Executive prior to the
termination of this Agreement, the Company's obligations to the
Executive shall be limited to those specified in this Section
7(b). It is understood that the Company shall not be under any
obligation to make payments pursuant to this Section 7(b) upon
any termination of employment which gives rise to payments under
the MCA.
<PAGE>
(f) Executive's Termination for Cause or Death. If the
------------------------------------------
Executive is terminated for Cause under Section 7(a) hereunder,
or is unwilling to perform services hereunder, or dies while
employed, the Company shall have no further obligation hereunder
to make payments to the Executive beyond the Date of Termination
(as defined below) of employment but shall be responsible for and
obligated to pay to the Executive or his estate, as the case may
be, all accrued but unpaid compensation hereunder.
(g) Disability.
----------
In the event that the Executive, because of
accident, disability or physical or mental illness, is incapable
of performing the essential functions of the job with or without
reasonable accommodation, the Company shall have the right to
terminate the Executive's employment under this agreement upon
thirty (30) days' written notice to the Executive. In the event
of any determination pursuant to this Section 7(d), the Company
shall make semi-monthly payments to the Executive in an amount
equal to one-half of the monthly rate of salary paid and accrued
to the Executive in the most recent month in which he was paid
prior to the determination of his disability plus one-
twenty-fourth (1/24) of the greater of (A) the previous three
years' annual average total incentive compensation award earned
under the Incentive Plan and (B) the target level of incentive
compensation under the Incentive Plan for the year in which such
disability takes place, in each case, reduced by the amount of
monthly payments made under any long-term disability insurance or
plan of the Company, if any. Such semi-monthly payments shall
continue for the number of months remaining in the term of the
agreement following the date of his disability. In addition, if
the Executive becomes disabled and the Executive has twenty (20)
years or more of service at the time of disability, the Company
will continue to provide the same medical, dental and life
insurance benefits as provided to other active employees until
such time as the Executive elects to retire under the provisions
of the Pension Plan. Disability for purposes of this section
shall have the same meaning as provided under any long-term
disability policy of the Company which covers the Executive, or,
if none, as defined in the EnergyNorth, Inc. Retirement Plan for
Salaried Employees.
(ii) Prior to a determination of disability as provided
in Subsection (i) of this Section 7(d), if the Executive fails to
perform under this contract due to mental or physical illness,
the period of
<PAGE>
such failure to perform prior to such determination of
disability but subsequent to any accrued sick days, vacation
days and reasonable leaves of absence shall be considered paid
leave, and the Company shall continue to make salary payments to
the Executive for the duration of such paid ]eave. Any period
during which the Executive is receiving benefits under any
long-term disability plan of the Company shall be considered
unpaid leave.
(iii) The Company and the Executive acknowledge and
agree that any termination pursuant to Section 7(d) shall not be
deemed a termination for Cause hereunder.
(h) Notice of Termination. Any termination by the Company
---------------------
(other than a termination for Cause pursuant to Section 7(a)),
shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 15. For purposes of
this Agreement, a "Notice of Termination" means a written notice
which
(i) indicates the specific termination provision in
this Agreement relied upon,
(ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and
(iii) if the Date of Termination (as defined below) is
other than the notice, specifies the termination date (which date
shall be not more than 15 days after the giving of such notice).
(i) Date of Termination. "Date of Termination" means
-------------------
(i) if the Executive's employment is terminated by the
Company for Cause, the For Cause Termination Date as specified in
the Notice provided pursuant to Section 7(a),
(ii) if the Executive's employment is terminated by the
Company other than for Cause, death or disability pursuant to
Section 7(d), the Date of Termination shall be the date on which
the Company notifies the Executive of such termination, and
(iii) if the Executive's employment is terminated by
reason of death or disability pursuant of Section 7(d), the Date
of Termination shall be the date of death of the Executive or the
date the Executive is determined to be incapable of performance
in accordance with Section 7(d) of this Agreement, as the case
may be.
<PAGE>
(j) Nothing under this Agreement shall affect the
Executive's right to receive payments under his Deferred
Compensation Agreement.
4. Executive's Obligations.
-----------------------
(a) Non-Competition.
---------------
(i) Except as provided in Section 8(a)(i), while
receiving payments from the Company under this Agreement and for
a period of twelve months thereafter, the Executive will not
directly or indirectly, own, manage, operate, control or
participate in the ownership, management, operation or control
of, or be connected as an officer, employee, partner, director or
otherwise with, or have any financial interest in, or aid or
assist anyone else in the conduct of, any business (other than
the businesses of the Company) which is in direct competition
with the business conducted by the Company or any of its
subsidiaries, in any geographic area where such business is being
conducted during such period. Nothing in this Section 8,
however, shall restrict the right of the Executive to own,
whether for himself or as a fiduciary, not more than 1% of the
equity securities of a company any of the securities of which are
registered under Sections 11(b) or 11(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
(ii) Notwithstanding anything contained herein to the
contrary, the Executive shall not be bound by the non-competition
covenant provided in Section 8(a)(ii) in the event that,
following a Change of Control (as defined in Section 4 of the
MCA), either: (i) the Executive is terminated without Cause
pursuant to Section 5(a) of the MCA or (ii) the Executive
terminates his employment for Good Reason pursuant to Section
5(b) of the MCA.
(b) Non-Disclosure. During the term of this Agreement and
--------------
thereafter, the Executive shall not, without the written consent
of the Board or a person authorized thereby, disclose or use
(except in the course of his employment hereunder and in
furtherance of the business of the Company or any subsidiaries or
affiliates thereof) any confidential information or proprietary
data of the Company or any of its subsidiaries or affiliates
thereof, including, without limitation, customer lists, cost
information or pricing information, except where such
confidential information or proprietary data becomes generally
<PAGE>
known at the time of disclosure (other than as a result of the
Executive's wrongful disclosure) or where the Executive is
required by law to so disclose.
(c) Solicitation for Employment. While he is receiving
---------------------------
payments from the Company under this Agreement or under the MCA,
and for a period of six months thereafter, the Executive will
not, directly or indirectly, employ, solicit for employment, or
advise or recommend to any other person that they employ or
solicit for employment, any person employed at the time by the
Company or any of its subsidiaries for the purpose of competing
with the Company in such manner as is described in Subsection (a)
of this Section 8.
5. Successor.
---------
6. The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement
in the same manner and to the same extent that the Company would
be required to perform it if no successor had taken place. As
used in this Agreement, "Company" shall mean the company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
7. Entire Agreement.
----------------
8. This Agreement contains the entire understanding of the
Company and the Executive with respect to the subject matter
hereof. This Agreement shall supersede the agreement between the
Company and the Executive dated as of December 1, 1995 (the
"Prior Agreement") in all respects, unless this Agreement is held
invalid or unenforceable by a court of competent jurisdiction, in
which case the Prior Agreement shall remain, and shall be deemed
to have remained at all times, in full force and effect.
9. Arbitration.
-----------
10. 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
<PAGE>
Hampshire Revised Statutes Annotated Chapter 542. Judgment upon
the award may be entered in any court of competent jurisdiction.
11. Assignability.
-------------
This Agreement is binding on and is for the benefit of
the parties hereto and their respective successors, heirs,
executors, administrators and other legal representatives.
Neither this Agreement nor any right or obligation hereunder may
be assigned by the Company or by the Executive without the other
party's prior written consent.
13. Withholding.
-----------
14. The Company may withhold from any amounts payable under
this Agreement such Federal, state or local taxes as shall be
permitted to be withheld pursuant to any applicable law or
regulation. The Company may withhold such other amounts as may
be permitted by law.
15. Amendment; Waiver.
-----------------
This Agreement may be amended only by an instrument in
writing signed by the parties hereto, and any provision hereof
may be waived only by an instrument in writing signed by the
party or parties against whom or which enforcement of such waiver
is sought. The failure of either party hereto at any time to
require the performance by the other party hereto of any
provision hereof shall in no way affect the full right to require
such performance at any time thereafter, nor shall the waiver by
either party hereto of a breach of any provision hereof be taken
or held to be a waiver of any succeeding breach of such provision
or a waiver of the provision itself or a waiver of any other
provision of this Agreement.
1. Notices.
-------
All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party
or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
-------------------
Robert R. Giordano
12 Cobbler Lane
Bedford, NH 03110
If to the Company:
-----------------
<PAGE>
Vice President of Human Resources
EnergyNorth, Inc.
1260 Elm Street
P.O. Box 329
Manchester, NH 03105
Copy:
Richard Samuels, Esquire
McLane, Graf, Raulerson & Middleton
900 Elm Street
P.O. Box 326
Manchester, NH 03105
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
1. Validity.
--------
2. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect, nor shall the invalidity
or unenforceability of a portion of any provision of this
Agreement affect the validity or enforceability of the balance of
such provision. If any provision of this Agreement, or portion
thereof is so broad, in scope or duration, as to be
unenforceable, such provision or portion thereof shall be
interpreted to be only so broad as is enforceable.
3. Beneficiary.
-----------
The Executive hereby designates as his beneficiary
under this Agreement Priscilla L. Giordano, provided that the
Executive may change his beneficiary, or provide for alternate
beneficiaries, at any time by notifying the Company in writing of
such change, and no consent shall be required from the
beneficiary or from the Company.
1. Independent Covenants.
---------------------
The obligations of the Executive set forth in paragraph
8 represent independent covenants by which the Executive is and
will remain bound notwithstanding any breach by the Company, and
shall survive the termination of this Agreement.
1. Applicable Law.
--------------
<PAGE>
2. This Agreement shall be governed by and construed in
accordance with the substantive internal law and not the conflict
of law provisions of the State of New Hampshire.
3. IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first mentioned above.
ENERGYNORTH, INC.
BY:
EDWARD T. BORER
Chairman - Board of Directors
ROBERT R. GIORDANO
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AGREEMENT dated as of July 14, 1999, between ENERGYNORTH,
INC., a New Hampshire corporation (the "Company"), and MICHELLE
L. CHICOINE residing in Bedford, New Hampshire (the "Executive").
WHEREAS, the Executive has been employed by the Company or
its subsidiaries in various executive positions and has performed
valuable services to the Company; and
WHEREAS, the Company and the Executive wish to amend and
restate the terms of that certain Employment Agreement dated as
of December 1, 1998 between the Company and the Executive; and
WHEREAS, the Executive is willing to continue in the employ
of the Company, and the Company desires to retain the services of
the Executive;
NOW, THEREFORE, in consideration of the foregoing and the
respective covenants and agreements of the Executive and the
Company herein contained, the parties hereto agree as follows:
1. Employment.
----------
The Company agrees to employ the Executive and, subject to
Section 2, may assign the Executive to work for it and for any
subsidiary or affiliated company, and the Executive agrees to
perform the duties assigned to her upon the terms and conditions
herein provided.
2. Position and Responsibilities.
-----------------------------
The Company shall employ the Executive and the Executive
agrees to serve, as Executive Vice President Officer, with such
duties and responsibilities as are customarily assigned to an
individual serving in such capacity, or any other executive
office to which she is elected that does not represent a material
diminution from the title, duties and responsibilities of the
office of Executive Vice President Officer, for the term and on
the conditions hereinafter set forth. The
<PAGE>
Executive agrees to perform such services not inconsistent with her
position as shall be assigned to her by the Board of Directors of the
Company (the "Board"). If elected, the Executive shall also serve as
an officer of any of the Company's subsidiary or affiliated corporations
as may be requested by the Board.
3. Term of Agreement and Duties.
----------------------------
(a) Term of Employment. The period of the Executive's
employment under this Agreement shall be deemed to have commenced
as of December 1, 1998 and shall continue for a period of at least
twenty-four (24) full calendar months thereafter, subject to
renewal in accordance with Section 3(b) below.
(b) One-Year Evergreen Provision. This Agreement
----------------------------
shall be reviewed annually by the Board at its meeting held for
the review of compensation and in all events prior to December 1
of each year. At such yearly review, the Board shall consider
whether or not to extend the term of this Agreement for an
additional year. Unless the Board affirmatively votes not to
extend this Agreement, the term of employment and the termination
of this Agreement shall be extended for a period of one year from
the previous termination date. In the event the Board votes not
to extend this Agreement, the termination date of this Agreement
shall be the later of the expiration of twenty-four (24) months
from the effective date of this Agreement or twenty-four (24)
months from December 1st of the year in which this Agreement was
last extended.
(c) Duties. During such period of her employment
------
hereunder, except for illness, vacation periods, and reasonable
leaves of absence, the Executive shall devote substantially all
of her business time, attention, skill and efforts to the
faithful performance of her duties. With the approval of the
Board, however, the Executive may serve, or continue to serve,
<PAGE>
on the boards of directors of, and hold any other offices or
positions in, companies or organizations, when, in the Board's
judgment, that service will not conflict with the interests of
the Company or any of its subsidiaries or affiliates or divisions
or materially affect the performance of the Executive's duties
pursuant to this Agreement.
4. Compensation.
------------
For all services to be rendered by the Executive in any
capacity during the period of her employment under this
Agreement, including, without limitation, services as an
executive, officer, director, or member of any committee of the
Company or of any subsidiary, affiliate or division thereof the
Company will pay or cause to be paid to the Executive and will
provide or cause to be provided to the Executive the following:
(a) Salary. The Executive shall be compensated by the
------
Company for her services in such capacities at the aggregate base
salary rate of one hundred seventy-five thousand dollars
($175,000) per year or such higher rate as the Board may, in its
discretion, determine, payable in equal installments no less
frequently than monthly. In addition, the Executive shall be
compensated by the Company crediting to her Deferred Compensation
Account, maintained in accordance with the Deferred Compensation
Agreement between the Executive and the Company, as amended or
replaced, such amount as the Board may, in its discretion,
determine, payable in equal installments no less frequently than
monthly.
(b) Incentive Compensation. The Executive shall be
----------------------
entitled to participate in any existing or future incentive
compensation, stock option, stock purchase or other bonus plans
covering the employees of the Company (or any subsidiary or
affiliate) on the same basis as other officers; and where
applicable, in any such plans of any subsidiary, affiliate or
division thereof from which she receives compensation.
<PAGE>
(c) Deferred Compensation. The Executive shall have
---------------------
the right to defer what would otherwise be current compensation
in accordance with a Deferred Compensation Agreement entered into
between the Executive and the Company, as amended or replaced.
The Executive, may, in addition, be compensated by the Company
crediting amounts to her Deferred Compensation Account,
maintained in accordance with such Deferred Compensation
Agreement, as such intervals during each year as the Company may
determine.
(d) Automobile. The Company shall provide to the
----------
Executive an automobile, or an automobile allowance, for her
exclusive use on the same basis as other officers and in any
event on a basis no less favorable than that enjoyed by her at
the date of this Agreement.
(e) Vacations. The Executive shall be entitled to
---------
vacation pursuant to that policy applicable to other employees of
similar rank and stature at the Company.
5. Expenses.
--------
The Company (or its subsidiaries or affiliates, as the case
may be) shall reimburse the Executive for all reasonable
expenses, including travel, and other disbursements incurred by
her for or on behalf of the Company (or its subsidiaries or
affiliates) in the performance of her duties hereunder consistent
with the current reimbursement policies of the Company, but in no
event less favorable than the reimbursement policies in existence
on the effective date of this Agreement.
6. Participation in Benefit and Incentive Plans.
--------------------------------------------
The Executive shall participate in any retirement, pension,
group life, health or accident insurance, stock option, stock
purchase, restricted stock, bonus or any other employee benefit
or incentive plans generally available to the executives and
employees of the Company (or any subsidiary or affiliate),
whether now in force or hereafter adopted, in accordance with
their
<PAGE>
terms. In the event the Executive is employed by the
Company pursuant to this Agreement and elects to retire under the
provisions of the EnergyNorth, Inc. Retirement Plan for Salaried
Employees ("Pension Plan"), the Executive shall be entitled to
the same post-retirement medical, life and other applicable
benefits that other officer level executives at the Company
receive upon retirement in accordance with the Company's then
existing administrative policies. Further, the Executive shall be
entitled to receive post-retirement medical, life and other
applicable benefits that other officer level executives at the
Company receive upon retirement in accordance with the Company's
then existing administrative policies and at the time the
Executive elects to retire under the provisions of the Pension
Plan if within two years after a Change of Control of the
Company, the Executive is discharged without Cause or resigns for
Good Reason as each of those terms is defined in the Amended and
Restated Management Continuity Agreement ("MCA") between the
Executive and the Company dated the date hereof.
7. Termination of Employment.
-------------------------
(a) Discharge for Cause. Notwithstanding any of the
-------------------
foregoing provisions of this Agreement, the Board may, subject to
this Section 7(a), discharge the Executive for Cause at any time
during the term of this Agreement. For the purposes of this
Section 7 cause shall mean: (i) conviction of a felony or crime
involving an act of moral turpitude, dishonesty or misfeasance,
in each case that substantially interferes with the orderly
business of the Company or any of its subsidiaries, (ii) refusal
of the Executive to follow or material neglect by the Executive
of reasonable requests of the Company made pursuant to this
Agreement (other than any such refusal or neglect resulting from
incapacity due to physical or mental illness), and (iii)
willfully engaging in conduct that substantially interferes with
or damages the standing or reputation of the Company or any of
its subsidiaries; provided, however, no termination for
<PAGE>
Cause pursuant to either clause (ii) or (iii) hereof shall be effective
unless the Company shall have first provided the Executive (A) 30
days written notice in the manner contemplated by Section 15
setting forth in reasonable detail the Company's basis for such
termination, including the manner in which the Board believes the
Executive has not substantially performed her duties and (B) an
opportunity to cure any deficiencies noted by the Company in such
notice that Executive shall not have reasonably addressed (and if
so reasonably addressed, shall be deemed cured) prior to the
expiration of such 30-day period (the "For Cause Termination
Date"). In the event of termination of employment for Cause,
this Agreement and all of the rights and obligations of the
parties hereto shall forthwith terminate, except where this
Agreement expressly provides that any provisions survive
termination of this Agreement. For purposes of this Section
7(a), no act or failure to act by the Executive shall be
considered "willful" unless it is done, or omitted to be done, in
bad faith and without reasonable belief that the Executive's
action or omission was in the best interests of the Company.
(b) Termination by the Company. If the Company
--------------------------
terminates the Executive prior to termination of this Agreement
(except for Cause), the Company shall pay semi-monthly to the
Executive, or if she is not living, to her estate or to her
beneficiary designated hereunder, as the case may be, as
severance pay and as liquidated damages an amount equal to one-
half the average monthly rate of the Executive's salary paid and
accrued including any amount the Executive has elected to defer
during the 12 months immediately prior to his termination of
employment plus one-twenty-fourth (1/24) of the greater of (A)
the previous three years' annual average total incentive
compensation award earned under the EnergyNorth, Inc. Key
Employee Performance and Equity Incentive Plan (the "Incentive
Plan") to the Executive, including any amounts the Executive has
elected to defer and (B) the target level of incentive compensation
<PAGE>
under the Incentive Plan for the year in which such termination
occurs. Such payments shall commence on the last day of the
month during which such termination occurs and shall continue
through the end of the term of this Agreement. The Executive
shall continue to receive medical, dental, vision and life
insurance benefits paid by the Company which shall continue
through the end of the term of this Agreement and at the time the
Executive elects to retire under the provisions of the Pension
Plan, the Executive shall receive post-retirement medical
benefits and life insurance in accordance with the Company's then
existing policies.
The Executive shall not be required to mitigate the amount
of any payment or benefits provided for by this Section 7 by
seeking other employment or otherwise, and if the Executive does
accept other employment, any payment or benefits hereunder shall
not be reduced by any compensation earned or other benefits
received by the Executive as a result of such employment.
In addition to the severance payment described in the first
paragraph of this Section 7(b), if the Company terminates the
Executive prior to the termination of this Agreement (except for
Cause), the Company shall pay to the Executive in one payment,
within ten days of the Date of Termination (as defined below), an
amount of cash equal to the product of (1) the number of shares
of Company Common Stock forfeited by the Executive pursuant to
Section 9.1 of the EnergyNorth, Inc. Key Employee Performance and
Equity Incentive Plan and (2) the average closing prices of
Company Common Stock on the New York Stock Exchange on the five
trading days ending on the Date of Termination (as defined
below).
If the Company terminates the Executive prior to the
termination of this Agreement, the Company's obligations to the
Executive shall be limited to those specified in this Section 7.
It is understood that the Company shall not be under any
obligation to make payments pursuant to
<PAGE>
this Section 7(b) upon any termination of employment which gives
rise to payments under the MCA.
(c) Executive Termination for Cause or Death. If the
----------------------------------------
Executive is terminated for Cause under Section 7(a) hereunder,
or is unwilling to perform services hereunder, or dies while
employed, the Company shall have no further obligation hereunder
to make payments to the Executive beyond the Date of Termination
(as defined below) of employment but shall be responsible for and
obligated to pay to the Executive or her estate, as the case may
be, all accrued but unpaid compensation hereunder.
(d) Disability.
----------
(i) In the event that the Executive, because of
accident, disability or physical or mental illness, is incapable
of performing the essential functions of the job with or without
reasonable accommodation, the Company shall have the right to
terminate the Executive's employment under this agreement upon
thirty (30) days' written notice to the Executive. In the event
of any determination pursuant to this Section 7(d), the Company
shall make semi-monthly payments to the Executive in an amount
equal to one-half of the monthly rate of salary paid and accrued
to the Executive in the most recent month in which she was paid
prior to the determination of her disability plus one-twenty
fourth (1/24) of the greater of (A) the previous three years'
annual average total incentive compensation award earned under
the Incentive Plan and (B) the target level of incentive
compensation under the Incentive Plan for the year in which such
disability takes place, in each case, reduced by the amount of
monthly payments made under any long-term disability insurance or
plan of the Company, if any. Such semi-monthly payments shall
continue for the number of months remaining in the term of the
agreement following the date of her disability. In addition, if
the Executive becomes disabled
<PAGE>
and the Executive has twenty (20) years or more of service
at the time of disability, the Company will continue to provide
the same medical, dental and life insurance benefits as provided
to other active employees until such time as the Executive
elects to retire under the provisions of the Pension Plan.
Disability for purposes of this section shall have the same
meaning as provided under any long-term disability policy of
the Company which covers the Executive, or, if none, as defined
in the EnergyNorth, Inc. Retirement Plan for Salaried Employees.
(ii) Prior to a determination of disability as
provided in Subsection (i) of this Section 7(d), if the Executive
fails to perform under this contract due to mental or physical
illness, the period of such failure to perform prior to such
determination of disability but subsequent to any accrued sick
days, vacation days and reasonable leaves of absence shall be
considered paid leave, and the Company shall continue to make
salary payments to the Executive for the duration of such paid
leave. Any period during which the Executive is receiving
benefits under any long-term disability plan of the Company shall
be considered unpaid leave.
(iii) The Company and the Executive
acknowledge and agree that any termination pursuant to Section
7(d) shall not be deemed a termination for Cause hereunder.
(e) Notice of Termination. Any termination by the
---------------------
Company (other than a termination for Cause pursuant to Section
7(a)) shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 15. For purposes
of this Agreement, a "Notice of Termination" means a written
notice which
(i) indicates the specific termination provision
in this Agreement relied upon,
<PAGE>
(ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and
(iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice,
specifies the termination date (which date shall be not more than
15 days after the giving of such notice).
(f) Date of Termination. "Date of Termination" means
-------------------
(i) if the Executive's employment is terminated
by the Company for Cause, the For Cause Termination Date as
specified in the notice provided pursuant to Section 7(a),
(ii) if the Executive's employment is terminated
by the Company other than for Cause, death or disability pursuant
to Section 7(d), the Date of Termination shall be the date on
which the Company notifies the Executive of such termination, and
(iii) if the Executive's employment is
terminated by reason of death or disability pursuant to Section
7(d), the Date of Termination shall be the date of death of the
Executive or the date the Executive is determined to be incapable
of performance in accordance with Section 7(d) of this Agreement,
as the case may be.
(g) Nothing under this Agreement shall affect the
Executive's right to receive payments under her Deferred
Compensation Agreement.
8. Executive's Obligations.
-----------------------
(a) Non-Competition.
---------------
(i) Except as provided in Section 8(a)(ii),
while receiving payments from the Company under this Agreement
and for a period of twelve months thereafter, the
<PAGE>
Executive will not directly or indirectly, own, manage, operate,
control or participate in the ownership, management, operation or
control of, or be connected as an officer, employee, partner, director
or otherwise with, or have any financial interest in, or aid or
assist anyone else in the conduct of, any business (other than
the businesses of the Company) which is in direct competition
with the business conducted by the Company or any of its
subsidiaries, in any geographic area where such business is being
conducted during such period. Nothing in this Section 8,
however, shall restrict the right of the Executive to own,
whether for herself or as a fiduciary, not more than 1% of the
equity securities of a company any of the securities of which are
registered under Sections 11(b) or 11(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
(ii) Notwithstanding anything contained herein to
the contrary, the Executive shall not be bound by the non-
competition covenant provided in Section 8(a)(i) in the event
that, following a Change of Control (as defined in Section 4 of
the MCA), either: (A) the Executive is terminated without Cause
pursuant to Section 5(a) of the MCA or (B) the Executive
terminates her employment for Good Reason pursuant to Section
5(b) of the MCA.
(b) Non-Disclosure. During the term of this Agreement
--------------
and thereafter, the Executive shall not, without the written
consent of the Board or a person authorized thereby, disclose or
use (except in the course of his employment hereunder and in
furtherance of the business of the Company or any subsidiaries or
affiliates thereof) any confidential information or proprietary
data of the Company or any of its subsidiaries or affiliates
thereof, including, without limitation, customer lists, cost
information or pricing information, except where such
confidential information or proprietary data becomes generally
known at the time of disclosure
<PAGE>
(other than as a result of the Executive's wrongful disclosure)
or where the Executive is required by law to so disclose.
(c) Solicitation for Employment. While she is
---------------------------
receiving payments from the Company under this Agreement or under
the MCA, and for a period of six months thereafter, the Executive
will not, directly or indirectly, employ, solicit for employment,
or advise or recommend to any other person that they employ or
solicit for employment, any person employed at the time by the
Company or any of its subsidiaries for the purpose of competing
with the Company in such manner as is described in Subsection (a)
of this Section 8.
9. Successor.
---------
The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company
to assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no successor had taken place. As used
in this Agreement, "Company" shall mean the company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
10. Entire Agreement.
----------------
This Agreement contains the entire understanding of the
Company and the Executive with respect to the subject matter
hereof.
11. 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
<PAGE>
New Hampshire Revised Statutes Annotated Chapter 542. Judgment
upon the award may be entered in any court of competent jurisdiction.
12. Assignability.
-------------
This Agreement is binding on and is for the benefit of the
parties hereto and their respective successors, heirs, executors,
administrators and other legal representatives. Neither this
Agreement nor any right or obligation hereunder may be assigned
by the Company or by the Executive without the other party's
prior written consent.
13. Withholding.
-----------
The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be
permitted to be withheld pursuant to any applicable law or
regulation. The Company may withhold such other amounts as may
be permitted by law.
14. Amendment; Waiver.
-----------------
This Agreement may be amended only by an instrument in
writing signed by the parties hereto, and any provision hereof
may be waived only by an instrument in writing signed by the
party or parties against whom or which enforcement of such waiver
is sought. The failure of either party hereto at any time to
require the performance by the other party hereto of any
provision hereof shall in no way affect the full right to require
such performance at any time thereafter, nor shall the waiver by
either party hereto of a breach of any provision hereof be taken
or held to be a waiver of any succeeding breach of such provision
or a waiver of the provision itself or a waiver of any other
provision of this Agreement.
<PAGE>
15. Notices.
-------
All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
Michelle L. Chicoine
8 Boxwood Road
Bedford, NH 03110
If to the Company:
Robert R. Giordano
President and CEO
EnergyNorth, Inc.
1260 Elm Street
P.O. Box 329
Manchester, NH 03105
Copy:
Richard Samuels, Esquire
McLane, Graf, Raulerson & Middleton
900 Elm Street
P.O. Box 325
Manchester, NH 03105
or to such other address as either party shall have
furnished to the other in writing in accordance herewith. Notice
and communications shall be effective when actually received by
the addressee.
16. Validity.
--------
The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect, nor shall the invalidity
or unenforceability of a portion of any provision of this
Agreement affect the validity or enforceability of the balance of
such provision. If any provision of this Agreement, or portion
thereof is so broad, in scope or duration, as to be
<PAGE>
unenforceable, such provision or portion thereof shall be
interpreted to be only so broad as is enforceable.
17. Beneficiary.
-----------
The Executive hereby designates as her beneficiary under
this Agreement David A. Goldman, provided that the Executive may
change her beneficiary, or provide for alternate beneficiaries,
at any time by notifying the Company in writing of such change,
and no consent shall be required from the beneficiary or from the
Company.
18. Independent Covenants.
---------------------
The obligations of the Executive set forth in paragraph 8
represent independent covenants by which the Executive is and
will remain bound notwithstanding any breach by the Company, and
shall survive the termination of this Agreement.
19. Applicable Law.
--------------
This Agreement shall be governed by and construed in
accordance with the substantive internal law and not the conflict
of law provisions of the State of New Hampshire.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement as of the date first mentioned above.
ENERGYNORTH, INC.
BY:/s/ Edward T. Borer
-------------------------------
EDWARD T. BORER
Chairman - Board of Directors
/s/ Michelle. L. Chicoine
-------------------------------
MICHELLE L. CHICOINE
July 14, 1999
Robert R. Giordano
12 Cobbler Lane
Bedford, New Hampshire 03110
Re: Amended and Restated Management Continuity Agreement
----------------------------------------------------
Dear Mr. Giordano:
The Board of Directors (the "Board") of EnergyNorth, Inc.
(the "Company") recognizes that, as is the case with many
publicly held corporations, there always exists the possibility
of a change of control of the Company. This possibility and the
uncertainty it creates may result in the loss or distraction of
members of management of the Company and its subsidiaries to the
detriment of the Company and its shareholders.
The Board considers the establishment, maintenance, and
continuity of a sound and vital management to be essential to
protecting and enhancing the best interests of the Company and
its shareholders. The Board also believes that when a change of
control is perceived as imminent, or is occurring, the Board
should be able to receive and rely on disinterested advice from
management regarding the best interests of the Company and its
shareholders without concern that members of management might be
distracted or concerned by the personal uncertainties and risks
created by the perception of an imminent or occurring change of
control.
Accordingly, the Board has determined that appropriate steps
should be taken to assure the Company of the continued employment
and attention and dedication to duty of certain members of
management of the Company and to ensure the availability of their
disinterested advice, notwithstanding the possibility, threat or
occurrence of a change of control.
In addition, the Board and you have agreed to amend and
restate the provisions of that certain Management Continuity
Agreement dated November 20, 1998 (the "Original MCA").
Therefore, in order to fulfill the above purposes, the Board
and you have agreed as set forth below.
<PAGE>
1. Offer. In order to induce you to remain in the employ of
-----
the Company and to provide continued services to the Company now
and in the event that a change of control is imminent or
occurring, this amended and restated letter agreement (the
"Agreement") sets forth severance benefits which the Company
offers to pay to you in the event of a termination of your
employment (as described in Section 5 below, excluding a
termination for Cause, disability, death or retirement)
subsequent to a Change of Control of the Company (as defined in
Section 4 below).
2. Operation. This Agreement shall be deemed to be
---------
effective as of the date of the Original MCA (the "Effective
Date") but, anything in this Agreement to the contrary
notwithstanding, neither this Agreement nor any of its provisions
shall be operative unless and until there has been a Change of
Control while you are still an employee of the Company, nor shall
this Agreement govern or affect your employment relationship with
the Company except as explicitly set forth herein. Upon a Change
of Control, if you are still employed by the Company, this
Agreement and all of its provisions shall become operative
immediately. If your employment relationship with the Company is
terminated before a Change of Control, you shall have no rights
or obligations under this Agreement.
3. Term.
----
a. Term of Agreement. This Agreement, and all rights
-----------------
and obligations of the parties hereunder, shall take effect upon
the Effective Date and shall expire upon the first to occur of
(a) the expiration of the Term (as defined below) if a Change of
Control has not occurred during the Term, (b) the date 36 months
after the Change of Control Date, if the Executive is still
employed by the Company as of such later date, or (c) the
fulfillment by the Company of all of its obligations under this
Agreement if the Executive's employment with the Company
terminates within 36 months following the Change of Control Date.
"Term" shall mean the period commencing as of the Effective Date
and continuing in effect through December 1, 2001.
b. One-Year Evergreen Provision. This Agreement shall be
----------------------------
reviewed annually by the Board at its meeting held for the review
of compensation and in all events prior to December 1 of each
year. At such yearly review, the Board shall consider whether or
not to extend the Term for an additional year. Unless the Board
affirmatively votes not to extend this Agreement, the Term shall
be extended for a
<PAGE>
period of one year from the previous termination date. In the
event the Board votes not to extend this Agreement, the termination
date of this Agreement shall be the later of sixty months from the
effective date of this Agreement or sixty months from December 1st
of the year in which this Agreement was last extended.
4. Change of Control: For the purpose of this Agreement, a
-----------------
"Change of Control" shall mean:
(a) The acquisition by an individual, entity or group
[within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")]
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly
from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), (ii) any acquisition by the
Company, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any acquisition by
any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (i), (ii) and
(iii) of Section 4(c) are satisfied; or
(b) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
<PAGE>
proxies or consents by or on behalf of a Person other than the
Board; or
(c) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (i) more
than 60% of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger or
consolidation and any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly
or indirectly, 20% or more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities, as the case may
be) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of
the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(d) Approval by the shareholders of the Company of (i)
a complete liquidation or dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect
to which following such sale or other disposition, (A) more than
60% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
<PAGE>
generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding the Company and any employee benefit plan (or
related trust) of the Company or such corporation and any Person
beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (C) at least a majority of the members of the board
of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition
of assets of the Company.
5. Severance Benefit.
-----------------
a. Severance Benefits. If, within three years after a
------------------
Change of Control (as defined above) of the Company, you are
discharged without Cause or resign for Good Reason (as defined
below), the Company shall:
(i) pay to you within ten business days following
the Date of Termination (as defined below) a lump sum severance
benefit equal to (A) the greater of three times (1) your annual
salary, including deferrals, as in effect immediately prior to
the Change of Control, or (2) your annual salary including
deferrals, as in effect on the Date of Termination, plus (B) the
greater of (1) three times the average of the prior three years'
annual incentive compensation award earned by you under the
EnergyNorth, Inc. Key Employee Performance and Equity Incentive
Plan (the "Incentive Plan") or (2) three times your "target"
level of incentive compensation, for the year in which the Date
of Termination falls, under the Incentive Plan, plus (C) interest
on any delayed payment at the rate of 150% of the Prime
<PAGE>
Rate as posted by BankBoston or any successor entity thereto;
(ii) pay to you within ten business days following
the Date of Termination an additional lump sum severance benefit
equal to the amount of the annual incentive compensation award,
at the "target" level of incentive compensation for the year in
which the Date of Termination falls, under the Incentive Plan,
multiplied by a fraction, the numerator of which shall be the
number of days in the Incentive Plan Year in which the Date of
Termination takes place through and including the Date of
Termination, and the denominator of which shall be 365, plus
interest on any delayed payment at the rate of 150% of the Prime
Rate as posted by BankBoston or any successor entity thereto;
(iii) to pay you within ten business days
following the Date of Termination an additional lump sum cash
amount equal to the present value of the excess of (a) the
aggregate benefit that would have been paid under the
EnergyNorth, Inc. Retirement Plan for Salaried Employees and the
EnergyNorth, Inc. Supplemental Executive Retirement Plan (the
"Retirement Plans") as in effect on the date of this Agreement,
if you had continued to be employed and to be entitled to service
credit for eligibility and benefit purposes during, and had
terminated on the last day of ("Deemed Termination Date") the
36-month period immediately following the actual Date of
Termination, over (b) the aggregate benefit actually payable
under the Retirement Plans and any successor retirement program
of the Company. For purposes of such calculation, the following
assumptions shall apply: (1) that you would continue to be
compensated during the 36-month period following termination at
annual rate of compensation equal to that used to calculate the
payments provided by 5(a)(i) above, calculated on the basis of
the compensation amount used in the benefit formula under the
Retirement Plans; (2) that you are fully vested and entitled to
receive a benefit under the Retirement Plans if age and service
requirements (based on the age on, and assumed service you would
have earned up to, the Deemed Termination Date) satisfy the
requirements for benefit payments thereunder at any time; and (3)
that the aggregate benefit that would have been paid under the
Retirement Plans is as of either the normal or early retirement
date for which you would have qualified, if you were still
employed on that date, whichever would produce the highest
present value amount payable under this Section 5(a)(iii); and
(iv) continue to provide to you, for the
thirty-six month period following
<PAGE>
the Date of Termination, all health, dental, vision and life
insurance benefits ("Welfare Benefits") pursuant to any and all
qualified and non-qualified employee benefit plans in which you
were a participant on the Date of Termination, as if you continued
to be employed by the Company during such thirty-six month period.
Any and all Welfare Benefits based on or with reference to your
base salary shall be calculated based upon the compensation
determined pursuant to Section 5(a)(i), and to the extent that
any such Welfare Benefits shall not be payable or provided to
you under any plan, the Company shall pay or provide such Welfare
Benefits to you on an individual basis. If the Company for any
reason is unable to continue the Welfare Benefits on an individual
basis, then the Company shall pay to you within ten business days
following the Date of Termination a lump sum cash amount equal to
the present value of the Welfare Benefits; and
(v) except to the extent prohibited under either
of the Retirement Plans, allow you at any time during the ninety
day period commencing on the Date of Termination, to retire as an
employee of the Company under the Retirement Plans and under the
policies that apply to retired employees entitling them to post-
retirement healthcare and life insurance benefits and deem the
period commencing on the Date of Termination and ending on the
date of your retirement not to constitute a break in service with
respect to the Retirement Plans, provided that you have satisfied
the age and length-of-service requirements set forth in the
Retirement Plans.
b. Good Reason. If any of the following events occurs
-----------
within three years after a Change of Control, you may voluntarily
terminate your employment for "Good Reason" within 30 days of the
occurrence of such event and be entitled to the severance
benefits set forth in Section 5 (a) above:
(i) the Company assigns any duties to you which are
inconsistent with your position, duties, offices, titles,
responsibilities, reporting requirements or status with the
Company immediately prior to a Change of Control; or
(ii) the Company reduces your base salary, including
deferrals, as in effect immediately prior to a Change of Control;
or
(iii) the Company discontinues any bonus or other
compensation plans or any other benefit, stock ownership plan,
stock purchase plan, stock option plan, life insurance plan,
<PAGE>
health plan, disability plan or similar plan (as the same existed
immediately prior to the Change of Control) in which you
participated or were eligible to participate in immediately prior
to the Change of Control and in lieu thereof does not make
available plans providing at least comparable benefits; or
(iv) the Company takes action which adversely affects
your participation in, or eligibility for, or materially reduces
your benefits under, any of the plans described in (3) above, or
which deprives you of any material fringe benefit enjoyed by you
immediately prior to the Change of Control, or fails to provide
you with the number of paid vacation days to which you were
entitled in accordance with normal vacation policy immediately
prior to the Change of Control; or
(v) the Company requires you to be based at any office
or location other than one within a 50-mile radius of the
boundaries of EnergyNorth Natural Gas, Inc.'s franchise territory
as such boundaries existed immediately prior to the Change in
Control; or
(vi) the Company purports to terminate your employment
otherwise than as expressly permitted by this Agreement; or
(vii) the Company fails to comply with and satisfy
Section 7, provided that such successor has received at least ten
days prior written notice from the Company or from you of the
requirements of Section 7.
You shall have the sole right to determine, in good faith,
whether any of the above events has occurred. Anything in this
Agreement to the contrary notwithstanding, a termination of
employment by you for any reason during the 30-day period
immediately following the first anniversary of a Change of
Control ("Window Period") shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
c. Cause. Cause shall mean:
-----
(i) conviction of a felony or crime involving an act
of moral turpitude, dishonesty or misfeasance, in each case that
substantially interferes with the orderly business of the Company
or any of its subsidiaries, (ii) refusal of the Executive to
follow or material neglect by Executive of reasonable requests of
the Company made pursuant to this Agreement (other than any such
refusal or neglect resulting from incapacity due to physical or
mental illness (each a "Disability") or any such failure
<PAGE>
or refusal after the Executive gives notice of termination for Good
Reason (as defined in Section 5(b)), and (iii) willfully engaging
in conduct that substantially interferes with or damages the
standing or reputation of the Company or any of its subsidiaries;
provided, however, no termination for Cause pursuant to either
clause (ii) or (iii) hereof shall be effective unless the Company
shall have first provided the Executive (A) 30 days written
notice in the manner contemplated by Section 9 setting forth in
reasonable detail the Company's basis for such termination,
including the manner in which the Board believes the Executive
has not substantially performed his duties and (B) an opportunity
to cure any deficiencies noted by the Company in such notice that
Executive shall not have reasonably addressed and if so
reasonably addressed, shall be deemed cured prior to the
expiration of such 30-day period (the "For Cause Termination
Date"). In the event of an effective termination of employment
for Cause, this Agreement and all of the rights and obligations
of the parties hereto shall forthwith terminate, except where
this Agreement expressly provides that any provisions survive
termination of this Agreement.
For purposes of this Section 5(c), no act or failure to act
by the Executive shall be considered "willful" unless it is done,
or omitted to be done, in bad faith and without reasonable belief
that the Executive's action or omission was in the best interests
of the Company. The Company and you acknowledge and agree that
any termination resulting from incapacity of the Executive due to
the Disability shall be deemed to be a termination without Cause.
d. Notice of Termination. Any termination by the Company
---------------------
(other than a termination for Cause pursuant to Section 5(c)), or
by you for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with
Section 9. For purposes of this Agreement, a "Notice of
Termination means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated
and (iii) if the Date of Termination (as defined below) is other
than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 15 days after
the giving of such notice).
<PAGE>
e. Date of Termination. "Date of Termination" means (i)
-------------------
if your employment is terminated by the Company for Cause the For
Cause Termination Date as specified in the notice provided
pursuant to Section 5(c), (ii) if your employment is terminated
by you for Good Reason, the date of receipt of the Notice of
Termination or any later date specified therein, as the case may
be, (iii) if your employment is terminated by the Company other
than for Cause, death or disability, the Date of Termination
shall be the date on which the Company notifies you of such
termination and (D) if your employment is terminated by reason of
death or disability, the Date of Termination shall be the date of
your death or the date you are determined to have a disability
under any long-term disability policy of the Company which covers
you, or, if none, as defined in the EnergyNorth, Inc. Retirement
Plan for Salaried Employees, as the case may be.
f. Other Benefits Payable. The severance benefit
----------------------
described in Section 5(a) above shall be payable in addition to,
and not in lieu of, all other accrued or vested or earned by
deferred compensation, rights, options or other benefits which
may be owed to you following discharge or resignation (and
whether or not contingent on any Change of Control preceding such
termination), including but not limited to accrued vacation or
sick pay, amounts or benefits payable, if any, under any bonus or
other compensation plans, stock option plan, stock ownership
plan, stock purchase plan, life insurance plan, health plan,
disability plan or similar plan.
g. Excise Tax Make-Whole. In the event it shall be
---------------------
determined that any payment or distribution by the Company to you
or for your benefit, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") (or any successor thereto) or comparable
state or local tax or any interest or penalties with respect to
such excise tax or comparable state or local tax (such excise
tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then
you shall be entitled to receive an additional payment (a
"Gross-Up Payment"). The Gross-Up Payment shall be equal to the
sum of the Excise Tax with respect to the Payment and all taxes
(including any interest or penalties imposed with respect to such
taxes) imposed on (or economically borne by) you (including the
Excise Tax, state and
<PAGE>
federal income taxes and all applicable withholding taxes)
attributable to the receipt of the Gross-Up Payment. For
purposes of the preceding sentence, all taxes attributable
to the receipt by you of a Gross-Up Payment shall be
computed assuming the application of the maximum tax rates
provided by law.
If the Company determines that it is required to withhold
any Excise Tax or report that any Excise Tax is due, or if the
Company otherwise determines that any Gross-Up Payment is
required, it shall promptly pay such Gross-Up Payment (net of
applicable wage withholding).
If you determine that a Gross-Up Payment is required, you
shall so notify the Company in writing, specifying the amount of
Gross-Up Payment required and details as to the calculation
thereof. The Company shall, within 30 days, either pay such
Gross-Up Payment (net of applicable wage withholding) to you or
furnish an unqualified opinion from Independent Tax Counsel (as
defined below), addressed to you and the Company, that there is
substantial authority (within the meaning of Section 6661 of the
Code) for the position that no Gross-Up Payment is required. In
that event the Company shall not withhold any amount of Excise
Tax or take any other action which is inconsistent with such
opinion of counsel. "Independent Tax Counsel" means a lawyer with
expertise in the area of executive compensation tax law, who
shall be selected by you and shall be reasonably acceptable to
the Company, and whose fees and disbursements shall be paid by
the Company.
If the Internal Revenue Service or other tax authority
proposes in writing an adjustment to your income tax that would
result in a Gross-Up Payment, you shall promptly notify the
Company in writing and shall refrain for at least thirty days
after giving such notice, if so permitted by law, from paying any
tax (including interest, penalties and additions to tax) asserted
to be payable as a result of such proposed adjustment. Before the
expiration of such period, the Company shall either pay the
Gross-Up Payment or provide an opinion from Independent Tax
Counsel to you and the Company as to whether it is more likely
than not that the proposed adjustment would be successfully
challenged if the matter were to be litigated. If the opinion
provides that a challenge would be more likely than not to be
successful if the issue were litigated, and the Company requests
in writing that you contest such proposed adjustment, then you
shall contest the proposed adjustment and shall consult in good
faith with the Company with respect to the nature of all action
to be taken in furtherance of the contest of such
<PAGE>
proposed adjustment; provided that you, after such consultation
with the Company, shall determine in your sole discretion the
nature of all action to be taken to contest such proposed adjustment,
including (a) whether any such action shall initially be by way
of judicial or administrative proceedings, or both, (b) whether
any such proposed adjustment shall be contested by resisting
payment thereof or by paying the same and seeking a refund
thereof, and (c) if you shall undertake judicial action with
respect to such proposed adjustment, the court or other judicial
body before which such action shall be commenced and the court or
other judicial body to which any appeals should be taken. You
agree to take appropriate appeals of any judicial decision that
would require the Company to pay a Gross-Up Payment, provided the
Company requests in writing that you do so and provides an
opinion from Independent Tax Counsel to you and the Company that
it is more likely than not that the appeal would be successful.
You further agree to settle, compromise or otherwise terminate a
contest with the Internal Revenue Service or other tax authority
with respect to all or a portion of the proposed adjustment
giving rise to the Gross-Up Payment, if requested by the Company
in writing to do so at any time, in which case you shall be
entitled to receive from the Company the Gross-Up Payment. In no
event shall you compromise or settle all or any portion of a
proposed adjustment which would result in a Gross-Up Payment
without the written consent of the Company.
You shall not be required to take or continue any action
pursuant to this Section 5(g) unless the Company acknowledges its
liability under this Agreement in the event that the Internal
Revenue Service or other tax authority prevails in the contest
and timely makes the payments required by this paragraph. The
Company hereby agrees to indemnify you in a manner reasonably
satisfactory to you for any fees, expenses, penalties, interest
or additions to tax which you may incur as a result of contesting
the validity of any Excise Tax and to pay you promptly upon
receipt from time to time of a written demand therefor all costs
and expenses which you may incur in connection with contesting
such proposed adjustment (including reasonable fees and
disbursements of Independent Tax Counsel); provided, however,
that the Company shall not be required to reimburse any amount of
tax which you are required to pay to permit your institution of a
claim for refund under this Section 5(g).
If you shall have contested any proposed adjustment as above
provided, and for so
<PAGE>
long as you shall be required under the terms of this Section
5(g) to continue such contest, the Company shall not be required to
pay a Gross-Up Payment until there occurs a Final Determination
(as defined below) of your liability for the tax and any interest,
penalties and additions to tax asserted to be payable as a result
of such proposed adjustment. A "Final Determination" shall mean (A)
a decision, judgment, decree or other order by any court of
competent jurisdiction, which decision, judgment, decree or other
order has become final after all allowable appeals by either party
to the action have been exhausted, the time for filing such appeal
has expired or you have no right under the terms thereof to request
an appeal, (B) a closing agreement entered into under Section 7121
of the Code or any other settlement agreement entered into in connection
with an administrative or judicial proceeding and with your consent,
or (C) the expiration of the time for instituting a claim for
refund, or if such a claim was filed, the expiration of the time
for instituting suit with respect thereto.
In the event you receive any refund from the Internal
Revenue Service or other tax authority on account of an
overpayment of Excise Tax, such amount shall be promptly paid by
you to the Company.
h. Payment Obligations Absolute. Upon a Change of Control
----------------------------
the Company's obligations to pay the severance benefits or make
any other payments described in this Section 5 shall be absolute
and unconditional and shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company or any of
its subsidiaries may have against you or anyone else. You shall
not be required to mitigate the amount of any payment or benefits
provided for by this Section 5 by seeking other employment, and
if you do accept other employment, any payment or benefits
hereunder shall not be reduced by any compensation earned or
other benefits received by you as a result of such employment.
i. Legal Fees and Expenses. Subject to and contingent
-----------------------
upon the occurrence of a Change of Control the Company agrees to
pay promptly as incurred, to the full extent permitted by law,
all legal fees and expenses which you may reasonably thereafter
incur as a result of any contest, litigation or arbitration
(regardless of the outcome thereof) by the Company, you or others
of the validity or enforceability of, or liability under, any
provision of this Agreement (including any contest by you about
<PAGE>
the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the rate of l50% of
the Prime Rate posted by the BankBoston or any successor entity
thereto.
j. Retirement. If your employment is terminated due to
----------
retirement, you shall not be entitled to severance benefits under
this Agreement, regardless of the occurrence of a Change of
Control. A termination by retirement shall have occurred where
your termination is caused by the fact that you have reached
normal retirement age for employees in your position.
k. Notwithstanding anything contained herein to the
contrary, in the event that prior to a Change of Control (i) the
Company terminates your employment without Cause or (ii) you
terminate your employment for Good Reason, in each case in
connection with or in anticipation of a Change of Control,
including at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control, you shall be
entitled to the severance benefits provided by Section 5 as if
such termination had occurred immediately following such Change
of Control.
6. Assignability. This Agreement is binding on and is for the
-------------
benefit of the parties hereto and their respective successors,
heirs, executors, administrators and other legal representatives.
Neither this Agreement nor any right or obligation hereunder may
be assigned by the Company (except to any subsidiary or
affiliate) or by you.
7. Successor. The Company shall require any successor
---------
(whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform. As used in this Agreement,
"Company" shall mean the company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law,
or otherwise.
8. Amendment; Waiver. This Agreement may be amended only
-----------------
by an instrument in writing signed by the parties hereto, and any
provision hereof may be waived only by an instrument in writing
signed by the party or parties against whom or which enforcement
of such waiver is sought. The failure of either party hereto at
any time to require the performance by the other party hereto of
any provision hereof shall in no way affect the full right to
require such performance at any time thereafter,
<PAGE>
nor shall the waiver by either party hereto of a breach of any provision
hereof be taken or held to be waiver of any succeeding breach of such
provision or a waiver of the provision itself or a waiver of any
other provision of this Agreement.
9. Notices. All notices and other communications
-------
hereunder shall be in writing and shall be given by hand delivery
to the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to you:
Robert R. Giordano
Cobbler lane
Bedford, NH 03110
If to the Company:
Director of Human Resources
EnergyNorth, Inc.
1260 Elm Street
P.O. Box 329
Manchester, NH 03105-0329
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
10. Validity. The invalidity or unenforceability of any
--------
provision or provisions of this Agreement shall not affect the
validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect, nor shall
the invalidity or unenforceability of a portion of any provision
of this Agreement affect the validity or enforceability of the
balance of such provision. If any provision of this Agreement, or
portion thereof is so broad, in scope or duration, as to be
unenforceable, such provision or portion thereof shall be
interpreted to be only so broad as is enforceable.
11. 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 Chapter 542. Judgment upon
the award may be entered in any court of competent jurisdiction.
<PAGE>
12. Withholding. The Company may withhold from any amounts
-----------
payable under this Agreement such Federal, state or local taxes
as shall be permitted to be withheld pursuant to any applicable
law or regulation. The Company may withhold such other amounts as
may be permitted by law.
13. Entire Agreement. This Agreement contains the entire
----------------
understanding of the Company and you with respect to the subject
matter hereof.
14. Applicable Law. This Agreement shall be governed by
--------------
and construed in accordance with the substantive internal law and
not the conflict of law provisions of the State of New Hampshire.
If the terms of the foregoing Agreement are acceptable to
you, please sign and return to the Company the enclosed copy of
this Agreement whereupon this Agreement shall become a valid and
legally binding contract between you and the Company.
Very truly yours,
ENERGYNORTH, INC.
By:________________________________
Edward T. Borer
Chairman, Board of Directors
Accepted and Agreed as of the date
first above written:
____________________________________
Robert R. Giordano
Z:\LaCascia_Michael\109026.117\mca_rrgf.doc
July 14, 1999
Michelle L. Chicoine
8 Boxwood Road
Bedford, New Hampshire 03110
Re: Amended and Restated Management Continuity Agreement
----------------------------------------------------
Dear Ms. Chicoine:
The Board of Directors (the "Board") of EnergyNorth, Inc.
(the "Company") recognizes that, as is the case with many
publicly held corporations, there always exists the possibility
of a change of control of the Company. This possibility and the
uncertainty it creates may result in the loss or distraction of
members of management of the Company and its subsidiaries to the
detriment of the Company and its shareholders.
The Board considers the establishment, maintenance, and
continuity of a sound and vital management to be essential to
protecting and enhancing the best interests of the Company and
its shareholders. The Board also believes that when a change of
control is perceived as imminent, or is occurring, the Board
should be able to receive and rely on disinterested advice from
management regarding the best interests of the Company and its
shareholders without concern that members of management might be
distracted or concerned by the personal uncertainties and risks
created by the perception of an imminent or occurring change of
control.
Accordingly, the Board has determined that appropriate steps
should be taken to assure the Company of the continued employment
and attention and dedication to duty of certain members of
management of the Company and to ensure the availability of their
disinterested advice, notwithstanding the possibility, threat or
occurrence of a change of control.
<PAGE>
In addition, the Board and you have agreed to amend and
restate the provisions of that certain Management Continuity
Agreement dated December 2, 1996 (the "Original MCA").
Therefore, in order to fulfill the above purposes, the Board
and you have agreed as set forth below.
1. Offer. In order to induce you to remain in the employ
-----
of the Company and to provide continued services to the Company
now and in the event that a change of control is imminent or
occurring, this amended and restated letter agreement (the
"Agreement") sets forth severance benefits which the Company
offers to pay to you in the event of a termination of your
employment (as described in Section 5 below, excluding a
termination for Cause, disability, death or retirement)
subsequent to a Change of Control of the Company (as defined in
Section 4 below).
2. Operation. This Agreement shall be deemed to be
---------
effective as of the date of the Original MCA (the "Effective
Date") but, anything in this Agreement to the contrary
notwithstanding, neither this Agreement nor any of its provisions
shall be operative unless and until there has been a Change of
Control while you are still an employee of the Company, nor shall
this Agreement govern or affect your employment relationship with
the Company except as explicitly set forth herein. Upon a Change
of Control, if you are still employed by the Company, this
Agreement and all of its provisions shall become operative
immediately. If your employment relationship with the Company is
terminated before a Change of Control, you shall have no rights
or obligations under this Agreement.
3. Term.
----
(a) Term of Agreement. This Agreement, and all
rights and obligations of the parties hereunder, shall take
effect upon the Effective Date and shall expire upon the first to
<PAGE>
occur of (i) the expiration of the Term (as defined below) if a
Change of Control has not occurred during the Term, (ii) the date
24 months after the Change of Control Date, if the Executive is
still employed by the Company as of such later date, or (iii) the
fulfillment by the Company of all of its obligations under this
Agreement if the Executive's employment with the Company
terminates within 24 months following the Change of Control Date.
"Term" shall mean the period commencing as of the Effective Date
and continuing in effect through December 1, 1998.
(b) One-Year Evergreen Provision. This Agreement
----------------------------
shall be reviewed annually by the Board at its meeting held for
the review of compensation and in all events prior to December 1
of each year. At such yearly review, the Board shall consider
whether or not to extend the Term for an additional year. Unless
the Board affirmatively votes not to extend this Agreement, the
Term shall be extended for a period of one year from the previous
termination date. In the event the Board votes not to extend this
Agreement, the termination date of this Agreement shall be the
later of twenty-four months from the effective date of this
Agreement or twenty-four months from December 1st of the year in
which this Agreement was last extended.
4. Change of Control. For the purpose of this Agreement,
-----------------
a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group
[within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")]
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the
<PAGE>
election of directors (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from
the Company (excluding an acquisition by virtue of the exercise
of a conversion privilege), (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (iv) any acquisition by any
corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (i), (ii) and
(iii) of Section 4 (c) are satisfied; or
(b) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board; or
(c) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (i) more
than 60% of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the
<PAGE>
election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger or
consolidation and any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly
or indirectly, 20% or more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities, as the case may
be) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or
consolidation were members of the Incumbent Board at the time of
the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(d) Approval by the shareholders of the Company of (i)
a complete liquidation or dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect
to which following such sale or other disposition, (A) more than
60% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting
<PAGE>
securities of such corporation entitled to vote generally
in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding the Company and any employee benefit plan (or
related trust) of the Company or such corporation and any Person
beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (C) at least a majority of the members of the board
of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition
of assets of the Company.
5. Severance Benefit.
-----------------
(a) Severance Benefits. If, within two years after a
------------------
Change of Control (as defined above) of the Company, you are
discharged without Cause or resign for Good Reason (as defined
below), the Company shall:
(i) pay to you within ten business days following
the Date of Termination (as defined below) a lump sum severance
benefit equal to (A) the greater of three times (1) your annual
salary, including deferrals, as in effect immediately prior to
the Change of
<PAGE>
Control, or (2) your annual salary including deferrals,
as in effect on the Date of Termination, plus (B) the
greater of (1) three times the average of the prior three years'
annual incentive compensation award earned by you under the
EnergyNorth, Inc. Key Employee Performance and Equity Incentive
Plan (the "Incentive Plan") or (2) three times your "target"
level of incentive compensation, for the year in which the Date
of Termination falls, under the Incentive Plan, plus (C) interest
on any delayed payment at the rate of 150% of the Prime Rate as
posted by BankBoston or any successor entity thereto;
(ii) pay to you within ten business days following
the Date of Termination an additional lump sum severance benefit
equal to the amount of the annual incentive compensation award,
at the "target" level of incentive compensation for the year in
which the Date of Termination falls, under the Incentive Plan,
multiplied by a fraction, the numerator of which shall be the
number of days in the Incentive Plan Year in which the Date of
Termination takes place through and including the Date of
Termination, and the denominator of which shall be 365, plus
interest on any delayed payment at the rate of 150% of the Prime
Rate as posted by BankBoston or any successor entity thereto; and
(iii) continue to provide to you, for the
thirty-six month period following the Date of Termination, all
health, dental, vision and life insurance benefits ("Welfare
Benefits") pursuant to any and all qualified and non-qualified
employee benefit plans in which you were a participant on the
Date of Termination, as if you continued to be employed by the
Company during such thirty-six month period. Any and all Welfare
Benefits based on or with reference to your base salary shall be
calculated based upon the compensation determined pursuant to
Section 5(a)(i), and to the extent that any such Welfare Benefits
shall not be payable or provided to you under any plan, the
Company shall pay or provide such Welfare Benefits to
<PAGE>
you on an individual basis. If the Company for any reason is
unable to continue the Welfare Benefits on an individual basis,
then the Company shall pay to you within ten business days following
the Date of Termination a lump sum cash amount equal to the present
value of the Welfare Benefits.
(b) Good Reason. If any of the following events
-----------
occurs within two years after a Change of Control, you may
voluntarily terminate your employment for "Good Reason" within 30
days of the occurrence of such event and be entitled to the
severance benefits set forth in Section 5 above:
(i) the Company assigns any duties to you which
are inconsistent with your position, duties, offices, titles,
responsibilities, reporting requirements or status with the
Company immediately prior to a Change of Control; or
(ii) the Company reduces your base salary,
including deferrals, as in effect immediately prior to a Change
of Control; or
(iii) the Company discontinues any bonus or
other compensation plans or any other benefit, stock ownership
plan, stock purchase plan, stock option plan, life insurance
plan, health plan, disability plan or similar plan (as the same
existed immediately prior to the Change of Control) in which you
participated or were eligible to participate in immediately prior
to the Change of Control and in lieu thereof does not make
available plans providing at least comparable benefits; or
(iv) the Company takes action which adversely
affects your participation in, or eligibility for, or materially
reduces your benefits under, any of the plans described in (3)
above, or which deprives you of any material fringe benefit
enjoyed by you immediately prior to the Change of Control, or
fails to provide you with the number of paid
<PAGE>
vacation days to which you were entitled in accordance with
normal vacation policy immediately prior to the Change of Control; or
(v) the Company requires you to be based at any
office or location other than one within a 50-mile radius of the
boundaries of EnergyNorth Natural Gas, Inc.'s Franchise territory
as such boundaries existed immediately prior to the Change in
Control; or
(vi) the Company purports to terminate your
employment otherwise than as expressly permitted by this
Agreement; or
(vii) the Company fails to comply with and
satisfy Section 7, provided that such successor has received at
least ten days prior written notice from the Company or from you
of the requirements of Section 7.
You shall have the sole right to determine, in good faith,
whether any of the above events has occurred. Anything in this
Agreement to the contrary notwithstanding, a termination of
employment by you for any reason during the 30-day period
immediately following the first anniversary of a Change of
Control ("Window Period") shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
(c) Cause. Cause shall mean: (i) conviction of a
-----
felony or crime involving an act of moral turpitude, dishonesty
or misfeasance, in each case that substantially interferes with
the orderly business of the Company or any of its subsidiaries,
(ii) refusal of the Executive to follow or material neglect by
the Executive of reasonable requests of the Company made pursuant
to this Agreement (other than any such refusal or neglect
resulting from incapacity due to physical or mental illness (each
a "Disability") or any such failure or refusal after the
Executive gives notice of termination for Good Reason (as defined
in Section 5(b)) , and (iii) willfully engaging in conduct that
substantially interferes with or damages the standing or
<PAGE>
reputation of the Company or any of its subsidiaries; provided,
however, no termination for Cause pursuant to either clause (ii)
or (iii) hereof shall be effective unless the Company shall have
first provided the Executive (A) 30 days written notice in the
manner contemplated by Section 9 setting forth in reasonable
detail the Company's basis for such termination, including the
manner in which the Board believes the Executive has not
substantially performed his duties and (B) an opportunity to cure
any deficiencies noted by the Company in such notice that
Executive shall not have reasonably addressed (and if so
reasonably addressed, shall be deemed cured) prior to the
expiration of such 30-day period (the "For Cause Termination
Date"). In the event of an effective termination of employment
for Cause, this Agreement and all of the rights and obligations
of the parties hereto shall forthwith terminate, except where
this Agreement expressly provides that any provisions survive
termination of this Agreement.
For purposes of this Section 5(c), no act or failure to act
by the Executive shall be considered "willful" unless it is done,
or omitted to be done, in bad faith and without reasonable belief
that the Executive's action or omission was in the best interests
of the Company. The Company and you acknowledge and agree that
any termination resulting from incapacity of the Executive due to
Disability shall be deemed a termination without Cause.
(d) Notice of Termination. Any termination by the
---------------------
Company (other than a termination for Cause pursuant to Section
5(c)), or by you for Good Reason, shall be communicated by Notice
of Termination to the other party hereto given in accordance with
Section 9. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated
and (iii) if the Date of
<PAGE>
Termination (as defined below) is other than the date of receipt
of such notice, specifies the termination date (which date shall
be not more than 15 days after the giving of such notice).
(e) Date of Termination. "Date of Termination" means
-------------------
(i) if your employment is terminated by the Company for Cause,
the For Cause Termination Date as specified in the notice
provided pursuant to Section 5(c), (ii) if your employment is
terminated by you for Good Reason, the date of receipt of the
Notice of Termination or any later date specified therein, as the
case may be, (iii) if your employment is terminated by the
Company other than for Cause, death or disability, the Date of
Termination shall be the date on which the Company notifies you
of such termination and (iv) if your employment is terminated by
reason of death or disability, the Date of Termination shall be
the date of your death or the date you are determined to have a
disability under any long-term disability policy of the Company
which covers you, or, if none, as defined in the EnergyNorth,
Inc. Retirement Plan for Salaried Employees, as the case may be.
(f) Other Benefits Payable. The severance benefit
----------------------
described in Section 5(a) above shall be payable in addition to,
and not in lieu of, all other accrued or vested or earned by
deferred compensation, rights, options or other benefits which
may be owed to you following discharge or resignation (and
whether or not contingent on any Change of Control preceding such
termination), including but not limited to accrued vacation or
sick pay, amounts or benefits payable, if any, under any bonus or
other compensation plans, stock option plan, stock ownership
plan, stock purchase plan, life insurance plan, health plan,
disability plan or similar plan.
(g) Excise Tax Make-Whole. In the event it shall be
---------------------
determined that any payment or distribution by the Company to you
or for your benefit, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"),
<PAGE>
would be subject to the excise tax imposed by Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code")
(or any successor thereto) or comparable state or local tax
or any interest or penalties with respect to such excise
tax or comparable state or local tax (such excise tax,
together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then you
shall be entitled to receive an additional payment (a
"Gross-Up Payment"). The Gross-Up Payment shall be equal to the
sum of the Excise Tax with respect to the Payment and all taxes
(including any interest or penalties imposed with respect to such
taxes) imposed on (or economically borne by) you (including the
Excise Tax, state and federal income taxes and all applicable
withholding taxes) attributable to the Gross-Up Payment. For
purposes of the preceding sentence, all taxes attributable to the
receipt by you of a Gross-Up Payment shall be computed assuming
the application of the maximum tax rates provided by law.
If the Company determines that it is required to withhold
any Excise Tax or report that any Excise Tax is due, or if the
Company otherwise determines that any Gross-Up Payment is
required, it shall promptly pay such Gross-Up Payment (net of
applicable wage withholding). If you determine that a Gross-Up
Payment is required, you shall so notify the Company in writing,
specifying the amount of Gross-Up Payment required and details as
to the calculation thereof. The Company shall, within 30 days,
either pay such Gross-Up Payment (net of applicable wage
withholding) to you or furnish an unqualified opinion from
Independent Tax Counsel (as defined below), addressed to you and
the Company, that there is substantial authority (within the
meaning of Section 6661 of the Code) for the position that no
Gross-Up Payment is required. In that event the Company shall not
withhold any amount of Excise Tax or take any other action which
is inconsistent with such opinion of counsel. "Independent Tax
Counsel" means a lawyer with expertise in the area of executive
compensation tax law, who shall be selected by you and
<PAGE>
shall be reasonably acceptable to the Company, and whose fees
and disbursements shall be paid by the Company.
If the Internal Revenue Service or other tax authority
proposes in writing an adjustment to your income tax that would
result in a Gross-Up Payment, you shall promptly notify the
Company in writing and shall refrain for at least thirty days
after giving such notice, if so permitted by law, from paying any
tax (including interest, penalties and additions to tax) asserted
to be payable as a result of such proposed adjustment. Before the
expiration of such period, the Company shall either pay the
Gross-Up Payment or provide an opinion from Independent Tax
Counsel to you and the Company as to whether it is more likely
than not that the proposed adjustment would be successfully
challenged if the matter were to be litigated. If the opinion
provides that a challenge would be more likely than not to be
successful if the issue were litigated, and the Company requests
in writing that you contest such proposed adjustment, then you
shall contest the proposed adjustment and shall consult in good
faith with the Company with respect to the nature of all action
to be taken in furtherance of the contest of such proposed
adjustment; provided that you, after such consultation with the
Company, shall determine in your sole discretion the nature of
all action to be taken to contest such proposed adjustment,
including (a) whether any such action shall initially be by way
of judicial or administrative proceedings, or both, (ii) whether
any such proposed adjustment shall be contested by resisting
payment thereof or by paying the same and seeking a refund
thereof, and (iii) if you shall undertake judicial action with
respect to such proposed adjustment, the court or other judicial
body before which such action shall be commenced and the court or
other judicial body to which any appeals should be taken. You
agree to take appropriate appeals of any judicial decision that
would require the Company to pay a Gross-Up Payment, provided the
Company requests in writing that you do so
(PAGE>
and provides an opinion from Independent Tax Counsel to
you and the Company that it is more likely than not that
the appeal would be successful. You further agree to settle,
compromise or otherwise terminate a contest with the Internal
Revenue Service or other tax authority with respect to all
or a portion of the proposed adjustment giving rise to the
Gross-Up Payment, if requested by the Company in writing
to do so at any time, in which case you shall be entitled
to receive from the Company the Gross-Up Payment. In no
event shall you compromise or settle all or any portion of a
proposed adjustment which would result in a Gross-Up Payment
without the written consent of the Company.
You shall not be required to take or continue any action
pursuant to this Section 5(g) unless the Company acknowledges its
liability under this Agreement in the event that the Internal
Revenue Service or other tax authority prevails in the contest
and timely makes the payments required by this paragraph. The
Company hereby agrees to indemnify you in a manner reasonably
satisfactory to you for any fees, expenses, penalties, interest
or additions to tax which you may incur as a result of contesting
the validity of any Excise Tax and to pay you promptly upon
receipt from time to time of a written demand therefor all costs
and expenses which you may incur in connection with contesting
such proposed adjustment (including reasonable fees and
disbursements of Independent Tax Counsel); provided, however,
that the Company shall not be required to reimburse any amount of
tax which you are required to pay to permit your institution of a
claim for refund under this Section 5(g).
If you shall have contested any proposed adjustment as above
provided, and for so long as you shall be required under the
terms of this Section 5(g) to continue such contest, the Company
shall not be required to pay a Gross-Up Payment until there
occurs a Final Determination (as defined below) of your liability
for the tax and any interest, penalties and
<PAGE>
additions to tax asserted to be payable as a result of such proposed
adjustment. A "Final Determination" shall mean (a) a decision, judgment,
decree or other order by any court of competent jurisdiction, which
decision, judgment, decree or other order has become final after
all allowable appeals by either party to the action have been
exhausted, the time for filing such appeal has expired or you
have no right under the terms thereof to request an appeal, (b) a
closing agreement entered into under Section 7121 of the Code or
any other settlement agreement entered into in connection with an
administrative or judicial proceeding and with your consent, or
(c) the expiration of the time for instituting a claim for
refund, or if such a claim was filed, the expiration of the time
for instituting suit with respect thereto.
In the event you receive any refund from the Internal
Revenue Service or other tax authority on account of an
overpayment of Excise Tax, such amount shall be promptly paid by
you to the Company.
(h) Payment Obligations Absolute. Upon a Change of
----------------------------
Control the Company's obligations to pay the severance benefits
or make any other payments described in this Section 5 shall be
absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the
Company or any of its subsidiaries may have against you or anyone
else. You shall not be required to mitigate the amount of any
payment or benefits provided by this Section 5 by seeking other
employment, and if you do accept other employment, any payment or
benefits hereunder shall not be reduced by any compensation
earned or other benefits received by you as a result of such
employment.
(i) Legal Fees and Expenses. Subject to and
-----------------------
contingent upon the occurrence of a Change of Control the Company
agrees to pay promptly as incurred, to the full extent
<PAGE>
permitted by law, all legal fees and expenses which you may
reasonably thereafter incur as a result of any contest, litigation
or arbitration (regardless of the outcome thereof) by the Company,
you or others of the validity or enforceability of, or liability
under, any provision of this Agreement (including any contest by
you about the amount of any payment pursuant to this Agreement),
plus in each case interest on any delayed payment at the rate of
150% of the Prime Rate posted by the BankBoston or any successor
entity thereto.
(j) Retirement. If your employment is terminated due
----------
to retirement, you shall not be entitled to severance benefits
under this Agreement, regardless of the occurrence of a Change of
Control. A termination by retirement shall have occurred where
your termination is caused by the fact that you have reached
normal retirement age for employees in your position.
(k) Notwithstanding anything contained herein to the
contrary, in the event that prior to a Change of Control (i) the
Company terminates your employment without Cause or (ii) you
terminate your employment for Good Reason, in each case in
connection with or in anticipation of a Change of Control,
including at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control, you shall be
entitled to the severance benefits provided by Section 5 as if
such termination had occurred immediately following such Change
of Control.
6. Assignability. This Agreement is binding on and is for
-------------
the benefit of the parties hereto and their respective
successors, heirs, executors, administrators and other legal
representatives. Neither this Agreement nor any right or
obligation hereunder may be assigned by the Company (except to
any subsidiary or affiliate) or by you.
7. Successor. The Company shall require any successor
---------
(whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or
<PAGE>
assets of the Company to assume expressly and agree to perform
this Agreement in the same manner and to the same extent that the
Company would be required to perform. As used in this Agreement,
"Company" shall mean the company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law,
or otherwise.
8. Amendment: Waiver. This Agreement may be amended only
-----------------
by an instrument in writing signed by the parties hereto, and any
provision hereof may be waived only by an instrument in writing
signed by the party or parties against whom or which enforcement
of such waiver is sought. The failure of either party hereto at
any time to require the performance by the other party hereto of
any provision hereof shall in no way affect the full right to
require such performance at any time thereafter, nor shall the
waiver by either party hereto of a breach of any provision hereof
be taken or held to be a waiver of any succeeding breach of such
provision or a waiver of the provision itself or a waiver of any
other provision of this Agreement.
9. Notices. All notices and other communications
-------
hereunder shall be in writing and shall be given by hand delivery
to the other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to you:
---------
Michelle L. Chicoine
8 Boxwood Road
Bedford, NH 03110
If to the Company:
-----------------
Vice President of Human Resources
EnergyNorth, Inc.
1260 Elm Street
P.O. Box 329
Manchester, NH 03105-0329
<PAGE>
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
10. Validity. The invalidity or unenforceability of any
--------
provision or provisions of this Agreement shall not affect the
validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect, nor shall
the invalidity or unenforceability of a portion of any provision
of this Agreement affect the validity or enforceability of the
balance of such provision. If any provision of this Agreement, or
portion thereof is so broad, in scope or duration, as to be
unenforceable, such provision or portion thereof shall be
interpreted to be only so broad as is enforceable.
11. 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 Chapter 542. Judgment upon
the award may be entered in any court of competent jurisdiction.
12. Withholding. The Company may withhold from any amounts
-----------
payable under this Agreement such Federal, state or local taxes
as shall be permitted to be withheld pursuant to any applicable
law or regulation. The Company may withhold such other amounts as
may be permitted by law.
13. Entire Agreement. This Agreement contains the entire
----------------
understanding of the Company and you with respect to the subject
matter hereof.
14. Applicable Law. This Agreement shall be governed by
--------------
and construed in accordance with the substantive internal law and
not the conflict of law provisions of the State of New Hampshire.
<PAGE>
If the terms of the foregoing Agreement are acceptable to
you, please sign and return to the Company the enclosed copy of
this Agreement whereupon this Agreement shall become a valid and
legally binding contract between you and the Company.
Very truly yours,
ENERGY NORTH, INC.
By: __________________________
Edward T. Borer, Chairman,
Board of Directors
Accepted and Agreed as of
the date first above written
______________________________
Michelle L. Chicoine
December 12, 1995
David A Skrzysowski
21 Brennan Street
Manchester, NH 03109
Management Continuity Agreement
-------------------------------
Dear Mr. Skrzysowski:
The Board of Directors (the "Board") of EnergyNorth, Inc.
(the "Company") recognizes that, as is the case with many
publicly held corporations, there always exists the possibility
of a change of control of the Company. This possibility and the
uncertainty it creates may result in the loss or distraction of
members of management of the Company and its subsidiaries to the
detriment of the Company and its shareholders.
The Board considers the establishment, maintenance, and
continuity of a sound and vital management to be essential to
protecting and enhancing the best interests of the Company and
its shareholders. The Board also believes that when a change of
control is perceived as imminent, or is occurring, the Board
should be able to receive and rely on disinterested advice from
management regarding the best interests of the Company and its
shareholders without concern that members of management might be
distracted or concerned by the personal uncertainties and risks
created by the perception of an imminent or occurring change of
control.
<PAGE>
Accordingly, the Board has determined that appropriate steps
should be taken to assure the Company of the continued employment
and attention and dedication to duty of certain members of
management of the Company and to ensure the availability of their
disinterested advice, notwithstanding the possibility, threat or
occurrence of a change of control.
Therefore, in order to fulfill the above purposes, the Board
has designated you as eligible for severance benefits as set
forth below.
1. Offer: In order to induce you to remain in the employ of
-----
the Company and to provide continued services to the Company now
and in the event that a change of control is imminent or
occurring, this letter agreement (the "Agreement") sets forth
severance benefits which the Company offers to pay to you in the
event of a termination of your employment (as described in
Section 5 below, excluding a termination for Cause, disability,
death or retirement) subsequent to a Change of Control of the
Company (as defined in Section 4 below).
2. Operation: This Agreement shall be effective immediately
---------
upon its execution but, anything in this Agreement to the
contrary notwithstanding, neither this Agreement nor any of its
provisions shall be operative unless and until there has been a
Change of Control while you are still an employee of the Company,
nor shall this Agreement govern or affect your employment
relationship with the Company except as explicitly set forth
herein. Upon a Change of Control, if you are still employed by
the Company, this
<PAGE>
Agreement and all of its provisions shall become operative immediately.
If your employment relationship with the Company is terminated before
a Change of Control, you shall have no rights or obligations under
this Agreement.
3. Term: The term of this Agreement shall commence immediately
----
upon the date hereof and continue until December 1, 1997. At the
conclusion of the initial term this Agreement shall be deemed
automatically renewed for a two-year term and, unless notice of
nonrenewal is furnished by you or by the Company as provided
below, shall be automatically renewed in like fashion at the end
of that and each succeeding two-year term. Either party hereto
may provide written notice to the other of nonrenewal of this
Agreement, to take effect at the conclusion of any term of this
Agreement but in no event shall such nonrenewal take effect less
than two years from the date on which notice is given. Such
notice shall be furnished in accordance with Section 10 of this
Agreement.
4. Change in Control: For the purpose of this Agreement, a
-----------------
"Change of Control" shall mean:
(1) The acquisition by any individual, entity or group
[within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")]
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of the Company
<PAGE>
entitled to vote generally in the election of directors
(the "Outstanding Company Voting Securities"); provided,
however, that the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly
from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), (ii) any acquisition by the
Company, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv) any acquisition by
any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (i), (ii) and
(iii) of Subparagraph (3) of this subsection (b) are satisfied;
or
(2) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board; or
<PAGE>
(3) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (i) more
than 60% of, respectively, the then outstanding shares of common
stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such
reorganization, merger or consolidation, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (ii) no Person (excluding the Company, any
employee benefit plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger or
consolidation and any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly
or indirectly, 20% or more of the Outstanding Company Common
Stock or Outstanding Company Voting Securities, as the case may
be) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or
consolidation or the combined voting power of the then
outstanding voting securities of
<PAGE>
such corporation entitled to vote generally in the election of
directors and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the
Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger or
consolidation; or
(4) Approval by the shareholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the
sale or other disposition of all or substantially all of the
assets of the Company, other than to a corporation, with respect
to which following such sale or other disposition, (A) more than
60% of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding the Company and any employee benefit plan (or
related trust) of the Company or such corporation and any Person
beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of
<PAGE>
the Outstanding Company Common Stock or Outstanding Company Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined
voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (C) at least a majority of the members of the board
of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition
of assets of the Company.
5. Termination of Employment:
-------------------------
a. Terminations Which Give Rise to Severance Benefits
--------------------------------------------------
Under this Agreement.
--------------------
i. Any termination of your employment by action of
the Company except for Cause (as defined below) or any
termination of your employment by you for Good Reason (as defined
below) within two years of a Change of Control shall entitle you
to the severance benefits set forth in Section 6 of this
Agreement.
ii. Good Reason. If any of the following events
-----------
occurs within two years after a Change of Control you may
voluntarily terminate your employment within 30 days of the
occurrence of such event and be entitled to the severance
benefits set forth in Section 6 of this Agreement:
<PAGE>
(1) the Company assigns any duties to you which
diminish your position, duties, offices, titles,
responsibilities, reporting requirements or status with the
Company from that in effect immediately prior to a Change of
Control; or
(2) the Company reduces your base salary,
including deferrals, as in effect immediately prior to a Change
of Control; or
(3) the Company discontinues any bonus or other
compensation plans or any other benefit, stock ownership plan,
stock purchase plan, stock option plan, life insurance plan,
health plan, disability plan or similar plan (as the same existed
immediately prior to the Change of Control) in which you
participated or were eligible to participate in immediately prior
to the Change of Control and in lieu thereof does not make
available plans providing at least comparable benefits; or
(4) the Company takes action which adversely
affects your participation in, or eligibility for, or materially
reduces your benefits under, any of the plans described in (3)
above, or which deprives you of any material fringe benefit
enjoyed by you immediately prior to the Change of Control, or
fails to provide you with the number of paid vacation days to
which you were entitled in accordance with normal vacation policy
immediately prior to the Change of Control; or
(5) the Company requires you to be based at any
office or location other than one within a 50-mile radius of the
boundaries of EnergyNorth Natural
<PAGE>
Gas, Inc.'s franchise territory as such boundaries existed immediately
prior to the Change in Control; or
(6) the Company purports to terminate your
employment otherwise than as expressly permitted by this
Agreement; or
(7) the Company fails to comply with and satisfy
Section 8, provided that such successor has received at least ten
days prior written notice from the Company or you of the
requirements of Section 8.
You shall have the sole right to determine, in good faith,
whether any of the above events has occurred. Anything in this
Agreement to the contrary notwithstanding, a termination of
employment by you for any reason during the 30-day period
immediately following the first anniversary of a Change of
Control ("Window Period") shall be deemed to be a termination for
Good Reason for all purposes of this Agreement.
iii. Notice of Termination. Any termination by the Company
---------------------
for Cause, or by you without any reason during the Window Period
or for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with
Section 10. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of your employment under the
<PAGE>
provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be
not more than 15 days after the giving of such notice).
iv. Date of Termination. "Date of Termination" means
-------------------
(A) if your employment is terminated by the Company for Cause, or
by you during the Window Period or for Good Reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be, (B) if your employment is terminated
by the Company other than for Cause or disability, the Date of
Termination shall be the date on which the Company notifies you
of such termination and (C) if your employment is terminated by
reason of death or disability, the Date of Termination shall be
the date of your death or the date you are determined to have a
disability as provided under Section 5(b) of this Agreement, as
the case may be.
(b) Terminations Which Do Not Give Rise to
--------------------------------------
Severance Benefits Under This Agreement. If your employment is
- ---------------------------------------
terminated due to Cause, disability, or retirement (as those
terms are defined below), you shall not be entitled to severance
benefits under this Agreement, regardless of the occurrence of a
Change of Control.
(i) A termination for disability shall have
occurred where you are determined to have a disability under any
long-term disability policy of the Company which covers you, or,
if none, as defined in the EnergyNorth, Inc. Retirement Plan for
Salaried Employees.
<PAGE>
(ii) A termination by retirement shall have
occurred where your termination is caused by the fact that you
have reached normal retirement age for employees in your
position.
(iii) A termination for Cause
shall have occurred where you are terminated because of:
conviction of a felony or crime involving an act of moral
turpitude, dishonesty, or misfeasance which substantially
interferes with the orderly business of the Company or any of its
subsidiaries, action that directly or indirectly causes the
Company or its subsidiaries to suffer substantial loss or damage,
refusal to follow or material neglect of reasonable requests of
the Company made pursuant to this Agreement, and conduct that
substantially interferes with or damages the standing or
reputation of the Company or any of its subsidiaries. In the
event of termination of employment for Cause, this Agreement and
all of the rights and obligations of the parties hereto shall
forthwith terminate, except where this Agreement expressly
provides that any provisions survive termination of this
Agreement.
6. Severance Benefits:
------------------
(a) Amount of Severance Benefits. If your employment is
----------------------------
terminated in circumstances described in Section 5(a) of this
Agreement, the Company shall pay you, within ten days of the date
such termination takes effect, a lump sum severance benefit in an
amount determined with reference to the chart below in this
Subsection (a). For purposes of this Subsection, "Salary" shall
mean the amount of your salary as in effect
<PAGE>
immediately prior to the Change of Control, including deferrals,
plus the average of the previous three years' annual incentive
compensation award earned under the EnergyNorth, Inc. Key Employee
Performance and Equity Incentive Plan. Any delayed payment shall include
interest at a rate of 150% of the Prime Rate posted by the Bank
of Boston.
Number of full years
of employment with Amount of
the Company severance benefit
- -------------------- ----------------
One year 1.6 times Salary
Two years 1.7 times Salary
Three years 1.8 times Salary
Four years 1.9 times Salary
Five years or more The greater of: (a) 2.0 times Salary
or (b) 275% of the
average aggregate compensation paid by the
Company or any of its subsidiaries to you
which was includible in your gross income
for federal tax purposes for the five tax
years ending immediately prior to the Change
of Control.
(b) Other Benefits Payable. Except as required by
----------------------
Subsection (c) below, the severance benefit described in
Subsection (a) above shall be payable in addition to, and not in
lieu of, all other accrued or vested or earned by deferred
compensation, rights, options or other benefits which may be owed
to you following termination (and not contingent on any Change of
Control preceding such termination), including but not limited to
accrued vacation or sick pay, amounts or benefits payable under
any bonus or other compensation plans, stock option plan, stock
ownership plan, stock purchase plan, life insurance plan, health
plan, disability plan or similar plan. You may elect to have any
<PAGE>
life insurance, health plan, disability plan or similar plan
which was in effect immediately prior to your termination
extended for a period of one year beyond when your eligibility
for such plan would otherwise have ended, provided that (i) you
so notify the Company within five days of the Date of Termination
and (ii) the cost of extending your eligibility as described
above shall be subtracted from the first payment of your
severance benefit. The "cost" for this purpose shall be deemed
to be the most recent rate charged to employees of the Company or
its subsidiaries for such benefits.
(c) Ceiling on Severance Benefits. In order to comply with
-----------------------------
certain provisions of the Internal Revenue Code of 1986, as
amended (the "Code") severance benefits payable under this
Agreement shall be subject to the following ceiling
notwithstanding anything in this Agreement to the contrary: The
"aggregate present value" of severance benefits payable under
this Agreement and of payments to you or for your benefit which
would be "parachute payments" if their "aggregate present value"
equalled or exceeded 300% of your "base amount" shall in no event
exceed 295% of your "base amount" (within those terms' meaning
under Section 280G of the Code).
It is the intention of the parties to this Agreement that no
severance benefits hereunder will be paid to the extent that such
benefits (either alone or when aggregated with other benefits
paid to you or for your benefit) constitute "excess parachute
payments" within the meaning of Section 280G of the Code as
amended from time to time.
<PAGE>
(d) Payment Obligations Absolute. Except to the extent set
----------------------------
forth in Subsection (c) above, upon a Change of Control the
Company's obligations to pay the severance benefits or make any
other payments described in this Section 6 shall be absolute and
unconditional and shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company or any of
its subsidiaries may have against you or anyone else.
(e) Legal Fees and Expenses. The Company agrees to pay to
-----------------------
you promptly, as incurred, to the full extent permitted by law,
all legal fees and expenses which you may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the
Company, you or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee
of performance thereof (including any contest by you about the
amount of any payment pursuant to this Agreement), plus in each
case interest on any delayed payment at the rate of 10%.
7. Assignability. This Agreement is binding on and is for the
-------------
benefit of the parties hereto and their respective successors,
heirs, executors, administrators and other legal representatives.
Neither this Agreement nor any right or obligation hereunder may
be assigned by the Company (except to any subsidiary or
affiliate) or by you.
8. Successor. The Company shall require any successor (whether
---------
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly and agree to perform
this Agreement in
<PAGE>
the same manner and to the same extent that the Company
would be required to perform. As used in this Agreement,
"Company" shall mean the company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law,
or otherwise.
9. Amendment: Waiver. This Agreement may be amended only by an
-----------------
instrument in writing signed by the parties hereto, and any
provision hereof may be waived only by an instrument in writing
signed by the party or parties against whom or which enforcement
of such waiver is sought. The failure of either party hereto at
any time to require the performance by the other party hereto of
any provision hereof shall in no way affect the full right to
require such performance at any time thereafter, nor shall the
waiver by either party hereto of a breach of any provision hereof
be taken or held to be a waiver of any succeeding breach of such
provision or a waiver of the provision itself or a waiver of any
other provision of this Agreement.
10. Notices . All notices and other communications hereunder
-------
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to you:
---------
David A Skrzysowski
21 Brennan Street
Manchester, NH 03109
<PAGE>
If to the Company:
-----------------
Director of Human Resources
EnergyNorth, Inc.
1260 Elm Street
P.O. Box 329
Manchester, NH 03105-0329
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
11. Validity. The invalidity or unenforceability of any
--------
provision or provisions of this Agreement shall not affect the
validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect, nor shall
the invalidity or unenforceability of a portion of any provision
of this Agreement affect the validity or enforceability of the
balance of such provision. If any provision of this Agreement,
or portion thereof is so broad, in scope or duration, as to be
unenforceable, such provision or portion thereof shall be
interpreted to be only so broad as is enforceable.
12. 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 Chapter 542. Judgment upon
the award may be entered in any court of competent jurisdiction.
<PAGE>
13. Withholding. The Company may withhold from any amounts
-----------
payable under this Agreement such Federal, state or local taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
14. Entire Agreement. This Agreement contains the entire
----------------
understanding of the Company and you with respect to the subject
matter hereof.
15. Applicable Law. This Agreement shall be governed by and
--------------
construed in accordance with the substantive internal law and not
the conflict of law provisions of the State of New Hampshire.
If the terms of the foregoing Agreement are acceptable to
you, please sign and return to the Company the enclosed copy of
this Agreement whereupon this Agreement shall become a valid and
legally binding contract between you and the Company.
Very truly yours,
EnergyNorth, Inc.
By:_____________________________________
Robert R. Giordano,
President and Chief Executive Officer
Accepted and Agreed as ofthe
date first above written:
____________________________
DAVID A. SKRZYSOWSKI
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement") is made by
EnergyNorth, Inc., with a business address at 1260 Elm
Street, Manchester, New Hampshire (the "Company"), Eastern
Enterprises ("Eastern") and ROBERT R. GIORDANO (the
"Consultant"); and is contingent upon the closing of the
merger involving the Company contemplated by the Agreement
and Plan of Reorganization dated as of July 14, 1999 by
and between the Company, Eastern and a merger subsidiary
(the "Transaction"), is effective upon the date of
Consultant's termination from employment with Company upon
or following the Transaction, and is for the purpose of
setting forth the exclusive terms and conditions by which
Company desires to acquire Consultant's services.
In consideration of the mutual obligations specified
in this Agreement, and any compensation paid to Consultant
for his services, the parties agree to the following:
I. TITLE AND SCOPE OF WORK.
(a) The Company hereby agrees that upon the
effective date of this Agreement it will retain
Consultant, and Consultant hereby agrees that in
accordance herewith he will perform at the request of the
Company, certain consulting services which are consistent
with consulting services typically provided by a senior
executive advisor, including but not limited to serving as
Chairman of the New Hampshire Advisory Board of
EnergyNorth Natural Gas, Inc., providing advisory services
to Eastern and its direct and indirect subsidiaries (such
direct and indirect subsidiaries as from time to time
existing during the Term, the "Subsidiaries"),
representing ENI and Eastern within New Hampshire with
local and regional civic, charitable and educational
organizations in the same manner as immediately prior to
the effective date of this Agreement, assisting in the
integration of operations after the Transaction, assisting
in any regulatory, environmental, legislative or legal
proceedings with the State of New Hampshire involving
Eastern and any of its Subsidiaries and assisting in
identifying new business opportunities for Eastern and its
Subsidiaries (the "Services"). Consultant shall hold the
title of Senior Executive Advisor and shall report to the
Chief Operating Officer of Eastern.
(b) During the first twelve (12) months of the Term
of this Agreement (the "first year of the Term"),
Consultant shall provide the Company with up to seventy-
five (75) full business days of Services. During the
twelve (12)-month period beginning on the first
anniversary of the effective date of this Agreement (the
"second year of the Term"),
<PAGE>
Consultant shall provide the Company with up to twenty-five
(25) full business days of Services. During the twelve
(12)-month period beginning on the second anniversary of the
effective date of this Agreement (the "third year of the Term"),
Consultant shall be available to provide to the Company up to
an additional twenty-five (25) full business days of Services.
The parties acknowledge that the Company's need for Consultant's
Services under this Agreement may vary from period to period
and is likely to be greater in the period shortly following
the Transaction, and Consultant agrees that he will provide
the Services described in this paragraph only as requested
by the Company and on such dates and at such times as the
Company may reasonably specify.
(c) If so requested by the Company during the Term,
Consultant may, but shall not be required to, provide the
Company with additional Services.
(d) For purposes of this Agreement, any business day
on which Consultant performs Services at the Company's
request shall count as a full business day of Services
unless the time spent by Consultant providing such
Services on such day amounts to a half day or less, in
which event such day shall count as one-half of a full
business day of Services. Time spent commuting by
Consultant shall not be counted as Services for purposes
of this Agreement, but time spent in other travel at the
request of the Company shall be counted.
II. TERM.
The Term of this Agreement shall commence upon the
effective date of this Agreement and shall continue
through the earlier of: (a) the day preceding the third
anniversary of such effective date, and (b) the effective
date of termination of this Agreement pursuant to Section
V(a) hereunder.
III. COMPENSATION HEREUNDER.
During the Term of this Agreement:
(a) Consultant shall, at the end of each month
during the Term, account to the Company in form
satisfactory to the Company for the Services he has
performed during the month. In exchange for the
performance of Services rendered to the Company under
Section I(b) and Section I(c) hereof during the first and
second years of the Term, the Company shall pay Consultant
an aggregate of $200,000 in substantially equal monthly
installments ($8,333.33 except for the last month, for
which the installment payment shall be $8,333.41) payable
in arrears. At such time, if any, as the aggregate number
of full business days of Services performed by Consultant
for the Company during those
<PAGE>
years exceeds one hundred (100) full business days
(each such excess day, an "additional day"), Consultant
shall be entitled to an additional payment of $2,000
for each additional day, such payment to be made within
seven (7) days after receipt by the Company of a proper
monthly accounting for such additional day or days.
Consultant shall likewise be entitled to a payment of
$2,000 for each full business day of Services, if any,
performed during the third year of the Term, such payment
to be made within seven (7) days after receipt by the
Company of a proper monthly accounting for such Services.
(b) In addition to amounts payable under paragraph
(a) above, the Company shall pay to Consultant or his
estate $29,000 at the beginning of each of the first,
second and third years of the Term. The Company's
obligation to make the payments described in this
subparagraph shall survive the termination of this
Agreement pursuant to Section V(a); provided, that if the
Consultant breaches Section VI neither he nor his estate
shall be entitled to any payments under this paragraph.
(c) The Company shall reimburse Consultant for all
necessary and reasonable travel and business expenses (but
not for expenses associated with commuting within New
Hampshire to or from home, or commuting from a vacation
site, unless such expenses are approved in advance by the
Company) incurred by Consultant in performing Company-
requested services under this Agreement.
(d) Except as otherwise required by law, the Company
shall not withhold any sums from payments made to
Consultant for social security or other federal, state or
local tax liabilities or contributions, and all such
withholdings, liabilities and contributions shall be
solely Consultant's responsibility, it being understood
and acknowledged that Consultant shall perform the
Services as an independent contractor and not as an
employee and that he shall not be eligible for, nor shall
he participate in, any employee benefit program of Eastern
or its Subsidiaries in respect of his Services under this
Agreement. Notwithstanding any provision to the contrary
in any other agreement or understanding, the Company shall
not be obligated to gross up Consultant for any taxes
incurred with respect to payments or benefits hereunder.
<PAGE>
IV. MAINTENANCE OF OFFICE AND SUPPORT SERVICES.
During the Term of this Agreement, the Company shall
provide Consultant with appropriate office space, parking,
reasonable secretarial support services, and computer
access at its principal administrative offices in New
Hampshire. To the extent consistent with the requirements
communicated to him by the Company in connection with a
request for particular Services, and if approved in
advance by the Company, Consultant may perform specific
Services from his home or another location (such as a
vacation site).
V. TERMINATION OF CONSULTING SERVICES.
(a) Discharge for Cause, Death or Disability.
Notwithstanding any of the foregoing provisions of this
Agreement, the Company may, subject to this Section V(a),
discharge Consultant for Cause, due to the death of
Consultant or due to Consultant's Disability. For
purposes of this Section V, "Cause" shall mean: (i)
conviction of a felony or crime involving an act of moral
turpitude, dishonesty or misfeasance, in each case that
substantially interferes with the orderly business of the
Company or any of its subsidiaries, (ii) the failure or
refusal of Consultant to follow or material neglect by
Consultant of reasonable requests of the Company made
pursuant to this Agreement, and (iii) violating Section VI
or otherwise willfully engaging in conduct that
substantially interferes with or damages the standing or
reputation of the Company or any of its subsidiaries;
provided, however, no termination for Cause pursuant to
either clause (ii) or (iii) hereof shall be effective
unless the Company shall have first provided Consultant
(A) 30 days written notice in the manner contemplated by
Section V(d) setting forth in reasonable detail the
Company's basis for such termination, including the manner
in which the Company believes Consultant has not
substantially performed his duties, and (B) 30 days during
which Consultant has an opportunity to cure any
deficiencies noted by the Company in such notice. In the
event of the discharge of Consultant for Cause or death or
Disability of Consultant, this Agreement and all of the
rights and obligations of the parties hereto shall
terminate, except where this Agreement expressly provides
that any provisions survive termination of this Agreement.
For purposes of this Section V(a), no act or failure to
act by Consultant shall be considered "willful" unless it
is done, or admitted to be done, in bad faith and without
a reasonable belief that Consultant's action or omission
was in the best interests of the Company.
<PAGE>
(b) "Disability," for purposes of this Section V(a),
shall be defined as the inability of Consultant to perform
the essential functions of the position with or without
reasonable accommodation due to physical or mental illness
or injury.
(c) Consequences of discharge. If the Company
discharges Consultant for Cause, death or Disability, the
Company shall have no further obligation to make payments
under Section III(a) except as provided in the immediately
following sentence. If as of the date of such a discharge
the aggregate payments previously made to Consultant under
Section III(a) do not at least equal the number obtained
by multiplying $2,000 times the number of full business
days of Services performed by Consultant, the Company
shall pay to Consultant, within seven (7) days after
receipt of a proper final accounting of Consultant's
Services, the excess of (i) the number obtained by
multiplying $2,000 times the number of full business days
of Services reflected in such accounting, over (ii) the
aggregate payments already made by the Company to
Consultant under Section III(a). If the Company
discharges Consultant without Cause, it shall continue to
pay Consultant for the remainder of the Term any amounts
not yet paid under Section III that would have been paid
if he had continued to serve hereunder through the end of
the Term.
(d) Any discharge of Consultant by the Company shall
be communicated by Notice of Termination to the other
party hereto given in accordance with Section XII hereof.
For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific
provision in this Agreement relied upon, (ii) sets forth
in reasonable detail the facts and circumstances claimed
to provide a basis for discharge of Consultant under the
provision so indicated, and (iii) if the date of discharge
is other than the notice, specifies the termination date
(which date shall be not more than 15 days after the
giving of such notice).
VI. CERTAIN UNDERTAKINGS
(a) In consideration of the Company's undertakings
pursuant to this Agreement, Consultant agrees that during
the first and second years of the Term he will not, within
the states in which Eastern operates its business or in
which any of Eastern's Subsidiaries operates its business,
engage, either as a principal, employee, partner,
consultant or investor (other than through a 1% or smaller
interest in a publicly traded entity) in a business which
competes with any such business of Eastern or its
Subsidiaries.
(b) Consultant further agrees that during the Term
and thereafter he will comply with Eastern's policies and
procedures regarding confidential information, as that term
<PAGE>
is hereinafter defined, and will never directly or
indirectly use or disclose, except to his attorney or as
required by judicial or regulatory process or order, any
confidential information as so defined. For purposes of
the preceding sentence, the term "confidential
information" means any and all information (including
without limitation information relating to the development
and implementation of business strategy, financial and
operating forecasts, business policies and practices, and
all other information related to the future conduct of
business (i) that Consultant has acquired in connection
with his previous employment with Eastern and its
Subsidiaries or in connection with his Services hereunder,
(ii) that is not generally known or available to others
with whom Eastern or its Subsidiaries do, or plan to,
compete or do business, and (iii) that pertains to the
business of, or belongs to, Eastern or its Subsidiaries or
a person described in clause (ii).
(c) Consultant agrees that if, at any time, pursuant
to action of any court of competent jurisdiction, the
operation of any part of this Section VI shall be
determined to be unlawful or otherwise unenforceable, then
the coverage of this Section VI shall be deemed to be
restricted as to duration, geographic scope or otherwise,
to the extent, but only to the extent, necessary to make
this paragraph lawful and enforceable in the particular
jurisdiction in which such determination is made.
(d) Consultant acknowledges and agrees that, were he
to breach the provisions of this Section VI, the harm to
Eastern and its Subsidiaries would be irreparable.
Consultant therefore agrees that in the event of such a
breach or threatened breach, Eastern or its Subsidiaries
shall have the right to obtain preliminary and permanent
injunctive relief against any such breach without having
to post bond. Nothing herein shall prohibit Eastern or
its Subsidiaries from seeking damages for a breach by
Consultant of this Section VI.
(e) The provisions of this Section VI and
Consultant's obligations hereunder shall survive the
termination of this Agreement.
VII. SUCCESSOR.
This Agreement shall be binding upon the successor to
the Company in the Transaction. The Company shall require
any other successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise, including
through both stock and asset transactions) to all or
substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that
the Company would be required to perform it if no
successor had taken
<PAGE>
place. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement
by operation of law, or otherwise.
VIII. ENTIRE AGREEMENT.
This Agreement contains the entire understanding of
the Company and Consultant, and supersedes any and all
prior communications, understanding, agreements or
statements between the parties, with respect to the
subject matter hereof.
IX. ARBITRATION.
Any dispute or controversy between the parties
relating to this Agreement shall be settled by binding
arbitration in New Hampshire pursuant to the governing
rules of the American Arbitration Association. Judgment
upon the award may be entered in any court of competent
jurisdiction.
X. ASSIGNABILITY.
This Agreement is binding on and is for the benefit
of the parties hereto and their respective successors,
heirs, executors, administrators and other legal
representatives. Neither this Agreement nor any right or
obligation hereunder may be assigned by the Company or by
Consultant without the other party's prior written
consent.
XI. AMENDMENT; WAIVER.
This Agreement may be amended only by an instrument
in writing signed by the parties hereto, and any provision
hereof may be waived only by an instrument in writing
signed by the party or parties against whom or which
enforcement of such waiver is sought. The failure of
either party hereto at any time to require the performance
by the other party hereto of any provision hereof shall in
no way affect the full right to require such performance
at any time thereafter, nor shall the waiver by either
party hereto of a breach of any provision hereof be taken
or held to be a waiver of any succeeding breach of such
provision or a waiver of the provision itself or a waiver
of any other provision of this Agreement.
<PAGE>
XII. NOTICES.
All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to Consultant:
----------------
Robert R. Giordano
12 Cobbler Lane
Bedford, NH 03110
If to the Company or to Eastern:
-------------------------------
c/o Eastern Enterprises
9 Riverside Road
Weston, MA 02493
Att: Fred C. Raskin
or to such other address as either party shall have
furnished to the other in writing in accordance herewith.
Notice and communications shall be effective when actually
received by the addressee.
XIII. VALIDITY.
The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the
validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect,
nor shall the invalidity or unenforceability of a portion
of any provision of this Agreement affect the validity or
enforceability of the balance of such provision.
XIV. APPLICABLE LAW.
This Agreement shall be governed by and construed in
accordance with the substantive internal law and not the
conflict of law provisions of the State of New Hampshire.
<PAGE>
XV. EASTERN DECLARATION OF TRUST
Reference is hereby made to the declaration of trust
establishing Eastern Enterprises dated July 18, 1929, as
amended, a copy of which is on file in the office of the
Secretary of State of the Commonwealth of Massachusetts.
The name "Eastern Enterprises" refers to the trustees
under said declaration as trustees and not personally, and
no trustee, shareholder, officer or agent of Eastern
Enterprises shall be held to any personal liability in
connection with the affairs of said Eastern Enterprises,
but the trust estate only is liable.
IN WITNESS WHEREOF, the parties hereto have duly
executed this Agreement as of the date first mentioned
above.
Eastern Enterprises EnergyNorth, Inc.
By: ____________________ By:_________________________
____________________________
ROBERT R. GIORDANO
July 14, 1999
Mr. Robert R. Giordano
12 Cobbler Lane
Bedford, New Hampshire 031110
Re: Employment and Related Matters
------------------------------
Dear Bob:
This letter is intended to set forth our understanding
concerning certain employment matters, including the
operation of your Amended and Restated Management
Continuity Agreement, dated as of July 14, 1999 attached
as Exhibit A hereto (the "MCA"), in light of the proposed
---------
business combination between EnergyNorth, Inc. (the "Company")
and Eastern Enterprises ("Eastern"). Capitalized terms
used in this letter and not otherwise defined have the
meanings set forth in the Agreement and Plan of
Reorganization, dated as of July 14, 1999, among the
Company, Eastern and wholly-owned subsidiary of Eastern
(the "Merger Agreement").
By execution of this letter, you and we acknowledge and agree
that:
1. Your employment with the Company will be terminated
effective upon the first day of the month immediately
following the date of the Closing (the "Effective Date").
2. The Closing and the consummation of the transactions
contemplated by the Merger Agreement constitute
"Good Reason" as such terms are defined in Section
5(b) of the MCA.
3. As of the date of this letter, both the Company and
Eastern have entered into a Consulting Agreement
with you substantially in the form attached as Exhibit B
to this letter providing, among other things, for
your provision of consulting services to Eastern
following the Effective Date.
If you agree with the foregoing, please so indicate by signing
where appropriate below.
EASTERN ENTERPRISES
By:________________________
Its:_______________________
AGREED AND ACCEPTED
_______________________________
Robert R. Giordano
Exhibit 23
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of EnergyNorth, Inc.:
As independent public accountants, we hereby consent to the
incorporation of our report, dated November 5, 1999, included
in EnergyNorth, Inc.'s Form 10-K, into the Company's previously
filed Registration Statement on Form S-3, File No. 33-58127.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
December 20, 1999
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
EnergyNorth, Inc. condensed consolidated balance sheet as of September 30,
1999 and condensed consolidated statement of income and statement of cash
flows for the twelve months ended September 30, 1999 and qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 113,730<F1>
<OTHER-PROPERTY-AND-INVEST> 8,049<F2>
<TOTAL-CURRENT-ASSETS> 28,420
<TOTAL-DEFERRED-CHARGES> 16,267
<OTHER-ASSETS> 1,859
<TOTAL-ASSETS> 168,325
<COMMON> 3,320
<CAPITAL-SURPLUS-PAID-IN> 32,506
<RETAINED-EARNINGS> 15,117
<TOTAL-COMMON-STOCKHOLDERS-EQ> 50,943
0
0
<LONG-TERM-DEBT-NET> 45,679
<SHORT-TERM-NOTES> 15,278
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 791
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 55,634
<TOT-CAPITALIZATION-AND-LIAB> 168,325
<GROSS-OPERATING-REVENUE> 119,172
<INCOME-TAX-EXPENSE> 3,222
<OTHER-OPERATING-EXPENSES> 106,329
<TOTAL-OPERATING-EXPENSES> 109,551
<OPERATING-INCOME-LOSS> 9,621
<OTHER-INCOME-NET> (128)
<INCOME-BEFORE-INTEREST-EXPEN> 9,493
<TOTAL-INTEREST-EXPENSE> 4,956
<NET-INCOME> 4,537
0
<EARNINGS-AVAILABLE-FOR-COMM> 4,537
<COMMON-STOCK-DIVIDENDS> 4,548
<TOTAL-INTEREST-ON-BONDS> 3,569
<CASH-FLOW-OPERATIONS> 6,952
<EPS-BASIC> $1.37
<EPS-DILUTED> $1.36
<FN>
<F1>Net of accumulated depreciation of $56,126
<F2>Net of accumulated depreciation of $11,213
</FN>
</TABLE>
