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As filed with the Securities and Exchange Commission on January 27, 1995
Registration No. 33-
______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
__________________
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
__________________
COMMONWEALTH ENERGY SYSTEM
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-1662010
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE MAIN STREET
CAMBRIDGE, MASSACHUSETTS 02142-9150
(Address of principal executive offices) (Zip Code)
__________________
Employees Savings Plan of
Commonwealth Energy System and Subsidiary Companies
(Full title of Plan)
James D. Rappoli, Financial Vice President and Treasurer
One Main Street, Cambridge, Massachusetts, 02142-9150
(Name and address of agent for service)
617-225-4300
(Registrant's telephone number, including area code of agent for service)
__________________
CALCULATION OF REGISTRATION FEE
______________________________________________________________________________
Proposed Proposed
Maximum Maximum Amount
Amount Offering Aggregate Of
Title Of Securities To Be Price Per Offering Registration
To Be Registered Registered Share (1)(2) Price (2) Fee
______________________________________________________________________________
Common Shares of
Beneficial Interest
$4 Par Value,
of Commonwealth 500,000
Energy System Shares $37.50 $18,750,000 $6,465.56
(1) This amount represents the average between the high and low market price
per Common Share on January 23, 1995 (which date is within five (5)
business days of the filing hereof), as reported on the New York Stock
Exchange composite transactions tape.
(2) Estimated solely for the purpose of calculating the registration fee.
__________________
This Registration Statement relates to 500,000 Common Shares of the System to
be registered pursuant to this Registration Statement and, in addition,
pursuant to Rule 429(a) under the Securities Act of 1933, to the 22,835 unsold
Common Shares of the System registered under Registration Statement
No. 33-28435. In addition, pursuant to Rule 416(c), this Registration
Statement also covers an indeterminate amount of participations to be offered
or sold pursuant to the employee benefit plan described herein.
This Registration Statement shall become effective in accordance with Section
8(a) of the Securities Act of 1933 and Rule 462 thereunder.
The Exhibit Index is on page 11 of this report.
______________________________________________________________________________
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PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
The following documents filed by Commonwealth Energy System ("System" or
"the Registrant") (Commission File No. 1-7316) with the Securities and
Exchange Commission (SEC) are incorporated herein by reference and made a part
hereof:
1. the System's Annual Report on Form 10-K for the year ended December
31, 1993 (which included the System's 1994 Proxy Statement and 1993
Financial Information as Exhibit 1) and the Employees Savings Plan of
Commonwealth Energy System and Subsidiary Companies (the Plan) 1993
Annual Report on Form 11-K filed under cover of Form 10-K/A Amendment
No. 1;
2. the System's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1994, June 30, 1994 and September 30, 1994; and
3. the description of the System's Common Shares of Beneficial Interest,
$4 Par Value, contained in the System's Form S-3 Registration State-
ment (Registration No. 33-55593) dated September 23, 1994 filed
pursuant to Section 12 of the Securities Exchange Act of 1934.
All documents filed by the Registrant pursuant to Sections 13(a), 13(c),
14, or 15(d) of the Securities Exchange Act of 1934 subsequent to the date of
this Registration Statement and prior to the filing of a post-effective
amendment which indicates that all securities offered hereunder have been sold
or which deregisters all securities then remaining unsold shall also be deemed
to be incorporated by reference herein and to be a part hereof from the date
of filing of such documents.
Item 4. Description of Securities
Not Applicable
Item 5. Interests of Named Experts and Counsel
Experts
The consolidated financial statements and schedules of Commonwealth
Energy System and subsidiary companies for the year ended December 31, 1993
incorporated by reference in this registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
reports.
Legal Opinions
The validity of the Plan and of the Common Shares of the System has been
passed upon by one or both of Messrs. Michael P. Sullivan, Vice President,
Secretary and General Counsel and Richard J. Morrison, Assistant General
Counsel and Assistant Secretary of the System, One Main Street, P.O. Box 9150,
Cambridge, MA 02142-9150. As of January 1, 1995, Mr. Sullivan was the
beneficial owner of 2,067 Common Shares of the System.
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Item 6. Indemnification of Directors and Officers
Each trustee, officer, agent or representative is entitled to reimburse-
ment or indemnification against any and all loss, costs, expense and liability
incurred or to be incurred by him or her in good faith in the execution of his
or her duties. Each present and future trustee, officer, agent or representa-
tive is entitled to reimbursement or indemnification by the System for or
against all expenses reasonably incurred or imposed by him or her in connec-
tion with, or arising out of, any action, suit or proceeding in which he or
she may be involved by reason of his or her being or having been a trustee,
officer, agent or representative of the System, where disposition of such
action, suit or proceeding is made in favor of such trustee, officer, agent or
representative; provided that no reimbursement shall be made until such time
has elapsed that appeal can no longer be taken and that, in the judgement of
the trustees, such action, suit or proceeding will not be recommended.
No trustee, officer, agent or representative of the System shall be
liable for any act, omission, step or conduct taken or had in good faith which
is required, authorized or approved by any order or orders issued pursuant to
the Public Utility Holding Company Act of 1935, the Federal Power Act or any
state statute regulating the System or its subsidiaries. The provisions
hereof shall be brought to the attention of any court and, if found by the
court not to constitute a valid defense on the grounds of not being applicable
to the particular class of plaintiff, each such trustee, officer, agent or
representative shall be reimbursed for, or indemnified against, all expenses
and liabilities incurred by him or her or imposed on him or her, in connection
with, or arising out of, any such action, suit or proceeding based on any act,
omission, step or conduct taken or had in good faith, and such expenses and
liabilities shall include, but shall not be limited to, judgements, court
costs and attorneys' fees.
The foregoing rights shall not be exclusive of any other rights to which
any trustee, officer, agent or representative might otherwise be entitled.
The above is a summary of certain provisions of the System's Declaration
of Trust, as amended, relating to indemnification of trustees and officers of
the System.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the SEC such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
Item 7. Exemption from Registration Claimed
Not Applicable
Item 8. Exhibits
Exhibit 4. Instruments defining the rights of security-holders, including
indentures.
Commonwealth Energy System:
Filed herein by reference:
The Declaration of Trust of Commonwealth Energy System dated December
31, 1926, as amended by vote of the shareholders and trustees on May 5,
1994 has been filed by the Registrant with the SEC as Exhibit 1 to the
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Form S-3 Registration Statement dated September 23, 1994 (Registration
No. 33-55593) and is incorporated herein by reference thereto.
Filed herein by reference:
Note Agreement ($40 Million Privately Placed Senior Notes) dated June
28, 1989 between the System and several insurance companies has been
filed by the Registrant with the SEC as Exhibit 1 to the September 1989
Quarterly Report on Form 10-Q (File No. 1-7316) and is incorporated
herein by reference thereto.
Filed herewith as Exhibit 6:
Term Loan Agreement between the System and The First National Bank of
Boston dated November 24, 1993.
Subsidiary Companies of the Registrant:
Filed herein by reference:
The Indenture of Trust between Cambridge Electric Light Company and
State Street Bank and Trust Company is incorporated herein by reference
thereto:
4(b)(2) Indenture or Supplemental
Exhibit Reference
File Exhibit
Indenture of Trust Dated Form Date No. Number
Original Indenture Apr. 1949 S-1 2-7909 7(a)
Third Supplemental June 1967 10-K 1984 2-7909 1
Fourth Supplemental June 1972 10-K 1984 2-7909 2
Sixth Supplemental Apr. 1989 10-Q Jun.1989 2-7909 1
Seventh Supplemental Mar. 1992 10-Q Jun.1992 2-7909 1
Filed herein by reference:
The Indenture of Trust between Commonwealth Gas Company and State
Street Bank and Trust Company is incorporated herein by reference
thereto:
4(b)(3) Indenture or Supplemental
Exhibit Reference
File Exhibit
Indenture of Trust Dated Form Date No. Number
Original Indenture Feb. 1949 S-1 2-7820 7(a)
Sixteenth Supplemental Oct. 1986 10-K 1986 2-1647 1
Seventeenth Supplemental Dec. 1990 10-K 1990 2-1647 2
Eighteenth Supplemental Dec. 1993 10-Q Mar. 1994 2-1647 1
Filed herein by reference:
The Indenture of Trust and First Mortgage or Supplemental Indenture of
Trust and First Mortgage for Canal Electric Company are incorporated
herein by reference thereto:
Exhibit Reference
File Exhibit
No. Number
4.2.1 Indenture of Trust and First Mortgage dated
as of October 1, 1968 with State Street Bank
and Trust Company, Trustee, has been filed
on Form S-1. 2-30057 4(b)
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Exhibit Reference
File Exhibit
No. Number
4.2.2 First and General Mortgage Indenture dated as
of September 1, 1976, with Citibank, N.A.,
Trustee, has been filed on Form S-1. 2-56915 4(b)2
4.2.3 First Supplemental Indenture dated as of
September 1, 1976, to Indenture of Trust and
First Mortgage dated as of October 1, 1968
with State Street Bank and Trust Company,
Trustee, has been filed on Form S-1. 2-56915 4(b)3
4.2.4 Third Supplemental Indenture dated as of
December 1, 1990, to the First and General
Mortgage Indenture dated as of September 1,
1976 with Citibank, N.A., Trustee, has been
filed in the 1990 Form 10-K. 2-30057 3
4.2.5 Fourth Supplemental Indenture dated as of
December 1, 1990, to the First and General
Mortgage Indenture dated as of September 1,
1976 with Citibank, N.A., Trustee, has been
filed in the 1990 Form 10-K. 2-30057 4
Exhibit 5. Opinion regarding legality.
Filed herewith as Exhibit 4:
Opinion of Michael P. Sullivan, Vice President, Secretary and General
Counsel of the System.
Exhibit 10. Material agreements.
Filed herein by reference:
10.3.2 Employees Savings Plan of Commonwealth Energy System and
Subsidiary Companies as amended and restated January 1, 1993
(Exhibit 2 to System Form 10-Q (September 1993), File No. 1-
7316).
Filed herewith as Exhibit 1:
10.3.2.1 First Amendment to the Employees Savings Plan of Commonwealth
Energy System and Subsidiary Companies, as amended and restat-
ed as of January 1, 1993, Effective October 1, 1994.
Exhibit 15. Letter regarding unaudited interim financial information.
Not applicable.
Exhibit 23. Consents of experts and counsel.
Filed herewith:
- Consent of Independent Public Accountants is filed herewith as
Exhibit 3 to this Registration Statement.
- Consent of Counsel is contained in Exhibit 4 to this Registration
Statement.
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Exhibit 24. Power of attorney.
Filed herewith as Exhibit 5:
Authorization of Trustees for designated persons, as Attorney-in-Fact,
to execute any amendment or amendments to this Registration Statement.
Exhibit 27. Financial Data Schedule.
Not applicable.
Exhibit 28. Information from reports furnished to state insurance
regulatory authorities.
Not applicable.
Exhibit 99. Additional exhibits.
Filed herein by reference:
The Trust Agreement dated January 1, 1989 between Vanguard Fiduciary
Trust Company and Commonwealth Energy System (Exhibit 2 to System Form
S-8 Registration Statement, dated May 21, 1989, Commission File No.
33-28435).
Filed herewith as Exhibit 2:
An Amendment dated January 1, 1993 to the Trust Agreement dated January
1, 1989 between Vanguard Fiduciary Trust Company and Commonwealth
Energy System.
Item 9. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information
set forth in the Registration Statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Regis-
tration Statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) above
do not apply if the Registration Statement is on Form S-3 or Form
S-8, and the information required to be included in a post-effec-
tive amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to section 13 or section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
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(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securi-
ties offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the Plan.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the Registrant's Annual Report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the Registration Statement shall
be deemed to be a new registration statement relating to the securi-
ties offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securi-
ties Act of 1933 may be permitted to trustees, officers and control-
ling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of
the SEC such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a trustee, officer
or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such trustee, officer
or controlling person in connection with the securities being regis-
tered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the members
of the Savings Plan Board designated to act under the Employees Savings Plan
and Trust of Commonwealth Energy System and Subsidiary Companies have duly
signed this Registration Statement in the City of Cambridge and the Common-
wealth of Massachusetts on this 26th day of January, 1995.
THE SAVINGS PLAN BOARD:
WILLIAM G. POIST
William G. Poist
JAMES D. RAPPOLI
James D. Rappoli
MICHAEL P. SULLIVAN
Michael P. Sullivan
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Commonwealth
Energy System, a Massachusetts Trust, certifies that it has reasonable grounds
to believe that it meets all of the requirements for filing on Form S-8 and
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cambridge, Commonwealth
of Massachusetts, on the dates indicated.
COMMONWEALTH ENERGY SYSTEM
BY WILLIAM G. POIST
William G. Poist, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registra-
tion Statement has been signed below by the following persons in the capaci-
ties and on the dates indicated. Moreover, the undersigned hereby also
certify that to the best of their knowledge and belief Commonwealth Energy
System also meets all of the requirements for filing on Form S-8.
(i) Principal Executive Officer:
WILLIAM G. POIST January 26, 1995
William G. Poist,
President and Chief Executive Officer
(ii) Principal Financial Officer:
JAMES D. RAPPOLI January 26, 1995
James D. Rappoli,
Financial Vice President and Treasurer
(iii) Principal Accounting Officer:
JOHN A. WHALEN January 26, 1995
John A. Whalen,
Comptroller
(iv) A Majority of the Board of Trustees:
SINCLAIR WEEKS, JR. January 26, 1995
Sinclair Weeks, Jr., Chairman of
the Board
SHELDON A. BUCKLER January 26, 1995
Sheldon A. Buckler, Trustee
P. H. CRESSY January 26, 1995
Peter H. Cressy, Trustee
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SIGNATURES
(Continued)
HENRY DORMITZER January 26, 1995
Henry Dormitzer, Trustee
B. L. FRANCIS January 26, 1995
Betty L. Francis, Trustee
FRANKLIN M. HUNDLEY January 26, 1995
Franklin M. Hundley, Trustee
WILLIAM J. O'BRIEN January 26, 1995
William J. O'Brien, Trustee
WILLIAM G. POIST January 26, 1995
William G. Poist, Trustee
G. L. WILSON January 26, 1995
Gerald L. Wilson, Trustee
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EXHIBIT INDEX
Reference in
Number Registration Statement
in SEC
Exhibit Exhibit
Table Description Number
4 Instruments defining the rights of security-
holders, including indentures....................... *
4 Term Loan Agreement between the System and The First
National Bank of Boston dated November 24, 1993..... 6
5 Opinion of Counsel, including Consent............... 4
10 Plan Document for the Employees Savings Plan of
Commonwealth Energy System and Subsidiary Companies
Companies, as amended and restated January 1, 1993.. *
10 First Amendment to the Employees Savings Plan of
Commonwealth Energy System and Subsidiary
Companies, as amended and restated as of
January 1, 1993, effective October 1, 1994.......... 1
23 Consent of Independent Public Accountants........... 3
24 Authorization for Attorney-in-Fact to execute
amendments to the Registration Statement............ 5
99 The Trust Agreement dated January 1, 1989
between Vanguard Fiduciary Trust Company and
Commonwealth Energy System.......................... *
99 Amendment dated January 1, 1993 to the Trust
Agreement dated January 1, 1989 between Vanguard
Fiduciary Trust Company and Commonwealth
Energy System....................................... 2
______________________
* Incorporated herein by reference at pages 3 through 6.
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EXHIBIT 6
TERM LOAN AGREEMENT
COMMONWEALTH ENERGY SYSTEM
Dated as of November 24, 1993
THE FIRST NATIONAL BANK OF BOSTON
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TABLE OF CONTENTS
EDGAR
Section Title Page PAGE
SECTION 1 - DEFINITIONS AND RULES OF CONSTRUCTION
1.1 Definitions................................... 1 4
1.2 References are to Agreement................... 6 7
1.3 Accounting Terms.............................. 6 8
1.4 Number and Gender............................. 7 8
SECTION 2 - THE TERM LOAN
2.1 Closing of the Term Loan...................... 7 8
2.2 The Note...................................... 7 8
SECTION 3 - INTEREST and FEES
3.1 Interest...................................... 7 8
3.2 Closing Fee................................... 8 8
3.3 Computation of Interest and Fees.............. 8 9
SECTION 4 - PAYMENTS AND PREPAYMENTS
4.1 Installments.................................. 8 9
4.2 Prepayments................................... 8 9
4.3 Method of Payment............................. 10 10
SECTION 5 - CONDITIONS
5.1 Representations and Warranties Correct;
No Default.................................. 10 10
5.2 Proceedings and Documents..................... 10 10
5.3 Legality of Investment........................ 11 10
5.4 Opinion of Company's Counsel.................. 11 10
SECTION 6 - REPRESENTATIONS AND WARRANTIES
6.1 Organization and Qualification................ 11 11
6.2 Status under Holding Company Act, Investment
Company Act and Federal Power Act........... 12 11
6.3 Subsidiaries.................................. 12 11
6.4 Authorization and Compliance of Agreement,
Note........................................ 12 12
6.5 Business and Property......................... 13 12
6.6 Changes....................................... 13 12
6.7 Financial Statements.......................... 14 13
6.8 Actions Pending............................... 14 13
6.9 Title to Properties........................... 14 13
6.10 Taxes......................................... 14 13
6.11 Conflicting Agreements........................ 15 13
6.12 Use of Proceeds............................... 15 13
6.13 Federal Reserve Regulations................... 15 14
6.14 ERISA......................................... 16 14
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EDGAR
Section Title Page PAGE
SECTION 7 - AFFIRMATIVE COVENANTS
7.1 Financial and Business Information............ 17 15
7.2 Delivery of Certificates...................... 19 16
7.3 Notice of Default............................. 19 16
7.4 Inspection of Property........................ 19 16
7.5 Compliance with Laws.......................... 19 16
7.6 Financial Records............................. 20 16
7.7 Maintenance and Existence and Franchises...... 20 17
7.8 Payment of Taxes and Claims................... 20 17
SECTION 8 - NEGATIVE COVENANTS
8.1 Limitation on Restricted Payments............. 20 17
8.2 Limitation on Funded Debt..................... 21 17
8.3 Negative Pledge............................... 22 18
8.4 Limitation on Sale of Assets.................. 23 19
8.5 Limitation of Certain Restrictions Affecting
any Subsidiary.............................. 23 19
8.6 Limitation on Issuance of Subsidiary's Shares 24 19
8.7 Limitation on Lines of Business............... 24 20
8.8 Limitation on Transactions with Affiliates.... 24 20
8.9 Merger and Sales of Assets as an Entirety..... 25 20
8.10 Consolidated Shareholders' Equity............. 26 20
SECTION 9 - EVENTS OF DEFAULT
9.1 Acceleration.................................. 26 21
9.2 Other Remedies................................ 28 22
SECTION 10 - MISCELLANEOUS
10.1 Expenses...................................... 28 22
10.2 Consents to Waiver, Amendment, etc............ 28 22
10.3 Transfers..................................... 29 23
10.4 Immunity of Shareholders and Others........... 29 23
10.5 Survival of Representations and Warranties.... 29 23
10.6 Successors and Assigns........................ 29 23
10.7 Notices....................................... 30 23
10.8 Descriptive Headings.......................... 30 24
10.9 Governing Law................................. 30 24
10.10 Counterparts.................................. 30 24
10.11 Severability.................................. 30 24
10.12 Waiver of Jury Trial.......................... 31 24
EXHIBIT A - Promissory Note 25
EXHIBIT B - Officer's Certificate 26
EXHIBIT C - Legal Opinion 30
Schedule I - Subsidiaries 37
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TERM LOAN AGREEMENT
Dated as of November 24, 1993
THIS TERM LOAN AGREEMENT is made as of November 24, 1993, by and between
COMMONWEALTH ENERGY SYSTEM, a Massachusetts business trust having its chief
executive office at One Main Street, Cambridge, Massachusetts 02142-9150 (the
"Company") and THE FIRST NATIONAL BANK OF BOSTON, a national banking associa-
tion having its head office at 100 Federal Street, Boston, Massachusetts 02110
(the "Bank").
1. Definitions and Rules of Construction.
1.1. Definitions. For the purpose of this Agreement, the following
defined terms shall have the respective meanings specified unless the context
clearly requires otherwise:
"Affiliate" shall mean any Person directly or indirectly controlling or
controlled by or under common control with the Company or any Subsidiary,
provided that, for purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
voting securities or by voting agreement or otherwise.
"Agreement" shall mean this Term Loan Agreement, as the same may be
amended, modified or extended from time to time.
"Bank" shall have the meaning set forth in the preamble to this Agree-
ment.
"Capital Stock" shall mean any and all shares, interests, participations,
shares of beneficial interest or other equivalents (however designated) of
stock, including, without limitation, preferred stock, redeemable preferred
stock, common stock, or options or warrants relating thereto.
"Closing Date" shall mean November 24, 1993, or such other date not later
than November 30, 1993 as may be agreed upon by the Company and the Bank.
"Commission" shall mean the Securities and Exchange Commission or any
governmental body or agency succeeding to its functions.
"Company" shall have the meaning set forth in the preamble to this Agree-
ment.
"Consolidated Assets" shall mean, at any time, the consolidated assets of
the Company and its Consolidated Subsidiaries as of such time, determined in
accordance with generally accepted accounting principles.
"Consolidated Capitalization" shall mean, at any time, the sum of (i)
Consolidated Funded Debt, (ii) Consolidated Short-Term Debt and (iii) Consoli-
dated Shareholders' Equity.
"Consolidated Debt" shall mean, at any time, the consolidated Debt of the
Company and its Consolidated Subsidiaries as of such time, as determined in
accordance with generally accepted accounting principles.
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"Consolidated Funded Debt" shall mean, at any time, Consolidated Debt
that is, at such time, Funded Debt.
"Consolidated Net Income" shall mean, for any period, the amount of
consolidated net income (or net loss) of the Company and its Consolidated
Subsidiaries for such period, as determined in accordance with generally
accepted accounting principles, provided that there shall be excluded (a) any
net income (or net loss) of a Consolidated Subsidiary (i) for any period
during which it was not a Consolidated Subsidiary or (ii) to the extent that
the declaration or payment of dividends or similar distributions by that
Consolidated Subsidiary is not at the time permitted by operation of the terms
of any contract or law, and (b) any net income (or net loss) of any Person
(other than a Consolidated Subsidiary) in which the Company or any Consolidat-
ed Subsidiary has an ownership interest, except to the extent of the greater
of (i) 50% of such net income and (ii) the amount of such income as has
actually been received by the Company or such Subsidiary in the form of cash
dividends or similar distributions.
"Consolidated Shareholders' Equity" shall mean, at any time, the aggre-
gate of the par value of, or stated capital represented by, the outstanding
shares of all classes of Capital Stock of the Company on a consolidated basis,
plus (or minus, if negative) the surplus of the Company, paid in, earned and
other, if any, as stated on its books of account and determined in accordance
with generally accepted accounting principles; provided that (a) surplus
resulting from good will or its equivalents or any write-up of assets shall be
excluded, and (b) there shall be added back to surplus any deductions from
surplus occurring after December 31, 1988 in respect of losses, write-offs or
write-downs of the investment or any Consolidated Subsidiary in any generating
station (not in commercial operation as of the date hereof), as recorded on
the consolidated books of account of the Company as of December 31, 1988.
"Consolidated Short-Term Debt" shall mean, at any time, the amount of
Short-Term Debt of the Company and its Consolidated Subsidiaries as of such
time, as determined on a consolidated basis in accordance with generally
accepted accounting principles.
"Consolidated Subsidiary" shall mean, at any time, any Subsidiary or
other Person the accounts of which would be consolidated with those of the
Company in its consolidated financial statements as of such time as required
by generally accepted accounting principles.
"Debt" of any Person shall mean (a) all obligations, secured or unse-
cured, direct or indirect, for borrowed money and evidenced by bonds, deben-
tures, notes or other similar instruments (including, without limitation,
obligations with respect to letters of credit, insurance policies supporting
repayment of indebtedness for borrowed money and bankers' acceptances and
obligations), (b) all Guaranties as to which such Person shall have any
liability and (c) all obligations under capitalized leases except Subsequent
Capitalized Leases.
"Event of Default" shall mean any of the events specified in Section 9.1,
provided that there has been satisfied any requirement in connection with such
event for the giving of notice, or the lapse of time, or the happening of any
further condition, event, or act; and "Default" shall mean any such event
whether or not any such requirement has been satisfied.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
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amended.
"FERC" shall mean the Federal Energy Regulatory Commission or any
governmental body or agency succeeding to its functions.
"Funded Debt" of any Person at any date means all Debt of such Person (a)
maturing by its terms more than 12 months after the date of issuance or
creation or (b) payable on demand or maturing 12 months or less from the date
of issuance or creation if such Debt is, at the election of the Person,
renewable or extendable pursuant to the terms thereof or any instrument or
agreement relating thereto, to a date more than one year from the date of
creation or issuance of such Debt.
"Guaranty" shall mean any obligation, contingent or otherwise, of the
Company, in respect of the payment of any Debt of any other Person, or in any
manner providing for the payment of any Debt of any other Person or otherwise
protecting the holder of such Debt against loss (including without limitation
obligations arising under agreements to keep well, to furnish capital funds by
the purchase of securities or to reimburse for payments made for the benefit
of such other Person under performance letters of credit).
"Holding Company Act" shall mean the Public Utility Holding Company Act
of 1935, as amended, or any successor federal statute providing for the
regulation of public utility holding company systems.
"Lien" shall mean, with respect to any property or asset (or any income
or profits therefrom) of any Person, any mortgage, lien, pledge, attachment,
levy, charge, or other security interest or encumbrance of any kind upon or in
respect of such property or asset (or upon or in respect of any income or
profits therefrom), in each case, whether the same is consensual or nonconsen-
sual or arises by contract, operation of law, legal process or otherwise. For
this purpose, the Company or any Consolidated Subsidiary shall be deemed to
own subject to a Lien any property or asset that it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capitalized lease or other title retention agreement relating to
such property or asset.
"Net Cash Proceeds" shall mean cash payments received (including any cash
payments received by way of deferred payment of principal pursuant to a note
or installment receivable or otherwise, but only as and when received) from
disposition of assets, in each case net of all legal, title and recording tax
expenses, commissions and other fees and expenses incurred, and all federal,
state, provincial and local taxes payable as a consequence of such disposition
of assets and in each case net o all payments made on indebtedness secured by
such asset in accordance with the terms of the Lien with respect to such asset
and net of all distributions and other payments made as a result of such
disposition of assets.
"Note" shall have the meaning specified in Section 2.2(a).
"Officer's Certificate" shall mean a certificate signed in the name of
the Company by its President, one of its Vice Presidents or its Treasurer.
"Operating Utility Subsidiaries" shall mean (i) Canal Electric Company,
Cambridge Electric Light Company, Commonwealth Electric Company and Common-
wealth Gas Company, or any successor Person thereto, and (ii) any Person which
becomes a Subsidiary of the Company after the date hereof and which is engaged
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<PAGE 7>
primarily in the business of a retail gas or electric utility company as
defined by Massachusetts General Laws, Chapter 164.
"Permitted Investments" shall mean (a) direct obligations of the United
States of America or any of its agencies or obligations fully guaranteed by
the United States of America maturing in not more than one year; (b) certifi-
cates of deposit issued by the Bank or a bank or trust company organized under
the laws of the United States or any of its states, and whose long-term
obligations are rated in one of the highest three "investment-grade" rating
categories by Moody's Investors Service, Inc. and Standard and Poor's Rating
Group, maturing not more than one year after the date acquired; and (c)
commercial paper maturing in nine months or less which is given the highest
rating by a nationally recognized statistical rating organization.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust or unincorporated organiza-
tion, or government or any agency or political subdivision thereof.
"Reports" shall have the meaning specified in Section 6.5.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Short-Term Debt" shall mean at any date any Debt of a Person maturing by
the terms of the instrument whereby it is evidenced or pursuant to which it
was incurred, less than one year from the date of issuance and not extendable
or renewable by such Person at its option beyond such term.
"Subsequent Capitalized Lease" shall mean a lease in effect on the date
hereof which is not deemed to be a capitalized lease in accordance with
generally accepted accounting principles in effect at the date hereof but
which later becomes such a capitalized lease.
"Subsidiary" shall mean any corporation, business trust or realty trust
at least a majority of the outstanding Voting Stock of which shall at the time
be owned by the Company, by one or more Subsidiaries, or by the Company and
one or more Subsidiaries.
"Term Loan" shall have the meaning specified in Section 2.1.
"Voting Stock" as applied to the stock (or the equivalent thereof) of any
corporation, business trust or realty trust, shall mean stock (or such
equivalent) of any class or classes, however designated, having ordinary
voting power for the election of at least a majority of the members of the
board of directors (or other governing body) of such corporation or business
trust, other than stock (or such equivalent) having such power only by reason
of the happening of a contingency.
"Wholly Owned Subsidiary" shall mean, as applied to any Person, a
Subsidiary all of the Voting Stock of which (except directors' qualifying
shares) is, directly or indirectly, owned or controlled by such Person, or one
or more Wholly Owned Subsidiaries or by the Person and one or more such
Subsidiaries.
1.2. References are to Agreement. Unless the contact otherwise requires,
all references herein to "Sections", "Paragraphs" and other subdivisions refer
to the corresponding Sections, Paragraphs and other subdivisions of this
Agreement, and the words "herein", "hereof", "hereby", "hereunder" and words
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<PAGE 8>
of similar import refer to this Agreement as a whole and not to any particular
Section, Paragraph or other subdivision hereof.
1.3. Accounting Terms. Unless the context otherwise requires, all
accounting terms used herein shall have the meanings ascribed to them in
accordance with generally accepted accounting principles.
1.4. Number and Gender. The singular form of any word used herein,
including the terms defined in Section 1.1, shall include the plural, and vice
versa. The use of a word or any gender shall include all genders.
The Term Loan.
2.1. Closing of the Term Loan. Subject to the terms hereof, the Bank will
lend to the Company, on the Closing Date, a term loan (the "Term Loan") that
shall not exceed, in the aggregate principal amount $25,000,000. Subject to
the terms and conditions hereof, the Bank shall make the Term Loan on the
effective date specified therefor by crediting the amount of the Term Loan to
the Company's demand deposit account with the Bank.
2.2. The Note. (a) The Term Loan shall be evidenced by a promissory note
in substantially the form of Exhibit A hereto (the "Note"), payable to the
order of the Bank and having a final maturity on the second anniversary of the
Closing Date. The Note shall be dated the Closing Date and shall have the
blanks therein appropriately completed.
(b) The Bank shall, and is hereby irrevocably authorized by the Company
to, enter on the schedule forming a part of the Note or otherwise in its
records appropriate notations evidencing the date and the amount of the Term
Loan, the interest rate applicable thereto and the date and amount of each
payment of principal made by the Company with respect thereto; and in the
absence of manifest error, such notations shall constitute conclusive evidence
thereof. The Bank is hereby irrevocably authorized by the Company to attach to
and make a part of the Note a continuation of any such schedule as and when
required. No failure on the part of the Bank to make any notation as provided
in this subsection (b) shall in any way affect the Term Loan or the rights or
obligations of the Bank or the Company with respect thereto.
3. Interest and Fees.
3.1. Interest. (a) The Term Loan shall bear interest on the outstanding
principal amount thereof at a rate per annum equal to four and seven tenths of
one percent (4.70%). Such interest shall be payable on the last day of each
January, May, July and October, commencing January 31, 1994, and when the Term
Loan is due (whether at maturity, by reason of acceleration or otherwise).
(b) Overdue principal (whether at maturity, by reason of acceleration or
otherwise) and, to the extent permitted by applicable law, overdue interest
and fees or any other amounts payable hereunder or under the Note shall bear
interest from and including the due date thereof until paid, compounded daily
and payable on demand, at a rate per annum equal to one percent (1%) above the
rate otherwise then applicable to the Term Loan.
3.2. Closing Fee. The Company shall pay to the Bank a closing fee
computed at the rate of one tenth of one percent (1/10%) of the amount of the
Term Loan, payable on the Closing Date.
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<PAGE 9>
3.3. Computation of Interest and Fees. Interest and all fees payable
hereunder shall be computed daily on the basis of a year of 360 days and paid
for the actual number of days for which due. If the due date for any payment
of principal is extended by operation of law, interest shall be payable for
such extended time. If any payment required by this Agreement becomes due on a
day that is not a business day such payment may be made on the next succeeding
business day, and such extension shall be included in computing interest in
connection with such payment.
4. Payments and Prepayments.
4.1. Installments. The Term Loan shall be payable in an installment equal
to $10,000,000 on the first anniversary of the Closing Date and an installment
of $15,000,000 (or such other amount as shall equal the principal amount then
outstanding) on the second anniversary of the Closing Date.
4.2. Prepayments. (a) The Term Loan may be prepaid at any time, in whole
or in part, provided that interest accrued on the amounts so paid to the date
of such payment must be paid at the time of any such payment, together with
amounts calculated pursuant to the next following paragraph. Prepayments of
the Term Loan shall be applied to installments of principal due thereunder in
the inverse order of their maturities.
(b) If the Company for any reason makes any payment of principal with respect
to the Term Loan on any day other than the due date therefor, whether by
reason of voluntary prepayment, acceleration or otherwise, the Company shall
pay to the Bank an amount computed pursuant to the following formula:
First, the Bank shall determine, for each principal installment
that is prepaid in whole or in part, the amount by which (i) the amount
of interest which would have accrued on such installment (or prepaid
portion thereof), had such prepayment not occurred, during the period
beginning on the date of the prepayment and ending on the date on which
such installment would otherwise have been due (the "Reemployment Peri-
od"), exceeds (ii) the total amount of interest which would accrue,
during the Reemployment Period, at an interest rate (the "Reinvestment
Rate") equivalent to the yield on any readily marketable bond or other
obligation of the United States, designated by the Bank in its sole
discretion, in an amount equal (as nearly as may be) to the total amount
of principal prepaid and having a maturity comparable to the weighted
average maturity of all prepaid installments.
The determination of the Reinvestment Rate shall reflect the amortization
of any discount from par or accretion of premium above par at which such
U.S. obligation is selling at the time of designation.
Second, the Bank shall divide such excess by the number of interest
payments which the Company would have been required to make during the
Reemployment Period in respect of such principal installment (or portion
thereof). The resulting amount is herein referred to as the "Interest
Indemnity Amount".
Third, an Interest Indemnity Amount shall be treated as payable on
each date on which interest would have been payable had such principal
installment (or portion thereof) not been prepaid.
Fourth, the Bank shall determine the present value of each such
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<PAGE 10>
Interest Indemnity Amount by discounting it at the Reinvestment Rate from
the date on which it is to be treated as payable.
Fifth, the amount to be paid with respect to each such principal
installment (or portion thereof) shall be the sum of all such discounted
Interest Indemnity Amounts.
The prepayment charge shall be the sum of the amounts payable with respect to
each prepaid installment (or portion thereof), determined as aforesaid. The
Company shall pay the amount of such prepayment charge upon presentation by
the Bank of a statement setting forth the amount and the Bank's calculation
thereof pursuant hereto, which statement shall be deemed true and correct
absent manifest error.
4.3. Method of Payment. All payments and prepayments of principal and all
payments of interest, fees and other amounts payable hereunder shall be made
by the Company to the Bank at its head office in immediately available funds,
on or before 11:00 a.m. (Boston, Massachusetts time) on the due date thereof,
free and clear of, and without any deduction or withholding for, any taxes or
other payments. The Bank may, and the Company hereby authorizes the Bank to,
debit the amount of any payment not made by such time to the demand deposit
account of the Company with the Bank.
5. Conditions.
The Bank's obligation to make the Term Loan on the Closing Date is
subject to the fulfillment to the Bank's satisfaction, on or before the
Closing Date, of the following conditions:
5.1. Representations and Warranties Correct; No Default. All repre-
sentations and warranties contained in Section 6 hereof shall be true and
correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on the Closing Date except to the
extent of changes caused by the transactions herein contemplated. The Company
shall have performed and complied with all agreements and conditions contained
in this Agreement required to be performed and complied with by it on or prior
to the Closing Date, and on the Closing Date there shall exist no Event of
Default or Default. The Company shall have delivered to the Bank an Officer's
certificate, dated as of the Closing Date, to each such effect.
5.2 Proceedings and Documents. All corporate transactions, proceedings
and instruments relating to this Agreement, the Note and the making of the
Term Loan hereunder shall be reasonably satisfactory to the Bank and its
counsel; and the Bank shall have received all copies of all such documents and
other evidence as it may reasonably request in order to verify the consumma-
tion of all such transactions, the taking of all necessary proceedings in
connection therewith and compliance with the terms conditions set forth in
this Agreement, in form (as to certification and otherwise) and substance
satisfactory to the Bank and its counsel.
5.3 Legality of Investment. On the Closing Date, there shall have
occurred no change in any law or regulation or interpretation thereof that, in
the opinion of counsel for the Bank, would make it illegal or against the
policy of any governmental agency or authority for the Bank to make the Term
Loan.
5.4. Opinion of Company's Counsel. The Bank shall have received from
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<PAGE 11>
general counsel to the Company an opinion, in substantially the form of
Exhibit C hereto, dated the Closing Date and addressed to the Bank. Such
opinion shall be supplemented to cover such other matters incident to the
transactions contemplated by this Agreement as the Bank may reasonably
request.
6. Representations and Warranties.
The Company represents and warrants as follows:
6.1. Organization and Qualification. (a) The Company is duly organized,
validly existing and in good standing under the laws of The Commonwealth of
Massachusetts, and has the power and authority to own its properties and to
carry on its business as now being and hereafter proposed to be conducted,
including the execution, delivery, and performance by the Company of this
Agreement and the Note. The nature of the business transacted by the Company
does not require the Company to be qualified or licensed to do business in any
other jurisdiction other than The Commonwealth of Massachusetts.
(b) Each Subsidiary is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, has the power and
authority to own its properties and to carry on its business as now being and
hereafter proposed to be conducted and is duly qualified and is in good
standing as a foreign corporation (or other entity), and is authorized to do
business, in all jurisdictions in which the character of its properties or the
nature of its business requires such qualification or authorization, except
for qualifications and authorizations the lack of which, singly or in the
aggregate, has not had and will not have a materially adverse effect upon the
business, prospects, profits, properties or condition (financial or otherwise)
of the Company or the Company and its Consolidated Subsidiaries taken as a
whole.
6.2. Status under Holding Company Act, Investment Company Act and Federal
Power Act. The Company is a "holding company" as such term is defined in the
Holding Company Act. The Company and its Subsidiaries are exempt from all the
provisions of the Holding Company Act, except Section 9(a)(2) thereof. The
Company is required under the Holding Company Act to file an exemption
statement on Form U-3A-2 annually with the Commission and such exemption
statement is in full force and effect. The Commission has taken no action, nor
threatened to take any action, to terminate such exemption. The Company is
not, and is not directly or indirectly controlled by, or acting on behalf of,
any Person which is an "investment company" within the meaning of the Invest-
ment Company Act of 1940, as amended. The Company is not required to obtain
any authorization or approval of the FERC Under the Federal Power Act as to
the transactions contemplated hereby.
6.3. Subsidiaries. Schedule I hereto sets forth all or the Subsidiaries
of the Company and the percentages of the various classes of their Capital
Stock owned by the Company and indicates which Subsidiaries are Consolidated
Subsidiaries. The Company or another Subsidiary has the unrestricted right to
vote, and (subject to limitations imposed by applicable law) to receive
dividends and distributions on, all Capital Stock owned by the Company or such
Subsidiary. All such Capital Stock have been duly authorized and issued and
are fully paid and nonassessable. Schedule I hereto also sets forth a reason-
ably complete description of the type of business engaged in by each Subsid-
iary listed therein.
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<PAGE 12>
6.4. Authorization and Compliance of Agreement, Note. All necessary
proceedings have been taken by the Company to authorize the execution,
delivery, and performance by the Company of this Agreement and the Note in
accordance with their respective terms. This Agreement and the Note have been
duly executed and delivered by the Company and are the legal, valid and
binding obligations of the Company.
6.5 Business and Property. In connection with the making of the Term Loan
hereunder, the Bank has been furnished with a copy of (a) the Annual Report of
the Company filed with the Commission on Form 10-K for the fiscal year ended
December 31, 1992 (the "Annual Report"), (b) the Quarterly Report of the
Company filed with the Commission for the fiscal quarter ended September 30,
1993 and (c) Form U-3A-2 of the Company for fiscal year ending December 31,
1992 filed with the Commission under the Holding Company Act (collectively,
the "Reports"). The Reports accurately describe in all material respects the
general nature of the business and properties of the Company and its Consoli-
dated Subsidiaries. Neither this Agreement or the Reports nor any other
document, certificate, instrument or written statement furnished to the Bank
in connection with the transactions contemplated hereby includes any untrue
statement of any material fact or omits to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. There is no fact which the Company
has not disclosed to the Bank in the Reports which materially and adversely
affects or, so far as the Company can now reasonably foresee, will materially
and adversely affect, the business, prospects, profits, properties or condi-
tion (financial or otherwise) of the Company or the Consolidated Subsidiaries,
or the ability of the Company to perform its obligations under this Agreement
or the Note. The Company has not filed with the Commission any reports under
Section 13 or 15(d) of the Exchange Act since September 30, 1993 which have
not been furnished to the Bank.
6.6. Changes. Except as contemplated in the Reports, subsequent to the
respective dates as of which information is given in the Reports, neither the
Company nor any of its Consolidated Subsidiaries has incurred any liabilities
or obligations, direct or indirect, absolute or contingent, or entered into
any transactions, not in the ordinary course of business, which are material
to the Company or such Consolidated Subsidiary, and other than the proposed
private placement of up to $40,000,000 in Funded Debt contemplated to be
issued by Commonwealth Gas Company, there has not been any change in the
Funded Debt of the Company or any Consolidated Subsidiary, or any material
change in the Short-Term Debt of the Company or any Consolidated Subsidiary,
or any material adverse change, or any development involving a prospective
material adverse change, in the business, prospects, profits, properties or
condition (financial or otherwise) of the Company or any Consolidated Subsid-
iary.
6.7. Financial Statements. The financial statements, together with the
related notes and schedules, set forth in the Reports (a) are complete and
correct in all material respects, (b) have been prepared in accordance with
generally accepted accounting principles consistently followed throughout the
periods involved (except as otherwise set forth in the notes to such financial
statements), (c) show all known material liabilities, direct or contingent, of
the Company and each of the Consolidated Subsidiaries as of the dates thereof
and (d) fairly present, as of the dates thereof, the financial position and
the results of the operations of the Company and the Consolidated Subsidiar-
ies.
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<PAGE 13>
6.8. Actions Pending. Except as disclosed in the Reports, there is no
action, suit, investigation or proceeding (including, without limitation,
actions, suits, investigations or proceedings relating to discharge of
pollutants or wastes into the environment) pending or, to the knowledge of the
Company, threatened against the Company or any of its Consolidated Subsidiar-
ies before any court, arbitrator or administrative or governmental body, which
could reasonably be expected to materially and adversely affect the business,
prospects, profits, properties or condition (financial or otherwise) of the
Company and its Consolidated Subsidiaries.
6.9. Title to Properties. The Company and each of its Consolidated
Subsidiaries have good and marketable title in fee simple (except as their
respective interests are stated in the Reports to be otherwise) to all of
their respective real estate described in the Reports, and good title to their
other properties described in the Reports, subject only to liens described in
the Reports, leases, liens, easements and other interests in real property of
a nature, and minor defects and irregularities customarily found in properties
of like size and character, in each case which do not impair the use of the
properties affected thereby in the operation of the business of the Company or
each Consolidated Subsidiary. To the best of the Company's knowledge after due
inquiry, the Company and its Consolidated Subsidiaries each possess all
licenses, permits and franchises which are required to conduct their respec-
tive businesses as now conducted.
6.10. Taxes. The Company has and each of its Consolidated Subsidiaries
has filed when due all Federal and State income tax returns which are required
to be filed, and each has paid or made adequate provision for the payment of
all taxes as shown on said returns and on all assessments received by it to
the extent that such taxes have become due. The Federal income tax liabilities
of the Company and all of its Consolidated Subsidiaries have been examined and
reported on by the Internal Revenue Service (or closed by applicable statutes)
and satisfied for all fiscal years prior to and including the fiscal year
ended December 31, 1986.
6.11. Conflicting Agreements. Neither the Company nor any of its Consoli-
dated Subsidiaries or Affiliates is a party to any contract or agreement or
subject to any charter or other corporate restriction which, in the opinion of
the officers of the Company, materially and adversely affects the business,
properties, or condition (financial or otherwise) of the Company or the
Company and its Consolidated Subsidiaries taken as a whole. Neither the
execution and delivery of this Agreement and the Note nor fulfillment of nor
compliance with the terms and provisions of this Agreement and of the Note
will conflict with, or result in a breach of the terms, conditions, or
provisions of, or constitute a default under, or result in any violation of,
or require any authorization, consent, approval, exemption or other action by
or notice to any court or administrative or governmental body pursuant to, (a)
the Declaration of Trust of the Company or the charter and By-Laws or other
documents of governance of any of its Consolidated Subsidiaries or Affiliates,
or (b) any agreement, instrument, order, judgment, decree, statute, law
(including any securities or Blue Sky law), rule or regulation to which the
Company or any of its Consolidated Subsidiaries is subject.
6.12. Use of Proceeds. The Company will apply the proceeds of the Term
Loan to refinance certain existing indebtedness incurred pursuant to the
Demand Promissory Note dated December 2, 1992, in the original principal
amount of $25,000,000, executed by the Company to the order of the Bank.
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<PAGE 14>
6.13. Federal Reserve Regulations. Neither the Company nor any Subsidiary
will, directly or indirectly, use any of the proceeds of the Term Loan for the
purpose, whether immediate, incidental or ultimate, of buying a "margin stock"
or of maintaining, reducing or retiring any indebtedness originally incurred
to purchase a stock that is currently a "margin stock", or for any other
purpose which might constitute this transaction a "purpose credit", in each
case within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System or otherwise take or permit to be taken any action
which would involve a violation of such Regulation U or of Regulation T or
Regulation X or any other regulation of such Board. Neither the Company nor
any Consolidated Subsidiary owns or has any present intention of acquiring any
such "margin stock".
6.14. ERISA. (a) For purposes of this Section 6.14 and the remainder of
this Agreement, the term "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended; the term "Code" shall mean the Internal
Revenue Code of 1986, as amended; the term "Plan" shall mean any employee
benefit plan subject to the funding requirements of ERISA Section 302 or Code
Section 412; and the term "ERISA Affiliate" shall mean any other member of the
same controlled group of organizations within the meaning of Code Section
414(b), (c), (m) or (o) of which the Company is a member.
(b) Each Plan of the Company and any ERISA Affiliate is in compliance
with ERISA in all material respects. Neither the Company nor any ERISA
Affiliate has, since the effective date of ERISA, contributed or been required
to contribute to any "multiemployer plan" as defined in ERISA Section
4001(a)(3).
(c) As of December 31, 1992, the aggregate accumulated benefit obligation
(using an October 1, 1992 measurement date and determined in accordance with
FAS 87) for the Plans of the Company and all ERISA Affiliates did not exceed
the fair market value of the assets of such Plans.
(d) Neither any of the Plans of the Company nor any trusts created
thereunder, nor, to the Company's knowledge, any trustee or administrator
thereof, has engaged in a "prohibited transaction", as such term is defined in
Code Section 4975 and ERISA Section 406, which could subject the Plans or any
of them, any such trust, or any trustee or administrator thereof, or any party
dealing with the Plan or any such trust to a material tax or penalty on
prohibited transactions imposed by Code Section 4975 or ERISA Section 502(i).
(e) Neither any of the Plans of the Company or any ERISA Affiliate nor
any trust created thereunder has been terminated, except for the Company's Tax
Reduction Act of 1975 Employee Stock Ownership Plan and Trust, nor since the
effective date of ERISA have there been any "reportable events", as that term
is defined in ERISA Section 4043, with respect to which the applicable 30-day
notice requirement has not been waived pursuant to regulations promulgated
under ERISA.
(f) Neither the Plans of the Company or any ERISA Affiliate nor any trust
created thereunder has incurred any "accumulated funding deficiency," as such
term is defined in ERISA Section 302 (whether or not waived), since the
effective date of ERISA which is likely to result in a material liability to
the Company.
(g) The Company and/or any ERISA Affiliate has, as of the date hereof,
made all contributions or payments to or under each Plan of the Company and
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<PAGE 15>
its ERISA Affiliates required by law or the terms of such Plan or any contract
or agreement. No material liability to the Pension Benefit Guaranty Corpora-
tion has been, or is expected to be, incurred by the Company or any ERISA
Affiliate. Liability, as referred to in this Section 6.14, includes any joint
and several liability.
7. Affirmative Covenants.
So long as the Term Loan or any other amount payable hereunder or under
the Note shall remain outstanding, the Company agrees with the Bank as
follows:
7.1. Financial and Business Information. The Company will deliver to the
Bank:
(a) as soon as available and in any event within 60 days after the
end of each quarterly period (other than the last quarterly period) in
each fiscal year of the Company, (i) a consolidated and consolidating
balance sheet of the Company and its Consolidated Subsidiaries as at the
end of such quarterly period, (ii) consolidated and consolidating state-
ments of income of the Company and its Consolidated Subsidiaries for such
quarterly period and the year-to-date period and (iii) a statement of
cash flows of the Company and its Consolidated Subsidiaries for the year-
to-date period. The consolidated financial statements shall be presented
in comparative form for the applicable corresponding period or periods
for the preceding fiscal year. All financial statements shall be present-
ed in reasonable detail, prepared in accordance with generally accepted
accounting principles consistently applied (except as disclosed therein
or in the footnotes thereto), subject, however, to changes resulting from
year-end adjustments, and certified by the chief accounting or chief
financial officer of the Company;
(b) as soon as available and in any event within 105 days after the
end of each fiscal year, a consolidated and consolidating balance sheet
of the Company and its Consolidated Subsidiaries as of the end of such
fiscal year and consolidated and consolidating statements of income,
capitalization and cash flow. The consolidated financial statements shall
be presented in comparative form for the preceding fiscal year. All
financial statements shall be presented in reasonable detail, prepared in
accordance with generally accepted accounting principles consistently
applied (except as disclosed therein or in the footnotes thereto) and all
consolidated financial statements shall be audited by independent public
accountants of recognized national standing selected by the Company whose
report shall be prepared in accordance with generally accepted auditing
standards (except as may otherwise be noted in their opinion) and shall
contain such accountants' opinion as to the fairness of the financial
statements presented. Notwithstanding the foregoing, annual consolidating
financial statements need not be separately delivered so long as the
Company delivers its Form U-3A-2 pursuant to paragraph (d) below;
(c) as soon as practicable, copies of all such financial statements
and reports as it shall send to its public stockholders, if any, or
public debtholders;
(d) promptly after filing, copies of (i) all registration state-
ments (without exhibits), excluding registration statements with respect
to offerings to employees, and all regular, periodic or current reports,
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<PAGE 16>
if any, which it files with the Commission and (ii) each form U-3A-2 of
the Company filed annually with the Commission under the Holding Company
Act and any amendments or modifications thereto;
(e) a copy of each agreement pursuant to which Funded Debt of the
Company is created or incurred, and a copy of each amendment to the
Company's Declaration of Trust; and
(f) with reasonable promptness, such other financial data as the
Bank may reasonably request.
7.2. Delivery of Certificates. Together with each delivery of financial
statements required by paragraphs (a) and (b) of Section 7.1, the Company will
deliver to the Bank an Officer's Certificate in substantially the form of
Exhibit B hereto, setting forth a computation demonstrating compliance by the
Company and its Consolidated Subsidiaries with Sections 8.1, 8.2 and 8.10, and
stating that there exists no Event of Default or Default, or, if any such
Event of Default or Default exists, specifying the nature thereof, the period
of existence thereof and what action the Company proposes to take with respect
thereto.
7.3. Notice of Default. The Company also covenants that immediately upon
the chief executive officer, principal financial officer or principal account-
ing officer of the Company obtaining knowledge of (a) an Event of Default or
Default under this Agreement, or (b) a similar event under any other agreement
evidencing Funded Debt of the Company or any Consolidated Subsidiary (or
pursuant to which such Funded Debt was created), it will deliver to the Bank
an Officer's Certificate specifying the nature thereof, the period of exis-
tence thereof, and what action the Company (or such Consolidated Subsidiary)
proposes to take with respect thereto.
7.4. Inspection of Property. The Company will permit any Person designat-
ed by the Bank in writing, at the Bank's expense, to visit and inspect any of
the properties of the Company and its Consolidated Subsidiaries, to examine
all of the corporate books and financial records of the Company and its
Consolidated Subsidiaries, to make copies and extracts therefrom, and to
discuss the affairs, finances and accounts of any of such corporations with
the principal officers of the Company and with the Company's independent
public accountants, all at such reasonable times and as often as the Bank may
reasonably request.
7.5. Compliance with Laws. The Company will, and will cause its Consoli-
dated Subsidiaries to, comply in all material respects with all applicable
laws, statutes, ordinances and governmental, administrative and public rules,
regulations and orders to which it is subject, in respect of the conduct of
its business and the ownership of its properties (including, without limita-
tion, any thereof relating to equal employment opportunities and environmental
standards and controls), except such as are being contested in good faith and
by appropriate proceedings and with respect to which adequate reserves are
maintained in accordance with generally accepted accounting principles.
7.6. Financial Records. The Company will, and will cause its Consolidated
Subsidiaries to, each maintain their financial records so as to reflect
accurately their financial condition in accordance with generally accepted
accounting principles consistently applied, including, without limitation, the
maintenance of adequate reserves, except as disclosed therein or in the
footnotes thereto.
<PAGE>
<PAGE 17>
7.7. Maintenance and Existence and Franchises. The Company will at all
times prior to the complete liquidation of its assets preserve and keep in
full force and effect its existence as a business trust. The Company will, and
will cause Consolidated Subsidiaries to, preserve and keep in full force and
effect all rights, leases, licenses and franchises which are material to its
and their respective businesses.
7.8. Payment of Taxes and Claims. The Company will, and will cause its
Consolidated Subsidiaries to, pay all taxes, assessments and other governmen-
tal charges imposed upon it and its Consolidated Subsidiaries or any of its
properties or assets or in respect of any of its licenses, franchises,
businesses, income or profits before any penalty or interest accrues thereon,
and all claims (including, without limitation, all claims for labor, services,
materials and supplies) for sums which have become due and payable and which
by law have or might become a lien upon any of its property or assets,
provided, that no such charge or claim need be paid if being contested in good
faith by appropriate proceedings promptly initiated and diligently conducted
and if such reserves or other appropriate provisions, if any, as shall be
required by generally accepted accounting principles shall have been made
therefor.
8. Negative Covenants.
So long as the Term Loan or any other amount payable hereunder or under
the Note shall remain outstanding, the Company agrees with the Bank as
follows:
8.1. Limitation on Restricted Payments. (a) The Company will not declare
or pay any dividends or make any other distributions (except dividends payable
or distributions made common shares of the Company) on or in respect of the
Company's common shares and the Company will not and will not permit any
Consolidated Subsidiary to make any payment on account of the purchase,
redemption, acquisition or other payment or retirement of the Company's common
shares if (i) there has occurred and is continuing at the time of such
declaration, payment or distribution an Event of Default (except an Event of
Default arising from a failure to comply with Sections 7.1 and 7.2) or (ii)
the aggregate of all such declarations, payments and distributions after
December 31, 1988 shall exceed the Company's aggregate Consolidated Net Income
earned since December 31, 1988 plus $60,000,000 (adjusted to remove the effect
of any losses, write-offs or write-downs described in paragraph (b) of the
definition of "Consolidated Shareholders' Equity" in Section 1.1).
(b) The provisions of paragraph (a) shall not prevent the payment of any
dividend on the Company's common shares within 60 days after the date of
declaration thereof, if at such date of declaration such payment complied with
the provisions of paragraph (a).
8.2. Limitation on Funded Debt. (a) The Company will not create, assume,
guarantee, incur or otherwise become liable, directly or indirectly, in
respect of any Funded Debt, other than the Term Loan, unless on the date on
which the Company proposes to create, assume, guarantee, incur, or otherwise
become liable, directly or indirectly, in respect of such Funded Debt, and
immediately after giving effect to such Funded Debt and to the retirement of
any Debt which is being retired on such date, the aggregate amount of Consoli-
dated Funded Debt plus Consolidated Short-Term Debt does not exceed 66 2/3% of
Consolidated Capitalization.
<PAGE>
<PAGE 18>
(b) For purposes of this Section 8.2, (i) at the time that a corporation
becomes a Consolidated Subsidiary it shall be deemed to have created at such
time all the Funded Debt (including for this purpose preferred stock having a
sinking fund installment, or an obligation on the part of the Company to
repurchase shares thereof, occurring prior to the maturity of the Term Loan)
it has outstanding immediately after such time, and (ii) in case any Subsid-
iary shall sell, transfer or otherwise dispose of any Funded Debt owing by the
Company, to a Person not a Subsidiary, such sale, transfer or disposition
shall be deemed to constitute the creation by the Company of Funded Debt.
8.3. Negative Pledge. (a) The Company will not create, assume, incur or
suffer to be created, assumed or incurred or to exist any Lien upon any of the
assets (including, without limitation, the stock of any Subsidiary) or proper-
ties of any character of the Company securing any Debt, without effectively
providing that the Note (together with, if the Company shall so determine, any
other Debt of the Company) shall be secured equally and ratably with (or, at
the option of the Company, prior to) such secured Debt, so long as such
secured Debt shall be so secured; provided that nothing in this paragraph (a)
shall prevent or be deemed to prohibit the Company from incurring or suffering
to be incurred or to exist upon any of its property or assets:
(i) Liens relating to any taxes or assessments or governmental
charges or levies, if such taxes or assessments or charges or levies
shall not at the time be due and payable or if the Company shall current-
ly be contesting the validity thereof in good faith by appropriate
proceedings and shall have set aside on its books adequate reserves with
respect thereto;
(ii) Liens relating to or arising out of any judgments, if such
judgments shall not have remained undischarged, or unstayed on appeal or
otherwise, for more than 90 days;
(iii) Liens securing the performance of bids, tenders, contracts,
leases or statutory obligations;
(iv) any other claims for labor, materials and supplies which, if
unpaid, might by law become a Lien or charge upon its property, if the
Company shall currently be contesting the validity thereof in good faith
by appropriate proceedings and shall have set aside on its books adequate
reserves with respect thereto;
(v) materialmen's, mechanics', carriers', warehousemen's, work
men's, repairmen's or other like Liens if arising in the ordinary course
of business in respect of obligations which are not overdue or liability
for which is currently being contested in good faith by appropriate pro-
ceedings, or deposits to obtain the release of such Liens;
(vi) any encumbrances consisting of zoning restrictions, easements
and restrictions on the use of real property and minor defects and
irregularities in the title thereto, which do not materially impair the
use of such property by the Company in the operation of its business or
the value of such property for the purpose of such business; or
(vii) landlords' Liens under or with respect to any leases or
subleases if the property subject thereto is not needed by the Company in
the operation of its business;
<PAGE>
<PAGE 19>
(b) If the Note is to become secured in accordance with paragraph (a) of
this Section 8.3, the Company agrees to enter into a mortgage and/or security
agreement, in form and substance satisfactory to the Bank, and shall pay all
fees and expenses of the Bank in connection with the execution and delivery of
such mortgage and/or security agreement.
(c) For purposes of this Section 8.3, the Company shall not be deemed to
have effectively provided that the Note is secured equally and ratably with
(or prior to) any secured Debt unless the Bank shall have received an opinion
to such effect from a nationally recognized law firm satisfactory to the Bank
in form reasonably satisfactory to the Bank.
(d) If, upon any consolidation, merger, sale or other transfer of all or
substantially all the assets of the Company to be effected in accordance with
Section 8.9 hereof, any of the properties or assets of the Company existing
immediately prior to such transaction would thereupon become subject to any
Lien (or such properties or assets are canceled or cease to exist and any
Funded Debt of the surviving or successor Person is secured), the Company
will, prior to or simultaneously with such consolidation, merger, sale or
other transfer, secure or cause to be secured the Note (equally and ratably
with any other Funded Debt then entitled thereto).
8.4 Limitation on Sale of Assets. (a) Except as permitted by Section 8.9,
and subject to Section 8.6, the Company will not, and will not permit any
Consolidated Subsidiary to, sell, transfer or otherwise dispose of, during any
period of 12 consecutive calendar months, assets with an aggregate fair market
value (as determined by the Board of Trustees of the Company) in excess of 10%
of the book value of the Consolidated Assets, to any Person other than the
Company or a Consolidated Subsidiary.
8.5. Limitation of Certain Restrictions Affecting Any Subsidiary. (a) The
Company will not, and will not permit any Subsidiary to, create or otherwise
cause or permit to exist or become effective any consensual encumbrance or
restriction on the ability of any Subsidiary to (i) pay dividends or make any
other distributions on such Subsidiary's Capital Stock to the Company or any
Subsidiary, (ii) pay any Debt owed to the Company or any Subsidiary, (iii)
make loans or advances to the Company or any Subsidiary or (iv) transfer any
of its property or assets to the Company or any Subsidiary, which, when taken
with those restrictions existing herein or under agreements in effect at the
Closing Date, may be reasonably expected to impair the ability of the Company
to repay interest and principal on the Note when due.
(b) Not later than five business days prior to the effective date of any
consensual encumbrance or restriction described in subparagraph (a) of this
Section 8.5 to be imposed in connection with the incurrence of any Debt or
issuance of any Capital Stock having an aggregate principal amount or liquida-
tion value of $3,000,000 or more, the Bank shall receive from the Company a
certificate signed by the chief financial or chief accounting officer of the
Company to the effect that the imposition of such encumbrance or restriction
complies with this Section 8.5. Such certificate shall also include complete
copies of such encumbrance or restriction.
8.6. Limitation on Issuance of Subsidiary's Shares. The Company will not
sell any shares of Capital Stock of the Operating Utility Subsidiaries, or
permit the Operating Utility Subsidiaries to issue shares of their respective
Capital Stock or any other ownership interests to any Person other than to the
Company or to a Wholly Owned Subsidiary.
<PAGE>
<PAGE 20>
8.7. Limitation on Lines of Business. The Company will not permit more
than 15% of the book value of its Consolidated Assets to be invested in any
types of businesses other than the types of businesses in which it and its
Subsidiaries were engaged as of December 31, 1992.
8.8. Limitation on Transactions with Affiliates. The Company will not
enter into any material transaction with an Affiliate other than in the normal
course of business and to the extent permitted by law. In addition to the
limitation provided above, the Company will not enter into any material
transaction with an Affiliate on terms which, based upon the Company's
knowledge at the time of entering into such transaction, would materially
adversely affect the financial condition of the Company.
8.9. Merger and Sales of Assets as an Entirety. The Company will not
consolidate with any other corporation or accept a merger of any other
corporation or permit the Company to be merged into any other corporation, or
sell or otherwise transfer its properties and assets as, or substantially as,
an entirety, unless:
(a) immediately after such consolidation, merger, sale or transfer,
an Event of Default or Default under this Agreement shall not have
occurred and be continuing, and
(b) in the case of any such consolidation or merger, if the Company
is not the surviving Person, then the resulting Person shall (i) be
acceptable to the Bank and (ii) succeed to and be substituted for the
Company with the same effect as if such Person had been named herein as a
party hereto and shall become liable and be bound for, and shall express-
ly assume, by supplemental agreement in form and substance satisfactory
to the Bank and executed and delivered to the Bank, the due and punctual
payment of the principal of, and interest on, the Note and all other
amounts payable hereunder and thereunder and the performance and obser-
vance of each and every covenant and condition of this Agreement on the
part of the Company to be performed or observed; and
(c) immediately after such consolidation, merger, sale or transfer
the resulting, surviving or transferee Person shall be permitted, pursu-
ant to Section 8.2 hereof, to issue or create at least $1.00 in principal
amount of Funded Debt.
Upon any consolidation or merger, or any sale of the properties and
assets of the Company as, or substantially as, an entirety in accordance with
the provisions of this Section 8.9, the Person formed by such consolidation or
into which the Company shall have been merged or to which such sale shall have
been made shall succeed to and be substituted for the Company with the same
effect as if it had been named herein as a party hereto, and thereafter from
time to time such Person may exercise each and every right and power of the
Company under this Agreement, in the name of the Company or in its own name;
and any act or proceeding by any provision of this Agreement or permitted to
be done by any board or officer of the Company may be done with like force and
effect by the like board or officer of any Person that shall at the time be
the successor of the Company hereunder.
8.10 Consolidated Shareholders' Equity. The Company shall at all times
maintain Consolidated Shareholders' Equity of at least $260,000,000.
<PAGE>
<PAGE 21>
9. Events of Default.
9.1. Acceleration. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise):
(a) the failure of the Company to pay any principal of the Note,
when and as the same shall become payable, whether at stated maturity as
herein or therein expressed, by declaration as authorized by this Agree-
ment or otherwise;
(b) the failure of the Company to pay any installment of interest
on the Note, or any other amount due hereunder or thereunder, when and as
the same shall become payable, which failure shall have continued
unremedied for a period of five days;
(c) the failure of the Company to observe and perform its covenants
and agreements contained in Section 7.3 (except to the extent that any
obligations under Section 7.3 arise by operation of Sections 7.1, 7.2 or
7.4) or in Section 8 hereof;
(d) the failure of the Company to observe and perform any other of
its covenants or agreements contained in this Agreement for a period of
30 days after notice to the Company by the Bank respect to such failure;
(e) the entry of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Company or any Operating
Utility Subsidiary in an involuntary case under the Federal bankruptcy
laws, as now or hereafter constituted, or any other applicable Federal or
State bankruptcy, insolvency or other similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or
other similar official) of the Company or any Operating Utility Subsid-
iary or for any substantial part of their respective properties, or
ordering the winding up or liquidation of their respective affairs and
the continuance of any such decree or order unstayed and in effect for a
period of 90 consecutive days;
(f) the commencement by the Company or any Operating Utility
Subsidiary of a voluntary case under the Federal bankruptcy laws, as now
constituted or hereafter amended, or any other applicable Federal or
State bankruptcy, insolvency or other similar law, or the consent by it
to the appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar official) of
the Company or any Operating Utility Subsidiary or for any substantial
part of their respective properties, or the making by the Company or any
Operating Utility Subsidiary of any assignment for the benefit of their
respective creditors, or the failure of the Company or any Operating
Utility Subsidiary generally to pay their respective debts as such debts
become due;
(g) the acceleration of Debt or default in payment of Debt (after
the expiration of any applicable grace periods) under any instrument
under which there may be issued, or by which there may be secured or
evidenced, any Debt of the Company or any Operating Utility Subsidiary,
if the amount of all such Debt which has been so accelerated and with
respect to which there has been such a default in payment shall exceed
<PAGE>
<PAGE 22>
$1,000,000 in the aggregate;
(h) the rendering of a judgment or order for the payment of money
in excess of $1,000,000 against the Company or any Subsidiary and such
judgment or order shall continue unsatisfied and unstayed for a period of
30 days;
(i) any representation or warranty made by or on behalf of the
Company herein or in any certificate or other writing delivered under or
pursuant to this Agreement or in connection with any provision hereof or
related to the transactions contemplated hereby shall prove to have been
false or incorrect or breached in any material respect on the date as of
which made;
then (i) upon the occurrence of any Event of Default described in clause (e)
or (f) above, with respect to the Company, the unpaid principal amount of the
Note together with the accrued interest thereon shall automatically become
immediately due and payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by the
Company, and (ii) upon the occurrence of any other Event of Default, the Bank
may, by written notice to the Company, declare the unpaid principal amount of
the Note to be, and the same shall forthwith become, due and payable, together
with accrued interest thereon which shall be deemed matured.
9.2. Other Remedies. If any Event of Default or Default shall have
occurred and be continuing, the Bank may proceed to protect and enforce its
rights under this Agreement and the Note by exercising such remedies as are
available to such holder in respect thereof under applicable law, either by
suit in equity or by action at law, or both, whether for specific performance
of any agreement contained in this Agreement or in aid of the exercise of any
power granted in this Agreement. No remedy is intended to be exclusive and
each remedy shall be cumulative.
10. Miscellaneous.
10.1. Expenses. The Company agrees, whether or not the transactions
hereby contemplated are consummated, to pay all reasonable expense, incident
to (a) such transactions, (b) any action taken by the Bank seeking enforcement
of remedies hereunder and under the Note, and (c) any amendment of, or waiver
under or with respect to (whether or not given), this Agreement or the Note,
including in each case, without limitation, all document production expenses
(other than any such expenses arising from the preparation of this Agreement),
and all reasonable fees and expenses of the Bank's counsel for services to the
Bank in connection with such transactions or any such action, amendment or
waiver, and to reimburse the Bank for any out-of-pocket expenses related to
the transactions hereby contemplated. The Company will also pay all taxes
(including interest and penalties but excluding taxes on the Bank's net
income) which may be payable in respect of the execution and delivery of this
Agreement or the Note (but not its transfer) of any amendment of, or waiver
under or with respect to, this Agreement or the Note and will save the Bank
harmless from any loss or liability resulting from nonpayment or delay in
payment of any such tax. The obligations of the Company under this Section
10.1 shall survive the payment of the Note.
10.2. Consents to Waiver, Amendment, etc. Any provision of this Agreement
may be amended, and the Company may take any action herein prohibited, or omit
to perform any act herein required to be performed by it, and the occurrence
<PAGE>
<PAGE 23>
of any Event of Default pursuant to Section 9.1 may be waived, only with the
prior written consent of the Bank to such amendment, action or omission to
act.
10.3. Transfers. The Bank may sell or transfer, or grant participations
in, all or any part of its interest in the Note without the prior written
consent of the Company, and in the case of any such participation, the Company
agrees that any such participant shall be entitled to the benefits of Sections
10.1 and 10.12 to the same extent as if such participant were the Bank
hereunder; provided that in the case of any such participation, the Company
may, for all purposes of this Agreement, treat the Bank as the person entitled
to exercise all rights hereunder and under the Note and to receive all
payments with respect thereto.
10.4. Immunity of Shareholders and Others. No shareholder, officer or
agent of the Company shall be held to any liability for the payment of any sum
of money under this Agreement or for damages for the non-performance of
anything that shall have been agreed upon herein on behalf of the Company by
the Board of Trustees or any other officer or agent, or in tort or otherwise,
and no member of the Board of Trustees shall be held to any such liability
unless expressly stipulated to that effect and then only as a member of the
Board of Trustees and not individually; and every person, firm, association,
trust and corporation shall look only to the Trust Property of the Company as
defined in its Amended Declaration of Trust dated December 31, 1926 as amended
by vote of the Shareholders and Trustees May 7, 1987.
10.5. Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by the Company in connection
herewith shall survive the execution and delivery of this Agreement and the
Note. All statements contained in any certificate or other instrument deliv-
ered by or on behalf of the Company hereunder or in connection with the
transactions contemplated hereby shall be deemed representations and warran-
ties of the Company hereunder.
10.6. Successors and Assigns. All covenants and agreements contained in
this Agreement by or on behalf of either of the parties hereto shall bind and
inure to benefit of the respective successors and assigns of the parties
hereto (including, without limitation, direct and indirect transferees of the
Note as contemplated in Section 10.3) whether so expressed or not, and all
notices, certificates, requests, statements and other documents required or
permitted to be delivered to the Bank by any provision hereof shall also be
delivered to each such holder which is a direct or indirect transferee of the
Bank hereunder. Without the prior written consent of the Bank, the Company may
not assign or transfer its rights or obligations hereunder.
10.7. Notices. All notices, requests and other communications provided
for herein may be (a) delivered by hand, or (b) mailed by certified mail,
postage prepaid and return receipt requested, or (c) transmitted by telegram,
telex, facsimile transmission or other means of written telecommunication, in
each case addressed as follows: (i) if to the Bank, at 100 Federal Street,
Mail Stop 01-08-02, Boston, Massachusetts 02110 Attention: Energy & Utilities
Division Executive, or (ii) if to the Company, to Commonwealth Energy System,
One Main Street, P.O. Box 9150, Cambridge, Massachusetts 02142-9150, Atten-
tion: Financial Vice President. Any address may be changed from time to time
and shall be the most recent address furnished in writing to the other party.
The time period for the taking of any action hereunder shall be deemed to
commence upon receipt by the Bank or the Company, as the case may be, of the
<PAGE>
<PAGE 24>
communication relating thereto as evidenced by the return receipt or, in the
case of a hand delivery or a written telecommunication, by the confirmation of
receipt thereof.
10.8. Descriptive Headings. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
10.9. Governing Law. This Agreement and the Note shall be deemed to be
documents executed under seal and shall be construed and enforced in accor-
dance with, and the rights of the parties shall be governed by, the law of The
Commonwealth of Massachusetts excluding those applicable to choice of law.
10.10. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, and it shall
not be necessary in making proof of this Agreement to produce or account for
more than one such counterpart.
10.11. Severability. Should any part of this Agreement for any reason be
declared invalid, such declaration shall not affect the validity of any
remaining portion, which remaining portion shall remain in full force and
effect as if this Agreement had been executed with the invalid portion thereof
eliminated and it is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this Agreement without
including therein any such part, parts, or portion which may, for any reason,
be hereafter declared invalid.
10.12. WAIVER OF JURY TRIAL. THE BANK AND THE COMPANY AGREE THAT NEITHER
OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON, OR ARISING
OUT OF, THIS AGREEMENT, ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE
DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO
CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY
DISCUSSED BY THE BANK AND THE COMPANY, AND THESE PROVISIONS SHALL BE SUBJECT
TO NO EXCEPTIONS. NEITHER THE BANK NOR THE COMPANY HAS AGREED WITH OR REPRE-
SENTED TO THE OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY
ENFORCED IN ALL INSTANCES.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized officers as of the day and year first above written.
COMMONWEALTH ENERGY SYSTEM
By: J. D. RAPPOLI
Title: Financial Vice President and Treasurer
THE FIRST NATIONAL BANK OF BOSTON
By: F. SMITH
Title: Director
<PAGE>
<PAGE 25>
EXHIBIT A
PROMISSORY NOTE
November 24, 1993
$25,000,000.00 Boston, Massachusetts
For value received, the undersigned hereby promises to pay to THE FIRST
NATIONAL BANK OF BOSTON (the "Bank"), or order, at the head office of the Bank
at 100 Federal Street, Boston, Massachusetts 02110, the principal amount of
TWENTY FIVE MILLION and no/100 DOLLARS ($25,000,000 00) or such lesser amount
as shall equal the principal amount outstanding hereunder on November 24,
1995, in one installment of $10,000,000 on the date occurring one year from
the date hereof and a second installment of $15,000,000 (or such other amount
as shall then remain unpaid) on the date occurring two years from the date
hereof, in lawful money of the United States of America and in immediately
available funds; and to pay interest on the unpaid principal balance hereof
from time to time outstanding, at said office and in like money and funds, for
the period commencing on the date hereof until paid in full, at the rates per
annum and on the dates provided in the Term Loan Agreement referred to below.
All principal remaining unpaid and any accrued but unpaid interest shall in
any event be due and payable on November 24, 1995.
This Note is issued pursuant to, and entitled to the benefits of, and is
subject to, the provisions of a certain Term Loan Agreement dated as of
November 24, 1993 by and between the undersigned and the Bank (herein, as the
same may from time to time be amended or extended, referred to as the "Agree-
ment"), but neither this reference to the Agreement nor any provision thereof
shall affect or impair the absolute and unconditional obligation of the
undersigned maker of this Note to pay the principal of and interest on this
Note as herein provided
In case an Event of Default (as defined in the Agreement) shall occur,
the aggregate unpaid principal of and accrued interest on this Note shall
become or may be declared to be due and payable in the manner and with the
effect provided in the Agreement
The undersigned may at its option prepay all or any part of the principal
of this Note before maturity upon the terms provided in the Agreement.
The undersigned maker hereby waives presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.
This instrument shall have the effect of an instrument executed under
seal and shall be governed by and construed in accordance with the laws of The
Commonwealth of Massachusetts (without giving effect to any conflicts of laws
provisions contained therein).
COMMONWEALTH ENERGY SYSTEM
By: J. D. RAPPOLI
Title: Financial Vice President and Treasurer
<PAGE>
<PAGE 26>
EXHIBIT B
COMMONWEALTH ENERGY SYSTEM
OFFICER'S CERTIFICATE
COMMONWEALTH ENERGY SYSTEM (the "Company") HEREBY CERTIFIES that:
This Report is furnished pursuant to Section 7.2 of the Term Loan
Agreement dated as of November 24, 1993 (the "Agreement") by and between the
Company and THE FIRST NATIONAL BANK OF BOSTON. Unless otherwise defined
herein, the terms used in this Report have the meanings given to them in the
Agreement.
As required by Section 7.1 [(a)] [(b)] of the Agreement, consolidated and
consolidating financial statements of the Company and its Subsidiaries for the
period ended September 30, 1993 (the "Financial Statements") prepared in
accordance with generally accepted accounting principles consistently applied
accompany this Report. The Financial Statements present fairly the consolidat-
ed financial position of the Company and its Subsidiaries as at the date
thereof and the consolidated results of operations of the Company and its
Subsidiaries for the period covered thereby (subject only to normal recurring
year-end adjustments).
The figures set forth in Schedule A for determining compliance by the
Company with the financial covenants contained in the Agreement are true and
complete as of the date hereof.
The activities of the Company and its Subsidiaries during the period
covered by the Financial Statements have been reviewed by the undersigned
officer or by employees or agents under his immediate supervision. Based on
such review, to the best knowledge and belief of the undersigned officer, and
as of the date of this Report, no Default has occurred.
WITNESS my hand this 24th day of November, 1993.
COMMONWEALTH ENERGY SYSTEM
BY J. D. RAPPOLI
Title: Financial Vice President
and Treasurer
<PAGE>
<PAGE 27>
SCHEDULE A
to
EXHIBIT B
FINANCIAL COVENANTS
(Dollars in Thousands)
Restricted Payments (Section 8.1)
PERMITTED:
(i) Aggregate Consolidated Net Income
earned from December 31, 1988
to September 30, 1993 $155,556
(ii) Plus: Amount specified in Section 8.1 60,000
(iii) Total permitted Payments $215,556
ACTUAL:
(iv) Dividend Declarations, Payments and
Distributions on Common Shares from
December 31, 1988 through September 30, 1993 $136,754
<PAGE>
<PAGE 28>
COMMONWEALTH ENERGY SYSTEM
Funded debt (Section 8.2)
For The Period Ended September 30, 1993
(Dollars in Thousands)
PERMITTED: 66 2/3%
ACTUAL:
(i) Consolidated Funded Debt
Long-term debt, less premiums,
current sinking fund requirements
and maturities $403,877
Capital Lease Obligations 14,788
Guarantees and other obligations 7,724
Subtotal $426,389
(ii) Consolidated Short-Term Debt
Notes Payable $ 88,275
Maturing Long-Term Debt 7,000
Current Sinking Fund Requirements 6,793
Subtotal $102,068
(iii) TOTAL FUNDED AND SHORT TERM INDEBTEDNESS $528,457
(iv) Consolidated Shareholders' Equity
Common Share Investment $328,726
Redeemable preferred shares, less
current sinking fund requirements 15,480
(v) TOTAL CONSOLIDATED SHAREHOLDERS' EQUITY $344,206
(vi) CONSOLIDATED CAPITALIZATION
(Line (iii) plus line (v) ) $872,663
(vii) CONSOLIDATED FUNDED DEBT PLUS
CONSOLIDATED SHORT-TERM DEBT
TO CONSOLIDATED CAPITALIZATION
(Line (iii) divided by line (vi) ) 60.6%
<PAGE>
<PAGE 29>
Consolidated Shareholder's Equity (Section 8.10)
REQUIRED: $260,000
ACTUAL: (Line (v) above) $344,206
WITNESS my hand this 24th day of November, 1993.
COMMONWEALTH ENERGY SYSTEM
By: J. D. RAPPOLI
Title: Financial Vice President
and Treasurer
<PAGE>
<PAGE 30>
EXHIBIT C
COMMONWEALTH ENERGY SYSTEM ONE MAIN STREET POST OFFICE BOX 9150
CAMBRIDGE, MASSACHUSETTS 02142-9150 TELEPHONE (617) 225-4000
November 24, 1993
The First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
RE: Term Loan Agreement dated as of
November 24, 1993 by and between
THE FIRST NATIONAL BANK OF BOSTON
(the "Bank" and COMMONWEALTH
ENERGY SYSTEM (the "System")
Gentlemen:
I am Vice President, Secretary and General Counsel of Commonwealth Energy
System (the "System") and with my staff have acted as counsel in connection
with the preparation, execution and delivery of the Term Loan Agreement dated
as of November 24, 1993 (the "Agreement") between The First National Bank of
Boston (the "Bank") and the System pursuant to which the System has executed
and delivered to the Bank its Note in the principal amount of $25,000,000. All
terms defined in the Agreement shall have the same meanings herein.
I have examined executed counterparts of the Agreement and the Note and
originals, or copies, the authenticity of which has been established to my
satisfaction, of such other documents, corporate records, agreements and
instruments and certificates of public officials and officers of the System as
I have deemed necessary as the basis for the opinions herein expressed. As to
the questions of fact material to such opinions I have, when relevant facts
were not independently established, relied upon certifications by officers of
the System.
Based on the foregoing and having regard for legal considerations as I have
deemed relevant, it is my opinion that:
1. The System is duly organized, validly existing and in good standing under
the laws of The Commonwealth of Massachusetts, and has the power and authority
to own its properties and to carry on its business as now being and hereafter
proposed to be conducted, including the execution, delivery, and performance
by the System of the Agreement and the Note. The nature of the business
transacted by the System does not require the System to be qualified or
licensed to do business in any other jurisdiction other than the Commonwealth
of Massachusetts.
2. Each Subsidiary of the System is duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization, has the
power and authority to own its properties and to carry on its business as now
being and hereafter proposed to be conducted and is duly qualified and is in
good standing as a foreign corporation (or other entity), and is authorized to
do business, in all jurisdictions in which the character of its properties or
the nature of its business requires such qualification or authorization,
except for qualifications and authorizations the lack of which, singly or in
the aggregate, has not had and will not have a materially adverse effect upon
<PAGE>
<PAGE 31>
the business, prospects, profits, properties or condition (financial or
otherwise) of the System or the System and its Consolidated Subsidiaries taken
as a whole.
3. The System is a "holding company" as such term is defined in the Holding
Company Act. The System and its Subsidiaries are exempt from all the provi-
sions of the Holding Company Act, except Section 9(a)(2) thereof. The System
is required under the Holding Company Act to file an exemption statement on
Form U-3A-2 annually with the Commission and such exemption statement is in
full force and effect. The Commission has taken no action, nor threatened to
take any action, to terminate such exemption. The System is not, and is not
directly or indirectly controlled by, or acting on behalf of, any Person which
is an "investment company" within the meaning of the Investment System Act of
1940, as amended. The System is not required to obtain any authorization or
approval of the FERC under the Federal Power Act as to the transactions
contemplated by the Agreement.
4. Schedule I to the Agreement sets forth all of the Subsidiaries of the
System and the percentages of the various classes of their Capital Stock owned
by the System and indicates which Subsidiaries are Consolidated Subsidiaries.
The System or another Subsidiary has the unrestricted right to vote, and
(subject to limitations imposed by applicable law) to receive dividends and
distributions on, all Capital Stock owned by the System or such Subsidiary.
All such Capital Stock have been duly authorized and issued are fully paid and
nonassessable. Schedule I hereto also sets forth a reasonable complete
description of the type of business engaged in by each Subsidiary listed
therein.
5. All necessary proceedings have been taken by the System to authorize the
execution, delivery, and performance by the System of the Agreement and the
Note in accordance with their respective terms. The Agreement and the Note
have been duly executed and delivered by the System and are the legal, valid
and binding obligations of the System.
6. Except as previously disclosed to the Bank in the manner described in the
Agreement, there is no action, suit, investigation or proceeding (including,
without limitation, actions, suits, investigations or proceedings relating to
discharge of pollutants or wastes into the environment) pending or, to my
knowledge, threatened against the System or any of its Consolidated Subsidiar-
ies before any court, arbitrator or administrative or governmental body, which
could reasonably be expected to materially and adversely affect the business,
prospects, profits, properties or condition (financial or otherwise) of the
System and its Consolidated Subsidiaries.
7. Neither the System nor any of its Consolidated Subsidiaries or Affiliates
is a party to any contract or agreement or subject to any charter or other
corporate restriction which, in the opinion of the officers of the System,
materially and adversely affects the business, properties, or condition
(financial or otherwise) of the System or the System and its Consolidated
Subsidiaries taken as a whole. Neither the execution and delivery of the
Agreement and the Note nor fulfillment of nor compliance with the terms and
provisions of the Agreement and of the Note will conflict with, or result in a
breach of the terms, conditions, or provisions of, or constitute a default
under, or result in any violation of, or require any authorization, consent,
approval, exemption or other action by or notice to any court or administra-
tive or governmental body pursuant to, (a) the Declaration of Trust of the
System or the charter and By-Laws or other documents of governance of any of
<PAGE>
<PAGE 32>
its Consolidated Subsidiaries or Affiliates, or (b) any agreement, instrument,
order, judgment, decree, statute, law (including any securities or Blue Sky
Law), rule or regulation to which the System or any of its Consolidated
Subsidiaries is subject.
Very truly yours,
MICHAEL P. SULLIVAN
Michael P. Sullivan
Vice President, Secretary
and General Counsel
CES
MPS:fji
<PAGE>
<PAGE 33>
COMMONWEALTH ENERGY SYSTEM
Certificate of Secretary
I, Michael P. Sullivan, hereby certify as follows:
1. I am the duly elected Secretary of Commonwealth Energy System (the
"System"), a Massachusetts business trust.
2. Attached hereto as Exhibit A is a true and correct copy of the
Declaration of Trust of the System duly adopted December 31, 1926 and amended
to May 7, 1987 and in force as of the date of this Certificate.
3. There are no proceedings for amendment of the Declaration of Trust of
the System and there have been none since May 7, 1987, and there are no
proceedings for the dissolution or liquidation of the System.
4. Attached hereto as Exhibit B are certified votes of the Board of
Trustees of the System dated September 23, 1993 relating to the authority of
the System to enter into the Term Loan Agreement between the System and the
First National Bank of Boston.
5. Attached hereto as Exhibit C is a Certificate of Incumbency relating
to certain officers of the System.
IN WITNESS WHEREOF, I have hereunto set my hand this 24th day of Novem-
ber, 1993.
M. P. SULLIVAN
Secretary
<PAGE>
<PAGE 34>
COMMONWEALTH ENERGY SYSTEM (Exhibit B)
Certified Votes of Trustees
VOTED: That in order to provide this System
with funds to renew $25,000,000 in
outstanding short-term borrowings
and to provide funds for general
working capital needs, this System
issue G and sell a note or notes, in
an aggregate principal amount of up
to $50,000,000, such note or notes to
mature up to five years from the
date of execution thereof, to bear
such rate or rates of interest, and
to be subject to such other terms and
conditions as may be approved by the
President or any Vice President of
this System.
VOTED: That the President or any Vice President
of this System be and each of them hereby
is authorized and empowered to enter
into a note agreement or agreements,
between this System and its applicable note
purchasers, relating to the issue
and sale by this System of up to
$50,000,000 in notes, such notes to
mature up to five years from the date
of execution thereof, to bear such
rate or rates of interest and to be
subject to such other terms and
conditions as may be approved by the
officers executing such notes, the
execution of said notes to be
conclusive evidence that the same is
approved and authorized by this vote.
VOTED: That the proper officers of this System
be and hereby are authorized and directed
to execute such documents, give such
notice, file such reports and in general
perform such transactions as are
necessary or proper to effectuate the
purposes of the foregoing votes.
<PAGE>
<PAGE 35>
THIS IS TO CERTIFY that the undersigned is Secretary of COMMONWEALTH
ENERGY SYSTEM, a trust constituted by Declaration of Trust dated December 31,
1926, as amended; that the above and foregoing is a true and correct copy of a
vote adopted by the Trustees of said System at a meeting thereof duly convened
and held on the 23rd day of September, 1993, at which meeting the entire Board
was present and voting; and that said vote has not been annulled, revoked or
amended in any way whatsoever, but is in full force and effect.
WITNESS my hand and the seal of said System hereunto affixed this 24th
day of November, 1993.
M. P. SULLIVAN
Secretary
<PAGE>
<PAGE 36>
COMMONWEALTH ENERGY SYSTEM (Exhibit C)
Incumbency Certificate
I, Richard J. Morrison, duly elected Assistant Secretary of Commonwealth
Energy System (the "System"), hereby certify that the following named persons
have been duly elected to and now hold the respective offices in the System
stated after their names, and that the signatures appearing next to the
respective names are the genuine signatures of said officers:
Name Office Signature
James D. Rappoli Financial Vice
President and
Treasurer J.D. RAPPOLI
Michael P. Sullivan Vice President,
Secretary and
General Counsel M. P. SULLIVAN
IN WITNESS WHEREOF, I have hereunto set my hand and seal of Commonwealth
Energy System this 23rd day of November, 1993.
RICHARD J. MORRISON
Assistant Secretary
<PAGE>
<PAGE 37>
SCHEDULE I
COMMONWEALTH ENERGY SYSTEM
SUBSIDIARIES
JURISDICTION OF % OWNERSHIP
NAME OF COMPANY ORGANIZATION BY COMPANY
Electric Utilities
Cambridge Electric Light Company Massachusetts 100%
Canal Electric Company Massachusetts 100%
Commonwealth Electric Company Massachusetts 100%
Gas Utility
Commonwealth Gas Company Massachusetts 100%
Other Subsidiaries
COM/Energy Acushnet Realty Massachusetts 100%
COM/Energy Cambridge Realty Massachusetts 100%
COM/Energy Freetown Realty Massachusetts 100%
COM/Energy Research Park Realty Massachusetts 100%
COM/Energy Services Company Massachusetts 100%
COM/Energy Steam Company Massachusetts 100%
Darvel Realty Trust Massachusetts 100%
Hopkinton LNG Corp. Massachusetts 100%
All of the foregoing Subsidiaries are Consolidated Subsidiaries.
<PAGE 1>
EXHIBIT 4
ONE MAIN STREET P.O. BOX 9150 CAMBRIDGE, MASSACHUSETTS 02142
January 26, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
RE: Employees Savings Plan of Commonwealth Energy
System and Subsidiary Companies
Dear Commissioners:
Commonwealth Energy System (the "System") is seeking to register 500,000
Common Shares of Beneficial Interest, par value $4 each, ("Common Shares") of
the System in connection with the Employees Savings Plan of Commonwealth
Energy System and Subsidiary Companies (the "Plan"). The System has requested
that I furnish to you an opinion as to the legality of these securities, which
opinion is to be filed as Exhibit 4 to the System's Registration Statement on
Form S-8 relating to such securities. It is my understanding that the Plan
Trustee (Vanguard Fiduciary Trust Company) appointed pursuant to the Plan will
purchase Common Shares to be held by the Plan on the open market, through the
Dividend Reinvestment and Common Share Purchase Plan of the System or
directly from the System.
I have acted as counsel for the System in connection with its proposed
registration of the aforementioned Common Shares. I have examined the
System's Declaration of Trust dated December 31, 1926, as amended, copies of
votes of the Board of Trustees of the System, the Form S-8 Registration
Statement (the "Registration Statement") which the System proposes to file
with the Securities and Exchange Commission relative to the above-described
offering, applicable provisions of the Employment Retirement Income Security
Act of 1974 ("ERISA"), and such other documents as I have deemed pertinent. I
and members of my staff have made such examination of law as I have felt
necessary in order to render this opinion.
Based upon the foregoing, I am of the opinion and advise you as follows:
1. The Common Shares to be purchased by the Trustee on the open market
(other than those sought to be registered through the Registration
Statement) to be held by the Plan have been duly authorized for
issuance and are now validly issued, fully-paid and non-assessable,
and the Common Shares under the Dividend Reinvestment and Common Share
Purchase Plan are duly authorized for issuance and when issued in
accordance with such Dividend Reinvestment and Common Share Purchase
Plan will then be validly issued, fully paid and non-assessable.
<PAGE>
<PAGE 2>
2. The Common Shares to be registered under the Registration Statement
will be, when issued, validly issued, fully-paid and non-assessable.
I have reviewed the terms of the System's Declaration of Trust and am of the
opinion that the purpose of the above-described offering is among those
permitted under Section 22 of the System's Declaration of Trust.
The System is an unincorporated business trust with transferable shares. The
Supreme Judicial Court of Massachusetts has in some circumstances imposed
personal liability upon shareholders of an unincorporated business where the
trust provides for ultimate control by shareholders. In my opinion, while a
partnership may technically exist among the System's common shareholders, the
possibility of any such personal liability of the System's shareholders is
remote because of the provisions of the System's Declaration of Trust, which
state that shareholders are protected from personal liability on contract
obligations containing the so-called limited liability clause which the System
customarily inserts in all contract obligations, including debt securities,
and because of certain other factors.
Attached to this opinion is a copy of an undated Internal Revenue Service
("IRS") determination letter that the Plan, as amended and restated January 1,
1993, is qualified under Section 401 of the Internal Revenue Code. Further, I
have examined the First Amendment to the Plan, effective as of October 1,
1994, and on the basis of the foregoing, am of the opinion that said amendment
is in conformity with the provisions of Title I of ERISA.
I hereby consent that this opinion may be filed as an exhibit to the
Registration Statement to be filed by the System with the Securities and
Exchange Commission. I further consent to the use of my name and to all
references to me included in or made a part of the Registration Statement.
Very truly yours,
MICHAEL P. SULLIVAN
Michael P. Sullivan
Vice President, Secretary
and General Counsel
<PAGE>
<PAGE 3>
INTERNAL REVENUE SERVICE DEPARTMENT OF THE TREASURY
DISTRICT DIRECTOR
G.P.O. BOX 1680
BROOKLYN, NY 11202
Employer Identification Number:
Date: 04-1662010
File Folder Number:
113028829
COMMONWEALTH ENERGY SYSTEM AND Person to Contact:
SUBSIDIARY COMPANIES ALLAN FELSEN
ONE MAIN STREET Contact Telephone Number:
CAMBRIDGE, MA 02142-9150 (516) 683-5395
Plan Name:
EES SAVINGS PLAN OF COMMONWEALTH
ENERGY SYSTEM & SUBS COMPANIES
Plan Number: 002
Dear Applicant:
We have made a favorable determination an your plan, identified above,
based on the information supplied. Please keep this letter in your permanent
records.
Continued qualification of the plan under its present form will depend on
its effect in operation. (See section 1.401-l(b)(3) of the Income Tax
Regulations.) We will review the status of the plan in operation periodical-
ly.
The enclosed document explains the significance of this favorable
determination letter, points out some features that may affect the qualified
status of your employee retirement plan, and provides information on the
reporting requirements for your plan. It also describes some events that
automatically nullify it. It is very important that you read the publication.
This letter relates only to the status of your plan under the Internal
Revenue Code. It is not a determination regarding the effect of other federal
or local statutes.
This determination applies to plan year(s) beginning after January 1,
1993.
This determination letter is applicable for the amendment(s) adopted on
January 15, 1993.
This letter does not consider whether the coverage and nondiscrimination
requirements have been satisfied with respect to former employees.
This letter does not consider whether the coverage and nondiscrimination
requirements have been satisfied with respect to former employees or whether
the plan is nondiscriminatory with respect to current availability of rights,
benefits or features that may have been prospectively eliminated. This letter
is based upon the demonstrations you submitted under Revenue Procedure 93-10,
1993-5 I.R.B. 13. Therefore, these demonstrations are considered an integral
part of this letter. Accordingly, YOU MUST KEEP A COPY OF THESE DOCUMENTS AS
A PERMANENT RECORD OR YOU MAY NOT BE ABLE TO REPLY ON THE ISSUES DESCRIBED IN
REVENUE PROCEDURE 93-10.
<PAGE>
<PAGE 4>
-2-
The Information on the enclosed addendum is an integral part of this
determination. Please be sure to read and keep it with this letter.
We have sent a copy of this letter to your representative as indicated in
the power of attorney.
If you have questions concerning this matter, please contact the person
whose name and telephone number are shown above.
Sincerely yours,
Herbert J. Huff
District Director
Enclosures:
Publication 794
Addendum
As provided by Revenue Procedure 93-6 this determination letter does not
rule on any medical benefit provisions within the jurisdiction of section 105
of the IRC.
This letter is based on the adoption of the amended plan submitted in
your representatives letter dated November 8, 1993.
<PAGE 1>
EXHIBIT 1
FIRST AMENDMENT TO
EMPLOYEES SAVINGS PLAN OF
COMMONWEALTH ENERGY SYSTEM
AND SUBSIDIARY COMPANIES,
AS AMENDED AND RESTATED AS OF JANUARY 1, 1993,
EFFECTIVE AS OF OCTOBER 1, 1994
______________________________________________________________________________
WHEREAS, the Employees Savings Plan of Commonwealth Energy System and
Subsidiary Companies (the "Plan") was originally established effective
September 1, 1962, amended from time to time, and restated in its entirety as
of December 1, 1975, as of January 1, 1979, as of May 11, 1981, as of January
1, 1984, as of January 1, 1985, as of January 1, 1989 and as of January 1,
1993; and
WHEREAS, Section 14.01 of the Plan gives Commonwealth Energy System ("the
System") the right to amend said Plan;
NOW, THEREFORE, in consideration of the premises and of the covenants
contained herein, the System does hereby covenant and agree that the Plan
shall be amended in accordance with the following provisions effective as of
October 1, 1994 or otherwise on the effective dates stated herein.
1. Section 2.10 is hereby amended effective as of January 1, 1994, by
deleting the words "provided however, that effective for Plan Years
commencing on or after January 1, 1989, an Employee's Compensation shall
not exceed $200,000" as appears in the sixth through eighth lines of said
Section 2.10, and substituting therein the words "provided however, that
effective for Plan Years commencing on or after January 1, 1994, an
Employee's Compensation shall not exceed $150,000".
2. Section 2.12 is hereby amended effective January 1, 1994, by deleting the
number "$200,000" as appears in the ninth line of said Section 2.12 and
substituting therein the number "$150,000".
3. Section 2.12 is hereby deleted in its entirety effective as of October 1,
1994 and a new Section 2.12 is added to read as follows:
"2.12 Eligible Compensation" means the authorized rate of compensation
(including any "lump sum payment" under the authorized basic
compensation pay program) from a Participating Company, exclusive
of all compensation in the form of pay for overtime, commissions,
bonuses and the like; except that in the case of sales personnel
compensated in whole or in part by commissions, "Eligible
Compensation" means ninety percent (90%) of the average earnings
during the immediately preceding four (4) calendar quarters, but
not less than the authorized basic compensation from a
Participating Company. Notwithstanding anything contained herein
to the contrary, a Member's Eligible Compensation for any year
<PAGE>
<PAGE 2>
shall not exceed $150,000 (or such higher limit as determined by
Section 401(a)(17) of the Internal Revenue Code)."
4. Article 2 "Definitions" is hereby amended effective October 1, 1993, by
adding the following new Sections 2.22 and 2.23:
"2.22 "Fund G" means the Investment Fund or Funds forming part of the
Trust Fund consisting of the monies which the Savings Plan Board shall
direct the Plan Trustee to invest in interests of a fund whose primary
objective is to provide investment results that correspond to the
aggregate price and yield performance of an equity index." "2.23 "Fund H"
means the Investment Fund or Funds forming part of the Trust Fund
consisting of the monies which the Savings Plan Board shall direct the
Plan Trustee to invest in interests of a fund whose primary objective is
capital growth in securities on a global or international basis."
5. Section 2.22 is hereby amended effective January 1, 1994, i) by deleting
the words "Section 2.221(iii)" as appears in the third line of said
Section 2.22 and substituting therein the words "Section 2.241(iii)", and
ii) by deleting the words "Section 2.22(a)" as appears in the first line
of Section 2.22(b)(ii) and substituting therein the words "Section
2.24(a)".
6. Section 2.221(ii) is hereby amended effective January 1, 1994, i) by
deleting the words "2.221(iii)" as appears in the second line of said
Section 2.221(ii) and substituting therein the words "Section 2.241(iii);
and ii) by deleting the words "2.22(a)iii or (iv), or Section 2.22(b)
(ii)" as appears in the eighth line of said Section 2.221(ii) and
substituting therein the words "Section 2.224(a)(iii) or (iv), or Section
2.24(b)(ii)".
7. Article 2 is hereby amended effective October 1, 1993, by renumbering
Sections 2.22, 2.221, 2.23, 2.24, 2.25, 2.26, 2.27, 2.28, 2.29, 2.30,
2.31, 2.32, 2.33, 2.34, 2.35, 2.36, 2.37, 2.38, 2.39, 2.40, 2.41, 2.42,
2.43, 2.44, 2.45, 2.46 and 2.47 as Sections 2.24, 2.241, 2.25, 2.26,
2.27, 2.28, 2.29, 2.30, 2.31, 2.32, 2.33, 2.34, 2.35, 2.36, 2.37, 2.38,
2.39, 2.40, 2.41, 2.42, 2.43, 2.44, 2.45, 2.46, 2.47, 2.48 and 2.49,
respectively.
8. Section 5.01 is hereby amended effective as of October 1, 1994 by
deleting the last sentence of such Section 5.01 and substituting therein
the following:
"A change in the Member's Eligible Compensation shall not affect the
amount of such Member's deferral until the Calendar Quarter coincident
with or next following such change in Eligible Compensation (except
that the amount deferred on a lump sum payment under the authorized
basic compensation pay program will be calculated and deferred on the
payroll period in which the lump sum payment is made)".
9. Section 5.01 is hereby further amended effective as of November 1, 1994
by deleting the last sentence of such Section 5.01 and substituting
therein the following:
"The amount deferred shall be credited to the Member's Pay Deferral
Account on a payroll period basis (except that the amount deferred on
<PAGE>
<PAGE 3>
a lump sum payment under the authorized basic compensation pay program
will be calculated and deferred on the payroll period in which the
lump sum payment is made effective October 1, 1994)".
10. Section 5.05 is hereby amended effective as of July 1, 1994, i) by
deleting the words "(in multiples of ten (10))" as appears in the second
line of said Section 5.05 and substituting therein the words "in at least
one percent (1%) increments"; ii) by deleting the words "January 1, 1993"
as appears in the sixteenth line of said Section 5.05 and substituting
therein the words "July 1, 1994"; and iii) by deleting the words "at any
time, but not more than once per calendar month" as appears in the
nineteenth line of said Section 5.05 and substituting therein the words
"once a day".
11. Section 5.06 is hereby amended effective July 1, 1994, by deleting the
words "at any time, but not more than once per calendar month" as appears
in the seventh and eighth lines of said Section 5.06, and substituting
therein the words "once a day".
12. Section 5.13 is hereby amended effective October 1, 1993, by deleting the
words "(as defined in Section 2.221(i)" as appears in the fourth and
fifth lines of said Section 5.13 and substituting therein words "(as
defined in Section 2.241(i))".
13. Article 8 "Distribution of Benefits" is hereby amended effective November
1, 1994 by adding the following new Section 8.12:
"8.12 The Plan Administrator may authorize the Plan Trustee to make a
distribution to an Alternate Payee pursuant to a Qualified
Domestic Relations Order as soon as administratively practicable
after the Valuation Date next following the date the Plan Agent
determines that the Order is a Qualified Domestic Relations Order,
subject to any deferred distribution date specified by a court of
lawful jurisdiction in the Qualified Domestic Relations Order."
14. Section 10.03 is hereby deleted in its entirety effective as of October
1, 1994, and a new Section 10.03 is added to read as follows:
"10.03 Request for Loan. A Member who is currently making Pay Deferral
Contributions to the Plan may request a loan in writing on a form
provided by the Plan Trustee".
15. Section 15.121 is hereby revised effective July 1, 1994, by deleting the
number "$200,000" as appears in the fifth line of said Section 15.121 and
substituting therein the number "$150,000".
<PAGE>
<PAGE 4>
IN WITNESS WHEREOF, Commonwealth Energy System, Cambridge Electric Light
Company, Canal Electric Company, Commonwealth Gas Company, COM/Energy Services
Company and Commonwealth Electric Company have caused this Amendment No. 1 to
be duly executed in their name and on their behalf, this 21st day of November,
1994, effective as of the dates set forth herein.
COMMONWEALTH ENERGY SYSTEM*
CAMBRIDGE ELECTRIC LIGHT COMPANY
CANAL ELECTRIC COMPANY
COMMONWEALTH GAS COMPANY
COM/ENERGY SERVICES COMPANY
COMMONWEALTH ELECTRIC COMPANY
By WILLIAM G. POIST
W. G. Poist
President of Commonwealth Energy System
and Chairman of its Subsidiary Companies
By MICHAEL P. SULLIVAN
M. P. Sullivan
Secretary of Commonwealth Energy System
and Clerk of its Subsidiary Companies
* The name "Commonwealth Energy System" means the trustees for the time being
(as trustees but not individually) under a declaration of Trust dated December
31, 1926, as amended, which is hereby referred to, and a copy of which has
been filed with the Secretary of the Commonwealth of Massachusetts. Any
agreement, obligation or liability made, entered into or incurred by or on
behalf of said System binds only the trust estate, and no shareholder,
director, trustee, officer or agent assumes, or shall be held to, any
liability by reason therefore.
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EXHIBIT 3
CONSENT
(a) The consent of Michael P. Sullivan, Vice President, Secretary and
General Counsel of the System is contained in his opinion, filed as Exhibit 4.
(b) The consent of Arthur Andersen LLP is set forth below.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Form S-8 Registration Statement of our reports dated
February 17, 1994 included or incorporated by reference in Commonwealth Energy
System's Annual Report on Form 10-K for the year ended December 31, 1993 and
to all references to our Firm in this registration statement.
ARTHUR ANDERSEN LLP
Arthur Andersen LLP
Boston, Massachusetts,
January 26, 1995.
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EXHIBIT 5
TO THE SECURITIES AND EXCHANGE COMMISSION:
We, the undersigned officers and trustees of Commonwealth Energy System,
hereby authorize and direct James D. Rappoli, John A. Whalen and Michael P.
Sullivan, or any one of them, as Attorney-in-Fact, to execute in the name and
on behalf of each of the undersigned persons and in the respective capacities
indicated below, any amendment or amendments to the registration statement on
Form S-8 of Commonwealth Energy System under the Securities Act of 1933,
relative to the Employees Savings Plan of Commonwealth Energy System and
Subsidiary Companies.
Witness our hands and common seal on the respective dates set forth below.
(i) Principal Executive Officer:
WILLIAM G. POIST January 26, 1995
William G. Poist,
President and Chief Executive Officer
(ii) Principal Financial Officer:
JAMES D. RAPPOLI January 26, 1995
James D. Rappoli,
Financial Vice President and Treasurer
(iii) Principal Accounting Officer:
JOHN A. WHALEN January 26, 1995
John A. Whalen,
Comptroller
(iv) A Majority of the Board of Trustees:
SINCLAIR WEEKS, JR. January 26, 1995
Sinclair Weeks, Jr., Chairman of
the Board
SHELDON A. BUCKLER January 26, 1995
Sheldon A. Buckler, Trustee
PETER H. CRESSY January 26, 1995
Peter H. Cressy, Trustee
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SIGNATURES
(Continued)
HENRY DORMITZER January 26, 1995
Henry Dormitzer, Trustee
B. L. FRANCIS January 26, 1995
Betty L. Francis, Trustee
FRANKLIN M. HUNDLEY January 26, 1995
Franklin M. Hundley, Trustee
WILLIAM J. O'BRIEN January 26, 1995
William J. O'Brien, Trustee
WILLIAM G. POIST January 26, 1995
William G. Poist, Trustee
G. L. WILSON January 26, 1995
Gerald L. Wilson, Trustee
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EXHIBIT 2
This Amendment, made as of this first day of January, 1993 ("Amendment")
to the Trust Agreement dated as of January 1, 1989 (the Trust Agreement") is
by and between COMMONWEALTH ENERGY SYSTEM, a voluntary association organized
under the laws of the Commonwealth of Massachusetts (hereinafter referred to
as the "System") and VANGUARD FIDUCIARY TRUST COMPANY, a trust company
incorporated under Chapter 10 of the Pennsylvania Banking Code, (hereinafter
referred to as the "Plan Trustee").
WITNESSETH:
WHEREAS, the System and its subsidiary companies have adopted and
maintain the Employees Savings Plan of Commonwealth Energy System and
Subsidiary Companies ("the Plan") for the exclusive benefit of their
employees, and:
WHEREAS, the System and the Plan Trustee are parties to that certain
Trust Agreement dated as of January 1, 1989, pursuant to which the System pays
such sums of money to the Plan Trustee under the Plan and the Plan Trustee
holds, invests, reinvests and administers such funds in accordance with the
terms of the Plan and the Trust Agreement, and:
WHEREAS, the System and the Plan Trustee wish to amend said Trust
Agreement in order to reflect certain amendments to the Plan relative to the
establishment of a post retirement medical subaccount under the Plan;
NOW THEREFORE, in consideration of the mutual covenants contained herein,
the System and the Plan Trustee, intending to be legally bound, hereby agree
as follows:
1) Notwithstanding anything set forth in the Trust Agreement to the
contrary, the Plan Trustee agrees that it shall establish and maintain a
separate fund under the Trust Agreement relative to the Plan participants'
medical subaccounts, and shall separately account and maintain records
relative to all contributions, earnings, losses and distributions of funds
maintained on behalf of such participants' post retirement medical
subaccounts.
2) Except as is expressly amended herein, the System and the Plan Trustee
agree that the Trust Agreement shall remain in full force and effect as is set
forth therein.
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IN WITNESS WHEREOF, the System and the Plan Trustee has caused this
instrument to be executed by their duly authorized officers as of the day and
year first written above.
Attest: COMMONWEALTH ENERGY SYSTEM*
RICHARD J. MORRISON By R.D. WRIGHT
Vice President
Attest: VANGUARD FIDUCIARY TRUST COMPANY
NANCY D. HIGGS By R. GREGORY BARTON
Vice President
*The name "Commonwealth Energy System" means the trustees for the time being
(as trustees but not individually) under a Declaration of Trust dated December
31, 1926, as amended, which is hereby referred to, and a copy of which has
been filed with the Commissioner of Corporations and Taxation of The
Commonwealth of Massachusetts. Any agreement, obligation or liability made,
entered into or incurred by or on behalf of said System binds only the trust
estate, and no shareholder, director, trustee, officer or agent assumes, or
shall be held to, any liability by reason thereof.
