File No. 70-8076
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 10
(Post-Effective Amendment 2)
to
APPLICATION/DECLARATION
ON FORM U-1
under
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
(The "Act")
NORTHEAST UTILITIES HEC INC.
174 Brush Hill Avenue 24 Prime Parkway
West Springfield, MA 01089 Natick, MA 01760
HEC ENERGY CONSULTING CANADA INC HEC INTERNATIONAL
285 YORKLAND BLVD CORPORATION
Willowdale, Ontario 24 Prime Parkway
M2J 1S5 Natick, MA 01760
HECI
1800 Harrison St.
Oakland, CA 94612
(Name of company filing this statement and address of
principal executive office)
NORTHEAST UTILITIES
(Name of top registered holding company)
Jeffrey C. Miller
Assistant General Counsel
Northeast Utilities Service Company
P.O. Box 270
Hartford, CT 06141-0270
(Name and address of agent for service)
The Commission is requested to mail signed copies of all orders, notices and
communications to:
Jeffery D. Cochran
Counsel
Northeast Utilities Service Company
P.O. Box 270
Hartford, CT 06141-0270
The application/declaration in this proceeding, as previously amended,
is further amended as follows:
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS
The first paragraph under the heading "Joint Ventures with Utilities" is
amended by adding the following sentence at the end of that paragraph:
The organizational documents governing such joint ventures will
expressly limit these entities' activities to the activities that HEC is
authorized to engage in.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
ITEM 6 is amended by deleting the text of this item as previously filed and
substituting the following in lieu thereof:
A. Exhibits
Exhibit A-1 - Copy of Articles of Organization of HEC (previously filed)*
Exhibit A-2 - Copy of by-laws of HEC (previously filed)*
Exhibit B - Form of Joint Venture Agreement (filed herewith)**
Exhibit F-1 - Opinion of Counsel (filed herewith)
Exhibit G - Form of Notice (previously filed)
* Filed as exhibits to its 1990 U-1 application/declaration (File No. 70-
7698).
** The actual joint venture agreements executed may vary slightly from the
attached form, but they will not change substantially and shall remain within
the parameters of the Commission's order, unless subsequent authorization is
obtained.
B. Financial Statements
1.1 Balance Sheet - HEC Inc., as of March 31, 1995, actual and pro forma
(filed herewith)
1.2 Statement of Income - HEC Inc., as of March 31, 1995, & Retained
Earnings, actual and pro-forma (filed herewith)
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned companies have duly caused this Amendment to their
application/declaration to be signed on their behalf by the undersigned
thereunto duly authorized.
NORTHEAST UTILITIES
HEC INC.
HEC ENERGY CONSULTING CANADA INC.
HEC INTERNATIONAL CORPORATION
HECI
By /s/Jeffery D. Cochran
Their Counsel
Dated: July 14, 1995
Exhibit B
Joint Venture Agreement
Between
HEC International Corporation
and
Partner Electric Power Company
This Joint Venture Agreement, is made and entered into as of the day of
1995, by and between HEC International Corporation, a
Massachusetts corporation with offices at 24 Prime Parkway, Natick,
Massachusetts 01760 (HEC International) and Partner Electric Power Company a
Corporation, with offices at (PEPC). HEC
International is a wholly-owned subsidiary of HEC Inc. (HEC).
RECITALS
HEC International and PEPC (collectively herein, the "Participants") hereby
agree to form a Joint Venture to engage in the energy services business in a
defined territory. Through the Joint Venture, HEC International will provide
PEPC with a dedicated source of energy services to further PEPC goals for
conservation and load management, providing additional services to retail and
wholesale customers, increasing energy sales through the application of
electrotechnologies and penetration of new markets and developing income from
unregulated business opportunities. Such energy services business is
described with more specificity in Article 2 of this Agreement. The Joint
Venture will draw on the market presence of PEPC and the technical
capabilities of HEC International.
HEC International and PEPC further propose that the Joint Venture take the
form of a limited liability company.
Now, therefore, in consideration of the mutual covenants and agreements
herein contained, the Participants hereby covenant and agree as follows:
ARTICLE 1 FORMATION OF VENTURE
1.1 Formation. HEC International and PEPC hereby form a limited liability
company (the "Joint Venture") for the purposes hereinafter set forth.
1.2 Name. The name of the Joint Venture shall be
and the Joint Venture shall be a Delaware limited liability company. The
Joint Venture shall execute, publish and/or file any and all assumed or
fictitious names, or other similar certificates required by law in connection
with the formation and operation of the Joint Venture.
1.3 Principal Office. The principal office and headquarters of the Joint
Venture shall be or such other place as the Managing
Board (as defined below) may, from time to time, determine.
1.4 Term. The Joint Venture shall commence on the date of this Agreement
and shall terminate on unless sooner terminated as
otherwise provided in this Agreement or by law.
ARTICLE 2 PURPOSES AND POWERS
2.1 Purposes. The Joint Venture is formed to provide Energy Services (which
are listed below and which HEC International is authorized by the Securities
and Exchange Commission ("SEC") to engage in) to customers located in the
Service Territory (as defined below). The Joint Venture may also engage in
any such other business that HEC International is, at such time, authorized
by the SEC to engage in and that is approved by the Managing Board.
a. Engineering consulting services to energy consumers including evaluation
of energy consumption patterns, analysis of existing energy systems,
development of energy conservation measures, feasibility studies, design of
energy-consuming systems and related structures and equipment, cost and
savings estimates, life cycle costing of designs, review of new construction
plans, evaluation of electrotechnologies and applications, development of
facility master plans, and other related engineering services.
b. Engineering and other engineering consulting services to entities
concerned with energy consumption (government agencies, utilities,
development banks and trade groups) including the design, implementation and
evaluation of demand-side management programs, evaluation, design and
implementation of electrotechnologies, assistance in customer marketing and
retention efforts.
c. Construction services including project management, construction of
energy consuming systems or energy conservation measures, design/build
services, system commissioning and related construction services.
d. Improved energy efficiency through special operation and maintenance
techniques for boiler and chiller systems.
e. For projects described in subparagraphs a, b, and c above, financing
services including identification of financing sources, assistance in
arranging financing for projects, providing construction financing (if
permanent financing is available), providing project investment under DSM
contracts, review of financial feasibility, assistance in obtaining
government, utility or grant financial support for projects.
f. Verification and monitoring of energy consumption or savings, post-
installation review of savings persistence using engineering techniques and
savings guarantees.
The Service Territory includes all customers located in the states of
. Projects for customers with sites both within the
Joint Venture Service Territory and outside of Joint Venture Service
Territory will be pursued by the Joint Venture upon the written approval of
HEC International and PEPC. The Joint Venture will not undertake projects in
service territories of other HEC joint ventures. It is the intent of both
Participants that all projects for customers in the Joint Venture Service
Territory that fall within the definition of the Joint Venture Energy
Services will be entered into and performed by the Joint Venture, unless both
Participants agree that a project is not appropriate for the Joint Venture.
The following projects are specifically excluded from Joint Venture:
a. By mutual agreement, contracts entered into prior to this agreement or
pursuant to a proposal submitted before the execution of this Agreement by
HEC International, HEC or PEPC. See Attachment A for a list of excluded
contracts and proposals.
The Joint Venture will be marketed as a joint venture of PEPC and HEC,
offering comprehensive Energy Services.
2.2 Powers. The Joint Venture shall have such powers as necessary or
appropriate to carry out the purposes of the Joint Venture and for the
protection and benefit of the Joint Venture, including without limitation,
the following powers:
a. to make such investments as the Managing Board deems advisable and
approves;
b. to have and maintain one or more offices within the Service Territory,
and in connection therewith to rent, lease or purchase office or other space,
facilities and equipment, to engage and pay personnel and do such other acts
and things and incur such other expenses on its behalf as may be necessary or
advisable in connection with the maintenance of such office or the conduct of
the Joint Venture;
c. to open, maintain and close bank accounts, and to draw checks and other
orders for the payment of money;
d. to employ and dismiss from employment any and all employees, agents or
independent contractors;
e. to sue and to defend suits, to prosecute, settle or compromise claims
against others, to compromise, settle or accept judgments or claims against
the Joint Venture and to execute all documents and make any representations,
admissions and waivers in connection therewith;
f. to enter into, make and perform all such contracts, agreements and other
undertakings, including indemnity agreements, as may be necessary or
advisable or incident to carrying out the foregoing purposes;
g. to borrow money from the Participants for any business object or purpose
of the Joint Venture; to issue evidences of indebtedness and to secure the
payment thereof by the creation of an interest in the property or rights of
the Joint Venture; and
h. to take such other actions as the Managing Board may deem necessary or
advisable in connection with the foregoing, including the retention of
agents, independent contractors, attorneys, accountants and other experts
selected by the Managing Board on behalf of and at the expense of the Joint
Venture, and in connection with the preparation and filing of all Joint
Venture tax returns.
Although the Joint Venture may engage in any or all of the above activities,
the Joint Venture need not engage in any one or more of them.
ARTICLE 3 INTERESTS AND CAPITAL OF PARTICIPANTS
3.1 Interests. The initial interest of the respective Participants in the
assets, liabilities, profits and losses of the Joint Venture shall be as
follows:
HEC International 50 percent
PEPC 50 percent
The Interest of a Participant at any time shall be equal to the Participant's
Capital Account as defined in section 5.4 divided by the total of all Capital
Accounts of the Joint Venture.
3.2 Initial Capital Contributions. HEC International shall contribute to
the Joint Venture, all of the assets listed on Schedule B attached hereto,
the right to use the space leased by HEC in , the assignment of HEC
staff also listed on Schedule B to the operation of the Joint Venture, all of
which the Participants agree has a fair market value of $ . PEPC
will contribute, as its capital contribution $ .
3.3 Additional Capital Contributions. The Managing Board may call for
additional capital contribution to the Joint Venture, provided that the
timing and amount of such call must be reasonable in view of the current and
reasonably foreseeable future needs of the Joint Venture. It is expected
that capital contributions required under the annual budget will be made
monthly so that the Joint Venture will be able to meet its obligations. The
amount to be contributed by each Participant shall be in the same proportion
as each Participant's percentage interest in the Joint Venture, provided
however that no Participant shall be required to make total contributions
which in the aggregate shall exceed $1 million, unless otherwise agreed by
the Participants.
3.4 Loans by Participants. Any Participant may lend funds to the Joint
Venture (i) upon the prior written approval of all Participants in the amount
approved, (ii) upon the occurrence of Insolvency or an Event of Default, as
described in Article 8, of the other Participant in the amount needed by the
Joint Venture to meet its obligations, or (iii) upon the failure of the other
Participant to make an additional capital contribution called for by the
Managing Board in the amount of the defaulting participant's unmet capital
call. Any loan made by a Participant to the Joint Venture shall be on an
open account basis and shall bear interest at the rate paid by HEC to the
Northeast Utilities System Money Pool.
3.5 Allocation of Profits and Losses. The profits and losses of the Joint
Venture shall be allocated to the Participants in accordance with the
Participants' percentage Interests.
3.6 No Withdrawals. The capital of the Joint Venture shall not be withdrawn
except as hereinafter expressly stipulated.
3.7 Distributions. The Joint Venture shall distribute such cash or other
property of the Joint Venture to Participants as may be approved by the
Managing Board from time to time. Except for distributions made as a part of
liquidation of the Joint Venture as called for in section 14.5, the priority
of distributions shall be first to the payment of interest and principal of
any loans from Participants made pursuant to section 3.4 and secondly a
distribution of profits or capital accounts in shares equal to their
respective interests as specified in Article 3.1.
ARTICLE 4 MANAGEMENT OF THE JOINT VENTURE
4.1 Participant Approval. Where approval of an action requires approval of
the Participants, such actions shall be in writing signed by both
Participants. Each Participant shall designate a representative of the
Participant for actions not within the authority of the Managing Board. A
Participant may remove its designated representative by providing written
notice to the other Participant and to the Joint Venture. Approval or action
taken by a Participant's designated representative shall constitute binding
approval or action by that Participant.
4.2 Managing Board Powers. Except as reserved to the Participants in this
Agreement, the business and affairs of the Joint Venture shall be managed
under the direction of the Managing Board, and the Managing Board shall have
all power and authority to manage, and direct the management and the business
and affairs of the Joint Venture. Any power not delegated pursuant to a
policy of delegation adopted by the Managing Board shall remain with the
Managing Board. Approval by or action taken by the Managing Board in
accordance with this Agreement shall constitute approval or action by the
Joint Venture and shall be binding on the Participants.
4.3 Managing Board. The Managing Board shall at all times consist of four
members, two appointed by each of the Participants (the "Members"). If a
Participant defaults or becomes insolvent under Article 8, the non-defaulting
or solvent Participant may appoint a fifth member of the Managing Board.
Each of the Participants may remove any Member appointed by it by delivering
written notice of such removal to the Joint Venture and to the other
Participant. Each Member shall serve until (i) his successor is designated
by the Participant that appointed him or (ii) his earlier resignation,
removal, death, or inability to serve. Appointment of a Member by a
Participant shall be effective upon receipt of notice by the Joint Venture
and the other Participant from the Participant taking such action.
4.4 Managing Board Meetings. Regular meetings of the Managing Board shall
be held at least once a quarter or at such other times as may be fixed by the
Managing Board. Each Participant or the Joint Venture Manager may convene a
special meeting of the Managing Board upon two days written notice. The
presence in person or by proxy of a majority of Members of the Managing Board
shall constitute a quorum for transaction of business at a Managing Board
meeting. The majority vote of Members present at a duly constituted meeting
shall constitute approval by the Managing Board except for the approval of
the annual business plan, which shall require unanimous approval of the
Managing Board. The Managing Board may act without a meeting if the action
taken is approved in advance in writing by the unanimous consent of all
Members of the Managing Board.
4.5 Authority of the Managing Board. Unless otherwise agreed to in writing
by the Participants, the Managing Board shall have the right, power and
authority to take the following actions and no such action will be taken
without the approval of the Managing Board:
a. making overall policy decisions with respect to the business and affairs
of the Joint Venture;
b. approving the annual budget and strategic plan for the Joint Venture
including additional capital contributions needed to meet the operating needs
for the year, and any material amendments and supplements thereto;
c. approving all employment and compensation policies and the hiring,
salary, promotion, transfer, or termination of any employee of Joint Venture,
or of any HEC International employee assigned to Joint Venture;
d. approving all proposals to customers of the Joint Venture with a value
in excess of $ ;
e. approving all client contracts of the Joint Venture with a value in
excess of $ ;
f. approving all subcontracts and expenditures of the Joint Venture in
excess of $ ;
g. approving the choice of bank depositories and approving arrangements
relating to signatories on bank accounts;
h. approving the acquisition or disposal of Joint Venture assets outside of
the annual budget.
4.6 Joint Venture Manager. The Members of Managing Board appointed by the
Participants shall jointly agree on and appoint a manager who will manage the
day-to-day affairs of the Joint Venture, carry out the direction of the
Managing Board and effectuate the business plan as set forth in the annual
budget and strategic plan. The Joint Venture Manager shall prepare the
annual plan and budget and submit it for approval by the Managing Board by
the end of the preceding year. If the Managing Board is unable to approve
the submitted plan, the plan shall be amended until approval is obtained. If
no plan is approved, the last annual plan and budget approved by the Managing
Board will be the annual budget and plan. Further, the Joint Venture Manager
shall obtain approval of the Managing Board before taking any action not
contemplated by the plan and budget. The Managing Board shall indicate in
writing the authority of the Joint Venture Manager to bind the Joint Venture
on contracts and otherwise in dealing with third parties.
ARTICLE 5 TRANSACTIONS WITH PARTICIPANTS OR AFFILIATES
5.1 Marketing Assistance by Participants. HEC International and PEPC will
assist in the preparation of Joint Venture proposals. The Participants will
allow the Joint Venture to use its marketing materials, including brochures,
statements of corporate capabilities, resumes, client references and other
collateral marketing material. PEPC will take the lead in identifying
opportunities and HEC International will take the lead in developing the
technical response included in the proposal. A Joint Venture proposal may
also incorporate services offered by the Participants in addition to Energy
Services, at prices and terms approved by the Participants. HEC
International and PEPC will refer leads (requests for proposals, telephone
calls requesting information or other indications of potential client
interest) for Energy Services within the Service Territory to the Joint
Venture. The Joint Venture will not pay for the staff time of Participants
devoted to marketing the Joint Venture. However, the Joint Venture will
reimburse out-of-pocket expenses such as travel and related expenses, if
authorized in advance by the Joint Venture.
5.2 Project-Related Assistance by Participants. The Joint Venture will give
first refusal to the Participants for any services offered by the Participant
that will be subcontracted by the Joint Venture. The Participants will
provide project-related services to the Joint Venture at their "cost rate" as
will be defined in the subcontract agreement between the Joint Venture and
the Participants.
5.3 Management and Administration by Participants. HEC International shall
provide project management and engineering protocols and standards available
to its branch offices to the Joint Venture. PEPC will provide coordination
between its staff and the Joint Venture staff. To simplify administration of
the Joint Venture, employees of the Participants may be assigned to the Joint
Venture and may remain as employees of the Participant. The Joint Venture
will reimburse the Participants for the salary and related benefit costs of
employees assigned full time to the Joint Venture. When deemed appropriate
by the Managing Board, the Joint Venture may hire the Participant employees
and cover them under its own benefit plans. HEC International will provide
the administrative and accounting services for the Joint Venture for an
agreed upon fee, set in advance each year and approved by the Managing Board.
The Joint Venture will not pay for the time of the Members of the Managing
Board, except the Joint Venture manager, if he is deemed to be a full time
manager of the Joint Venture.
5.4 Potential Conflict of Interest. The Participants recognize that there
may be opportunities within the scope of the Joint Venture that would create
a conflict of interest for the Participants or the their affiliates, and that
either Participant may request that the Joint Venture not pursue such
opportunities.
5.5 Use of Joint Venture Services by Participants. Upon the approval of the
Managing Board, a Participant may enter into an agreement with the Joint
Venture for services outside of the service territory or for services other
than energy services. Such transactions will be on an arms-length basis.
5.6 Other Activities. The Participants will seek other opportunities to
work together and for its affiliates to work together.
ARTICLE 6 BOOKS AND RECORDS
6.1 Books; Statements. The Joint Venture Manager keep accurate, full and
complete books and accounts showing its assets and liabilities, operations,
transactions and financial condition. All financial statements shall be
accurate in all material respects, shall present fairly the financial
position and results of the Joint Venture and shall be prepared on an accrual
basis in accordance with generally accepted accounting principles
consistently applied. The Joint Venture Manager shall have financial
statements prepared and submitted to each Participant, no later than 20 days
after each month-end during the term of this Agreement.
6.2 Access. The books, accounts and records of the Joint Venture shall be
maintained at the principal office of HEC International. Each Participant
shall have reasonable access to and may inspect and copy the books, accounts
and records of the Joint Venture.
6.3 Audits. In addition to the foregoing, any Participant may, at its
option and at its own expense, conduct internal audits of the books, records
and accounts of the Joint Venture.
6.4 Capital Accounts. A separate capital account shall be maintained for
each Participant. The initial capital account of the Participants shall be
equal to the value of the capital contributions made under Article 3.2.
Except as otherwise provided in Article 14.4, all items of income, gain, loss
or deduction shall be allocated equally among the Participants and shall
increase or decrease each Participant's capital account. Distributions to a
Participant shall reduce its capital account.
6.5 Taxes. As soon as practicable after the end of each fiscal year of the
Joint Venture, the Joint Venture shall prepare and mail to each Participant,
a report containing all information necessary for such Participant to include
its share of taxable income or loss in its income tax return. For tax
purposes, all items of income, gain, loss and deduction shall be allocated
between the Participants in the same manner that the corresponding book items
are allocated to the respective capital accounts of the Participants.
6.6 Other Information. The Joint Venture shall make available to each
Participant such information in addition to the foregoing as shall be
required by either of them in connection with the preparation of registration
statements, current and periodic reports, proxy statements and other
documents required to be filed under foreign, federal or state securities
laws and shall cooperate in the preparation of any such documents.
6.7 Fiscal Year. The fiscal year of the Joint Venture shall be January 1
through December 31.
ARTICLE 7 ASSIGNMENT AND RIGHTS TO SALE OF INTEREST
7.1 Consent Required. No Participant, nor any assignee or successor in
interest of any Participant, shall sell assign, give, pledge, hypothecate,
encumber or otherwise transfer its interest in the Joint Venture without the
prior written consent of the other Participant.
7.2 Right of First Refusal. If a Participant proposes to sell or otherwise
transfer all or any part of its interest in the Joint Venture to a third
party, such Participant shall submit a written notice to the other
Participant ("Remaining Participant") describing the material terms and
conditions of the proposed transfer in reasonable detail, including, without
limitation, the proposed purchase price, the amount and kind of consideration
to be paid, and the proposed purchaser. The Remaining Participant shall have
the right, exercisable by written notice within 60 days of receipt of notice
of proposed transfer to elect to: (i) purchase the other Participant's
entire interest in the Joint Venture on the same terms and conditions
specified in the notice of proposed transfer; or (ii) approve the transfer at
the terms and conditions of the proposed transfer within a date certain. The
transfer must occur within the given time on the terms and conditions and
only to the proposed purchaser specified in the notice.
7.3 Right to Purchase and Sell. At any time, each Participant ("Offering
Participant") shall have the right, exercisable by written notice to the
other Participant to purchase the interest of the other Participant ("Offeree
Participant") in the Joint Venture at a price fixed by Offering Participant
("Offered Price"). The written notice shall specify the disposition of
Participant loans and third-party liabilities, timing of the closing, place
of the closing, calculation of the purchase price, conditions to the closing,
consequences of failure of the conditions, allocation of costs, closing
deliveries and treatment of the seller's and buyer's obligations for
liabilities of the Joint Venture. Within ten days of receipt of the notice,
the Offeree Participant shall have the right to (i) accept the Offering
Participant's offer to purchase its interest in the Joint Venture at the
Offered Price or (ii) purchase the Offering Participant's interest in the
Joint Venture at the Offered Price.
ARTICLE 8 DEFAULTS
8.1 Insolvency. A Participant will become insolvent as evidenced by any of
the following:
a. appointment of a receiver, liquidator, assignee, custodian, trustee, or
conservator to take possession of a Participant or any substantial part of
its property without obtaining a discharge or dismissal within fifteen days
of the appointment or
b. a court having jurisdiction entering a decree or order for relief in
respect of a Participant in an involuntary case under any applicable
bankruptcy law where the Participant is unable to have the decree or order
set aside within fifteen days, or
c. the Participant commences a voluntary case under any applicable
bankruptcy law, or
d. a Participant admit in writing its inability to pay debts as they
mature; or
e. a Participant gives notice to any governmental body of insolvency or
pending insolvency or suspension or pending suspension of operations (an
"Insolvency").
f. the Participant fails to maintain or comply with regulatory approvals or
applicable laws and regulations.
In any of these events, the other Participant shall have the right to pursue
the remedies under Article 8.3.
8.2 Breach of Covenants; Failure to Perform Obligations. If any Participant
fails to perform any of its obligations or covenants or breaches any of its
representations hereunder (an "Event of Default"), then the other Participant
shall have the right to give such party a notice of default. If within the
30 day period following receipt of the notice, the defaulting Participant in
good faith commences to perform such obligations and cure such default, and
thereafter prosecutes to completion with diligence and continuity the curing
thereof and cures such default within a reasonable time, then the defaulting
Participant shall lose no rights hereunder. If the defaulting Participant
does not commence in good faith the curing of such default or does not
thereafter prosecute to completion with diligence and continuity the curing
thereof or the default is of such a nature that a cure is not practical such
as , then the non-defaulting Participant, shall have the
right to pursue the remedies under Article 8.3.
8.3 Remedies. If an Insolvency or Event of Default occurs, the non-
defaulting or solvent Participant may, at its option either (i) purchase the
interest of the insolvent or defaulting Participant at a price equal to
eighty percent (80%) of the fair market value of such interest as determined
by an independent appraiser approved by the Participants, and if the
Participants are unable to agree upon an independent appraiser, an appraiser
selected by the , or (ii) cause a dissolution of the Joint
Venture and the solvent or non-defaulting Participant shall be the
Liquidating Participant as described in Article 14 or (iii) to a third-party
at a price equal to at least 80% of the fair market value of such interests
as determined by an independent appraiser.
ARTICLE 9 COVENANT NOT TO COMPETE
9.1 Covenant not to Compete. Each Participant and its affiliates are
prohibited from directly or indirectly engaging in or possessing an interest
in an activity, the purpose or business of which is similar to that described
in Article 2 in the Service Territory during the Term of the Joint Venture
and for a period of one year following the sale of its interest in the Joint
Venture or the termination of the Joint Venture. After the sale of its
interest, the former Participant shall not interfere with Joint Venture
contracts, clients, staff or other relationships. If employees of the former
Participant provided services for the Joint Venture, the employees will
remain employees of the former Participant and may be reassigned unless
otherwise agreed upon by the Participants. If the Joint Venture declines to
bid or submit a proposal on a project within the Joint Venture Scope, either
or both PEPC or HEC International may pursue the project.
ARTICLE 10 REPRESENTATIONS AND WARRANTIES
10.1 Representations and Warranties by HEC International. HEC International
represents and warrants to, and covenants with PEPC, as follows:
a. HEC International is a corporation duly organized and validly existing
under the laws of the Commonwealth of Massachusetts and is in good standing
in such jurisdiction. HEC International is qualified to do business and in
good standing as a foreign corporation in any other jurisdiction where the
failure to be so qualified or in good standing would have a material adverse
impact on the business or financial condition of the Joint Venture.
b. HEC International has the full right, power and authority to enter into
this Agreement and will at all times have the full power and authority to
perform its obligations under this Agreement. This agreement has been duly
authorized, executed and delivered by it, and this Agreement constitutes its
valid and binding obligation, enforceable in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, or other loss
affecting creditors' rights generally, whether applied in a proceeding
inequity or law.
c. HEC International is not, nor at any time will it be a party to any
contract or other arrangement of any nature that will materially interfere
with its full, due and complete performance of this Agreement.
d. HEC International is not, not at any time will it be, in violation of
any applicable law or regulation, be it state or federal, by entering into
and undertaking the performance of this Agreement.
e. HEC International will comply with all applicable laws and regulations
and devote the necessary resources to the Joint Venture within the parameters
of the Agreement.
10.2 Representations and Warranties by PEPC. PEPC represents and warrants
to, and covenants with HEC International, as follows:
a. PEPC is a corporation duly organized and validly existing under the laws
of the State of and is in good standing in such
jurisdiction. PEPC is qualified to do business and in good standing as a
foreign corporation in any other jurisdiction where the failure to be so
qualified or in good standing would have a material adverse impact on the
business or financial condition of the Joint Venture.
b. PEPC has the full right, power and authority to enter into this
Agreement and will at all times have the full power and authority to perform
its obligations under this Agreement. This agreement has been duly
authorized, executed and delivered by it, and this Agreement constitutes its
valid and binding obligation, enforceable in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, or other loss
affecting creditors' rights generally, whether applied in a proceeding
inequity or law.
c. PEPC is not, nor at any time will it be a party to any contract or other
arrangement of any nature that will materially interfere with its full, due
and complete performance of this Agreement.
d. PEPC is not, not at any time will it be, in violation of any applicable
law or regulation, be it state or federal, by entering into and undertaking
the performance of this Agreement.
e. PEPC will comply with all applicable laws and regulations and devote the
necessary resources to the Joint Venture within the parameters of the
Agreement.
ARTICLE 11 RESOLUTION OF DISPUTES
11.1 Arbitration. If a disagreement exists between or among the
Participants, the Participants agree to enter into good faith negotiations to
attempt to resolve the disagreement. If such disagreement cannot be settled
by good faith negotiations between the Participants, and if the continued
failure to settle such disagreement is likely to have a material adverse
impact on the Joint Venture, any Participant may elect to submit the
disagreement to arbitration. Such arbitration shall proceed in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
then pertaining (the "Rules") and pursuant to the following procedures:
a. notice of the demand for arbitration shall be filed writing with the
other party to this Agreement and with the American Arbitration Association.
Each Participant shall appoint an arbitrator, and those appointed arbitrators
shall appoint a third neutral arbitrator within 10 days. If the appointed
arbitrators fail to appoint a third, neutral arbitrator within 10 days, such
third, neutral arbitrator shall be appointed by the American Arbitration
Association in accordance with the Rules. A determination by a majority of
the panel shall be binding;
b. reasonable discovery shall be allowed in arbitration;
c. all proceedings before the arbitrators shall be held in Boston,
Massachusetts;
d. the costs and fees of the arbitration, including attorneys' fees, shall
be allocated by the arbitrators; and
e. the award rendered by the arbitrators shall be final and judgment may be
entered in accordance with applicable law and in any court having
jurisdiction thereof.
ARTICLE 12 INDEMNIFICATION
12.1 By the Joint Venture. The Joint Venture shall indemnify, defend, and
hold harmless each Participant and its employees, officers, directors and
agents from and against all loss, cost, liability and expense which may be
imposed upon or reasonably incurred by such Participant including reasonable
attorneys' fees and disbursements and reasonable settlement payments, in
connection with any claim, action, suit or proceeding or threat thereof, made
or instituted in which such Participant may be involved or be made a party by
reason of such Participant being, or having been in the past, a Participant
or by reason of any action alleged to have been taken or omitted by such
Participant in such capacity, or by its employees, officers, directors or
agents acting on behalf of the Participant, if such Participant, or employee,
officer, director or agent were acting in good faith and with reasonable care
in what it (or he) reasonably believed to be its (or his) scope of authority
set forth in this Agreement and in the best interest of the Joint Venture.
Nothing in this Article 12.1 shall be construed to require the Joint Venture
to reimburse, defend indemnify or hold harmless any Participant or its
employees, officers, directors or agents with respect to any loss, cost,
liability or expense in any circumstance in which this Agreement requires a
Participant to reimburse, defend, indemnify or hold harmless any other
Participant or the Joint Venture.
12.2 By a Participant. Each Participant shall indemnify, defend, and hold
harmless the Joint Venture and each other Participant from and against all
loss, cost, liability and expense except consequential, special or punitive
damages that may be imposed upon or reasonably incurred by the Joint Venture
or the other Participant, including reasonable attorneys' fees and
disbursements and reasonable settlement payments, in connection with any
claim, action, suit or proceeding or threat thereof, made or instituted in
which the Joint Venture, the other Participant may be involved or be made a
party by reason of a breach of such Participant's representations or
covenants or such Participant's gross negligence or willful misconduct.
ARTICLE 13 INSURANCE
13.1 Types and Amounts. The Participants shall maintain the following
insurance coverage:
a. Worker's Compensation: Statutory requirement.
b. Employer's Liability: A minimum of $500,000 per occurrence.
c. Comprehensive Automobile Liability: A minimum of $1,000,000 combined
single limit including bodily injury or death and property damage liability.
d. Comprehensive General Liability: Not less than combined single limit,
including bodily injury and property damage liability, of $1,000,000 per
occurrence and $2,000,000 in aggregate. Contractual Liability is to include
liability assumed under this Agreement.
e. Umbrella Coverage: A minimum of $2,000,000.
13.2. Insurance Certificates: Each of the parties to this Agreement shall
deliver to each other certificates of insurance completed by the respective
carriers for each party certifying that the minimum insurance coverage, as
required above, are in effect and will not be canceled or changed without
thirty days written notice.
ARTICLE 14 DISSOLUTION
14.1 Dissolution. The Joint Venture shall continue until dissolved and
terminated pursuant to the terms of this Agreement. The Joint Venture shall
dissolve (i) on the termination date as set in Article 1.4 or (ii) upon the sale
of a Participant's Interest to the Remaining Participant under Articles 7.2 or
7.3 or (iii) upon an Insolvency or an Event of Default as allowed in Article 8.3
if elected by the non-defaulting or solvent Participant or (iv) at any time upon
the unanimous agreement of the Participants and the approval of the Managing
Board. Without limiting any other rights or remedies (in equity or at law)
available to a Participant, upon any dissolution occurring in contravention of
this Agreement caused by the express will or withdrawal of a Participant, the
other Participant shall be the Liquidating Participant. In the event of
dissolution in accordance with Article 8.3, the non defaulting or solvent
Participant shall act to liquidate the Joint Venture on behalf of the
Participants and will have the rights and duties of a Liquidating Participant.
In the event of dissolution upon the termination date or agreement of the
Participants, the Managing Board will select a person to act as the Liquidating
Participant.
14.2 Dissolution of the Joint Venture. Upon dissolution of the Joint Venture
under Section 14.1 (i), (iii) and (iv), the Joint Venture's business shall be
dissolved and all its assets distributed in liquidation, provided, however, that
the Participants acknowledge and agree that, in the event of a dissolution of
the Joint Venture, the business shall be operated in the normal course of events
during the dissolution period (except for sales of assets or the business, or
parts thereof, as approved by the Liquidating Participant). During the
dissolution, the Joint Venture shall continue to act through the Joint Venture
Manager with the Liquidating Participant acting as the Managing Board. Upon
dissolution of the Joint Venture under Article 14.1 (ii), the Remaining
Participant shall own all assets of the Joint Venture upon closing of the
purchase of the Terminating Participant's share.
14.3 Sale of the Business by Liquidating Participant. During the dissolution
process as set forth above, the Liquidating Participant shall have the right to
wind up the Joint Venture and offer the business and the assets of the Joint
Venture for sale, in whole or in part, as promptly as shall be practicable and
with reasonable diligence and upon sale to distribute the proceeds of sale as
provided below, provided however that the Liquidating Participant shall have the
authority to decide whether to liquidate all assets of the Joint Venture or make
certain in-kind distributions to the Participant as part of the liquidation
process. Any offer for sale of the business and the assets of the Joint Venture
shall be conducted in a manner customary for the sale of businesses of the type
engaged in by the Joint Venture, on such terms and conditions as the Liquidating
Participant deems appropriate in order to maximize the proceeds of such sale.
14.4 Offset for Damages. In the event of dissolution in contravention of this
Agreement, the Liquidating Participant shall be entitled to deduct from the
amount payable to the Participant that violated such provision, the amount of
damages incurred by the Joint Venture proximately related to such act, and such
amount be paid to the other Participant. To the extent the provisions of this
paragraph cause or increase a deficit in any Participant's capital account, such
Participants shall be required to restore to the Joint Venture the amount of
such deficit (or such increase in deficit) within 30 days after dissolution of
the Joint Venture.
14.5 Distribution of Proceeds of Liquidation. Regardless of the capital and
undistributed earning accounts of the Participant or their shares of profits and
losses or their respective rights to receive distributions, the proceeds from
liquidation shall be applied and distributed in the following order of priority:
a. First to the payment of (i) debts and liabilities of the Joint Venture,
except loans or advances that may have been made by any of the Participant to
the Joint Venture pursuant to Article 3.4 and (ii) expenses of liquidation;
b. Then to the setting up of any reserves which the Liquidating Participant
may deem necessary for any contingent of unforeseen liabilities or obligations
of the Joint Venture or of the Participants out of or in connection with the
Joint Venture. Said reserves may be held by a bank or trust company acceptable
to the Liquidating Participant as escrow to be held by it for the purpose of
disbursing such reserves in payment of any of the aforementioned liabilities or
obligations, and at the expiration of such period as the Liquidating Participant
shall deem advisable, distributing the balance, if any, thereafter remaining,
in the manner hereinafter provided;
c. Then to the repayment of any other loans that may have been made by any of
the Participants to the Joint Venture pursuant to Article 3.4; and
d. Then any balance remaining shall be distributed to the Participants in
accordance with their respective positive capital account, provided, however,
that if the liquidation of the Joint Venture occurs pursuant to an Event of
Default, then the distribution to be made to the defaulting Participant shall
be reduced, at the option of the Liquidating Participant, by either actual
damages suffered as the result of the Event of Default or Insolvency or if the
actual damages cannot readily be determined, twenty percent (20%) and the
distribution to be made to the non-defaulting Participant shall be increased by
the amount of that reduction as liquidated damages. The Participants agree that
damages resulting from liquidation pursuant to the occurrence of an Event of
Default or Insolvency may be impossible to measure; therefore the Participants
further agree that the 20% distribution that may be made under this Article to
the solvent Participant or the non-defaulting Participant following liquidation
pursuant to Article 7.3 constitutes the Participants' best estimate of any such
damages and is not a penalty.
Except as provided in Article 14.4 or as otherwise provided by law, no
Participant shall be obliged to restore any negative balance in its capital
account.
ARTICLE 15 MISCELLANEOUS
15.1 Governing Law. Except as is expressly herein stipulated to the contrary,
the rights and obligations of the Participants and the administration and
termination of the Joint Venture shall be governed by the laws of the State of
Delaware.
15.2 Pronouns. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.
15.3 Entire Agreement. This instrument contains all of the understandings and
agreements of whatsoever kind and nature existing between the parties hereto
with respect to this Agreement and the rights, interests, understandings,
agreements and obligations of the respective parties pertaining to the Joint
Venture.
15.4 Amendments. This Agreement may not be amended, altered or modified except
by a written instrument signed by each of the Participants.
15.5 Notices. All notices hereunder shall be sufficient if such written notice
is hand delivered, delivered by prepaid overnight courier service or mailed by
prepaid certified mail, addressed to the respective and appropriate party as
follows (or to such other address as the parties may indicate in writing):
If to HEC International:
HEC International Corporation
24 Prime Parkway
Natick, MA 01760
Attention: Thomas W. Philbin, Ph.D.
If to PEPC:
Attention:
If to the Joint Venture: Joint Venture Name
Attention:
15.6 Public Utility Holding Company Act. HEC International and the Joint
Venture are subject to requirements of the Public Utility Holding Company Act
of 1935, 15 U.S.C. 79 et. seq., and the regulations, orders and decisions of the
SEC thereunder. The Joint Venture shall comply with the requirements of this
Act.
IN WITNESS WHEREOF, HEC International Corporation and Wisconsin Electric Power
Company have caused this Agreement to be signed by their duly authorized
representatives as of the date first written above.
HEC International Corporation
By
Thomas W. Philbin, Ph.D.
President
Date
Partner Electric Power Company
By
Name
Title
Date
Exhibit F-1
July 14, 1995
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 10549
Ladies and Gentlemen:
As Counsel at Northeast Utilities' (NU) subsidiary, Northeast Utilities
Service Company (NUSCO), I have acted as counsel to NU, and as counsel to its
subsidiary HEC Inc. (HEC), and HEC's subsidiaries HEC Energy Consulting Canada
(HEC Canada) and HEC International Corporation (HEC International), with respect
to the Application/Declaration, as heretofore amended, and Post-Effective
Amendments Nos. 1 and 2 thereto (collectively, the Application) on Form U-1
filed with the Securities and Exchange Commission in File No. 70-8076, seeking,
among other things, authorization for HEC and its subsidiaries to form joint
ventures with utilities outside New England and New York for the purposes of
joining forces with these utilities to provide energy management, demand-side
management and consulting services. I am furnishing this opinion to you in
connection with the Application.
As counsel to NU, HEC, HEC Canada and HEC International, I am generally
familiar with the nature and character of the businesses of such companies. I
am a member of the bar of Connecticut. I am not a member of the bar of the
Commonwealth of Massachusetts, the Commonwealth in which NU is organized, and
in which HEC and HEC International are incorporated, nor am I qualified to
practice law in the Province of Ontario, Canada, the Province in which HEC
Canada is organized. I do not hold myself out as an expert in the law of such
Commonwealth or Province, although I have made a study of the laws of such
Commonwealth and have consulted with other counsel to NUSCO and to HEC who are
expert in such laws. For purposes of this opinion, I have relied on advice from
counsel employed by NUSCO and counsel retained by HEC Canada who are members of
the bar of the Commonwealth of Massachusetts and of the Province of Ontario,
Canada, respectively.
In connection with this opinion, I have examined or caused to be examined
the Commission's orders dated July 27, 1990 (HCA Rel. No. 35-25114-A), September
30, 1993 (HCA Rel. No. 35-25900) and August 19, 1994 (HCA Rel. No. 35-26108),
the Application and the various exhibits thereto, the minutes of various
meetings of the Boards of Directors of HEC and its subsidiaries, the laws of the
Commonwealth of Massachusetts, the certificates of incorporation and by-laws of
HEC and its subsidiaries and such other documents as I deem necessary for the
purpose of this opinion. I assume that the Boards of Directors of HEC and its
subsidiaries and the officials and other representatives of HEC and its
subsidiaries will take all further corporate actions and all administrative
steps necessary to authorize and implement certain of the transactions
contemplated by the Application. This opinion is subject to the Securities and
Exchange Commission issuing an order under the Public Utility Holding Company
Act of 1935 as requested in the Application, and the assumption that all actions
taken thereafter will be in conformity with such order.
Based on the foregoing, I am of the opinion that:
A. All state laws applicable to the transactions described in the
Application have been complied with;
B. HEC, HEC Canada and HEC International are validly organized and duly
existing;
C. When issued and sold as described in the Application, any equity
security of joint venture subsidiaries of HEC or its subsidiaries
("Joint Venture Subsidiaries"), issued and sold in accordance with
the Commission's authorization of the transactions contemplated by
the Application will be validly issued, fully paid, and non-
assessable, and the holders thereof will be entitled to the rights
and privileges appertaining thereto set forth in the joint
venture documents defining such rights and privileges;
D. When acquired as described in the Application, HEC or its
subsidiaries will legally acquire any equity security of Joint
Venture Subsidiaries issued and, sold in accordance with the
Commission's authorization of transactions contemplated by the
Application;
E. When issued as described in the Application, any evidence of
indebtedness issued by Joint Venture Subsidiaries to HEC or its
subsidiaries will be valid and binding obligations of the Joint
Venture subsidiary, in accordance with their terms, subject to laws
of general application with respect to rights and remedies of
creditors and subject to equitable principles and;
F. The consummation of the proposed transactions as described in the
Application will not violate the legal rights of any holders of
securities issued by NU, HEC, HEC Canada, HEC International, or any
other existing NU subsidiary company.
I hereby consent to the use of this opinion in connection with the filing
of the Application.
Very truly yours,
/s/Jeffery D. Cochran
Counsel
Northeast Utilities Service Company
HEC INC. FINANCIAL STATEMENT 1.1
BALANCE SHEETS
<TABLE>
<CAPTION>
Pro Forma
Giving Effect
March Pro Forma To Proposed
1995 Adjustments Transactions
-------------------------------------
(Thousands of Dollars)
<S> <C> <C> <C>
ASSETS
- ------
Utility Plant, at original cost:
Electric................................. $ 2,946 $ $ 2,946
Other.................................... 897 897
-------------------------------------
3,843 3,843
Less: Accumulated provision
for depreciation.................... 1,519 1,519
-------------------------------------
Total net utility plant.............. 2,324 0 2,324
-------------------------------------
Other Property and Investments:
Investment in subsidiaries, at equity 17 17
Investment in Joint Venture A 1,000 (a) 1,000
Investment in Joint Venture B 1,000 (a) 1,000
Investment in Joint Venture C 1,000 (a) 1,000
Investment in Joint Venture D 1,000 (a) 1,000
Investment in Joint Venture E 1,000 (a) 1,000
Investment in Joint Venture F 1,000 (a) 1,000
Investment in Joint Venture G 1,000 (a) 1,000
Investment in Joint Venture H 1,000 (a) 1,000
-------------------------------------
17 8,000 8,017
-------------------------------------
Current Assets:
Cash..................................... 464 8,000 (a) 464
(8,000)(a)
Receivables.............................. 3,000 333 (d) 3,333
Receivables from affiliated companies.... 309 309
Materials and supplies, at average cost.. 20 20
Prepayments and other.................... 160 160
-------------------------------------
3,953 333 4,286
-------------------------------------
Deferred Charges:
Other deferred debits.................... 1,360 1,360
-------------------------------------
1,360 0 1,360
-------------------------------------
Total Assets......................... $ 7,654 8,333 $ 15,987
=====================================
</TABLE>
HEC INC. FINANCIAL STATEMENT 1.1
BALANCE SHEETS
<TABLE>
<CAPTION>
Pro Forma
Giving Effect
March Pro Forma To Proposed
1995 Adjustments Transactions
--------------------------------------
(Thousands of Dollars)
<S> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization:
Common stock, $1 par value. Authorized
and outstanding 1,000 shares............ $ 0 $ $ 0
Capital surplus, paid in................. 4,066 4,066
Retained earnings........................ (915) 0 (d,b,c) (915)
--------------------------------------
Total common stockholder's equity.... 3,151 0 3,151
Long-term debt........................... 0 0
--------------------------------------
Total capitalization............ 3,151 0 3,151
--------------------------------------
Current Liabilities:
Notes payable to associated companies.... 2,225 8,000 (a) 10,225
Accounts payable......................... 1,692 1,692
Accrued taxes............................ (94) (171)(c) (265)
Other current liabilities................ 278 504 (b) 782
--------------------------------------
4,101 8,333 12,434
--------------------------------------
Deferred Credits:
Accumulated deferred income taxes........ 402 402
--------------------------------------
402 0 402
--------------------------------------
Total Capitalization and Liabilities... $ 7,654 8,333 $ 15,987
======================================
</TABLE>
HEC INC. FINANCIAL STATEMENT 1.2
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Pro Forma
12 Months Giving Effect
Ended Pro Forma To Proposed
March 1995 Adjustments Transactions
--------------------------------------
(Thousands of Dollars)
<S> <C> <C> <C>
Operating Revenues......................... $ 21,447 $ 333 (d) $ 21,780
--------------------------------------
Operating Expenses:
Operation - other........................ 20,534 20,534
Maintenance.............................. 11 11
Depreciation............................. 411 411
Federal and state income taxes........... 182 (171)(c) 11
Taxes other than income taxes............ 167 167
--------------------------------------
Total operating expenses........... 21,305 (171) 21,134
--------------------------------------
Operating Income........................... 142 504 646
--------------------------------------
Other Income:
Other, net............................... 175 175
Income taxes--credit..................... (18) (18)
--------------------------------------
Other income, net.................. 157 0 157
--------------------------------------
Income before interest charges..... 299 504 803
--------------------------------------
Interest Charges:
Other interest........................... 109 504 (b) 613
--------------------------------------
Interest charges, net.............. 109 504 613
--------------------------------------
Net Income ................................ $ 190 $ 0 $ 190
======================================
</TABLE>
FINANCIAL STATEMENT 1.2
Proforma Journal Entries Debits Credits
- ------------------------ ------ -------
(Thousands of Dollars)
(a) Cash $8,000
Notes payable to associated companies $8,000
Investment in Joint Venture A 1,000
Investment in Joint Venture B 1,000
Investment in Joint Venture C 1,000
Investment in Joint Venture D 1,000
Investment in Joint Venture E 1,000
Investment in Joint Venture F 1,000
Investment in Joint Venture G 1,000
Investment in Joint Venture H 1,000
Cash 8,000
To record a $8 million investment by HEC (parent) in 8 Joint Ventures
($1 million each venture). HEC would finance the investment by use
of HEC's borrowing through the NU system Money Pool with no additional
equity coming from Northeast Utilities.
(b) Interest expense $504
Other current liabilities $504
Interest expense = 8,000 x 6.30% = 504
To record higher interest on Notes Payable to Associated Companies as
a result of borrowing from the NU System Money Pool.
(c) Accrued taxes $171
Income tax expense $171
Tax Expense = 504 x 34% = 171
To record the reduction in income taxes due to higher interest expense.
(d) Accounts receivable $333
Operating revenue $333
To record revenue to cover additional interest costs, net of income taxes
(504 - 171).
