SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8858
UNITIL CORPORATION
(Exact name of registrant as specified in its charter)
New Hampshire 02-0381573
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6 Liberty Lane West, Hampton, New Hampshire 03842-1720
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (603) 772-0775
Securities registered pursuant to
Section 12(b) of the Act:
Title of Each Class Name of Exchange on Which Registered
Common Stock, No Par Value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K [ X ]
Based on the closing price of March 1, 2000, the aggregate market value of
common stock held by non-affiliates of the registrant was $152,713,587.
The number of common shares outstanding of the registrant was 4,717,022 as
of March 1, 2000.
Documents Incorporated by Reference:
Portions of the Proxy Statement relating to the Annual Meeting of
Shareholders to be held April 20, 2000, are incorporated by reference
into Part III of this Report.
UNITIL CORPORATION
FORM 10-K
For the Fiscal Year Ended December 31, 1999
Table of Contents
Item Description Page
PART I
1. Business
The Unitil System ...................... 2
Utility Operations ........................... 2
Rates and Regulation ............................. 4
Regulatory Matters ........................... 5
Electric Power Supply ........................... 7
Gas Supply ................................... 9
Environmental Matters ........................... 9
Capital Requirements .......................... 9
Financing Activities .......................... 10
Employees .................................... 10
Executive Officers of the Registrant ......... 12
2. Properties ...................................... 13
3. Legal Proceedings .................................. 14
4. Submission of Matters to a Vote of Securities Holders ... 14
PART II
5. Market for Registrant's Common Equity and
Related Stockholder Matters ........................ 15
6. Selected Financial Data ........................... 16
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations .......... 17
8. Financial Statements and Supplementary Data .......... 27
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ......... 47
PART III
10. Directors and Executive Officers of the Registrant.... 48
11. Executive Compensation .......... ................ 48
12. Security Ownership of Certain Beneficial
Owners and Management ......................... ... 48
13. Certain Relationships and Related Transactions.......... 48
PART IV
14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K .......................... 49
Consent of Independent Certified Public Accountants..... 56
Signatures .................................... 57
Schedule VIII Valuation and Qualifying Accounts and Reserves.. 59
Exhibit 11.1 Computation in Support of Earnings per Share
Exhibit 12.1 Computation in Support of Ratio of
Earnings to Fixed Charges
Exhibit 21.1 Subsidiaries of Registrant
Exhibit 27 Financial Data Schedule
Exhibit 4.26 Note Agreement for 7.37% Notes due
January 15, 2028
Exhibit 10.14 Select Energy Agreement
Exhibit 10.15 Purchase and Sale Agreement of New Haven Harbor
Exhibit 99.1 1999 Proxy Statement
PART I
Item 1. Business
THE UNITIL SYSTEM
Unitil Corporation (Unitil or the Company) was incorporated under the laws
of the State of New Hampshire in 1984. Unitil is a registered public utility
holding company under the Public Utility Holding Company Act of 1935
(the 1935 Act), and is the parent company of the Unitil System. The
following companies are wholly owned subsidiaries of Unitil, which together
make up the Unitil System:
Unitil Corporation State and Principal Type
Subsidiaries Year of of
Organization Business
Concord Electric
Company (CECo) NH - 1901 Retail Electric Distribution Utility
Exeter & Hampton Electric
Company (E&H) NH - 1908 Retail Electric Distribution Utility
Fitchburg Gas and Electric
Light Company(FG&E) MA - 1852 Retail Electric & Gas Distribution
Utility
Unitil Power Corp.
(Unitil Power) NH - 1984 Wholesale Electric Power Utility
Unitil Realty Corp.
(Unitil Realty) NH - 1986 Real Estate Management
Unitil Service Corp.
(Unitil Service) NH - 1984 System Service Company
Unitil Resources, Inc.
(Unitil Resources) NH - 1993 Energy Brokering, Marketing and
Services
The Unitil System's principal business is the retail sale and distribution
of electricity and related services in several cities and towns in the
seacoast and capital city areas of New Hampshire, and both electricity and
gas and related services in north central Massachusetts, through Unitil's
three wholly owned retail distribution utility subsidiaries (CECo, E&H and
FG&E, collectively referred to as the Retail Distribution Utilities). The
Company's wholesale electric power utility subsidiary, Unitil Power Corp.,
principally provides all the electric power supply requirements to CECo and
E&H for resale at retail, and also engages in various other wholesale
electric power services with affiliates and non-affiliates throughout the
New England region.
Unitil has three additional wholly owned subsidiaries: Unitil Realty Corp.
(Unitil Realty), Unitil Service Corp. (Unitil Service) and Unitil Resources,
Inc. (Unitil Resources). Unitil Realty owns and manages the Company's
corporate office building and property located in Hampton, New Hampshire and
leases this facility to Unitil Service under a long-term lease arrangement.
Unitil Service provides, at cost, centralized management, administrative,
accounting, financial, engineering, information systems, regulatory,
planning, procurement, and other services to the Unitil System companies.
Unitil Resources is the Company's wholly owned non-utility subsidiary and
has been authorized by the Securities and Exchange Commission, pursuant to
the rules and regulations of the 1935 Act, to engage in business
transactions as a competitive marketer of electricity, gas and other energy
commodities in wholesale and retail markets, and to provide energy brokering,
consulting and management related services within the United States.
During 1999 Unitil acquired a minority interest in Enermetrix.com (formerly
known as North American Power Brokers, Inc.), a privately held company
providing Internet technology solutions to the energy industry. Unitil,
through Unitil Resources, has licensed and deployed Enermetrix.com's
innovative Internet-based technology for electricity and natural gas sales
between consumers and suppliers. Under the name "UsourceTM" URI offers
retail energy consumers the market benefits of energy supply bidding with
the efficiency and cost benefits of e-commerce.
UTILITY OPERATIONS
CECo is engaged principally in the distribution and sale of electricity at
retail to approximately 26,800 customers in the City of Concord, which is
the state capital, and twelve surrounding towns, all in New Hampshire.
CECo's service area consists of approximately 240 square miles in the
Merrimack River Valley of south central New Hampshire. The service area
includes the City of Concord and major portions of the surrounding towns of
Bow, Boscawen, Canterbury, Chichester, Epsom, Salisbury and Webster, and
limited areas in the towns of Allenstown, Dunbarton, Hopkinton, Loudon and
Pembroke.
The State of New Hampshire's government operations are located within CECo's
service area, including the executive, legislative, judicial branches and
offices and facilities for all major state government services. In addition,
CECo's service area is a retail trading center for the north central part of
the state and has over sixty diversified businesses relating to insurance,
printing, electronics, granite, belting, plastic yarns, furniture, machinery,
sportswear and lumber. Of CECo's 1999 retail electric revenues, approximately
34% were derived from residential sales, 55% from commercial, government
and nonmanufacturing sales, and 11% from industrial/manufacturing sales.
E&H is engaged principally in the distribution and sale of electricity at
retail to approximately 39,700 customers in the towns of Exeter and Hampton
and in all or part of sixteen surrounding towns, all in New Hampshire. E&H's
service area consists of approximately 168 square miles in southeastern New
Hampshire. The service area includes all of the towns of Atkinson, Danville,
East Kingston, Exeter, Hampton, Hampton Falls, Kensington, Kingston, Newton,
Plaistow, Seabrook, South Hampton and Stratham, and portions of the towns of
Derry, Brentwood, Greenland, Hampstead and North Hampton.
Commercial and industrial customers served by E&H are quite diversified and
include retail stores, shopping centers, motels, farms, restaurants, apple
orchards and office buildings, as well as manufacturing firms engaged in the
production of sportswear, automobile parts and electronic components. It is
estimated that there are over 150,000 daily summer visitors to E&H's
territory, which includes several popular resort areas and beaches along the
Atlantic Ocean. Of E&H's 1999 retail electric revenues, approximately 47%
were derived from residential sales, 43% from commercial and nonmanufacturing
sales, 10% from industrial/manufacturing sales.
FG&E is engaged principally in the distribution and sale of both electricity
and natural gas in the City of Fitchburg and several surrounding communities.
FG&E's service area encompasses approximately 170 square miles in north
central Massachusetts.
Electricity is supplied and distributed by FG&E to approximately 26,000
customers in the communities of Fitchburg, Ashby, Townsend and Lunenburg.
FG&E's industrial customers include paper manufacturing and paper products
companies, rubber and plastics manufacturers, chemical products companies
and printing, publishing and allied industries. Of FG&E's 1999 electric
revenues, approximately 34% were derived from residential sales, 33% from
commercial and nonmanufacturing sales, and 33% from industrial/manufacturing
sales.
Natural gas is supplied and distributed by FG&E to approximately 14,900
customers in the communities of Fitchburg, Lunenburg, Townsend, Ashby,
Gardner and Westminster, all located in Massachusetts. Of FG&E's 1999 gas
operating revenues, approximately 48% were derived from residential sales,
28% from commercial sales, 12% from firm sales to industrial customers, and
12% from interruptible sales (which are sales to customers that have agreed
to discontinue use of the Company-supplied service temporarily upon notice
by the Company, and which customers usually have an alternate fuel
capability, e.g., fuel oil, that they can employ during the interruption
periods). FG&E's industrial gas revenue is primarily derived from firm sales
to paper manufacturing and paper products companies, fabricated metal
products manufacturers, rubber and plastics manufacturers, primary iron
manufacturers and other miscellaneous industries.
Natural gas sales in New England are seasonal, and the Company's results of
operations reflect this seasonality. Accordingly, results of operations are
typically positively impacted by gas operations during the five heating
season months from November through March of the following year. Electric
sales in New England are far less seasonal than natural gas sales; however,
the highest usage typically occurs in the summer and winter months due to
air conditioning and heating requirements, respectively. The Unitil System
is not dependent on a single customer or a few customers for its electric
and gas sales.
(For details on the Unitil System's Results of Operations see Part II,
Item 7 herein.)
(For segment information see Part II, Item 8, Footnote 11 herein.)
RATES AND REGULATION
The Company is registered with the Securities and Exchange Commission (SEC)
as a holding company under the 1935 Act, and it and its subsidiaries are
subject to the provisions of the 1935 Act. Accordingly, the Securities and
Exchange Commission (SEC) has jurisdiction over Unitil and its subsidiaries
with respect to, among other things, securities issues, sales and
acquisitions of securities and utility assets, intercompany loans, services
performed by and for affiliated companies, certain accounts and records, and
involvement in non utility operations. The Company and its subsidiaries,
where applicable, are subject to regulation by the Federal Energy Regulatory
Commission (FERC), the New Hampshire Public Utilities Commission (NHPUC) and
the Massachusetts Department of Telecommunications and Energy (MDTE) with
respect to rates, adequacy of service, issuance of securities, accounting
and other matters. Unitil Power, as a wholesale utility, is subject to rate
regulation by the FERC. Both CECo and E&H, as retail electric utilities in
New Hampshire, are subject to rate regulation by the NHPUC, and FG&E is
subject to MDTE regulation with respect to gas and electric retail rates,
and FERC regulation with respect to New England Power Pool (NEPOOL)
interchanges and other wholesale sales of electricity.
Current Rate Regulation--- The revenues of Unitil's Retail Distribution
Utilities are collected pursuant to rates on file with the NHPUC, the MDTE
and, to a minor extent, the FERC. In general, the Retail Distribution
Companies current retail rates are comprised of a base rate component,
established during comprehensive base rate cases, and various periodic rate
adjustment mechanisms, which track and reconcile particular expense
elements with associated collected revenues. The last comprehensive
regulatory proceedings to increase base electric rates for Unitil's Retail
Distribution Utilities were in 1985 for CECo, 1984 for FG&E, and 1981 for
E&H. FG&E was granted its first Gas Base Rate adjustment in 14 years
effective December 1, 1998. The majority of the Unitil System's utility
operating revenues are presently collected under various rate adjustment
mechanisms, including revenues collected from customers for fuel, purchased
power, cost of gas, transition costs and demand-side management program
costs.
The Unitil System Agreement (System Agreement), as approved by the FERC,
governs wholesale sales by Unitil Power to its New Hampshire retail
distribution affiliates, CECo and E&H, and provides for recovery by Unitil
Power of all costs incurred in the provision of service. Unitil Power has
continued to adjust its wholesale rates every six months in accordance with
the System Agreement, and CECo and E&H have continued to file corresponding
semiannual changes in their retail fuel and purchased power adjustment
clauses with the NHPUC which have been routinely approved.
The Massachusetts Electric Restructuring Law has changed the way FG&E
provides service to its electric customers. Instead of supplying energy on
demand to all its customers, FG&E delivers energy to its customers on behalf
of competitive suppliers and will supply Standard Offer Service energy to
customers who do not choose a competitive supplier and Default Service to
customers whose supplier fails to deliver. The result of these changes was
the replacement of FG&E's quarterly filed electric fuel charge with: a) an
annually determined Standard Offer Service charge and reconciliation
adjustment mechanism; and b) a monthly determined Default Service charge and
reconciliation adjustment mechanism both of which are designed to allow FG&E
to recover all its power supply costs. In addition FG&E has implemented a
Transition Cost Charge and reconciliation adjustment mechanism enabling it
to recover all its stranded costs (See Massachusetts (Electric) in
Regulatory Matters section).
FG&E's gas costs are recovered through a cost of gas adjustment (CGA)
mechanism, through which firm gas customers pay the costs incurred for
procuring and transporting gas to FG&E's local distribution system for
delivery to customers. FG&E gas operations incurred FERC-approved transition
charges from interstate pipeline suppliers from 1992 to 1998, resulting from
the transition to a comprehensive set of new regulations under FERC Order
636. These costs have been recovered directly from FG&E's gas customers
through the CGA mechanism, as authorized by the MDTE. FG&E did not incur
any additional transition costs in 1999 and is not expected to incur these
costs in the future.
SFAS No. 71 --- The Company accounts for all its regulated operations in
accordance with Statement of Financial Accounting Standard ("SFAS") No. 71,
"Accounting for the Effects of Certain Types of Regulation," requiring the
Company to record the financial statement effects of the rate regulation to
which the Company is currently subject. If a separable portion of the
Company's business no longer meets SFAS No. 71, the Company is required to
eliminate the financial statement effects of regulation for that portion.
(See "Power Supply Divestiture" in Note 8 of the financial statements
contained herein.)
REGULATORY MATTERS
Restructuring Activity --- Electric and gas industry restructuring and the
process for separating the "competitive" retail sale of the electric and gas
energy from the "regulated" delivery of that energy over a utilities
transmission and distribution system has been the predominant focus of the
Company's regulatory initiatives and activities in both Massachusetts and
New Hampshire.
Since March 1, 1998 all electric consumers in Massachusetts served by
investor-owned utilities have had the ability to choose their electric
energy supplier. FG&E, the Company's Massachusetts utility operating
subsidiary, began implementation of its comprehensive electric restructuring
plan that includes the divestiture of its entire regulated power supply
business.
In New Hampshire, CECo and E&H, our electric utility operating subsidiaries,
and Unitil Power Corp., our wholesale power company, continue to prepare for
the the transition that will move them into this new market structure
pending resolution of key restructuring policies and issues that have slowed
the restructing process in the state.
Massachusetts gas industry restructuring plans continue to be a major focus
of our regulatory activities as well. Since 1997, FG&E has worked in
collaboration with the other Massachusetts Local Distribution Companies
(LDCs) and various other stakeholders to develop and implement the
infrastructure to offer gas customers choice of their competitive gas energy
supplier and to complete the restructuring of gas service provided by LDCs.
FG&E is required to file with the MDTE new gas tariffs to implement natural
gas unbundling in accordance with Model Terms and Conditions resulting from
these collaborative efforts. The target date for implementation of approved
tariffs and final rules is April 1, 2000.
New Hampshire - On February 28, 1997, the NHPUC issued its Final Plan for
New Hampshire electric utilities to transition to a competitive electric
market in the state ("Final Plan"). The Final Plan linked the interim
recovery of stranded cost by the State's utilities to a comparison of their
existing rates with the regional average utility rates. CECo's and E&H's
rates are below the regional average; thus, the NHPUC found that CECo and
E&H were entitled to full interim stranded cost recovery, as defined by the
NHPUC. However, the NHPUC also made certain legal rulings, which could
affect CECo's and E&H's long-term ability to recover all of its stranded
costs.
Northeast Utilities' affiliate, Public Service Company of New Hampshire,
filed suit in U.S. District Court for protection from the Final Plan and
related orders and was granted an indefinite stay. In June 1997, Unitil,
and other utilities in New Hampshire, intervened as plaintiffs in the
federal court proceeding. In June 1998, the federal court clarified that the
injunctions issued by the court in 1997 had effectively frozen the NHPUC's
efforts to implement restructuring. This amended injunction was challenged
by the NHPUC, but affirmed by the First Circuit of the United States Court
of Appeals in December 1998. Unitil continues to be a plaintiff-intervenor
in federal district court and cross motions for summary judgement by all
parties are now under review by the court.
During 1998, Unitil took steps to settle all of the outstanding issues
related to the Final Plan and the federal court litigation over electric
industry restructuring. In September 1998, Unitil reached a settlement with
key parties and filed this unopposed agreement with the NHPUC for approval.
However, the NHPUC imposed unacceptable conditions to approval of the
settlement, and CECo and E&H withdrew the proposed settlement from further
NHPUC review. Unitil has continued to work actively to explore additional
settlement opportunities and to seek a fair and reasonable resolution of key
restructuring policies and issues in New Hampshire. The Company is also
monitoring the regulatory and legislative proceedings dealing with electric
restructuring for other utilities in New Hampshire.
NH Pilot Program -- In June 1996, the New Hampshire Retail Competition Pilot
Program (Pilot Program), mandated by legislation enacted a year earlier,
became operational. During the original two-year term of the Pilot Program,
up to 3% - or some 17,000 New Hampshire electric consumers - were allowed to
choose from competing electric suppliers, and have this supply delivered
across the local utility system. The Company's subsidiary, Unitil Resources,
Inc., began competitive marketing efforts in May 1996, and began making
sales in June, 1996. In 1998, the State of New Hampshire extended this
program beyond the original 24 month period. Unitil Resources ended its
participation in the Pilot Program effective December 31, 1999.
Massachusetts (Electric) -- On January 15, 1999, the MDTE approved FG&E's
restructuring plan with certain modifications. The Plan provides customers
with: a) the ability to choose an energy supplier; b) an option to purchase
Standard Offer Service provided by FG&E at regulated rates for up to seven
years; and c) a cumulative 15% rate reduction. The Order also approved
FG&E's power supply divestiture plan for its interest in three generating
units and four long-term power supply contracts. The Company has been
afforded full recovery of any transition costs through a non-bypassable
retail Transition Charge.
Pursuant to the Plan, on October 30, 1998, FG&E filed a proposed contract
with Constellation Power Services Inc. for provision of Standard Offer
Service. Service under the FG&E/Constellation contract commenced on March 1,
1999, and is scheduled to continue through February 28, 2005. This contract
is the result of the first successful Standard Offer auction conducted in
Massachusetts.
A contract for the sale of FG&E's interest in the New Haven Harbor plant was
approved by the MDTE on March 31, 1999 and the sale of the unit closed on
April 14, 1999. A contract for the sale of the entire output from FG&E's
remaining generating assets and purchased power contracts was approved by
the MDTE on December 28, 1999, and went into effect February 1, 2000.
FG&E filed an electric rate decrease effective September 1, 1999, as
provided for by the 1997 Massachusetts Electric Restructuring Act (the Act).
The Act mandated a 10% rate reduction in March 1998, to be followed by an
additional, inflation-adjusted 5% rate reduction by September 1, 1999. The
net rate decrease of 1.3% reflects FG&E's divestiture of its generation
assets and purchased power portfolio.
On December 22, 1999, FG&E filed with the MDTE new rates for effect January
1, 2000. The revised rates maintain the required inflation-adjusted 15% rate
discount. The MDTE approved the rates on January 5, 2000, subject to
reconciliation pursuant to an investigation, resulting in an upward
inflation adjustment of 2.5% relative to September 1999 rates. The MDTE has
issued a notice of public hearing and procedural conference to examine
electric restructuring issues including, but not limited to, consistency of
the proposed charges and adjustments with the methods approved in FG&E's
restructuring plan.
As a result of restructuring and divestiture of FG&E's generation and
purchased power portfolio, FG&E has accelerated the write-off of its
electric generation assets and on FG&E's abandoned investment in Seabrook
Station. An MDTE Order established the return to be earned on the
unamortized balance of FG&E's generation plant. The new return reduces
FG&E's earnings on its generation assets. As this portfolio is amortized
over the next 10 years, earnings from this segment of FG&E's utility
business will continue to decline and ultimately cease. Currently, Unitil's
earnings from this business segment represent approximately 10% of total
consolidated earnings.
Massachusetts (Gas) -- In mid-1997, the MDTE directed all Massachusetts
natural gas LDCs to form a collaborative with other stakeholders to develop
common principles and appropriate regulations for the unbundling of gas
service, and directed FG&E and four other LDCs to file unbundled gas rates
for its review. FG&E's unbundled gas rates were filed with, and approved by,
the MDTE and implemented in November 1998.
On February 1, 1999, the MDTE issued an order in which it determined that
the LDCs would continue to have an obligation to provide gas supply and
delivery services for another five years, with a review after three years.
This order also set forth the MDTE's decision regarding release by LDCs of
their pipeline capacity contracts to competitive marketers. In March 1999,
the LDCs and other stakeholders filed a settlement with the MDTE which set
forth rules for implementing an interim firm transportation service through
October 31, 2000. The interim service will ultimately be superseded by the
permanent transportation service, expected to begin April 1, 2000. The MDTE
approved the settlement on April 2, 1999. FG&E has made separate compliance
filings that were approved by the MDTE to implement its interim firm gas
transportation service for its largest general service customers effective
June 1, 1999 and to complement this service with a firm gas peaking service.
On November 3, 1999 the Massachusetts LDCs filed Model Terms and Conditions
for Gas Service, including provisions for capacity assignment, peaking
service and default service. In accordance with the MDTE's approval of
these Model Terms and Conditions in January 2000, FG&E is required to file
Company-specific tariffs that implement natural gas unbundling. The MDTE has
also opened a rulemaking proceeding on proposed regulations that would
govern the unbundling of services related to the provision of natural gas.
The target date for implementation of approved tariffs and final rules is
April 1, 2000.
Millstone Unit No. 3 - FG&E has a 0.217% nonoperating ownership in the
Millstone Unit No. 3 (Millstone 3) nuclear generating unit which supplies
it with 2.49 megawatts (MW) of electric capacity. In January 1996, the
Nuclear Regulatory Commission (NRC) placed Millstone 3 on its Watch List,
which calls for increased NRC inspection attention. In March 1996, as a
result of engineering evaluations, Millstone 3 was taken out of service.
The NRC authorized the restart of Millstone 3 in June 1998.
During the period that Millstone 3 was out of service, FG&E continued to
incur its proportionate share of the unit's ongoing Operations and
Maintenance (O&M) costs, and may incur additional O&M costs and capital
expenditures to meet NRC requirements. FG&E also incurred costs to replace
the power that was expected to be generated by the unit. During the outage,
FG&E incurred approximately $1.2 million in replacement power costs, and
recovered those costs through its electric fuel charge, which is subject to
review and reconciliation by the MDTE. Under existing MDTE precendent,
FG&E's replacement power costs of $1.2 million could be subject to
disallowance in rates.
In August 1997, FG&E, in concert with other non-operating joint owners,
filed a demand for arbitration in Connecticut and a lawsuit in Massachusetts,
in an effort to recover costs associated with the extended unplanned
shutdown. Several preliminary rulings have been issued in the arbitration
and legal cases, and both cases are continuing. On March 22, 2000, FG&E
entered into a settlement agreement with the defendants under which FG&E will
dismiss its lawsuit and arbitration claims. The settlement is generally
similar to earlier settlements with the defendants and three joint owners
that own, in the aggregate, approximately 19 percent of the unit. The
settlement provides for FG&E to receive an initial payment of $600,000 and
other amounts contingent upon future events and would result in FG&E's entire
interest in the unit being included in the auction of the majority interest,
and certain of the minority interests, in Millstone 3 expected to be
completed by 2001. Upon completion of the sale of Millstone 3,FG&E will be
relieved of all residual liabilities, including decommissioning
liabilities, associated with Millstone 3. FG&E expects to flow the net
proceeds of the settlement to its customers.
ELECTRIC POWER SUPPLY
New England Power Pool --- FG&E, UPC, CECo, and E&H are members of the New
England Power Pool (NEPOOL). NEPOOL was formed to assure reliable operation
of the bulk power system in the most economic manner for the region. Under
the NEPOOL Agreement, to which virtually all New England electric utilities
are parties, substantially all operation and dispatching of electric
generation and bulk transmission capacity in New England is performed on a
regional basis. NEPOOL is governed by an agreement that is filed with the
FERC and its provisions are subject to continuing FERC jurisdiction. The
NEPOOL Agreement imposes generating capacity and reserve obligations,
provides for the use of major transmission facilities and payments
associated therewith. The most notable benefits of NEPOOL are coordinated
power system operation in a reliable manner and providing a supportive
business environment for the development of a competitive electric
marketplace.
There are ongoing legislative and regulatory initiatives that are primarily
focused on the deregulation of the generation and supply of electricity and
the corresponding development of a competitive market place from which
customers could choose their electric energy supplier. As a result, the
NEPOOL Agreement continues to be restructured. NEPOOL's membership
provisions have been broadened to cover all entities engaged in the
electricity business in New England, including power marketers and brokers,
independent power producers, load aggregators and retail customers in states
that have enacted retail access statutes. The regional bulk power system is
operated by an independent corporate entity, ISO New England (ISO-NE), so
that there is no opportunity for conflicting financial interests between the
system operator and the market-driven participants. Various energy and
capacity products will be traded in open, competitive markets, with
transmission access and pricing subject to a regional tariff designed to
promote competition among power suppliers. On May 1, 1999, ISO-NE began
dispatching generating units using a bid-based system and implemented
bid-based markets for reserve products and automatic generation control.
Energy Resources --- Since April 1, 1998, each electric utility is required
to carry an allocated share of the NEPOOL capability responsibility under
the NEPOOL agreement. These capacity requirements are determined each month
based on regional reliability criteria. Unitil Power Corp., the full
requirements supplier to CECo and E&H, had a capability responsibility for
November, 1999 of 254.59 MW and a corresponding monthly peak demand of
179.08 MW. FG&E's capability responsibility is down substantially from a
year ago due to a contract with Constellation Power Source for the Standard
Offer Service Load within its distribution territory. FG&E's capability
responsibility for November, 1999 was 6.15 MW, with a coresponding monthly
peak demand of 4.50 MW.
To meet the needs of CECo and E&H, Unitil Power Corp. has contracted for
generating capacity and energy and for associated transmission services as
needed to meet NEPOOL requirements and to provide a diverse and economical
energy supply. Unitil Power's purchases are from various utility and
non-utility generating units using a variety of fuels and from several
utility systems in the U.S. and Canada. For the twelve months ended December
31,1999, Unitil Power's energy needs were provided by the following fuel
sources: nuclear (29%), oil (15%), gas (11%), coal (5%), wood and refuse
(5%) , hydro (1%), and system and other (34%).
In 1999, FG&E met its capacity requirements through an all requirements
Standard Offer contract with Constellation Power Source, purchase power
contracts and ownership interests in three generating units in which FG&E
participates on a tenancy-in-common basis as a non-operating owner. FG&E's
contract and jointly owned asset purchases are from various utility and
non-utility generating units using a variety of fuels and from several
utility systems in the U.S. and Canada. For the twelve months ended December
31, 1999, FG&E's energy needs were met with a combination of output
originating from the Standard Offer, all requirements service contract and
the FG&E power portfolio. Default customer energy needs were provided by the
following fuel sources: oil (24%), wood (22%), hydro (4%), coal (10%) and
nuclear (4%), system (27%)and other (9%).
FG&E is participating, on a tenancy-in-common basis with other New England
utilities, in the ownership of two generating units. Wyman Unit No. 4 is an
oil-fired station in Yarmouth Maine, which is operated by Central Maine
Power Company as the majority owner, that has been in commercial operation
since December 1978. Millstone Unit No. 3, a nuclear generating unit
operated by Northeast Utilities, has been in commercial operation since
April 1986. FG&E completed the sale of its principal generating asset, a
4.5% interest in New Haven Harbor Station, in March 1999. In accordance with
Massachusetts Electric Restructuring Law, and pursuant to the power supply
divestiture discussed in Note 8 of the Financial Statements, FG&E began
selling the output from its generation units on February 1, 2000.
Fuel --- Oil: Approximately 24% of FG&E's and 5% of UPC's electric power
in 1999 was provided by oil-fired units, some of which are owned by FG&E.
Most fuel oil used by New England electric utilities is acquired from
foreign sources and is subject to interruption and price increases by
foreign governments.
Coal: Approximately 10% of FG&E's and 2% of UPC's 1999 requirements were
from coal-burning facilities. The facilities generally purchase their coal
under long term supply agreements with prices tied to economic indices.
Although coal is stored both on-site and by fuel suppliers, long term
interruptions of coal supply may result in limitations in the production of
power or fuel switching to oil and thus result in higher energy prices.
Nuclear: FG&E has a 0.217% ownership interest in Millstone Unit No. 3
(the Unit). The Unit has contracted for certain segments of the nuclear
fuel production cycle through various dates. This cycle includes, among
other things, mining, enrichment and disposal of used fuel.
Pursuant to the Nuclear Waste Policy Act of 1982, the participants in
Millstone 3 were required to enter into contracts with the United States
Department of Energy, prior to the operation of that Unit, for the transport
and disposal of spent fuel at a nuclear waste repository. FG&E cannot
predict whether the Federal government will be able to provide storage or
permanent disposal repositories for spent fuel.
GAS SUPPLY
FG&E distributes gas purchased from domestic and Canadian suppliers under
long term contracts as well as gas purchased from producers and marketers on
the spot market. The following tables summarize actual gas purchases by
source of supply and the cost of gas sold for the years 1997 through 1999.
Sources of Gas Supply
(Expressed as percent of total MMBtu of gas purchased)
Natural Gas: 1999 1998 1997
Domestic firm.......... 75.4% 78.4% 82.7%
Canadian firm.......... 6.4% 6.4% 5.7%
Domestic spot market.... 17.2% 14.5% 10.5%
Total natural gas....... 99.0% 99.3% 98.9%
Supplemental gas.......... 1.0% 0.7% 1.1%
Total gas purchases...... 100.0% 100.0% 100.0%
Cost of Gas Sold
1999 1998 1997
Cost of gas purchased
and sold per MMBtu... $3.18 $3.16 $3.61
Percent Increase
(Decrease) from prior year 0.6% (12.4)% (10.1)%
As a supplement to pipeline natural gas, FG&E owns a propane air gas plant
and a liquefied natural gas (LNG) storage and vaporization facility. These
plants are used principally during peak load periods to augment the supply
of pipeline natural gas.
ENVIRONMENTAL MATTERS
In October 1999, FG&E applied for a time extension on the Tier 1B permit
(which allows FG&E to work towards temporary remediation of the site) for
the Company's former manufactured gas plant site (MGP) at Sawyer Passway.
The permit extension application was made to accommodate delays in the
scheduled construction of the new highway bridge that is to be built across
Sawyer Passway and to permit fulfillment of FG&E's obligations associated
with the bridge construction as stipulated in a memorandum of understanding
with the Massachusetts Highway Department and the Massachusetts Department
of Environmental Protection.
In December 1999, the Massachusetts Department of Environmental Protection
granted FG&E a two year extension to the FG&E's current Tier 1B permit at
Sawyer Passway. Upon completion of site remediation associated with the
bridge construction, the last remaining portion of the Sawyer Passway MGP
site is expected to be closed out and attain the status of temporary closure
in late 2001. This temporary closure allows FG&E to monitor the site every
five years to determine if a more feasible remediation alternative can be
developed and achieved.
The costs of remedial action at this site are initially funded from
traditional sources of capital and recovered from customers under a rate
recovery mechanism approved by the MDTE. The Company also has a number of
liability insurance policies that may provide coverage for environmental
remediation at this site.
CAPITAL REQUIREMENTS
Net capital expenditures increased approximately $0.9 million in 1999
compared to 1998, reflecting higher planned spending for utility
distribution system additions and improvements. The Company received cash
payments in 1999 of $5.3 million from the sale its 4.5% interest in New
Haven Harbor Station. The increase of $0.6 million in 1998 compared to 1997
also reflected higher spending for utility customer and distribution system
additions and improvements.
Capital expenditures are projected to increase in 2000 to approximately
$19.0 million, primarily reflecting a major distribution substation addition
and distribution system improvements.
FINANCING ACTIVITIES
Cash Flows from Financing Activities decreased by $7.4 million in 1999
compared to 1998. This decrease reflects lower borrowings in 1999 versus
1998.
On January 26, 1999, FG&E sold $12,000,000 of long-term notes at par to
institutional investors, bearing an interest rate of 7.37%. Proceeds were
used to repay short-term indebtedness, incurred to fund FG&E's ongoing
construction programs.
On September 3, 1998, CECo sold $10,000,000 of 30-year Series J First
Mortgage Bonds at par to an institutional investor, bearing an interest rate
of 6.96%. Proceeds were used to repay short-term indebtedness and to redeem
$4,550,000 of 9.43% Series H First Mortgage Bonds.
On September 3, 1998, E&H sold $10,000,000 of 30-year Series L First
Mortgage Bonds at par to an institutional investor, bearing an interest rate
of 6.96%. Proceeds were used to repay short-term indebtedness and to redeem
$700,000 of 8.5% Series H First Mortgage Bonds, and $3,500,000 of 9.43%
Series J First Mortgage Bonds.
The change in Cash From Financing Activities from 1997 to 1998 reflects an
increase in both short-term and long-term borrowings.
The Company currently has unsecured committed bank lines for short-term debt
aggregating $21,000,000 with three banks for which it pays commitment fees.
At December 31, 1999, the unused portion of the committed credit lines
outstanding was $10,500,000. The average interest rate on all short-term
borrowings were 5.72% and 5.95% during 1999 and 1998, respectively.
EMPLOYEES
As of December 31, 1999, the Company and its subsidiaries had 328 full-time
employees. The Company considers its relationship with its employees to be
good and has not experienced any major labor disruptions since the early
1960's.
There are approximately 100 employees represented by labor unions. In 1998,
E&H reached a new two year pact with its employees covered by a collective
bargaining agreement which will expire effective May 31, 2000. In 1997, CECo
reached a new three year pact with its employees covered by a collective
bargaining agreement which will expire effective May 31, 2000. In 1998,
FG&E reached a two year pact with its employees covered by collective
bargaining agreements which will expire effective May 31, 2000. The
agreements provided for discreet salary adjustments, established work
practices and provided uniform benefit packages. The Company expects to
successfully negotiate new agreements prior to the expiration dates of
these contracts.
The Company and its subsidiaries, where applicable, have in force funded
Retirement Plans and related Trust Agreements providing retirement annuities
for participating employees at age 65. The Company's policy is to fund the
pension cost accrued (see Note 9 of Notes to Consolidated Financial
Statements contained in Part II, Item 8).
The Company maintains two stock option plans which provide for the granting
of options to key employees, as follows:
Unitil Corporation Key Employee Stock Option Plan: The "Unitil Corporation
Key Employee Stock Option Plan" was a ten year plan which began in March,
1989. The number of shares granted under this plan, as well as the terms and
conditions of each grant, were determined by the Board of Directors, subject
to plan limitations. All options granted under this plan vested upon grant.
The ten year period in which options could be granted under this plan
expired in March, 1999. The plan provides dividend equivalents on options
granted, which are recorded at fair value as compensation expense.
Unitil Corporation 1998 Stock Option Plan: The "Unitil Corporation 1998
Stock Option Plan" became effective on December 11,1998. The number of
shares granted under this plan, as well as the terms and conditions of each
grant, are determined by the Board of Directors, subject to plan limitations.
All options granted under this plan vest over a three year period from the
date of the grant with 25% vesting on the first anniversary of the grant,
25% vesting on the second anniversary and 50% vesting on the third
anniversary. Under the terms of this plan, key employees may be granted
options to purchase the Company's common stock at no less than 100% of the
market price on the date the option is granted. All options must be
exercised no later than ten years after the date on which they were granted
(see Note 2 of Notes to Consolidated Financial Statements contained in Part
II, Item 8).
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages and positions of all of the executive officers of the
Company as of March 1, 2000 are listed below, along with a brief account of
their business experience during the past five years. All officers are
elected annually by the Board of Directors at the Directors' first meeting
following the annual meeting which is held on the third Thursday in April,
or at a special meeting held in lieu thereof. There are no family
relationships among these officers, nor is there any arrangement or
understanding between any officer and any other person pursuant to which
the officer was selected. Officers of the Company also hold various Director
and Officer positions with subsidiary companies.
Name, Age Business Experience
and Position During the Past 5 years
Robert G. Schoenberger, 49, Mr. Schoenberger has been Chairman
Chairman of the Board of Directors of the Board and Chief Executive
and Chief Executive Officer Officer of Unitil since 1997.
Prior to his employment with
Unitil, Mr. Schoenberger was
President and Chief Operating
Officer at New York Power
Authority (NYPA) from 1993 until
1997.
Michael J. Dalton, 59, Mr. Dalton has been a Director,
President and President and Chief Operating
Chief Operating Officer Officer of the Company since its
incorporation in 1984.
Anthony J. Baratta, Jr., 56, Mr. Baratta has been Senior Vice
Senior Vice President and President and Chief Financial
Chief Financial Officer Officer of Unitil since 1998.
Prior to his employment with
Unitil, Mr. Baratta was Executive
Vice President and Chief Financial
Officer at New World Power
Corporation. From 1990 to 1995,
Mr. Baratta was President, Chief
Executive Officer and Director at
HYDRA-CO Enterprises, Inc., a
wholly-owned subsidiary of
Niagara Mohawk Power Corp.
Mark H. Collin, 41, Mr. Collin was appointed Treasurer
Treasurer and Secretary and Secretary in January, 1998.
and Vice President, Unitil Service Mr. Collin has been the System
subsidiary Treasurer and Vice
President of Unitil Service Corp.
since 1992.
George R. Gantz, 48, Mr. Gantz has been Senior Vice
Senior Vice President President of Unitil Service since
Business Development 1994. Mr. Gantz was Vice
Unitil Service President of Unitil Service from
1989 to 1994.
Item 2. Properties
CECo's distribution service center building and adjoining administration
building, totaling 37,560 square feet of office, warehouse and garage area,
are located on land in the City of Concord owned by CECo in fee. CECo's
sixteen electric distribution substations constitute 114,290 kVA of capacity
for the transformation of electric energy from the 34.5 kV transmission
voltage to primary distribution voltage levels. The electric substations
are, with one exception, located on land owned by CECo in fee. The sole
exception is located on land occupied pursuant to a perpetual easement.
CECo has in excess of 34 pole miles of 34.5 kV electric transmission
facilities located, with minor exceptions, either on land owned by CECo in
fee or on land occupied pursuant to perpetual easements. CECo also has a
total of approximately 640 pole miles of overhead electric distribution
lines and a total of approximately 44 conduit bank miles (121 cable miles)
of underground electric distribution lines. The electric distribution lines
are located in, on or under public highways or private lands pursuant to
lease, easement, permit, municipal consent, tariff conditions, agreement or
license, expressed or implied through use by CECo without objection by the
owners. In the case of certain distribution lines, CECo owns only a part
interest in the poles upon which its wires are installed, the remaining
interest being owned by telephone and telegraph companies.
Additionally, CECo owns in fee 137.7 acres of land located on the east bank
of the Merrimack River in the City of Concord. Of the total acreage, 81.2
acres are located within an industrial park zone, as specified in the zoning
ordinances of the City of Concord.
The physical properties of CECo (with certain exceptions) and its franchises
are subject to the lien of its Indenture of Mortgage and Deed of Trust, as
supplemented, under which the respective series of First Mortgage Bonds of
CECo are outstanding.
E&H's distribution and engineering service center building is located on
land owned by E&H in fee. E&H's fourteen electric distribution substations,
including a 5,000 kVA mobile substation, constitute 91,400 kVA of capacity
for the transformation of electric energy from the 34.5 kV transmission
voltage to primary distribution voltage levels. The electric substations are
located on land owned by E&H in fee.
E&H has in excess of 68 pole miles of 34.5 kV electric transmission
facilities located on land either owned or occupied pursuant to perpetual
easements. E&H also has a total of approximately 724 pole miles of overhead
electric distribution lines and a total of approximately 101 conduit bank
miles of underground electric distribution lines. The electric distribution
lines are located in, on or under public highways or private lands pursuant
to lease, easement, permit, municipal consent, tariff conditions, agreement
or license, expressed or implied through use by E&H without objection by the
owners. In the case of certain distribution lines, E&H owns only a part
interest in the poles upon which its wires are installed, the remaining
interest being owned by telephone and telegraph companies.
Certain physical properties of E&H and its franchises are subject to the
lien of its Indenture of Mortgage and Deed of Trust, as supplemented, under
which the respective series of First Mortgage Bonds of E&H are outstanding.
FG&E owns a liquid propane gas plant and a liquid natural gas plant, both of
which are located on land owned in fee. FG&E is participating, on a
tenancy-in-common basis with other New England utilities, in the ownership
of two generating units. In accordance with Massachusetts Electric
Restructuring Law, and pursuant to the power supply divestiture discussed in
Note 8 of the Financial Statements, FG&E began selling the output from its
generation units on February 1, 2000. At December 31, 1999, the electric
properties of the Company consisted principally of 69 miles of transmission
lines, 16 transmission and distribution substations with a total capacity of
456,525 kVA and 474.8 miles of distribution lines. Electric transmission
facilities (including substations) and steel, cast iron and plastic gas mains
owned by the Company are, with minor exceptions, located on land owned by
the Company in fee or occupied pursuant to perpetual easements. The Company
leases its service building. (See Business - Electric Power Supply and Gas
Supply above for additional information regarding the Company's plants,
facilities and gas mains and services.)
Unitil Realty owns the Company's corporate headquarters building and 12
acres of land in fee, which is located in the town of Hampton, New Hampshire.
The Company believes that its facilities are currently adequate for its
intended uses.
Item 3. Legal Proceedings
The Company is involved in legal and administrative proceedings and claims
of various types which arise in the ordinary course of business. In the
opinion of the Company's management, based upon information furnished by
counsel and others, the ultimate resolution of these claims will not have a
material impact on the Company's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market For Registrant's Common Equity and
Related Stockholder Matters
Common Stock Data
Dividends Paid Per Common Share 1999 1998
1st Quarter $0.345 $0.34
2nd Quarter $0.345 $0.34
3rd Quarter $0.345 $0.34
4th Quarter $0.345 $0.34
The Year $1.38 $1.36
1999 1998
High/Ask Low/Bid High/Ask Low/Bid
1st Quarter 26 5/16 22 5/8 27 1/4 23 5/8
2nd Quarter 25 11/16 22 25 5/8 22 1/4
3rd Quarter 28 1/2 24 5/16 24 3/8 21 1/8
4th Quarter 37 23 1/4 28 13/16 22 3/4
Item 6. Selected Financial Data
1999 1998 1997 1996 1995
Consolidated Statements of
Earnings (000's)
Operating Income $15,408 $15,306 $15,562 $14,273 $14,225
Non-operating Expense (Income) 51 156 160 (627) 217
Income Before Interest Expense 15,357 15,150 15,402 14,900 14,008
Interest Expense, Net 6,919 6,901 7,167 6,171 5,639
Net Income 8,438 8,249 8,235 8,729 8,369
Dividends on Preferred Stock 268 274 276 278 284
Net Income Applicable to
Common Stock $8,170 $7,975 $7,959 $8,451 $8,085
Balance Sheet Data (000's)
Utility Plant (Original Cost) $219,838 $209,462 $219,475 $207,545 $190,177
Total Assets $363,527 376,835 238,531 232,108 211,702
Capitalization and Short-term Debt:
Common Stock Equity $78,675 $75,351 $71,644 $67,974 $63,895
Preferred Stock 3,757 3,843 3,891 3,891 3,999
Long-Term Debt 86,157 75,222 68,366 62,211 63,505
Total Capitalization $168,589 $154,416 $143,901 $134,076 $131,399
Capitalization Ratios:
Common Stock Equity 47% 49% 50% 51% 49%
Preferred Stock 2% 2% 3% 3% 3%
Long-Term Debt 51% 49% 47% 46% 48%
Short-Term Notes Payable $10,500 $20,000 $18,000 $21,400 $2,700
Common Stock Data (000's)
Shares of Common Stock (Year-End) 4,712 4,575 4,464 4,384 4,330
Shares of Common Stock (Average) 4,682 4,506 4,413 4,354 4,299
Per Share Data
Basic Earnings Per Average Share $1.74 $1.77 $1.80 $1.94 $1.88
Diluted Earnings per Average Share $1.74 $1.72 $1.76 $1.89 $1.85
Dividends Paid Per Share (Year-End) $1.38 $1.36 $1.34 $1.32 $1.28
Book Value Per Share (Year-End) $16.70 $16.47 $16.05 $15.50 $14.76
Electric and Gas Statistics 1999 1998 1997 1996 1995
Electric Sales - (MWH) 1,608,824 1,540,968 1,491,103 1,532,015 1,401,292
Customers Served - Year End 92,505 91,729 90,776 89,149 88,316
Gas Sales - (000's of
Firm Therms) 22,136 22,027 23,716 24,508 22,303
Customers Served - Year End 14,928 14,915 14,943 14,848 14,846
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
THE YEAR IN REVIEW
The Year 1999 presented both challenges and opportunities for Unitil
Corporation ("Unitil" or the "Company"). We developed an aggressive plan to
grow our Company and made necessary expenditures for the successful start-up
of new ventures. We continued to focus on managing the restructuring of our
core utility business in a way that ensures fairness in the treatment of the
Company's assets and obligations and, at the same time, provides choice for
customers.
Our Massachusetts subsidiary, Fitchburg Gas and Electric Light Company
(FG&E), successfully completed the divestiture of its electric generation
and power supply portfolio, complied with legislatively mandated rate
discounts for all customers, and provided systems and information for
customers to choose their electric energy supplier. FG&E also began the
transition out of the gas merchant function for gas supply under a
multi-year phase-in of a restructured natural gas industry that will provide
customers the opportunity to choose their gas supplier. Our New Hampshire
electric utility operating subsidiaries, Concord Electric Company (CECo) and
Exeter & Hampton Electric Company (E&H), continue to prepare for the
transition to a deregulated market structure, pending resolution on key
restructuring policies and issues that have slowed the restructuring process
in the state.
The weather played an important role during the year, as another unusually
warm winter negatively impacted gas sales used for heating. By contrast,
the hot summer weather in New England produced record demand for electricity
and helped increase electricity sales for the year. Apart from these
seasonal weather factors, the underlying economic growth within our utility
service territories remains strong.
One of our major customers filed for Chapter 11 bankruptcy in June 1999.
The customer is currently looking for a buyer, with the goal of resuming
operations in 2000. We continue to work closely with the customer,
providing electric and gas service, and are working out payment terms on a
current basis.
During 1999, the Company continued its work to ensure that the arrival of
the new millennium did not impact service to its customers. We assessed,
remediated and tested all our mission-critical systems; worked in
collaboration with government, industry and business allies; and achieved
our goal of being Y2K compliant by mid-year. Unitil experienced no problems,
malfunctions or interruption of service resulting from Y2K effects on any
critical systems. Moving forward into the year 2000, we do not anticipate
any problems or interruptions to normal business operations as a result of
Y2K.
USOURCETM
During 1999 Unitil acquired a minority interest in Enermetrix.com (formerly
known as North American Power Brokers, Inc.) through the purchase of $4.3
million of Convertible Preferred Stock and $142,000 of Common Stock Warrants.
Enermetrix.com is a privately held company which has been financed by
several rounds of venture capital. Unitil has participated in two of these
rounds of financing. Enermetrix.com is a developer of an Internet-based
energy procurement bid system (the Enermetrix.com Exchange or the "Exchange")
that matches buyers and sellers of energy in competitive markets. Unitil's
ownership represents a 10% equity interest in Enermetrix.com and Unitil is
represented on Enermetrix.com's Board of Directors. Although the market
value of the investment in Enermetrix.com stock is not readily determinable,
management believes the fair value of this investment currently exceeds its
carrying cost.
In addition, Unitil Resources, Inc. (URI), a non-regulated subsidiary of
Unitil, licensed Enermetrix.com's innovative Internet-based technology for
brokering electricity and natural gas sales between consumers and suppliers.
Under the name "UsourceTM", we offer retail energy consumers the market
benefits of energy supply bidding with the efficiency and cost benefits of
e-commerce. Customers, with the assistance of our UsourceTM sales force and
back-office support, post their electric and gas requirements on the
Exchange through the UsourceTM website. Customers realize significant time
and dollar savings using the Exchange, eliminating costly and time consuming
RFP's (Request for Proposals) and assuring highly competitive, time-sensitive
bids. Suppliers use the Exchange as a low-cost, efficient customer
acquisition vehicle, and are able to adjust their bids in real time in
response to rapidly changing market conditions.
In January 2000, URI signed an agreement with a major software development
vendor to further automate the UsourceTM product line for mid-market
business-to-business e-commerce. The UsourceTM website and automated
customer enrollment process will facilitate consumer access to the Exchange
and ultimately to energy suppliers. This enhanced product development
effort is designed to meet the needs and requirements of the mid-market
business customer segment and increase the total market for UsourceTM
products and services.
UsourceTM continues to attract new customers and has expanded service
throughout New York and New England. URI has entered into a product
partnership with a metering and data collection company in order to offer a
broader line of products in addition to brokering services. Unitil plans to
deploy additional capital and resources to UsourceTM to expand our customer
base and to more fully automate the on-line energy procurement process.
EARNINGS AND DIVIDENDS
Net Income Applicable to Common Stock for 1999 was $8.2 million, 2.4% above
1998 net income. Contributing positively to the Company's earnings
performance were higher electric and gas Distribution Revenues and the
contribution of revenues from UsourceTM. Also contibuting to earnings were
lower Property and Other Taxes compared to the prior year. Offsetting these
positive contributors were higher Depreciation and Amortization expenses due
to a higher level of Plant in Service and the accelerated write-off of
electric generating assets under our restructuring plan in Massachusetts.
Diluted earnings per average common share were $1.74 for the year ended
December 31, 1999, compared to $1.72 and $1.76 for 1998 and 1997,
respectively. The average return on common equity was 10.6%, 10.9%, and
11.4% in 1999, 1998, and 1997, respectively.
Unitil's common stock dividends in 1999 were $1.38 per share, an increase of
1.5% over 1998's annual dividend of $1.36 per share. This annual dividend of
$1.38 in 1999 resulted in a payout ratio of 79%. At its January 2000 meeting,
the Unitil Board of Directors declared a regular quarterly dividend on the
Company's common stock of $0.345 per share. This quarterly dividend maintains
the annual dividend rate at $1.38 per share, as the Company balances growth
initiatives and income objectives.
OPERATING REVENUES-ELECTRIC
Unit (kWh) Sales - Unitil's total electric kilowatt-hour (kWh) sales
increased by 4.4% in 1999 compared to 1998, primarily due to system growth
and a warmer summer season. In our utility service territories, cooling
degree days were well above normal during the summer cooling season.
Sales to residential customers increased by 5.6% in 1999 compared to 1998,
and were 7.1% higher than 1997 sales. These energy sales increases were due
to warmer summer weather and a 1.1% increase in the number of residential
customers that we serve.
Commercial and industrial sales of electricity were up 3.8% in 1999, due to
a continued strong regional economy. 1999 sales were higher by 8.4%
compared to 1997, reflecting the fact that a major customer had suspended
operations in 1997, but resumed operations for a portion of 1999.
The following table details total kilowatt-hour sales for the last three
years by major customer class:
KWH Sales (000's) 1999 1998 1997
Residential 571,694 541,492 533,907
Commercial/Industrial 1,037,130 999,476 957,196
Total KWH Sales 1,608,824 1,540,968 1,491,103
Electric Operating Revenue increased by $4.4 million, or 3.0%, in 1999
compared to 1998. Approximately one-third of this increase was the result
of higher sales volume across all customer classes, slightly offset by lower
electric rates, due to additional rate discounts mandated in Massachusetts
and lower energy supply prices in New Hampshire. The remainder of this
increase was the result of the resale of energy supply, due to the electric
utility industry restructuring process. The energy component of electric
operating revenue represents the recovery of energy supply costs which are
collected from customers through periodic cost recovery adjustment
mechanisms. Changes in energy supply prices do not affect net income, as
they normally mirror corresponding changes in energy supply costs.
Electric Operating Revenue (000's) 1999 1998 1997
Residential $58,415 $57,242 $57,947
Commercial/Industrial 95,662 92,397 92,026
Total Operating Revenue $154,077 $149,639 $149,973
OPERATING REVENUES-GAS
Unit (Therm) Sales - Total firm therm gas sales increased 0.5% in 1999 when
compared to 1998. The decrease in sales is attributable to a 7.6% increase
in sales to commercial/industrial customers, offset by a 5.8% decrease in
sales to residential customers, due to the warm winter weather. Total firm
therm sales decreased 6.7% in the two-year period from 1997 to 1999, as the
winter heating season in 1999 was warmer than in 1997.
The following table details total firm therm gas sales for the last three
years, by major customer class:
Firm Therm Sales (000's) 1999 1998 1997
Residential 10,980 11,656 13,038
Commercial/Industrial 11,156 10,371 10,678
Total Firm Therm Sales 22,136 22,027 23,716
Gas Operating Revenues, which represent approximately 10% of Unitil's total
operating revenues, increased by $1.1 million, or 6.5%, in 1999 compared to
1998. This increase was attributable to an approximate 7% base rate increase
that went into effect in December 1998.
Gas Operating Revenue (000's) 1999 1998 1997
Residential $8,635 $8,581 $10,179
Commercial/Industrial 7,148 6,259 7,368
Total Firm Gas Revenue 15,783 14,840 17,547
Interruptible Gas Revenue 2,333 2,169 2,182
Total Gas Revenues $18,116 $17,009 $19,729
OPERATING REVENUES-OTHER
Other Revenue increased from $30,000 in 1998 to $180,000 in 1999. This
increase was the result of revenue generated from consulting activities of
$100,000 and the Company's internet based energy brokering business,
UsourceTM of $50,000. UsourceTM began operations in May of 1999.
OPERATING EXPENSES
Fuel and Purchased Power expense is the cost of power supply, including fuel
used in electric generation and the price of wholesale energy and capacity,
that meets Unitil's electric energy requirements. Fuel and purchased power
expenses (normally recoverable from customers through periodic cost recovery
adjustment mechanisms) increased $3.6 million, or 3.6% in 1999 compared to
1998. The change was driven by an increase in the Company's total energy
requirements in 1999, offset by a decrease in wholesale power prices. An
additional component of this increase was the purchase of excess energy
supply, due to electric utility industry restructuring and the timing of the
divestiture of FG&E's power supply portfolio. The Company anticipates that
power supply-related costs and corresponding revenues will decline in future
years, as customers choose alternate competitive energy suppliers under a
restructured electric utility industry.
Gas Purchased for Resale reflects gas purchased and manufactured to supply
the Company's total gas energy requirements. Gas supply costs are
recoverable from customers through the Cost of Gas Adjustment mechanism.
Purchased Gas costs remained level in 1999 compared to 1998, reflecting a
decrease in therms purchased, offset by slightly higher wholesale gas prices
in 1999. Gas purchased for resale decreased by $2.2 million, or 18.1% in the
two-year period from 1997 to 1999, driven by a decrease in therms purchased
due to warmer winter weather.
Under Order 636, the Federal Energy Regulatory Commission (FERC) allowed gas
pipeline suppliers to recover prudently incurred costs resulting from the
transition into a deregulated environment. Through the end of 1998, the
amount of transition costs incurred by the Company totaled approximately
$3.4 million. These costs were recovered directly from gas customers through
the Cost of Gas Adjustment mechanism. The Company did not incur any
additional transition costs in 1999 and is not expected to incur these costs
in the future.
Operation and Maintenance expense, which includes distribution utility
operating costs, Conservation and Load Management (C&LM) Program
expenditures, and the Company's share of operating costs related to power
production at the generation facilities in which the Company has a partial
ownership interest, increased by approximately $0.8 million, or 3.2% in
1999 compared to 1998. The increase in Operation and Maintenance expenses
compared to last year reflects $0.6 million increase in costs associated
with C&LM Programs, as well as approximately $0.1 million in costs to launch
UsourceTM. The C&LM expenses are offset by revenues accrued to be collected
in the future from customers through rate recovery mechanisms.
In 1998, Operation and Maintenance expense increased from 1997 by
approximately $0.1 million, or 0.4%, due to higher administrative costs
related to electric utility industry restructuring.
DEPRECIATION, AMORTIZATION AND TAXES
Depreciation and Amortization expense increased $1.4 million, or 14.0%, for
1999 over the prior year, due to a higher level of Plant in Service, higher
gas Plant depreciation rates and the accelerated write-off of electric
generating assets, due to electric utility industry restructuring in
Massachusetts. The electric generating assets will be fully amortized in
approximately 10 years.
Federal and State Income Taxes increased by $0.3 million in 1999 compared
to 1998. This result reflects higher net income before taxes, as well as a
higher effective income tax rate in 1999, partially due to the lower level
of Investment Tax Credit amortization.
Local Property and Other Taxes decreased $0.5 million, or 8.4%, in 1999.
This decrease was related to the divestiture of generating assets and the
impact of state and local property tax changes in New Hampshire.
NON-OPERATING INCOME/EXPENSES
Non-Operating Expenses, Net in 1999 were lower than in 1998, reflecting a
higher level of non-operating income related to non-utility products and
services.
INTEREST EXPENSE
Interest Expense, Net remained level in 1999 compared to the prior year. An
increase in accrued interest income associated with deferred rate recovery
mechanisms and lower short-term borrowing rates were offset by interest
expense on a higher level of debt outstanding. The $0.3 million decrease in
interest expense in 1998 from 1997 was due to an increase in accrued
interest income related to deferred rate recovery mechanisms and interest on
refunds received from suppliers.
CAPITAL REQUIREMENTS AND LIQUIDITY
Unitil requires capital for the acquisition of property, plant, and equipment
in order to improve, protect, maintain and expand its electric and gas
distribution systems; to improve customer service operations and
capabilities; and to pursue new growth opportunities. The capital necessary
to meet these requirements has been derived primarily from the Company's
retained earnings and through the sale of shares of common stock through the
Company's Dividend Reinvestment and Stock Purchase Plans. When
internally-generated funds are not available, it is the Company's policy to
borrow funds on a short-term basis to meet the capital requirements of its
subsidiaries and, when necessary, to repay short-term debt through the
issuance of permanent financing.
Cash Flows from Operating Activities increased by $5.1 million in 1999,
after decreasing by $3.3 million in 1998.
The increase in 1999 compared to 1998 was due to lower working capital needs
at the year-end Balance Sheet date as a result of timing differences of
payments on energy supply contracts. This favorable cash flow variance was
offset by higher levels of accrued revenues, due to rate discounts
associated with electric utility industry restructuring in Massachusetts.
Other contributors to the increase in cash flow were a lower level of
Materials and Supplies inventory, an increase in Customer Deposits,
increased Interest Payable, and a decrease in net Regulatory Assets.
Offsetting these contributors were a smaller increase in deferred tax
provisions from the prior year and a higher level of taxes refundable.
Cash flow from operating activities is expected to be negatively impacted in
the foreseeable future, as a result of electric utility industry
restructuring in Massachusetts. As a result of legislatively mandated retail
rate caps, the Company is deferring the recovery of certain costs related to
the restructuring of its utility business. These costs are currently being
funded from internally generated cash. The Company is exploring various
financing alternatives to fund projected deferral levels in future years.
The decrease in 1998 compared to 1997 was primarily due to higher working
capital needs at the year-end Balance Sheet date, as a result of timing
differences of payments on energy supply contracts, as well as increased
refunds of customer deposits.
Operating Activities (000's) 1999 1998 1997
Cash Provided by Operating Activities $18,308 $13,215 $16,555
Cash Flows Used in Investing Activities increased approximately $0.7 million
in 1999. Higher spending for utility distribution system additions and
improvements ($1.0 million) plus the Company's investment in Enermetrix.com
($4.4 million) were offset by cash received from the sale of the Company's
4.5% interest in New Haven Harbor Station ($5.3 million).
The increase of $0.6 million in 1998 compared to 1997 reflected higher
spending for utility customer and distribution system additions and
improvements.
Capital expenditures are projected to increase in 2000 to approximately
$19.0 million, primarily reflecting a major distribution substation addition
and distribution system improvements.
Investing Activities (000's) 1999 1998 1997
Cash Used in Investing Activities $(15,131) $(14,463) $(13,887)
Cash Flows from Financing Activities decreased by $7.4 million in 1999
compared to 1998. This decrease reflects lower borrowings in 1999 versus
1998.
On January 26, 1999, FG&E sold $12,000,000 of long-term notes at par to
institutional investors, bearing an interest rate of 7.37%. Proceeds were
used to repay short-term indebtedness, incurred to fund FG&E's ongoing
construction programs.
On September 3, 1998, CECo sold $10,000,000 of 30-year Series J First
Mortgage Bonds at par to an institutional investor, bearing an interest rate
of 6.96%. Proceeds were used to repay short-term indebtedness and to redeem
$4,550,000 of 9.43% Series H First Mortgage Bonds.
On September 3, 1998, E&H sold $10,000,000 of 30-year Series L First
Mortgage Bonds at par to an institutional investor, bearing an interest rate
of 6.96%. Proceeds were used to repay short-term indebtedness and to redeem
$700,000 of 8.5% Series H First Mortgage Bonds, and $3,500,000 of 9.43%
Series J First Mortgage Bonds.
During 1999, the Company raised $0.7 million of additional common equity
capital through the issuance of 27,619 shares of common stock in connection
with the Dividend Reinvestment and Stock Purchase plans. The Company raised
$1.0 million of additional common equity capital in 1998 and $1.0 million of
additional equity capital in 1997, through the issuance of 43,862 and 51,529
shares, respectively, of common stock in connection with these plans. The
Company also raised $804,000, $566,000, and $242,000 of additional common
equity capital in 1999, 1998, and 1997, respectively, through the issuance
of shares, as a result of the exercise of options granted under the
Company's Key Employee Stock Option Plan (KESOP). The total number of shares
exercised under the KESOP plan in 1999, 1998 and 1997 were 109,753 shares,
66,951 shares and 28,222 shares, respectively. The Company plans to move to
open-market purchases to meet its share issuance obligations under these
plans in the future.
The change in Cash From Financing Activities from 1997 to 1998 reflects an
increase in both short-term and long-term borrowings.
Financing Activities (000's) 1999 1998 1997
Cash From Financing Activities $(4,413) $2,994 $(3,234)
REGULATORY MATTERS
Restructuring Activity --- Electric and gas industry restructuring and the
process for separating the "competitive" retail sale of the electric and gas
energy from the "regulated" delivery of that energy over a utility's
transmission and distribution system has been the predominant focus of the
Company's regulatory initiatives and activities in both Massachusetts and
New Hampshire.
Since March 1, 1998 all electric consumers in Massachusetts served by
investor-owned utilities have had the ability to choose their electric
energy supplier. FG&E, the Company's Massachusetts utility operating
subsidiary, began implementation of its comprehensive electric restructuring
plan that includes the divestiture of its entire regulated power supply
business.
In New Hampshire, CECo and E&H, our electric utility operating subsidiaries,
and Unitil Power Corp., our wholesale power company, continue to prepare for
the the transition that will move them into this new market structure
pending resolution of key restructuring policies and issues that have slowed
the restructing process in the state.
Massachusetts gas industry restructuring plans continue to be a major focus
of our regulatory activities as well. Since 1997, FG&E has worked in
collaboration with the other Massachusetts Local Distribution Companies
(LDCs) and various other stakeholders to develop and implement the
infrastructure to offer gas customers choice of their competitive gas energy
supplier and to complete the restructuring of gas service provided by LDCs.
FG&E is required to file with the Massachusetts Department of
Telecommunications and Energy (MDTE) new gas tariffs to implement natural
gas unbundling in accordance with Model Terms and Conditions resulting from
these collaborative efforts. The target date for implementation of approved
tariffs and final rules is April 1, 2000.
Massachusetts (Electric)- On January 15, 1999, the MDTE approved FG&E's
restructuring plan with certain modifications. The Plan provides customers
with: a) the ability to choose an energy supplier; b) an option to purchase
Standard Offer Service provided by FG&E at regulated rates for up to seven
years; and c) a cumulative 15% rate reduction. The Order also approved
FG&E's power supply divestiture plan for its interest in three generating
units and four long-term power supply contracts. The Company has been
afforded full recovery of any transition costs through a non-bypassable
retail Transition Charge.
Pursuant to the Plan, on October 30, 1998, FG&E filed a proposed contract
with Constellation Power Services Inc. for provision of Standard Offer
Service. Service under the FG&E/Constellation contract commenced on March 1,
1999, and is scheduled to continue through February 28, 2005. This contract
is the result of the first successful Standard Offer auction conducted in
Massachusetts.
A contract for the sale of FG&E's interest in the New Haven Harbor plant was
approved by the MDTE on March 31, 1999 and the sale of the unit closed on
April 14, 1999. A contract for the sale of the entire output from FG&E's
remaining generating assets and purchased power contracts was approved by
the MDTE on December 28, 1999, and went into effect February 1, 2000.
FG&E filed an electric rate decrease effective September 1, 1999, as
provided for by the 1997 Massachusetts Electric Restructuring Act (the Act).
The Act mandated a 10% rate reduction in March 1998, to be followed by an
additional, inflation-adjusted 5% rate reduction by September 1, 1999. The
net rate decrease of 1.3% reflects FG&E's divestiture of its generation
assets and purchased power portfolio.
On December 22, 1999, FG&E filed with the MDTE new rates for effect January
1, 2000. The revised rates maintain the required inflation-adjusted 15% rate
discount. The MDTE approved the rates on January 5, 2000, subject to
reconciliation pursuant to an investigation, resulting in an upward
inflation adjustment of 2.5% relative to September 1999 rates. The MDTE has
issued a notice of public hearing and procedural conference to examine
electric restructuring issues including, but not limited to, consistency of
the proposed charges and adjustments with the methods approved in FG&E's
restructuring plan.
As a result of restructuring and divestiture of FG&E's generation and
purchased power portfolio, FG&E has accelerated the write-off of its
electric generation assets and on FG&E's abandoned investment in Seabrook
Station. An MDTE Order established the return to be earned on the
unamortized balance of FG&E's generation plant. The new return reduces
FG&E's earnings on its generation assets. As this portfolio is amortized
over the next 10 years, earnings from this segment of FG&E's utility
business will continue to decline and ultimately cease. Currently, Unitil's
earnings from this business segment represent approximately 10% of total
consolidated earnings.
Massachusetts (Gas)- In mid-1997, the MDTE directed all Massachusetts
natural gas LDCs to form a collaborative with other stakeholders to develop
common principles and appropriate regulations for the unbundling of gas
service, and directed FG&E and four other LDCs to file unbundled gas rates
for its review. FG&E's unbundled gas rates were filed with, and approved by,
the MDTE and implemented in November 1998.
On February 1, 1999, the MDTE issued an order in which it determined that
the LDCs would continue to have an obligation to provide gas supply and
delivery services for another five years, with a review after three years.
This order also set forth the MDTE's decision regarding release by LDCs of
their pipeline capacity contracts to competitive marketers. In March 1999,
the LDCs and other stakeholders filed a settlement with the MDTE which set
forth rules for implementing an interim firm transportation service through
October 31, 2000. The interim service will ultimately be superseded by the
permanent transportation service, expected to begin April 1, 2000. The MDTE
approved the settlement on April 2, 1999. FG&E has made separate compliance
filings that were approved by the MDTE to implement its interim firm gas
transportation service for its largest general service customers effective
June 1, 1999 and to complement this service with a firm gas peaking service.
On November 3, 1999 the Massachusetts LDCs filed Model Terms and Conditions
for Gas Service, including provisions for capacity assignment, peaking
service and default service. In accordance with the MDTE's approval of
these Model Terms and Conditions in January 2000, FG&E is required to file
Company-specific tariffs that implement natural gas unbundling. The MDTE has
also opened a rulemaking proceeding on proposed regulations that would
govern the unbundling of services related to the provision of natural gas.
The target date for implementation of approved tariffs and final rules is
April 1, 2000.
New Hampshire - On February 28, 1997, the New Hampshire Public Utilities
Commission (NHPUC) issued its Final Plan for New Hampshire electric
utilities to transition to a competitive electric market in the state
("Final Plan"). The Final Plan linked the interim recovery of stranded cost
by the State's utilities to a comparison of their existing rates with the
regional average utility rates. CECo's and E&H's rates are below the regional
average; thus, the NHPUC found that CECo and E&H were entitled to full
interim stranded cost recovery, as defined by the NHPUC. However, the NHPUC
also made certain legal rulings, which could affect CECo's and E&H's
long-term ability to recover all of its stranded costs.
Northeast Utilities' affiliate, Public Service Company of New Hampshire,
filed suit in U.S. District Court for protection from the Final Plan and
related orders and was granted an indefinite stay. In June 1997, Unitil, and
other utilities in New Hampshire, intervened as plaintiffs in the federal
court proceeding. In June 1998, the federal court clarified that the
injunctions issued by the court in 1997 had effectively frozen the NHPUC's
efforts to implement restructuring. This amended injunction was challenged
by the NHPUC, but affirmed by the First Circuit Court of Appeals in December
1998. Unitil continues to be a plaintiff-intervenor in federal district
court and cross motions for summary judgement by all parties are now under
review by the court.
During 1998, Unitil took steps to settle all of the outstanding issues
related to the Final Plan and the federal court litigation over electric
industry restructuring. In September 1998, Unitil reached a settlement with
key parties and filed this unopposed agreement with the NHPUC for approval.
However, the NHPUC imposed unacceptable conditions to approval of the
settlement, and CECo and E&H withdrew the proposed settlement from further
NHPUC review. Unitil has continued to work actively to explore additional
settlement opportunities and to seek a fair and reasonable resolution of key
restructuring policies and issues in New Hampshire. The Company is also
monitoring the regulatory and legislative proceedings dealing with electric
restructuring for other utilities in New Hampshire.
Rate Proceedings -The last formal regulatory filings to increase base
electric rates for Unitil's three retail operating subsidiaries occurred in
1985 for CECo, 1984 for FG&E, and 1981 for E&H. A majority of the Company's
operating revenues are collected under various periodic rate adjustment
mechanisms including fuel, purchased power, cost of gas, energy efficiency,
and restructuring-related cost recovery mechanisms. Industry restructuring
will continue to change the methods of how certain costs are recovered
through the Company's regulated rates and tariffs.
On May 15, 1998, FG&E filed a gas base rate case with the MDTE. The last
base rate case had been in 1984. After evidentiary hearings, the MDTE issued
an Order allowing FG&E to establish new rates, effective November 30, 1998,
that would produce an annual increase of approximately $1.0 million in gas
revenues. As part of the proceeding, the Massachusetts Attorney General
alleged that FG&E had double-collected fuel inventory finance charges, and
requested that the MDTE require FG&E to refund approximately $1.6 million in
double collections since 1987. The Company believes that the Attorney
General's claim is without merit and that a refund was not justified or
warranted. The MDTE rejected the Attorney General's request and stated its
intent to open a separate proceeding to investigate the Attorney General's
claim. On November 1, 1999, the MDTE issued an Order of Notice initiating an
investigation of this matter. This proceeding is underway and is expected to
be concluded in the second quarter of 2000.
On October 29, 1999, the MDTE initiated a proceeding designed to result in
the eventual implementation of Performance Based Ratemaking (PBR) for all
electric and gas distribution utilities in Massachusetts. PBR is a method of
setting regulated distribution rates that provide incentives for utilities
to control costs while maintaining a high level of service quality. Under
PBR, a company's earnings are tied to performance targets, and penalties can
be imposed for deterioration of service quality. On December 29, 1999, FG&E
filed a petition with the MDTE for authority to defer for later recovery
costs associated with its preparation of a PBR filing for its gas division
and its participation in the MDTE-initiated generic gas and electric PBR
proceedings. This petition is pending. The Company is currently evaluating
the impact, if any, that PBR would have on the Company's ability to continue
applying the standards of Statement of Financial Accounting Standards No.71
"Accounting for the Effects of Certain Types of Regulation."
On December 31, 1999, the Massachusetts Attorney General initiated a
Complaint against FG&E. The Attorney General requested that the MDTE launch
an investigation of the distribution rates, rate of return, and depreciation
accrual rates for FG&E's electric operations in calendar year 1999. To date,
the MDTE has taken no action on the Attorney General's complaint.
Millstone Unit No. 3 - FG&E has a 0.217% nonoperating ownership in the
Millstone Unit No. 3 (Millstone 3) nuclear generating unit which supplies it
with 2.49 megawatts (MW) of electric capacity. In January 1996, the Nuclear
Regulatory Commission (NRC) placed Millstone 3 on its Watch List, which
calls for increased NRC inspection attention. In March 1996, as a result of
engineering evaluations, Millstone 3 was taken out of service. The NRC
authorized the restart of Millstone 3 in June 1998.
During the period that Millstone 3 was out of service, FG&E continued to
incur its proportionate share of the unit's ongoing Operations and
Maintenance (O&M) costs, and may incur additional O&M costs and capital
expenditures to meet NRC requirements. FG&E also incurred costs to replace
the power that was expected to be generated by the unit. During the outage,
FG&E incurred approximately $1.2 million in replacement power costs, and
recovered those costs through its electric fuel charge, which is subject to
review and reconciliation by the MDTE. Under existing MDTE precendent,
FG&E's replacement power costs of $1.2 million could be subject to
disallowance in rates.
In August 1997, FG&E, in concert with other non-operating joint owners,
filed a demand for arbitration in Connecticut and a lawsuit in Massachusetts,
in an effort to recover costs associated with the extended unplanned
shutdown. Several preliminary rulings have been issued in the arbitration
and legal cases, and both cases are continuing. On March 22, 2000, FG&E
entered into a settlement agreement with the defendants under which FG&E
will dismiss its lawsuit and arbitration claims. The settlement is generally
similar to earlier settlements with the defendants and three joint owners
that own, in the aggregate, approximately 19 percent of the unit. The
settlement provides for FG&E to receive an initial payment of $600,000 and
other amounts contingent upon future events and would result in FG&E's
entire interest in the unit being included in the auction of the majority
interest, and certain of the minority interests, in Millstone 3 expected to
be completed by 2001. Upon completion of the sale of Millstone 3, FG&E will
be relieved of all residual liabilities, including decommissioning
liabilities, associated with Millstone 3. FG&E expects to flow the net
proceeds of the settlement to its customers.
Environmental Matters - In October 1999, FG&E applied for a time extension
on the Tier 1B permit (which allows FG&E to work towards temporary
remediation of the site) for FG&E's former manufactured gas plant site (MGP)
at Sawyer Passway. The permit extension application was made to accommodate
delays in the scheduled construction of the new highway bridge that is to be
built across Sawyer Passway and to permit fulfillment of FG&E's obligations
associated with the bridge construction as stipulated in a memorandum of
understanding with the Massachusetts Highway Department and the
Massachusetts Department of Environmental Protection.
In December 1999, the Massachusetts Department of Environmental Protection
granted FG&E a two year extension to the FG&E's current Tier 1B permit at
Sawyer Passway. Upon completion of site remediation associated with the
bridge construction, the last remaining portion of the Sawyer Passway MGP
site is expected to be closed out and attain the status of temporary closure
in late 2001. This temporary closure allows FG&E to monitor the site every
five years to determine if a more feasible remediation alternative can be
developed and achieved.
The costs of remedial action at this site are initially funded from
traditional sources of capital and recovered from customers under a rate
recovery mechanism approved by the MDTE. The Company also has a number of
liability insurance policies that may provide coverage for environmental
remediation at this site.
Market Risk - Although Unitil's utility operating companies are subject to
commodity price risk as part of their traditional operations, the current
regulatory framework within which these companies operate allows for full
collection of fuel and gas costs in rates. Consequently, there is limited
commodity price risk after consideration of the related rate-making. As the
utility industry deregulates, the Company will be divesting its
commodity-related energy businesses and therefore will be further reducing
its exposure to commodity-related risk.
FORWARD-LOOKING INFORMATION
This report contains forward-looking statements which are subject to the
inherent uncertainties in predicting future results and conditions. Certain
factors that could cause the actual results to differ materially from those
projected in these forward-looking statements include, but are not limited
to; variations in weather, changes in the regulatory environment, customers'
preferences on energy sources, general economic conditions, increased
competition and other uncertainties, all of which are difficult to predict,
and many of which are beyond the control of the Company.
CONSOLIDATED STATEMENTS OF EARNINGS
(000's, except common shares and per share data)
Year Ended December 31, 1999 1998 1997
Operating Revenues:
Electric $154,077 $149,639 $149,973
Gas 18,116 17,009 19,729
Other 180 30 36
Total Operating Revenues 172,373 166,678 169,738
Operating Expenses:
Fuel and Purchased Power 102,171 98,589 99,974
Gas Purchased for Resale 9,854 9,874 12,032
Operation and Maintenance 24,404 23,652 23,550
Depreciation and Amortization 11,412 10,007 9,178
Provisions for Taxes:
Local Property and Other 5,077 5,540 5,276
Federal and State Income 4,047 3,710 4,166
Total Operating Expenses 156,965 151,372 154,176
Operating Income 15,408 15,306 15,562
Non-Operating Expenses 51 156 160
Income Before Interest Expense 15,357 15,150 15,402
Interest Epense, Net 6,919 6,901 7,167
Net Income 8,438 8,249 8,235
Less Dividends on Preferred Stock 268 274 276
Net Income Applicable to Common Stock $8,170 $7,975 $7,959
Average Common Shares Outstanding 4,682,273 4,505,784 4,412,869
Basic Earnings Per Share $1.74 $1.77 $1.80
Diluted Earnings Per Share $1.74 $1.72 $1.76
(The accompanying Notes are an integral part of these financial statements.)
CONSOLIDATED BALANCE SHEETS (000'S)
ASSETS
December 31, 1999 1998
Utility Plant:
Electric $161,767 $152,940
Gas 34,031 32,622
Common 21,541 20,876
Construction Work in Progress 2,499 3,024
Utility Plant 219,838 209,462
Less: Accumulated Depreciation 66,429 63,428
Net Utility Plant 153,409 146,034
Other Property and Investments 5,051 42
Current Assets:
Cash 2,847 4,083
Accounts Receivable - Less Allowance for
Doubtful Accounts of $598 and $646 16,630 15,999
Taxes Refundable 1,419 1,056
Material and Supplies 2,503 2,962
Prepayments 713 1,147
Accrued Revenue 2,262 1,175
Total Current Assets 26,374 26,422
Noncurrent Assets:
Regulatory Assets 143,470 167,181
Prepaid Pension Costs 9,119 8,591
Debt Issuance Coss 1,351 1,320
Other Noncurrent Assets 24,753 27,245
Total Noncurrent Assets 178,693 204,337
TOTAL $363,527 $376,835
(The accompanying Notes are an integral part of these financial statements.)
CONSOLIDATED BALANCE SHEETS (Cont.) (000'S)
CAPITALIZATION AND LIABILITIES
December 31, 1999 1998
Capitalization:
Common Stock Equity $78,675 $75,351
Preferred Stock, Non-Redeemable,
Non-Cumulative 225 225
Preferred Stock, Redeemable, Cumulative 3,532 3,618
Long-Term Debt, Less Current Portion 84,966 74,047
Total Capitalization 167,398 153,241
Current Liabilities:
Long-Term Debt, Current Portion 1,191 1,175
Capitalized Leases, Current Portion 902 907
Accounts Payable 16,515 11,382
Short-Term Debt 10,500 20,000
Dividends Declared and Payable 220 232
Refundable Customer Deposits 1,302 1,293
Interest Payable 1,245 841
Other Current Liabilities 3,042 2,776
Total Current Liabilities 34,917 38,606
Deferred Income Taxes 42,634 43,027
Noncurrent Liabilities:
Power Supply Contract Obligations 106,184 129,688
Capitalized Leases, Less Current Portion 3,860 4,287
Other Noncurrent Liabilities 8,534 7,986
Total Noncurrent Liabilities 118,578 141,961
TOTAL $363,527 $376,835
(The accompanying Notes are an integral part of these financial statements.)
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(000's except number of shares and par value)
December 31, 1999 1998
Common Stock Equity
Common Stock, No Par Value
(Authorized - 8,000,000 shares; $40,352 $38,407
Outstanding - 4,712,001 and 4,574,629 shares)
Stock Options 194 543
Retained Earnings 38,129 36,401
Total Common Stock Equity 78,675 75,351
Preferred Stock
CECo Preferred Stock, Non-Redeemable,
Non-Cumulative:
6% Series, $100 Par Value 225 225
CECo Preferred Stock, Redeemable, Cumulative:
8.7% Series, $100 Par Value 215 215
E&H Preferred Stock, Redeemable, Cumulative:
5% Series, $100 Par Value 91 91
6% Series, $100 Par Value 168 168
8.75% Series, $100 Par Value 333 333
8.25% Series, $100 Par Value 385 406
FG&E Preferred Stock, Redeemable, Cumulative:
5.125% Series, $100 Par Value 987 998
8% Series, $100 Par Value 1,353 1,407
Total Preferred Stock 3,757 3,843
Long-Term Debt
CECo First Mortgage Bonds:
Series I, 8.49%, Due October 14, 2024 6,000 6,000
Series J, 6.96%, Due September 1, 2028 10,000 10,000
E&H First Mortgage Bonds:
Series K, 8.49%, Due October 14, 2024 9,000 9,000
Series L, 6.96%, Due September 1, 2028 10,000 10,000
FG&E Long-Term Notes:
8.55% Notes due March 31, 2004 13,000 14,000
6.75% Notes due November 30, 2023 19,000 19,000
7.37% Notes due January 15, 2028 12,000 ----
Unitil Realty Corp. Senior Secured Notes:
8.00% Notes Due August 1, 2017 7,157 7,222
Total Long-Term Debt 86,157 75,222
Less: Long-term Debt, Current Portion 1,191 1,175
Total Long-Term Debt, Less Current Portion 84,966 74,047
Total Capitalization $167,398 $153,241
(The accompanying Notes are an integral part of these financial statements.)
CONSOLIDATED STATEMENTS OF CASH FLOWS (000's)
Year Ended December 31, 1999 1998 1997
Operating Activities:
Net Income $8,438 $8,249 $8,235
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Depreciation and Amortization 11,412 10,007 9,178
Deferred Tax Provision 72 1,515 660
Amortization of Investment Tax Credit (322) (402) (172)
Amortization of Debt Issuance Costs 60 61 60
Changes in Working Capital:
Accounts Receivable (631) 891 (506)
Materials and Supplies 459 (299) (184)
Prepayments (94) (713) (725)
Accrued Revenue (1,087) 5,621 2,063
Accounts Payable 5,133 (3,352) (370)
Refundable Customer Deposits 9 (894) 602
Taxes and Interest Payable 41 (748) (804)
Other, Net (5,182) (6,721) (1,482)
Cash Provided by Operation Activities 18,308 13,215 16,555
Cash Flows Used In Investing Activities:
Acquisition of Property, Plant & Equipment (15,411) (14,463) (13,887)
Proceeds from the Sale of Electric
Generation Assets 5,288 ---- ----
Acquisition of Other Property and
Investments (5,008) ---- ----
Cash Used in Investing Activities (15,131) (14,463) (13,887)
Cash Flows From Financing Activities:
Proceeds From (Repayment of)
Short-Term Debt, net (9,500) 2,000 (3,400)
Proceeds From Issuance of Long-Term Debt 12,000 20,000 7,500
Repayment of Long-Term Debt (1,065) (13,144) (1,345)
Dividends Paid (6,722) (6,368) (6,159)
Issuance of Common Stock 1,945 1,600 1,285
Retirement of Preferred Stock (86) (48) ----
Repayment of Capital Lease Obligations (985) (1,046) (1,115)
Cash (Used In)Provided by
Financing Activities (4,413) 2,994 (3,234)
Net (Decrease)Increase in Cash (1,236) 1,746 (566)
Cash at Beginning of Year 4,083 2,337 2,903
Cash at End of Year $2,847 $4,083 $2,337
Supplemental Cash Flow Information:
Interest Paid $7,164 $7,445 $7,531
Federal Income Taxes Paid $4,018 $2,490 $3,340
Supplemental Schedule of Noncash Activities:
Capital Leases Incurred $553 $624 $1,057
The Company recorded the estimated impact of the Order from the
MDTE related to its Electric Utility Restructuring Plan on its December 31,
1998, and subsequently updated for actual amounts in 1999. The noncash
charges related to the Restructuring Plan are as follows:
(Decrease) Increase in Regulatory Assets (23,504) 129,688 ---
Decrease (Increase) in Power Supply
Contract Obligations 23,504 (129,688) ---
(The accompanying Notes are an integral part of these statements.)
CHANGES IN COMMON STOCK EQUITY (000's except number of shares)
Deferred
Common Stock Option Retained
Shares Plan Earnings Total
Balance at January 1, 1997 $33,984 $1,506 $32,484 $67,974
Net Income for 1997 8,235 8,235
Dividends on Preferred Shares (276) (276)
Dividends on Common Shares -
at an Annual Rate of
$1.34 per Share (5,904) (5,904)
Stock Option Plan 330 330
Exercised Stock Options -
28,222 Shares 626 (384) 242
Issuance of 51,029
Common Shares (a) 1,043 1,043
Balance at December 31, 1997 35,653 1,452 34,539 71,644
Net Income for 1998 8,249 8,249
Dividends on Preferred Shares (274) (274)
Dividends on Common Shares -
at an Annual Rate of
$1.36 per Share (6,113) (6,113)
Stock Option Plan 245 245
Exercised Stock Options -
66,951 Shares 1,720 (1,154) 566
Issuance of 43,862
Common Shares (a) 1,034 1,034
Balance at December 31, 1998 38,407 543 36,401 75,351
Net Income for 1999 8,438 8,438
Dividends on Preferred Shares (268) (268)
Dividends on Common Shares -
at an Annual Rate of
$1.38 per Share (6,442) (6,442)
Stock Option Plan 116 116
Exercised Stock Options -
109,753 Shares 2,543 (1,739) 804
Issuance of 27,619
Common Shares (a) 676 676
Effect of Termination of
Stock Option Plan (1,274) 1,274 ---
Balance at December 31, 1999 $40,352 $194 $38,129 $78,675
(a) Shares sold and issued in connection with the Company's Dividend
Reinvestment and Stock Purchase Plan and Employee 401(k) Tax Deferred
Savings and Investment Plan (See Note 2).
(The accompanying Notes are an integral part of these financial statements.)
Note 1: Summary of Significant Accounting Policies
Nature of Operations --- Unitil Corporation (Unitil or the Company) is
registered with the Securities and Exchange Commission (SEC) as a public
utility holding company under the Public Utility Holding Company Act of
1935, and is the parent of the Unitil System (the System). The following
companies are wholly owned subsidiaries of Unitil: Concord Electric Company
(CECo), Exeter & Hampton Electric Company (E&H), Fitchburg Gas and Electric
Light Company (FG&E), Unitil Power Corp. (UPC), Unitil Realty Corp. (URC),
Unitil Service Corp. (USC), and Unitil Resources, Inc. (URI).
Unitil's principal business is the retail sale and distribution of
electricity in New Hampshire and both electric and gas services in
Massachusetts through its retail distribution subsidiaries CECo, E&H, and
FG&E. The Company's wholesale electric power subsidiary, UPC, principally
provides all the electric power supply requirements to CECo and E&H for
resale at retail, and also engages in various other wholesale electric power
services with affiliates and non-affiliates throughout the New England
region. URI provides an Internet-based energy brokering business under the
name "UsourceTM", as well as various energy consulting and marketing
activities. Finally, URC and USC provide centralized facilities and
operations to support the Unitil System.
With respect to rates and accounting practices, CECo and E&H are subject to
regulation by the New Hampshire Public Utilities Commission (NHPUC), FG&E is
regulated by the Massachusetts Department of Telecommunications & Energy
(MDTE), and UPC and FG&E are regulated by the Federal Energy Regulatory
Commission (FERC).
The Company accounts for all its regulated operations in accordance with
Statement of Financial Accounting Standard ("SFAS") No. 71, "Accounting for
the Effects of Certain Types of Regulation," requiring the Company to record
the financial statement effects of the rate regulation to which the Company
is currently subject. If a separable portion of the Company's business no
longer meets SFAS No. 71, the Company is required to eliminate the financial
statement effects of regulation for that portion.
Basis of Presentation
Principles of Consolidation --- Unitil Corporation is the parent company of
the Unitil System. The consolidated financial statements include the
accounts of the Company and all of its wholly-owned subsidiaries. All
material intercompany balances and transactions have been eliminated in
consolidation.
Use of Estimates --- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and requires disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
Revenue Recognition --- The Company's operating subsidiaries record electric
and gas operating revenues based upon the amount of electricity and gas
delivered to customers through the end of the accounting period.
Other Property and Investments --- At December 31, 1999, Other Property and
Investments includes the Company's investment in the stock of Enermetrix.com,
which is recorded at its historical cost of $4,424,000, comprised of
$4,282,000 of Enermetrix.com Convertible Preferred Stock and $142,000 of
Enermetrix.com Common Stock Warrants. Although the market value of the
investment in Enermetrix.com stock is not readily determinable, management
believes the fair value of this investment currently exceeds its carrying
cost.
Depreciation and Amortization --- Depreciation provisions for the Company's
utility operating subsidiaries are determined on a group straight-line basis.
Provisions for depreciation were equivalent to the following composite rates,
based on the average depreciable property balances at the beginning and end
of each year: 1999 - 3.72 percent; 1998 - 3.21 percent; and 1997 - 3.45
percent.
Amortization provisions include the recovery of a portion of FG&E's former
investment in the Seabrook Nuclear Power Plant in rates to its customers
through a Seabrook Amortization Surcharge as ordered by the MDTE. In
addition, FG&E is amortizing electric generating assets, in accordance with
its electric restructuring plan approved by the MDTE (See Note 12).
Federal Income Taxes --- Deferred tax assets and liabilities are determined
based on differences between the financial reporting and tax bases of assets
and liabilities, and are measured by applying tax rates applicable to the
taxable years in which those differences are expected to reverse. The Tax
Reduction Act of 1986 eliminated investment tax credits. Investment tax
credits generated prior to 1986 are being amortized, for financial reporting
purposes, over the productive lives of the related assets.
Reclassifications --- Certain amounts previously reported have been
reclassified to conform with current year presentation.
Note 2: Common Stock
New Shares Issued --- During 1999, the Company raised $676,000 of additional
common equity capital through the issuance of 27,619 shares of common stock
in connection with the Dividend Reinvestment and Stock Purchase Plan and the
Employee 401(k) Tax Deferred Savings and Investment Plan. The Dividend
Reinvestment and Stock Purchase Plan provides participants in the plan a
method for investing cash dividends on the Company's Common Stock and cash
payments in additional shares of the Company's Common Stock. The Employee
401(k) Tax Deferred Savings and Investment Plan is described in Note 9. In
1998, the Company raised $1,034,000 of additional common equity capital
through the issuance of 43,862 shares of common stock in connection with
these plans.
Stock-Based Compensation Plans --- The Company maintains two stock option
plans which provide for the granting of options to key employees, as follows:
Unitil Corporation Key Employee Stock Option Plan: The "Unitil Corporation
Key Employee Stock Option Plan" was a ten year plan which began in March
1989. The number of shares granted under this plan, as well as the terms and
conditions of each grant, were determined by the Board of Directors, subject
to plan limitations. All options granted under this plan vested upon grant.
The ten year period in which options could be granted under this plan
expired in March, 1999. The plan provides dividend equivalents on options
granted, which are recorded at fair value as compensation expense. The total
compensation expenses recorded by the Company with respect to this plan
were $74,000, $245,000 and $330,000 for the years ended December 31, 1999,
1998 and 1997, respectively.
Share Option Activity of the "Unitil Corporation Key Employee Stock Option
Plan" is presented in the following table:
1999 1998 1997
Beginning Options Outstanding
and Exercisable 134,741 191,365 182,495
Options Granted ---- ---- 25,000
Dividend Equivalents Earned 2,988 10,327 12,092
Options Exercised (109,753) (66,951) (28,222)
Ending Options Outstanding
and Exercisable 27,976 134,741 191,365
Range of Option Exercise
Price per Share $12.11-$18.28 $12.11-$18.28 $12.11-$18.28
Unitil Corporation 1998 Stock Option Plan: The "Unitil Corporation 1998
Stock Option Plan" became effective on December 11,1998. The number of
shares granted under this plan, as well as the terms and conditions of each
grant, are determined by the Board of Directors, subject to plan limitations.
All options granted under this plan vest over a three year period from the
date of the grant with 25% vesting on the first anniversary of the grant,
25% vesting on the second anniversary and 50% vesting on the third
anniversary. Under the terms of this plan, key employees may be granted
options to purchase the Company's common stock at no less than 100% of the
market price on the date the option is granted. All options must be exercised
no later than ten years after the date on which they were granted. On March
5,1999, 62,000 options were granted with an exercise price of $23.38. No
options were exercisable under this plan in 1999. The total compensation
expense recorded by the Company with respect to this plan was $42,000
for the year ended December 31, 1999.
The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock Based Compensation," and recognizes
compensation costs at fair value at the date of grant.
The weighted average fair value per share of options granted during 1999 and
1997 was $3.25 and $3.21, respectively. No options were granted in 1998. The
weighted average exercise price of options and dividend equivalents
exercised in 1999 and 1998 was $7.32 and $8.38 per share, respectively. The
fair value of options at the date of grant was estimated using the
Black-Scholes model with the following weighted average assumptions:
1999 1998 1997
Expected Life (Years) 10.0 None Granted 2.0
Interest Rate 6.0% 6.0%
Volatility 19.9% 19.5%
Dividend Yield 5.9% 5.5%
Restrictions on Retained Earnings ---Unitil Corporation has no restriction
on the payment of common dividends from retained earnings. Its three retail
distribution subsidiaries do have restrictions. Under the terms of the First
Mortgage Bond Indentures, CECo and E&H had $3,761,000 and $3,716,000,
respectively, available for the payment of cash dividends on their common
stock at December 31, 1999. Under the terms of long-term debt Purchase
Agreements, FG&E had $10,036,000 of retained earnings available for the
payment of cash dividends on its common stock at December 31, 1999.
Note 3: Preferred Stock
Certain of the Unitil subsidiaries have redeemable Cumulative Preferred
Stock outstanding and one subsidiary, CECo, has a Non-Redeemable,
Non-Cumulative Preferred Stock issue outstanding. All such subsidiaries are
required to offer to redeem annually a given number of shares of each series
of Redeemable Cumulative Preferred Stock and to purchase such shares that
shall have been tendered by holders of the respective stock. All such
subsidiaries may redeem, at their option, the Redeemable Cumulative
Preferred Stock at a given redemption price, plus accrued dividends.
The aggregate purchases of Redeemable Cumulative Preferred Stock during
1999, 1998 and 1997 were $86,300; $47,300; and $0, respectively. The
aggregate amount of sinking fund requirements of the Redeemable Cumulative
Preferred Stock for each of the five years following 1999 are $206,000 per
year.
Note 4: Long-Term Debt
Certain of the Company's long-term debt agreements contain provisions which,
among other things, limit the incursion of additional long-term debt.
Total aggregate amount of sinking fund payments relating to bond issues and
normal scheduled long-term debt repayments amounted to $1,065,000 and
$4,394,000 in 1999 and 1998, respectively.
The aggregate amount of bond sinking fund requirements and normal scheduled
long-term debt repayments for each of the five years following 1999 is:
2000 - $1,191,000; 2001 - $3,208,000; 2002 - $3,225,000; 2003 - $3,244,000
and 2004 - $3,264,000.
On January 26, 1999, FG&E sold $12,000,000 of long-term notes at par to
institutional investors, bearing an interest rate of 7.37%. Proceeds were
used to repay short-term indebtedness, incurred to fund FG&E's ongoing
construction program.
On September 3, 1998, CECo sold $10,000,000 of 30-year Series J First
Mortgage Bonds at par to an institutional investor, bearing an interest rate
of 6.96%. Proceeds were used to repay short-term indebtedness, incurred to
fund CECo's ongoing construction program, and to redeem a higher coupon
long-term debt issue prior to its maturity. The redemption of $4,550,000
was on the 9.43% Series H First Mortgage Bonds.
On September 3, 1998, E&H sold $10,000,000 of 30-year Series L First
Mortgage Bonds at par to an institutional investor, bearing an interest rate
of 6.96%. Proceeds were used to repay short-term indebtedness, incurred to
fund E&H's ongoing construction program, and to redeem two higher coupon
long-term debt issues prior to their maturity. The redemptions, which
totaled $4,200,000, included $700,000 of 8.5% Series H First Mortgage
Bonds, and $3,500,000 of 9.43% Series J First Mortgage Bonds.
The fair value of the Company's long-term debt is estimated based on the
quoted market prices for the same or similar issues, or on the current rates
offered to the Company for debt of the same remaining maturities. In
management's opinion, the carrying value of the debt approximated its fair
value at December 31, 1999 and 1998.
Note 5: Credit Arrangements
At December 31, 1999, the Company had unsecured committed bank lines for
short-term debt aggregating $21,000,000 with three banks for which it pays
commitment fees. At December 31, 1999, the unused portion of the committed
credit lines outstanding was $10,500,000. The average interest rates on all
short-term borrowings were 5.72% and 5.95% during 1999 and 1998,
respectively.
Note 6: Leases
The Company's subsidiaries conduct a portion of their operations in leased
facilities and also lease some of their machinery and office equipment.
FG&E has a facility lease for twenty-two years which began in February 1981.
The lease allows five, five-year renewal periods at the option of FG&E. The
equipment leases included a twenty-five-year lease, which expired in 1988,
for a combustion turbine which was retired, and a liquefied natural gas
storage and vaporization facility which the Company acquired. In addition,
Unitil's subsidiaries lease some equipment under operating leases.
The following is a schedule of the leased property under capital leases by
major classes:
Asset Balances at December 31,
Classes of Utility Plant (000's) 1999 1998
Common Plant $7,451 $6,899
Less: Accumulated Depreciation 2,711 1,705
Net Plant $4,740 $5,194
The following is a schedule by years of future minimum lease payments
and present value of net minimum lease payments under capital leases as
of December 31, 1999:
Year Ending December 31, (000's)
2000 $1,480
2001 1,340
2002 1,233
2003 813
2004 434
2005 - 2008 1,393
Total Minimum Lease Payments $6,693
Less: Amount Representing Interest 1,931
Present Value of Net Minimum Lease Payments $4,762
Total rental expense charged to operations for the years ended December 31,
1999, 1998 and 1997 amounted to $103,000, $88,000; and $110,000,
respectively. There are no material future operating lease payment
obligations at December 31, 1999.
Note 7: Income Taxes
Federal Income Taxes were provided for the following items for the years
ended December 31, 1999, 1998 and 1997, respectively:
1999 1998 1997
Current Federal Tax Provision (000's)
Operating Income $3,492 $2,221 $2,999
Amortizaton of Investment Tax Credits (322) (402) (172)
Total Current Federal Tax Provision 3,170 1,819 2,827
Deferred Federal Tax Provision (000's)
Accelerated Tax Depreciation 132 488 500
Abandoned Properties (794) (656) (589)
Allowance for Funds Used During Construction
("AFUDC") and Overheads (53) (58) (65)
Post Retirement Benefits Other Than Pensions (27) (32) (33)
Environmental Remediation (15) 45 112
Accrued Revenue 1,624 1,042 ---
Deferred Gas Rate Case Expense (101) 283 ---
Percentage Repair Allowance 3 115 108
Deferred Advances (124) (72) 52
Deferred Pensions 159 146 237
Electric and Gas Industry
Restructuring Costs 273 --- ---
Deferred Gain on Sale of New Haven Harbor (1,437) --- ---
Miscellaneous 425 (76) 251
Total Deferred Federal
Tax Provision 65 1,225 573
Total Federal Tax Provision $3,235 $3,044 $3,400
The components of the Federal and State income tax provisions reflected
in the accompanying consolidated statements of earnings for the years
ended December 31, 1999, 1998 and 1997 were as follows:
Federal and State Tax Provisions (000's) 1999 1998 1997
Federal
Current $3,492 $2,221 $2,999
Deferred 65 1,225 573
Amortization of Investment Tax Credits (322) (402) (172)
Total Federal Tax Provision 3,235 3,044 3,400
State
Current 805 377 679
Deferred 7 289 87
Total State Tax Provision 812 666 766
Total Provision for Federal
and State Income Taxes $4,047 $3,710 $4,166
The differences between the Company's provisions for Federal Income Taxes
and the provisions calculated at the statutory federal tax rate, expressed
in percentages, are shown below for the years ended December 31, 1999, 1998
and 1997:
1999 1998 1997
Statutory Federal Income Tax Rate 34% 34% 34%
Income Tax Effects of:
Investment Tax Credits (2) (3) (1)
Abandoned Property (7) (6) (5)
Other, Net 3 2 1
Effective Federal Income Tax Rate 28% 27% 29%
Temporary differences which gave rise to deferred tax assets and liabilities
are shown below for the years ended December 31, 1999, 1998:
Deferred Income Taxes (000's) 1999 1998
Accelerated Depreciatio $24,506 $24,658
Abandoned Property 7,649 8,442
Contributions in Aid to Construction (2,948) (2,819)
Percentage Repair Allowance 1,923 1,924
Cathodic Protection 374 369
Retirement Loss 2,640 2,348
Deferred Pensions 2,970 2,870
AFUDC 19 31
Overheads 159 202
KESOP (45) (442)
Bad Debts (222) (225)
Accumulated Deferred 3,170 3,179
Environmental Remediation 169 186
Accrued Revenue 3,073 1,199
Deferred Gas Rate Case Expense 217 337
Investment Tax Credit 460 916
Electric and Gas Industry Restructuring 304 ---
Gain on Sale of New Haven Harbor (1,712) ---
Other (72) (148)
Total Deferred Income Tax $42,634 $43,027
Note 8: Energy Supply
Massachusetts:
Joint Owned Units --- FG&E is participating, on a tenancy-in-common basis
with other New England utilities, in the ownership of two generating units.
Wyman Unit No. 4 is an oil-fired station that has been in commercial
operation since December 1978. Millstone Unit No. 3, a nuclear generating
unit, has been in commercial operation since April 1986. FG&E completed the
sale of its principal generating asset, a 4.5% interest in New Haven Harbor
Station, in March 1999. Kilowatt-hour generation and operating expenses of
the joint ownership units are divided on the same basis as ownership. FG&E's
proportionate costs are reflected in the Consolidated Statements of Earnings.
In accordance with Massachusetts Electric Restructuring Law, and pursuant to
the power supply divestiture discussed below, FG&E began selling the output
from their generation units on February 1, 2000. Information with respect to
FG&E's generation assets at December 31, 1999 is shown below:
Company's
Joint Ownership Proportionate Share of Net Book
Units State Ownership % Total MW Value
Millstone Unit No. 3 CT 0.2170 2.50 $6,779
Wyman Unit No. 4 ME 0.1822 1.13 116
3.63 $6,895
Purchased Power and Gas Supply Contracts --- FG&E has commitments under
long-term contracts for the purchase of electricity and gas from various
suppliers. Generally, these contracts are for fixed periods and require
payment of demand and energy charges. Total costs under these contracts are
included in Electricity and Gas Purchased for Resale in the Consolidated
Statements of Earnings. These costs are normally recoverable in revenues
under various cost recovery mechanisms. In accordance with Massachusetts
Electric Restructuring Law, and pursuant to the power supply divestiture
discussed below, FG&E began selling the output from their power supply
contracts on February 1, 2000. Information with respect to FG&E's electric
purchased power contracts at December 31, 1999 is shown below:
Unit
Fuel Energy Contract
Type Entitlements End Date
Hydro 8MW 2001
Hydro 3MW 2012
Wood 14MW 2012
System 15MW 2000
Power Supply Divestiture --- In January 2000, FG&E announced the completion
of its electric power supply restructuring efforts, with the approval by the
MDTE, of FG&E's agreement to sell the output from its remaining electric
power generation portfolio to Select Energy, a subsidiary of Northeast
Utilites. FG&E initiated its electric restructuring process, including the
divestiture and sale of its power supply portfolio, in 1998, in response to
the Massachusetts Electric Restructuring Law. Under the Select Energy
contract, which went into effect February 1, 2000, FG&E began selling the
output from its remaining power contracts and the output of its two minority
interests in generation assets to Select Energy.
Under the Massachusetts Electric Restructuring Law, customers not purchasing
electric power from competitive suppliers are eligible either for Standard
Offer Service ("SOS") or for Default Service. Most of FG&E's customers are
currently eligible for SOS service. On March 1, 1999, FG&E entered into a
contract with Consetellation Power Source to procure power needed to serve
the SOS load. The contract will continue through February 28, 2005. The
power required to meet Default Service is currently being procured in the
short-term markets. The MDTE is currently conducting a proceeding to
determine the best way for utilities under its jurisdiction, including FG&E,
to procure Default service.
FG&E has been allowed recovery of its transition costs, including the
above-market or stranded generation and power-supply related costs, via a
non-bypassable uniform Transition Charge. The recoverable transition cost
which have been recorded on FG&E's balance sheet as Regulatory Assets,
include $106,184,000 of purchased power contracts and $7,810,000 of stranded
generation assets and other adjustments related to the restructuring process.
As a result of the Order by the MDTE related to Electric Industry
Restructuring in Massachusetts (See Note 12), the Company is required to
discontinue the provisions of Statement of Financial Accounting Standards
71, "Accounting for the Effects of Certain Types of Regulation" (SFAS No.
71), to the generation and power supply portion of FG&E's business. FG&E's
electric distribution business and gas supply and distribution business, as
well as the power supply and distribution business of CECo, E&H and UPC will
continue to apply SFAS No. 71.
New Hampshire:
Purchased Power Contracts --- UPC has commitments under long-term contracts
for the purchase of electricity from various suppliers. These wholesale
contracts are generally for fixed periods and require payment of demand and
energy charges. The total costs under these contracts are included in
Electricity Purchased for Resale in the Consolidated Statements of Earnings
and are normally recoverable in revenues under various cost recovery
mechanisms.
The status of UPC's electric purchased power contracts at December 31, 1999,
is as shown below:
Est. Annual
Minimum
Payments Which
Unit 1999 Energy Cover Future
Fuel MW Winter Purchased Contract Debt Service
Type Entitlements (MWH's) End Date Requirements
(000's)
Gas 24 122,554 2010 $5,044(1)
Oil/Gas 2 4,517 2003 None
Oil/Gas 16 76,235 2006 None
Oil/Gas 10 35,673 2008 None
Oil 10 41,986 2005 None
Coal 25 124,762 2005 None
Nuclear 25 195,844 2001 None
Nuclear 5 37,521 2005 None
Nuclear 10 75,536 2010 None
Nuclear 2 14,332 2013 None
Hydro 5 68,426 2001 $957(2)
Refuse 6 38,995 2003 None
System 18 5,755 2002 None
System 30 148,523 Variable None
Various 189,922 Short-term None
Notes:
(1) Total estimated 1999 annualized capacity payments.
(2) Total estimated 1999 annualized support charges.
In New Hampshire, Electric Industry Restructuring is not yet complete. The
Company expects that, upon completion of industry restructuring, the
above-market portion of the contracts listed above would be classified as
stranded costs.
Note 9: Benefit Plans
Pension Plans --- Prior to May 1, 1998 four of the Company's subsidiaries
had defined benefit Retirement and Pension plans and related Trust Agreements
to provide retirement annuities for participating employees at age 65. On
May 1, 1998, the plans of each employer were merged into one plan with
uniform plan provisions to be known as the "Unitil Corporation Retirement
Plan." The entire cost of the plan is borne by the respective subsidiaries.
The following tables provide the components of the Unitil Corporation
Retirement Plan for years 1999, 1998 and 1997:
Net Periodic Expense (Income)(000's) 1999 1998 1997
Service Cost $935 $827 $767
Interest Cost 2,395 2,207 2,023
Expected Return on Plan Assets (4,044) (3,562) (3,094)
Amortization of Transition Obligation 85 (16) (16)
Amortization of Prior-Service Cost 101 74 13
Net Periodic Benefit Income ($528) ($470) ($307)
Reconciliation of Projected
Benefit Obligations (000's): 1999 1998 1997
Beginning of Year $36,621 $29,853 $26,907
Service Cost 935 827 767
Interest Cost 2,395 2,207 2,023
Amendments --- 1,292 ---
Actuarial (Gain) Loss (4,601) 4,290 1,836
Benefit Payments (1,979) (1,848) (1,680)
End of Year $33,371 $36,621 $29,853
Reconciliation of Fair Value of
Plan Assets (000's): 1999 1998 1997
Beginning of Year $48,627 $42,304 $36,547
Actual Return of Plan Assets (865) 8,171 6,971
Employer Contributions --- --- 466
Benefit Payments (1,979) (1,848) (1,680)
End of Year $45,783 $48,627 $42,304
Funded Status (000's): 1999 1998 1997
Funded Status at December 31 $12,411 $12,006 $12,451
Unrecognized Transition Obligation 169 254 238
Unrecognized Prior-Service Cost 1,216 1,317 98
Unrecognized (Gain) Loss (4,677) (4,986) (4,667)
Prepaid Pension Cost $9,119 $8,591 $8,120
Plan assets are invested in common stock, short-term investments and various
other fixed income security funds. The weighted-average discount rates used
in determining the projected benefit obligation in 1999, 1998 and 1997 were
7.75%, 7.00%, and 7.25%, respectively, while the rate of increase in future
compensation levels for 1999, 1998 and 1997 were 4.00%, 4.00% and 4.50%,
respectively. The expected long-term rates of return on assets in 1999, 1998
and 1997 were 9.25% in each year.
Unitil Service Corp. has a Supplemental Executive Retirement Plan (SERP).
The SERP is an unfunded retirement plan with participation limited to
executives selected by the Board of Directors. The cost associated with the
SERP amounted to approximately $157,000; $114,000; and $112,000 for the
years ended December 31, 1999, 1998 and 1997, respectively.
Employee 401(k) Tax Deferred Savings Plan --- The Company sponsors a defined
contribution plan (under Section 401 (k) of the Internal Revenue Code)
covering substantially all of the Company's employees. Participants may
elect to defer from 1% to 15% of current compensation to the plan. The
Company matches contributions, with a maximum matching contribution of 3% of
current compensation. Employees may direct the investment of their savings
plan balances into a variety of investment options, including a Company
common stock fund. Participants are 100% vested in contributions made on
their behalf, once they have completed three years of service. The Company's
share of contributions to the plan were $407,000, $384,000 and $390,000 for
the years ended December 31, 1999, 1998 and 1997, respectively.
Post-Retirement Benefits --- The Company's subsidiaries provide health care
benefits to retirees for a twelve-month period following their retirement.
The Company's subsidiaries continue to provide life insurance coverage to
retirees. Life insurance and limited health care post-retirement benefits
require the Company to accrue post-retirement benefits during the employee's
years of service with the Company and the recognition of the actuarially
determined total post retirement benefit obligation earned by existing
retirees. At December 31, 1999, 1998 and 1997, the accumulated post
retirement benefit obligation (transition obligation) was approximately
$278,000, $299,000 and $321,000, respectively, and the period cost
associated with these benefits for 1999, 1998 and 1997 was approximately
$84,000, $76,000 and $75,000, respectively. This obligation is being
recognized on a delayed basis over the average remaining service period of
active participants and such period will not exceed 20 years.
Note 10: Earnings Per Share
The following table reconciles basic and diluted earnings per share assuming
all outstanding vested stock options were converted to common shares per
SFAS 128.
(000's except share and per share data) 1999 1998 1997
Basic Income Available to Common Stock $8,170 $7,975 $7,959
Weighted Average Common Shares
Outstanding - Basic 4,682,273 4,505,784 4,412,869
Plus: Diluted Effect of Incremental Shares
from Assumed Conversion 10,381 128,324 107,512
Weighted Average Common Shares 4,692,654 4,634,108 4,520,381
Outstanding - Diluted
Basic Earnings per Share $1.74 $1.77 $1.80
Diluted Earnings per Share $1.74 $1.72 $1.76
Note 11: Segment Information
The Company has two reportable segments: Electric (CECo, E&H, UPC, URI's
electric sales, and the electric portion of FG&E's business) and Gas (the
gas portion of FG&E's business). Unitil is engaged principally in the retail
sale and distribution of electricity in New Hampshire and both electric and
gas service in Massachusetts through its retail distribution subsidiaries
CECo, E&H, and FG&E. The Company's wholesale electric power subsidiary,
UPC, provides all the electric power supply requirements to CECo and E&H
for resale at retail, and also engages in various other wholesale electric
power services with affiliates and non-affiliates throughout the New England
Region. URI provides an Internet-based energy brokering service, as well as
various energy consulting and marketing activities. URC and USC provide
centralized facilities and operations to support the Unitil System.
URC, USC and URI's energy brokering business are included in the "Other"
column of the table below. USC provides centralized management and
admininstrative services, including information systems management and
financial record-keeping. URC owns certain real estate, principally the
Company's corporate headquarters.
The segments follow the same accounting policies as described in the Summary
of Significant Accounting Policies. Intersegment sales take place at cost
and the effects of all intersegment and/or intercompany transactions are
eliminated in the consolidated financial statements. Segment profit or loss
is based on profit or loss from operations after income taxes. Expenses used
to determine operating income before taxes are charged directly to each
segment or are allocated in accordance with factors contained in cost of
service studies which were included in rate applications approved by the
NHPUC and MDTE. Assets allocated to each segment are based upon specific
identification of such assets provided by Company records.
The following table provides significant segment financial data for the
years ended December 31, 1999, 1998 and 1997:
Year Ended December 31,1999(000's) Electric Gas Other Elimin-
ations Total
Revenues
External Customers $154,077 $18,116 $180 $172,373
Intersegment ---- ---- 19,089 (19,089) ----
Depreciation and Amortization 8,362 1,458 1,592 11,412
Interest, net 5,094 1,255 570 6,919
Income Taxes 4,051 (200) 196 4,047
Segment Profit 7,830 320 20 8,170
Identifiable Segment Assets 306,786 35,653 41,892 (20,804 )363,527
Regulatory Assets 143,470 ---- ---- 143,470
Capital Expenditures 12,193 2,266 952 15,411
Year Ended December 31,1998(000's) Electric Gas Other Elimin-
ations Total
Revenues
External Customers $149,639 $17,009 $30 $166,678
Intersegment ---- ---- 18,483 (18,483) ----
Depreciation and Amortization 7,917 893 1,197 10,007
Interest, net 4,842 1,097 962 6,901
Income Taxes 3,609 (145) 246 3,710
Segment Profit 7,428 176 371 7,975
Identifiable Segment Assets 316,568 36,354 44,932 (21,019) 376,835
Regulatory Assets 167,181 ---- ---- 167,181
Capital Expenditures 10,644 3,171 648 14,463
Year Ended December 31,1997(000's) Electric Gas Other Elimin-
ations Total
Revenues
External Customers $149,973 $19,729 $36 $169,738
Intersegment ---- ---- 14,295 (14,295) ---
Depreciation and Amortization 7,246 892 1,040 9,178
Interest, net 5,715 1,034 418 7,167
Income Taxes 3,563 414 189 4,166
Segment Profit 6,772 916 271 7,959
Identifiable Segment Assets 177,684 36,045 47,488 (22,686) 238,531
Regulatory Assets 23,885 ---- ---- 23,885
Capital Expenditures 10,475 2,182 1,230 13,887
Note 12: Commitments and Contingencies
Environmental Matters
In October 1999, FG&E applied for a time extension on the Tier 1B permit
(which allows FG&E to work towards temporary remediation of the site) for
FG&E's former manufactured gas plant site (MGP) at Sawyer Passway. The
permit extension application was made to accommodate delays in the scheduled
construction of the new highway bridge that is to be built across Sawyer
Passway and to permit fulfillment of FG&E's obligations associated with the
bridge construction as stipulated in a memorandum of understanding with the
Massachusetts Highway Department and the Massachusetts Department of
Environmental Protection.
In December 1999, the Massachusetts Department of Environmental Protection
granted FG&E a two year extension to the FG&E's current Tier 1B permit at
Sawyer Passway. Upon completion of site remediation associated with the
bridge construction, the last remaining portion of the Sawyer Passway MGP
site is expected to be closed out and attain the status of temporary closure
in late 2001. This temporary closure allows FG&E to monitor the site every
five years to determine if a more feasible remediation alternative can be
developed and achieved.
The costs of remedial action at this site are initially funded from
traditional sources of capital and recovered from customers under a rate
recovery mechanism approved by the MDTE. The Company also has a number of
liability insurance policies that may provide coverage for environmental
remediation at this site.
Regulatory Matters
Restructuring Activity --- Electric and gas industry restructuring and the
process for separating the "competitive" retail sale of the electric and gas
energy from the "regulated" delivery of that energy over a utility's
transmission and distribution system has been the predominant focus of the
Company's regulatory initiatives and activities in both Massachusetts and
New Hampshire.
Since March 1, 1998 all electric consumers in Massachusetts served by
investor-owned utilities have had the ability to choose their electric
energy supplier. FG&E, the Company's Massachusetts utility operating
subsidiary, began implementation of its comprehensive electric restructuring
plan that includes the divestiture of its entire regulated power supply
business.
In New Hampshire, CECo and E&H, our electric utility operating subsidiaries,
and Unitil Power Corp., our wholesale power company, continue to prepare for
the the transition that will move them into this new market structure
pending resolution of key restructuring policies and issues that have slowed
the restructing process in the state.
Massachusetts gas industry restructuring plans continue to be a major focus
of our regulatory activities as well. Since 1997, FG&E has worked in
collaboration with the other Massachusetts Local Distribution Companies
(LDCs) and various other stakeholders to develop and implement the
infrastructure to offer gas customers choice of their competitive gas energy
supplier and to complete the restructuring of gas service provided by LDCs.
FG&E is required to file with the Massachusetts Department of
Telecommunications and Energy (MDTE) new gas tariffs to implement natural
gas unbundling in accordance with Model Terms and Conditions resulting from
these collaborative efforts. The target date for implementation of approved
tariffs and final rules is April 1, 2000.
Massachusetts (Electric)- On January 15, 1999, the MDTE approved FG&E's
restructuring plan with certain modifications. The Plan provides customers
with: a) the ability to choose an energy supplier; b) an option to purchase
Standard Offer Service provided by FG&E at regulated rates for up to seven
years; and c) a cumulative 15% rate reduction. The Order also approved FG&E's
power supply divestiture plan for its interest in three generating units and
four long-term power supply contracts. The Company has been afforded full
recovery of any transition costs through a non-bypassable retail Transition
Charge.
Pursuant to the Plan, on October 30, 1998, FG&E filed a proposed contract
with Constellation Power Services Inc. for provision of Standard Offer
Service. Service under the FG&E/Constellation contract commenced on March
1, 1999, and is scheduled to continue through February 28, 2005. This
contract is the result of the first successful Standard Offer auction
conducted in Massachusetts.
A contract for the sale of FG&E's interest in the New Haven Harbor plant was
approved by the MDTE on March 31, 1999 and the sale of the unit closed on
April 14, 1999. A contract for the sale of the entire output from FG&E's
remaining generating assets and purchased power contracts was approved by
the MDTE on December 28, 1999, and went into effect February 1, 2000.
FG&E filed an electric rate decrease effective September 1, 1999, as provided
for by the 1997 Massachusetts Electric Restructuring Act (the Act). The Act
mandated a 10% rate reduction in March 1998, to be followed by an additional,
inflation-adjusted 5% rate reduction by September 1, 1999. The net rate
decrease of 1.3% reflects FG&E's divestiture of its generation assets and
purchased power portfolio.
On December 22, 1999, FG&E filed with the MDTE new rates for effect January
1, 2000. The revised rates maintain the required inflation-adjusted 15% rate
discount. The MDTE approved the rates on January 5, 2000, subject to
reconciliation pursuant to an investigation, resulting in an upward
inflation adjustment of 2.5% relative to September 1999 rates. The MDTE has
issued a notice of public hearing and procedural conference to examine
electric restructuring issues including, but not limited to, consistency of
the proposed charges and adjustments with the methods approved in FG&E's
restructuring plan.
As a result of restructuring and divestiture of FG&E's generation and
purchased power portfolio, FG&E has accelerated the write-off of its
electric generation assets and on FG&E's abandoned investment in Seabrook
Station. An MDTE Order established the return to be earned on the
unamortized balance of FG&E's generation plant. The new return reduces
FG&E's earnings on its generation assets. As this portfolio is amortized
over the next 10 years, earnings from this segment of FG&E's utility
business will continue to decline and ultimately cease. Currently, Unitil's
earnings from this business segment represent approximately 10% of total
consolidated earnings.
Massachusetts (Gas)- In mid-1997, the MDTE directed all Massachusetts
natural gas LDCs to form a collaborative with other stakeholders to develop
common principles and appropriate regulations for the unbundling of gas
service, and directed FG&E and four other LDCs to file unbundled gas rates
for its review. FG&E's unbundled gas rates were filed with, and approved by,
the MDTE and implemented in November 1998.
On February 1, 1999, the MDTE issued an order in which it determined that
the LDCs would continue to have an obligation to provide gas supply and
delivery services for another five years, with a review after three years.
This order also set forth the MDTE's decision regarding release by LDCs of
their pipeline capacity contracts to competitive marketers. In March 1999,
the LDCs and other stakeholders filed a settlement with the MDTE which set
forth rules for implementing an interim firm transportation service through
October 31, 2000. The interim service will ultimately be superseded by the
permanent transportation service, expected to begin April 1, 2000. The MDTE
approved the settlement on April 2, 1999. FG&E has made separate compliance
filings that were approved by the MDTE to implement its interim firm gas
transportation service for its largest general service customers effective
June 1, 1999 and to complement this service with a firm gas peaking service.
On November 3, 1999 the Massachusetts LDCs filed Model Terms and Conditions
for Gas Service, including provisions for capacity assignment, peaking
service and default service. In accordance with the MDTE's approval of
these Model Terms and Conditions in January 2000, FG&E is required to file
Company-specific tariffs that implement natural gas unbundling. The MDTE has
also opened a rulemaking proceeding on proposed regulations that would
govern the unbundling of services related to the provision of natural gas.
The target date for implementation of approved tariffs and final rules is
April 1, 2000.
New Hampshire - On February 28, 1997, the New Hampshire Public Utilities
Commission (NHPUC) issued its Final Plan for New Hampshire electric
utilities to transition to a competitive electric market in the state
("Final Plan"). The Final Plan linked the interim recovery of stranded cost
by the State's utilities to a comparison of their existing rates with the
regional average utility rates. CECo's and E&H's rates are below the
regional average; thus, the NHPUC found that CECo and E&H were entitled to
full interim stranded cost recovery, as defined by the NHPUC. However, the
NHPUC also made certain legal rulings, which could affect CECo's and E&H's
long-term ability to recover all of its stranded costs.
Northeast Utilities' affiliate, Public Service Company of New Hampshire,
filed suit in U.S. District Court for protection from the Final Plan and
related orders and was granted an indefinite stay. In June 1997, Unitil,
and other utilities in New Hampshire, intervened as plaintiffs in the
federal court proceeding. In June 1998, the federal court clarified that the
injunctions issued by the court in 1997 had effectively frozen the NHPUC's
efforts to implement restructuring. This amended injunction was challenged
by the NHPUC, but affirmed by the First Circuit Court of Appeals in December
1998. Unitil continues to be a plaintiff-intervenor in federal district
court and cross motions for summary judgement by all parties are now under
review by the court.
During 1998, Unitil took steps to settle all of the outstanding issues
related to the Final Plan and the federal court litigation over electric
industry restructuring. In September 1998, Unitil reached a settlement with
key parties and filed this unopposed agreement with the NHPUC for approval.
However, the NHPUC imposed unacceptable conditions to approval of the
settlement, and CECo and E&H withdrew the proposed settlement from further
NHPUC review. Unitil has continued to work actively to explore additional
settlement opportunities and to seek a fair and reasonable resolution of key
restructuring policies and issues in New Hampshire. The Company is also
monitoring the regulatory and legislative proceedings dealing with electric
restructuring for other utilities in New Hampshire.
Rate Proceedings -The last formal regulatory filings to increase base
electric rates for Unitil's three retail operating subsidiaries occurred in
1985 for CECo, 1984 for FG&E, and 1981 for E&H. A majority of the Company's
operating revenues are collected under various periodic rate adjustment
mechanisms including fuel, purchased power, cost of gas, energy efficiency,
and restructuring-related cost recovery mechanisms. Industry restructuring
will continue to change the methods of how certain costs are recovered
through the Company's regulated rates and tariffs.
On May 15, 1998, FG&E filed a gas base rate case with the MDTE. The last
base rate case had been in 1984. After evidentiary hearings, the MDTE issued
an Order allowing FG&E to establish new rates, effective November 30, 1998,
that would produce an annual increase of approximately $1.0 million in gas
revenues. As part of the proceeding, the Massachusetts Attorney General
alleged that FG&E had double-collected fuel inventory finance charges, and
requested that the MDTE require FG&E to refund approximately $1.6 million in
double collections since 1987. The Company believes that the Attorney
General's claim is without merit and that a refund was not justified or
warranted. The MDTE rejected the Attorney General's request and stated its
intent to open a separate proceeding to investigate the Attorney General's
claim. On November 1, 1999, the MDTE issued an Order of Notice initiating
an investigation of this matter. This proceeding is underway and is expected
to be concluded in the second quarter of 2000.
On October 29, 1999, the MDTE initiated a proceeding designed to result in
the eventual implementation of Performance Based Ratemaking (PBR) for all
electric and gas distribution utilities in Massachusetts. PBR is a method
of setting regulated distribution rates that provide incentives for utilities
to control costs while maintaining a high level of service quality. Under
PBR, a company's earnings are tied to performance targets, and penalties can
be imposed for deterioration of service quality. On December 29, 1999, FG&E
filed a petition with the MDTE for authority to defer for later recovery
costs associated with its preparation of a PBR filing for its gas division
and its participation in the MDTE-initiated generic gas and electric PBR
proceedings. This petition is pending. The Company is currently evaluating
the impact, if any, that PBR would have on the Company's ability to continue
applying the standards of Statement of Financial Accounting Standards No.71
"Accounting for the Effects of Certain Types of Regulation."
On December 31, 1999, the Massachusetts Attorney General initiated a
Complaint against FG&E. The Attorney General requested that the MDTE launch
an investigation of the distribution rates, rate of return, and depreciation
accrual rates for FG&E's electric operations in calendar year 1999. To date,
the MDTE has taken no action on the Attorney General's complaint.
Millstone Unit No. 3 - FG&E has a 0.217% nonoperating ownership in the
Millstone Unit No. 3 (Millstone 3) nuclear generating unit which supplies it
with 2.49 megawatts (MW) of electric capacity. In January 1996, the Nuclear
Regulatory Commission (NRC) placed Millstone 3 on its Watch List, which
calls for increased NRC inspection attention. In March 1996, as a result of
engineering evaluations, Millstone 3 was taken out of service. The NRC
authorized the restart of Millstone 3 in June 1998.
During the period that Millstone 3 was out of service, FG&E continued to
incur its proportionate share of the unit's ongoing Operations and
Maintenance (O&M) costs, and may incur additional O&M costs and capital
expenditures to meet NRC requirements. FG&E also incurred costs to replace
the power that was expected to be generated by the unit. During the outage,
FG&E incurred approximately $1.2 million in replacement power costs, and
recovered those costs through its electric fuel charge, which is subject to
review and reconciliation by the MDTE. Under existing MDTE precendent,
FG&E's replacement power costs of $1.2 million could be subject to
disallowance in rates.
In August 1997, FG&E, in concert with other non-operating joint owners,
filed a demand for arbitration in Connecticut and a lawsuit in Massachusetts,
in an effort to recover costs associated with the extended unplanned
shutdown. Several preliminary rulings have been issued in the arbitration
and legal cases, and both cases are continuing. Nonoperating owners
representing 19% of Millstone 3 ownership have settled their claims with
Northeast Utilities while nonoperating owners, including FG&E, representing
12% of Millstone 3 continue to pursue the arbitration and legal cases.
Market Risk - Although Unitil's utility operating companies are subject to
commodity price risk as part of their traditional operations, the current
regulatory framework within which these companies operate allows for full
collection of fuel and gas costs in rates. Consequently, there is limited
commodity price risk after consideration of the related rate-making. As the
utility industry deregulates, the Company will be divesting its
commodity-related energy businesses and therefore will be further reducing
its exposure to commodity-related risk.
Other Contingencies
The Company is currently undergoing an audit of the 1992 and 1993 Federal
income tax returns by the Internal Revenue Service (IRS). Although the IRS
has not completed its examination of these returns, it has proposed
adjustments relating to the timing of tax deductions taken by Unitil in
those years. The Company strongly disagrees with the IRS' position and will
vigorously contest it. If the IRS prevails with its position, the Company
may be required to pay additional taxes and interest. However, those taxes
will be recovered in future years. Although the outcome cannot be predicted
with certainty, the Company's management does not expect it to have a
material adverse impact on the Company's results of operations.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Information required by this Item is set forth in Exhibit 99.1 on
pages 2 through 7 of the 1999 Proxy Statement.
Item 11. Executive Compensation
Information required by this Item is set forth in Exhibit 99.1
on pages 8 through 13 of the 1999 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information required by this Item is set forth in
Exhibit 99.1 on pages 3 through 5 of the 1999 Proxy S
tatement and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
None
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) and (2) -
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following financial statements are included herein under
Part II, Item 8, Financial Statements and Supplementary Data.
Report of Independent Certified Public Accountants
Consolidated Balance Sheets - December 31, 1999 and 1998
Consolidated Statements of Earnings - for the years ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Capitalization - December 31, 1999 and 1998
Consolidated Statements of Cash Flows
for the years ended December 31, 1999, 1998 and 1997
Consolidated Statements of Changes in Common Stock Equity -
for the years ended December 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
The following consolidated financial statement schedules of the
Company and subsidiaries are included in Item 14(d):
Report of Independent Certified Public Accountants
Schedule VIII Valuation and Qualifying Accounts for December 31,
1999, 1998 and 1997
All other schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange
Commission are not required under the related instructions, are
inappropriate, or information required is included in the financial
statements or notes thereto and, therefore, have been omitted.
(3) - List of Exhibits
Exhibit Number Description of Exhibit Reference
3.1 Articles of Incorporation Exhibit 3.1 to Form
of the Company. S-14 Registration
Statement 2-93769
3.2 Articles of Amendment to the Exhibit 3.2 to Form
Articles of Incorporation 10-K for 1992
Filed on March 4, 1992 and
April 30, 1992.
3.3 By-laws of the Company. Exhibit 3.2 to
Form S-14 Registration
Statement 2-93769
3.4 Articles of Exchange of Concord Exhibit 3.3 to
Electric Company (CECo), 10-K for 1984
Exeter & Hampton Electric
Company (E&H) and the
Company.
3.5 Articles of Exchange of CECo, Exhibit 3.4 to
E&H, and the Company - Form 10-K for 1984
Stipulation of the Parties
Relative to Recordation and
Effective Date.
3.6 The Agreement and Plan of Merger Exhibit 25(b) to
dated March 1, 1989 among the Form 8-K dated
Company, Fitchburg Gas and Electric March 1, 1989
Light Company (FG&E) and
UMC Electric Co., Inc. (UMC).
3.7 Amendment No. 1 to The Agreement Exhibit 28(b) to
and Plan of Merger dated March 1, Form 8-K dated
1989 among the Company, FG&E December 14, 1989
and UMC.
4.1 Indenture of Mortgage and Deed of **
Trust dated July 15, 1958 of
CECo relating to First Mortgage
Bonds, Series B, 4 3/8% due
September 15, 1988 and all
Series unless supplemented.
4.2 First Supplemental Indenture **
dated January 15, 1968 relating
to CECo's First Mortgage Bonds,
Series C, 6 3/4% due January 5,
1998 and all additional series
unless supplemented.
4.3 Second Supplemental Indenture **
dated November 15, 1971 relating
to CECo's First Mortgage Bonds,
Series D, 8.7% due November
15, 2001 and all additional series
unless supplemented.
4.4 Fourth Supplemental Indenture **
dated March 28, 1984 amending
CECo's Original First Mortgage
Bonds Indenture, and First, Second
and Third Supplemental Indentures
and all additional series unless
supplemented.
4.5 Fifth Supplemental Indenture **
dated June 1, 1984 relating
to CECo's First Mortgage Bonds,
Series F, 14 7/8% due June 1,
1999 and all additional series
unless supplemented.
4.6 Sixth Supplemental Indenture Exhibit 4.6 to
dated October 29, 1987 relating Form 10-K
to CECo's First Mortgage Bonds , for 1987
Series G, 9.85% due October
15, 1997 and all additional series
unless supplemented.
4.7 Seventh Supplemental Indenture Exhibit 4.7 to
dated August 29, 1991 relating Form 10-K
to CECo's First Mortgage Bonds, for 1991
Series H, 9.43% due September 1,
2003 and all additional series
unless supplemented.
4.8 Eight Supplemental Indenture Exhibit 4.8 to
dated October 14, 1994 relating Form 10-K
to CECo's First Mortgage Bonds, for 1994
Series I, 8.49% due October 14,
2024 and all additional series
unless supplemented.
4.9 Indenture of Mortgage and Deed Exhibit 4.5 to
of Trust dated December 1, 1952 Registration
of E&H relating to all series Statement 2-49218
unless supplemented.
4.10 Third Supplemental Indenture Exhibit 4.5 to
dated June 1, 1964 relating Registration
to E&H's First Mortgage Bonds, Statement 2-49218
series D, 4 3/4% due June 1, 1994
and all additional series
unless supplemented.
4.11 Fourth Supplemental Indenture Exhibit 4.6 to
dated January 15, 1968 relating to Registration
E&H's First Mortgage Bonds, Statement 2-49218
Series E, 6 3/4% due January 15,
1998 and all additional series
unless supplemented.
4.12 Fifth Supplemental Indenture Exhibit 4.7 to
dated November 15, 1971 relating Registration
to E&H's First Mortgage Bonds, Statement 2-49218
Series F, 8.7% due November 15,
2001 and all additional series
unless supplemented
4.13 Sixth Supplemental Indenture **
dated April 1, 1974 relating to
E&H's First Mortgage Bonds,
Series G, 8 7/8% due April 1, 2004
and all additional series
unless supplemented.
4.14 Seventh Supplemental Indenture Exhibit 4 to
dated December 15, 1977 relating Form 10-K
relating to E&H's First Mortgage for 1977
Bonds, Series H, 8.5% due December (File No. 0-7751)
15, 2002 and all additional series
unless supplemented.
4.15 Eighth Supplemental Indenture Exhibit 4.15 to
dated October 29, 1987 relating Form 10-K
to E&H's First Mortgage Bonds, for 1987
Series I, 9.85% due October 15,
1997 and all additional series
unless supplemented.
4.16 Ninth Supplemental Indenture Exhibit 4.18 to
dated August 29, 1991 relating Form 10-K
to E&H's First Mortgage Bonds, for 1991
Series J, 9.43% due September 1,
2003 and all additional series
unless supplemented.
4.17 Tenth Supplemental Indenture Exhibit 4.17 to
dated October 14, 1994 relating Form 10-K
to E&H's First Mortgage Bonds, for 1994
Series K, 8.49% due October 14,
2024 and all additional series
unless supplemented.
4.18 Bond Purchase Agreement dated Exhibit 4.19 to
August 29, 1991 relating to E&H's Form 10-K
First Mortgage Bonds, Series J for 1991
9.43% due September 1, 2003.
4.19 Purchase Agreement dated Exhibit 4.18 to
March 20, 1992 for the 8.55% Form 10-K
Senior Notes due March 31, 2004. for 1993
4.20 Note Agreement dated November 30, Exhibit 4.18 to
1993 for the 6.75% Notes due Form 10-K
November 23, 2023. for 1993
4.21 First Mortgage Loan Agreement Exhibit 4.16 to
dated October 24, 1988 with an Form 10-K
with an Institutional Investor in for 1988
connection ith Unitil Realty's
acquisition of the Company's
facilities in Exeter, New Hampshire.
4.22 Note Purchase Agreement dated Exhibit 4.22 to
July 1, 1997 for the 8.00% Senior Form 10-K
Secured Notes due August 1, 2017. for 1997
4.23 Eleventh Supplemental Indenture Exhibit 4.23 to
dated September 1, 1998 relating Form 10-K
to E&H's First Mortgage Bonds, for 1998
Series L, 6.96% due September
1, 2028.
4.24 Ninth Supplemental Indenture dated Exhibit 4.24 to
September 1, 1998 relating to CECo's Form 10-K
First Mortgage Bonds, Series J, for 1998
6.96% due September 1, 2028.
4.25 Note Agreement dated January 26, Filed Herewith
1999 for the 7.37% Notes due
January 15, 2028.
10.1 Labor Agreement effective June 1, Exhibit 10.1 to
1997 between CECo and The Form 10-K
International Brotherhood of for 1997
Electrical Workers, Local Union
No. 1837.
10.2 Labor Agreement effective May 31, Exhibit 10.2 to
1998 between E&H and The Form 10-K
International Brotherhood of for 1998
Electrical Workers, Local Union
No. 1837, Unit 1.
10.3 Labor Agreement effective May 1, Exhibit 10.3 to
1998 between FG&E and The Form 10-K
Brotherhood of Utility Workers of for 1998
New England, Inc., Local Union
No. 340.
10.4 Unitil System Agreement dated Exhibit 10.9 to
June 19, 1986 providing that Unitil Form 10-K
Power will supply wholesale for 1986
requirements electric service
to CECo and E&H.
10.5 Supplement No. 1 to Unitil System Exhibit 10.8 to
Agreement providing that Unitil Form 10-K
Power will supply wholesale for 1987
requirements electric service
to CECo and E&H.
10.6 Transmission Agreement between Exhibit 10.6 to
Unitil Power Corp. and Public Form 10-K
Service Company of New Hampshire, for 1993
effective November 11, 1992.
10.7 Form of Severence Agreement dated Exhibit 10.55 to
February 21, 1989, between the Form 8 dated
Company and the persons named in April 12, 1989
the schedule attached thereto.
10.8 Key Employee Stock Option Plan Exhibit 10.56 to
effective January 17, 1989. Form 8 dated
April 12, 1989
10.9 Unitil Corporation Key Employee Exhibit 10.63 to
Stock Option Plan Award Form 10-K
Agreement. for 1989
10.10 Unitil Corporation Management Exhibit 10.94 to
Performance Compensation Plan. Form 10-K/A for
1993
10.11 Unitil Corporation Supplemental Exhibit 10.95 to
Executive Retirement Plan Form 10-K/A for
1993
effective as of January 1, 1987.
10.12 Unitil Corporation 1998 Stock Exhibit 10.12 to
Option Plan. Form 10-K for 1998
10.13 Unitil Corporation Management Exhibit 10.13 to
Incentive Plan. Form 10-K for 1998
10.14 Entitlement Sale and
Administrative Services
Agreement with Select Energy Filed herewith
10.15 New Haven Harbor Purchase Filed herewith
and Sale Agreement
11.1 Statement Re Computation in Filed herewith
Support of Earnings per Share
For the company.
12.1 Statement Re Computation in Filed herewith
Support of Ratio of Earnings
to Fixed Charges for the Company.
21.1 Statement Re Subsidiaries Filed herewith
of Registrant
27 Financial Data Schedule Filed herewith
99.1 1999 Proxy Statement Filed herewith
* The exhibits referred to in this column by specific designations and
dates have heretofore been filed with the Securities and Exchange
Commission under such designations and are hereby incorporated by reference.
** Copies of these debt instruments will be furnished to the Securities
and Exchange Commission upon request.
(b) Report on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the year
ended December 31, 1999.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated February 7, 2000, accompanying the
consolidated financial statements and schedule included in the
Annual Report of Unitil Corporation and subsidiaries on Form 10-K
for the year ended December 31, 1999. We hereby consent to the
incorporation by reference of said report in the Registration
Statements of Unitil Corporation and subsidiaries on Form S-3 and on
Form S-8.
GRANT THORNTON LLP
Boston, Massachusetts
March 29, 2000
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Registrant has duly
caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Unitil Corporation
Date March 28, 2000 By /s/ Robert G. Schoenberger
Robert G. Schoenberger
Chairman of the Board Directors,
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the
dates indicated.
Signature Capacity Date
/s/ Robert G. Schoenberger Principal Executive March 28, 2000
Robert G. Schoenberger Officer; Director
/s/ Michael J. Dalton Principal Operating March 28, 2000
Michael J. Dalton Officer; Director
/s/ Anthony J. Baratta, Jr. Principal Financial March 28, 2000
Anthony J. Baratta, Jr. Officer
/s/ Albert H. Elfner, III Director March 28, 2000
Albert H. Elfner, III
/s/ Ross B. George Director March 28, 2000
Ross B. George
/s/ Bruce W. Keough Director March 28, 2000
Bruce W. Keough
/s/ M. Brian O'Shaughnessy Director March 28, 2000
M. Brian O'Shaughnessy
/s/ J. Parker Rice, Jr. Director March 28, 2000
J. Parker Rice, Jr.
/s/ Charles H. Tenney III Director March 28, 2000
Charles H. Tenney III
/s/ W. William VanderWolk, Jr.Director March 28, 2000
W. William VanderWolk, Jr.
/s/ Joan D. Wheeler Director March 28, 2000
Joan D. Wheeler
/s/ Franklin Wyman, Jr. Director March 28, 2000
Franklin Wyman, Jr.
/s/ William E. Aubuchon, III Director March 28, 2000
William E. Aubuchon, III
SCHEDULE VIII
UNITIL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Additions
Balance Charged Charged Deductions Balance
at to to at
Beginning Costs and Other from End of
Description of Period Expenses Accounts(A) Reserves(B) Period
Year Ended December 31, 1999
Reserves Deducted from A/R
Electric $568,025 $441,694 $113,625 $658,547 $464,797
Gas 78,059 365,365 65,256 374,877 133,803
$646,084 $807,059 $178,881 $1,033,424 $598,600
Year Ended December 31, 1998
Reserves Deducted from A/R
Electric $544,224 $459,942 $146,387 $582,528 $568,025
Gas 108,899 288,214 31,189 350,243 78,059
$653,123 $748,156 $177,576 $932,771 $646,084
Year Ended December 31, 1997
Reserves Deducted from A/R
Electric $518,606 $670,548 $262,523 $907,453 $544,224
Gas 141,508 177,733 41,284 251,626 108,899
$660,114 $848,281 $303,807 $1,159,079 $653,123
(A) Collections on Accounts Previously Charged Off
(B) Bad Debts Charged Off
Exhibit 11.1
UNITIL CORPORATION
Computation in Support of Earnings per Share
Year Ended December 31,
1999 1998 1997
(000's omitted)
BASIC EARNINGS PER SHARE
Net Income $8,438 $8,249 $8,235
Less: Dividend Requirements on
Preferred Stock 268 274 276
Net Income Applicable to
Common Stock $8,170 $7,975 $7,959
Average Number of Common
Shares Outstanding 4,682 4,506 4,413
Basic Earnings per Average
Common Shares Outstanding $1.74 $1.77 $1.80
DILUTED EARNINGS PER SHARE
Net Income $8,438 $8,249 $8,235
Less: Dividend Requirements on
Preferred Stock 268 274 276
Net Income Applicable to Common Stock $8,170 $7,975 $7,959
Average Number of Common Shares
Outstanding plus
Assumed Options converted* 4,693 4,634 4,520
Diluted Earnings per Average
Common Shares Outstanding $1.74 $1.72 $1.76
* Assumes all options were converted to common shares per SFAS 128.
Exhibit 12.1
UNITIL CORPORATION
Computation in Support of Ratio of Earnings to Fixed Charges
Year Ended December 31,
1999 1998 1997 1996 1995
(000's Omitted Except Ratio)
Earnings:
Net Income, per Consolidated
Statement of Earnings $8,438 $8,249 $8,235 $8,729 $8,369
Federal Income Tax 3,492 2,221 2,999 3,658 3,960
Deferred Federal Income Tax 65 1,225 573 321 (298)
State Income Tax 805 377 679 691 692
Deferred State Income Tax 7 289 87 137 (16)
Amortization of Tax Credit (322) (402) (172) (194) (202)
Interest on Long-Term Debt 6,477 5,412 5,242 5,142 5,193
Amortization of Debt
Discount Expense 60 61 60 57 72
Other Interest 1,091 1,787 1,889 1,049 799
Total $20,113 $19,219 $19,592 $19,590 $18,569
Fixed Charges:
Interest of Long-Term Debt $6,477 $5,412 $5,242 $5,142 $5,193
Amortization of Debt
Discount Expense 60 61 60 57 72
Other Interest 1,091 $1,787 $1,889 $1,049 $799
Total $7,628 $7,260 $7,191 $6,248 $6,064
Ratio of Earnings to Fixed Charges 2.64 2.65 2.72 3.14 3.06
Exhibit 21.1
Subsidiaries of Registrant
The Company or the registrant has seven wholly-owned subsidiaries,
six of which are corporations organized under the laws of The State
of New Hampshire: Concord Electric Company, Exeter & Hampton Electric
Company, Unitil Power Corp., Unitil Realty Corp., Unitil Resources,
Inc., and Unitil Service Corp. The seventh, Fitchburg Gas and
Electric Light Company, is organized under the laws of The State of
Massachusetts.
Exhibit 4.26
FITCHBURG GAS AND ELECTRIC LIGHT COMPANY
Re:
$12,000,000 7.37% Notes
due January 15, 2029
Conformed Copy
of
Note Agreement
Dated as of January 15, 1999
FITCHBURG GAS AND ELECTRIC LIGHT COMPANY
$12,000,000 Aggregate Principal Amount of 7.37%Notes due January 15,2029
NOTE AGREEMENT
Dated as of January 15, 1999
TABLE OF CONTENTS
SECTION HEADING PAGE
SECTION 1. AUTHORIZATION OF NOTES . . . . . . . . . . . . . . 1
SECTION 2. SALE AND PURCHASE OF NOTB .... .............. 1
Section 2.1. Commitment ......................... 1
Section 2.2. Several Commitments ................. 1
SECTION 3. CLOSING. . . . . . . .. . . . . . . . . . . . . . 1
SECTION 4. CONDITIONS TO CLOSING .. . . . . . . . . . . . . . 2
Section 4.1. Representations and Warranties ...... 2
Section 4.2. Performance; No Default ..............2
Section 4.3. Compliance Certificate .............. 2
Section 4.4. Regulatory Approvals..................2
Section 4.5. Legal Opinions...................... .2
Section 4.6. Related Transactions .................2
Section 4.7. Proceedings and Documents.............2
Section 4.8. Private Placement Number .............3
SECTION 5. REPRESENTATIONS AND WARRANTB OF THE COMPANY. . . . 3
Section 5.1. Organization, Standing,
Due Authorization ................... 3
Section 5.2. Capitalization ..................... .3
Section 5.3. Subsidiaries........................ .3
Section 5.4. Qualification ...................... .3
Section 5.5. Periodic Reports .................... 4
Section 5.6. Franchises; Etc .................... .4
Section 5.7. Financial Statements ................ 4
Section 5.8. Changes; Etc ................... 5
Section 5.9. Tax Returns and Payments ............ 5
Section 5.10. Title to Properties ................ 5
Section 5.11. Litigation; Etc .................... 5
Section 5.12. Compliance with Other
Instruments, Etc ................... 6
Section 5.13. Employee Retirement Income
Security Act of 1974 ............... 6
Section 5.14. Regulatory Jurisdiction and
Approvals .......................... 6
Section 5.15. Patents; Trademarks; Etc ........... 6
Section 5.16. Offer of Notes ..................... 7
Section 5.17. Investment Company Act Status.. ... .7
Section 5.18. Federal Reserve Regulations ........ 7
Section 5.19. Foreign Credit Restraints .......... 7
Section 5.20. Disclosure ....... ................. 7
Section 5.21. Funded Indebtedness ............... 8
Section 5.22. Sale is Legal and Authorized.........8
Section 5.23. No Defaults..........................8
Section 5.24. Compliance with Environmental Laws...8
SECTION 6 USE OF PROCEEDS....................................9
SECTION 7. PURCHASER'S REPRESENTATIONS........................9
SECTION 8. REGISTRATION, TRANSFER AND SUBSTITUTION OF NOTES...9
Section 8.1. Note Register; Ownership of Notes.....9
Section 8.2. Transfer and Exchange of Notes........9
Section 8.3. Replacement of Notes.................10
SECTION 9. PAYMENT OF NOTES..................................10
SECTION 10. REDEMPTION OF NOTES...............................11
Section 10.1. Fixed Redemptions...................11
Section 10.2. Original Redemptions................11
Section 10.3. Notice of Original Redemptions......11
Section 10.4. Selection of Notes for Redemption...11
Section 10.5. Maturity; Surrender; Etc............11
Section 10.6. Repurchase of Notes.................12
SECTION 11. COVENANTS.........................................12
Section 11.1. Punctual Payment....................12
Section 11.2. Prompt Payment of Taxes and
Indebtedness........................12
Section 11.3. Limitations on Liens................13
Section 11.4. Limitation of Funded Indebtedness...15
Section 11.5. Limitation on Subsidiary
Indebtedness........................16
Section 11.6. Restriction on Dividents............16
Section 11.7. Nature of Business..................17
Section 11.8. Corporate Existence, Etc............17
Section 11.9. Maintenance of Insurance............17
Section 11.10.Maintenance of Properties, Etc......17
Section 11.11.Merger or Consolidation; Sale
or Transfer of Assets...............17
Section 11.12.Books of Accounts and Reports.......18
Section 11.13.Transactions with Affilitates.......18
Section 11.14.Compliance with Laws................18
SECTION 12. INFORMATIONS AS TO THE COMPANY....................19
Section 12.1. Accounting; Financial Statements
and Other Information...............19
Section 12.2. Inspection..........................20
SECTION 13. DEFAULTS ........................................ 21
Section 13.1. Events of Default; Acceleration ....21
Section 13.2. Remedies on Default; Etc .......... 23
Section 13.3. Rescission of Acceleration........ .23
SECTION 14. DEFINITIONS; ACCOUNTING PRINCIPLES .............. 24
Section 14.1. Definitions ....................... 24
Section 14.2. Accounting Principles ............. 28
SECTION 15. EXPENSES; ETC .................................. .28
SECTION 16. SURVIVAL OF AGREEMENTS; ETC..................... .29
SECTION 17. AMENDMENTS AND WAIVERS.......................... .29
SECHON 18. NOTICES; ETC .................................... .30
SECTION 19. FURTHER ASSURANCEs.............................. .30
SECTION 20. MISCELLANEOUS ................................... 30
SECTION 21. SEVERABILITY..................................... 30
Signature Page .. .... .... ...... .... .... .... .... .... ..31
Schedules and Exhibits:
Schedule I -Names and Addresses of Purchasers
Schedule II -Funded Indebtedness Outstanding
Exhibit A -Form of Note
FITCHBURG GAS AND ELECTRIC LIGHT COMPANY
6 Liberty Lane West
Hampton, New Hampshire 03842
Dated as of January 15, 1999
To the Purchasers named in Schedule I
attached hereto
FITCHBURG GAS AND ELECTRIC LIGHT COMPANY (the "Company"), a Massachusetts
corporation, agrees with the Purchasers named on Schedule I of this
Agreement (the "Purchasers")as follows:
SECTION 1. AUTHORIZATION OF NOTES.
The Company has authorized the issue and sale of $12,000,000 principal
amount of its 7.37%Notes due January 15,2029 (the "Notes", such term to
include any such notes issued in substitution therefor pursuant to Section 8
hereof), interest to be payable semiannually on January 15 and July 15 in
each year (commencing on July 15, 1999), such Notes to be substantially in
the form of Exhibit A attached hereto, with such changes therein, if any, as
may be approved by the Purchasers and the Company. Certain capitalized terms
used herein are defined in Section 14 hereof.
SECTION 2. SALE AND PURCHASE OF NOTES.
Section 2.1. Commitment. The Company will issue and sell to each Purchaser
and, subject to the terms and conditions hereof, each Purchaser will purchase
from the Company, Notes at a purchase price of 100%of the principal amount
thereof set forth opposite such Purchaser's name on Schedule I hereto, on
the Closing Date hereinafter defined.
Section 2.2. Several Commitments. The obligations of the Purchasers shall be
several and not joint and no Purchaser shall be liable or responsible for
the acts or defaults of any other Purchaser.
SECTION 3. CLOSING.
The closing of the sale and purchase of the Notes (the "Closing ")shall take
place at the offices of Chapman and Cutler, 111 West Monroe Street, Chicago,
Illinois 60603 at 10: 00 a. m., Chicago time on January 26, 1999 or on such
other business day not later than February 17, 1999 as may be mutually
agreed upon by the Purchasers and the Company (the "Closing Date"). At the
Closing the Company will deliver to each Purchaser the Notes in the form of
a single registered Note (unless different denominations are specified by
such Purchaser)in the form of Exhibit A attached hereto dated the Closing
Date for the full amount of the purchase price and registered in such
Purchaser's name or in the name of such Purchaser's nominee, all as such
Purchaser may specify at any time prior to the date fixed for delivery,
against receipt of the
purchase price payable by wire transfer of immediately available funds to
such account as the Company shall notify the Purchasers in writing at least
two days prior to the Closing Date. If at the Closing the Company shall fail
to tender such Note as provided herein, or if at the Closing any of the
conditions specified in Section 4 shall not have been fulfilled, each
Purchaser shall, at its election, be relieved of all further obligations to
purchase Notes under this Agreement, without thereby waiving any other
rights it may have by reason of such failure or such nonfulfillment.
SECTION 4. CONDITIONS TO CLOSING.
The obligation of each Purchaser to purchase the Notes to be sold to it at
the Closing is subject to the fulfillment, prior to or at the Closing, of
the following conditions:
Section 4.1. Representations and Warranties. The representations and
warranties of the Company in Section 5 shall be correct when made and at
the time of the Closing.
Section 4.2. Performance; No Default. The Company shall have performed and
complied with all agreements and conditions contained herein required to be
performed or complied with by it prior to or at the Closing, and at the time
of the Closing no condition or event shall exist which constitutes or which,
after notice or lapse of time or both, would constitute an Event of Default
(as defined in Section 13.1 hereof).
Section 4.3. Compliance Certificate. The Company shall have delivered to
each Purchaser an Officers'Certificate, dated the date of the Closing,
certifying that the conditions specified in Sections 4.1 and 4.2 hereof have
been fulfilled.
Section 4.4. Regulatory Approvals. The issue and sale of the Notes shall
have been duly authorized by order of the Massachusetts Department of
Telecommunications and Energy (the "MD,")and such order shall be in full
force and effect at the time of the Closing and the appeal period applicable
to such order shall have expired. The Connecticut Department of Public
Utility Control (the "DPUC")has waived the requirements of Section 16-43 of
the Connecticut General Statutes with respect to the issuance and sale of
the Notes.
Section 4.5. Legal Opinions. Each Purchaser shall have received from Chapman
and Cutler, who is acting as special counsel to the Purchasers in this
transaction and from LeBoeuf, Lamb, Greene &MacRae, L. L. P., counsel for
the Company, their respective opinions, dated the Closing Date,
substantially in the form of Exhibits B and C attached hereto.
Section 4.6. Related Transactions. On the Closing Date the Company shall
have consummated the sale of the Notes scheduled to be sold to the other
Purchaser on the Closing Date pursuant to this Agreement.
Section 4.7. Proceedings and Documents. All corporate and other proceedings
in connectiou'with the transactions contemplated hereby and all documents
and instruments incident to such transactions shall be satisfactory in
substance and form to each Purchaser and its special counsel, and each
Purchaser and its special counsel shall have received all such
- -2-
counterpart originals or certified or other copies of such documents as they
may reasonably request.
Section 4.8. Private Placement Number. Purchasers'special counsel shall have
obtained from Standard &Poor's Corporation and provided to each Purchaser a
Private Placement Number for the Notes.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY .
The Company represents and warrants that:
Section 5. I. Organization, Standing, Due Authorization. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Massachusetts and has all requisite corporate
power and authority to own and operate its Properties, to carry on its
business as now conducted, to enter into this Agreement, to issue and sell
the Notes and to carry out the terms hereof and thereof. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Company's Board of
Directors, and no approval of the stockholders of the Company is required in
connection therewith.
Section 5.2. Capitalization. The Company's authorized and outstanding
capital stock is as follows:
TITLE OF CLASS SHARES AUTHORIZED SHARES OUTSTANDING
Common Stock, $10 par value 2,000,000 1,244,629
Cumulative Preferred Stock, 99,820
$100 par value
5-1/8% Series 9,985
8% Series 14,070
All of the Company's outstanding capital stock is validly issued,
fully paid and non-assessable.
Section 5.3. Subsidiaries. Other than holdings of capital stock which,
individually and in the aggregate, are immaterial to the business and
financial condition of the Company, the Company does not own any shares of
capital stock or shares of beneficial interest of any corporation or other
entity except Fitchburg Energy Development Company, a wholly-owned
Subsidiary, which is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and which is currently
an inactive Subsidiary.
Section 5.4. Qualification. In all jurisdictions where the Company owns real
Property or maintains any place of business, it is either qualified to do
business and in good standing or such qualification can readily be obtained
without substantial penalty and the failure to qualify in jurisdictions
where the Company has not done so will not have a material adverse effect on
the
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business or condition of the Company and its Subsidiary, taken as a whole,
financial or otherwise.
Section 5.5. Periodic Reports. The Company has delivered to each Purchaser
the Annual Report on Form 10-K Report filed by UNITIL with the Securities
and Exchange Commission (the "SEC")for the fiscal year ended December 31,
1997, including such Exhibits thereto as each Purchaser has requested (the
"10-K Report"), and the Quarterly Reports on Form 10-Q by UNITIL filed with
the SEC for the fiscal quarters ended March 3 1, June 30 and September 30,
1998, respectively (the "IO-Q Reports"). UNITIL has not filed any Current
Reports on Form 8-K filed with the SEC during calendar year 1998 or 1999.
There is no fact known to the Company which materially and adversely affects,
or which in the future may (so far as the Company can now foresee)materially
and adversely affect, the business, Properties, operations or condition,
financial or otherwise, of the Company and its Subsidiary taken as a whole,
which has not been set forth in the 10-K Report, the 10-Q Reports, this
Agreement, the Notes or in the other written documents, certificates and
statements already furnished to each Purchaser by or on behalf of the
Company in connection with the transactions contemplated hereby.
Section 5.6. Franchises; Etc. The Company has all franchises, certificates
of convenience and necessity, operating rights, licenses, permits, consents,
approvals, authorizations and orders of governmental bodies, political
subdivisions and regulatory authorities, free from unduly burdensome
restrictions, as are reasonably necessary for the ownership of the
Properties now owned and operated by it, the maintenance and operation of
the Properties now operated by it and the conduct of the business now
conducted by it.
Section 5.7. Financial Statements. The Company has furnished to each
Purchaser:
(a)the Company's financial statements for each of its fiscal years ended
December 31, 1995, 1996 and 1997 (the "Annual Reports"), containing balance
sheets, on a consolidated basis, of the Company and its Subsidiary as at the
end of such fiscal years and the related statements of earnings, retained
earnings and cash flows of the Company on a consolidated basis for such
fiscal years, as certified by Grant Thornton L. L. P., independent certified
public accountants; and
(b)unaudited consolidated financial statements of the Company and its
Subsidiary for the twelve months ended September 30, 1998, including a
consolidated balance sheet as at such date and statements of earnings and
retained earnings for such period (together with the Annual Reports, the
"Company Reports").
Subject to any qualifications set forth in the accompanying reports of
independent certified public accountants, all such financial statements are
complete and correct (subject, in the case of such unaudited financial
statements, to year-end and audit adjustments)and have been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods covered thereby. Such balance sheets
(together with the pertinent notes thereto)fairly present the financial
condition of the Company and its Subsidiary as at the respective dates
indicated, and in each case reflect all known liabilities, contingent or
- -4-
otherwise, at such dates, all in accordance with generally accepted
accounting principles, and such statements of earnings, retained earnings
and cash flows fairly present the results of the operations of the Company
and its Subsidiary for the respective periods indicated.
Section 5.8. Changes; Etc. Since December 3 1, 1997: (a)except as disclosed
in the 10-K Report, 10-Q Reports or the Company Reports, there has been no
material adverse change
in the assets, liabilities or financial condition of the Company and its
Subsidiary, taken as a whole, from that reflected in the balance sheet as at
December 31, 1997 referred to in Section 5.7 or otherwise previously
disclosed in writing, other than changes in the ordinary course of business;
(b)neither the business, operations or affairs of the Company and its
Subsidiary nor any of their Properties or assets, taken as a whole, have
been materially adversely affected by any occurrence or development (whether
or not insured against)except as disclosed in the 10-K Report, the 10-Q
Reports or the Company Reports or otherwise previously disclosed in writing;
and (c)the Company has not, prior to the Closing Date, directly or
indirectly, declared, paid or made any dividend or distribution on or on
account of any shares of capital stock of the Company or any redemption,
retirement, purchase or other acquisition of any shares of capital stock of
the Company, or agreed to do so, except for the payment of regular cash
dividends on its Cumulative Preferred Stock and purchases of Cumulative
Preferred Stock under applicable sinking fund provisions.
Section 5.9. Tax Returns and Payments. All tax returns of the Company and
its Subsidiary required by law to be filed have been duly filed, and all
taxes, assessments, fees and other governmental charges upon the Company or
its Subsidiary shown to be due on such returns have been paid. The federal
income tax liability of the Company and its Subsidiary has been finally
determined by the Internal Revenue Service and satisfied through the fiscal
year ended December 31, 1983. The charges, accruals and reserves on the
books of the Company and its Subsidiary in respect of income taxes for all
fiscal periods are adequate in the opinion of the Company and, except as
disclosed in the 10-K Report, the 10-Q Reports or the Company Reports, the
Company knows of no unpaid assessment for additional income taxes for any
fiscal period or of any basis therefor.
Section 5.10. Title to Properties. Each of the Company and its Subsidiary
has good and marketable title to all the real Property and a good and valid
ownership interest in all the other assets reflected in the most recent
balance sheet referred to in Section 5.7 or subsequently acquired, other
than real Property and other assets subsequently sold or otherwise disposed
of in the ordinary course of business, subject in each case only to Liens
permitted by Section 11.3.
Section 5.11. Litigation; Etc. There is no action, proceeding or
investigation pending or, to the Company's knowledge, threatened (or any
basis therefor known to the Company)which questions the validity of this
Agreement or the Notes or any action taken or to be taken pursuant hereto or
thereto, nor, except as disclosed in the 10-K Report, the 10-Q Reports or
the Company Reports, is there any action, proceeding or investigation
pending or, to the Company's knowledge, threatened (or any basis therefor
known to the Company)which might result, either in any case or in the
aggregate, in any material adverse change in the business, operations,
affairs or condition of the Company and its Subsidiary or their Properties
and assets taken as a whole or in any material liability on the part of the
Company or its Subsidiary.
- -5-
Section 5.12. Compliance with Other Instruments, Etc. Except as set forth in
the 10-K Report, the 10-Q Reports or the Company Reports, the Company is not
in violation of any term of its Articles of Organization or By-Laws, or, to
the Company's knowledge, in violation of any term of any franchise, license,
permit, agreement, indenture, instrument, judgment, decree, order, statute,
or governmental rule or regulation applicable to it so as to materially and
adversely affect, either individually or in the aggregate, its financial
condition; and the execution, delivery and performance of this Agreement and
the Notes will not result in any such violation or be in conflict with or
constitute a default under any term of any of the foregoing and will not
result in the creation of any mortgage, lien, charge or encumbrance upon any
of the Properties or assets of the Company or its. Subsidiary pursuant to
any such term.
Section 5.13. Employee Retirement Income Security Act of 1974. The Company
has not incurred (a)any material "accumulated funding deficiency" within the
meaning of Section 412 of the Internal Revenue Code of 1986, as amended
(the "Code"), and Section 302 of the Employee Retirement Income Security Act
of 1974, as amended (" ERISA "), or (b)any liability to the Pension Benefit
Guaranty Corporation (" PBGC")(other than for routine payment of premiums to
the PBGC)in connection with any employee benefit plan subject to Title IV of
ERISA established or maintained by the Company or with respect to which the
Company has any liability. The Company has not, with respect to any employee
benefit plan established or maintained by the Company, engaged in any
"prohibited transaction" (as defined in Section 4975 of the Code or Section
406 of ERISA)that would be expected to subject the Company to a material tax
or penalty imposed under Section 4975 of the Code or Title I of ERISA. Neither
the purchase of the Notes by the Purchasers pursuant to the terms hereof nor
the consummation of any of the other transactions contemplated by this
Agreement is or will constitute a prohibited transaction within the meaning
of Section 4975 of the Code or Section 406 of ERISA; provided, however, that
this representation is made in reliance on the representation of each
Purchaser in Section 7 hereof. The Company is not now or has not been for
the last five years a contributing employer to a "multiemployer plan"
(within the meaning of Section 4001(a)(3)of ERISA)and neither has incurred
nor expects to incur any withdrawal liability under Title IV of ERISA with
respect to any such multiemployer plan.
Section 5.14. Regulatory Jurisdiction and Approvals. The Company is subject
to regulation by the MDTE with respect to retail rates, adequacy of service,
issuance of securities, accounting and other matters. The issuance and sale
of the Notes has been authorized by an order of the MDTE which has become
final and the applicable appeal period has expired. The DPUC has waived the
requirements of Section 16-43 of the Connecticut General Statutes with
respect to the issuance and sale of the Notes. The Company is exempt from
registration of the Notes with the SEC pursuant to Regulation 250.52(a)
promulgated under the Public Utility Holding Company Act of 1935, as amended.
No order, consent, approval or authorization of, or any declaration or
filing with, any other governmental agency or authority is required as a
condition precedent to the valid offering, issue, sale and delivery of the
Notes by the Company and the consummation by the Company of the transactions
contemplated hereby.
Section 5.15. Patents; Trademarks; Etc. The Company owns or possesses all
of the patents, trademarks, service marks, trade names and copyrights, and
all rights of use with respect
-6-
to the foregoing, necessary for the conduct of its business as now conducted,
without any known conflict with the rights of others.
Section 5.16. Offer of Notes. Neither the Company nor anyone authorized to
act on its behalf has directly or indirectly offered or will offer the Notes
or any part thereof or any similar securities for issue or sale to, or
solicited or will solicit any offer to acquire any of the same from, or has
otherwise approached or negotiated or will approach or negotiate in respect
thereof with anyone other than the Purchasers and not more than 125 other
institutional investors. Neither the Company nor anyone authorized to act on
its behalf has taken or will take any action which will subject the issuance
and sale of the Notes to the provisions of Section 5 of the Securities Act
of 1933, as amended (the "Securities Act").
Section 5.17. Investment Company Act Status. Neither the Company nor its
Subsidiary is an "investment company" or a company "controlled" by an
"investment company", as such terms are defined in the Investment Company
Act of 1940, as amended.
Section 5.18. Federal Reserve Regulations. Neither the Company nor its
Subsidiary owns or has any present intention of acquiring any "margin
security" within the meaning of Regulation U (12 CFR Part 207)of the Board
of Governors of the Federal Reserve System (herein called a "margin
security"). The proceeds of the sale of the Notes will be applied as provided
in Section 6. None of such proceeds will be used, directly or indirectly,
for the purpose of purchasing or carrying any margin security or for the
purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry a margin security or for any other purpose
which might constitute the transactions contemplated hereby a "purpose
credit" within the meaning .of said Regulation U, or cause this Agreement to
violate Regulation U, Regulation T, Regulation X, or any other regulation of
the Board of Governors of the Federal Reserve System or Section 7 of the
Securities Exchange Act of 1934 (the "Exchange Act"), each now in effect.
Section 5.19. Foreign Credit Restraints. Neither the consummation of the
transactions contemplated by this Agreement nor the use of the proceeds of
the sale of the Notes will violate any provision of any applicable statute,
regulation or order of, or any restriction imposed by, the United States of
America or any authorized official, board, department, instrumentality or
agency thereof relating to the control of foreign or overseas lending or
investment.
Section 5.20. Disclosure. Neither this Agreement, the financial statements
referred to in Section 5.7, the 10-K Report, the 10-Q Reports, the Company
Reports, nor any other document, certificate or written statement furnished
to the Purchasers by or on behalf of the Company in connection with the
negotiation of the sale of the Notes, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make
the statements contained herein and therein not misleading. There is no fact
known to the Company which materially adversely affects or in the future
may (so far as the Company can now foresee)materially adversely affect the
business, operations, affairs or condition of the Company and its Subsidiary,
taken as a whole, or their Properties or assets, taken as a whole, which has
not been set forth in this Agreement or in the other documents, certificates,
the 10-K Report, the 10-Q Reports, the Company Reports and written statements
furnished to the Purchasers by or on behalf of the
- -7-
Company prior to the date of this Agreement in connection with the
transactions contemplated hereby.
Section 5.21. Funded Indebtedness. Schedule II attached hereto correctly
describes all Funded Indebtedness of the Company and its Subsidiary
outstanding on December 31, 1998.
Section 5.22. Sale is Legal and Authorized. The sale of the Notes and
compliance by the Company with all of the provisions of the Agreement and
the Notes 3
(a)are within the corporate powers of the Company; and
(b)have been duly authorized by proper corporate action on the part of the
Company (no action by the stockholders of the Company being required by law,
by the Articles of Organization or By-laws of the Company or otherwise);
this Agreement and, when executed and delivered in accordance with the terms
hereof, the Notes, have been or will have been, as the case may be, duly
executed and delivered on behalf of the Company by duly authorized officers
thereof, and this Agreement and, when executed and delivered in accordance
with the terms hereof, the Notes constitute or will constitute, as the case
may be, the legal, valid and binding obligations, contracts and agreements
of the Company enforceable in accordance with their respective terms.
Section 5.23. No Defaults. No Default or Event of Default has occurred and
is continuing. The Company is not in default in the payment of principal or
interest on any Indebtedness and is not in default under any instrument or
instruments or agreements under and subject to which any Indebtedness has
been issued and no event has occurred and is continuing under the provisions
of any such instrument or agreement which with the lapse of time or the
giving of notice, or. both, would constitute an event of default thereunder.
Section 5.24. Compliance with Environmental Laws. Except as disclosed in the
10-K Report, the 10-Q Reports or the Company Reports, the Company is not in
violation of any applicable Federal, state, or local laws, statutes, rules,
regulations or ordinances relating to public health, safety or the
environment, including, without limitation, relating to releases, discharges,
emissions or disposals to air, water, land or ground water, to the withdrawal
or use of ground water, to the use, handling or disposal of polychlorinated
biphenyls (PCBs), asbestos or urea formaldehyde, to the treatment, storage,
disposal or management of hazardous substances (including, without
limitation, petroleum, crude oil or any fraction thereof, or other
hydrocarbons), pollutants or contaminants, to exposure to toxic, hazardous
or other controlled, prohibited or regulated substances which violation could
have a material adverse effect on the business, prospects, profits,
properties or condition (financial or otherwise)of the Company and its
Subsidiary, taken as a whole. Except as disclosed in the 10-K Report, the
10-Q Reports or the Company Reports, the Company does not know of any
liability or class of liability of the Company or its Subsidiary under the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended (42 U. S. C. Section 9601 et seq.), or the Resource
Conservation and Recovery Act of 1976, as amended (42 U. S. C. Section 6901
et seq.).
- -8-
SECTION 6. USE OF PROCEEDS.
The proceeds of the sale of the Notes will be applied by the Company to
refinance existing short-term debt and for general corporate purposes.
SECTION 7. PURCHASER'S REPRESENTATIONS .
Each Purchaser represents that such Purchaser is purchasing the Notes for
its own account for investment and not with a view to the distribution
thereof and has no present intention of selling, negotiating, or otherwise
disposing of the Notes, provided that the disposition of the Purchaser's
Property shall at all times be within its control. Each Purchaser represents
that either: (a)it is acquiring the Notes with assets from its "insurance
company general account" within the meaning of Department of Labor
Prohibited Transaction Exemption
(" PTE")95-60 (issued July 12, 1995)and there is no employee benefit plan,
treating as a single plan all plans maintained by the same employer or
employee organization, with respect to which the amount of the general
account reserves and liabilities for all contracts held by or on behalf of
such plan, exceeds ten percent (10%)of the total reserves and liabilities of
such general account (exclusive of separate account liabilities)plus
surplus, as set forth in the NAIC Annual Statement filed with its state of
domicile; or (b)all or a part of the funds to be used by it to purchase
Notes constitute assets of one or more separate accounts maintained by it,
and it has disclosed to the Company the names of such employee benefit
plans, whose assets in such separate account or accounts exceed 10%of the
total assets or are expected to exceed 10%of the total assets of such
account or accounts as of the date of such purchase (for the purpose of this
clause (b), all employee benefit plans maintained by the same employer or
employee organization are deemed to be a single plan). As used in this
Section, the terms "separate account" and "employee benefit plan" shall have
the respective meanings assigned to them in ERISA. The acquisition of any of
the Notes by such Purchaser shall constitute such Purchaser's reaffirmation
of such representation, and it is understood that in making the
representations contained in Sections 5.13 and 5.16, the Company is relying,
to the extent applicable, on the Purchaser's representation as aforesaid.
SECTION 8. REGISTRATION , TRANSFER AND SUBSTITUTION OF NOTES.
Section 8. I. Note Register; Ownership of Notes. The Company will keep at
its principal office located at 6 Liberty Lane West, Hampton, New Hampshire,
or such other address of which the Company may hereafter notify the holders
of the Notes from time to time, a register in which the Company will provide
for the registration of Notes and the registration of transfers of Notes.
The Company may treat the Person in whose name any Note is registered on
such register as the owner thereof for the purpose of receiving payment of
the principal of and interest on such Note and for all other purposes,
whether or not such Note shall be overdue, and the Company shall not be
affected by any notice to the contrary except for a properly presented
request by such owner to transfer such Note to another Person. All
references in this Agreement to a "holder" of any Note shall mean the Person
in whose name such Note is at the time registered on such register.
Section 8.2. Transfer and Exchange of Notes. Upon surrender of any Note by
the holder or transferee thereof for registration or transfer or for
exchange at the principal office of the
- -9-
Company, the Company at its expense will execute and deliver in exchange
therefor a new Note or Notes in denominations of not less than $100,000
(amounts in excess thereof to be in $10,000 increments, unless the entire
principal balance of a Note is being transferred or exchanged, in which case
the denomination may be made in increments of less than $10,000 if such Note
being transferred or exchanged is in an amount that does not represent
$10,000 increments)requested by the holder or transferee which aggregate the
unpaid principal amount of such surrendered Note, registered as such holder
or transferee may request, dated so that there will be no loss of interest
on such surrendered Note and otherwise of like tenor.
Section 8.3. Replacement of Notes. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
any Note and, in the case of any such loss, theft or destruction upon
delivery of indemnity reasonably satisfactory to the Company in
form and amount, or, in the case of any such mutilation, upon the surrender
of such Note for cancellation at the principal office of the Company, the
Company at its expense will execute and deliver, in lieu thereof, a new Note
of like tenor, dated so that there will be no loss of interest on such lost,
stolen, destroyed or mutilated Note. If the Purchasers or any subsequent
Institutional Holder is the owner of any such lost, stolen or destroyed
Note, then the affidavit of an authorized officer of such owner, setting
forth the fact of loss, theft or destruction and of its ownership of such
Note at the time of such loss, theft or destruction shall be accepted as
satisfactory evidence thereof and no further indemnity shall be required as
a condition to the execution and delivery of a new Note other than the
written agreement of such owner to indemnify the Company. Any Note in lieu
of which any such new Note has been so executed and delivered by the Company
shall not be deemed to be an outstanding Note for any purpose of this
Agreement.
SECTION 9. PAYMENT ON NOTES.
The Company will pay all sums becoming due on each Note (including
redemptions, whether for principal or interest)by check mailed to the holder
of such Note at the registered address of such holder as set forth in the
register kept by the Company at its principal office as provided in Section
8.1, without the presentation or surrender of such Note or the making of any
notation thereon, except that any Note paid or prepaid in full shall be
surrendered to the Company at its principal office for cancellation,
provided that, in the case of any Note with 3 respect to which any Purchaser
or any subsequent Institutional Holder is the registered owner, and with
respect to which any such subsequent Institutional Holder has given written
notice to the Company requesting that the provisions of this Section 9 shall
apply, the Company will punctually pay when due the principal thereof,
interest thereon and premium, if any, due with respect to said principal,
without any presentment thereof, directly to such Purchaser or to such
subsequent Institutional Holder at such Purchaser's address set forth in
Schedule I hereto or such 3 other address as such Purchaser or such
subsequent Institutional Holder may from time to time designate in writing
to the Company or, if a bank account with a United States bank is designated
for such Purchaser on Schedule I hereto or in any written notice to the
Company from the Purchaser or from any such subsequent Institutional Holder,
the Company will make such payments in immediately available funds to such
bank account, marked for attention as indicated, or in such other manner or
to such other account in any United States bank as such Purchaser or any
such subsequent Institutional Holder may from time to time direct in writing.
The Company will not be liable for failure to make payment on the Notes so
long as the
- -lO-
Company acts in accordance with any written instructions given by a
Purchaser or any such Institutional Holder under Section 9. Prior to any
sale or other disposition of any Note, the holder thereof will, at its
election, either endorse thereon the amount of principal paid thereon and
the last date to which interest has been paid thereon, or make such Note
available to the Company at its principal office for the purpose of making
such endorsement thereon.
SECTION 10. REDEMPTION 0F NOTES.
Section IO. I. Fixed Redemptions. The Company agrees that on January 15 in
each year commencing January 15, 2020 and ending January 15, 2029, it will
redeem and there shall become due and payable on the principal indebtedness
evidenced by the Notes an amount equal to the lesser of (i)$1,200,000 or (ii)
the principal amount of the Notes then outstanding. For purposes of this
Section 10.1, any redemption of less than all of the outstanding Notes
pursuant to Section 10.2 shall be deemed to be applied first, to the amount
of principal scheduled to be paid on January 15, 2029, and then to the
remaining scheduled principal payments in inverse chronological order.
Section 10.2. Optional Redemptions. The Company may at its option, upon
notice as provided in Section 10.3, redeem at any time all or, from time to
time, any part of the Notes aggregating at least $100,000 in aggregate
principal amount, in each case by payment of the principal amount of the
Notes, or portion thereof to be redeemed and accrued interest thereon to the
date of such redemption, together with a premium equal to the Make-Whole
Premium, determined as of five business days prior to the date of such
prepayment pursuant to this Section 10.2.
Section 10.3. Notice of Optional Redemptions. The Company will give each
holder of any Notes written notice of each optional redemption under Section
10.2 not less than fifteen (15)days and not more than forty-five (45)days
prior to the date fixed for such optional redemption, specifying (i)such
date, (ii)the aggregate principal amount of the Notes to be redeemed on such
date, (iii)the principal amount of each Note held by such holder to be
redeemed on such date, (iv)whether a premium may be payable, (v)the date
when any such premium will be calculated, (vi)if a premium may be payable,
the estimated premium, and (vii)the accrued interest applicable to the
redemption. Such notice of redemption shall also certify all facts, if any,
which are conditions precedent to any such redemption. Not later than two
business days prior to the redemption date specified in such notice, the
Company shall provide each holder of a Note written notice of the premium,
if any, payable in connection with such redemption and, whether or not any
premium is payable, a reasonably detailed computation of the Make-Whole
Premium.
Section 10.4. Selection of Notes for Redemption. Redemptions pursuant to
this Section 10 shall be made in units of $1,000 principal amount and
integral multiples thereof and the Notes then held by each holder shall be
redeemed in proportion, as nearly as may be, to the aggregate principal
amount of Notes then outstanding.
Section 10.5. Maturity; Surrender; Etc. In the case of each redemption, the
principal amount of each Note to be redeemed and the premium, if any,
payable with respect thereto shall
- -11-
become due and payable on the date fixed for such redemption by the written
notice referred to in Section 10.3, together with interest on such principal
amount accrued to such date. From and after such date, unless the Company
shall fail to pay such principal amount when so due and payable, together
with the interest to the date of redemption, interest on such principal
amount shall cease to accrue. Any Note redeemed in full shall be surrendered
to the Company and cancelled and shall not be reissued, and no Note shall be
issued in lieu of any prepaid principal amount of any Note.
Section 10.6. Repurchase of Notes. The Company will not, nor will it permit
any Affiliate to, directly or indirectly repurchase or make any offer to
repurchase any Notes unless the Company or any such Affiliate has offered to
repurchase Notes, pro rata, from all holders of the Notes at the time
outstanding upon the same terms. In case the Company or any such Affiliate
repurchases any Notes, such Notes shall thereafter be cancelled and no Notes
shall be issued in substitution therefor. Without limiting the foregoing,
upon the repurchase or other acquisition of any Notes by the Company or any
Affiliate, such Notes shall no longer be outstanding for purposes of any
section of this Agreement relating to the taking by the holders of the Notes
of any actions with respect hereto, including, without limitation, Sections
13.1, 13.3 and 17.
SECTION 11. COVENANTS.
The Company covenants that, from and after the date of this Agreement and
until none of the Notes shall be outstanding:
Section 11.1. Punctual Payment. The Company will duly and punctually pay the
principal, premium, if any, and interest on the Notes in accordance with the
terms of this Agreement and of the Notes.
Section 11.2. Prompt Payment of Taxes and Indebtedness. The Company will
promptly pay and discharge, and will cause each Subsidiary to pay and
discharge, all lawful taxes, assessments and governmental charges or levies
imposed upon the Company or Subsidiary or upon its income or profits, or
upon any Property belonging to it; provided, however, that the Company and
its Subsidiary shall not be required to pay any such tax, assessment, charge
or levy if the same shall not at the time be due and payable or can be paid
thereafter without additional liability, or if the validity or amount
thereof shall then be contested in good faith by appropriate proceedings and
if the Company shall have set aside on its books adequate reserves with
respect thereto in accordance with generally accepted accounting principles;
and provided, further, that the Company and its Subsidiaries will pay all
such taxes, assessments, charges or levies when and as necessary to prevent
foreclosure of any Lien which may have attached as security therefor or to
prevent the forfeiture or sale of the property subject to the Lien of such
assessment, charge or levy or any material interference with the use thereof
by the Company or any Subsidiary. The Company will promptly pay when due, or
in conformance with customary trade terms, all other indebtedness incident
to operations and dividends declared, other than disputed claims which are
being contested in good faith and for which the Company has set aside on its
books adequate reserves in accordance with generally accepted accounting
principles.
- -12-
Section 11.3. Limitation on Liens. Except as hereinafter in this Section
expressly permitted, the Company will not at any time, nor will it permit
any Subsidiary to, directly or indirectly, create, assume or suffer to
exist, except in favor of the Company or any Subsidiary, any Lien upon any
of its Properties or assets, real or personal, whether now owned or
hereafter acquired, or of or upon any income or profits therefrom, without
making effective provision, and the Company covenants that in any such case
it will make or cause to be made effective provision, whereby the Notes then
outstanding shall be secured by such Lien equally and ratably with any and
all other Indebtedness to be secured thereby, so long as any such other
Indebtedness shall be so secured.
Nothing in this Section shall be construed to prevent the Company or a
Subsidiary from creating, assuming or suffering to exist, and the Company
and its Subsidiaries are hereby expressly permitted to create, assume or
suffer to exist, without securing the Notes as hereinabove provided, Liens
of the following character:
(a)Liens existing on the date hereof;
(b)Liens, in addition to those otherwise permitted by this Section 11.3,
securing Indebtedness which does not exceed in the aggregate $5,000,000 at
any one time outstanding; provided that all such Indebtedness shall have
been incurred within the applicable limitations provided in Sections 11.4
and 11.5;
(c) any purchase money mortgage or other Lien existing on any Property of
the Company or a Subsidiary at the time of acquisition, whether or not
assumed, or created contemporaneously with the acquisition or construction
of Property, to secure or provide for the payment of the purchase or
construction price of such Property, and any conditional sales agreement or
other title retention agreement with respect to any Property hereafter
acquired; provided, however, that (i)the aggregate principal amount of the
Indebtedness secured by all such mortgages and other liens on a particular
parcel of Property shall not exceed 100%of the lesser of the total cost or
fair market value at the time of the acquisition or construction of such
Property, including the improvements thereon (as determined in good faith by
the Board of Directors of the Company)and (ii)all such Indebtedness shall
have been incurred within the applicable limitations provided in Sections
11.4 and 11.5;
(d)refundings or extensions of any Lien permitted by this Section 11.3 for
amounts not exceeding the principal amount of the Indebtedness so refunded
or extended at the time of the refunding or extension thereof, and covering
only the same Property theretofore securing the same;
(e)deposits, Liens or pledges to enable the Company or a Subsidiary to
exercise any privilege or license, or to secure payment of worker's
compensation, unemployment insurance, old age pensions or other social
security, or to secure the performance of bids, tenders, contracts or leases
to which the Company or a Subsidiary is a party, or to secure public or
statutory obligations of the Company or a Subsidiary, or to
- -13-
secure surety, stay or appeal bonds to which the Company or a Subsidiary is
a party; or other similar deposits or pledges made in the ordinary course of
business;
(f)mechanics', workmen's, repairmen's, materialmen's or carrier's liens or
other similar Liens arising in the ordinary course of business; or deposits
or pledges to obtain the release of any such Liens;
(g)Liens arising out of judgments or awards against the Company or a
Subsidiary with respect to which the Company or a Subsidiary shall in good
faith be prosecuting an appeal or proceedings for review and in respect of
which a stay of execution pending such appeal or proceeding for review shall
have been secured; or Liens incurred by the Company or a Subsidiary for the
purpose of obtaining a stay or discharge in the course of any legal
proceeding to which the Company or a Subsidiary is a party;
(h)Liens for taxes (x)not yet subject to penalties for non-payment or (y)
being contested provided, payment thereof is not required by Section 11.2;
or minor survey exceptions, or minor encumbrances, easements or reservations
of, or rights of others for, rights of way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or zoning or other
restrictions as to the use of real Properties, which encumbrances,
easements, reservations, rights and restrictions do not in the aggregate
materially detract from the value of said Properties or materially impair
their use in the operation of the business of the Company or a Subsidiary;
(i)pledges, assignments and other security devices entered into in connection
with the financing or refinancing of customer's conditional sales contracts;
(j)Liens incurred in connection with the lease of conversion burners and
water heaters to customers;
(k)Liens incurred in connection with agreements for the financing of gas,
nuclear and other fuel inventories and cushion gas;
(l)Liens on Property acquired through the merger or consolidation of another
utility company with or into, or the purchase of all or substantially all of
the assets of another utility company by, the Company or a Subsidiary,
provided that such Lien does not extend to other Property of the Company or
a Subsidiary; and.
(m)Security interests in, and pledges of, the Company's rights and benefits
under contracts which have been or may be entered into by the Company and
other New England utility companies in connection with participation by the
Company and such other utilities in the Hydro-Quebec Purchase Power and
Interconnection Projects.
If at any time the Company or a Subsidiary shall create or assume any Lien
not permitted by this Section, to which the covenant in the first paragraph
of this Section 11.3 is applicable, the Company will promptly deliver to
each holder of record of the Notes then outstanding:
- -14-
(a) an Officers*Certificate stating that the covenant of the Company
contained in the first paragraph of this Section 11.3 has been complied
with; and
(b)an Opinion of Counsel addressed to such holders to the effect that such
covenant has been complied with, and that any instruments executed by the
Company in the performance of such covenant comply with the requirements
of such covenant.
Section 11.4. Limitation on Funded Indebtedness. The Company will not, nor
will it permit any Subsidiary to, create, incur or assume any Funded
Indebtedness other than:
(a)Funded Indebtedness evidenced by the Notes;
(b)Funded Indebtedness outstanding on the date hereof which is described on
Schedule II hereto; and
(c)additional Funded Indebtedness so long as (i)the aggregate outstanding
principal amount of such Funded Indebtedness, after giving effect to the
application of the proceeds thereof (subject to the proviso set forth
hereafter)and when added to all other Funded Indebtedness of the Company and
its Subsidiaries then outstanding, does not exceed 65%of the Total
Capitalization; provided, that in giving effect to the application of such
proceeds, only applications which are substantially contemporaneous with the
incurrence of such additional Funded Indebtedness shall be given such effect,
except that if the application of such proceeds involves the redemption of
other securities of the Company, and such redemption cannot be made
substantially contemporaneously with the incurrence of such additional
Funded Indebtedness, then such intended redemption shall nevertheless be
given effect for purposes hereof if either (1)the Company shall have given
irrevocable written notice of redemption of such other securities tothe
holders thereof at or prior to the time of the incurrence of such
additional Funded Indebtedness and such redemption is thereafter made in
accordance with the terms of such notice, or (2)if such notice was not
permitted to be given at or prior to the time of the incurrence of such
additional Funded Indebtedness and the redemption will occur within 180 days
after such incurrence, then (A)the proceeds of such Funded Indebtedness to
be used for such redemption shall have been set aside in an escrow or trust
account with a United States bank or other financial institution having
capital and surplus of at least $35,000,000, together with written
instructions to the escrow agent or trustee to send notice of redemption of
such securities provided by the Company to the holders thereof in accordance
with the terms of such securities and thereafter to use such proceeds for
such redemption in accordance with the terms of such notice, such escrow or
trust account to also provide (x)that the funds set aside therein are not to
be released to or for the benefit of the Company except for the purpose of
accomplishing the redemption contemplated thereby, or with the prior written
consent of all holders of Notes then outstanding, and (y)that if the funds
set aside therein are invested in securities by such bank or financial
institution, they shall be invested only in direct obligations of the United
States of America maturing in not more than 180 days, and (B)unless
otherwise agreed to in writing by all of the holders of Notes then
outstanding, the redemptions to be funded from such escrow or trust account
is actually made in accordance with the terms
- -15-
under which such escrow or trust account is established; and (ii)Earnings
Available for Interest of the Company and its Subsidiaries shall equal or
exceed, for at least twelve (12) consecutive calendar months out of the
fifteen (15)months immediately preceding the proposed creation, incurrence
or assumption of such Funded Indebtedness, two times all amounts of interest
for which the Company and its Subsidiaries will, for the twelve month period
immediately following the date of such creation, incurrence or assumption,
be obligated on account of all Funded Indebtedness to be outstanding
immediately thereafter, in each case after giving effect to the application
of the proceeds of such Funded Indebtedness (subject to the proviso set
forth in clause (i)of this subdivision (c)of this Section 11.4)and (iii)in
the case of additional Subsidiary Indebtedness, the Subsidiary shall be in
compliance with Section 11.5.
Any corporation which becomes a Subsidiary after the date hereof shall for
all purposes of this Section 11.4 be deemed to have created, assumed or
incurred at the time it becomes a Subsidiary all Funded Indebtedness of such
corporation existing immediately after it becomes a Subsidiary.
Section 11.5. Limitation on Subsidiary Indebtedness. In addition to the
limitations contained in Section 11.4, no Subsidiary shall create, incur,
assume or become liable for or have outstanding, or permit its Property to
be subject to a lien securing any Funded Indebtedness if, after giving
effect thereto and to any concurrent transaction, the aggregate amount of
all Funded Indebtedness of all Subsidiaries would exceed 20%of the aggregate
amount of total common stock equity, preference stock and preferred stock of
the Company as presented in accordance with generally accepted accounting
principles on a consolidated balance sheet of the Company as of such date.
Section 11.6. Restriction on Dividends. Other than dividends payable solely
in shares of its own common stock, the Company will not declare or pay any
dividend or make any other distribution on any shares of its common stock or
apply any of its Property or assets (other than amounts equal to net
proceeds received from the sale of common stock of the Company subsequent to
the date of this Agreement)to the purchase or retirement of, or make any
other distribution, through reduction of capital or otherwise, in respect of
any shares of its common stock (which dividends, distributions, purchases
and retirements are hereinafter referred to as "distributions")if, after
giving effect to such distribution, the aggregate of all such distributions
declared, paid, made or applied subsequent to December 31, 1997, plus the
amount of all regular dividends declared on any class of preferred stock of
the Company subsequent to December 31, 1997 and all amounts charged to
retained earnings after December 3 1, 1997 in connection with the purchase
or retirement of any shares of preferred stock or preference stock of the
Company, would exceed an amount equal to the sum of $8,000,000 plus (or
minus in the event of a deficit) Net Income (Deficit)accumulated after
December 31, 1997.
For the purposes of this Section 11.6, the amount of any distribution
declared, paid or distributed in Property shall be deemed to be the fair
market value (as determined in good faith by the Board of Directors of the
Company)of such Property at the time of the making of the distribution in
question.
- -16-
Section 11. 7. Nature of Business. Neither the Company nor any Subsidiary
will engage in any business if, as a result, the general nature of the
business, taken on a consolidated basis, which would then be engaged in by
the Company and its Subsidiaries would be substantially changed from the
general nature of the business engaged in by the Company and its
Subsidiaries on the date of this Agreement; provided, that any sale or other
disposition of the Company's natural gas distribution business shall not be
deemed to be a change in the general nature of the business of the Company
and its Subsidiaries.
Section 11.8. Corporate Existence, Etc. The Company will preserve and keep
in full force and effect, and will cause each Subsidiary to preserve and
keep in full force and effect, its corporate existence and all licenses and
permits necessary to the proper conduct of its business; provided, however,
that the foregoing shall not prevent any transaction permitted by Section
11.11 nor shall the foregoing prevent any transaction involving the
liquidation or dissolution of any Subsidiary of the Company so long as such
liquidation or dissolution would not have a material impact on the Company
and its Subsidiaries taken as a whole.
Section 11.9. Maintenance of Insurance. The Company will insure and keep
insured, and will cause every Subsidiary to insure and keep insured, to a
reasonable amount with reputable insurance companies, so much of their
respective Properties as companies engaged in a similar business and to the
extent such companies in accordance with good business practice customarily
insure Properties of a similar character against loss by fire and from other
causes or, in lieu thereof, in the case of itself or its Subsidiaries, the
Company will maintain or cause to be maintained a system or systems of
self-insurance which will accord with the approved practices of companies
owning or operating Properties of a similar character and maintaining such
systems, and of a size similar to that of the Company's ultimate corporate
parent, including the Company and all other direct and indirect subsidiaries
of such ultimate corporate parent on a consolidated basis.
Section 11.10. Maintenance of Properties; Etc. The Company will, and will
cause every Subsidiary to, maintain, preserve, protect and keep its
Properties in good repair, working order and condition, and from time to
time make all needful and proper repairs, renewals, replacements, additions
and improvements thereto so that its business and every portion thereof may
be properly and advantageously conducted at all times.
Section 11.11. Merger or Consolidation; Sale or Transfer of Assets. The
Company will not (a)consolidate with or be a party to a merger with any
other corporation or (b)sell, lease or otherwise dispose of all or
substantially all of the assets of the Company and its Subsidiaries;
provided, however, that the Company may consolidate or merge with any other
corporation, or sell, lease or otherwise dispose of all or substantially all
of the assets of the Company and its Subsidiaries, if (i)the corporation
which results from such consolidation or merger or the corporation to which
the Company sells, leases or otherwise disposes of all or substantially all
of its and its Subsidiaries'assets (in either case, the "surviving
corporation")is either the Company (in the case of a merger or
consolidation), or, if not, is organized under the laws of any State of the
United States or the District of Columbia, (ii)if the surviving corporation
is not the Company, the obligations of the Company under this Agreement and
the Notes are expressly assumed in writing by the surviving corporation and
the surviving corporation shall furnish the
- -17-
holders of the Notes an opinion of counsel satisfactory to such holders to
the effect that the instrument of assumption has been duly authorized,
executed and delivered and constitutes the legal, valid and binding contract
and agreement of the surviving corporation enforceable in accordance with
its terms, except as enforcement of such terms may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles, and (iii)at the time of such consolidation or merger or sale,
lease or other disposition of all or substantially all of the Company's and
its Subsidiaries'assets, and immediately after giving effect thereto, no
Default or Event of Default shall have occurred and be continuing and the
Company or the surviving corporation, as the case may be, could incur at
least $1 .OO of additional Funded Indebtedness pursuant to Section 11.4.;
provided, further that the Company will be permitted to sell its generating
assets and power purchase entitlements without the consent of the Purchasers,
pursuant to the Company's restructuring plan filed with the MDTE on December
31, 1997.
Section 11.12. Books of Account and Reports. The Company will keep true
records and books of account in which full, true and correct entries will be
made of all dealings or transactions in relation to the business and affairs
of the Company and its Subsidiaries, in accordance with such system of
accounts and orders as shall be prescribed by governmental authorities
having jurisdiction in the premises, or, in the absence thereof, in
accordance with generally accepted accounting principles, and will file such
reports and documents with such Federal and state governmental authorities
as may be required by law.
Section 11.13. Transactions with Affiliates. Neither the Company nor any
Subsidiary will enter into any transaction, including, without limitation,
the purchase, sale or exchange of Property or the rendering of any service,
with any Affiliate except in the ordinary course of and pursuant to the
reasonable requirements of the Company's or such Subsidiary's business and
upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would obtain in a comparable arm's_length transaction with a
Person not an Affiliate, except as may be necessary in order for the Company
to comply with requirements of any applicable state or federal statute or
regulation; provided, however, that if it is not possible to identify what
terms would apply to a comparable arm's_length transaction with a Person not
an Affiliate, such transaction shall be upon such terms as shall be fair and
reasonable under the circumstances.
Section 11.14. Compliance with Laws. The Company will promptly comply in all
material respects, and will cause each Subsidiary to comply in all material
respects, with all laws, ordinances or governmental rules and regulations
to which it is subject including, without limitation, the Occupational
Safety and Health Act of 1970, as amended, ERISA and all laws, ordinances,
governmental rules and regulations relating to environmental protection in
all P applicable jurisdictions, the violation of which would materially and
adversely affect the properties, business, prospects, or financial condition
of the Company and its Subsidiaries taken as a whole would result in any
Lien not permitted under Section 11.3.
- -18-
SECHON 12. INFORMATION AS TO THE COMPANY.
Section 12.1. Accounting; Financial Statements and Other Information. The
Company will deliver (in duplicate)to each Purchaser, so long as it is the
holder of any Notes, and to each Institutional Holder of at least 5% in
principal amount of the Notes at the time outstanding:
(a)as soon as available but in any event within ninety (90)days
after the end of each of the first three quarterly fiscal periods in each
year of the Company, a consolidated balance sheet of the Company and its
Subsidiaries at the end of such period, and a consolidated statement of
earnings and retained earnings of the Company and its Subsidiaries for such
period and for the portion of the fiscal year ending with such period,
together with a statement of cash flows for the portion of the fiscal year
ending with such period, in each case setting forth in comparative form
figures for the corresponding period of the previous year, all in reasonable
detail and certified, subject to changes resulting from year-end and audit
adjustments, by the Treasurer or an Assistant Treasurer of the Company;
(b) soon as available but in any event within one hundred twenty (120) days
after the end of each fiscal year of the Company, a consolidated balance
sheet of the Company and its Subsidiaries as at the end of such year, and a
consolidated statement of earnings and retained earnings and cash flows of
the Company and its Subsidiaries, in each case setting forth in comparative
form the figures for the previous fiscal year, all in reasonable detail and
accompanied by a report thereon of Grant Thornton or other independent
public accountants of recognized national standing selected by the Company
to the effect. that such financial statements have been prepared in
accordance .with generally accepted accounting principles applied on a basis
consistent with the prior fiscal year (except for such changes, if any, as
may be specified in such opinion)and fairly present, in all material
respects, the consolidated financial position of the Company and its
Subsidiaries as of the end of such year and the consolidated results of
operations for such year, and that the examination by such accountants in
connection with such financial statements has been made in accordance with
generally accepted auditing standards;
(cl as soon as available but in any event within ninety (90)days after the
end of each of the first three quarterly fiscal periods in each year of
UNITIL, a balance sheet of UNITIL at the end of such period, and a statement
of earnings and retained earnings of UNITIL for such period and for the
portion of the fiscal year ending with such period, together with a
statement of cash flows for the portion of the fiscal year ending with such
period, in each case setting forth in comparative form figures for the
corresponding period of the previous year, all in reasonable detail and
certified, subject to changes resulting from year-end and audit adjustments,
by the Treasurer, an Assistant Treasurer or any Vice President of UNITIL;
(d)as soon as available but in any event within one hundred twenty (120)
days after the end of the fiscal year of UNITIL, a balance sheet of UNITIL
as at the end of such year, and a consolidated statement of earnings and
retained earnings and cash
- -19-
flows of UNITIL, in each case setting forth in comparative form the figures
for the previous fiscal year, all in reasonable detail and accompanied by a
report thereon of Grant Thornton or other independent public accountants of
recognized national standing selected by UNITIL to the effect that such
financial statements have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent with the prior
fiscal year (except for such changes, if any, as may be specified in such
opinion)and fairly present, in all material respects, the financial position
of UNITIL as of the end of such year and the results of operations for such
year, and that the examination by such accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards;
(e) concurrently with delivery of the documents provided for in
Sections 12.1(a)and (b), an Officer's Certificate, stating that the officer
providing the certificate has reviewed the provisions of this Agreement and
setting forth whether there existed as of the date of such financial
statements and whether, to the best of such officer's knowledge, there
exists on the date of the certificate or existed at any time during the
period covered by such financial statements any Default or Event of Default
and, if any such condition or event exists on the date of the certificate,
specifying the nature and period of existence thereof and the action the
Company is taking and proposes to take with respect thereto;
(f)promptly after the same are available, copies of all proxy statements,
financial statements and reports as the Company or its parent shall send to
its public stockholders, and copies of all reports which the Company or its
parent may file with the SEC or any governmental authority at any time
substituted therefor; and
(g)such other information relating to the affairs of the Company as a
Purchaser or any such holder reasonably may request from time to time,
including, without limitation, written verification (including computations)
of compliance by the Company with the requirements of Section 11.3 through
11.4.
Section 12.2. Inspection. The Company will permit any authorized
representatives designated by a Purchaser, so long as it is the holder of
any Notes, or by each Institutional Holder which holds at least 50%in
principal amount of the Notes then outstanding, at such Purchaser's or such
Institutional Holder's expense, to visit and inspect any of the Properties
of the Company or any Subsidiary including its books of account, to make
copies and take extracts therefrom and to discuss their respective affairs,
finances and accounts with their respective officers and independent public
accountants (and by this provision the Company authorizes such accountants
to discuss with such Purchaser or any such other Institutional Holder the
finances and affairs of the Company or any Subsidiary in the presence of an
officer of the Company), all at such reasonable times during customary
business hours and as often as may reasonably be requested; provided, that
such Purchaser agrees and any such Institutional Holder by its acquisition
of any Notes shall be deemed to agree to keep confidential any nonpublic
information received asa result of the rights granted in this Section 12.2,
except that each such holder of the Notes reserves the right to disclose
such information (i)as may be appropriate in connection with enforcing
compliance with the terms and conditions of this Agreement, (ii)as may be
required to
- -20-
governmental agencies, courts or other agencies to whose regulation such
holder may be subject but only to the extent that such agencies or courts
are authorized by or have apparent authority under applicable law,
regulation, court order or other regulatory authority to request such
information and (iii)as may be necessary to furnish to a prospective bona
fide purchaser of any of the Notes, any of such information which, in the
reasonable opinion of the holder of such Notes, is a material fact regarding
the Company, provided, that disclosure of any such information may be made
to no more than two such prospective purchasers in any thirty day period,
each such prospective purchaser must be eligible to be an Institutional
Holder should it purchase Notes, and the amount of Notes which would be
involved in a sale to any such prospective purchaser is at least 5%of the
then-outstanding Notes.
SECTION 13. DEFAULTS.
Section 13.1. Events of Default; Acceleration. If any one or more of the
following conditions or events (" Events of Default")shall occur:
(a)default shall occur in the payment of interest on any Note when the same
becomes due and payable, and such default shall have continued for more than
five (5) days; or
(b)default shall occur in the making of any required redemption of any of
the Notes as provided in Section 10.1, or in the making of any other payment
of principal of any Note or the premium thereon at the expressed or any
accelerated maturity date or at any date fixed for redemption; or
(c)the Company shall default in the performance of or compliance with any
term contained in Sections 11.3, 11.4, 11.5, 11.6 or 11.11; or
(d)the Company shall default in the performance of or compliance with any
term contained herein other than those referred to above in this Section 13
and such default shall not have been remedied within thirty (30)days after
the earlier of (i)the day on which the President, Treasurer or a Senior or
Executive Vice President first obtains knowledge of such default or (ii)the
date on which written notice thereof shall have been given to the Company by
any holder of any Note; or
(e)any representation or warranty made in writing by or on behalf of the
Company herein or pursuant hereto or in connection with the consummation of
the issuance and delivery of the Notes shall have been false or incorrect in
any material respect at the time as of which made; or
(f)the Company or any Subsidiary shall default (as principal or guarantor or
other surety)in the payment of any principal of or premium, if any, or
interest on any Indebtedness for borrowed money (other than the Notes)the
aggregate outstanding principal balance of which shall then exceed
$5,000,000 and such default shall continue for more than the period of
grace, if any, specified therein and shall not have been waived pursuant
thereto; or the Company or any Subsidiary shall default in the performance
of or
- -21-
compliance with any term of any evidence of such Indebtedness for borrowed
money or of any mortgage, indenture or any other agreement relating thereto
and the effect of such default is to permit the acceleration of the maturity
of such Indebtedness for borrowed money prior to its stated maturity or
prior to its regularly scheduled dates of payment; or
(g)the Company or any Subsidiary shall commence a voluntary case under the
federal bankruptcy laws or take advantage of any insolvency law, or shall
admit in writing its insolvency or its inability to pay its debts as they
become due, or shall make an assignment for the benefit of creditors, or
shall apply for, consent to or acquiesce in the appointment of, or taking
possession by, a trustee, receiver, custodian or similar official or agent
for itself or any substantial part of its Property, or shall take any
corporate action authorizing or seeking to effect any of the foregoing, or
shall generally not pay its debts as they become due; or
(h)a trustee, receiver, custodian or similar official or agent shall be
appointed for the Company or any Subsidiary by a court or other governmental
authority or agency having jurisdiction in the premises or for any
substantial part of its Property, and is not discharged for a period of
thirty (30)days from the date of its entry, or all or any substantial part
of the Property of the Company or any Subsidiary is condemned by eminent
domain, seized or otherwise appropriated by any such governmental authority;
or
(i)the Company or any Subsidiary shall have a court order or decree for
relief in any involuntary case under the federal bankruptcy laws entered
against it, and such court order or decree shall remain undismissed and
unstayed for sixty (60)days, or a petition seeking reorganization,
readjustment, arrangement, composition, or other similar relief as to it
under the federal bankruptcy laws or any similar law for the relief of
debtors shall be brought against it and shall be consented to by it or shall
remain undismissed and unstayed for sixty (60)days; or
(i)one or more final judgments for payment of money exceeding in the
aggregate $5,000,000 (in excess of insurance available therefor)shall be
rendered against the Company or any Subsidiary and shall remain undischarged
for a period of sixty (60) days during which execution shall not be
effectively stayed;
then, and in the event that any Event of Default described in subdivisions
(a)through (f), (h)or (j)has occurred and is continuing, any holder or
holders of at least 25%in principal amount of the Notes at the time
outstanding may at any time (unless all defaults shall theretofore have been
remedied)at its or their option, by written notice or notices to the
Company, declare all of the Notes to be due and payable, whereupon the same
shall forthwith mature and become due and payable, together with premium,
if any, and interest accrued thereon, without presentment, demand, protest
or notice, all of which are hereby waived, provided that during the
existence of an Event of Default described in subdivision (a)or (b)of this
Section 13.1, and irrespective of whether the holder or holders of at least
25%in principal amount of Notes then outstanding have declared alLthe Notes
to be due and payable, any holder of Notes which has not consented to any
waiver with respect to such Event of Default may, at its option, by written
notice to the Company, declare the Notes then held by such holder to be due
and payable, whereupon the
- -22-
same shall forthwith become due and payable, together with premium, if any,
and interest accrued thereon, without presentment, demand, protest or notice,
all of which are hereby waived. When any Event of Default described in
subdivisions (g)or (i)of Section 13.1 has occurred, then all outstanding
Notes shall immediately become due and payable without presentment, demand
or notice of any kind. Upon the Notes becoming due and payable as a result
of any Event of Default as aforesaid, the Company will forthwith pay to the
holders of the Notes the entire principal and interest accrued on the Notes
and, to the extent not prohibited by applicable law, an amount as liquidated
damages for the loss of the bargain evidenced hereby (and not as a penalty)
equal to the Make-Whole Premium determined as of the date on which the Notes
shall so become due and payable. No course of dealing on the part of the
holder or holders of any Notes nor any delay or failure on the part of any
holder of Notes to exercise any right shall operate as a waiver of such
right or otherwise prejudice such holder's rights, powers and remedies. If
any holder of any Note shall give any notice or take any other action with
respect to a claimed default under this Agreement, or if any Person shall
give notice to the Company or take any other action with respect to a
claimed default of the type referred to in subdivision (f)of this Section
13.1, the Company will forthwith give written notice thereof to all holders
of the Notes at the time outstanding, describing the notice or action and
the nature of the claimed default.
Section 13.2. Remedies on Default; Etc. In case any one or more Events of
Default shall occur and be continuing, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by
an action at law, suit in equity or other appropriate proceeding, whether
for the specific performance of any agreement contained herein or in such
Note, or for an injunction against a violation of any of the terms hereof or
thereof, or in aid of the exercise of any power granted hereby or thereby by
law. The Company further agrees, to the extent permitted by law, to pay to
the holder or holders of the Notes all reasonable costs and expenses
incurred by them in the collection of any Notes upon any default hereunder
or thereon, including reasonable compensation to such holder's or holders'
attorneys for all services rendered in connection therewith. No course of
dealing and no delay on the part of any holder of any Note in exercising any
right shall operate as a waiver thereof or otherwise prejudice such holder's
rights, powers or remedies. No right, power or remedy conferred by this
Agreement or by any Note upon any holder thereof shall be exclusive of any
other right, power or remedy referred to herein or therein or now or
hereafter available at law, in equity, by statute or otherwise.
Section 13.3. Rescission of Acceleration. The provisions of Section 13.1 are
subject to the condition that if the principal of and accrued interest on
all or any outstanding Notes have been declared immediately due and payable
by reason of the occurrence of any Event of Default described in
subdivisions (a)through (f), (h)or (j)of Section 13.1, the holders of
66-2/3% in aggregate principal amount of the Notes then outstanding may, by
written instrument filed with the Company, rescind and annul such
declaration and the consequences thereof, provided that at the time such
declaration is annulled and rescinded:
(a)no judgment or decree has been entered for the payment of any monies due
pursuant to the Notes or this Agreement;
- -23-
(b)all arrears of interest upon all the Notes and all other sums payable
under the Notes and under this Agreement (except any principal, interest or
premium on the Notes which has become due and payable solely by reason of
such declaration under Section 13.1)shall have been duly paid; and
(cl each and every other Default and Event of Default shall have been made
good, cured or waived pursuant to Section 17;
and provided further, that no such rescission and annulment shall extend to
or affect any subsequent Default or Event of Default or impair any right
consequent thereto.
SECTION 14. DEFINITIONS; ACCOUNTING PRINCIPLES.
Section 14.1. Definitions. As used in this Agreement the following terms
have the following respective meanings:
Affiliute: Any director, officer or employee of the Company and any other
Person directly or indirectly controlling or controlled by or under direct
or indirect common control with the Company. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of any Person, whether through the
ownership of voting securities, by contract or otherwise.
Company Reports: The meaning specified in Section 5.7.
Default: Any event or condition the occurrence of which would, with the
lapse of time or the giving of notice, or both, constitute an Event of
Default.
Earnings Available For Interest: Of any Person for a period, shall mean the
excess of the operating revenues of such Person received in the ordinary
course of business for such period, together with an allowance for funds
used during construction in accordance with generally accepted accounting
principles, and net non-operating income (loss), over the sum of all
operating expenses, including taxes and adequate and reasonable allowances
for maintenance, depreciation and retirement of Properties as charged by
such Person, and provision for depletion, obsolescence or amortization of
Properties, but excluding, however, any allowance for Federal and state
taxes on income or portions thereof for the period for which earnings are
being computed.
ERISA: The Employee Retirement Income Security Act of 1974, as amended, and
any successor statute of similar import, together with the regulations
thereunder, in each case as in effect from time to time. References to
sections of ERISA shall be construed to also refer to any successor sections.
Event of Default: The meaning specified in Section 13.
Fur&fed Indebtedness: Of any Person as of any date as of which the amount
thereof is to be determined, shall mean (i)all Indebtedness of such Person
required to be paid more than one
- -24-
year from the date as of which Funded Indebtedness is being determined and
all Indebtedness required to be paid within such year which may be renewed
or extended beyond such year pursuant to the terms of the agreement or
instrument under which such Indebtedness was incurred, but there shall be
excluded sinking fund, serial maturity, periodic installment and
amortization payments on account of Indebtedness which are required to be
made within such year and (ii)all guaranties of Funded Indebtedness of
others described in clause (i)of this definition.
Hydro-Quebec Purchase Power and Interconnection Projects: The projects
pursuant to which the Company and approximately sixty other members of the
New England Power Pool have agreed to purchase from Hydro Quebec
approximately 33 million megawatt hours (" MWh")of electricity between 1986
and 1997, and approximately 70 million MWh of electricity between 1990 and
2001, as such agreements may be extended, renewed or replaced.
Indebtedness: Of any Person as of any date as of which the amount thereof is
to be determined, shall mean all (i)obligations of such Person for borrowed
money, (ii)obligations secured by any Lien upon Property or assets owned by
such Person, even though such Person has not assumed or become liable for
the payment of such obligations, and (iii)obligations created or arising
under any conditional sale or other title retention agreement with respect
to Property acquired by such Person, notwithstanding the fact that the
rights and remedies of the seller, lender or lessor under such agreement in
the event of default are limited to repossession or sale
of Property; provided, that notwithstanding anything to the contrary in the
foregoing, Indebtedness of the Company shall not include (A)its obligations
under contracts for the purchase by it of gas (including propane and
liquefied natural gas)or electric energy or capacity, including transmission
charges, (B)obligations not in excess of $6,000,000 in the aggregate at any
time outstanding incurred in connection with agreements for the financing of
gas, nuclear and other fuel inventories and cushion gas, (C)Lease
obligations of the Company or any Subsidiary, (D)pension and other
obligations of the Company or any Subsidiary with respect to benefits
provided to employees of the Company and its Subsidiaries, regardless of
whether such obligations are absolute or contingent or included, in
accordance with generally accepted accounting principles, in determining
total liabilities as shown on the liability side of a balance sheet of the
Company, and (E)obligations relating to the sale of generating assets and
power purchase entitlements as provided for in the Company's restructuring
plan filed with the Massachusetts Department of Telecommunications and
Energy on December 31, 1997.
Institutional Holder: Any insurance company, bank, savings and loan
association, trust company, investment company, charitable foundation,
employee benefit plan (as defined in ERISA)or other institutional investor
or financial institution.
Lease: As applied to any Person shall mean any lease of any Property
(whether real, personal or mixed)by that Person as lessee which would, in
conformity with generally accepted accounting principles, be required to be
accounted for as a capital lease or an operating lease on the financial
statements of that Person.
Lien: (i)Any interest in Property (whether real, personal or mixed and
whether tangible or intangible)which secures an obligation owed to, or a
claim by, a Person other than the owner
- -25-
of such Property, whether such interest is based on the common law, statute
or contract, including, without limitation, any such interest arising from a
mortgage, charge, pledge, security agreement, conditional sale or trust
receipt, or arising from a lease, consignment or bailment given for security
purposes, (ii)any encumbrance upon such Property which does not secure an
obligation and (iii)any exception to or defect in the title to or ownership
interest in such Property, including, without limitation, reservations,
rights of entry, possibilities of reverter, encroachments, easements, rights
of way, restrictive covenants, leases, licenses and profits a prendre. For
purposes of this Agreement, the Company or a Subsidiary shall be deemed to
be the owner of any Property which it has acquired or holds subject to a
conditional sales agreement or other arrangement pursuant to which title to
the Property has been retained by or vested in some other Person for
security purposes.
Make-Whole Premium: In connection with any redemption or acceleration of the
Notes the excess, if any, of (i)the aggregate present value as of the date
of such redemption or acceleration of each dollar of principal being prepaid
(taking into account the application of each redemption required by Section
10.1)and the amount of interest (exclusive of interest accrued to the date
of redemption)that would have been payable in respect of each dollar if such
redemption had not been made, determined by discounting such amounts at the
Reinvestment Rate from the respective dates on which they would have been
payable to the date of such redemption or acceleration, over (ii)100%of the
principal amount of the outstanding Notes being redeemed. If the
Reinvestment Rate is equal to or higher than 7.37%, the Make-Whole Premium
shall be zero. For purposes of any determination of the Make-Whole Premium:
"Reinvestment Rate" shall mean (1)the sum of 0.50%, plus the yield reported
on page "USD" of the Bloomberg Financial Markets Services Screen (or, if not
available, any other nationally recognized trading screen reporting on-line
intraday trading in United States Government Securities at 11: OO a. m.
(New York City time)for the United States Government Securities having a
maturity (rounded to the nearest month) corresponding to the Weighted
Average Life to Maturity of the principal being redeemed (taking into
account the application of each redemption required by Section 10.1)or (2)in
the event that no nationally recognized trading screen reporting on-line
intraday trading in the United States Government Securities is available,
Reinvestment Rate shall mean the sum of 0.50%plus the arithmetic mean of the
yields for the two columns under the heading "Week Ending" published in the
Statistical Release under the caption "Treasury Constant Maturities" for the
maturity (rounded to the nearest month) corresponding to the Weighted
Average Life to Maturity of the principal being redeemed (taking into
account the application of each redemption required by Section 10.1). If no
maturity exactly corresponds to such Weighted Average Life to Maturity,
yields for the published maturity next longer than the Weighted Average Life
to Maturity and for the published maturity next shorter than the Weighted
Average Life to Maturity shall be calculated pursuant to the immediately
preceding sentence and the Reinvestment Rate shall be interpolated from such
yields on a straight-line basis, rounding in each of such relevant periods
to the nearest month. For the purposes of calculating the Reinvestment Rate,
the most recent Statistical Release published prior to the date of
determination of the Make-Whole Premium shall be used
- -26-
"Statistical Release" shall mean the then most recently published
statistical release designated "H. 15(5 19)" or any successor publication
which is published weekly by the Federal Reserve System and which
establishes yields on actively traded
U. S. Government Securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination
hereunder, then such other reasonably comparable index which shall be
designated by the holders of 66-2/3%in aggregate principal amount of the
outstanding Notes.
"Weighted Average Life to Maturity" of the principal amount of the Notes
being redeemed shall mean, as of the time of any determination thereof, the
number of years obtained by dividing the then Remaining Dollar-Years of such
principal by the aggregate amount of such principal. The term "Remaining
Dollar-Yeurs" of such principal shall mean the amount obtained by (i)
multiplying (x)the remainder of (1)the amount of principal that would have
become due on each scheduled payment date if such redemption had not been
made, less (2)the amount of principal on the Notes scheduled to become due
on such date after giving effect to such redemption and the application
thereof in accordance with the provisions of Section 10.1, by (y)the number
of years (calculated to the nearest one-twelfth)which will elapse between
the date of determination and such scheduled payment date, and (ii)totalling
the products obtained in (i).
MDTE: The meaning specified in Section 4.4.
Net Income (Deficit): The amount of net income (or if such Net Income is a
deficit, the amount of such deficit)of the Company and its Subsidiaries for
the period in question (taken as a cumulative whole), as determined in
accordance with generally accepted accounting principles; provided,
however, that any gain or loss from sales or other dispositions (i)of
generating assets and power purchase entitlements as provided for in the
Company's restructuring plan filed with the Massachusetts Department of
Telecommunications and Energy on December 31, 1997, shall be excluded from
the calculation of Net Income (Deficit)and (ii)of any other Property which
was previously used in the business of the Company and its Subsidiaries,
which sales or dispositions occurred during the twelve month period
immediately preceding the date as of which Net Income (Deficit)is being
determined, the book value of which Property represents in the aggregate
more than 10%of Tangible Assets (determined as of the end of the immediately
preceding fiscal year of the Company), shall be excluded from the
calculation of Net Income (Deficit); and provided, further, that the
foregoing proviso shall create no implication that gain or loss from the
sale or other disposition of Property of the Company and its Subsidiaries
shall be included in determining Net Income (Deficit), unless such inclusion
is otherwise in accordance with generally accepted accounting principles.
Oflcers'Certificate: A certificate signed by the Chairman of the Board of
Directors, the President or any Vice President and by the Treasurer, any
Assistant Treasurer, the Clerk or an Assistant Clerk of the Company.
- -27-
Opinion of Counsel: An opinion in writing signed by legal counsel, who shall
be reasonably satisfactory to the Purchasers and to the holders of at least
50%of the aggregate principal amount of the Notes then outstanding, and who
may be counsel to the Company.
Person: An individual, an association, a corporation, a partnership, a trust
or estate, a government, foreign or domestic, and any agency or political
subdivision thereof, or any other entity, including the Company and any
Subsidiary.
Property: Any kind of property or asset, whether real, personal or mixed, or
tangible or intangible.
Subsidiary: Any corporation or other entity at least a majority of the
outstanding voting shares of which is at the time owned (either alone or
through Subsidiaries or together with Subsidiaries)by the Company or another
Subsidiary.
Tangible Assets: As of the date of any determination thereof the total
amount of all assets of the Company and its Subsidiaries (less depreciation,
depletion and other properly deductible valuation reserves)after deducting
good will, patents, trade names, trade marks, copyrights, experimental
expense, and the excess of cost of shares acquired over book value of
related assets.
Total Capitalization: At any date means the sum of (x)Funded Indebtedness of
the Company and its Subsidiaries, and (y)the aggregate amount for total
common stock equity, preference stock and preferred stock as presented in
accordance with generally accepted accounting principles on a consolidated
balance sheet of the Company as of such date; provided, however, that any
securities or Funded Indebtedness to be redeemed from the proceeds of the
incurrence of Funded Indebtedness as provided for in Section 11.4(c)hereof,
which have not yet been so redeemed, shall not be included in the
determination of Total Capitalization.
UNITIL shall mean UNITIL Corporation, owner of all of the outstanding stock
of the Company.
Section 14.2. Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be determined
or any consolidation or other accounting computation is required to be made
for the purposes of this Agreement, the same shall be done in accordance
with generally accepted accounting principles then in effect, to the extent
applicable, except where such principles are inconsistent with the
requirements of this Agreement.
SECTION 15. EXPENSES; ETC.
Whether or not the transactions contemplated hereby shall be consummated,
the Company will pay all reasonable expenses in connection with such
transactions and in connection, with any amendments or waivers (whether or
not the same become effective)under or in respect of this Agreement or the
Notes, including, without limitation: (a)the cost and expenses of
reproducing this Agreement, of the reproducing and issue of the Notes, of
furnishing
- -28-
all opinions of counsel for the Company and all certificates on behalf of
the Company, and of the Company's performance of and compliance with all
agreements and conditions contained herein on its part to be performed or
complied with; (b)the cost of delivering to the principal office of each
Purchaser, insured to its satisfaction, any Notes delivered to it upon any
substitution of Notes pursuant to Section 8 and of each Purchaser's
delivering any Notes, insured to its satisfaction, upon any such
substitution; (c)the reasonable fees, expenses and disbursements of Chapman
and Cutler, special counsel for the Purchasers, in connection with such
transactions and any such amendments or waivers; and (d)the reasonable
out-of-pocket expenses incurred by a Purchaser in connection with such
transactions and any such amendments or waivers. The Company will indemnify
and hold each Purchaser harmless from and against all claims in respect of
the fees, if any, of brokers and finders payable in connection with the
execution and delivery of this Agreement or the carrying out of the
transactions contemplated hereby. The Company will also pay, and will save
each Purchaser and each holder of any Notes harmless from, any and all
liabilities with respect to any taxes (including interest and penalties)
which may be payable in respect of the execution and delivery of this
Agreement, the issue of the Notes and any amendment or waiver under or in
respect of this Agreement or the Notes.
SECTION 16. SURVIVAL OF AGREEMENTS; ETC.
All agreements contained herein and all representations and warranties made
in writing by or on behalf of the Company herein or pursuant hereto shall
survive the execution and delivery of this Agreement, any investigation at
any time made by a Purchaser or on its behalf, the purchase of the Notes by
a Pu, rchaser hereunder, and any disposition or payment of the Notes. All
statements contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto or in connection with the
transactions contemplated hereby shall be deemed representations and
warranties made by the Company hereunder.
SECTION 17. AMENDMENTS AND WAIVERS.
Any term of this Agreement or of the Notes may be amended and the observance
of any term hereof or thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively)only with the
written consent of the Company and the holders of at least 66-2/3% in
principal amount of the Notes at the time outstanding, provided that,
without the prior written consent of the holders of all the Notes at the
time outstanding, no such amendment or waiver shall (a)change the time of
payment (including any prepayment required
by Section 10.1)of the principal of or the interest on any Note or change
the principal amount thereof or change the rate of interest thereon, or
(b)change any of the provisions with respect to optional prepayments, or
(c)reduce the aforesaid percentage of the principal amount of the Notes the
holders of which are required to consent to any such amendment or waiver,
or (d)change the provisions of Section 13 giving each holder of any Note the
right, without joining any other such holders of the Notes, to declare the
Notes held by such holder due and payable as provided in Section 13. Any
amendment or waiver effected in accordance with this Section 17 shall be
binding upon each holder of any Note at the time outstanding, each future
holder of any Note and the Company. Notes directly or indirectly held by
the Company or any Affiliate of the Company shall not be deemed outstanding
for purposes of determining whether any amendment or waiver has been
effected in accordance with this Section 17.
- -29-
SECTION 18. NOTICES; ETC.
All notices and other communications hereunder shall be in writing and shall
be mailed by certified mail, return receipt requested or overnight courier,
(a)if to a Purchaser, addressed to the address of such Purchaser designated
as the Purchaser's address on Schedule I attached hereto, or at such other
address as such Purchaser shall have furnished to the Company in writing,
except that payments on any Note and notices in respect thereof shall be
made and sent as provided in Section 9, or at such other address as such
Purchaser shall have furnished to the Company for such purpose, or (b)if to
any other holder of any Note, at the registered address of such holder as
set forth in the register kept by the Company as provided in Section 8, or
(c)if to the Company, to 6 Liberty Lane West, Hampton, New Hampshire 03842,
Attention: Treasurer, or at such other address as the Company shall have
furnished to each Purchaser and each such other holder in writing.
SECTION 19. FURTHER ASSURANCES.
The Company will execute and deliver all such instruments and take all such
action as the Purchasers from time to time may reasonably request in order
to further effectuate the purposes and carry out the terms of this Agreement
and the Notes.
SECTION 20. MISCELLANEOUS.
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the parties hereto,
whether so expressed or not, and, in particular, shall inure to the benefit
of and be enforceable by any holder or holders at the time of the Notes or
any part thereof. This Agreement embodies the entire agreement and
understanding between each Purchaser and the Company and supersedes all
prior agreements and understandings relating to the subject matter hereof.
This Agreement and the Notes shall be construed and enforced in accordance
with and governed by the laws of the Commonwealth of Massachusetts. The
headings in this Agreement are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof. This Agreement may be executed
in any number of counterparts, each of which shall be an original, but all
of which together shall constitute one instrument.
SECTION 21. SEVERABILITY.
Should any part of this Agreement for any reason be declared invalid or
unenforceable, such decision shall not affect the validity or enforceability
of any remaining portion, which remaining portion shall remain in force and
effect as if this Agreement had been executed with the invalid or
unenforceable 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 or
unenforceable.
-30-
The execution by the Purchasers shall constitute a contract among the Company
and the Purchasers for the uses and purposes hereinabove set forth. This
Agreement may be executed in any number of counterparts, each executed
counterpart constituting an original but all together only one agreement.
FITCHBURG GAS AND ELECTRIC LIGHT
COMPANY
By /s/Mark H. collin
Name: Mark H. Collie
Title: Treasurer
- -3l-
Accepted as of January 15, 1999:
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By: CIGNA Investments, Inc. (authorized agent)
By /s/Laurence A. Drsks
Name: Lawrence A. Drake
Title: Managing Director
AMERICAN UNITED LIFE INSURANCE COMPANY
By /s/Steven T. Holland
Name: Steven T. Holland
Title: Vice President
-32-
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
CONNECTICUT GENERAL LIFE INSURANCE COMPANY $9,000,000
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division -S-307
Fax: 860-726-7203
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Fitchburg Gas and Electric Light Company, 7.37%Notes due January 15, 2029,
PPN 338135 C@3" and identifying the breakdown of principal and interest and
the payment date)to:
Chase NYC/CTR/
BNF=CIGNA Private Placements/AC=9009001802
ABA #O21OOOO21
Address for Notices Related to Payments:
CIG &Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing S-309
900 Cottage Grove Road
Hartford, Connecticut 06152-2309
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities -S-307
Operations Group
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Fax: 860-726-7203
SCHEDULE I
(to Note Agreement)
with a copy to:
Chase Manhattan Bank, N. A.
Private Placement Servicing
P. 0. Box 1508
Bowling Green Station
New York, New York 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/lOO5
Address for All Other Notices:
CIG &Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division -S-307
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Fax: 860-726-7203
Name of Nominee in which Notes are to be issued: CIG & Co.
Taxpayer I. D. Number for CIG &Co.: 13-3574027
I-2
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
AMERICAN UNITED LIFE INSURANCE COMPANY $3,000,000
One American Square
Post Office Box 368
Indianapolis, Indiana 46206
Attention: Christopher D. Pahlke, Securities Department
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Fitchburg Gas and Electric Light Company, 7.37%Notes due January 15, 2029,
PPN 338135 C@3" and identifying the breakdown of principal and interest and
the payment date)to:
Bank of New York
Attention: P&I Department
One Wall Street, 3rd Floor
Window A
New York, New York 10286
ABA #O21000018, BNF: IOC566
Account #186683/AUL
Notices
All notices and communications, including notices with respect to payments
and written confirmation of each such payment, to be addressed as first
provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I. D. Number: 35-0145825
I-3
FITCHBURG GAS AND ELECTRIC LIGHT COMPANY
Funded Indebtedness Outstanding
as of December 31,1998
Issue Total Amount Outstanding
8.55% Notes due March 31,2OO4 $13,000,000
6.75% Notes due November 30,2023 $19,000,000
Total Funded Indebtedness $32,000,000
SCHEDULE II
(to Note Agreement)
FITCHBURG GAS AND ELECTRIC LIGHT COMPANY
7.37% Note due January 15,2029
PPN: 338135 C@3
FITCHBURG GAS AND ELECTRIC LIGHT COMPANY (the "Company"), a Massachusetts
corporation, for value received, hereby promises to pay to or registered
assigns the principal sum of Dollars ($)on January 15,2029; and to pay
interest (computed on the basis of a 360-day year of twelve 30-day months)
on the unpaid principal balance hereof from the date of this Note at the
rate of 7.37%per annum, semiannually on the fifteenth day of January and
July in each year, commencing with July 15, 1999, until the principal amount
hereof shall become due and payable. The Company agrees to pay interest on
overdue principal (including any overdue required or optional prepayment of
principal)and premium, if any, and (to the extent legally enforceable)on any
overdue installment of interest, at the rate of 9.37%per annum after the due
date, whether by acceleration or otherwise, until paid.
Payments of principal, premium, if any, and interest shall be made in such
coin or currency of the United States of America as at the time of payment
is legal tender for the payment of public and private debts by check mailed
and addressed to the registered holder hereof at the address shown in the
register maintained by the Company for such purpose, or, at the option of
the holder hereof, in such manner and at such other place in the United
States of America as the holder hereof shall have designated to the Company
in writing.
This Note is one of the 7.37%Notes due January 15, 2029 of the Company
issued in an aggregate principal amount limited to $12,000,000 pursuant to
the Company's Note Agreement with the Purchasers named therein dated as of
January 15, 1999, and this Note and the holder hereof are entitled equally
and ratably with the holders of all other Notes outstanding under the Note
Agreement to all the benefits provided for thereby or referred to therein.
Reference is hereby made to the Note Agreement for a statement of such
rights and benefits.
This Note and the other Notes outstanding under the Note Agreement may be
declared due prior to their expressed maturity dates and certain prepayments
are required to be made thereon, all in the events, on the terms and in the
manner and amounts as provided in the Note Agreement.
The Notes are subject to prepayment or redemption at the option of the
Company prior to their expressed maturity dates only on the terms and
conditions and in the amounts and with the premium, if any, set forth in
the Note Agreement.
This Note is a registered Note and is transferable only by surrender thereof
at the principal office of the Company, duly endorsed or accompanied by a
written instrument of
EXHIBIT A
(to Note Agreement)
transfer duly executed by the registered holder of this Note or his attorney
duly authorized in writing.
Under certain circumstances, as specified in said Agreement, the principal
of this Note may be declared due and payable in the manner and with the
effect provided in said Agreement.
This Note and said Agreement are governed by and construed in accordance
with the Massachusetts law.
FITCHBURG GAS AND ELECTRIC LIGHT COMPANY
Exhibit 10.14
ENTITLEMENT SALE AND ADMIMSTRATIVE SERVICES- AGREEMENT
between
FITCHBURG GAS AND ELECTRIC LIGHT COMPANY
and
SELECT ENERGY, INC.
Dated as of May 17, 1999
TABLE OF CONTENTS.
ARTICLE I DEFINITIONS 1
1.1 Certain Definitions 1
ARTICLE 2 SALE OF ENTITLEMENTS 5
2.1 Sale of Entitlements 5
2.2 Casualty or Condemnation Awards 6
2.3 Deliverables 6
2.4 Risk of Unit Performance 6
2.5 Change to Character of Entitlement 7
ARTICLE 3 ENTITLEMENT SALES CHARGE 7
3.1 Entitlement Sales Charge 7
3.2 Excluded Liabilities 8
3.3. Billing and Payment 9
ARTICLE 4 EFFECTIVE DATE AND TERM 9
4.1 Effective Date 9
4.2 Term 10
4.3 Termination 10
4.4 Notice 10
ARTICLE 5 CONDITIONS 10
5.1 Conditions to Obligation of the Company 10
5.2 Conditions to Obligation of Buyer 10
5.3 Joint Conditions 12
5.4 Coordination 13
ARTICLE 6 REPRESENTATIONS AND WARRANTIES 13
6.1 General Representations and Warranties 13
6.2 Representations of the Company 14
6.3 Representations of Buyer 15
ARTICLE 7 CONTRACT ADMINISTRATION 15
7.1 Operational Matters Relating to
the Entitlements 15
7.2 Contract Administration Services 16
7.3 Appointment as Administrative Agent 18
7.4 Material Amendments 18
7.5 Books and Records 18
ARTICLE 8 CQMPANY UNDERTAKINGS 19
8.1 Provision of Information Regarding
Operational Matters 19
8.2 Payments Under Power Supply and
Ownership Agreements 19
8.3 Enforcement of Power Supply Agreements
and Ownership Agreements 19
8.4 Interim Conduct of Business 20
ARTICLE 9 SECURITY 20
9.1 Buyer Security 20
9.2 Company Security 21
9.3 Use of Proceeds 22
ARTICLE 10 EVENTS OF DEFAULT 22
10.1 Events of Default by Buyer 22
10.2 Events of Default by the Company 23
10.3 Remedies 24
ARTICLE I I INDEMNIFICATION 25
11.1 InderrmificationbyBuyer 25
11.2 IndenmificationbytheCompany 26
11.3 No Indirect, Special or
Consequential Damages 26
ARTICLE 12 DISPUTE RESOLUTION; ARBITRATION 27
12.1 Resolution By Officers of the Parties 27
12.2 Arbitration Procedures 27
12.3 Binding Award 28
12.4 Continued Performance 28
ARTICLE 13 MISCELLANEOUS 28
13.1 Assignment; Successors and Assigns 28
13.2 Notices 29
13.3 Governing Law 29
13.4 Confidentiality 29
13.5 No Partnership 30
13.6 Fees and Expenses 30
13.7 Captions 30
13.8 Entire Agreement 30
13.9 Severability 30
13.10 Further Assurances 31
13.11 Changes in Law 31
13.12 Counterparts 31
13.13 Interpretation 31
13.14 Independent Relationship 31
13.15 No Third Party Beneficiaries 31
LIST OF EXHIBITS
EXHIBIT A COST OF SERVICE CHARGE
EXHIBIT B ALLOCATION OF RETAINED ENTITLEMENT OBLIGATION
EXHIBIT C POWER SUPPLY AGREEMENTS AND DELIVERY POINTS
EXHIBIT D GUARANTY
EXHIBIT E RETAINED ENTITLEMENT OBLIGATION
EXHIBIT F REQUIRED GOVERNMENTAL AUTHORIZATIONS - COMPANY
EXHIBIT G REQUIRED GOVERNMENTAL AUTHORIZATIONS -BUYER
EXHIBIT H FIRM ENERGY AND FACILITIES AGREEMENT
EXHIBIT I ASSUMPTION AND ASSIGNMENT AGREEMENT
ENTITLEMENT SALE AND ADMINIST@TIVE SERVICES AGREEMENT
This ENTITLEMENT SALE AND ADMINISTRATIVE SERVICES AGREEMENT (this
"Agreement") is entered into as of the 17th day of May, 1999, by and between
FITCHBURG GAS AND ELECTRIC LIGHT COMPANY, a Massachusetts corporation (the
"Company") and SELECT ENERGY, INC., a Connecticut corporation ("Buyer").
The Company and the Buyer are also referred to individually as a "Party"
or collectively as the "Parties".
WHEREAS, the Company is a party to certain power supply agreements and
agreements for joint ownership of certain electric generating facilities,
pursuant to which the Company has an entitlement to capacity and associated
electric energy from the facilities referenced therein;and
WHEREAS, the Company desires to divest itself of all its Entitlements and to
that end has conducted an auction of such Entitlements; and
WHEREAS, the Buyer wishes to acquire the Entitlements and the Company wishes
to sell the Entitlements to the Buyer and authorize the Buyer to administer
the underlying power supply agreements on the terms and conditions set forth
herein.
NOW, THEREFORE, for and in consideration of the foregoing, the covenants
herein contained and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties hereby agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Definitions.
As used herein, the following terms have the following meanings:
"Affiliate" of a Party shall mean any corporation, partnership, limited
liability company or business trust (i) 25% or more of the equity securities
of which are owned, directly or indirectly, by such Party, (ii) which owns,
directly or indirectly, 25% or more of the equity securities of such Party,
or (iii) 25% or more of the equity securities of which are owned, directly
or indirectly, by any other corporation, partnership, limited liability
company or business trust which is an Affiliate of such Party pursuant to
the foregoing clauses (i) or (ii).
"Assets" means the real and personal property constituting Wyman 4 under
the Wyman 4 Joint Ownership Agreement and Millstone 3 under the Millstone 3
Sharing Agreement.
"Capacity and Associated Energy" means the kilowatts of electricity to be
available at the Delivery Point and the associated electric energy and
ancillary services produced by the Units,
pursuant to the terms of each Power Supply Agreement and Ownership
Agreement, and shall be deemed to include all benefits associated therewith,
including any so-called "green" power credits and all rights or entitlements
with respect thereto assigned by NEPOOL, the Northeast Power Coordinating
Council, the North American Electric Reliability Council, ISONew England,
Inc. or the successor of any of them, and any allowances, air emission
credits and similar authorizations or rights associated with the Assets;
provided, that the Company shall receive the sole benefit of (and retain the
liability for) (i) any billing adjustments with respect to periods occurring
prior to the Effective Date and any payments to the extent related to
Excluded Liabilities; (ii) the Millstone 3 Claims and HQ Claims; (iii) any
events with respect to Wyman 4 that occur after the commencement of the
Permanent Shutdown; and (iv) any events with respect to Millstone 3 that
occur after the commencement of the Post-Shutdown and Decommissioning Period.
"Capital Costs" means the amounts of the Cost of Service Charge relating to
capital expenditures made from and after the Effective Date with respect to
Millstone 3 and Wyman 4 that will be amortized over the life of the asset
or a fixed period in accordance with the Uniform System of Accounts
prescribed by FERC for Class A and Class B Public Utilities and Licensees.
"Cost of Service Charge" means the monthly amount to be charged by the
Company to the Buyer for all Capacity and Associated Energy provided to the
Buyer from the Company's rights under the Ownership Agreements. The Cost of
Service Charge shall be calculated in accordance with the methodology set
forth in Exhibit A hereto using the relevant information from the invoices
submitted to, and to be paid by, the Company under the Ownership Agreements.
"Deliverables" shall have the meaning given such term in Section 2.3 hereof.
"Delivery Point" means each point described in Exhibit C for the delivery of
electric energy and capacity by the Company to the Buyer under each of the
Power Supply Agreements and Ownership Agreements.
"Effective Date" means the first day of the month that is not less than 15
days from the date on which all of the conditions set forth in Article 5
have been satisfied or waived as the case may be in accordance with Article 5.
"Entitlement(s)" means the Company's right to receive the Capacity and
Associated Energy under the Power Supply Agreements and the Ownership
Agreements during the respective terms thereof, together with all rights of
the Company thereunder relating to Capacity and Associated Energy, including
any right the Company may have to dispatch the applicable Units under the
Power Supply Agreements.
"Entitlement Sales Charge" shall have the meaning set forth in Section 3.1.
"FERC" means the Federal Energy Regulatory Commission or such successor
federal regulatory agency as may have jurisdiction over this Agreement.
- -2-
"Good Utility Practice" means any of the applicable practices, methods and
acts (i) required by NEPOOL, the Northeast Power Coordinating Council, the
North American Electric Reliability Council, ISO New England, Inc. or the
successor of any of them; (ii) required by the policies and standards of
state regulatory authorities having jurisdiction relating to emergency
operations or otherwise required by applicable law; or (iii) otherwise
engaged in or approved by a significant portion of the electric utility
industry during the relevant time period; which in each case in the exercise
of reasonable judgment in light of the facts known or that should have been
known at the time a decision was made, could have been expected to
accomplish the desired result in a manner consistent with law, regulation,
safety, environmental protection, economy, and expedition. Good Utility
Practice is intended to be acceptable practices, methods or acts generally
accepted and lawful in the region, and is not intended to be limited to the
optimum practices, methods or acts to the exclusion of all others.
"Guarantor" means any Affiliate of Buyer that from time to time may fumish a
Guaranty to the Company in connection with the satisfaction of Buyees
security obligations under Section 9.1.
"Guaranty" shall mean a guaranty agreement in substantially the form
attached hereto as Exhibit D.
"HQ Claims" means the litigation between Hydro Quebec and certain New
England utilities in the case entitled "New England Utilities (Plaintiff) v.
Hydro Quebec (Defendant)," Federal Court of Appeals for the I st Circuit,
Docket No. 98-1773.
"MDTE" means the Massachusetts Department of Telecommunications and Energy.
"Millstone 3" means the nuclear unit known as Millstone Unit No. 3, as more
particularly described in, and governed by the terms of, the Millstone 3
Sharing Agreement.
"Millstone 3 Sharing Agreement" means the Sharing Agreement - 1979
Connecticut Nuclear Unit dated September 1, 1973, among The Connecticut
Light and Power Company, The Hartford Electric Light Company, the Western
Massachusetts Electric Company, New England Power Company, The United
Illuminating Company, Public Service Company of New Hampshire, Central
Vermont Public Service Corporation, Montaup Electric Company and the
Company, as amended.
"Millstone 3 Claims" means collectively the lawsuit currently pending in
Massachusetts Superior Court (Civil Action #97-4249-A), and the arbitration
proceeding entitled "Arbitration of Disputes with respect to 'Sharing
Agreement, 1979 Connecticut Nuclear Unit"' pending before Judge Prentice H.
Marshall.
"NEPOOL" means the New England Power Pool or its successor.
"Net Worth" of a person means the consolidated total assets less
consolidated total liabilities of such person as reflectred on a balance
sheet prepared in accordance with generally accepted accounting principles
consistently applied.
- -3-
"Ownership Agreements" means, collectively, the Millstone 3 Sharing
Agreement and the Wyman 4 Joint Ownership Agreement.
"Permanent Shutdown" of Wyman 4 shall mean either (i) a determination to
permanently cease operation of Wyman 4 under the Wyman 4 Joint Ownership
Agreement, or (ii) a determination by the Company not to fund its share of
a Ma or Capital Improvement to Wyman 4. For purposes hereof, a "Major
Capital Improvement" shall mean any capital improvement challenged at FERC
or otherwise not made due to a negotiated settlement with the other owners.
"Post-Shutdown and Decommissioning Period" shall mean the period of time
that commences on the date set forth in a written certification to the
Nuclear Regulatory Conunission (or its successor) as the date that Northeast
Nuclear Energy Company (or its successor appointed pursuant to the Millstone
3 Sharing Agreement) has permanently ceased operation of Millstone 3.
"Power Supply Agreement(s)" means the contracts described in Exhibit C hereto.
"Reference Rate" means the base lending rate announced as in effect by
BankBoston, N.A. (or its successor) from time to time.
"Retained Entitlement Obligation" shall have the meaning set forth in
Section 3.1 hereof
"Supplier" means the party (or parties) with which the Company has
contracted for the purchase and sale of Capacity and Associated Energy
under a Power Supply Agreement.
"System" means the interconnected network of distribution and transmission
lines used for the delivery of electricity and owned by the Company.
"Units" means Millstone 3, Wyman 4 and the facility (or facilities) which
produce the Capacity and Associated Energy pursuant to the terms of a Power
Supply Agreement, and "Unit" means any of them.
"Wyman 4 Joint Ownership Agreement" means the William F. Wyman Unit No. 4
Agreement for Joint Ownership, Construction and Operation dated November 1,
1974, among the Company, Central Maine Power Company, Bangor Hydro-Electric
Company, Maine Public Service Company, Boston Edison Company, Montaup
Electric Company, Newport Electric Company, Public Service Company of New
Hampshire and Vermont Electric Power Company, Inc. as amended by Amendment
No. I dated June 30, 1975, Amendment No. 2 dated August 16, 1976, Extension
Agreement dated December 31, 1976 and Amendment No. 3 dated December 31, 1978.
"Wyman 4" means the oil-fired unit known as Wyman Unit No. 4, as more
particularly described in, and governed by the terms of, the Wyman 4 Joint
Ownership Agreement.
- -4-
"Wyman 4 Claims" means any claim the Company may have under the Wyman 4
Joint Ownership Agreement against Central Maine Power Company related to the
sale by Central Maine Power Company of its ownership interest in Wyman 4 to
FPL Energy.
ARTICLE 2
SALE OF ENTITLEMENTS
2.1 Sale of Entitlements.
(a) In consideration of the payment by Buyer of the Entitlement Sales
Charge and the performance of Buyer's other obligations hereunder and
subject to the terms and conditions hereof, the Company hereby sells to
Buyer all its right, title and interest in and to the Entitlements. As a
result of such sale, Buyer shall be entitled to receive as of the Effective
Date at the Delivery Point all Capacity and Associated Energy purchased by
or available to the Company under the Power Supply Agreements and Ownership
Agreements.
(b) Notwithstanding any provision herein to the contrary, the sale by
the Company of the Entitlements hereunder shall not result in the transfer
of any ownership interest or title to either Millstone 3 or Wyman 4 to the
Buyer, nor shall the Buyer have any interest in the Millstone 3 Claims, the
HQ Claims or the Wyman 4 Claims, which shall be retained by the Company and
with respect to which the Company shall have the sole right to receive any
amounts payable in connection therewith.
(c) In the event that in accordance with the terms hereof, at any time
the Company sells all or any portion of its ownership interest in
Millstone 3 or Wyman 4, the Company shall pay to the Buyer the net proceeds
received by it from such sale. For purposes hereof, the "net proceeds" from
the sale or liquidation by the Company of its ownership interest in such
Units shall be the total proceeds or other consideration in whatever form
actually received by the Company from such sale, less (i) the actual
out-of-pocket costs incurred by the Company in connection with such sale,
(ii) any tax liability incurred or paid by the Company in connection with
such sale, after taking into account the payment of amounts to Buyer under
this Section 2.1, and (iii) the undepreciated portionof the Capital Costs
paid by the Company under the applicable Ownership Agreement from and after
June 1, 1999; provided that if the foregoing calculation results in a
negative number, "net proceeds" shall be deemed to equal zero.
(d) The Company hereby agrees not to sell its ownership interest in
Millstone 3 or Wyman 4 without the prior written consent of the Buyer, which
consent tile Buyer shall not unreasonably withhold and which consent the
Buyer shall grant if in the transaction proposed by the Company, the price
to be received by the Company from any such sale is not materially less than
the per MW price realized in a sale completed not more than one year prior
to the proposed sale by the Company by any other owner or owners covered by
the applicable Ownership Agreement.
(e) The Company shall promptly advise user of any offer, proposal or other
solicitation that it receives or initiates with respect to the sale of
Millstone 3 or Wyman 4. If the Company is subject to a confidentiality
agreement with respect to information regarding such sale, the Company may
condition the supply of such information upon Buyer entering into an
undertaking to maintain such confidentiality.
(f) Buyer shall be released from all obligations or liabilities hereunder
with respect to Millstone 3 of Wyman 4 upon the sale of such Asset; provided
that such sale shall not relieve either Party from any default asserted
hereunder with respect to such Asset before the closing of such sale.
2.2
The Company shall pay (or to the extent not yet payable at such time, assign)
to Buyer any proceeds received by or payable to the Company in connection
with any insured casualty or condemnation that affects any of the Assets
after the date hereof, other than any such proceeds (i) of an insured
casualty or condemnation with respect to Millstone 3 that occurs after the
commencement of the Post-Shutdown and Decommissioning Period, (ii) of an
insured casualty or condemnation with respect to Wyman 4 that occurs after
the commencement of Permanent Shutdown, and (iii) which are required to be
reinvested in the Assets by the Company under the terms of the applicable
Ownership Agreement or any action taken by the owners of the applicable
Assets thereunder.
2.3 Deliverables.
The Company represents and warrants to Buyer that prior to the execution of
this Agreement, it has delivered to Buyer true, correct and complete copies
of the following documentation ("Deliverables") relevant to the Entitlements:
(a) A copy of each Power Supply Agreement and Ownership Agreement,
including all amendments thereto.
(b) A personnel list setting forth the names, telephone numbers and
responsibilities of Suppliers personnel involved in administering each Unit.
(c) Copies of all documents relating to the Units in its possession,
including all NEPOOL documents relating thereto.
2.4 Risk of Unit Performance.
Buyer understands that the Company makes no representation, guaranty or
warranty concerning the availability of Capacity and Associated Energy from
the Units, and that Buyer shall have no remedy and recourse against the
Company in the case of any deficiency or failure pertaining to any Unit or
default by a Supplier under a Power Supply Agreement. The Buyer shall bear
the entire risk of performance by the other parties to the Power Supply
Agreements and Ownership Agreements.
- -6-
2.5
In the event that any Supplier or the owners under an Ownership Agreement
seek to expand a Unit or to extend the life of such Unit and correspondingly
extend the term of the relevant Power Supply Agreement or arnend the
relevant Ownership Agreement to increase the capacity of a Unit, the Parties
agree that neither Party will provide its consent to such action, unless the
other Party also provides its agreement in writing, which agreements such
Party may grant or withhold in its sole and absolute discretion. If the
Company has the right to prohibit or relieve itself from liability for any
such change in character to a Unit, Buyer shall have the right to direct the
Company to take the appropriate action to effect such prohibition or relief.
In addition, Buyer shall have the right to engage in negotiations with the
Suppliers to modify or terminate a Power Supply Agreement, and the Company
hereby consents to such negotiations. Each Party shall have the right to
engage in negotiations to sell the Assets, and the other Party consents to
such negotiations.
ARTICLE 3
ENTITLEMENT SALES CHARGE
3.1 Entitlement Sales Charge.
In consideration for the sale and delivery of the Entitlements to the Buyer
hereunder, the Buyer agrees to pay to the Company each month during the term
hereof, commencing on the Effective Date, the Entitlement Sales Charge (as
hereinafter defined) in accordance with Section 3.3.
The Entitlement Sales Charge shall be equal to the sum of- (i) all amounts
due from the Company under the Power Supply Agreements for a particular
month (if any); @u (ii) until the earlier of (A) the commencement of the
Permanent Shutdown of Wyman 4 and (B) the sale of the Company's ownership
interest in Wyman 4, the Cost of Service Charge for Wyman 4; Wu (iii) until
the earlier of (A) the commencement of the Post-Shutdown and Decommissioning
Period and (B) the sale of the Company's ownership interest in Millstone 3,
the Cost of Service Charge for Millstone 3; less (iv) the applicable
Retained Entitlement Obligation (as defined hereafter); provided, however,
that in no event shall the Entitlement Sales Charge include any amounts in
respect of interest, penalties or damages incurred as a result of the
failure of the Company to perfon-n its obligations hereunder, including any
failure to remit payment in accordance with the requirements of the Power
Supply Agreements and Ownership Agreements. The "Retained Entitlement
Obligation" means the fixed monthly amount to be credited by the Company to
the Buyer against the amounts (if any) due under the Entitlements which the
Buyer will not be obligated to pay as part of the Entitlement Sales Charge
or which the Company will pay to the Buyer in accordance with Section 3.3.
The Retained Entitlement Obligation for each year (on an annual and monthly
basis) during the ten-n hereof is set forth on Exhibit E hereto.
- -7-
3.2 Excluded Liabilitiea
(a) The Buyer hereby agrees to pay, perform and fulfill all terms,
conditions and obligations of the Company (unless otherwise specifically
provided herein) and accepts all risks under each Power Supply Agreement.
Buyer shall perform such obligations with the same effect as if Buyer were
party to each such Power Supply Agreement in place of the Company, such
undertaking to be effective as of the Effective Date; provided, that (i) the
Buyer shall be responsible for only those obligations of the Company under
each Power Supply Agreement which relate to acts, events or omissions
occurring from and after the Effective Date and (ii) the Buyer shall not
have any obligation under any Power Supply Agreement for any matter
pertaining to the maintenance, operation or use of the System (e.g.,
interconnection), any service provided by the Company or relating to the
System (e.g., standby service), and/or wheeling or transmission arrangements
with respect to energy generated by a Unit thereunder.
(b) The Buyer shall have no liability or responsibility for any amount
with respect to the Wyman 4 Joint Ownership Agreement or the Millstone 3
Sharing Agreement or the Assets other than with respect to the Cost of
Service Charges payable thereunder. Without limiting the generality of the
foregoing, this Agreement shall not relieve the Company from ultimate
financial responsibility under the Millstone 3 Sharing Agreement. Moreover,
the Buyer shall further not be liable for any of the following, and no such
amounts shall be reflected in any component of the Entitlement Sales Charge:
(i) any obligation or liability of the Company arising out of the
performance or a breach by the Company of any of its obligations under this
Agreement;
(ii) any fines or penalties imposed by govenunental agencies resulting
from (A) an investigation or proceeding pending prior to the Effective Date
or (B) illegal acts, willful misconduct or gross negligence of the Company
prior to the Effective Date;
(iii) any payment obligations of the Company for goods delivered or
services rendered prior to the Effective Date unless such obligations are
included in billings to the Company under the Ownership Agreements;
(iv) any liabilities or obligations of the Company resulting from
entering into or performing its obligations pursuant to or consummating the
transactions contemplated herein unless the cost of such obligations are
included in billings to the Company under the Ownership Agreements;
(v) any obligations for wages, overtime, employment taxes, severance
pay, transition payments in respect of compensation or similar benefits
accruing or arising prior to the Effective Date, unless the cost of such
obligations are included in billings to the Company under the Ownership
Agreements; or
(vi) any liabilities or obligations of the Company arising from the
breach by the Company or any of its Affiliates on or prior to the Effective
Date of any term or provision of
- -8-
any contract, instrument or agreement relating to any of the Assets or any
of the Power Supply Agreements.
All such liabilities and obligations not being undertaken pursuant to this
Section 3.2(b) are herein called the "Excluded Liabilities," it being
understood that any particular Excluded Liability may be included in one or
more of the foregoing clauses, and the Company's liability therefor shall
not be affected by such multiplicity. In addition to the Excluded
Liabilities, the Buyer shall not be liable for any Capital Costs incurred
prior to June 1, 1999, but shall be responsible for Capital Costs incurred
thereafter, which shall be charged as part of the Cost of Service Charge, it
being the intention of the Parties that the Buyer reimburse the Company for
such obligations and liabilities of the Company under the Ownership
Agreements after June 1, 1999 through the Cost of Service Charge determined
in accordance with Exhibit A.
3.3 Billing and Payment.
The Company shall pay all amounts due under the Power Supply Agreements and
Ownership Agreements each month during the term hereof. On or before the
tenth(10th)dayof each month, the Company shall forward to the Buyer an
invoice setting forth the calculation of the Entitlement Sales Charge for
the immediately preceding month. In addition to the calculation of amounts
due hereunder, such invoice shall include copies of the underlying invoices
received under the Ownership Agreements and the Power Supply Agreements with
respect to any Unit. Bills shall be based on estimates where appropriate,
subject to true-up in the following month based on actual data. Buyer shall
remit payment of the amount shown to be due thereon not later than ten (10)
days after receipt of the Company's invoice. Any amount due to the Company
but not paid as set forth herein shall be subject to a late payment charge
equal to the Reference Rate, from the date payment is due until the date
payment is made. In the event that the Retained Entitlement Obligation in
any month is greater than the amount due under the Entitlements for such
month, so that the Entitlement Sales Charge for such month is negative, then
no amount shall be due to the Company from the Buyer for such month, and the
amount of the negative Entitlement Sales Charge for such month shall be
subtracted from the Entitlement Sales Charge due for the succeeding month
(such negative amount to be carried forward without interest and,
if not fully utilized then the unutilized portion of such amount shall be
paid in cash by the Company to the Buyer within ten (10) days following the
end of such subsequent month). Any amount due to Buyer from the Company
hereunder, but not paid as set forth herein, shall be subject to a late
payment charge equal to the Reference Rate, from the date payment is due
until the date payment is made.
4.1 Effective Date.
The obligations of the Parties with respect to the Power Supply Agreements
and the Ownership Agreements under this Agrement shall become effective on
the Effective Date. Each Party shall keep the other Party reasonably
apprised of the status of the conditions
- -9-
precedent to the occurrence of the Effective Date applicable to it. The
Parties shall reasonably coordinate so that subject to the satisfaction of
other prior conditions, the certificates, opinions and security to be
delivered by a Party hereunder in connection with the Effective Date have
been provided by the Effective Date. If the Effective Date has not occurred
by December 31, 1999, then at any time thereafter either Party may terminate
this Agreement on written notice of termination to the other Party, without
any liability or obligation of either Party to the other as a result of such
termination, unless prior to any such termination the Effective Date shall
have occurred.
4.2 Term
This Agreement shall continue in effect, unless sooner terminated in
accordance with the provisions of this A ent, until the later of (a) the
termination of the @ to waninate, of the Power Supply Agreements (or the
release of the Company from its obligations under the last of the Power
Supply Agreements that the Company had been liable), (b) the sale of, or
other termination of the Company's ownership interest in, Millstone 3 and
Wyman 4 (or, if sooner occurring, with respect to Millstone 3, the
commencement of the Post-Shutdown and Decommissioning Period, and with
respect to Wyman 4, the expiration or termination of the Wyman 4 Joint
Ownership Agreement or the commencement of Permanent Shutdown), and (c) the
satisfaction in full of the obligation of the Company to pay to the Buyer
the Retained Entitlement Obligation in accordance with the terms of this
Agreement.
4.3 Termination
Any entire or partial termination of this Agreement agreed to by the Parties
shall be in writing and signed by each Party; this Agreement may be
terminated as provided in Article 10 hereof.
4.4 Notice
Each Party shall notify the other Party promptly if any information comes to
its attentionprior to the Effective Date that it believes might excuse such
Party from the performance of its obligations under this Agreement or would
or might cause any condition set forth in Article 5 not to be satisfied.
Without limiting the generality of the foregoing, the Company shall furnish
Buyer with a copy of each material report, schedule or other document filed
by the Company or any of its Affiliates with respect to the transaction
contemplated hereunder with the MDTE.
ARTICLE 5
CONDITIONS
5.1 Conditions to Obligations of the Company.
The obligations of the Company under this Agreement are subject to the
fulfillment and satisfaction of each of the following conditions, any one
or more of which may be waived only in
- -10-
writing, in whole or in part, by the Company:
(a) Representations, Warranties and Covenants True at the Effective Date.
(i) All
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects as of the date when made and at
and as of the Effective Date a .. 4, though such representations and
warranties had been made or given on such date (except to the extent such
representations and warranties specifically pertain to an earlier date),
except (A) for changes contemplated by this Agreement and (B) where the
failure to be true and correct will not have a material adverse effect, as
determined in the Company's reasonable discretion, on the business,
property, financial condition, results of operations or prospects of Buyer,
or on the Company's rights under this Agreement; (ii) Buyer shall have
performed and complied with, in all material respects, its obligations that
are to be performed or complied with by it hereunder prior to or on the
Effective Date; and (iii) Buyer shall have delivered a certificate signed by
one of its duly authorized officers certifying as to the fulfillment of the
conditions set forth in the foregoing clauses (i) and (ii).
(b) Guaranty. The Buyer shall have delivered a Guaranty executed and
delivered by a Guarantor if necessary to satisfy the financial requirements
of Section 9.1.
(c) Governmental Approvals. All the approvals and authorizations set
forth on Exhibit F hereto shall have been received in a form reasonably
acceptable to the Company, and shall no longer be subject to rehearing,
reconsideration or appeal (or all parties that have the right to bring an
appeal have waived appeal rights).
(d) Legal Opinions. The Company shall have received from counsel to the
Buyer its opinion, dated the Effective Date, in form and substance
reasonably satisfactory to Company.
(e) No Material Adverse Ch@e. No material adverse change in the
business, property, financial condition, results of operations or prospects
of Northeast Utilities shall have occurred and be continuing, or with the
passage of time, the giving of notice or both, shall be reasonably likely
to occur.
(f) Absence of Litigatign. No claims, actions, suits, grievances,
arbitrations or proceedings shall be pending or threatened against either
Party with respect to the transactions contemplated hereunder.
(g) Security. The Buyer shall have either provided to the Company
evidence of its satisfaction of the financial requirements set forth in
Section 9.1 (or if Buyer has caused the delivery of a Guaranty, evidence of
the financial condition of the Guarantor), or delivered to the Company the
financial instrument required in lieu of such satisfaction.
5.2 Conditions to Obligation of Buyer.
The obligations of Buyer under this Agreement are subject to the fulfillment
and satisfaction, on or prior to the Effective Date, of each of the
following conditions, any one or more of which may be waived only in
writing, in whole or in part, by Buyer.
- -11-
(a)Representations, Warranties and Covenants True at the Effective Date
(i) All
representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects when made and
at and as of the Effective Date as though such representations and
warranties had been made or given on such date (except to the extent such
representations and warranties specifically pertain to an earlier date),
except (A) for changes contemplated by this Agreement and (B) where the
failure to be true and correct will not have a material adverse effect, as
determined in the Buyees reasonable discretion, on the busin property,
financial condition, results of operations or prospects of the Company, the
Entiti or the Buyees rights under this Agreement; (ii) the Company shall
have performed and complied with, in all material respects, its obligations
that are to be performed or complied with by it hereunder prior to or on the
Effective Date; and (iii) the Company shall deliver a certificate signed by
one of its duly authorized officers certifying as to the fulfillment of the
conditions set forth in the foregoing clauses (i) and (ii).
(b) Governmental Approvala. All the approvals and authorizations
required for the performance by the Buyer of its obligations under this
Agreement set forth on Exhibit G hereto shall have been received in a form
reasonably acceptable to the Buyer, and such approvals and authorizations
shall no longer be subject to rehearing, reconsideration or appeal (or all
parties that have the right to bring an appeal have waived appeal rights).
(c) MDTE Approval. The MDTE shall have issued an order or orders
approving the transactions contemplated by this Agreement and the Buyer
shall be reasonably satisfied that following the issuance of such order the
Company is reasonably likely to be able to recover from its retail
ratepayers substantially all of the Retained Entitlement Obligation either
during the term of this Agreement or thereafter through the creation of
appropriate deferral accounts.
(d) Legal Opinipn. The Buyer shall have received from counsel to the
Company its opinion, dated the Effective Date, in form and substance
reasonably satisfactory to the Buyer.
(e) No Material Adverse Change. No material adverse change in the
business, property, financial condition, results of operations or prospects
of the Company shall haveoccurred and be continuing, or with the passage of
time, the giving of notice or both, shall be reasonable likely to occur.
(o Absence of Litigation. No claims, actions, suits, grievances,
arbitrations or proceedings shall be pending or threatened against either
Party with respect to (i) this Agreement or (ii) any of the Power Supply
Agreements, the Ownership Agreements or the transactions contemplated
thereunder which might have a material adverse effect on the benefits to
be realized by the Buyer hereunder.
5.3 Joint Conditions.
The obligations of each Party under this Agreement are subject to the
fulfillment and satisfaction, on or prior to the Effective Date, of the
following condition, which may only be w#ivqd in writing, in whole or in by
both Parties:
- -12-
(a) The Parties shall have entered into the Firm Energy and Facilities
Agreement with respect to the Company's Firm Energy Agreement with
Hydro-Quebec (including any acknowledgment of such transaction by
Hydro-Quebec) and the Assumption and Assignment Agreement with respect to
the Company's Sale Agreement with respect to System Capacity and Energy with
Public Service Company of New Hampshire, each in the form of Exhibits H
and I hereto, and all conditions to the effectiveness of such agreements
shall have been satisfied.
(b) Any and all necessary filings or notices shall have been given or
made with NEPOOL and any and all approvals or authorizations concerning the
transaction contemplated by this Agreement shall have been received in a
form reasonably acceptable to each Party.
5.4 Coordination
The Company and Buyer shall cooperate with each other and use all
commercially reasonable efforts to (a) promptly prepare and file all
necessary documentation, (b) effect all necessary applications, notices,
petitions and filings and execute all agreements and documents, and (c)
obtain all necessary consents, approvals and authorizations of all other
parties necessary or advisable to consummate the transactions contemplated
by this Agreement (including the respective govenunental approvals required
by the Parties).
ARTICLE 6
6.1 General Representations and Warranties.
Each Party hereby represents and warrants to the other that:
(a) It is duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization and is duly qualified to do
business in all jurisdictions where such qualification is required.
(b) It has full power and authority to enter this Agreement and perform
its obligations hereunder. The execution, delivery and performance of this
Agreement have been duly authorized by all necessary corporate action and do
not and will not contravene its organizational documents or conflict with,
result in a breach of, or entitle any party (with due notice or lapse of
time or both) to terminate, accelerate or declare a default under, any
agreement or instrument to which it is a party or by which it is bound.
The execution, delivery and performance by it of this Agreement will not
result in any violation by it of any law, rule or regulation applicable to
it. It is not a party to, nor subject to or bound by, any judgment,
injunction or decree of any court or other governmental entity which may
restrict or interfere with the performance of this Agreement by it or may
materially and adversely affect the business, property, financial condition,
results of operations or prospects of such Party. This Agreement is its
valid and binding obligation, enforceable against it in accordance with its
terms, except as (i) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights generally and (ii) the remedy of
specific performance and
- -13-
injunctive relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(c) Except as set forth on Exhibits F and G hereto, no consent, waiver,
order, approval, authorization or order of, or registration, qualification
or filing with, any court or other goverrunental agency or authority or
other person is required for the execution, delivery and performance by such
Party of this Agreement and the consummation by such Party of the
transactions contemplated hereby. No consent or waiver of any party to any
contract to which such Party is a party or by which it is bound is required
for the execution, delivery and performance by such Party of this Agreement
which has not been duty obtained.
(d) There is no action, suit, grievance, arbitration or proceeding
pending or, to the knowledge of such Party, threatened against or affecting
such Party at law or in equity, before any federal, state, municipal or
other govenunentat court, department, commission, board, arbitrator, bureau,
agency or instrumentality which prohibits or impairs its ability to execute
and deliver this Agreement or to consummate any of the transactions
contemplated hereby. Such Party has not received written notice of and
otherwise is not aware of any such pending or threatened investigation,
inquiry or review by any governmental entity.
6.2 Representations of the Company
(a) The Company hereby represents and warrants to Buyer that:
(i) Each of the Power Supply Agreements and the Ownership Agreements
constitutes a valid and binding obligation of the Company and, to the
Company's knowledge, constitutes a valid and binding obligation of the other
parties thereto, and is in full force and effect.
(ii) True and correct copies of the Power Supply Agreements and the
Ownership Agreements, including any and all amendments thereto and all
written contracts, agreements, commitments, understandings or instruments
relating to, or otherwise affecting, the Power Supply Agreements and the
Ownership Agreements, have been delivered or made available to Buyer, and
the Company has not taken or failed to take any action which would result in
any other modification or amendment of any Power Supply Agreement or any
Ownership Agreement, or the waiver of any material term of any Power Supply
Agreement or any Ownership Agreement.
(iii) There is not, under any Power Supply Agreement or any Ownership
Agreement, any default or event which, with notice or lapse of time or both,
would constitute a default on the part of the Company or, to the Company's
knowledge, any of the other parties thereto. Without limiting the
generality of the foregoing, all payments due from the Company under the
Power Supply Agreements and the Ownership Agreements have been paid in full.
(iv) Except for the Millstone 3 Claims, the HQ Claims and the Wyman 4
Claims, the Company has not received any notification of, and is not aware
of any claim alleging any violation with respect to any Power Supply
Agreement, any Ownership Agreement, or any
-14-
agreement or arrangement relating thereto, including interconnection,
transmission and financing arrangements.
(v) 'Me Company has the right to transfer its entitlement under the
Power Supply Agreements and Ownership Agreements in accordance with the
terms hereof and has not granted, or suffered to exist any lien, mortgage,
encumbrance, charge, pledge, security interest, entitlement or other similar
right of any kind with respect to any of the Power Supply Agreements, any of
the Ownership Agreements or its interest therein.
(vi) Except for the Millstone 3 Claims, the HQ Claims and the Wyman 4
Claims, no claims, actions, suits, grievances, arbitrations or proceedings
are pending or, to the knowledge of the Company, threatened with respect to
any of the Power Supply Agreements, any of the Ownership Agreements or the
transactions contemplated thereunder. There are no judgments, orders,
decrees, citations, fines or penalties heretofore assessed against the
Company with respect to any of the Power Supply Agreements, any of the
Ownership Agreements or the transactions contemplated thereunder.
(b) The representations and warranties of the Company set forth in this
Section 6.2 shall terminate and be of no further force and effect from and
after the Effective Date.
6.3 RMresentations of Buyer.
Buyer hereby represents and warrants to the Company that Buyer has made a
complete and thorough review of the Power Supply Agreements and Ownership
Agreements, all related documents and the Units, sufficient for it to
understand the benefits and risks of the transactions contemplated by this
Agreement, and that it is not relying on any representations or warranties
by the Company or any person actually or purportedly acting on the Company's
behalf with respect to any matter affecting or arising out of or in
connection with the Power Supply Agreements or Ownership Agreements, except
as otherwise expressly set forth herein. THE BUYER ACKNOWLEDGES AND AGREES
THAT THE COMPANY MAKES NO REPRESENTATIONS OR WARRANTIES, WRITTEN OR ORAL,
STATUTORY, EXPRESS OR IMPLIED, CONCERNING THE ENTITLEMENTS, INCLUDING IN
PARTICULAR, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, ALL OF WHICH ARE HEREBY EXPRESSLY EXCLUDED AND DISCLAIMED, OTHER
THAN THOSE EXPRESSLY SET FORTH HEREIN.
ARTICLE 7
CONTRACT ADMINISTRATION
7.1 Operational Matters Relating to the Entitlements
(a) Buyer will make all necessary efforts, and take full responsibility,
for communicating with each respective Supplier regarding the dispatch,
scheduling of planned outages and any unplanned outages of each Unit under
any Power Supply Agreement. Buyer will pifficipate in any administrative
committee meetings concerning any such Unit to the extent that Buyer deems
necessary and as provided in the pertinent Power Supply Agreement.
The Buyer's actions associated with the scheduling, dispatch and/or
operation of any Unit under any Power Supply Agreement shall be taken
consistent with Good Utility Practice and in a manner that will not, to the
knowledge of Buyer, materially adversely affect the Company's System. Buyer
will make its own arrangements at Buyees own cost for the transmission from
the Delivery Points and sale of all electricity generated by such Units and
required to be purchased under the applio*lo. Power Supply Agreement.
Buyer acknowledges that, except as specifically provided herein, the Company
has no obligations or responsibility regarding (i) operation of the Units
under any Power Supply Agreement; (ii) dispatch or scheduling outages, or
return to service, of such Units; (iii) transmission of electricity produced
by such Units beyond the Delivery Points; or (iv) Buyer's sale of such
electricity.
(b) Buyer will make its own arrangements at Buyees own cost for the
transmission from the Delivery Points and sale of the Company's share of
electricity generated by Millstone 3 and Wyman 4. Buyer acknowledges that
the Company has no obligations or responsibility regarding the transmission
of electricity produced by Millstone 3 and Wyman 4 for the account of the
Company under the applicable Ownership Agreement beyond the applicable
Delivery Points, or Buyer's sale of such electricity.
(c) The Company shall deliver to the Delivery Point, at the Company's
own cost for the wheeling, transmission and distribution, all electricity
subject hereto. To the extent the Company has transmission congestion
rights with respect to the transmission of Capacity and Associated Energy
from the Delivery Points to the System without charge to the Company, the
Company shall make such rights available to the Buyer without charge.
7.2 Contract Administration Services
(a) The Company shall timely perform, without cost or charge to Buyer,
the contract administration services, which for purposes hereof shall mean
the following services:
(i) metering the electricity produced under a specific Entitlement and
delivered at the applicable Delivery Point;
(ii) determining and invoicing the appropriate charges to be paid by the
Company and the Buyer;
(iii) collecting the aforementioned charges to be paid by the Buyer;
(iv) monitoring the Power Supply Agreements consistent with its past
administrative practices;
(v) performing contract administration activities within the context of
this Agreement and as provided for in the applicable Power Supply Agreement
(including, without limitation, performing such activities and executing and
delivering such documents as may be required in connection with any
refinancings, financial restructurings or other similar activities undertaken
by any Supplier under or with respect to a Power Supply Agreement); and
- -16-
(vi) performing all of its functions as an owner under this Agreement and
the applicable Ownership Agreement. The Company shall promptly provide and
deliver to Buyer all relevant information that the Company now or hereafter
acquires with respect to any Power Supply Agreement or Ownership Agreement,
and shall request that NEPOOL, the Northeast Power Coordinating Council, the
North American Electric Reliability Council, ISO- New England, Inc. or the
successor of any of them supply to Buyer copies of information regarding
each Unit that such entities fumish to the Company.
(b) In addition to the contract administration services provided for in
Section 7.2(a), the Company shall perform the following tasks with respect
to the Entitlements at no cost to the Buyer:
(i) The Company shall promptly advise the Buyer of any material matter
of which it becomes aware which could affect the energy and capacity to be
delivered under a particular Power Supply Agreement (e.g., dispatching,
planned outages and unplanned outages) and will take such actions as Buyer
reasonably requests in connection therewith;
(ii) The Company will continue to function as a joint owner of Millstone 3
and Wyman 4;
(iii) The Company shall promptly advise the Buyer of any material matter of
which it becomes aware which could affect the energy and capacity to be
delivered under a particular Ownership Agreement or the calculation of the
Cost of Service Charge, and will take such actions as Buyer reasonably
requests in connection therewith; and
(iv) The Company will make all filings with NEPOOL, ISO-New England, Inc.
and other appropriate entities necessary to ensure that the Buyer is
credited with the Capacity and Associated Energy sold to it hereunder.
(c) The Buyer shall have the right to direct the Company to request or
otherwise exercise all powers granted to the Company by a Power Supply
Agreement or Ownership Agreement to receive, review and/or audit information
and other documentation to which it is entitled thereunder, or to enforce
rights the Company has under any Power Supply Agreement or Ownership
Agreement; provided, that the Buyer shall be obligated to reimburse the
Company for the costs incurred by it in exercising any such rights or
pursuing any such enforcement actions to the extent and in the manner set
forth in Section 8.3 hereof. At the Company's option, the Company may elect
to execute a power of attorney in favor of the Buyer to act in the place and
stead of the Company with respect to any matter as to which the Buyer has
requested the Company to take action under this paragraph or under Section
8.3.
(d) Without the prior consent of Buyer, the Company shall not under any
circumstances take any action or fail to take any action after the Effective
Date that would:
(i) bind Buyer;
(ii) affect the Entitlements; or
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(iii) alter, change or modify or waive any material rights under any Power
Supply Agreement or Ownership Agreement.
7.3 Appointment as Administrative Agent
The Company shall designate Buyer as the Company's agent for purposes of
administering the Power Supply Agreements.
7.4 Material Amendments
The prior written consent of each Party, which may be granted or withheld in
each such Party's sole discretion, shall be required for any of the following
actions under a Power Supply Agreement or Ownership Agreement:
(a) Actions that increase the price charged for or the quantity of power
to be purchased by the Company thereunder.
(b) Term extensions or similar amendments or option exercises.
(c) Any other matter which such Party reasonably believes will materially
increase such Party's financial risks or obligations thereunder or hereunder.
Notwithstanding the foregoing, the Company's consent shall not be required
for any agreements between the Buyer and a Supplier which do not purport to
involve the Company and which do not purport to affect in any way the
Company's obligations under a Power Supply Agreement or Ownership Agreement.
7.5 Books and Records
(a) The Company will permit Buyer and its representatives access during
normal business hours and upon reasonable notice, in a manner so as not to
interfere with the normal business operations of the itompany, to its
personnel, books,records and documents associated with the Power Supply
Agreements and/or Ownership Agreements.
(b) Buyer shall have the right to audit the Company's books and records
with respect to the Power Supply Agreements, the Ownership Agreements and
this Agreement, at such times during normal business hours and as often as
Buyer may reasonably request. Any amount shown to be due by the Company or
the Buyer as a result of such audit shall be paid in accordance with the
provisions of Section 3.3.
(c) If the Company shall desire to dispose of any of records, books or
documents that may relate to any Power Supply Agreement or Ownership
Agreement during tile temi of this Agreement or during the three (3) year
period after the expiration or termination hereof, the Company shall,
prior to such disposition, give to Buyer a reasonable opportunity, at
Buyees expense, to segregate and remove such records, books or documents as
Buyer may select.
- -18-
ARTICLE 8 COMPANY UNDERTAKINGS
8.1 Provision of Information regarding operational Matters.
(a) The Company agrees to use reasonable efforts to require that the
Suppliers direct all information, notices, documents or other communications
regarding operation, dispatch, scheduling and other matters relevant to the
Unit under the applicable Power Supply Agreement and provided to the Company,
directly to Buyer or in a manner directed by Buyer. To the extent that the
Company receives any such materials relating to the Power Supply Agreements,
the Company agrees promptly to advise Buyer of such receipt and thereafter
to forward such materials to Buyer at the address set forth in Article 13
hereof, or in such other manner as may reasonably be agreed upon by the
Parties in writing.
(b) The Company shall promptly fumish to Buyer or in a manner directed
by Buyer all information, notices, documents or other communications
regarding operation, scheduling and other matters relevant to Millstone 3 or
Wyman 4 and provided to the Company. To facilitate the prompt exchange of
such materials, the Company agrees promptly to advise Buyer of its receipt
and thereafter to forward such materials to Buyer at the address set forth
in Article 13 hereof, or in such other manner as may reasonably be agreed
upon by the Parties in writing.
8.2 Payments under Power Supl2ly Aizreements and Ownershil2 Agreements.
The Company shall make timely payments of all amounts due under the Power
Supply Agreements and Ownership Agreements. Without limiting the generality
of the foregoing, the Company shall solely bear any amounts in respect of
interest or penalties incurred as a result of the failure of the Company to
remit payment in accordance with the requirements of the Power Supply
Agreements and Ownership Agreements. The Company shall immediately notify
Buyer of any notice received from, or other action taken by, a Supplier or
an owner to declare a default under any Power Supply Agreement or Ownership
Agreement, or to otherwise terminate the Company's rights therein.
8.3 Enforcement of Power Supply Agreements and Ownership Agreements.
Upon the request of Buyer, the Company shall make reasonable efforts to
enforce the provisions of any Power Supply Agreement or Ownership Agreement,
or to otherwise support Buyer or Buyees reasonable position in any dispute
thereunder, provided, however, that subject to the Company's obligations
under Section 11.2, the Company shall be compensated for its reasonable
costs associated with such efforts. Such costs shall include, but are not
limited to, costs arising from the employment of any counsel, consultants or
experts, and the internal costs associated with personnel of the Company who
devote time to any such matter; provided that the Company shall advise Buyer
prior to incurring any such costs and to the extent possible obtain an
estimate of total expected costs. The costs incurred by the Company to be
reimbursed to it by the Buyer under this Section 8.3 shall be added (with
supporting detail) to the bills rendered by the Company to the Buyer under
Section 3.2 hereof,
- -19-
8.4 Interim Conduct of Business.
(a) Except to the extent Buyer otherwise consents in writing, during the
period from the date of this Agreement to the Effective Date, the Company
shall (i) conduct its business with respect to the Power Supply Agreements
and the Ownership Agreements in the ordinary course of business consistent
with the past practices of the Company or its Affiliates and with Good
Utility Practice, (ii) use all reasonable efforts to preserve intact such
agreements, (iii) not consent to the incurrence of any material obligation
with respect to any of such agreements, and (iv) endeavor to preserve the
goodwill and relationships with the Suppliers and other owners. Without
limiting the generality of the foregoing, without the prior written consent
of Buyer, the Company shall not agree to modify, amend or terminate any
Power Supply Agreement or any Ownership Agreement in any material respect or
sell or commit to sell any Asset.
(b) The Parties shall reasonably cooperate to transition the Entitlements
from the date hereof to the Effective Date. In furtherance of the foregoing,
the Company shall afford to Buyer full and complete access to the Company's
books and records relating to the Power Supply Agreements and the Ownership
Agreements.
ARTICLE 9
SECURITY
9.1 Buyer Security.
(a) Buyer shall maintain, or, if Buyer is unable to so maintain, then
Buyer shall provide a Guaranty from a Guarantor and such Guarantor shall
maintain, as determined as of the end of each fiscal quarter during the term
of this Agreement, either (i) an Investment Grade Rating on senior debt
securities of the Buyer or the Guarantor, as the case may be, or (ii) a Net
Worth of at least Two Hundred Million Dollars ($200,000,000.00). For purposes
hereof, an "Investment Grade Rating" shall mean a rating by Standard and
Poors Corporation, Moody's Investors Service, Inc., Fitch IBCA or another
nationally recognized rating service reasonably acceptable to the Company
(with BBB- (Standard and Pooes), Baa3 (Moody's) or BBB- (Fitch) or its
equivalent for any other rating service constituting "investment grade").
In the event that a Guaranty is provided on behalf of Buyer to satisfy the
requirements of this Section 9.1, the form of Guaranty shall be as set forth
in Exhibit D. The Buyer may cause a substitute Guarantor to provide the
Guaranty at any time upon written notice to the Company; provided, that if
the Buyer is not a wholly-owned direct or indirect subsidiary of the
Guarantor, then such notice shall be accompanied by either (i) an opinion
of legal counsel to the Guarantor to the effect that such Guaranty is the
legal and valid obligation of the Guarantor, enforceable against the
Guarantor in accordance with its terms (subject to usual bankruptcy and
equitable remedies exceptions); or (ii) evidence reasonably satisfactory to
the Company that the Guaranty is an enforceable obligation of the Guarantor.
If a dispute arises between the Parties with respect to such substituted
Guarantor, including the adequacy of compliance with clauses (i) or (ii),
above, and the Parties cannot resolve such dispute despite good faith
negotiations, then the Buyer shall be entitled to
- -20-
deliver a financial instrument in a form contemplated hereafter in this
Section 9 in lieu of a Guaranty.
In the event that neither Buyer nor a Guarantor is able to meet the
Investment Grade RatinS or Net Worth requirements set forth hereinabove,
then, within thirty days following the end of the quarter in which such
event occurs, Buyer shall deliver to the Company an irrevocable standby
letter of credit issued by a commercial bank, a surety bond or any other
reasonably equivalent financial instrument, in each case reasonably
acceptable to the Company, in the amount (if positive) determined in the
manner set forth on Schedule 9.1 hereto at such time, which financial
instrument shall be available to be drawn upon (and held subject to Section
9.3) by the Company in the event that an Event of Default occurs with
respect to the Buyer hereunder, and which shall otherwise be in form and
substance reasonably acceptable to the Company. Buyer shall maintain such
financial instrument in effect until Buyer either meets such Investment
Grade Rating or Net Worth requirements, or provides a Guaranty from a
Guarantor which meets such requirements.
Buyer shall certify to the Company at least quarterly that it or the
Guarantor, as the case may be, has either the Net Worth or the Investment
Grade Rating required by this Section 9.1 (unless the Buyer has delivered a
financial instrument in lieu of such requirement), and shall deliver to the
Company on a quarterly basis unaudited balance sheets for itself or the
Guarantor, as the case may be, within sixty (60) days following the end of
each of its first three fiscal quarters in each year, and an audited balance
sheet for itself or the Guarantor, as the case may be, within one hundred
twenty (120) days following the end of each fiscal year.
(b) If Buyer has delivered a financial instrument to the Company in
accordance with Section 9. 1 (a), the amount available to be drawn
thereunder shall be adjusted within thirty (30) days after each of (i) the
end of each fiscal quarter and (ii) any material modification or termination
of any Power Supply Agreement or Ownership Agreement, the sale of either
Wyman 4 or Millstone 3, the occurrence of the Post-Shutdown and
Decommissioning Period with respect to Millstone 3 or the Permanent Shutdown
of Wyman 4, or a material variance in the production of any Unit, in each
case to reflect an amount determined in the manner set forth on Schedule 9.1
at that time. The Parties shall reasonably cooperate with the issuer of such
financial instrument to minimize the cost associated with any such
adjustments.
(c) If a Guarantor has furnished a Guaranty, or Buyer has furnished an
alternative financial instrument in accordance with Section 9. 1 (a), then
either the Guaranty and/or such alternative financial instrument, as the
case may be, shall be canceled and released promptly after either (i) Buyer
satisfies the Investment Grade Rating or Net Worth tests, or (ii) Buyer
provides a Guaranty from a Guarantor which meets the Investment Grade Rating
or Net Worth tests. In any such event, the original canceled instrument(s)
shall be immediately returned to Buyer (or as directed by Buyer).
9.2 Company Security
If after the Effective date the MDTE takes final action against the Company
(after resolution of all regulatory and judicial appeals by the Company) the
effect of which is a
- -21-
disallowance of the Company's recovery in rates of a material portion of the
Retained
Entitlement Obligation, and the result of such final action by the MDTE is
reasonably likely to be a material adverse effect on the Company's ability
to meet its obligations hereunder, then, within thirty (30) days after such
final action, the Company shall deliver to Buyer a financial instrument or
other security reasonably acceptable to Buyer (which may be a guarantee of
an Affiliate of the Company) in an amount equal to (i) with respect to
Entitlements which remain in effect, an amount (if negative) determined in
accordance with Schedule 9.1 hereof, and (ii) with respect to Entitlements
which have been terminated, a reasonable estimate of the then present value
of the remaining Retained Entitlement Obligation with respect thereto,
determined in accordance with the allocations set forth on Exhibit B hereto
and which shall otherwise be in form and substance reasonably acceptable to
Buyer. The face amount of such security shall be subject to adjustment on
an annual basis to reflect the requirements of this Section 9.2 and the then
remaining Retained Entitlement Obligation.
9.3 Use of Proceeds
The proceeds from any draw under any financial instrument fumished hereunder
shall be held by the drawing party in a notional account that shall bear
interest at a per annum rate equal to the Reference Rate from the date of
entry through the date of any withdrawal. Such proceeds, together with
accrued interest, shall be so held as security pending the determination of
Damages, if any, due to the drawing party as a result of the underlying
default. Each Party shall use reasonable efforts to mitigate all Damages
resulting from a default hereunder. The balance, if any, of such proceeds
and accrued interest remaining after the payment of such Damages shall be
promptly refunded to the other Party (and in any event within thirty (30)
days after determination of such damages). The failure of such proceeds and
accrued interest to fully satisfy the Damages awarded to a Party shall not
prejudice or otherwise affect the rights and remedies of such Party to
collect such Damages under applicable law.
ARTICLE 10
EVENTS OF DEFAULT
10.1 Events of Default by Buyer
Any one or more of the following shall constitute an "Event of Default"
hereunder with respect to Buyer:
(a) Buyer shall fail to pay any amounts due from Buyer hereunder which
shall continue for more than ten days beyond the due date; provided that the
Company shall immediately notify Buyer of any such default.
(b) Buyer shall fail to provide the Guaranty or financial instrument
when required in compliance with Section 9.1 hereof.
(c) A default shall occur in the performance of any other material
covenant or condition to be performed by the Buyer hereunder and such
default shall continue unremedied for a period of thirty days after notice
frorii the Company specifying the nature of such default.
- -22-
(d) A custodian, receiver, liquidator or trustee of the Buyer or the
Guarantor, if any, or of all or substantially all of the property of either,
is appointed or takes possession and such appointment or possession remains
uncontested or in effect for more than 60 days; or the Buyer or the
Guarantor makes an assignment for the benefit of its creditors or admits in
writing its inability to pay its debts as they mature; or the Buyer or the
Guarantor is adjudicated bankrupt or insolvent; or an order for relief is
entered under the Federal Bankruptcy Code against the Buyer or the Guarantor;
or all or substantially all of the material property of either is sequestered
by court order and the order remains in effect for more than 60 days; or a
petition is filed against the Buyer or the Guarantor under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution
or liquidation law of any jurisdiction, whether now or subsequently in
effect, and is not stayed or dismissed within 60 days after filing.
(e) The Buyer or the Guarantor files a petition in voluntary bankruptcy
or seeking relief under any provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation
law of any jurisdiction, whether now or subsequently in effect; or consents
to the filing of any petition against it under any such law; or consents to
the appointment of or taking possession by a custodian, receiver, trustee or
liquidator of the Buyer or the Guarantor or all or substantially all of the
property of either.
10.2 Events of Default by the Company.
Any one or more of the following shall constitute an "Event of Default"
hereunder with respect to the Company:
(a) The Company shall fail to pay any amounts due from the Company to
the Buyer hereunder or any amounts due to any Supplier, owner or
administrator under any Power Supply Agreement or Ownership Agreement, which
shall continue for more than ten days after the due date.
(b) The Company shall fail to provide the security required under
Section 9.2 hereof.
(c) Default shall occur in the performance of any convenant or condition to
be performed by the Company hereunder (other than the payment of money or as
set forth in Section 10.2(b)) and such default shall continue unremedied for
a period of thirty days after notice from the Buyer specifying the nature of
such default.
(d) A custodian, receiver, liquidator or trustee of the Company or of
all or substantially all of its property is appointed or takes possession
and such appointment or possession remains uncontested or in effect for more
than 60 days; or the Company makes an assigrument for the benefit of its
creditors or admits in writing its inability to pay its debts as they mature;
or the Company is adjudicated bankrupt or insolvent; or an order for relief
is entered under the Federal Bankruptcy Code against the Company; or all or
substantially all of the material property of the Company is sequestered by
court order and the order remains in effect for more than 60 days; or a
petition is filed against the Company under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law
of
- -23-
any jurisdiction, whether now or subsequently in effect, and is not stayed
or dismissed within 60 days after filing.
(e) The Company files a petition in voluntary bankruptcy or sftking
relief und any provision of any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction, whether now or subsequently in effect; or consents to the
filing of any petition against it under any such law; or consents to the
appointment of or taking possession by a custodian, receiver, trustee or
liquidator of the Company or all or substantially all of its property.
10.3 Remedies.
The Parties shall have the following remedies available to them with respect
to the occurrence of an Event of Default with respect to the other Party
hereunder:
(a) Upon the occurrence of an Event of Default by either Party hereunder,
the nondefaulting Party shall have the right (i) to collect all amounts then
or thereafter due to it from the defaulting Party hereunder, and (ii) to
terminate this Agreement at any time during the continuation of such Event
of Default. In addition, if the Buyer is the defaulting Party, then the
Company shall have the right during the continuation of such default and
prior to any termination of this Agreement to cease making the Entitlements
available to the Buyer hereunder and to instead sell such Entitlements to
third parties for the account of the Company. In addition, if the Company
is the defaulting Party and Buyer is not receiving all or a portion of
Capacity and Associated Energy in accordance with the terms hereof, then
Buyer shall have the right during the continuation of such default and prior
to any termination of this Agreement to purchase Capacity and Associated
Energy from to third parties to cover such shortfall, the costs of which
(after taking into account the Entitlement Sales Charge that would have
applied thereto) shall be paid by the Company.
(b) If the Company terminates this Agreement as a result of the
occurrence of an Event of Default by Buyer, then the Company shall
thereafter have no further obligations hereunder and have all rights and
remediese available to it under applicable law, including the right to
recover damages calculated by the amount of the difference between the
Entitlement Sales Charge, and any amounts that the Company actually realizes
in reselling the Capacity and Associated Energy to be purchased by Buyer
hereunder, after taking into account any and all reasonable costs incurred
by the Company in such making such resales, the termination or expiration of
any Power Supply Agreement or Ownership Agreement, and the Retained
Entitlement Obligation that the Company otherwise would have paid hereunder.
In addition, the Company @hali be entitled to reimbursement of all reasonable
costs incurred by it (including reasonable attorneys' fees incurred in the
enforcement or attempted enforcement hereof) as a result of the termination
of this Agreement.
(c) If the Buyer terminates this Agreement as a result of the occurrence
of an Event of Default by the Company, then the Buyer shall thereafter have
no further obligations hereunder or with respect to the Power Supply
Agreements or the Ownership Agreements and shall have all rights and
remedies available to it hereunder and under applicable law, including the
right to rFApeAt to the Powgr Supply A, ,Sreements or the Ownership
Agreements and shall have all rights and remedies available to it hereunder
and under applicable law, including the right to
- -24-
recover damages calculated by the amount of the sum of (i) the difference
between the amount paid by Buyer for a corresponding amount of available
Capacity and Associated Energy and attendant benefits for the remaining
term of this Agreement, and the Entitlement Sales Charge that would have
been paid therefor during such term, after taking into account any and all
reasonable costs incurred by Buyer in such making such purchases; and (ii)
without duplication of clause (i), the remaining Retained Entitlement
Obligation relating to any Power Supply Agreement or Ownership Agreement
that terminated or otherwise expired before the calculation of such damages.
In addition, the Buyer shall be entitled to reimbursement of all reasonable
costs incurred by it (including reasonable attorneys' fees incurred in the
enforcement or attempted enforcement hereoo as a result of the termination
of this Agreement.
(d) Neither Party shall be entitled to recover special, indirect,
incidental or consequential damages in connection with the occurrence of an
Event of Default hereunder, except insofar as any such damages are expressly
provided for in clauses (b) and (c) of this
Section 10.3.
ARTICLE 11 INDEMNIFICATION
11.1 Indemnification by Buyer
Buyer shall indemnify, defend and hold han-nless the Company and the
Company's officers, directors, agents, employees and Affiliates from and
against any and all loss, costs, expense, claims, demands, liabilities
(including reasonable attorneys' fees), judgments, fines, settlements and
other amounts (collectively, "Damages") arising from any and all pending or
threatened civil, criminal, administrative or investigative proceedings
(collectively, "Claims") relating to or arising out of:
(a) Any failure of Buyer to observe or perform any material term or
provision of this Agreement.
(b) Any failure of any representation or warranty made by Buyer herein to
be true in any material respect.
(c) Any Claim of a Supplier, an owner under the Wyman 4 Joint Ownership
Agreement or any other third party to the extent arising from the acts or
omissions of Buyer or any of its agents or employees in exercising its
rights or performing its obligations hereunder after the Effective Date.
Since the Buyer's obligations hereunder with respect to Millstone 3 are
limited to the payment of the applicable Cost of Service Charge, if the
Buyer fails to pay such Cost of Service Charge or this Agreement is
otherwise terminated by the Company in'accordance with Section 10.3 as a
result of an Event of Default by Buyer, the Company' sole remedy with
respect @hereto shall be to recover damages from the Buyer calculated in
accordance with Section 10.3(,#)'Tn reselling the Capacity and Associated
Energy relating to Millstone 3, and the Buyershall have no obligation or
liability relating to Millstone 3 other than to the Company. Without
limiting the
- -25-
generality of the foregoing, the Buyer shall not have any liability under
any circumstances whatsoever on account of this Agreement to the owners
under the Millstone 3 Sharing Agreement or any other third parties with
respect to Millstone 3, whether directly or indirectly, and the Company
shall not be entitled to indemnification from Buyer for any such Claims or
Damages.
11.2 Indemnification by the Company
The Company shall indemnify, defend and hold harmless Buyer, its officers,
directors, agents, employees and Affiliates from and against any and all
Damages arising from any and all Claims relating to or arising out of:
(a) Any failure of the Company to observe or perform any material term
or provision of this Agreement.
(b) Any failure of any representation or warranty made by the Company
herein to be true in any material respect.
(c) Any Claim of a Supplier, an owner under the Wyman 4 Joint Ownership
Agreement or any other third party to the extent arising from the acts or
omissions of the Company or any of its agents or employees and any claim
related to Millstone 3.
(d) Any Claim that the transactions contemplated hereby violate or
otherwise constitute a default under any Power Supply Agreement or Ownership
Agreement provided,that the Company's indemnification obligations with
respect to any Claim by a Supplier that the transactions contemplated hereby
violate or otherwise constitute a default under a Power Supply Agreement or
Ownership Agreement shall be limited to Buyer's reasonable out-of-pocket
legal costs and expenses incurred in cooperating with the Company in
disputing or defending against any such Claim, and the Company shall have no
other liability to the Buyer with respect to any such Claim, even if
successful).
(e) An Excluded Liability.
11.3 No Indirect, Special or Consequential Damages
Notwithstanding anything to the contrary contained in this Article 11,
neither Party shall be entitled to recover special, indirect, incidental or
consequential damages in connection with an indemnification claim hereunder,
except with respect to damage claims expressly provided for in clauses (b)
and (c) of Section 10.3.
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ARTICLE 12
12.1
In the event of any dispute between the parties hereto as to a matter
referred to herein or as to the interpretation of any part of this Agreement,
including this Section 12.1 or as to tM determination of any rights or
obligations or entitlements arising from or related to this Agreement or as
to the calculation of any amounts payable under this Agreement, the parties
shall refer to the matter to their respective chief executive officers, or
another duly authorized officer, for resolution. Should such officers of
the respective parties fail to resolve the dispute within 20 days from such
referral, the Parties agree that any such dispute involving $500,000 or less
shall be referred to binding arbitration. Where the amount in controversy
exceeds $500,000, the Parties may mutually agree to refer the dispute to
binding arbitration, but shall not be obligated to do so.
12.2 Arbitration Procedures
Aparty submitting a dispute to arbitration (the "Requesting Party") shall do
so by delivering to the other party a notice demanding or requesting, as the
case may be, arbitration of the dispute and naming an arbitrator. If the
dispute is subject to required arbitration pursuant to Section 12. 1, or if
the Requesting Party and the other party desire to have any other dispute
decided by arbitration, then, within thirty (30) days after the receipt of
the notice from the Requesting Party, the other party shall, in writing,
serve upon the Requesting Party a notice designating an arbitrator on its
behalf. The two arbitrators so chosen shall within twenty (20) days after
the appointment of the second arbitrator, in writing, designate a third
arbitrator. Upon the failure of the party notified to appoint the second
arbitrator within such time, the party invoking such arbitration may proceed
with the single arbitrator. If the first and second arbitrators are unable
to agree on a third arbitrator within
twenty(20)day of the appointment of the second arbitrator, the first and second
arbitrator shall invoke the services of the American Arbitration Association
to appoint a third arbitrator. Said third arbitrator shall, to the extent
practicable, have special competence and experience with the subject matter
under consideration. An arbitrator so appointed shall have full authority to
act pursuant to this Article. No arbitrator, whether chosen by a party
hereto or appointed, shall have the power to amend or add to this Agreement.
The party calling the arbitration shall, within twenty (20) days after
either the failure of the other party to name an arbitrator, or the
appointment of the third arbitrator, as the case may be, fix, in writing, a
time and a place of hearing, to be not less than twenty (20) days from
delivery of notice to the other party. The arbitrator or arbitrators shall,
thereupon, proceed promptly to hear and determine the controversy pursuant
to the then current rules of the American Arbitration Association for the
conduct of commercial arbitration proceedings, except that if such rules
shall conflict with the then current provisions of the laws of the
Commonwealth of Massachusetts relating to arbitration, such conflict shall
be governed by the then current provisions of the laws of the Commonwealth
of Massachusetts relating to arbitration. Such arbitrator or arbitrators
shall fix a time within which the matter shall be submitted to him or them
by either or both of the parties, and shall make his or their deci on,
within , (IO) final submission to him or them unless, for good reasons to be
certified by him or them in
- -27-
writing, he or they shall extend such time. The decision of the single
arbitrator, or two of the three arbitrators, shall be taken as the
arbitration decision. Such decision shall be made in writing and in
duplicate, and one copy shall be delivered to each of the parties. The
arbitrator or arbitrators by his or their award shall determine the manner
in which the expense of the arbitration shall be bome, except that such
party shall pay the costs of its own counsel. Each party shall accept and
abide by the decision. The award of the arbitml tribunal shall be firw,
except as otherwise provided by applicable law. Judgment upon such award
may be entered by the prevailing party in any court having jurisdiction
thereof, or application may be made by such party to any such court for
judicial acceptance of such award and an order of enforcement.
12.3 Binding Award
This agreement to arbitrate and any award made hereunder shall be binding
upon the successors and assigns and any trustee or receiver of each Party.
12.4 Continued Performance
No dispute shall interfere with the Parties' continued fulfillment of their
obligations under this Agreement, the Power Supply Agreements and the
Ownership Agreements pending the decision of the arbitrator(s).
ARTICLE 13
MISCELLANEOUS
13.1 Assignment; Successors and Assigns.
This Agreement shall inure to the benefit of and bind the respective
successors and assigns of the Parties, including any successor to any Party
by consolidation, merger, or acquisition of all or substantially all of the
assets of such Party; 12rovided, however, that no assignment by either Party
(or any successor or assignee thereof) of its rights and obligations
hereunder shall be made or become effective without the prior written
consent of the other Party
in each case obtained, which consent may be withheld in such other's sole
discretion;
provided, that the Buyer or any assignee of Buyer may assign this Agreement
(a) as collateral security to any lender from time to time providing
financing to Buyer in connection with the transactions contemplated hereby,
so long as neither the Buyer nor the Guarantor is relieved of any obligation
or liability hereunder as a result of such assignment; and (b) to any
Affiliate of Buyer so long as the security requirements of Section 9.1
continue to be satisfied in connection therewith, in which case such
assigning party shall be released of duties and responsibilities hereunder.
The Company shall execute and deliver such documents as may be reasonably
necessary to accomplish any such assignment, transfer, pledge or other
disposition of rights and interests to any such lender so long as the
Company's rights under this Agreement are not thereby materially altered,
amended, diminished or otherwise impaired. Any assignments by either Party
shall be in such form as to assure that such Party's obligations under this
Agreement will be honored fully and timely by any succeeding party.
This Section 13.1 shall not limit or otherwise
restrict in any manner whatsoever Buyer's ability to resell or enter into
any other agreement with respect to the sale of the Capacity and Associated
Energy.
- -28-
13.2 Notices
All notices, requests and other communications hereunder (herein collectively
a "notice" or "notices") shall be deemed to have been duly delivered, given
or made to or upon any Party if in writing and delivered by hand against
receipt, or by certified or registered mail, postage prepaid, return receipt
requested, or to a courier who guarantees next business day delivery or sent
by telecopy (with confirmation) to such Party at its address set forth below
or to such other address as such party may at any time, or from time to
time, direct by notice given in accordance with this Section 13.2.
IF TO BUYER:
Select Energy, Inc.
107 Selden Street
Berlin, CT 06037
Attn: Senior Vice President - Wholesale Marketing
IF TO THE COMPANY:
Fitchburg Gas and Electric Light Company
6 Liberty Lane West
Hampton, NH 03842
Attn: Senior Vice President - Energy Markets
The date of delivery of any such notice, request or other communication
shall be the earlier of (i) the date of actual receipt or (ii) three (3)
business days after such notice, request or other communication is sent by
certified or registered mail, (iii) if sent by courier who guarantees next
business day delivery, the business day next following the day of such
notice, request or other it ffMIl@l f6 tm"urier tw (iv) the day wtunity
telempied (vaith confirmation mailed to the other Party).
13.3 Governing Law.
The rights and obligations of the Parties shall be construed and interpreted
in accordance with the substantive law of the Commonwealth of Massachusetts
without giving effect to its principles for choice of law.
13.4 Confidentialy.
Each Party shall keep confidential, and shall not disseminate to any third
party or use for any other purpose (except with the written authorization of
the other Party), any information r from the other that is confidenti or
propri@ kwl 1*@ ly compelled by deposition, inquiry, request for documents,
subpoena, request for documents, subpoena, civil investigative demand or
similar process, or by
- -29-
order of a court or tribunal of competent jurisdiction (so long as the Party
required to provide such disclosure so advisu, the other Party as soon as
practicable and seeks an appropriate protective order prior to disclosure);
or in order to comply with applicable rules or requirements of any stock
exchange, government department or agency or other regulatory authority, or
by requirements of any securiti law or regulation or other legal
requirement. The Parties shall reasonably coordinate all publicity
specifically relating to the transactions contemplated hereunder. This
Agreement shall supersede the confidentiality agreement dated April 29,
1998, between the Company and an Affiliate of the Buyer.
13.5 No Partnership
Nothing contained in this Agreement shall be construed to create a
partnership, joint venture or other relationship that may invoke fiduciary
obligations between the Parties.
13.6 Fees and Expenses
Except as otherwise provided herein, each of the Company and Buyer shall pay
all fees and expenses incurred by, or on behalf of, such Party in connection
with, or in anticipation of, this Agreement and the consummation of the
transactions contemplated hereby.
13.7 Captions
The captions to sections throughout this Agreement are intended solely to
facilitate reading and reference to all sections and provisions of this
Agreement. Such captions shall not affect the meaning or interpretation of
this Agreement.
13.8 Entire Agreement
This Agreement sets forth the entire agreement of the Parties with respect
to the subject matter herein and takes precedence over all prior
understandings. This Agreement may not be amended except by a writing
signed by the Parties.
13.9 Severability
The invalidity or unenforceability of any provisions of this Agreement shall
not affect the other provisions hereof. If any provision of this Agreement
is held to be invalid, such provisions shall not be severed from this
Agreement; instead, the scope of the rights and duties created thereby shall
be reduced by the smallest extent necessary to confon-n such provision to
the applicable law, preserving to the greatest extent the intent of the
Parties to create such rights and duties as set out herein. If necessary to
preserve the intent of the Parties, the Parties shall negotiate in good
faith to amend this Agreement, adopting a substitute provision for the one
deemed invalid or unenforceable that is legally binding and enforceable.
- -30-
THIS ASSUMPTION AND ASSIGNMENT AGREEMENT (this "Assignment"), dated as of
the 17th day of May, 1999, is made between FITCHBURG GAS AND
ELECTRIC LIGHT COMPANY, a Massachusetts corporation ("Assignor") and SELECT
ENERGY, INC., a Connecticut corporation ("Assignee").
RECITALS
A. Assignor and Public Service of New Hampshire ("PSNH") are parties to
a Sales Agreement with respect to System Capacity and Energy dated June 1,
1992 (the "PPA"), a copy of which is attached hereto as Exhibit A, pursuant
to which Assignor has agreed to purchase and PSNH has agreed to sell certain
energy and capacity to Assignor, on terms and conditions more particularly
set forth in the PPA.
B. Assignor and Assignee have entered into an Entitlement Sale and
Administrative Services Agreement of even date herewith (the "Entitlement
Agreement"), pursuant to which, among other things, Assignor has agreed to
transfer to Assignee certain entitlements under other power supply
agreements and ownership agreements, on terms and conditions set forth
therein.
C. In connection with, and as a condition of, the consummation of the
transactions contemplated under the Entitlement Agreement, Assignor has
agreed to twsfer and assign to Assignee all of its right to, and interest
in, and Assignee has agreed to assume all of Assignor's obligations under
the PPA.
D. The transactions contemplated under this Assignment shall not be
effective until the effectiveness of the transactions contemplated under the
Entitlement Agreement.
NOW, THEREFORE, in consideration of the foregoing, the parties agree as
follows:
I. Assigrunent and Assumption. Assignor hereby irrevocably conveys,
assigns, sets over, transfers and delivers to Assignee, its successors and
assigns, to have and to hold for its and their own use and benefit forever,
all of Assignor's right, title and interest in and to the PPA. Assignee
hereby accepts the foregoing assignment and irrevocably assumes and agrees
to pay and perform as and when due all of Assignor's obligations and
liabilities to PSNH under the PPA.
2. Representation. Assignor represents and warrants to Assignee that a
true and correct copy of the PPA is attached hereto as Exhibit A, including,
without limitation, any and all amendments thereto, and Assignor has not
taken or failed to take any action which would result in any other
modification or amendment of the PPA, or the waiver of any material term of
thereof.
3. Effectiveness. The obligations of the parties under this
Assigment shall not be effective until the later to occur of:
(a) approval of the assignment contemplated hereunder by the Federal
Energy Regulatory Commission ("FERC") and any state agencies having
jurisdiction. Each party shall promptly prepare and file all necessary
documentation with FERC and such agencies to obtain such approval and shall
cooperate with each other and PSNH in connection therewith; or
(b) the occurrence of the Effective Date under, and as defined in, the
Entitlement Agreement. Termination of the Entitlement Agreement prior to
the Effective Date shall result in the termination of this Assigrunent
without further action by the parties or PSNH, in which case Assignor shall
remain the party to the PPA as though this Assignment never existed. Either
party shall provide notice to PSNH regarding the occurrence or nonoccurrence
of the Effective Date, as appropriate.
4. Further Assurences. The parties shall execute and deliver such
other documents and instruments and take such other action as may be
reasonably necessary, proper or advisable, to the extent permitted by
applicable law, to fulfill the purpose and intent of this Assignment.
5. Miscellaneous.
(a) This Assigrunent shall be binding upon Assignor and Assignee and their
respective successors and assigns. Assignee shall be entitled to assign its
rights hereunder to any person without the consent of Assignor.
(b) This Assignment shall be construed in accordance with and governed
by the laws of the Commonwealth of Massachusetts without application of
principles of conflicts of law. In the event that any one or more of the
provisions contained in this Assignment should be held invalid, illegal or
unenforceable in any respect, the validity, legality and %*rceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
(c) Neither this Assigrunent nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the parties hereto. The failure to exercise any right
hereunder shall not constitute a waiver thereof or otherwise preclude any
other or further exercise thereof, or the exercise of any other right.
(d) The headings to sections have been inserted for convenience only and
shall have no substantive bearing on this Assignment.
(e) This Assignment may be executed in two or more counterparts, each
of which shall constitute an original but all of which, taken together,
shall constitute but one contract.
Dated as of the date first written above.
FITCHBURG GAS AND ELECTRIC SELECT ENERGY, INC.
LIGHT COMPANY
James G. Daly Frank P. Sabatino
Senior Vice President Senior Vice President
Power Marketing
The undersigned hereby consents to the foregoing assignment and assumption
and acknowledges that upon the effectiveness of the assigrunent in accordance
with Section 3 above, Assignee shall be solely liable for Assignors
obligations under the PPA, Assignor being hereby fully and irrevocably
released and discharged by the undersigned from any and all obligations to
the undersigned under, or arising out of, the PPA.
PUBLIC SERVICE COMPANY OF
NEW HAMPSHIRE
By:
Name: Robert A. Bersak
Title: Assistant General Counsel & Assistant Secretary
Exhibit 10.15
PURCHASE AND SALE AGREEMENT
Dated as of October 30,1998
Between
THE UNITED ILLUMINATING COMPANY
and
FITCHBURG GAS AND ELECTRIC LIGHT COMPANY
PURCHASE AND SALE AGREEMENT
AGREEMENT dated as of October 30, 1998, between THE UNITED
ILLUMINATING COMPANY, a corporation specially chartered by the
State of
Connecticut ("UI"), and F1TCHBURG GAS AND ELECTRIC LIGHT
COMPANY, a
Massachusetts corporation (" Fitchburg").
WTNESSETH:
WHEREAS, under an Agreement dated as of August 1, 1975, as
amended, (the "Joint Ownership
Agreement"), UI, Fitchburg, City of Holyoke, Massachusetts Gas
and Electric Department
(" Holyoke"), North Attleborough Electric Department (" North
Attleborough"), and Littleton
Electric Department (" Littleton")are each Participants in New
Haven Harbor Station, with
undivided ownership interests of 93.705%, 4.5%, 1.12%, 0.4%and
0.225%, respectively;
WHEREAS, Section 23 of the Joint Ownership Agreement requires
thaf before any Participant
in New Haven Harbor Station sells all or any portion of its
Ownership Share, the other
Participants shall have first been afforded an opportunity to
purchase on equal or better terms
than those offered to the non-Participant, and informed of the
proposed terms and conditions of
the sale and the date, not less than twelve months born the date
of notice, on which it is proposed
to consummate the sale;
WHEREAS, legislation recently enacted in the Commonwealth of
Massachusetts and the State
of Connecticut adopts the public policy of restructuring the
electric utility industry, including the
divestiture of generating units by electric companies;
WHEREAS, UI and Fitchburg wish to proceed expeditiously to comply
with the divestiture
requirements of such legislation; and
WHEREAS, to avoid the delay that would result from complying with
Section 23 of the Joint
Ownership Agreement, UI is willing to purchase, and Fitchburg is
willing to sell, Fitchburg's
4.5% Ownership Share in New Haven Harbor Station (the "Fitchburg
Ownership Share").
NOW, THEREFORE, in consideration of the premises and covenants
herein contained, and
other good and valuable consideration, it is agreed between the
parties hereto for their mutual
benefit as follows:
SECTION 1. SALE AND CONVEYANCE OF FITCHBURG OWNERSHIP SHARE.
(a)Fitchburg agrees to sell, assign and convey to UI, and UI
agrees to purchase and acquire
from Fitchburg, the Fitchburg Ownership Share, for a purchase
price (the "Purchase Price")
equal to the greater of(i)Five Million Dollars (S5,000,000), or
(ii)the UI Price (as determined in
accordance with Section l(b)).
(b)The "Ui Price" shall be determined as follows: UI and
Wisvest-Comecticut, LLC
("Wisvest")have entered into a Purchase and Sale Agreement,
dated October 2, 1998
(the "Wisvest Contract")for the sale by UI of its
93.705% Ownership Share in New Haven
Harbor Station. The UI Price shall be the Wisvest Contract price
of $110,726,OOO for the portion
of UI's Ownership Share being sold, adjusted in accordance with
the Wisvest Contract, and
actually received by UI at the closing of the purchase and sale
thereof, multiplied by 4.8%
[0.045/0.93705].
(c)The Purchase Price shall be payable by UI to Fitchburg in
cash, by wire transfer of
immediately available funds, on the closing date of the sale of
UI's Ownership Share in New
Haven Harbor Station (the "Time of Sale"). At such closing,
Fitchburg shall deliver to UI such
instruments of transfer as UI shall reasonably require in order
to vest in UI good and valid title to
Fitchburg's Ownership Share.
(d)Upon the closing at the Time of Sale, UI shall assume and be
responsible for (i)all
obligations and liabilities related to, arising from or
associated with ownership, use or operation
of Fitchburg's Ownership Share from and after the Time of Sale,
and (ii)the following
obligations and liabilities of Fitchburg if and to the extent
such obligations and liabilities arose
prior to the Time of Sale (collectively, "UI's Liabilities"):
(i) (1)responsibility and liability for all Environmental
Conditions and
Remediation thereof; (2)responsibility and liability for all
Hazardous Substances, and
Remediation thereof, present in, on or incorporated into the
improvements, buildings, structures,
or equipment which constitute New Haven Harbor Station, or which
are othervise located on the
site of New Haven Harbor Station, including (I)liability for
bodily injury to any person to the
extent arising from exposure to such Hazardous Substances or
Remediation thereof; (II)liability
for any Hazardous Substances present in, on, under or about, or
incorporated into any drums,
equipment, or debris that were disposed of, discarded or
abandoned and buried in the ground at
the site of New Haven Harbor Station, or any portion thereof
(but specifically excluding any
Hazardous Substances present in, on, under or about, or
incorporated into any drums, equipment,
or debris that were disposed of, discarded, abandoned or buried
in the ground at, or any activities
conducted at or related to, any Off-Site Disposal Location);
(III)liability arising from the
ownership, possession, use or operation of equipment,
structures, surface impoundment's or any
other improvement at New Haven Harbor Station used for the
treatment, storage, handling or
disposal of Hazardous Substances; and (IV)any obligation to
decommission, deactivate,
dismantle, demolish or close New Haven Harbor Station or any
portion thereof.
(ii)Obligations to comply with permits, licenses and approvals
obtained or
required in connection with New Haven Harbor Station, including
the obligation to cure any
violation or default thereunder, irrespective of whether such
violation or default arose or
occurred prior to the Time of Sale, but excluding any fines or
monetary penalties levied by a
Governmental Authority as a result of any violation or default
that occurred or occurs after June
30, 1998 and prior to the Time of Sale.
(iii)Obligations under any pending applications by the joint
owners of New
Haven Harbor Station for new permits, variances, certificates,
licenses, consents, authorizations
and approvals relating thereto, or any amendments,
modifications, extensions or renewals of any
existing permits, variances, certificates, licenses, consents,
authorizations and approvals, to the
extent UT desires to proceed with such applications.
(iv)obligations under aly leases, licenses, permits or contracts
relating to New
Haven Harbor Station relating to the period from and after the
Time of Sale.
(v)liabilities under state and federal laws relating to
employment matters with
respect to any employees at New Haven Harbor Station arising out
of matters that occur or are
alleged to have occurred on or after the Time of Sale and that
are first asserted on or after the
Time of Sale.
(vi)All other obligations and liabilities expressly allocated to
UI in this
Agreement.
(e)Nothing in this Agreement shall be deemed to limit in any way
any claims UI
may have against Fitchburg or which Fitchburg may have against
UI under the Joint Ownership
Agreement relating to the period prior to the Time of Sale,
except as otherwise expressiy
provided herein.
(f)For all purposes of this Agreement, the following terms shall
have the indicated
meanings:
"Environmental Conditions" means the presence of Hazardous
Substances on, over,
under or about the site of New Haven Harbor Station, any portion
thereof or any Off-Site
Disposal Location, or the soil or groundwater or both at such
site, any portion thereof or any OffSite
Disposal Location, whether before or after the Time of Sale,
including any-migration of such
Hazardous Substances through soil or groundwater or both before
or after the Closing, including
migration to a location off such site. Environmental Conditions
include any Hazardous
Substances present in, on or incorporated into any drums,
equipment, or debris that are or were
discarded or abandoned and buried in the ground at such site,
any portion thereof or any Off-Site
Disposal Location, prior to or after the Time of Sale.
"Environmental Laws" means any applicable federal, state,
regional or local statutes,
regulations, ordinances, codes, permits, orders, or published
administrative or judicial decisions
relating to (i)air emissions, hazardous materials, storage, use
and release to the environment of
Hazardous Substances, generation, treatment, storage and
disposal of hazardous wastes,
wastewater discharges and similar environmental matters; or
(ii)the impact of the matters
described in the preceding clause upon human health or the
environment, including, without
limitation, those matters governed by the Comprehensive
Environmental Response,
Compensation and Liability Act (42 U. S. C. 9601 et seq.), the
Hazardous Materials
Transportation Act (42 U. S. C. 1801 et seq.), the Resource
Conservation and Recovery Act (42
U. S. C. 6901 et seq.), the Federal Water Pollution Control Act
(33 U. S. C. 1251 et seq.), the
Clean Air Act (42 U. S. C. 7401 et seq.), the Toxic Substance
Control Act (15 U. S. C. 2601 et
seq.), the Oil Pollution Act (33 U. S. C. 2701 et seq.), the
Occupational Safety and Health Act
(42 USC. 651 et seq.), the Emergency Planning and Community
Right-to-Know Act (42
U. S. C. 11001 et seq.), and the Atomic Energy Act (42 U. S. C.
2011 et seq.), all as amended
from time to time.
"Hazardous Substances" means any chemical, material or substance
that is listed or
regulated under applicable Environmental Laws as a "hazardous"
or "toxic" substance or waste,
or as a "contaminant", or is otherwise listed or regulated under
applicable Environmental Laws
because it poses a threat to human health or the environment.
"Off-Site Disposal Location" means a disposal location not
located on the New Haven
Harbor Station site, used by the joint owners of New Haven
Harbor Station to dispose of
Hazardous Substances or other materials generated by New Haven
Harbor Station.
"Remediation" means any or all of the following activities to
the extent they relate to or
arise from the presence of Hazardous Substances in the soil or
groundwater or both: (i)
monitoring, investigation, cleanup, containment, remediation,
removal, mitigation, response or
restoration work required by Environmental Laws; (ii)obtaining
any permits, consents,
approvals or authorizations of any Governmental Authority
necessary to conduct any such work;
(iii)preparing and implementing any plans or studies for such
work; (iv)obtaining a written
notice from a Governmental Authority or a Licensed Environmental
Professional with
jurisdiction over the New Haven Harbor Station site or any
portion thereof under Environmental
Laws that no material additional work is rquired by such
Governmental Authority or a Licensed
Environmental Professional; and (v)any other activities
reasonably determined by UI to be
necessary or appropriate or required under Environmental Laws to
address the presence of
Hazardous Substances in the soil or groundwater or both at the
New Haven Harbor Station site or
any portion thereof or at a location off such site to which
Hazardous Substances from such site
have migrated.
"Governmental Authority" means any federal, state, local or
other governmental,
regulatory or administrative agency, governmental commission,
department, board, subdivision,
court, tribunal, or other governmental arbitrator, arbitral body
or other authority, but excluding
Wisvest and any subsequent owner of the New Haven Harbor Station
site (if otherwise a
Governmental Authority under this definition).
"Licensed Environmental Professional*'has the meaning given in
Connecticut General
Statutes 22a-133v.
SECTION 2. COMPLIANCE WITH JOINT OWNERSHIP AGREEMENT.
Fitchburg agrees to cooperate with UI and U1 agrees to cooperate
with Fitchburg in complying
with all requirements of the Joint Ownership Agreement in
connection with the transactions
contemplated by this Agreement, including but not limited to the
requirement, if any, in Section
23 thereof that Fitchburg give notice to Holyoke, North
Attleborough and Littleton of the proposed terms and conditions of the
sale provided for in this
Agreement. Fitchburg agrees to
give such notice at the time reasonably requested by UI.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF FITCHBURG.
Fitchburg represents and warrants to UI as follows:
(i)it is a corporation duly organized, validly existing and in
good standing under the laws of the
Commonwealth of Massachusetts, has the corporate power to own
its assets and to transact the
business in which it is engaged, and is duly qualified as a
foreign corporation and in good
standing under the laws of each jurisdiction in which the
conduct of its business or the ownership
of its assets requires such qualification;
(ii)it has good and valid title to the Ownership Share free of
any mortgage, pledge, lien,
encumbrance or security interest created or suffered by it,
except for any such liens and
encumbrances created pursuant to the Joint Ownership Agreement
or which encumber New
Haven Harbor Station generally (the "Permitted Exceptions"). The
term "good and valid title"
required to be furnished by Fitchburg shall mean marketable
title subject to Permitted Exceptions
and the marketability thereof shall be determined in accordance
with the Standards of Title of the
Connecticut Bar Association now in force;
(iii)it has the corporate power to execute, deliver and perform
this Agreement, and, upon the
receipt of the Board of Directors approval contemplated by
Section 6 hereof, will have taken all
corporate action necessary to authorize the execution, delivery
and performance of this
Agreement;
(iv)the execution, delivery and performance of this Agreement
(A)will not violate any
provision of any applicable law or regulation or of any order,
writ, judgment or decree of any
court, arbitrator, or governmental instrumentality applicable to
Fitchburg-or to which Fitchburg
is a party, (B)will not violate any provision of its Articles of
Organization or bylaws, and (C)
will not violate any provision of, or constitute a default
under, or result in the creation or
imposition of any lien, charge or encumbrance on or security
interest in the Fitchburg Ownership
Share pursuant to the provisions of any mortgage, indenture,
contract agreement or other
undertaking to which it is a party or which is binding upon it
or upon any of its assets;
(v)upon securing the governmental approvals and third party
consents contemplated by Section
6 hereof, it will have obtained all necessary consents, permits,
licenses and approvals of
governmental authorities required under federal, state or local
law to authorize the execution,
delivery and performance of this Agreement; and
(vi)this Agreement constitutes the legal, valid and binding
obligation of Fitchburg, enforceable
in accordance with its terms, except as such enforceability may
be limited by applicable
bankruptcy, insolvency or other laws affecting the enforcement
of creditors'rights generally.
SECTION 4. LIMITATIONS ON FITCHBURG REPRESENTATIONS AND WARRANTIES
UI acknowledges that it is the majority owner and the operator
of New Haven Harbor Station and
that Fitchburg has no special knowledge with respect thereto.
Fitchburg makes no
representations or warranties regarding New Haven Harbor Station
except as expressly set forth
herein, and in particular makes no representations or warranties
with respect to any matters
concerning the operation or Environmental Conditions of New
Haven Harbor Station.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF UI.
UI represents and warrants as follows:
(i)it is a corporation duly organized, validly existing and in
good standing under the laws of the
State of Connecticut, has the corporate power to own its assets
and to transact the business in
which it is engaged, and is duly qualified as a foreign
corporation and is in good standing under
the laws of each jurisdiction in which the conduct of its
business or the ownership of its assets
requires such qualification;
(ii)it has the corporate power to execute, deliver and perform
this Agreement, and, upon the
receipt of the Board of Directors approval contemplated by
Section 6 hereof, will have taken all
corporate action necessary to authorize the execution, delivery
and performance of this
Agreement;
(iii)the execution, delivery and performance of this Agreement
(A)will not violate any
provision of any applicable law or regulation or of any order,
writ, judgment or decree of any
court, arbitrator, or governmental instrumentality applicable to
UI or to which UI is a party, (B)
will not violate any provision of its articles of incorporation
or bylaws, and (C)will not violate
any provision of, or constitute a default under, or result in
the creation or imposition of any lien,
charge or encumbrance on or security interest in, its Ownership
Share pursuant to the provisions
of any mortgage, indenture, contract, agreement or other
undertaking to which it is a party or
which is binding upon it or upon any of its assets;
(iv)upon securing any governmental approvals and third party
consents contemplated by
Section 6 hereof, it will have obtained all necessary contracts
and agreements with and consents,
permits, licenses and approvals of governmental authorities
required under federal, state or local
law or regulation to authorize the execution, delivery and
performance by it of this Agreement;
and
(v)this Agreement constitutes the legal, valid and binding
obligation of UI, enforceable in
accordance with its terms, except as such enforceability may be
limited by applicable
bankruptcy, insolvency or other laws affecting the enforcement
of creditors'rights generally.
SECTION 6. DOCUMENTS DELIVERED AT TIME OF SALE
(a)At the Time of Sale Fitchburg shall deliver to UI the
following:
(i)duly executed Quitclaim Deeds and bills of sale in form and
substance reasonably acceptable
to both parties conveying and transferring to UI the Fitchburg
Ownership Share.
(ii)an opinion of counsel for Fitchburg, addressed to UI, dated
the Time of Sale and to the effect
that:
(A)Fitchburg is a corporation duly organized, validly existing
and in good standing under the
laws of the Commonwealth of Massachusetts, has the corporate
power to own its assets and to
transact the business in which it is engaged, and is duly
qualified and in good standing as a
foreign corporation authorized to do business in each
jurisdiction where a failure so to qualify
would have a materially adverse effect on the business or
operations of Fitchburg;
(B)Fitchburg has full corporate power to execute, deliver and
perform this Agreement and the
instruments conveying the Fitchburg Ownership Share to UI, and
has taken all necessary
corporate action to authorize the execution, delivery and
performance of this Agreement and
such instruments;
(C)the execution, delivery and performance of this Agreement and
such instruments by
Fitchburg (1)will not violate any provision of any applicable law
or regulation or of any order,
writ, judgment or decree of any court, arbitrator or governmental
instrumentality applicable to
Fitchburg or to which Fitchburg is a party, and (2)will not
violate any provision of the articles of
incorporation or bylaws of Fitchburg;
(D)Fitchburg has obtained all necessary contracts and agreements
with and consents, permits,
licenses and approvals of governmental authorities then required
under law to authorize the
execution, delivery and performance of this Agreement and the
instruments of conveyance by
Fitchburg;
(E)this Agreement has been duly authorized, executed and delivered
by Fitchburg and
constitutes the legal, valid and binding obligation of Fitchburg
enforceable against it in
accordance with its terms, except as enforceability may be
limited by applicable bankruptcy,
insolvency or other laws affecting the enforcement of
creditors'rights generally or by general
principles of equity; and the instruments of conveyance are in
proper form to convey to UI good
and valid title to the Fitchburg Ownership Share.
(iii)such title affidavits as a title company may require in
order to remove exceptions for
mechanics lien claims.
(iv)such certificates and other documents as UI shall reasonably
request.
(b)At the Time of Sale UI shall deliver to Fitchburg the
following:
(i)The Purchase Price in immediately available funds, by wire
transfer to such account as
Fitchburg shall have specified.
(ii)An opinion of counsel for UI, addressed to Fitchburg, dated
the Time of Sale and to the
effect that:
(A)UI is a corporation duly organized, validly existing and in
good standing under the laws of
the State of Connecticut, has the corporate power to own its
assets and to transact the business in
which it is engaged, and is duly qualified and in good standing
as a foreign corporation
authorized to do business in each jurisdiction where a failure
so to qualify would have a
materially adverse effect on the business or operations of UI;
(B)UI has full corporate power to execute, deliver and perform
this Agreement and has taken all
necessary corporate action to authorize the execution, delivery
and performance of this
Agreement;
(C)the execution, delivery and performance of this Agreement by
UI (1)will not violate any
provision of any applicable law or regulation or of any order,
writ, judgment or decree of any
court, arbitrator or governmental instrumentality applicable to
UI or to which UI is a party, and
(2)will not violate any provision of the articles of
incorporation or bylaws of UI,
(D)UI has obtained all necessary contracts and agreements with
and consents, permits, licenses
and approvals of governmental authorities then required under
law to authorize the execution,
delivery and performance of this Agreement by UI;
(E)this Agreement has been duly authorized, executed and
delivered by UI and constitutes the
legal, valid and binding obligation of UI enforceable against it
in accordance with its terms,
except as enforceability may be limited by applicable
bankruptcy, insolvency or other laws
affecting the enforcement of creditors'rights generally or by
general principles of quity.
(C)Closing costs, conveyance and transfer taxes, property taxes,
fuel and spare parts in
inventory shall, to the extent not automatically adjusted for in
the determination of the UI Price,
be apportioned between UI and Fitchburg in the same manner that
such items are apportioned
between seller and buyer in the Wisvest Contract.
(iii)Such certificates and other documents as Fitchburg shall
reasonably request.
SECTION 7. CONDITIONS TO THE OBLIGATIONS OF FITCHBURG AND
UI UNDER THIS AGREEMENT.
(a)The obligation of Fitchburg to consummate the transactions
contemplated hereby is subject
to the satisfaction of the following conditions precedent:
(i)An order from the Massachusetts Department of
Telecommunications and Energy approving
the sale of the Fitchburg Ownership Share in form and substance
reasonably acceptable to
Fitchburg, which order shall be final and not subject to any
actual or potential appeal or
rehearing;
(ii)The consent of the holders of Fitchburg outstanding
indebtedness, which consent Fitchburg
agrees to use reasonable efforts to obtain as soon as practicable
after the date hereof; and
(iii)The waiver by Holyoke, North Attleborough and Littleton of
their first-refusal rights, if any,
with respect to the Fitchburg Ownership Share under Section 23
of the Joint Ownership
Agreement or otherwise.
(b)The obligation of UI to consummate the transactions
contemplated hereby is subject to the
satisfaction of the following condition precedent:
(i)The waiver by Holyoke, North Attleborough and Littleton of
their first-refusal rights, if any,
with respect to the Fitchburg Ownership Share under Section 23 of
the Joint Ownership
Agreement or otherwise.
SECTION 8. TERMINATION.
(a)This Agreement may be tetminated by either party, upon written
notice to the other party, at
any time and without any liability of either party to the other,
in the event that
(i)any of the conditions to the obligations of the parties
hereunder set forth in Section 7 hereof
are not satisfied on or before December 15,1999, unless such
conditions are waived by the party
whose obligations are conditioned, or satisfied after such date
but before notice of termination of
this Agreement is delivered by one party to the other; or
(b)If this Agreement is terminated by either party in accordance
with Section 8(a), and if at the
time of such termination UI has not consummated the sale to
Wisvest, then Fitchburg hereby
waives its right of first refusal under Section 23 of the Joint
Ownership Agreement or otherwise,
with respect to such sale to Wisvest.
(c)If this Agreement is terminated by either party in accordance
with Section 8(a), and if at the
time of such termination UI has contracted but not consummated a
purchase of one or more of
the Ownership Shares of Holyoke, North Attleborough and Littleton,
then Fitchburg hereby
waives its right of first refusal, if any, under Section 23 of the
Joint Ownership Agreement or
othewise, with respect to such purchase(s).
SECTION 9. FURTHER ASSUR4NCES.
From time to time, at the request of UI and without further
consideration, Fitchburg will execute
and deliver such additional instruments of conveyance, transfer
and assignment and take such
other action as UI may reasonably request in order to more
effectively convey, transfer and
assign to or vest in UI the ownership of the Fitchburg Ownership
Share.
SECTIOX 10. ENVIRONMENTAL MATTERS
(a) UI acknowledges that (A)Environmental Conditions exist with
respect to the
presence of Hazardous Substances at the New Haven Harbor
Station site or in connection with
the assets at such site, (B)the economic and legal consequences
of the environmental condition
of New Haven Harbor Station and its site, including, without
limitation, Environmental
Conditions, have been the subject of negotiation between the
parties, and the Purchase Price
reflects any actual or potential environmental impairment
whether known or unknown, fixed or
contingent, and (C)Fitchburg has not made any representation or
warranty, whether express or
implied, with respect to any environmental, health or safety
matter, including natural resources,
related in any way to New Haven Harbor Station and its site or
to this Agreement or its subject
matter.
(b)From and after the Time of Sale, UI shall assume all
responsibility and liability
for, and Fitchburg shall have no responsibility or liability
for, any matter within the scope of
Section 1 (d).
(c) UI agrees that it is UI's sole and exclusive responsibility
to comply, or ensure
compliance, with any requirement for executing all required
forms and making all required
submissions in connection with the Transfer Act (Connecticut
General Statutes 22a-134 et seq.
and all regulations and administrative or judicial decisions
thereunder), including without
limitation any and all required investigation or Remediation of
Hazardous Substances released at
or emanating from the New Haven Harbor Station and the payment
of all transfer fees due the
Connecticut Department of Environmental Protection and all other
related fees or costs.
(d)If UI undertakes any activities affecting soil or groundwater
or both at the New
Haven Harbor Station site or any portion thereof (including the
decommissioning, dismantling or
removal of any improvements, any improvement or development
activities at such site or any
portion thereof, or any extraction, excavation or removal of any
soil or groundwater or both at
such site or any portion thereof), or undertakes any
interactions with any Governmental
Authorities with jurisdiction over such site or any portion
thereof under Environmental Laws, UI
shall: (A)comply with all applicable Environmental Laws;
(B)adhere to prudent engineering
practices and procedures; and (C)exercise due care in connection
with any disruption,
disturbance or excavation of soil or groundwater or both known
to be contaminated with any
Hazardous Substances and the handling, removal and disposal of
any such contaminated soil or
groundwater or both.
SECTION 11. INDEMNIFICATION
(a) Fitchburg will indemnify, defend and hold harmless UI and its
affiliates, and each
of their officers, directors, employees, partners, attorneys,
agents and successors and assigns
(collectively, the "Purchaser Group"), from and against all
damages, claims, losses, fines,
penalties, liabilities and expenses, including reasonable legal,
accounting and other expenses,
which arise out of or relate to the following (collectively,
"Purchaser Claims"):
(1)any breach or violation of this agreement by Fitchburg;
(2)any Third Party Claims againsi any member of the Purchaser
Group(other than the third party claims included in UI's
Liabilities)for personal injury or
property loss or damages (but only where the alleged personal
injury or property loss or
damage occurred before the Time of Sale)resulting from or
arising out of the ownership or
operation of Fitchburg's Ownership Share by Fitchburg prior to
the Time of Sale;
(3)any Third Party Claims against any member of the Purchaser
Group
resulting from or arising out of any activities conducted at or
related to, an Off-Site Disposal
Location that exist at the Time of Sale and are not included in
UI's Liabilities; and
(4)any fine or other monetary penalty levied by a Governmental
Authority as a result of a violation or default by Fitchburg
under any of the permits, licenses and
approval required for the operation of the New Haven Harbor
Station that occurred or occurs
after June 30, 1998 and prior to the Closing Date.
For all purposes of this Agreement, "Third Party Claim" means a
claim by an individual
or entity that is not a member of the Fitchburg Group or the
Purchaser Group, as the case may
be.
(b) Notwithstanding anything else contained herein, Purchaser
Claims will not
include any damages, claims, losses, fines, penalties,
liabilities and expenses with respect to
which UI expressly has agreed to provide indemnification
pursuant to Subsection (d)below, or
which UI has expressly agreed to assume pursuant to this
Agreement.
(c)The Purchaser Group will not in any event be entitled to any
punitive, incidental,
indirect special or consequential damages resulting from or
arising out of any Purchaser Claims,
including damages for lost revenues, income, profits or tax
benefits, diminution in value of, or
any other damage or loss resulting from any disruption to, or
loss of operation of New Haven
Harbor Station, except in the event of actual fraud by any
member of the Fitchburg Group,
defined below.
(d)UI will indemnify, defend and hold harmless Fitchburg and
its affiliates and each
of their officers, directors, employees, partners, attorneys,
agents and successors and assigns
(collectively, the "Fitchburg Group"), from and against all
damages, claims, losses, fines,
penalties, liabilities and expenses, including reasonable
legal, accounting and other expenses,
which arise out of or relate to the following (collectively,
"Fitchburg Claims"):
(1)any breach or violation of this Agreement by UI;
(2)any Third Party Claims against any member of the Fitchburg
Group (other
than the third party claims described in subsection
(3)below)for personal injury or
property loss or damages resulting from or arising out of the
ownership or operation of the
New Haven Harbor Station from and after the Closing, but only
where the alleged personal
injury or property damage occurred after the Closing Date;
(3)any Third Party Claims against any member of the Fitchburg
Group
resulting from or arising out of any Environmental Condition
included in UI's Liabilities
hereunder; or
(4)UT's Liabilities.
(e)Fitchburg Claims will not include any damages, claims,
losses, fines, penalties,
liabilities and expenses for which Fitchburg expressly has
agreed to provide indemnification
pursuant to Subsection (a), above.
(f)The Fitchburg Group will not in any event be entitled to any
punitive, incidental,
indirect, special or consequential damages resulting from or
arising out of any Fitchburg Claim,
including damages for lost revenues, income, profits or tax
benefits, diminution in the value or
any other damage or loss resulting from any disruption to or
loss of operation of New Haven
Harbor Station, except in the event of actual fraud by any mtmber
of the Purchaser Group.
(9)UI, FOR ITSELF AND ON BEHALF OF THE PURCHASER GROUP,
DOES HEREBY RELEASE, HOLD HARMLESS AND FOREVER DISCHARGE EACH
MEMBER OF THE FITCHBURG GROUP FROM ANY AND ALL CLAIMS,
DEMANDS, LIABILITIES (INCLUDING FINES AND CIVIL PENALTIES)OR
CAUSES OF ACTION AT LAW OR IN EQUITY (INCLUDING ANY ACTIONS
ARISING UNDER ENVIRONMENTAL LAWS), DESTRUCTION, LOSS OR DAMAGE
OF ANY KIND OR CHARACTER, WHETHER KNOWN OR UNKNOWN, TO THE
PERSON OR PROPERTY OF ANY MEMBER OF THE PURCHASER GROUP
RESULTING FROM OR ARISING OUT OF ANY HUARDOUS SUBSTANCES
PRESENT IN THE SOIL OR GROUNDWATER OR BOTH AT, UNDER, OR IN THE
NEW HAVEN HARBOR STATION SITE OR ANY PORTION THEREOF, AND ANY
MIGRATION OF SUCH HAZARDOUS SUBSTANCES IN SOIL OR GROUNDWATER
OR BOTH BEFORE OR AFTER THE CLOSING, INCLUDING AW MIGRATION OF
THOSE HAZARDOUS SUBSTANCES FROM SUCH SITE OR ANY PORTION
THEREOF TO AN OFFSITE LOCATION, EXCEPT FOR HAZARDOUS SUBSTANCES
MIGRATING AFTER CLOSING TO SOIL OR GROUNDWATER OR BOTH AT SUCH
SITE OR ANY PORTION THEREOF FROM PROPERTY OWNED OR OPERATED BY
A MEMBER OF THE FITCHBURG GROUP AND EXCEPT AS TO FITCHBURG'S
OBLIGATIONS UNDER SUBSECTION (a)ABOVE. UI HEREBY WAIVES ANY AND
ALL RIGHTS AND BENEFITS THAT IT NOW HAS, OR IN THE FUTURE MAY
HAVE CONFERRED UPON IT BY VIRTUE OF THE PROVISIONS OF ANY LAW OR
REGULATION THAT DOES OR MAY PROVIDE IN WHOLE OR IN PART AS
FOLLOWS:
A GENERAL RELEASE DOES NOT EXTEND TO
CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME
OF EXECUTING THE RELEASE, WHICH IF IF KNOWN
BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR
IN THIS CONNECTION, UI HEREBY AGREES, REPRESENTS, AND
WARRANTS THAT IT REALIZES AND ACKNOWLEDGES THAT FACTUAL
MATTERS NOW UNKNOWN TO IT MAY HAVE GIVEN OR MAY HEREAFTER
GIVE RISE TO CLAIMS THAT ARE PRESENTLY UNKNOWN,
UNANTICIPATED AND UNSUSPECTED, AND IT FURTHER AGREES,
REPRESENTS, AND WARRANTS THAT THIS RELEASE HAS BEEN
NEGOTIATED AND AGREED UPON IN LIGHT OF THAT REALIZATION AND
IT NEVERTHELESS HEREBY INTENDS TO RELEASE EACH MEMBER OF THE
FITCHBURG GROUP FROM THE CLAIMS, DEMANDS AND LIABILITIES
DESCRIBED IN THE FIRST SENTENCE OF THIS SUBSECTION (g).
NOTHING
CONTAINED HEREIN IS INTENDED OR SH4LL BE DEEMED TO RELEASE OR
OTHERWISE AFFECT THE LIABILITY OF ANY PARTY OTHER THAN A
MEMBER OF THE FITCHBURG GROUP.
FITCHBURG HEREBY ASSIGNS TO UI ANY AND ALL RIGHTS IT MAY
HAVE AGAINST PARTIES OTHER THAN MEMBERS OF THE FITCHBURG
GROUP ARISING OUT OF OR RELATING TO THE MATTERS RELEASED
HEREUNDER
(h)Subject to the terms of this Agreement and upon obtaining
knowledge of a
claim for which it is entitled to indemnity hereunder, the
Party seeking indemnification
hereunder (the "Indemnitee")will promptly notify the Party
against whom indemnification
is sought (the "Indemnitor")in writing of any damage, claim,
1oss; liability or expense that
the Indemnitee has determined has given or could give rise to
a claim hereunder. (The
written notice is referred to as a "Notice of Claim".)A Notice
of Claim will specify, in
reasonable detail, the facts known to the Indemnitee regarding
the claim. Subject to the terms
of this Agreement, the failure to provide (or timely provide)a
Notice of Claim will not affect
the Indemnitee's rights to indemnification; provided, however,
the Indemnitor is not
obligated to indemnify the Indemnitee for the increased amount
of any claim that would
otherwise have been payable to the extent that the increase
resulted from the failure to
deliver timely a Notice of Claim.
(i) The Indemnitor will defend, in good faith and at its
expense, with counsel
selected by Indemnitor after reasonable consultation with the
Indemnitee, any claim or
demand set forth in a Notice of Claim relating to a Third
Party Claim and the Indemnitee, at
its expense, may participate in the defense. If the named
parties to any such proceeding
(including any impleaded parties)include both the Indemnitee
and the Indemnitor, and if the
Indemnitor requires that the same counsel represent both the
Indemnitee and the Indemnitor,
and the representation of both parties by the same counsel
would be inappropriate due to actual or potential conflicts of interests
between them, then
the Indemnitee shall have the
right to retain its own counsel at the cost and expense of
the indemnitor. The indemnitee
cannot settle or compromise any third party claim so long as
the Indemnitor is defending it
in good faith, except that the indemnitee may settle or
compromise any claim with respect to
which it releases the Indemnitor from its indemnification
obligations hereunder. If the
Indemnitor elects not to contest a Third Party Claim, the
Indemnitee may undertake its
defense, and the Indemnitor will be bound by the result
obtained by the Indemnitee. The
Indemnitor may at any time request the Indemnitee to agree to
the abandonment of the
contest of the third party claim or to the payment or
compromise by the Indemnitor of the
asserted claim or demand. If the Indemnitee does not object
in writing within fifteen (15)
days of the Indemnitor's request, the Indemnitor may proceed
with the action stated in the
request.'If within that fifteen (15)day period the Indemnitee
notifies the Indemnitor in
writing that it has determined that the contest should be
continued, the Indemnitor will be
liable only for an amount up to the amount that the third
Party to the contested Third Party
Claim had agreed to accept in payment or compromise as of the
time the Indemnitor made
its request. This Subsection (i)is subject to the rights of
any lndemnitee's insurance carrier
that is defending the Third Party Claim.
(j)The party defending the third party claim will (a)consult
with the other party
throughout the pendency of the Third Party Claim regarding
the investigation, defense,
settlement, trial, appeal or other resolution of the Third
Party Claim; and (b)afford the other
party the opportunity to be associated in the defense of the
Third Party Claim. The parties
will cooperate in the defense of the Third Party Claim. The
Indemnitee will make available
to the Indemnitor or its representatives all records and
other materials reasonably required by
them for use in contesting any Third Party Claim (subject to
obtaining a joint defense
agreement to maintain the confidentiality of confidential or
proprietary materials in a form
reasonably acceptable to Indemnitor and Indemnitee). If
requested by the Indemnitor, the
Indemnitee will cooperate with the Indemnitor and its counsel
in contesting any Third Party
Claim that the Indemnitor elects to contest or, if
appropriate, in making any counterclaim
against the individual or entity asserting the claim or
demand, or any cross-complaint against
any individual or entity. The Indemnitor will reimburse the
Indemnitee for any expenses
incurred by Indemnitee in cooperating with or acting at the
request of the Indemnitor.
(k) As used herein, "Indemnifiable Claim" means any Purchaser
Claim or
Fitchburg Claim. Notwithstanding anything to the contrary
contained herein:
(i)The Indemnitee will take all reasonable steps to mitigate
all losses,
damages and the like relating to an Indermnifiable Claim,
including availing itself of any
defenses, limitations, rights of contribution, claims against
third persons and other rights at
law or equity, and will provide such evidence and
documentation of the nature and extent of
the Indemnifiable Claim as may be reasonably requested by the
Indemnitor. The
Indemnitee's reasonable steps include the reasonable
expenditure of money to mitigate or
otherwise reduce or eliminate any loss or expense for which
indemnification would
otherwise be due hereunder and the Indemnitor will reimburse
the Indemnitee for the
Indemnitee's reasonable expenditures in undertaking the
mitigation.
(ii)Any Indemnifiable Claim is limited to the amount of actual
damages
sustained by the lndemnitee by reason of such breach or
nonperformace, exclusive of any
consequential dangers and net of the dollar amount of(i)any
insurance proceeds receivable
by the Indernnitee or any of its affiliates from any third
party insurer with respect to the
Indemnifiable Claim, and (ii)any federal or state tax
benefits realizable by the Indemnitee or
any of its affiliates as the result of the loss related to
such breach or nonperformance.
(iii)No Party is required to indemnify the other Party
hereunder(i)arising
from any single circumstance if the amount of the
Indemnifiable Claim does not exceed
S5,OOO and (ii)unless and until the aggregate amount of all
allowable Indemnifiable
Claim(s)otherwise payable by the Indemnitor exceeds Three
Hundred Eighty-Four
Thousand Dollars ($384,000)and, in such event, the Indemnitor
is responsible for the full
amount of all Indemnifiable Claims and not only for the amount
in excess of $384,000.
(l)With respect to any Third Party Claim for Remediation, the
parties'obligations
under these Subsections (i), (j)and (k)above are subject to the
parties'rights and obligations
under Section 10 and, in the event of any inconsistency
between the parties'rights and
obligations under Section 10, on the one hand, and Subsections
(i), (j)and (k)above on the
other hand, the provisions of Section 10 shall control.
(m)The obligations of the parties set under Sections l(d), 10
and 11 shall survive
without limitation in time regardless of whether UI continues
to own all or any portion of
New Haven Harbor Station or its site; provided, however, that
in the event UI assigns this
Agreement as contemplated by Section 12(d)hereof, then UI
shall, from and after the
effective time of such assignment, be relieved of any further
obligations or liability to
Fitchburg under said Sections l(d), 10 and 11, and Fitchburg
will be deemed to have given
its prior written consent thereto for purposes of said Section
12(d):
(n)The remedies set forth in this Section 11 constitute the
sole and exclusive remedy
for any post-closing claims made for any of the matters
indemnified pursuan hereto. Each
party waives any provision of law to the extent that it would
limit or restrict the agreements
contained in this Section Il.
SECTION 12. MISCELLANEOUS.
(a)All notices and other communications required or permitted
hereunder shall be in writing
and delivered to the parties by hand, prepaid first class
mail, receipted private courier
delivery, or by facsimile with confirmation following by first
class mail, at the parties'
respective addresses set forth below:
The United Illuminating Company
157 Church Street
P. O. Box 1564
New Haven, CT 06506-090
Attention: James F. Crowe
Fitchburg Gas and Electric Light Compvly
6 Liberty Lane West
ijampton, NH 03842-I 720
Attention: James G. Daly
(b)The captions in this Agreement are included for convenience
of reference only and in no
way define or delimit any of the provisions hereof or
otherwise affect their construction or
effect.
(c)If any provision of this Agreement shall be held or made
invalid or enforceable in any
respect by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall
not be affected or impaired thereby.
(d)This Agreement may not be assigned by either party without
the prior written consent of
the other party hereto; provided, however, that this Agreement may be
assigned without
consent by UI to Wisvest or another purchaser of part or all
of UI's 93.705%Ownership
Share in New Haven Harbor Station, so long as Wisvest or such
purchaser from UI agrees to
assume in writing all obligations of UI hereunder. Any
assignment effected in accordance
with this Section 12(d)will not relieve UI of any of its
duties or obligations, or any current
or future liability, under this Agreement without the prior
written consent of Fitchburg.
(e)This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto
and their respective successors and assigns.
(f)The agreements herein set forth have been made for the
benefit of UI and Fitchburg and
their respective successors and assigns, and no other person
shall acquire or have any right
under or by virtue of this Agreement.
(g)This Agreement shall be governed by and construed and
interpreted in accordance with
the laws of the State of Connecticut, without regard to its
conflicts of laws principles.
(h)Capitalized terms not expressly defined in this Agreement,
including but not limited to
the terms "Ownership Share" and "Participant" shall have the
meanings given to those terms
in the Joint Ownership Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
agreement to be duly
executed and delivered by their duly authorized officers as
of the day and year above written,
Signed, sealed and
in the presence of:
THE UNITED ILLUMINATION COMPANY
FITCHBURG GAS AND ELECTRIC LIGHT
COMPANY
Exhibit 99.1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No.)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Unitil Corporation
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously paid:
---------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------
(3) Filing party:
---------------------------------------------------------------
(4) Date Filed:
---------------------------------------------------------------
[Unitil Logo]
March 10, 2000
Dear Fellow Shareholder,
The Annual Meeting of Common Shareholders is scheduled to be held on
Thursday, April 20, 2000, at 10:30 A.M., at the office of the Company, 6
Liberty Lane West, Hampton, New Hampshire.
Enclosed you will find a 1999 annual report, a notice of meeting, a proxy
statement and a proxy card to be used in connection with the meeting. This
year, shareholders are being asked to vote on the election of three
Directors.
We hope that you are able to attend the Annual Meeting. Your vote is
important whether you own one share or many. Whether or not you plan to be
present, we urge you to sign and promptly return the enclosed proxy card in
the envelope provided.
Thank you for your continued interest in the Company.
Sincerely,
/s/ Robert G. Schoenberger
Robert G. Schoenberger
Chairman of the Board of Directors
and Chief Executive Officer
[Unitil Logo]
NOTICE OF ANNUAL MEETING OF COMMON SHAREHOLDERS
Hampton, New Hampshire
March 10, 2000
To the Common Shareholders:
You are hereby notified that the annual meeting of common shareholders
of Unitil Corporation will be held at the office of the Company, 6 Liberty
Lane West, Hampton, New Hampshire, on Thursday, April 20, 2000, at 10:30
A.M., for the following purposes:
1. To elect three Directors.
2. To act on such other matters as may properly come before the
meeting and any adjournments thereof.
The enclosed form of proxy has been prepared at the direction of the
Board of Directors of Unitil and is sent to you at its request. The persons
named in said proxy have been designated by the Board of Directors.
Regardless of whether or not you plan to attend the meeting, you can
be sure your shares are represented at the meeting by promptly signing,
dating and returning the enclosed proxy card in the postage-paid envelope,
also enclosed. If for any reason you desire to revoke or change your proxy,
you may do so at any time before it is voted.
The Board of Directors fixed February 23, 2000 as the date for
determining holders of record of Common Stock who are thereby entitled to
notice of and to vote at this meeting and any adjournments thereof.
By Order of the Board of Directors,
Mark H. Collin
Treasurer & Secretary
[Unitil Logo]
6 Liberty Lane West
Hampton, New Hampshire 03842-1720
March 10, 2000
Proxy Statement
ANNUAL MEETING OF COMMON SHAREHOLDERS, APRIL 20, 2000
This proxy statement is furnished in connection with the solicitation
by the Board of Directors of proxies in the accompanying form for use at the
2000 annual meeting of common shareholders of Unitil Corporation ("Unitil"
or "the Company"). Each proxy can be revoked at any time before it is voted
by written notification to the Secretary of Unitil at the above address
prior to the meeting, or in person at the meeting. Every properly signed
proxy will be voted unless previously revoked.
Unitil presently has seven subsidiaries, Concord Electric Company
("CECo"), Exeter & Hampton Electric Company ("E&H"), Fitchburg Gas and
Electric Light Company ("FG&E"), Unitil Power Corp. ("Unitil Power"), Unitil
Realty Corp. ("Unitil Realty"), Unitil Resources, Inc. ("Unitil Resources")
and Unitil Service Corp. ("Unitil Service").
The annual report of Unitil for the year 1999 is enclosed herewith and
includes consolidated financial statements which are not part of this proxy
statement.
The voting securities of Unitil issued and outstanding on February 23,
2000 consisted of 4,717,022 shares of Common Stock, no par value, entitling
the holders thereof to one vote per share. Holders of Common Stock of record
on such date are entitled to notice of and to vote at the annual meeting and
any adjournments thereof. A majority of the outstanding shares of Common
Stock constitutes a quorum.
Except as set forth below, no person owns of record and, to the
knowledge of Unitil, no person owns beneficially more than five percent of
the Common Stock of Unitil which may be voted at the meeting and any
adjournments thereof.
<TABLE>
<CAPTION>
Name and Address Shares of Common Stock Percent of Shares
of Beneficial Owner Beneficially Owned Outstanding
- ------------------------------------------------------------------------
<S> <C> <C>
Charles H. Tenney II 270,964 (1) 5.74%
30 Cedar Road
Chestnut Hill, MA 02167
- ------------------------------------------------------------------------
NOTES:
<FN>
<F1> Based on information provided by Mr. Tenney. Total shares of Common
Stock owned by Mr. Tenney include 3,456 shares which are held in trust
under the terms of the Unitil Tax Deferred Savings and Investment Plan
("401(k)"). Mr. Tenney has voting power only with respect to the
shares credited to his account. (See "Other Compensation
Arrangements"). Mr. Tenney is the former Chairman and CEO and a former
Director of the Company. Mr. Tenney did not stand for reelection to
the Board of Directors in April, 1999, as a result of the age
limitation policy adopted by the Board of Directors in 1998.
</FN>
</TABLE>
The twelve Directors and the officers of Unitil as a group have
beneficial ownership as of February 23, 2000 of 91,995 shares (1.95%) of
Common Stock, of which they have direct beneficial ownership of 75,719
shares (1.61%), which excludes options to purchase 113,296 shares (2.40%)
pursuant to the exercise of those options, and indirect beneficial ownership
of 16,277 shares (0.35%). To the knowledge of Unitil, each of said Directors
and officers has voting and investment power with respect to the shares
directly owned. With regard to certain of the indirect beneficial ownership
by said group, see the footnotes to the table contained in the section of
this proxy statement entitled "As to the Election of Directors" setting
forth certain information about the Directors of Unitil.
Assuming a quorum is present, the favorable vote of a majority of the
shares of Common Stock represented and voting will be required for approval
of all matters, including the election of Directors, which may come before
the meeting.
As to the Election of Directors
--------------------------------------------------
The By-Laws of Unitil provide for a Board of between nine and fifteen
Directors divided into three classes, each class being as nearly equal in
number as possible, and each with their respective terms of office arranged
so that the term of office of one class expires in each year, at which time
a corresponding number of Directors is elected for a term of three years.
Unitil currently has twelve Directors.
The Board of Directors has a stock ownership policy of the Board that
no person be nominated as a candidate for Director for election to a second
term as part of the slate of Directors proposed by the Company unless he or
she is a beneficial owner, either directly or indirectly, of at least 1,000
shares of Unitil Common Stock. The Board of Directors also has an age
limitation policy of the Board, which has been in effect since January,
1999, that no person be nominated as a candidate for Director for reelection
as part of the slate of Directors proposed for election by the Company after
he or she has reached age 70. W. William VanderWolk, Jr. and Franklin Wyman,
Jr. will not stand for re-election this year as a result of this policy.
Information About Nominees for Directors
--------------------------------------------------
Each nominee has been a member of the Board of Directors since the
date indicated. Proxies will be voted for the persons whose names are set
forth below unless instructed otherwise. If any nominee shall be unable to
serve, the proxies will be voted for such person as may be designated by
management to replace such nominee. Each of the nominees has consented to
being named in this proxy statement and to serve if elected. Unless
otherwise indicated, all shares shown represent sole voting and investment
power.
Nominees for Directors whose terms will expire in the year 2003
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Common Stock Owned
Beneficially on
Director February 23, 2000(1)
Since Shares
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
William E. Aubuchon, III, Age 55 1999(2) 0
- -------------------------------------------------------------------
Chairman and Chief Executive Officer of W.E. Aubuchon
Company, Inc. (retail hardware company), Westminster, MA,
since 1993. Mr. Aubuchon is also a Director of the North Central
Massachusetts Chamber of Commerce, since 1991, and a
Director of the Mt. Wachusett Community College Foundation,
Inc., Gardner, MA, since 1999.
Robert G. Schoenberger, Age 49 1997 73,590 (3)(4)(5)
- -------------------------------------------------------------------
Chairman of the Board and Chief Executive Officer of Unitil
since 1997. Prior to his employment with Unitil,
Mr. Schoenberger was President and Chief Operating Officer at
the New York Power Authority ("NYPA") from 1993 until 1997.
Prior to 1993, Executive Vice President - Finance and
Administration, also at NYPA (state owned public power
enterprise). Mr. Schoenberger is also a Director of the Greater
Seacoast (NH) United Way since 1998, Director of Exeter Health
Resources, Exeter, NH, since 1998, Director of Enermetrix.com,
Maynard, MA, since 1999, and a Director of the New England
Gas Association, since 1999.
Charles H. Tenney III, Age 52 1992 2,885
- -------------------------------------------------------------------
Director of Corporate Services, Log On America, Inc.,
Providence, RI (New England regional competitive local
exchange carrier and information/Internet service provider) since
1999. Mr. Tenney is the former Secretary (1997-1999) of
Northern Utilities, Inc., Portsmouth, NH (natural gas distributor)
and former Secretary (1997-1999) of Granite State Gas
Transmission, Inc., Portsmouth, NH. Mr. Tenney is also the
former Clerk (1991-1999) of Bay State Gas Company, a
subsidiary of NIPSCO Industries, Inc., Merrillville, IN. (utility
holding company)
</TABLE>
<TABLE>
<CAPTION>
Information About Directors
Whose Terms of Office Continue
--------------------------------------------------
Common Stock Owned
Beneficially on
Director Term to February 23, 2000(1)
Since Expire Shares
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Michael J. Dalton, Age 59 1984 2001 61,753 (3)(6)(7)(8)
- ----------------------------------------------------------------
President and Chief Operating Officer of Unitil. Mr. Dalton is
also a Director, since 1996, and Secretary, since 1997, of the
University of New Hampshire Foundation, and Chairman of the
University of New Hampshire President's Council since 1995.
Albert H. Elfner, III, Age 55 1999 2002 1,155
- ----------------------------------------------------------------
Retired Chairman (1994 - 1999) and Chief Executive Officer
(1995 - 1999) of Evergreen Investment Management
Company, Boston, MA. Mr. Elfner is also a Director of Polaris
International Investment Trust Company, Taipei, Taiwan,
ROC. Mr. Elfner is a former Chairman and Director
(1995 - 1999) of Keystone Trust Company, Portsmouth, NH,
and a former Director (1998 - 1999) of Investment Mutual
Insurance Company, Washington, DC.
Ross B. George, Age 67 1999 2002 2,655
- ----------------------------------------------------------------
Chairman of the Board, since 1999 (Director since 1988) of
Simonds Industries, Inc., ("Simonds") Fitchburg, MA.
Mr. George served as Chief Executive Officer (1995 - 1999)
and President and Chief Operating Officer (1988 - 1995), also
at Simonds (industrial cutting tools manufacturing company).
Bruce W. Keough, Age 43 1998 2001 2,355
- ----------------------------------------------------------------
Real estate developer and private equity investor. Mr. Keough
is also Chairman of the Board of Trustees of the University
System of New Hampshire since 1999 (Trustee since 1997).
Mr. Keough is also a former New Hampshire State Senator
(1994 - 1996) and a member of the Board of Governors of
New Hampshire Public Television since 1997.
J. Parker Rice, Jr., Age 74 1992 2001 1,807
- ----------------------------------------------------------------
Retired, since 1999, Director, former President and Treasurer
of Hyland/Rice Office Products, Inc., Fitchburg, MA (office
products dealer).
M. Brian O'Shaughnessy, Age 57 1998 2002 455
- ----------------------------------------------------------------
Chairman of the Board, Chief Executive Officer and President
of Revere Copper Products, Inc., Rome, NY, since 1988.
Joan D. Wheeler, Age 62 1994 2001 1,355
- ----------------------------------------------------------------
Owner of the Russian Gallery, Marblehead, MA (art gallery).
Ms. Wheeler is a former Director of Shaw's Supermarkets,
Inc. (1979 - 1987), a former Director of Granite Bank, Keene,
NH, and a former Trustee of Franklin Pierce College.
- ---------------------------------------------------------------------------------------------------------------
NOTES:
<FN>
Except as otherwise noted, each of the persons named above has held
his present position (or another executive position with the same employer)
for more than the past five (5) years.
<F1> Based on information furnished to Unitil by the nominees and
continuing Directors. No Director standing for election, no Director
whose term is continuing and no officer owns more than one percent of
the total outstanding shares.
<F2> Mr. Aubuchon is a Director nominee elected to the Board by the Board
of Directors upon recommendation by the Executive Committee in
December, 1999. Mr. Aubuchon has not previously been elected by the
shareholders of the Company.
<F3> Included are 1,294 and 4,439 shares which are held in trust for
Messrs. Schoenberger and Dalton, respectively, under the terms of the
Unitil Tax Deferred Savings and Investment Plan ("401(k)"). Messrs.
Schoenberger and Dalton have voting power only with respect to the
shares credited to their accounts. For further information regarding
401(k), see "Other Compensation Arrangements - Tax-Qualified Savings
and Investment Plan" below.
<F4> Included are 28,296 options which Mr. Schoenberger has the right to
purchase pursuant to the exercise of those options under the terms of
the 1989 Key Employee Stock Option Plan ("KESOP"). For further
information regarding the KESOP, see "Other Compensation Arrangements"
below.
<F5> Included are 40,000 options which Mr. Schoenberger has the right to
purchase upon the exercise of those options under the terms of the
1998 Stock Option Plan ("Option Plan"). See "Other Compensation
Arrangements." Mr. Schoenberger was granted 20,000 options in March,
1999, and 20,000 options in January, 2000, all of which will vest at a
rate of 25% in year one, 25% in year two, and 50% in year three,
following the dates of the respective grants.
<F6> Included are 20,000 options which Mr. Dalton has the right to purchase
upon the exercise of those options under the terms of the 1998 Stock
Option Plan ("Option Plan"). See "Other Compensation Arrangements."
Mr. Dalton was granted 10,000 options in March, 1999, and 10,000
options in January, 2000, all of which will vest at a rate of 25% in
year one, 25% in year two, and 50% in year three, following the dates
of the respective grants.
<F7> Included are 100 shares held by Mr. Dalton jointly with his wife with
whom he shares voting and investment power.
<F8> Included are 9,501 shares held by a member of Mr. Dalton's family. He
has no voting rights or investment power with respect to, and no
beneficial interest in, such shares.
</FN>
</TABLE>
The Board of Directors met six times in 1999. During 1999, Directors
attended an average of 97% of all meetings of the Board of Directors held
and of all meetings held by all Committees of the Board on which they
served, if any.
Section 17(a) of the Public Utility Holding Company Act of 1935 and
Section 16(a) of the Securities Exchange Act of 1934 require the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file certain reports
of ownership and changes in share ownership with the Securities and Exchange
Commission and the American Stock Exchange and to furnish the Company with
copies of all Section 17(a) and Section 16(a) forms they file. Based solely
on its review of the copies of such forms received by it, or written
representations from certain reporting persons that such forms were not
required for those persons, the Company believes that all filing
requirements applicable to its officers and directors during 1999 and
through February, 2000, were met.
Compensation of Directors
--------------------------------------------------
In 1999, members of the Board of Directors who are not officers of
Unitil or any of its subsidiaries received an annual retainer fee of $7,000
in cash and $5,500 in Unitil Common Stock, and $500 for each Board meeting
attended. Members of the Executive Committee, who are not officers of Unitil
or any of its subsidiaries, received an annual retainer fee of $3,000 and
$400 for each meeting attended. The Chairman of the Executive Committee
received an annual retainer fee of $15,000, and $400 for each meeting
attended. Members of the Audit Committee and Compensation Committee received
an annual retainer fee of $1,000 and $400 for each meeting attended. The
Chairman of the Audit Committee and the Chairman of the Compensation
Committee received an annual retainer fee of $2,000, respectively, and $400
for each meeting attended. Those Directors of Unitil who also serve as
Directors of CECo, E&H or FG&E and who are not officers of Unitil or any of
its subsidiaries received a meeting fee of $100 per subsidiary meeting
attended and no annual retainer fee from CECo, E&H or FG&E. All Directors
are entitled to reimbursement of expenses incurred in connection with
attendance at meetings of the Board of Directors and any Committee on which
they serve.
As part of the Company's overall support for charitable institutions,
in 1999 the Company instituted a program which provides a perpetual gift of
$1,000 annually to the Greater Seacoast United Way ("United Way") on behalf
of each Director who retires from the Board. The Director(s) receive no
financial benefit from this program as the charitable deductions accrue
solely to the Company. In 1999, three Directors retired from the Board.
In 1999, the Board of Directors approved the Unitil Corporation
Directors' Deferred Compensation Plan ("Deferred Plan") for the purpose of
allowing non-employee members of the Board to defer payment of all or a
specified part of compensation for services performed as Directors. The
Deferred Plan is administered by the Compensation Committee and stipulates
that eligible Directors may elect to defer all or a portion of their cash
retainer and meeting fees. Separate accounts are maintained for each
Director participant, which are an unfunded liability of the Company.
Additionally, accounts are credited monthly with interest based on the
current rate of 60-month Treasury bills. Funds contributed and interest
credited is tax deferred until withdrawn from the Deferred Plan. Director
participants may elect to withdraw funds from the Deferred Plan after a
fixed amount of time, upon resignation or retirement from the Board, upon
death or disability, or upon a Change in Control. Withdrawals may be taken
in cash, either in one lump sum or in a series of installments.
Committees of the Board of Directors
--------------------------------------------------
Executive Committee
----------------------
The Executive Committee of the Board of Directors held 11 meetings in
1999. Its members are Bruce W. Keough, Robert G. Schoenberger, W. William
VanderWolk, Jr. (Chairman), Joan D. Wheeler and Franklin Wyman, Jr. This
Committee's responsibility is to review and oversee corporate policies
related to the Company's long-range strategic business, financial and
operating plans. In addition, the Executive Committee also acts as a
nominating committee. In its function as a nominating committee, the
committee coordinates suggestions or searches for potential nominees for
Board members; reviews and evaluates qualifications of potential Board
members; and recommends to the Board of Directors nominees for vacancies
occurring from time to time on the Board of Directors. The Committee will
consider nominees recommended by shareholders upon timely submission of the
names of such nominees with qualifications and biographical information
forwarded to the Executive Committee of the Board of Directors. The
Executive Committee's duties also include the review and recommendation of
corporate governance standards and the annual review of Board member and CEO
performance.
Audit Committee
----------------------
The Audit Committee of the Board of Directors, which held two meetings
in 1999, consists of Ross B. George, M. Brian O'Shaughnessy, and J. Parker
Rice, Jr. (Chairman). The duties of this Committee encompass making
recommendations on the selection of Unitil's independent auditors;
conferring with such auditors regarding, among other things, the scope of
their examination, with particular emphasis on areas where special attention
should be directed; reviewing the accounting principles and practices being
followed by Unitil; assessing the adequacy of Unitil's interim and annual
financial statements; reviewing the internal audit controls of Unitil and
its subsidiaries; performing such other duties as are appropriate to monitor
the accounting and auditing policies and procedures of Unitil and its
subsidiaries; and reporting to the full Unitil Board from time to time. In
addition, beginning in 1998 and throughout 1999, the Audit Committee also
had the responsibility of monitoring the Company's progress regarding the
Year 2000 date recognition matter. At the Committee's meetings, reports from
management were presented regarding the Company's Year 2000 remediation and
testing efforts. Additionally, the Committee, at its discretion, meets
independently with the Company's external auditors and/or the Company's
internal auditor.
Compensation Committee
----------------------
The Compensation Committee of the Board of Directors, which held three
meetings in 1999, consists of Albert H. Elfner, III, Bruce W. Keough
(Chairman), and Charles H. Tenney III. The duties of this Committee include
studying and making recommendations to the Board of Directors with respect
to base and incentive compensation plans and payments and other benefits to
be paid to the officers of Unitil. The Compensation Committee's duties also
include the annual review of management succession planning, administration
of the Company's Stock Option Plans, administration of merit, incentive and
commission compensation plans for all appropriate personnel and
administration of the Directors' Deferred Compensation Plan.
Report of the Compensation Committee
--------------------------------------------------
Upon the recommendation of the Compensation Committee, the Board of
Directors votes to approve the compensation of the Chief Executive Officer.
The Committee reports all of its decisions to the Board. The Board
unanimously has accepted each of the recommendations described below made in
1999 and to date in 2000. The Committee also votes the compensation of all
other Company executive officers listed in the Summary Compensation Table,
as well as other senior employees. The Board has ratified the compensation
decision for these executive officers.
The overall objective of the Company's Board of Directors, and
specifically this Compensation Committee, in setting compensation for
Unitil's executive officers is to attract, retain and reward managers who
are committed to solid financial performance and foster excellence in the
management of the assets of the Company and who can successfully lead the
Company as the industry undergoes unprecedented change and restructuring. To
help meet these objectives, the Committee believes it is important for the
Company to provide compensation to its executive officers, which varies
directly with the performance of the Company.
The Company pays both "base" and "variable" compensation to its
officers. The base component of compensation is determined under Unitil's
salary policy which is reviewed from time to time by outside consultants as
to its competitiveness. Variable compensation is based on factors that
measure the success of the Company for any given year and is governed by
Unitil's Management Incentive Plan ("Incentive Plan"). The factors under the
Incentive Plan provide a cash incentive opportunity if the Company meets
certain targets for earnings and a high performing work force. The bonus
opportunities are set by level of the executive position according to other
companies in the utility industry. In 1999, threshold levels of the goals
defined under the Incentive Plan were not achieved. Given earnings for 1999,
there would have been no payout for 1999 according to the provisions of the
Incentive Plan. The terms and provisions of the Incentive Plan provide the
Committee with discretion to take extenuating circumstances into account
when reviewing actual performance. In exercising its duties under the
Incentive Plan, the Committee determined that it needed to take into account
the bankruptcy of the Company's largest customer, adverse regulatory
rulings, another record warm winter, continued cost pressures of industry
restructuring, and the Company's investment in growth initiatives, all of
which occurred during 1999. After consideration of these factors, and upon
consultation with a nationally known compensation consulting firm, the
Committee decided to grant an incentive payout of 60% of target. The payout
for 1999 performance was made in February, 2000, and will therefore be
reflected on the "Compensation of Officers" Table in the 2000 Proxy
Statement.
In addition, to further align the interest of the Company's management
with shareholders and customers, the Company, in 1998, instituted a Stock
Option Plan ("Option Plan"). The Option Plan provides grants of options to
buy common shares of Company Stock. The Option Plan anticipates the granting
of options over a period of five years, and each grant will vest over a
three-year period. Each option grant is priced at the market price on the
date of the grant. This plan emphasizes long-term growth of the price of the
Company's common stock. In March, 1999, the Committee granted a total of
62,000 options to the members of senior management.
The compensation of the Chief Executive Officer ("CEO"), is governed
by these same plans and objectives. As Chairman of the Board and CEO, Mr.
Schoenberger was paid an annual base salary of $267,048 in 1999. This
amount, based on the terms of Mr. Schoenberger's 1997 employment agreement
calling for $245,000 per annum with an annual performance and salary review,
was determined in accordance with Unitil's salary policy. Mr. Schoenberger's
employment agreement with the Company is further detailed on page 15.
The Committee periodically reviews each component of the Company's
executive compensation program to ensure that pay levels and incentive
opportunities are competitive and that incentive opportunities are linked to
Company performance. The Company engaged a nationally known compensation
consulting firm in 1998 to review the competitiveness of the total
compensation package for the CEO and other executive positions. As a result
of this review, the Company adopted a new salary policy, new base salary
ranges, a new Management Incentive Plan (see "Other Compensation
Arrangements") and a new non-qualified Stock Option Plan (see "Other
Compensation Arrangements"). These new policies and plans brought the
Company's compensation practices into line with current market conditions
for competitive pay levels of utility executives, and better support the
achievement of the Company's mission and strategies.
Compensation Committee Members
-----------------------------------------------------
Albert H. Elfner, III, Bruce W. Keough, Chairman,
and Charles H. Tenney III
Stock Performance Graph and Information
--------------------------------------------------
Comparative Five-Year Cumulative Total Returns
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
--------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Unitil $100 $138 $141 $183 $180 $300
Peer Group $100 $132 $132 $157 $146 $151
S&P 500 $100 $137 $167 $221 $282 $335
</TABLE>
The graph above assumes $100 invested on December 31, 1993, in each category
and the reinvestment of all dividends during the period. The Peer Group is
comprised of the S&P 40 Utilities.
- ----------------------------------------------------------------------------
Compensation of Officers
--------------------------------------------------
The tabulation below shows the compensation Unitil, or any of its
subsidiaries, has paid to its Chief Executive Officer and its most highly
compensated officers whose total annual salary and bonus were in excess of
$100,000 during the year 1999.
SUMMARY COMPENSATION TABLE
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------------
Annual Compensation Awards Payouts
-------------------------------- ------------------------ -------
Other
Name and Annual Restricted All Other
Principal Salary Bonus Comp. Stock LTIP Comp.
Position(1) Year ($) ($)(2) ($) Awards($) Options(#) Payouts ($)
- --------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert G. Schoenberger(3) 1999 $267,048 $109,415 -- -- 20,000(5) -- $ 6,080(7)
Chairman of the Board & 1998 245,003 -- -- -- -- --
Chief Executive Officer 1997 65,833(4) -- -- -- 25,000(6) --
Michael J. Dalton 1999 $199,500 $ 67,882 -- -- 10,000(5) -- $ 7,271(8)
President & Chief 1998 190,005 67,959 -- -- -- --
Operating Officer 1997 174,000 63,834 -- -- -- --
Anthony J. Baratta, Jr.(9) 1999 $159,078 $ 33,606 -- -- 10,000(5) -- $26,667(11)
Senior Vice President & 1998 107,501(10) -- -- -- -- --
Chief Financial Officer 1997 -- -- -- -- -- --
James G. Daly(12) 1999 $151,668 $ 38,074 -- -- 2,500(5) -- $ 4,962(13)
Senior Vice President, 1998 142,092 39,314 -- -- -- --
Unitil Service 1997 125,625 33,568 -- -- -- --
George R. Gantz 1999 $132,420 $ 32,261 -- -- 2,500(5) -- $ 4,540(14)
Senior Vice President, 1998 120,399 39,314 -- -- -- --
Unitil Service 1997 104,475 33,658 -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
NOTES:
<FN>
<F1> Officers of the Company also hold various positions with subsidiary
companies. Compensation for those positions is included in the above
table.
<F2> Bonus amounts reflected are comprised of the Unitil Management
Incentive Plan ("Incentive Plan") cash awards paid in February, 1999,
for 1998 results. The terms of the Incentive Plan provide a cash
incentive opportunity if the Company meets certain pre-established
performance targets (see "Other Compensation Arrangements").
<F3> Robert G. Schoenberger was elected Chairman of the Board and Chief
Executive Officer in October 1997. Mr. Schoenberger was not employed
by the Company or any of its subsidiary companies prior to October
1997.
<F4> Base salary paid to Mr. Schoenberger for 1997 includes salary for the
months of November and December, and a $25,000 payment received on his
first day of employment with the Company. Mr. Schoenberger's annual
base salary in 1997 was $245,000.
<F5> Options were granted in March, 1999, under the 1998 Stock Option Plan
("Option Plan"). Options will vest at a rate of 25% in year one, 25%
in year two, and 50% in year three, following the date of the grant.
As of February, 2000, no options are vested and no options are
exercisable.
<F6> Options were granted to Mr. Schoenberger on November 3, 1997, under
the Key Employee Stock Option Plan (see "Other Compensation
Arrangements" and subsequent notes).
<F7> All Other Compensation for Mr. Schoenberger for the year 1999 includes
401(K) company contribution, and Group Term Life Insurance payment
valued at $4,800 and $1,280, respectively.
<F8> All Other Compensation for Mr. Dalton for the year 1999 includes,
401(K) company contribution and Group Term Life Insurance payment,
valued at $4,800 and $2,471, respectively.
<F9> Anthony J. Baratta, Jr. began his employment with the Company as
Senior Vice President and Chief Financial Officer in April, 1998. Mr.
Baratta was not employed by the Company or any of its subsidiary
companies prior to April, 1998.
<F10> Base salary paid to Mr. Baratta for 1998 includes salary for the
months of April through December. Mr. Baratta's annual salary in
1998 was $150,000.
<F11> All Other Compensation for Mr. Baratta for the year 1999 includes,
401(K) company contribution, Group Term Life Insurance payment, and
taxable relocation payment valued at $4,770, $1,897 and $20,000,
respectively.
<F12> Mr. Daly resigned from the Company on February 7, 2000.
<F13> All Other Compensation for Mr. Daly for the year 1999 includes 401(K)
company contribution and Group Term Life Insurance payment, valued at
$4,550 and $411, respectively.
<F14> All Other Compensation for Mr. Gantz for the year 1999 includes 401(K)
company contribution and Group Term Life Insurance payment, valued at
$3,973 and $568, respectively.
</FN>
</TABLE>
Other Compensation Arrangements
--------------------------------------------------
The table below provides information with respect to options granted
in fiscal 1999 under the 1998 Stock Option Plan (See also "Other
Compensation Arrangements") to the named executive officers in the Summary
Compensation table. The Company has no compensation plan under which Stock
Appreciation Rights (SARs) are granted and thus reference to SARs has been
omitted from the table.
OPTION GRANTS IN LAST FISCAL YEAR
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Individual Grants Annual Rates of Stock
Price Appreciation for
Option Term
- ----------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
- ----------------------------------------------------------------------------------------------------------------
% of Total Option Price
Number of Options -----------------------
Securities Granted to Market
Underlying Employees Exercise or Price on
Options in Fiscal Base Price Date of Exp.
Name Granted(#) Year ($/Sh) Grant Date 5%($) 10%($)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert G. Schoenberger
Chairman of the Board & 20,000 32.3% $23.375 $23.375 3/5/09 $294,000 $745,000
Chief Executive Officer
Michael J. Dalton
President & 10,000 16.1% $23.375 $23.375 3/5/09 $147,000 $372,500
Chief Operating Officer
Anthony J. Baratta, Jr.
Senior Vice President & 10,000 16.1% $23.375 $23.375 3/5/09 $147,000 $372,500
Chief Financial Officer
James G. Daly
Senior Vice President, 2,500 4.0% $23.375 $23.375 3/5/09 $ 36,750 $ 93,125
Unitil Service
George R. Gantz
Senior Vice President, 2,500 4.0% $23.375 $23.375 3/5/09 $ 36,750 $ 93,125
Unitil Service
</TABLE>
The table below provides information with respect to options to
purchase shares of the Company's Common Stock exercised in fiscal 1999 under
the 1989 Key Employee Stock Option Plan ("KESOP") and the value of
unexercised options granted in prior years and in 1999 under the KESOP and
the 1998 Stock Option Plan ("Option Plan"), respectively, to the named
executive officers in the Summary Compensation Table and held by them as of
December 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR (FY)
AND FY-END OPTION VALUES (1)(2)
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Shares Options at In-the-Money Options
Acquired FY-End (#) at FY-End ($)
on Value ---------------------------- -------------------------
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Schoenberger -- -- exercisable 25,000(3)(4) exercisable $487,750
Chairman of the Board & unexercisable 20,000 unexercisable $247,500
Chief Executive Officer
Michael J. Dalton 12,000 $197,280 exercisable 0 exercisable $ 0
President & unexercisable 10,000 unexercisable $123,750
Chief Operating Officer
Anthony J. Baratta, Jr. -- -- exercisable 0 exercisable $ 0
Senior Vice President & unexercisable 10,000 unexercisable $123,750
Chief Financial Officer
James G. Daly -- -- exercisable 0 exercisable $ 0
Senior Vice President, unexercisable 2,500 unexercisable $ 30,938
Unitil Service
George R. Gantz 5,078 $ 69,873 exercisable 0 exercisable $ 0
Senior Vice President, unexercisable 2,500 unexercisable $ 30,938
Unitil Service
- ------------------------------------------------------------------------------------------------------------
NOTES:
<FN>
<F1> The KESOP authorizes the Compensation Committee to provide in the
award agreements that the participant's right to exercise the options
provided for therein will be accelerated upon the occurrence of a
"Change in Control" of Unitil. The term "Change in Control" is defined
in substantially the same manner as in the Severance Agreements as
defined on pages 14 and 15. All of the award agreements entered into
with participants in the KESOP to date contain such a "Change in
Control" provision. Each award agreement also provides that, upon the
exercise of an option on or after a Change in Control, Unitil shall
pay to the optionee, within five business days, a lump sum cash amount
equal to the economic benefit of the optionee's outstanding options
and associated dividend equivalents that the optionee would have
received had the option remained unexercised until the day preceding
the expiration of the grant. Upon the exercise of any option by an
employee and upon payment of the option price for shares of Unitil
Common Stock as to which the option was granted (the "Primary
Shares"), Unitil will cause to be delivered to such employee (i) the
Primary Shares and (ii) the number of shares of Unitil Common Stock
(the "Dividend Equivalent Shares") equal to the dollar amount of
dividends which would have been paid on the Primary Shares (and
previously accrued Dividend Equivalent Shares) had they been
outstanding, divided by the fair market value of Unitil Common Stock
determined as of the record date for each dividend. All options, with
the exception of Mr. Schoenberger's options (see Note 3), associated
with the KESOP were exercised as of March 7, 1999.
<F2> The Option Plan authorizes the Compensation Committee to provide in
the award agreements that the participant's right to exercise the
options provided for therein will be accelerated upon the occurrence
of a "Change in Control" of Unitil, and will become 100% vested and
fully exercisable. The term "Change in Control" is defined in
substantially the same manner as in the Severance Agreements as
defined on pages 14 and 15. All of the award agreements entered into
with participants in the Option Plan to date contain such a "Change
in Control" provision. All options reported as "unexercisable" in the
table were granted in March, 1999, under the Option Plan.
<F3> In accordance with the terms of Mr. Schoenberger's employment
agreement, on November 3, 1997, he received 25,000 options to purchase
shares of Company stock under the KESOP. The options granted to Mr.
Schoenberger became exercisable on November 3, 1998. In 1998, the
Compensation Committee extended the expiration date of Mr.
Schoenberger's options until November 3, 2007 (ten years from the date
of the grant), because the Option Plan originally provided ten years
between the grant and expiration of options.
<F4> Mr. Schoenberger's exercisable options listed in column (d) in the
table above do not include non-preferential dividend equivalents
associated with options outstanding.
</FN>
</TABLE>
In December, 1998, the Unitil Board of Directors adopted the Unitil
Corporation 1998 Stock Option Plan ("Option Plan"). The Company intends to
grant stock options each year through March 1, 2004 under the plan to
certain employees and directors, for the purchase of up to 350,000 shares of
Unitil Common Stock. To date, grants were made to certain management
employees in March, 1999, and in January, 2000. Each option grant will vest
over a three year period and each grant will expire ten years after the date
of grant.
The purpose of the Option Plan is to provide an incentive to key
employees and directors of Unitil and its affiliates who are in a position
to contribute materially to the long-term success of Unitil and/or its
affiliates, to increase their interest in the welfare of Unitil and its
affiliates, and to attract and retain employees and directors of outstanding
ability. The Compensation Committee will administer the plan. The Committee
has the authority to interpret the plan and to designate recipients of the
stock options.
Stock options granted under the Option Plan will entitle the holders
of those options to purchase up to the number of shares of common stock
specified in the grant at a price established by the Committee. All grants
will be issued at 100% of market value. Under the Option Plan, stock options
for shares constituting not more than five percent of the common stock may
be issued in any one year.
The Company adopted a new Management Incentive Plan and a new Employee
Incentive Plan in December, 1998, to provide cash incentive payments which
are tied directly to achievement of the Company's strategic goals. Annual
goals are established each year by the Board of Directors and payment of
awards are made in February of the year following achievement of the goals.
Target incentive payments have been established which vary based upon the
grade level of each position. Actual awards can be less than or greater than
the target payout depending upon actual results achieved.
Unitil maintains a tax-qualified defined benefit pension plan and
related trust agreement (the "Retirement Plan"), which provides retirement
annuities for eligible employees of Unitil and its subsidiaries. Since the
Retirement Plan is a defined benefit plan, no amounts were contributed or
accrued specifically for the benefit of any officer of Unitil under the
Retirement Plan. Directors of Unitil who are not and have not been officers
of Unitil or any of its subsidiaries are not eligible to participate in the
Retirement Plan.
The table below sets forth the estimated annual benefits (exclusive of
Social Security payments) payable to participants in the specified
compensation and years of service classifications, assuming continued active
service until retirement. The average annual earnings used to compute the
annual benefits are subject to a $160,000 limit.
PENSION PLAN TABLE
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
ANNUAL PENSION
----------------------------------------------------
Average Annual Earnings 10 Years 20 Years 30 Years 40 Years
Used for Computing Pension of Service of Service of Service of Service
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$100,000 20,000 40,000 50,000 55,000
125,000 25,000 50,000 62,500 68,750
150,000 30,000 60,000 75,000 82,500
160,000 32,000 64,000 80,000 88,000
</TABLE>
The present formula for determining annual benefits under the
Retirement Plan's life annuity option is (i) 2% of average annual salary
(average annual salary during the five consecutive years out of the last
twenty years of employment that give the highest average salary) for each of
the first twenty years of benefit service, plus (ii) 1% of average annual
salary for each of the next ten years of benefit service and (iii) 1/2% of
average annual salary for each year of benefit service in excess of thirty,
minus (iv) 50% of age 65 annual Social Security benefit (as defined in the
Retirement Plan), and (v) any benefit under another Unitil retirement plan
of a former employer for which credit for service is given under the
Retirement Plan. A participant is eligible for early retirement at an
actuarially reduced pension upon the attainment of age 55 with at least 15
years of service with Unitil or one of its subsidiaries. A participant is
100% vested in his benefit under the Retirement Plan after 5 years of
service with Unitil or one of its subsidiaries. As of January 1, 2000,
Messrs. Schoenberger, Dalton, Baratta, Daly and Gantz had 2, 32, 1, 11 and
16 credited years of service, respectively, under the Retirement Plan.
Unitil also maintains a Supplemental Executive Retirement Plan
("SERP"), a non-qualified defined benefit plan. SERP provides for
supplemental retirement benefits to executives selected by the Board of
Directors. At the present time, Messrs. Schoenberger and Dalton are eligible
for SERP benefits upon attaining normal or early retirement eligibility.
Annual benefits are based on a participant's final average earnings less the
participant's benefits payable under the Retirement Plan, less other
retirement income payable to such participant by Unitil or any previous
employer and less income that a participant receives as a primary Social
Security benefit. Early retirement benefits are available to a participant,
with the Unitil Board's approval, if the participant has attained age 55 and
completed 15 years of service. Should a participant elect to begin receiving
early retirement benefits under SERP prior to attaining age 60, the benefits
are reduced by 5% for each year that commencement of benefits precedes
attainment of age 60. If a participant terminates employment for any reason
prior to retirement, the participant will not be entitled to any benefits.
Under the SERP, Messrs. Schoenberger and Dalton would be entitled to receive
an annual benefit of $38,551 and $28,191, respectively, assuming normal
retirement at age 65 and that their projected final average earnings are
equal to the average of their respective three consecutive years of highest
compensation prior to retirement.
Unitil and certain subsidiaries maintain severance agreements (the
"Severance Agreements") with certain management employees, including
Executive Officers. The Severance Agreements are intended to help assure
continuity in the management and operation of Unitil and its subsidiaries in
the event of a proposed "Change in Control". Each Severance Agreement only
becomes effective upon the occurrence of a Change in Control of Unitil as
defined in the Severance Agreements. If an employee's stipulated
compensation and benefits, position, responsibilities and other conditions
of employment are reduced during the thirty-six month period following a
Change in Control, the employee is entitled to a severance benefit.
The severance benefit is a lump sum cash amount equal to (i) the
present value of three years' base salary and bonus; (ii) the present value
of the additional amount the employee would have received under the
Retirement Plan if the employee had continued to be employed for such
thirty-six month period; (iii) the present value of contributions that would
have been made by Unitil or its subsidiaries under the 401(k) if the
employee had been employed for such thirty-six month period; and (iv) the
economic benefit on any outstanding Unitil stock options and associated
dividend equivalents, if applicable, assuming such options remained
unexercised until the day preceding the expiration of the grant, including
the spread on any stock options that would have been granted under the
Option Plan if the employee had been employed for such thirty-six month
period. Each Severance Agreement also provides for the continuation of all
employee benefits for a period of thirty-six months, commencing with the
month in which the termination occurred. In addition, pursuant to each
Severance Agreement, Unitil is required to make an additional payment to the
employee sufficient on an after-tax basis to satisfy any additional
individual tax liability incurred under Section 280G of the Internal Revenue
Code of 1986, as amended, in respect to such payments.
The Company entered into an employment agreement with Mr. Schoenberger
on November 1, 1997. The term of the agreement is for three years with an
expiration date of October 31, 2000. Under the terms of the employment
agreement, Mr. Schoenberger will receive an annual base salary of $245,000
which is subject to annual review by the Board for discretionary periodic
increases in accordance with the Company's compensation policies. Mr.
Schoenberger is entitled to participate in the Company's SERP, Executive
Supplemental Life Insurance Program and all other employee benefit plans
made available by the Company. On November 3, 1997, Mr. Schoenberger also
received 25,000 options to purchase shares of Company stock under the
Company's 1989 Key Employee Stock Option Plan ("KESOP"). In 1998, the
Compensation Committee extended the expiration date of the options granted
to Mr. Schoenberger under the KESOP until November 3, 2007. Said options
were originally set to expire on March 7, 1999. Mr. Schoenberger was
reimbursed for all reasonable interim living and reasonable travel expenses
during 1997 and 1998. In addition, in 1998, Mr. Schoenberger was reimbursed
for all direct moving expenses and received $50,000 when he relocated to the
area, as was stipulated in the terms of his employment agreement. The
agreement also provides that the Company and Mr. Schoenberger enter into a
Severance Agreement, more fully described above. Mr. Schoenberger and the
Company entered into said Severance Agreement in February, 1998. The
Company, by action of the Board, may terminate Mr. Schoenberger's employment
for any reason. If Mr. Schoenberger's employment is terminated by the
Company during the term of the agreement for any reason other than Cause,
death or disability, the Company shall pay Mr. Schoenberger's base pay at
the rate in effect on the date of employment termination and benefits until
the end of the term of the agreement, or if employment termination is after
November 1, 1999, for one year.
As to Other Matters to Come Before the Meeting
--------------------------------------------------
The Board of Directors does not intend to bring before the meeting any
matters other than the one referred to above and knows of no other matters
which may properly come before the meeting. If any other matters or motions
come before the meeting, it is the intention of the persons named in the
accompanying form of proxy to vote such proxy in accordance with their
judgment on such matters or motions, including any matters dealing with the
conduct of the meeting.
The Board of Directors has selected and employed the firm of Grant
Thornton as Unitil's independent certified public accountants to audit
Unitil's financial statements for the fiscal year 1999. A representative of
the firm will be present at the meeting and will be available to respond to
appropriate questions. It is not anticipated that such representative will
make a prepared statement at the meeting; however, he will be free to do so
if he so chooses.
Any proposal submitted by a shareholder of Unitil for inclusion in the
proxy material for the 2001 annual meeting of shareholders must be received
by Unitil at its Corporate Headquarters not later than December 20, 2000.
Solicitation, Revocation and Use of Proxies
--------------------------------------------------
Shares of Unitil Common Stock represented by properly executed proxies
received by Unitil prior to or at the meeting will be voted at the meeting
in accordance with the instructions specified on the proxies. If no
instructions are specified on such proxies, shares will be voted FOR the
election of the nominees for Directors. Abstentions and non-votes will have
the same effect as negative votes.
Any Unitil shareholder who executes and returns a proxy has the power
to revoke such proxy at any time before it is voted by filing with the
Secretary of Unitil, at the address of Unitil set forth above, written
notice of such revocation or a duly executed proxy bearing a later date, or
by attending and voting in person at the meeting. Attendance at the meeting
will not in and of itself constitute a revocation of a proxy.
Unitil will bear the costs of solicitation by the Board of Directors
of proxies from Unitil shareholders. In addition to the use of the mail,
proxies may be solicited by the Directors, officers and employees of Unitil
by personal interview, telephone, telegram or otherwise. Such Directors,
officers and employees will not be additionally compensated, but may be
reimbursed for out-of-pocket expenses in connection with such solicitation.
Arrangements also will be made with brokerage houses and other custodians,
nominees and fiduciaries for the forwarding of solicitation material to the
beneficial owners of stock held of record by such persons, and Unitil may
reimburse such custodians, nominees and fiduciaries for reasonable out-of-
pocket expenses in connection therewith.
By Order of the Board of Directors,
Mark H. Collin
Treasurer & Secretary
- ----------------------------------------------------------------------------
Unitil will furnish without charge to any shareholder entitled to vote and
to any beneficial owner of shares entitled to be voted at the annual meeting
of common shareholders, to be held April 20, 2000, a copy of its annual
report on Form 10-K, including financial statements and schedules thereto,
required to be filed with the Securities and Exchange Commission for the
fiscal year 1999, upon written request to Mark H. Collin, Treasurer, Unitil
Corporation, 6 Liberty Lane West, Hampton, NH 03842-1720.
- ----------------------------------------------------------------------------
437-PS-00
PROXY
UNITIL CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all previous proxies, hereby appoints
ANTHONY J. BARATTA, JR., MARK H. COLLIN, MICHAEL J. DALTON and ROBERT G.
SCHOENBERGER, and each of them, proxies will full power of substitution to
each, to vote for the undersigned at the Annual Meeting of Common
Shareholders of Unitil Corporation (the "Company") to be held at the office
of the Company, 6 Liberty Lane West, Hampton, New Hampshire on Thursday,
April 20, 2000, at 10:30 A.M., and at any and all adjournments thereof,
with all powers the undersigned would possess if personally present and
voting and particularly with respect to the matters set forth on the
reverse side hereof.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD ON THE REVERSE SIDE HEREOF
AND RETURN PROMPTLY USING THE ENCLOSED ENVELOPE.
- ------------- -------------
|SEE REVERSE| CONTINUED AND TO BE SIGNED ON REVERSE SIDE |SEE REVERSE|
- ------------- -------------
[Unitil Logo]
your energy choice
c/o Equiserve
P.O. Box 8040
Boston, MA 02266-8040
THIS IS YOUR PROXY. YOUR VOTE IS IMPORTANT.
Regardless of whether or not you plan to attend the Annual Meeting of
Shareholders, you can be sure your shares are represented at the Meeting by
promptly returning your proxy (attached below) in the enclosed envelope.
Thank you for your attention to this important matter.
Directions to Unitil's Corporate Headquarters
6 Liberty Lane West
Hampton, New Hampshire
From Route 95
- -------------
Take New Hampshire Exit 2. Immediately after the toll booth (50 cents) bear
left onto Rte. 101 East. Cross back over Rte. 95, then take the first
right, follow signs for Liberty Lane/Rte 27. Take the first left to the
Liberty Lane entrance. Stay right on the access road until it crosses under
Rte. 95, then turn left at the Liberty Lane West sign. Continue straight,
1/2 mile to Unitil on the right.
From Route 101 East
- -------------------
Cross over Rte. 95, then take the first right, follow signs for Liberty
Lane/Rte 27. Take the first left to the Liberty Lane entrance. Stay right
on the access road until it crosses under Rte. 95, then turn left at the
Liberty Lane West sign. Continue straight, 1/2 mile to Unitil on the right.
Please call 800/999-6501 if you would like additional information.
DETACH HERE
- --------------------------------------------------------------------------
[x] Please mark
vote as in
this example.
This proxy will be voted in accordance with the instructions given below.
If no instructions are given, this proxy will be voted in favor of the
election of the three Directors listed in Item 1.
The Board of Directors recommends a vote "FOR" each of the nominees listed
below.
1. To elect three Directors:
Nominees: William E. Aubuchon, III, Robert G. Schoenberger,
Charles H. Tenney, III
FOR [ ] [ ] WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
[ ] ______________________________________
For all nominees except as noted above
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please sign exactly as your name appears hereon.
When shares are held by joint tenants, both should
sign. When signing as attorney, executor,
administrator, trustee or guardian, please give
full title as such.
PLEASE RETURN THIS PROXY PROMPTLY.
Signature:_______________ Date: ______ Signature:_________________ Date: ______
Exhibit 27
<TABLE> <S> <C>
<ARTICLE> UT
<MULTIPLIER> 1,000
<S>
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<PERIOD-TYPE> YEAR
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 153,409
<TOTAL-CURRENT-ASSETS> 26,374
<TOTAL-DEFERRED-CHARGES> 178,693
<OTHER-PROPERTY-AND-INVEST> 5,051
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 363,527
<COMMON> 40,352
<CAPITAL-SURPLUS-PAID-IN> 194
<RETAINED-EARNINGS> 38,129
<TOTAL-COMMON-STOCKHOLDERS-EQ> 78,675
3,532
225
<LONG-TERM-DEBT-NET> 84,966
<SHORT-TERM-NOTES> 10,500
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,191
0
<CAPITAL-LEASE-OBLIGATIONS> 3,860
<LEASES-CURRENT> 902
<OTHER-ITEMS-CAPITAL-AND-LIAB> 179,676
<TOT-CAPITALIZATION-AND-LIAB> 363,527
<GROSS-OPERATING-REVENUE> 172,373
<INCOME-TAX-EXPENSE> 4,047
<OTHER-OPERATING-EXPENSES> 152,918
<TOTAL-OPERATING-EXPENSES> 156,965
<OPERATING-INCOME-LOSS> 15,408
<OTHER-INCOME-NET> (51)
<INCOME-BEFORE-INTEREST-EXPEN> 15,357
<TOTAL-INTEREST-EXPENSE> 6,919
<NET-INCOME> 8,438
268
<EARNINGS-AVAILABLE-FOR-COMM> 8,170
<COMMON-STOCK-DIVIDENDS> 6,442
<TOTAL-INTEREST-ON-BONDS> 6,477
<CASH-FLOW-OPERATIONS> 18,308
<EPS-BASIC> 1.74
<EPS-DILUTED> 1.74
</TABLE>
