<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURI-
TIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-10721
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Yankee Energy System, Inc.
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(Exact name of registrant as specified in its charter)
Connecticut 06-1236430
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
599 Research Parkway, Meriden, CT 06450-1030
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Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 639-4000
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, Par Value
$5 Per Share, and Common
Share Purchase Rights New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of class)
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
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-
affiliates of the registrant at December 15, 1995 was
$256,177,374.75 based on the closing price of $24.75 per share.
On December 15, 1995, the Company had 10,403,686 shares of common
stock outstanding.
Documents Incorporated by Reference Part of Form 10-K
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Annual Report to Shareholders Part II
for the Fiscal Year Ended
September 30, 1995
Proxy Statement For Its Annual Part III
Meeting to be Held on
February 23, 1996
<PAGE>
PART I
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ITEM 1. BUSINESS
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The Company
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Yankee Energy System, Inc. ("Yankee Energy" or the
"Company") is a public utility holding company incorporated in
Connecticut in 1989. The Company is primarily engaged in the
retail distribution of natural gas through its wholly-owned
subsidiary, Yankee Gas Services Company ("Yankee Gas"), a
Connecticut public service company. Yankee Gas serves
approximately 178,000 residential, commercial and industrial
customers in 67 cities and towns in Connecticut. The Company is
exempt from registration under the Public Utility Holding Company
Act of 1935.
The Company has five additional wholly-owned subsidiaries
which support the Company's core natural gas distribution
business or allow the Company to expand its business of providing
total energy services. Housatonic Corporation ("Housatonic")
holds a 10.5% equity interest in the Iroquois Gas Transmission
System, L.P. ("Iroquois"), a limited partnership that owns and
operates a natural gas pipeline that transports gas from Canada
to markets in the northeastern United States. NorConn
Properties, Inc. ("NorConn") owns the Company's corporate office
building and another service building and leases both facilities
to Yankee Gas. Yankee Energy Financial Services Company ("Yankee
Financial") promotes the sale of natural gas by providing
customers with equipment financing for natural gas installations.
Yankee Energy Services Company ("YESCo") invests in on-site, gas-
fired electric generation facilities and offers a full range of
energy related services, including total energy management
programs, the development of on-site generation and cogeneration
systems, technical and operating support for power plants and
boilerhouses and equipment financing. YESCo also has a wholly-
owned subsidiary, BVA Cogen, Inc. ("BVA"), a Delaware corporation
located in Massachusetts which develops customer-designed
cogeneration systems and distributes in the United States the
Deutz MWM Gas-Driven Engine/Generator sets used for on-site
electric generation. BVA also provides energy-related services
such as feasibility studies, design engineering, turnkey
installations and ongoing service contracts. R. M. Services,
Inc. ("RMS") was formed to provide credit and collections
management services to businesses and municipalities.
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The Company may consider or explore opportunities to acquire
or invest in other gas distribution companies or other energy-
related businesses. The Company's overall investment in
unregulated businesses is limited to 20% of the Company's total
consolidated assets, pursuant to a cap imposed by the Connecticut
Department of Public Utility Control ("DPUC") at the time of the
Company's formation.
Gas Markets and Competition
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General. Yankee Gas operates the largest natural gas
distribution system in Connecticut as measured by number of
customers and size of service territory. Total throughput (sales
and transportation) for fiscal 1995 was 44.8 billion cubic feet
("Bcf"). In fiscal 1995, gas revenues were comprised of the
following: 44% residential; 30% commercial; 25% industrial; and
the remaining 1% other. Yankee Gas offers firm and interruptible
gas sales services to its customers. Yankee Gas provides firm
service to customers who require a continuous gas supply
throughout the year, such as residential customers who rely on
gas for their heating and cooking needs. Yankee Gas also
provides interruptible service to certain commercial and
industrial customers that have the capability to switch from
natural gas to an alternative fuel on short notice. Yankee Gas
can interrupt service to these customers during peak demand
periods. Yankee Gas offers interruptible transportation services
to customers who purchase gas from sources other than Yankee Gas.
In addition, Yankee Gas performs gas exchanges, off-system sales
and capacity release to other local gas distribution companies
("LDCs") and marketers to reduce its overall gas expense.
Firm Sales. In fiscal 1995, total firm gas sales of 30.6
Bcf accounted for approximately 75.6% of total gas sales and
approximately 88.8% of the Company's consolidated operating
revenues. Firm gas sales, particularly sales for residential
space heating, are highly seasonal. In fiscal 1995, about 60.0%
of total firm sales occurred in the five months from November
through March. The following tables set forth certain
information with respect to firm sales in fiscal 1995.
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<TABLE>
<CAPTION>
FISCAL 1995 FIRM SALES
----------------------
Average Number Volumes
of Customers in Bcf
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<S> <C> <C>
Residential 156,539 11.6
Commercial 19,039 9.0
Industrial 2,047 10.0
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177,625 30.6
</TABLE>
<TABLE>
<CAPTION>
Volumes as a
Percent of
Revenues Firm Sales
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<S> <C> <C>
Residential $127,493,000 38%
Commercial $ 81,631,000 29%
Industrial $ 51,960,000 33%
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$261,084,000 100%
</TABLE>
Interruptible Sales. In fiscal 1995, total interruptible
gas sales of 9.1 Bcf accounted for approximately 9.9% of total
gas sales and approximately 22.5% of the Company's consolidated
operating revenues. The price charged for interruptible sales
service is a market price based on the cost of the customer's
alternative fuel, which is usually oil. Interruptible sales
depend upon the availability of gas supplies and, generally, have
offered lower margins than firm sales. Yankee Gas has the
authorization from the DPUC to engage in flexible pricing to meet
market prices for alternative fuels available to interruptible
customers. The following table sets forth certain information
with respect to interruptible sales in fiscal 1995.
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<TABLE>
<CAPTION>
FISCAL 1995 INTERRUPTIBLE SALES
-------------------------------
Average Number Volumes
of Customers in Bcf Revenues
-------------- -------- -----------
<S> <C> <C> <C>
Commercial and
Industrial 224 9.1 $29,106,000
</TABLE>
Transportation Services. Yankee Gas also offers
interruptible transportation service to its customers. This
service permits customers who desire to purchase gas from sources
other than Yankee Gas to do so, provided they have made all the
necessary transportation arrangements with the transmission
pipelines to deliver their gas to the Yankee Gas distribution
system. Customers can purchase gas directly from producers and
suppliers and contract for transportation services rather than
purchase gas solely from the local distribution system.
Generally, transportation service is used by customers on an
interruptible basis as it is highly sensitive to alternative fuel
prices as well as to the availability of interstate pipeline
capacity into the region. Large firm sales customers can utilize
transportation in place of firm sales service during the summer.
Under existing tariff structures, the financial condition of the
Company is unaffected by customers electing to use transportation
service in lieu of making gas purchases from Yankee Gas.
Market Expansion. Over the last few years, Yankee Gas has
intensified efforts to provide additional service throughout its
service territory. Yankee Gas concentrates its marketing efforts
on increasing the number of residential households using natural
gas for heating, hot water and cooking needs, increasing sales to
existing commercial and industrial customers and increasing the
overall number of both large and small customers through
expansion of Yankee Gas' distribution system within its service
territory.
In the residential market, Yankee Gas focuses marketing
efforts on households along Yankee Gas' existing mains because
they present opportunities to increase gas sales with little or
no capital investment. Yankee Gas added 834 new customers in
fiscal 1995. Conversions of homes to gas heating accounted for
42% of total new residential customer additions in fiscal 1995.
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In the commercial and industrial markets, the Company seeks
to expand gas sales by increasing sales to existing customers for
both traditional and innovative uses, such as cogeneration. The
Company also emphasizes attracting new commercial and industrial
customers within its service territory. In recent years, Yankee
Gas has added several significant industrial customers by
extending gas mains and by establishing additional
interconnections with the interstate pipeline system.
The emergence of natural gas vehicles creates a potential
new market for the natural gas industry. Connecticut law
currently provides a 50% state tax credit for installation of
natural gas fueling equipment and/or conversion equipment for
motor vehicles. In addition, qualifying motor vehicle fleets are
exempt from Connecticut's motor fuels tax, which is currently 34
cents per gallon. These provisions may encourage the increased
use of natural gas as a motor vehicle fuel. However, development
of an infrastructure to provide natural gas vehicle fueling
stations is essential to the development of this market.
Currently, Yankee Gas operates 96 bi-fuel (natural gas and
gasoline) vehicles and 2 dedicated fuel vehicles in its fleet and
plans to add other natural gas vehicles in 1996. Yankee Gas
operates two refueling stations for its own natural gas vehicles
and is evaluating various options for the establishment and
location of additional facilities. On January 13, 1994, Yankee
Gas, in cooperation with Shell Oil Company, opened Connecticut's
first retail public natural gas vehicle refueling station in
Windsor Locks. A second station was opened in Norwalk on
November 21, 1994 in cooperation with British Petroleum.
The Company is also seeking to expand gas sales in the non-
winter months through sales to the air conditioning market. The
environmental advantages of natural gas air conditioning,
together with technological advances in natural gas air
conditioning equipment, are making natural gas more competitive
in the air conditioning market. The Company will continue to
focus on this market in fiscal 1996.
Competition. Yankee Gas' principal competitors are
unregulated fuel-oil retailers and regulated electric utilities.
Natural gas competes with oil and electricity in many commercial
and industrial applications and in residential space and water
heating, clothes drying and cooking. Demand for natural gas is
affected by the marketing and pricing of competing sources of
energy.
Yankee Gas may also face competition from other LDCs. In
the past, LDCs did not directly compete with other LDCs for
retail customers because the territories they serve are fixed by
franchise. However, since 1993, LDCs began marketing efforts
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within the service territory of other LDCs under blanket
certificates granted by the Federal Energy Regulatory Commission
("FERC"). Yankee Gas has such a marketing certificate, which
allows gas to be sold, but not necessarily delivered, in the
service territory of another LDC. With the recent deregulation
of pipeline services brought about by the FERC and local public
utility commissions, pipeline companies, producers and
marketers/brokers compete with LDCs for gas sales to those
customers who utilize transportation service, especially large
industrial customers.
Recent Federal regulatory changes also permit customers
within Yankee Gas' distribution system to connect directly with
transmission pipelines and bypass Yankee Gas' distribution
system. No interstate pipeline company, however, has physically
bypassed Yankee Gas' distribution system to provide retail
service to customers in Yankee Gas' service territory. A
Connecticut statute currently prohibits an interstate pipeline
from bypassing an LDC without the DPUC's prior approval. The
Company believes that Yankee Gas is successfully addressing the
threat of bypass by its industrial customers by understanding
what services they need and executing market-competitive gas
service agreements.
Gas Supply
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In 1992, the FERC issued Order No. 636, which required
natural gas pipeline companies to separate or "unbundle" their
services. Prior to the issuance of Order No. 636, natural gas
pipeline companies sold pipeline services, such as gas
purchasing, storage and transportation, as a package. In 1993,
the interstate pipeline companies that provided natural gas to
Yankee Gas complied with Order No. 636. As a result, Yankee Gas
executed contracts with interstate pipelines for services to
transport gas from production and underground storage areas to
Yankee Gas' service territory to replace the traditional merchant
services previously provided by the pipeline companies. Yankee
Gas concurrently replaced the gas supply traditionally obtained
from the pipelines' merchant services with firm purchases
directly from producers and/or marketing companies.
Interstate pipelines delivered over 99.98 percent of Yankee
Gas' 1995 fiscal year requirements to its distribution system.
Interstate pipeline capacity enables Yankee Gas to meet its firm
customers' requirements with pipeline supplies for more than 99.2
percent of the year.
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The following table sets forth sources of fiscal 1995 gas
supply (including purchases for storage injections).
<TABLE>
<CAPTION>
Percent of
Source Total Supply
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<S> <C>
Alberta Northeast Energy, Ltd. 43.87
Direct Firm Purchases 43.13
Boundary Gas 7.05
Spot Market Purchase 5.93
Other .02
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Total 100%
</TABLE>
Yankee Gas is entitled to purchase 59,000 thousand cubic
feet ("Mcf") per day of gas, or about 21.5 Bcf annually, from
Alberta Northeast Energy, Ltd. ("ANE"). Yankee Gas holds a 15.9
percent equity interest in ANE, an entity formed by several
utilities in the Northeast to aggregate the purchase of natural
gas from Western Canada and to facilitate its sale to LDC owners
at the United States-Canadian Border. The sales contracts
between Yankee Gas and ANE expire in 2006. The gas purchased
from ANE is delivered in the United States by the Iroquois
pipeline and the transportation contract between Yankee Gas and
Iroquois expires in 2011.
Yankee Gas is also entitled to purchase 9,500 Mcf of gas per
day, or about 3.5 Bcf annually, from Boundary Gas ("Boundary").
Yankee Gas owns a 10.4 percent equity interest in Boundary, an
LDC consortium which imports natural gas from Canada. The sales
contract between Yankee Gas and Boundary expires in 2003.
In 1992, Yankee Gas converted its long-term sales contract
with Tennessee Gas Pipeline Company ("Tennessee") into a
transportation contract that expires in 2000, but may be
continued on a year to year basis after that with the mutual
consent of the parties. The contract provides for 562,794 Mcf of
pipeline capacity on an annual basis. Another long term
transportation contract with Tennessee provides for an annual
quantity of 511,000 Mcf and terminates in 2017. In addition to
the conversion to transportation service with Tennessee, Yankee
Gas also received its proportional share (approximately 1.8 Bcf)
of the underground storage that had been utilized previously by
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Tennessee to support the merchant service it had provided Yankee
Gas. To replace the natural gas that Yankee Gas previously
purchased directly from Tennessee, Yankee Gas negotiated for the
purchase of approximately 30,000 Mcf per day of gas from three
suppliers. These contracts provide varying term lengths,
flexibility options and pricing determinants. While the merchant
service previously provided by Tennessee subjected both
Tennessee's transportation and gas supply charges to FERC
regulation, Yankee Gas' gas purchase contracts with these
suppliers contain freely negotiated (non-FERC regulated) pricing
provisions. Tennessee's transportation function remains
regulated by the FERC.
Order No. 636 also mandated replacement of the former
merchant services provided by Algonquin Gas Transmission Company
("Algonquin") and required that Algonquin assign to Yankee Gas
its proportional share of the transportation capacity
entitlements it held on the systems of Texas Eastern Transmission
Company ("Texas Eastern"), Transcontinental Gas Pipeline
Corporation ("Transco"), National Fuel Gas Supply Corporation
("National Fuel") and CNG Transmission Corporation ("CNGT").
Additionally, Yankee Gas received its proportional share of firm
storage services (approximately 2.4 Bcf) provided by Texas
Eastern and CNGT which had been utilized to provide the Algonquin
merchant services. Yankee Gas has negotiated with a variety of
suppliers for a total of approximately 65,000 Mcf per day of gas
to replace the supplies previously purchased from the Algonquin
merchant service. These contracts provide a variety of term
lengths and flexibility provisions to meet Yankee Gas' current
and future supply requirements. The contracts held with
suppliers contain freely negotiated (non-FERC regulated) pricing
provisions, while the transportation and storage services
provided by Algonquin, Texas Eastern, Transco, National Fuel and
CNGT remain regulated by FERC.
As a result of the restructuring of pipeline services
required by Order No. 636, Yankee Gas has increased its firm
underground storage capacity to approximately 6.6 Bcf.
In addition to the firm long-term contracts Yankee Gas has
with a number of suppliers, Yankee Gas also participates in the
spot market, buying gas supply on an "as available" basis, to the
extent those firm contracts permit such replacement whenever it
is operationally feasible and economically beneficial.
Yankee Gas does not have sufficient capacity entitlements on
the interstate pipelines to serve its firm customers with
pipeline-delivered gas at all times. During the winter,
therefore, whenever daily firm demand exceeds the amount of gas
delivered by the pipelines, service to interruptible customers is
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interrupted and Yankee Gas supplements pipeline gas with a
propane-air mixture produced at facilities within Yankee Gas'
service territory. In fiscal 1995, such propane-air comprised
less than .02 percent of Yankee Gas' total supply. Although
Yankee Gas anticipates continued utilization of this relatively
expensive supplemental gas, the quantities to be used are
substantially decreased from prior periods due to the addition of
the ANE supplies transported by Iroquois.
Iroquois Gas Transmission System. Iroquois is a natural gas
pipeline that transports gas purchased from Canadian producers to
the northeastern United States. This additional capacity has
enabled Yankee Gas to expand and diversify its gas supply
portfolio. Yankee Gas is entitled to transport 59,000 Mcf per
day on the Iroquois pipeline. Housatonic, a wholly-owned
subsidiary of Yankee Energy, was organized for the sole purpose
of owning 10.5 percent of the equity in the partnership that owns
Iroquois. The Iroquois partnership consists of United States and
Canadian companies involved in various facets of the natural gas
business, including production, transmission and distribution.
Regulation and Rates
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Federal Regulation. Although Yankee Gas is not subject to
FERC jurisdiction, the FERC does regulate the interstate
pipelines serving Yankee Gas' service territory. Yankee Gas,
therefore, is directly and substantially affected by the FERC's
policies and actions. Accordingly, Yankee Gas closely follows
and, when appropriate, participates in proceedings before the
FERC.
Connecticut Regulation. Yankee Gas is subject to regulation
by the DPUC, which, among other things, has jurisdiction over
rates, accounting procedures, certain dispositions of property
and plant, mergers and consolidations, issuances of securities,
standards of service, management efficiency and construction and
operation of distribution, production and storage facilities.
Yankee Gas sells gas to its retail customers under rate
schedules filed with and approved by the DPUC. Firm sales rates
are subject to monthly adjustments pursuant to a Purchased Gas
Adjustment ("PGA") clause approved by the DPUC. The PGA passes
through to customers most changes in the cost of gas purchased by
Yankee Gas. These adjustments are designed to collect or refund
differences in purchased gas costs from the costs included in the
base rates. The DPUC may, after a special public hearing, order
an interim rate decrease if it finds that Yankee Gas' return on
equity exceeds a reasonable rate of return and rates are more
than just, reasonable and adequate as determined by the DPUC.
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The DPUC also is empowered to grant an interim rate increase
under compelling circumstances.
Yankee Gas' most recent rate order (effective for service
rendered on and after October 1, 1992) allowed a return on equity
of 12.43 percent and provided for favorable accounting treatment
for environmental cleanup costs, post-retirement benefits and
certain other major items.
FERC Order No. 636. In implementing Order No. 636, the FERC
recognized that the restructuring of the pipelines' traditional
services would cause pipelines to incur transition costs in
several areas. Transition costs may result from pipelines: 1)
having to negotiate out of supply contracts previously utilized
to provide "merchant service" (categorized as gas supply
realignment ("GSR") costs); 2) no longer needing capacity
entitlements on other pipelines ("stranded costs"); and 3)
abandoning the purchased gas adjustment mechanism through which
they recovered supply costs ("Acct. 191" costs). The FERC has
permitted certain transition costs to be recovered by the
pipeline companies from their customers. Such recovery is
conditioned upon a finding by the FERC that such costs were
caused by the implementation of Order No. 636 and were prudently
incurred.
An estimate made by the FERC staff as to the magnitude of
transition costs for each pipeline led Yankee Gas to conclude
that its ultimate liability would be approximately $15 million,
should the amounts estimated be deemed eligible and prudent by
the FERC. The DPUC acknowledged FERC jurisdiction with regard to
prudence issues while indicating a need for further discussion of
these costs at the state level. In July 1994, the DPUC issued an
order permitting the offset of transition costs billed by
pipelines under Order No. 636 with recoveries from capacity
release activity or deferred gas cost credits for the 1992-1993
period and all subsequent annual deferred costs, gas supplier
refunds and fifty percent of off system sales margins and
interruptible margins earned in excess of target amounts. With
the exception of all subsequent annual deferred gas costs
credits, the DPUC has ordered that all transition cost recovery
dollars be applied immediately on a monthly basis to the
transition costs that have been or are subsequently billed. All
subsequent annual deferred gas costs credits will be applied on
an annual basis. If needed, a per unit surcharge will be applied
to firm customers' bills.
Through September 30, 1995, Yankee Gas has paid
approximately $14.0 million of transition costs and an additional
$1.0 million are anticipated. To date, Yankee Gas has collected
$23.1 million through a combination of gas supplier refunds,
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deferred gas costs credits and excess interruptible margins. On
September 12, 1995, a proposed settlement agreement between
Yankee Gas and the Connecticut Office of Consumer Counsel was
filed with the DPUC. This three-year settlement agreement
provides for the retention of over-collected transition cost
credits to offset certain deferred expenses. As a result of this
proposed settlement agreement, Yankee Gas would stipulate that,
except in the event of certain circumstances which would
adversely affect Yankee Gas' financial condition, it would not
increase its rates prior to September 30, 1998. As of December
18, 1995, a final decision has not been issued.
The DPUC also ordered the Connecticut LDCs to file rates for
unbundled services by November 1, 1995 and agreed to review areas
considered impediments to the LDCs' ability to compete with
unregulated energy providers once unbundling is implemented.
On August 2, 1995, the DPUC issued a Final Decision in
Docket No. 94-11-12, DPUC Review of Connecticut Local
Distribution Companies' Cost of Service Study Methodologies. The
docket investigated the issues surrounding the development of
firm transportation ("FT") rates at the state level in response
to FERC Order No. 636. The Decision provides guidelines for the
development of FT rates to be offered by the state's three LDCs.
Each LDC filed specific FT rate proposals in separate company
rate dockets. The Decision states that an FT rate option is
expected to be implemented for the largest commercial and
industrial customers upon the conclusion of the individual
company rate dockets. Commercial and industrial FT rates will go
into effect on April 1, 1996.
Hearings were held in November 1995 to review Yankee Gas' FT
rate proposal. A final decision on rates is expected in January
1996. This FT filing will not address Yankee Gas' revenue
requirements and will maintain the existing margin recovery and
rates of return established in the last rate case decision issued
for Yankee Gas in 1992.
Order No. 636 also authorizes LDCs to make off system sales
or to release firm pipeline capacity. Yankee Gas has engaged in
these activities and expects they will generate approximately $2
million over the next fiscal year.
Environmental Matters
- ---------------------
The Company is subject to federal and state environmental
regulation of its operations and properties. Such regulation may
result in future environmental liabilities that may include
significant expenses incurred to remove, contain or remediate
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contamination caused by operations of former gas manufacturing
plant sites, including coal tar deposits. Coal tar is a by-
product of the gas manufacturing process used by Yankee Gas'
predecessor companies in the mid-20th century. Those predecessor
companies disposed of the coal tar deposits in accordance with
the standard operating practices of the time.
Pursuant to an Environmental Liability Sharing and Indemnity
Agreement, dated July 1, 1989, Yankee Gas and The Connecticut
Light and Power Company ("CL&P") have allocated potential
environmental liabilities at sites previously owned by CL&P and
used in CL&P's gas business and at sites not previously owned by
CL&P but which had prior uses in CL&P's gas business. As part of
that agreement, Yankee Gas and CL&P would share equally the costs
of environmental remediation at sites owned by CL&P prior to July
1, 1989 that were used in CL&P's gas business. Additional on and
off-site investigations of one such property began in fiscal 1993
and will continue in fiscal 1996. Following compilation of the
additional data, a determination will be made on the need for
remediation.
Fourteen sites initially believed to contain coal tar became
the property of Yankee Gas upon its divestiture from Northeast
Utilities in 1989. Responsibility for future investigation and
remediation at these sites rests solely with Yankee Gas. Each of
these sites has been the subject of a field investigation, and
coal tar constituents have been found in some soil and ground
water samples. The Company has reported the results of the
environmental studies to the Connecticut Department of
Environmental Protection ("DEP"). The DEP has not required that
any remedial action be undertaken to date. However, seven of the
fourteen sites are presently listed on the Connecticut Inventory
of Hazardous Waste Sites. Inclusion of a site on this list
indicates that remediation may be required in the future.
During 1993, the Company conducted additional research and
began to prioritize the fourteen sites to further define any that
may require remediation. The Company identified four sites that
are likely to require remediation. The Company's proposed
prioritization was submitted to the DEP. Extensive site
investigations were conducted at the four sites to define the
extent of contamination and begin remedial plans. Remedial
activity began at two sites during fiscal 1994 and will continue
at those locations during fiscal 1996. Complete remediation of
one of these properties is expected during fiscal 1996. In
addition, the Company has developed a cost estimate for the
remaining ten sites based on the probability of clean-up. As a
result of this effort, the Company has recorded a liability of
$35 million for future environmental clean-up.
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Recovery of remediation costs has been specifically allowed
by Yankee Gas' 1992 rate case decision. Presently, $325,000 is
allowed annually in rates. If costs are expected to exceed $2.5
million on an annual basis, Yankee Gas is required to go to the
DPUC for review. The DPUC has stated that "to the extent that
coal tar remediation expenses are prudently incurred, they should
be allowed as proper operating expenses."
The Company also believes that it has valid claims for
insurance recovery of remediation costs and is currently actively
pursuing these claims against its insurers.
Franchises
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Over the past 137 years, Yankee Gas and its predecessors in
interest have held valid franchises to sell gas in the areas in
which Yankee Gas supplies gas service. Such franchises are
perpetual but remain subject to the power of alteration,
amendment or repeal by the General Assembly of the State of
Connecticut, the power of revocation by the DPUC and certain
approvals, permits and consents of public authorities and others
prescribed by statute. Yankee Gas franchises include, among
other rights and powers, the rights and powers to manufacture,
generate, purchase, transmit and distribute gas, to sell gas at
wholesale to other utility companies and municipalities and to
erect and maintain certain facilities on public highways and
grounds, all subject to such consents and approvals of public
authorities and others as may be required by law. The franchises
include the power of eminent domain.
Self-generation and Cogeneration
- --------------------------------
With the current industry deregulation, two expanding gas
markets in Connecticut and elsewhere are self-generation and
cogeneration of electricity. Self-generation is the generation
of some or all of a user's electricity requirements, typically
for commercial or industrial purposes. Cogeneration involves
sequential production of electricity and thermal or mechanical
energy. YESCo has invested as a limited partner in two
cogeneration projects. Other opportunities for investing in this
market are currently being investigated.
Under an agreement between Yankee Gas and The Dexter
Corporation ("Dexter"), Yankee Gas' largest customer, Dexter has
a contract to purchase annually approximately 3.9 Bcf of natural
gas sales service for use in its 56-megawatt cogeneration
facility for an initial term of 20 years (1989-2009).
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Employees
- ---------
Yankee Gas employs approximately 566 people. Some of these
employees also provide accounting, financial, administrative,
legal and other managerial services to Yankee Energy, Housatonic,
NorConn, Yankee Financial and YESCo. With the exception of 5
persons employed by YESCo and 10 persons employed by BVA, none of
these companies currently have employees. Services are provided
on an as-needed basis and Yankee Gas employees charge the time
spent in providing the services directly to those companies.
During fiscal 1995, the Company initiated a business
transformation plan to streamline the Company's operations by
taking advantage of certain consolidation opportunities and to
achieve future operating efficiencies and savings. The plan is
also intended to provide additional opportunities for business
expansion and growth. Organizational charges related to the
business transformation plan, which included an early retirement
program, resulted in a one time operating cost increase of $5.4
million with an after tax effect on earnings per share of $0.30.
On July 5, 1995, Yankee Gas offered a voluntary early retirement
program to its non-bargaining unit employees who were at least 55
years of age and had ten years of service with the Company. A
total of 37 employees were eligible, of which 34 opted for early
retirement, with an effective date of October 1, 1995. On
September 27, 1995, 39 clerical and salaried employees were laid-
off as part of the business transformation plan. Additionally,
13 vacant positions have been eliminated and will not be
refilled, for a total reduction of 86 full-time positions from
the Company's previous staffing levels.
ITEM 2. PROPERTIES
----------
Yankee Gas' property includes, among other things,
distribution lines (mains and services), meters, pumps, valves
and pressure and flow controllers. Yankee Gas currently owns
2,712 miles of distribution mains, 128,143 service lines and
178,624 active meters for customer use. Of the 2,712 miles of
distribution mains, 1,723 miles are steel, 534 miles are cast
iron and 455 miles are plastic. Yankee Gas also owns six miles
of steel transmission mains.
Yankee Gas owns various propane facilities with a combined
storage capacity equivalent to approximately 360,000 Mcf and
seven gas storage holders with a total capacity of approximately
5,000 Mcf. In addition, Yankee Gas leases approximately 200,000
Mcf of storage capacity in one other large liquefied natural gas
storage facility owned by Algonquin. Yankee Gas does not own any
14
<PAGE>
underground natural gas storage facilities, although it contracts
for a total of approximately 6.6 Bcf of storage capacity with
Texas-Eastern, Penn-York Energy Corporation, Consolidated Gas
Transmission Corporation and Tennessee.
In the opinion of management, Yankee Gas' distribution
system is in good condition. Virtually all of the gas properties
are subject to the lien of the Yankee Gas first mortgage bond
indenture.
NorConn owns the Company's headquarters building in Meriden,
Connecticut and currently leases it to Yankee Gas. This is the
site of the Company's corporate administrative and staff
functions including the Customer Service Center. NorConn also
owns and leases to Yankee Gas a service building in East Windsor.
Yankee Gas owns service facilities in Meriden, Waterbury,
Torrington, Mystic, Bristol, Shelton, Bethel and Danielson,
Connecticut.
ITEM 3. LEGAL PROCEEDINGS
-----------------
Yankee Gas
Municipal Tax Assessment. In November 1995, Yankee Gas
received revised tax bills for the years 1991 through 1994 from
the City of Meriden, Connecticut (the "City"). The City is
asserting a claim for the payment of approximately $3.3 million
of back taxes and interest resulting from a retroactive
reassessment and revaluation of Yankee Gas' personal property
filings. The City did not locate or identify any property which
Yankee Gas omitted from its filings. The tax bills reflect a
reassessment of property at higher rates than those previously
accepted by the City. Yankee Gas intends to vigorously contest
this retroactive reassessment. On November 17, 1995, Yankee Gas
filed a complaint in Connecticut Superior Court against the City
and certain City officials alleging that the Connecticut state
statutes prohibit the City from retroactively reassessing
personal property after grand lists are filed and requesting that
the City's order to pay additional taxes be invalidated.
Although no assurances can be given and no determination can be
made at this time as to the outcome of the City's claim or Yankee
Gas' lawsuit, the Company does not anticipate that the outcome of
this matter will have a material adverse effect on the Company's
consolidated results of operations or financial position.
Licensing Issue. In November 1995, The Connecticut Heating
and Cooling Contractors Association, Inc. and others filed a
class action suit against Yankee Gas and Connecticut's two other
15
<PAGE>
LDCs, Connecticut Natural Gas Corporation and The Southern
Connecticut Gas Company, claiming the LDCs engaged in unfair
trade practices. The action alleges that the LDCs unfairly
competed with licensed plumbers and contractors by performing
customer service work using customer service employees who did
not possess Connecticut state trade licenses. The plaintiffs are
seeking injunctive relief and unspecified punitive and actual
damages.
The LDCs have asserted that such licenses are not required
for this work based on a statutory exemption enacted in 1965 and
amended in 1967. However, in a separate proceeding, a
Connecticut Superior Court has upheld an administrative ruling
against the LDCs' position. Yankee Gas intends to vigorously
defend this claim. Yankee Gas is participating in an appeal of
that decision. In 1995, the Connecticut General Assembly enacted
legislation that established on a going-forward basis a separate
procedure for State certification of gas service employees.
While the ultimate results of the class action suit cannot be
determined, management does not expect that it will have a
material adverse effect on the Company's consolidated results of
operations or financial position.
Iroquois
The following information relates to legal proceedings
involving Iroquois. Housatonic has a 10.5 percent equity
interest in Iroquois.
Federal Investigations. Iroquois remains subject to federal
civil and criminal investigations commenced in 1992 regarding
alleged violations of federal environmental laws in connection
with the construction of the Iroquois pipeline. Iroquois and its
counsel have met and expect to continue to meet with the federal
officers conducting the civil and criminal investigations in
order to explore a range of possible resolutions acceptable to
all parties. Resolution of the federal civil and criminal
investigations may involve the imposition of fines and other
monetary sanctions that could have a material effect on the
results of operation and financial condition of Iroquois.
Although no agreements have been reached regarding the
disposition of these matters, Iroquois has notified the Company
that it has included a provision in its financial statements for
the possibility of monetary liability arising from a settlement
or other disposition of these matters. As a result, the Company
has made a $2.1 million provision in its consolidated financial
statements representing Housatonic's proportionate share of
Iroquois' estimated charge associated with the investigations.
16
<PAGE>
New York State Proceedings. Iroquois has received inquiries
from the New York Department of Transportation and the staff of
the New York Public Service Commission regarding construction of
certain of its pipeline facilities. In addition, in January
1995, a group of landowners along the pipeline route filed a
complaint with the New York Public Service Commission concerning
certain construction practices by Iroquois. Iroquois has been
asked by the New York Public Service Commission to respond to
such inquiries. Iroquois is providing information to these
agencies in response to their requests.
Other legal proceedings involving the Company and its
subsidiaries are litigation incidental to the conduct of the
Company's business which, in management's opinion, will not have
a material impact on the Company's financial condition or results
of operation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
There was no matter submitted to a vote of security holders
during the fourth quarter of 1995.
EXECUTIVE OFFICERS OF THE COMPANY
---------------------------------
Position and Business Experience
Name Age During Past Five Years
- ---- --- ---------------------------------
Branko Terzic 48 Chairman, President and Chief Executive
Officer of the Company and its
subsidiaries. Mr. Terzic became
Chairman in August 1995, Chief
Executive Officer in March 1995 and
President in September 1994. From June
1993 to September 1994, Mr. Terzic was
Managing Director of Arthur Andersen
Economic Consulting, Washington, D.C.
From October 1990 to May 1993, he served
as a Commissioner of the Federal Energy
Regulatory Commission, and, from 1986 to
October 1990, as Group Vice President
and Director of AUS Consultants
(Management Consultants) in Milwaukee,
Wisconsin.
17
<PAGE>
Charles E. Gooley 42 Executive Vice President of the Company
and its subsidiaries since July 1994.
Previously, he served as Vice President
and General Counsel of the Company from
July 1989 to July 1994.
Michael E. Bielonko 43 Vice President of the Company and its
subsidiaries since July 1989 and Chief
Financial Officer since July 1990. From
July 1989 to July 1990 and from
September 1992 to May 1995, he also
served as Treasurer of the Company.
Thomas J. Houde 48 Vice President of the Company and its
subsidiaries since January 1992.
Previously, he served as Director,
Corporate Planning, Rates and Economic
Analysis of Yankee Gas from March 1990
to December 1991 and as Manager, Rates
and Economic Analysis from July 1989 to
March 1990.
Mary J. Healey 44 Vice President, General Counsel and
Secretary of the Company and its
subsidiaries since January 1995.
Previously, she served as Secretary and
Assistant General Counsel of the Company
from January 1992 to January 1995 and as
Secretary and Counsel of the Company
from July 1989 to January 1992.
Ellen J. Quinn 39 Vice President of the Company and its
subsidiaries since May 1995.
Previously, she served as Director,
Corporate and Environmental Planning
from October 1992 to May 1995, as
Manager, Corporate and Environmental
Planning from March 1990 to October 1992
and as Senior Strategic Planner from
December 1988 to March 1990.
All executive officers are elected annually by the Company's
Board of Directors. There are no family relationships among the
executive officers and directors nor are there any arrangements
or understandings between any executive officer and any other
person pursuant to which the officer was selected.
18
<PAGE>
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
--------------------------------------
Yankee Energy declared and paid regular quarterly cash
dividends in 1995. The dividend paid for the first two quarters
of 1995 was $.305 per share and $.315 per share in the last two
quarters of 1995. Other information required by this item is
incorporated herein by reference to Yankee Energy's 1995 Annual
Report to Shareholders ("1995 Annual Report"), on the inside back
cover, subsections entitled "Market for Common Stock", and
"Dividends".
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
Information required by this item is incorporated herein by
reference to the 1995 Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
-------------------------------------------------
Information required by this item is incorporated herein by
reference to the 1995 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The Consolidated Financial Statements of Yankee Energy and
the Notes thereto, together with the report thereon of the
Company's Management and of Arthur Andersen LLP are incorporated
herein by reference to the 1995 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
-------------------------------------------------
None.
19
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
-----------------------------------------------
Information regarding Yankee Energy's directors and with
respect to delinquent filers pursuant to Item 405 of Regulation
S-K is incorporated herein by reference to the Company's Proxy
Statement for its Annual Meeting of Shareholders to be held on
February 23, 1996 (the "1996 Proxy Statement").
Information regarding the Company's executive officers
follows Item 4 in Part I of this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
Information regarding compensation of Yankee Energy's
executive officers, except the Report of the Organization and
Compensation Committee and the Stock Performance Graph, is
incorporated herein by reference to the 1996 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
-----------------------------------------------
Information regarding the beneficial ownership of shares of
Common Stock of the Company by certain persons is incorporated
herein by reference to the 1996 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
None.
20
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
---------------------------------------------------
(a) 1. Financial Statements:
The following Consolidated Financial Statements of
Yankee Energy are incorporated herein by reference to the
Company's 1995 Annual Report in response to Item 8 hereof:
(i) Report of Independent Public Accountants
(ii) Consolidated Statements of Income for the years
ended September 30, 1995, 1994 and 1993.
(iii) Consolidated Balance Sheets at September 30, 1995
and 1994.
(iv) Consolidated Statements of Cash Flows for the
years ended September 30, 1995, 1994 and 1993.
(v) Consolidated Statements of Capitalization at
September 30, 1995 and 1994.
(vi) Consolidated Statements of Common Shareholders'
Equity for the years ended September 30, 1995,
1994 and 1993.
(vii) Notes to Consolidated Financial Statements
2. Financial Statement Schedules:
The following schedules of the Company are included on
the attached pages as indicated:
Page
----
Report of Independent Public Accountants on Schedules...S-1
Schedule II Valuation and Qualifying Accounts and
Reserves for the years ended September
30, 1995, 1994 and 1993..................S-2
3. Exhibits:
Exhibits for Yankee Energy are listed in the Index
to Exhibits........................................E-1
(b)Reports on Form 8-K:
Current Report on Form 8-K dated September 27, 1995 and
filed October 4, 1995, Item 5.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
YANKEE ENERGY SYSTEM, INC.
--------------------------
(Registrant)
Date: December 19, 1995 By /s/ Branko Terzic
-----------------------
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Date Title Signature
- ---- ----- ---------
December 19, 1995 Chairman, President /s/ Branko Terzic
and Chief Executive Branko Terzic
Officer
December 19, 1995 Vice President, /s/ Michael E. Bielonko
Chief Financial Michael E. Bielonko
Officer
December 19, 1995 Controller /s/ Nicholas A. Rinaldi
Nicholas A. Rinaldi
December 19, 1995 Director /s/ Sanford Cloud, Jr.
Sanford Cloud, Jr.
December 19, 1995 Director /s/ Eileen S. Kraus
Eileen S. Kraus
December 19, 1995 Director /s/ Frederick M. Lowther
Frederick M. Lowther
December 19, 1995 Director /s/ Thomas H. O'Brien
Thomas H. O'Brien
December 19, 1995 Director /s/ Leonard A. O'Connor
Leonard A. O'Connor
December 19, 1995 Director /s/ Emery G. Olcott
Emery G. Olcott
December 19, 1995 Director /s/ Nicholas L. Trivisonno
Nicholas L. Trivisonno
22
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Shareholders of Yankee Energy System, Inc.:
We have audited, in accordance with generally accepted auditing
standards, the financial statements included in Yankee Energy
System, Inc.'s (the Company) Annual Report incorporated by
reference in this Form 10-K, and have issued our report thereon
dated November 21, 1995. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The
schedule listed in the accompanying index is presented for
purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial
statements. The schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements
and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to
the basic financial statements taken as a whole.
Arthur Andersen LLP
Hartford, Connecticut
November 21, 1995
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
SCHEDULE
II Valuation and Qualifying Accounts and Reserves
for Years Ended September 30, 1995, 1994 and 1993
<PAGE>
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEAR ENDED SEPTEMBER 30, 1995
SCHEDULE II
(Thousands of Dollars)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
Additions
__________
(1) (2)
Charged
Balance Charged to Balance
at to other at end
beginning costs and accounts Deductions of
Descrip. of period expenses describe describe period
RESERVES DEDUCTED FROM ASSETS
TO WHICH THEY APPLY:
<S> <C> <C> <C> <C> <C>
Reserves
for
uncol-
lectible
accounts $5,444 $2,784 $ - $2,747(a) $5,481
RESERVES NOT APPLIED
AGAINST ASSETS:
Injuries and
damages(b)$1,031 $ 803 $ - $1,033(c) $ 801
Medical(d) 1,085 3,675 - 3,487(e) 1,273
_____ ______ ____ ______ ______
Total $2,116 $4,478 $ - $4,520 $2,074
______ ______ ____ ______ ______
______ ______ ____ ______ ______
</TABLE>
(a) Amounts charged off as uncollectible after deducting
customers' deposits and recoveries of accounts previously charged
off.
(b) Provided to cover claims for injuries to employees, for
workmen's compensation, for bodily injury to others and property
damage.
(c) Principally payments for various injuries and damages and
expenses in connection therewith.
(d) Provided to cover employee medical claims.
(e) Principally payments for various employee medical expenses
and expenses in connection therewith.
<PAGE>
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEAR ENDED SEPTEMBER 30, 1994
SCHEDULE II
(Thousands of Dollars)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
Additions
__________
(1) (2)
Charged
Balance Charged to Balance
at to other at end
beginning costs and accounts Deductions of
Descrip. of period expenses describe describe period
RESERVES DEDUCTED FROM ASSETS
TO WHICH THEY APPLY:
<S> <C> <C> <C> <C> <C>
Reserves
for
uncol-
lectible
accounts $4,914 $3,455 $ - $2,925(a) $5,444
RESERVES NOT APPLIED
AGAINST ASSETS:
Injuries and
damages(b)$ 869 $ 700 $ - $ 538(c) $1,031
Medical(d) 861 3,142 - 2,918(e) 1,085
___ ______ ____ _______ _______
Total $1,730 $3,842 $ - $3,456 $2,116
______ ______ ____ ______ ______
______ ______ ____ ______ ______
</TABLE>
(a) Amounts charged off as uncollectible after deducting
customers' deposits and recoveries of accounts previously charged
off.
(b) Provided to cover claims for injuries to employees for
workmen's compensation, for bodily injury to others and property
damage.
(c) Principally payments for various injuries and damages and
expenses in connection therewith.
(d) Provided to cover employee medical claims.
(e) Principally payments for various employee medical expenses
and expenses in connection therewith.
<PAGE>
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEAR ENDED SEPTEMBER 30, 1993
SCHEDULE II
(Thousands of Dollars)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
Additions
__________
(1) (2)
Charged
Balance Charged to Balance
at to other at end
beginning costs and accounts Deductions of
Descrip. of period expenses describe describe period
RESERVES DEDUCTED FROM ASSETS
TO WHICH THEY APPLY:
<S> <C> <C> <C> <C> <C>
Reserves
for
uncol-
lectible
accounts $4,298 $4,258 $ - $3,642(a) $4,914
RESERVES NOT APPLIED
AGAINST ASSETS:
Injuries and
damages(b)$ 614 $ 994 $ - $ 739(c) $ 869
Medical(d) 613 3,133 - 2,885(e) 861
___ ______ ____ _______ _______
Total $1,227 $4,127 $ - $3,624 $1,730
______ ______ ____ ______ ______
______ ______ ____ ______ ______
</TABLE>
(a) Amounts charged off as uncollectible after deducting
customers' deposits and recoveries of accounts previously charged
off.
(b) Provided to cover claims for injuries to employees for
workmen's compensation, for bodily injury to others and property
damage.
(c) Principally payments for various injuries and damages and
expenses in connection therewith.
(d) Provided to cover employee medical claims.
(e) Principally payments for various employee medical expenses
and expenses in connection therewith.
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
<S> <C>
Exhibit
Number Description of Exhibit
- -------- -----------------------
(3)
3.1 Restated Certificate of Incorporation of Yankee
Energy System, Inc. (the "Company")(Incorporated
by reference to Form 10 Registration Statement
dated April 14, 1989 and amendments thereto, File
No. 0-17605 ("Form 10")).
3.2 Amended Bylaws of the Company (Incorporated by
reference to Form 10).
(4)
4.1 Specimen of the Company's Common Stock
(Incorporated by reference to Form 10).
4.2 Rights Agreement between the Company and The
Connecticut Bank and Trust Company, N.A., as
Rights Agent, dated November 20, 1989
(Incorporated by reference to Form 8-A
Registration Statement dated December 7, 1989,
File No. 0-17605).
4.3 Amendment to Rights Agreement dated May 10, 1990
(Incorporated by reference to Form 8 dated May 30,
1990, File No. 0-17605).
4.4 Amendment to Rights Agreement dated January 23,
1991 (Incorporated by reference to Form 8 dated
January 31, 1991, File No. 0-17605).
4.5 Guaranty of the Company dated June 30, 1989 with
Credit Agreement between Housatonic Corporation
("Housatonic") and Bankers Trust Company ("Bankers
Trust") dated June 30, 1989 (Incorporated by
reference to Form 10).
4.6 Amendment to Credit Agreement between Housatonic
and Bankers Trust dated June 9, 1992
(Incorporated by reference to Form 10-K for the
fiscal year ended September 30, 1992, File No. 0-
17605 ("1992 Form 10-K")).
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Exhibit
Number Description of Exhibit
- -------- -----------------------
4.7 Bond Purchase Agreement dated July 1, 1989 between
Yankee Gas Services Company ("Yankee Gas") and the
Purchasers identified therein (Incorporated by
reference to Form 10).
4.8 Indenture of Mortgage and Deed of Trust dated July
1, 1989 between Yankee Gas and The Connecticut
National Bank, as Trustee (Incorporated by
reference to Form 10).
4.9 Guaranty of the Company with Term Loan Agreement
dated July 20, 1989 between United Bank & Trust
Company, as Trustee of the Trust of the Company's
401(k) Employee Stock Ownership Plan and The
First National Bank of Boston (Incorporated by
reference to Form 10-K for the fiscal year ended
December 31, 1989, File No. 0-17605 ("1989 Form
10-K")).
4.10 First Supplemental Indenture of Mortgage and Deed
of Trust dated April 1, 1992 between Yankee Gas
and The Connecticut National Bank, as Trustee
(Incorporated by reference to Form S-3
Registration Statement #33- 52750 dated October 2,
1992 ("Form S-3")).
4.11 Second Supplemental Indenture of Mortgage and Deed
of Trust dated December 1, 1992 between Yankee
Gas and The Connecticut National Bank, as Trustee
(Incorporated by reference to 1992 Form 10-K).
4.12 Bond Purchase Agreement dated April 1, 1992
between Yankee Gas and the Purchasers identified
therein (Incorporated by reference to Form S-3).
4.13 Bond Purchase Agreement dated December 1, 1992
between Yankee Gas and Purchaser identified
therein (Incorporated by reference to 1992 Form
10-K).
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Exhibit
Number Description of Exhibit
- -------- -----------------------
4.14* Third Supplemental of Mortgage and Deed of Trust
dated June 1, 1995 between Yankee Gas and Shawmut
Bank Connecticut, N.A., as Trustee.
4.15* Bond Purchase Agreement dated June 22, 1995
between Yankee Gas and Purchaser identified
therein.
(10)
10.1 Asset Transfer Agreement among Northeast Utilities
Service Company ("NUSCO"), The Connecticut Light
and Power Company ("CL&P"), the Company, Yankee
Gas and Housatonic dated June 30, 1989
(Incorporated by reference to Form 10).
10.2 Environmental Liability Sharing and Indemnity
Agreement dated June 30, 1989 between Yankee Gas
and CL&P (Incorporated by reference to Form 10).
10.3 Rate Case Decision dated August 26, 1992
(Incorporated by reference to 1992 Form 10-K).
10.4 Lease Agreement between Yankee Gas and NorConn
dated October 1, 1990 (Incorporated by reference
to Form S-1 Registration Statement #33-40758 dated
May 22, 1991 and amendment thereto dated June 18,
1991 ("Form S-1")).
10.5 Note Purchase Agreement among NorConn Properties,
Inc. (NorConn), the Company and the Knights of
Columbus dated November 9, 1990 (Incorporated by
reference to Form S-1).
10.6+ Long-Term Incentive Compensation Plan adopted
December 5, 1990 (Incorporated by reference to
Proxy Statement dated December 24, 1990).
10.7+ Annual Incentive Compensation Plan adopted
December 5, 1990 (Incorporated by reference to
Form 10-K for the fiscal year ended September 30,
1991, File No.0-17605 ("1991 Form 10-K")).
</TABLE>
* Filed herewith.
+ Management contract or compensatory plan required to be filed
as an exhibit to this form pursuant to Item 14c of this report.
3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Exhibit
Number Description of Exhibit
- -------- -----------------------
10.8+ Non-Employee Directors' Stock Compensation Plan
adopted March 21, 1991 (Incorporated by reference
to 1991 Form 10-K).
10.9 Severance Pay Plan adopted October 17, 1991
(Incorporated by reference to 1991 Form 10-K).
10.10 Service Agreement #800308 dated June 1, 1993,
applicable to Rate Schedule FT-1 (Firm
Transportation) between Texas Eastern Transmission
Company ("Texas Eastern") and Yankee Gas Services
Company ("Yankee") (Incorporated by reference to
Form 10-K for the fiscal year ended September 30,
1993, File No. 0-17605 ("1993 Form 10-K")).
10.11 Service Agreement #1596 dated September 1, 1993,
applicable to Rate Schedule FT-A (Firm
Transportation) between Tennessee Gas Pipeline
("Tennessee") and Yankee Gas Services Company
("Yankee") (Incorporated by reference to 1993
Form 10-K).
10.12 Service Agreement #333 dated September 1, 1993,
applicable to Rate Schedule FT-A (Firm
Transportation) between Tennessee Gas Pipeline
("Tennessee") and Yankee Gas Services Company
("Yankee") (Incorporated by reference to 1993
Form 10-K).
10.13 Transportation Agreement dated February 7, 1991
between Iroquois Gas Transmission System
("Iroquois") and Yankee Gas for transportation of
Canadian gas purchased (Incorporated by
reference to Form S-1).
10.14 Service Agreement dated February 7, 1991 between
Alberta Northeast Gas Ltd. ("ANE") and Yankee Gas
Services Company for purchase of gas from ATCOR
Limited (Incorporated by reference to Form S-1).
10.15 Service Agreement dated February 7, 1991 between
ANE and Yankee Gas Services Company for purchase
of gas from PROGAS Limited (Incorporated by
reference to Form S-1).
</TABLE>
* Filed herewith.
4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Exhibit
Number Description of Exhibit
- -------- -----------------------
10.16 Service Agreement dated February 7, 1991 between
ANE and Yankee Gas for purchase of gas from AEC
Oil and Gas Company (Incorporated by reference to
Form S-1).
10.17 Service Agreement dated February 7, 1991 between
ANE and Yankee Gas Services Company for purchase
of gas from TransCanada Pipelines Limited
(Incorporated by reference to Form S-1).
10.18+ Employment Agreement between the Company and Mr.
Branko Terzic dated September 15, 1994
(Incorporated by reference to Form 10-K for the
fiscal year ended September 30, 1994, File No.
0-017605).
10.19+* Form of Change in Control Executive Severance
Agreement dated April 25, 1995 for Michael E.
Bielonko, Charles E. Gooley, Mary J. Healey and
Thomas J. Houde.
10.20+* Memorandum of Understanding dated December 6,
1994 for Philip T. Ashton.
10.21+* Amendment to the Memorandum of Understanding for
Philip T. Ashton dated August 22, 1995.
10.22+* Supplemental Benefit Plan for Philip T. Ashton
dated February 28, 1995.
10.23* $60 million Revolving Credit Agreement among
Yankee Gas and several banks dated February 2,
1995.
10.24 Memorandum of Understanding among Housatonic and
Iroquois partners relating to equity contributions
and guarantees dated March 13, 1991 (Incorporated
by reference to Form S-1).
10.25 Agreement for Systems Operations Services among
Yankee Gas and Integrated Systems Solutions
Corporation ("ISSC") dated August 12, 1991
(Incorporated by reference to 1992 Form 10-K).
</TABLE>
* Filed herewith.
+ Management contract or compensatory plan required to be filed
as an exhibit to this form pursuant to Item 14c of this report.
5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Exhibit
Number Description of Exhibit
- -------- -----------------------
10.64 Phase 2 Sales Agreement dated September 14, 1987
applicable to rate Schedule G-1 among Boundary,
Yankee Gas and other utilities (Boundary, G-1), as
amended September 14, 1988 and July 1, 1989 (Filed
in Form 10).
11* Statement re: Computation of per share earnings.
13* 1995 Annual Report to Shareholders.
21* Subsidiaries of the registrant.
23* Consent of Arthur Andersen LLP.
27* Financial date schedule pursuant to Article 5 of
Regulation S-X for commercial/industrial
customers.
</TABLE>
* Filed herewith.
6
Exhibit 4.14
THIRD SUPPLEMENTAL INDENTURE
from
YANKEE GAS SERVICES COMPANY
to
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION
TRUSTEE
_________________________________
Dated as of June 1, 1995
Supplemental to Indenture of Mortgage
and Deed of Trust from
Yankee Gas Services Company to
The Connecticut National Bank (now known as
Shawmut Bank Connecticut, National Association), Trustee,
dated as of July 1, 1989
THIRD SUPPLEMENTAL INDENTURE
THIRD SUPPLEMENTAL INDENTURE, dated as of June 1, 1995,
between YANKEE GAS SERVICES COMPANY, a specially chartered
Connecticut corporation (herein called the "Company"), and
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION (formerly known as
The Connecticut National Bank), a national banking association,
as Trustee (the "Trustee") under the Indenture of Mortgage and
Deed of Trust, dated as of July 1, 1989, executed and delivered
by the Company (herein called the "Original Indenture"; the
Original Indenture and any and all indentures and instruments
supplemental thereto, including, without limitation, this Third
Supplemental Indenture, being herein called the "Indenture");
1
<PAGE>
WHEREAS, pursuant to Sections 13.01(C), 13.01(G), 3.03 and
Article Five of the Original Indenture, the Company desires to
provide for the issuance under the Indenture of a new series of
Bonds, which Bonds will be secured by and entitled to the
benefits of the Indenture, and to add to its covenants and
agreements contained in the Original Indenture certain other
covenants and agreements; and
WHEREAS, all acts and things necessary to make this Third
Supplemental Indenture a valid, binding and legal instrument have
been performed, and the issuance of the new series of Bonds,
subject to the terms of the Original Indenture, has been duly
authorized by the Board of Directors of the Company and approved
by the Connecticut Department of Public Utility Control, and the
Company has requested and hereby requests the Trustee to enter
into and join the Company in the execution and delivery of this
Third Supplemental Indenture;
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that, to secure
the payment of the principal of (and premium, if any) and
interest on the Outstanding Secured Bonds, including the new
series of Bonds hereunder issued, and the performance of the
covenants therein and herein contained and to declare the terms
and conditions on which all such Outstanding Secured Bonds are
secured, and in consideration of the premises and of the purchase
of the Bonds by the Holders thereof, the Company by these
presents does grant, bargain, sell, alien, remise, release,
convey, assign, transfer, mortgage, hypothecate, pledge, set over
and confirm to the Trustee, all property, rights, privileges and
franchises of the Company of every kind and description, real,
personal or mixed, tangible and intangible, whether now owned or
hereafter acquired by the Company, wherever located, and grants a
security interest therein for the purposes herein expressed,
except any Excepted Property which is expressly excepted from the
lien hereof in the Original Indenture, and including, without
limitation, all and singular the following:
All property, rights, privileges and franchises
particularly described in the Original Indenture, and
any and all indentures and instruments supplemental
thereto, including, without limitation, the First
Supplemental Indenture dated as of April 1, 1992, the
Second Supplemental Indenture dated as of December 1,
1992, and in addition, all the property, rights,
privileges and franchises particularly described in
Schedule A annexed to this Third Supplemental
Indenture, which are hereby made a part of, and deemed
to be described herein, as fully as if set forth
herein at length.
2
<PAGE>
TO HAVE AND TO HOLD all said property, rights, privileges
and franchises of every kind and description, real, personal or
mixed, hereby and hereafter (by supplemental indenture or
otherwise) granted, bargained, sold, aliened, remised, released,
conveyed, assigned, transferred, mortgaged, hypothecated,
pledged, set over or confirmed as aforesaid, or intended, agreed
or covenanted so to be, together with all the appurtenances
thereto appertaining (said properties, rights, privileges and
franchises, including any cash and securities hereafter deposited
or required to be deposited with the Trustee (other than any such
cash which is specifically stated herein not to be deemed part of
the Trust Estate), being herein collectively called "Trust
Estate") unto the Trustee and its successors and assigns forever.
SUBJECT, HOWEVER, to Permitted Encumbrances (as defined in
Section 1.01 of the Original Indenture).
BUT IN TRUST, NEVERTHELESS, for the proportionate and equal
benefit and security of the Holders from time to time of all the
Outstanding Secured Bonds without any preference or priority of
any such Bond over any other such Bond.
UPON CONDITION that, until the happening of an Event of
Default (as defined in Section 1.01 of the Original Indenture)
and subject to the provisions of Article Six of the Original
Indenture, the Company shall be permitted to possess and use the
Trust Estate, except cash, securities and other personal property
deposited and pledged, or required to be deposited and pledged,
with the Trustee, and to receive and use the rents, issues,
profits, revenues and other income of the Trust Estate.
AND IT IS HEREBY DECLARED that in order to set forth the
terms and provisions of the new series of Bonds and in
consideration of the premises and of the purchase and acceptance
of such Bonds by the holders thereof, and in consideration of the
sum of One Dollar ($1.00) to it duly paid by the Trustee, and of
other good and valuable consideration, the receipt whereof is
hereby acknowledged, and for the purpose of securing the faithful
performance and observance of all the covenants and conditions of
the Indenture, the Company hereby covenants and agrees with the
Trustee and provides as follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.01. Terms from the Original Indenture. All
defined terms used in this Third Supplemental Indenture and not
otherwise defined herein shall have the respective meanings
ascribed to them in the Original Indenture.
3
<PAGE>
Section 1.02. References are to Third Supplemental
Indenture. Unless the context otherwise requires, all references
herein to "Articles," "Sections" and other subdivisions are to
the designated Articles, Sections and other subdivisions of this
Third Supplemental Indenture, and the words "herein," "hereof,"
"hereby," "hereunder" and words of similar import refer to this
Third Supplemental Indenture as a whole and not to any particular
Article, Section or other subdivision hereof or to the Original
Indenture.
ARTICLE II
SERIES D BONDS
Section 2.01 Specific Title, Terms and Forms. There is
hereby created and shall be outstanding under and secured by the
Indenture a series of Bonds entitled "First Mortgage Bonds,
Series D" (herein called the "Series D Bonds"), limited in
aggregate principal amount at any one time outstanding to Twenty
Million Dollars ($20,000,000). The form of the Series D Bonds
shall be substantially as set forth in Exhibit A hereto with such
insertions, omissions, substitutions and variations as may be
determined by the officers executing the same as evidenced by
their execution thereof.
The Series D Bonds shall be issued as fully registered Bonds
in denominations of $250,000 or any amount in excess thereof
which is an integral multiple of $5,000. The Series D Bonds
shall be numbered D-1 and consecutively upwards, or in any other
manner deemed appropriate by the Trustee. The Series D Bonds
shall mature on June 1, 2005 and shall bear interest from the
date of issuance thereof (or from the most recent Interest
Payment Date to which interest has been paid or duly provided
for) at the rate of six and three-quarters percent [6.75%] per
annum (computed on the basis of a 360-day year of twelve 30-day
months). Interest Payment Dates for the Series D Bonds shall be
June 1 and December 1 of each year, commencing December 1, 1995.
The Regular Record Date referred to in Section 3.09 of the
Original Indenture for the payment of the interest on the Series
D Bonds payable, and punctually paid or duly provided for, on any
Interest Payment Date shall be the 15th day (whether or not a
business day) of the calendar month next preceding such Interest
Payment Date.
Section 2.02 No Sinking Fund; No Optional Redemption. The
Series D Bonds shall not be subject to any sinking fund and shall
not be redeemable or subject to prepayment at the option of the
Company or the Holders prior to their Stated Maturity.
4
<PAGE>
Section 2.03. Place of Payment. The principal and the
Redemption price of, and the premium, if any, and the interest
on, the Series D Bonds shall be payable at the principal
corporate trust office of Shawmut Bank Connecticut, National
Association, in Hartford, Connecticut. So long as The Depository
Trust Company ("DTC") (or a successor securities depository) is
acting as securities depository with respect to the Series D
Bonds, such payments shall be made at the time and in the manner
necessary to conform to the requirements of such securities
depository.
Section 2.04. Exchangeability. Subject to Section 3.07 of
the Indenture, all Series D Bonds shall be fully interchangeable,
and, upon surrender at the office or agency of the Company in a
Place of Payment therefor, shall be exchangeable for other Series
D Bonds of a different authorized denomination or denominations,
as requested by the Holder surrendering the same. The Company
will execute, and the Trustee shall authenticate and deliver,
Series D Bonds whenever the same are required for any such
exchange.
Section 2.05. The Depository Trust Company; Registration of
the Series D Bonds. Notwithstanding any other provisions of this
Third Supplemental Indenture, the Series D Bonds issued by the
Company and authenticated and delivered by the Trustee under this
Third Supplemental Indenture in reliance on Rule 144A shall be
issued as one definitive, fully registered Bond, without interest
coupons, as a global security in the name of Cede & Co., as
nominee of DTC, in the aggregate principal amount of all Series D
Bonds issued hereunder.
The Company and the Trustee may treat DTC as, and shall deem
DTC to be, the absolute owner of the Series D Bonds evidenced by
the global security for the purpose of payment of principal of,
premium, if any, and interest on such Series D Bonds, for the
purpose of all other matters with respect to such Series D Bonds,
for the purpose of registering transfers with respect to the
Series D Bonds, and for all other purposes whatsoever. Neither
the Company nor the Trustee shall have any responsibility or
obligation to any of DTC's direct or indirect participants.
Without limiting the immediately preceding sentence, neither the
Company nor the Trustee shall have any responsibility or
obligation with respect to (i) the accuracy of the records of DTC
or its nominee or any of its direct or indirect participants with
respect to any ownership interest in the global security, (ii)
the delivery to any of DTC's direct or indirect participants or
any other person, other than DTC, of any notice with respect to
the Series D Bonds evidenced by the global security, (iii) the
payment to any of DTC's direct or indirect participants or any
other person, other than DTC, of any amount with respect to the
5
<PAGE>
principal of, premium, if any, or interest on the Series D Bonds
evidenced by the global security, and (iv) the failure of DTC to
provide any information or notification on behalf of any of DTC's
direct or indirect participants. The Trustee shall pay all
principal of and premium, if any, and interest on the Series D
Bonds only to or upon the order of DTC, and all such payments
shall be valid and effective to fully satisfy the Company's
obligations with respect to the principal of and premium, if any,
and interest on such Series D Bonds to the extent so paid.
Notwithstanding the provisions of the Indenture to the contrary
(including, without limitation, place of payment, surrender of
the Series D Bonds, registration and transfer thereof and
authorized denominations), so long as any of the Series D Bonds
are in the form of a global security, full effect shall be given
to the procedures and practices of DTC with respect thereto, and
the Trustee shall comply therewith.
In the event that the Company determines that the
continuation of the system of book-entry only transfers through
DTC (or a successor securities depository) is not in the best
interests of the beneficial owners of the Series D Bonds or is
burdensome to the Company, the Company will notify DTC and the
Trustee, whereupon DTC or the Trustee will notify DTC
participants of the availability through DTC of certificates for
the Series D Bonds. In such event, the Company shall issue and
the Trustee shall transfer and exchange certificates for the
Series D Bonds as requested by DTC in denominations as prescribed
by Section 2.01 hereof, to the identifiable beneficial owners in
replacement of such beneficial owners' beneficial interest in the
Series D Bonds.
Section 2.06. Restrictions on Transfer. All Series D Bonds
originally issued hereunder shall bear the following legend:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT").
THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES
FOR THE BENEFIT OF YANKEE GAS SERVICES COMPANY (THE
"COMPANY") AND PRIOR HOLDERS THAT THIS SECURITY MAY BE
OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(1) TO THE COMPANY (UPON REDEMPTION THEREOF OR
OTHERWISE), (2) SO LONG AS THIS SECURITY IS ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER, WITHIN THE MEANING OF RULE 144A UNDER THE 1933
ACT, IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
REGULATION S UNDER THE 1933 ACT, (4) PURSUANT TO AN
EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH RULE 144
(IF AVAILABLE) UNDER THE 1933 ACT, (5) IN RELIANCE ON
6
<PAGE>
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE 1933 ACT, SUBJECT TO THE RECEIPT BY THE COMPANY OF
AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH TRANSFER
IS IN COMPLIANCE WITH THE 1933 ACT OR (6) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT,
SUBJECT (IN THE CASE OF CLAUSES (2), (3), (4) AND (5))
TO THE RECEIPT BY THE COMPANY OF A CERTIFICATION OF THE
TRANSFEROR (WHICH, IN THE CASE OF CLAUSE (4), MAY BE A
COPY OF FORM 144 AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION) TO THE EFFECT THAT SUCH TRANSFER
IS IN COMPLIANCE WITH THE 1933 ACT, AND IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
JURISDICTION OF THE UNITED STATES. THE HOLDER OF THIS
SECURITY WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF
THE RESALE RESTRICTIONS REFERRED TO HEREIN.
All Series D Bonds issued upon transfer or exchange thereof
shall bear such legend unless the Company shall have delivered to
the Trustee an Opinion of Counsel which states that the Series D
Bonds may be issued without such legend. All Series D Bonds
issued upon transfer or exchange of a Series D Bond or Bonds
which do not bear such legend shall be issued without such
legend. The Company may from time to time modify the foregoing
restrictions on resale and other transfers, without the consent
of but upon notice to the Holders, in order to reflect any
amendment to Rule 144A or change in the interpretation thereof or
practices thereunder.
So long as The Depository Trust Company is acting as
securities depository with respect to the Series D Bonds, the
Series D Bonds shall also bear the following legend:
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New
York corporation ("DTC"), to the Company or its agent
for registration of transfer, exchange or payment,
and any certificate issued is registered in the name
of Cede & Co. or in such other name as is requested
by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity
as is requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the registered holder hereof, Cede & Co.,
has an interest herein.
Section 2.07. Authentication and Delivery. Upon the
execution of this Third Supplemental Indenture, the Series D
Bonds shall be executed by the Company and delivered to the
7
<PAGE>
Trustee for authentication, and thereupon the same shall be
authenticated and delivered by the Trustee upon Company Request.
Section 2.08 CUSIP Numbers. The Company in issuing the
Series D Bonds may use "CUSIP" numbers (if then generally in
use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that
any such notice may state that no representation is made as to
the correctness of such numbers either as printed on the Series D
Bonds or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers
printed on the Series D Bonds, and any such redemption shall not
be affected by any defect in or omission of such numbers.
Section 2.09. Default. Pursuant to the Original Indenture
(and notwithstanding any provision of Section 9.22 thereof to the
contrary), for purposes of determining whether an Event of
Default exists with respect to the Series D Bonds, any default in
payment (whether due as a scheduled installment of principal or
interest, or at original maturity or earlier redemption or
acceleration, or otherwise) with respect to Bonds of any other
series which constitutes an Event of Default with respect to the
Bonds of such series shall also constitute an Event of Default
with respect to the Series D Bonds.
ARTICLE III
MISCELLANEOUS PROVISIONS
Section 3.01. Effectiveness and Ratification of Indenture.
The provisions of this Third Supplemental Indenture shall be
effective from and after the execution hereof; and the Indenture,
as hereby supplemented, shall remain in full force and effect.
Section 3.02. Titles. The titles of the several Articles
and Sections of this Third Supplemental Indenture shall not be
deemed to be any part thereof, are inserted for convenience only
and shall not affect any interpretation hereof.
Section 3.03. Successors and Assigns. All covenants,
provisions, stipulations and agreements in this Third
Supplemental Indenture contained are and shall be for the sole
and exclusive benefit of the parties hereto, their successors and
assigns, and (subject to the provisions of the Purchase
Agreement) of the Holders and registered owners from time to time
of the Bonds issued and outstanding under and secured by the
Indenture (except that the provisions of Article II hereof are
and shall be for the sole and exclusive benefit of the Holders of
the Series D Bonds).
8
<PAGE>
Section 3.04. Counterparts. This Third Supplemental
Indenture may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, and all such
counterparts shall together constitute but one and the same
instrument.
Section 3.05. Governing Law. The laws of the State of
Connecticut shall govern this Third Supplemental Indenture and
the Series D Bonds, except to the extent that the validity or
perfection of the lien of the Indenture, or remedies thereunder,
are governed by the laws of a jurisdiction other than the State
of Connecticut.
[THIS SPACE LEFT INTENTIONALLY BLANK]
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Third Supplemental Indenture to be duly executed, sealed and
attested as of the day and year first above written.
YANKEE GAS SERVICES COMPANY
By /s/ Michael E. Bielonko
--------------------------
Michael E. Bielonko
Its Vice President and
Chief Financial Officer
Attest:
/s/ Mary J. Healey
- -----------------------------
Mary J. Healey
Secretary and General Counsel
Executed, sealed and delivered by
YANKEE GAS SERVICES COMPANY
in the presence of:
/s/ Maritza M. Agosto
- -------------------------
/s/ Sarah K. Sanders
- -------------------------
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, as Trustee
By /s/ Michelle K. Blezand
-------------------------------
Attest:
__________________________________
Executed, sealed and delivered by
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, as Trustee,
in the presence of:
/s/ K. Larimore
- -------------------------
Kathy A. Larimore
/s/ Steven Cimalore
- -------------------------
Steven Cimalore
10
<PAGE>
STATE OF CONNECTICUT )
) ss.: Meriden
COUNTY OF NEW HAVEN )
On this 27th day of June, 1995, before me, Nicholas A.
Rinaldi, the undersigned officer, personally appeared Michael E.
Bielonko and Mary J. Healey, who acknowledged themselves to be
Vice President and Chief Financial Officer and Secretary and
General Counsel, respectively, of Yankee Gas Services Company, a
Connecticut corporation, and that they, as such officers, being
authorized so to do, executed the foregoing instrument for the
purpose therein contained, by signing the name of the corporation
by themselves as such officers, and as their free act and deed.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
/s/ Nicholas A. Rinaldi
----------------------------
Notary Public
My commission expires:12/31/94
(SEAL)
STATE OF CONNECTICUT )
) ss.: Hartford
COUNTY OF HARTFORD )
On this 28th day of June, 1995, before me, Karen R. Felt,
the undersigned officer, personally appeared Michelle K. Blezand
and Michael M. Hopkins, who acknowledged themselves to be
Corporate Trust Officer and Vice President, respectively, of
Shawmut Bank Connecticut, National Association, a national
banking association, and that they, as such officers, being
authorized so to do, executed the foregoing instrument for the
purposes therein contained, by signing the name of the
association by themselves as such officers, and as their free act
and deed.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
/s/ Karen R. Felt
------------------------------
Notary Public
My commission expires:02/28/99
(SEAL)
11
<PAGE>
EXHIBIT A
(to Third Supplemental Indenture)
(FORM OF FIRST MORTGAGE BOND, SERIES D)
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF YANKEE GAS
SERVICES COMPANY (THE "COMPANY") AND PRIOR HOLDERS THAT THIS
SECURITY MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY (1) TO THE COMPANY (UPON REDEMPTION THEREOF OR OTHERWISE),
(2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A, TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER, WITHIN THE MEANING OF RULE 144A
UNDER THE 1933 ACT, IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
REGULATION S UNDER THE 1933 ACT, (4) PURSUANT TO AN EXEMPTION
FROM REGISTRATION IN ACCORDANCE WITH RULE 144 (IF AVAILABLE)
UNDER THE 1933 ACT, (5) IN RELIANCE ON ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE 1933 ACT, SUBJECT TO THE RECEIPT
BY THE COMPANY OF AN OPINION OF COUNSEL TO THE EFFECT THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE 1933 ACT OR (6) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, SUBJECT (IN
THE CASE OF CLAUSES (2), (3), (4) AND (5)) TO THE RECEIPT BY THE
COMPANY OF A CERTIFICATION OF THE TRANSFEROR (WHICH, IN THE CASE
OF CLAUSE (4), MAY BE A COPY OF FORM 144 AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION) TO THE EFFECT THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE 1933 ACT, AND IN EACH CASE IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
JURISDICTION OF THE UNITED STATES. THE HOLDER OF THIS SECURITY
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THIS SECURITY FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO HEREIN.
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the Company or its agent for registration
of transfer, exchange, or payment, and any certificate issued is
registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and payment is
made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein.
12
<PAGE>
Yankee Gas Services Company
First Mortgage Bonds,
6.75% Series D
CUSIP 98477YAA1 No. D - 1
Principal Amount: $20,000,000
Stated Maturity of Principal: June 1, 2005
Applicable Rate: 6.75%
Interest Payment Dates: June 1 and December 1,
commencing December 1, 1995
Yankee Gas Services Company, a specially chartered
Connecticut corporation (hereinafter called the "Company", which
term includes any successor corporation under the Indenture
hereinafter referred to), for value received, hereby promises to
pay to CEDE & CO., or registered assigns, at the Stated Maturity
set forth above, the Principal Amount set forth above (or so much
thereof as shall not have been paid upon prior redemption) and to
pay interest (computed on the basis of a 360-day year of twelve
30-day months) thereon from the date of issuance hereof or from
the most recent Interest Payment Date to which interest has been
paid or duly provided for, on each Interest Payment Date set
forth above in each year at the Applicable Rate set forth above.
The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in said
Indenture, be paid to the Person in whose name this Bond (or one
or more Predecessor Bonds, as defined in said Indenture) is
registered at the close of business on the Regular Record Date
for such interest, which shall be the 15th day (whether or not a
business day) of the calendar month next preceding such Interest
Payment Date. Any such interest not so punctually paid or duly
provided for shall be paid to the Person in whose name this Bond
is registered on the Business Day immediately preceding the date
of such payment. If all or any portion of the principal of, or
the premium (if any) or interest on, this Bond shall not be paid
when due, the amount not so paid shall bear interest at the
Applicable Rate until paid.
The principal and the Redemption Price of, and the premium,
if any, and the interest on, this Bond shall be payable at the
principal corporate trust office of Shawmut Bank Connecticut,
National Association, in Hartford, Connecticut. So long as The
Depository Trust Company (or a successor securities depository)
is acting as securities depository with respect to the Series D
Bonds, such payments shall be made at the time and in the manner
13
<PAGE>
necessary to conform to the requirements of such securities
depository. All such payments shall be made in such coin or
currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts.
This Bond is one of a duly authorized issue of Bonds of the
Company designated as its "First Mortgage Bonds" (herein called
the "Bonds"), issued and to be issued in one or more series
under, and all equally and ratably secured by, an Indenture of
Mortgage and Deed of Trust, dated as of July 1, 1989, (herein,
together with any indenture or instruments supplemental thereto,
including the First Supplemental Indenture dated as of April 1,
1992, the Second Supplemental Indenture dated as of December 1,
1992, and the Third Supplemental Indenture dated as of June 1,
1995, called the "Indenture"), between the Company and Shawmut
Bank Connecticut, National Association (formerly known as The
Connecticut National Bank), as Trustee (herein called the
"Trustee," which term includes any successor Trustee under the
Indenture). Reference is hereby made to the Indenture for a
description of the properties thereby mortgaged, pledged and
assigned, the nature and extent of the security, the respective
rights thereunder of the Holders of the Bonds, the Trustee and
the Company, and the terms upon which the Bonds are, and are to
be, authenticated and delivered. All capitalized terms used in
this Bond which are not defined herein shall have the respective
meanings ascribed thereto in the Indenture.
As provided in the Indenture, the Bonds are issuable in
series which may vary as in the Indenture provided or permitted.
This Bond is one of the series specified in its title.
The Series D Bonds are not subject to any sinking fund and
are not redeemable or subject to prepayment at the option of the
Company or the Holders prior to their Stated Maturity.
If an Event of Default, as defined in the Indenture, shall
occur, the principal of the Series D Bonds may become or be
declared due and payable in the manner and with the effect
provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Holders of the Bonds under the Indenture at any time by the
Company with the consent of the Holders of a majority in
aggregate principal amount of the Bonds of all series at the time
Outstanding affected by such modification. The Indenture also
contains provisions permitting the Holders of specified
percentages in principal amount of Bonds at the time Outstanding
on behalf of the Holders of all the Bonds, to waive compliance by
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the Company with certain provisions of the Indenture and certain
past defaults under the Indenture and their consequences. Any
such consent or waiver agreed to as set forth above by the Holder
of this Bond shall be conclusive and binding upon such Holder and
upon all future Holders of this Bond and of any Bond issued upon
the transfer hereof or in exchange hereof or in lieu hereof,
whether or not notation of such consent or waiver is made upon
this Bond.
No reference herein to the Indenture and no provision of
this Bond or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of (and premium, if any) and interest on
this Bond at the times, places and rates, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, this Bond is transferable on the
Bond Register of the Company, upon surrender of this Bond for
transfer at the office or agency of the Company in Hartford,
Connecticut, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and
the Bond Registrar, duly executed by the Registered Holder hereof
or by his attorney duly authorized in writing, and thereupon one
or more new Bonds of the same series, or authorized denominations
and for the same aggregate principal amount, will be issued to
the designated transferee or transferees.
All Bonds of this series shall be fully interchangeable,
and, upon surrender at the office or agency of the Company in a
Place of Payment therefor, shall be exchangeable for other Bonds
of this series of a different authorized denomination or
denominations, as requested by the Holder surrendering the same.
No service charge shall be made for any transfer or exchange
hereinbefore referred to, but the Company may require payment of
a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
The Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Bond is
registered as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or
not this Bond is overdue, and neither the Company, the Trustee
nor any such agent shall be affected by notice to the contrary.
Unless the certificate of authentication hereon has been
executed by the Trustee or Authenticating Agent by manual
signature, this Bond shall not be entitled to any benefit under
the Indenture or be valid or obligatory for any purpose.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Bond to be
duly executed under its corporate seal.
Dated: __________________ YANKEE GAS SERVICES COMPANY
By __________________________
Attest:
_________________________
This is one of the Bonds of the series
designated therein referred to in the
within-mentioned Indenture.
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION,
as Trustee
By ____________________________
Authorized Officer
16
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Exhibit 4.15
YANKEE GAS SERVICES COMPANY
$20,000,000 aggregate principal amount
of First Mortgage Bonds,
6.75% Series D, due 2005
PURCHASE AGREEMENT
------------------
June 22, 1995
To: Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Ladies and Gentlemen:
Yankee Gas Services Company, a Connecticut corporation
(the "Company"), confirms its agreement with you (the
"Purchaser") as follows:
1. Description of Securities; Offering. The Company
has duly authorized the issuance and delivery of $20,000,000 in
aggregate principal amount of its First Mortgage Bonds, 6.75%
Series D, due 2005 (collectively, the "Bonds"), to be issued
under and secured by that certain Indenture of Mortgage and Deed
of Trust dated as of July 1, 1989 (the "Original Indenture") by
and between the Company and the Trustee, as to be supplemented
and amended by a Third Supplemental Indenture dated as of June 1,
1995 (the "Supplemental Indenture") and entitled to the benefits
thereof. The Original Indenture, as heretofore supplemented and
amended including, without limitation, by the Supplemental
Indenture, is hereinafter referred to as the "Indenture." The
terms of the Bonds shall be substantially as set forth in the
Supplemental Indenture; will be in the amount of $250,000 or any
amount in excess thereof which is an integral multiple of $5,000;
will bear interest on the unpaid principal balance thereof from
the date of the Bonds at the rate of 6.75% per annum, payable
semiannually on the first day of each June and December in each
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<PAGE>
year, commencing on December 1, 1995, until the principal amount
thereof becomes due and payable. If all or any portion of the
principal of, or the premium (if any) or interest on, the Bonds
shall not be paid when due, the amount not so paid shall bear
interest at the rate of 6.75% per annum until paid; and will be
expressed to mature on June 1, 2005. Interest on the Bonds shall
be computed on the basis of a 360-day year of twelve 30-day
months. The Bonds are not subject to prepayment or redemption at
the option of the Company prior to their expressed maturity date.
The Indenture creates and will create a first mortgage
Lien on and a first security interest in the Property and
Property rights of the Company described therein as being
subjected to the Lien thereof (subject to Permitted Encumbrances
as therein defined), except such Property and Property rights as
may have been released from the Lien thereof in accordance with
the terms thereof (such Property and Property rights not so
released being hereinafter defined as the "Trust Estate").
The Bonds will be sold to the Purchaser without being
registered under the Securities Act, in reliance on an exemption
therefrom. The Company has prepared a private placement
memorandum dated June 22, 1995 (including the exhibits thereto
and documents incorporated by reference therein, the "Private
Placement Memorandum"), relating to the Bonds, which consists of
a description of the offering, a description of the Company, its
business and any material recent developments relating to the
Company and its business.
You have advised the Company that you intend to make
resales of the Bonds purchased by you hereunder on the terms set
forth in the Private Placement Memorandum, as soon as practicable
after the date of this Agreement as in your judgment is
advisable, but only to persons (other than persons in the State
of New Hampshire) whom you reasonably believe to be Qualified
Institutional Buyers. You will resell the Bonds to Qualified
Institutional Buyers initially at the price set forth on Schedule
I hereto.
2. Purchase, Sale and Delivery of Bonds. On the
basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set
forth, the Company agrees to issue and sell to the Purchaser, and
the Purchaser agrees to purchase from the Company, $20,000,000
aggregate principal amount of Bonds at a purchase price equal to
99.210% of the principal amount thereof.
The Bonds shall be issued in book-entry form through
the facilities of The Depository Trust Company ("DTC"). Payment
for the Bonds shall be made to the Company, by certified or
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<PAGE>
official bank check or checks in New York Clearing House (next
day) funds payable to the order of the Company, upon delivery to
DTC for credit to the account of the Purchaser of one global
security evidencing the Bonds in definitive form, registered in
the name of DTC or its nominee, at the offices of Shipman &
Goodwin, One American Row, Hartford, Connecticut 06103-2819, at
10:00 A.M., Hartford, Connecticut time, on June 29, 1995 (or if
the New York or American Stock Exchanges or commercial banks in
The City of New York are not open on such day, the next day on
which such exchanges and banks are open), or at such other time
not later than eight full business days thereafter as you and the
Company determine, such time being herein referred to as the
"Closing Date."
3. Representations and Warranties of the Company.
The Company represents and warrants to, and agrees with, the
Purchaser that as of the date of this Agreement and on the
Closing Date:
(a) The Company (i) is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Connecticut; (ii) has all requisite power and authority
(corporate and other) and all necessary licenses, permits and
rights to own and operate its Properties and to carry on its
business as now conducted and as presently proposed to be
conducted as described in the Private Placement Memorandum; and
(iii) has no Properties and carries on no activities in any
jurisdiction which would require qualification, licensing or
authorization to do business as a foreign corporation in such
jurisdiction.
(b) The Company has no subsidiaries. Each of the
Company's corporate or joint venture Affiliates are disclosed in
the Private Placement Memorandum.
(c) The Private Placement Memorandum does not and, on
the Closing Date, will not contain an untrue statement of a
material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which
they are made, not misleading (except that this representation
and warranty shall not apply to statements or omissions made in
reliance upon and in conformity with information furnished in
writing to the Company by or on behalf of the Purchaser or DTC
expressly for use in the Private Placement Memorandum); and no
stop order preventing the use of the Private Placement Memorandum
or any amendment or supplement thereto or any order asserting
that any of the transactions contemplated by this Agreement are
subject to the registration requirements of the Securities Act
has, to the knowledge of the Company, been issued.
3
<PAGE>
(d) The financial statements of the Company and the
related notes included as exhibits to the Private Placement
Memorandum present fairly the financial position of the Parent
and its subsidiaries as of the dates indicated, and the results
of its operations and its cash flow for the periods therein
specified. Such financial statements (including the related
notes) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout
the periods therein specified, except as set forth therein. The
financial information and statistical data set forth in the
Private Placement Memorandum under the caption "Selected
Financial Information" are prepared on a basis consistent with
the financial statements of the Parent and its subsidiaries.
(e) Except as contemplated in the Private Placement
Memorandum, subsequent to the respective dates as of which
information is given in the Private Placement Memorandum, (i) the
Company has not incurred any liabilities or obligations, direct
or contingent, or entered into any transactions, not in the
ordinary course of business, that are material to the Company,
(ii) there has not been any change, or any development involving
a prospective change, in the business, prospects, Properties or
condition (financial or other) or results of operations of the
Company except changes in the ordinary course of business, none
of which, either individually or in the aggregate, has been
materially adverse.
(f) Except as set forth in the Private Placement
Memorandum, there is no action at law, suit in equity or other
proceeding or investigation (whether or not purportedly on behalf
of the Company) in any court or by or before any other
governmental or public authority or agency or any arbitrator, or,
to the best knowledge of the Company, threatened against, the
Company or any of its Properties which if determined adversely to
the Company, involves the reasonable possibility of materially
and adversely affecting the business, prospects, Properties or
condition (financial or other) of the Company, or the ability of
the Company to perform its obligations under this Agreement, the
Indenture or the Bonds. To the best of its knowledge after due
inquiry, the Company is not in default in any material respect
with respect to any judgment, order, writ, injunction, rule or
regulation or decree or demand of any court or other governmental
or public authority or agency, or with respect to the award of
any arbitrator.
(g) The Trust Estate constitutes substantially all the
Property of the Company, other than the Excepted Property (as
defined in the Indenture). The Company has such title (or may
obtain such title by the exercise of its power to condemn
property) to its Property as is necessary to engage in its
4
<PAGE>
business and substantially all such Property is in good repair,
is properly maintained and is suitable for the use for which it
is intended. All real Property which constitutes the Trust
Estate is located in the State of Connecticut. There is no
outstanding indebtedness of the Company or of any other Person
for the indebtedness of the Company or for the purchase price or
construction of, or for services, materials and supplies rendered
or delivered in connection with the construction of, any
Property, or for current operations, which has or could become
the basis of a Lien prior to the Lien of the Indenture upon any
material portion or all of the Trust Estate, other than a
Permitted Encumbrance.
(h) The Company has the right to, and does, enjoy
peaceful and undisturbed possession under all material leases to
which it is a party or under which it is operating. All such
leases are valid, subsisting and in full force and effect, and
the Company is not in default under any such lease and no event
has occurred and is continuing, and no condition exists, that,
after notice or the passage of time or both, could become a
material default under any such lease. All material leases to
which the Company is a party or under which the Company is
operating are situated on real Property located in the State of
Connecticut.
(i) The Company holds all material franchises,
patents, trademarks, service marks, trade names, copyrights,
certificates, permits, licenses, rights-of-way, easements,
consents and other rights, and holds, or holds in effect by
acquiescence and is in compliance in all material respects with
the terms of, all material franchises, patents, trademarks,
service marks, trade names, and copyrights for its business and
operations as presently conducted and (except for such
franchises, patents, trademarks, service marks, trade names,
copyrights, certificates, permits, licenses, rights-of-way,
easements, consents and other rights, as may be required to be
obtained in the future) as presently proposed to be conducted as
described in the Private Placement Memorandum, without, after due
inquiry, any known conflicts with the rights of others, which
either individually or in the aggregate could reasonably be
expected to materially adversely affect or materially interfere
with the operations of the Company's business.
(j) Each of the sale of the Bonds by the Company and
compliance by the Company with all of the provisions of this
Agreement, the Indenture and the Bonds (i) is within the
corporate powers of the Company; and (ii) is legal and does not
conflict with, result in any breach of any of the provisions of,
constitute a default under, or result in the creation of any Lien
(other than the Lien created by the Indenture) upon any Property
5
<PAGE>
of the Company under the provisions of any agreement, charter
instrument, bylaw or other instrument to which it is a party or
by which it or any of its Property may be bound.
(k) The obligations of the Company under this
Agreement, the Indenture and the Bonds have been duly authorized
by proper corporate action on the part of the Company (no action
by the shareholders of the Company being required by law, any
charter instrument or bylaws of the Company or otherwise), and
this Agreement, the Indenture and the Bonds have been executed
and delivered by the Company and are valid, binding and
enforceable in accordance with the terms of this Agreement, the
Indenture and the Bonds, except to the extent that enforcement
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application
relating to or affecting the enforcement of the rights of
creditors or by equitable principles, regardless of whether
enforcement is sought in equity or at law.
(l) No event has occurred and no condition exists
which, upon the issuance of the Bonds, would constitute a Default
or an Event of Default. The Company is not in violation in any
respect of any term of any charter instrument or bylaw and is, to
the best of its knowledge after due inquiry, not in violation in
any material respect of any term in any agreement or other
instrument to which it is a party or by which it or any of its
Property may be bound.
(m) The Company is subject to the jurisdiction of the
DPUC and various other state, Federal and local governmental
departments and regulatory and environmental commissions,
agencies, authorities and bodies with respect to its business
operations. Neither the Company nor the Parent is directly
subject to the jurisdiction of the FERC. The nature and extent
of such regulation are generally described in the Private
Placement Memorandum.
(n) The Company is exempt from the requirements of the
Public Utility Holding Company Act of 1935, as amended (except
Section 9(a)(2) thereof) pursuant to Section 3(a)(1) thereof.
The Company has filed all necessary exemption statements with the
SEC as of the date of this Agreement.
(o) The Company is not, and is not directly or
indirectly controlled by, or acting on behalf of any Person which
is, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(p) Assuming the representation set forth in Section 9
is correct and the covenants contained therein are complied with,
6
<PAGE>
no consent of, approval or authorization by, filing or
registration with, or notice to any governmental or public
authority or agency is required for the issuance, sale or
delivery of the Bonds or the execution, delivery or performance
of this Agreement or the Indenture by the Company, other than
(i) the authorizations (received to date) of the DPUC for the
issuance and sale of the Bonds on the terms set forth in, or
contemplated by, this Agreement (collectively, the "DPUC Order"),
which authorizations have been duly obtained, are in full force
and effect, and have not been appealed, abrogated, modified,
stayed or suspended and no subsequent appeal would, under
applicable law, affect the validity or enforceability of the
Bonds and (ii) the recording or filings, in respect of the Lien
of the Indenture, required under the Indenture. The Company has
furnished to your counsel true, correct and complete copies of
(a) said authorization and (b) all applications, petitions,
reports and other papers, and any amendments and supplements
thereto (hereinafter in this Subsection 3(p) referred to
collectively as "Applications"), heretofore filed with or
submitted to the DPUC by the Company in connection with its
action to obtain said authorization. The Applications did not
contain, as of the respective dates of filing or submission
thereof, any untrue or incorrect statements of material fact or
omit to state any material fact necessary to make the statements
contained therein not misleading. Prior to the Closing Date, the
Company will furnish to your counsel all subsequent Applications,
if any.
(q) Neither the creation, authorization, issuance or
sale of the Bonds, nor the execution, delivery or performance of
this Agreement or the Supplemental Indenture, will require any
vote, consent or approval in any manner of any creditor of the
Company.
(r) The Company has conducted a thorough investigation
of all MGP Sites currently owned by it for which it could accrue
liabilities or have responsibilities pursuant to Environmental
Laws. The scope of its investigation included all real
Properties (i) for which the Company, to its knowledge as of the
date hereof, has responsibilities pursuant to the Environmental
Liability Sharing and Indemnity Agreement, dated July 1, 1989,
between the Company and Connecticut Light & Power Company, and
(ii) set forth in Schedule II (hereafter, the "Disclosed MGP
Sites"). As of the date hereof, the Company knows of no MGP
Sites other than the Disclosed MGP Sites for which it could
accrue liabilities or have responsibilities pursuant to
Environmental Laws. Based upon the present knowledge of the
Company, the Company does not believe that the Disclosed MGP
Sites, individually or in the aggregate, could reasonably be
expected to have a material adverse effect on the business,
7
<PAGE>
prospects, Properties or condition (financial or otherwise) of
the Company.
(s) The issuance and purchase of the Bonds and the
security interest granted by the Indenture and contemplated by
this Agreement, are not subject to the provisions of
Connecticut's Hazardous Waste Establishment law, Conn. Gen. Stat.
Sec. 22a-134 et seq.
(t) The Company is not in violation of applicable
Environmental Laws, which violation could reasonably be expected
to have a material adverse effect on the business, prospects,
Properties or condition (financial or otherwise) of the Company.
The Company has not received notification from any party that it
has any liability or class of liability of the Company 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.).
(u) Neither the Company nor any affiliate (as defined
in Rule 501(b) of Regulation D under the Securities Act) of the
Company has directly, or through any agent, (i) sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect
of, any security (as defined in the Securities Act) which is or
will be integrated with the sale of the Bonds in a manner that
would require the registration under the Securities Act of the
Bonds or (ii) engaged in any form of general solicitation or
general advertising in connection with the offering of the Bonds,
or otherwise taken any action which would make the exemption
afforded by Section 4(2) of the Securities Act unavailable in
respect of the sale of the Bonds to the Purchaser.
4. Covenants. The Company covenants and agrees with
the Purchaser that:
(a) The Company will furnish you, without charge,
during the period mentioned in paragraph (c) below, as many
copies of the Private Placement Memorandum and any supplements
and amendments thereto as you may reasonably request.
(b) During such period after the date hereof and prior
to the completion of the placement of the Bonds as determined by
you, before amending or supplementing the Private Placement
Memorandum (including through filing with the SEC a document
which is deemed to be incorporated by reference therein), the
Company will furnish you a copy of each such proposed amendment
or supplement and for a period of 90 days from the date of
issuance of the Bonds, will not effect such amendment or
supplement without your consent.
8
<PAGE>
(c) If, during such period after the date hereof and
prior to the completion of the placement of the Bonds as
determined by you, any event shall occur as a result of which it
is necessary in your reasonable judgment to amend or supplement
the Private Placement Memorandum in order to make the statements
therein, in the light of the circumstances when the Private
Placement Memorandum is delivered to a purchaser, not misleading,
or if it is necessary to amend or supplement the Private
Placement Memorandum to comply with applicable law, the Company
will forthwith prepare and furnish, at its own expense, to you,
either amendments or supplements to the Private Placement
Memorandum so that the statements in the Private Placement
Memorandum as so amended or supplemented will not, in the light
of the circumstances when the Private Placement Memorandum is
delivered to a purchaser, be misleading or so that the Private
Placement Memorandum, as so amended or supplemented, will comply
with applicable law.
(d) The Company will use its best efforts to qualify
the Bonds for sale under the securities or Blue Sky laws of such
jurisdictions as you reasonably designate and to continue such
qualifications in effect so long as required for the distribution
of the Bonds, except that the Company shall not be required in
connection therewith to qualify as a foreign corporation in any
jurisdiction in which it is not now so qualified or to execute a
general consent to service of process in any jurisdiction.
(e) The Company shall, whether or not any sale of the
Bonds is consummated, pay the following: (i) the fees,
disbursements and expenses of the Company's counsel incurred in
connection with the offering, (ii) the expenses of preparation,
printing and distribution of this Agreement, the Private
Placement Memorandum and all amendments and supplements thereto,
and the Bonds, (iii) all expenses in connection with the
qualification of the Bonds for offering and sale under state
securities or Blue Sky laws in accordance with the provisions of
subsection (d) above, including filing fees and fees and
disbursements of your counsel in connection therewith and in
connection with the preparation of any Blue Sky memoranda, and
(iv) all other costs and expenses incident to the performance of
the Company's obligations hereunder which are not otherwise
specifically provided for in this subsection. It is understood,
however, that, except as provided in this subsection and Section
7 hereof, the Purchaser will pay all of its own costs and
expenses, including the fees of its counsel, except (i) as
provided in this subsection and Section 7 hereof and (ii) if this
Agreement is terminated in accordance with the provision of
clauses (i) or (ii) of Section 10 hereof, the Company will
reimburse the Purchaser for (x) the reasonable fees and
disbursements of counsel to the Purchaser in an amount not to
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<PAGE>
exceed $30,000 and (y) the Purchaser's reasonable and documented
out-of-pocket expenses in an amount not to exceed $5,000,
incurred in contemplation of its performance of this Agreement.
The Company shall not in any event be liable to the Purchaser for
damages on account of loss of anticipated profits.
(f) Neither the Company nor any affiliate (as defined
in Regulation 501(b) of Regulation D under the Securities Act)
will sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the
Securities Act) which will be integrated with the sale of the
Bonds in a manner which would require the registration under the
Securities Act of the Bonds.
(g) The Company will apply the net proceeds that it
receives from the offer and sale of the Bonds in the manner set
forth in the Private Placement Memorandum under the heading "Use
of Proceeds."
(h) Unless subject to a registration statement
effective under the Securities Act, for so long as any of the
Bonds are outstanding and are "restricted securities" within the
meaning of Rule 144(a) (3) under the Securities Act, the Company
will provide to any holder of Bonds and any prospective purchaser
of Bonds designated by a holder of such Bonds, upon the request
of such holder or prospective purchaser, the information required
to be provided to such holder or prospective purchaser by Rule
144A(d)(4) under the Securities Act.
(i) The Company will not, directly or indirectly,
offer, sell, contract to sell, grant any option to purchase or
otherwise dispose of any Bonds or any securities that are
substantially similar to the Bonds or securities convertible into
or exchangeable or exercisable for, or any rights to purchase or
acquire, Bonds or such similar securities prior to the expiration
of 90 days from the date of the Private Placement Memorandum
without your prior written consent; provided, however, that the
foregoing restrictions shall not apply to the sale of Bonds as
contemplated herein.
5. Conditions to Closing of the Purchaser. The
obligations of the Purchaser to purchase and pay for the Bonds as
provided herein shall be subject to the accuracy, as of the date
hereof and the Closing Date (as if made at the Closing Date), of
the representations and warranties of the Company herein, to the
performance by the Company of its obligations hereunder and to
the following additional conditions:
(a) Except as contemplated in the Private Placement
Memorandum, subsequent to the respective dates as of which
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<PAGE>
information is given in the Private Placement Memorandum, (i) the
Company shall not have incurred any liabilities or obligations,
direct or contingent, or entered into any transactions, not in
the ordinary course of business, that are material to the Company
and (ii) there shall not have been any material adverse change,
or any development involving a prospective material adverse
change, in the condition (financial or other) or results of
operations of the Company that, in your judgment, makes it
impractical or inadvisable to offer or deliver the Bonds on the
terms and in the manner contemplated in the Private Placement
Memorandum.
(b) You shall have received the opinion of Shipman &
Goodwin, counsel for the Company, dated the Closing Date, to the
effect that:
(i) The Company is a specially chartered
corporation duly organized, validly existing and in good standing
under the laws of the State of Connecticut and has all requisite
corporate power and authority to own its Property and to conduct
its business as presently owned and conducted and to issue and
sell the Bonds.
(ii) The Agreement and the Supplemental Indenture
have been duly authorized, executed and delivered by the Company,
and the Agreement and the Indenture constitute the legal, valid
and binding contracts and agreements of the Company enforceable
against the Company in accordance with their respective terms.
(iii) All conditions precedent contained in the
Indenture to the authentication and delivery of the Bonds have
been complied with, and the Bonds delivered on the Closing Date
have been duly authorized, executed, issued and delivered by the
Company and duly authenticated by the Trustee under the Indenture
and constitute the legal, valid and binding obligations of the
Company enforceable against the Company in accordance with their
terms and are entitled to the benefits of the Indenture in
accordance with its terms.
(iv) The Bonds conform in all material respects
to the description thereof contained in the Private Placement
Memorandum.
(v) The execution and delivery of the
Supplemental Indenture by the Company and the issuance by the
Company of the Bonds pursuant to the Agreement and the Indenture
have, to the extent required by law, been authorized by the DPUC
in the DPUC Order, and the DPUC Order is in full force and
effect, constitutes sufficient governmental authorization for the
Bonds and is not subject to any suspension, modification or
appeal which could affect the validity or enforceability of the
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Bonds. No consent or approval of, or registration or filing
with, any other governmental or public regulatory body or
authority or other Person is required for the execution and
delivery by the Company of the Supplemental Indenture and the
consummation of the transactions contemplated thereby, including
the issuance of the Bonds.
(vi) The offer, issuance, sale and delivery of
the Bonds to the Purchaser and the reoffer, resale and delivery
of the Bonds by the Purchaser to the initial purchasers under the
circumstances contemplated herein do not require registration
under the Securities Act, and, in connection therewith, the
Indenture is not required to be qualified under the Trust
Indenture Act.
(vii) The Supplemental Indenture is acceptable
for recording, and has been recorded, in the office of the
Secretary of the State of the State of Connecticut and it is not
necessary to file the Supplemental Indenture in any other
location in order for there to exist a valid mortgage under
Section 49-5 of the Connecticut General Statutes.
(viii) The major gas plants, gate stations,
service and storage centers and gas transmission pipelines of the
Company as identified in a Schedule hereto, together with the
parcels of land upon which all of the foregoing are located (the
"Major Gas Properties") are on land in which the Company owns a
full or undivided fee interest, adequate to exclude all parties,
except possibly the state or federal governments, or, in the case
of gas transmission pipelines, are in the main on land owned in
fee by the Company or over which the Company has adequate
easements or rights of way from the apparent owner thereto, free
and clear of any major defects in title, any such defects in
title being in the main curable by the exercise of eminent
domain. Based upon searches of the land records of the towns
identified in a Schedule hereto as indexed in the name of the
Company (the "Title Bringdowns"), the Company has not conveyed
title to any of the Major Gas Properties.
(ix) The Indenture constitutes a direct and valid
mortgage lien upon the Property of the Company (other than
Excepted Property as defined in the Indenture) and, under
existing law, will constitute a similar lien at the time of
acquisition upon all Property of the Company acquired after the
date hereof located within the State of Connecticut and required
by the Indenture to be subjected to the lien thereof. The
Indenture and the Indenture Notices have been executed in forms
that are in accordance with the requirements of all applicable
laws in effect in the State of Connecticut, and are acceptable
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for recording in, respectively, the office of the Secretary of
the State of the State of Connecticut and the offices of town
clerks of the towns listed in a Schedule hereto (the "Recorders'
Offices"). The Indenture and the Indenture Notices have been
recorded in, respectively, the offices of the Secretary of the
State of the State of Connecticut and the Recorders' Offices,
such offices being the only places in which the Indenture and the
Indenture Notices must be recorded in order to constitute the
Indenture a valid and effectual mortgage lien upon the Property
of the Company (other than Excepted Property) located in the
State of Connecticut. Insofar as the lien of the Indenture
relates to the Major Gas Properties, such lien is subject only to
Permitted Encumbrances (as defined in the Indenture) and such
other liens and encumbrances, if any, created by any Person other
than the Company and existing at the time of the acquisition by
the Company of such properties. To such counsel's knowledge, the
Major Gas Properties are subject to no other lien or encumbrance
of record created after June 30, 1989, other than Permitted
Encumbrances (as defined in the Indenture).
(x) Neither the execution, delivery or
performance of the Agreement or the Supplemental Indenture, nor
the performance of the Indenture, nor the offer, issuance, sale
or delivery of or performance under the Bonds, does or will cause
the Company to be in violation of any published law or any order,
rule or regulation of any governmental or public authority or
agency of the State of Connecticut, any subdivision thereof, or
the United States of America having jurisdiction over the Company
or over its Properties.
(xi) Neither the execution, delivery or
performance of the Agreement, the Supplemental Indenture or the
Bonds, the consummation of the transactions therein contemplated,
nor the fulfillment of the terms thereof by the Company, nor the
performance of the Indenture, will (a) conflict with, violate,
constitute a default under, or result in the creation or
imposition of any Lien upon any of the Properties or assets of
the Company (other than the Lien of the Indenture) under the
terms of any indenture, mortgage, deed of trust, credit
agreement, franchise or other agreement or instrument known to
such counsel to which the Company is now a party or by which the
Company is bound by succession or otherwise or (b) conflict with
or violate the articles of incorporation or the bylaws of the
Company, as presently in effect.
(xii) To such counsel's knowledge, except as
disclosed in the Private Placement Memorandum, there is no action
at law, suit in equity or other proceeding or investigation in
any court or by or before any other governmental or public
authority or agency or any arbitrator against or affecting, or
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threatened against, the Company or any of its Properties which
could reasonably be expected to have a materially adverse effect
on the ability of the Company to perform its obligations under
the Agreement, the Bonds or the Indenture.
(xiii) Yankee Energy System, Inc., a Connecticut
corporation which owns all of the outstanding voting stock of the
Company, is exempt from the provisions of the Public Utility
Holding Company Act of 1935, as amended, except for the
provisions of Section 9(a)(2) thereof. The Company is not a
"holding company" as such term is defined in the Public Utility
Holding Company Act of 1935, as amended, or 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.
(xiv) None of the transactions contemplated by
the Agreement (including, without limitation, the direct or
indirect use of the proceeds from the sale of the Bonds) will
violate or result in a violation of Section 7 of the Exchange Act
or any regulations issued pursuant thereto, including, without
limitation, Regulation G (12 C.F.R., Part 207), as amended,
Regulation T (12 C.F.R., Part 220), as amended, and Regulation X
(12 C.F.R., Part 224), as amended, of the Board of Governors of
the Federal Reserve System.
(xv) A Uniform Commercial Code financing
statement (the "Financing Statement") has been properly filed in
the office of the Secretary of the State of the State of
Connecticut. The office of the Secretary of the State of the
State of Connecticut is the only place in the State of
Connecticut in which a financing statement is required to be
filed under the Connecticut Uniform Commercial Code in order
generally to perfect a security interest in personal property as
to which such security interest may be perfected by filing. Lien
searches indicate that, as of the date and time the Financing
Statement was filed, there were no other Uniform Commercial Code
financing statements on file with the office of the Secretary of
the State of the State of Connecticut which name the Company as
debtor and which cover any of the collateral described in the
Financing Statement.
(xvi) All Connecticut taxes and filing fees in
connection with the execution, delivery, recordation and filing
of the Supplemental Indenture, the Indenture Notices, the
Financing Statement, the execution, authentication, issuance and
delivery of the Bonds, and the mortgaging of the Trust Estate
under the Indenture have been paid.
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In addition, such counsel shall state that they have
participated in conferences with officers and representatives of
the Company and the independent accountants of the Company at
which the contents of the Private Placement Memorandum and
related matters were discussed and, although they have assumed
the correctness and completeness of the statements made by the
Company and information included in the Private Placement
Memorandum and take no responsibility therefor, except insofar as
such statements relate to such counsel and as set forth in
paragraph (iv) above, on the basis of the foregoing, no facts
have come to such counsel's attention that would lead them to
believe that the Private Placement Memorandum, as of its date and
the date of such opinion, contains an untrue statement of a
material fact or omits to state a material fact necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except
that such counsel need not express any opinion or belief with
respect to the financial statements, schedules and other
financial or statistical data included in or excluded from the
Private Placement Memorandum.
As to the due authorization, execution and delivery of
the Supplemental Indenture by the Trustee and the authentication
of the Bonds by the Trustee, such counsel may state that they
have relied, with your consent, upon the opinion of LeBoeuf,
Lamb, Greene and MacRae, counsel to the Trustee, to the effect
specified in Exhibit A hereto.
(c) You shall have received the opinion of Mary
Healey, Esq., Secretary and General Counsel of the Company, dated
the Closing Date, substantially in the form set forth in Exhibit
B hereto.
(d) You shall have received from Winthrop, Stimson,
Putnam & Roberts, counsel for the Purchaser, an opinion or
opinions, dated the Closing Date, as to the applicability of the
Securities Act to the Bonds and other matters related to the
offering of the Bonds, in form and substance satisfactory to you,
and such counsel shall have received such documents and
information from the Purchaser as they request to enable them to
pass upon such matters. Such counsel, to the extent their
opinion involves matters of Connecticut law, may rely solely on
the opinion of Shipman & Goodwin.
(e) You shall have received from LeBoeuf, Lamb, Greene
and MacRae, counsel for the Trustee, an opinion, dated the
Closing Date, in form and substance satisfactory to you and your
counsel, to the effect specified in Exhibit A hereto.
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(f) The Company shall have furnished to the Trustee
the resolutions, certificates and other instruments and cash, if
any, required to be delivered prior to or upon the issuance of
the Bonds pursuant to the provisions of the Indenture. The
Company shall have requested the Trustee to and the Trustee shall
have authenticated the Bonds pursuant to Article Five of the
Indenture. The Company shall be able to comply with all other
conditions with respect to the authentication of the Bonds
imposed by the Indenture.
(g) On or prior to the Closing Date, the Supplemental
Indenture shall have been duly authorized, executed and delivered
by the Company and the Trustee, substantially in the form
furnished to your counsel prior to the date hereof (with such
changes therein as shall be agreed upon by you and the Company),
and shall be in full force and effect, and the Indenture
(including the Supplemental Indenture) and all other documents,
including, without limitation, the Financing Statement and lien
certificates pursuant to Section 49-5 of the Connecticut General
Statutes shall have been duly executed and properly recorded or
filed in such manner and in each jurisdiction in which recording
is required to establish the mortgage Lien and security interest
created by the Indenture as a first mortgage Lien on and/or a
first security interest in the Trust Estate, subject only to
Permitted Encumbrances.
(h) You shall have received from the Company a
certificate, signed by the principal financial and accounting
officers of the Company, dated the Closing Date, to the effect
that, to the best of their knowledge based upon reasonable
investigation, the representations and warranties of the Company
in this Agreement are true and correct, as if made at and as of
the Closing Date, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date.
(i) There shall have been issued, and there shall be
in full force and effect, on or prior to 5:00 p.m. on June 26,
1995, to the extent legally required for the issuance and sale of
the Bonds, all authorizations required to be obtained from the
DPUC, and such authorizations shall not have been revoked,
rescinded or repealed, and to the best of the Company's
knowledge, nor has such action been threatened, on or prior to
the Closing Date.
(j) At the Closing Date, Arthur Andersen LLP shall
have furnished to you a letter, dated as of the Closing Date, in
form and substance satisfactory to you, which sets forth certain
matters in accordance with the procedures agreed upon between you
and Arthur Andersen LLP.
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<PAGE>
(k) The Company shall have furnished to you such
further certificates and documents as you shall have reasonably
requested.
All such opinions, certificates, letters and other documents will
be in compliance with the provisions hereof only if they are
reasonably satisfactory in form and substance to you. The
Company will furnish you with such conformed copies of such
opinions, certificates and other documents as you shall
reasonably request.
6. Condition to Closing of the Company. The
obligations of the Company to issue and sell the Bonds to the
Purchaser as provided herein shall be subject to the following
condition: There shall have been issued, and there shall be in
full force and effect, on or prior to 5:00 p.m. on June 26, 1995,
to the extent legally required for the issuance and sale of the
Bonds, all authorizations required to be obtained from the DPUC,
and such authorizations shall not have been revoked, rescinded or
repealed, and to the best of the Company's knowledge, nor has
such action been threatened, on or prior to the Closing Date.
7. Indemnification and Contribution. The Company
will indemnify and hold harmless the Purchaser, each person, if
any, who controls the Purchaser within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange
Act, and the agents, employees, officers and directors of the
Purchaser and each such controlling person (the Purchaser, such
controlling persons and each such agent, employee, officer and
director are referred to collectively as the "Purchaser Group"),
against any losses, claims, damages, or liabilities to which any
member of the Purchaser Group may become subject, under the
Securities Act, the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or action in respect
thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any part
of the Private Placement Memorandum or any amendment or
supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made,
not misleading, and will reimburse the Purchaser Group for any
legal or other expenses reasonably incurred by it in connection
with investigating or defending against such loss, claim, damage,
liability or action as such expenses are incurred; provided,
however, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made therein in
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<PAGE>
reliance upon and in conformity with written information
furnished to the Company by the Purchaser specifically for use in
the preparation thereof; and provided, further, that the Company
shall not be liable to any member of the Purchaser Group under
the indemnity agreement in this subsection with respect to the
Private Placement Memorandum to the extent that any such loss,
claim, damage or liability of such member of the Purchaser Group
results solely from an untrue statement of a material fact
contained in, or the omission of a material fact from, the
Private Placement Memorandum which untrue statement or omission
was corrected in an amended or supplemented Private Placement
Memorandum, if the Purchaser sold Bonds to the person alleging
such loss, claim, damage or liability without sending or giving,
at or prior to the written confirmation of such sale, a copy of
the amended or supplemented Private Placement Memorandum if the
Company had previously furnished copies thereof to the Purchaser.
(b) The Purchaser will indemnify and hold harmless the
Company, its directors and officers and each person, if any, who
controls the Company within the meaning of either Section 15 of
the Securities Act or Section 20 of the Exchange Act, against any
losses, claims, damages or liabilities to which the Company may
become subject, under the Securities Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact
contained in the Private Placement Memorandum or any amendment or
supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made therein in reliance upon
and in conformity with written information furnished to the
Company by the Purchaser specifically for use in the preparation
thereof; and will reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with
investigating or defending against any such loss, claim, damage,
liability or action with respect to the foregoing as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party
under subsection (a) or (b) above of notice of the commencement
of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party
under such subsection, notify the indemnifying party in writing
of the commencement thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability that
it may have to any indemnified party otherwise than under such
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<PAGE>
subsection. In case any such action shall be brought against any
indemnified party, and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be
entitled to participate in, and, to the extent that it shall
wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the
indemnifying party). In the event the indemnifying party shall
assume the defense thereof, any such indemnified party shall have
the right to employ separate counsel in such action and to
participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such indemnified party
unless (i) the indemnifying party has agreed to pay such fees and
expenses or (ii) the named parties to any such action or
proceeding (including any impleaded parties) include both such
indemnified party and the indemnifying party, and such
indemnified party shall have been advised by counsel that there
may be one or more legal defenses available to such indemnified
party which are different from or additional to those available
to the indemnifying party (in which case, if such indemnified
party notifies the indemnifying party in writing that it elects
to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume
the defense of such action or proceeding on behalf of such
indemnified party, it being understood, however, that the
indemnifying party shall not, in connection with any one such
action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising
out of the same general allegations or circumstances, be liable
for the fees and expenses of more than one separate firm of
attorneys (together with appropriate local counsel) at any time
for all such indemnified parties). Any such fees and expenses
payable by the indemnifying party shall be paid to the
indemnified party entitled thereto as incurred by such
indemnified party. The indemnifying party shall not be liable
for any settlement of any such action or proceeding effected
without its written consent (which shall not be unreasonably
withheld), but if settled with its written consent, or if there
is a final judgment for the plaintiff in any such action or
proceeding, the indemnifying party agrees to indemnify and hold
harmless each such indemnified party from and against any loss or
liability by reason of such settlement or judgment. The
indemnifying party shall not, without the prior written consent
of the indemnified party, effect any settlement of any pending or
threatened litigation, proceeding or claim in respect of which
(if asserted against an indemnified party) indemnity might be
sought hereunder, unless such settlement includes an
unconditional release of all indemnified parties from all
liability with respect to claims which are the subject matter of
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such litigation, proceeding or claim or which relate to or arise
out of the same or substantially similar facts or circumstances.
(d) If the indemnification provided for in this
Section 7 is unavailable or insufficient to hold harmless an
indemnified party under subsection (a) or (b) above, then each
indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a result of the losses, claims,
damages or liabilities referred to in subsection (a) or (b)
above, (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the
Purchaser on the other from the offering of the Bonds or (ii) if
the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above
but also the relative fault of the Company on the one hand and
the Purchaser on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on
the one hand and the Purchaser on the other shall be deemed to be
in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Company bear
to the compensation received by the Purchaser. The relative
fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Purchaser
and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue
statement or omission. The Company and the Purchaser agree that
it would not be just and equitable if contributions pursuant to
this subsection (d) were to be determined by pro rata allocation
or by any other method of allocation that does not take account
of the equitable consideration referred to in the first sentence
of this subsection (d). The amount paid by an indemnified party
as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or
defending against any action or claim that is the subject of this
subsection (d). Notwithstanding the provisions of this
subsection (d), the Purchaser shall not be required to contribute
any amount in excess of the amount by which the Purchaser's
compensation exceeds the amount of any damages that the Purchaser
has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to
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contribution from any person who was not guilty of such
fraudulent misrepresentation.
(e) The obligations of the Company under this Section
7 shall be in addition to any liability that the Company may
otherwise have; and the obligations of the Purchaser under this
Section 7 shall be in addition to any liability that the
Purchaser may otherwise have.
8. Representations and Agreements to Survive
Delivery. All representations, warranties and agreements of the
Company herein or in certificates delivered pursuant hereto, and
the agreements of the Company and the Purchaser contained in
Section 7 hereof, shall remain operative and in full force and
effect regardless of any investigation made by or on behalf of
any Purchaser Group, or the Company or any of its officers,
directors or any controlling persons, and shall survive delivery
of and payment for the Bonds hereunder.
9. Offering of Bonds; Restrictions on Transfer. The
Purchaser agrees with the Company that (i) it will not solicit
offers for, or offer or sell, the Bonds by any form of general
solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) or in any manner involving
a public offering within the meaning of Section 4(2) of the
Securities Act (except that it may publish a tombstone
advertisement at such time after the Closing Date as you may
elect), (ii) it will not effect resales, or offers to resell the
Bonds to any purchaser or prospective purchaser in the State of
New Hampshire and (iii) it will effect resales of the Bonds only
pursuant to Rule 144A under the Securities Act only from, and
will offer the Bonds only to, persons whom it reasonably believes
to be Qualified Institutional Buyers in that, by purchasing the
Bonds, they may be deemed to have represented and agreed as
provided for in the Private Placement Memorandum. The Purchaser
agrees to deliver a copy of the Private Placement Memorandum to
each Qualified Institutional Buyer purchasing the Bonds from it.
10. Termination. You shall have the right by giving
notice as hereinafter specified at any time at or prior to the
Closing Date to terminate this Agreement if (i) the Company shall
have failed, refused or been unable, at or prior to the Closing
Date, to perform in any material respect any agreement on its
part to be performed hereunder, (ii) any other condition of the
Purchaser's obligations hereunder is not fulfilled, (iii) trading
generally on the New York Stock Exchange or the American Stock
Exchange, or trading in the securities of the Parent shall have
been suspended, (iv) minimum or maximum prices for trading shall
have been fixed, or maximum ranges for prices for securities
shall have been required, on the New York Stock Exchange or the
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American Stock Exchange, by such Exchange or by order of the
Commission or any other governmental authority having
jurisdiction, (v) a banking moratorium shall have been declared
by Federal or New York authorities, or (vi) an outbreak or
escalation of hostilities in which the United States is involved,
a declaration of war by Congress, any other substantial national
or international calamity or any other event or occurrence of a
similar character shall have occurred since the execution of this
Agreement that, in your judgment, makes it impractical or
inadvisable to proceed with the completion of the sale of and
payment for the Bonds. Any such termination shall be without
liability of any party to any other party with respect to Bonds
not purchased by reason of such termination except that the
provisions of Subsection 4(e) and Section 7 hereof shall at all
times be effective. If you elect to terminate this Agreement as
provided in this section, the Company shall be notified promptly
by you by telephone or telecopy, confirmed by letter.
11. Notices. All notices or communications hereunder
shall be in writing and if sent to you shall be mailed,
delivered, telexed or telecopied and confirmed to you at your
address set forth on the cover page hereof or if sent to the
Company, shall be mailed, delivered or telecopied and confirmed
to the Company at Yankee Gas Services Company, 599 Research
Parkway, Meriden, Connecticut 06450-1030, Attention: Chief
Financial Officer. Any party to this Agreement may change such
address for notices by sending to the parties in this Agreement
written notice of a new address for such purpose.
12. Legend. Each certificate for the Bonds shall
include legends in substantially the following form:
(i) THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THE
HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE
BENEFIT OF YANKEE GAS SERVICES COMPANY (THE "COMPANY") AND
PRIOR HOLDERS THAT THIS SECURITY MAY BE OFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) TO THE COMPANY
(UPON REDEMPTION THEREOF OR OTHERWISE), (2) SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER, WITHIN THE MEANING OF RULE 144A UNDER
THE 1933 ACT, IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH
REGULATION S UNDER THE 1933 ACT, (4) PURSUANT TO AN
EXEMPTION FROM REGISTRATION IN ACCORDANCE WITH RULE 144 (IF
AVAILABLE) UNDER THE 1933 ACT, (5) IN RELIANCE ON ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933
ACT, SUBJECT TO THE RECEIPT BY THE COMPANY OF AN OPINION OF
COUNSEL TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE
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WITH THE 1933 ACT OR (6) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE 1933 ACT, SUBJECT (IN THE
CASE OF CLAUSES (2),(3),(4) AND (5)) TO THE RECEIPT BY THE
COMPANY OF A CERTIFICATION OF THE TRANSFEROR (WHICH, IN THE
CASE OF CLAUSE (4), MAY BE A COPY OF FORM 144 AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION) TO THE EFFECT THAT
SUCH TRANSFER IS IN COMPLIANCE WITH THE 1933 ACT, AND IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY JURISDICTION OF THE UNITED STATES. THE HOLDER OF
THIS SECURITY WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO, NOTIFY ANY PURCHASER OF THIS SECURITY FROM IT OF THE
RESALE RESTRICTIONS REFERRED TO HEREIN.
(ii) Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the Company or its agent for
registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co.
or in such other name as is requested by an authorized
representative of DTC (and payment is made to Cede & Co. or
to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede &
Co., has an interest herein.
13. Severability. The invalidity, illegality or
unenforceability of one or more of the provisions of this
Agreement in any jurisdiction shall not affect the validity,
legality or enforceability of the remainder of this Agreement in
such jurisdiction or the validity, legality or enforceability of
this Agreement, including any such provision, in any other
jurisdiction, it being intended that all rights and obligations
of the parties hereunder shall be enforceable to the fullest
extent permitted by law.
14. Parties and Beneficiaries. This Agreement shall
inure to the benefit of and be binding upon the Company, the
Purchaser, the Purchaser Group (to the extent set forth in
Section 7 hereof) and their respective successors and (to the
extent set forth in Section 7 hereof) the controlling persons,
officers and directors referred to in Section 7 hereof, and no
other person will have any legal right or obligation hereunder.
15. Applicable Law. This Agreement shall be governed
by, and construed in accordance with, the internal laws of the
State of New York.
16. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be an original,
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but such counterparts shall together constitute but one and the
same instrument.
17. Definitions. Except as the context shall
otherwise require, the following terms shall have the following
meanings for all purposes of this Agreement (the definitions to
be applicable to both the singular and the plural forms of the
terms defined, where either such form is used in this Agreement):
The term "Affiliate" with respect to any Person shall
mean a Person (a) which, directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under
common control with, such Person, (b) which, directly or
indirectly, beneficially owns or holds of record 10% or more of
the shares of any class of capital stock of or interest in such
Person, (c) 10% or more of the shares of any class of capital
stock of or interests in which is, directly or indirectly,
beneficially owned or held of record by such Person, or (d) who
is an officer or director of (or an individual performing similar
management or supervisory functions for) such Person. The term
"control" (including the related terms "controlled by" and "under
common control with") shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the
ownership of capital stock, by contract or otherwise.
The term "Applications" shall have the meaning assigned
thereto in Subsection 3(p) hereof.
The term "Bonds" shall have the meaning assigned
thereto in Section 1 hereof.
The term "Closing Date" shall have the meaning assigned
thereto in Section 2 hereof.
The term "Company" shall have the meaning assigned
thereto in the preamble hereof.
The term "Default" shall mean 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.
The term "Disclosed MGP Site" shall have the meaning
set forth in Subsection 3(r) hereof.
The term "DPUC" shall mean the Department of Public
Utility Control of the State of Connecticut.
The term "DPUC Order" shall have the meaning assigned
thereto in Subsection 3(p) hereof.
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The term "DTC" shall have the meaning assigned thereto
in Section 2 hereof.
The term "Environmental Law" shall mean any federal,
state or local, statute, law, regulation, ordinance, order,
consent decree, judgment, permit, license, code, common law or
other legal requirement pertaining to protection of the
environment, health or safety of persons, natural resources,
conservation, wildlife, waste management, any Hazardous
Substance, and pollution (including, without limitation,
regulation of releases and disposals to air, land, water and
groundwater), and includes, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended by the Superfund Amendments and Reauthorization Action
of 1986, 42 U.S.C. Sec. 9601 et seq., Solid Waste Disposal Act,
as amended by the Resource Conservation and Recovery Act of 1976
and Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. Sec.
6901 et seq., Federal Water Pollution Control Act, as amended by
the Clean Water Act of 1977, 33 U.S.C. Sec. 1251 et seq., Clean
Air Act of 1966, as amended, 42 U.S.C. Sec. 7401 et seq., Toxic
Substances Control Act of 1976, 15 U.S.C. Sec. 2601 et seq.,
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C.
Sec. 651 et seq., Emergency Planning and Community Right-to-Know
Act of 1986, 42 U.S.C. Sec. 11001 et seq., National Environmental
Policy Act of 1975, 42 U.S.C. Sec. 4321 et seq., Safe Drinking
Water Act of 1974, as amended, 42 U.S.C. Sec. 300(f) et seq., and
any similar or implementing state law, and all amendments, rules,
regulations and publications promulgated thereunder.
The term "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended.
The term "Event of Default" shall mean one of the
"events of default" enumerated in Article Nine of the Indenture.
The term "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
The term "FERC" shall mean the Federal Energy
Regulatory Commission.
The term "Financing Statement" shall have the meaning
assigned thereto in Subsection 5(b)(xv) hereof.
The term "Hazardous Substance" shall mean any hazardous
or toxic chemical, waste, byproduct, pollutant, contaminant,
product, material or substance, including without limitation,
asbestos, polychlorinated biphenyls, petroleum (including crude
25
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oil or any fraction thereof) and any substance defined as a
hazardous substance or waste pursuant to an Environmental Law.
The term "hereof", "herein", "hereunder" and other
words of similar import shall be construed to refer to this
Agreement as a whole and not to any particular Section or other
subdivision.
The term "heretofore" shall be construed to refer to
the time prior to the date of original execution and delivery by
the Company of this Agreement.
The term "holder" (with respect to any Bond) shall mean
the Person in whose name a bond is registered in the register of
Bonds maintained pursuant to the Indenture.
The term "Indenture" shall have the meaning assigned
thereto in Section 1 hereof.
The term "Indenture Notices" shall mean certificates of
mortgage with respect to the lien of the Indenture made pursuant
to Section 49-5 of the Connecticut General Statutes.
The term "Lien" shall mean any interest in Property
securing an obligation owed to, or a claim by, any Person other
than the owner of the Property, whether such interest shall be
based on the common law, statute or contract, and including the
Lien or security interest arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt, or from a lease,
consignment or bailment for security purposes. The term "Lien"
shall also include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting
Property. For purposes of this Agreement, a Person shall be
deemed to be the owner of any Property that it shall have
acquired or shall hold subject to a conditional sale agreement or
other arrangement (including a leasing arrangement) pursuant to
which title to the Property shall have been retained by or vested
in some other Person for security purposes.
The term "Major Gas Properties" shall have the meaning
assigned thereto in Subsection 5(b)(viii) hereof.
The term "MGP Site" shall mean any real property upon
which a manufactured gas plant or facility or manufacturing town
gas from coal or petroleum is or was located.
The term "Private Placement Memorandum" shall have the
meaning assigned thereto in Section 1 hereof.
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The term "Original Indenture" shall have the meaning
assigned thereto in Section 1 hereof.
The term "Parent" shall mean Yankee Energy System,
Inc., a Connecticut corporation, and its successors and assigns.
The term "Permitted Encumbrances" shall have the
meaning assigned thereto in Section 1.01 of the Indenture.
The term "Person" shall mean an individual,
corporation, partnership, trust, estate, unincorporated
organization or government or an agency or political subdivision
thereof.
The term "Property" shall mean any interest in any kind
of Property or asset, whether real, personal or mixed, and
whether tangible or intangible.
The term "Purchaser" shall have the meaning assigned
thereto in the preamble hereof.
The term "Purchaser Group" shall have the meaning
assigned thereto in Subsection 7(a) hereof.
The term "Qualified Institutional Buyers" shall have
the meaning assigned thereto in Rule 144A under the Securities
Act.
The term "Recorders' Offices" shall have the meaning
assigned thereto in Subsection 5(b)(ix) hereof.
The term "SEC" shall mean the Securities and Exchange
Commission.
The term "Securities Act" shall mean the Securities Act
of 1933, as amended.
The term "Supplemental Indenture" shall have the
meaning assigned thereto in Section 1 hereof.
The term "this Agreement" shall mean this Bond Purchase
Agreement (including the annexed Schedules and Exhibits), as it
may from time to time be amended, supplemented or modified, in
accordance with its terms.
The term "Title Bringdowns" shall have the meaning
assigned thereto in Section 5(b)(viii) hereof.
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<PAGE>
The term "Trust Estate" shall have the meaning assigned
thereto in Section 1 hereof.
The term "Trust Indenture Act" shall mean the Trust
Indenture Act of 1939, as amended.
The term "Trustee" shall mean Shawmut Bank Connecticut,
National Association, and its successors and assigns.
If the foregoing correctly sets forth the understanding
between the Company and the Purchaser, please so indicate in the
space provided below for that purpose, whereupon this letter
shall constitute a binding agreement between the Company and the
Purchaser.
Very truly yours,
YANKEE GAS SERVICES COMPANY
By: /s/ Sarah K. Sanders
---------------------------
Name: Sarah K. Sanders
Title: Treasurer
ACCEPTED as of the date
set forth above
BEAR, STEARNS & CO. INC.
By:_______________________________
Name:
Title:
28
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Exhibit 10.19
CHANGE IN CONTROL EXECUTIVE SEVERANCE AGREEMENT
-----------------------------------------------
This CHANGE IN CONTROL EXECUTIVE SEVERANCE AGREEMENT (the
"Agreement") is entered into as of the 25th day of April, 1995, by
and between YANKEE ENERGY SYSTEM, INC., a Connecticut corporation
("YES"), and its wholly-owned subsidiary, YANKEE GAS SERVICES
COMPANY, also a Connecticut corporation ("Yankee"), referred to
collectively as the "Employer", and ____________________ ( the
"Executive").
RECITALS:
A. The Executive is a key member of the management of the
Employer. It is in the best interest of YES, its shareholders,
and Yankee to provide an inducement to the Executive to remain in
the service of Employer in the event of a proposed or anticipated
Change in Control (as defined herein), as well as to facilitate an
orderly transition in the event of a Change in Control.
B. Employer wishes to assure the continued attention and
dedication of Executive to his or her assigned duties without any
possible distraction arising out of uncertain personal
circumstances in connection with a proposed or anticipated Change
in Control.
C. Employer wishes to provide to Executive compensation
and benefit arrangements upon a Change of Control that are fair
and equitable and which are competitive with those of other
corporations.
D. The following provisions have been approved by the
Boards of Directors of YES and Yankee, and apply in the event of a
Change in Control.
AGREEMENT:
1. Definitions: For purposes of this Agreement, the
following terms shall have the meanings set forth in this Section
1.
"Benefit Plan" - Any plan, policy, or program of
Employer (whether or not on an insured basis) providing medical,
dental, health, disability income, life insurance or other death
benefits, or similar types of benefits to employees of Employer.
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Benefit Plan does not include any plan or arrangement providing
for vacation pay, bonuses or incentive compensation of any kind,
or current or deferred salary or similar compensation.
"Board" - the Board of Directors of YES.
"Cause" - cause for termination shall mean (i)
commission of an act of fraud, embezzlement, or theft constituting
a felony, (ii) commission of an act (or failure to take an action)
intentionally against the interest of Employer which causes
Employer material injury, or (iii) the failure of Executive to
substantially perform his or her duties with Employer (other than
such failure resulting from incapacity due to physical or mental
illness). Notwithstanding the foregoing, Executive shall not be
deemed to have been terminated for Cause unless and until there
shall have been delivered to Executive a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the
entire membership of the Board at a meeting of the Board (after
reasonable notice to Executive and an opportunity for Executive,
together with Executive's counsel, to be heard before the Board),
finding that in the good faith opinion of the Board Executive was
guilty of conduct constituting Cause as defined in this Agreement
and specifying the particulars thereof in detail. The foregoing
provisions shall not restrict the authority, discretion, or power
of the Board (or of the board of directors of Yankee), by any
action taken in compliance with YES's (or Yankee's) certificate of
incorporation and bylaws, to terminate Executive's employment with
or without Cause. Rather, the foregoing provisions merely define,
for purposes of Executive's contractual rights and remedies under
this Agreement, the circumstances in which termination of
Executive's employment will constitute termination for Cause.
"Change in Control" - A change in control of YES shall mean:
(a) A change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A as in effect on the date hereof pursuant to the
Exchange Act; provided that, without limitation, such a change in
control shall be deemed to have occurred at such time as any
Person hereafter becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of 25
percent or more of the combined voting power of YES Voting
Securities; or
(b) The occurrence of a change during any 25
consecutive calendar months in the composition of the Board so
that the Continuing Directors (as hereafter defined) cease for
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any reason to constitute a majority of the Board. As used herein,
"Continuing Directors" means the individuals who were directors at
the beginning of the 25-month period or whose nomination for
election or appointment to the Board was approved by a vote of at
least a majority of the then Continuing Directors; or
(c) There shall be consummated (i) any consolidation
or merger of YES in which YES is not the continuing or surviving
corporation or pursuant to which Voting Securities (other than
fractional shares) would be converted into cash, securities, or
other property, other than a merger of YES in which the holders of
Voting Securities immediately prior to the merger have the same
proportionate ownership of common stock of the surviving
corporation immediately after the merger, (ii) any sale, lease,
exchange, or other transfer (in one transaction or a series of
related transactions) of a majority (by value) of the assets of
YES, provided that any such consolidation, merger, sale, lease,
exchange, or other transfer consummated at the insistence of an
appropriate public utility regulatory agency shall not constitute
a Change in Control; or
(d) Approval by the shareholders of YES of any plan or
proposal for the liquidation or dissolution of YES; or
(e) Determination by the Board that a Change in
Control has occurred for purposes of this Agreement.
"Code" - The Internal Revenue Code of 1986, as amended.
"Date of Termination" - Shall mean (a) if this Agreement is
terminated for Disability, 30 days after Notice of Termination is
given (provided that Executive shall not have returned to the
performance of Executive's duties on a full-time basis within such
30-day period), or (b) if Executive's employment is terminated for
any other reason, the date on which a Notice of Termination is
given; provided that if within 30 days after any Notice of
Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual
written agreement of the parties or by a final judgment, order, or
decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected).
The term of this Agreement shall be extended until the Date of
Termination.
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<PAGE>
"Disability" - Termination of Executive's employment with
Employer for "Disability" shall mean termination because of (a)
Executive's absence from Executive's duties with Employer on a
full-time basis for 180 consecutive days as a result of
Executive's incapacity due to physical or mental illness and (b)
Executive's failure to return to performance of Executive's duties
with Employer on a full-time basis within 30 days after a written
Notice of Termination is given to Executive.
"Exchange Act" - The Securities Exchange Act of 1934, as
amended.
"Good Reason"- Termination by Executive of Executive's
employment for "Good Reason" shall mean termination based on any
of the following:
(a) A change in Executive's status or position or
positions with Employer which, in Executive's reasonable judgment,
represents a demotion from Executive's status or position or
positions as in effect immediately prior to the Change in Control,
or a change in Executive's duties or responsibilities which, in
Executive's reasonable judgment, is inconsistent with such status
or position or positions, or any removal of Executive from or any
failure to reappoint or reelect Executive to such position or
positions, except in connection with the termination or
Executive's employment for Cause or Disability or as a result of
Executive's death or the termination by Executive other than for
Good Reason; or
(b) A reduction by Employer in Executive's base salary
as in effect immediately prior to the Change in Control; or
(c) The failure by Employer to continue in effect any
Plan in which Executive is participating at the time of the Change
in Control (or Plans providing Executive with at least
substantially similar benefits), other than as a result of the
normal expiration of any such Plan in accordance with its terms or
a modification of such Plan which modification is applicable to
all employees who participate in such Plan, as in effect at the
time of the Change in Control, or the taking of any action, or the
failure to act, by Employer which would adversely effect
Executive's continued participation in any of such Plans on at
least as favorable a basis to Executive as is the case on the date
of the Change in Control or which would materially reduce
Executive's benefits in the future under any of such Plans or
deprive Executive of any material benefit enjoyed by Executive at
the time of the Change in Control; or
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<PAGE>
(d) The failure by Employer to provide and credit
Executive with the number of paid vacation days to which Executive
is then entitled in accordance with Employer's normal vacation
policy as in effect immediately prior to the Change in Control; or
(e) Employer's requiring Executive to be based
anywhere more than 50 miles from where Executive's office is
located immediately prior to the Change in Control except for
required travel on Employer's business to an extent substantially
consistent with the business travel obligations which Executive
undertook on behalf of Employer prior to the Change in Control; or
(f) The failure by Employer to obtain from any
successor the assent to this Agreement contemplated by subsection
5(a) hereof; or
(g) Any purported termination by Employer of
Executive's employment which is not effected pursuant to a Notice
of Termination satisfying the requirements of this Agreement; and
for purposes of this Agreement, no such purported termination
shall be effective; or
(h) Any refusal by Employer to continue to allow
Executive to attend to matters or engage in activities not
directly related to the business of Employer which, prior to the
Change in Control, Executive was permitted to attend to or engage
in.
"Notice of Termination" - Any notice of any termination of
Executive's employment shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" of Executive's employment by
Employer shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under
the provision so indicated.
"Other Agreement" - A plan, arrangement, or agreement
pursuant to which an Other Payment is made.
"Other Payment"- Any payment or benefit payable to Executive
in connection with a Change in Control of YES pursuant to any
plan, arrangement, or agreement (other than this Agreement) with
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<PAGE>
Employer, a Person whose actions result in such Change in Control,
or any Person affiliated with Employer or such person.
"Person" - Any individual, corporation, partnership, group,
association, or other "person," as such term is used in Section
14(d) of the Exchange Act, other than YES, Yankee or any employee
benefit plan or plans sponsored by either.
"Plan" - Any compensation plan such as a plan providing for
incentive or deferred compensation, stock options, or other stock
or stock-related grants or awards or any employee benefit plan
such as a thrift, investment, savings, pension, profit sharing,
medical, disability, accident, life insurance, cafeteria, or
relocation plan or any other plan, policy, or program of Employer
providing similar types of benefits to employees of Employer.
"Severance Payments" - The payments described in subsection
4(d) of this Agreement.
"Total Payments" - All payments or benefits payable to
Executive in connection with a Change in Control of YES, including
Severance Payments under this Agreement and Other Payments.
"Voting Securities" - YES's issued and outstanding securities
ordinarily having the right to vote at elections of the Board.
2. Agreement to Provide Services; Right to Terminate;
Confidentiality.
(a) Termination Prior to Certain Events. Except in
the event of a Change in Control, and except as otherwise provided
in subsection 2(b) of this Agreement or in any written employment
agreement between Executive and Employer, either Employer or
Executive may terminate Executive's employment at any time,
subject to Employer paying whatever severance benefits are
provided for pursuant to applicable Employer Plans or compensation
agreements other than this Agreement. If, and only if,
termination of Executive's employment with Employer occurs after a
Change in Control, the provisions of this Agreement regarding the
payment of Severance Payments shall apply. If it is reasonably
demonstrated by Executive that the termination by Employer of
Executive's employment or a change in the terms and conditions of
such employment such that the Executive would have Good Reason for
termination, in either case occurring prior to a Change in Control
(i) was at the request or direction of a Person
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<PAGE>
who has taken steps reasonably calculated to effect a Change in
Control, or (ii) otherwise was in connection with or anticipation
of a Change in Control, then, for purposes of Section 4 of this
Agreement, the Change in Control shall be deemed to have occurred
immediately prior to such termination or such change in the terms
and conditions of Executive's employment.
(b) Continuation of Services Subsequent to Certain
Events. In the event a tender offer or exchange offer is made by
a Person for more than 25 percent of YES's Voting Securities,
Executive agrees that Executive will not leave the employ of
Employer (other than as a result of Disability) and will render
services to Employer in the capacity in which Executive then
serves until such tender offer or exchange offer has been
abandoned or terminated or a Change in Control has occurred. In
the event that, during the period Executive is obligated to
continue in the employ of Employer pursuant to this subsection
2(b), Employer reduces Executive's compensation, Executive's
obligations under this subsection 2(b) shall terminate.
(c) Termination for Cause. Employer may terminate
Executive's employment for Cause whether or not a Change in
Control has occurred.
(d) Confidentiality. Executive acknowledge that (i)
by reason of the capacity in which Executive has been employed,
Executive has financial and business information regarding
Employer which has not been publicly disclosed and which is
confidential to Employer, and (ii) disclosure of such financial or
business information could cause irreparable harm to Employer.
Executive agrees that Executive will not disclose, without prior
written consent of Employer, any financial or other confidential
business information regarding Employer which has not been
publicly disclosed by Employer.
3. Term of Agreement. This Agreement shall commence on
the date hereof and shall continue in effect until December 31,
1995; provided, however, that commencing on January 1, 1996, and
each January 1 thereafter, the term of this Agreement shall
automatically be extended for one additional year unless at least
30 days prior to such January 1, Employer or Executive shall have
given notice that this Agreement shall not be extended; and
provided, further, that if a Change in Control shall occur while
this Agreement is in effect, the term of this Agreement shall
automatically be extended for a period of 24 calendar months from
the date of occurrence of the event constituting such Change in
Control. Except as provided in subsection 2(a) of this
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<PAGE>
Agreement, this Agreement shall terminate if Executive or Employer
terminates Executive's employment prior to a Change in Control.
4. Termination Following Change in Control. In the event
that Executive's employment with Employer is terminated, whether
by Executive or by Employer, within 24 calendar months from the
date of occurrence of any event constituting a Change in Control
(it being recognized that more than one such event may occur in
which case the 24-month period shall run from the date of
occurrence of each such event), Executive shall be entitled to the
following respective benefits:
(a) Disability. During any period that Executive is
unable to perform Executive's duties hereunder as a result of
incapacity due to physical or mental illness, Executive shall
continue to receive Executive's full base salary at the rate then
in effect until Executive's employment with Employer is terminated
by Employer for Disability. Thereafter, Executive's benefits
shall be determined in accordance with Employer's generally
applicable disability income program. If Employer's disability
income program is modified or terminated following a Change in
Control, Employer shall substitute another plan or program with
benefits applicable to Executive substantially similar to those
provided by the disability income program prior to its
modification or termination.
(b) Termination Upon Death. In the event of
Executive's death while an employee of Employer, Employer shall
pay to his or her representative Executive's full base salary
through the date of Executive's death at the rate in effect on the
date of the Change in Control, together with all benefits,
including death benefits, to which Executive is then entitled
under Plans in which Executive is a participant, and Employer
shall have no further obligations to Executive under this
Agreement.
(c) Termination for Cause or Without Good Reason. If
Executive's employment is terminated by Employer for Cause, or by
Executive other than for Good Reason, Employer shall pay Executive
his or her full base salary through the Date of Termination at the
rate in effect on the date the Change in Control occurs, together
with all benefits to which Executive is then entitled under Plans
in which Executive's is a participant, and Employer shall have no
further obligations to Executive under this Agreement.
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<PAGE>
(d) Termination Without Cause or With Good Reason. If
Executive's employment with Employer is terminated (other than for
Disability or upon Executive's death) by Employer without Cause or
by Executive with Good Reason, subject to the limitations set
forth in Section 6 and Section 10, Employer shall pay Executive,
upon demand, the following amounts ("Severance Payments"):
(i) Executive's full base salary through the Date
of Termination at the rate in effect on the date the Change in
Control occurs;
(ii) in lieu of any further salary payments to
Executive for periods subsequent to the Date of Termination, an
amount of severance pay equal to two times the sum of (A)
Executive's annual base salary, at the rate in effect on the date
the Change in Control occurs, plus (B) the average annual
incentive compensation (if any) paid to Executive or accrued to
Executive's benefit (prior to any deferrals) in respect of the two
fiscal years last ended prior to the fiscal year in which the
Change in Control occurs;
(iii) all reasonable legal fees and expenses
incurred by Executive as a result of such termination (including
all such reasonable fees and expenses, if any, incurred in
contesting or disputing in good faith any such termination or in
seeking in good faith to obtain or enforce any right or benefit
provided by this Agreement); and
(iv) reimbursement in full of all reasonable
amounts paid or incurred by Executive for outplacement services in
connection with obtaining other employment.
The amount of Severance Payments otherwise payable pursuant
to this Agreement shall be reduced by (A) amounts payable to
Executive pursuant to any plan providing severance benefits to
Employer's employees and (B) amounts payable to Executive (after
any adjustment or reduction to reflect payments described in
clause (A)) as salary continuation and incentive compensation
pursuant to any employment agreement between Executive and
Employer which is in effect as of the Date of Termination. The
payments provided for in this paragraph shall be made not later
than the fifth day following the Date of Termination; provided,
however, that if the amounts of such payments cannot be finally
determined on or before such day, Employer shall pay to Executive
on such day an estimate, as determined in good faith by Employer,
of the minimum amount of such payments, and shall pay the
remainder of such payments (together with interest at the rate of
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<PAGE>
8 percent per annum) as soon as the amount thereof can be
determined but in no event later than the 30th day after the Date
of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by Employer to Executive,
payable on the fifth day after demand by Employer (together with
interest at the rate of 8 percent per annum).
(e) Related Benefits. Unless Executive dies or
Executive's employment is terminated by Employer for Cause or
Disability, or by Executive other than for Good Reason, Employer
shall maintain in full force and effect, for the continued benefit
of Executive for two years after the Date of Termination, all
Benefit Plans in which Executive was entitled to participate
immediately prior to the Date of Termination, provided that
Executive's continued participation is possible under the general
terms and provisions of such Benefit Plans; provided, however,
that if Executive becomes eligible to participate in a benefit
plan, program, or arrangement of another employer which confers
benefits upon Executive substantially similar to those provided by
one or more Benefit Plans, Executive shall cease to receive
benefits under this subparagraph in respect of such Benefit Plan
or Plans. In the event that Executive's participation in any
Benefit Plan is barred by the provisions of such Benefit Plan,
Employer shall arrange to provide Executive with benefits
substantially similar to those which Executive is entitled to
receive under such Benefit Plan.
(f) Pension Credit. If the Executive is age 55 or
older on the Date of Termination and Executive's employment with
Employer is terminated (other than for Disability or upon
Executive's death) by Employer without Cause or by Executive with
Good Reason, Executive will continue to receive, until his or her
normal retirement date, service credit under the Company's pension
plans and any supplemental arrangements maintained for his or her
benefit in effect immediately prior to the Date of Termination,
and the benefit levels thereunder shall be calculated as though
the Executive had received an annual increase in compensation
until his or her normal retirement date in an amount equal to the
average annual compensation increase of all salaried personnel of
the Company included in such plans. To the extent that payment of
any amounts resulting from the foregoing may not be made from such
plans, the Company will pay such amounts to Executive as
supplemental benefits.
(g) No Mitigation. Executive shall not be required to
mitigate the amount of any payment provided for in this Section 4
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by seeking other employment or otherwise, nor, except as expressly
set forth in subsection 4(e), shall the amount of any payment
provided for in this Section 4 be reduced by any compensation
earned by Executive as the result of employment by another
employer after the Date of Termination, or otherwise.
5. Successors; Binding Agreement.
(a) This Agreement shall inure to the benefit of,
and be binding upon, any corporate or other successor or assignee of
Employer which shall acquire, directly or indirectly, by merger,
consolidation or purchase, or otherwise, all or substantially all of
the business or assets of Employer. Employer shall require any such
successor, by an agreement in form and substance reasonably satisfactory to
Executive, expressly to assume and agree to perform this Agreement in the
same manner and to the same extent as Employer would be required to perform
if no such succession had taken place.
(b) This Agreement shall inure to the benefit of and
be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees, and legatees. If Executive should die while any amount
would still be payable to Executive hereunder if Executive had
continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee, or other designee or,
if there is no such designee, to Executive's estate.
6. Reduction in Severance Payments to Avoid Excess
Parachute Tax Payments.
(a) Reduction. In the event that any portion of the
Total Payments received by Executive in connection with a Change
in Control of YES would not be deductible, in whole or in part,
for federal income tax purposes as a result of Section 280G of the
Code, the Severance Payments otherwise payable under this
Agreement shall be reduced until (i) no portion of the Total
Payments is not deductible pursuant to Section 280G of the Code or
(ii) the Severance Payments are reduced to zero.
(b) Application. For purposes of this limitation:
(i) No portion of the Total Payments, the
receipts or enjoyment of which Executive has effectively waived
11
<PAGE>
in writing prior to the date of payment of the Severance Payments,
shall be taken into account;
(ii) No portion of the Total Payments shall be
taken into account which, in the opinion of tax counsel selected
by YES and reasonably acceptable to Executive ("Tax Counsel"),
does not constitute a "parachute payment" within the meaning of
Section 280G of the Code;
(iii) The Severance Payments shall be reduced
only to the extent necessary so that the Total Payments (other
than those referred to in paragraphs (b)(i) and (ii) above) in
their entirety constitute, in the opinion of Tax Counsel,
reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code; and
(iv) The value of any noncash benefit or any
deferred payment or benefit included in the Total Payments, and
whether or not all or a portion of any payment or benefit is a
"parachute payment" for purposes of paragraph (b)(ii) above, shall
be determined by YES's independent accountants in accordance with
the principles of Section 280G(d)(3) and (4) of the Code.
(c) Effect on Other Agreements. In the event that any
Other Agreement has a provision that requires a reduction in the
Other Payment governed by such Other Agreement to avoid or
eliminate an "excess parachute payment" for purposes of Section
280G of the Code, the reduction in Severance Payments pursuant to
this Section 6 shall be given effect before any reduction in the
Other Payment pursuant to the Other Agreement.
7. Non-Exclusivity of Rights. Nothing in the Agreement
shall prevent or limit the Executive's continuing or future
participation in any benefit, bonus, incentive or other plans,
programs, policies or practices, provided by Employer and for
which the Executive may qualify, nor shall anything herein limit
or otherwise affect such rights as the Executive may have under
any other agreements with Employer. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive
under any plan, policy, practice or program of Employer at or
subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program (including
any provisions thereof providing for the acceleration of vesting
or the lapse of restrictions upon a change in control) except as
explicitly modified by this Agreement. For purposes of the Yankee
Energy System, Inc. 1991 Long-Term Incentive Compensation
12
<PAGE>
Plan and the terms of any award thereunder, termination of
Executive's employment in circumstances that would give rise to a
right to receive Severance Payments pursuant to Section 4(d) shall
be deemed to be termination of employment as a result of early
retirement with approval of the Board.
8. Continued Employment. This Agreement shall not give
Executive any right of continued employment or any right to
compensation or benefits from Employer except the rights
specifically stated herein to certain severance and other benefits
in the event of a Change in Control, and shall not limit
Employer's right to change the terms of or to terminate
Executive's employment, with or without Cause, at any time,
subject only to the payment and provision of such severance and
other benefits as are specifically provided for in this Agreement.
9. Full Settlement. The obligation of Employer to make
the payments provided for in this Agreement and otherwise to
perform their obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right
or action which Employer may have against the Executive or others.
10. Regulatory Limitations. Notwithstanding any other
provision of this Agreement, Employer shall have no obligation to
make any payments to Employee pursuant to Section 4 of this
Agreement if, or to the extent, such payments are prohibited by
any applicable law or regulation.
11. Assignment. The Executive may not assign, transfer,
pledge or in any way encumber the compensation or other benefits
payable to Executive or any rights which he or she may have under
this Agreement.
12. Severability. The provisions of this Agreement are
severable, and if any one or more provisions may be determined to
be invalid or otherwise unenforceable, in whole or in part, the
remaining provisions, and any partially enforceable provision, to
the extent enforceable in any jurisdiction, shall nevertheless be
binding and enforceable.
13. Waiver. The waiver by Yankee, YES or the Executive of
a breach of any provision of this Agreement shall not operate or
be construed as a waiver of any prior or subsequent breach by any
of the parties hereto.
13
<PAGE>
14. Entire Agreement; Amendment. This Agreement contains
the entire agreement between the parties hereto with respect to
the matters contemplated herein. No amendment or alteration of
terms of this Agreement shall be valid unless made in writing and
signed by all of the parties hereto.
15. Governing Law. This Agreement shall be governed by the
laws of the State of Connecticut.
16. Arbitration. Any controversy, claim or breach arising
out of or relating to this Agreement shall be submitted for
settlement to a panel of three arbitrators. Each party shall
select an arbitrator and the two thus chosen shall select a third.
The decision of a majority of the arbitrators shall be final and
binding on the parties. If the two arbitrators cannot agree upon
a third arbitrator, the American Arbitration Association will be
requested to appoint such an arbitrator. Such arbitration shall
be held in Hartford, Connecticut in accordance with the rules and
practices of the American Arbitration Association then in effect,
and judgment upon the award rendered may be entered in any court
having jurisdiction thereof.
17. Notices and Communications. Notices and all other
communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given when delivered or
three business days after being mailed by United States registered
or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Yankee or YES, to:
Yankee Energy System, Inc.
599 Research Parkway
Meriden, CT 06450-1030
Attn: Chairman of the Board
If to the Executive, to the Executive:
c/o Yankee Gas Services Company
599 Research Parkway
Meriden, CT 06450-1030
(Marked "Personal and Confidential")
or to such other address as either party shall furnish to the
other in writing in accordance with this Section.
14
<PAGE>
18. Authorization. This Agreement is executed for and on
behalf of YES and Yankee by officers duly authorized to do so by
resolutions of the boards of directors, voting separately,
approving this Agreement and authorizing such execution.
19. Counterparts. This Agreement may be executed in
several counterparts, each one of which shall be deemed to be an
original but all of which together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the day and year first above written.
YANKEE ENERGY SYSTEM, INC.
By:___________________________
Emery G. Olcott
Chairman, Organization &
Compensation Committee
YANKEE GAS SERVICES COMPANY
By:___________________________
Branko Terzic
President and Chief Executive
Officer
EXECUTIVE:
By:___________________________
Name:
15
Executive Officers Party to
Change in Control Severance Agreements
Michael E. Bielonko
Charles E. Gooley
Mary J. Healey
Thomas J. Houde
16
<PAGE>
Exhibit 10.20
MEMORANDUM OF UNDERSTANDING
YANKEE ENERGY BOARD AND PHILIP T. ASHTON
On December 6, 1994, the Board of Directors ("Board") of
Yankee Energy System, Inc. (together with all subsidiaries,
"Yankee") and Philip T. Ashton ("Ashton") reached an agreement on
the following matters:
1. Ashton has agreed to resign as Chief Executive Officer of
Yankee effective March 1, 1995. Ashton has submitted his letter
of resignation to the Board. The transition of Chief Executive
Officer duties to Terzic will begin immediately, as of December
6, 1994.
2. Ashton will stand for election to a new three-year term as a
director at the 1995 Annual Meeting of Shareholders on February
24, 1995, and (assuming he is re-elected by the shareholders)
will remain as Chairman of the Board until the Board meeting
following the 1996 Annual Meeting of Shareholders, at which time
the Board will consider whether to continue Ashton as Chairman.
If the Board determines not to continue Ashton as Chairman after
that meeting, the resolution adopted by the Board on May 26, 1994
regarding nomination and tenure of directors will apply and
Ashton will submit his resignation to the Board no later than
March 1, 1996. From the period between the 1995 and 1996 Annual
Meeting of Shareholders, Ashton will receive $25,000 annually as
Chairman of the Board and will also receive all fees paid to
directors in accordance with Yankee's policy for compensating
directors. Ashton's duties as Chairman will be determined by the
Board.
3. Ashton agrees to retire from Yankee effective March 1, 1995.
The Board agrees that Ashton's total monthly retirement plan will
be $17,310 and that a supplemental retirement plan or other
mutually acceptable document will be entered into as soon as
practicable after December 6, 1994, to assure the $17,310 monthly
retirement payment. In addition to the above monthly total
retirement payment, Ashton will be entitled to any other benefits
generally available to retired persons under Yankee's retirement
plans. The document establishing Ashton's entitlement to the
monthly retirement payment shall include a requirement that
Ashton not compete with Yankee so long as he is receiving
retirement benefits.
1
<PAGE>
4. The Board agrees that all stock grants and options held by
Ashton will vest on the same vesting schedule that would have
applied if Ashton were not retiring on March 1, 1995, provided
that any vesting which would occur upon Ashton's retirement will
still occur upon that event. The Board agrees to examine whether
the stock option exercise date can be extended by the Board until
the expiration of 12 months after Ashton reaches the age of 65;
if so, such an extension will be effected. If shareholder
approval of the stock option plan amendments, necessary to effect
such changes, will be required to preserve the current status of
the stock option plan under Federal securities law, the Board and
Ashton agree to discuss in good faith alternatives to the
continued vesting and extended exercise periods.
5. The Board agrees that Ashton's 1994 base annual salary shall
be set at $262,500 effective May 1, 1994. The Board also agrees
that Ashton will be given an incentive compensation award of
$80,000 for 1994. This will result in a cash payment in December
of $88,400 (which includes the $8,400 lump sum salary adjustment
for May 1, 1994 to December 31, 1994 and the $80,000 bonus.) For
January and February, 1995, Ashton will be paid at the annual
base salary rate of $262,500.
6. The Board has given Ashton written notice on December 6,
1994 of its intent not to renew Ashton's January 1, 1993
Employment Agreement, and Ashton agrees that the Employment
Agreement will terminate, and he will be an employee at will,
effective at midnight on December 31, 1994.
7. The Board and Ashton have agreed upon the text of a press
release announcing Ashton's prospective retirement and the change
in the Chief Executive Officer position. The Board and Ashton
agree that all other disclosures and reports required by law will
be made on a timely basis.
2
<PAGE>
8. This Memorandum of Understanding shall be subject to the
execution of such definitive agreements as may be necessary to
give effect thereto and the satisfaction of all applicable legal
and regulatory requirements.
Accepted:
/s/ Philip T. Ashton
- -------------------------
Philip T. Ashton December 12, 1994
/s/ Emery G. Olcott
- -------------------------
Emery G. Olcott December 12, 1994
3
<PAGE>
Exhibit 10.21
August 22, 1995
Philip T. Ashton
39 Daffodil Lane
Meriden, CT 06450
Dear Phil:
This letter of understanding contains the agreement reached
with the Board of Directors of Yankee Energy System, Inc. ("the
Company") relating to your resignation as Chairman and a director
of the Company effective August 1, 1995.
1. All rights afforded you under the Supplemental Benefit
Plan, effective December 6, 1994 and the Stock Appreciation
Rights Agreement dated February 28, 1995, relating to stock,
stock options and retirement compensation will remain in effect
unchanged and all vesting will occur in accordance with the terms
of those respective plans.
2. With respect to the non-compete clause in Paragraph 6
of the Supplemental Benefit Plan, this clause will continue to
govern your activities. However, the Board has no objection to
your serving as a director of, or consultant to, any company
PROVIDED that you give the Board reasonable advance notice of any
proposed engagement and obtain Board consent, which shall not be
unreasonably withheld, so that the Board can judge whether there
is in fact any real or potential conflict.
3. You will receive the balance of the retainer you would
have earned as Chairman but no other payments relating to your
directorship such as meeting fees. The balance of your retainer
as Chairman will be paid in lump sum on the day of the January,
1996 Board meeting. In consideration of the payment, you agree
to consult with the Board and the Company's senior officers on
matters in which you were involved as an officer or director of
the Company such as Iroquois. In addition, the balance of
1
<PAGE>
restricted stock granted under the 1991 Long-Term Incentive
Compensation Plan of 1676 shares due to vest in 1996 and the 150
shares of restricted stock which would vest upon your completion
of one year of your term as a director of the Company will be
deemed vested by the Board as of the January, 1996 Board meeting.
Very truly yours,
/s/ Emery G. Olcott
Emery G. Olcott, for the Board
Accepted:
/s/ Philip T. Ashton
- -------------------------
Philip T. Ashton
2
<PAGE>
Exhibit 10.22
YANKEE ENERGY SYSTEM, INC.
SUPPLEMENTAL BENEFIT PLAN
This instrument is executed by Yankee Energy System, Inc. to
record its adoption on the terms and conditions hereinafter set
forth, of a Supplemental Benefit Plan for the benefit of its
employee, Philip T. Ashton, effective December 6, 1994.
RECITALS
Yankee Energy System, Inc. (the "Employer") maintains for
the benefit of certain employees a retirement plan known as the
Yankee Energy System, Inc. Retirement Plan. (That retirement
plan, together with any subsequent amendments and future
restatements, is referred to herein as the "Retirement Plan").
In addition, Yankee Energy System, Inc. maintains for certain of
its employees, including Philip T. Ashton, a non-qualified plan
established to provide retirement benefits which would have been
provided under the Retirement Plan if the benefits were not
subject to the benefit limitations imposed by Sec. 415 of the
Internal Revenue Code, as amended (the "Code") and the
compensation limitations imposed by Sec. 401(a)(17) of the Code.
(That plan, together with any subsequent amendments and future
restatements, is referred to herein as the "Excess Benefit
Plan.")
The Employer wishes to supplement the retirement benefits of
Philip T. Ashton.
In view of the foregoing the Employer hereby adopts the
Yankee Energy System, Inc. Supplemental Benefit Plan (the
"Plan"), effective immediately, on the following terms and
conditions:
1. Covered Employee. The sole Participant of the Plan is
Philip T. Ashton.
2. Benefits. The Benefit payable under this Plan shall
equal $17,310.00 per month in the Elected Form (as defined in
Section 3 below) less the sum of: (i) the monthly amount of
benefit payable under the Retirement Plan in the Elected Form;
(ii) the monthly amount of benefit payable under the Excess
Benefit Plan in the Elected Form.
3. Manner of Payment of Benefits. Unless the Plan
Participant elects an alternate form of benefit payment, the
benefit payable under this Plan shall be paid as a joint and 1/3
survivor annuity (the "Elected Form"), with the contingent
1
<PAGE>
annuitant being the same person chosen under the Retirement Plan
and Excess Benefit Plan. If the Participant's benefits under the
Retirement Plan and Excess Benefit Plan are paid in a form other
than the Elected Form (an "Alternate Form"), the Alternate Form
will also apply to this Plan, and the benefit paid under Section
2 above shall be adjusted so that it is the actuarial equivalent
of the benefit payable under the Elected Form. Any such
actuarial adjustments shall be made using the applicable
adjustment factors under the Retirement Plan for the same form of
benefit.
4. Funding of Benefits. Benefits under this Plan will be
paid out of the general assets of the Employer. The Employer may
not prefund benefits under this Plan be means of any trust fund
(other than a Rabbi Trust), annuity contract or funded reserve.
Any accrual of liabilities under this Plan on the books of the
Employer is for accounting purposes only and shall not be
construed as indicative of any prefunding or earmarking of assets
or revenues for use in discharge of liabilities under this Plan.
5. Nonalienation of Benefits. Neither the Participant nor
his or her Beneficiary or heirs shall have any right to commute,
sell, transfer, assign, or otherwise convey the right to receive
any payments under the terms of this Agreement.
6. Non-Competition. No benefit will be payable under this
Plan, and any benefit already in payment status will cease, if
the Employer determines that the Participant has engaged in any
activity which is competitive with the Employer.
7. Administration. This Plan will be administered by the
committee that has been established by the Board of Directors of
the Employer which has primary responsibility for compensation
policies, or if such committee does not exist, the Employer.
8. Amendment and Termination. This Plan may only be
amended or terminated by mutual consent of the Employer and the
Participant.
9. Applicable Law. The interpretation of the provisions
and the administration of the Plan shall be governed by the laws
of Connecticut.
IN WITNESS WHEREOF, the Employer has executed this document
this 28th day of February, 1995.
YANKEE ENERGY SYSTEM, INC.
By: /s/ Charles E. Gooley
--------------------------
Its: Executive Vice President
2
<PAGE>
Exhibit 10.23
$60,000,000
AMENDED AND RESTATED CREDIT AGREEMENT
Among
YANKEE GAS SERVICES COMPANY
THE BANKS LISTED ON ANNEX A HERETO
and
THE BANK OF NEW YORK,
as Agent
Dated as of February 2, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
CREDIT FACILITIES...........................................1
1.01. Revolving Credit Facility............................1
1.02. Manner of Borrowing..................................1
1.03. Bid Loan Facility....................................3
1.04. Interest.............................................5
(a) Rates..................................................5
(b) Payment................................................5
(c) Conversion and Continuation............................6
(d) Maximum Interest Rate..................................6
1.05. Repayment............................................7
1.06. Prepayments..........................................7
1.07. Minimum Amount of Loans..............................7
1.08. Cancellation or Reduction of Commitments.............8
1.09. Facility Fee.........................................8
1.10. Agent's Fees.........................................8
1.11. Computation of Interest..............................8
1.12. Payments by the Borrower.............................8
1.13. Evidence of Indebtedness.............................10
1.14. Pro Rata Treatment...................................10
ARTICLE 2
CONDITIONS TO EFFECTIVENESS.................................11
2.01. Conditions to Restatement Effective Date.............11
2.02. Conditions to Each Loan..............................12
2.03. Special Additional Conditions to Bid Loans...........12
2.04. Special Conditions to Refunding Loans................13
2.05. Extension of Termination Date........................13
ARTICLE 3
CERTAIN REPRESENTATIONS AND WARRANTIES OF THE BORROWER......13
3.01. Organization; Power; Qualification...................14
3.02. Authorization; Enforceability; Required Consents;
Absence of Conflicts........................................14
3.03. Subsidiaries.........................................14
3.04. Governmental Approvals...............................14
3.05. Debt; Liabilities....................................15
3.06. Litigation...........................................15
3.07. Environmental Matters................................15
3.08. ERISA................................................15
3.09. Tax Returns and Payments.............................15
3.10. No Material Adverse Change or Event..................16
3.11. Investment Company Act; Public Utility Holding
Company Act.................................................16
ARTICLE 4
COVENANTS.....................................................16
4.01. Preservation of Existence and Properties, Scope of
Business, Compliance with Law, Payment of Taxes and Claims....16
4.02. Insurance...............................................16
4.03. Use of Proceeds........................................17
4.04. Merger or Consolidation................................17
4.05. Disposition of Assets..................................17
4.06. Taxes of Other Persons.................................17
4.07. Benefit Plans..........................................17
4.08. Transactions with Affiliates...........................17
4.09. Liens..................................................18
4.10. Equity Ratio...........................................18
4.11. Consolidated Stockholders' Equity......................18
4.12. Consolidated Cash Coverage Ratio.......................18
ARTICLE 5
FINANCIAL STATEMENTS AND INFORMATION...........................18
5.01. Financial Statements and Information to Be Furnished....18
(a) Quarterly Financial Statements; Officer's Certificate.....18
(b) Year-End Financial Statements; Accountant's and Officer's
Certificates...................................................19
(c) Additional Materials......................................19
(i) Reports and Filings.......................................19
(ii) Requested Materials.......................................19
(d) Notice of Defaults, Litigation and Other Matters..........20
5.02. Accuracy of Financial Statements and Information........20
(a) Historical Financial Statements...........................20
(b) Future Financial Statements...............................20
(d) Historical Information....................................21
(e) Future Information........................................21
5.03. Additional Covenants Relating to Disclosure.............22
(a) Accounting Methods and Financial Records..................22
(b) Visits and Inspections....................................22
ARTICLE 6
DEFAULT........................................................22
6.01. Events of Default........................................22
6.02. Remedies upon Event of Default...........................25
ARTICLE 7
LIBOR AND BASE RATE LOAN PROVISIONS............................25
7.01. Mandatory Suspension and Conversion of LIBOR Loans......25
7.02. Regulatory Changes......................................26
7.03. Change of Lending Office................................27
7.04. Funding Losses..........................................27
7.05. Determinations..........................................27
ARTICLE 8
THE AGENT......................................................28
8.01. Appointment and Powers..................................28
8.02. Limitation on Agent's LiabilitY.........................28
8.03. Defaults................................................29
8.04. Rights as a Bank........................................29
8.05. Indemnification.........................................29
8.06. Non-Reliance on Agent and Other Banks...................30
8.07. Resignation of the Agent................................30
ARTICLE 9
MISCELLANEOUS..................................................31
9.01. Notices.................................................31
9.02. Expenses; Indemnification...............................32
9.03. Rights Cumulative.......................................34
9.04. Waivers; Amendments.....................................34
9.05. Set-Off.................................................35
9.06. Sharing of Recoveries...................................35
9.07. Assignment..............................................36
9.08. Participations..........................................37
9.09. Governing Law...........................................38
9.10. Judicial Proceedings; Waiver of Jury Trial..............38
9.11. Exemption from Withholding..............................38
9.12. Severability of Provisions..............................39
9.13. Survival of Obligations.................................39
9.14. Entire Agreement........................................40
9.15. Counterparts............................................40
9.16. Successors and Assigns..................................40
ARTICLE 10
INTERPRETATION.................................................40
10.01. Definitional Provisions................................40
(a) Defined Terms.............................................40
(b) Other Definitional Provisions.............................53
10.02. Accounting Matters.....................................54
10.03. Representations and Warranties.........................54
10.04. Captions...............................................55
Annex A Banks, Lending Offices, Notice Addresses and Commitments
Schedule 1.02 Notice of Borrowing
Schedule 1.03(b)Bid Borrowing Notice
Schedule 1.03(c)Form of Bid
Schedule 1.03(e)Notice of Acceptance of Bid(s)
Schedule 2.01(a)Borrower's Certificate as to Resolutions,etc.
Schedule 2.01(d) Opinion of Counsel for the Borrower and its
Subsidiaries
Schedule 2.01(f) Certificate of Negotiating Officer
Schedule 3.03 Subsidiaries
Schedule 3.08 ERISA Plans
Schedule 4.09 Liens
Schedule 5.01(a) Officer's Certificate as to Quarterly Financial
Statements; Compliance
Schedule 5.01(b)Officer's Certificate as to Year-End Financial
Statements; Compliance
Exhibit A-1 Base Rate Note
Exhibit A-2 LIBOR Note
Exhibit A-3 Bid Note
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of February 2, 1995
WHEREAS, YANKEE GAS SERVICES COMPANY, a Connecticut corporation,
as Borrower (the "Borrower"), The Bank of New York, as Agent, and
certain banks were parties to a Credit Agreement dated as of June
20, 1989, which Credit Agreement was amended by Amendment No. I
dated as of June 20, 1992 (as amended, the "Original Agreement");
and
WHEREAS, the Borrower, The Bank of New York, as Agent (the
"Agent") and the banks listed on the signature pages hereof (the
"Banks"), wish to amend and restate the Original Agreement;
NOW, THEREFORE, the Borrower, the Agent and the Banks agree that
the Original Agreement is amended and restated in its entirety as
of the Restatement Effective Date as follows (as amended and
restated hereby, the "Agreement") (with certain terms used herein
being defined in Article 10):
<PAGE>
ARTICLE 1
CREDIT FACILITIES
Section 1.01. Revolving Credit Facility. Upon the terms and
subject to the conditions of this Agreement, each Bank, severally
and not jointly, shall, from time to time from the Agreement Date
and until the Termination Date, make one or more Loans to the
Borrower, the aggregate unpaid principal amount of which (not
including Bid Loans) at any time shall not exceed such Bank's
Commitment at such time and which may initially be, or may from
time to time be converted into, Base Rate, LIBOR or Bid Loans, or
any combination thereof; provided, however, that the aggregate
unpaid principal amount of all Loans, including Bid Loans, shall
not at any time exceed the aggregate Commitments of the Banks at
such time.
Section 1.02. Manner of Borrowing. (a) To request a Loan, the
Borrower shall give the Agent notice of each proposed borrowing
of (i) a Base Rate Loan no later than 9:30 a.m. on the requested
date of such borrowing, (ii) a LIBOR Loan not less than three
LIBOR Business Days prior to the date of such borrowing and (iii)
a Bid Loan at the time required pursuant to Section 1.03. Each
such notice shall be in the form of Schedule 1.02 and shall
specify (i) in the case of all Loans, the date, which shall be a
Business Day (and a LIBOR Business Day in the case of a LIBOR
Loan), and the amount of the proposed borrowing (which shall be a
multiple of $100,000) and whether the Loan is to be made as a
Base Rate Loan, a LIBOR Loan or a Bid Loan, (ii) in the case of
LIBOR Loans, the duration of the initial Interest Period as
selected by the Borrower and (iii) in the case of Bid Loans, the
information required by Section 1.03. Each such notice (other
than notices for Bid Loans) shall be irrevocable. Base Rate
Loans and Bid Borrowings shall be made only on a Business Day and
LIBOR Loans shall be made only on a LIBOR Business Day. The
aggregate principal amount of Loans made as part of any Advance
shall be not less than the lesser of (x) $1,000,000 and (y) the
remaining unused amount of the Commitments.
(b) Upon receipt of each notice of borrowing, the Agent shall
promptly notify each Bank of the contents thereof and, in the
case of Pro Rata Loans, of such Bank's ratable share of the Loans
requested pursuant thereto.
(c) Not later than 12:00 p.m. (New York time) on the date of each
Advance of a Pro Rata Loan, each Bank shall (except as provided
in subsection 1.02(d)) make available its pro rata share of such
Advance to the Agent, in Dollars immediately available to the
Agent at the Agent's Office. Any Bank's failure to make any Loan
to be made by it in connection with any Advance on the date
specified therefor shall not relieve any other Bank of its
obligation to make any Loan to be made by such other Bank on such
date, but such other Bank shall not be liable for such failure.
<PAGE>
(d) Unless the Agent shall have received written notice from a
Bank prior to 11:00 a.m. (New York time) on the date of any
Advance of a Pro Rata Loan that such Bank will not make available
to the Agent such Bank's pro rata share of such Advance, the
Agent may assume that such Bank has made such amount available to
the Agent on the date of such Advance in accordance with Section
1.02(c) and the Agent in its sole discretion may, in reliance
upon such assumption, make available to the Borrower on such date
a corresponding amount on behalf of such Bank. Any such amount
so made available by the Agent on behalf of such Bank shall be
deemed a Loan by such Bank. If and to the extent such Bank shall
not have so made available to the Agent such Bank's pro rata
share of such Advance and the Agent shall have so made available
to the Borrower a corresponding amount on behalf of such Bank,
the Agent shall be entitled to recover such corresponding amount
on demand from such Bank together with interest thereon, for each
day from the date such corresponding amount shall have been so
made available by the Agent to the Borrower until the date such
corresponding amount shall have been repaid to the Agent, at the
interest rate applicable at the time to such Advance. If such
Bank does not pay such corresponding amount promptly upon the
Agent's demand therefor, the Agent shall promptly notify the
Borrower and the Borrower shall immediately upon receipt of
notice repay such corresponding amount to the Agent together with
accrued interest thereon at the applicable rate or rates provided
in Section 1.04(a).
(e) Each Loan shall be disbursed by the Agent, in Dollars in
funds immediately available to the Borrower, by credit to an
account of the Borrower at the Agent's Office. Unless the Agent
determines that any applicable condition specified in Article 2
has not been satisfied to the satisfaction of the Agent, such
disbursement shall be made not later than 2:00 p.m. (New York
time) on the date specified therefor.
Section 1.03. Bid Loan Facility. (a) Upon the terms and subject
to the conditions of this Agreement, each Bank may make Bid Loans
to the Borrower from time to time prior to the Termination Date.
(b) To request a Bid Borrowing, the Borrower shall give the Agent
a non-binding notice of such request no later than 9:00 a.m. on
the requested date for such Bid Borrowing. Such notice shall be
submitted in the form of Schedule 1.03(b) and shall specify (i)
the requested date of such Bid Borrowing, which shall be a
Business Day, (ii) the principal amount of such Bid Borrowing,
which shall be equal to $2,500,000 or a greater multiple of
$100,000, (iii) the extent to which such Bid Borrowing is to be a
Refunding Loan and (iv) the duration of two alternative Interest
Periods for such Bid Borrowing, which must be equal to or greater
than seven days but no greater than 180 days. Upon receipt of a
request for a Bid Borrowing, the Agent shall promptly notify each
Bank of the contents thereof.
<PAGE>
(c) Each Bank may, in its sole discretion, submit, by telex or
telecopy to the Agent no later than 10:00 a.m. on the requested
date for a proposed Bid Borrowing, a bid for a Bid Loan to the
Agent in response to a request for a Bid Borrowing. Such bid
shall be submitted in the form of Schedule 1.03(c) and shall
identify (i) the Bank making such bid and (ii) the requested date
of such Bid Borrowing, and shall specify (i) the fixed rate of
interest per annum (computed on the basis of a 360-day year and
for the actual number of days elapsed and expressed in decimals
to 1/10,000 of 1%) that such Bank is willing to offer for a Bid
Loan to be made as part of such Bid Borrowing and (ii) the
principal amount of the Bid Loan such Bank is willing to make at
such rate as part of such Bid Borrowing, which amount may exceed
such Bank's Commitment at such time. A Bank may submit up to two
bids in response to any request for a Bid Borrowing, but both
bids of a Bank with respect to Bid Borrowings requested at the
same time must be submitted by such Bank at the same time. No
such bid may contain qualifying, conditional or similar language
or contain proposed terms other than those specified in this
paragraph.
(d) Each such bid shall be irrevocable and may not be modified
except to correct a manifest error therein. The Agent shall
notify the Borrower of the contents of any bid to be made by it
in its capacity as a Bank in response to a request for a Bid
Borrowing no later than 9:45 a.m. on the requested date of such
Bid Borrowing. No later than 10:30 a.m. on the requested date
for a Bid Borrowing, the Agent shall notify the Borrower of the
contents of all bids received by the Agent prior to 10:00 a.m. on
such day from the other Banks.
(e) Not later than 11:00 a.m. on the requested date for a Bid
Borrowing, the Borrower shall notify the Agent (which notice
shall be irrevocable) of the bids, if any, that the Borrower is
accepting. Such notice of acceptance of bids shall be in the
form of Schedule 1.03(e). Any bids omitted from such notice shall
be deemed to have been rejected. The Borrower may accept any bid
in whole or in part; provided that (i) the Borrower may not
accept bids with respect to any Bid Borrowing if, after giving
effect thereto, the aggregate unpaid principal amount of Pro Rata
Loans and Bid Loans of all the Banks at such time would exceed
the aggregate Commitments of all of the Banks at such time, (ii)
the aggregate principal amount of bids accepted with respect to
any Bid Borrowing may not exceed the principal amount specified
for such Bid Borrowing in the request therefor, (iii) the
aggregate principal amount of bids by any Bank accepted with
respect to Bid Borrowings requested at the same time may not
exceed the maximum aggregate principal amount specified in such
Bank's response to the request for such Bid Borrowings or be less
than the minimum aggregate principal amount specified in such
Bank's response to the request for such Bid Borrowing and (iv)
bids with respect to any Bid Borrowing may be accepted only in
<PAGE>
ascending order of the interest rates specified in such bids. If
two or more bids specify the same interest rate, then the
Borrower shall accept such bid or bids, in such respective
amounts as the Borrower may choose. Upon receipt of any notice
from the Borrower accepting any bid or bids, the Agent shall
promptly notify each of the Banks that submitted a bid with
respect to the applicable Bid Borrowing whether its bids were
accepted or rejected and, if any of such Bank's bids were
accepted, shall identify such bids and the respective amounts
thereof so accepted. If the Borrower has not accepted any bids
in accordance with the foregoing procedure in an amount
sufficient to repay all maturing Bid Loans on the requested date
for a Bid Borrowing, the Agent shall, by 11:30 a.m. on such day,
notify each Bank as to the Pro Rata Loan deemed requested as of
such date in accordance with Section 1.03(i) below.
(f) Not later than 2:00 p.m. on the date of each Bid Borrowing,
each Bank that has had accepted all or part of any bid made by it
with respect to such Bid Borrowing shall make the amount of the
Bid Loan to be made by such Bank as part of such Bid Borrowing
available to the Agent, in Dollars immediately available to the
Agent, at the Agent's Office.
(g) Bid Borrowings shall be disbursed by the Agent not later than
3:00 p.m. on the date specified therefor, in Dollars immediately
available to the Borrower, by credit to the Borrower's account
with the Agent in writing, except that Refunding Loans shall be
applied by the Agent to repay maturing Bid Loans on the date of
such Refunding Loans.
(h) Each Bid Borrowing shall reduce the unused Commitment of each
Bank in an amount equal to such Bank's prorata share (in
accordance with the Commitment of each Bank) of such Bid
Borrowing, whether or not such Bank shall have made any Loan, and
notwithstanding the amount of any Loan made by such Bank, as a
part of such Bid Borrowing. The unused Commitment of each Bank
shall, upon maturity of a Bid Loan, be reinstated in the amount
of the reduction effected in the preceding sentence.
(i) If the Borrower shall fail to request a conversion into a Pro
Rata Loan in accordance with Section 1.04(c), or shall fail to
accept Bids in an amount sufficient to pay the Bid Loan or Bid
Loans maturing on any day, or if no Bank submits a bid in
response to a request for a Bid Borrowing, the Borrower shall,
unless it provides written notice to the Agent to the contrary by
11:30 a.m. on the day of a maturing Bid Loan or Bid Loans, be
deemed to have requested a Refunding Loan (which is subject to
the special conditions to Refunding Loans set forth in Section
2.04) on such date in an amount sufficient to pay such maturing
Bid Loan or Bid Loans and such Refunding Loan shall bear interest
at the Base Rate.
<PAGE>
Section 1.04. Interest. (a) Rates. Until an Event of Default
occurs and is continuing, (i) each Loan shall bear interest on
the outstanding principal amount thereof until due at a rate per
annum equal to, (A) so long as it is a Base Rate Loan, the
Alternate Base Rate as in effect from time to time, (B) so long
as it is a LIBOR Loan, Adjusted LIBOR for the applicable Interest
Period plus the LIBOR Margin as in effect on the first day of
such Interest Period and (C) so long as it is a Bid Loan, a rate
determined pursuant to Section 1.03, and (ii) each other amount
due and payable under this Agreement shall, to the maximum extent
permitted by Applicable Law, bear interest at a rate per annum
equal to the Base Rate as in effect from time to time. So long
as an Event of Default is continuing (and whether before or after
judgment), each Loan (whether or not due) and, to the maximum
extent permitted by Applicable Law, each other amount due and
payable under this Agreement or any Note shall bear interest at a
rate per annum equal to the applicable Post-Default Rate.
(b) Payment. Interest shall be payable (i) in the case of Base
Rate Loans, on each Interest Payment Date, (ii) in the case of
LIBOR Loans, on the last day of each applicable Interest Period
(and, if an Interest Period is longer than three months, at
intervals of three months after the first day of such Interest
Period), (iii) in the case of any Loan, when such Loan shall be
due (whether at maturity, by reason of notice of prepayment or
acceleration or otherwise) or converted, but only to the extent
then accrued on the amount then so due or converted and (iv) in
the case of all other amounts due and payable under this
Agreement and the Notes, except as otherwise expressly provided
herein, upon demand. Interest at the Post-Default Rate shall be
payable on demand.
(c) Conversion and Continuation. (i) All or any part of the
principal amount of Loans of any type may, on any Business Day,
be converted into any other type or types of Pro Rata Loans,
except that (A) the aggregate principal amount of Loans to be
converted of the same type and, in the case of LIBOR Loans,
having the same Interest Period shall be at least $1,000,000, (B)
Base Rate Loans may be converted into LIBOR Loans only on a LIBOR
Business Day, (C) LIBOR Loans may only be converted on the last
day of an applicable Interest Period (D) Bid Loans may only be
converted upon maturity and (E) except for conversions of LIBOR
Loans to Base Rate Loans, no conversions shall be made so long as
a Default shall have occurred and be continuing.
(ii) All or any part of the principal amount of a LIBOR Loan may,
on the last day of an Interest Period applicable to such Loan, be
continued as a LIBOR Loan for another Interest Period.
(iii) The Borrower shall give the Agent notice (which shall be
irrevocable) of each conversion or continuation at least, in the
case of conversions into Base Rate Loans, one Business Day, in
<PAGE>
the case of conversions into or continuations of LIBOR Loans,
three LIBOR Business Days, and, in the case of conversions into
or continuations of Bid Loans at the time specified in Section
1.03, before the requested date of such conversion or
continuation, specifying (A) such requested date, (B) the amount
and type and, in the case of Fixed Rate Loans, the last day of
the applicable Interest Period of the Loans to be converted or
continued and (C) in the case of a conversion, the amount and the
type or types of Loans into which such Loans are to be converted.
In the absence of any such notice, LIBOR Loans shall be converted
into Base Rate Loans at the end of the then current Interest
Period therefor. Upon receipt of any such notice, the Agent
shall promptly notify each Bank of (x) the contents thereof, (y)
the amount and type and, in the case of LIBOR Loans, the last day
of the applicable Interest Period of each Loan to be converted or
continued by such Bank and (z) in the case of a conversion, the
type or types of Loans into which such Loans are to be converted.
(d) Maximum Interest Rate. Nothing contained in this Agreement
or any Note shall require the Borrower to pay interest at a rate
exceeding the Maximum Permissible Rate. If interest payable to
any Bank on any date would otherwise exceed the maximum amount
permitted by the Maximum Permissible Rate, such interest payment
shall be automatically reduced to such maximum permitted amount,
and interest payable to such Bank for any subsequent period
shall, to the extent less than the maximum amount for such period
permitted by the Maximum Permissible Rate, be increased by the
unpaid amount of such reduction. Any interest actually received
for any period in excess of such maximum permitted amount for
such period shall be deemed to have been paid and applied as a
prepayment of the Loans.
Section 1.05. Repayment. Each amount advanced as a Loan shall
mature and become due and payable, and shall be repaid by the
Borrower, in full, not later than the earlier of (a) the
Termination Date and (b) the date that is 364 days after the date
such Loan is made.
Section 1.06. Prepayments. (a) The Borrower may at any time and
from time to time prepay Pro Rata Loans in whole or in part,
without premium or penalty (except as provided in Section 7.04),
except that any prepayment pursuant to this paragraph (a) shall
be in an aggregate principal amount of at least $1,000,000.
Amounts to be prepaid pursuant to this paragraph (a) shall
irrevocably be due and payable on the date specified in the
applicable notice of prepayment.
(b) Upon any reduction in the Commitments, the Borrower shall, if
the aggregate unpaid principal amount of all Loans exceeds the
aggregate amount of the Commitments as so reduced, prepay an
amount of the Pro Rata Loans (to the extent that there are Pro
Rata Loans outstanding) equal to the amount of such excess. Such
<PAGE>
amounts shall be prepaid at the time or times that the
Commitments are so reduced.
(c) The Borrower shall give the Agent notice of each prepayment
at least, in the case of a prepayment of Base Rate Loans, one
Business Day, and, in the case of a prepayment of LIBOR Loans,
three LIBOR Business Days, before the date of such prepayment,
specifying (i) the date such prepayment is to be made, (ii) the
paragraph pursuant to which such prepayment is to be made and
(iii) the amount and type and, in the case of LIBOR Loans, the
last day of the applicable Interest Period of each Loan to be
prepaid. Upon receipt of any such notice, the Agent shall
promptly notify each Bank of the contents thereof and the amount
and type, and in case of a LIBOR Loan, the last day of the
applicable Interest Period of each Loan of such Bank to be
prepaid.
(d) Any prepayment of a LIBOR Loan shall be made only on the last
day of an applicable Interest Period; provided, however, that,
notwithstanding the foregoing provisions of this clause (d), the
Borrower may prepay any Pro Rata Loan on any Business Day,
whether or not the last day of an Interest Period, if, in the
case of a LIBOR Loan, the Borrower pays each Bank compensation as
provided in Section 7.04.
(e) Amounts of Loans prepaid may be reborrowed, subject to the
terms and conditions hereof.
Section 1.07. Minimum Amount of Loans. Notwithstanding anything
to the contrary contained in this Agreement, the Borrower shall
borrow, prepay, convert and continue Loans in a manner such that
there will not be outstanding at any time Loans of the same type
and, in the case of LIBOR and Bid Loans, having the same Interest
Period with an aggregate principal amount of less than
$1,000,000.
Section 1.08. Cancellation or Reduction of Commitments. The
Borrower may at any time, upon not less than ten Business Days'
prior notice to the Agent (which notice shall be irrevocable),
cancel or reduce the Commitments, without penalty; provided that
any reduction shall be in an aggregate amount that is a multiple
of $5,000,000.
Section 1.09. Facility Fee. The Borrower shall pay to the Agent,
for the account of the Banks, a facility fee on the aggregate
Commitments of the Banks for each day from the Effective Date
through the Termination Date at a rate per annum of .12%, payable
on each Fee Payment Date in arrears, on the Termination Date and
on the date of any reduction of the Commitments (to the extent
accrued and unpaid on the amount of the reduction). Fees shall
be computed on the basis of a year of 360 days.
<PAGE>
Section 1.10. Agent's Fees. The Borrower shall pay to the Agent
such fees as are set forth in the Agent's Fee Letter.
Section 1.11. Computation of Interest. Interest on the Loans
shall be computed, if a LIBOR or a Bid Loan, on the basis of a
year of 360 days, and if a Base Rate Loan, on the basis of a year
of 365 days, and paid for the actual number of days elapsed.
Interest for any period shall be calculated from and including
the first day thereof to but excluding the last day thereof.
Section 1.12. Payments by the Borrower. (a) All payments due to
the Agent under this Agreement or any Note shall be made to the
Agent at the Agent's Office or at such other address as the Agent
may designate by notice to the Borrower. All payments due to any
Bank under this Agreement or any Note shall, in the case of
payments on account of principal of the Loans, interest on the
Loans or fees, be made to the Agent at the Agent's Office and, in
the case of all other payments, be made directly to such Bank at
its Domestic Lending Office or at such other address as such Bank
may designate by notice to the Borrower. All payments due to any
Bank on account of LIBOR Loans shall be made to the Agent or
directly to such Bank, as the case may be, for the account of
such Bank's LIBOR Lending Office. A payment shall not be deemed
to have been made on any day unless such payment is in Dollars in
funds immediately available to such Person and at such address as
such payment is to be made in accordance with this paragraph (a),
no later than 3:00 p.m. (New York time) on such day. All unpaid
principal shall become due and payable as provided in Section
1.05.
(b) All payments due the Agent or any Bank under this Agreement
or any Note, and all terms, conditions, covenants and agreements
to be observed or performed by the Borrower thereunder, shall be
made, observed or performed by the Borrower without any reduction
or deduction whatsoever, including, but not limited to, any
deduction for any set-off, recoupment, counterclaim (whether
sounding in tort, contract or otherwise) or Tax. If any Tax is
required to be withheld or deducted from any payment due the
Agent or any Bank under this Agreement or any Note, the Borrower
shall withhold or deduct such amount and shall pay to or for the
account of the Agent or such Bank, as the case may be, such
additional amounts as may be necessary so that every net payment,
after withholding or deduction for any Tax, will not be less than
the amount provided in this Agreement. The Borrower agrees to
furnish promptly to the Agent or such Bank, as the case may be,
official receipts evidencing any withholding or deduction for any
Tax.
(c) Whenever any payment under this Agreement or any Note shall
be due on a day that is not a Business Day, or, in the case of
payments on account of LIBOR Loans, a LIBOR Business Day, the
date of payment therefor shall be extended to the next succeeding
<PAGE>
Business or LIBOR Business Day, as the case may be, unless, in
the case of a payment on account of a LIBOR Loan, such extension
would cause payment to be made in the next succeeding calendar
month, in which case such due date shall be advanced to the next
preceding LIBOR Business Day. If the date for any payment of any
amount under this Agreement or any Note is extended (whether by
operation of this Agreement or any Note, any provision of law or
otherwise), interest shall be payable on such amount for such
extended time on the extended date of payment provided that the
Borrower shall not be obligated to pay interest on such amount
for such extended time in the next succeeding Interest Period.
(d) The Agent shall distribute to each Bank its ratable share of
each payment received by the Agent under this Agreement or any
Note for the account of such Bank, in Dollars in funds
immediately available to such Bank, by credit to an account of
such Bank at the Agent's Office or otherwise in accordance with
the instructions of such Bank. Each such distribution of any
such payment shall be made on (i) the same day as such payment is
received by the Agent, if such payment is received by the Agent
prior to 2:00 p.m. (New York time) on any day and (ii) the first
Business Day after such payment is received by the Agent, if such
payment is received by the Agent after 2:00 p.m. (New York time)
on any day.
(e) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Banks
hereunder that the Borrower will not make such payment in full,
the Agent may assume that the Borrower has made such payment in
full to the Agent on such date and the Agent in its sole
discretion may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date a corresponding amount
with respect to the amount then due such Bank. If and to the
extent the Borrower shall not have so made such payment in full
to the Agent and the Agent shall have so caused to be distributed
to any Bank a corresponding amount with respect to the amount
then due such Bank, such Bank shall repay to the Agent forthwith
on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such
amount to the Agent, at the Federal Funds Rate until (and
including) the third Business Day after such demand is made and
thereafter at the Base Rate.
Section 1.13. Evidence of Indebtedness. Each Bank's Loans, and
the Borrower's obligation to repay such Loans with interest in
accordance with the terms of this Agreement, shall be evidenced
by this Agreement, the records of such Bank and, in the case of
Loans that are Base Rate Loans, a single Base Rate Note payable
to the order of such Bank, in the case of Loans that are LIBOR
Loans, a single LIBOR Note payable to the order of such Bank,
and, in the case of any Loan that is a Bid Loan, a single Bid
<PAGE>
Note payable to the order of such Bank. The records of each Bank
shall be prima facie evidence of the Loans of such Bank and
accrued interest thereon and of all payments made in respect
thereof.
Section 1.14. Pro Rata Treatment. Except to the extent otherwise
provided herein, (a) each Pro Rata Loan (including each Refunding
Loan to the extent that it is a Pro Rata Loan) shall be made from
the Banks pro rata in accordance with their respective
Commitments, (b) each payment and prepayment of principal of Pro
Rata Loans (including Refunding Loans to the extent that they are
Pro Rata Loans) (except prepayments pursuant to Section 7.01)
shall be made pro rata in accordance with the respective amounts
thereof then outstanding, (c) each payment of interest on Pro
Rata Loans and facility fees shall be made for the account of the
Banks pro rata in accordance with their respective amounts
thereof then due and payable, (d) each cancellation or reduction
in the Commitments shall be made pro rata in accordance with the
Banks respective amounts thereof and (e) each conversion of Loans
of a particular type and Interest Period shall be made pro rata
in accordance with the Banks' respective Commitments.
ARTICLE 2
CONDITIONS TO EFFECTIVENESS
Section 2.01. Conditions to Restatement Effective Date. The
amendment and restatement of this Agreement being effected hereby
shall become effective on the date (the "Restatement Effective
Date") on which the Agent has received, with copies for each
Bank, each of the following:
(a) a certificate of the Secretary or an Assistant Secretary of
the Borrower, dated the date of such Loan, substantially in the
form of Schedule 2.01(a), to which shall be attached copies of
the resolutions and by-laws referred to in such certificate;
(b) a copy of the certificate of incorporation of the Borrower,
certified as of a recent date by the Secretary of State or other
appropriate official of the Borrower's jurisdiction of
incorporation;
(c) a good standing certificate with respect to the Borrower,
issued as of a recent date by the Secretary of State or other
appropriate official of the jurisdiction of the Borrower's
incorporation, together with a telegram from such Secretary of
State or other official, updating the information in such
certificate;
(d) an opinion of counsel for the Borrower, dated the date of
such Loan, substantially in the form of Schedule 2.01(d);
(e) a duly executed Base Rate Note and LIBOR Note for each Bank,
<PAGE>
each dated the Restatement Effective Date and in the amount of
each Bank's Commitment, as increased as of the Restatement
Effective Date;
(f) a certificate in the form of Schedule 2.01(f);
(g) a certificate of a corporate officer of the Borrower
certifying that, at and as of the Restatement Effective Date, (i)
all of the Representations and Warranties shall be true and
correct and (ii) no Default shall have occurred and be
continuing;
(h) the Agent shall have received all materials as the Agent or
the Required Banks may have requested pursuant to Section
5.01(c)(ii) that may reasonably be produced prior to the
Restatement Effective Date; and
(i) all legal matters incident to such amendment and restatement
and the other transactions contemplated by this Agreement shall
be satisfactory to Messrs. Winthrop, Stimson, Putnam & Roberts,
counsel for the Agent and the Banks.
Section 2.02. Conditions to Each Loan. The obligation of each
Bank to make each Loan, including its initial Loan, on the
occasion of each Borrowing (but not the obligation to convert or
continue any Loan) is subject to the fulfillment of each of the
following conditions:
(a) the Agent shall have received a notice of borrowing with
respect to such Loan complying with the requirements of Section
1.02;
(b) all of the Representations and Warranties shall be true and
correct at and as of the time of such borrowing, with and without
giving effect to such borrowing and to the application of the
proceeds thereof;
(c) no Default shall have occurred and be continuing at such time
or after giving effect to such borrowing;
(d) the Agent shall have received all materials as the Agent or
the Required Banks may have requested pursuant to Section
5.01(c)(ii) that may reasonably be produced prior to the time of
such borrowing;
(e) such Loan will not contravene any Applicable Law applicable
to such Bank; and
(f) all legal matters incident to such Loan and the other
transactions contemplated by this Agreement shall be satisfactory
to Messrs. Winthrop, Stimson, Putnam & Roberts, counsel for the
Agent and the Banks.
<PAGE>
Each notice of borrowing shall constitute a representation and
warranty by the Borrower made as of the time of the making of the
requested borrowing that the conditions specified in clauses (b)
and (c) have been fulfilled as of such time, unless a notice to
the contrary specifically captioned "Disclosure Statement" is
received by the Agent from the Borrower prior to 5:00 p.m. (New
York time) on the Business Day preceding the date of the
requested Loan.
Section 2.03. Special Additional Conditions to Bid Loans. The
obligation of any Bank to make a Bid Loan is subject to:
(a) the receipt by the Agent of notice from the Borrower of its
intention to borrow such Loan in accordance with the provisions
of Section 1.03(b); and
(b) the receipt by the Agent, prior to or contemporaneously with
the making of such Loan, of a duly executed Bid Note in favor of
such Bank, in the form of Exhibit A-3 attached hereto.
Section 2.04. Special Conditions to Refunding Loans. The
obligation of each Bank to make a Refunding Loan is subject to
each of the following conditions:
(a) either the Borrower (i) shall have given notice of its
intention to borrow such Loan in accordance with the provisions
of Section 1.02 or (ii) shall be deemed to have requested a
Refunding Loan in accordance with the provisions of Section
1.03(i);
(b) all of the Representations and Warranties shall be true and
correct at and as of the time of such borrowing, with and without
giving effect to such borrowing and to the application of the
proceeds thereof; and
(c) no Default shall have occurred and be continuing at such time
or after giving effect to such borrowing;
Such conditions shall be the exclusive conditions to the making
of Refunding Loans.
Section 2.05. Extension of Termination Date. It is understood
that the Borrower may, prior to the date two months prior to the
first anniversary of the Restatement Effective Date and the first
anniversary thereafter, if applicable, deliver a written notice
to each of the Banks requesting that the Termination Date be
extended for one year. Each of the Banks agrees to respond to
any such request within 45 days of its receipt of such notice
from the Borrower provided that the failure to respond shall not
be deemed to be a consent to the requested Extension and shall
not otherwise subject any Bank to any liability. Each of the
Banks may, in accordance with the request of the Borrower but in
<PAGE>
the sole discretion of such Bank, agree to extend the Termination
Date by delivering a written notice to such effect to the Agent
and the Borrower, which notice shall specifically refer to this
Section 2.05. No such extension shall be effective unless
consented to in writing by each of the Banks. Any Bank which
chooses not to extend the Termination Date may, in accordance
with Section 9.07, be replaced.
ARTICLE 3
CERTAIN REPRESENTATIONS AND WARRANTIES OF THE BORROWER
A. In order to induce the Agent and each Bank to enter into this
Agreement and to make each Loan, the Borrower represents and
warrants, as of the Agreement Date, as of the Restatement
Effective Date and as of the time of each Loan, as follows:
Section 3.01. Organization; Power; Qualification. The Borrower
and each of its Subsidiaries are corporations duly organized,
validly existing and in good standing under the laws of their
respective jurisdictions of incorporation, have the corporate
power and authority to own their respective properties and to
carry on their respective businesses as now being and hereafter
proposed to be conducted.
Section 3.02. Authorization; Enforceability; Required Consents;
Absence of Conflicts. The Borrower has the corporate power, and
has taken all necessary corporate action (including, if
necessary, any stockholder action) to authorize it, to execute,
deliver and perform in accordance with their respective terms
this Agreement and the Notes and to borrow hereunder in the
amount of the Commitments. This Agreement has been duly executed
and delivered by the Borrower and is, and each of the Notes when
delivered to the Banks will be, a legal, valid and binding
obligation of the Borrower. The execution, delivery and
performance in accordance with their respective terms by the
Borrower of this Agreement and the Notes, and each borrowing
hereunder, whether or not in the amount of the unused
Commitments, do not and will not (a) require any Governmental
Approval, any consent or approval of the Borrower or any of its
Subsidiaries or any consent or approval of the stockholders of
the Borrower or any of its Subsidiaries other than Governmental
Approvals and other consents and approvals that have been
obtained and, except for Governmental Approvals and consents and
approvals required as a result of a Regulatory Change, (b)
violate or conflict with, result in a breach of, or constitute a
default under (I) any Contract to which the Borrower or any of
its Subsidiaries is a party or by which any of them or any of
their respective properties may be bound or (ii) any Applicable
Law, except for violations, conflicts, breaches or defaults that,
singly and in the aggregate, have not had and are not reasonably
likely to have a Materially Adverse Effect on the Borrower and
its Subsidiaries taken as a whole or on this Agreement or (c)
<PAGE>
result in or require the creation of any Lien upon any assets of
the Borrower or any of its Subsidiaries.
B. In order to induce each Bank to make each Loan, the Borrower
represents and warrants, as of the time of each Loan, as follows:
Section 3.03. Subsidiaries. Schedule 3.03 sets forth, as of the
Agreement Date and the Restatement Effective Date, all of the
Subsidiaries of the Borrower, their jurisdictions of
incorporation and the percentages of the various classes of their
capital securities owned by the Borrower or another of its
Subsidiaries and indicates which Subsidiaries are Consolidated
Subsidiaries.
Section 3.04. Governmental Approvals. The Borrower and each of
its Subsidiaries owns, or is licensed or otherwise has the lawful
right to use, all Governmental Approvals used in or necessary for
the conduct of its business as currently conducted.
Section 3.05. Debt; Liabilities. The Borrower and its
Subsidiaries have no Debt or Liabilities as of the Agreement Date
or the Restatement Effective Date, except (a) as previously
disclosed to the Banks and (b) other Liabilities that, singly and
in the aggregate, have not had and are not reasonably likely to
have a Materially Adverse Effect on the Borrower and its
Subsidiaries taken as a whole.
Section 3.06. Litigation. Except as previously disclosed on the
registration statement filed with the Securities and Exchange
Commission ("SEC") on Form S-1 on April 14, 1989 or on Amendment
No. 1 thereto filed with the SEC on June 6, 1989, there are not,
in any court or before any arbitrator of any kind or before or by
any governmental or non-governmental body, any actions, suits or
proceedings, pending or (to the knowledge of the Borrower)
probable of assertion against or in any other way relating to or
affecting (a) the Borrower or any of its Subsidiaries or the
business or any property of the Borrower or any of its
Subsidiaries, except actions, suits or proceedings that could not
reasonably be expected, singly or in the aggregate, to have a
Materially Adverse Effect on the Borrower and its Subsidiaries
taken as a whole or (b) this Agreement or any Note.
Section 3.07. Environmental Matters. Except as previously
disclosed to the Banks in writing, the Borrower and each of its
Subsidiaries is in compliance with all requirements of
environmental, health and safety Applicable Law except any
noncompliances that, in the aggregate, will not have a Materially
Adverse Effect on the Borrower and its Subsidiaries taken as a
whole.
Section 3.08. ERISA. (a) All of the Plans as of the Agreement
Date and the Restatement Effective Date are set forth in Schedule
<PAGE>
3.08.
(b) Each Plan is in compliance with ERISA in all material
respects. The Borrower and each ERISA Affiliate have complied
with the requirements of ERISA Section 515 with respect to each
Plan that is a Multiemployer Plan. No material liability to the
PBGC has been, or is expected by the Borrower to be, incurred by
the Borrower or any of its ERISA Affiliates.
Section 3.09. Tax Returns and Payments. The Borrower and each of
its Subsidiaries have (a) filed all Tax returns required to be
filed by it under Applicable Law, (b) paid all Taxes that are due
and payable by it except for Taxes the nonpayment of which does
not contravene Section 4.01(e) and (c) to the extent required by
generally accepted accounting principles, reserved against all
Taxes that are not yet due and payable or the non-payment of
which does not contravene Section 4.01(e) and the Borrower knows
of no reason to anticipate any additional assessments in respect
thereof.
Section 3.10. No Material Adverse Change or Event. Since the
Agreement Date, no change in the business, assets, liabilities,
financial condition, results of operations or business prospects
of the Borrower and its Consolidated Subsidiaries, and no event
has occurred or failed to occur, that has had or is reasonably
likely to have, either alone or in conjunction with all other
such changes, events and failures, a Materially Adverse Effect on
(I) the Borrower and its Consolidated Subsidiaries or (ii) on
this Agreement or the Notes.
Section 3.11. Investment Company Act; Public Utility Holding
Company Act. The Borrower (a) is not an investment company
within the meaning of the Investment Company Act of 1940 and (b)
is exempt from registration under the Public Utility Holding
Company Act of 1935 pursuant to Section 3(a)(1) thereof.
ARTICLE 4
COVENANTS
From the Agreement Date and until the Repayment Date,
A. The Borrower shall and shall cause each of its Subsidiaries
to:
Section 4.01. Preservation of Existence and Properties, Scope of
Business, Compliance with Law, Payment of Taxes and Claims. (a)
Preserve and maintain its corporate existence and all of its
other franchises, licenses, rights and privileges, (b) preserve
and maintain in good repair, working order and condition all
other properties, required for the conduct of its business, (c)
engage primarily in the businesses conducted on the Agreement
Date and in businesses related thereto, (d) comply with all
<PAGE>
Applicable Laws and (e) pay or discharge when due all Taxes and
all claims that might become a Lien on any properties of the
Borrower or any of its Subsidiaries, except that this Section
4.01 (other than clauses (a), in so far as it requires the
Borrower to preserve its corporate existence, and (c)) shall not
apply in any circumstance where noncompliance, together with all
other noncompliances, will not have a Materially Adverse Effect
on (x) the Borrower and its Subsidiaries taken as a whole or (y)
this Agreement and the Notes.
Section 4.02. Insurance. Maintain insurance with responsible
insurance companies against such risks and in such amounts as is
customarily maintained by similar businesses, or as may be
required by Applicable Law or reasonably requested by the
Required Banks.
B. The Borrower shall:
Section 4.03. Use of Proceeds. Use the proceeds of the Loans for
general corporate purposes. None of the proceeds of any of the
Loans shall be used to purchase or carry, or to reduce or retire
or refinance any credit incurred to purchase or carry, any Margin
Stock or to extend credit to others for the purpose of purchasing
or carrying any Margin Stock. If requested by any Bank, the
Borrower will furnish to such Bank statements in conformity with
the requirements of Federal Reserve Form U-1 referred to in
Regulation U.
C. The Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly:
Section 4.04. Merger or Consolidation. Merge or consolidate with
any Person, except that, if after giving effect thereto no
Default would exist, this Section 4.04 shall not apply to any
merger or consolidation of the Borrower with any one or more
Persons, provided that the Borrower shall be the continuing
Person.
Section 4.05. Disposition of Assets. Sell, lease, transfer or
otherwise voluntarily dispose of any assets, except that this
Section 4.05 shall not apply to (a) any disposition of assets in
the ordinary course of business, (b) any disposition of any
obsolete or retired property not used or useful in its business,
(c) any disposition of assets to the Borrower and (d) other
dispositions of assets not exceeding $20,000,000 in aggregate
book value in any fiscal year for the Borrower and all of its
Subsidiaries.
Section 4.06. Taxes of Other Persons. (a) File a consolidated tax
return with any other Person other than, in the case of the
Borrower, YES or a Consolidated Subsidiary and, in the case of
any such Subsidiary, YES, the Borrower or a Consolidated
<PAGE>
Subsidiary or (b) except as required by Applicable Law, pay or
enter into any Contract to pay any Taxes owing by any Person
other than the Borrower or a Consolidated Subsidiary.
Section 4.07. Benefit Plans. (a) Amend any Existing Benefit Plan
in any manner that would increase the aggregate Unfunded Benefit
Liabilities under all Existing Benefit Plans to an amount which
would have a Materially Adverse Effect on the Borrower and its
Consolidated Subsidiaries taken as a whole or (b) permit any
Existing Benefit Plan to have a Funded Current Liability
Percentage of less than 60%.
Section 4.08. Transactions with Affiliates. Except to the extent
provided otherwise in the Connecticut Department of Public
Utilities Control Order dated December 21, 1988, effect any
transaction with any Affiliate on a basis less favorable than
would at the time be obtainable for a comparable transaction in
arm's-length dealing with an unrelated third party.
Section 4.09. Liens. Create, assume or incur, or permit or
suffer to exist or to be created, assumed or incurred, any Lien
upon any of its properties or assets of any character, whether
now owned or hereafter acquired, or upon any income or profits
therefrom, except that this Section 4.09 shall not apply to
Permitted Liens, provided, however, that if, notwithstanding this
Section 4.09, any Lien to which this Section is applicable shall
be created or arise, the obligations and liabilities of the
Borrower under this Agreement and the Notes shall automatically
be secured by such Lien equally and ratably with the other
obligations and liabilities secured thereby, and the holder of
such other obligations and liabilities, by accepting such Lien,
shall be deemed to have agreed thereto and to share with the
Banks, on that basis, the proceeds of such Lien, whether or not
the Banks' security interest shall be perfected, provided
further, however, that notwithstanding such equal and ratable
securing and sharing, the existence of such Lien shall constitute
a default by the Borrower in the performance or observance of
this Section 4.09.
D. The Borrower shall not:
Section 4.10. Equity Ratio. At any time permit the ratio of
Common Equity to Consolidated Capitalization to decline below 37-
1/2%.
Section 4.11. Consolidated Stockholders' Equitv. At any time
permit Consolidated Stockholders Equity to be less than
$90,000,000.
Section 4.12. Consolidated Cash Coverage Ratio. With respect to
any twelve month period ending on the last day of each fiscal
quarter, permit the Cash Coverage Ratio to be less than 2 to 1.
<PAGE>
ARTICLE 5
FINANCIAL STATEMENTS AND INFORMATION
Section 5.01. Financial Statements and Information to Be
Furnished. From the Agreement Date and until the Repayment Date,
the Borrower shall furnish to each Bank:
(a) Quarterly Financial Statements; Officer's Certificate. As
soon as available and in any event within 50 days after the close
of each of the first three quarterly accounting periods in each
fiscal year of the Borrower:
(I) consolidated and consolidating balance sheets of the Borrower
and its Consolidated Subsidiaries as at the end of such quarterly
period and the related consolidated and consolidating statements
of income, retained earnings and cash flows of the Borrower and
its Consolidated Subsidiaries for such quarterly period and for
the elapsed portion of the fiscal year ended with the last day of
such quarterly period, setting forth in each case in comparative
form the figures for the corresponding periods of the previous
fiscal year; and
(ii) a certificate with respect thereto of the president or chief
financial officer of the Borrower in the form of Schedule
5.01(a).
(b) Year-End Financial Statements; Accountants' and Officer's
Certificates. As soon as available and in any event within 105
days after the end of each fiscal year of the Borrower:
(i) consolidated and consolidating balance sheets of the Borrower
and its Consolidated Subsidiaries as at the end of such fiscal
year and the related consolidated and consolidating statements of
income, retained earnings and cash flows of the Borrower and its
Consolidated Subsidiaries for such fiscal year, setting forth in
comparative form the figures as at the end of and for the
previous fiscal year;
(ii) a report of independent certified public accountants of
recognized standing satisfactory to the Required Banks, on such
of the financial statements referred to in clause (i) as are
consolidated financial statements, which report shall be either
(A) prepared in accordance with Generally Accepted Accounting
Principles, not limited in scope and without qualification or
exceptions or (B) in scope and substance satisfactory to the
Required Banks; and
(iii) a certificate of the president or chief financial officer
of the Borrower in the form of Schedule 5.01(b).
(c) Additional Materials.
<PAGE>
(I) Reports and Filings. As soon as practicable, copies of all
such financial statements and reports as YES, the Borrower or any
of the Borrower's Subsidiaries shall send to its stockholders and
of all registration statements and all regular or periodic
reports that the Borrower or any of its Subsidiaries shall file,
or may be required to file, with the Securities and Exchange
Commission or any successor commission.
(ii) Requested Materials. From time to time and promptly upon
request of the Agent or the Required Banks, such data,
certificates, reports, statements, opinions of counsel, documents
and further information regarding any Loan, this Agreement or any
Note or the business, assets, liabilities, financial condition,
results of operations or business prospects of the Borrower and
its Subsidiaries as the Agent or the Required Banks may
reasonably request, in each case in form and substance and
certified in a manner satisfactory to the Agent or the Required
Banks.
(d) Notice of Defaults, Litigation and Other Matters. Promptly
after becoming aware thereof, notice of (i) any Default; (ii) any
change or event referred to in Section 3.10; (iii) any event or
condition referred to in clauses (i) through (vi) of Section
6.01(g), whether or not such event or condition shall constitute
an Event of Default; (iv) the commencement of any actions, suits
or proceedings or investigations in any court or before any
arbitrator of any kind or by or before any governmental or non-
governmental body against or in any other way relating to or
affecting (A) the Borrower or any of its Subsidiaries or any of
their respective businesses or properties or (B) this Agreement
or the Notes, that, if adversely determined, might singly or in
the aggregate, have a Materially Adverse Effect on (x) the
Borrower and its Subsidiaries taken as a whole or (y) this
Agreement and the Notes; and (v) any amendment of the certificate
of incorporation or by-laws of the Borrower.
Section 5.02. Accuracy of Financial Statements and Information.
(a) Historical Financial Statements. The Borrower hereby
represents and warrants that (i) the financial statements
submitted by the Borrower to the Banks, prior to the Restatement
Effective Date and in connection with the Original Agreement, are
complete and correct and present fairly, in accordance with
Generally Accepted Accounting Principles, the consolidated and
consolidating financial position of the Borrower and the
Consolidated Subsidiaries, as at their respective dates and the
consolidated and consolidating results of operations, retained
earnings and, as applicable, changes in financial position or
cash flows of the Borrower and such Subsidiaries, for the
respective periods to which such statements relate, and (ii)
except as disclosed or reflected in such financial statements, as
at September 30, 1994, neither the Borrower nor any Subsidiary
<PAGE>
had any Liability, contingent or otherwise, or any unrealized or
anticipated loss, that, singly or in the aggregate, has had or
might have a Materially Adverse Effect on the Borrower and the
Consolidated Subsidiaries taken as a whole, and the furnishing of
the same to the Agent constitutes a representation and warranty
to that effect.
(b) Future Financial Statements. The financial statements
delivered pursuant to Section 5.01(a) or (b) shall be complete
and correct and present fairly, in accordance with Generally
Accepted Accounting Principles (except for changes therein or
departures therefrom that are described in the certificate or
report accompanying such statement and that have been approved in
writing by the Borrower's then current independent certified
public accountants), the consolidated and consolidating financial
position of the Borrower and the Consolidated Subsidiaries as at
their respective dates and the consolidated and consolidating
results of operations, retained earnings and cash flows of the
Borrower and such Subsidiaries for the respective periods to
which such statements relate, and the furnishing of the same to
the Banks shall constitute a representation and warranty by the
Borrower made on the date the same are furnished to the Banks to
that effect and to the further effect that, except as disclosed
or reflected in such financial statements, as at the respective
dates thereof, neither the Borrower nor any Subsidiary had any
Liability, contingent or otherwise, or any unrealized or
anticipated loss, that, singly or in the aggregate, has had or
might have a Materially Adverse Effect on the Borrower and the
Consolidated Subsidiaries taken as a whole.
(d) Historical Information. The Borrower hereby represents and
warrants to the Agent and the Banks that (i) all Information
furnished to the Agent or the Banks by or on behalf of the
Borrower or any of its Subsidiaries prior to the Agreement Date
in connection with or pursuant to this Agreement and the Notes or
the relationship established under this Agreement and the Notes,
and (ii) all Information provided in the registration statement
filed with the Securities Exchange Commission on Form S-1 on
April 14, 1989 with respect to YES, at the time all such
Information was so furnished, but in the case of Information
dated as of a prior date, as of such prior date, (A) in the case
of any such Information prepared in the ordinary course of
business, was complete and correct in all material respects in
the light of the purpose prepared, and, in the case of any such
Information the preparation of which was requested by the Agent
or any Bank, was complete and correct to the extent necessary to
give the Agent or such Bank true and accurate knowledge of the
subject matter thereof in all material respects, (B) did not
contain any untrue statement of a material fact and (C) did not
omit to state a fact necessary in order to make the statements
contained therein not materially misleading in the light of the
circumstances under which they were made.
<PAGE>
(e) Future Information. All Information furnished to the Agent or
any Bank by or on behalf of the Borrower or any of its
Subsidiaries on and after the Agreement Date in connection with
or pursuant to this Agreement and the Notes or in connection with
or pursuant to any amendment or modification of, or waiver under,
this Agreement or any Note, shall, at the time the same is so
furnished, but in the case of Information dated as of a prior
date, as of such prior date, (A) in the case of any such
Information prepared in the ordinary course of business, be
complete and correct in all material respects in the light of the
purpose prepared, and, in the case of any such Information
required by the terms of this Agreement or any Note or the
preparation of which was requested by the Agent or any Bank, be
complete and correct to the extent necessary to give the Agent or
such Bank true and accurate knowledge of the subject matter
thereof in all material respects, (B) not contain any untrue
statement of a material fact and (C) not omit to state a fact
necessary in order to make the statements contained therein not
materially misleading in the light of the circumstances under
which they were made, and the furnishing of the same to the Agent
or any Bank shall constitute a representation and warranty by the
Borrower made on the date the same are so furnished to the effect
specified in clauses (A), (B) and (C).
Section 5.03. Additional Covenants Relating to Disclosure. From
the Agreement Date and until the Repayment Date, the Borrower
shall and shall cause each of its Subsidiaries to:
(a) Accounting Methods and Financial Records. Maintain a system
of accounting, and keep such books, records and accounts
(which shall be true and complete), as may be required or
necessary to permit (i) the preparation of financial statements
required to be delivered pursuant to Section 5.01(a) and (b) and
(ii) the determination of the Borrower's compliance with the
terms of this Agreement.
(b) Visits and Inspections. Permit representatives (whether or
not officers or employees) of the Agent or any Bank, from time to
time, as often as may be reasonably requested, but only during
normal business hours, upon two Business Days' notice, to (i)
visit and inspect any properties of the Borrower and each of its
Subsidiaries, (ii) inspect and make extracts from their books and
records, including but not limited to management letters prepared
by the Borrower's independent accountants and (iii) discuss with
their principal officers, and their independent accountants,
their respective businesses, assets, liabilities, financial
conditions, results of operations and business prospects. Any of
the Borrower's proprietary Information obtained by
representatives of the Agent or any Bank shall be kept
confidential except to the extent necessary to effect an
assignment pursuant to Section 9.07 hereof or to grant a
participation pursuant to Section 9.08 hereof or except as
<PAGE>
otherwise required by law, regulation or judicial process.
ARTICLE 6
DEFAULT
Section 6.01. Events of Default. Each of the following shall
constitute an Event of Default, whatever the reason for such
event and whether it shall be voluntary or involuntary, or within
or without the control of the Borrower or its Subsidiaries, or be
effected by operation of law or pursuant to any judgment or order
of any court or any order, rule or regulation of any governmental
or nongovernmental body:
(a) The payment of principal of or interest on any of the Loans
or the Notes or of any fees shall not be made when and as due
(whether at maturity, by reason of notice of prepayment or
acceleration or otherwise) and in accordance with the terms of
this Agreement and the Notes and, in the case of interest and
fees, such default shall continue unremedied for three Business
Days;
(b) Any Representation or Warranty shall at any time prove to
have been incorrect or misleading in any material respect when
made;
(c) The Borrower shall default in the performance or observance
of:
(i) any term, covenant, condition or agreement contained in
Section 4.01(a) (insofar as such Section requires the
preservation of the corporate existence of the Borrower),
Sections 4.04 through 4.12, Section 5.01(d) or Section 5.03 (b);
or
(ii)any term, covenant, condition or agreement contained in this
Agreement (other than a term, covenant, condition or agreement a
default in the performance or observance of which is elsewhere in
this Section specifically dealt with) and, if such default is
capable of being remedied, such default shall continue unremedied
for a period of 30 days.
(d) The Borrower or any of its Subsidiaries shall fail to pay, in
accordance with its terms and when due and payable, any principal
of or interest on any Debt having an aggregate outstanding
principal amount in excess of $1,000,000 (other than (i) the
Loans and (ii) amounts which the Borrower or such Subsidiary
disputes in good faith), or the maturity of any such Debt shall,
in whole or in part, have been accelerated, or any such Debt
shall, in whole or in part, have been required to be prepaid
prior to the stated maturity thereof, in accordance with the
provisions of any Contract evidencing, providing for the creation
of or concerning such Debt or any event shall have occurred and
<PAGE>
be continuing that permits any holder or holders of such Debt,
any trustee or agent acting on behalf of such holder or holders
or any other Person so to accelerate such maturity or require any
such prepayment;
(e) (i) The Borrower or any of its Subsidiaries shall
(A)commence a voluntary case under the Federal bankruptcy laws
(as now or hereafter in effect), (B) file a petition seeking to
take advantage of any other laws, domestic or foreign, relating
to bankruptcy, insolvency, reorganization, winding up or
composition or adjustment of debts, (C) consent to or fail to
contest in a timely and appropriate manner any petition filed
against it in an involuntary case under such bankruptcy laws or
other laws, (D) apply for, or consent to, or fail to contest in a
timely and appropriate manner, the appointment of, or the taking
of possession by, a receiver, custodian, trustee, liquidator or
the like of itself or of a substantial part of its assets,
domestic or foreign, (E) admit in writing its inability to pay,
or generally not be paying, its debts (other than those that are
the subject of bona fide disputes) as they become due, (F) make a
general assignment for the benefit of creditors or (G) take any
corporate action for the purpose of effecting any of the
foregoing; or
(ii) (A) A case or other proceeding shall be commenced against
the Borrower or any of its Subsidiaries in any court of competent
jurisdiction seeking (1) relief under the Federal bankruptcy laws
(as now or hereafter in effect) or under any other laws, domestic
or foreign, relating to bankruptcy, insolvency, reorganization,
winding up or composition or adjustment of debts or (2) the
appointment of a trustee, receiver, custodian, liquidator or the
like of the Borrower or such Subsidiary, or of all or any
substantial part of the assets, domestic or foreign, of the
Borrower or such Subsidiary, and such case or proceeding shall
continue undismissed or unstayed for a period of 30 days, or (B)
an order granting the relief requested in such case or proceeding
against the Borrower or such Subsidiary (including, but not
limited to, an order for relief under such Federal bankruptcy
laws) shall be entered;
(f) A judgment or order for the payment of money shall be entered
against the Borrower or any of its Subsidiaries by any court, and
either (i) such judgment or order shall continue undischarged and
unstayed for a period of 30 days in which the aggregate amount of
all such judgments and orders exceeds $1,000,000 or (ii)
enforcement proceedings shall have been commenced upon such
judgment or order; or
(g) (i) Any Termination Event shall occur, (ii) any Accumulated
Funding Deficiency, whether or not waived, shall exist with
respect to any Plan, (iii) any Person shall engage in any
Prohibited Transaction involving any Plan, (iv) the Borrower or
<PAGE>
any ERISA Affiliate shall be in "default" (as defined in ERISA
Section 4219(c)(5)) with respect to payments owing to a
Multiemployer Plan as a result of the Borrower's or any ERISA
Affiliate's complete or partial withdrawal (as described in ERISA
Section 4203 or 4205) from such Multiemployer Plan, (v) the
Borrower or any ERISA Affiliate shall fail to pay when due an
amount that is payable by it to the PBGC or to a Plan under Title
IV of ERISA, (vi) a proceeding shall be instituted by a fiduciary
of any Plan against the Borrower or any ERISA Affiliate to
enforce ERISA Section 515 and such proceeding shall not have been
dismissed within 30 days thereafter or (vii) any other event or
condition (other than an ordinary event or condition relating to
the regular and ongoing operation and administration of a Plan or
a related funding vehicle) shall occur or exist with respect to a
Plan, except that no event or condition referred to in clauses
(i) through (vii) shall constitute an Event of Default if it,
together with all other such events or conditions at the time
existing, has not subjected, and in the reasonable determination
of the Required Banks is not reasonably likely to subject, the
Borrower or any of its Subsidiaries to any Debt or Liability
(other than a Liability constituting the obligation to make
future contributions) that, alone or in the aggregate, exceeds
$1,000,000.
Section 6.02. Remedies upon Event of Default. Upon the
occurrence and during the continuance of any Event of Default and
in every such event, the Agent, upon notice to the Borrower, may
do any or all of the following: (a) declare the principal of and
interest on the Loans and the Notes and all other amounts owing
by the Borrower under this Agreement to be, and the Loans and the
Notes and all such other amounts shall thereupon become,
immediately due and payable, (b) terminate the Commitments and
(c)exercise or cause to be exercised any other rights that may be
available to the Agent and the Banks under Applicable Law. Upon
the occurrence of an Event of Default specified in Section
6.01(e), automatically and without any notice to the Borrower (a)
the principal of and interest on the Loans and the Notes and all
other amounts owing by the Borrower under this Agreement shall
become immediately due and payable and (b) the Commitments shall
terminate. Presentment, demand, protest or notice of any kind
(other than the notice provided for in the first sentence of this
Section 6.02) are hereby expressly waived.
ARTICLE 7
LIBOR AND BASE RATE LOAN PROVISIONS
Section 7.01. Mandatory Suspension and Conversion of LIBOR Loans.
A Bank's obligations to make, maintain or convert into LIBOR
Loans of any type shall be suspended, all such Bank's outstanding
Loans of that type shall be converted on the last day of their
applicable Interest Periods (or, if earlier, in the case of
clause (c) below, on the last day such Bank may lawfully continue
<PAGE>
to maintain Loans of that type or, in the case of clause (d)
below, on the day determined by such Bank to be the last Business
Day or LIBOR Business Day, as the case may be, before the
effective date of the applicable restriction) into, and all
pending requests for the making of or conversion into Loans of
such type by such Bank shall be deemed requests for, Base Rate
Loans, if and so long as:
(a) on or prior to the determination of an interest rate for a
LIBOR Loan other than a Bid Loan of that type for any Interest
Period, the Agent determines that for any reason appropriate
information is not available to it for purposes of determining
LIBOR for such Interest Period;
(b) on or prior to the first day of any Interest Period for a
LIBOR Loan, the Required Banks determine that LIBOR, as
determined by the Agent for such Interest Period, would not
accurately reflect the cost to such Banks of making, maintaining
or converting into a Loan of such type for such Interest Period;
(c) at any time such Bank determines that any Regulatory Change
makes it unlawful or impracticable for such Bank to make or
maintain any LIBOR Loan, or to comply with its obligations
hereunder in respect thereof; or
(d) such Bank determines that by reason of any Regulatory Change
it is restricted, directly or indirectly, in the amount that it
may hold of (i) a category of liabilities that includes deposits
by reference to which, or on the basis of which, the interest
rate applicable to LIBOR Loans is directly or indirectly
determined, or (ii) the category of assets that includes LIBOR
Loans.
The Agent shall promptly notify the Borrower and each Bank of the
existence or occurrence of any condition or circumstance
specified in clause (a) above, and each Bank shall promptly
notify the Borrower and the Agent of the existence or occurrence
of any condition or circumstance specified in clause (b), (c) or
(d) above applicable to such Bank's Loans, but the failure by the
Agent or such Bank to give any such notice shall not affect such
Bank's rights hereunder.
Section 7.02. Regulatory Changes. If in the determination of any
Bank (a) any Regulatory Change shall (i) reduce the amount of any
sum received or receivable by such Bank with respect to any Loan
or the return to be earned by such Bank on any Loan, (ii) impose
a cost on such Bank or any Affiliate of such Bank that is
attributable to the making or maintaining of, or such Bank's
commitment to make, any Loan, (iii) require such Bank or any
Affiliate of such Bank to make any payment on or calculated by
reference to the gross amount of any amount received by such Bank
hereunder or under any Note or (iv) reduce the rate of return on
<PAGE>
the capital of such Bank or any Affiliate of such Bank allocable
to any Loan or such Bank's commitment to make any Loan and (b)
such reduction, increased cost or payment shall not be fully
compensated for by an adjustment in the applicable rates of
interest payable hereunder, then, within 15 days after request by
such Bank, the Borrower shall pay to such Bank such additional
amount or amounts as such Bank determines will, together with any
adjustment in the applicable rates of interest payable hereunder,
fully compensate for such reduction, increased cost or payment.
Such Bank will promptly notify the Borrower of any Regulatory
Change of which it has knowledge that will entitle such Bank to
compensation pursuant to this Section 7.02, but the failure to
give such notice shall not affect such Bank's right to such
compensation.
Section 7.03. Change of Lending Office. If an event occurs with
respect to a Lending Office that makes operable the provisions of
clause (b), (c) or (d) of Section 7.01 with respect to any Bank
or entitles any Bank to make a claim under Section 7.02, such
Bank shall, upon the request of the Borrower, use reasonable
efforts to designate another Lending Office or Offices the
designation of which will eliminate such operability or reduce
the amount such Bank is so entitled to claim, provided that such
designation would not, in the sole and absolute discretion of
such Bank, be disadvantageous to such Bank in any manner or
contrary to such Bank's policies. Each Bank may at any time and
from time to time change any Lending Office and shall give prompt
notice of any such change to the Agent and the Borrower. Except
in the case of a change in Lending Offices made at the request of
the Borrower, the designation of a new Lending Office by any Bank
shall not make operable the provisions of clause (b), (c) or (d)
of Section 7.01 or increase the amount such Bank is entitled to
claim under Section 7.02 if the operability of such clause or the
increase in the amount such Bank is so entitled to claim results
solely from such designation and does not result from a
subsequent Regulatory Change.
Section 7.04. Funding Losses. The Borrower shall pay to each
Bank, upon request, such amount or amounts as such Bank
determines are necessary to compensate it for any loss, cost or
expense incurred by it as a result of (a) any payment, prepayment
or conversion of a LIBOR Loan or a Bid Loan (including, without
limitation, any such payment, prepayment or conversion that is
mandatory or automatic, other than a payment or prepayment
required pursuant to Section 1.02(d) or 1.04(d)) on a date other
than the last day of an Interest Period for such Loan or (b) a
LIBOR Loan or a Bid Loan for any reason not being made or
converted, or any payment of principal thereof or interest
thereon not being made, on the date therefor determined in
accordance with the applicable provisions of this Agreement. At
the election of such Bank, and without limiting the generality of
the foregoing, but without duplication, such compensation on
<PAGE>
account of losses may include an amount equal to the excess of
(i) the interest that would have been received from the Borrower
under this Agreement on any amounts to be reemployed during an
Interest Period or its remaining portion over (ii) the interest
component of the return that such Bank determines it could have
obtained had it placed such amount on deposit in the interbank
Dollar market selected by it for a period equal to such Interest
Period or its remaining portion.
Section 7.05. Determinations. (a) All determinations by a Bank
contemplated by Sections 7.01, 7.02 and 7.04 shall be made by
such Bank in good faith. In making such determinations, each Bank
may make such estimates, assumptions, allocations and the like
that such Bank in good faith determines to be appropriate, but
such Bank's selection thereof in accordance with this Section
7.05, and the determinations made by such Bank on the basis
thereof, shall be final, binding and conclusive upon the
Borrower, except, in the case of such determinations, for
manifest errors in computation or transmission. Each Bank
requesting payment under this Article 7 shall furnish to the
Borrower upon request a certificate describing the assumptions
underlying the computation of the amounts claimed by it. The
Bank submitting such certificate shall indicate the extent to
which the amount requested reflects an increased cost to a bank
or other institution to which it sold a participation in
accordance with Section 9.08.
(b) Each Bank agrees to attempt to avoid or minimize increased
costs under Sections 7.01, 7.02 and 7.04 unless in the sole
opinion of such Bank such action would adversely affect it.
ARTICLE 8
THE AGENT
Section 8.01. Appointment and Powers. Each Bank hereby
irrevocably appoints and authorizes The Bank of New York, and The
Bank of New York hereby agrees, to act as the agent and
representative of such Bank under this Agreement with such powers
as are delegated to the Agent by the terms hereof, together with
such other powers as are reasonably incidental thereto. The
Agent shall have no duties or responsibilities except those
expressly set forth herein and shall not be required under any
circumstances to take any action that, in its judgment, is
contrary to this Agreement or Applicable Law or would expose it
to personal liability. The Agent shall not, by reason of its
serving as the Agent, be a trustee or other fiduciary for any
Bank.
Section 8.02. Limitation on Agent's Liability. Neither the Agent
nor any of its directors, officers, employees or agents shall be
liable or responsible for any action taken or omitted to be taken
by it or them under this Agreement or any Note, except for its or
<PAGE>
their own gross negligence, willful misconduct or knowing
violations of law. The Agent shall not be responsible to any of
the Banks for (a) any recitals, statements, representations or
warranties contained in this Agreement or any Note or in any
certificate or other document referred to or provided for in, or
received by any of the Banks under, this Agreement, (b) the
validity, effectiveness or enforceability of any certificate or
other document or (c) any failure by the Borrower to perform any
of its obligations under this Agreement or any Note. The Agent
may employ agents and attorneys-in-fact and shall not be
responsible for the negligence or misconduct of any such agents
or attorneys-in-fact so long as the Agent was not grossly
negligent in selecting or directing such agents or attorneys-in-
fact. The Agent shall be entitled to rely upon any
certification, notice or other communication (including any
thereof by telephone, telex, telecopier, telegram or cable)
believed by it to be genuine and correct and to have been signed
or sent by or on behalf of the proper Person or Persons, and upon
advice and statements of legal counsel, independent accountants
and other experts selected by the Agent. As to any matters not
expressly provided for by this Agreement, the Agent shall in all
cases be fully protected in acting, or in refraining from acting,
under this Agreement in accordance with instructions signed by
the Required Banks, and such instructions of the Required Banks
and any action taken or failure to act pursuant thereto shall be
binding on all of the Banks.
Section 8.03. Defaults. The Agent shall not be deemed to have
knowledge of the occurrence of a Default (other than the non-
payment to it of fees or principal of or interest on Loans)
unless the Agent has received notice from a Bank or the Borrower
specifying such Default and stating that such notice is a "Notice
of Default". In the event that the Agent receives such a notice
of the occurrence of a Default, the Agent shall give prompt
notice thereof to the Banks. In the event of any Default, the
Agent shall (subject to Section 8.05(b)) (a) in the case of a
Default that constitutes an Event of Default, take either or both
of the actions referred to in clauses (a) and (b) of the first
sentence of Section 6.02, if so directed by the Required Banks,
and (b) in the case of any Default, take such other action with
respect to such Default as shall be reasonably directed by the
Required Banks (such action to be conclusively deemed reasonable
if taken by the Agent); provided that, unless and until the Agent
shall have received such directions, the Agent may take such
action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interest of the
Banks.
Section 8.04. Rights as a Bank. Each Person acting as the Agent
that is also a Bank shall, in its capacity as a Bank, have the
same rights and powers under this Agreement as any other Bank and
may exercise the same as though it were not acting as the Agent,
<PAGE>
and the term "Bank" or "Banks" shall, unless the context
otherwise indicates, include such Person in its individual
capacity. Each Person acting as the Agent and its Affiliates may
(without having to account therefor to any Bank) accept deposits
from, lend money to and generally engage in any kind of banking,
trust or other business with the Borrower and its Affiliates as
if it were not acting as the Agent, and such Person and its
Affiliates may accept fees and other consideration from the
Borrower and its Affiliates for services in connection with this
Agreement or otherwise without having to account for the same to
the Banks.
Section 8.05. Indemnification. (a) The Banks agree to indemnify
the Agent (to the extent not reimbursed under Section 9.02),
ratably on the basis of the respective principal amounts of the
Loans outstanding made by the Banks (or, if no Loans are at the
time outstanding, ratably on the basis of their respective
Commitments), for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever that may be
imposed on, incurred by or asserted against the Agent (including
the costs and expenses that the Borrower is obligated to pay
under Section 9.02) in any way relating to or arising out of this
Agreement or any Note or any other documents contemplated thereby
or referred to therein or the transactions contemplated thereby
or the enforcement of any of the terms thereof or of any such
other documents, provided that no Bank shall be liable for any of
the foregoing to the extent they arise from gross negligence,
willful misconduct or knowing violations of law by the Agent.
(b) Notwithstanding any other provision of this Agreement or any
Note, the Agent shall in all cases be fully justified in failing
or refusing to act hereunder unless it shall be indemnified to
its satisfaction by the Banks against any and all liability and
expense that may be incurred by it by reason of taking or
continuing to take any such action.
Section 8.06. Non-Reliance on Agent and Other Banks. Each Bank
agrees that it has, independently and without reliance on the
Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit
analysis of the Borrower and the decision to enter into this
Agreement, and that it will, independently and without reliance
upon the Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking
action under this Agreement. The Agent shall not be required to
keep itself informed as to the performance or observance by the
Borrower of this Agreement or any other document referred to or
provided for herein or to inspect the properties or books of the
Borrower or any Subsidiary thereof. Except for notices, reports
and other documents and information expressly required to be
<PAGE>
furnished to the Banks by the Agent under this Agreement, the
Agent shall not have any duty or responsibility to provide any
Bank with any credit or other information concerning the affairs,
financial condition or business of the Borrower or any Affiliate
thereof that may come into the possession of the Agent or any of
its Affiliates.
Section 8.07. Resignation of the Agent. Subject to the
appointment and acceptance of a successor Agent as provided
below, the Agent may resign at any time by giving notice thereof
to the Banks and the Borrower. Upon receipt of any such notice
of resignation, the Required Banks may, after consultation with
the Borrower, appoint a successor Agent. If no successor Agent
shall have been so appointed by the Required Banks and shall have
accepted such appointment within 30 days after the retiring
Agent's giving of notice of resignation, then the retiring Agent
may, on behalf of the Banks and after consultation with the
Borrower, appoint a successor Agent. Upon the acceptance of any
appointment as Agent by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights,
powers, privileges, duties and obligations of the retiring Agent,
and the retiring Agent shall be discharged from its duties and
obligations as Agent under this Agreement. After any retiring
Agent's resignation or removal as Agent, the provisions of this
Article 8 shall continue in effect for its benefit in respect of
any actions taken or omitted to be taken by it while it was
acting as the Agent.
ARTICLE 9
MISCELLANEOUS
Section 9.01. Notices. (a) All notices and other communications
under this Agreement, including but not limited to materials
delivered pursuant to Article 5, shall be in writing (which shall
include communications by telex and telecopy), except that
notices under Sections 1.02(a), 1.02(b), 1.02(d), 1.03(b),
1.04(c)(iii), 1.06(c), 1.08, 1.12(e) and 6.02 may be by
telephone, promptly confirmed in writing. In the event of a
discrepancy between telephonic notice to the Agent or any Bank
and the written confirmation thereof, or in the event written
confirmation of such notice is not furnished, the telephonic
notice as understood by the Agent or such Bank will be deemed the
effective notice to the extent that the Agent or such Bank acts
in reliance thereon. All written notices and communications
shall be sent by registered or certified mail, postage prepaid,
return receipt requested, by prepaid telex, by telecopier or by
courier service, or shall be delivered by hand.
(b) All notices and other communications under this Agreement
shall be given at the following respective addresses and telex,
telecopier and telephone numbers and to the attention of the
following Persons:
<PAGE>
(i) if to the Borrower, to it at:
Yankee Gas Services Company
599 Research Parkway
Meriden, CT 06450
Telecopier No.: (203) 639-4011
Telephone No.: (203) 639-4462
Attention: Sarah K. Sanders
(ii) if to the Agent, to it at:
The Bank of New York
One Wall Street
19th Floor
New York, New York 10286
Telex No.: 177612
Attention: John W. Hall, 19th Floor
Telephone No: (212) 635-7581
Telecopier No: (212) 635-7923
Patricia Clancy, 18th Floor
Telephone No: (212) 635-4696
Telecopier No: (212) 635-6365/6367
(iii)if to any Bank, to it at the address or telex, telecopier or
telephone number, and to the attention of the Person, set forth
under such Bank's name on Annex A as the notice address for such
Bank; or at such other address or telex, telecopier or telephone
number or to the attention of such other Person as the party to
which such information pertains may hereafter specify for the
purpose in a notice to the Borrower and the Agent specifically
captioned "Notice of Change of Address".
(c) Each notice and other communication under this Agreement
shall be effective or deemed delivered or furnished (i) if given
by mail, on the third Business Day after such communication is
deposited in the mail, addressed as above provided, (ii) if given
by telex or telecopier, when such communication is transmitted to
the appropriate number determined as provided above in Section
9.01(b) and the appropriate answer-back is received or receipt is
otherwise acknowledged, (iii) if given by courier service or by
hand delivery, when delivered to the addressee as provided above
and (iv) if given by telephone, when communicated to the Person
or to the holder of the office specified as the Person or
officeholder to whose attention communications are to be given,
or, in the case of notice by the Agent to the Borrower under
Section 6.02 given by telephone, if such Person or officeholder
is unavailable at the time, such notice shall be effective when
communicated to any other officer of the Borrower.
Notwithstanding the foregoing, (i) notices of a change of
<PAGE>
address, telex, telecopier or telephone number shall not be
effective until received and (ii) notices to the Agent under
Sections 1.02(a), 1.02(b), 1.02(d), 1.03(b), 1.04(c)(iii),
1.06(c), 1.08 and 1.12(e) shall not be deemed given or furnished
on any day unless physically received, by an officer of the Agent
in its syndications department, not later than 1:00 p.m. (New
York time) on such day.
(d) Any requirement under Applicable Law of reasonable notice by
the Agent or the Banks to the Borrower of any event shall be met
if notice is given in the manner prescribed above at least 10
days before (i) the date of such event or (ii) the date after
which such event will occur.
Section 9.02. Expenses; Indemnification. Whether or not any
Loans are made hereunder, the Borrower shall:
(a) pay or reimburse the Agent and the Banks for all reasonable
transfer, documentary, stamp and similar taxes, and all recording
and filing fees, payable as a result of, in connection with, or
in any way related to the execution, delivery and performance of
this Agreement, the Notes or the making of the Loans;
(b) pay or reimburse the Agent for all of the Agent's reasonable
costs and expenses (including reasonable fees and disbursements
of legal counsel and other experts employed or retained by the
Agent) incurred in connection with (i) the negotiation,
preparation, execution and delivery of (A) this Agreement and the
Notes and (B) whether or not executed, any waiver, amendment or
consent under or to this Agreement and the Notes, (ii) consulting
with respect to any matter in any way arising out of, relating
to, or connected with, this Agreement, including, but not limited
to, the enforcement by the Agent or the Banks of any of their
respective rights or the performance by the Agent or the Banks of
their respective obligations under this Agreement and the Notes
and (iii) protecting, preserving, exercising or enforcing any of
the rights of the Agent or the Banks under this Agreement or the
Notes;
(c) pay or reimburse the Banks for all of their reasonable costs
and expenses (including reasonable fees and disbursements of
legal counsel and other experts employed or retained by any
Bank), incurred during the continuance of or related to a
Default, in connection with (i) the negotiation, preparation,
execution and delivery of any waiver, amendment or consent under
or to this Agreement or any Note, whether or not executed, (ii)
consulting with respect to any matter in any way arising out of,
relating to, or connected with this Agreement, including, but not
limited to, the enforcement by the Banks of their rights or the
performance by the Banks of their respective obligations under
this Agreement or any Note and (iii) protecting, preserving,
exercising or enforcing any of the rights of the Banks under this
Agreement or any Note; and
<PAGE>
(d) indemnify and hold the Agent and the Banks harmless from and
against all losses suffered, and pay or reimburse the Agent and
the Banks for all of its and their reasonable costs and expenses
(including reasonable fees and disbursements of legal counsel and
other experts employed or retained by the Agent or any Bank)
incurred, in connection with (i) any Credit Agreement Related
Claim (whether asserted by any Bank or the Borrower or any other
Person and whether asserted before or after the Repayment Date),
and the prosecution or defense thereof, or (ii) any governmental
investigation (whether by a judicial, executive or legislative
body) in any manner related to or arising out of the Agreement,
the Notes or the transactions contemplated thereby), except that
the foregoing indemnity shall not be applicable to any loss
suffered or any cost or expense incurred by the Agent or any Bank
to the extent such loss, cost or expense is determined by a
judgment of a court referred to in the second to last sentence of
Section 9.10 that is binding on the Agent or such Bank, final and
not subject to review on appeal, to be the direct result of acts
or omissions on the part of the Agent or such Bank, as the case
may be, constituting (A) reckless disregard for the rights of
another Person, (B) willful misconduct, (C) knowing violations of
law or (D)in the case of claims by the Borrower against the Agent
or any Bank, the Agent's or such Bank's failure to observe any
other standard applicable to it under any of the other provisions
of this Agreement or, but only to the extent not waivable
thereunder, Applicable Law. All amounts payable by the Borrower
under this Section 9.02 shall be due upon written demand with an
itemization of costs.
Section 9.03. Rights Cumulative. All of the rights and remedies
of the Agent and the Banks under this Agreement and the Notes
shall be cumulative and not exclusive and shall be in addition to
all other rights and remedies of the Agent and the Banks under
this Agreement, the Notes and Applicable Law, and nothing herein
or therein shall be construed as limiting any such rights or
remedies.
Section 9.04. Waivers; Amendments. (a) Except as provided in
paragraph (b) of this Section, any term, covenant, agreement or
condition of this Agreement or the Notes may be amended or
waived, and any departure therefrom may be consented to, if, but
only if, such amendment, waiver or consent is in writing and is
signed by the Required Banks and, if the rights or duties of the
Agent are affected thereby, by the Agent and, in the case of an
amendment, by the Borrower; provided, however, that no amendment,
waiver or consent shall (i) unless in writing and signed by each
Bank affected thereby, (A) increase the amount of such Bank's
Commitment, (B) reduce the amount of any payment of principal of
or interest on such Bank's Loans or Notes or the fees payable to
such Bank hereunder, or (C) postpone any date fixed for any
payment of principal of or interest on such Bank's Loans or Notes
<PAGE>
or the fees payable to such Bank hereunder, or (ii) unless in
writing and signed by each of the Banks, (A) amend the definition
of "Required Banks" contained in Section 10.01,(B) amend this
Section 9.04 or any provision of this Agreement requiring the
consent or other action of all of the Banks, or (C) increase the
aggregate amount of the Commitments as the same may be reduced
from time to time pursuant to any provision of this Agreement.
Unless otherwise specified in such waiver or consent, a waiver or
consent given hereunder or under the Notes shall be effective
only in the specific instance and for the specific purpose for
which given.
(b) Notwithstanding anything to the contrary contained herein,
this Agreement, including (i) Annex A, may be amended from time
to time for the purpose of effecting an assignment by a Bank in
accordance with Section 9.07(a) by an amendment in writing signed
by the assignor Bank, the assignee Bank, the Agent and, in the
case of an assigment requiring the consent of the Borrower, the
Borrower, and (ii) the timing and administrative procedures set
forth in Section 1.03 may be unilaterally amended by the Agent on
a reasonable basis with prior notice to the Borrower, with
reasonable notice to the Borrower and the Banks.
(c) No course of dealing or performance by the Agent or any Bank,
including any delay or forbearance by it in exercising any right
under this Agreement or any Note, shall operate as a waiver by it
of such right, or the amendment, release or novation of any
provision thereof, nor shall any single or partial exercise of
any right preclude other or further exercises thereof or the
exercise of any other right. In exercising their rights and
remedies, the Agent and the Banks may be selective, and the
exercise by the Agent or any Bank of any right or remedy shall
not be deemed a waiver of its right at any time and from time to
time to exercise any one or more of its other rights and
remedies, nor shall any single or partial exercise of any right
or remedy preclude its other or further exercise at any time and
from time to time.
Section 9.05. Set-Off. Upon the failure of the Borrower to pay
when due any amount payable under this Agreement or any Note or
upon and after the occurrence of any Event of Default, the Agent
and each Bank and each of their respective branches and offices
is hereby authorized by the Borrower, at any time and from time
to time, without notice, (a) to set off against, and to
appropriate and apply to the payment of, the Obligations, any and
all amounts owing by the Agent or such Bank or any such office or
branch to the Borrower (whether payable in Dollars or any other
currency, whether matured or unmatured, and, in the case of
deposits, whether general or special, time or demand and however
evidenced) and (b) pending any such action, to the extent
necessary, to hold such amounts as collateral to secure the
Obligations and to return as unpaid for insufficient funds any
<PAGE>
and all checks and other items drawn against any deposits so held
as the Agent or such Bank in its sole discretion may elect.
Section 9.06. Sharing of Recoveries. Each Bank agrees that, if,
including, but not limited to, as a result of (a) the exercise of
any right of counterclaim, set-off, banker's lien or similar
right, (b) its receipt of a secured claim under any applicable
bankruptcy, insolvency or other similar law, the security for
which is a debt owed by it to the Borrower, including a secured
claim under 11 U.S.C.A. Sec. 506, (c) the allocation of payments by
the Borrower in a manner contrary to the provisions of Section
1.14 or (d) any other reason, such Bank shall receive payment of
a proportion of the aggregate amount due and payable to it
hereunder and under its Notes as principal, interest or fees that
is greater than the proportion received by any other Bank in
respect of the aggregate of such amounts due and payable to such
other Bank hereunder and under its Notes, then the Bank receiving
such proportionately greater payment shall purchase
participations (which it shall be deemed to have done
simultaneously upon the receipt of such payment) in the rights of
the other Banks hereunder and under their Notes so that all such
recoveries with respect to such amounts due and payable hereunder
and under all the Notes held by the Banks shall be pro rata;
provided that if all or part of such proportionately greater
payment received by the purchasing Bank is thereafter recovered
by or on behalf of the Borrower from such Bank, such purchases
shall be rescinded and the purchase prices paid for such
participations shall be returned to such Bank to the extent of
such recovery, but without interest (unless the purchasing Bank
is required to pay interest on the amount recovered to the Person
recovering such amount, in which case the selling Bank shall be
required to pay interest at a like rate), provided further that
nothing in this Section 9.06 shall impair the right of any Bank
to exercise any right of set-off or counterclaim it may have and
to apply the amount subject to such exercise to the payment of
indebtedness of the Borrower and its Subsidiaries other than the
Obligations subject to the sharing provisions of this Section
9.06. The Borrower expressly consents to the foregoing
arrangements and agrees that any holder of a participation in any
rights hereunder or under any such Note so purchased or acquired
pursuant to this Section 9.06 shall, with respect to such
participation, be entitled to all of the rights of a Bank under
Sections 7.02, 7.04, 9.02(d) and 9.05 and may exercise any and
all rights of set-off with respect to such participation as fully
as if the Borrower was directly indebted to the holder of such
participation for Loans in the amount of such participation.
Section 9.07. Assignment. (a) The Borrower may, with the prior
written consent of the Agent (which consent shall not be
unreasonably withheld), replace any of the Banks listed on Annex
A with another bank; provided, (i) that the Bank being replaced
has been paid in full all amounts due it hereunder, (ii) that the
<PAGE>
full amount of the Commitments remains unchanged, (iii) that the
percentage of the total Commitments allocated to the other Banks
listed on Annex A (or any successors thereto) remains unchanged
unless prior written consent from such Banks has been obtained
and (iv) any such replacement bank assumes all the rights and
obligations of its predecessor.
(b) The Bank of New York may, without the consent of the Borrower
or any Bank, assign any or all of its rights and obligations
under this Agreement and any Note to one or more Persons, except
that (i) no such assignment shall be made to a Person that is not
an Eligible Assignee without the written consent of the Borrower
and (ii) no such assignment shall be made without the consent of
the Borrower if, after giving effect thereto, The Bank of New
York's Commitment would be less than $1,000,000. Each Bank other
than The Bank of New York may (i) without the consent of the
Borrower or the Agent, assign all (but not less than all) of its
rights and obligations under this Agreement and the Notes to any
of its Affiliates that is an Eligible Assignee and (ii) with the
prior consent of the Borrower with notice to the Agent (which
consent shall not be unreasonably withheld), assign any or all of
its rights and obligations under this Agreement and the Notes to
one or more Persons. Any assignment or transfer by The Bank of
New York or any other Bank of any of its obligations under this
Agreement or the Notes in accordance with the terms of this
paragraph (a) shall, to the extent of the obligations so assigned
or transferred, release such Bank and constitute a novation. In
connection with each such assignment by The Bank of New York or
any other Bank, (i) the assignor Bank, the assignee Bank, the
Agent and, in the case of an assignment requiring the consent of
the Borrower, the Borrower shall enter into an amendment to Annex
A and (ii) the Borrower shall issue new Notes to the assignee
Bank and, in the case of a partial assignment, to the assignor
Bank against receipt of the existing Notes of the assignor Bank,
such amendment and new Notes to appropriately reflect such
assignment. In the event of any partial assignment by any Bank,
all payments and communications by the Borrower or the Agent to
the assignee Bank may, at the option of the Borrower and the
Agent, respectively, be made to the assignor Bank in the same
manner as if such assignment had not occurred.
(c) The Borrower may not assign or transfer any of its rights or
obligations under this Agreement or any Note without the prior
written consent of each Bank, and no such assignment or transfer
of any such obligation shall relieve the Borrower thereof unless
each Bank shall have consented to such release in a writing
specifically referring to the obligation from which the Borrower
is to be released.
(d) Notwithstanding any other provision of this Section 9.07,
each Bank may at any time, without complying with any
restrictions set forth in this Section 9.07, assign all or any
<PAGE>
portion of its rights under such Bank's Commitment under this
Agreement, its Loans and Notes to any of the twelve Federal
Reserve Banks provided that any such assignment to a Federal
Reserve Bank shall not release the Bank assignor from its
obligations under this Agreement.
Section 9.08. Participations. Each Bank may from time to time
sell or otherwise grant participations in its Loans and Notes to
any Person, and the holder of any such participation (a) shall,
with respect to its participation, be entitled to all of the
rights of a Bank under Sections 7.02, 7.04, 9.02(d) and 9.05 and
(b) may exercise any and all rights of set-off or banker's lien
with respect thereto, in each case as fully as if the Borrower
was directly indebted to the holder of such participation for
Loans in the amount of such participation; provided that (i) all
claims to be made on behalf of any participant under Section
7.02, 7.04 or 9.02(d) shall be made by the Bank that granted such
participation and all payments pursuant to such claims shall be
made by the Borrower to such Bank, (ii) such Bank shall remain
primarily liable to the parties hereto for its obligations
hereunder, and (iii) each participation agreement shall provide
that the participant (A) will comply with the restrictions
contained in the last sentence of Section 5.03(b) to the same
extent as if it were a Bank and (B) will keep all of the
Borrower's proprietary Information confidential. Each Bank
shall, promptly after granting any such participation, notify the
Borrower of the identity of the holder of such participation.
Section 9.09. Governing Law. This Agreement and the Notes,
including matters related to the Maximum Permissible Rate, shall
be construed in accordance with and governed by the law of the
State of New York.
Section 9.10. Judicial Proceedings; Waiver of Jury Trial. Any
judicial proceeding brought against the Borrower with respect to
any Credit Agreement Related Claim may be brought in any court of
competent jurisdiction in the City and State of New York and, by
execution and delivery of this Agreement, the Borrower (a)
accepts, generally and unconditionally, the nonexclusive
jurisdiction of such courts and any related appellate court and
irrevocably agrees to be bound by any judgment rendered thereby
in connection with any Credit Agreement Related Claim and (b)
irrevocably waives any objection it may now or hereafter have as
to the venue of any such suit, action or proceeding brought in
such a court or that such court is an inconvenient forum. The
Borrower hereby waives personal service of process and consents
that service of process upon it may be made by certified or
registered mail, return receipt requested, at its address
specified or determined in accordance with the provisions of
Section 9.01(b), and service so made shall be deemed completed on
the third Business Day after such service is deposited in the
mail. Nothing herein shall affect the right to serve process in
<PAGE>
any other manner permitted by law or shall limit the right of the
Agent or any Bank to bring proceedings against the Borrower in
the courts of any other jurisdiction. Any judicial proceeding by
the Borrower against the Agent or any Bank involving any Credit
Agreement Related Claim shall be brought only in a court in New
York, New York or the city in which the chief executive office of
the Agent or such Bank, as the case may be, is located. THE
BORROWER, THE AGENT AND EACH BANK HEREBY WAIVE TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING ANY CREDIT AGREEMENT RELATED
CLAIM.
Section 9.11. Exemption from Withholding. (a) Each Bank that is
not a United States person (as such term is defined in Section
7701(a)(30) of the Code) shall submit to the Borrower and the
Agent on or before the date the initial Loan is made hereunder
(or, in the case of a Person that became a Bank by assignment,
promptly upon such assignment), duly completed and signed copies
of either (i) Form 1001 of the United States Internal Revenue
Service entitling such Bank to a complete exemption from
withholding on all amounts to be received by such Bank pursuant
to this Agreement and the Loans or (ii) Form 4224 of the United
States Internal Revenue Service relating to all amounts to be
received by such Bank pursuant to this Agreement and the Loans.
Each such Bank shall, from time to time after submitting either
such Form, submit to the Borrower and the Agent such additional
duly completed and signed copies of one or the other of such
Forms (or such successor Forms as shall be adopted from time to
time by the relevant United States taxing authorities) as may be
(i) requested in writing by the Borrower or the Agent and (ii)
appropriate under then current United States law or regulations
to avoid or reduce United States withholding taxes on payments in
respect of all amounts to be received by such Bank pursuant to
this Agreement or the Loans. Upon the request of the Borrower or
the Agent, each Bank that is a United States person (as such term
is defined in Section 7701(a)(30) of the Code) shall submit to
the Borrower and the Agent a certificate to the effect that it is
such a United States person.
(b) If any Bank determines that, as a result of any Regulatory
Change, it is unable to submit to the Borrower or the Agent any
form or certificate that such Bank is obligated to submit
pursuant to the preceding paragraph, or that such Bank is
required to withdraw or cancel any such form or certificate, or
any such form or certificate previously submitted has otherwise
become ineffective or inaccurate, such Bank shall promptly notify
the Borrower and the Agent of such fact.
(c) Notwithstanding anything to the contrary contained herein,
the Borrower shall not be required to pay any additional amount
in respect of United States withholding taxes pursuant to Section
1.12(b) or Section 7.02 to any Bank that (i) is not, on the date
this Agreement executed by such Bank (or, in the case of a Person
<PAGE>
that became a Bank by assignment, on the date of such
assignment), either (x) entitled to submit Form 1001 entitling
such Bank to a complete exemption from withholding on all amounts
to be received by such Bank pursuant to this Agreement and the
Loans or Form 4224 relating to all amounts to be received by such
Bank pursuant to this Agreement and the Loans or (y) a United
States person (as such term is defined in Section 7701(a)(30) of
the Code), or (ii) has failed to submit any form or certificate
that it was required so to do pursuant to this Section 9.11 and
entitled so to do under Applicable Law or (iii) is no longer
entitled to submit Form 1001 or Form 4224 (or any successor Form
as shall be adopted from time to time by the relevant United
States taxing authorities) as a result of any change in
circumstances other than a Regulatory Change.
Section 9.12. Severability of Provisions. Any provision of this
Agreement that is prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. To
the extent permitted by Applicable Law, the Borrower hereby
waives any provision of law that renders any provision hereof
prohibited or unenforceable in any respect.
Section 9.13. Survival of Obligations. Except as otherwise
expressly provided herein, the rights and obligations of the
parties hereunder shall survive the repayment of the Loans and
the Notes.
Section 9.14. Entire Agreement. This Agreement and the Notes
embody the entire agreement between the Borrower, the Agent and
the Banks relating to the subject matter hereof and supersede all
prior agreements, representations and understandings, if any,
relating to such subject matter.
Section 9.15. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon
the same instrument.
Section 9.16. Successors and Assigns. All the provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
ARTICLE 10
INTERPRETATION
Section 10.01. Definitional Provisions.
(a) Defined Terms. For the purposes of this Agreement:
<PAGE>
"Accumulated Funding Deficiency" has the meaning ascribed to that
term in Section 302 of ERISA.
"Adjusted LIBOR" means, for any Interest Period, a rate per annum
(rounded upward, if necessary, to the next higher 1/16 of 1%)
equal to the rate obtained by dividing (i) LIBOR (similarly
rounded) for such Interest Period by (ii) a percentage equal to 1
minus the Reserve Requirement in effect from time to time during
such Interest Period.
"Advance" means an advance of the proceeds of a Loan hereunder.
"Affiliate" means, with respect to any Person at any time, any
other Person that, directly or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, such first Person at such time.
"Agent" means The Bank of New York, as agent and representative
for the Banks under this Agreement and the Notes, and any
replacement Agent appointed pursuant to Section 8.07.
"Agent's Fee Letter" means the letter, dated the date hereof,
from the Borrower to, and accepted by, The Bank of New York,
relating to the payment of certain fees by the Borrower to the
Agent.
"Agent's Office" means the address of The Bank of New York
specified in or determined in accordance with the provisions of
Section 9.01(b).
"Agreement" means this Agreement, as amended from time to time,
and after giving effect to all waivers and departures from the
terms hereof that have been consented to but only, in the case of
each such amendment, waiver or consent, to the extent it complies
with the provisions of Section 9.04.
"Agreement Date" means June 20, 1989.
"Alternate Base Rate" means, at any time, the higher of (i) the
Base Rate and (ii) the Federal Funds Rate plus 1/2%.
"Applicable Law" means, anything in Section 9.10 to the contrary
notwithstanding, (i) all applicable common law and principles of
equity and (ii) all applicable provisions of all (A)
constitutions, statutes, rules, regulations and orders of
governmental bodies, (B) Governmental Approvals and (C) orders,
decisions, judgments and decrees of all courts and arbitrators.
"Base Rate" means, at any time, the rate of interest publicly
announced from time to time by The Bank of New York as its
"prime" rate (which rate is not The Bank of New York's lowest
rate of interest).
<PAGE>
"Base Rate Loan" means a Loan the interest on which is, or is to
be, as the context may require, computed on the basis of the Base
Rate.
"Base Rate Note" means a promissory note in the form of Exhibit
A-1.
"Bid Borrowing" means any borrowing of Bid Loans from one or more
of the Banks on a given date, consisting, collectively, of all
Bid Loans made or to be made by the Banks on such date.
"Bid Loan" means an amount advanced by a Bank pursuant to Section
1.03.
"Bid Note" means a promissory note in the form of Exhibit A-3.
"Bonds" means first mortgage bonds issued by the Borrower or, if
there are no such first mortgage bonds outstanding, the senior
debt securities of the Borrower.
"Business Day" means any day other than a Saturday, Sunday or
other day on which banks in New York City are authorized to
close.
"Cash Coverage Ratio" means with respect to any such period the
ratio of (a) the sum of (i) consolidated net income of the
Borrower for such period plus (or minus) (ii) all extraordinary
items deducted (or added) in determining said net income plus
(iii) all income taxes deducted in determining said net income
plus (iv) total interest charges of the Borrower and its
Subsidiaries deducted in determining said net income, excluding
allowance for borrowed funds used during construction (such
interest charges with such exclusion being referred to as "Actual
Interest Expense") plus (v) depreciation minus (vi) allowance for
equity and borrowed funds used during construction and other
noncash items described in Financial Accounting Standards Board
Statement No. 90 to (b) Actual Interest Expense for such period.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment" of any Bank means the amount set forth opposite its
name in Annex A, as the same may be reduced or limited from time
to time pursuant to Section 1.08, or, as the context may require,
the obligation of such Bank to make Pro Rata Loans in an
aggregate amount not exceeding such amount as so reduced or
limited.
"Common Equity" shall mean the sum of (i) the aggregate par value
of common stock issued to provide funds to finance the business
of the Borrower, (ii) capital contributions from Persons to
provide funds to finance the business of the Borrower, (iii)
<PAGE>
other capital paid-in to provide funds to finance the business of
the Borrower, (iv) plus any earned surplus or less any deficit,
attributable to the business of the Borrower.
"Consolidated Capitalization" means at any time an amount equal
to the sum of (a) Consolidated Stockholders' Equity and (b)
Consolidated Funded Debt, in each case, as of such time.
"Consolidated Debt" means at any time the consolidated Debt of
the Borrower and its Consolidated Subsidiaries as of such time.
"Consolidated Funded Debt" means at any time Consolidated Debt
that is, at such time, Funded Debt.
"Consolidated Net Income", for any Person for any period, means
the amount of consolidated net income of such Person and its
Consolidated Subsidiaries for such period (taken as a cumulative
whole), provided that there shall be excluded: (i) any net income
(or net loss) of a Consolidated Subsidiary (A) for any period
during which it was not a Consolidated Subsidiary or (B), in case
of any such net income, to the extent that the declaration or
payment of dividends or similar distributions by that
Consolidated Subsidiary is not at the time permitted by operation
of the terms of any Contract or Applicable Law; (ii) any net
income (or net loss) of any other Person (other than a
Consolidated Subsidiary) in which such Person or any of its
Consolidated Subsidiaries has an ownership interest, except to
the extent that any such income has actually been received by
such Person or such Subsidiary in the form of cash dividends or
similar distributions; (iii) any restoration of any contingency
reserve, except to the extent that provision for such reserve was
made out of income during such period; (iv) any net gains or
losses on the sale or other disposition, not in the ordinary
course of business, of investments and other capital assets,
provided that there shall also be excluded any related charges
for taxes thereon; (v) any net gain arising from the collection
of the proceeds of any insurance policy (other than a business
interruption insurance policy); (vi) any write-up of any asset;
(vii) any net gains resulting from the defeasance of any Debt;
(viii) any earnings from discontinued businesses; and (ix) any
extraordinary gains or losses.
"Consolidated Stockholders' Equity" means at any time the
consolidated stockholders' equity of the Borrower and the
Consolidated Subsidiaries less their consolidated Mandatorily
Redeemable Obligations (except to the extent deducted in
determining such consolidated stockholders equity), in each case,
as of such time.
"Consolidated Subsidiary" means, with respect to any Person at
any time, any Subsidiary of such Person or any other entity the
accounts of which would be consolidated with those of such first
<PAGE>
Person in its consolidated financial statements as of such time.
"Contract" means any indenture, agreement, other contractual
restriction, lease, instrument, certificate of incorporation or
charter, or by-law, except that no Loan Document shall constitute
a "Contract".
"Credit Agreement Related Claim" means any claim (whether
sounding in tort, contract or otherwise) in any way arising out
of, related to, or connected with, this Agreement, the Notes or
the relationship established hereunder or thereunder, whether
such claim arises or is asserted before or after the Agreement
Date or before or after the Repayment Date.
"Debt" of any Person means at any time, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (iii) all obligations of such
Person to pay the deferred purchase price of property or
services, except trade accounts payable that arise in the
ordinary course of business but only if and so long as the same
are payable on customary trade terms, (iv) all obligations of
such Person as lessee under capital leases, (v) all obligations
of such Person to purchase securities or other property that
arise out of or in connection with the sale of the same or
substantially similar securities or property, (vi) all non-
contingent obligations of such Person to reimburse any other
Person in respect of amounts paid under a letter of credit or
similar instrument to the extent that such reimbursement
obligations remain outstanding after they become non-contingent,
(vii) all obligations with respect to interest rate and currency
swaps and similar obligations obligating such Person to make
payments, whether periodically or upon the happening of a
contingency, except that if any agreement relating to such
obligations provides for the netting of amounts payable by and to
such Person thereunder or if any such agreement provides for the
simultaneous payment of amounts by and to such Person, then in
each such case, the amount of such obligations shall be the net
amount thereof, (viii) all Debt secured by (or for which the
holder of such Debt has an existing right, contingent or
otherwise, to be secured by) a Lien on any asset of such Person,
whether or not such Debt is assumed by such Person, and (ix) all
Debt of others Guaranteed by such Person.
"Default" means any condition or event that constitutes an Event
of Default or that with the giving of notice or lapse of time or
both would, unless cured or waived, become an Event of Default.
"Dollars" and the sign "$" mean lawful money of the United States
of America.
"Domestic Lending Office" of any Bank means the branch or office
<PAGE>
designated by such Bank from time to time as the branch or office
at which such Bank's Base Rate Loans are to be made and
maintained.
"Eligible Assignee" means (i) a commercial bank organized under
the laws of the United States, or any State thereof, and having
combined capital and surplus in excess of $100,000,000, (ii) a
commercial bank organized under the laws of any other country
that is a member of the Organization for Economic Cooperation and
Development ("OECD"), or a political subdivision of any such
country, and having combined capital and surplus (or the
equivalent thereof under the accounting principles applicable
thereto) in excess of $100,000,000, provided that such bank is
acting through a branch or agency located in the country in which
it is organized or another country that is also a member of the
OECD and (iii) the central bank of any country that is a member
of the OECD.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means any Person, including a Subsidiary or
other Affiliate of the Borrower, that is a member of any group of
organizations within the meaning of Code Sections 414(b), (c),
(m) or (o) of which the Borrower is a member.
"Existing Benefit Plan" means any Plan listed on Schedule 3.08.
"Event of Default" means any of the events specified in Section
6.01.
"Extension" means an extension of the Termination Date for one
year pursuant to Section 2.05.
"Federal Funds Rate" means, for any day, the rate determined by
the Agent to be the prevailing rate per annum (rounded upward, if
necessary, to the next higher 1/100 of 1 %)bid at 10:00 a.m. (or
as soon thereafter as is practicable) on such day by two or more
New York Federal funds dealers of recognized standing selected by
the Agent for the purchase at face value of Federal funds in the
secondary market in an amount comparable to the principal amount
of the Loans of the Bank acting as Agent to which the Federal
Funds Rate is to apply and with a maturity of one day.
"Fee Payment Date" means the fifth Business Day of each January,
April, July and October.
"Funded Current Liability Percentage" has the meaning ascribed to
such term in Code Section 401(a)(29).
"Funded Debt" means, with respect to any Person, Debt of such
Person having a final maturity date more than one year after the
<PAGE>
date of issuance, incurrence or assumption thereof by such
Person, including the current portion of any such Debt and
including Debt that is renewable or extendable, at the option of
the obligor, to a date more than one year after the date of
issuance, incurrence or assumption thereof.
"Generally Accepted Accounting Principles" means generally
accounting principles as in effect in the United States on the
Restatement Effective Date (or the Agreement Date with respect to
financial statements and computations delivered or made prior to
the Restatement Effective Date).
"Governmental Approval" means an authorization, consent,
approval, license or exemption of, registration or filing with,
or report or notice to, any governmental unit.
"Guaranty" by any Person means any obligation, contingent or
otherwise, of such Person, directly or indirectly,(i)
guaranteeing any Debt or Liability of any other Person or (ii) in
any other manner (whether or not constituting a guaranty)
providing for the payment of any such Debt or Liability or
otherwise protecting, or having the practical effect of
protecting, the holder of such Debt or Liability against loss
(whether such obligation arises by virtue of such Person being a
partner of a partnership or participant in a joint venture or by
agreement to indemnify, to keep well, to purchase assets, goods,
securities or services, to take or pay, to reimburse for payments
made under letters of credit or otherwise). The word "Guarantee"
when used as a verb has the correlative meaning.
"Information" means data, certificates, reports, statements
(including, but not limited to, financial statements delivered
pursuant to or referred to in Sections 5.01 and 5.02), opinions
of counsel, documents and other information, whether, in the case
of any such in writing, the same was prepared by the Borrower or
any other Person.
"Interest Payment Date" means the last Business Day of January,
April, July and October of each year.
"Interest Period" means a period commencing, in the case of a Bid
Loan and in the case of the first Interest Period applicable to a
LIBOR Loan, on the date of the making of, or conversion into,
such Loan, and, in the case of each subsequent, successive
Interest Period applicable thereto, on the last day of the
immediately preceding Interest Period, and ending, at the
election of the Borrower, in the case of LIBOR Interest Periods,
on the same day in the first, second, third or sixth calendar
month thereafter, and, in the case of a Bid Loan, on the day
specified in the notice of the Borrower delivered pursuant to
Section 1.03(e) except that (i) any Interest Period that would
otherwise end on a day that is not a LIBOR Business Day shall be
extended to the next succeeding LIBOR Business Day unless, in the
<PAGE>
case of a LIBOR Interest Period, such LIBOR Business Day falls in
another calendar month, in which case such Interest Period shall
end on the next preceding LIBOR Business Day, (ii) any LIBOR
Interest Period that begins on the last LIBOR Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month in which such Interest
Period ends) shall, subject to clauses (iii) and (iv) below, end
on the last LIBOR Business Day of a calendar month, (iii) any
Interest Period that begins prior to the Termination Date and
that would otherwise end after the Termination Date shall end on
the Termination Date, and (iv) if any Interest Period applicable
to a LIBOR Loan would, by virtue of clause (iii) above, be less
than one month, such Loan shall be made as or converted into a
Base Rate Loan. "LIBOR Interest Period" means an Interest Period
applicable to a LIBOR Loan.
"Lending Office" of any Bank means the Domestic Lending Office or
LIBOR Lending Office of such Bank or both. For purposes of
Sections 7.01 and 7.02, references to a "Bank" shall be deemed to
include a reference to any applicable Lending Office of such
Bank.
"Liability" as applied to a Person, means an obligation or
liability, whether arising under Contract, Applicable Law or
otherwise, in each case to the extent such obligation or
liability does not otherwise constitute Debt of such Person.
"LIBOR" means, for any Interest Period, the rate per annum at
which The Bank of New York offered or would have offered to place
with first-class banks in the London interbank market deposits in
Dollars in amounts comparable to the LIBOR Loan to which such
Interest Period applies, for a period equal to such Interest
Period, at 11:00 a.m. (London time) on the second LIBOR Business
Day before the first day of such Interest Period.
"LIBOR Business Day" means any Business Day on which dealings in
Dollar deposits are carried on in the London interbank market and
on which commercial banks are open for domestic and international
business (including dealings in Dollar deposits) in London.
"LIBOR Lending Office" of any Bank means the branch, office or
Affiliate designated by such Bank from time to time as the
branch, office or Affiliate at which such Bank's LIBOR Loans are
to be made and maintained.
"LIBOR Loan" means a Loan the interest on which is, or is to be,
as the context may require, computed on the basis of Adjusted
LIBOR.
"LIBOR Margin" means, at all times, .2250%.
"LIBOR Note" means a promissory note in the form of Exhibit A-2.
<PAGE>
"Lien", as applied to the property or assets (or the income or
profits therefrom) of any Person, means (in each case, whether
the same is consensual or nonconsensual or arises by Contract,
operation of law, legal process or otherwise): any mortgage,
lien, pledge, attachment, levy, charge or other security interest
or encumbrance of any kind in respect of any property of such
Person, or upon the income or profits therefrom. For this
purpose, a Person shall be deemed to own subject to a Lien any
asset that it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement,
capitalized lease or other title retention agreement relating to
such asset.
"Loan" means any amount advanced pursuant to Section 1.01 or
Section 1.03, and a Loan of a "type" means a Loan that bears, or
is to bear, as the context may require, interest based on the
Base Rate, the Adjusted LIBOR for a one-month Interest Period the
Adjusted LIBOR for a two-month Interest Period, the Adjusted
LIBOR for a three-month Interest Period, the Adjusted LIBOR for a
six-month Interest Period or interest as determined pursuant to
Section 1.03 if a Bid Loan.
"Loan Documents" means (i) this Agreement, the Notes and (ii) all
other agreements, documents and instruments arising out of (A)
any agreement, document or instrument referred to in clause (i)
above, (B) any other agreement, document or instrument
referred to in this clause (ii) or (C) any of the transactions
pursuant to any agreement, document or instrument referred to in
clause (i) above or in this clause (ii).
"Mandatorily Redeemable Obligation" means, as applied to a
Person, an obligation of such Person to the extent that it is
redeemable, payable or required to be purchased or otherwise
retired or extinguished (a) at a fixed or determinable date,
whether by operation of a sinking fund or otherwise, (b) at the
option of any Person other than such Person or (c) upon the
occurrence of a condition not solely within the control of such
Person, such as a redemption required to be made out of future
earnings.
"Margin Stock" means "margin stock" as defined in Regulations U
and X.
"Materially Adverse Effect" means, (i) with respect to any
Person, a materially adverse effect on such Person's business,
assets, liabilities, financial condition, results of operations
or business prospects, (ii) with respect to a group of Persons
"taken as a whole", a materially adverse effect on such Persons'
business, assets, liabilities, financial conditions, results of
operations or business prospects taken as a whole on, where
appropriate, a consolidated basis in accordance with Generally
Accepted Accounting Principles, (iii) with respect to any
<PAGE>
Contract or any other obligation (other than this Agreement and
the Notes), a materially adverse effect, as to any party thereto,
upon the binding nature, validity or enforceability thereof, and
(iv) with respect to this Agreement or any of the Notes, an
adverse effect, whether or not material, on the binding nature,
validity or enforceability thereof as an obligation of the
Borrower.
"Maximum Permissible Rate" means, with respect to interest
payable on any amount owing to any Person, the rate of interest
on such amount that, if exceeded, could, under Applicable Law,
result in (i) civil or criminal penalties being imposed on such
Person or (ii) such Person's being unable to enforce payment of
(or, if collected, to retain) all or any part of such amount or
the interest payable thereon.
"Multiemployer Plan" means a Plan that is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Note" means a Base Rate Note and a LIBOR Note, in each case
dated the Restatement Effective Date, or a Bid Note.
"Obligations" means all indebtedness, liabilities, obligations,
covenants and duties of, and all terms and conditions to be
observed by, the Borrower due or owing to, or in favor or for the
benefit of, the Agent and the Banks, or any of them, under this
Agreement or any of the Notes, or any of them, of every kind,
nature and description, direct or indirect, absolute or
contingent, due or not due, contractual or tortious, liquidated
or unliquidated, arising by operation of law or otherwise, now
existing or hereafter arising, and whether or not (i) for the
payment of money or the performance or nonperformance of any act,
(ii) arising or accruing before or after the filing by or against
the borrower of a petition under the Bankruptcy Code or (iii)
allowable under Section 5.02(b)(2) of the Bankruptcy Code.
"Original Agreement" shall have the meaning ascribed thereto in
the first recital to this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Lien" means: (i) any Lien securing first mortgage
bonds issued pursuant to the Indenture of Mortgage and Deed of
Trust dated as of June 30, 1989 between the Borrower and the
Connecticut National Bank, as Trustee, or other secured debt
issued by the Borrower that did not at the time of issuance
result in a violation of Section 4.10; (ii) any Lien securing a
tax, assessment or other governmental charge or levy or the claim
of a materialman, mechanic, carrier, warehouseman or landlord for
labor, materials, supplies or rentals incurred in the ordinary
course of business, but only if payment thereof shall not at the
time be required to be made in accordance with Section 4.01(e)
<PAGE>
and foreclosure, distraint, sale or other similar proceedings
shall not have been commenced; (iii) any Lien on the properties
and assets of a Subsidiary of the Borrower securing an obligation
owing to the Borrower; (iv) any Lien consisting of a deposit or
pledge made in the ordinary course of business in connection
with, or to secure payment of, obligations under worker's
compensation, unemployment insurance or similar legislation; (v)
any Lien constituting an encumbrance in the nature of zoning
restrictions, easements and rights or restrictions of record on
the use of real property that does not materially detract from
the value of such property or impair the use thereof in the
business of the Borrower or any Subsidiary; (vi) any Lien
constituting a lease or sublease granted by the Borrower or any
Subsidiary to others pursuant to a transaction to which Section
4.05 does not apply; (vii) any Lien arising pursuant to an order
of attachment, distraint or similar legal process arising in
connection with legal proceedings, but only if and so long as the
execution or other enforcement thereof is not unstayed for more
than 20 days; (viii) any Lien existing on (A) any property or
asset of any Person at the time such Person becomes a Subsidiary
or (B) any property or asset at the time such property or asset
is acquired by the Borrower or a Subsidiary, but only, in the
case of either (A) or (B), if and so long as (1) such Lien was
not created in contemplation of such Person becoming a Subsidiary
or such property or asset being acquired, (2) such Lien is and
will remain confined to the property or asset subject to it at
the time such Person becomes a Subsidiary or such property or
asset is acquired and to fixed improvements thereafter erected on
such property or asset, (3) such Lien secures only the obligation
secured thereby at the time such Person becomes a Subsidiary or
such property or asset is acquired and (4) the obligation secured
by such Lien is not in default; (ix) any Lien in existence on the
Agreement Date to the extent set forth on Schedule 4.09, but
only, in the case of each such Lien, to the extent it secures an
obligation outstanding on the Agreement Date to the extent set
forth on such Schedule; (x) any Lien securing Purchase Money Debt
but only if, in the case of each such Lien, (A) such Lien shall
at all times be confined solely to the property or asset the
purchase price of which was financed through the incurrence of
the Purchase Money Debt secured by such Lien and to fixed
improvements thereafter erected on such property or asset and (B)
such Lien attached to such property or asset within 30 days of
the acquisition of such property or asset; or (xi) any Lien
constituting a renewal, extension or replacement of a Lien
constituting a Permitted Lien by virtue of clause (viii), (ix),
(x) or (xi) of this definition, but only, in the case of each
such renewal, extension or replacement Lien, if (A) the principal
amount of the obligation secured by such Lien does not exceed the
principal amount of the obligation so secured at the time of the
extension, renewal or replacement, (B) the obligation secured by
such Lien bears interest at a rate per annum that is commercially
reasonable at the time such obligation is incurred and (C) such
<PAGE>
renewal, extension or replacement Lien is limited to all or a
part of the property or asset that was subject to the Lien
extended, renewed or replaced and to fixed improvements
thereafter erected on such property or asset.
"Person" means an individual, sole proprietorship, corporation,
partnership, trust, unincorporated organization, mutual company,
joint stock company, estate, union, employee organization, a
government or any agency or political subdivision thereof and,
for the purpose of the definition of "ERISA Affiliate", a trade
or business.
"Plan" means, at any time, any employee benefit plan (including a
Multiemployer Plan), the funding requirements of which (under
Section 302 of ERISA or Section 412 of the Code) are, or at any
time within six years immediately preceding the time in question
were, in whole or in part, the responsibility of the Borrower or
any ERISA Affiliate.
"Post-Default Rate" means a rate per annum equal to the Base Rate
as in effect from time to time plus 2% (provided that, if the
amount that is to bear interest at the Post-Default Rate is a
LIBOR Loan, the "Post-Default Rate" for such Loan shall be, for
the period commencing on the date the Post-Default Rate becomes
applicable and ending on the earlier of (i) the day such Loan is
converted into a Base Rate Loan and (ii) the last day of the
Interest Period during which such amount becomes due and payable,
the interest rate for such Loan as provided in Section
1.04(a)(i)(B) plus 2% and thereafter the Base Rate as in effect
from time to time plus 2%).
"Pro Rata Loan" means a Base Rate or LIBOR Loan.
"Prohibited Transaction" means a transaction that is prohibited
under Section 4975 of the Code or Section 406 of ERISA and not
exempt under Section 4975 of the Code or Section 408 of ERISA.
"Purchase Money Debt" means (i) Debt of the Borrower that is
incurred to finance part or all of (but not more than) the
purchase price of a tangible asset, provided that (A) neither the
Borrower nor any Subsidiary had at any time prior to such
purchase any interest in such asset other than a security
interest or an interest as lessee under an operating lease and
(B) such Debt is incurred within 30 days after such purchase, or
(ii) Debt that (A) constitutes a renewal, extension or refunding
of, but not an increase in the principal amount of, Purchase
Money Debt that is such by virtue of clause (i) or (ii) and (B)
bears interest at a rate per annum that is commercially
reasonable at the time such Debt is incurred.
"Refunding Loan" means any Loan to the extent the proceeds
thereof are to be used to refinance outstanding Bid Loans.
<PAGE>
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System and any successor regulation.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System and any successor regulation.
"Regulation X" means Regulation X of the Board of Governors of
the Federal Reserve System and any successor regulation.
"Regulatory Change" means any Applicable Law (including, without
limitation, the risk-based capital guidelines contained in 12
C.F.R. Parts 3, 208, 225 and 325), interpretation, directive,
request or guideline (whether or not having the force of law), or
any change therein or in the administration or enforcement
thereof, that becomes effective or is implemented after the
Agreement Date, whether or not the same is (i) the result of an
enactment by a government or any agency or political subdivision
thereof, a determination of a court or regulatory authority, or
otherwise or (ii) enacted, adopted, issued or proposed before or
after the Agreement Date, including any such that imposes,
increases or modifies any Tax, reserve requirement, insurance
charge, special deposit requirement, assessment or capital
adequacy requirement, but excluding any such that imposes,
increases or modifies any income or franchise tax imposed upon
any Bank by any jurisdiction (or any political subdivision
thereof) in which such Bank or any Lending Office is located.
"Repayment Date" means the later of (i) the Termination Date or
the cancellation or reduction to zero of the Commitments,
whichever occurs first, and (b) the payment in full of the
Obligations.
"Reportable Event" means, to the extent the same relates to or
affects a Plan, (i) any of the events set forth in ERISA Sections
4043(b) (other than a Reportable Event as to which the provision
of 30 days' notice to the PBGC is waived under applicable
regulations), 4068(f) or 4063(a) or the regulations thereunder,
(ii) any event requiring the Borrower or any ERISA Affiliate to
provide security to a Plan under Code Section 401(a)(29) and
(iii) any failure to make a payment required by Code Section
412(m).
"Representation and Warranty" means each representation or
warranty made pursuant to or under (i) Section 2.01, Section
2.02, Article 3, Section 5.02 or any other provision of this
Agreement, (ii) any amendment of or waiver or consent under this
Agreement or (iii) any Schedule to this Agreement or any such
amendment, waiver or consent, whether or not, in the case of any
representation or warranty referred to in clause (i), (ii) or
(iii) of this definition, the information that is the subject
matter thereof is within the knowledge of the Borrower.
<PAGE>
"Required Banks" means Banks holding more than 66-2/3% of the
aggregate unpaid principal amount of the Notes (if any) and Banks
having in the aggregate more than 66-2/3% of the Commitments;
provided, that if any Note is outstanding, for purposes of
requesting the Agent to take any action described in Section
6.02(a), "Required Banks" means Banks holding more than 66-2/3%
of the aggregate unpaid principal amount of the Notes then
outstanding; and provided, further, that for purposes of
requesting the Agent to take any action described in Section
6.02(b), "Required Banks" means Banks having in the aggregate
more than 66-2/3% of the Commitments.
"Reserve Requirement" means at any time the then current maximum
rate for which reserves (including any marginal, supplemental or
emergency reserve) are required to be maintained under Regulation
D by member banks of the Federal Reserve System in New York City
with deposits exceeding five billion Dollars against
"Eurocurrency liabilities", as that term is used in Regulation D.
Adjusted LIBOR shall be adjusted automatically on and as of the
effective date of any change in the applicable Reserve
Requirement.
"Restatement Effective Date" shall have the meaning set forth in
Section 2.01.
"Subsidiary" means, with respect to any Person, any other Person
of which (i) securities having ordinary voting power to elect a
majority of the board of directors (or other persons having
similar functions) or (ii) other ownership interests ordinarily
constituting a majority voting interest, are at the time,
directly or indirectly, owned or controlled by such first Person,
or by one or more of its Subsidiaries, or by such first Person
and one or more of its Subsidiaries.
"Tax" means any Federal, State or foreign tax, assessment or
other governmental charge or levy (including any withholding tax)
upon a Person or upon its assets, revenues, income or profits,
other than income and franchise taxes imposed upon any Bank by
the jurisdictions (or any political subdivisions thereof) in
which such Bank or any Lending Office of such Bank is located.
"Termination Date" means January 31, 1998 or such later date to
which the Commitments have been extended pursuant to an
Extension.
"Termination Event" means (i) a Reportable Event, (ii) the
termination of a Plan, or the filing of a notice of intent to
terminate a Plan, or the treatment of a Plan amendment as a
termination under ERISA Section 4041(c), (iii) the institution of
proceedings to terminate a Plan under ERISA Section 4042 or (iv)
the appointment of a trustee to administer any Plan under ERISA
Section 4042.
<PAGE>
"Unfunded Benefit Liabilities" means with respect to any Plan at
any time, the amount of unfunded benefit liabilities of such Plan
at such time as determined under ERISA Section 4001(a)(18).
"YES" means Yankee Energy System, Inc., a Connecticut
corporation, of which the Borrower is a wholly-owned subsidiary.
(b) Other Definitional Provisions. (i) Except as otherwise
specified herein, all references herein (A) to any Person shall
be deemed to include such Person's successors and assignees, but
only, in the case of assignees of the Borrower or any Bank, to
the extent the applicable assignment complies with the provisions
of this Agreement, (B) to any Applicable Law defined or referred
to herein shall be deemed references to such Applicable Law as
the same may have been or may be amended or supplemented from
time to time, (C) to this Agreement or any Note shall be deemed
references to this Agreement or such Note (and, in the case of
any Note, any other instrument issued in substitution therefor)
as the terms thereof may have been or may be amended,
supplemented, waived or modified from time to time, but only, in
the case of each such amendment, supplement, waiver or
modification, to the extent permitted by, and effected in
accordance with, the terms thereof, and (D) to any other Contract
defined or referred to herein or therein shall be deemed
references to such Contract (and, in the case of any instrument,
any other instrument issued in substitution therefor) as the
terms thereof may have been or may be amended, supplemented,
waived or otherwise modified from time to time.
(ii) When used in this Agreement, the words "herein", "hereof"
and "hereunder", and words of similar import, shall refer to this
Agreement as a whole and not to any provision of this Agreement,
and the words "Section", "Article", "Schedule", "Annex" and
"Exhibit" shall refer to Sections and Articles of, and Schedules,
Annexes and Exhibits to, this Agreement unless otherwise
specified.
(iii) Whenever the context so requires, the neuter gender
includes the masculine or feminine, and the singular number
includes the plural, and vice versa.
(iv) Unless otherwise specified, all references herein to a time
of day shall mean that time of day in New York City.
(v) All terms defined in this Agreement shall have the defined
meanings when used in the Notes or, except as otherwise expressly
stated therein, any certificate, opinion or other document
delivered pursuant hereto.
Section 10.02. Accounting Matters. Unless otherwise specified
herein, all accounting determinations hereunder and all
<PAGE>
computations utilized by the Borrower in complying with the
covenants contained herein shall be made, all accounting terms
used herein shall be interpreted, and all financial statements
required to be delivered hereunder shall be prepared, in
accordance with Generally Accepted Accounting Principles
(subject, in the case of financial statements delivered pursuant
to Section 5.01(a), to normal year-end auditing adjustments),
except, in the case of such financial statements, for departures
from Generally Accepted Accounting Principles that may from time
to time be concurred with by the Borrower's independent certified
public accountants.
Section 10.03. Representations and Warranties. Unless otherwise
specified, all Representations and Warranties shall be deemed
made at and as of the Agreement Date, at and as of the
Restatement Effective Date, at and as of the time of each Loan,
and, in addition, in the case of any particular Representation
and Warranty, at such other time or times as such Representation
and Warranty is made or deemed made in accordance with the
provisions of this Agreement pursuant to, under which, or in
connection with which, such Representation or Warranty is made or
deemed made.
Section 10.04. Captions. Captions to Sections, Articles,
Schedules, Annexes and Exhibits are provided for convenience of
reference only and shall not constitute a part of this Agreement
for any other purpose.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their duly authorized officers all as of the
Restatement Effective Date.
YANKEE GAS SERVICES COMPANY
By s/s Sarah K. Sander
Title: Assistant Treasurer
THE BANK OF NEW YORK,
as Agent and as a Bank
By s/s John W. Hall
Title: Vice President
THE FIRST NATIONAL BANK OF BOSTON
By s/s Frank T. Smith, Jr.
Title: Director
SHAWMUT BANK CONNECTICUT, N.A.
By s/s Thomas L. Rose
Title: Vice President
MELLON BANK, N.A.
By s/s Mary Ellen Usher
Title: Vice President
SWISS BANK CORPORATION
By s/s Darryl Monasebian
Title: Associate Director
By s/s Donna L. Burton
Title: Associate Director
<PAGE>
Banks, Lending Offices
and Notice Addresses Commitment
THE BANK OF NEW YORK $20,000,000
Domestic Lending Office:
The Bank of New York
One Wall Street
19th Floor
New York, New York 10286
LIBOR Lending Office:
The Bank of New York
One Wall Street
19th Floor
New York, New York 10286
Notice Address:
The Bank of New York
One Wall Street
New York, New York 10286
Telex No.: 177612
Attention: John W. Hall, 19th Floor
Telephone No.: (212) 635-7581
Telecopy No.: (212) 635-7923
Patricia Clancy, 18th Floor
Telephone No.: (212) 635-4696
Telecopy No.: (212) 635-6365/6367
THE FIRST NATIONAL BANK
OF BOSTON $10,000,000
Domestic Lending Office:
The First National Bank of Boston
100 Federal Street, M/S 01-08-02
Boston, MA 02110
LIBOR Lending Office:
The First National Bank of Boston
100 Federal Street, M/S 01-08-02
Boston, MA 02110
Notice Address:
The First National Bank of Boston
100 Federal Street, MIS 01-08-02
Boston, MA 02110
Telex No.: 499-6527
For credit issues:
Attention: Carol E. Holley
Vice President
Telephone No.: (617) 434-1921
Telecopy No.: (617) 434-3652
For notices and other issues:
Attention: Debra Williams
Telephone: (617) 467-2314
Telecopy: (617) 467-2276
SHAWMUT BANK
CONNECTICUT, N.A. $10,000,000
Domestic Lending Office:
Shawmut Bank N.A.
One Federal Street, OF0308
Boston, MA 02211
LIBOR Lending Office:
Shawmut Bank N.A.
One Federal Street, OF0308
Boston, MA 02211
Notice Address:
Shawmut Bank N.A.
One Federal Street, OF0308
Boston, MA 02211
Telephone No.: (617) 292-3030
Telecopy No.: (617) 292-2619
Attention: Thomas L. Rose
Vice President
MELLON BANK, N.A. $10,000,000
Domestic Lending Office:
Mellon Bank, N.A.
One Mellon Bank Center
Grant Street
Pittsburgh, PA 15258-0001
LIBOR Lending Office:
Mellon Bank, N.A.
One Mellon Bank Center
Grant Street
Pittsburgh, PA 15258-0001
Notice Address:
Mellon Bank, N.A.
One Mellon Bank Center
Grant Street
Pittsburgh, PA 15258-0001
Telephone No.: (412) 236-1203
Telecopy No.: (412) 234-8888
Attention: Mary Ellen Usher
SWISS BANK CORPORATION $10,000,000
Domestic Lending Office:
Swiss Bank Corporation New York Branch and Cayman Islands
Branches
222 Broadway
New York, New York 10038
LIBOR Lending Office:
Swiss Bank Corporation
New York Branch and Cayman Islands Branches
222 Broadway
New York, New York 10038
Notice Address:
Swiss Bank Corporation
New York Branch and Cayman Islands Branches
222 Broadway
New York, New York 10038
Attention: Public Utilities Department
Reference all correspondence: Yankee Gas
Services Co. No. 039152
For credit issues:
Attention: Darryl Monasebian
Telephone No.: (212) 574-3103
Telecopy No.: (212) 574-4395
For notices and other issues:
Attention: Laura Paradiso
Telephone No.: (212) 574-4119
Telecopy No.: (212) 574-3180
<PAGE>
EXHIBIT 11
<TABLE>
<CAPTION>
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
Earnings Per Share Computation
For the Years Ended September 30
--------------------------------
<S> <C> <C> <C>
1995 1994 1993
---- ---- ----
(Thousands of Dollars, Except Share Data)
Net Income $12,358 $19,485 $17,479
------- ---------- -------
Average Common
Shares
Outstanding(b) 10,332,447 10,287,683 10,287,683
---------- ---------- ----------
Earnings Per
Share $1.20(c) $1.89(a)(c) $1.70(c)
-------- ----------- --------
</TABLE>
(a) Exclusive of an $0.08 per share charge resulting from
an early redemption premium on the Company's preferred stock.
taxes.
(b) All per share amounts have be restated to give
retroactive effect to a three-for-two stock split on June 28,
1993.
(c) Earnings per share information is the same on both a
primary and fully diluted basis as Yankee Energy System, Inc. has
a simple capital structure.
1
<PAGE>
Exhibit 13
Cover:
Top Center: Yankee Energy System, Inc.
A Competitive world has two possibilities. You can lose, Or if
you want to win you can change.
Bottom Left: 1995 Annual Report
Photo on Left: Yankee Energy race car and driver
2 Photos on Right: Yankee Gas natural gas pump and photo of 2
workers on PC.
<PAGE>
Inside Front Cover:
Company Profile
Background is a picture/map outlining the New England states.
Yankee Energy System, Inc. (Yankee Energy) is the parent
of Yankee Gas Services Company (Yankee Gas), Housatonic
Corporation (Housatonic), NorConn Properties, Inc. (NorConn),
Yankee Energy Financial Services Company (Yankee Financial),
Yankee Energy Services Company (YESCo) and R.M. Services, Inc.
(RMS).
Yankee Gas, the principal subsidiary, is a natural gas
distribution company regulated by the Connecticut Department of
Public Utility Control (DPUC) and provides natural gas services
to about 178,000 customers in 67 Connecticut communities.
Housatonic is a single purpose corporation holding a 10.5 percent
interest in the Iroquois Gas Transmission System (Iroquois) a
pipeline that delivers Canadian gas into the Northeastern United
States and is regulated by the Federal Energy Regulatory
Commission (FERC).
NorConn owns the Company s corporate office building and another
service building and leases both to Yankee Gas.
Yankee Financial provides customers with equipment financing for
natural gas installations. YESCo is a full service energy
company providing fuel management, project development and
operations and maintenance services at selected customer sites.
BVA Cogen, Inc., (BVA) acquired by YESCo in August 1995, is a
cogeneration developer with projects in operation throughout the
Northeastern United States.
RMS was established in November 1995, to provide debt collection
services to utilities and other businesses nationwide.
*Yankee Energy System, Inc. Headquarters - Meriden, Connecticut
Bottom Right:
Contents
1 Financial Highlights
2 Chairman's Letter
6 Business Transformation
8 Leadership in Marketing
9 Dedication in Customer Service
10 Diversification
12 Directors and Officers
13 Financial and Statistical Section
31 Shareholder and Stock Information
End of Company Profile page.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
<S> <C> <C> <C>
Years Ended September 30, 1995 1994 % Change
Financial (Thousands)
Operating Revenues $293,996 $317,298 (7.3)%
Net Income 12,358 18,605 (33.6)%
Net Income
(Before extraordinary item) 12,358 19,485 (36.6)%
Capital Expenditures 26,562 28,493 (6.8)%
Net Utility Plant 324,870 315,063 3.1%
Common Stock (Per Share Data)
Earnings Per Share $1.20 $1.81 (33.7)%
Earnings Per Share
(Before extraordinary item) $1.20 $1.89 (36.5)%
Stock Price (End of Year) $21.38 $21.50 (0.6)%
Quarterly Dividend
(End of Year) $0.315 $0.305 3.3%
Yield (End of Year) 5.9% 5.7% 3.5%
Common Shares Outstanding
(Average) 10,332,447 10,287,683 0.4%
Book Value Per Share
(End of Year) $14.69 $14.54 1.0%
Operations
Sales and Transportation
(MMcf) 44,751 43,150 3.7%
Degree Days (Normal 6,151) 5,595 6,454 (13.3)%
Customers (Average) 177,852 177,011 0.5%
</TABLE>
<TABLE>
<CAPTION>
Bar Graph at Bottom of Page showing the following information:
Book Value Per Share Dividend Growth - Dividend Paid
($/Share)
<S> <C> <C> <C>
1991 $11.91 1991 $1.04
1992 $12.59 1992 $1.09
1993 $13.86 1993 $1.13
1994 $14.54 1994 $1.19
1995 $14.69 1995 $1.24
</TABLE>
Page one
<PAGE>
Photo of Branko Terzic, Chairman, President and Chief Executive
Officer on Left of Page.
A YEAR OF CHANGE
"We change not for the sake of change, but in acknowledgement of
the new realities confronting our business: impending
"unbundling"; aggressive competition; slow economic growth;
industry consolidations; and the potential to leverage our
management talents and investors capital through new
international opportunities."
- - Branko Terzic
This is my first annual report to you, my fellow shareholders, as
steward of your investment in Yankee Energy System, Inc. I must
begin by informing you that earnings in 1995 were significantly
lower than 1994. The explanation of this has much, but not all,
to do with the weather as I will address later. We are all
disappointed in this year s financial performance and the rest of
this letter will inform you of the steps I have taken to improve
future performance and opportunity for shareholder value
enhancement.
I have selected "A Year of Change" as the theme for my message
based on reflection back over the past twelve months and my
anticipation of things to come during the next twelve months. In
1867, Benjamin Disraeli said, "In a progressive country, change
is constant." This I believe to be true for a progressive
business enterprise as well.
Not since we divested from Northeast Utilities has so much change
taken place at Yankee Energy during the course of a single year,
and never before has there been so many forces lowering expected
revenues and increasing expenses. The competitive energy
commodity, delivery and service marketplace has become even more
so. We find ourselves one of a number of competing energy
delivery
Page two
<PAGE>
systems in a market where new technology and changing regulation
obsolete old ways of doing business. Thus, we are actively
positioning ourselves to respond effectively.
Top Right of Page: Watermark - Vision
Left of Page: "I want Yankee to take advantage of our greatest
intangible asset, the intellectual resources of our employees.
To successfully compete in a global energy market requires the
full utilization of all our assets - especially our brightest
minds."
Fiscal year 1995 began with the introduction of new leadership
and ended with the implementation of a major organizational
restructuring of our principal operating subsidiary, Yankee Gas
Services Company (Yankee Gas). Organizational changes also took
place at our energy management subsidiary, Yankee Energy Services
Company (YESCo), where professionals in finance, marketing and
engineering were added to more aggressively respond to our
customers' many energy needs. YESCo also acquired BVA Cogen,
Inc., a successful cogeneration power plant developer, operator
and United States distributor for the Duetz MWM gas-driven
generator sets.
One step taken at Yankee Gas has been to complete a restructuring
project which we have named Business Transformation. The goals
are to reduce our costs and enhance our revenues resulting in
increased shareholder value. Specially trained teams of company
process experts, guided by internationally recognized
consultants, reviewed all the major processes involved in the
business of natural gas distribution. The results of this
project have been to reorganize the gas company. We have
streamlined the management structure, simplified procedures,
increased individual authority and responsibility, and made
commitments to purchase technology which will increase
productivity and improve service quality. The completed Business
Transformation improvements have resulted in lower operating
budgets for next year and continued savings into the future.
Since "change is constant" you have my commitment that we will
continue to make improvements during the next year.
A Foundation to Build Upon
I joined Yankee Energy as President and Chief Operating Officer
in September, 1994. Philip T. Ashton, then Chairman,
relinquished the duties of Chief Executive Officer to me on March
1, 1995, and upon his retirement on August 1, 1995, the Board of
Directors elected me to succeed him. Phil played a major role in
the establishment of Yankee Energy as an important competitor in
the energy marketplace and a financially successful corporation
in Connecticut. His leadership during the critical formative
years, which included, among many important initiatives, the
decisions to form a holding company and to successfully gain
listing on the New York Stock Exchange, merit the full gratitude
and congratulations of all shareholders, employees and customers.
It is upon this foundation that Yankee Energy will continue to
grow and prosper. Our expansion efforts are focused on not just
our natural gas distribution segment but in other energy related
areas as well. We will utilize all our assets to the fullest
extent possible to maximize the return on your investment in
Yankee Energy. Thomas Jefferson wrote in an 1816 letter,
"...with the change in circumstances, institutions must advance
also to keep pace with the times."
Page three
<PAGE>
Top Left: "Yankee Energy Services Company (YESCO) provides a full
range of energy management services to solve customers' energy
conversion problems. YESCO develops on-site generation or co-
generation systems, provides technical and operating support for
power plants and boiler houses, and offers energy equipment
financing."
Warmer Weather, Restructuring Charges Cause 1995 Earnings Decline
Earnings per share of $1.20 for fiscal year 1995, down 34 percent
from $1.81 earned per share in 1994, was a major disappointment
for us. Three primary factors were behind the first fiscal
earnings decline in our brief six-year history. First, this past
winter was one of the warmest on record, 13 percent warmer than
the previous year and 9 percent warmer than normal. As a result,
sales to our firm customers were down nearly 9 percent. Despite
this, total sales and transportation increased by 1.6 billion
cubic feet (bcf) or 3.7 percent in fiscal year 1995. The warmer
weather caused natural gas commodity prices to decline and become
more competitive with alternate forms of energy and our off-
system and transportation volumes increased sixfold. However,
the margins (revenues less cost of gas) on these sales were not
enough to compensate for the higher margins lost on firm sales.
Secondly, organizational charges related to our Business
Transformation amounted to, on an after-tax basis, $3.5 million
for costs of an early retirement package and severance benefits
for positions terminated.
Finally, we established a provision for our proportionate share
for the estimated cost for the legal proceedings surrounding the
federal investigation of the Iroquois Pipeline.
These charges are discussed in greater detail in the Management's
Discussion and Analysis which precedes our financial exhibits.
But, it is important to note that the charges to fiscal 1995
earnings for Business Transformation and estimated legal costs of
the Iroquois investigation are one-time, nonrecurring items.
Yankee Energy remains in strong financial condition and retains
the ability to grow its dividend.
Establishment of Yankee Energy Services Company (YESCo)
Two developments, the addition of staff experienced in the energy
utility business and the acquisition of BVA Cogen, have
essentially given us a quick jump-start in our energy services
subsidiary.
We now have, in YESCo, the credentials necessary to aggressively
offer cost effective and unique energy solutions to commercial,
industrial and institutional customers. The addition of BVA
allows us to offer customers a more comprehensive package of
solutions to their energy procurement and conversion problems.
Initially, we will market in New England. Then we will go
wherever we have a competitive advantage.
The Current Situation for Yankee Gas:
Yankee Gas continued this past year to experience relatively
little growth in natural gas sales within its service territory.
Historically for a local distribution gas company, forecasting
models predict future sales based on factors such as economic
activity, housing starts and industrial output. All of these
factors were down last year. In addition, the Company remains at
the high cost end for natural gas service and against competitive
fuels. The Company's response was to initiate the Business
Transformation project.
Our Business Transformation efforts were successful in
identifying opportunities to reduce our costs and in implementing
the changes necessary to effect
Page four
<PAGE>
these cost savings. To address the problem of low growth in
sales we have reviewed our entire marketing structure and plans.
Our newly established marketing department now has dedicated
teams for each of our customer groups, an enhanced research and
technical support organization and a coordinated and focused
marketing program. Increasing sales of natural gas delivery
services is essential to achieve our aim of avoiding the need for
rate increase requests. Our marketing strategy is based on
research which demonstrates that natural gas provides both a
"better lifestyle" and has environmentally superior
characteristics.
Left of Page: 3 Photographs of Branko Terzic.
Preparing for the Future Structure of the Natural Gas Service
Industry:
Our larger natural gas customers see us as one of a number of
competing energy delivery systems. Indeed, even some residential
customers can and have exercised their option of choosing other
energy service providers. Our customers want energy delivered to
their site for conversion to useful purposes such as heating,
cooling, drying and electric generation. Their other choices for
energy, beside natural gas delivered by our distribution system,
include: electric service by wire, oil by truck, barge or rail
and propane by truck or rail.
Today most consumers of natural gas buy a "bundled" service of
natural gas commodity and delivery service from their local gas
distribution company, (commonly called an "LDC"). Many state
utility regulatory commissions, such as the Connecticut
Department of Public Utility Control (DPUC), are extending the
option of separate purchase of gas commodity from gas delivery to
more customers. Yankee Gas, as an LDC, would still provide the
local delivery. Done correctly, this new system would increase
competition in the commodity sales of gas, offer consumers more
choices than they have now and still preserve the necessary
amount of regulation on our gas delivery system. This type of
"unbundled" system has been widely proposed throughout the United
States and will be implemented in different ways in many systems.
However, at this time it is not known how this market experiment
will evolve or how well it will work here in Connecticut. In
consideration of this and other forthcoming changes, we have
attempted to establish an efficient, flexible and adaptive
management and workforce to meet any possibility with a high
degree of confidence. We will be vigilant in our efforts to
respond to the warning that "change is constant."
Conclusion:
I am honored to have the opportunity to lead Yankee Energy into
this challenging but exciting future competitive energy
environment. In my speeches, panel appearances and interviews
around the country and abroad this past year, I have introduced
Yankee Energy as more than a natural gas distribution company.
Yankee Energy is an energy services provider based in Connecticut
with both tangible and intangible assets dedicated to enhancing
shareholder value through the full utilization of all assets in
contestable markets offering competitive returns. All
opportunities to maximize your investment in Yankee Energy will
be explored. You have my word on that.
Branko Terzic
Chairman, President and
Chief Executive Officer
Page five
<PAGE>
Top Left of Page: Photo of Charles E. Gooley, Executive Vice
President
"Introducing radical change to an established, successful
business can be unsettling. That degree of change was necessary,
however, to meet the increasingly demanding expectations of
customers and investors."
BUSINESS TRANSFORMATION
Yankee Energy, from its inception, has enjoyed a reputation for
innovation. Past annual reports have discussed the recognition
the Company has received for its operational innovations,
creative uses of technology and unique business practices. That
recognition continued in 1995 as Yankee Gas was honored by the
American Gas Association for leadership in the development of the
natural gas vehicle market. The innovation for which Yankee
Energy was honored was essential to respond to evolutionary
changes in the energy industry. Over the last few years,
however, changes in the energy business, and industry in general,
have been revolutionary. In 1995, a radical transformation of
Yankee's business was necessary to stay ahead of those changes.
In the fall of 1994, the Yankee Energy Board of Directors
approved a proposal from the Company's management to begin the
process of radical change. The Board's charge was simply stated,
but a challenge to accomplish: design and create an energy
services company capable of exceeding customers' and
shareholders' expectations well into the next century. Thus,
began Business Transformation.
The first stage of Business Transformation involved discussions
among senior executives of the Company and Board members on major
business issues. From these discussions emerged the strategic
vision to be pursued, in part, through Business Transformation.
At the core of that strategic vision is the development of Yankee
Energy as a provider of a wide array of energy products and
services in addition to natural gas distribution services
provided through Yankee Gas. Business Transformation focused
primarily on Yankee Gas, with a goal of making it the energy
provider of choice by lowering costs, providing a full range of
equipment and appliance services and excelling in customer
service. We believed it appropriate to measure the quality of
our customer interactions not only against other gas distribution
companies, but against the best service providers in all
businesses.
Beginning in January and lasting over several months, all of the
major business processes within Yankee Gas were analyzed by teams
of employees to eliminate tasks that did not add value and to
provide for the most efficient performance of the remaining work.
These teams made recommendations to the Business Transformation
Steering Committee, which I chaired, for changes in the way we
had come to do our business. Some of these changes were in
Page six
<PAGE>
fact radical. Throughout the entire process of transforming our
Company to meet the challenges of the next century, we kept all
employees informed of major issues and decisions.
Top Left of Page: Thomas J. Houde, Vice President, Rates and
Resource Planning and Mary J. Healey, Vice President, General
Counsel and Secretary.
Top Right of Page: Ellen J. Quinn, Vice President,
Administration.
Bottom: Watermark - Added value
Today, roughly a year after we began to transform our business,
Yankee Gas does not resemble the Company that existed a year ago.
As opposed to employees working in departments that sometimes
were islands unto themselves, all of us are members of process
teams, each of which has all the resources needed to make the
process work. The process leaders themselves work as a team to
ensure the smooth operation of our customer service and sales
activities. We have expanded the cost-effective use of
technology, particularly in the scheduling and
dispatching of our service mechanics. Most significantly, by
redesigning work processes we have been able to reduce our
workforce, while at the same time enhancing customer service.
Through a combination ofvoluntary early retirements, attrition
and employee severances, we have 13 percent fewer employees
within Yankee Gas today than we did a year ago. We have been
able to create positions for some employees within
our unregulated subsidiaries, which are growing to meet the
demands in collections and the small power generation markets.
The next several years will continue to be a challenge for us
however, as we strive to transform the culture within the Yankee
Energy companies to conform to our reengineered business
processes.
Business Transformation so far is a success story for Yankee
Energy because it is not a euphemism for downsizing. It has
involved a fundamental reexamination of our business practices
and a willingness to do whatever is necessary to improve our
overall business. Our goal is to
benefit our customers, through better, less costly service, and
our shareholders through enhanced value of their investment in
the Company.
Page seven
<PAGE>
LEADERSHIP IN MARKETING
Top Left Photo: Wayne and Lorraine Roberts discuss with Laurie
Fiore, Yankee Gas Energy Consultant, the convenient and clean
burning operation of their new natural gas fueled fireplace.
For Sales and Marketing, 1995 was a year of concurrent effort
focused on producing near term achievement
and long-term growth strategies. Achievement is measured by
continued success in traditional and emerging markets and
national recognition for performance and customer service.
Strategic direction was developed through a rigorous ground-up
transformation designed to position Yankee Gas for enhanced
performance in the increasingly competitive markets we serve.
In addition to strong showings in our residential and commercial
markets, our longer term sales efforts resulted in the addition
of a number of key industrial accounts to our system. Dow
Chemical of Gales Ferry and FIDCO, a New Milford based subsidiary
of Nestle, U.S.A., are prime examples of 1995 successes.
Yankee gained national recognition as one of five companies named
by the American Gas Cooling Center as top natural gas air-
conditioning marketers in the United States. In addition, our
extensive promotion of natural gas for vehicle fuel resulted in
Yankee being honored with the American Gas Association's Top
Achievement Award. Our most prized accolade of 1995 came from
our customers themselves in the form of their response to a
national survey of industrial customer satisfaction. Yankee Gas
was singled out as the only company in the United States that
ranked in the top ten across all service categories measured.
Finally, through transformation, the individual sales and
marketing functions were newly integrated into a single structure
designed to capitalize on existing strengths as well as enhance
opportunities to grow sales. Highlights of the results of this
effort include a restructuring of the sales force into discreet
customer segment teams to further concentrate sales efforts in
residential, commercial and industrial markets. We streamlined
processes to net a 50% reduction in sales force
administrative time. Also, we created a new product development
team to assure continued introduction of innovative offerings for
our customers. All of these moves are designed to position
Yankee as a continued leader in future energy sales achievement.
What's next for Sales and Marketing?
A renewed commitment to customer satisfaction as our standard of
success. Innovative programs designed to capitalize on Yankee's
marketing philosophy that our customers best interest is
Yankee's best interest, aggressively increasing our penetration
into traditional and emerging technology markets and finally,
continuing to set a nationwide standard for customer
satisfaction.
With our customer-centered vision firmly in place, we are
confident the newly transformed Sales and Marketing team will
fulfill its mission to be the catalyst for Yankee s success
throughout the challenging years to come.
Bottom Right Headshot of Jessica K. Bray
General Manager
Sales and Marketing
Page eight
<PAGE>
DEDICATION IN CUSTOMER SERVICE
Top Right Photo of Robert C. Luther, Yankee Gas Meter Service
Mechanic, finishes routine maintenance on the Triathlon unit, a
new technology gas-fired system that provides both heating and
air conditioning.
The recent Business Transformation process was essential for the
distribution process to not only maintain our competitive edge
but, more importantly, to put us in the forefront of a very
dynamic business climate.
The main areas of focus in the distribution process are
increasing accountability, improving planning and realigning work
processes. Improvements in these areas will reduce operating
costs.
Our supervisors and managers have increased their span of control
and accountability. Management will be concentrating on helping
co-workers to take on new responsibilities, encouraging a sense
of belonging to a team and instilling a sense of excitement about
corporate changes.
Our long-term planning efforts focused on distribution system
replacements, while short-term planning concentrated on
increasing the efficiency of our resources and reducing
inventory. The capital construction process is now in the new
Waterbury Operating Center which is centrally located to allow us
to serve 70% of our customers from within a 30 mile radius.
Another major advantage of the Waterbury Operations Center is
centralized planning by coordinating regional projects, corrosion
work and new business growth analysis. The net effect will be a
reduction in capital budget requirements. We have also set up a
new "Just in Time" inventory system that has enabled us to
eliminate six area storerooms, dramatically reducing inventory by
60%. We are realigning work processes by allowing employees to
work more efficiently. We will deliver material and equipment to
job sites after hours so employees can increase "site time" by
reporting directly to the job. A gas pressure management team
will provide scheduled maintenance and upgrading to our gate
stations and regulator stations. This team will also enable us
to generate revenue by providing specialized and technical
contract service to our larger industrial customers. Another
efficiency improvement includes the centralization of a welding
shop. We can dispatch a welder as work loads dictate, and
produce prefabricated manifolds for the customer service process
and to sell to other utilities.
All of these dynamic changes in the distribution process will
allow Yankee Gas to serve customers more efficiently and reduce
operating costs.
Bottom Right headshot of Alex C. W. Cheng
General Manager
Distribution
Page nine
<PAGE>
Diversification - Emerging Growth Opportunities
"Our collective experience, proven expertise and the latest in
energy delivery technologies allows us to provide customers with
cost-effective solutions to their energy related issues. We have
people such as myself that have been 'the customer' for what we
do. So, it's more than lip service when we tell a customer, 'We
can provide solutions that meet your needs in the way that s best
for you.'"
Page D. Miller
The deregulation of the electric and gas utility industries is
creating many opportunities to serve customers in new ways. Our
strategy is to pursue those endeavors where we have a competitive
advantage to create additional shareholder value.
There are three basic objectives to our diversification efforts.
1. To position Yankee Energy to increase its presence in the
competitive energy marketplace. Our non-utility subsidiaries
have been staffed with skilled people in order to meet the new
challenges before us.
2. To provide sufficient net income contributions to Yankee
Energy to allow it to meet its earnings growth goal. The
lackluster Connecticut economy is limiting the rate of earnings
growth for Yankee Gas' natural gas distribution business. Our
non-utility subsidiaries are targeted to contribute an increasing
percentage of Yankee Energy s total earnings and grow at a
substantially higher rate.
3. To create new and diverse career opportunities for our
employees. Developing career paths with increasing
responsibilities will allow us to attract and retain the most
talented people.
Our primary focus will be on the activities of Yankee Energy
Services Company (YESCo). With the hiring of several key
personnel and the purchase of BVA Cogen, Inc. (BVA), we achieved
our 1995 goal of positioning YESCo to be able to strengthen its
efforts in the marketplace. YESCo is now actively engaged in a
number of projects to provide customers
Page ten
<PAGE>
with innovative solutions to their energy-related needs such as
reliability and supply of cost-effective electricity. Many of
these solutions will take the form of on-site generation of
electricity, steam and compressed air using natural gas-fired
equipment. In addition, customers will soon have the ability to
choose their electric and gas suppliers. YESCo is ready to
acquire and manage energy supplies for its customers and have
them delivered over the local utility distribution system.
The addition of BVA has allowed us to accelerate our entry into
the smaller sized on-site electric generation market. Led by its
president, Jim Sweeney, BVA has specialized in designing,
building and maintaining cogeneration plants that utilize gas-
fired reciprocating engines. In addition, and consistent with
this technological application, BVA acquired in 1995 the U.S.
distribution rights to reciprocating engines made by Duetz MWM, a
German manufacturer. These engines, offered in a wide variety of
sizes, possess high reliability and low emission characteristics
and have been operating successfully around the world for a
number of years. Being a distributor gives us an additional
advantage for competing for projects to further enhance our
earnings potential.
A secondary thrust of our diversification efforts will take place
through R. M. Services, Inc. (RMS). This subsidiary was created
to offer a full menu of receivables management services to other
utilities. In addition, RMS has capabilities in providing
telemarketing and phone surveying services. Led by Murry
Staples, RMS personnel possess significant expertise and
experience in credit and collection activities and have a proven
track record of success. This is demonstrated by the ratio of
bad debt expense to revenues for Yankee Gas which has declined
four years in a row and is below that of any other major
independent gas company in New England. During the past two
years, we have had a number of inquiries from both electric and
gas utilities seeking insights into our performance. We have
determined through diligent research that a market exists to
provide services to other utilities experiencing difficulty with
their level of unpaid bills. We believe that, more and more,
utilities that cannot achieve a high degree of success compared
to their peers will choose to outsource to companies, such as
RMS, who can improve their results.
We have developed comprehensive, highly integrated plans
governing our diversification efforts and we now have a group of
talented, highly motivated employees dedicated to achieving our
objectives. We are confident our efforts will be successful and
create additional shareholder value. Like the Yankee Energy
sponsored pro-stock racing car, we re "Racing Ahead of the
Competition."
"Our people's proven track record demonstrates we can deliver
'best in class' receivables management solutions to our
customers. By blending state-of-the-art technologies with
experienced and highly motivated people, we have created a
modern, professional and competitive work environment that can
meet our customers' objectives and ours to bring about
increasing shareholder value."
Bottom Left Headshot of Murry K. Staples, General Manager, RMS
Services, Inc.
Page eleven
<PAGE>
DIRECTORS & OFFICERS
BOARD OF DIRECTORS
Branko Terzic1
Chairman and Chief Executive Officer
Yankee Energy System, Inc.
Meriden, CT
Sanford Cloud, Jr.2,3
President and Chief Executive Officer
The National Conference
New York, NY
Eileen S. Kraus2,4,5
Chairman
Fleet Bank, N.A.
Hartford, CT
Frederick M. Lowther4,5
Partner
Dickstein, Shapiro & Morin, LLP
Washington, D.C.
Thomas H. O Brien3,5
President
O Brien Associates
Garden City, NY
Leonard A. O Connor2,3
Retired Vice President and
Chief Financial Officer
Yankee Energy System, Inc.
Meriden, CT
Emery G. Olcott1,4,5
President and Chief Executive Officer
Canberra Industries, Inc.
Meriden, CT
Nicholas L. Trivisonno1,2,3
Executive Vice President
Finance and Chief Financial Officer
The Dun & Bradstreet Corporation
Wilton, CT
Left of Page: Photos of Directors listed above.
Officers of Yankee Energy System, Inc.
Branko Terzic
Chairman and Chief Executive Officer
Charles E. Gooley
Executive Vice President
Michael E. Bielonko
Vice President and Chief Financial Officer
Ellen J. Quinn
Vice President
Thomas J. Houde
Vice President
Mary J. Healey
Vice President, General Counsel & Secretary
Nicholas A. Rinaldi
Controller
Sarah K. Sanders
Treasurer
Committees of the Board
1 Executive
2 Audit
3 Finance
4 Organization and Compensation
5 Committee on Directors
Page twelve
<PAGE>
FINANCIAL INFORMATION
Contents
Management's Discussion and Analysis
Management and Independent Public Accountants Reports
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Capitalization
Consolidated Statements of Common Shareholders' Equity
Notes to Consolidated Financial Statements
Selected Financial and Operating Data
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Financial Condition
OVERVIEW
Yankee Energy System, Inc. (Yankee Energy or the Company) is a
holding company, headquartered in Connecticut, whose principal
operating subsidiary is Yankee Gas Services Company (Yankee Gas).
Yankee Gas provides retail distribution of natural gas to a
service area comprising 67 cities and towns in Connecticut which
cover approximately 2,200 square miles. The Company has five
nonregulated subsidiaries: Housatonic Corporation (Housatonic)
which owns a 10.5 percent equity interest in the Iroquois Gas
Transmission System, L.P. (Iroquois); NorConn Properties, Inc.
(NorConn) which owns selected system real estate; Yankee Energy
Financial Services Company (Yankee Financial) which provides
certain customers with financing to promote the sale of natural
gas; Yankee Energy Services Company (YESCo) whose purpose is to
encourage additional natural gas sales in special applications to
large customers and to make capital investments in such projects,
including on-site electric generation; and R.M. Services, Inc.
(R.M. Services) which was formed to provide collection services
to businesses and municipalities.
The Company reported consolidated net income of $12.4 million, or
earnings per share of $1.20 for its fiscal year ended September
30, 1995. This compares with consolidated net income of $18.6
million and $17.5 million, reflecting earnings per share of $1.81
and 1.70, respectively, for fiscal years ended September 30, 1994
and 1993. Earnings for fiscal year 1994 reflect an $0.08
per share charge resulting from an early redemption premium on
the Company's preferred stock. Earnings decreased in 1995
principally due to (1) the warmer weather experienced during the
fiscal year, (2) organizational charges resulting from the
Company's business transformation efforts which commenced in
fiscal year 1995, and (3) provision for resolution of the federal
investigation of the Iroquois pipeline concerning alleged
environmental violations during its construction. The increase
in 1994 earnings was due primarily to higher firm sales from
colder weather in fiscal 1994 and lower interest expense.
During fiscal 1995, the Company initiated a business
transformation project. The goal of the project is to streamline
the Company's operations by taking advantage of certain
consolidation opportunities within the field organization and to
improve overall business processes to achieve future operating
efficiencies and savings. This goal is complemented with
additional opportunities for business expansion and growth. In
connection with the business transformation project, the Company
reducted its workforce, through voluntary and involuntary
programs, by 86 employees. Organization charges related to the
business transformation plan, which included an early retirement
program, resulted in a one time operating charge of $5.4 million
with an after tax effect on earnings per share of $0.30. The
charge consists mainly of severance and additional retirement
benefits paid to those employees affected by the transformation
process. The transformation process is scheduled to be completed
by the end of fiscal 1996 and is expected to result in future
annual pre-tax cost savings of approximately $3.9 million.
Management plans to use the savings to capitalize on growth
opportunities thereby maximizing the Company's competitive
position and improving shareholder value.
Earnings on Housatonic's investment in Iroquois in fiscal 1995
were approximately $0.4 million and contributed $0.04 to earnings
per share as compared to $1.8 million in fiscal 1994 or $0.17 per
share. Housatonic's earnings for fiscal 1995 reflect a $2.1
million provision representing Housatonic's share of Iroquois'
estimated charge associated with the federal investigation of
Iroquois concerning alleged environmental violations during
construction of the Iroquois pipeline. This provision caused
1995 earnings to decrease by $0.20 per common share. As of
September 30, 1995, Housatonic's investment in Iroquois totaled
approximately $19.6 million. Housatonic received net cash
distributions from Iroquois of approximately $1.5 million in
fiscal 1995 and $2.2 million in fiscal 1994. For further
information on Iroquois, see Note 8 to the Consolidated Financial
Statements.
Despite the earnings decrease resulting from a 13 percent warmer
heating season, the Company increased dividends paid per share to
$1.24 in 1995, up 4.2 percent, from the $1.19 per share in 1994.
Fiscal 1995 earnings per share are based on 10,322,447 average
common shares outstanding. All prior period per share amounts
are based on 10,287,683 average common shares outstanding. The
Company issued 108,839 new shares of common stock during fiscal
1995 under its Shareholder Investment Plan. The Company issued
an additional 775,000 shares of common stock (1,162,500 shares
restated for the three-for-two common stock split) on October 28,
1992. All per share amounts in this report have been adjusted to
reflect the three-for-two common stock split on June 28, 1993.
RATE MATTERS
On April 8, 1992, the Federal Energy Regulatory Commission (FERC)
issued Order No. 636 on pipeline restructuring. In essence, the
FERC found that absent the unbundling of traditional merchant
services, pipelines would not be able to achieve the FERC's long-
term goal of open access and provide transportation services that
are indifferent to the seller of the gas. Order No. 636,
therefore, required all pipelines to implement restructuring of
their services by the winter of 1993-94. The three major
pipeline systems serving Yankee Gas (Iroquois, Tennessee Gas
Pipeline Company and Algonquin Gas Transmission Company and its
affiliate, Texas Eastern Transmission Company), have all
restructured pursuant to the FERC directive. Iroquois was
designed and constructed as a transportation-only pipeline, and
as such, its restructuring has very minimal impact.
Order No. 636 acknowledges that the restructuring of the
pipelines' traditional services will cause pipelines to incur
transition costs in several areas and provides mechanisms for the
pipelines to fully recover prudently incurred transition costs
attributable to the implementation of Order No. 636.
On July 8, 1994, the Connecticut Department of Public Utility
Control (DPUC) issued a decision on the implementation of FERC
Order No. 636 by the Connecticut Local Distribution Companies
(LDCs). The DPUC is allowing the LDCs to offset the transition
costs billed by pipelines under Order No. 636 with recoveries
from capacity release activity, refunds or deferred gas costs
credits for the 1992-93 period and all subsequent annual deferred
gas costs, gas supplier refunds and fifty percent of off-system
sales margins and interruptible margins earned in excess of
target amounts. With the exception of all subsequent annual
deferred gas costs credits, the DPUC has ordered that all
transition cost recovery dollars be applied immediately on a
monthly basis to the transition costs that have been or are
subsequently billed. All subsequent annual deferred gas costs
credits will be applied on an annual basis. If needed, a per
unit surcharge will be applied to firm customers' bills.
Through September 30, 1995, Yankee Gas has paid approximately
$14.0 million of transition costs and an additional $1.0 million
are anticipated. To date, Yankee Gas has collected $23.1 million
through a combination of gas supplier refunds, deferred gas costs
credits and excess interruptible margins.
On September 12, 1995, a proposed settlement agreement between
Yankee Gas and the Office of Consumer Counsel (OCC) was filed
with the DPUC. This three-year settlement agreement provides for
the retention of overcollected transition cost credits to offset
certain deferred expenses. As a result of this proposed
settlement agreement, Yankee Gas would stipulate that, except in
the event of certain circumstances which would adversely affect
Yankee Gas' financial condition, it would not increase its rates
prior to September 30, 1998. As of December 18, 1995, no
final decision had been rendered by the DPUC.
On August 2, 1995, the DPUC issued a Final Decision in Docket No.
94-11-12, DPUC Review of Connecticut Local Distribution
Companies' Cost of Service Study Methodologies. The docket
investigated the issues surrounding the development of firm
transportation (FT) rates at the state level in response to
FERC Order No. 636. The Decision provides guidelines for the
development of FT rates to be offered by the state's three LDCs.
Each LDC filed specific FT rate proposals in separate company
rate dockets. The Decision states that an FT rate option should
be implemented for the largest commercial and industrial
customers upon the conclusion of the individual company rate
dockets. The Company has proposed that all commercial and
industrial FT rates go into effect on April 1, 1996.
Hearings were held in November, 1995 to review Yankee Gas'
FT rate proposal. A final decision on rates is expected in
January, 1996. This FT filing will not address Yankee Gas'
revenue requirements and will maintain the existing margin
recovery and rates of return established in the last rate case
decision issued for Yankee Gas in 1992.
RESULTS OF OPERATIONS
OPERATING REVENUES
Operating revenues decreased $23.3 million from 1994 to 1995 and
increased $14.6 million from 1993 to 1994. The components of the
change in operating revenues for the past two years are provided
in the following table:
<TABLE>
<CAPTION>
(Millions of Dollars)
Increase/(Decrease)
Years Ended September 30, 1995 vs 1994 1994 vs 1993
<S> <C> <C>
Firm and other (excluding gas
cost recoveries):
Regulatory decision $ - $ 0.2
Sales, transportation
and other (6.6) 3.9
_____ ____
Subtotal - Firm and
other (6.6) 4.1
_____ ____
Interruptible (excluding gas
cost recoveries):
Sales and transportation - -
Margin sharing (0.8) 0.5
____ ____
Subtotal -
Interruptible (0.8) 0.5
____ ____
Total excluding gas cost
recoveries (7.4) 4.6
Plus: Gas cost
recoveries (15.9) 10.0
____ ____
Total $(23.3) $14.6
_____ _____
_____ _____
</TABLE>
The corresponding changes in the Company's throughput were as
follows:
<TABLE>
<CAPTION>
(Mcf-thousands)
Years Ended September 30, 1995 vs 1994 1994 vs 1993
<S> <C> <C>
Firm sales and transportation (1,891) 1,603
Interruptible sales and
transportation 3,492 858
_____ _____
Total 1,601 2,461
_____ _____
_____ _____
</TABLE>
Although operating revenues reflect a decrease in firm sales,
primarily related to a 13 percent warmer heating season than that
of 1994, increases in off-system sales and transportation to
others amounted to approximately $2.3 million over 1994 levels.
The increase in firm and other revenues from 1993 to 1994 was due
primarily to increased firm gas heating sales reflecting colder
weather experienced in 1994. Despite an increase in
interruptible sales from 1993 to 1994, interruptible margin was
essentially flat, reflecting a decrease in per unit revenue in
fiscal 1994 compared to fiscal 1993. This per unit revenue
decrease is attributable to an increasingly competitive
environment. Additionally, certain interruptible customers were
shut-off in January, 1994 due to high demand as a result of
twenty-eight percent colder weather compared to January, 1993.
Interruptible margins in excess of target amounts earned in
fiscal 1994 were applied to unrecovered transition costs as
allowed in the July 8, 1994 DPUC decision and resulted in a
reduction of the required sharing with firm customers of
interruptible margins in excess of target amounts when compared
to fiscal 1993.
Gas cost recoveries decreased due to lower firm sales and lower
per-unit gas costs in fiscal 1995 compared to fiscal 1994. Gas
cost recoveries increased in fiscal 1994 compared to fiscal 1993
due to higher firm sales and the effect of less of an
underrecovery of gas costs in fiscal 1994 compared to fiscal
1993.
COST OF GAS
Cost of gas decreased $13.4 million in 1995 compared to 1994 and
increased $11.0 million in 1994 compared to 1993. The Company
defers differences between actual purchased gas costs and the
current cost recovery and recovers or refunds such differences in
future periods. This deferral results in an increase or decrease
to gas costs in each fiscal year. The 1995 decrease was
primarily due to lower volumes of gas purchased as a result of
the warmer weather. The fiscal 1994 deferral reflected an
underrecovery of gas costs that was less than the underrecovery
in fiscal 1993 and had the effect of increasing gas costs for
fiscal 1994.
OTHER OPERATING EXPENSES
Total other operating expenses decreased $4.4 million in 1995
compared to 1994 and increased $2.9 million in 1994 compared to
1993 as a result of the following items:
Operation and maintenance expense decreased $2.7 million
in 1995 compared to 1994 and increased $3.6 million in 1994
compared to 1993. The 1995 decrease was primarily due to
lower uncollectible accounts expense, the effect of a 1994
special marketing inventive program and lower maintenance
costs associated with mains, services, equipment and general
plant. The 1994 increase was due primarily to higher
payroll and employee benefits.
Depreciation expense decreased $0.5 million in 1995 compared
to 1994 and decreased $0.1 million in 1994 compared to 1993.
The 1995 and 1994 decreases were primarily due to changes in
the estimated cost of removal percentages for distribution
property in 1994, which were partially offset by
depreciation on normal plant additions.
Federal and state income taxes, including the portion
contained in other income decreased $5.1 million in 1995
compared to 1994, and decreased $0.1 million in 1994
compared to 1993. The 1995 decrease was primarily due to
decreased earnings from operations. Please refer to Note 2
to the Consolidated Financial Statements for additional
information concerning the components of federal and state
income taxes.
Taxes other than income taxes decreased $1.4 million in
1995 compared to 1994 and $0.5 million in 1994 compared to
1993. The 1995 decrease is primarily due to lower gross
earnings taxes which resulted from lower revenues in 1995
compared to 1994, partially offset by higher municipal
taxes. The 1994 decrease was due to higher unemployment tax
expense in 1993 associated with claims paid to Yankee Gas
bargaining unit employees during a ten week work stoppage
that ended on January 4, 1993.
The Company has undergone a company-wide business
transformation review, the objectives of which were to
improve the efficiency of business processes, reduce costs
and increase revenues. The 1995 organizational charge of
$5.4 million represents (i) the present value of excess
retirement benefits (above and beyond the Company's standard
employee benefit plans) provided to Company employees who
opted for early retirement and to the Company's former chief
executive officer who retired effective March 1, 1995, (ii)
severance pay and benefits to laid-off employees and (iii)
the cost of outside services related to the Company's
transformation efforts.
Other income decreased $1.1 million in 1995 compared to 1994
and increased $0.1 million in 1994 compared to 1993. The 1995
decrease is primarily due to the recognition of Housatonic's
proportionate share of the provision representing Iroquois'
estimated charge associated with the federal investigation.
Interest expense in 1995 increased $1.3 million as compared to
1994 primarily due to higher levels of short-term debt and higher
interest on the Company's Purchased Gas Adjustment (PGA) balance
in the current period. These increases were partially offset by
savings resulting from the retirement of higher rate long-term
debt. Interest expense in 1994 decreased $0.8 million as
compared to 1993 partly due to lower interest on long-term debt
resulting from the retirement of the $15 million first mortgage
bond in April, 1993. Additionally, there was lower interest
expense on the Company's PGA balance in 1994.
LIQUIDITY AND CAPITAL RESOURCES
Expenditures for utility plant totaled $25.3 million in 1995
reflecting a $2.5 million increase from 1994 and was primarily
attributable to plant additions.
Cash flow (defined as net income adjusted for non-cash items such
as depreciation, deferred income taxes and the Company's non-cash
equity earnings from investments) represents the cash generated
from operations available for capital expenditures, dividends and
other needs. Cash flows from operating activities increased $6.7
million in fiscal 1995 compared to fiscal 1994, and increased
$0.7 million in fiscal 1994 compared to fiscal 1993.
The seasonal nature of gas revenues, inventory purchases and
construction expenditures create a need for short-term borrowing
to supplement internally generated funds. Yankee Gas has
arranged a $60 million revolving line of credit with a group of
five banks whereby funds may be borrowed on a short-term
revolving basis using either fixed or variable rate loans. Yankee
Gas also has an additional $27 million of credit lines available
on an uncommitted basis. Yankee Gas had $17.7 million and $17.3
million outstanding under its agreements at September 30, 1995
and 1994, respectively. In addition, Yankee Energy (parent) had
$10.8 million and $7.3 million outstanding on a $15 million line
of credit at September 30, 1995 and 1994, respectively. The
weighted average interest rates on short-term borrowings at
September 30, 1995 and 1994 were 6.0 percent and 5.4 percent,
respectively.
The long-term credit needs of Yankee Gas are being met by a first
mortgage bond indenture that provides for the issuance of bonds
from time to time as the need arises, subject to certain issuance
tests. At September 30, 1995, indenture requirements, including
the required coverage ratio, would allow for the issuance of an
additional $61.0 million of bonds at an assumed interest rate of
7.37 percent.
On April 1, 1995, Yankee Gas redeemed all $18,000,000 Series A
Tranche B First Mortgage Bonds which matured on that date. The
Company used cash on hand and short-term bank debt to redeem the
bonds. On June 30, 1995, Yankee Gas issued $20 million principal
amount of Series D First Mortgage Bonds through a private
placement. The bonds were sold by the initial purchaser to
"qualified institutional buyers" as defined in and pursuant to
Rule 144A under the Securities Act of 1933. The bonds will
mature June 1, 2005 and interest is payable at an annual rate of
6.75 percent. Net proceeds from the sale of the bonds were used
to repay short-term indebtedness incurred to redeem Yankee Gas
Series A Tranche B Bonds, which matured April 1, 1995, and to
reduce short-term debt.
On July 1, 1994, Yankee Gas redeemed all 600,000 outstanding
shares of its 9.125 percent cumulative preferred stock, $25 par
value. The Company used cash on hand to pay both the $15 million
par amount and the early redemption premium of $879,900.
On November 4, 1994, Yankee Energy filed a Form S-3 registration
statement with the Securities and Exchange Commission to issue up
to 1,200,000 shares of common stock under its proposed
Shareholder Investment Plan (Plan). The Plan, which became
effective January 25, 1995, provides existing
shareholders and their family members the ability to acquire
shares of common stock through dividend reinvestment or voluntary
cash purchases. The Plan provides the Company the option to use
new shares of common stock or market purchases. The Company
issued 108,839 new shares which provided 2.3 million of new
equity funding in fiscal 1995. The new equity was used primarily
to provide capital contributions to the Company's nonregulated
subsidiaries.
At September 30, 1995, Housatonic's investment in Iroquois,
including its non-cash equity portion, was $19.6 million. On
November 1, 1992, a $20 million bank credit agreement utilized by
Housatonic for purposes of making its equity contributions to
Iroquois converted to a three-year variable rate term loan
requiring annual sinking fund payments. At September 30, 1995,
Housatonic had $2.0 million outstanding on this agreement which
was paid on November 1, 1995.
The Company's estimated construction expenditures for the fiscal
years 1996 through 2000 are $151 million, including $34 million
for 1996. Approximately $20 million, including $3.0 million for
1996, of the total estimated construction expenditures is
expected to be invested in independent power production projects
through the Company's nonregulated subsidiary, YESCo. The 1996
construction expenditures are expected to be financed by a
combination of internally generated funds and short-term
borrowings. For Yankee Gas, long-term debt maturities and
sinking fund requirements during this period total $47.8
million and are expected to be refinanced with additional debt
issues as they come due.
The estimated expenditures discussed above for the five-year
period 1996 to 2000 are exclusive of any expenditures for
remediation of coal tar contamination. As more fully discussed
in Note 8 to the Consolidated Financial Statements, the Company
expects to incur additional expenditures for remediation efforts,
most of which will be deferred for future recovery in rates.
Depending upon the timing and extent to which such costs occur,
the Company expects to finance such expenditures through a
combination of internally generated funds and short-term debt.
The Company is also pursuing recovery of costs from insurance.
It is too soon to determine the probability of recovery or the
amount recoverable.
In September 1995, the Company authorized the formation of R.M.
Services, Inc., which is Yankee Energy's fifth nonregulated
subsidiary. The Company, capitalizing on Yankee Gas' credit and
collection expertise, formed R.M. Services, Inc. to provide
collection services to businesses and municipalities.
<PAGE>
MANAGEMENT REPORT
The consolidated financial statements of Yankee Energy System,
Inc. and subsidiaries and other sections of this Annual Report
were prepared by management, which is responsible for their
integrity and objectivity. These financial statements, which
were audited by Arthur Andersen LLP, were prepared in accordance
with generally accepted accounting principles using estimates and
judgement, where required, and giving consideration to
materiality.
The Company maintains a system of internal controls over
financial reporting, which is designed to provide reasonable
assurance to the Company's management and Board of Directors
regarding the preparation of reliable published financial
statements. The system contains self-monitoring mechanisms, and
actions are taken to correct deficiencies as they are identified.
Even an effective internal control system, no matter how well
designed, has inherent limitations, including the possibility of
the circumvention or overriding of controls, and such systems can
provide only reasonable assurance with respect to financial
statement preparation. Further, because of changes in conditions,
internal control system effectiveness may vary over time.
Through established programs, the Company regularly emphasizes to
its management employees their internal control responsibilities
and policies prohibiting conflicts of interest. The Audit
Committee of the Board of Directors is composed entirely of
outside directors. This Committee meets periodically with
management, the internal auditors and the independent auditors to
review the activities of each and to discuss audit matters,
financial reporting and the adequacy of internal controls.
Management believes that its system of internal accounting
controls and control environment provide reasonable assurance
that its assets are safeguarded from loss or unauthorized use and
that its financial records, which are the basis for the
preparation of all financial statements, are reliable.
Branko Terzic,
Chairman, President and
Chief Executive Officer
Michael E. Bielonko,
Vice President and
Chief Financial Officer
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Yankee Energy
System, Inc.:
We have audited the accompanying consolidated balance sheets and
consolidated statements of capitalization of Yankee Energy
System, Inc. (a Connecticut corporation) and subsidiaries (the
Company) as of September 30, 1995 and 1994, and the related
consolidated statements of income, common shareholders' equity
and cash flows, for each of the three years in the period ended
September 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Yankee Energy System, Inc. and subsidiaries as of September
30, 1995 and 1994 and the results of their operations and their
cash flows for each of the three years in the period ended
September 30, 1995, in conformity with generally accepted
accounting principles.
Hartford, Connecticut Arthur Andersen LLP
November 21, 1995
<PAGE>
<TABLE>
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Thousands of Dollars, except share information)
<CAPTION>
For the Years Ended September 30, 1995 1994 1993
<S> <C> <C> <C>
Operating Revenues $293,996 $317,298 $302,657
Less: Cost of Gas 155,378 168,816 157,816
________ ________ ________
Revenues, net of cost of gas 138,618 148,482 144,841
________ ________ ________
Other Operating Expenses:
Operations 53,831 54,980 52,282
Maintenance 6,251 7,753 6,860
Depreciation 16,520 16,993 17,133
Federal and state income taxes 9,406 14,624 14,643
Taxes other than income taxes 21,444 22,844 23,359
Organizational charges 5,391 - -
________ ________ _________
Total Other Operating Expenses 112,843 117,194 114,277
________ ________ _________
Operating Income 25,775 31,288 30,564
Other Income, net 2,088 3,184 3,008
________ _______ ________
Income Before Interest Charges 27,863 34,472 33,572
Interest Charges, net 15,505 14,165 14,996
________ ________ ________
Income Before Preferred Dividends
and Redemption Premium 12,358 20,307 18,576
Preferred Dividends - 822 1,097
________ ________ ________
Income Before Redemption Premium 12,358 19,485 17,479
Premium on Early Redemption of
Preferred Stock - 880 -
________ ________ ________
Net Income $12,358 $18,605 $17,479
________ ________ ________
________ ________ ________
Earnings per Common Share Before
Redemption Premium $1.20 $1.89 $1.70
Effect of Redemption Premium on
Earnings per Common Share - (0.08) -
_____ _____ _____
Total Earnings per Common Share $1.20 $1.81 $1.70
_____ _____ _____
_____ _____ _____
Common Shares Outstanding
(Average) 10,332,447 10,287,683 10,287,683
__________ _________ _________
__________ _________ _________
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE>
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Thousands of Dollars)
<CAPTION>
At September 30, 1995 1994
ASSETS
<S> <C> <C>
Utility Plant, at original cost $488,540 $468,202
Less: Accumulated provision for depreciation 174,522 164,327
_______ _______
314,018 303,875
Construction work in progress 10,852 11,188
_______ _______
Total Net Utility Plant 324,870 315,063
_______ _______
Other Property and Investments 30,565 28,609
_______ _______
Current Assets:
Cash and temporary cash investments 725 602
Accounts receivable, less accumulated
provision for uncollectible accounts of
$5,481 in 1995 and $5,444 in 1994 22,044 21,412
Fuel supplies 10,611 10,936
Other material and supplies 1,625 1,550
Recoverable gas costs 1,713 429
Accrued utility revenues 5,638 5,751
Prepaid Taxes 281 3,352
Other 4,069 3,933
_______ _______
Total Current Assets 46,706 47,965
_______ _______
Deferred Gas Costs 2,261 4,338
Recoverable Environmental Cleanup Costs 38,331 36,467
Recoverable Income Taxes 27,575 32,198
Recoverable Postretirement Benefits Costs 2,390 1,419
Other Deferred Debits 6,603 15,459
________ ________
Total Assets $479,301 $481,518
________ ________
________ ________
</TABLE>
<TABLE>
<CAPTION>
CAPITALIZATION AND LIABILITIES
<S> <C> <C>
Capitalization (see accompanying statements):
Common shareholders' equity $151,753 $149,547
Long-term debt 141,049 126,966
_______ _______
Total Capitalization 292,802 276,513
_______ _______
Current Liabilities:
Notes payable to banks 28,525 24,600
Long-term debt - current portion 5,917 26,667
Accounts payable 18,300 17,805
Accrued interest 3,569 4,124
Refundable gas costs 697 106
Pipeline transition costs payable 962 573
Other 5,593 4,483
_______ _______
Total Current Liabilities 63,563 78,358
_______ _______
Accumulated Deferred Income Taxes 39,513 41,439
Unfunded Deferred Income Taxes 27,557 32,150
Accumulated Deferred Investment Tax Credits 9,457 9,835
Reserve for Environmental Cleanup Costs 35,000 35,000
Unfunded Postretirement Benefits Costs 2,390 1,419
Other Deferred Credits 9,019 6,804
Commitments and Contingencies (Note 8)
________ ________
Total Capitalization and Liabilities $479,301 $481,518
________ ________
________ ________
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE>
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Thousands of Dollars)
<CAPTION>
For the Years Ended September 30, 1995 1994 1993
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Income before preferred dividends $12,358 $20,307 $18,576
Adjusted for the following:
Depreciation 16,520 16,993 17,133
Equity earnings from investments (2,552) (3,352) (3,443)
Deferred income taxes, net (1,545) 3,191 11,815
Deferred gas costs activity and other
non-cash items 10,609 (9,203) (8,221)
Changes in working capital:
Accounts receivable and
accrued utility revenues (519) (1,933) (2,172)
Accounts payable 495 1,066 4,196
Accrued taxes 3,071 542 (6,246)
Other working capital (excludes cash) 20 4,103 (614)
______ _______ _______
Net cash provided by
operating activities 38,457 31,714 31,024
_______ _______ _______
Cash Flows From Financing Activities:
Net proceeds from common
stock issuance 2,308 - 21,544
Net proceeds from long-term debt 20,000 - 19,790
Early redemption-preferred stock - (15,000) -
Retirement of long-term debt (26,667) (8,667)(20,750)
Net increase (decrease) in
short-term debt 3,925 24,600 (15,300)
Cash dividends-preferred stock - (822) (1,097)
Early redemption premium -
preferred stock - (880) -
Cash dividends-common stock (12,808) (12,242)(11,659)
_______ _______ _______
Net cash used for financing activities (13,242) (13,011) (7,472)
_______ _______ _______
Investment In Plant and Other:
Utility Plant, net of allowance for
other funds used during construction(25,311) (22,790)(21,501)
Other property and investments (1,251) (5,703) (1,779)
Iroquois distributions 1,470 3,883 5,775
_______ _______ _______
Net cash used for plant and
other investments (25,092) (24,610)(17,505)
_______ _______ _______
Net Increase (Decrease) In Cash and
Temporary Cash Investments For The Year 123 (5,907) 6,047
Cash and Temporary Cash Investments,
beginning of year 602 6,509 462
_______ _______ _______
Cash and Temporary Cash Investments,
end of year $ 725 $ 602 $6,509
_______ _______ _______
_______ _______ _______
Supplemental Cash Flow Information:
Cash paid during the year for:
Interest, net of amounts capitalized $14,412 $14,420 $15,778
Income taxes $ 8,681 $11,195 $10,147
</TABLE>
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE>
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
Consolidated Statements of Capitalization
(Thousands of Dollars)
<CAPTION>
At September 30, 1995 1994
<S> <C> <C>
Common Shareholders' Equity:
Common shares - $5 par value, authorized
20,000,000 shares; 10,396,522 and
10,287,683 shares outstanding at
September 30, 1995 and 1994 $51,982 $51,438
Capital surplus, paid in 86,965 85,294
Unearned compensation-restricted
stock awards (a) (103) (144)
Retained earnings 14,709 15,159
Employee stock ownership plan guarantee (b) (1,800) (2,200)
_______ _______
Total Common Shareholders' Equity 151,753 149,547
_______ _______
Long-Term Debt:
First Mortgage Bonds (c)
Maturity Interest Rates
1995 9.86% 0 18,000
1997 9.90% 30,000 30,000
2004 10.03% 30,266 33,633
2019 10.07% 19,000 19,000
2022 8.48% 20,000 20,000
2023 8.63% 20,000 20,000
2025 6.75% 20,000 0
________ ________
Total First Mortgage Bonds 139,266 140,633
Term Loan Agreement, variable rate,
due November, 1995 (c) 2,000 6,750
Note Purchase Agreement, 9.55%,
due November, 2000 (c) 3,900 4,050
Guarantee of Employee Stock Ownership Plan
Term Loan Agreement, 10.38%,
due July, 1999 (b) 1,800 2,200
_______ _______
Total Long-Term Debt 146,966 153,633
Less amounts due within one year (b)(c) 5,917 26,667
_______ _______
Long-Term Debt, Net 141,049 126,966
_______ _______
Total Capitalization $292,802 $276,513
________ ________
________ ________
</TABLE>
(a) Consistent with the terms of the Non-Employee Directors'
Restricted Stock Plan, incentive awards of 1,050 shares of
restricted common stock were granted to Directors during 1995.
Under the Long-Term Incentive Compensation Plan the market value
of the restricted stock awards has been recorded as unearned
compensation and is shown as a separate component of
shareholders' equity. The earned compensation is charged to
administrative and general expense as shares become vested.
Earned compensation was approximately $132,000 for fiscal 1995
and $171,000 for fiscal 1994.
(b) On July 20, 1989, Yankee Energy became guarantor of a term
loan agreement between the Trustee for the Company's 401(k)
Employee Stock Ownership Plan (ESOP), and a commercial bank, in
the amount of $4,000,000. The proceeds were used by the Trustee
exclusively to acquire outstanding shares of Yankee Energy common
stock pursuant to the terms of the Company's ESOP. The final
maturity date of the agreement is July 1, 1999 with an annual
sinking fund requirement of $400,000 for the fiscal years 1996
through 1998 and $600,000 for the 1999 fiscal year.
(c) Long-term debt maturities and cash sinking-fund requirements
on debt outstanding at September 30, 1995 for each of the fiscal
years 1996 through 2000 (excluding the ESOP sinking fund
requirement) are $5,517,000. $33,517,000, $3,517,000, $3,517,000
and $4,467,000, respectively.
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<TABLE>
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
Consolidated Statements of Common Shareholders' Equity
(Thousands of Dollars)
<CAPTION>
Employee
Stock
Capital (a) Ownership
Common Surplus, Retained Plan
Shares Paid In Earnings Guarantee Total
<S> <C> <C> <C> <C> <C>
Balance at
September
30, 1992 $30,417 $84,498 $ 2,976 $(3,000) $114,891
Net Income 17,479 17,479
Issuance of
775,000 common shares -
$5 par value 3,875 18,794 22,669
Three-for-two
stock split (b) 17,146 (17,146) --
Cash dividends
on common
shares - $1.13
per share (b) (11,659) (11,659)
Employee stock
ownership plan
loan repayment 400 400
Common stock
issuance expenses (1,125) (1,125)
Unearned compensation-
restricted stock
awards (c) (97) (97)
Amortization of
preferred stock
issuance expenses 6 6
_____ ______ ______ ______ _______
Balance at
September
30, 1993 51,438 84,930 8,796 (2,600) 142,564
Net Income
before redemption
premium 19,485 19,485
Cash dividends on
common shares -
$1.19 per share (b) (12,242) (12,242)
Employee stock
ownership plan
loan repayment 400 400
Unearned compensation-
restricted stock
awards (c) 137 137
Amortization of
preferred stock
issuance expenses 83 83
Early redemption premium
on preferred stock (d) (880) (880)
_____ _____ ______ ______ _______
Balance at
September
30, 1994 51,438 85,150 15,159 (2,200) 149,547
Net Income 12,358 12,358
Issuance of 108,839
common shares -
$5 par value 544 1,764 2,308
Cash dividends
on common shares -
$1.24 per share (12,808) (12,808)
Employee stock
ownership plan
loan repayment 400 400
Common stock
issuance expenses (92) (92)
Unearned compensation -
restricted stock
awards (c) 40 40
______ _______ ______ ______ ______
Balance at
September
30, 1995 $51,982 $86,862 $14,709 $(1,800) $151,753
_______ _______ _______ _______ ________
_______ _______ _______ _______ ________
</TABLE>
(a) Yankee Gas has dividend restrictions imposed by its Bond
Purchase Agreements. At September 30, 1995, retained earnings
available for common dividends under the terms of the Series A
agreement totaled approximately $23.9 million and $34.3 million
under the terms of the Series B and C agreements.
(b) Cash dividends on common shares have been restated for fiscal
years 1993 and 1992 to give retroactive effect to the three-for-
two stock split on June 28, 1993. Amount transferred to common
shares in fiscal year 1993 represents the par value of the
additional shares issued.
(c) See note (a) of the Consolidated Statements of
Capitalization.
(d) On July 1, 1994, the Company redeemed all 600,000 outstanding
shares of its 9.125 percent cumulative preferred stock, $25 par
value and paid a 5.866 percent early redemption premium of
$879,900.
The accompanying notes are an integral part of these financial
statements.
<PAGE>
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1) Summary of Significant Accounting Policies
The Company: Yankee Energy System, Inc. (Yankee Energy or the
Company) is a holding company, headquartered in Connecticut,
whose principal operating subsidiary is Yankee Gas Services
Company (Yankee Gas). Yankee Gas provides retail distribution of
natural gas to a service area comprising 67 cities and towns in
Connecticut which cover approximately 2,200 square miles. The
Company has five nonregulated subsidiaries: Housatonic
Corporation (Housatonic) which owns a 10.5 percent equity
interest in the Iroquois Gas Transmission System, L.P.
(Iroquois); NorConn Properties, Inc. (NorConn) which owns
selected system real estate; Yankee Energy Financial Services
Company (Yankee Financial) which provides certain customers with
financing to promote the sale of natural gas; Yankee Energy
Services Company (YESCo) whose purpose is to encourage
additional natural gas sales in special applications to large
customers and to make capital investments in such projects,
including on-site electric generation; and R.M. Services, Inc.
(R.M. Services) which was formed to provide collection services
to businesses and municipalities.
PRINCIPLES OF CONSOLIDATION: The consolidated financial
statements of Yankee Energy include the accounts of all
subsidiaries. Intercompany transactions have been eliminated in
consolidation.
PUBLIC UTILITY REGULATION: Yankee Gas is subject to regulation
for rates and other matters by the Connecticut Department of
Public Utility Control (DPUC) and follows accounting policies
prescribed by the DPUC. The Company prepares its financial
statements in accordance with generally accepted accounting
principles which includes the provisions of Statement of
Financial Accounting Standards No. 71, "Accounting for the
Effects of Certan Types of Regulation," (FAS 71). FAS 71
requires a cost-based, rate-regulated enterprise such as Yankee
Gas to reflect the impact of regulatory decisions in its
financial statements. The DPUC, through the rate regulation
process, can create regulatory assets that result when costs are
allowed for ratemaking purposes in a period other than the period
in which the costs would be charged to expense by an unregulated
enterprise.
Following the provisions of FAS 71, the Company has recorded
regulatory assets or liabilities as appropriate primarily related
to deferred gas costs, pipeline transition costs, hardship
customer receivables, environmental cleanup costs, income taxes
and postretirement benefits costs. The specific amounts related
to these items are disclosed in the consolidated balance sheets.
Yankee Gas continues to be subject to cost-of-service based rate
regulation by the DPUC. Based upon current regulation and recent
regulatory decisions, the Company believes that its use of
regulatory accounting is appropriate and in accordance with the
provisions of FAS 71. Iroquois is subject to regulation by the
Federal Energy Regulatory Commission (FERC).
REVENUES: Revenues are based on authorized rates applied to each
customer's use of gas. Rates can be changed only through a
formal proceeding before the DPUC. At the end of each accounting
period, a revenue estimate for the amount of gas delivered but
unbilled is accrued.
DEPRECIATION: The provision for depreciation is calculated using
the straight-line method based on estimated remaining useful
lives of depreciable utility plant in service, adjusted for net
salvage value and removal costs as approved by the DPUC. The
depreciation rates for the several classes of plant in service
are equivalent to an overall composite rate of 3.4 percent in
fiscal year 1995, 3.7 percent in fiscal year 1994 and 3.9 percent
in fiscal year 1993.
PURCHASED GAS ADJUSTMENT CLAUSE (PGA): The DPUC-approved rates
include an adjustment clause under which gas costs above or below
base rate levels are charged or credited to customers. As
prescribed by the DPUC, differences between the actual purchased
gas costs and the current cost recovery are deferred and
recovered or refunded over future periods.
EQUITY ACCOUNTING: The Company accounts for Housatonic's
investment in Iroquois and YESCo's investments in two
cogeneration facilities using the equity method, recording their
proportionate share of earnings (losses) with corresponding
increases (decreases) in their investment. Distributions
received reduce the carrying amount of these investments.
INCOME TAXES: Differences exist between the periods in which
transactions affect income in the financial statements and the
periods in which they affect the determination of income subject
to tax. The tax effect of such timing differences is accounted
for in accordance with the ratemaking treatment required by the
DPUC.
Effective October 1, 1993, Yankee Energy adopted the provisions
of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," (FAS 109). FAS 109 supersedes
previously issued income tax accounting standards. Yankee Energy
recorded a deferred tax liability and a regulatory asset of $27.6
million and $32.2 million at September 30, 1995 and 1994,
respectively, representing the probable future rate recovery from
customers when such deferred tax liability becomes payable. The
deferred tax liability primarily represents certain temporary
differences between the book and tax basis of utility plant for
which deferred taxes had not previously been recorded in
accordance with the regulatory rate practices of the DPUC. The
adoption of FAS 109 did not have a material effect on the
Company's results of operations or financial position.
POSTRETIREMENT BENEFITS: Effective October 1, 1993, Yankee
Energy adopted the provisions of Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," (FAS 106). The
provisions of FAS 106 require that Yankee Energy record the cost
of postretirement benefits over the employees' active service
periods rather than on a pay-as-you-go basis as was Yankee
Energy's prior practice. The adoption of FAS 106 increased
assets and liabilities but did not have a negative impact on the
Company's results of operations or financial position.
LONG-LIVED ASSETS: In March 1995, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of." This
Statement imposes stricter criteria for regulatory assets and in
evaluating that such assets be probable of future recovery at
each balance sheet date. Yankee Energy does not expect this
Statement to have a material impact on the financial position or
results of operations of Yankee Energy based on the current
regulatory structure in which Yankee Gas operates. This
conclusion may change in the future as competitive factors
influence wholesale and retail pricing in this industry.
CHANGES IN PREFERRED STOCK: On July 1, 1994, Yankee Gas redeemed
all 600,000 outstanding shares of its 9.125 percent cumulative
preferred stock, $25 par value. The Company used cash on hand to
pay both the $15 million par amount and an early redemption
premium of $879,900.
CHANGES IN COMMON STOCK: A three-for-two common stock split was
effected by the June 28, 1993 distribution of one additional
share of common stock for each two shares of common stock owned
by shareholders of record on June 7, 1993. All fiscal 1993 per
share amounts and numbers of common shares outstanding presented
in this report have been restated to give retroactive effect to
the stock split.
RECLASSIFICATIONS: Certain prior year amounts have been
reclassified to conform with current year classifications.
Note 2) Income Tax Expense
<TABLE>
<CAPTION>
The components of the federal and state income tax provisions
are:
Years Ended September 30, 1995 1994 1993
(Thousands of Dollars)
Charged to income:
<S> <C> <C> <C>
Current income taxes:
Federal $ 8,734 $ 8,496 $ 2,325
State 3,090 3,081 1,325
________ _______ _______
Total current 11,824 11,577 3,640
________ _______ _______
Deferred income taxes, net:
Investment tax credits (377) (377) (377)
Federal (108) 3,617 9,743
State (1,060) 533 2,449
________ _______ _______
Total Deferred (1,545) 3,773 11,815
________ _______ _______
Total income tax expense $10,278 $15,350 $15,455
_______ _______ _______
_______ _______ _______
</TABLE>
The components of total income tax expense are classified as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Charged to operating expenses $ 9,406 $14,624 $14,643
Charged to other income 872 726 812
_______ _______ _______
Total income tax expense $10,278 $15,350 $15,455
_______ _______ _______
_______ _______ _______
</TABLE>
Deferred income taxes are comprised of the tax effects of timing
differences as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Investment tax credits $ (377) $ (377) $ (377)
Liberalized depreciation 4,602 3,789 3,581
Deferred gas costs (5,631) (57) 7,770
Alternative minimum tax
and other (139) 418 841
_______ ______ ______
Deferred income taxes, net $(1,545) $ 3,773 $11,815
_______ _______ _______
_______ _______ _______
</TABLE>
In accordance with required regulatory treatment, deferred income
taxes are not provided for certain timing differences. This
treatment, along with other items, causes differences between the
statutory income tax rate and the effective income tax rate.
These differences between the effective income tax rate recorded
by the Company and the statutory federal tax rate are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Federal statutory income
tax rate 35.0% 35.0% 34.8%
Tax effect of differences:
Depreciation 5.6 3.5 5.1
State income taxes net
of federal benefit 6.1 6.0 7.6
Effective tax rate
adjustment (1.8) 3.0 (2.0)
Shared interest savings - (0.7) (1.0)
Property taxes - 1.9 1.4
Investment tax credit and
excess deferred taxes (1.7) (1.1) (1.1)
Capitalized overheads - 0.2 0.4
Postretirement benefit
contribution - (0.3) 2.0
Bad debt reserve and
amortization (1.9) (2.8) (1.1)
Litigation reserve 3.3 - -
Miscellaneous .7 (1.7) (0.7)
_____ _____ _____
Effective income tax rate 45.3% 43.0% 45.4%
____ ____ ____
____ ____ ____
</TABLE>
Note 3) Leases
Yankee Gas has entered into operating lease agreements for the
use of office equipment, vehicles and buildings. For fiscal
1995, 1994 and 1993, these rental payments were $1,751,000,
$1,739,000, and $1,762,000, respectively.
Future minimum rental payments, excluding associated costs such
as property taxes, state use taxes, insurance, and maintenance,
under long-term noncancelable leases as of September 30, 1995,
are approximately:
<TABLE>
<CAPTION>
Year Operating Leases
(Thousands of Dollars)
<S> <C>
1996 $1,591
1997 1,322
1998 1,156
1999 910
2000 737
After 2000 2,690
______
Future minimum lease
payments $8,406
______
______
</TABLE>
Note 4) Postretirement Benefits
The Company has a noncontributory defined benefit retirement plan
covering all regular employees. Benefits are based on years of
service and employees' highest consecutive sixty months of
compensation during the last one hundred twenty months of
employment. It is the Company's policy to fund annually an
amount at least equal to that which will satisfy the requirements
of the Employee Retirement Income Security Act and the Internal
Revenue Code. No contributions were required or made in fiscal
1995 and 1994. Pension assets are invested primarily in equity
securities and investment grade bonds.
The components of net pension cost were:
<TABLE>
<CAPTION>
Years Ended September 30, 1995 1994 1993
(Thousands of Dollars)
<S> <C> <C> <C>
Service cost $1,817 $2,114 $1,928
Interest cost 3,715 3,504 3,310
Net amortization (461) (496) 2,376
Less: Return on plan assets 5,094 5,242 7,606
______ ______ ______
Net pension cost (credit) $ (23) $ (120) $ 8
______ ______ ______
______ ______ ______
</TABLE>
In addition, a cost of $2,734,000 was recognized as a result of
special termination benefits under the pension plan. This amount
is included in the Company's 1995 Statement of Income under the
Organizational Charges category.
For calculating net pension cost, the Company used discount rates
of 7.75 percent, 7.75 percent, and 8.5 percent for 1995, 1994 and
1993, respectively. The assumed long-term rate of return was 9.0
percent for all years and the compensation progression rate was
assumed to be 4.5 percent, 5.0 percent, and 5.5 percent for 1995,
1994, and 1993, respectively.
Total pension cost, part of which was charged to utility plant,
resulted in an expense of $62,000 for the year ended September
30, 1995, a credit of $35,000 for the year ended September 30,
1994, and an expense of $93,000 for the year ended September 30,
1993. Pension cost for 1995, 1994 and 1993 includes $85,000 in
cost of living increases each year for Northeast Utilities (NU)
retirees who were previously employed in the gas business
operated by The Connecticut Light and Power Company (CL&P), a
subsidiary of NU. These payments were agreed to at the time of
divestiture from NU.
For calculating the plan's year-end funded status, the following
assumptions were used:
<TABLE>
<CAPTION>
Years Ended September 30, 1995 1994 1993
<S> <C> <C> <C>
Discount rate 7.75% 8.25% 8.50%
Expected long-term rate
of return 9.00% 9.00% 9.00%
Compensation/progression rate 4.50% 4.50% 5.50%
</TABLE>
The following table represents the plan's funded status
reconciled to the consolidated balance sheets:
<TABLE>
<CAPTION>
At September 30, 1995 1994
(Thousands of Dollars)
<S> <C> <C>
Accumulated benefit obligation,
including $43,260 of vested benefits
at September 30, 1995 and $33,401 at
September 30, 1994 $44,453 $34,691
_______ _______
_______ _______
Projected benefit obligation $56,614 $45,832
Less: Market value of plan assets 66,089 57,394
_______ _______
Plan surplus 9,475 11,562
Unrecognized transition amount (875) (961)
Unrecognized prior service costs (31) (34)
Unrecognized net gain (12,508) (11,795)
________ ________
Accrued pension liability $(3,939) $(1,228)
________ ________
________ ________
</TABLE>
During fiscal 1994, the Company adopted an Excess Benefit Plan
(EBP) that provides retirement benefits to executive officers and
other key management staff. The EBP recognizes total
compensation and service that would otherwise be disregarded due
to Internal Revenue Code limitations on compensation in
determining benefits under the regular retirement plan. The EBP
also takes into consideration awards to some executives under the
Northeast Utilities Executive Incentive Compensation Program.
The EBP is not funded and benefits are paid when due from
general corporate assets.
Note 5) Postretirement Benefits Other Than Pensions
The Company provides certain health care and life insurance
benefits to its retired employees. On July 1, 1990, in
accordance with terms of the divestiture, Yankee Gas began
compensating the NU System for a portion of the NU System's
liability for certain health care and life insurance expenses of
retirees or surviving spouses. Yankee Gas and the NU System will
share costs in a defined manner until June 30, 2005. The cost of
providing those benefits for NU retirees was approximately
$1,070,000 for the fiscal year ended September 30, 1995 and
$969,000 and $869,000 for the comparable periods in 1994 and
1993, respectively.
Yankee Gas has established two Internal Revenue Code Section
501(c)(9) Voluntary Employee Beneficiary Association (VEBA)
Trusts, one for union employees and one for non-union employees,
to fund its future liabilities for retiree health care and life
insurance benefits. Contributions to the VEBA Trusts totaled
$1.728 million for fiscal 1995, and $0.772 million for fiscal
1994. Assets of the VEBA Trusts are invested primarily in equity
securities and investment grade bonds.
Effective October 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions," (FAS 106), which
requires, among other things, that other postretirement benefits
costs be recognized over the employment period that encompasses
eligibility to receive such benefits. The DPUC is allowing
$1.728 million of associated expenses to be recovered in rates
and has indicated its objective to grant full rate recovery
within a reasonable time frame of all FAS 106 related expenses.
On this basis, the Company is deferring for future recovery the
difference between the annual estimated expense and the portion
currently being collected in rates.
The components of net postretirement benefits costs were:
<TABLE>
<CAPTION>
Years Ended September 30, 1995 1994
(Thousands of Dollars)
<S> <C> <C>
Service cost $ 847 $ 982
Interest cost 1,453 1,509
Net transition amortization 876 876
Net other deferrals 221 (301)
Less: Return on assets 698 (81)
_______ ______
Net postretirement benefits costs $2,699 $3,147
______ ______
______ ______
</TABLE>
For calculating the plan's year-end funded status, as well as the
ensuing year's postretirement benefits costs, the following
assumptions were used:
<TABLE>
<CAPTION>
Years Ended September 30,
1995 1994
<S> <C> <C>
Discount rate 7.75% 8.25%
Expected long-term rate of return 9.00% 9.00%
Health care cost trend rate
- First year 10.00% 11.00%
- Ultimate 5.00% 5.00%
</TABLE>
Trend rates are assumed to decrease one percent per year until
they reach the ultimate rate. A one percent increase in the
weighted average trend rate assumption of health care claims
would result in an nineteen percent increase in accumulated
benefit obligations and a twenty-three percent increase in net
periodic postretirement benefits costs.
The following table represents the postretirement benefit plan's
funded status reconciled to the consolidated balance sheets:
<TABLE>
<CAPTION>
At September 30, 1995 1994
(Thousands of Dollars)
<S> <C> <C>
Accumulated benefit obligation $21,596 $20,177
Less: Market value of assets 4,737 2,700
_______ ______
Accumulated benefit obligation
(greater than) plan assets (16,859) (17,477)
Unrecognized transition amount 15,358 16,234
Unrecognized net gain (2,186) (1,473)
______ _______
Accrued postretirement benefit
liability $(3,687) $(2,716)
________ ________
________ ________
</TABLE>
In November, 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Post-Employment Benefits," (FAS 112).
This Statement, which was adopted during the first quarter of
fiscal 1995, establishes accounting standards for employers who
provide benefits, such as unemployment compensation, severance
benefits and disability benefits, to former or inactive employees
after employment but before retirement and requires recognition
of the obligation for these benefits. There was no material
impact on the Company's results of operations or financial
position as a result of the adoption of FAS 112.
Note 6) Short-Term Debt
Yankee Gas has arranged a $60 million revolving line of credit
with a group of five banks whereby funds may be borrowed on a
short-term revolving basis using either fixed or variable rate
loans. Yankee Gas also has an additional $27 million of credit
lines available on an uncommitted basis. Yankee Gas had $17.7
million and $17.3 million outstanding under its agreements at
September 30, 1995 and 1994, respectively. In addition, Yankee
Energy (parent) had $10.3 million and $7.3 million outstanding on
a $15 million line of credit at September 30, 1995 and 1994,
respectively. The weighted average interest rates on short-term
debt at September 30, 1995 and 1994 were 6.0 percent and 5.4
percent, respectively.
Note 7) Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the
fair value of each of the following financial instruments:
CASH AND TEMPORARY CASH INVESTMENTS: The carrying amount
approximates fair value.
FIRST MORTGAGE BONDS: The fair value of the Company's fixed rate
long-term debt is based upon borrowing rates currently available
to the Company. Adjustable rate securities are assumed to have a
fair value equal to their carrying value.
The carrying amount of the Company's financial instruments and
the estimated fair value at September 30, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
September 30, 1995 1994
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
(Thousands of Dollars)
<S> <C> <C> <C> <C>
First mortgage
bonds $139,266 $150,680 $140,633 $142,282
________ ________ ________ ________
</TABLE>
The fair values shown above have been reported to meet the
disclosure requirements of Statement of Financial Accounting
Standards No. 107, "Disclosures About Fair Values of Financial
Instruments," and do not purport to represent the amounts at
which those obligations would be settled.
Note 8) Commitments and Contingencies
CONSTRUCTION PROGRAM: The Company's estimated construction
expenditures for the fiscal years 1996 through 2000 are $151
million, including $34 million for fiscal 1996. The Company
intends to use $131 million over this period, including $31
million for fiscal 1996, of these estimated construction
expenditures to maintain the reliability of the distribution
system in projects that will generate gas sales and
transportation revenues. The remaining $20 million estimated,
including $3.0 million for fiscal 1996, is expected to be
invested in independent power production projects through the
Company's nonregulated subsidiary, YESCo.
IROQUOIS: The Iroquois Gas Transmission System has been informed
by the U.S. Attorneys' Offices for the Northern, Southern and
Eastern Districts of New York that a civil investigation is
underway to determine whether Iroquois committed civil
environmental violations during construction of the pipeline. At
the outset of the investigation, Iroquois was notified of 26
alleged violations. In response, Iroquois denied that such
violations occurred and asserted that all concerns raised by
governmental authorities during construction had been fully
responded to. Iroquois has since been informed that the universe
of alleged violations initially raised is contained in certain
field reports prepared by a Federal/State Inter-Agency Task Force
which surveyed the right-of-way in connection with the right-of-
way restoration program. No proceedings in connection with this
civil investigation have been commenced by the federal government
against Iroquois.
In addition, Iroquois, its environmental consultant and certain
former Iroquois employees, remain subjects of a federal criminal
investigation commenced in 1992. This investigation is being
conducted by the U.S. Attorney's Office for the Northern District
of New York in conjunction with the U.S. Environmental Protection
Agency (EPA) and the Federal Bureau of Investigation (FBI). An
FBI press release issued in July 1992 described the focus of the
inquiry as whether Iroquois and possibly others violated federal
environmental laws, provided false information or otherwise
concealed information in conjunction with the construction of the
base pipeline or otherwise used interstate mails or wire to
commit a fraud in connection with the construction of the base
pipeline. To date, no criminal charges have been filed. Iroquois
management, however, believes and has represented to the Company
that the pipeline construction and right-of-way activities were
conducted in a responsible manner. However, Iroquois deems it
probable that the U.S. Attorneys' Offices will seek indictments
and in them substantial fines and other sanctions.
Iroquois and its counsel have met with and expect to continue to
meet with those conducting the civil and criminal investigations,
from time to time, both to gain an informed understanding of the
focus and direction of the investigations in order to defend
itself and to explore a range of possible resolutions acceptable
to all parties.
Although it is not anticipated that the outcome of these
proceedings will have a material impact on the Company, based on
the information available at this time, management cannot predict
what the ultimate impact might be. As mentioned in the
Management's Discussion and Analysis section, the Company has
recorded a $2.1 million provision representing Housatonic's share
of Iroquois' estimated charge associated with resolution of the
federal investigation of Iroquois concerning alleged
environmental violations during construction of the Iroquois
pipeline.
ENVIRONMENTAL MATTERS: The Company is subject to federal and
state environmental regulation of its operations and properties.
Such regulation may result in future environmental liabilities
that may include significant expenses incurred to remove, contain
or remediate contamination caused by operations of former
manufactured gas plant sites.
Pursuant to an Environmental Liability Sharing and Indemnity
Agreement, dated July 1, 1989, Yankee Gas and CL&P have allocated
potential environmental liabilities at sites previously owned by
CL&P and used in CL&P's gas business, and at sites not previously
owned by CL&P but which had prior uses in CL&P's gas business. As
part of that agreement, Yankee Gas and CL&P would share equally
the costs of environmental remediation at sites owned by CL&P
prior to July 1, 1989 and used in CL&P's gas business.
Additional on and off-site investigations of one such property
began in fiscal 1993 and will continue in fiscal 1996. Following
compilation of the additional data, a determination will be made
on the need to remediate.
Fourteen sites initially believed to contain coal tar became the
property of Yankee Gas at divestiture from Northeast Utilities.
Responsibility for future investigation and remediation at these
sites rests solely with Yankee Gas. Each of these sites has been
the subject of a field investigation and coal tar constituents
have been found in some soil and ground water samples. The
Company has reported the results of the environmental studies to
the Connecticut Department of Environmental Protection (DEP).
The DEP has not ordered that any remedial action be taken.
However, of the fourteen, seven sites are presently listed on the
Connecticut Inventory of Hazardous Waste Sites. Inclusion of a
site on this list indicates that remediation may be required in
the future.
During 1993, the Company conducted additional research and began
to prioritize the fourteen sites to further define any that may
require remediation. The Company identified four sites that are
likely to require remediation. The Company's proposed
prioritization was submitted to the DEP. Extensive site
investigations were then conducted at the four sites to define
the exent of contamination and begin remedial plans. Remedial
activity began at two sites during fiscal 1994 and will continue
at those locations during fiscal 1996. Complete remediation of
one of these properties is expected during fiscal 1996. In
addition, the Company has developed a cost estimate for the
remaining ten sites based on the probability of cleanup. As a
result of this effort, the Company recorded a liability of $35
million in fiscal year 1993 for future environmental cleanup.
Recovery of remediation costs has been specifically allowed by
the Company's 1992 rate case decision. Presently, $325,000 is
allowed annually in rates. If costs are expected to exceed $2.5
million on an annual basis, the Company is required to go to the
DPUC for review. The DPUC has stated that "to the extent that
coal tar remediation expenses are prudently incurred, they should
be allowed as proper operating expenses."
The Company also believes that it has valid claims for insurance
recovery of remediation costs and is pursuing those claims
against insurers.
TRANSITION COSTS - ORDER NO. 636: On April 8, 1992, the FERC
issued Order No. 636 on pipeline restructuring. In essence, the
FERC found that absent the unbundling of traditional merchant
services, pipelines would not be able to achieve the FERC's long-
term goal of open access and provide transportation services that
are indifferent to the seller of the gas. Order No. 636,
therefore, required all pipelines to implement restructuring of
their services by the winter of 1993-94. The three major
pipeline systems serving Yankee Gas (Iroquois, Tennessee Gas
Pipeline Company and Algonquin Gas Transmission Company and its
affiliate, Texas Eastern Transmission Company), have all
restructured pursuant to the FERC directive. Iroquois was
designed and constructed as a transportation-only pipeline, and
as such, its restructuring has very minimal impact.
Order No. 636 acknowledges that the restructuring of the
pipelines' traditional services will cause pipelines to incur
transition costs in several areas and provides mechanisms for the
pipelines to fully recover prudently incurred transition costs
attributable to the implementation of Order No. 636.
On July 8, 1994, the DPUC issued a decision on the implementation
of FERC Order No. 636 by the Connecticut Local Distribution
Companies (LDCs). The DPUC is allowing the LDCs to offset the
transition costs billed by pipelines under Order No. 636 with
recoveries from capacity release activity, refunds or deferred
gas costs credits for the 1992-93 period and all subsequent
annual deferred gas costs, gas supplier refunds and fifty percent
of off-system sales margins and interruptible margins earned in
excess of target amounts. With the exception of all subsequent
annual deferred gas costs credits, the DPUC has ordered that all
transition cost recovery dollars be applied immediately on a
monthly basis to the transition costs that have been or are
subsequently billed. All subsequent annual deferred gas costs
credits will be applied on an annual basis. If needed, a per
unit surcharge will be applied to firm customers' bills.
Through September 30, 1995, Yankee Gas has paid approximately
$14.0 million of transition costs and an additional $1.0 million
are anticipated. To date, Yankee Gas has collected $23.1 million
through a combination of gas supplier refunds, deferred gas costs
credits and excess interruptible margins.
On September 12, 1995, a proposed settlement agreement between
Yankee Gas and the Office of Consumer Counsel (OCC) was filed
with the DPUC. This three-year settlement agreement provides for
the retention of overcollected transition cost credits to offset
certain deferred expenses. As a result of this proposed
settlement agreement, Yankee Gas would stipulate that, except in
the event of certain circumstances which would adversely affect
Yankee Gas' financial condition, it would not increase its rates
prior to September 30, 1998. As of December 18, 1995, no
final decision had been rendered by the DPUC.
TAKE-OR-PAY LIABILITY: Take-or-pay liabilities arose from the
inability or unwillingness of pipeline companies to take the
volumes of gas for which they had contracted with producers. To
avoid or settle litigation by producers to recover payment for
the contracted-for volumes, some pipeline companies, including
certain Yankee Gas suppliers, have negotiated or are negotiating
settlements of their contracts. The pipeline companies were
authorized by the FERC to recover from their customers a portion
of their settlement costs under guidelines set forth by the FERC.
Yankee Gas has collected approximately $8.2 million of its
current estimated take-or-pay cost of $8.4 million through
September 30, 1995. This take-or-pay cost reflects a revised
estimate from Algonquin during fiscal 1995. The collection was
accomplished primarily by retaining gas supplier refunds and
deferred gas costs credits that otherwise would have been
refunded to customers as prescribed by a November 20, 1991, DPUC
decision and through a surcharge applied to interruptible
customers. Management expects to recover the entire remaining
amount within the next fiscal year.
GAS SUPPLY HEDGING ACTIVITIES: The Company has gas service
agreements with two customers to supply gas at fixed prices.
Because the Company purchases gas on a variable price basis, it
has found it necessary to hedge gas prices with derivatives to
respond to customers' needs for long-term fixed pricing. Both
agreements are similar in structure in that the Company executed
a commodity swap contract with a commodity trading firm. Under a
master commodity swap agreement, the price of a specified
quantity of gas is fixed over the term of the gas service
agreement with the customer. In both cases, the Company is
acting an an agent using its credit to provide fixed pricing to
its customers using a commodity swap. The Company's results of
operations are unaffected by the hedge transaction given that it
passes through the cost of the hedge to either the commodity
trading firm or its customer depending on the difference in the
fixed and floating prices for gas. Also, the customers are
accountable for all costs incurred by the Company to execute and
maintain the commodity swap contract.
Of the two gas service hedging agreements currently in force,
only one is material relative to the significance of gas volumes
being hedged. This agreement has a ten year term and requires
the Company to supply approximately one BCF of gas per year, with
relatively low margin, at a fixed price beginning August 1, 1995.
The price is allowed to escalate by a predetermined rate every
year after the first year. The commodity swap contract for this
hedging agreement was executed August 17, 1994. The Company is
responsible for margin calls collateralizing the commodity swap
contract from August 17, 1994 through the term of the gas service
agreement. Currently, the Company has a letter of credit in the
amount of $4.5 million issued to the commodity trading firm
collateralizing the commodity contract.
TAX/LEGAL ISSUES: The Company received revised tax bills from
the City of Meriden, Connecticut (the City). The City is
asserting a claim for the payment of back taxes and interest
resulting from a retroactive reassessment and revaluation of
the Company's personal property filings. The City did not locate
or identify any property which the Company omitted from its
filings. The tax bills reflect a reassessment of property at
higher rates than those previously accepted by the City. The
Company intends to vigorously contest the results of retroactive
reassessment. Although it is not anticipated that the outcome of
this claim will have a material impact on the Company, based on
the information available at this time, management cannot predict
what the ultimate impact might be.
In November 1995, a class action suit was filed against the
Company and the state's two other local distribution companies
(LDCs), claiming the LDCs engaged in unfair trade practices. The
action alleges that the LDCs unfairly competed with licensed
plumbers and contractors by performing customer service work
using customer service employees who did not possess state trade
licenses.
The LDCs have asserted that such licenses are not required for
this work based on a statutory exemption enacted in 1965 and
amended in 1967. However, in a separate proceeding, a
Connecticut Superior Court has upheld an administrative ruling
against the LDCs' position, and the Company is participating in
an appeal of that decision. In 1995, the Connecticut General
Assembly enacted legislation that established on a going-forward
basis a separate procedure for state certification of gas service
employees.
The Company intends to vigorously defend this claim. While the
ultimate results of the matters described above cannot be
determined, management does not expect that they will have a
material adverse effect on the Company's results of operations or
financial position.
Note 9) Acquisitions
On August 8, 1995, the Company's subsidiary, Yankee Energy
Services Company, acquired all of the outstanding capital stock
of BVA Cogen, Inc. (BVA). BVA is a developer of custom-designed
cogeneration systems and the United States distributor for the
Deutz MWM Gas-Driven Engine/Generator sets used for on-site
electrical generation. The acquisition was accounted for using
the purchase method. BVA's results of operations have been
included in the consolidated results of operations since the date
of acquisition. The impact of the acquisition and BVA's
operations are not material to the financial condition or results
of operations of the Company.
Note 10) Quarterly Financial Data (Unaudited)
The following table provides information with respect to the
consolidated quarterly results of operations for the fiscal years
ended September 30, 1995 and 1994, and reflects the seasonal
nature of the Company's operations. The results of any one
quarter during the year are not indicative of the results of
future quarters.
<TABLE>
<CAPTION>
Quarter Ended
Fiscal Year 1995 December 31 March 31 June 30 September 30
(Thousands of Dollars, except share information)
<S> <C> <C> <C> <C>
Operating
Revenues $82,284 $116,756 $55,101 $39,855
Operating Income 10,251 14,575 3,181 (2,232)
Net Income
(Loss) 7,459 11,750 255 (7,106)
Earnings (Loss)
per Common
Share (2) $0.73 $1.14 $0.02 $(0.69)
</TABLE>
<TABLE>
<CAPTION>
Quarter Ended
Fiscal Year 1994 December 31 March 31 June 30 September 30
<S> <C> <C> <C> <C>
Operating
Revenues $91,786 $134,369 $53,612 $37,531
Operating Income
(Loss) 11,444 17,976 2,357 (489)
Net Income (Loss)(1) 8,359 14,922 (563) (3,233)
Earnings (Loss) per
Common Share (1)(2) $0.81 $1.45 $(0.05) $(0.32)
</TABLE>
(1) Exclusive of an $879,000 charge, or $0.08 per share,
resulting from the early redemption of the Company's 9.125
percent cumulative preferred stock.
(2) Earnings (Loss) per common share were calculated on the
average common shares outstanding of 10,332,447 and
10,287,683 for the twelve months ended September 30, 1995
and 1994, respectively.
<PAGE>
YANKEE ENERGY SYSTEM, INC. AND SUBSIDIARIES
Selected Financial and Operating Data
<TABLE>
<CAPTION>
September 30, 1995 1994 1993 1992 1991
Balance Sheet Data:
(Thousands)
<S> <C> <C> <C> <C> <C>
Net Utility
Plant $324,870 $315,063 $308,384 $303,715 $287,841
Total Assets 479,301 481,518 441,293 393,227 356,269
Total
Capitalization 292,802 276,513 311,197 277,391 250,012
Income and Share Data:
(Thousands except share data)
Operating
Revenues $293,996 $317,298 $302,657 $278,760 $234,458
Cost of Gas 155,378 168,816 157,816 150,616 114,037
Other O&M
Expenses 59,326 62,733 59,142 56,246 55,009
Depreciation 16,520 16,993 17,133 16,086 14,039
Net Income (1) 12,358 19,485 17,479 13,135 10,844
Earnings
per Share (1) $1.20 $1.89 $1.70 $1.44 $1.28
Revenues:
(Thousands)
Gas:
Residential $127,493 $140,403 $133,846 $124,435 $100,959
Commercial 88,983 95,286 93,045 85,920 69,746
Industrial 73,715 77,850 72,940 64,004 57,294
Miscellaneous 2,162 3,328 1,884 1,211 3,304
Transportation 1,631 431 942 3,190 3,155
Total Gas $293,984 $317,298 $302,657 $278,760 $234,458
Other 12 -- -- -- --
________ ________ ________ ________ ________
Total Operating
Revenues $293,996 $317,298 $302,657 $278,760 $234,458
Sales and Transportation:
(Mcf-Thousands)
Firm:
Residential 11,591 13,101 12,691 12,312 11,029
Commercial 9,022 9,998 9,703 9,183 7,951
Industrial 10,007 10,421 9,600 8,058 8,098
Transportation 589 128 167 1,700 1,089
Unbilled and
other 793 245 129 (58) (15)
_______ _______ ______ ______ ______
Total Firm 32,002 33,893 32,290 31,195 28,152
Non-Firm:
Commercial 1,809 1,549 1,663 1,377 1,403
Industrial 7,286 7,149 5,336 3,632 3,240
Transportation 3,654 559 1,400 3,147 4,576
Total
Non-Firm 12,749 9,257 8,399 8,156 9,219
Total Sales and
Transportation 44,751 43,150 40,689 39,351 37,371
Customers:
(Average)
Residential 156,539 155,874 155,385 154,934 154,116
Commercial (2) 19,167 19,156 19,139 19,056 18,928
Industrial (2) 2,145 1,980 1,893 1,885 1,872
Resale 1 1 1 1 1
Total 177,852 177,011 176,418 175,876 174,917
Sources of Gas:
(Mcf-Thousands)
Domestic 13,534 16,162 7,474 9,526 14,121
Canadian Gas
Firm 24,283 24,440 23,970 11,016 1,837
Spot Market Gas 2,836 2,318 8,155 14,386 16,191
Produced Gas 9 30 6 15 63
Company Use/
Unaccounted For (154) (488) (608) (377) (487)
Total 40,508 42,462 38,997 34,566 31,725
Peak Day Data:
Peak Day Send
Out (Mcf per
day) (3) 250,518 262,794 247,315 237,077 225,122
Peak Day Date 2/06/95 1/19/94 2/01/93 1/16/92 1/22/91
Peak Day
Degree Days 59 55 54 55 56
Total Annual
Heating
Degree Days 5,595 6,454 6,232 5,995 5,198
</TABLE>
(1) Exclusive of an $879,900 charge, or $0.08 per share,
resulting from the early redemption premium on the Company's
preferred stock in fiscal 1994 and a $2,566,000 credit, or $0.28
per share, resulting from a change in the Company's method of
accounting for municipal property taxes in fiscal 1992. All per
share amounts have been restated to give retroactive effect to
the three-for-two stock split on June 28, 1993.
(2) Transportation customers are included in these customer
categories. Average transportation customers are as follows:
1995:27, 1994:17, 1993:25, 1992:51 and 1991:36.
(3) Converted from BTU-millions assuming 1,033 BTU per cubic
foot. 1994 sendout includes one time delivery of 17,425 Mcf to
Con Ed.
<PAGE>
Inside Back Cover:
Shareholder and Stock Information
Annual Meeting
The Annual Meeting of Shareholders will take place on Friday,
February 23, 1996, at 10:30 a.m. at the Ramada Plaza Hotel in
Meriden, Connecticut.
Market for Common Stock
As of November 29, 1995, there were 30,504 holders of record of
Yankee Energy common stock. Yankee Energy s stock is quoted on
the New York Stock Exchange (NYSE) under the symbol "YES"
although it is frequently presented as "YanEnS" in various
financial publications.
<TABLE>
<CAPTION>
High and Low Stock Prices and Dividend Information ($/Share)
<S> <C> <C> <C>
Year Ended September 30, 1994 High Low Dividend
First Quarter, 1994 29.25 24.00 0.290
Second Quarter, 1994 25.50 22.38 0.290
Third Quarter, 1994 25.38 20.00 0.305
Fourth Quarter, 1994 25.00 20.00 0.305
Year Ended September 30, 1995
First Quarter, 1995 22.63 20.38 0.305
Second Quarter, 1995 22.38 20.00 0.305
Third Quarter, 1995 22.88 19.50 0.315
Fourth Quarter, 1995 22.38 19.75 0.315
</TABLE>
Dividends
Dividends are considered quarterly by the Board of Directors and,
if declared, are payable at the end of March, June, September and
December. The dividend record date is generally three weeks
prior to the dividend payable date. Yankee Energy offers
registered shareholders the ability to have quarterly dividends
deposited directly into their bank account.
Shareholder Investment Plan
The Yankee Energy Shareholder Investment Plan is administered by
the Company s stock transfer agent, Chemical Mellon Shareholder
Services (Chemical Mellon). The Plan provides registered
shareholders and their family members a convenient way to acquire
shares of common stock. Shares can be purchased by having
quarterly dividends automatically reinvested in additional shares
or by sending in funds to purchase additional shares. In
addition, holders of fewer than 100 shares may sell all their
shares at any time for no fee. The Plan also offers charitable
donation and share safekeeping services as well. Copies of the
Plan are available from Chemical Mellon or Yankee Energy.
Transfer Agent
Shareholders who have questions about their accounts or desire to
transfer their stock from one name to another should contact
Chemical Mellon at 1-800-288-9541 or write:
For Transfers and Transfer Inquiries:
Chemical Mellon Shareholder Services, L.L.C.
85 Challenger Road
Overpeck Centre
Ridgefield Park, NJ 07660
All Other Inquiries:
Chemical Mellon Shareholder Services
Transfer Services
P.O. Box 590
Pittsburgh, PA 15230
Yankee Energy News and Information
Yankee Energy has a toll-free news and information service which
includes current news releases, a Chairman s message, earnings
and dividend information as well as access to the transfer agent
or the Company s Investor Relations Department.
1-800-YES-9989
Shareholders, interested investors and analysts may also contact
Yankee Energy by calling or writing to:
Steven P. Eschbach, CFA
Investor Relations Manager
Yankee Energy System, Inc.
599 Research Parkway
Meriden, CT 06450-1030
Phone 203-639-4459
Fax 203-639-4011
Yankee Energy will provide shareholders with a copy of its 1995
Annual Report to the Securities and Exchange Commission on Form
10-K, without charge, upon written request.
Back Cover:
Top Left: Photo of race car and driver.
Top Right: Partial picture of race car.
Background across top: Blurred picture of race car
Bottom Left: Yankee Energy Logo and list of company
and subsidiaries.
Yankee Energy System, Inc.
599 Research Parkway
Meriden, CT 06450-1030
203-639-4000
Yankee Energy Services Company
639 Research Parkway
Meriden, CT 06450-1030
203-639-4670
R. M. Services, Inc.
639 Research Parkway
Meriden, CT 06450-1030
203-639-4501
BVA Cogen, Inc.
33 Christa McAuliffe Blvd
Plymouth, MA 02360
508-746-5500
Middle Right:
Caption: Stock car racing is the fastest growing professional
sport in America. And racing fans have shown that they are loyal
brand-name customers. What better way to raise awareness and
capture the spirit of the new Yankee Energy than by sponsoring a
winning racing team. Pictured is driver Barry Gray next to the
#29 pro-stock racing car. Behind is the Yankee Energy
executives' pool car, powered by clean burning natural gas.
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
------------------------------
Yankee Gas Services Company is a wholly-owned subsidiary of the
registrant. It is incorporated in Connecticut and does business under its own
name.
Yankee Energy Financial Services Company is a wholly-owned subsidiary of
the registrant. It is incorporated in Connecticut and does business under its
own name.
Yankee Energy Services Company (formerly known as Yankee Energy
Production Services Company) is a wholly-owned subsidiary of the registrant.
It is incorporated in Connecticut and does business under its own name in
Connecticut and New Jersey.
BVA Cogen, Inc. is a wholly-owned subsidiary of Yankee Energy Services
Company, a wholly-owned subsidiary of the registrant. It is incorporated in
Delaware and does business under its own name.
Housatonic Corporation is a wholly-owned subsidiary of the registrant.
It is incorporated in Connecticut and does business under its own name.
NorConn Properties, Inc. is a wholly-owned subsidiary of the registrant.
It is incorporated in Connecticut and does business under its own name.
R. M. Services, Inc. is a wholly-owned subsidiary of the registrant. It
is incorporated in Connecticut and does business under its own name in
Connecticut and Pennsylvania.
<PAGE>
Exhibit 23
(Arthur Andersen, LLP Letterhead)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation of our reports included (or incorporated by
reference) in this Form 10-K, into the Company's previously filed
Registration Statement File No. 033-56323.
Hartford, Connecticut
December 19, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 725
<SECURITIES> 0
<RECEIVABLES> 27,525
<ALLOWANCES> 5,481
<INVENTORY> 12,236
<CURRENT-ASSETS> 46,706
<PP&E> 499,392
<DEPRECIATION> 174,522
<TOTAL-ASSETS> 479,301
<CURRENT-LIABILITIES> 63,563
<BONDS> 146,966
<COMMON> 51,982
0
0
<OTHER-SE> 99,771
<TOTAL-LIABILITY-AND-EQUITY> 479,301
<SALES> 293,996
<TOTAL-REVENUES> 293,996
<CGS> 155,378
<TOTAL-COSTS> 155,378
<OTHER-EXPENSES> 110,063
<LOSS-PROVISION> 2,780
<INTEREST-EXPENSE> 15,505
<INCOME-PRETAX> 22,636
<INCOME-TAX> 10,278
<INCOME-CONTINUING> 12,358
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,358
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.20
</TABLE>
