-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M+zkhfF69RNsF9G8aERkcA9BvggSJMTAGdUZXCeoDfRyZCltSuKwa9aMShfhg+0A +rQKAN/sjBNWwpk1WsoWqg== 0000910647-98-000280.txt : 19981123 0000910647-98-000280.hdr.sgml : 19981123 ACCESSION NUMBER: 0000910647-98-000280 CONFORMED SUBMISSION TYPE: S-3D PUBLIC DOCUMENT COUNT: 4 REFERENCES 429: 333-00000 FILED AS OF DATE: 19981112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERKSHIRE GAS CO /MA/ CENTRAL INDEX KEY: 0000317406 STANDARD INDUSTRIAL CLASSIFICATION: 4924 IRS NUMBER: 041731220 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-3D SEC ACT: SEC FILE NUMBER: 333-67097 FILM NUMBER: 98743718 BUSINESS ADDRESS: STREET 1: 115 CHESHIRE RD CITY: PITTSFIELD STATE: MA ZIP: 01201-1388 BUSINESS PHONE: 4134421511 S-3 1 BODY OF FORM S-3 Registration No. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------- THE BERKSHIRE GAS COMPANY (Exact Name of Registrant as Specified in its Charter) MASSACHUSETTS 04-1731220 (State of Other Jurisdiction of (I.R.S. Employer Identification Incorporation or Organization) Number) 115 Cheshire Road Pittsfield, Massachusetts 01201 413-442-1511 (Address, Including Zip Code, and Telephone Number, Including Area Code of Registrant's Principal Executive Offices) ------------------- SCOTT S. ROBINSON, President 115 Cheshire Road, Pittsfield, Massachusetts 01201 (413) 442-1511 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) ------------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [x] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] _______________ If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] _______________ If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ------------------- CALCULATION OF REGISTRATION FEE
- - ---------------------------------------------------------------------------------------------------------- Proposed maximum Proposed maximum Title of each class of Amount to be offering price aggregate Amount of securities to be registered registered per share offering price registration fee - - ---------------------------------------------------------------------------------------------------------- Common Stock, $2.50 par value................ 200,000 shares *$23.75 $4,750,000 $1,320.50 - - ---------------------------------------------------------------------------------------------------------- Used only for the purpose of calculating the amount of the registration fee pursuant to Rule 457(c), based upon the average of the reported bid and asked prices of such securities on November 5, 1998.
PROSPECTUS 200,000 Shares [Berkshire Gas Logo] The Berkshire Gas Company Common Stock ------------------- All of the Shares of Common Stock being offered are being sold by the Company. Our Common Stock is listed and traded on the NASDAQ National Market System under the symbol "BGAS." The last reported sale price of the Common Stock on the NASDAQ National Market System on November 9, 1998 was $23.25 per share. ------------------- All of the securities being offered will be sold through our Share Owner Dividend Reinvestment and Stock Purchase Plan. The price of these securities will be a percentage of the average of the daily high and low sales prices for our Common Stock on the NASDAQ National Market System, for the five consecutive trading days up to and including the date of the purchase. (See the response to Question 11 - What will be the price of the Common Stock purchased under the Plan? - on P.6) ------------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. ------------------- This Prospectus is dated November 10, 1998 The Berkshire Gas Company 115 Cheshire Road Pittsfield, Massachusetts 01201 (413-442-1511) Share Owner Dividend Reinvestment and Stock Purchase Plan 200,000 Shares Common Stock, $2.50 Par Value The Share Owner Dividend Reinvestment and Stock Purchase Plan (the "Plan") of The Berkshire Gas Company (the "Company") provides holders of record of Common Stock of the Company a simple and convenient method of investing in additional shares of Common Stock of the Company. Participants in the Plan may: * automatically reinvest cash dividends on all or a portion of their shares; * make optional cash investments in the Company at any time, from a minimum amount of $15.00 in any calendar month, to a maximum amount of $5,000 in any calendar quarter; or * reinvest their cash dividends and make optional cash investments in the Company. The price for shares purchased through the Plan shall be equal to 97% of the average of the daily high and low sales prices for the Company's Common Stock (as quoted in the NASDAQ National Market System) for the five consecutive trading days prior to and including the date of purchase (the "Average"). If the price of shares to be purchased under the Plan falls below the book value of such shares, then the price for such shares shall be equal to 100% of the Average. Participants may not purchase shares of Common Stock through the Plan if the price for such shares would be less than their par value. The Company will not pay any underwriting discounts or commission in connection with the sale of the Common Stock pursuant to the Plan. The Company realizes proceeds from such sales equal to the sales price less customary administrative and legal fees. This Prospectus relates to authorized shares of Common Stock of the Company registered under the Plan. ------------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. The date of this Prospectus is November 10, 1998. You should rely only on the information incorporated by reference or provided in this prospectus or any prospectus supplement. We have not authorized anyone else to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this prospectus or any prospectus supplement is accurate as of any date other than the date on the front of those documents. WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC's web site at http://www.sec.gov. You may also read and copy any document we file at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Additional updating information with respect to the securities and the Plan may be provided in the future to the Plan participants by means of appendices to this Prospectus. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The SEC allows us to "incorporate by reference" the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is an important part of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until we sell all of the securities or deregister all remaining unsold securities. * The Company's Annual Report on Form 10-K for the year ended June 30, 1998, filed pursuant to the Securities Exchange Act of 1934 which contains, either directly or by incorporation by reference, audited financial statements for the Company's most recent fiscal year. You may request a copy of these filings at no cost, by writing or telephoning us at the following address: Cheryl M. Clark, The Berkshire Gas Company, 115 Cheshire Road, Pittsfield, Massachusetts 01201 Telephone: (413) 442-1511. THE COMPANY The Berkshire Gas Company is a public utility company incorporated in Massachusetts in 1853. We are engaged primarily in the distribution, sale and transportation of natural gas for residential, commercial and industrial use, and also sell and lease gas-burning equipment and market liquefied petroleum gas through our Berkshire Propane operations. We have also formed a strategic marketing alliance with Conectiv/CNE, LLC to engage in energy marketing activities. We provide natural gas service in nineteen communities, including the cities of Pittsfield and North Adams, the towns of Adams, Amherst, Great Barrington, Greenfield and Williamstown, and twelve similar municipalities. While primarily residential in character, our service territory also includes industrial, agricultural and educational facilities and resort areas. Our utility business is subject to the regulatory jurisdiction of the Massachusetts Department of Telecommunications and Energy with respect to rates, adequacy of service, issuance of securities, accounting and other matters. THE OFFERING We are offering 200,000 shares of the Company's Common Stock. USE OF PROCEEDS We cannot predict either the number of shares of Common Stock that will ultimately be sold pursuant to the Plan or the prices at which such shares will be sold. We intend to use the proceeds from any such sales from time to time to purchase additional property, plant and equipment or to repay temporary indebtedness incurred to finance such additions. DESCRIPTION OF THE PLAN The following is a description of the Plan presented in a question and answer format. Purpose 1. What is the purpose of the Plan? The purpose of the Plan is to provide holders of record of Common Stock of the Company a simple and convenient method of investing cash dividends and optional cash payments in additional shares of Common Stock of the Company. Also, because participants in the Plan will purchase shares directly from us, we will receive funds needed for our corporate purposes (see "Use of Proceeds" herein). Advantages 2. What are the advantages of the Plan? Participants in the Plan may: * automatically reinvest cash dividends on all or a portion of their shares; * make optional cash investments in the Company at any time, from a minimum amount of $15.00 in any calendar month, to a maximum amount of $5,000.00 in any calendar quarter; or * reinvest their cash dividends and make optional cash investments in the Company. The shares of Common Stock purchased on behalf of participants in the Plan generally will be purchased at a discounted price, which price, and the restrictions thereon, are more fully explained in the answer to Question 11 of this Prospectus. Participants in the Plan will not pay any brokerage commissions, service charges, or other expenses in connection with purchases under the Plan. Since fractional shares, as well as full shares, may be credited to participants' accounts, participants may fully invest funds. In addition, dividends in respect of such fractional shares, as well as full shares, will be credited to participants' accounts. Participants avoid the necessity for safekeeping of stock certificates for shares credited to their accounts. Regular statements of account simplify record keeping. Plan Administration 3. Who administers the Plan for participants? The Plan is administered by the Share Owner Dividend Reinvestment and Stock Purchase Plan Committee (the "Committee") appointed by our Board of Directors. The Committee shall determine the rights of the participants in accordance with the Plan and interpret the Plan as it deems necessary or desirable in connection with its operation. The Committee may adopt such rules and regulations as it deems appropriate to promote the objectives of the Plan. All correspondence with regard to the Plan, except communications otherwise specified herein to be directed to the Agent referred to in Question 4, should be addressed to The Berkshire Gas Company, Attention: Secretary of the Share Owner Dividend Reinvestment and Stock Purchase Plan Committee, 115 Cheshire Road, Pittsfield, Massachusetts 01201. 4. Who is the agent for the Plan participants? The designated agent under the Plan is State Street Bank and Trust Company (the "Agent"). The Agent will be responsible for investing participants' funds and keeping continuous records of participants' accounts. The Agent will send participants statements of account at least quarterly and perform other duties for Plan participants as needed. All authorization forms, optional cash payments, notices of withdrawal and other communications with the Agent should be sent to: State Street Bank and Trust Company P.O. Box 8209 Boston, Massachusetts 02101-8209 If State Street Bank and Trust Company ceases to act as Agent under the Plan, either the Company or the Committee will designate another agent. Eligibility and Participation 5. Who is eligible to participate? * All holders of record of ten or more shares of Common Stock of the Company who are not employed by us; * All of our employees who own of record one or more shares; and * Shareholders of the Company who hold their shares in "street" name may participate in the Plan through the Depository Trust Company. (You should contact your broker for this service.) These shareholders, however, may only reinvest dividends and may not use optional cash payments for the purchase of shares through the Plan. 6. How may an eligible person join the Plan? A shareholder may join the Plan at any time by signing an "Authorization Form" and returning it to the Agent. Authorization Forms are automatically sent to new shareholders or may be obtained upon request from the Company at the address set forth in Question 3 or from the Agent at the address set forth in Question 4. A shareholder may also join the Plan by telephoning the Transfer Agent at 1-800-426-5523. 7. What does the Authorization Form provide? The Authorization Form directs: (a) us to pay to the Agent the cash dividends on all or a specified portion of the shares of Common Stock in a participant's name and on all shares credited to such participant's Plan account; and (b) the Agent to use these cash dividends, together with any optional cash payments made by the participant, to purchase shares of Common Stock from us. The Authorization Form provides for the purchase of shares through the following investment options: * Reinvest dividends on all of the shares held by a participant; * Reinvest dividends on fewer than all of the shares held by a participant and continue to receive cash dividends on the other shares; or * Invest by making optional payments at any time in any amount from a minimum of $15.00 in any calendar month to a maximum aggregate of $5,000.00 in any calendar quarter, whether or not dividends are being reinvested. A participant may change the investment option at any time by signing a new Authorization Form and returning it to the Agent, or by telephone as noted above in Question 6. Cash dividends on shares credited to the participant's account under the Plan are automatically reinvested in additional Common Stock. 8. When may a shareholder join the Plan? A shareholder may enroll in the Plan at any time. The Authorization Form or telephone request must be received by the Agent by the last day of the month immediately preceding the month in which the next dividend is paid in order to reinvest that dividend. If received after that date, the shareholder's participation in the Plan will become effective on the next dividend payment date. Dividends historically have been paid on the fifteenth day of the months of January, April, July and October, but the Company reserves the right to change its dividend payment dates at any time, or to suspend dividend payments at any time. For example, in order to invest a quarterly dividend payable on October 15, 1998, a shareholder's Authorization Form must be received by the Agent no later than September 30, 1998. If the Authorization Form is received after September 30, 1998, the dividend payable on October 15, 1998 will be paid in cash and the shareholder's participation in dividend reinvestment will commence on the next dividend payment date. Cost to Participants 9. Are there any costs to the participants under the Plan? We will pay all of the administration fees incurred in connection with the Plan. Plan participants will not have to pay any brokerage fees or transfer taxes when they purchase shares of Common Stock from us through the Plan. However, participants will bear certain expenses upon their withdrawal from the Plan or if we terminate the Plan (see Question 19). Purchases 10. How many shares of Common Stock will the Agent purchase for participants? The number of shares to be purchased by the Agent for a particular participant in the Plan will depend upon the amount of dividends to which the participant is entitled, any optional cash payments made by the participant, and the purchase price of the Common Stock. For a given participant, the Agent will purchase that number of shares, including fractional shares computed to four decimal places, equal to the total dollar amount to be invested by that participant divided by the purchase price per share of the Common Stock. 11. What will be the price of the Common Stock purchased under the Plan? The price for shares purchased through the Plan shall be equal to 97% of the average of the daily high and low sales prices for the Company's Common Stock (as quoted in the NASDAQ National Market System) for the five consecutive trading days prior to and including the date of purchase (or, in the event that the NASDAQ National Market System is closed on the day of purchase, for the five consecutive trading days immediately preceding the date of purchase) (the "Average"). If the price of shares to be purchased under the Plan falls below the book value of the shares, then the price shall be equal to 100% of the Average. We will provide written notification to Plan participants in the event we suspend the "discount" price. Participants may not purchase shares of Common Stock through the Plan if the price for a share would be less than the par value of such share, currently $2.50. Optional Cash Payments 12. How are optional cash payments made? Optional cash payments may be made at any time, from a minimum amount of $15 in any calendar month to a maximum of $5,000.00 in any calendar quarter. Optional cash payments may be made in varying amounts and there is no obligation to make regular optional cash payments. Checks or money orders for optional cash payments must be made payable to State Street Bank and Trust Company and mailed to the Agent at the address set forth herein under Question 4. 13. When must optional cash payments be received by the Agent to be invested? Optional cash payments will be invested on the fifteenth of each month, whether or not such date is a business day. Optional cash payments must be received by the Agent no later than the fifteenth day of any month in order to be invested that month. Optional cash payments received by the Agent after the fifteenth of the month will be held for investment in the following month. YOU WILL NOT RECEIVE ANY INTEREST ON OPTIONAL CASH PAYMENTS If you make an optional cash payment and then decide that you do not want to make that investment, you must make a written request to the Agent to return your optional cash payment and the Agent must receive this request at least 48 hours prior to the next investment date for optional cash payments. Otherwise, your optional cash payment will be invested in Common Stock through the Plan. Reports to Participants 14. What record will a participant have of his or her purchases? Each participant (of record) in the Plan will receive from the Agent a statement of account at least quarterly showing amounts invested, purchase prices, shares purchased and other information for the preceding quarter and the year-to-date. These statements are a participant's continuing record of the cost of such participant's purchases and should be retained for income tax purposes. 15. What other reports will participants receive? Plan participants (of record) will receive the same communications sent to every other holder of the Company's Common Stock, including our Annual Report to Shareholders, a Notice of Annual Meeting of Shareholders and Proxy Statement, a proxy, and income tax information forms reporting dividends paid. Shareholders who hold their shares in street name may request these reports from us or their broker. Certificates for Shares 16. Will certificates be issued to participants for shares purchased under the Plan? Normally, participants will not receive certificates for Common Stock purchased under the Plan. The participant's quarterly statement of account will show the number of shares held in the participant's account under the Plan. However, within five business days of receipt by the Agent of a written request from a participant, certificates for any number of whole shares credited to a participant's account under the Plan will be issued to the participant. Any remaining full shares and any fractional share will continue to be held in the participant's account. Certificates for fractional shares will not be issued under any circumstances. The issuance of certificates will not terminate the participant's continuation of the Plan. Any request for the issuance of certificates to a participant should be mailed to the Agent at the address set forth under Question 4. Shares credited to the account of a participant in the Plan may not be acceptable as collateral for loans. A participant who wishes to pledge such shares should request that certificates for such shares be issued and delivered to such participant. 17. In whose name will certificates be registered when issued to a participant? The certificates will be issued in the name under which the participant's shares were registered upon enrolling in the Plan. Withdrawal from the Plan 18. When may a participant withdraw from the Plan? A participant may withdraw from the Plan at any time. If a notice of withdrawal is received by the Agent at least ten days prior to the record date for the next dividend, such dividend and all subsequent dividends will be paid in cash to the withdrawing participant. If such notice of withdrawal is received by the Agent subsequent to the date specified, such dividends will be invested under the Plan for the participant's account. All subsequent dividends will be paid in cash to the withdrawing participant. Investment of any optional cash payments will be cancelled upon receipt by the Agent of such notice of withdrawal at least 48 hours prior to an investment date for optional cash payments, and any optional cash payments received prior to such withdrawal date will be returned to the withdrawing participant. Any shareholder who has withdrawn from the Plan may re-enroll at any time upon submission of an Authorization Form or telephone request to the Transfer Agent, as provided under Question 6. Until such time, dividends will be paid to such shareholder in cash. 19. How does a participant withdraw from the Plan? In order to withdraw from the Plan, a participant must write to the Agent at the address set forth under Question 4, notifying the Agent that such participant is withdrawing from the Plan. The notice must also state the participant's account number. To facilitate the withdrawal, the participant may forward the bottom portion of such participant's most recent quarterly account statement. When a participant withdraws from the Plan, or upon termination of the Plan by the Company, the Agent will cause a certificate or certificates for the full shares credited to the participant's account to be issued and delivered to the participant. The participant's interest in any fractional share will be converted to cash using a share price equal to the average of the daily high and low sales prices for the Company's Common Stock for the five consecutive trading days ending on and including such date of withdrawal. Upon withdrawal from the Plan, the participant may also request in writing that some or all of the shares, both whole and fractional, held in such participant's Plan account be sold. If the participant so requests, the Agent will sell such shares and deliver to the participant the proceeds, less a handling charge of 5% of the proceeds received from such sale or $5.00 (whichever is less), and any broker's commissions and transfer taxes payable. Shares will be sold for the participant only upon the receipt by the Agent of clear written instructions to sell at the prevailing market price and the proper documents to effect the sale. Such documents include a stock power, signed by the registered owner exactly as such owner's name appears on the Agent's records, with signature guaranteed according to the Uniform Commercial Code by a commercial bank that is a member of the Federal Deposit Insurance Corporation or by a member firm of the New York, American, Boston, Midwest or Pacific Stock Exchange (Medallion Guarantee). If the shares are held of record in the name of a corporation, partnership, trust or other fiduciary or if a record owner has died, the Agent may require certified and current evidence of authority before accepting a request to sell shares credited to a participant. Voting Rights 20. How are participant's shares voted? All shares owned by the participant, whether held by the shareholder directly or by the Agent under the Plan for such shareholder's account, will be aggregated for voting purposes. Each participant in the Plan will receive a proxy indicating the total number of shares of Common Stock held by the participant, including shares registered in such participant's name and shares credited to such participant's account under the Plan. Instruction forms for voting purposes will be forwarded to the participant. Alternatively, a participant may vote the shares registered in such participant's name and shares credited to such participant's Plan account in person at meetings of the Company's shareholders. Income Tax Information 21. What are the federal income tax consequences of participation in the Plan? a. General: In general, participants in the Plan have the same federal income tax obligations with respect to reinvested dividends as with dividends not reinvested under the Plan. We understand that Participants are treated for federal income tax purposes as having received, on the dividend payment date, a dividend equal to the full amount of the cash dividend payable on such date with respect to (1) shares of Common Stock held in the participant's account under the Plan, and (2) shares of Common Stock owned directly by the participant (the dividends from which may or may not be reinvested under the Plan). This is required even though the reinvested dividends are not actually received but are applied to the purchase of additional shares. To the extent that Plan participants purchase shares through the Plan at a discount, for federal income tax purposes, such participants will be deemed to have received income equal to the value of the additional shares, or fraction thereof, purchased as a result of the discount. The tax basis of shares purchased through the Plan is the purchase price, before discount if any, per share of the stock on the investment date. (See Question 11.) The holding period for shares purchased with dividends or optional cash payments begins on the day after the applicable date of investment. A participant will not realize any taxable income upon receiving certificates for whole shares, either upon request for certificates for those shares or upon withdrawal from or termination of the Plan. However, a participant may realize ordinary income or a capital gain or loss on any cash payment that is made in settlement of a fractional share upon withdrawal from or termination of the Plan. Ordinary income or capital gain or loss may also be realized upon withdrawal from the Plan, when any or all whole shares are sold by the participant. The amount of income, capital gain or loss will be the difference between the amount received and the tax basis for both the fractional and whole shares which are sold. b. Tax Information Forms: Following each tax year, the Company sends each participant a United States Information Return (Form 1099 Div. B) reporting the taxable dividends and the aggregate discount received by the participant for that tax year. This form contains the information necessary for each participant to complete the dividend income information on such participant's federal income tax return. Generally, the amount in the box labeled "Total Dividends For The Calendar Year" should be included on a participant's federal income tax return as taxable income. Tax consequences will vary depending on the special circumstances of each participant (and for shares purchased between 1982 and 1985, where taxes on reinvested dividends may have been deferred under then effective law). For additional information and any questions regarding tax consequences of participation in the Plan, participants should consult their own tax advisors. 22. What provision is made for foreign shareholders whose dividends are subject to United States' income tax withholdings? In the case of those foreign shareholders whose dividends are subject to United States' income tax withholding, the Agent will first deduct the amount of such taxes and then apply the remaining amount of the participant's dividend to the purchase of Common Stock. If such foreign participants desire to invest the full amount of their dividends, they may tender cash payments to the Agent equal to the amount of tax withheld. The minimum optional cash payment requirement of $15.00 will be waived to accommodate all payments, regardless of size, made by foreign shareholders for this express purpose. Such payments will be invested for the foreign shareholders for this express purpose. Such payments will be invested for the foreign participants on the regular dividend investment date for all participants if received by the Agent prior to that date. In addition, foreign shareholders may make optional cash payments. Miscellaneous 23. What are the responsibilities of the Agent and the Company under the Plan? Neither we nor the Agent will be liable for any act done in good faith or for any good faith omission to act in administering the Plan including, without limitation, any claim of liability arising out of failure to terminate a participant's account upon such participant's death prior to receipt of notice in writing of such death. Participants should recognize that neither we nor the Agent can assure them of a profit or protect them against a loss on the shares purchased by participants under the Plan, nor guarantee the existence, frequency or amount of any future dividends on the shares declared or paid by us. 24. May the Plan be changed or discontinued? Although we hope that shareholder response will justify continuing the Plan indefinitely, we reserve the right to modify, suspend or terminate the plan at any time, specifically including, but not limited to the operation of the 3% price discount referred to above. Notice of any such action will be mailed to all participants at their address of record. If we terminate the Plan: * we will issue certificates for whole shares credited to a participant's account under the Plan; and * we will pay the participant, in cash, the value of any fractional share credited to the participant's account, in lieu of issuing a certificate for that fractional share. * We reserve the right to interpret and regulate the Plan as may be necessary, appropriate or desirable in connection with the operation of the Plan. 25. What happens if a participant sells or transfers all the shares registered to the participant? If a participant sells or transfers all of the shares registered in the participant's name: * participation in the Plan will terminate automatically; * certificates for whole shares credited to the former participant's account under the Plan will be issued to the former participant; and * a cash payment will be made to the former participant for any fractional share, in each case, as of the date of such transfer or sale, in lieu of issuing a certificate to the former participant for that fractional share. DIVIDENDS ON COMMON STOCK The following table sets forth the cash dividends declared and paid on the Company's Common Stock for the periods shown:
Dividend Quarter Ended Per Share ------------- --------- March 31, 1996 $.275 June 30, 1996 $.28 September 30, 1996 $.28 December 31, 1996 $.28 March 31, 1997 $.28 June 30, 1997 $.285 September 30, 1997 $.285 December 31, 1997 $.285 March 31, 1998 $.285 June 30, 1998 $.29 September 30, 1998 $.29
We intend to declare and pay dividends quarterly on our Common Stock, but we can make no representations concerning the amount or frequency of future dividends. The Board of Directors determines, from time to time, whether to declare dividends in the light of the Company's earnings, cash position and other relevant factors. Reference is made to "Description of Common Stock" herein for information with respect to limitations on the payment of dividends. COMMON STOCK PRICE RANGE Our Common Stock is traded on the NASDAQ National Market System. The table below sets forth the high and low average of the bid and asked prices for shares of our Common Stock, as reported by the National Quotation Bureau, Incorporated, for the periods indicated.
Quarter Ended High Low ------------- ---- --- March 31, 1996 $16.75 $15.00 June 30, 1996 $16.00 $14.75 September 30, 1996 $16.75 $14.88 December 31, 1996 $18.00 $15.25 March 31, 1997 $17.50 $15.25 June 30, 1997 $16.00 $15.00 September 30, 1997 $17.38 $15.25 December 31, 1997 $23.50 $16.25 March 31, 1998 $25.63 $21.50 June 30, 1998 $24.75 $21.63 September 30, 1998 $25.00 $19.50
These quotations represent prices between dealers and do not include retail markup, markdown or commission. They do not necessarily represent actual transactions. On November 5, 1998, the daily high sales price was $23.75 and the daily low sales price was $23.75. DESCRIPTION OF COMMON STOCK As of November 9, 1998, the capital stock of the Company consisted of 4,600,000 shares of Common Stock, $2.50 par value, of which 2,370,961 were issued and outstanding, and 3,121 shares of Class A 4.8% Cumulative Preferred Stock, $100 par value per share, were issued and outstanding. The information set forth below is summarized from the Articles of Organization, as amended, of the Company and the Indenture referred to below, each as amended or supplemented from time to time, which either have been previously filed with the Securities and Exchange Commission and are incorporated herein by reference, or are filed herewith as exhibits. The statements and descriptions contained in this Prospectus may not be complete and are qualified in their entirety by reference to such exhibits. Dividend Rights The holders of Common Stock shall be entitled to receive such dividends as may be declared by the Board of Directors subject to the preferential rights of the holders of Preferred Stock to receive full cumulative quarterly dividends at the rates set forth in the title of each class and series thereof before any dividends are paid to the holders of Common Stock. Limitation on Payment of Dividends on Common Stock The Company's charter provisions relating to its Preferred Stock and the provisions of the Company's Indenture, as supplemented and amended, securing the Company's outstanding First Mortgage Bonds impose certain restrictions on the payment of cash dividends on, or repurchases of, Common Stock. Under the most restrictive of these provisions $3,576,115 of retained earnings was unrestricted at September 30, 1998. Voting Rights Except as provided by law or otherwise provided below, the holders of Common Stock have the sole voting rights and are entitled to one vote for each share held of record. In addition, holders of fractional shares are permitted a vote equal to their fractional interest. The Company's Board of Directors is classified into three classes. There are no cumulative voting rights, which means that a majority of the Common Stock voting at any election can elect the directors for the class whose term is then expiring. The Company's Articles of Organization and By-laws contain provisions specifying the vote necessary to take certain actions. The approval of a business combination not approved by a two-thirds vote of the Board of Directors requires a 75% vote of the Common shareholders. The approval of an amendment removing or altering that provision or provisions concerning the classification of directors, filling vacancies on the Board of Directors and notice requirements for shareholder meetings also require a 75% vote of the Common shareholders. Charter Provisions That May Affect Attempts To Change Control Of The Company The Company's Articles of Organization and By-Laws contain provisions that may have the effect of delaying or deterring a change in control of the Company by requiring a vote of 75% of the Company's outstanding Common shares for approval of certain business combinations of the Company and another entity, which the Company's Board of Directors has not approved by a two-thirds majority. Other provisions concerning classification of the Board, filling vacancies on the Board and notice requirements also may have such an effect, but those provisions operate regardless of whether extraordinary corporate transactions are proposed. Miscellaneous The Common Stock has no conversion rights and is not subject to redemption. The outstanding shares of Common Stock are, and the shares to be issued under the Plan will be, when issued and paid for, fully paid and non- assessable. We distribute to our shareholders annual reports containing audited financial statements, and, in addition, twelve-month condensed financial statements in each quarter. The transfer agent of the Company's Common Stock is State Street Bank and Trust Company, Boston, Massachusetts. LEGAL OPINIONS Legal matters in connection with this offering will be passed upon for the Company by Rich, May, Bilodeau & Flaherty, P.C., Old South Building, 294 Washington Street, Boston, Massachusetts 02108, general counsel for the Company. The Chairman of the Board of Directors of the Company, Franklin M. Hundley, is of counsel to, and a former a managing director of the firm of Rich, May, Bilodeau & Flaherty, P.C. EXPERTS The financial statements and the related financial statement schedules incorporated in this Prospectus by reference from the Company's Annual Report on Form 10-K for the year ended June 30, 1998 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports which are incorporated herein by reference, and have been so incorporated in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing. INDEMNIFICATION The Company's By-Laws permit the Company's directors and officers (and persons who occupy such positions in other companies at the request of the Company) to be indemnified for liabilities arising in connection with any action, suit or proceeding prosecuted to a final determination on the merits (except for any costs or expenses as to which such person shall be finally adjudged to be liable), and any action, suit or proceeding which is settled with the approval of the court having jurisdiction thereof, but only in such amount (which shall not include any sum ordered to be paid by such indemnified person to the Company) as such court shall determine to be fair and reasonable under the circumstances. Indemnification payments properly authorized may include reimbursement for the amount of the claim or judgment and expenses of defense, including legal fees. Massachusetts law allows such indemnification, but limits provision of indemnification where a person is adjudicated not to have acted in good faith in the reasonable belief that such action was in the best interest of the corporation. Indemnification is also available to officers and directors in connection with certain actions taken by them in reliance upon governmental regulations, rules, orders and determinations. Certain liabilities arising under the Securities Act of 1933 may be covered by this indemnification provision, although the By-Laws provide that indemnification of liabilities arising under such Act shall be available only to the extent that such rights of indemnification may be determined to be valid by a court of competent jurisdiction. Massachusetts law also allows a corporation to purchase and maintain insurance on behalf of such persons against any liabilities incurred in the capacity of director or officer and the Company has such insurance. Pursuant to a vote by Common shareholders at their 1987 Annual Meeting, the Company's Articles of Organization were amended to provide that, to the fullest extent that the General Laws of the Commonwealth of Massachusetts as they exist on the date of such vote, or as they may thereafter be amended, permit the limitation or elimination of the liability of directors, no director of the Company shall be personally liable to the Company or its shareholders for monetary damages for breach of fiduciary duty, notwithstanding any provision of law imposing such liability. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director of the Company with respect to any acts or omissions of such director occurring prior to such amendment or repeal. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is therefore unenforceable. =========================================================================== The Berkshire Gas Company SHARE OWNER DIVIDEND REINVESTMENT and STOCK PURCHASE PLAN Common Stock ($2.50 Par Value) November 10, 1998 PROSPECTUS =========================================================================== PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution The following are the estimated expenses in connection with the proposed issuance and distribution of the Common Stock: Registration Fee $ 1,321 Printing $ 6,000 Accounting Fees $ 1,200 Legal Fees $12,000 Miscellaneous Expenses $ 1,000 ------- Total (estimated) $21,521
Item 15. Indemnification of Directors and Officers The general effect of the Company's Bylaws with respect to insurance for and indemnification of directors and officers is set forth in Part I of this Registration Statement under "INDEMNIFICATION" and is incorporated herein by this reference. Item 16. List of Exhibits See Exhibit Index at page II-5. Item 17. Undertakings The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price set represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933 each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; (4) That, for the purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (5) To furnish the Division of Corporation Finance a letter informing said Division when all of the securities registered have been sold. The issuer hereby undertakes to transmit or cause to be transmitted to all participants in the Plan (except those who, having the same address as a shareholder of the registrant, have consented in writing that only one copy of such material need be sent to such address), who do not otherwise receive such material as shareholders of the issuer, at the time and in the manner such material is sent to its shareholders generally, copies of all reports, proxy statements and other communications distributed to its shareholders generally. This issuer also undertakes to transmit to the Commission for its information copies of all such material which is not otherwise furnished to or filed with the Commission pursuant to any other requirement of the Commission. Copies of such material transmitted to the Commission pursuant to this undertaking shall not be deemed to be "filed" as a part of the registration statement. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto authorized, in the City of Pittsfield, Massachusetts, on the 6 day of November, 1998. THE BERKSHIRE GAS COMPANY BY: /s/ Michael J. Marrone Michael J. Marrone, Vice President Treasurer and Chief Financial Officer Power of Attorney KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Scott S. Robinson and Michael J. Marrone, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about said matters, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirement of the Securities Act of 1933, this registration statement has been signed below by the following persons and in the capacities indicated on the 6 day of November, 1998. (i) Principal Executive Officer: /s/ Scott S. Robinson, President Scott S. Robinson (ii) Principal Financial Officer and Principal Accounting Officer: /s/ Michael J. Marrone, Vice President, Treasurer Michael J. Marrone and Chief Financial Officer (iii) Directors: /s/ George R. Baldwin George R. Baldwin /s/ John W. Bond John W. Bond /s/ Paul L. Gioia Paul L. Gioia /s/ Franklin M. Hundley Franklin M. Hundley /s/ James R. Keys James R. Keys /s/ Scott S. Robinson Scott S. Robinson /s/ Robert B. Trask Robert B. Trask EXHIBIT INDEX Certain of the following exhibits are filed herewith or will be filed herewith by amendment. Certain other of the following exhibits have heretofore been filed with the Commission and pursuant to Rule 411 are incorporated herein by reference.
Sequential Exhibits* Description of Exhibit Page Number - - --------- ---------------------- ----------- Exhibit 1. Underwriting Agreement. Not applicable. Exhibit 2. Plan of acquisition, reorganization arrangement, liquidation or succession. Exhibit 4. Instruments defining rights of security holders, including indentures. 4(a) First Mortgage Indenture and Deed of Trust, dated as of July 1, 1954, between Pittsfield Coal Gas Company (now the Berkshire Gas Company) and Chemical Bank & Trust Company (now Chemical Bank), Trustee (Exhibit 4(c) to the Company's Registration Statement on Form S-1, File No. 2-19808). 4(b) First Supplemental Indenture, dated as of June 1, 1956, between the Company and Chemical Corn Exchange Bank (now Chemical Bank), Trustee (Exhibit 4(d) to the Company's Registration Statement on Form S-1, File No. 2-19808). 4(c) Second Supplemental Indenture, dated as of October 1, 1957, between the Company and Chemical Corn Exchange Bank (now Chemical Bank), Trustee (Exhibit 4(e) to the Company's Registration Statement on Form S-1, File No. 2-19808). 4(d) Third Supplemental Indenture, dated as of October 1, 1958, between the Company and Chemical Corn Exchange Bank (now Chemical Bank), Trustee (Exhibit 4(f) to the Company's Registration Statement on Form S-1, File No. 2-19808). 4(e) Fourth Supplemental Indenture, dated as of August 1, 1960, between the Company and Chemical Bank New York Trust Company (now Chemical Bank), Trustee. (Exhibit 4(e) to the Company's Registration Statement on Form S-2, File No. 33-1492). 4(f) Fifth Supplemental Indenture, dated as of June 1, 1962, between the Company and Chemical Bank New York Trust Company (now Chemical Bank), Trustee. Filed as Exhibit 4(f) to the Company's Registration Statement on Form S-2, File No. 33-1492, and incorporated herein by reference. 4(g) Sixth Supplemental Indenture, dated as of February 1, 1965, between the Company and Chemical Bank New York Trust Company (now Chemical Bank),Trustee. Filed as Exhibit 4(g) to the Company's Registration Statement on Form S-2, File No. 33-1492, and incorporated herein by reference. 4(h) Seventh Supplemental Indenture, dated as of October 1, 1965, between the Company and Chemical Bank New York Trust Company (now Chemical Bank), Trustee. Filed as Exhibit 4(h) to the Company's Registration Statement on Form S-2, File No. 33-1492, and incorporated herein by reference. 4(i) Eighth Supplemental Indenture, dated as of September 1, 1967, between the Company and Chemical Bank New York Trust Company (now Chemical Bank), Trustee. Filed as Exhibit 4(i) to the Company's Registration Statement on Form S-2, File No. 33-1492, and incorporated herein by reference. 4(j) Ninth Supplemental Indenture, dated as of April 1, 1969, between the Company and Chemical Bank, Trustee. Filed as Exhibit 4(j) to the Company's Registration Statement on Form S-2, File No. 33-1492, and incorporated herein by reference. 4(k) Tenth Supplemental Indenture, dated as of March 1, 1972, between the Company and Chemical Bank, Trustee. Filed as Exhibit 4(k) to the Company's Registration Statement on Form S-2, File No. 33-1492, and incorporated herein by reference. 4(l) Eleventh Supplemental Indenture, dated as of April 15, 1975, between the Company and Chemical Bank, Trustee. Filed as Exhibit 4(l) the Company's Registration Statement on Form S-2, File No. 33-1492, and incorporated herein by reference. 4(m) Twelfth Supplemental Indenture, dated as of November 27, 1978, between the Company and Chemical Bank, Trustee. Filed as Exhibit 4(m) to the Company's Registration Statement on Form S-2, File No. 33-1492, and incorporated herein by reference. 4(n) Thirteenth Supplemental Indenture, dated as of October 15, 1981, between the Company and Chemical Bank, Trustee. Filed as Exhibit 4(n) to the Company's Registration Statement on Form S-2, File No. 33-1492, and incorporated herein by reference. 4(o) Fourteenth Supplemental Indenture, dated as of August 19, 1983, between the Company and Chemical Bank, Trustee. Filed as Exhibit 4(o) to the Company's Registration Statement on Form S-2, File No. 33-1492, and incorporated herein by reference. 4(p) Fifteenth Supplemental Indenture, dated as of August 19, 1985, between the Company and Chemical Bank, Trustee. Filed as Exhibit 4(p) to the Company's Registration Statement on Form S-2, Registration No. 33-1492, and incorporated herein by reference. 4(q) Sixteenth Supplemental Indenture, dated as of January 1, 1988, between the Company and Chemical Bank, Trustee. Filed as Exhibit 4(q) to the Company's Registration Statement on Form S-3, Registration No. 33-27785, and incorporated herein by reference. 4(r) Seventeenth Supplemental Indenture, dated as of February 1, 1989, between the Company and Chemical Bank, Trustee. Filed as Exhibit 4(r) to the Company's Registration Statement on Form S-3, Registration Statement No. 33-27785, and incorporated herein by reference. 4(s) Eighteenth Supplemental Indenture, dated as of September 1, 1991, between the Company and Chemical Bank, Trustee. Filed as Exhibit 4(x) to the Company's Registration Statement on Form S-3, Registration Statement No. 33-64302, and incorporated herein by reference. 4(t) Nineteenth Supplemental Indenture, dated as of September 1, 1992, between the Company and Chemical Bank, Trustee. Filed as Exhibit 4(z) to the Company's Registration Statement on Form S-3, Registration Statement No. 33-64302, and incorporated herein by reference. 4(u) Debenture Indenture, dated as of November 1, 1986, between the Company and Centerre Trust Company of St. Louis (now Boatmen's Trust Company), as Trustee. Filed as Exhibit 4(q) to the Company's Registration Statement on Form S-2, Registration Statement No. 33-9509, and incorporated herein by reference. 4(v) Senior Note Agreement, dated as of July 1, 1990, between the Company and Allstate Life Insurance Company. Filed as Exhibit 4(w) to the Company's Registration Statement on Form S-3, Registration Statement No. 33-64302, and incorporated herein by reference. 4(w) Charter of the Company. Filed as Exhibit 3(a) to the Company's Form 8, amending the Company's Form 10-Q for the fiscal quarter ended September 30, 1984, File No. 0-1857- 3, and incorporated herein by reference. 4(x) Amendment to the Company's Charter, dated October 30, 1985. Filed as Exhibit 3(b) to the Company's Registration Statement on Form S-2, Registration Statement No. 33-1492, and incorporated herein by reference. 4(y) Amendment to the Company's Charter, dated July 14, 1986. Filed as Exhibit 3(a) to the Company's Form 10-K for the fiscal year ended June 30, 1986, File No. 0-1857-3, and incorporated herein by reference. 4(z) Amendment to the Company's Charter, dated October 28, 1986. Filed as Exhibit 4(v) to the Company's Registration Statement on Form S-3, Registration Statement No. 33-27785, and incorporated herein by reference. 4(aa) Amendment to the Company's Charter, dated June 15, 1992. Filed as Exhibit 4(y) to the Company's Registration Statement on Form S-3, Registration Statement No. 33-64302, and incorporated herein by reference. 4(bb) Amendment to the Company's Charter, dated July 29, 1994. (Exhibit 4(bb) on the Company Registration Statement on Form S-2, Registration Statement No. 33-83828). Exhibit 5. Opinion regarding legality. **5 Opinion of Rich, May, Bilodeau & Flaherty, P.C. Exhibit 8. Opinion regarding tax matters. Not applicable. Exhibit 12. Statement regarding computation of ratios. Not applicable. Exhibit 15. Letter regarding unaudited interim financial information. Not applicable. Exhibit 23. Consents of Experts and counsel. **23(a) Consent of Deloitte & Touche LLP, independent certified public accountants. **23(b) Consent of Rich, May, Bilodeau & Flaherty, P.C. (included in opinion filed as Exhibit 5 to this Registration Statement). Exhibit 24. Power of Attorney. **24(a) Power of Attorney (set forth on page II-3 of this Registration Statement). Exhibit 25. Statement of eligibility of trustee Not applicable. Exhibit 26. Invitations for competitive bids. Not applicable. Exhibit 27. Financial data schedules. Not applicable. Exhibit 99. Additional Exhibits *99(a) A copy of the Order of the Massachusetts Department of Public Utilities dated November 5, 1998, relating to the issue and the sale of 200,000 shares of common stock pursuant to the Plan. Exhibit numbers designated in Regulation S-K Filed herewith
EX-5 2 EXHIBIT 5 November 10, 1998 The Berkshire Gas Company 115 Cheshire Road Pittsfield, MA 01201 Dear Sirs/Mesdames: You are seeking to register, pursuant to the Securities Act of 1933, an aggregate of 200,000 shares of Common Stock, $2.50 par value, of The Berkshire Gas Company (the "Company"), under the Company's Share Owner Dividend Reinvestment and Stock Purchase Plan. You have requested that we furnish to you an opinion that is to be filed as Exhibit 5 to the Registration Statement on Form S-3 (the "Registration Statement") relating to such shares. We have examined the Company's charter documents and the Company's By- laws, each as amended, copies of the resolutions adopted by the Board of Directors of the Company, the Registration Statement, and such other documents as we have deemed pertinent. We have participated in the filing with the Massachusetts Department of Telecommunications and Energy ("MDTE") of the Company's application and petition relating to authorization and approval of the issue and sale of such shares and we have examined the order of the MDTE relating thereto. We have made such examination of law as we have felt necessary in order to render this opinion. It is our understanding that the purpose of the above-described offering is to provide the Company with funds to finance additions to the Company's property, plant and equipment or to repay temporary indebtedness incurred to finance such additions. Based on the foregoing, we are of the opinion and advise you that, under the applicable rules and regulations of the Securities and Exchange Commission, the Registration Statement will become effective upon the filing thereof with the Securities and Exchange Commission; we are further of the opinion that, with respect to the 200,000 shares of stock being registered, such shares will be legally issued, fully paid and non-assessable when issued and delivered for the consideration described in the Registration Statement. This opinion does not pass on the application of the securities or "Blue Sky" laws of the various states. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. We further consent to the use of our name and to all references to us included in or made a part of the Registration Statement. Very truly yours, /s/ RICH, MAY, BILODEAU & FLAHERTY, P.C. RICH, MAY, BILODEAU & FLAHERTY, P.C. EX-23 3 EXHIBIT 23(A) INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement for the Share Owner Dividend Reinvestment and Stock Purchase Plan of the Berkshire Gas Company on Form S-3 of our report dated August 12, 1998, appearing in the Annual Report on Form 10-K of The Berkshire Gas Company for the year ended June 30, 1998 and to the reference to us under the heading "Experts" in the Prospectus, which is part of this Registration Statement. /s/ DELOITTE & TOUCHE LLP Deloitte & Touche LLP Hartford, Connecticut November 10, 1998 EX-99 4 EXHIBIT 99(A) The Commonwealth of Massachusetts DEPARTMENT OF TELECOMMUNICATIONS AND ENERGY November 5, 1998 D.T.E. 98-61/87 Petition of The Berkshire Gas Company and Berkshire Gas Mergeco Gas Company, Inc. for approvals related to a reorganization merger to establish a Holding Company pursuant to G.L. c. 164, [Section Sign] 96. Petition of The Berkshire Gas Company to the Department of Telecommunications and Energy pursuant to G.L. c. 164, [Section Sign] 14 for approval and authorization to issue and sell not more than 200,000 additional shares of common stock. APPEARANCES: James M. Avery, Esq. Emmett E. Lyne, Esq. K. Jill Rizzotti, Esq. Rich, May, Bilodeau & Flaherty, P.C. The Old South Building 294 Washington Street Boston, MA 02108-4675 FOR: THE BERKSHIRE GAS COMPANY and BERKSHIRE GAS MERGECO GAS COMPANY, INC. Petitioners Scott Harshbarger, Attorney General By: James W. Stetson Assistant Attorney General 200 Portland Street Boston, Massachusetts 02114 Intervenor Timothy A. Clark, General Counsel Colonial Gas Company 40 Market Street Lowell, MA 01852 -and- Jeffrey F. Jones, Esq. Constantine Athanas, Esq. Palmer & Dodge, LLP One Beacon Street Boston, MA 02108 FOR: COLONIAL GAS COMPANY Limited Participant TABLE OF CONTENTS I. INTRODUCTION Page 1 II. PROCEDURAL HISTORY Page 2 III. COMPANIES' PROPOSAL Page 2 A. Merger Page 2 B. DRIP Petition Page 5 C. Exemption Request Page 6 IV. CONSISTENCY OF HOLDING COMPANY PROPOSAL WITH THE PUBLIC INTEREST Page 6 A. Introduction Page 6 B. Standard of Review Page 7 C. Specific Considerations Page 9 1. Impact on Rates Page 9 2. Impact on Quality of Service Page 11 3. Impact on Competition Page 12 4. The Financial Integrity of the Post-Merger Entity Page 13 5. Societal Costs Page 14 6. Impact on Economic Development Page 14 7. Alternatives to the Merger Page 15 D. Conclusion Page 16 V. CONDITIONS OF APPROVAL Page 16 A. Dividend Policy Page 16 1. Introduction Page 16 2. Analysis and Findings Page 17 B. Cost of Capital Page 18 C. Asset Transfers Page 19 1. Description of Company Proposal Page 19 2. Analysis and Findings Page 19 VI. MANAGEMENT AGREEMENT Page 20 A. Description Page 20 B. Analysis and Findings Page 22 VII. TAX SHARING AGREEMENT Page 24 A. Description Page 24 B. Analysis and Findings Page 24 VIII. STOCK ISSUANCE Page 26 A. Standard of Review Page 26 B. Mergeco Page 28 1. Description of Proposal Page 28 2. Analysis and Findings Page 28 C. Dividend Reinvestment Plan Stock Issuance Page 29 1. Description of the Proposed Financing Page 29 2. Capital Structure of the Company Page 31 3. Analysis and Findings Page 32 IX. EXEMPTION FROM SEPARATION REQUIREMENTS OF THE STANDARDS OF CONDUCT Page 33 A. Introduction Page 33 B. Analysis and Findings Page 34 X. ORDER Page 36 I. INTRODUCTION On June 23, 1998, Berkshire Gas Company ("Berkshire" or "Company") and Berkshire Gas Mergeco Gas Company, Inc. ("Mergeco") (together, the "Companies") filed a petition for approval ("Restructuring Petition") pursuant to G.L. c. 164, [Section Sign] 96, of an Agreement and Plan of Merger ("Reorganization Plan") with the Department of Telecommunications and Energy ("Department"). In its Reorganization Plan, Berkshire proposes to create a holding company, Berkshire Energy Resources ("BER"), to directly own the common stock of Berkshire. The Companies have requested Department approval of their Reorganization Plan. On August 14, 1998, Berkshire also requested Department approval and authorization, pursuant to G.L. 164, [Section Sign] 14, for the issuance and sale of an additional 200,000 shares of common stock, $2.50 par value, pursuant to Berkshire's Share Owner Dividend Reinvestment and Stock Purchase Plan (the "DRIP") ("DRIP Petition"). The Department granted the Companies' motion to review these petitions on a consolidated basis. On October 7, 1998, Berkshire filed a request pursuant to 220 C.M.R. [Section Sign] 12.03(17) for a limited exemption from the separation requirements of 220 C.M.R. [Section Sign] 12.03(15) ("Exemption Request"), with respect to certain employees who will serve in management positions for Berkshire, and the non-regulated affiliates of Berkshire. This Order approves the Companies' petitions to (1) create a holding company to directly hold the common stock of Berkshire and (2) issue and sell an additional 200,000 shares of common stock, $2.50 par value, pursuant to Berkshire's DRIP. This Order denies, without prejudice, the Companies' Exemption Request. This Order also sets forth certain ratepayer protections. The Companies must implement the protections as a condition of their corporate restructuring, in order to safeguard the public interest. II. PROCEDURAL HISTORY On July 30, 1998, the Department held a public hearing in its offices regarding the Restructuring Petition, docketed as D.T.E. 98-61. The Department granted limited participant status to Colonial Gas Company ("Colonial"). The Attorney General intervened pursuant to G.L. c. 12, [Section Sign] 11E, on August 14, 1998. On September 29, 1998, the Department held a public hearing in its offices regarding the DRIP Petition, docketed as D.T.E. 98-87. On the same day, the Department held a combined evidentiary hearing in D.T.E. 98-61 and D.T.E. 98-87. The Companies presented two witnesses: Michael J. Marrone, vice president, treasurer and chief financial officer of Berkshire; and John J. Reed, president of Reed Consulting Group. The evidentiary record consists of 53 exhibits. On October 8, 1998, the Companies filed a brief in support of their petitions. III. COMPANIES' PROPOSAL A. Merger Currently, Berkshire is an investor-owned public utility that serves 19 communities in western Massachusetts. Berkshire also operates a retail propane business as a division and has entered into a strategic marketing alliance with Conectiv/CNE, LLC, a joint venture formed by a subsidiary of Connecticut Energy Corporation and a subsidiary of Delmarva Power & Light Company. The Companies request Department approval of their Reorganization Plan to create a holding company that will directly hold the common stock of Berkshire (Exh. BG-MJM-1, at 2). Pursuant to the Reorganization Plan, Berkshire has formed BER,(1) a Massachusetts business trust, and Mergeco, BER's wholly-owned subsidiary and a Massachusetts gas utility corporation that has no present business or assets of its own (id. at 11). Under the Reorganization Plan, Berkshire will become a subsidiary of BER through the merger of Berkshire with and into Mergeco, with Berkshire being the surviving entity (id. at 12). The Companies assert that their proposal is essentially identical to the corporate restructuring approved by the Department in Boston Edison Company, D.P.U./D.T.E. 97-63 (1998) (id. at 2). ___________________ (1) By Order dated January 30, 1998, the Department approved the investment in BER of such amounts required to submit the Reorganization Plan to Berkshire's shareholders and regulatory authorities having jurisdiction. The Berkshire Gas Company, D.T.E. 97-107 (1998). The Companies represent that the following events will occur simultaneously at the time of the merger: (1) each share of Mergeco common stock issued and outstanding immediately prior to the merger will be changed and converted into one share of Berkshire common stock, $2.50 par value; (2) each share of Berkshire's common stock issued and outstanding immediately prior to the merger will be changed and converted into one common share of BER; and (3) each share of BER issued and outstanding immediately prior to the merger will be cancelled (id. at 12). The Companies further represent that Berkshire cumulative preferred stock will not be affected by the merger (id. at 15). The Companies also claim that their long-term debt securities, assuming the negotiation of acceptable consents or amendments, will be similarly unaffected (id.). The Companies state that, as a result of the merger, (1) Berkshire will become a wholly-owned subsidiary of BER, (2) all of BER's common shares outstanding immediately after the merger will be owned by the holders of Berkshire's common stock outstanding immediately prior to the merger, and (3) Mergeco will cease to exist as a separate legal entity (id.). The Companies explain that the retail propane operations and energy marketing activities of Berkshire, currently performed through divisions of Berkshire, will be transferred to new subsidiaries after the merger (Exh. BG-MJM-1, at 5). In its Proxy Statement/Prospectus dated March 17, 1998, Berkshire proposes the following corporate structure (Exh. BG-MJM-5, at 22-23). The Companies state that the current board of directors of Berkshire will become the board of trustees of BER (id. at 22). The Company also reports that Berkshire's current officers will continue to serve as officers for Berkshire and also will serve in comparable senior positions for non- regulated affiliates of Berkshire (id. at 23). The Companies report that Berkshire also will perform certain services for its affiliates pursuant to the terms of a Management Services Agreement ("Management Agreement") (Exhs. BG-MJM-1, at 13; BG-MJM-6, at 1; RR-DTE-4(a)). B. DRIP Petition Berkshire proposes to issue and sell from time to time up to 200,000 additional shares of common stock through the Company's DRIP (DRIP Petition at 2). Berkshire explains that the DRIP allows the common stock cash dividends to be automatically reinvested in additional, original issue shares of common stock of the Company (id. at 3). Berkshire notes that participation in the DRIP is optional and is available to holders of ten or more shares of common stock, or to any Berkshire employee who owns one or more shares of common stock (id.). Berkshire seeks approval of the DRIP Petition concurrently with the Restructuring Petition because Berkshire anticipates that the merger probably will not be completed before the end of 1998 and that it will not have an adequate number of shares available for issuance pursuant to the DRIP for the interim period prior to the proposed corporate restructuring (id. at 4; Exh. BG-MJM-10, at 4). Therefore, Berkshire determined that it was necessary to increase the number of shares authorized for issuance pursuant to the DRIP rather than suspend the DRIP pending completion of the merger (DRIP Petition at 4; Exh. BG-MJM-10, at 4). Berkshire states that, upon approval of the Reorganization Plan by the Department, the DRIP will be assumed by BER (Exh. BG-MJM-10, at 3-4). Berkshire reports that participants in the DRIP will continue to be able to invest their dividends in BER's common shares, as well as purchase additional common shares and make optional payments to acquire such shares (id. at 4). The Company represents that it will take appropriate action to achieve compliance with applicable federal securities laws upon approval of the DRIP Petition (id. at 6-7). C. Exemption Request During the course of the evidentiary hearing, the Department raised the issue of whether the overlap of management between Berkshire's regulated and non-regulated entities was consonant with the Department's Standards of Conduct, 220 C.M.R [Section Sign] 12.00, et seq. (Tr. at 37-45). Therefore, Berkshire filed the Exemption Request with respect to certain senior executives that would serve Berkshire as well as its non-regulated affiliates, including its competitive energy affiliate (id. at 46). IV. CONSISTENCY OF HOLDING COMPANY PROPOSAL WITH THE PUBLIC INTEREST A. Introduction Through the merger, Berkshire would be transformed from a publicly traded stock corporation to a corporation whose equity would be entirely owned by a holding company. Of the commonwealth's ten investor-owned local gas distribution companies ("LDCs"),(2) five are currently affiliates of holding companies(3) (Exh. BG-JR-1, at 4). In addition to Berkshire, two of the other remaining LDCs that are not affiliates of holding companies, Bay State Gas Company ("Bay State") and Colonial, are currently involved in transactions that, if completed, will result in their becoming affiliates of holding companies(4) (id. at 4). It should be noted that, with the Department's Order in D.P.U./D.T.E. 97-63, all investor-owned electric utility companies in Massachusetts now operate within a holding company structure (id. at 3). ___________________ (2) The ten LDCs are: Berkshire, Bay State Gas Company, Blackstone Gas Company, Boston Gas Company, Colonial, Commonwealth Gas Company, Essex County Gas Company, Fall River Gas Company, North Attleboro Gas Company and Unitil/Fitchburg Gas and Electric Company. (3) The five LDCs that already are affiliates of holding companies are: Boston Gas Company, Commonwealth Gas Company, Unitil/Fitchburg Gas and Electric Company, North Attleboro Gas Company, and Essex County Gas Company (Exh. BG-JR-1, at 4). (4) The Department is currently reviewing these transactions in proceedings docketed as D.T.E. 98-31 for Bay State and D.T.E. 98-71 for Colonial. B. Standard of Review The Department's authority to review and approve mergers and acquisitions is found at G.L. c. 164, [Section Sign] 96, which, as a condition for approval, requires the Department to find that mergers and acquisitions are "consistent with the public interest." In Boston Edison Company, D.P.U. 850, at 6-8 (1983), the Department construed [Section Sign] 96's standard of consistency with the public interest as requiring a balancing of the costs and benefits attendant on any proposed merger or acquisition. The Department stated that the core of the consistency standard was "avoidance of harm to the public." D.P.U. 850, at 5. Therefore, under the terms of D.P.U. 850, a proposed merger or acquisition is allowed to go forward upon a finding by the Department that the public interest would be at least as well served by approval of a proposal as by its denial. D.P.U. 850, at 5-8; Eastern-Essex Acquisition, D.T.E. 98-27, at 8 (1998).(5) The Department has reaffirmed that it would consider the potential gains and losses of a proposed merger to determine whether the proposed transaction satisfies the [Section Sign] 96 standard. D.T.E. 98- 27, at 8; D.P.U./D.T.E. 97-63, at 7; Mergers and Acquisitions, D.T.E. 93- 167-A at 6, 7, 9 (1994). The public interest standard, as elucidated in D.P.U. 850, must be understood as a "no net harm," rather than a "net benefit" test.(6) D.T.E. 98-27, at 8. The Department considers the special factors of an individual proposal to determine whether it is consistent with the public interest. Id.; D.P.U./D.T.E. 97-63, at 7; Mergers and Acquisitions at 7-9. To meet this standard, costs or disadvantages of a proposed merger must be accompanied by offsetting benefits that warrant their allowance. D.T.E. 98-27, at 8; D.P.U./D.T.E. 97-63, at 7; D.T.E. 93- 167-A at 18-19. ___________________ (5) The Department issued its Order in Eastern-Essex Acquisition, D.T.E. 98-27 (1998) on September 17, 1998, which was after hearings were completed and briefs had been filed in this case. (6) The Department notes that a finding that a proposed merger or acquisition would probably yield a net benefit does not mean that such a transaction must yield a net benefit to satisfy G.L. c. 164, [Section Sign] 96 and Boston Edison, D.P.U. 850. Various factors may be considered in determining whether a proposed merger or acquisition is consistent with the public interest pursuant to G.L. c. 164, [Section Sign] 96. These factors were set forth in Mergers and Acquisitions: (1) effect on rates; (2) effect on the quality of service; (3) resulting net savings; (4) effect on competition; (5) financial integrity of the post-merger entity; (6) fairness of the distribution of resulting benefits between shareholders and ratepayers; (7) societal costs, such as job loss; (8) effect on economic development; and (9) alternatives to the merger or acquisition. D.T.E. 98-27, at 8-9; D.P.U./D.T.E. 97-63, at 7-8; D.T.E. 93-167-A at 7-9. This list is illustrative and not exhaustive, and the Department may consider other factors when evaluating a [Section Sign] 96 proposal. D.T.E. 98-27, at 9; D.T.E. 93-167-A at 9. C. Specific Considerations As described above, the Department has developed a nine-factor test to examine the benefits and costs of a proposed merger of utility companies. D.P.U. 93-167-A at 7-9. Because the standard of review was designed to apply to mergers between operating companies or acquisitions by one company of another, not all of the factors are relevant to or determinative of the issues raised by this holding company proposal. In considering the special circumstances of this proposal, the Department's analysis focuses on the following factors: (1) impact on rates; (2) impact on the quality of service; (3) impact on competition; (4) the financial integrity of the post- merger entity; (5) societal costs; (6) impact on economic development; and (7) alternatives to the merger or acquisition. D.P.U./D.T.E. 97-63, at 12- 13. These are the factors that we use in our analysis. However, the result of the analysis on any single factor is not controlling. Our review and judgment under G.L. c. 164, [Section Sign] 96, and in D.P. U. 850, is of the proposal taken as a whole and of the consistency of the proposal with the public interest. 1. Impact on Rates Berkshire states that it is not proposing any changes in its rates (Ex. BG-MJM-1, at 7; Tr. at 20). The Department may find that a proposal is consistent with the public interest if, upon consideration of its significant aspects viewed as a whole, the public interest is at least as well served by approval of the proposal as by its denial. D.P.U. 850, at 8. Thus, the Companies need not demonstrate that Berkshire's rates will decrease upon the formation of the holding company. The formation of a holding company, assuming the adoption of appropriate safeguards by the Department, likely will have no adverse impact on Berkshire's rates because the Company will continue to operate and be regulated in virtually the same manner as under the current structure (Tr. at 20). The Companies' proposal is not a merger whereby two entities seek enhanced efficiency through the elimination of duplicate services and departments. In the instant case, the regulated business of Berkshire will operate in the same manner before and after the formation of the holding company. The Company's current rates are established pursuant to the terms of the Department's Order in The Berkshire Gas Company, D.P.U. 92-10 (1993), and, more recently, with respect to the unbundling of such rates, a settlement approved by the Department in The Berkshire Gas Company, D.T.E. 98-65 (1998). Any future adjustments to the Company's rates will be subject to the same regulatory scrutiny applied today. See G.L. c. 164, [Section Sign] 94. Therefore, the public will be held harmless in accordance with the standard set forth in D.P.U. 850, at 8, i.e., that the public interest is at least as well served by approval of the proposal as by its denial. In addition, as discussed below, the Department will ensure through appropriate safeguards that ratepayers will not pay increased rates due to cross- subsidization or excessive dividend payments. The Department notes that our ability to ensure compliance with these safeguards is, in fact, enhanced under a holding company structure. 2. Impact on Quality of Service Berkshire claims that the regulated utility operations will be central to the proposed holding company and that the Company will continue its commitment to customer service and relevant operating and safety requirements (Exh. BG-MJM-1, at 8). Berkshire claims that the quality of service will not be negatively affected and that, if there is any effect, it will be to encourage Berkshire to maintain its high standards (id.; Tr. at 20). The Company has stated that its desire to enter other business ventures is driving, at least in part, the present proposal to restructure its corporate organization (Exh. BG-MJM-1, at 6). The Department recognizes that as a regulated utility enters new areas of unregulated business, the potential exists for the diversion of the regulated utility's resources to the unregulated business, resulting in degradation of service quality. Likewise, potential exists that the less profitable resources of an affiliated unregulated company may be transferred to the regulated business, leading to poor service quality in the regulated business. Berkshire notes three incentives to maintain high standards in its service quality: continued rate regulation, revised service quality standards if it withdraws from the merchant function and is subject to the requirements of performance-based rates, and potential to increase efficiency as a result of a more appropriate corporate structure (Exh. BG-MJM-1, at 8). In the present situation, the Department determines that, pursuant to G.L. 164 [Section Sign] 93, its authority to investigate service quality problems pursuant to a petition from elected officials or groups of twenty or more affected customers provides adequate protection from degradation in the quality of service of Berkshire. In addition, the Department expects that in the future, the quality of service monitoring under performance-based ratemaking will protect customers from a degradation in the quality of service. Therefore, the Department concludes that the formation of a holding company need not, and likely will not, have an adverse effect on quality of service. 3. Impact on Competition Berkshire states that few competitors are currently in western Massachusetts and that few competitors are likely to enter the region's natural gas market initially (Exh. BG-MJM-1, at 9). The Company states that the proposed merger will have a positive effect on competition by opening this regional market to greater competition and helping to develop the region's economy (id.; Exh. DTE-1-4; Tr. at 21-22). The Department has encouraged a holding company corporate structure to maintain clear lines between and among competitive and non-competitive business ventures and to encourage the growth of competition. D.P.U. 96-100, at 74-79; D.P.U./D.T.E. 97-63, at 12; D.T.E. 97-24, at 24-25. Further, the Companies state that the proposed corporate separation of Berkshire's energy marketing operation in a marketing affiliate separated from its regulated business will eliminate significant barriers to entry in the natural gas market (Exh. BG-MJM-1, at 4). The Department finds that the implementation of the holding company structure most likely will have a positive effect upon competition in the natural gas industry by removing potential barriers to market entry for Berkshire, and by separating Berkshire's regulated and unregulated operations. 4. The Financial Integrity of the Post-Merger Entity The major difference between the current structure of Berkshire and the proposed holding company structure will be the accounting treatment of the utility. The Department recognizes that there can be additional risks to ratepayers upon the formation of the holding company. Diversification, without appropriate ratepayer protections, could result in an increase to the overall risk profile of Berkshire. The Department finds that the risks of increased diversification into energy and other related businesses should be borne by the shareholders, not ratepayers. D.P.U./D.T.E. 97-63, at 18. Furthermore, Berkshire has agreed to be governed by safeguards comparable to those imposed with respect to BECo's corporate restructuring to establish a holding company corporate structure (Exhs. DTE-1-19; DTE-1-20).(7) Thus, the formation of a holding company will not affect the financial stability of the post-merger utility as long as appropriate safeguards are established to protect ratepayers from the risks inherent in increased diversification. These safeguards are discussed in Section V, below. ___________________ (7) The safeguards include (1) monitoring of dividend payments by Berkshire to BER, (2) determining the cost of capital on a stand-alone basis, (3) pricing of the transfer of rate-base assets consistent with the Standards of Conduct, and (4) maintaining a log of all transactions with affiliated companies. 5. Societal Costs The Department's analysis of societal costs focuses on the public benefits and costs that may be caused by the Companies' proposal, and specifically looks at the impact on employment. D.P.U. 93-167-A, at 8; D.P.U./D.T.E. 97-63, at 19. According to the Companies, although a merger or acquisition typically results in some loss of jobs where two companies possess redundant capacities, the proposed formation of a holding company may create employment opportunities (Exh. BG-MJM-1, at 9; Tr. at 22-23). In fact, Berkshire notes a modest increase in its own hiring as a result of the Company's restructuring efforts (Exh. DTE-1-5; Tr. at 22-23). Accordingly, we find that the Reorganization Plan will impose no societal costs and may, in fact, help create jobs in western Massachusetts. 6. Impact on Economic Development The Companies claim that one of the most significant public benefits of their holding company proposal is its impact on economic development in western Massachusetts (Exh. BG-MJM-1, at 10). The Companies assert that the anticipated increase in competition in the energy market will enhance economic development in the area (id. at 10). Although forecasts of economic development resulting from any action can never be certain, the Department recognizes that economic development is affected by, among other things, changes in employment opportunities, levels of wages, and the price and quality of goods and services offered. The Department has determined, in Section IV(C)(5), above, that the Companies' proposal is not likely to have a negative effect on employment. Moreover, the Department has determined that the quality of the Companies' service would not suffer as a result of implementing this proposal. Given these findings, the Department determines that there likely would be no negative effect on economic development as a result of the formation of the holding company. 7. Alternatives to the Merger When a utility requests approval for a traditional merger or acquisition, the Department may review alternatives, including other acquisition or merger partners, creation of affiliates and reorganization of existing assets. Berkshire considered "several" potential corporate structures when analyzing how to respond to the changing regulatory environment (Exhs. BG-MJM-1, at 10; DTE-1-6). Among these were (1) maintaining its existing corporate structure and (2) establishing separate corporate subsidiaries wholly owned by Berkshire. The Company states that the first alternative did not provide the degree of separation consistent with the principles articulated in the Department's Standards of Conduct, 220 C.M.R. [Section Sign] 12.00 et. seq. (Exh. DTE-1-6). An evaluation of the second alternative led the Company to conclude that it would frustrate its ability to participate in the market (Exh. DTE-1-6). The Companies contend that formation of a holding company would allow them to adjust to and compete in the evolving energy marketplace (id.). The Department finds that the other alternatives to the holding company structure would not provide the complete separation that the Department requires in regulating utility versus non-utility businesses and would frustrate Berkshire's ability to pursue opportunities in competitive markets and. With the holding company structure, BER will be able to participate in the competitive energy market through Berkshire Energy Marketing, thereby increasing the number of participants in the energy services market. Therefore, the Department finds the corporate restructuring is in the public interest. D. Conclusion Based on the foregoing analyses, the Department determines that the holding company structure is appropriate for the Company. However, the Department has several specific concerns given the potential for abuse inherent in this structure that the Department addresses by the imposition of certain conditions on the Companies' formation of a holding company. We find that, with these appropriate conditions, the public interest standard of [Section Sign] 96 is met by the approval of the Companies' proposal. We address these conditions in Section V, below. V. CONDITIONS OF APPROVAL A. Dividend Policy 1. Introduction Under the current corporate structure, Berkshire pays dividends to its shareholders and may not, without Department approval, reinvest its earnings in its unregulated businesses that might be established as separate corporate entities. Berkshire is similarly limited in its ability to make investments in joint ventures with third parties in competitive markets. However, under the proposed holding company structure, Berkshire would pay dividends to BER, which may choose to (1) invest some or all of the dividend income received from Berkshire into its non-utility subsidiaries without Department approval, (2) retain the income, or (3) disburse the income to its own shareholders as dividends (Companies Brief at 22). The issue is whether the Department should condition the approval of the holding company proposal on the Company's adopting a particular dividend policy. 2. Analysis and Findings The Department has previously analyzed the issues involved in a dividend policy for corporate restructuring resulting in a holding company and found that restrictions on dividend payments are necessary only under extraordinary circumstances, for example, when the financial health of the company is in question. D.P.U./D.T.E. 97-63, at 25-27. A review of the Company's Annual Report to Shareholders for 1997 shows that over the last ten years, Berkshire has had reasonable earnings and a reasonable dividend payout policy, and that the Company has maintained a reasonable level of equity in its total capitalization (Exh. BG-MJM-11, Annual Report at 14-15). The Company's financial health is not in jeopardy and there is no evidence that the Company's actions with respect to the dividend policy would harm Berkshire. Therefore, in this case, we find restrictions on Berkshire's dividend payments are not necessary. The Department recognized, in D.T.E. 97-63, the concerns about the overlap of the officers of the holding company and the regulated utility raised by intervenors in that case. D.T.E. 97-63, at 26. This overlap does not diminish the obligation of the officers of Berkshire to give first priority to the capital needs of the regulated utility and to protect its financial integrity. The Department will monitor the dividend payments of Berkshire and BER, and therefore directs the Company to report the level of payments to the Department whenever dividends are declared. In fact, Berkshire has already indicated its willingness to comply with such directives (Exh. DTE-1-19). If a pattern of inappropriate levels of dividend payments threatens to emerge, the Department will investigate and could impose restrictions at that time, if necessary. The Department also finds that restrictions on dividend payments unique to Berkshire are not necessary at this time. B. Cost of Capital Berkshire proposes that its cost of capital continue to be established on a "stand-alone" basis after the formation of the holding company (Exh. DTE-1-2). The Company proposes to continue the rate-setting approach that it has followed in determining its cost of capital (id.). The utility's own capital structure will be used to calculate the weighted average cost of capital and the utility's embedded cost of long-term debt and preferred stock will be employed with the capital structure (id.). The cost of equity will continue to be developed from a proxy group of gas distribution companies (id.). The Company's proposal for determining the cost of capital is consistent with the Department's policy of determining an operating utility's cost of capital on a stand-alone basis, and not on the basis of the holding company's cost of capital. Therefore, the Companies' proposal is approved. C. Asset Transfers 1. Description of Company Proposal Under the Companies' proposal, they will not initially transfer any rate-base assets to any new unregulated entity (Exh. BG-MJM-1, at 8). The Company plans to transfer certain facilities used by its retail propane operation to a new subsidiary of BER, Berkshire Propane, Inc. (id.). Berkshire claims that these assets have never been rate-base assets and that, therefore, this transfer would have no effect on Berkshire's cost of service (id.). Berkshire states that these assets will be transferred to the propane subsidiary at net book value (id.). Berkshire proposes that all transfers of rate-base assets will be made at the higher of net book value or fair market value in accordance with 220 C.M.R. [Section Sign]12.04(1) (Companies Brief at 23-24). Berkshire states that its proposal maximizes the value of the asset and ensures that the benefits from the sale or transfer are passed on appropriately to the utility's ratepayers (id. at 24). Further, Berkshire proposes that any asset transfers from an affiliate to Berkshire will be at a rate not higher than the fair market value of the asset (id.). In addition, Berkshire has indicated that it will provide, as part of its initial filing in future rate case proceedings, detailed information concerning asset transfers made since the end of the test year used in the Company's previous rate case filing (Exh. DTE-1-20). 2. Analysis and Findings Regarding the transfer of facilities associated with the propane operation to the propane subsidiary at net book value, the Department approves the transfer. In fact, the facilities were never included in Berkshire's rate base. Further, we find that the asset transfer pricing proposals put forth by Berkshire are consistent with the Department's Standards of Conduct. 220 C.M.R. [Section Sign]12.04. Therefore, in accordance with the Companies' proposal, the Department directs the Companies to price any rate-base asset transfers from Berkshire to its affiliates at the higher of net book value or fair market value, and to price any asset transfers from an affiliate to Berkshire at no higher than the market price for the asset. Further, we also expect Berkshire to comply with the other requirements of 220 C.M.R. [Section Sign]12.04, including the requirement to maintain a log of all transactions with affiliated companies. VI. MANAGEMENT AGREEMENT A. Description The Companies state that BER will have no employees of its own, beyond its three officers, for some time to come. However, it will be required to maintain some corporate functions, such as shareholder relations, investor relations, and accounting and legal operations (Exh. BG-MJM-1, at 13). In order to provide BER with the requisite services, the Company entered into a Management Agreement with BER (id.; Exh. BG-MJM-6). In response to a record request from the Department, Berkshire provided a revised Management Agreement(8) ("Revised Agreement") in order to reflect more clearly its intent regarding the pricing of services by Berkshire for BER (RR-DTE-4(a)). The Revised Agreement provides that Berkshire will furnish BER and its affiliates specific services upon request, provided that the Company has available personnel and resources (id. at 2). If, after consultation with BER, the Company determines that third-party services are necessary, Berkshire will arrange for the appropriate services on behalf of BER (id.). ___________________ (8) Berkshire provided revised language stating explicitly that as compensation for services rendered by Berkshire, BER will pay the higher of fully allocated costs or fair market value where a measurable market exists for the service. BER would request the desired services on an as-needed basis through purchase orders, which may be amended from time to time through written change orders (id. at 2-3). In return, BER would compensate Berkshire for those services, based on direct labor, indirect labor, and capital expenditures (id.). Berkshire proposes to charge BER the higher of (1) the fully-allocated costs for the services provided or (2) a rate based on the fair market value of those services provided to BER, as determined by Berkshire, if there is a measurable market for such services (id. at 3). If Berkshire's charges to BER are different from the Company's full embedded costs, the Company will record reasonable third-party offers to provide like services at market prices, and will maintain records comparing each rate to Berkshire's own marginal costs of providing such services (id. at 4). The Company states that it considered the merits of forming a service company to provide services to BER and its subsidiaries instead of entering into a management services agreement (Exh. DTE-1-12). The Company contends that, initially, the proposed corporate structure would be relatively simple and a service company is not warranted (id.). Berkshire states that if a more complex corporate structure evolves with more than one regulated utility, then the formation of a service company may be appropriate (id.). Further, the Company asserts that the allocation factors established under the Management Agreement address any potential concerns that would justify a service company (id.). Therefore, the Company concludes, at this time, that there would be no advantage gained by the formation of a service company (id.). However, Berkshire stated that it will continue to evaluate the merits of forming a service company (id.). B. Analysis and Findings Section 94B subjects contracts entered into by gas companies and an affiliated company to Department review and approval. In evaluating [Section Sign] 94B proposals, the Department requires utilities to demonstrate that (1) the proposal provides a reasonable method of allocating liabilities and benefits between a utility company and its affiliate, and (2) the methods employed in structuring the proposal are sufficient to protect the interests of a utility company's ratepayers. In addition, such contracts are required to be consistent with the Standards of Conduct. 220 C.M.R. [Section Sign]12.00 et. seq. The holding company structure we approve here is relatively simple and only a very limited number of employees would be providing services to Berkshire and its un-regulated affiliates. The Department has examined the cost allocation method proposed by Berkshire, which applies allocation factors specifically developed for the company in its most recent base rate proceeding. The Berkshire Gas Company, D.P.U. 92-210 (1993). The Department's Standards of Conduct state that a distribution company may provide services to an affiliate provided that the price charged for such services is equal to or greater than the distribution company's fully allocated cost to provide the service. 220 C.M.R. [Section Sign] 12.04(2). This pricing policy provides sufficient assurance that affiliates will not gain competitive advantages at the expense of ratepayers. 220 C.M.R. [Section Sign]12.00 et. seq.. Therefore, the Department approves the Revised Agreement.(9) ___________________ (9) The Department notes that the actual implementation of the Management Agreement must comply with all of the Standards of Conduct, including 220 C.M.R. [Section Sign] 12.03(4), related to non-discriminatory access to certain products and services provided by the distribution company to a competitive energy affiliate. Regarding the formation of a service company, while a well-structured service company may result in an allocation of common costs among multiple affiliates that is more explicit than what may be offered through a management services arrangement, the formation of a service company would be a form of corporate separation, which the Department has previously determined that we lack clear authority to mandate. D.P.U./D.T.E. 97-63, at 65. Further, the Department is persuaded by the Company's argument that given the relatively simple holding company structure we approve here, at this time a service company does not appear to be warranted. However, future circumstances (for example, mergers, acquisitions, or further energy diversification) might make a service company's creation beneficial to ratepayers. Therefore, the Company is directed to continue to evaluate the merits of a service company, as it has already indicated it intends to do. VII. TAX SHARING AGREEMENT A. Description The proposed Tax Sharing Agreement provides that, each year, BER and its subsidiaries, including Berkshire, would calculate their income tax liability on a stand-alone basis (Exhs. BG-MJM-1, at 14; BG-MJM-7). In turn, each subsidiary would make tax payments to BER based on the calculation of its stand-alone tax liability, if any liability exists (Exh. BG-MJM-1, at 14). In the event that a subsidiary generates a tax loss or other tax benefit that is available to BER in its consolidated income tax return, BER would make payments to the subsidiary consistent with the value of such tax benefits at the marginal tax rate (id.). According to the Companies, because certain tax items must be treated on a consolidated basis, to the extent that a particular subsidiary's specific tax benefits are applied to the consolidated return, that subsidiary is allocated the benefit of that tax item for purposes of determining its share of the consolidated tax liability (Exh. BG-MJM-7). Payments of any amount due under the tax sharing agreement may be made in cash or otherwise recognized on the books of BER and its subsidiary (id.). B. Analysis and Findings The Tax Sharing Agreement requires Berkshire to potentially advance funds to BER in connection with the filing of a consolidated tax return. This payment could be considered an advance that would require Department approval pursuant to G.L. c. 164, [Section Sign] 17A. Pursuant to G.L. c. 164, [Section Sign] 17A, a gas or electric company must obtain written Department approval in order to "loan its funds to, guarantee or endorse the indebtedness of, or invest its funds in the stock, bonds, certificates of participation or other securities of, any corporation, association or trust...." The Department has indicated that such proposals must be "consistent with the public interest," that is, a [Section Sign] 17A proposal will be approved if the public interest is at least as well served by approval of the proposal as by its denial. The Bay State Gas Company, D.P.U. 91-165, at 7 (1992). The Department has stated that it will interpret the facts of each [Section Sign] 17A case on its own merits. A determination that the proposal is consistent with the public interest considers the overall anticipated effect on ratepayers of the potential harms and benefits of the proposal by weighing a number of factors, including, but not limited to: the nature and complexity of the proposal; the relationship of the parties involved in the underlying transaction; the use of funds associated with the proposal; the risks and uncertainties associated with the proposal; the extent of regulatory oversight on the parties involved in the underlying transaction; and the existence of safeguards to ensure the financial stability of the utility. D.P.U. 91-165, at 8. The Department finds that the Tax Sharing Agreement provides a reasonable method of allocating liabilities and benefits among the Company, BER, and its other affiliates. The Department also finds that the methods employed in the Tax Sharing Agreement are sufficient to protect the interests of the Company's ratepayers. Accordingly, the Tax Sharing Agreement is approved. VIII. STOCK ISSUANCE A. Standard of Review In order for the Department to approve the issuance of stock, bonds, coupon notes, or other types of long-term indebtedness,(10) the Department must determine that the proposed issuance meets two tests. First, the Department must assess whether the proposed issuance is reasonably necessary to accomplish some legitimate purpose in meeting a company's service obligations, pursuant to G.L. c. 164, [Section Sign] 14. Fitchburg Gas & Electric Light Company v. Department of Public Utilities, 395 Mass. 836, 842 (1985) ("Fitchburg II") citing Fitchburg Gas & Electric Light Company v. Department of Public Utilities, 394 Mass. 671, 678 (1985) ("Fitchburg I")). Second, the Department must determine whether the Company has met the net plant test.(11) Colonial Gas Company, D.P.U. 84-96 (1984). ___________________ (10) Long-term refers to periods of more than one year after the date of issuance. G.L. c. 164, [Section Sign] 15A. (11) The net plant test is derived from G.L. c. 164, [Section Sign] 16. The Court has found that, for the purposes of G.L. c. 164, [Section Sign] 14, "reasonably necessary" means "reasonably necessary for the accomplishment of some purpose having to do with the obligations of the company to the public and its ability to carry out those obligations with the greatest possible efficiency." Fitchburg II at 836, citing, Lowell Gas Light Company v. Department of Public Utilities, 319 Mass. 46, 52 (1946). In cases where no issue exists about the reasonableness of management decisions regarding the requested financing, the Department limits its [Section Sign] 14 review to the facial reasonableness of the purpose to which the proceeds of the proposed issuance will be put. Canal Electric Company, et al., D.P.U. 84-152, at 20 (1984); see, e.g., Colonial Gas Company, D.P.U. 90-50, at 6 (1990). The Fitchburg I and II and Lowell Gas cases also established that the burden of proving that an issuance is reasonably necessary rests with the company proposing the issuance, and that the Department's authority to review a proposed issuance "is not limited to a 'perfunctory review'." Fitchburg I at 678; Fitchburg II at 842, citing Lowell Gas at 52. Where issues concerning the prudence of the Company's capital financing have not been raised or adjudicated in a proceeding, the Department's decision in such a case does not represent a determination that any specific project is economically beneficial to a company or to its customers. In such circumstances, the Department's determination in its Order may not in any way be construed as ruling on the appropriate ratemaking treatment to be accorded any costs associated with the proposed financing. See, e.g., Boston Gas Company, D.P.U. 95-66, at 7 (1995). Regarding the net plant test, a company is required to present evidence that its net utility plant (original cost of capitalizable plant, less accumulated depreciation) equals or exceeds its total capitalization (the sum of its long-term debt and its preferred and common stock outstanding) and will continue to do so following the proposed issuance. Colonial Gas Company, D.P.U. 84-96, at 5 (1984). If the Department determines at that time that the fair structural value of the net plant and land and the fair value of gas inventories owned by such a utility are less than its outstanding stock and debt, it may prescribe such conditions and requirements as it deems best to make good within a reasonable time the impairment of the capital stock. G.L. c. 164, [Section Sign] 16. B. Mergeco 1. Description of Proposal Mergeco has an authorized capitalization consisting of 200,000 shares of common stock, $1 par value, of which 100 shares have been subscribed for by BER, and which, subject to the approval of the Department, will be issued and sold to BER at a price of $1 per share (Restructuring Petition at 2). The Companies request that the Department authorize and approve the proposed issuance of 100 shares of Mergeco common stock to BER (id. at 5). The Companies claim the proposed issuance is reasonably necessary to effect the holding company structure (id.). 2. Analysis and Findings The Department finds that the issuance of 100 shares of common stock by Mergeco, at a par value of $1.00, is a necessary mechanism for the purpose of forming Mergeco and thus effecting the proposed merger. Accordingly, the Department finds that the proposed stock issuance is reasonably necessary and is in accordance with G.L. c. 164, [Section Sign] 14. With regard to the net plant test of G.L. c. 164, [Section Sign] 16, the record indicates that Mergeco has no assets and, thus, cannot meet the net plant test. However, the Department notes that the intended purpose of the stock issuance is to set up a transient framework of the consummation of the merger and acquisition of Berkshire by BER. The merger would extinguish the corporate existence of Mergeco, and consequently, remedy any net plant deficiency of Mergeco. D.T.E. 98-27, at 74. The purpose of the net plant test is to protect investors from hidden watering of stock. Id. Application of the net plant test has no place in a transaction as patent and transparent as the instant one. Id. No public protective purpose would be served by applying the test here. It is sufficient to note that the transaction is structured to prevent any adverse risk to the investing public and immediately to correct any theoretical problems with Mergeco shares. Id. Therefore, the Department finds it unnecessary to impose further conditions on Mergeco under G.L. c. 164, [Section Sign] 16. C. Dividend Reinvestment Plan Stock Issuance 1. Description of the Proposed Financing The Company requests approval by the Department of the issuance and sale from time to time of up to 200,000 additional shares of authorized common stock pursuant to the Company's Dividend Reinvestment and Stock Purchase Plan (DRIP Petition at 1). According to the Company, the net proceeds of such issuances and sales will be applied to repay short-term bank loans incurred from time to time for the purpose of financing additions to the Company's property, plant, and equipment and for such other uses as the Department may authorize (id. at 4). The Company states that participants in the DRIP may invest in additional shares of common stock by (1) having cash dividends on all or a portion of their shares automatically reinvested, (2) investing in additional common stock by making optional cash payments at any time in any amount from a minimum $15.00 in any calendar month to a maximum of $5,000 in any calendar quarter, and (3) investing both their cash dividends and optional cash payments (Exh. DTE-2-1(c) at 1). The price of shares purchased by participants in the DRIP is established at 97 percent of the average of the daily high and low sales price of the Company's common stock in the over-the-counter market(12) during the five consecutive trading days ending on and including the day of purchase (id.). In the event that the discounted common share price falls below the book value of the stock, the three percent discount will be suspended until such time as the price exceeds the book value (id.). The Company also declares that no shares will be available for purchase under the DRIP at less than par value (id.). Participation in the DRIP is optional and is available to holders of ten or more shares of common stock or to any employee of the Company who owns one or more shares of common stock (id. at 4). The Company states that the DRIP is administered externally by Boston EquiServe, associated with State Street Bank and Trust Company (Exh. DTE-2-6). All administrative fees for the DRIP are paid by the shareholders (id.; Tr. at 50). ___________________ (12) The price of the Company's common stock is currently quoted in the NASDAQ National Market Stock tables. The Company entered into evidence the certificate of vote taken by the board of directors on August 29, 1998, which authorized the issue and sale of 200,000 additional shares of common stock pursuant to the DRIP (Exh. BG- MJM-12). As of June 30, 1998, 4,600,000 shares of common stock were authorized by shareholders for issuance for proper corporate purposes, including issuance pursuant to the DRIP. As of June 30, 1998, 2,315,914 authorized shares of common stock were actually issued and outstanding, and 69,307 authorized shares of common stock were still reserved for issuance and sale under the DRIP (DRIP Petition at 2). Previously, the Department has approved the issuance and sale by the Company of a number of shares pursuant to the DRIP. See D.P.U. 40 (1980) (approving initial issuance of common stock under the DRIP); D.P.U. 84-219 (1984); D.P.U. 89-59 (1989); D.P.U. 90-83 (1990); D.P.U. 93-182 (1992); and D.P.U. 96-64 (1996). 2. Capital Structure of the Company As of June 30, 1998, the Company's capitalization comprised $40,000,000 long-term debt, consisting of senior notes of $24,000,000, first mortgage bonds series P of $10,000,000, and a current portion of long-term debt in the amount of $6,000,000 (Exhs. BG-MJM-10, at Sch. 4; BG-MJM-11, at 25 of the Annual Report to shareholders); 2,315,914 shares of common stock, authorized and outstanding, having a par value of $2.50 per share and a total par value of $5,789,785; 3,212 shares of preferred stock, authorized and outstanding, having a par value of $100 per share and a total par value of $321,200; and a premium on common stock of $18,835,026 (DRIP Petition at 1). The total capitalization of the Company, as of June 30, 1998, is therefore equal to $64,946,011.(13) ___________________ (13) The total capitalization of $64,946,011 is equal to the sum of $40,000,000 long-term debt, plus $5,789,785 total par value of common stock, plus $321,200 total par value of preferred stock, plus $18,835,026 premium on common stock. 3. Analysis and Findings The Department, pursuant to G.L. c. 164 [Section Sign] 16, requires any company requesting approval to issue new stock, bonds, or other securities to demonstrate that its net utility plant supports the additional amount of financing. Colonial Gas Company, D.P.U. 84-96, at 8 (1984). Under the net plant test, a company must present evidence showing that its net utility plant (utility plant less accumulated depreciation) is equal to or greater than its total capitalization (the sum of long-term debt, preferred stock and common stock outstanding). Id. at 5. As of June 30, 1998, the Company's utility plant in service was $106,057,000, with accumulated depreciation of $31,371,000 resulting in net utility plant in service of $74,686,000 (Exh. BG-MJM-10, at Sch. 3). As of June 30, 1998, the Company's total capitalization consisted of $64,946,011, resulting in an excess of net utility plant in service over outstanding capital of $9,739,989 (id.). The proposed issuance of 200,000 shares plus a remaining balance of 69,307(14) shares authorized but not issued yet would increase the total capitalization of $6,073,546,(15) resulting in an excess of net utility plant over outstanding capital of $3,666,443. Therefore, under the Department's precedent regarding the calculation of the net plant test, the Department finds that the Company's proposed financing meets the net plant test. ___________________ (14) The computation of the net plant test takes account of 69,307 shares of common stock previously authorized by the Department in D.P.U. 96- 64 but that are still unissued. (15) The amount of $6,073,546 is equal to the total value (total par value plus premium on common stock) of 269,307 shares of common stock computed at the price of $23.25 per share less the 3 percent discount established in the Company's DRIP (Exh. BG-MJM-10, at Sch. 4). The Department also finds that the evidence presented in this case demonstrates that the Company intends to use the proceeds of the proposed financing to reduce short-term debt(16) incurred to finance additions to the Company's plant, property and equipment and to provide permanent financing to such additions (Exhs. BG-MJM-10, at 5; DTE-2-2). Accordingly, the Department finds that the Company's proposed issuance of an additional 200,000 shares of common stock is reasonably necessary for the purposes for which it is proposed. Issues concerning the prudence of the Company's financing have not been addressed in this proceeding, and the Department's decision in this case does not represent a determination that any project is economically beneficial to the Company or its customers. The Department emphasizes that its determination in this Order shall not in any way be construed as a ruling relative to the appropriate rate making to be accorded any costs associated with the proposed financing. ___________________ (16) As of June 30, 1998, the Company recorded $7,085,000 as short-term indebtedness (Exh. DTE-2-2; DRIP Petition at 2; Tr. at 12). IX. EXEMPTION FROM SEPARATION REQUIREMENTS OF THE STANDARDS OF CONDUCT A. Introduction The Company states that initially, the employees of BER will consist only of its three officers, Scott S. Robinson, Michael J. Marrone, and Cheryl M. Clark (Exh. BG-MJM-8). The three BER officers are, and will continue to be, along with Robert M. Allessio, officers of Berkshire (Exh. BG-MJM-9). These four individuals will also serve as officers of the proposed competitive affiliates, Berkshire Propane, Inc. and Berkshire Energy Marketing, Inc., the latter of which the Company indicated would constitute a "competitive energy affiliate" as defined at 220 C.M.R. [Section Sign]12.02(4) (Exemption Request at 2). Berkshire seeks an exemption from the separation requirements of 220 C.M.R. [Section Sign]12.03(15) for these individuals (Exemption Request at 4). Berkshire asserts that as officers, these individuals will only be charged with senior management or executive tasks and generally will not be involved in the day- to-day operations of Berkshire Energy Marketing, Inc (id. at 3). Currently, Berkshire does not have any affiliated entities.(17) After the Department's approval of the proposed merger, BER expects to initially operate two affiliates in non-regulated operations (Companies Brief at 20- 21). Berkshire states that it and its non-regulated affiliates will maintain separate facilities, separate staffs (excepting the officers named above), separate computer systems, and separate functions as required by 220 C.M.R. [Section Sign]12.00 et. seq. (Exemption Request at 3). ___________________ (17) As noted above, Berkshire Propane operates as a division of Berkshire. B. Analysis and Findings Pursuant to the Standards of Conduct, an exemption from the prohibition of sharing employees may be granted upon a showing that the shared employees would be in the best interests of the ratepayers, have minimal anti-competitive effect, and that the costs can be fully allocated between the distribution company and its affiliate. 220 C.M.R. [Section Sign] 12.03(17). The Companies state that, because Berkshire has a small executive staff, its costs would increase and consequently rates for the regulated utility would increase, if it is compelled to have separate directors and officers for its distribution company (Exemption Request at 3; Tr. at 41- 42). The Companies state that the four officers who will be shared by Berkshire and its unregulated affiliates will not be involved in the day-to- day operations of the entities and will not provide any competitively sensitive information to such affiliate (Exemption Request at 3). Further, the Companies note that the non-regulated businesses will be conducted separately from the regulated business at the operational level, with separate operational staff, separate computer systems, and separate facilities (id.). The Department recognizes that there may be separation of the regulated company from the competitive energy affiliate at the operational level, but there is no evidence in the record that assuages our concern that the sharing of management employees between a distribution company and a competitive energy affiliate would not result in the very anti-competitive activity that 220 C.M.R. [Section Sign] 12.03(15) is meant to eliminate. This competitive risk outweighs the prospect of savings for ratepayers derived from having Berkshire share officers with its competitive affiliates. Because the Companies have the burden of proof in seeking an exemption pursuant to 220 C.M.R. [Section Sign] 12.03(17), the lack of sufficient record evidence regarding competitive protections is fatal to Berkshire's request, although the Companies may renew their request for an exemption and proffer further evidence on this issue. Based on the foregoing analysis, the Department finds that the Companies have failed to meet their burden for seeking an exemption from the separation requirements of 220 C.M.R. [Section Sign] 12.03(15), and therefore the request is denied, without prejudice(18). ___________________ (18) COM/Energy has raised similar issues regarding the separation requirements of the Standards of Conduct in a letter to the Department, dated July 31, 1998. The Department will address these issues. X. ORDER After due notice, hearing and consideration, the Department VOTES: That pursuant to Section 14 of Chapter 164, the proposed issuance of common stock of Berkshire Gas Mergeco Gas Company, Inc. to BER is reasonably necessary to effect corporate restructuring; and VOTES: That pursuant to Section 14 of Chapter 164, the proposed issuance of common stock of Berkshire Gas Mergeco Gas Company, Inc. to BER is in the public interest; and VOTES: That the issuance and sale, from time to time, by Berkshire Gas Company of not in excess of 200,000 shares of common stock, $2.50 par value, pursuant to its Share Owner Dividend Reinvestment and Stock Purchase Plan, is reasonably necessary for the purpose for which the Company has petitioned; and it is ORDERED: That pursuant to Section 14 of Chapter 164, the issuance by Mergeco of 100 shares of its common stock to BER in consideration of payment of $100 by BER is hereby approved and authorized; and it is FURTHER ORDERED: That pursuant to Section 96 of Chapter 164, the merger to form a holding company structure for Berkshire and the terms thereof are consistent with the public interest; and it is FURTHER ORDERED: That pursuant to Section 96 of Chapter 164, the Agreement and Plan of Merger dated as of February 19, 1998, and the merger of Mergeco into Berkshire pursuant thereto is hereby approved and authorized; and it is FURTHER ORDERED: That pursuant to Sections 17A and 94B of Chapter 164, the Tax Sharing Agreement between Berkshire and BER is hereby approved and authorized; and it is FURTHER ORDERED: That pursuant to Section 94B of Chapter 164, the Department approves the Management Services Agreement between Berkshire and BER, and it is FURTHER ORDERED: That the Department denies, without prejudice, Berkshire's request for an exemption from any applicable restrictions within 220 C.M.R. [Section Sign]12.03(15) with respect to the four senior executives that will serve Berkshire and its proposed non-regulated energy marketing affiliate to be known as Berkshire Energy Marketing, Inc.; and it is FURTHER ORDERED: That the Department hereby approves and authorizes the issuance and sale from time to time of not in excess of additional 200,000 Berkshire shares of common stock, $2.50, par value, pursuant to its Share Owner Dividend Reinvestment and Stock Purchase Plan; and it is FURTHER ORDERED: That the net proceeds from Berkshire's issuance and sale of all such securities issued pursuant to its Share Owner Dividend Reinvestment and Stock Purchase Plan shall be used for the purposes set forth herein; and it is FURTHER ORDERED: That the Secretary of the Department notify the Secretary of State of the issuance of stock and deliver a certified copy of this Order to the Secretary of State within five business days hereof; and it is FURTHER ORDERED: That Berkshire comply with all directives contained in this Order. By Order of the Department, /s/ Janet Gail Besser _____________________________ Janet Gail Besser, Chair /s/ James Connelly _____________________________ James Connelly, Commissioner /s/ W. Robert Keating (jgb) _____________________________ W. Robert Keating, Commissioner /s/ Paul B. Vasington (jc) _____________________________ Paul B. Vasington, Commissioner /s/ Eugene J. Sullivan _____________________________ Eugene J. Sullivan, Jr., Commissioner A true copy Attest /s/ Mary L. Cottrell _________________________________ Mary L. Cottrell, Secretary Appeal as to matter of law from any final decision, order or ruling of the Commission may be taken to the Supreme Judicial Court by an aggrieved party in interest by the filing of a written petition praying that the Order of the Commission be modified or set aside in whole or in part. Such Petition for appeal shall be filed with the Secretary of the Commission within twenty days after the date of service of the decision, order or filing of the Commission, or within such further time as the Commission may allow upon request filed prior to the expiration of twenty days after the date of service of said decision, order or ruling. Within ten days after such petition has been filed, the appealing party shall enter the appeal in the Supreme Judicial Court siting in Suffolk County by filing a copy thereof with the Clerk of said Court. (Sec. 5, Chapter 25, G.L. Ter. Ed., as most recently amended by Chapter 485 of the Acts of 1971). -----END PRIVACY-ENHANCED MESSAGE-----