-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, E/Z+8W/3IWL6MXaxTVDDRXajD0w5pwf4eh63NTcxbO7DNZkHUM/B1RAFlAFui/rg zBsNCBXoiB/usLXNVaj/tQ== 0000072741-95-000036.txt : 199507180000072741-95-000036.hdr.sgml : 19950718 ACCESSION NUMBER: 0000072741-95-000036 CONFORMED SUBMISSION TYPE: POS AMC PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19950717 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHEAST UTILITIES CENTRAL INDEX KEY: 0000072741 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 042147929 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: POS AMC SEC ACT: 1935 Act SEC FILE NUMBER: 070-08076 FILM NUMBER: 95554325 BUSINESS ADDRESS: STREET 1: 174 BRUSH HILL AVE CITY: WEST SPRINGFIELD STATE: MA ZIP: 01090-0010 BUSINESS PHONE: 2036655000 MAIL ADDRESS: STREET 1: 107 SELDON ST CITY: BERLIN STATE: CT ZIP: 06037-1616 POS AMC 1 HEC POST-EFFECTIVE AMENDMENT #2 File No. 70-8076 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 AMENDMENT NO. 10 (Post-Effective Amendment 2) to APPLICATION/DECLARATION ON FORM U-1 under THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 (The "Act") NORTHEAST UTILITIES HEC INC. 174 Brush Hill Avenue 24 Prime Parkway West Springfield, MA 01089 Natick, MA 01760 HEC ENERGY CONSULTING CANADA INC HEC INTERNATIONAL 285 YORKLAND BLVD CORPORATION Willowdale, Ontario 24 Prime Parkway M2J 1S5 Natick, MA 01760 HECI 1800 Harrison St. Oakland, CA 94612 (Name of company filing this statement and address of principal executive office) NORTHEAST UTILITIES (Name of top registered holding company) Jeffrey C. Miller Assistant General Counsel Northeast Utilities Service Company P.O. Box 270 Hartford, CT 06141-0270 (Name and address of agent for service) The Commission is requested to mail signed copies of all orders, notices and communications to: Jeffery D. Cochran Counsel Northeast Utilities Service Company P.O. Box 270 Hartford, CT 06141-0270 The application/declaration in this proceeding, as previously amended, is further amended as follows: ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS The first paragraph under the heading "Joint Ventures with Utilities" is amended by adding the following sentence at the end of that paragraph: The organizational documents governing such joint ventures will expressly limit these entities' activities to the activities that HEC is authorized to engage in. ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS ITEM 6 is amended by deleting the text of this item as previously filed and substituting the following in lieu thereof: A. Exhibits Exhibit A-1 - Copy of Articles of Organization of HEC (previously filed)* Exhibit A-2 - Copy of by-laws of HEC (previously filed)* Exhibit B - Form of Joint Venture Agreement (filed herewith)** Exhibit F-1 - Opinion of Counsel (filed herewith) Exhibit G - Form of Notice (previously filed) * Filed as exhibits to its 1990 U-1 application/declaration (File No. 70- 7698). ** The actual joint venture agreements executed may vary slightly from the attached form, but they will not change substantially and shall remain within the parameters of the Commission's order, unless subsequent authorization is obtained. B. Financial Statements 1.1 Balance Sheet - HEC Inc., as of March 31, 1995, actual and pro forma (filed herewith) 1.2 Statement of Income - HEC Inc., as of March 31, 1995, & Retained Earnings, actual and pro-forma (filed herewith) SIGNATURE Pursuant to the requirements of the Public Utility Holding Company Act of 1935, the undersigned companies have duly caused this Amendment to their application/declaration to be signed on their behalf by the undersigned thereunto duly authorized. NORTHEAST UTILITIES HEC INC. HEC ENERGY CONSULTING CANADA INC. HEC INTERNATIONAL CORPORATION HECI By /s/Jeffery D. Cochran Their Counsel Dated: July 14, 1995 EX-10 2 EXHIBIT B, FORM OF JOINT VENTURE AGREEMENT Exhibit B Joint Venture Agreement Between HEC International Corporation and Partner Electric Power Company This Joint Venture Agreement, is made and entered into as of the day of 1995, by and between HEC International Corporation, a Massachusetts corporation with offices at 24 Prime Parkway, Natick, Massachusetts 01760 (HEC International) and Partner Electric Power Company a Corporation, with offices at (PEPC). HEC International is a wholly-owned subsidiary of HEC Inc. (HEC). RECITALS HEC International and PEPC (collectively herein, the "Participants") hereby agree to form a Joint Venture to engage in the energy services business in a defined territory. Through the Joint Venture, HEC International will provide PEPC with a dedicated source of energy services to further PEPC goals for conservation and load management, providing additional services to retail and wholesale customers, increasing energy sales through the application of electrotechnologies and penetration of new markets and developing income from unregulated business opportunities. Such energy services business is described with more specificity in Article 2 of this Agreement. The Joint Venture will draw on the market presence of PEPC and the technical capabilities of HEC International. HEC International and PEPC further propose that the Joint Venture take the form of a limited liability company. Now, therefore, in consideration of the mutual covenants and agreements herein contained, the Participants hereby covenant and agree as follows: ARTICLE 1 FORMATION OF VENTURE 1.1 Formation. HEC International and PEPC hereby form a limited liability company (the "Joint Venture") for the purposes hereinafter set forth. 1.2 Name. The name of the Joint Venture shall be and the Joint Venture shall be a Delaware limited liability company. The Joint Venture shall execute, publish and/or file any and all assumed or fictitious names, or other similar certificates required by law in connection with the formation and operation of the Joint Venture. 1.3 Principal Office. The principal office and headquarters of the Joint Venture shall be or such other place as the Managing Board (as defined below) may, from time to time, determine. 1.4 Term. The Joint Venture shall commence on the date of this Agreement and shall terminate on unless sooner terminated as otherwise provided in this Agreement or by law. ARTICLE 2 PURPOSES AND POWERS 2.1 Purposes. The Joint Venture is formed to provide Energy Services (which are listed below and which HEC International is authorized by the Securities and Exchange Commission ("SEC") to engage in) to customers located in the Service Territory (as defined below). The Joint Venture may also engage in any such other business that HEC International is, at such time, authorized by the SEC to engage in and that is approved by the Managing Board. a. Engineering consulting services to energy consumers including evaluation of energy consumption patterns, analysis of existing energy systems, development of energy conservation measures, feasibility studies, design of energy-consuming systems and related structures and equipment, cost and savings estimates, life cycle costing of designs, review of new construction plans, evaluation of electrotechnologies and applications, development of facility master plans, and other related engineering services. b. Engineering and other engineering consulting services to entities concerned with energy consumption (government agencies, utilities, development banks and trade groups) including the design, implementation and evaluation of demand-side management programs, evaluation, design and implementation of electrotechnologies, assistance in customer marketing and retention efforts. c. Construction services including project management, construction of energy consuming systems or energy conservation measures, design/build services, system commissioning and related construction services. d. Improved energy efficiency through special operation and maintenance techniques for boiler and chiller systems. e. For projects described in subparagraphs a, b, and c above, financing services including identification of financing sources, assistance in arranging financing for projects, providing construction financing (if permanent financing is available), providing project investment under DSM contracts, review of financial feasibility, assistance in obtaining government, utility or grant financial support for projects. f. Verification and monitoring of energy consumption or savings, post- installation review of savings persistence using engineering techniques and savings guarantees. The Service Territory includes all customers located in the states of . Projects for customers with sites both within the Joint Venture Service Territory and outside of Joint Venture Service Territory will be pursued by the Joint Venture upon the written approval of HEC International and PEPC. The Joint Venture will not undertake projects in service territories of other HEC joint ventures. It is the intent of both Participants that all projects for customers in the Joint Venture Service Territory that fall within the definition of the Joint Venture Energy Services will be entered into and performed by the Joint Venture, unless both Participants agree that a project is not appropriate for the Joint Venture. The following projects are specifically excluded from Joint Venture: a. By mutual agreement, contracts entered into prior to this agreement or pursuant to a proposal submitted before the execution of this Agreement by HEC International, HEC or PEPC. See Attachment A for a list of excluded contracts and proposals. The Joint Venture will be marketed as a joint venture of PEPC and HEC, offering comprehensive Energy Services. 2.2 Powers. The Joint Venture shall have such powers as necessary or appropriate to carry out the purposes of the Joint Venture and for the protection and benefit of the Joint Venture, including without limitation, the following powers: a. to make such investments as the Managing Board deems advisable and approves; b. to have and maintain one or more offices within the Service Territory, and in connection therewith to rent, lease or purchase office or other space, facilities and equipment, to engage and pay personnel and do such other acts and things and incur such other expenses on its behalf as may be necessary or advisable in connection with the maintenance of such office or the conduct of the Joint Venture; c. to open, maintain and close bank accounts, and to draw checks and other orders for the payment of money; d. to employ and dismiss from employment any and all employees, agents or independent contractors; e. to sue and to defend suits, to prosecute, settle or compromise claims against others, to compromise, settle or accept judgments or claims against the Joint Venture and to execute all documents and make any representations, admissions and waivers in connection therewith; f. to enter into, make and perform all such contracts, agreements and other undertakings, including indemnity agreements, as may be necessary or advisable or incident to carrying out the foregoing purposes; g. to borrow money from the Participants for any business object or purpose of the Joint Venture; to issue evidences of indebtedness and to secure the payment thereof by the creation of an interest in the property or rights of the Joint Venture; and h. to take such other actions as the Managing Board may deem necessary or advisable in connection with the foregoing, including the retention of agents, independent contractors, attorneys, accountants and other experts selected by the Managing Board on behalf of and at the expense of the Joint Venture, and in connection with the preparation and filing of all Joint Venture tax returns. Although the Joint Venture may engage in any or all of the above activities, the Joint Venture need not engage in any one or more of them. ARTICLE 3 INTERESTS AND CAPITAL OF PARTICIPANTS 3.1 Interests. The initial interest of the respective Participants in the assets, liabilities, profits and losses of the Joint Venture shall be as follows: HEC International 50 percent PEPC 50 percent The Interest of a Participant at any time shall be equal to the Participant's Capital Account as defined in section 5.4 divided by the total of all Capital Accounts of the Joint Venture. 3.2 Initial Capital Contributions. HEC International shall contribute to the Joint Venture, all of the assets listed on Schedule B attached hereto, the right to use the space leased by HEC in , the assignment of HEC staff also listed on Schedule B to the operation of the Joint Venture, all of which the Participants agree has a fair market value of $ . PEPC will contribute, as its capital contribution $ . 3.3 Additional Capital Contributions. The Managing Board may call for additional capital contribution to the Joint Venture, provided that the timing and amount of such call must be reasonable in view of the current and reasonably foreseeable future needs of the Joint Venture. It is expected that capital contributions required under the annual budget will be made monthly so that the Joint Venture will be able to meet its obligations. The amount to be contributed by each Participant shall be in the same proportion as each Participant's percentage interest in the Joint Venture, provided however that no Participant shall be required to make total contributions which in the aggregate shall exceed $1 million, unless otherwise agreed by the Participants. 3.4 Loans by Participants. Any Participant may lend funds to the Joint Venture (i) upon the prior written approval of all Participants in the amount approved, (ii) upon the occurrence of Insolvency or an Event of Default, as described in Article 8, of the other Participant in the amount needed by the Joint Venture to meet its obligations, or (iii) upon the failure of the other Participant to make an additional capital contribution called for by the Managing Board in the amount of the defaulting participant's unmet capital call. Any loan made by a Participant to the Joint Venture shall be on an open account basis and shall bear interest at the rate paid by HEC to the Northeast Utilities System Money Pool. 3.5 Allocation of Profits and Losses. The profits and losses of the Joint Venture shall be allocated to the Participants in accordance with the Participants' percentage Interests. 3.6 No Withdrawals. The capital of the Joint Venture shall not be withdrawn except as hereinafter expressly stipulated. 3.7 Distributions. The Joint Venture shall distribute such cash or other property of the Joint Venture to Participants as may be approved by the Managing Board from time to time. Except for distributions made as a part of liquidation of the Joint Venture as called for in section 14.5, the priority of distributions shall be first to the payment of interest and principal of any loans from Participants made pursuant to section 3.4 and secondly a distribution of profits or capital accounts in shares equal to their respective interests as specified in Article 3.1. ARTICLE 4 MANAGEMENT OF THE JOINT VENTURE 4.1 Participant Approval. Where approval of an action requires approval of the Participants, such actions shall be in writing signed by both Participants. Each Participant shall designate a representative of the Participant for actions not within the authority of the Managing Board. A Participant may remove its designated representative by providing written notice to the other Participant and to the Joint Venture. Approval or action taken by a Participant's designated representative shall constitute binding approval or action by that Participant. 4.2 Managing Board Powers. Except as reserved to the Participants in this Agreement, the business and affairs of the Joint Venture shall be managed under the direction of the Managing Board, and the Managing Board shall have all power and authority to manage, and direct the management and the business and affairs of the Joint Venture. Any power not delegated pursuant to a policy of delegation adopted by the Managing Board shall remain with the Managing Board. Approval by or action taken by the Managing Board in accordance with this Agreement shall constitute approval or action by the Joint Venture and shall be binding on the Participants. 4.3 Managing Board. The Managing Board shall at all times consist of four members, two appointed by each of the Participants (the "Members"). If a Participant defaults or becomes insolvent under Article 8, the non-defaulting or solvent Participant may appoint a fifth member of the Managing Board. Each of the Participants may remove any Member appointed by it by delivering written notice of such removal to the Joint Venture and to the other Participant. Each Member shall serve until (i) his successor is designated by the Participant that appointed him or (ii) his earlier resignation, removal, death, or inability to serve. Appointment of a Member by a Participant shall be effective upon receipt of notice by the Joint Venture and the other Participant from the Participant taking such action. 4.4 Managing Board Meetings. Regular meetings of the Managing Board shall be held at least once a quarter or at such other times as may be fixed by the Managing Board. Each Participant or the Joint Venture Manager may convene a special meeting of the Managing Board upon two days written notice. The presence in person or by proxy of a majority of Members of the Managing Board shall constitute a quorum for transaction of business at a Managing Board meeting. The majority vote of Members present at a duly constituted meeting shall constitute approval by the Managing Board except for the approval of the annual business plan, which shall require unanimous approval of the Managing Board. The Managing Board may act without a meeting if the action taken is approved in advance in writing by the unanimous consent of all Members of the Managing Board. 4.5 Authority of the Managing Board. Unless otherwise agreed to in writing by the Participants, the Managing Board shall have the right, power and authority to take the following actions and no such action will be taken without the approval of the Managing Board: a. making overall policy decisions with respect to the business and affairs of the Joint Venture; b. approving the annual budget and strategic plan for the Joint Venture including additional capital contributions needed to meet the operating needs for the year, and any material amendments and supplements thereto; c. approving all employment and compensation policies and the hiring, salary, promotion, transfer, or termination of any employee of Joint Venture, or of any HEC International employee assigned to Joint Venture; d. approving all proposals to customers of the Joint Venture with a value in excess of $ ; e. approving all client contracts of the Joint Venture with a value in excess of $ ; f. approving all subcontracts and expenditures of the Joint Venture in excess of $ ; g. approving the choice of bank depositories and approving arrangements relating to signatories on bank accounts; h. approving the acquisition or disposal of Joint Venture assets outside of the annual budget. 4.6 Joint Venture Manager. The Members of Managing Board appointed by the Participants shall jointly agree on and appoint a manager who will manage the day-to-day affairs of the Joint Venture, carry out the direction of the Managing Board and effectuate the business plan as set forth in the annual budget and strategic plan. The Joint Venture Manager shall prepare the annual plan and budget and submit it for approval by the Managing Board by the end of the preceding year. If the Managing Board is unable to approve the submitted plan, the plan shall be amended until approval is obtained. If no plan is approved, the last annual plan and budget approved by the Managing Board will be the annual budget and plan. Further, the Joint Venture Manager shall obtain approval of the Managing Board before taking any action not contemplated by the plan and budget. The Managing Board shall indicate in writing the authority of the Joint Venture Manager to bind the Joint Venture on contracts and otherwise in dealing with third parties. ARTICLE 5 TRANSACTIONS WITH PARTICIPANTS OR AFFILIATES 5.1 Marketing Assistance by Participants. HEC International and PEPC will assist in the preparation of Joint Venture proposals. The Participants will allow the Joint Venture to use its marketing materials, including brochures, statements of corporate capabilities, resumes, client references and other collateral marketing material. PEPC will take the lead in identifying opportunities and HEC International will take the lead in developing the technical response included in the proposal. A Joint Venture proposal may also incorporate services offered by the Participants in addition to Energy Services, at prices and terms approved by the Participants. HEC International and PEPC will refer leads (requests for proposals, telephone calls requesting information or other indications of potential client interest) for Energy Services within the Service Territory to the Joint Venture. The Joint Venture will not pay for the staff time of Participants devoted to marketing the Joint Venture. However, the Joint Venture will reimburse out-of-pocket expenses such as travel and related expenses, if authorized in advance by the Joint Venture. 5.2 Project-Related Assistance by Participants. The Joint Venture will give first refusal to the Participants for any services offered by the Participant that will be subcontracted by the Joint Venture. The Participants will provide project-related services to the Joint Venture at their "cost rate" as will be defined in the subcontract agreement between the Joint Venture and the Participants. 5.3 Management and Administration by Participants. HEC International shall provide project management and engineering protocols and standards available to its branch offices to the Joint Venture. PEPC will provide coordination between its staff and the Joint Venture staff. To simplify administration of the Joint Venture, employees of the Participants may be assigned to the Joint Venture and may remain as employees of the Participant. The Joint Venture will reimburse the Participants for the salary and related benefit costs of employees assigned full time to the Joint Venture. When deemed appropriate by the Managing Board, the Joint Venture may hire the Participant employees and cover them under its own benefit plans. HEC International will provide the administrative and accounting services for the Joint Venture for an agreed upon fee, set in advance each year and approved by the Managing Board. The Joint Venture will not pay for the time of the Members of the Managing Board, except the Joint Venture manager, if he is deemed to be a full time manager of the Joint Venture. 5.4 Potential Conflict of Interest. The Participants recognize that there may be opportunities within the scope of the Joint Venture that would create a conflict of interest for the Participants or the their affiliates, and that either Participant may request that the Joint Venture not pursue such opportunities. 5.5 Use of Joint Venture Services by Participants. Upon the approval of the Managing Board, a Participant may enter into an agreement with the Joint Venture for services outside of the service territory or for services other than energy services. Such transactions will be on an arms-length basis. 5.6 Other Activities. The Participants will seek other opportunities to work together and for its affiliates to work together. ARTICLE 6 BOOKS AND RECORDS 6.1 Books; Statements. The Joint Venture Manager keep accurate, full and complete books and accounts showing its assets and liabilities, operations, transactions and financial condition. All financial statements shall be accurate in all material respects, shall present fairly the financial position and results of the Joint Venture and shall be prepared on an accrual basis in accordance with generally accepted accounting principles consistently applied. The Joint Venture Manager shall have financial statements prepared and submitted to each Participant, no later than 20 days after each month-end during the term of this Agreement. 6.2 Access. The books, accounts and records of the Joint Venture shall be maintained at the principal office of HEC International. Each Participant shall have reasonable access to and may inspect and copy the books, accounts and records of the Joint Venture. 6.3 Audits. In addition to the foregoing, any Participant may, at its option and at its own expense, conduct internal audits of the books, records and accounts of the Joint Venture. 6.4 Capital Accounts. A separate capital account shall be maintained for each Participant. The initial capital account of the Participants shall be equal to the value of the capital contributions made under Article 3.2. Except as otherwise provided in Article 14.4, all items of income, gain, loss or deduction shall be allocated equally among the Participants and shall increase or decrease each Participant's capital account. Distributions to a Participant shall reduce its capital account. 6.5 Taxes. As soon as practicable after the end of each fiscal year of the Joint Venture, the Joint Venture shall prepare and mail to each Participant, a report containing all information necessary for such Participant to include its share of taxable income or loss in its income tax return. For tax purposes, all items of income, gain, loss and deduction shall be allocated between the Participants in the same manner that the corresponding book items are allocated to the respective capital accounts of the Participants. 6.6 Other Information. The Joint Venture shall make available to each Participant such information in addition to the foregoing as shall be required by either of them in connection with the preparation of registration statements, current and periodic reports, proxy statements and other documents required to be filed under foreign, federal or state securities laws and shall cooperate in the preparation of any such documents. 6.7 Fiscal Year. The fiscal year of the Joint Venture shall be January 1 through December 31. ARTICLE 7 ASSIGNMENT AND RIGHTS TO SALE OF INTEREST 7.1 Consent Required. No Participant, nor any assignee or successor in interest of any Participant, shall sell assign, give, pledge, hypothecate, encumber or otherwise transfer its interest in the Joint Venture without the prior written consent of the other Participant. 7.2 Right of First Refusal. If a Participant proposes to sell or otherwise transfer all or any part of its interest in the Joint Venture to a third party, such Participant shall submit a written notice to the other Participant ("Remaining Participant") describing the material terms and conditions of the proposed transfer in reasonable detail, including, without limitation, the proposed purchase price, the amount and kind of consideration to be paid, and the proposed purchaser. The Remaining Participant shall have the right, exercisable by written notice within 60 days of receipt of notice of proposed transfer to elect to: (i) purchase the other Participant's entire interest in the Joint Venture on the same terms and conditions specified in the notice of proposed transfer; or (ii) approve the transfer at the terms and conditions of the proposed transfer within a date certain. The transfer must occur within the given time on the terms and conditions and only to the proposed purchaser specified in the notice. 7.3 Right to Purchase and Sell. At any time, each Participant ("Offering Participant") shall have the right, exercisable by written notice to the other Participant to purchase the interest of the other Participant ("Offeree Participant") in the Joint Venture at a price fixed by Offering Participant ("Offered Price"). The written notice shall specify the disposition of Participant loans and third-party liabilities, timing of the closing, place of the closing, calculation of the purchase price, conditions to the closing, consequences of failure of the conditions, allocation of costs, closing deliveries and treatment of the seller's and buyer's obligations for liabilities of the Joint Venture. Within ten days of receipt of the notice, the Offeree Participant shall have the right to (i) accept the Offering Participant's offer to purchase its interest in the Joint Venture at the Offered Price or (ii) purchase the Offering Participant's interest in the Joint Venture at the Offered Price. ARTICLE 8 DEFAULTS 8.1 Insolvency. A Participant will become insolvent as evidenced by any of the following: a. appointment of a receiver, liquidator, assignee, custodian, trustee, or conservator to take possession of a Participant or any substantial part of its property without obtaining a discharge or dismissal within fifteen days of the appointment or b. a court having jurisdiction entering a decree or order for relief in respect of a Participant in an involuntary case under any applicable bankruptcy law where the Participant is unable to have the decree or order set aside within fifteen days, or c. the Participant commences a voluntary case under any applicable bankruptcy law, or d. a Participant admit in writing its inability to pay debts as they mature; or e. a Participant gives notice to any governmental body of insolvency or pending insolvency or suspension or pending suspension of operations (an "Insolvency"). f. the Participant fails to maintain or comply with regulatory approvals or applicable laws and regulations. In any of these events, the other Participant shall have the right to pursue the remedies under Article 8.3. 8.2 Breach of Covenants; Failure to Perform Obligations. If any Participant fails to perform any of its obligations or covenants or breaches any of its representations hereunder (an "Event of Default"), then the other Participant shall have the right to give such party a notice of default. If within the 30 day period following receipt of the notice, the defaulting Participant in good faith commences to perform such obligations and cure such default, and thereafter prosecutes to completion with diligence and continuity the curing thereof and cures such default within a reasonable time, then the defaulting Participant shall lose no rights hereunder. If the defaulting Participant does not commence in good faith the curing of such default or does not thereafter prosecute to completion with diligence and continuity the curing thereof or the default is of such a nature that a cure is not practical such as , then the non-defaulting Participant, shall have the right to pursue the remedies under Article 8.3. 8.3 Remedies. If an Insolvency or Event of Default occurs, the non- defaulting or solvent Participant may, at its option either (i) purchase the interest of the insolvent or defaulting Participant at a price equal to eighty percent (80%) of the fair market value of such interest as determined by an independent appraiser approved by the Participants, and if the Participants are unable to agree upon an independent appraiser, an appraiser selected by the , or (ii) cause a dissolution of the Joint Venture and the solvent or non-defaulting Participant shall be the Liquidating Participant as described in Article 14 or (iii) to a third-party at a price equal to at least 80% of the fair market value of such interests as determined by an independent appraiser. ARTICLE 9 COVENANT NOT TO COMPETE 9.1 Covenant not to Compete. Each Participant and its affiliates are prohibited from directly or indirectly engaging in or possessing an interest in an activity, the purpose or business of which is similar to that described in Article 2 in the Service Territory during the Term of the Joint Venture and for a period of one year following the sale of its interest in the Joint Venture or the termination of the Joint Venture. After the sale of its interest, the former Participant shall not interfere with Joint Venture contracts, clients, staff or other relationships. If employees of the former Participant provided services for the Joint Venture, the employees will remain employees of the former Participant and may be reassigned unless otherwise agreed upon by the Participants. If the Joint Venture declines to bid or submit a proposal on a project within the Joint Venture Scope, either or both PEPC or HEC International may pursue the project. ARTICLE 10 REPRESENTATIONS AND WARRANTIES 10.1 Representations and Warranties by HEC International. HEC International represents and warrants to, and covenants with PEPC, as follows: a. HEC International is a corporation duly organized and validly existing under the laws of the Commonwealth of Massachusetts and is in good standing in such jurisdiction. HEC International is qualified to do business and in good standing as a foreign corporation in any other jurisdiction where the failure to be so qualified or in good standing would have a material adverse impact on the business or financial condition of the Joint Venture. b. HEC International has the full right, power and authority to enter into this Agreement and will at all times have the full power and authority to perform its obligations under this Agreement. This agreement has been duly authorized, executed and delivered by it, and this Agreement constitutes its valid and binding obligation, enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, or other loss affecting creditors' rights generally, whether applied in a proceeding inequity or law. c. HEC International is not, nor at any time will it be a party to any contract or other arrangement of any nature that will materially interfere with its full, due and complete performance of this Agreement. d. HEC International is not, not at any time will it be, in violation of any applicable law or regulation, be it state or federal, by entering into and undertaking the performance of this Agreement. e. HEC International will comply with all applicable laws and regulations and devote the necessary resources to the Joint Venture within the parameters of the Agreement. 10.2 Representations and Warranties by PEPC. PEPC represents and warrants to, and covenants with HEC International, as follows: a. PEPC is a corporation duly organized and validly existing under the laws of the State of and is in good standing in such jurisdiction. PEPC is qualified to do business and in good standing as a foreign corporation in any other jurisdiction where the failure to be so qualified or in good standing would have a material adverse impact on the business or financial condition of the Joint Venture. b. PEPC has the full right, power and authority to enter into this Agreement and will at all times have the full power and authority to perform its obligations under this Agreement. This agreement has been duly authorized, executed and delivered by it, and this Agreement constitutes its valid and binding obligation, enforceable in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, or other loss affecting creditors' rights generally, whether applied in a proceeding inequity or law. c. PEPC is not, nor at any time will it be a party to any contract or other arrangement of any nature that will materially interfere with its full, due and complete performance of this Agreement. d. PEPC is not, not at any time will it be, in violation of any applicable law or regulation, be it state or federal, by entering into and undertaking the performance of this Agreement. e. PEPC will comply with all applicable laws and regulations and devote the necessary resources to the Joint Venture within the parameters of the Agreement. ARTICLE 11 RESOLUTION OF DISPUTES 11.1 Arbitration. If a disagreement exists between or among the Participants, the Participants agree to enter into good faith negotiations to attempt to resolve the disagreement. If such disagreement cannot be settled by good faith negotiations between the Participants, and if the continued failure to settle such disagreement is likely to have a material adverse impact on the Joint Venture, any Participant may elect to submit the disagreement to arbitration. Such arbitration shall proceed in accordance with the Commercial Arbitration Rules of the American Arbitration Association then pertaining (the "Rules") and pursuant to the following procedures: a. notice of the demand for arbitration shall be filed writing with the other party to this Agreement and with the American Arbitration Association. Each Participant shall appoint an arbitrator, and those appointed arbitrators shall appoint a third neutral arbitrator within 10 days. If the appointed arbitrators fail to appoint a third, neutral arbitrator within 10 days, such third, neutral arbitrator shall be appointed by the American Arbitration Association in accordance with the Rules. A determination by a majority of the panel shall be binding; b. reasonable discovery shall be allowed in arbitration; c. all proceedings before the arbitrators shall be held in Boston, Massachusetts; d. the costs and fees of the arbitration, including attorneys' fees, shall be allocated by the arbitrators; and e. the award rendered by the arbitrators shall be final and judgment may be entered in accordance with applicable law and in any court having jurisdiction thereof. ARTICLE 12 INDEMNIFICATION 12.1 By the Joint Venture. The Joint Venture shall indemnify, defend, and hold harmless each Participant and its employees, officers, directors and agents from and against all loss, cost, liability and expense which may be imposed upon or reasonably incurred by such Participant including reasonable attorneys' fees and disbursements and reasonable settlement payments, in connection with any claim, action, suit or proceeding or threat thereof, made or instituted in which such Participant may be involved or be made a party by reason of such Participant being, or having been in the past, a Participant or by reason of any action alleged to have been taken or omitted by such Participant in such capacity, or by its employees, officers, directors or agents acting on behalf of the Participant, if such Participant, or employee, officer, director or agent were acting in good faith and with reasonable care in what it (or he) reasonably believed to be its (or his) scope of authority set forth in this Agreement and in the best interest of the Joint Venture. Nothing in this Article 12.1 shall be construed to require the Joint Venture to reimburse, defend indemnify or hold harmless any Participant or its employees, officers, directors or agents with respect to any loss, cost, liability or expense in any circumstance in which this Agreement requires a Participant to reimburse, defend, indemnify or hold harmless any other Participant or the Joint Venture. 12.2 By a Participant. Each Participant shall indemnify, defend, and hold harmless the Joint Venture and each other Participant from and against all loss, cost, liability and expense except consequential, special or punitive damages that may be imposed upon or reasonably incurred by the Joint Venture or the other Participant, including reasonable attorneys' fees and disbursements and reasonable settlement payments, in connection with any claim, action, suit or proceeding or threat thereof, made or instituted in which the Joint Venture, the other Participant may be involved or be made a party by reason of a breach of such Participant's representations or covenants or such Participant's gross negligence or willful misconduct. ARTICLE 13 INSURANCE 13.1 Types and Amounts. The Participants shall maintain the following insurance coverage: a. Worker's Compensation: Statutory requirement. b. Employer's Liability: A minimum of $500,000 per occurrence. c. Comprehensive Automobile Liability: A minimum of $1,000,000 combined single limit including bodily injury or death and property damage liability. d. Comprehensive General Liability: Not less than combined single limit, including bodily injury and property damage liability, of $1,000,000 per occurrence and $2,000,000 in aggregate. Contractual Liability is to include liability assumed under this Agreement. e. Umbrella Coverage: A minimum of $2,000,000. 13.2. Insurance Certificates: Each of the parties to this Agreement shall deliver to each other certificates of insurance completed by the respective carriers for each party certifying that the minimum insurance coverage, as required above, are in effect and will not be canceled or changed without thirty days written notice. ARTICLE 14 DISSOLUTION 14.1 Dissolution. The Joint Venture shall continue until dissolved and terminated pursuant to the terms of this Agreement. The Joint Venture shall dissolve (i) on the termination date as set in Article 1.4 or (ii) upon the sale of a Participant's Interest to the Remaining Participant under Articles 7.2 or 7.3 or (iii) upon an Insolvency or an Event of Default as allowed in Article 8.3 if elected by the non-defaulting or solvent Participant or (iv) at any time upon the unanimous agreement of the Participants and the approval of the Managing Board. Without limiting any other rights or remedies (in equity or at law) available to a Participant, upon any dissolution occurring in contravention of this Agreement caused by the express will or withdrawal of a Participant, the other Participant shall be the Liquidating Participant. In the event of dissolution in accordance with Article 8.3, the non defaulting or solvent Participant shall act to liquidate the Joint Venture on behalf of the Participants and will have the rights and duties of a Liquidating Participant. In the event of dissolution upon the termination date or agreement of the Participants, the Managing Board will select a person to act as the Liquidating Participant. 14.2 Dissolution of the Joint Venture. Upon dissolution of the Joint Venture under Section 14.1 (i), (iii) and (iv), the Joint Venture's business shall be dissolved and all its assets distributed in liquidation, provided, however, that the Participants acknowledge and agree that, in the event of a dissolution of the Joint Venture, the business shall be operated in the normal course of events during the dissolution period (except for sales of assets or the business, or parts thereof, as approved by the Liquidating Participant). During the dissolution, the Joint Venture shall continue to act through the Joint Venture Manager with the Liquidating Participant acting as the Managing Board. Upon dissolution of the Joint Venture under Article 14.1 (ii), the Remaining Participant shall own all assets of the Joint Venture upon closing of the purchase of the Terminating Participant's share. 14.3 Sale of the Business by Liquidating Participant. During the dissolution process as set forth above, the Liquidating Participant shall have the right to wind up the Joint Venture and offer the business and the assets of the Joint Venture for sale, in whole or in part, as promptly as shall be practicable and with reasonable diligence and upon sale to distribute the proceeds of sale as provided below, provided however that the Liquidating Participant shall have the authority to decide whether to liquidate all assets of the Joint Venture or make certain in-kind distributions to the Participant as part of the liquidation process. Any offer for sale of the business and the assets of the Joint Venture shall be conducted in a manner customary for the sale of businesses of the type engaged in by the Joint Venture, on such terms and conditions as the Liquidating Participant deems appropriate in order to maximize the proceeds of such sale. 14.4 Offset for Damages. In the event of dissolution in contravention of this Agreement, the Liquidating Participant shall be entitled to deduct from the amount payable to the Participant that violated such provision, the amount of damages incurred by the Joint Venture proximately related to such act, and such amount be paid to the other Participant. To the extent the provisions of this paragraph cause or increase a deficit in any Participant's capital account, such Participants shall be required to restore to the Joint Venture the amount of such deficit (or such increase in deficit) within 30 days after dissolution of the Joint Venture. 14.5 Distribution of Proceeds of Liquidation. Regardless of the capital and undistributed earning accounts of the Participant or their shares of profits and losses or their respective rights to receive distributions, the proceeds from liquidation shall be applied and distributed in the following order of priority: a. First to the payment of (i) debts and liabilities of the Joint Venture, except loans or advances that may have been made by any of the Participant to the Joint Venture pursuant to Article 3.4 and (ii) expenses of liquidation; b. Then to the setting up of any reserves which the Liquidating Participant may deem necessary for any contingent of unforeseen liabilities or obligations of the Joint Venture or of the Participants out of or in connection with the Joint Venture. Said reserves may be held by a bank or trust company acceptable to the Liquidating Participant as escrow to be held by it for the purpose of disbursing such reserves in payment of any of the aforementioned liabilities or obligations, and at the expiration of such period as the Liquidating Participant shall deem advisable, distributing the balance, if any, thereafter remaining, in the manner hereinafter provided; c. Then to the repayment of any other loans that may have been made by any of the Participants to the Joint Venture pursuant to Article 3.4; and d. Then any balance remaining shall be distributed to the Participants in accordance with their respective positive capital account, provided, however, that if the liquidation of the Joint Venture occurs pursuant to an Event of Default, then the distribution to be made to the defaulting Participant shall be reduced, at the option of the Liquidating Participant, by either actual damages suffered as the result of the Event of Default or Insolvency or if the actual damages cannot readily be determined, twenty percent (20%) and the distribution to be made to the non-defaulting Participant shall be increased by the amount of that reduction as liquidated damages. The Participants agree that damages resulting from liquidation pursuant to the occurrence of an Event of Default or Insolvency may be impossible to measure; therefore the Participants further agree that the 20% distribution that may be made under this Article to the solvent Participant or the non-defaulting Participant following liquidation pursuant to Article 7.3 constitutes the Participants' best estimate of any such damages and is not a penalty. Except as provided in Article 14.4 or as otherwise provided by law, no Participant shall be obliged to restore any negative balance in its capital account. ARTICLE 15 MISCELLANEOUS 15.1 Governing Law. Except as is expressly herein stipulated to the contrary, the rights and obligations of the Participants and the administration and termination of the Joint Venture shall be governed by the laws of the State of Delaware. 15.2 Pronouns. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine or neuter, singular or plural, as the identity of the person or persons may require. 15.3 Entire Agreement. This instrument contains all of the understandings and agreements of whatsoever kind and nature existing between the parties hereto with respect to this Agreement and the rights, interests, understandings, agreements and obligations of the respective parties pertaining to the Joint Venture. 15.4 Amendments. This Agreement may not be amended, altered or modified except by a written instrument signed by each of the Participants. 15.5 Notices. All notices hereunder shall be sufficient if such written notice is hand delivered, delivered by prepaid overnight courier service or mailed by prepaid certified mail, addressed to the respective and appropriate party as follows (or to such other address as the parties may indicate in writing): If to HEC International: HEC International Corporation 24 Prime Parkway Natick, MA 01760 Attention: Thomas W. Philbin, Ph.D. If to PEPC: Attention: If to the Joint Venture: Joint Venture Name Attention: 15.6 Public Utility Holding Company Act. HEC International and the Joint Venture are subject to requirements of the Public Utility Holding Company Act of 1935, 15 U.S.C. 79 et. seq., and the regulations, orders and decisions of the SEC thereunder. The Joint Venture shall comply with the requirements of this Act. IN WITNESS WHEREOF, HEC International Corporation and Wisconsin Electric Power Company have caused this Agreement to be signed by their duly authorized representatives as of the date first written above. HEC International Corporation By Thomas W. Philbin, Ph.D. President Date Partner Electric Power Company By Name Title Date EX-5 3 EXHIBIT F-1, OPINION OF COUNSEL Exhibit F-1 July 14, 1995 Securities and Exchange Commission Judiciary Plaza 450 Fifth Street, N.W. Washington, D.C. 10549 Ladies and Gentlemen: As Counsel at Northeast Utilities' (NU) subsidiary, Northeast Utilities Service Company (NUSCO), I have acted as counsel to NU, and as counsel to its subsidiary HEC Inc. (HEC), and HEC's subsidiaries HEC Energy Consulting Canada (HEC Canada) and HEC International Corporation (HEC International), with respect to the Application/Declaration, as heretofore amended, and Post-Effective Amendments Nos. 1 and 2 thereto (collectively, the Application) on Form U-1 filed with the Securities and Exchange Commission in File No. 70-8076, seeking, among other things, authorization for HEC and its subsidiaries to form joint ventures with utilities outside New England and New York for the purposes of joining forces with these utilities to provide energy management, demand-side management and consulting services. I am furnishing this opinion to you in connection with the Application. As counsel to NU, HEC, HEC Canada and HEC International, I am generally familiar with the nature and character of the businesses of such companies. I am a member of the bar of Connecticut. I am not a member of the bar of the Commonwealth of Massachusetts, the Commonwealth in which NU is organized, and in which HEC and HEC International are incorporated, nor am I qualified to practice law in the Province of Ontario, Canada, the Province in which HEC Canada is organized. I do not hold myself out as an expert in the law of such Commonwealth or Province, although I have made a study of the laws of such Commonwealth and have consulted with other counsel to NUSCO and to HEC who are expert in such laws. For purposes of this opinion, I have relied on advice from counsel employed by NUSCO and counsel retained by HEC Canada who are members of the bar of the Commonwealth of Massachusetts and of the Province of Ontario, Canada, respectively. In connection with this opinion, I have examined or caused to be examined the Commission's orders dated July 27, 1990 (HCA Rel. No. 35-25114-A), September 30, 1993 (HCA Rel. No. 35-25900) and August 19, 1994 (HCA Rel. No. 35-26108), the Application and the various exhibits thereto, the minutes of various meetings of the Boards of Directors of HEC and its subsidiaries, the laws of the Commonwealth of Massachusetts, the certificates of incorporation and by-laws of HEC and its subsidiaries and such other documents as I deem necessary for the purpose of this opinion. I assume that the Boards of Directors of HEC and its subsidiaries and the officials and other representatives of HEC and its subsidiaries will take all further corporate actions and all administrative steps necessary to authorize and implement certain of the transactions contemplated by the Application. This opinion is subject to the Securities and Exchange Commission issuing an order under the Public Utility Holding Company Act of 1935 as requested in the Application, and the assumption that all actions taken thereafter will be in conformity with such order. Based on the foregoing, I am of the opinion that: A. All state laws applicable to the transactions described in the Application have been complied with; B. HEC, HEC Canada and HEC International are validly organized and duly existing; C. When issued and sold as described in the Application, any equity security of joint venture subsidiaries of HEC or its subsidiaries ("Joint Venture Subsidiaries"), issued and sold in accordance with the Commission's authorization of the transactions contemplated by the Application will be validly issued, fully paid, and non- assessable, and the holders thereof will be entitled to the rights and privileges appertaining thereto set forth in the joint venture documents defining such rights and privileges; D. When acquired as described in the Application, HEC or its subsidiaries will legally acquire any equity security of Joint Venture Subsidiaries issued and, sold in accordance with the Commission's authorization of transactions contemplated by the Application; E. When issued as described in the Application, any evidence of indebtedness issued by Joint Venture Subsidiaries to HEC or its subsidiaries will be valid and binding obligations of the Joint Venture subsidiary, in accordance with their terms, subject to laws of general application with respect to rights and remedies of creditors and subject to equitable principles and; F. The consummation of the proposed transactions as described in the Application will not violate the legal rights of any holders of securities issued by NU, HEC, HEC Canada, HEC International, or any other existing NU subsidiary company. I hereby consent to the use of this opinion in connection with the filing of the Application. Very truly yours, /s/Jeffery D. Cochran Counsel Northeast Utilities Service Company EX-99 4 FINANCIAL STATEMENT - BALANCE SHEET HEC INC. FINANCIAL STATEMENT 1.1 BALANCE SHEETS
Pro Forma Giving Effect March Pro Forma To Proposed 1995 Adjustments Transactions ------------------------------------- (Thousands of Dollars) ASSETS - ------ Utility Plant, at original cost: Electric................................. $ 2,946 $ $ 2,946 Other.................................... 897 897 ------------------------------------- 3,843 3,843 Less: Accumulated provision for depreciation.................... 1,519 1,519 ------------------------------------- Total net utility plant.............. 2,324 0 2,324 ------------------------------------- Other Property and Investments: Investment in subsidiaries, at equity 17 17 Investment in Joint Venture A 1,000 (a) 1,000 Investment in Joint Venture B 1,000 (a) 1,000 Investment in Joint Venture C 1,000 (a) 1,000 Investment in Joint Venture D 1,000 (a) 1,000 Investment in Joint Venture E 1,000 (a) 1,000 Investment in Joint Venture F 1,000 (a) 1,000 Investment in Joint Venture G 1,000 (a) 1,000 Investment in Joint Venture H 1,000 (a) 1,000 ------------------------------------- 17 8,000 8,017 ------------------------------------- Current Assets: Cash..................................... 464 8,000 (a) 464 (8,000)(a) Receivables.............................. 3,000 333 (d) 3,333 Receivables from affiliated companies.... 309 309 Materials and supplies, at average cost.. 20 20 Prepayments and other.................... 160 160 ------------------------------------- 3,953 333 4,286 ------------------------------------- Deferred Charges: Other deferred debits.................... 1,360 1,360 ------------------------------------- 1,360 0 1,360 ------------------------------------- Total Assets......................... $ 7,654 8,333 $ 15,987 =====================================
HEC INC. FINANCIAL STATEMENT 1.1 BALANCE SHEETS
Pro Forma Giving Effect March Pro Forma To Proposed 1995 Adjustments Transactions -------------------------------------- (Thousands of Dollars) CAPITALIZATION AND LIABILITIES - ------------------------------ Capitalization: Common stock, $1 par value. Authorized and outstanding 1,000 shares............ $ 0 $ $ 0 Capital surplus, paid in................. 4,066 4,066 Retained earnings........................ (915) 0 (d,b,c) (915) -------------------------------------- Total common stockholder's equity.... 3,151 0 3,151 Long-term debt........................... 0 0 -------------------------------------- Total capitalization............ 3,151 0 3,151 -------------------------------------- Current Liabilities: Notes payable to associated companies.... 2,225 8,000 (a) 10,225 Accounts payable......................... 1,692 1,692 Accrued taxes............................ (94) (171)(c) (265) Other current liabilities................ 278 504 (b) 782 -------------------------------------- 4,101 8,333 12,434 -------------------------------------- Deferred Credits: Accumulated deferred income taxes........ 402 402 -------------------------------------- 402 0 402 -------------------------------------- Total Capitalization and Liabilities... $ 7,654 8,333 $ 15,987 ======================================
EX-99 5 FINANCIAL STATEMENT - STATEMENT OF INCOME HEC INC. FINANCIAL STATEMENT 1.2 STATEMENTS OF INCOME
Pro Forma 12 Months Giving Effect Ended Pro Forma To Proposed March 1995 Adjustments Transactions -------------------------------------- (Thousands of Dollars) Operating Revenues......................... $ 21,447 $ 333 (d) $ 21,780 -------------------------------------- Operating Expenses: Operation - other........................ 20,534 20,534 Maintenance.............................. 11 11 Depreciation............................. 411 411 Federal and state income taxes........... 182 (171)(c) 11 Taxes other than income taxes............ 167 167 -------------------------------------- Total operating expenses........... 21,305 (171) 21,134 -------------------------------------- Operating Income........................... 142 504 646 -------------------------------------- Other Income: Other, net............................... 175 175 Income taxes--credit..................... (18) (18) -------------------------------------- Other income, net.................. 157 0 157 -------------------------------------- Income before interest charges..... 299 504 803 -------------------------------------- Interest Charges: Other interest........................... 109 504 (b) 613 -------------------------------------- Interest charges, net.............. 109 504 613 -------------------------------------- Net Income ................................ $ 190 $ 0 $ 190 ======================================
FINANCIAL STATEMENT 1.2 Proforma Journal Entries Debits Credits - ------------------------ ------ ------- (Thousands of Dollars) (a) Cash $8,000 Notes payable to associated companies $8,000 Investment in Joint Venture A 1,000 Investment in Joint Venture B 1,000 Investment in Joint Venture C 1,000 Investment in Joint Venture D 1,000 Investment in Joint Venture E 1,000 Investment in Joint Venture F 1,000 Investment in Joint Venture G 1,000 Investment in Joint Venture H 1,000 Cash 8,000 To record a $8 million investment by HEC (parent) in 8 Joint Ventures ($1 million each venture). HEC would finance the investment by use of HEC's borrowing through the NU system Money Pool with no additional equity coming from Northeast Utilities. (b) Interest expense $504 Other current liabilities $504 Interest expense = 8,000 x 6.30% = 504 To record higher interest on Notes Payable to Associated Companies as a result of borrowing from the NU System Money Pool. (c) Accrued taxes $171 Income tax expense $171 Tax Expense = 504 x 34% = 171 To record the reduction in income taxes due to higher interest expense. (d) Accounts receivable $333 Operating revenue $333 To record revenue to cover additional interest costs, net of income taxes (504 - 171). -----END PRIVACY-ENHANCED MESSAGE-----