-----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, PK54kZCK+MLL0nnt3KJ/XE5VnAeL7yXtb28tvIIiyVBUV/xv+yh+eGgiLKPBfK0h kO0o+iB+Fn0vS/qSS/kKxQ== 0000009548-98-000013.txt : 19980814 0000009548-98-000013.hdr.sgml : 19980814 ACCESSION NUMBER: 0000009548-98-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BANGOR HYDRO ELECTRIC CO CENTRAL INDEX KEY: 0000009548 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 010024370 STATE OF INCORPORATION: ME FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-10922 FILM NUMBER: 98684605 BUSINESS ADDRESS: STREET 1: 33 STATE ST CITY: BANGOR STATE: ME ZIP: 04401 BUSINESS PHONE: 2079455621 MAIL ADDRESS: STREET 1: PO BOX 932 CITY: BANGOR STATE: ME ZIP: 04401 10-Q 1 2ND QUARTER 10Q DOCUMENT/BANGOR HYDRO-ELECTRIC CO. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended JUNE 30, 1998 Commission File No. 0-505 ------------- ----- BANGOR HYDRO-ELECTRIC COMPANY ------------------------------------------------------ (Exact Name of Registrant as specified in its Charter MAINE 01-0024370 - ------------------------------- -------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 33 STATE STREET, BANGOR, MAINE 04401 - ---------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code 207-945-5621 ------------ NONE - ----------------------------------------------------------------------- Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report Outstanding Common Stock, $5 Par Value - 7,363,424 Shares June 30, 1998 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ---- FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998 PART I - FINANCIAL INFORMATION PAGE Cover Page 1 Index 2 Consolidated Statements of Income 3 Management's Discussion and Analysis of Results of Operations and Financial Condition 4 Consolidated Balance Sheets - June 30, 1998 and December 31, 1997 21 Consolidated Statements of Capitalization 23 Consolidated Statements of Cash Flows 24 Consolidated Statements of Common Stock Investment 25 Notes to the Consolidated Financial Statements 26 PART II - OTHER INFORMATION 38 Item 4 - Submission of Matters to a Vote of Security Holders 39 Item 6 - Exhibits and Reports on Form 8-K 39 Signature Page 41 BANGOR HYDRO-ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF INCOME 000's Omitted Except Per Share Amounts (UNAUDITED) Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 1998 1997 1998 1997 --------------------------------------- ELECTRIC OPERATING REVENUES $ 46,601 $ 42,236 $ 95,701 $ 90,412 --------------------------------------- OPERATING EXPENSES: Fuel for generation and purchased power $ 20,045 $ 21,006 $ 41,404 $ 45,288 Other operation and maintenance 8,318 7,935 16,628 15,697 Depreciation and amortization 2,440 2,414 5,054 5,166 Amortization of Seabrook Nuclear Unit 425 425 850 850 Amortization of contract buyouts 4,950 5,229 10,041 10,457 Taxes - Property and payroll 1,278 1,411 2,813 2,823 State income 184 (282) 412 (562) Federal income 955 (798) 2,083 (860) --------------------------------------- $ 38,595 $ 37,340 $ 79,285 $ 78,859 --------------------------------------- OPERATING INCOME $ 8,006 $ 4,896 $ 16,416 $ 11,553 --------------------------------------- OTHER INCOME AND (DEDUCTIONS): Allowance for equity funds used during construction $ 109 $ 88 $ 178 $ 183 Other, net of applicable income taxes 272 246 469 543 --------------------------------------- $ 381 $ 334 $ 647 $ 726 --------------------------------------- INCOME BEFORE INTEREST EXPENSE $ 8,387 $ 5,230 $ 17,063 $ 12,279 --------------------------------------- INTEREST EXPENSE: Long-term debt $ 5,786 $ 5,722 $ 11,261 $ 11,477 Other 507 717 1,429 1,483 Allowance for borrowed funds used during construction (173) (172) (302) (360) --------------------------------------- $ 6,120 $ 6,267 $ 12,388 $ 12,600 --------------------------------------- NET INCOME (LOSS) $ 2,267 $ (1,037)$ 4,675 $ (321) DIVIDENDS ON PREFERRED STOCK 311 344 623 689 --------------------------------------- EARNINGS (LOSS) APPLICABLE TO COMMON STOCK $ 1,956 $ (1,381)$ 4,052 $ (1,010) ======================================= WEIGHTED AVERAGE NUMBER OF SHARES 7,363 7,363 7,363 7,363 ======================================= EARNINGS (LOSS) PER COMMON SHARE, Basic $ 0.27 $ 0.19 $ 0.55 $ 0.14 Diluted $ 0.26 $ 0.19 $ 0.55 $ 0.14 ======================================= DIVIDENDS DECLARED PER COMMON SHARE $ - $ - $ - $ - ============================== ======== See notes to the consolidated financial statements. BANGOR HYDRO-ELECTRIC COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Management's Discussion and Analysis of the Results of Operations and Financial Condition contained in Bangor Hydro-Electric Company's (the Company) Annual Report on Form 10-K for the year ended December 31, 1997 (1997 Form 10-K) should be read in conjunction with the comments below. EARNINGS The quarter ended June 30, 1998 resulted in earnings of $.27 per common share, compared to a loss of $.19 per common share for the quarter ended June 30, 1997. The improvement in first quarter earnings is attributable largely to the February 9, 1998 rate increase authorized by the Maine Public Utilities Commission (MPUC) designed to increase annual revenues by approximately $13.2 million. IMPORTANT CURRENT ACTIVITIES- PENOBSCOT ENERGY RECOVERY COMPANY - As previously reported the Company has been working to restructure a power purchase contract with the Penobscot Energy Recovery Company (PERC), its last remaining high-priced non-utility generator contract that offers a potential for substantial savings. In June 1998 the Company successfully completed this major restructuring of its obligations under various agreements with PERC. The restructuring will result in a substantial savings for the Company and will allow PERC to continue to meet the solid waste disposal needs of Maine communities. This major restructuring involves several separate components including the following: 1) PERC refinanced $45 million in existing bonds with a remaining five year term over a twenty year period using tax exempt bonds issued by the Finance Authority of Maine under its Electric Rate Stabilization Program. 2) PERC will share the net revenues generated by the facility on a pro rata basis with the Company and the Municipal Review Committee (MRC) which represents over 130 Maine municipalities receiving waste disposal service from PERC. 3) The Company made a one-time payment of $6 million to PERC and will make additional quarterly payments of $250,000 for four years totaling $4 million. 4) Bangor Hydro and PERC amended their existing power purchase agreement to include the MRC as a party. 5) The MRC's constituent municipalities extended their contracts with PERC by 15 years to supply solid waste to the facility through 2018. 6) Bangor Hydro issued two million warrants to purchase common stock, one million each to PERC and the MRC. Each warrant entitles the warrant holder to acquire one share of Bangor Hydro common stock at a price of $7 per share. No warrants may be exercised within the first nine months after their issuance, and they become exercisable in 500,000 share blocks following the expiration of nine months, 21 months, 33 months, and 45 months from the closing date. Depending upon a number of assumptions, including the ultimate cost of the warrants and markets for solid waste disposal, it is projected that the restructuring will result in cost savings to Bangor Hydro over the next twenty years with a net present value of $30-40 million. The anticipated savings resulting from this transaction were used to reduce the level of electric rates approved by the MPUC in the Company's recent general rate case by approximately $3 million on an annual basis. With the completion of the transaction, the Company will now begin realizing these benefits. The refinancing by PERC was made possible by the Maine Legislature through an amendment to the Electric Rate Stabilization Program that allowed PERC to qualify for such financing. Under the Program, the State of Maine's "moral obligation" supports the new non-recourse debt. The Company has deferred, as a regulatory asset, the $6 million payment to PERC, approximately $1.5 million in costs associated with the contract restructuring, and $2 million for the estimated fair value of the warrants. As discussed above, the Company is currently recovering PERC restructuring costs in rates. The $2 million in warrants have also increased additional paid-in capital. AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT - As previously reported, during 1997 the Company negotiated amendments to the credit agreement with its lending banks in order to resolve potential violations of certain financial covenants. As a result of those amendments, the Company reported that during 1998 or beyond, future cash needs might exceed the borrowing capacity under the credit facility, and accordingly, the Company might be required to find new sources of financing. On June 29, 1998, the Company entered into an Amended and Restated Revolving Credit and Term Loan Agreement with a new group of lenders that provides a two year term loan of $45 million and a revolving credit commitment of $30 million. Under current projections of cash needs, the new facilities should provide adequate borrowing capacity. The new credit agreement contains financial covenants which are not significantly different than the covenants contained in the previous credit agreement. The Company was in compliance with all covenants associated with the new credit agreement as of June 30, 1998. The credit agreement also provides for the issuance of a letter of credit required to support $4.2 million of the Company's Pollution Control Revenue Bonds. To secure the existing letter of credit related to the Pollution Control Revenue Bonds, until the new letter of credit could be issued, the Company deposited approximately $4.6 million of the proceeds from this financing with a third party trustee. This amount has been included with Other Investments on the Company's Consolidated Balance Sheets at June 30, 1998. REGULATORY MATTERS - The Company is preparing for the introduction of retail electric competition on March 1, 2000, as required by a Maine legislative act signed on May 29, 1997. That process includes complying with a state mandate to divest generation-related assets. The Company's divestiture process remains on schedule. Binding bids from a short list of bidders are expected to be received in August 1998, with financial closing scheduled for the first quarter of 1999. Also in connection with the advent of retail competition, the Company is engaged in a regulatory proceeding at the MPUC to determine the revenue requirements of the stand-alone Bangor Hydro transmission and distribution company and the manner of recovery of stranded costs. MONETIZATION OF POWER SALE CONTRACT - As reported in the 1997 Form 10-K, the Company had been negotiating a transaction for the monetization of a power sale contract with UNITIL Power Corp. (UNITIL), a New Hampshire based electric utility. The Company currently provides power to UNITIL at significantly above-market rates, with the contract term ending in the year 2003. Based upon current projections of wholesale electricity markets, it is expected that the rates charged under the UNITIL contract will remain at above-market levels for the remainder of the contract term. Therefore, the assignment of the Company's rights under the contract has a positive present cash value. On March 31, 1998, the Company completed a transaction with a financial institution that provided a loan of approximately $23 million in net proceeds secured by the value of the UNITIL contract. Also as previously reported, beginning in early 1997, the Company failed to comply with certain financial covenants under its bank lending agreements and received temporary waivers from the lending banks. By using a portion of the proceeds of the UNITIL monetization to pay down a portion of the bank obligations, the Company was able to negotiate permanent waivers of the earlier financial covenant violations. At the time the Company filed its 1997 Form 10-K, the monetization of the UNITIL contract had not been completed and the financial covenant violations had, therefore, not been waived permanently. As discussed in the 1997 Form 10-K, all debt under the bank credit facilities, including certain medium term notes, was classified as a current liability on the Company's Consolidated Balance Sheets as of December 31, 1997. As a result of the permanent waivers that became effective upon completion of the UNITIL monetization, $22 million of medium term notes, previously classified as a current liability, were reclassified as a long-term liability as of March 31, 1998. STORM DAMAGE - As discussed in the 1997 Form 10-K, the Company suffered widespread damage throughout its service territory to its transmission and distribution equipment during a major ice storm in January 1998. The Company's incremental costs associated with the service restoration effort were approximately $4.2 million, and additional incremental costs associated with line clearance work are expected to be incurred in the future. The $4.2 million has been deferred and included in Other Deferred Charges on the Company's Consolidated Balance Sheets as of June 30, 1998. The MPUC issued an order authorizing the Company to defer incremental, non-capitalized storm damage expenses for future recovery through the rates charged to customers. MPUC proceedings on the recovery of the incremental ice storm costs have been delayed, due to the possibility of federal funds being available to utilities for ice storm property damage. The Company is uncertain whether any federal funds will be received or the timing of MPUC proceedings. The Company believes its storm damage costs were prudently incurred and it should, therefore, be allowed to recover them in rates if it does not otherwise receive publicly financed assistance. BANGOR GAS JOINT VENTURE - In the second quarter of 1998, Bangor Gas Company, LLC (Bangor Gas) received unconditional authority from the MPUC to provide natural gas service to the greater Bangor area. For more discussion of the Bangor Gas joint venture, see the 1997 Form 10-K. REVENUES Electric operating revenue increased by $4.4 million, or 10.3% in the second quarter of 1998 due principally to the impact of the 3.8% temporary rate increase effective on July 1, 1997 and the additional 5.83% rate increase effective February 13, 1998. The electric operating revenue increase was also affected by a $1.5 million increase in off-system sales in the second quarter of 1998. Offsetting these increases was a 5.3% decrease in total kilowatt hour (KWH) sales (excluding off-system sales) in the second quarter of 1998 as compared to second quarter 1997 sales. The decrease in KWH sales in the second quarter of 1998 was impacted by significantly warmer weather as compared to the 1997 quarter. EXPENSES Fuel for generation and purchased power expense decreased $961,000 or 4.6% in the second quarter of 1998 as compared to 1997. The decreased expense was a result of several factors. The largest was reduced expense associated with the permanent shutdown of the Maine Yankee nuclear plant in 1998 as compared to maintaining the plant in an operating mode in the first quarter of 1997. Also, in connection with the Company's recent rate order (See the 1997 Form 10-K for discussion of the rate order), the Company was ordered to defer, for future recovery, the excess of actual Maine Yankee related costs incurred during 1998 over the Maine Yankee costs included in the rate order. This deferral mechanism resulted in a reduction in expense in the second quarter of 1998 of approximately $419,000. The reduction in expense in the second quarter of 1998 was also impacted by the previously mentioned 5.3% decrease in KWH sales. The Company also recorded a $500,000 benefit in the second quarter of 1998 related to savings to be realized from the previously discussed PERC contract restructuring. These increases were offset by the previously mentioned $1.5 million increase in off-system sales in the second quarter of 1998. Purchases from contracts tied largely to the cost of oil decreased in 1998, and these decreases were approximately offset by payouts under the Company's fuel hedging program. Other operation and maintenance (O&M) expense increased by $383,000 in the second quarter of 1998. O&M payroll expense increased by $345,000 due principally to significantly less payroll charged to the Company's capital program in the second quarter of 1998. Also affecting the increased O&M payroll was a 3% union wage increase effective January 1, 1998. These increases were offset to some extent by lower employee levels in 1998. Depreciation and amortization expense increased $26,000 in the second quarter of 1998 as compared to the 1997 quarter, due principally to the impact of anticipated 1998 property additions. Effective February 13, 1998, in connection with the Company's most recent rate order, the Company lengthened the depreciable lives of its large information system capital projects from seven to ten years, and began amortizing its $3.6 million overaccumulated depreciation reserve ($450,000 amortization in the second quarter of 1998), thus reducing depreciation expense. The $279,000 decrease in amortization of contract buyouts in the 1998 quarter was also due principally to the recent rate order, whereby the MPUC required the Company to reduce the amortization of the deferred regulatory asset associated with the 1993 buyout of one of its high-priced non-utility generator contracts by an annualized amount of approximately $1.1 million, effective February 13, 1998. The decrease in property and other taxes in the second quarter of 1998 was due principally to a reduction in property taxes associated with the Company's 8.33% ownership in the oil-fired 600 megawatt Wyman Unit No.4 in Yarmouth, Maine. The Company records its proportionate share of the direct expenses of this unit. The increase in income taxes was principally a function of greater earnings in the second quarter of 1998 as compared to the 1997 quarter. See Footnote 2 to the Consolidated Financial Statements for a reconciliation of the Company's effective income tax rate. Allowance for funds used during construction increased by $27,000 in the 1998 quarter as compared to 1997. This increase was due principally to carrying costs being recorded on deferred incremental Maine Yankee and deferred incremental ice storm costs in the second quarter of 1998. These increases were offset, to some extent, by the effect of lower levels of construction work in progress in the 1998 quarter. Long-term debt interest expense increased $64,000 in the second quarter of 1998 as compared to 1997 due principally to the previously discussed $24.8 million in medium term notes issued on March 31, 1998, in connection with the UNITIL purchased power contract monetization. Offsetting this increase was $18 million in principal repayments in 1997 and 1998 on the medium term notes associated with the Company's revolving credit facility, sinking fund payments on the Company's 12.25% first mortgage bonds, and the final maturity of $2.5 million of 6.75% series First Mortgage Bonds in March 1998. Other interest expense, which is composed principally of interest expense on short term borrowings, decreased due to a $13.5 million decrease in weighted average short-term borrowings outstanding in the 1998 quarter as compared to 1997, offset somewhat by an increase in average short- term interest rates in 1998. SIX MONTHS OF 1998 AS COMPARED TO THE SIX MONTHS OF 1997 EARNINGS Earnings for the six months ended June 30, 1998 were $.55 per common share, compared to a loss of $.14 per common share for the 1997 period. As previously discussed, the increased earnings were principally a result of the February 9, 1998 rate increase authorized by the MPUC. Earnings in the 1997 period were positively affected by three transactions that were nonrecurring in nature. The Company recorded $335,000 in revenues from the sale of air emission allowances to a coal fired generating facility, and $350,000 in revenue was recognized under a shared savings distribution agreement with another utility. Also, the Company recorded a $204,000 state income tax benefit as the result of an IRS examination of the Company's 1994 federal income tax return. Without the impact of these one-time events benefitting earnings, the Company would have incurred a $.22 loss per common share in the 1997 period. REVENUES The $5.3 million increase in electric operating revenues was due primarily to the previously mentioned rate increases in July 1997 and February 1998, as well as a $1.6 million increase in off-system sales in the 1998 period. Offsetting these increases, to some extent, were a 5.1% reduction in total KWH sales (excluding off-system sales) in 1998 and the impact of the previously discussed sale of air emission allowances and revenue associated with the shared distribution savings with another utility in 1997. The decrease in sales in 1998 was due to service interruption during the ice storm in January 1998, as well as significantly warmer weather in the winter and spring of 1998 as compared to 1997. EXPENSES Fuel for generation and purchased power expense decreased by $3.9 million in the 1998 period as compared to 1997. The decrease in largely attributable to the same reasons discussed above for the second quarter of 1998 as compared to the second quarter of 1997. The Maine Yankee deferral mechanism resulted in an approximately $1.2 million reduction in expense in the 1998 period. Other O&M expense increased by $931,000 for the six months ended June 1998 as compared to the 1997 period. O&M payroll expense increased by $959,000 due principally to significantly less payroll charged to the Company's capital program in the 1998 period. The lower capital labor was primarily a result of service restoration efforts associated with the January 1998 ice storm. The Company was ordered by the MPUC to defer incremental non-capital costs related to the ice storm, but the non- incremental labor costs were charged principally to other O&M in the first quarter of 1998. The change from 1997 to 1998 was also affected by the previously discussed wage increases and changes in employee levels. Depreciation and amortization expense decreased $112,000 in 1998 as compared to 1997 due principally to the previously mentioned lengthening of lives of information system capital assets and the amortization of the overaccumulated depreciation reserve, offset by the impact of 1998 property additions. The decreases in amortization of contract buyouts and property and other taxes and the increase in income taxes in 1998 were due principally to the same reasons discussed above for the second quarter of 1998 as compared to the second quarter of 1997. The decrease in AFUDC was attributable to reductions in construction expenditures in 1998 as compared to 1997, offset by $221,000 in carrying costs recorded in connection with deferred incremental Maine Yankee and deferred incremental ice storm costs in 1998. Other income decreased by $74,000 in 1998 due principally to incurring start-up costs associated with non-core business ventures. The reduction in long-term debt interest expense in 1998 was due primarily to the previously discussed principal repayments on various long-term debt issues, offset by the issuance of the $24.8 million of medium term notes on March 31, 1998. Other interest expense decreased principally for the same reasons discussed above for the second quarter of 1998 as compared to the second quarter of 1997. The weighted average short-term borrowings outstanding decreased by $5.4 million in the 1998 period as compared to the 1997 period. LIQUIDITY AND CAPITAL RESOURCES The Consolidated Statements of Cash Flows reflect events in the first six months of 1998 and 1997 as they affect the Company's liquidity. Net cash provided by operations was $8.8 million in 1998 as compared to $21.0 million in the 1997. Negatively impacting cash flows from operations in the 1998 period were the approximately $7.5 million in costs incurred to restructure the PERC purchased power contract as well as approximately $4 million in incremental costs incurred in connection with the January 1998 ice storm. Cash flows were also reduced by the effect of a large customer, who prepaid its electric usage for a one-year period in the third quarter of 1997. Offsetting these cash flow reductions was the beneficial impact of the 3.8% temporary rate increase on July 1, 1997 and the 5.83% rate increase effective February 13, 1998. Due principally to costs incurred to rebuild a major transmission line damaged in the January 1998 ice storm, construction expenditures were $1.7 million higher in 1998 as compared to 1997. Dividends paid on common stock were lower in 1998 due to the suspension of the common dividend, beginning with the first quarter of 1997. The reduction in preferred dividends paid resulted principally from a $1.5 million sinking fund payment made on the Company's 8.76% mandatory redeemable preferred stock in December 1997. The Company in each period made sinking fund payments on its 12.25% first mortgage bonds. In the first quarter of 1998 the Company made the final $2.5 million payment on its 6.75% first mortgage bonds and made a $4 million principal repayment on its medium term notes. In June 1998 the Company made a $12.3 million principal payment on its Finance Authority of Maine Revenue Notes. Also, as previously discussed, in connection with the new credit agreement, the Company fully repaid its $30 million in outstanding medium term notes in June 1998. As previously discussed, in connection with the monetization of the UNITIL contract, the Company issued $24.8 million in medium term notes on March 31, 1998. The Company's net proceeds from this issuance were $23.3 million, due to the requirement to deposit $1.5 million in a capital reserve fund for the final payment of principal and interest in 2002. Of the $23.3 million of proceeds received, the Company utilized $19 million to repay borrowings outstanding under its revolving credit facility. The remaining funds were utilized for the PERC purchased power contract restructuring transaction discussed above. As previously discussed, in June 1998 the Company entered into an Amended and Restated Revolving Credit and Term Loan Agreement with a new group of lenders that provides a two year term loan of $45 million and a revolving credit commitment of $30 million. Under current projections of cash needs, the new credit facilities should provide the Company with adequate borrowing capacity. As previously discussed, in order secure the existing letter of credit related to the Pollution Control Revenue Bonds, until a new letter of credit could be issued, the Company deposited approximately $4.6 million of the proceeds from this financing with a third party trustee. NEW ACCOUNTING PRONOUNCEMENT In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FASB 133), and is effective for fiscal years beginning after June 15, 1999. FASB 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The affects of the adoption of FASB 133 on the Company's financial statements are currently not known. OTHER Management's Discussion and Analysis of Results of Operations and Financial Condition contains items that are "forward-looking" as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Readers should not place undue reliance on forward-looking statements, which reflect management's view only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances. Factors that might cause such differences include, but are not limited to, future economic conditions, relationship with lenders, earnings retention and dividend payout policies, electric utility restructuring, developments in the legislative, regulatory and competitive environments in which the Company operates, and other circumstances that could affect revenues and costs. BANGOR HYDRO-ELECTRIC COMPANY CONSOLIDATED BALANCE SHEETS 000's Omitted (Unaudited) Jun.30, Dec. 31, ASSETS 1998 1997 -------------------- INVESTMENT IN UTILITY PLANT: Electric plant in service, at original cost $ 346,383 $ 341,009 Less - Accumulated depreciation and amortization 101,502 96,595 ---------- --------- $ 244,881 $ 244,414 Construction work in progress 15,626 12,011 ---------- --------- $ 260,507 $ 256,425 Investments in corporate joint ventures: Maine Yankee Atomic Power Company $ 5,831 $ 5,532 Maine Electric Power Company, Inc. 360 326 ---------- --------- $ 266,698 $ 262,283 ---------- --------- OTHER INVESTMENTS, principally at cost $ 10,394 $ 5,274 ---------- --------- FUNDS HELD BY TRUSTEE, at cost $ 22,700 $ 21,196 ---------- --------- CURRENT ASSETS: Cash and cash equivalents $ 1,460 $ 937 Accounts receivable, net of reserve 16,542 16,615 Unbilled revenue receivable 10,211 11,605 Inventories, at average cost: Material and supplies 2,838 2,759 Fuel oil 416 35 Prepaid expenses 705 1,207 Deferred Maine Yankee refueling costs 0 286 ---------- --------- Total current assets $ 32,172 $ 33,444 ---------- --------- DEFERRED CHARGES: Investment in Seabrook Nuclear Project, net of accumulated amortization of $29,324 in 1998 and $28,474 in 1997 $ 29,518 $ 30,368 Costs to terminate/restructure power contracts, net of accumulated amortization of $69,657 in 1998 and $59,616 in 1997 147,075 147,633 Maine Yankee decommissioning costs 56,509 60,924 Deferred regulatory assets 32,411 32,551 Demand-side management costs 1,242 1,705 Other 11,521 5,205 ---------- --------- Total deferred charges $ 278,276 $ 278,386 ---------- --------- Total assets $ 610,240 $ 600,583 ========== ========== See notes to the consolidated financial statements. BANGOR HYDRO-ELECTRIC COMPANY CONSOLIDATED BALANCE SHEETS 000's Omitted (Unaudited) Jun.30, Dec. 31, STOCKHOLDERS' INVESTMENT AND LIABILITIES 1998 1997 -------------------- CAPITALIZATION: Common stock investment $ 112,646 $ 106,558 Preferred stock 4,734 4,734 Preferred stock subject to mandatory redemption, exclusive of current sinking fund requirements 9,168 9,137 Long-term debt, net of current portion 285,435 221,643 ---------- --------- Total capitalization $ 411,983 $ 342,072 ---------- --------- CURRENT LIABILITIES: Notes payable - banks $ 22,000 $ 34,000 ---------- --------- Other current liabilities - Current portion of long-term debt and sinking fund requirements on preferred stock $ 7,992 $ 52,172 Accounts payable 11,936 13,171 Dividends payable 296 327 Accrued interest 3,172 3,667 Customers' deposits 287 297 Deferred revenue 193 1,571 Current income taxes payable 0 8 ---------- --------- Total other current liabilities $ 23,876 $ 71,213 ---------- --------- Total current liabilities $ 45,876 $ 105,213 ---------- --------- DEFERRED CREDITS AND RESERVES: Deferred income taxes - Seabrook $ 15,323 $ 15,766 Other accumulated deferred income taxes 59,169 55,859 Maine Yankee decommissioning liability 56,511 60,926 Deferred regulatory liability 9,799 9,972 Unamortized investment tax credits 1,855 1,962 Accrued pension and postretirement benefit costs 7,412 7,034 Other 2,312 1,779 ---------- --------- Total deferred credits and reserves $ 152,381 $ 153,298 ---------- --------- Total Stockholders' Investment and Liabilities $ 610,240 $ 600,583 ========== ======== See notes to the consolidated financial statements. BANGOR HYDRO-ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF CAPITALIZATION 000's Omitted (Unaudited) Jun. 30, Dec. 31, 1998 1997 ------------------ COMMON STOCK INVESTMENT Common stock, par value $5 per share- $ 36,817 $ 36,817 Authorized -- 10,000,000 shares Outstanding -- 7,363,424 shares in 1998 and 1997 Amounts paid in excess of par value 59,005 56,969 Retained earnings 16,824 12,772 ------------------ Total common stock investment $ 112,646 $ 106,558 ------------------ PREFERRED STOCK-Non participating, cumulative- Par value $100 per share, authorized 600,000 shares Not redeemable or redeemable solely at the option of the issuer- 7%, Noncallable, 25,000 shares, authorized and outstanding $ 2,500 $ 2,500 4.25%, Callable at $100, 4,840 shares, authorized and outstanding 484 484 4%, Series A, Callable at $110, 17,500 shares, authorized and outstanding 1,750 1,750 ------------------ $ 4,734 $ 4,734 ------------------ 8.76%, Subject to mandatory redemption requirements- Callable at 103.75% if called on or prior to December 27, 1998, 150,000 shares authorized and 105,000 shares outstanding in 1998 and 1997 $ 10,762 $ 10,731 Less: Sinking fund requirements 1,594 1,594 ------------------ $ 9,168 $ 9,137 ------------------ LONG-TERM DEBT First Mortgage Bonds- 6.75% Series due 1998 $ 0 $ 2,500 10.25% Series due 2019 15,000 15,000 10.25% Series due 2020 30,000 30,000 8.98% Series due 2022 20,000 20,000 7.38% Series due 2002 20,000 20,000 7.30% Series due 2003 15,000 15,000 12.25% Series due 2001 4,509 5,521 ------------------ $ 104,509 $ 108,021 Less: Current maturity in 1997 and sinking fund requirements 1,579 4,278 ------------------ Total first mortgage bonds $ 102,930 $ 103,743 ------------------ Variable rate demand pollution control revenue bonds Series 1983 due 2009 $ 4,200 $ 4,200 ------------------ Other Long-Term Debt- Finance Authority of Maine - Taxable Electric Rate Stabilization Revenue Notes, 7.03% Series 1995A, due 2005 $ 113,700 $ 126,000 Medium Term Notes, Variable interest rate- LIBO Rate plus 2%, due 2000 (Fully repaid June 1998) 0 34,000 Medium Term Notes, Variable interest rate- LIBO Rate plus 1.125%, due 2002 24,425 0 Medium Term Notes, Variable interest rate- LIBO Rate plus 2%, due 2000 45,000 0 ------------------ $ 183,125 $ 160,000 Less: Current portion of long-term debt 4,820 46,300 ------------------ $ 178,305 $ 113,700 ------------------ Total long-term debt $ 285,435 $ 221,643 ------------------ Total Capitalization $ 411,983 $ 342,072 ================== See notes to the consolidated financial statements. BANGOR HYDRO-ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 000's Omitted (Unaudited) 1998 1997 ---------- ---------- Cash Flows From Operations: Net income (loss) $ 4,675 $ (321) Adjustments to reconcile net income (loss) to net cash provided by(used in) operations: Depreciation and amortization 5,054 5,166 Amortization of Seabrook Nuclear Project 850 850 Amortization of contract buyouts 10,041 10,457 Other amortizations 885 860 Costs to restructure purchased power contract (7,448) 0 Allowance for equity funds used during construction (178) (183) Deferred income tax provision and investment tax credits 2,829 (1,286) Changes in assets and liabilities: Deferred incremental ice storm costs (4,042) 0 Deferred incremental Maine Yankee costs (1,240) 0 Deferred fuel revenue and Maine Yankee 286 (2,268) refueling costs Accounts receivable, net and unbilled revenue 1,467 5,738 Accounts payable (1,235) 1,656 Accrued interest (495) 77 Current and deferred income taxes (145) 201 Accrued postretirement benefit costs 323 201 Deferred revenue (1,378) 0 Other current assets and liabilities, net 32 920 Other, net 3,072 (1,035) ---------- ---------- Net Cash Provided By Operations $ 13,353 $ 21,033 ---------- ---------- Cash Flows From Investing: Construction expenditures $ (8,832)$ (7,167) Allowance for borrowed funds used during construction (302) (360) ---------- ---------- Net Cash Used In Investing $ (9,134)$ (7,527) ---------- ---------- Cash Flows From Financing: Dividends on preferred stock $ (624)$ (691) Dividends on common stock 0 (1,325) Payments on long-term debt (50,188) (12,898) Proceeds from issuance of long-term debt, net of capital reserve fund requirements 68,300 0 Short-term debt, net (12,000) 500 Special deposit associated with securing letter of credit (4,592) 0 ---------- ---------- Net Cash Used In Financing $ 896 $ (14,414) ---------- ---------- Net Change in Cash and Cash Equivalents $ 5,115 $ (908) Cash and Cash Equivalents at Beginning of Period 937 1,274 ---------- ---------- Cash and Cash Equivalents at End of Period $ 6,052 $ 366 ========== ========== Cash Paid During the Six Months For: Interest (Net of Amount Capitalized) $ 12,352 $ 12,049 Income Taxes 141 91 ========== ========== See notes to consolidated financial statements. BANGOR HYDRO-ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF COMMON STOCK INVESTMENT FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997 000's Omitted (Unaudited) Amounts Total Paid in Common Common Excess of Retained Stock Stock Par Value Earnings Investment BALANCE DECEMBER 31, 1996 $ 36,817 $ 56,969 $ 14,535 $ 108,321 Net loss - - (321) (321) Cash dividends declared on- Preferred stock - - (658) (658) Other - - (31) (31) ---------- ---------- --------------------- BALANCE JUNE 30, 1997 $ 36,817 $ 56,969 $ 13,525 107,311 ========== ========== ===================== BALANCE DECEMBER 31, 1997 $ 36,817 $ 56,969 $ 12,772 $ 106,558 Net income - - 4,675 4,675 Cash dividends declared on- Preferred stock - - (592) (592) Other - - (31) (31) Issuance of warrants - 2,036 - 2,036 ---------- ---------- --------------------- BALANCE JUNE 30, 1998 $ 36,817 $ 59,005 $ 16,824 $ 112,646 ========== ========== ===================== See notes to the consolidated financial statements. BANGOR HYDRO-ELECTRIC COMPANY NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1998 ------------- (Unaudited) (1) BASIS OF PRESENTATION AND ACCOUNTING POLICIES: Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted in this Form 10-Q pursuant to the Rules and Regulations of the Securities and Exchange Commission. However, in the opinion of Bangor Hydro-Electric Company (the Company), the disclosures contained in this Form 10-Q are adequate to make the information presented not misleading. The year end condensed balance sheet data was derived from audited consolidated financial statements but does not include all disclosures required by generally accepted accounting principles. These statements should be read in conjunction with the consolidated financial statements, footnotes and all other information included in the 1997 Form 10-K. In the opinion of the Company, the accompanying unaudited consolidated financial statements reflect all adjustments, including normal recurring accruals, necessary to present fairly the financial position as of June 30, 1998 and the results of operations and cash flows for the periods ended June 30, 1998 and 1997. The Company's significant accounting policies are described in the Notes to the Consolidated Financial Statements included in its 1997 Form 10-K filed with the Securities and Exchange Commission. For interim reporting purposes, the Company follows these same basic accounting policies but considers each interim period as an integral part of an annual period. Accordingly, certain expenses are allocated to interim periods based upon estimates of such expenses for the year. (2) INCOME TAXES: The following table reconciles a provision calculated by multi- plying income before federal income taxes by the statutory federal income tax rate to the federal income tax provision: Six Months Ended June 30, 1998 1997 Amount % Amount % (Dollars in Thousands) Federal income tax provision at statutory rate $2,552 35 $(461) (34) Plus permanent reductions in tax expense resulting from statutory exclusions from taxable income 33 - 52 4 ------ --- ----- --- Federal income tax provision before effect of temporary differences and investment tax credits $2,585 35 $(409) (30) (Less)plus temporary differences that are flowed through for rate- making and accounting purposes (133) (2) 21 1 (Less) utilization and amortization of investment tax credits (107) (2) (171) (12) ------ --- ----- --- Federal income tax provision $2,345 31 $(559) (41) ====== === ===== === (3) INVESTMENT IN JOINTLY OWNED FACILITIES: Condensed financial information for Maine Yankee Atomic Power Company ("Maine Yankee"), Maine Electric Power Company, Inc. ("MEPCO"), Bangor- Pacific Hydro Associates ("BPHA") and Chester SVC Partnership ("Chester") is as follows: MAINE YANKEE MEPCO (Dollars in Thousands) (Unaudited) Operations for Six Months Ended ----------------------------------- Jun.30, Jun.30, Jun.30, Jun.30, 1998 1997 1998 1997 OPERATIONS: ------- -------- -------- ------- As reported by investee- Operating revenues $66,538 $145,733 $ 1,610 $21,568 ======= ======== ======= ======= Earnings applicable to common stock $ 4,209 $ 3,624 $ 526 $ 545 ======= ======== ======= ======= Company's reported equity- Equity in net income $ 295 $ 254 $ 75 $ 77 Add(Deduct)-Effect of adjusting Company's estimate to actual 4 (5) (34) 41 -------- -------- ------- ------- Amounts reported by Company $ 299 $ 249 $ 41 $ 118 ======== ======== ======= ======= MAINE YANKEE MEPCO (Dollars in Thousands) (Unaudited) Financial Position at ---------------------------------------- Jun.30, Dec. 31, Jun.30, Dec. 31, 1998 1997 1998 1997 FINANCIAL POSITION: ---------- ---------- ------- -------- As reported by investee- Total assets $1,266,731 $1,368,143 $ 4,743 $ 4,362 Less- Preferred stock 16,800 17,400 - - Long-term debt 85,000 143,665 320 420 Other liabilities and deferred credits 1,081,773 1,128,128 1,581 1,578 ---------- --------- ------- ------- Net assets $ 83,158 $ 78,950 $ 2,842 $ 2,364 ========== ========== ======= ======= Company's reported equity- Equity in net assets $ 5,821 $ 5,527 $ 404 $ 336 Add(Deduct)- Effect of adjusting Company's estimate to actual 10 5 (44) (10) ---------- ---------- ------- ------- Amounts reported by Co. $ 5,831 $ 5,532 $ 360 $ 326 ========== ========== ======= ======= BPHA Chester ----------------- ----------------- (Dollars in Thousands) (Unaudited) Operations for Three Months Ended ------------------------------------- Jun.30, Jun.30, Jun.30, Jun.30, 1998 1997 1998 1997 ------- ------- -------- ------- OPERATIONS: As reported by investee- Operating revenues $ 3,951 $ 3,906 $ 2,194 $ 2,255 ======= ======= ======= ======= Net Income $ 1,542 $ 1,346 $ - $ - ======= ======= ======= ======= Company's reported equity in net income $ 771 $ 673 $ - $ - ======= ======= ======= ======= Financial Position at Jun. 30, Dec. 31, Jun. 30, Dec. 31, 1998 1997 1998 1997 -------- -------- -------- -------- FINANCIAL POSITION: As reported by investee- Total assets $38,792 $39,013 $26,993 $27,633 Less- Long-term debt 27,400 28,500 25,246 25,837 Other liabilities 2,463 2,425 1,747 1,796 ------- ------- ------- ------- Net assets $ 8,929 $ 8,088 $ - $ - ======= ======= ======= ======= Company's reported equity in net assets $ 4,465 $ 4,044 $ - $ - ======= ======= ======= ======= (4) EARNINGS PER SHARE - The following table reconciles basic and diluted earnings per common share assuming all stock warrants were converted to common shares in accordance with Statement of Financial Accounting Standards No. 128, "Earnings Per Share": Amounts in 000's, except per share data. For the Quarters For the Six Months Ending Ending ------------------ ------------------ June 30, June 30, June 30, June 30, 1998 1997 1998 1997 -------- -------- -------- -------- Earnings (loss) applicable to common stock $1,956 $(1,382) $4,052 $(1,010) ------ ------- ------ ------- Average common shares outstanding 7,363 7,363 7,363 7,363 Plus: incremental shares from assumed conversion 24 - 12 - ------ ------- ------ ------- Average common shares outstanding plus assumed warrants converted 7,387 7,363 7,375 7,363 ------ ------- ------ ------- Basic earnings (loss) per common share $ .27 $ (.19) $ .55 $ (.14) ====== ======= ====== ======= Diluted earnings (loss) per common share $ .26 $ (.19) $ .55 $ (.14) ====== ======= ====== ======= (5) MONETIZATION OF POWER SALE CONTRACT - As reported in the 1997 Form 10-K, the Company had been negotiating a transaction for the monetization of a contract with UNITIL Power Corp. (UNITIL), a New Hampshire based electric utility. The Company currently provides power to UNITIL at significantly above-market rates, with the contract term ending in the year 2003. Based upon current projections of wholesale electricity markets, it is expected that the rates charged under the UNITIL contract will remain at above-market levels for the remainder of the contract term. Therefore, the assignment of the Company's rights under the contract has a positive present cash value. On March 31, 1998, the Company completed a transaction with a financial institution that provided loan proceeds of approximately $23.3 million, net of a requirement to deposit $1.5 million of the proceeds in a debt service reserve fund. The loan is secured by the value of the UNITIL contract. Also as previously reported, beginning in early 1997, the Company failed to comply with certain financial covenants under its bank lending agreements and received temporary waivers from the lending banks. By using a portion of the proceeds of the UNITIL monetization to pay down a portion of the bank obligations, the Company was able to negotiate permanent waivers of the earlier financial covenant violations. At the time the Company filed its 1997 Form 10-K, the monetization of the UNITIL contract had not been completed and the financial covenant violations referred to above had, therefore, not been waived permanently. As discussed in the 1997 Form 10-K, all debt under the bank credit facilities, including certain medium term notes, was classified as a current liability on the Company's Consolidated Balance Sheets as of December 31, 1997. As a result of the permanent waivers that became effective upon completion of the UNITIL monetization, $22 million of medium term notes, previously classified as a current liability, were reclassified as a long-term liability as of March 31, 1998. (6) STORM DAMAGE - As discussed in the 1997 Form 10-K, the Company suffered widespread damage throughout its service territory to its transmission and distribution equipment during a major ice storm in January 1998. The Company's incremental costs associated with the service restoration effort were approximately $4.2 million, and additional incremental costs associated with line clearance work are expected to be incurred in the future. The $4.2 million has been recorded as a deferred asset on the Company's Consolidated Balance Sheets as of June 30, 1998. The MPUC issued an order authorizing the Company to defer incremental, non-capitalized storm damage expenses for future recovery through the rates charged to customers. MPUC proceedings on the recovery of the incremental ice storm costs have been delayed, due to the possibility of federal funds being available to utilities for ice storm property damage. The Company is uncertain whether any federal funds will be received or the timing of MPUC proceedings. The Company believes its storm damage costs were prudently incurred and it should, therefore, be allowed to recover them in rates if it does not otherwise receive publicly financed assistance. (7) PENOBSCOT ENERGY RECOVERY COMPANY - As previously reported the Company has been working to restructure a power purchase contract with the Penobscot Energy Recovery Company (PERC), its last remaining high-priced non-utility generator contract that offers a potential for substantial savings. In June 1998 the Company successfully completed this major restructuring of its obligations under various agreements with PERC. The restructuring will result in a substantial savings for the Company and will allow PERC to continue to meet the solid waste disposal needs of Maine communities. This major restructuring involves several separate components including the following: - - PERC refinanced $45 million in existing bonds with a remaining five year term over a twenty year period using tax exempt bonds issued by the Finance Authority of Maine under its Electric Rate Stabilization Program. - - PERC will share the net revenues generated by the facility on a pro rata basis with the Company and the Municipal Review Committee (MRC) which represents over 130 Maine municipalities receiving waste disposal service from PERC. - - The Company made a one-time payment of $6 million to PERC and will make additional quarterly payments of $250,000 for four years totaling $4 million. - - Bangor Hydro and PERC amended their existing power purchase agreement to include the MRC as a party. - - The MRC's constituent municipalities extended their contracts with PERC by 15 years to supply solid waste to the facility through 2018. - - Bangor Hydro issued two million warrants to purchase common stock, one million each to PERC and the MRC. Each warrant entitles the warrant holder to acquire one share of Bangor Hydro common stock at a price of $7 per share. No warrants may be exercised within the first nine months after their issuance, and they become exercisable in 500,000 share blocks following the expiration of nine months, 21 months, 33 months, and 45 months from the closing date. Depending upon a number of assumptions, including the ultimate cost of the warrants and markets for solid waste disposal, it is projected that the restructuring will result in cost savings to Bangor Hydro over the next twenty years with a net present value of $30-40 million. The anticipated savings resulting from this transaction were used to reduce the level of electric rates approved by the MPUC in the Company's recent general rate case by approximately $3 million on an annual basis. With the completion of the transaction, the Company will now begin realizing these benefits. The refinancing by PERC was made possible by the Maine Legislature through an amendment to the Electric Rate Stabilization Program that allowed PERC to qualify for such financing. Under the Program, the State of Maine's "moral obligation" supports the new non-recourse debt. The Company has deferred, as a regulatory asset, the $6 million payment to PERC, approximately $1.5 million in costs associated with the contract restructuring, and $2 million for the estimated fair value of the warrants. As discussed above, the Company is currently recovering PERC restructuring costs in rates. The $2 million in warrants have also increased additional paid-in capital. (8) AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT - As previously reported, during 1997 the Company negotiated amendments to the credit agreement with its lending banks in order to resolve potential violations of certain financial covenants. As a result of those amendments, the Company reported that during 1998 or beyond, future cash needs might exceed the borrowing capacity under the credit facility, and accordingly, the Company might be required to find new sources of financing. On June 29, 1998, the Company entered into an Amended and Restated Revolving Credit and Term Loan Agreement with a new group of lenders that provides a two year term loan of $45 million and a revolving credit commitment of $30 million. Under current projections of cash needs, the new facilities should provide adequate borrowing capacity. The new credit agreement contains financial covenants which are not significantly different than the covenants contained in the previous credit agreement. The Company was in compliance with all covenants associated with the new credit agreement as of June 30, 1998. The credit agreement also provides for the issuance of a letter of credit required to support $4.2 million of the Company's Pollution Control Revenue Bonds. To secure the existing letter of credit related to the Pollution Control Revenue Bonds, until the new letter of credit could be issued, the Company deposited approximately $4.6 million of the proceeds from this financing with a third party trustee. This amount has been included with Other Investments on the Company's Consolidated Balance Sheets at June 30, 1998. (9) NEW ACCOUNTING STANDARDS - In June 1997 the FASB issued Statement No. 130, "Reporting Comprehensive Income" (FAS 130), which establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. This Statement requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. This Statement is effective for fiscal years beginning after December 15, 1997. There was no impact in adopting FAS 130 on the Company's consolidated financial statements for the quarter and six months ended June 30, 1998. In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities" (FAS 133), and is effective for fiscal years beginning after June 15, 1999. FAS 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The affects of the adoption of FAS 133 on the Company's financial statements are currently not known. (10) RECLASSIFICATIONS - Certain 1997 amounts have been reclassified to conform with the presentation used in Form 10-Q for the quarter ended June 30, 1998. BANGOR HYDRO-ELECTRIC COMPANY FORM 10-Q FOR PERIOD ENDING JUNE 30, 1998 PART II ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ------ --------------------------------------------------- The Company held its annual meeting of stockholders on May 13, 1998. The only matter submitted to a vote was the election of three Class III Directors for terms ending in 2001). The following persons were elected to fill those positions pursuant to the corresponding tabulations of votes: TOTAL VOTE FOR TOTAL VOTE AGAINST -------------- ------------------ Jane J. Bush 492,489 18,265 David M. Carlisle 493,704 17,050 Carroll R. Lee 494,018 16,736 The terms of the following Directors, members of Class I and Class II, continued after the annual meeting: Robert S. Briggs William C. Bullock, Jr. Alton E. Cianchette G. Clifton Eames Marion M. Kane Norman A. Ledwin ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ------ -------------------------------- EXHIBITS: - -------- 4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS --------------------------------------------------- 4(a) Warrant to Purchase Common Stock Granted to the Municipal Review Committee, Inc. on June 26, 1998 4(b) Warrant to Purchase Common Stock Dated Granted to PERC Management Company Limited Partnership on June 26, 1998 4(c) Warrant to Purchase Common Stock Granted to Energy National, Inc. on June 26, 1998 4(d) Supplemental Indenture Dated as of June 29, 1998 between the Company and Citibank, N.A. 10. MATERIAL CONTRACTS ------------------ 10(a) Surplus Cash Agreement dated as of June 26, 1998 among the Company, Penobscot Energy Recovery Company Limited Partnership and the Municipal Review Committee, Inc. 10(b) Guaranty Agreement dated as of June 1, 1998 between the Company and The Chase Manhattan Bank 10(c) Amendment No. 2 to Purchase Power Agreement dated as of June 26, 1998 between the Company and Penobscot Energy Recovery Company Limited Partnership 10(d) Amended and Restated Revolving Credit And Term Loan Agreement dated as of June 19, 1998 between the Company and BankBoston, N.A. and Fleet National Bank REPORTS ON FORM 8-K ------------------- A Current Report on Form 8-K, dated April 8, 1998, was filed in the second quarter of 1998 regarding existing lending agreements and monetization of a power sale contract with UNITIL Power Corp. BANGOR HYDRO-ELECTRIC COMPANY FORM 10-Q FOR PERIOD ENDED JUNE 30, 1998 The information furnished in this report reflects all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim period. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BANGOR HYDRO-ELECTRIC COMPANY ----------------------------- (Registrant) Dated: August 13, 1998 /s/ Frederick S. Samp ----------------------------- Frederick S. Samp Vice President - Finance & Law (Chief Financial Officer) EX-27 2 FINANCIAL DATA SCHEDULE/BANGOR HYDRO-ELECTRIC CO.
UT This schedule contains summary financial information extracted from Bangor Hydro-Electric Co. Form 10Q for 06/30/98 and is qualified in its entirety by reference to such 10Q. 0000009548 BANGOR HYDRO-ELECTRIC COMPANY 1,000 6-MOS DEC-31-1998 JUN-30-1998 PER-BOOK 244,881 54,911 32,172 278,276 0 610,240 36,817 59,005 16,824 112,646 9,168 4,734 285,435 0 22,000 0 6,398 1,594 0 0 168,265 610,240 95,701 2,495 76,790 79,285 16,416 647 17,063 12,388 4,675 623 4,052 0 22,785 8,761 $0.55 $0.55
EX-4 3 EXHIBIT 4(a) THIS WARRANT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT AS SPECIFIED IN SECTION 15 HEREOF. NEITHER THE RIGHTS REPRESENTED BY THIS WARRANT NOR THE SHARES ISSUABLE UPON THE EXERCISE THEREOF HAVE BEEN REGISTERED FOR OFFER OR SALE UNDER THE SECURITIES ACT OF 1933. SUCH RIGHTS AND SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN WHOLE OR IN PART EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 15 HEREOF. BANGOR HYDRO-ELECTRIC COMPANY WARRANT TO PURCHASE COMMON STOCK -------------------------------- BANGOR HYDRO-ELECTRIC COMPANY, a Maine corporation (the "Company"), hereby certifies that, for value received, Municipal Review Committee, Inc., a Maine nonprofit corporation and the registered holder hereof or its registered assigns for the benefit of its members Amending Charter Municipalities, is entitled, subject to the terms set forth below, to purchase from the Company upon surrender of this Warrant, at any time or times on or after JUNE 26, 1998 but not after 4:00 P.M., Eastern Prevailing Time, on the Expiration Date, JUNE 26, 2008, one million (1,000,000) fully paid nonassessable shares (the "Warrant Shares") of Common Stock, $5.00 par value, of the Company (as adjusted from time to time as provided in this Warrant) at an initial purchase price of $7.00 per share in lawful money of the United States. DEFINITIONS ----------- SECTION 1. (a) DEFINITIONS. The following words and terms as used in this Warrant shall have the following meanings: "AFFILIATE" shall mean, with respect to a Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person. "AMENDING CHARTER MUNICIPALITIES" shall mean those Charter Municipalities as each term is defined in the respective waste disposal agreements with Penobscot Energy Recovery Company, Limited Partnership. "BUSINESS DAY" shall mean, except as otherwise provided in the definition of "Market Price", a day other than a Saturday, a Sunday or a day on which banking institutions in Maine are authorized or obligated by law or required by executive order to be closed. "CHANGE OF CONTROL" shall mean (i) any merger, consolidation, arrangement or reorganization of the Company with any Person whereby, after such transaction, holders of Shares of Common Stock prior to the transaction, do not continue to own, directly or indirectly, at least a majority, determined on a fully-diluted basis, of the shares of the Voting Stock of the Company or the surviving or resulting corporation, or (ii) any sale, lease or exchange of 50% or more of the assets of the Company and its Subsidiaries, taken as a whole, to any Person. "COMMISSION" shall mean the United States Securities and Exchange Commission or the principal United States agency administering the United States securities laws. "COMMON STOCK" shall mean with reference to the Common Stock for which Warrants are exercisable, only Common Stock of the class existing on the date hereof and any stock into which such Common Stock may thereafter have been changed, and, when otherwise used herein, shall include also stock of the Company of any other class, whether now or hereafter authorized, which ranks, or is entitled to a participation, as to assets or dividends, substantially on a parity with such existing Common Stock or other class of stock into which such Common Stock have been changed. "CONVERTIBLE SECURITIES" shall mean any securities issued by the Company that are convertible into or exchangeable for, directly or indirectly, shares of Common Stock. "EXPIRATION DATE" shall mean JUNE 26, 2008. "HOLDER" shall mean the Person in whose name the Warrant set forth herein is registered on the books of the Company maintained for such purpose. "MAJORITY HOLDERS" shall mean the holders of Warrants exercisable for 50% or more of the aggregate number of shares of Common Stock then purchasable upon exercise of all Warrants. "MARKET PRICE" shall mean (a) the higher of (i) the highest closing sale price of the Common Stock on any domestic exchange on which the Common Stock may be listed for the Business Day immediately preceding, or the last Business Day that the Common Stock traded on such exchange prior to, the date as to which "Market Price" is being determined and (ii) the average of the closing prices of the Common Stock sales on all domestic exchanges on which the Common Stock may at the time be listed or, if there shall have been no sales on any such exchange on any day, the average of the reported bid prices on all such exchanges at the end of such day or, if on any day the Common Stock shall not be so listed, the average of the representative bid prices quoted in the NASDAQ as of 3:30 P.M., New York prevailing time, or if on any day the Common Stock shall not be quoted in the NASDAQ, the average of the high and low bid prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization, in each such case averaged over a period of 10 consecutive Business Days (or other such period as shall be specified herein) prior to the date as of which "Market Price" is being determined; provided, however, that if the Common Stock is listed on any domestic exchange or the NASDAQ the term "Business Day" as used in this definition shall mean any day on which such exchange or the NASDAQ is open for trading or (b) in the event the Common Stock is not Publicly Traded, the fair market value of the Common Stock as determined in good faith by the Board of Directors of the Company; provided, however, that such determination may be challenged by any Holders and any dispute arising therefrom shall be resolved by an investment bank of recognized standing selected by the Company and reasonably satisfactory to such Holders whose determination of the fair market value of the Common Stock shall be final and binding on the parties; and the fees and expenses incurred by such investment bank in connection with its determination shall, in the case it determines that the fair market value of the Common Stock is (i) 90% or more of such determination of the Board of Directors, be borne by such Holders, and (ii) less than 90% of such determination of the Board of Directors, be borne by the Company. "PERSON" shall mean an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "PUBLIC OFFERING" shall mean a firm underwritten offering of Common Stock registered under the Securities Act of 1933 on Form S-1, S-2 or S-3 (or any successor form) and offered generally to the public. "PUBLICLY TRADED" shall mean, with respect to any securities, listed on a nationally recognized U.S. securities exchange or admitted for trading on the NASDAQ. "RULE 144" shall mean the rule of such number promulgated by the Commission under the Securities Act and any successor rule thereto. "VOTING STOCK" shall mean, as applied to the stock (or the equivalent thereof) of any Person, stock (or such equivalent) of any class or classes, however designated, having ordinary voting power for the election of at least a majority of the board of directors (or other governing body) of such Person, other than stock (or such equivalent) having such power only by reason of the happening of a contingency. "WARRANT EXERCISE PRICE" shall mean initially $7.00 per share and shall be adjusted and readjusted from time to time as provided in this Warrant. "WARRANTS" shall mean collectively the rights granted by this Warrant and the rights granted by Warrants issued on June 26, 1998 to PERC Management Company Limited Partnership and Energy National Inc. (b) OTHER DEFINITIONAL PROVISIONS. (i) Except as otherwise specified herein, all references herein (A) to any Person other than the Company shall be deemed to include such Person's successors and assigns, (B) to the Company shall be deemed to include the Company's successors and (C) to any applicable law defined or referred to herein shall be deemed references to such applicable law as the same may have been or may be amended or supplemented from time to time. (ii) When used in this Warrant, the words "herein", "hereof" and "hereunder", and words of similar import, shall refer to this Warrant as a whole and not to any provision of this Warrant, and the words "Section", "Schedule" and "Exhibit" shall refer to Sections of, and Schedules and Exhibits to, this Warrant unless otherwise specified. (iii) Whenever the context so requires, the neuter gender includes the masculine or feminine, and the singular number includes the plural, and vice versa. SECTION 2. EXERCISE OF WARRANT. Subject to the terms and conditions hereof, this Warrant may be exercised, in whole or in part, at any time during normal business hours on or after the opening of business on JUNE 26, 1998 and prior to 4:00 P.M., Eastern Prevailing Time, on the Expiration Date. The rights represented by this Warrant may be exercised by the Holder, in whole or in part (except that this Warrant shall not be exercisable as to a fractional share), by (i) delivery of a written notice, in the form of the Subscription Notice attached as Exhibit A, of the Holder's election to exercise this Warrant, which notice shall specify the number of Warrant Shares to be purchased, (ii) payment to the Company of an amount equal to the Warrant Exercise Price multiplied by the number of Warrant Shares as to which the Warrant is being exercised in cash or by certified or official bank check, for the number of Warrant Shares as to which this Warrant shall have been exercised, (iii) the surrender of this Warrant, properly endorsed, at the principal office of the Company at 33 State Street, Bangor, Maine (or at such other agency or office of the Company as the Company may designate by notice to the Holder) and (iv) if the Warrant Shares issuable upon the exercise of the rights represented by this Warrant have not been registered under the Securities Act, delivery to the Company by the Holder of a letter in the form of Exhibit B hereto [unless in the opinion of counsel to the Holder reasonably acceptable to the Company (delivered to the Company) delivery of such letter is not required]. If such Warrant Shares are to be issued in any name other than that of the Holder or its nominee, such issuance shall be deemed a transfer and the provisions of Section 15 shall be applicable. In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the Warrant Shares so purchased, registered in the name of, or as directed by, the Holder, shall be delivered to, or as directed by, Holder within a reasonable time, not exceeding five days, after such rights shall have been so exercised. Unless the rights represented by this Warrant shall have expired or have been fully exercised, the Company shall issue a new Warrant identical in all respects to the Warrant exercised except (A) it shall represent rights to purchase the number of Warrant Shares purchasable immediately prior to such exercise under the Warrant exercised, less the number of Warrant Shares with respect to which such Warrant was exercised and (B) the Warrant Exercise Price thereof shall be the Warrant Exercise Price of the Warrant exercised. The Person in whose name any certificate for Warrant Shares is issued upon exercise of this Warrant shall for all purposes be deemed to have become the holder of record of such Warrant Shares immediately prior to the close of business on the date on which the Warrant was surrendered and payment of the amount due in respect of such exercise was made, irrespective of the date of delivery of such share certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are properly closed, such Person shall be deemed to have become the holder of such Warrant Shares at the opening of business on the next succeeding date on which the stock transfer books are open. SECTION 3. COVENANTS AS TO COMMON STOCK. The Company covenants and agrees that all Warrant Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued, fully paid and nonassessable. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved a sufficient number of shares of Common Stock to provide for the exercise of the rights then represented by this Warrant and that the par value of said shares will at all times be less than the applicable Warrant Exercise Price. SECTION 4. ADJUSTMENT OF WARRANT EXERCISE PRICE AND ADJUSTMENT OF NUMBER OF SHARES. The number of shares and Warrant Exercise Price of Common Stock issuable upon exercise of this Warrant shall be subject to adjustment on a weighted average basis to prevent dilution, (a) in the event that the Company issues additional Common Stock at less than the Market Price as of the date of issue (other than pursuant to this Warrant), or rights, warrants, or options to acquire Common Stock at less than the Market Price as of the date of issue (other than shares reserved for issuance to employees or directors); (b) in the event that the Company issues securities convertible into or exchangeable for Common Stock at less than the equivalent Market Price of the Common Stock as of the date of issue; (c) in the event that the Company declares any cash distributions other than from current earnings; or (d) upon stock splits, stock dividends, divisions, combinations, reorganizations, reclassifications, or any other event which is similar in effect to any of the events described in subsections (a) through (d) hereof. SECTION 5. REORGANIZATIONS. (A) REORGANIZATION OR RECLASSIFICATION. In case of any capital reorganization or of any reclassification of the Capital Stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value), this Warrant shall, upon such capital reorganization or reclassification, entitle the Holder to purchase the kind and number of shares of stock or other securities or cash, assets or other property of the Company to which the Holder would have been entitled if the holder had held the Common Stock issuable upon the exercise hereof immediately prior to such capital reorganization or reclassification. (b) CHANGE OF CONTROL. In case of any Change of Control, this Warrant shall entitle the holder, immediately and at all times thereafter until the Expiration Date, to exercise this Warrant and to receive the kind and number of shares of stock or other securities or cash, assets or other property of the Person resulting from or surviving such Change of Control to which the holder would have been entitled if the holder had held the Common Stock issuable upon the exercise hereof immediately prior to such Change of Control. The Company shall not effect any such Change of Control unless, prior to or simultaneously with the consummation thereof, the successor Person (if other than the Company) resulting from such Change of Control or the corporation purchasing such assets shall assume by written instrument executed and mailed or delivered to the holder the obligation to deliver to the holder such shares of stock, securities, cash, assets or other property as, in accordance with the foregoing provisions, such Holder may be entitled to receive upon the exercise of this Warrant. (c) APPLICABLE PROVISIONS. In case of either paragraph (a) or (b) of this Section 5, appropriate provision shall be made with respect to the rights and interests of the holder to the end that the provisions hereof (including without limitation provisions for adjustment of the Warrant Exercise Price and of the number of shares purchasable upon the exercise of this Warrant) shall thereafter be applicable, as nearly as may be in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise of the rights represented hereby. SECTION 6. NOTICE OF WARRANT EXERCISE PRICE. The Company shall annually give a notice to the Holder, which notice shall state the Warrant Exercise Price in effect and the increase or decrease, if any, in the number of shares purchasable at the Warrant Exercise Price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. SECTION 7. COMPUTATION OF ADJUSTMENTS. Upon each computation of an adjustment to the Warrant Exercise Price and the number of shares that may be subscribed for and purchased upon exercise of this Warrant, the Warrant Exercise Price shall be computed to the nearest cent (i.e., fractions of 0.5 of a cent or greater, shall be rounded to the next highest cent) and the number of shares that may be subscribed for and purchased upon exercise of this Warrant shall be calculated to the nearest whole share (i.e., fractions of less than one half of a share shall be disregarded and fractions of one half of a share or greater shall be treated as being a whole share). No such adjustment shall be made, however, if the change in the Warrant Exercise Price would be less than $0.01 per share, but any such lesser adjustment shall be made (i) at the time and together with the next subsequent adjustment which, together with any adjustments carried forward, shall amount to $0.01 per share or more, or (ii) if earlier, upon the third anniversary of the event for which such adjustment is required. SECTION 8. NOTICE OF CERTAIN EVENTS. In case at any time: (a) the Company shall make any distribution in respect of its Common Stock (other than the payment of a cash dividend from current earnings); (b) the Company shall propose to register any of its Common Stock under the Securities Act in connection with a public offering of such Common Stock (other than with respect to a registration statement filed on Form S-8 or other such similar form then in effect under the Securities Act); (c) the Company shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other rights; (d) there shall be any capital reorganization, or reclassification of the capital stock, of the Company, or Change of Control; or (e) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in any one or more of said cases, the Company shall give notice to the Holder of the date on which (i) the books of the Company shall close or a record shall be taken for such distribution or subscription rights or (ii) such reorganization, reclassification, Change of Control, dissolution, liquidation or winding up shall take place, as the case may be. Such notice shall be given not less than twenty-one (21) days prior to the record date or the date on which the transfer books of the Company are to be closed in respect thereto in the case of an action specified in clause (i) and at least forty-five (45) days prior to the action in question in the case of an action specified in clause (ii). SECTION 9. NO CHANGE IN WARRANT TERMS ON ADJUSTMENT. Irrespective of any adjustment in the Warrant Exercise Price or the number of shares of Common Stock issuable upon exercise hereof, this Warrant, whether theretofore or thereafter issued or reissued, may continue to express the same price and number of shares as are stated herein and the Warrant Exercise Price and such number of shares specified herein shall be deemed to have been so adjusted. SECTION 10. LIMITATION ON RIGHT TO EXERCISE WARRANTS. Notwithstanding the rights to exercise the Warrant granted herein, other than as provided in Section 5, the Holder may exercise this Warrant only to the following extent: (a) 25% of the Warrants initially granted hereunder may be exercised on or after MARCH 26, 1999; (b) 50% of the Warrants initially granted hereunder may be exercised on or after MARCH 26, 2000; (c) 75% of the Warrants initially granted hereunder may be exercised on or after MARCH 26, 2001; (d) 100% of the Warrants initially granted hereunder may be exercised on or after MARCH 26, 2002. SECTION 11. REGISTRATION RIGHTS. (A) REQUIRED REGISTRATION. Upon written request by Majority Holders, the Company shall use its best efforts to register and to maintain in effect for a period of one year, pursuant to the Securities Act of 1933, the Common Stock for which Warrants are exercisable or have been exercised. The Company's Board of Directors may, upon determining that there is a valid business reason for doing so, delay filing a Registration Statement for up to 120 days after receipt of the written request. Upon receipt of such written request, the Company shall notify all holders of Warrants that such a request has been made and shall provide all holders reasonable opportunity to include Common Stock in the registration. If on the date of such written request the Company has filed or notifies the Majority Holders it intends to file a Registration Statement pursuant to the Securities Act of 1933 within 120 days, the requirements of this subsection will be met by the inclusion of Common Stock within the Registration Statement filed or to be filed. Upon filing a Registration Statement pursuant to this subsection, the Company shall have no obligation to file additional Registration Statements at the request of Majority Holders for a period of one year. (b) INCIDENTAL REGISTRATION. If the Company proposes to register any of its common stock pursuant to the Securities Act of 1933 in connection with a public distribution of that stock, other than pursuant to a merger or acquisition for stock or pursuant to an employee benefits, option or compensation plan (unless such plans in the aggregate provide for the issuance of more than 10% of the Company's then outstanding common stock), it shall give notice to all holders of Warrants and give them reasonable opportunity to participate in the registration. (c) TAG-ALONG RIGHTS. If the Company shall propose to issue and if any single entity shall propose to acquire securities of the Company having voting power equal to or more than the voting power of the then outstanding shares of the Company, the Company may not accept the offer of such entity unless such entity shall simultaneously make an offer to purchase this warrant, or all of the shares underlying this warrant and all other warrants of this class of warrant, or all of the shares underlying such warrants, which is accepted by at least one of the holders of this class of warrants. Such purchase must be simultaneous with the purchase of the securities to be issued by the Company to such entity. (d) COSTS OF REGISTRATION. All costs of registration shall be paid by the Company. SECTION 12. OPTIONS AT THE TIME OF EXERCISE. (A) COMPANY'S OPTION TO PAY CASH IN LIEU OF ISSUING COMMON STOCK. Upon the exercise of this Warrant, the Company may elect, at its option, to give the Holder immediate notice and to pay the Holder within ten (10) business days a sum of cash in lieu of Issuing Common Stock as provided in Section 2. The amount of cash payable pursuant to this subsection shall be calculated by subtracting the Warrant Exercise Price from the Market Price on the date of exercise and multiplying the result by the number of shares of Common Stock as to which exercise is being made. At the time of making any payment pursuant to this Section, the Company shall repay to the Holder any amounts paid in connection with the exercise of the Warrant pursuant to Section 2. The Company may exercise this option only if in doing so it does not violate any material covenants contained in any of its financing agreements that have not been waived. (b) CASHLESS EXERCISE. At the time of exercise of this Warrant, the Holder may elect to exercise the option provided in this subsection in lieu of making the cash payment required by Section 2. Upon written notice of its desire to exercise this option given at the same time and in the same manner as the notice specified in Section 2, the Holder shall be entitled to the issuance of Warrant Shares (in lieu of the Warrant Shares otherwise issuable pursuant to Section 2), the number of which shall be calculated as follows: the product of (x) the number of shares as to which the Warrant is being exercised and (y) a fraction, the numerator of which is the Market Price of the Common Stock minus the Warrant Exercise Price and the denominator of which is the Market Price of the Common Stock. SECTION 13. WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as provided in Section 8, no Holder, as such, shall be entitled to vote or receive dividends or be deemed the holder of shares of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a shareholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue or reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance of record to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of this Warrant. SECTION 14. NO LIMITATION ON CORPORATE ACTION; NO AVOIDANCE OF TERMS. (a) No provisions of this Warrant and no right or option granted or conferred hereunder shall in any way limit, affect or abridge the exercise by the Company of any of its corporate rights or powers to recapitalize, amend its charter, reorganize, consolidate or merge with or into another corporation, or to transfer all or any part of its property or assets, or the exercise of any other of its corporate rights and powers. (b) The Company shall not by any action, including, without limitation, amending its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger or arrangement, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. SECTION 15. TRANSFER; OPINIONS OF COUNSEL; RESTRICTIVE LEGENDS. (a) Prior to any sale, transfer or other disposition of this Warrant or the Warrant Shares, the Holder thereof will give seven (7) days' notice to the Company of its intention to effect such transfer. Each such notice shall describe the manner and circumstances of the proposed transfer and shall be accompanied by an opinion of counsel for the Holder reasonably satisfactory to the Company, addressed to the Company and reasonably satisfactory in form and substance to it stating that, in the opinion of such counsel, such transfer is a transaction exempt from registration under the Securities Act. (b) If such sale, transfer or other disposition may, in the opinion of such counsel, be effected without registration under the Securities Act, the holder shall thereupon be entitled to transfer this Warrant and the Warrant Shares in accordance with the terms of the notice delivered by the Holder to the Company. If, in the opinion of such counsel, such transfer may not be effected without registration under the Securities Act, the Holder shall not be entitled to so transfer this Warrant or the Warrant Shares unless (i) the Company elects to file a registration statement relating to such proposed transfer and such registration statement has become effective under the Securities Act or (ii) the provisions of Section 11 apply. (c) Notwithstanding the provisions of this Section 15, the Holder may at any time transfer this Warrant or the Warrant Shares to an Affiliate or an Associate (as such term is defined in Section 12b-2 of the Securities Exchange Act of 1934, as amended) of the Holder. (d)(i) Except as otherwise provided in this Section 15, each certificate for Warrant Shares initially issued upon the exercise of this Warrant, and each certificate for Warrant Shares issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with a legend stating that the shares represented by such certificate have not been registered under the Securities Act of 1933 and may not be transferred except in accordance with the provisions of the Securities Act of 1933 and Section 15 of this Warrant. (ii) Except as otherwise provided in this Section 15, each Warrant shall be stamped or otherwise imprinted with a legend stating that neither the rights represented by the Warrant nor the shares issuable upon the exercise thereof have been registered under the Securities Act of 1933 and that such rights and shares may not be transferred except in accordance with the provisions of the Securities Act of 1933 and Section 15 of this Warrant. (e) TERMINATION OF RESTRICTIONS. The restrictions imposed by Section 15(a) and the legend requirements of Section 15(d) shall terminate as to any particular Warrant or Warrant Share (i) when and so long as such security shall have been effectively registered under the Securities Act of 1933 and disposed of in a public sale or distribution pursuant thereto, (ii) when such security shall have been disposed of in accordance with Rule 144 or (iii) when the Company shall have received opinions of counsel reasonably satisfactory to it, which opinions shall be satisfactory in substance and form to the Company, to the effect that such restrictions on transfer pursuant to the Securities Act of 1933 no longer apply. Whenever said restrictions and legend requirements shall terminate as to this Warrant, as hereinabove provided, the Holder shall be entitled to receive from the Company, at the expense of the Company, a new Warrant bearing a legend in place of the restrictive legend described in Section 15(d) stating that the restrictions on transferability of the Warrant have been terminated. Whenever the restrictions imposed by this Section 15 shall terminate as to any Warrant Share, as hereinabove provided, the holder thereof shall be entitled to receive from the Company, at the Company's expense, a new certificate representing such Common Stock not bearing the restrictive legend described in Section 15(d). SECTION 16. EXCHANGE OF WARRANT. This Warrant is exchangeable upon the surrender hereof by the Holder at the office or agency of the Company, for new Warrants of like tenor representing in the aggregate the right to subscribe for and purchase the number of shares which may be subscribed for and purchased hereunder from time to time after giving effect to all the provisions hereof, each of such new Warrants to represent the right to subscribe for and purchase such number of shares as shall be designated by the Holder hereof at the time of such surrender. SECTION 17. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost, stolen, mutilated or destroyed, the Company shall, upon receipt by it of indemnity satisfactory to it, issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone. SECTION 18. DIVISION AND COMBINATION. Subject to Section 15, this Warrant may be divided or combined with other Warrants upon presentation hereof at the office or agency of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 15, as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. The Company shall prepare, issue and deliver at its own expense the new Warrant or Warrants under each of Section 15 and this Section 18. SECTION 19. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its office or agency, books for the registration and the registration of transfer of the Warrants. SECTION 20. REPRESENTATION OF HOLDER. The Holder, by the acceptance hereof, represents that it is acquiring this Warrant for the account of the Amending Charter Municipalities for investment and not with a view to, or sale in connection with, any distribution hereof or of any of the Warrant Shares or other securities issuable upon the exercise thereof, nor with any present intention of distributing any of the same; provided, however, that the disposition of the Holder's property shall at all times be within its control. SECTION 21. NOTICE. All notices and other communications under this Warrant shall (a) be in writing, (b) be (i) sent by registered or certified mail, postage prepaid, return receipt requested or (ii) delivered by hand, (c) be given at the following respective addresses and to the attention of the following Persons: (i) if to the Company, to it at: Bangor Hydro-Electric Company 33 State Street P.O. Box 932 Bangor, Maine 04402-0932 Attention: President (ii) if to the initial Holder, to it at: Municipal Review Committee, Inc. Eastern Maine Development Corporation One Cumberland Place Bangor, Maine 04401 with a copy to: Thomas Brown, Esq. Eaton Peabody Bradford & Veague, P.A. P. O. Box 1210 Bangor, Maine 04402-1210 or to such other address or to the attention of such other person as the party to whom such information pertains may hereafter specify for the purpose in a notice to the other specifically captioned "Notice of Change of Address" and (d) be effective or deeded delivered or furnished (i) if given by mail, on the fifth Business Day after such communication is deposited in the mail, addressed as above provided and (ii) if given by hand delivery, when left with an employee of the addressee at the address of the addressee addressed as above provided, except that notices of a change of address shall not be deemed furnished until received. SECTION 22. MISCELLANEOUS. This Warrant and any term hereof may not be changed, waived, discharged, or terminated except by an instrument in writing signed by the party or holder hereof against which enforcement of such change, waiver, discharge or termination is sought. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. SECTION 23. DATE. The date of this Warrant is JUNE 26, 1998. This Warrant, in all events, shall be wholly void and of no effect after the close of business on the Expiration Date, except that notwithstanding any other provisions hereof, the provisions of Sections 11 and 15 shall continue in full force and effect after such date as to any Warrant Shares or other securities issued upon the exercise of this Warrant. SECTION 24. GOVERNING LAW. This Warrant shall be construed in accordance with and governed by the laws of the State of Maine, excluding those applicable to choice of law. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officers as of this JUNE 26, 1998. BANGOR HYDRO-ELECTRIC COMPANY By: Its: Vice President - Finance & Law Exhibit A to Warrant SUBSCRIPTION NOTICE TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH HOLDER DESIRES TO EXERCISE THIS WARRANT BANGOR HYDRO-ELECTRIC COMPANY The undersigned hereby exercises the right to purchase Warrant Shares covered by this Warrant according to the conditions thereof and herewith makes payment of $------------------, the aggregate Warrant Exercise Price of such Warrant Shares, in full. [NAME OF HOLDER] By: Title: Number of Warrant Shares Being Purchased Dated: , 19[20] Exhibit B to Warrant Attention: Re: Exercise of Warrant, dated Dear Sirs: In connection with the undersigned's purchase of Common Stock of Bangor Hydro-Electric Company upon exercise of a warrant therefor, the undersigned confirms and agrees as follows: 1. As the purchaser of the shares of Common Stock in a private placement not registered under the Securities Act of 1933, as amended (the "Act"), the undersigned is purchasing such shares for its own account for investment and (subject to the disposition of its property being at all times within its control) not with a view to any resale, distribution or other disposition thereof, and the undersigned is proceeding on the assumption that it must bear the economic risk of the investment for an indefinite period, since the shares of Common Stock may not be sold except as provided in paragraph 2 below. 2. The undersigned agrees that, if in the future the undersigned should decide to dispose of the shares of Common Stock (such disposition not being presently foreseen or contemplated), the undersigned will not offer, sell, transfer or exchange such shares of Common Stock, except under conditions that would not violated the Act or any applicable securities laws. 3. The undersigned is purchasing the shares of Common Stock pursuant to an exemption from the registration requirements of the Act and from registration or qualification requirements under applicable state securities laws. If administrative or legal proceedings are commenced or threatened in connection with which this notice is or would be relevant, the undersigned irrevocably authorizes Bangor Hydro-Electric Company to produce this notice or a copy thereof to any interested party in such proceedings. Date: [NAME OF HOLDER] By: Title: EX-4 4 EXHIBIT 4(b) THIS WARRANT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT AS SPECIFIED IN SECTION 15 HEREOF. NEITHER THE RIGHTS REPRESENTED BY THIS WARRANT NOR THE SHARES ISSUABLE UPON THE EXERCISE THEREOF HAVE BEEN REGISTERED FOR OFFER OR SALE UNDER THE SECURITIES ACT OF 1933. SUCH RIGHTS AND SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN WHOLE OR IN PART EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 15 HEREOF. BANGOR HYDRO-ELECTRIC COMPANY WARRANT TO PURCHASE COMMON STOCK --------------------------------- BANGOR HYDRO-ELECTRIC COMPANY, a Maine corporation (the "Company"), hereby certifies that, for value received, PERC Management Company Limited Partnership, a Maine limited partnership, is entitled, subject to the terms set forth below, to purchase from the Company upon surrender of this Warrant, at any time or times on or after JUNE 26, 1998 but not after 4:00 P.M., Eastern Prevailing Time, on the Expiration Date, JUNE 26, 2008, seven hundred twelve thousand eight hundred and fifty-seven (712,857) fully paid nonassessable shares (the "Warrant Shares") of Common Stock, $5.00 par value, of the Company (as adjusted from time to time as provided in this Warrant) at an initial purchase price of $7.00 per share in lawful money of the United States. DEFINITIONS ----------- SECTION 1. (a) DEFINITIONS. The following words and terms as used in this Warrant shall have the following meanings: "AFFILIATE" shall mean, with respect to a Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person. "BUSINESS DAY" shall mean, except as otherwise provided in the definition of "Market Price", a day other than a Saturday, a Sunday or a day on which banking institutions in Maine are authorized or obligated by law or required by executive order to be closed. "CHANGE OF CONTROL" shall mean (i) any merger, consolidation, arrangement or reorganization of the Company with any Person whereby, after such transaction, holders of Shares of Common Stock prior to the transaction, do not continue to own, directly or indirectly, at least a majority, determined on a fully-diluted basis, of the shares of the Voting Stock of the Company or the surviving or resulting corporation, or (ii) any sale, lease or exchange of 50% or more of the assets of the Company and its Subsidiaries, taken as a whole, to any Person. "COMMISSION" shall mean the United States Securities and Exchange Commission or the principal United States agency administering the United States securities laws. "COMMON STOCK" shall mean with reference to the Common Stock for which Warrants are exercisable, only Common Stock of the class existing on the date hereof and any stock into which such Common Stock may thereafter have been changed, and, when otherwise used herein, shall include also stock of the Company of any other class, whether now or hereafter authorized, which ranks, or is entitled to a participation, as to assets or dividends, substantially on a parity with such existing Common Stock or other class of stock into which such Common Stock have been changed. "CONVERTIBLE SECURITIES" shall mean any securities issued by the Company that are convertible into or exchangeable for, directly or indirectly, shares of Common Stock. "EXPIRATION DATE" shall mean JUNE 26, 2008. "HOLDER" shall mean the Person in whose name the Warrant set forth herein is registered on the books of the Company maintained for such purpose. "MAJORITY HOLDERS" shall mean the holders of Warrants exercisable for 50% or more of the aggregate number of shares of Common Stock then purchasable upon exercise of all Warrants. "MARKET PRICE" shall mean (a) the higher of (i) the highest closing sale price of the Common Stock on any domestic exchange on which the Common Stock may be listed for the Business Day immediately preceding, or the last Business Day that the Common Stock traded on such exchange prior to, the date as to which "Market Price" is being determined and (ii) the average of the closing prices of the Common Stock sales on all domestic exchanges on which the Common Stock may at the time be listed or, if there shall have been no sales on any such exchange on any day, the average of the reported bid prices on all such exchanges at the end of such day or, if on any day the Common Stock shall not be so listed, the average of the representative bid prices quoted in the NASDAQ as of 3:30 P.M., New York prevailing time, or if on any day the Common Stock shall not be quoted in the NASDAQ, the average of the high and low bid prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization, in each such case averaged over a period of 10 consecutive Business Days (or other such period as shall be specified herein) prior to the date as of which "Market Price" is being determined; provided, however, that if the Common Stock is listed on any domestic exchange or the NASDAQ the term "Business Day" as used in this definition shall mean any day on which such exchange or the NASDAQ is open for trading or (b) in the event the Common Stock is not Publicly Traded, the fair market value of the Common Stock as determined in good faith by the Board of Directors of the Company; provided, however, that such determination may be challenged by any Holders and any dispute arising therefrom shall be resolved by an investment bank of recognized standing selected by the Company and reasonably satisfactory to such Holders whose determination of the fair market value of the Common Stock shall be final and binding on the parties; and the fees and expenses incurred by such investment bank in connection with its determination shall, in the case it determines that the fair market value of the Common Stock is (i) 90% or more of such determination of the Board of Directors, be borne by such Holders, and (ii) less than 90% of such determination of the Board of Directors, be borne by the Company. "PERSON" shall mean an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "PUBLIC OFFERING" shall mean a firm underwritten offering of Common Stock registered under the Securities Act of 1933 on Form S-1, S-2 or S-3 (or any successor form) and offered generally to the public. "PUBLICLY TRADED" shall mean, with respect to any securities, listed on a nationally recognized U.S. securities exchange or admitted for trading on the NASDAQ. "RULE 144" shall mean the rule of such number promulgated by the Commission under the Securities Act and any successor rule thereto. "VOTING STOCK" shall mean, as applied to the stock (or the equivalent thereof) of any Person, stock (or such equivalent) of any class or classes, however designated, having ordinary voting power for the election of at least a majority of the board of directors (or other governing body) of such Person, other than stock (or such equivalent) having such power only by reason of the happening of a contingency. "WARRANT EXERCISE PRICE" shall mean initially $7.00 per share and shall be adjusted and readjusted from time to time as provided in this Warrant. "WARRANTS" shall mean collectively the rights granted by this Warrant and the rights granted by Warrants issued on JUNE 26, 1998 to Municipal Review Committee, Inc. and Energy National Inc. (b) OTHER DEFINITIONAL PROVISIONS. (i) Except as otherwise specified herein, all references herein (A) to any Person other than the Company shall be deemed to include such Person's successors and assigns, (B) to the Company shall be deemed to include the Company's successors and (C) to any applicable law defined or referred to herein shall be deemed references to such applicable law as the same may have been or may be amended or supplemented from time to time. (ii) When used in this Warrant, the words "herein", "hereof" and "hereunder", and words of similar import, shall refer to this Warrant as a whole and not to any provision of this Warrant, and the words "Section", "Schedule" and "Exhibit" shall refer to Sections of, and Schedules and Exhibits to, this Warrant unless otherwise specified. (iii) Whenever the context so requires, the neuter gender includes the masculine or feminine, and the singular number includes the plural, and vice versa. SECTION 2. EXERCISE OF WARRANT. Subject to the terms and conditions hereof, this Warrant may be exercised, in whole or in part, at any time during normal business hours on or after the opening of business on JUNE 26, 1998 and prior to 4:00 P.M., Eastern Prevailing Time, on the Expiration Date. The rights represented by this Warrant may be exercised by the Holder, in whole or in part (except that this Warrant shall not be exercisable as to a fractional share), by (i) delivery of a written notice, in the form of the Subscription Notice attached as Exhibit A, of the Holder's election to exercise this Warrant, which notice shall specify the number of Warrant Shares to be purchased, (ii) payment to the Company of an amount equal to the Warrant Exercise Price multiplied by the number of Warrant Shares as to which the Warrant is being exercised in cash or by certified or official bank check, for the number of Warrant Shares as to which this Warrant shall have been exercised, (iii) the surrender of this Warrant, properly endorsed, at the principal office of the Company at 33 State Street, Bangor, Maine (or at such other agency or office of the Company as the Company may designate by notice to the Holder) and (iv) if the Warrant Shares issuable upon the exercise of the rights represented by this Warrant have not been registered under the Securities Act, delivery to the Company by the Holder of a letter in the form of Exhibit B hereto [unless in the opinion of counsel to the Holder reasonably acceptable to the Company (delivered to the Company) delivery of such letter is not required]. If such Warrant Shares are to be issued in any name other than that of the Holder or its nominee, such issuance shall be deemed a transfer and the provisions of Section 15 shall be applicable. In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the Warrant Shares so purchased, registered in the name of, or as directed by, the Holder, shall be delivered to, or as directed by, Holder within a reasonable time, not exceeding five days, after such rights shall have been so exercised. Unless the rights represented by this Warrant shall have expired or have been fully exercised, the Company shall issue a new Warrant identical in all respects to the Warrant exercised except (A) it shall represent rights to purchase the number of Warrant Shares purchasable immediately prior to such exercise under the Warrant exercised, less the number of Warrant Shares with respect to which such Warrant was exercised and (B) the Warrant Exercise Price thereof shall be the Warrant Exercise Price of the Warrant exercised. The Person in whose name any certificate for Warrant Shares is issued upon exercise of this Warrant shall for all purposes be deemed to have become the holder of record of such Warrant Shares immediately prior to the close of business on the date on which the Warrant was surrendered and payment of the amount due in respect of such exercise was made, irrespective of the date of delivery of such share certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are properly closed, such Person shall be deemed to have become the holder of such Warrant Shares at the opening of business on the next succeeding date on which the stock transfer books are open. SECTION 3. COVENANTS AS TO COMMON STOCK. The Company covenants and agrees that all Warrant Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued, fully paid and nonassessable. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved a sufficient number of shares of Common Stock to provide for the exercise of the rights then represented by this Warrant and that the par value of said shares will at all times be less than the applicable Warrant Exercise Price. SECTION 4. ADJUSTMENT OF WARRANT EXERCISE PRICE AND ADJUSTMENT OF NUMBER OF SHARES. The number of shares and Warrant Exercise Price of Common Stock issuable upon exercise of this Warrant shall be subject to adjustment on a weighted average basis to prevent dilution, (a) in the event that the Company issues additional Common Stock at less than the Market Price as of the date of issue (other than pursuant to this Warrant), or rights, warrants, or options to acquire Common Stock at less than the Market Price as of the date of issue (other than shares reserved for issuance to employees or directors); (b) in the event that the Company issues securities convertible into or exchangeable for Common Stock at less than the equivalent Market Price of the Common Stock as of the date of issue; (c) in the event that the Company declares any cash distributions other than from current earnings; or (d) upon stock splits, stock dividends, divisions, combinations, reorganizations, reclassifications, or any other event which is similar in effect to any of the events described in subsections (a) through (d) hereof. SECTION 5. REORGANIZATIONS. (a) REORGANIZATION OR RECLASSIFICATION. In case of any capital reorganization or of any reclassification of the Capital Stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value), this Warrant shall, upon such capital reorganization or reclassification, entitle the Holder to purchase the kind and number of shares of stock or other securities or cash, assets or other property of the Company to which the Holder would have been entitled if the holder had held the Common Stock issuable upon the exercise hereof immediately prior to such capital reorganization or reclassification. (b) CHANGE OF CONTROL. In case of any Change of Control, this Warrant shall entitle the holder, immediately and at all times thereafter until the Expiration Date, to exercise this Warrant and to receive the kind and number of shares of stock or other securities or cash, assets or other property of the Person resulting from or surviving such Change of Control to which the holder would have been entitled if the holder had held the Common Stock issuable upon the exercise hereof immediately prior to such Change of Control. The Company shall not effect any such Change of Control unless, prior to or simultaneously with the consummation thereof, the successor Person (if other than the Company) resulting from such Change of Control or the corporation purchasing such assets shall assume by written instrument executed and mailed or delivered to the holder the obligation to deliver to the holder such shares of stock, securities, cash, assets or other property as, in accordance with the foregoing provisions, such Holder may be entitled to receive upon the exercise of this Warrant. (c) APPLICABLE PROVISIONS. In case of either paragraph (a) or (b) of this Section 5, appropriate provision shall be made with respect to the rights and interests of the holder to the end that the provisions hereof (including without limitation provisions for adjustment of the Warrant Exercise Price and of the number of shares purchasable upon the exercise of this Warrant) shall thereafter be applicable, as nearly as may be in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise of the rights represented hereby. SECTION 6. NOTICE OF WARRANT EXERCISE PRICE. The Company shall annually give a notice to the Holder, which notice shall state the Warrant Exercise Price in effect and the increase or decrease, if any, in the number of shares purchasable at the Warrant Exercise Price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. SECTION 7. COMPUTATION OF ADJUSTMENTS. Upon each computation of an adjustment to the Warrant Exercise Price and the number of shares that may be subscribed for and purchased upon exercise of this Warrant, the Warrant Exercise Price shall be computed to the nearest cent (i.e., fractions of 0.5 of a cent or greater, shall be rounded to the next highest cent) and the number of shares that may be subscribed for and purchased upon exercise of this Warrant shall be calculated to the nearest whole share (i.e., fractions of less than one half of a share shall be disregarded and fractions of one half of a share or greater shall be treated as being a whole share). No such adjustment shall be made, however, if the change in the Warrant Exercise Price would be less than $0.01 per share, but any such lesser adjustment shall be made (i) at the time and together with the next subsequent adjustment which, together with any adjustments carried forward, shall amount to $0.01 per share or more, or (ii) if earlier, upon the third anniversary of the event for which such adjustment is required. SECTION 8. NOTICE OF CERTAIN EVENTS. In case at any time: (a) the Company shall make any distribution in respect of its Common Stock (other than the payment of a cash dividend from current earnings); (b) the Company shall propose to register any of its Common Stock under the Securities Act in connection with a public offering of such Common Stock (other than with respect to a registration statement filed on Form S-8 or other such similar form then in effect under the Securities Act); (c) the Company shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other rights; (d) there shall be any capital reorganization, or reclassification of the capital stock, of the Company, or Change of Control; or (e) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in any one or more of said cases, the Company shall give notice to the Holder of the date on which (i) the books of the Company shall close or a record shall be taken for such distribution or subscription rights or (ii) such reorganization, reclassification, Change of Control, dissolution, liquidation or winding up shall take place, as the case may be. Such notice shall be given not less than twenty-one (21) days prior to the record date or the date on which the transfer books of the Company are to be closed in respect thereto in the case of an action specified in clause (i) and at least forty-five (45) days prior to the action in question in the case of an action specified in clause (ii). SECTION 9. NO CHANGE IN WARRANT TERMS ON ADJUSTMENT. Irrespective of any adjustment in the Warrant Exercise Price or the number of shares of Common Stock issuable upon exercise hereof, this Warrant, whether theretofore or thereafter issued or reissued, may continue to express the same price and number of shares as are stated herein and the Warrant Exercise Price and such number of shares specified herein shall be deemed to have been so adjusted. SECTION 10. LIMITATION ON RIGHT TO EXERCISE WARRANTS. Notwithstanding the rights to exercise the Warrant granted herein, other than as provided in Section 5, the Holder may exercise this Warrant only to the following extent: (a) 25% of the Warrants initially granted hereunder may be exercised on or after MARCH 26, 1999; (b) 50% of the Warrants initially granted hereunder may be exercised on or after MARCH 26, 2000; (c) 75% of the Warrants initially granted hereunder may be exercised on or after MARCH 26, 2001; (d) 100% of the Warrants initially granted hereunder may be exercised on or after MARCH 26, 2002. SECTION 11. REGISTRATION RIGHTS. (a) REQUIRED REGISTRATION. Upon written request by Majority Holders, the Company shall use its best efforts to register and to maintain in effect for a period of one year, pursuant to the Securities Act of 1933, the Common Stock for which Warrants are exercisable or have been exercised. The Company's Board of Directors may, upon determining that there is a valid business reason for doing so, delay filing a Registration Statement for up to 120 days after receipt of the written request. Upon receipt of such written request, the Company shall notify all holders of Warrants that such a request has been made and shall provide all holders reasonable opportunity to include Common Stock in the registration. If on the date of such written request the Company has filed or notifies the Majority Holders it intends to file a Registration Statement pursuant to the Securities Act of 1933 within 120 days, the requirements of this subsection will be met by the inclusion of Common Stock within the Registration Statement filed or to be filed. Upon filing a Registration Statement pursuant to this subsection, the Company shall have no obligation to file additional Registration Statements at the request of Majority Holders for a period of one year. (b) INCIDENTAL REGISTRATION. If the Company proposes to register any of its common stock pursuant to the Securities Act of 1933 in connection with a public distribution of that stock, other than pursuant to a merger or acquisition for stock or pursuant to an employee benefits, option or compensation plan (unless such plans in the aggregate provide for the issuance of more than 10% of the Company's then outstanding common stock), it shall give notice to all holders of Warrants and give them reasonable opportunity to participate in the registration. (c) TAG-ALONG RIGHTS. If the Company shall propose to issue and if any single entity shall propose to acquire securities of the Company having voting power equal to or more than the voting power of the then outstanding shares of the Company, the Company may not accept the offer of such entity unless such entity shall simultaneously make an offer to purchase this warrant, or all of the shares underlying this warrant and all other warrants of this class of warrant, or all of the shares underlying such warrants, which is accepted by at least one of the holders of this class of warrants. Such purchase must be simultaneous with the purchase of the securities to be issued by the Company to such entity. (d) COSTS OF REGISTRATION. All costs of registration shall be paid by the Company. SECTION 12. OPTIONS AT THE TIME OF EXERCISE. (a) COMPANY'S OPTION TO PAY CASH IN LIEU OF ISSUING COMMON STOCK. Upon the exercise of this Warrant, the Company may elect, at its option, to give the Holder immediate notice and to pay the Holder within ten (10) business days a sum of cash in lieu of Issuing Common Stock as provided in Section 2. The amount of cash payable pursuant to this subsection shall be calculated by subtracting the Warrant Exercise Price from the Market Price on the date of exercise and multiplying the result by the number of shares of Common Stock as to which exercise is being made. At the time of making any payment pursuant to this Section, the Company shall repay to the Holder any amounts paid in connection with the exercise of the Warrant pursuant to Section 2. The Company may exercise this option only if in doing so it does not violate any material covenants contained in any of its financing agreements that have not been waived. (b) CASHLESS EXERCISE. At the time of exercise of this Warrant, the Holder may elect to exercise the option provided in this subsection in lieu of making the cash payment required by Section 2. Upon written notice of its desire to exercise this option given at the same time and in the same manner as the notice specified in Section 2, the Holder shall be entitled to the issuance of Warrant Shares (in lieu of the Warrant Shares otherwise issuable pursuant to Section 2), the number of which shall be calculated as follows: the product of (x) the number of shares as to which the Warrant is being exercised and (y) a fraction, the numerator of which is the Market Price of the Common Stock minus the Warrant Exercise Price and the denominator of which is the Market Price of the Common Stock. SECTION 13. WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as provided in Section 8, no Holder, as such, shall be entitled to vote or receive dividends or be deemed the holder of shares of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a shareholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue or reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance of record to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of this Warrant. SECTION 14. NO LIMITATION ON CORPORATE ACTION; NO AVOIDANCE OF TERMS. (a) No provisions of this Warrant and no right or option granted or conferred hereunder shall in any way limit, affect or abridge the exercise by the Company of any of its corporate rights or powers to recapitalize, amend its charter, reorganize, consolidate or merge with or into another corporation, or to transfer all or any part of its property or assets, or the exercise of any other of its corporate rights and powers. (b) The Company shall not by any action, including, without limitation, amending its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger or arrangement, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. SECTION 15. TRANSFER; OPINIONS OF COUNSEL; RESTRICTIVE LEGENDS. (a) Prior to any sale, transfer or other disposition of this Warrant or the Warrant Shares, the Holder thereof will give seven (7) days' notice to the Company of its intention to effect such transfer. Each such notice shall describe the manner and circumstances of the proposed transfer and shall be accompanied by an opinion of counsel for the Holder reasonably satisfactory to the Company, addressed to the Company and reasonably satisfactory in form and substance to it stating that, in the opinion of such counsel, such transfer is a transaction exempt from registration under the Securities Act. (b) If such sale, transfer or other disposition may, in the opinion of such counsel, be effected without registration under the Securities Act, the holder shall thereupon be entitled to transfer this Warrant and the Warrant Shares in accordance with the terms of the notice delivered by the Holder to the Company. If, in the opinion of such counsel, such transfer may not be effected without registration under the Securities Act, the Holder shall not be entitled to so transfer this Warrant or the Warrant Shares unless (i) the Company elects to file a registration statement relating to such proposed transfer and such registration statement has become effective under the Securities Act or (ii) the provisions of Section 11 apply. (c) Notwithstanding the provisions of this Section 15, the Holder may at any time transfer this Warrant or the Warrant Shares to an Affiliate or an Associate (as such term is defined in Section 12b-2 of the Securities Exchange Act of 1934, as amended) of the Holder. (d)(i) Except as otherwise provided in this Section 15, each certificate for Warrant Shares initially issued upon the exercise of this Warrant, and each certificate for Warrant Shares issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with a legend stating that the shares represented by such certificate have not been registered under the Securities Act of 1933 and may not be transferred except in accordance with the provisions of the Securities Act of 1933 and Section 15 of this Warrant. (ii) Except as otherwise provided in this Section 15, each Warrant shall be stamped or otherwise imprinted with a legend stating that neither the rights represented by the Warrant nor the shares issuable upon the exercise thereof have been registered under the Securities Act of 1933 and that such rights and shares may not be transferred except in accordance with the provisions of the Securities Act of 1933 and Section 15 of this Warrant. (e) TERMINATION OF RESTRICTIONS. The restrictions imposed by Section 15(a) and the legend requirements of Section 15(d) shall terminate as to any particular Warrant or Warrant Share (i) when and so long as such security shall have been effectively registered under the Securities Act of 1933 and disposed of in a public sale or distribution pursuant thereto, (ii) when such security shall have been disposed of in accordance with Rule 144 or (iii) when the Company shall have received opinions of counsel reasonably satisfactory to it, which opinions shall be satisfactory in substance and form to the Company, to the effect that such restrictions on transfer pursuant to the Securities Act of 1933 no longer apply. Whenever said restrictions and legend requirements shall terminate as to this Warrant, as hereinabove provided, the Holder shall be entitled to receive from the Company, at the expense of the Company, a new Warrant bearing a legend in place of the restrictive legend described in Section 15(d) stating that the restrictions on transferability of the Warrant have been terminated. Whenever the restrictions imposed by this Section 15 shall terminate as to any Warrant Share, as hereinabove provided, the holder thereof shall be entitled to receive from the Company, at the Company's expense, a new certificate representing such Common Stock not bearing the restrictive legend described in Section 15(d). SECTION 16. EXCHANGE OF WARRANT. This Warrant is exchangeable upon the surrender hereof by the Holder at the office or agency of the Company, for new Warrants of like tenor representing in the aggregate the right to subscribe for and purchase the number of shares which may be subscribed for and purchased hereunder from time to time after giving effect to all the provisions hereof, each of such new Warrants to represent the right to subscribe for and purchase such number of shares as shall be designated by the Holder hereof at the time of such surrender. SECTION 17. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost, stolen, mutilated or destroyed, the Company shall, upon receipt by it of indemnity satisfactory to it, issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone. SECTION 18. DIVISION AND COMBINATION. Subject to Section 15, this Warrant may be divided or combined with other Warrants upon presentation hereof at the office or agency of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 15, as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. The Company shall prepare, issue and deliver at its own expense the new Warrant or Warrants under each of Section 15 and this Section 18. SECTION 19. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its office or agency, books for the registration and the registration of transfer of the Warrants. SECTION 20. [Intentionally Omitted.] SECTION 21. NOTICE. All notices and other communications under this Warrant shall (a) be in writing, (b) be (i) sent by registered or certified mail, postage prepaid, return receipt requested or (ii) delivered by hand, (c) be given at the following respective addresses and to the attention of the following Persons: (i) if to the Company, to it at: Bangor Hydro-Electric Company 33 State Street P.O. Box 932 Bangor, Maine 04402-0932 Attention: President (ii) if to the initial Holder, to it at: PERC Management Company Limited Partnership c/o KTI, Inc. 7000 Boulevard East Guttenberg, NJ 07093 Attention: President or to such other address or to the attention of such other person as the party to whom such information pertains may hereafter specify for the purpose in a notice to the other specifically captioned "Notice of Change of Address" and (d) be effective or deeded delivered or furnished (i) if given by mail, on the fifth Business Day after such communication is deposited in the mail, addressed as above provided and (ii) if given by hand delivery, when left with an employee of the addressee at the address of the addressee addressed as above provided, except that notices of a change of address shall not be deemed furnished until received. SECTION 22. MISCELLANEOUS. This Warrant and any term hereof may not be changed, waived, discharged, or terminated except by an instrument in writing signed by the party or holder hereof against which enforcement of such change, waiver, discharge or termination is sought. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. SECTION 23. DATE. The date of this Warrant is JUNE 26, 1998. This Warrant, in all events, shall be wholly void and of no effect after the close of business on the Expiration Date, except that notwithstanding any other provisions hereof, the provisions of Sections 11 and 15 shall continue in full force and effect after such date as to any Warrant Shares or other securities issued upon the exercise of this Warrant. SECTION 24. GOVERNING LAW. This Warrant shall be construed in accordance with and governed by the laws of the State of Maine, excluding those applicable to choice of law. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officers as of this JUNE 26, 1998. BANGOR HYDRO-ELECTRIC COMPANY By: Its: Vice President - Finance & Law Exhibit A to Warrant SUBSCRIPTION NOTICE TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH HOLDER DESIRES TO EXERCISE THIS WARRANT BANGOR HYDRO-ELECTRIC COMPANY The undersigned hereby exercises the right to purchase Warrant Shares covered by this Warrant according to the conditions thereof and herewith makes payment of $ , the aggregate Warrant Exercise Price of such Warrant Shares, in full. [NAME OF HOLDER] By: Title: Number of Warrant Shares Being Purchased Dated: , 19[20] Exhibit B to Warrant Attention: Re: Exercise of Warrant, dated Dear Sirs: In connection with the undersigned's purchase of Common Stock of Bangor Hydro-Electric Company upon exercise of a warrant therefor, the undersigned confirms and agrees as follows: 1. As the purchaser of the shares of Common Stock in a private placement not registered under the Securities Act of 1933, as amended (the "Act"), the undersigned is purchasing such shares for its own account for investment and (subject to the disposition of its property being at all times within its control) not with a view to any resale, distribution or other disposition thereof, and the undersigned is proceeding on the assumption that it must bear the economic risk of the investment for an indefinite period, since the shares of Common Stock may not be sold except as provided in paragraph 2 below. 2. The undersigned agrees that, if in the future the undersigned should decide to dispose of the shares of Common Stock (such disposition not being presently foreseen or contemplated), the undersigned will not offer, sell, transfer or exchange such shares of Common Stock, except under conditions that would not violated the Act or any applicable securities laws. 3. The undersigned is purchasing the shares of Common Stock pursuant to an exemption from the registration requirements of the Act and from registration or qualification requirements under applicable state securities laws. If administrative or legal proceedings are commenced or threatened in connection with which this notice is or would be relevant, the undersigned irrevocably authorizes Bangor Hydro-Electric Company to produce this notice or a copy thereof to any interested party in such proceedings. Date: [NAME OF HOLDER] By: Title: EX-4 5 EXHIBIT 4(c) THIS WARRANT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT AS SPECIFIED IN SECTION 15 HEREOF. NEITHER THE RIGHTS REPRESENTED BY THIS WARRANT NOR THE SHARES ISSUABLE UPON THE EXERCISE THEREOF HAVE BEEN REGISTERED FOR OFFER OR SALE UNDER THE SECURITIES ACT OF 1933. SUCH RIGHTS AND SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN WHOLE OR IN PART EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SECTION 15 HEREOF. BANGOR HYDRO-ELECTRIC COMPANY WARRANT TO PURCHASE COMMON STOCK -------------------------------- BANGOR HYDRO-ELECTRIC COMPANY, a Maine corporation (the "Company"), hereby certifies that, for value received, Energy National Inc., a Utah corporation, is entitled, subject to the terms set forth below, to purchase from the Company upon surrender of this Warrant, at any time or times on or after JUNE 26, 1998 but not after 4:00 P.M., Eastern Prevailing Time, on the Expiration Date, JUNE 26, 2008, two hundred eighty-seven thousand one hundred and forty-three (287,143) fully paid nonassessable shares (the "Warrant Shares") of Common Stock, $5.00 par value, of the Company (as adjusted from time to time as provided in this Warrant) at an initial purchase price of $7.00 per share in lawful money of the United States. DEFINITIONS ----------- SECTION 1. (a) DEFINITIONS. The following words and terms as used in this Warrant shall have the following meanings: "AFFILIATE" shall mean, with respect to a Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person. "BUSINESS DAY" shall mean, except as otherwise provided in the definition of "Market Price", a day other than a Saturday, a Sunday or a day on which banking institutions in Maine are authorized or obligated by law or required by executive order to be closed. "CHANGE OF CONTROL" shall mean (i) any merger, consolidation, arrangement or reorganization of the Company with any Person whereby, after such transaction, holders of Shares of Common Stock prior to the transaction, do not continue to own, directly or indirectly, at least a majority, determined on a fully-diluted basis, of the shares of the Voting Stock of the Company or the surviving or resulting corporation, or (ii) any sale, lease or exchange of 50% or more of the assets of the Company and its Subsidiaries, taken as a whole, to any Person. "COMMISSION" shall mean the United States Securities and Exchange Commission or the principal United States agency administering the United States securities laws. "COMMON STOCK" shall mean with reference to the Common Stock for which Warrants are exercisable, only Common Stock of the class existing on the date hereof and any stock into which such Common Stock may thereafter have been changed, and, when otherwise used herein, shall include also stock of the Company of any other class, whether now or hereafter authorized, which ranks, or is entitled to a participation, as to assets or dividends, substantially on a parity with such existing Common Stock or other class of stock into which such Common Stock have been changed. "CONVERTIBLE SECURITIES" shall mean any securities issued by the Company that are convertible into or exchangeable for, directly or indirectly, shares of Common Stock. "EXPIRATION DATE" shall mean JUNE 26, 2008. "HOLDER" shall mean the Person in whose name the Warrant set forth herein is registered on the books of the Company maintained for such purpose. "MAJORITY HOLDERS" shall mean the holders of Warrants exercisable for 50% or more of the aggregate number of shares of Common Stock then purchasable upon exercise of all Warrants. "MARKET PRICE" shall mean (a) the higher of (i) the highest closing sale price of the Common Stock on any domestic exchange on which the Common Stock may be listed for the Business Day immediately preceding, or the last Business Day that the Common Stock traded on such exchange prior to, the date as to which "Market Price" is being determined and (ii) the average of the closing prices of the Common Stock sales on all domestic exchanges on which the Common Stock may at the time be listed or, if there shall have been no sales on any such exchange on any day, the average of the reported bid prices on all such exchanges at the end of such day or, if on any day the Common Stock shall not be so listed, the average of the representative bid prices quoted in the NASDAQ as of 3:30 P.M., New York prevailing time, or if on any day the Common Stock shall not be quoted in the NASDAQ, the average of the high and low bid prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization, in each such case averaged over a period of 10 consecutive Business Days (or other such period as shall be specified herein) prior to the date as of which "Market Price" is being determined; provided, however, that if the Common Stock is listed on any domestic exchange or the NASDAQ the term "Business Day" as used in this definition shall mean any day on which such exchange or the NASDAQ is open for trading or (b) in the event the Common Stock is not Publicly Traded, the fair market value of the Common Stock as determined in good faith by the Board of Directors of the Company; provided, however, that such determination may be challenged by any Holders and any dispute arising therefrom shall be resolved by an investment bank of recognized standing selected by the Company and reasonably satisfactory to such Holders whose determination of the fair market value of the Common Stock shall be final and binding on the parties; and the fees and expenses incurred by such investment bank in connection with its determination shall, in the case it determines that the fair market value of the Common Stock is (i) 90% or more of such determination of the Board of Directors, be borne by such Holders, and (ii) less than 90% of such determination of the Board of Directors, be borne by the Company. "PERSON" shall mean an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind. "PUBLIC OFFERING" shall mean a firm underwritten offering of Common Stock registered under the Securities Act of 1933 on Form S-1, S-2 or S-3 (or any successor form) and offered generally to the public. "PUBLICLY TRADED" shall mean, with respect to any securities, listed on a nationally recognized U.S. securities exchange or admitted for trading on the NASDAQ. "RULE 144" shall mean the rule of such number promulgated by the Commission under the Securities Act and any successor rule thereto. "VOTING STOCK" shall mean, as applied to the stock (or the equivalent thereof) of any Person, stock (or such equivalent) of any class or classes, however designated, having ordinary voting power for the election of at least a majority of the board of directors (or other governing body) of such Person, other than stock (or such equivalent) having such power only by reason of the happening of a contingency. "WARRANT EXERCISE PRICE" shall mean initially $7.00 per share and shall be adjusted and readjusted from time to time as provided in this Warrant. "WARRANTS" shall mean collectively the rights granted by this Warrant and the rights granted by Warrants issued on JUNE 26, 1998 to Municipal Review Committee, Inc. and PERC Management Company Limited Partnership. (b) OTHER DEFINITIONAL PROVISIONS. (i) Except as otherwise specified herein, all references herein (A) to any Person other than the Company shall be deemed to include such Person's successors and assigns, (B) to the Company shall be deemed to include the Company's successors and (C) to any applicable law defined or referred to herein shall be deemed references to such applicable law as the same may have been or may be amended or supplemented from time to time. (ii) When used in this Warrant, the words "herein", "hereof" and "hereunder", and words of similar import, shall refer to this Warrant as a whole and not to any provision of this Warrant, and the words "Section", "Schedule" and "Exhibit" shall refer to Sections of, and Schedules and Exhibits to, this Warrant unless otherwise specified. (iii) Whenever the context so requires, the neuter gender includes the masculine or feminine, and the singular number includes the plural, and vice versa. SECTION 2. EXERCISE OF WARRANT. Subject to the terms and conditions hereof, this Warrant may be exercised, in whole or in part, at any time during normal business hours on or after the opening of business on JUNE 26, 1998 and prior to 4:00 P.M., Eastern Prevailing Time, on the Expiration Date. The rights represented by this Warrant may be exercised by the Holder, in whole or in part (except that this Warrant shall not be exercisable as to a fractional share), by (i) delivery of a written notice, in the form of the Subscription Notice attached as Exhibit A, of the Holder's election to exercise this Warrant, which notice shall specify the number of Warrant Shares to be purchased, (ii) payment to the Company of an amount equal to the Warrant Exercise Price multiplied by the number of Warrant Shares as to which the Warrant is being exercised in cash or by certified or official bank check, for the number of Warrant Shares as to which this Warrant shall have been exercised, (iii) the surrender of this Warrant, properly endorsed, at the principal office of the Company at 33 State Street, Bangor, Maine (or at such other agency or office of the Company as the Company may designate by notice to the Holder) and (iv) if the Warrant Shares issuable upon the exercise of the rights represented by this Warrant have not been registered under the Securities Act, delivery to the Company by the Holder of a letter in the form of Exhibit B hereto [unless in the opinion of counsel to the Holder reasonably acceptable to the Company (delivered to the Company) delivery of such letter is not required]. If such Warrant Shares are to be issued in any name other than that of the Holder or its nominee, such issuance shall be deemed a transfer and the provisions of Section 15 shall be applicable. In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for the Warrant Shares so purchased, registered in the name of, or as directed by, the Holder, shall be delivered to, or as directed by, Holder within a reasonable time, not exceeding five days, after such rights shall have been so exercised. Unless the rights represented by this Warrant shall have expired or have been fully exercised, the Company shall issue a new Warrant identical in all respects to the Warrant exercised except (A) it shall represent rights to purchase the number of Warrant Shares purchasable immediately prior to such exercise under the Warrant exercised, less the number of Warrant Shares with respect to which such Warrant was exercised and (B) the Warrant Exercise Price thereof shall be the Warrant Exercise Price of the Warrant exercised. The Person in whose name any certificate for Warrant Shares is issued upon exercise of this Warrant shall for all purposes be deemed to have become the holder of record of such Warrant Shares immediately prior to the close of business on the date on which the Warrant was surrendered and payment of the amount due in respect of such exercise was made, irrespective of the date of delivery of such share certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are properly closed, such Person shall be deemed to have become the holder of such Warrant Shares at the opening of business on the next succeeding date on which the stock transfer books are open. SECTION 3. COVENANTS AS TO COMMON STOCK. The Company covenants and agrees that all Warrant Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued, fully paid and nonassessable. The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved a sufficient number of shares of Common Stock to provide for the exercise of the rights then represented by this Warrant and that the par value of said shares will at all times be less than the applicable Warrant Exercise Price. SECTION 4. ADJUSTMENT OF WARRANT EXERCISE PRICE AND ADJUSTMENT OF NUMBER OF SHARES. The number of shares and Warrant Exercise Price of Common Stock issuable upon exercise of this Warrant shall be subject to adjustment on a weighted average basis to prevent dilution, (a) in the event that the Company issues additional Common Stock at less than the Market Price as of the date of issue (other than pursuant to this Warrant), or rights, warrants, or options to acquire Common Stock at less than the Market Price as of the date of issue (other than shares reserved for issuance to employees or directors); (b) in the event that the Company issues securities convertible into or exchangeable for Common Stock at less than the equivalent Market Price of the Common Stock as of the date of issue; (c) in the event that the Company declares any cash distributions other than from current earnings; or (d) upon stock splits, stock dividends, divisions, combinations, reorganizations, reclassifications, or any other event which is similar in effect to any of the events described in subsections (a) through (d) hereof. SECTION 5. REORGANIZATIONS. (a) REORGANIZATION OR RECLASSIFICATION. In case of any capital reorganization or of any reclassification of the Capital Stock of the Company (other than a change in par value or from par value to no par value or from no par value to par value), this Warrant shall, upon such capital reorganization or reclassification, entitle the Holder to purchase the kind and number of shares of stock or other securities or cash, assets or other property of the Company to which the Holder would have been entitled if the holder had held the Common Stock issuable upon the exercise hereof immediately prior to such capital reorganization or reclassification. (b) CHANGE OF CONTROL. In case of any Change of Control, this Warrant shall entitle the holder, immediately and at all times thereafter until the Expiration Date, to exercise this Warrant and to receive the kind and number of shares of stock or other securities or cash, assets or other property of the Person resulting from or surviving such Change of Control to which the holder would have been entitled if the holder had held the Common Stock issuable upon the exercise hereof immediately prior to such Change of Control. The Company shall not effect any such Change of Control unless, prior to or simultaneously with the consummation thereof, the successor Person (if other than the Company) resulting from such Change of Control or the corporation purchasing such assets shall assume by written instrument executed and mailed or delivered to the holder the obligation to deliver to the holder such shares of stock, securities, cash, assets or other property as, in accordance with the foregoing provisions, such Holder may be entitled to receive upon the exercise of this Warrant. (c) APPLICABLE PROVISIONS. In case of either paragraph (a) or (b) of this Section 5, appropriate provision shall be made with respect to the rights and interests of the holder to the end that the provisions hereof (including without limitation provisions for adjustment of the Warrant Exercise Price and of the number of shares purchasable upon the exercise of this Warrant) shall thereafter be applicable, as nearly as may be in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise of the rights represented hereby. SECTION 6. NOTICE OF WARRANT EXERCISE PRICE. The Company shall annually give a notice to the Holder, which notice shall state the Warrant Exercise Price in effect and the increase or decrease, if any, in the number of shares purchasable at the Warrant Exercise Price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. SECTION 7. COMPUTATION OF ADJUSTMENTS. Upon each computation of an adjustment to the Warrant Exercise Price and the number of shares that may be subscribed for and purchased upon exercise of this Warrant, the Warrant Exercise Price shall be computed to the nearest cent (i.e., fractions of 0.5 of a cent or greater, shall be rounded to the next highest cent) and the number of shares that may be subscribed for and purchased upon exercise of this Warrant shall be calculated to the nearest whole share (i.e., fractions of less than one half of a share shall be disregarded and fractions of one half of a share or greater shall be treated as being a whole share). No such adjustment shall be made, however, if the change in the Warrant Exercise Price would be less than $0.01 per share, but any such lesser adjustment shall be made (i) at the time and together with the next subsequent adjustment which, together with any adjustments carried forward, shall amount to $0.01 per share or more, or (ii) if earlier, upon the third anniversary of the event for which such adjustment is required. SECTION 8. NOTICE OF CERTAIN EVENTS. In case at any time: (a) the Company shall make any distribution in respect of its Common Stock (other than the payment of a cash dividend from current earnings); (b) the Company shall propose to register any of its Common Stock under the Securities Act in connection with a public offering of such Common Stock (other than with respect to a registration statement filed on Form S-8 or other such similar form then in effect under the Securities Act); (c) the Company shall offer for subscription pro rata to the holders of its Common Stock any additional shares of stock of any class or other rights; (d) there shall be any capital reorganization, or reclassification of the capital stock, of the Company, or Change of Control; or (e) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in any one or more of said cases, the Company shall give notice to the Holder of the date on which (i) the books of the Company shall close or a record shall be taken for such distribution or subscription rights or (ii) such reorganization, reclassification, Change of Control, dissolution, liquidation or winding up shall take place, as the case may be. Such notice shall be given not less than twenty-one (21) days prior to the record date or the date on which the transfer books of the Company are to be closed in respect thereto in the case of an action specified in clause (i) and at least forty-five (45) days prior to the action in question in the case of an action specified in clause (ii). SECTION 9. NO CHANGE IN WARRANT TERMS ON ADJUSTMENT. Irrespective of any adjustment in the Warrant Exercise Price or the number of shares of Common Stock issuable upon exercise hereof, this Warrant, whether theretofore or thereafter issued or reissued, may continue to express the same price and number of shares as are stated herein and the Warrant Exercise Price and such number of shares specified herein shall be deemed to have been so adjusted. SECTION 10. LIMITATION ON RIGHT TO EXERCISE WARRANTS. Notwithstanding the rights to exercise the Warrant granted herein, other than as provided in Section 5, the Holder may exercise this Warrant only to the following extent: (a) 25% of the Warrants initially granted hereunder may be exercised on or after MARCH 26, 1999; (b) 50% of the Warrants initially granted hereunder may be exercised on or after MARCH 26, 2000; (c) 75% of the Warrants initially granted hereunder may be exercised on or after MARCH 26, 2001; (d) 100% of the Warrants initially granted hereunder may be exercised on or after MARCH 26, 2002. SECTION 11. REGISTRATION RIGHTS. (a) REQUIRED REGISTRATION. Upon written request by Majority Holders, the Company shall use its best efforts to register and to maintain in effect for a period of one year, pursuant to the Securities Act of 1933, the Common Stock for which Warrants are exercisable or have been exercised. The Company's Board of Directors may, upon determining that there is a valid business reason for doing so, delay filing a Registration Statement for up to 120 days after receipt of the written request. Upon receipt of such written request, the Company shall notify all holders of Warrants that such a request has been made and shall provide all holders reasonable opportunity to include Common Stock in the registration. If on the date of such written request the Company has filed or notifies the Majority Holders it intends to file a Registration Statement pursuant to the Securities Act of 1933 within 120 days, the requirements of this subsection will be met by the inclusion of Common Stock within the Registration Statement filed or to be filed. Upon filing a Registration Statement pursuant to this subsection, the Company shall have no obligation to file additional Registration Statements at the request of Majority Holders for a period of one year. (b) INCIDENTAL REGISTRATION. If the Company proposes to register any of its common stock pursuant to the Securities Act of 1933 in connection with a public distribution of that stock, other than pursuant to a merger or acquisition for stock or pursuant to an employee benefits, option or compensation plan (unless such plans in the aggregate provide for the issuance of more than 10% of the Company's then outstanding common stock), it shall give notice to all holders of Warrants and give them reasonable opportunity to participate in the registration. (c) TAG-ALONG RIGHTS. If the Company shall propose to issue and if any single entity shall propose to acquire securities of the Company having voting power equal to or more than the voting power of the then outstanding shares of the Company, the Company may not accept the offer of such entity unless such entity shall simultaneously make an offer to purchase this warrant, or all of the shares underlying this warrant and all other warrants of this class of warrant, or all of the shares underlying such warrants, which is accepted by at least one of the holders of this class of warrants. Such purchase must be simultaneous with the purchase of the securities to be issued by the Company to such entity. (d) COSTS OF REGISTRATION. All costs of registration shall be paid by the Company. SECTION 12. OPTIONS AT THE TIME OF EXERCISE. (a) COMPANY'S OPTION TO PAY CASH IN LIEU OF ISSUING COMMON STOCK. Upon the exercise of this Warrant, the Company may elect, at its option, to give the Holder immediate notice and to pay the Holder within ten (10) business days a sum of cash in lieu of Issuing Common Stock as provided in Section 2. The amount of cash payable pursuant to this subsection shall be calculated by subtracting the Warrant Exercise Price from the Market Price on the date of exercise and multiplying the result by the number of shares of Common Stock as to which exercise is being made. At the time of making any payment pursuant to this Section, the Company shall repay to the Holder any amounts paid in connection with the exercise of the Warrant pursuant to Section 2. The Company may exercise this option only if in doing so it does not violate any material covenants contained in any of its financing agreements that have not been waived. (b) CASHLESS EXERCISE. At the time of exercise of this Warrant, the Holder may elect to exercise the option provided in this subsection in lieu of making the cash payment required by Section 2. Upon written notice of its desire to exercise this option given at the same time and in the same manner as the notice specified in Section 2, the Holder shall be entitled to the issuance of Warrant Shares (in lieu of the Warrant Shares otherwise issuable pursuant to Section 2), the number of which shall be calculated as follows: the product of (x) the number of shares as to which the Warrant is being exercised and (y) a fraction, the numerator of which is the Market Price of the Common Stock minus the Warrant Exercise Price and the denominator of which is the Market Price of the Common Stock. SECTION 13. WARRANT HOLDER NOT DEEMED A SHAREHOLDER. Except as provided in Section 8, no Holder, as such, shall be entitled to vote or receive dividends or be deemed the holder of shares of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, as such, any of the rights of a shareholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue or reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance of record to the Holder of the Warrant Shares which it is then entitled to receive upon the due exercise of this Warrant. SECTION 14. NO LIMITATION ON CORPORATE ACTION; NO AVOIDANCE OF TERMS. (a) No provisions of this Warrant and no right or option granted or conferred hereunder shall in any way limit, affect or abridge the exercise by the Company of any of its corporate rights or powers to recapitalize, amend its charter, reorganize, consolidate or merge with or into another corporation, or to transfer all or any part of its property or assets, or the exercise of any other of its corporate rights and powers. (b) The Company shall not by any action, including, without limitation, amending its articles of incorporation or through any reorganization, transfer of assets, consolidation, merger or arrangement, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant. SECTION 15. TRANSFER; OPINIONS OF COUNSEL; RESTRICTIVE LEGENDS. (a) Prior to any sale, transfer or other disposition of this Warrant or the Warrant Shares, the Holder thereof will give seven (7) days' notice to the Company of its intention to effect such transfer. Each such notice shall describe the manner and circumstances of the proposed transfer and shall be accompanied by an opinion of counsel for the Holder reasonably satisfactory to the Company, addressed to the Company and reasonably satisfactory in form and substance to it stating that, in the opinion of such counsel, such transfer is a transaction exempt from registration under the Securities Act. (b) If such sale, transfer or other disposition may, in the opinion of such counsel, be effected without registration under the Securities Act, the holder shall thereupon be entitled to transfer this Warrant and the Warrant Shares in accordance with the terms of the notice delivered by the Holder to the Company. If, in the opinion of such counsel, such transfer may not be effected without registration under the Securities Act, the Holder shall not be entitled to so transfer this Warrant or the Warrant Shares unless (i) the Company elects to file a registration statement relating to such proposed transfer and such registration statement has become effective under the Securities Act or (ii) the provisions of Section 11 apply. (c) Notwithstanding the provisions of this Section 15, the Holder may at any time transfer this Warrant or the Warrant Shares to an Affiliate or an Associate (as such term is defined in Section 12b-2 of the Securities Exchange Act of 1934, as amended) of the Holder. (d)(i) Except as otherwise provided in this Section 15, each certificate for Warrant Shares initially issued upon the exercise of this Warrant, and each certificate for Warrant Shares issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with a legend stating that the shares represented by such certificate have not been registered under the Securities Act of 1933 and may not be transferred except in accordance with the provisions of the Securities Act of 1933 and Section 15 of this Warrant. (ii) Except as otherwise provided in this Section 15, each Warrant shall be stamped or otherwise imprinted with a legend stating that neither the rights represented by the Warrant nor the shares issuable upon the exercise thereof have been registered under the Securities Act of 1933 and that such rights and shares may not be transferred except in accordance with the provisions of the Securities Act of 1933 and Section 15 of this Warrant. (e) TERMINATION OF RESTRICTIONS. The restrictions imposed by Section 15(a) and the legend requirements of Section 15(d) shall terminate as to any particular Warrant or Warrant Share (i) when and so long as such security shall have been effectively registered under the Securities Act of 1933 and disposed of in a public sale or distribution pursuant thereto, (ii) when such security shall have been disposed of in accordance with Rule 144 or (iii) when the Company shall have received opinions of counsel reasonably satisfactory to it, which opinions shall be satisfactory in substance and form to the Company, to the effect that such restrictions on transfer pursuant to the Securities Act of 1933 no longer apply. Whenever said restrictions and legend requirements shall terminate as to this Warrant, as hereinabove provided, the Holder shall be entitled to receive from the Company, at the expense of the Company, a new Warrant bearing a legend in place of the restrictive legend described in Section 15(d) stating that the restrictions on transferability of the Warrant have been terminated. Whenever the restrictions imposed by this Section 15 shall terminate as to any Warrant Share, as hereinabove provided, the holder thereof shall be entitled to receive from the Company, at the Company's expense, a new certificate representing such Common Stock not bearing the restrictive legend described in Section 15(d). SECTION 16. EXCHANGE OF WARRANT. This Warrant is exchangeable upon the surrender hereof by the Holder at the office or agency of the Company, for new Warrants of like tenor representing in the aggregate the right to subscribe for and purchase the number of shares which may be subscribed for and purchased hereunder from time to time after giving effect to all the provisions hereof, each of such new Warrants to represent the right to subscribe for and purchase such number of shares as shall be designated by the Holder hereof at the time of such surrender. SECTION 17. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is lost, stolen, mutilated or destroyed, the Company shall, upon receipt by it of indemnity satisfactory to it, issue a new Warrant of like denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. Any such new Warrant shall constitute an original contractual obligation of the Company, whether or not the allegedly lost, stolen, mutilated or destroyed Warrant shall be at any time enforceable by anyone. SECTION 18. DIVISION AND COMBINATION. Subject to Section 15, this Warrant may be divided or combined with other Warrants upon presentation hereof at the office or agency of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 15, as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. The Company shall prepare, issue and deliver at its own expense the new Warrant or Warrants under each of Section 15 and this Section 18. SECTION 19. MAINTENANCE OF BOOKS. The Company agrees to maintain, at its office or agency, books for the registration and the registration of transfer of the Warrants. SECTION 20. [Intentionally Omitted.] SECTION 21. NOTICE. All notices and other communications under this Warrant shall (a) be in writing, (b) be (i) sent by registered or certified mail, postage prepaid, return receipt requested or (ii) delivered by hand, (c) be given at the following respective addresses and to the attention of the following Persons: (i) if to the Company, to it at: Bangor Hydro-Electric Company 33 State Street P.O. Box 932 Bangor, Maine 04402-0932 Attention: President (ii) if to the initial Holder, to it at: Energy National Inc. c/o NRG Energy, Inc. 1200 Nicollet Mall Minneapolis, Minnesota Attention: Stan Marks or to such other address or to the attention of such other person as the party to whom such information pertains may hereafter specify for the purpose in a notice to the other specifically captioned "Notice of Change of Address" and (d) be effective or deeded delivered or furnished (i) if given by mail, on the fifth Business Day after such communication is deposited in the mail, addressed as above provided and (ii) if given by hand delivery, when left with an employee of the addressee at the address of the addressee addressed as above provided, except that notices of a change of address shall not be deemed furnished until received. SECTION 22. MISCELLANEOUS. This Warrant and any term hereof may not be changed, waived, discharged, or terminated except by an instrument in writing signed by the party or holder hereof against which enforcement of such change, waiver, discharge or termination is sought. The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. SECTION 23. DATE. The date of this Warrant is JUNE 26, 1998. This Warrant, in all events, shall be wholly void and of no effect after the close of business on the Expiration Date, except that notwithstanding any other provisions hereof, the provisions of Sections 11 and 15 shall continue in full force and effect after such date as to any Warrant Shares or other securities issued upon the exercise of this Warrant. SECTION 24. GOVERNING LAW. This Warrant shall be construed in accordance with and governed by the laws of the State of Maine, excluding those applicable to choice of law. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officers as of this JUNE 26, 1998. BANGOR HYDRO-ELECTRIC COMPANY By: ___________________________________ Its: Vice President - Finance & Law Exhibit A to Warrant SUBSCRIPTION NOTICE TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH HOLDER DESIRES TO EXERCISE THIS WARRANT BANGOR HYDRO-ELECTRIC COMPANY The undersigned hereby exercises the right to purchase Warrant Shares covered by this Warrant according to the conditions thereof and herewith makes payment of $ , the aggregate Warrant Exercise Price of such Warrant Shares, in full. [NAME OF HOLDER] By: Title: Number of Warrant Shares Being Purchased Dated: , 19[20] Exhibit B to Warrant Attention: Re: Exercise of Warrant, dated Dear Sirs: In connection with the undersigned's purchase of Common Stock of Bangor Hydro-Electric Company upon exercise of a warrant therefor, the undersigned confirms and agrees as follows: 1. As the purchaser of the shares of Common Stock in a private placement not registered under the Securities Act of 1933, as amended (the "Act"), the undersigned is purchasing such shares for its own account for investment and (subject to the disposition of its property being at all times within its control) not with a view to any resale, distribution or other disposition thereof, and the undersigned is proceeding on the assumption that it must bear the economic risk of the investment for an indefinite period, since the shares of Common Stock may not be sold except as provided in paragraph 2 below. 2. The undersigned agrees that, if in the future the undersigned should decide to dispose of the shares of Common Stock (such disposition not being presently foreseen or contemplated), the undersigned will not offer, sell, transfer or exchange such shares of Common Stock, except under conditions that would not violated the Act or any applicable securities laws. 3. The undersigned is purchasing the shares of Common Stock pursuant to an exemption from the registration requirements of the Act and from registration or qualification requirements under applicable state securities laws. If administrative or legal proceedings are commenced or threatened in connection with which this notice is or would be relevant, the undersigned irrevocably authorizes Bangor Hydro-Electric Company to produce this notice or a copy thereof to any interested party in such proceedings. Date: [NAME OF HOLDER] By: Title: EX-4 6 EXHIBIT 4(d) BANGOR HYDRO-ELECTRIC COMPANY To CITIBANK, N.A., As Trustee _____________________________ SUPPLEMENTAL INDENTURE Dated as of June 29, 1998 ______________________________ Re: $115,000,000 First Mortgage Bonds Collateral Series due 2001 Supplemental to Mortgage and Deed of Trust Dated as of July 1, 1936, and Amendatory to Supplemental Indenture Dated as of June 29, 1995 SUPPLEMENTAL INDENTURE, dated as of June 29, 1998, between BANGOR HYDRO- ELECTRIC COMPANY, a corporation organized and existing under the laws of the State of Maine (hereinafter called the "COMPANY"), party of the first part, CITIBANK, N.A. (successor to City Bank Farmers Trust Company), a national banking association organized under the laws of the United States of America, having its corporate trust office at 111 Wall Street, in the Borough of Manhattan, City and State of New York, as Trustee under the Mortgage and Deed of Trust hereinafter referred to (hereinafter called the "TRUSTEE"), party of the second part. WHEREAS, the Company heretofore executed and delivered to City Bank Farmers Trust Company, as Trustee, its Mortgage and Deed of Trust dated as of July 1, 1936 (hereinafter referred to as the "ORIGINAL INDENTURE", and hereinafter as heretofore supplemented and amended by duly recorded Indentures supplemental thereto, referred to as the "INDENTURE"); and WHEREAS, City Bank Farmers Trust Company was converted as of the close of business on January 30, 1959, into a national banking association named First National City Trust Company and having its head office at 55 Wall Street, in the Borough of Manhattan, City, County and State of New York; and WHEREAS, First National City Trust Company was merged on January 15, 1963 into First National City Bank, a national banking association incorporated and existing under the laws of the United States of America and having its head office at 55 Wall Street, in the Borough of Manhattan, City, County and State of New York and said First National City Bank has succeeded to First National City Trust Company, as Trustee under the Indenture and is hereinabove denominated as Trustee; and WHEREAS, First National City Bank changed its name to Citibank, N.A., effective March 1, 1976; and WHEREAS, the Original Indenture was recorded in the following places in the State of Maine: in Aroostook County Registry of Deeds, Book 444, Page 130; in Hancock County Registry of Deeds, in Book 654, Page 79; in Penobscot County Registry of Deeds, in Book 1117, Page 3, in Piscataquis County Registry of Deeds, in Book 257, Page 241, in Washington County Registry of Deeds, in Book 418, Page 102; in Cumberland County Registry of Deeds, in Book 3957, Page 1; in Waldo County Registry of Deeds, in Book 786, Page 119; in the City Clerk s Office for the City of Bangor, in Book 19, Page 304; and in the Rockingham County Registry of Deeds in the State of New Hampshire, in Book 2351, Page 203; and WHEREAS, pursuant to the provisions of the Indenture, the Company duly issued the following First Mortgage Bonds: 3.75% Series due 1966 in the aggregate principal amount of $7,108,000, none of which is now outstanding; 3% Series due 1966 in the aggregate principal amount of $500,000, none of which is now outstanding; 3% Series due 1975 in the aggregate principal amount of $5,000,000, none of which is now outstanding; 3% Series due 1977 in the aggregate principal amount of $2,500,000, none of which is now outstanding; 2.75% Series due 1980 in the aggregate principal amount of $2,000,000, none of which is now outstanding; 3.25% Series due 1982 in the aggregate principal amount of $1,000,000, none of which is now outstanding; 3 % Series due 1984 in the aggregate principal amount of $1,000,000, none of which is now outstanding; 3.25% Series due 1985 in the aggregate principal amount of $1,500,000, none of which is now outstanding; 4% Series due 1988 in the aggregate principal amount of $2,500,000, none of which is now outstanding; 4% Series due 1993 in the aggregate principal amount of $3,500,000, none of which is now outstanding; 6.75% Series due 1998 in the aggregate principal amount of $2,500,000, none of which are now outstanding; 8.25% Series due 1999 in the aggregate principal amount of $3,500,000, none of which are now outstanding; 10.5% Series due 2000 in the aggregate principal amount of $5,000,000, none of which is now outstanding; 9.25% Series due 2001 in the aggregate principal amount of $3,000,000, none of which are now outstanding; 8.60% Series due 2003 in the aggregate principal amount of $2,500,000, none of which are now outstanding; 10.25% Series due 2004 in the aggregate principal amount of $7,000,000, none of which is now outstanding; 15.25% Series due 1996 in the aggregate principal amount of $5,000,000, none of which is now outstanding; 16.50% Series due 1996 in the aggregate principal amount of $15,000,000, none of which is now outstanding; 12.50% Series due 1998 in the aggregate principal amount of $19,500,000, none of which are now outstanding; 17.35% Series due 1994 in the aggregate principal amount of $11,000,000, none of which are now outstanding; 10.25% Series due 2019 in the aggregate principal amount of $15,000,000, all of which are now outstanding; 10.25% Series due 2020 in the aggregate principal amount of $30,000,000, all of which are now outstanding; 8.98% Series due 2022 in the aggregate principal amount of $20,000,000, all of which are now outstanding; 7.38% Series due 2002 in the aggregate principal amount of $20,000,000, all of which are now outstanding; 12.25% Series due 2001 in the aggregate principal amount of $14,316,422, $4,508,704 of which are now outstanding; 7.30% Series due 2003 in the aggregate principal amount of $15,000,000, all of which are now outstanding; and Collateral Series due 2000 in the aggregate principal amount of $115,000,000 (the "2000 Series Bonds"), all of which are now outstanding; and WHEREAS, in accordance with Section 94 of the Indenture, the Company has received the consent of each holder of 2000 Series Bonds to amend and modify such Bonds as hereinafter set forth, such Bonds, as so amended and modified, to be designated "Collateral Series due 2001"; and WHEREAS, in order to confirm the terms, provisions and conditions of the Bonds of the Collateral Series due 2001, the Company has determined to execute this Supplemental Indenture, which shall amend and restate in full the referenced provisions of that certain Supplemental Indenture, dated as of June 29, 1995, pursuant to which the 2000 Series Bonds were issued (the "Prior Supplemental Indenture"); and WHEREAS, all conditions and requirements necessary to make this Supplemental Indenture a valid, binding and legal instrument have been performed and fulfilled and the execution and delivery hereof have in all respects been duly authorized and all things necessary to make the Bonds of the Collateral Series due 2001, when authenticated by the Trustee, the valid, binding and legal obligations of the Company entitled in all respects to the security of the Indenture, have been done and performed; and WHEREAS, the Company and the Trustee deem it desirable to enter into this Supplemental Indenture; NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH, that in consideration of the premises and of the sum of One Dollar in lawful money of the United States of America to the Company duly paid by the Trustee at or before the execution and delivery of this Supplemental Indenture, the receipt whereof is hereby acknowledged, the Company hereby covenants and agrees with the Trustee and its successors in the Trust under the Indenture, as hereby supplemented by this Supplemental Indenture, for the benefit of those who shall hold the First Mortgage Bonds, and interest coupons, including the First Mortgage Bonds, Collateral Series due 2001, or any of them, that Sections 1 through 5, inclusive, of the Prior Supplemental Indenture is hereby amended and restated in full as follows: "Section 1. Section 3 of the Original Indenture is hereby amended by adding the following sentence at the end of said Section: "Notwithstanding the foregoing, the First Mortgage Bonds, Collateral Series due 2001 shall be Registered Bonds in the denomination of $1,000 and multiples of $1,000. Section 2. Section 11 of the original Indenture is hereby further amended by deleting the last sentence at the end of the first paragraph of such Section 11, and substituting in its stead: "Notwithstanding the foregoing, the First Mortgage Bonds, 10.5% Series due 2000 shall bear interest from November 25, 1975; the First Mortgage Bonds, 10.25% Series due 2004 shall bear interest from the date of issuance thereof; the First Mortgage Bonds, 15.25% Series due 1996 shall bear interest from the date of issuance thereof; the First Mortgage Bonds, 16.50% Series due 1996 shall be dated as of, and shall bear interest from, July 30, 1981; the First Mortgage Bonds, 12.50% Series due 1998 shall bear interest from the date of issuance thereof; the First Mortgage Bonds, 17.35% Series due 1994 shall be dated as of and shall bear interest from, the date of issuance thereof; the First Mortgage Bonds, 10.25% Series due 2019 shall be dated and shall bear interest from, the date of issuance thereof; the First Mortgage Bonds, 10.25% Series due 2020 shall be dated and shall bear interest from, the date of issuance thereof; the First Mortgage Bonds, 8.98% Series due 2022 shall be dated and shall bear interest from, the date of issuance thereof; the First Mortgage Bonds, 7.38% Series due 2002 shall be dated and shall bear interest from, the date of issuance thereof; the First Mortgage Bonds, 7.30% Series due 2003 shall be dated and shall bear interest from the date of issuance thereof; and the First Mortgage Bonds, Collateral Series due 2001 shall be dated the date of issuance thereof and shall bear interest at a rate of 0%. Section 3. Section 11 of the Original Indenture is hereby further amended by adding the following sentence at the end of the second paragraph: "Notwithstanding the foregoing, there shall not be reserved unissued any Coupon Bond or Bonds of the First Mortgage Bonds, Collateral Series due 2001. Section 4. Pursuant to paragraph (b) of Section 93 of the Indenture, the Indenture is hereby amended as follows, such amendments to remain in effect for so long as any Bonds of the Collateral Series due 2001 (as defined in Section 5 hereof) are outstanding: (a) Section 66 of the Indenture is hereby amended by adding the following after the word "expressed" in paragraph (a) thereof: ", upon a required redemption" (b) Section 66 of the Indenture is hereby further amended by adding the following after the word "notwithstanding" in the language immediately following paragraph (e) thereof: "(provided that if any default described in paragraph (d) or (e) occurs and is continuing, all of the Bonds then outstanding and the interest accrued thereon, if any, shall immediately become due and payable without declaration, presentment, demand or notice of any kind by the Trustee or any holder of Bonds)" Section 5. (a) The Company hereby creates a series of Bonds to be issued under and secured by the Indenture, as hereby supplemented, in the aggregate principal amount of $115,000,000, to be designated as "FIRST MORTGAGE BONDS, COLLATERAL SERIES DUE 2001" (referred to herein as "BONDS OF THE COLLATERAL SERIES DUE 2001"). The Bonds of said series shall be payable as to principal on June 30, 2001, and shall not bear interest. The principal thereof shall be payable in any coin or currency of the United States of America which at the time of payment shall be legal tender for public and private debts and shall be payable at the corporate trust office of the Trustee in the Borough of Manhattan, City and State of New York. (b) Definitive Bonds of the Collateral Series due 2001 shall be issued as of the date of this Supplemental Indenture, as amended and shall be issued only as fully Registered Bonds without coupons. The definitive Registered Bonds without coupons shall be issuable in denominations of $1,000, and any integral multiple of $1,000 approved by the Company, such approval to be evidenced by the execution thereof. The several authorized denominations of Registered Bonds without coupons of said series shall be interchangeable in like aggregate principal amounts. (c) Bonds of the Collateral Series due 2001 in a principal amount of $82,500,000 are initially delivered to BankBoston, N.A., as administrative agent (the "Administrative Agent") pursuant to the terms of that certain Amended and Restated Bond Pledge and Security Agreement, dated as of June 29, 1998, between the Company and the Administrative Agent (the "Pledge Agreement"), to secure the obligations of the Company (described in the Pledge Agreement) under an Amended and Restated Revolving Credit and Term Loan Agreement, dated as of June 29, 1998, among the Company, the Banks named therein, and BankBoston, N.A., as administrative agent and Fleet National Bank, as documentation agent (as amended from time to time, the "Credit Agreement"). To the extent that scheduled installment payments are made in respect of the term loans under the Credit Agreement ("Term Loans ), such payments shall constitute a credit against the payment obligations of the Company with respect to the Bonds of the Collateral Series due 2001 held by the Administrative Agent or its transferees, provided that the making of any such payment shall not constitute a credit (i) in respect of Bonds of the Collateral Series due 2001 registered in the name of the Administrative Agent while any Default or Event of Default (as defined in the Credit Agreement) has occurred and is continuing under the Credit Agreement after giving effect to such payment, or (ii) to the extent a principal amount of Bonds of the Collateral Series due 2001 equal to the amount of any such payment is assigned by the Administrative Agent to the G&R Trustee (as defined below) as required by the Pledge Agreement. Bonds of the Collateral Series due 2001 in a principal amount of $30,000,000 are initially delivered to the trustee (the "G&R Trustee") under the General and Refunding Mortgage Indenture and Deed of Trust, dated as of June 1, 1995 between the Company and The Chase Manhattan Bank (formerly known as Chemical Bank), as trustee (the "General and Refunding Mortgage"). No payments shall be required to be made in respect of such Bonds of the Collateral Series due 2001, or in respect of any additional Bonds of the Collateral Series due 2001 which are assigned by the Administrative Agent to the G&R Trustee as required by the Pledge Agreement, unless and until (i) all Bonds of the Collateral Series due 2001 become or are declared to be due and payable pursuant to Section 66 of the Indenture, or (ii) demand for redemption of such Bonds is made by the G&R Trustee as provided in subsection (d) below. The Trustee may at any and all times conclusively assume that the obligations of the Company to make payments with respect to the Bonds of the Collateral Series due 2001, so far as such payments shall at the time have become due, have been fully satisfied and discharged unless and until (i) all Bonds of the Collateral Series due 2001 become or are declared to be due and payable pursuant to Section 66 of the Indenture, (ii) the Trustee shall have received a written notice from the Administrative Agent signed by one of its officers stating that the indebtedness of the Company has become, or has been declared to be, due and payable pursuant to the Credit Agreement and demanding redemption of the Bonds of the Collateral Series due 2001 held by the Administrative Agent as provided in subsection (d) of this Section, or (iii) the Trustee shall have received the notice described in such subsection (d) from the G&R Trustee in respect of Bonds of the Collateral Series due 2001 held by the G&R Trustee. (d) The Bonds of the Collateral Series due 2001 are not redeemable at the option of the Company at any time prior to maturity and are not redeemable by the operation of the General Reserve Fund provisions of the Indenture. Bonds of the Collateral Series due 2001 that are registered in the name of the Administrative Agent shall immediately be redeemed by the Company in whole, by payment of 100% of the outstanding principal amount thereof, on the date of receipt by the Trustee and the Company of a written notice (the "Acceleration Notice") from the Administrative Agent stating that the indebtedness of the Company has become, or has been declared to be, due and payable pursuant to the Credit Agreement. Each of the Administrative Agent and the Trustee hereby waives any other right to receive notices of redemption pursuant to Article Eighth of Indenture. Bonds of the Collateral Series due 2001 that are registered in the name of the G&R Trustee shall be subject to redemption by the Company at the option of the G&R Trustee as the holder thereof, by payment of 100% of the principal amount thereof, on the date of receipt by the Trustee of a written notice from the G&R Trustee stating that the indebtedness of the Company under the General and Refunding Mortgage has become, or has been declared to be, due and payable. So long as the Administrative Agent is the registered holder of any Bonds of the Collateral Series due 2001, receipt by the Trustee of any such notice and demand for redemption from the G&R Trustee shall be deemed also to constitute an Acceleration Notice with respect to any such Bonds held by the Administrative Agent. (e) If, while any bonds of the Collateral Series due 2001 are outstanding, the Company effects the release, pursuant to Section 59 of the Indenture, of any part of the mortgaged properties sold by the Company in a Generating Asset Transaction (as defined in the Credit Agreement), the Company covenants that it will forthwith direct the Trustee, pursuant to Section 60 of the Indenture, to apply the net proceeds of such release to the purchase, at a price equal to the principal amount thereof, of Bonds of the Collateral Series due 2001 registered in the name of the Administrative Agent, as authorized by paragraph (c) of Subdivision I of Section 49 of the Indenture; provided, that the principal amount of Bonds of the Collateral Series due 2001 so purchased shall not, without the consent of the Administrative Agent, exceed the principal amount of Term Loans then outstanding. Bonds of the Collateral Series due 2001 shall not be otherwise subject to redemption or retirement with the proceeds of released Property. (f) The Bonds of the Collateral Series due 2001 and the Trustee's certificate to be endorsed on such Bonds, shall be substantially in the following form: (FORM OF BOND) THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND SUCH SECURITY MAY NOT BE TRANSFERRED WITHOUT COMPLIANCE WITH APPLICABLE SECURITIES LAWS. No. R- $__________ BANGOR HYDRO-ELECTRIC COMPANY FIRST MORTGAGE BOND Collateral Series due 2001 Due June 30, 2001 BANGOR HYDRO-ELECTRIC COMPANY, a corporation organized and existing under the laws of the State of Maine (hereinafter called the "COMPANY"), for value received, hereby promises to pay to ______________________________________________ or registered assigns, the principal sum of __________________________________ DOLLARS ($_________) on June 30, 2001 upon presentation and surrender hereof to the Trustee. This bond shall not bear interest. The principal of this Bond is payable in any coin or currency of the United States of America which at the time of payment shall be legal tender for public and private debts, at the corporate trust office of the Trustee hereinafter named, in the Borough of Manhattan, City and State of New York. This Bond is one of a duly authorized issue of First Mortgage Bonds of the Company, issuable in series and in fully registered form without interest coupons, and is one of a series designated as "COLLATERAL SERIES DUE 2001", all of which Bonds of whatever series are issued and to be issued under and, irrespective of the time of issue, are equally secured by a certain Mortgage and Deed of Trust dated as of July 1, 1936, executed by the Company to City Bank Farmers Trust Company (of which Citibank, N.A., a national banking association, is the successor), as Trustee, and all indentures amendatory thereto and supplemental thereto (all collectively herein called the "INDENTURE"), to which reference is hereby made for a description of the properties mortgaged, the nature and extent of the security, the rights of the holders of the Bonds with respect to such security and the terms and conditions upon which the Bonds are secured. In the manner provided in the Indenture, the rights and obligations of the Company and of the holders of the Bonds may be changed and modified at any time upon the consent and approval of the holders of 66-2/3% in aggregate principal amount of the Bonds then outstanding affected by such change or modification; PROVIDED, HOWEVER, that no such change or modification shall (a) alter or impair the obligation of the Company to pay the principal of and interest, if any, on any Bond at the time and place and at the rate and in the currency provided therein, without the consent of the holder of such Bond, or (b) permit the creation by the Company of any mortgage, or lien in the nature of a mortgage, or security interest ranking prior to or PARI PASSU with the lien of and security interest created by the Indenture, except as in the Indenture otherwise provided, or (c) permit the reduction of the percentage of outstanding Bonds affected required for any such change or modification. Bonds of this Series are not redeemable at the option of the Company at any time prior to Maturity and are not redeemable by the operation of the General Reserve Fund provisions of the Indenture. The Bonds of this Series are subject to mandatory redemption as provided in the supplemental indenture, dated as of June 29, 1995, as amended establishing such Series. In case a default, as defined in the Indenture, shall occur, the principal of all of the Bonds of each and every series issued and outstanding thereunder may be declared or may become due and payable before maturity in the manner and with the effect provided in the Indenture. Subject to compliance with applicable securities laws, this Bond is transferable by the registered owner in person or by a duly authorized attorney at the corporate trust office of the Trustee in the Borough of Manhattan, City and State of New York, upon the surrender and cancellation of this Bond, and thereupon a registered Bond of this series will be issued to the transferee in exchange therefor, as provided in the Indenture, and on payment, if the Company shall so require, of the charge therein provided for. Bonds of the Collateral Series due 2001 are issuable in the denominations of $1,000 and any integral multiple of $1,000 approved by the Company, such approval to be evidenced by the execution thereof. In the manner prescribed in the Indenture, any registered Bond of such series may be exchanged for a like aggregate principal amount of registered Bonds of such series of other authorized denominations. No recourse shall be had for the payment of any part of the principal of this Bond, or for any claim based hereon, or for the consequences of any default in the payment hereof, or otherwise in any manner in respect hereof or in respect of the Indenture or of the indebtedness represented hereby, to or against any incorporator, stockholder, officer or director, past, present or future, of the Company or of any predecessor or successor corporation, either directly or through the Company or any such predecessor or successor corporation, whether by virtue of any statute or constitutional provision or rule of law, or by the enforcement of any assessment or penalty or otherwise, or in any manner; all such liability, by the acceptance hereof, and as part of the consideration for the issue hereof, being expressly released, as provided in the Indenture. This Bond shall not be obligatory or valid for any purpose until authenticated by the execution by the Trustee of the certificate endorsed hereon. IN WITNESS WHEREOF, the Company has caused this Bond to be signed by its President or one of its Vice Presidents and impressed or imprinted with its corporate seal or a facsimile thereof, attested by its Treasurer or an Assistant Treasurer, as of June , 1998. BANGOR HYDRO-ELECTRIC COMPANY By__________________ Its Vice President [SEAL] ATTEST: By________________________ Its Treasurer (FORM OF TRUSTEE S CERTIFICATE) TRUSTEE'S AUTHENTICATION CERTIFICATE This is one of the Bonds of the series designated therein, described in the within-mentioned Mortgage and Deed of Trust. Dated: CITIBANK, N.A., as Trustee, By______________________________ Its Authorized Signatory Section 6. Upon receipt of evidence satisfactory to the Trustee that the registered holders of the bonds of the Collateral Series due 2000 have consented to the amendment and modification of such Bonds as set forth in the foregoing sections, the Trustee shall execute this Supplemental Indenture and shall, upon written order of the Company and surrender for cancellation of certificates representing the bonds of the Collateral Series due 2000, authenticate and deliver new certificates representing the Bonds of the Collateral Series due 2001, in the form set forth in Section 5, to the above- mentioned registered holders. Section 7. The Trustee accepts the trusts created by this Supplemental Indenture upon the terms and conditions hereof and of the Indenture. All covenants and provisions of the Indenture shall continue in full force and effect, as this Supplemental Indenture shall form part of the Indenture. Except as herein otherwise expressly provided, no duties, responsibilities or liabilities are assumed, or shall be construed to be assumed, by the Trustee by reason of this Supplemental Indenture, other than as set forth in the Indenture. The Trustee shall not be responsible for the recitals herein or in the Bonds, all of which are made by the Company solely. Section 8. This Supplemental Indenture may be executed in any number of counterparts, each of which, if so executed, shall be deemed to be an original; and all such counterparts shall together constitute but one and the same instrument IN WITNESS WHEREOF, Bangor Hydro-Electric Company has caused this Supplemental Indenture to be executed on its behalf by one of its Vice Presidents and its corporate seal to be hereto affixed and attested by its Clerk; and Citibank, N.A., as Trustee as aforesaid, has caused this Supplemental Indenture to be executed on its behalf by one of its and its corporate seal to be hereto affixed and attested by an , all as of the day and year first above written. BANGOR HYDRO-ELECTRIC COMPANY By __________________________ Its Vice President Finance & Law, and Treasurer WITNESS __________________ ATTEST ___________________ Its Clerk CITIBANK, N.A., as Trustee as aforesaid, By __________________________ WITNESS __________________ ATTEST ___________________ STATE OF NEW YORK ) ) ss.: COUNTY OF NEW YORK ) On June , 1998 before me personally appeared the above-named , a Vice President, and , an Assistant Vice President, of Citibank, N.A., the national banking institution that executed the within and foregoing instrument as Trustee, and severally acknowledged said instrument to be their free act and deed in their said capacities and the free act and deed of the said national banking institution, as such Trustee. IN WITNESS WHEREOF, I have hereunto set my hand and seal on the day and year first above mentioned. _____________________________________ Notary Public My Commission expires . [NOTARIAL SEAL] COMMONWEALTH OF MASSACHUSETTS ) ) ss.: COUNTY OF ) On June , 1998 before me personally appeared the above-named , a VICE PRESIDENT, and ANDREW LANDRY, a CLERK, of Bangor Hydro-Electric Company, the corporation that executed the within and foregoing instrument, and severally acknowledged said instrument to be their free act and deed in their said capacities and the free act and deed of the said corporation. IN WITNESS WHEREOF, I have hereunto set my hand and seal on the day and year first above mentioned. ______________________________ Notary Public My Commission expires . [NOTARIAL SEAL] EX-10 7 EXHIBIT 10(a) SURPLUS CASH AGREEMENT ---------------------- This Agreement dated as of June 26, 1998 is among Penobscot Energy Recovery Company, Limited Partnership, a Maine limited partnership (the "Partnership"), Bangor Hydro-Electric Company, a Maine corporation ("Bangor Hydro") and Municipal Review Committee, Inc., a Maine not-for-profit corporation (the "MRC"). WHEREAS, the Partnership and the Finance Authority of Maine ("FAME") have entered into a Loan Agreement pursuant to which FAME has agreed to issue its Electric Rate Stabilization Revenue Refunding Bonds, Series 1998A (Penobscot Energy Recovery Company, LP) in the aggregate principal amount of $29,930,000 (the "Series A Bonds" and its Electric Rate Stabilization Revenue Refunding Bonds, Series 1998B (Penobscot Energy Recovery Company, LP) in the aggregate principal amount of $15,065,000 (the "Series B Bonds" and, together with the Series A Bonds, the "Bonds") pursuant to the Trust Indenture dated as of June 1, 1998 (the "Indenture") between FAME and The Chase Manhattan Bank, as Trustee (the "Trustee"); and WHEREAS, the Partnership and Bangor Hydro entered into a Power Purchase Agreement dated June 21, 1984, as amended by Amendment No. 1 dated March 24, 1986 and as further amended by Amendment No. 2 (the "Power Purchase Agreement Amendment No. 2") dated as of the date hereof (collectively, the "Power Purchase Agreement"); and WHEREAS, the MRC is the designated agent for certain municipalities in the State of Maine which have entered into with the Partnership the First Amended and Restated Waste Disposal Agreements on effective as of April 1, 1991 (the "Charter Municipalities") and Second Amended, Restated and Extended Waste Disposal Agreements (the "Extended Waste Disposal Agreements") in 1998 in connection with the issuance of the Bonds (the "Amending Charter Municipalities); and WHEREAS, under Article XIX of the Extended Waste Disposal Agreements, the Amending Charter Municipalities, acting through the MRC pursuant to paragraph E of Article XII, have the option to participate in the purchase of limited partnership interests in the Partnership, with the purchase price payable from a designation of Performance Credits (as defined in the Extended Waste Disposal Agreements), and under paragraph B of Article XVIII and paragraph C.3.III of Article XIX, funds credited to the MRC Prepayment Account in the Bond Prepayment and Reserve Fund from Revenues (as defined in and pursuant to Article V of the Indenture) or deposited therein by the MRC from designated Performance Credits and either (i) transferred to the Special Redemption Account of the Debt Service Fund to redeem "Series 1998B Special Term Bonds" (as defined in the Indenture) prior to their stated maturity date, or (ii) used to purchase and cancel, or to defease or otherwise optionally redeem, Bonds prior to their stated maturity date; and WHEREAS, the distribution to the MRC constitutes the Performance Credits contemplated in Article XVIII of the Extended Waste Disposal Agreement and the calculation of such Performance Credits needs to be adjusted as a result of additional reserve accounts required by FAME in connection with the issuance of the Bonds, as contemplated in paragraph A of Article XVIII of the Extended Waste Disposal Agreement and approved by the MRC; and WHEREAS, under the Power Purchase Agreement, Bangor Hydro is obligated to pay $250,000 on the first day of each January, April, July and October, commencing October 1, 1998, until the amount paid equals $4,000,000, by wire transfer to the Trustee for credit to the Bangor Hydro Funded Account of the Bond Prepayment and Reserve Fund (the "Bangor Hydro Payment"); and WHEREAS, under Section 5.01 of the Indenture, the Trustee has established certain Trust Funds, including the Special Redemption Account of the Debt Service Fund and the Bond Prepayment and Reserve Fund consisting of (1) the Bangor Hydro-Funded Account (consisting of the MRC Retention Subaccount and the Borrower Retention Subaccount), (2) the MRC Prepayment Account, and (3) the Borrower Reserve Account; and WHEREAS, Section 5.03 of the Indenture provides for the application of Revenues on the fifteenth day of each calendar month (each an "Indenture Distribution Date"), and any balance remaining after application pursuant to clauses (1) through (9) and the funding of certain Accounts pursuant to clause (10) of said Section 5.03 is paid to or at the direction of the Partnership for distribution among the Partnership, Bangor Hydro and the MRC; and WHEREAS, the parties hereto desire to set forth herein their agreement of the distribution of (i) the Allocable Funds after accounting for Reserve Deposits, (ii) interest on various reserve funds held under the Indenture, and (iii) Indenture Residual paid by the Trustee to or at the direction of the Partnership under the Indenture. NOW, THEREFORE, for good and valuable consideration, the parties hereto hereby agree as follows: Section 1. DEFINITIONS. Capitalized terms used herein and not otherwise defined have the meanings given such terms in the Indenture. In addition, the following terms, as used herein, have the following meanings: "ALLOCABLE FUNDS" means, as of any Indenture Distribution Date, the Revenue Fund Balance, LESS reimbursements of the Partnership and the MRC under Section 4(a) of this Agreement for withdrawals by the Trustee from the Borrower Reserve Account, the Borrower Retention Subaccount and the MRC Reserve Accounts, and LESS the Prepayment Benefit (if any) for the Monthly Period ended on such Indenture Disbursement Date. "BANGOR HYDRO PAYMENT" has the meaning given such term in the sixth WHEREAS clause above. "BOND DOCUMENTS" means the Indenture and the Financing Documents. "ENI" means Energy National, Inc., a Utah corporation, and its successors or assigns as a general or limited partner in the Partnership. "FUNDING DATE PARTNERS" means the partners of the Partnership (as their respective interests are then reflected on the books and records of the Partnership) on each Indenture Distribution Date from July 15, 1998 to the date on which the aggregate amount of all deposits made into the Borrower Reserve Account under Section 5.03(b)(10)(iv) is $2,500,000. "INDENTURE RESIDUAL" has the meaning given such term in Section 6 hereof. "ISSUE DATE PARTNERS" means PMC and ENI. "MRC RESERVE ACCOUNTS" means collectively, the MRC Retention Subaccount in the Bangor Hydro-Funded Account, and the MRC Prepayment Account, of the Bond Prepayment and Reserve Fund. "MONTHLY PERIOD" means a period beginning on an Indenture Distribution Date and ending on the next succeeding Indenture Distribution Date. "PMC" means PERC Management Company Limited Partnership, a Maine limited partnership, and its successors or assigns as a general or limited partner in the Partnership. "PREPAYMENT BENEFIT" means, for any period of determination, an amount equal to (i) the interest and the Capital Reserve Premium payable to the Authority that would have been payable on the Bonds during such period if no Bonds had been optionally redeemed, purchased or defeased as contemplated by Section 7 of this Agreement, less (ii) the interest and the Capital Reserve Premium payable to the Authority paid on outstanding Bonds during such period. "RESERVE DEPOSITS" means, as of any Indenture Distribution Date, the aggregate amount of the Revenue Fund Balance credited by the Trustee (i) to the MRC Retention Subaccount pursuant to Section 5.03(10)(i) of the Indenture; (ii) to the Borrower Retention Subaccount pursuant to Section 5.03(10)(ii) of the Indenture; (iii) to the MRC Prepayment Account pursuant to Section 5.03(10)(iii) of the Indenture; and (iv) to the Borrower Reserve Account pursuant to Section 5.03(10)(iv) of the Indenture. "REVENUE FUND BALANCE" has the meaning given such term in Section 5.03(10) of the Indenture; namely, it is the balance of the Revenues in the Revenue Fund on each Indenture Distribution Date after application of Revenues by the Trustee pursuant to clauses (1) through (9) of said Section 5.03 of the Indenture. Section 2. BANGOR HYDRO PAYMENTS. Bangor Hydro shall pay, by wire transfer or in other immediately available funds, to the Trustee for credit to the Bangor Hydro-Funded Account of the Bond Prepayment and Reserve Fund, the Bangor Hydro Payment, one-half of which is to be designated by Bangor Hydro for credit to the MRC Retention Subaccount and one-half of which is to be designated by Bangor Hydro for credit to the Borrower Retention Subaccount. Section 3. INVESTMENT OF MRC ACCOUNTS; INTEREST EARNINGS. (a) Under Section 5.12 of the Indenture, the Partnership has the right to direct the investment, from time to time, of the various Trust Funds, including the MRC Reserve Accounts, in Eligible Investments, and as of the date hereof the Partnership has provided the Trustee with written investment instructions and intends to do so from time to time, in its discretion, except that upon the Partnership s receipt of written instructions of the MRC, the Partnership agrees to direct the Trustee to invest funds in the MRC Reserve Accounts, or either of them, in accordance with such instructions, provided that such investment instructions comply with the provisions of Section 5.12 of the Indenture and the Tax Regulatory Agreement. The MRC hereby agrees and acknowledges that such investments may be made with or through the Trustee or its affiliates, and neither the Trustee nor the Partnership shall be responsible or liable for any losses incurred or realized by the investment of such Account or Subaccount so long as such investments qualify as "Eligible Investments" as required under the Indenture. (b) Under Section 5.12(b)(iii) of the Indenture, interest earnings on funds credited to the Special Redemption Account and the Bond Prepayment and Reserve Fund are to be distributed from time to time at the direction of the Partnership. The parties hereto agree that the Partnership shall direct the Trustee to distribute such interest earnings as follows: (i) on the Special Redemption Account, as and when earned, to the Partnership; (ii) on the Borrower Retention Subaccount, as and when earned, to the Issue Date Partners; (iii) on the Borrower Reserve Account, as and when earned, to the Funding Date Partners; and (iv) on the MRC Reserve Accounts, as and when earned, to the MRC unless the MRC has provided the Partnership with written instructions to direct the Trustee to retain such amounts therein, or to transfer such amounts (in minimum increments as specified in Section 7 of this Agreement) to the Special Redemption Account. Section 4. DISTRIBUTION OF REVENUE FUND BALANCE. After applications of the Revenue Fund Balance pursuant to Section 5.03(10) of the Indenture (that is after any Reserve Deposits), the Trustee pays the balance to or at the direction of the Partnership on each Indenture Distribution Date. The parties hereto agree that the Partnership shall direct the Trustee to disburse the balance payable to the Partnership on an Indenture Disbursement Date, as follows: (a) First, pro rata to the Issue Date Partners, an amount equal to any amounts theretofore withdrawn by the Trustee from the Borrower Reserve Account under Section 5.10(a)(2) of the Indenture and to the Funding Date Partners, an amount equal to any amounts theretofore withdrawn by the Trustee from the Borrower Retention Subaccount under Section 5.10(a)(2) of the Indenture to pay deficiencies in the Debt Service Fund, until such partners have been fully reimbursed for all such amounts withdrawn by the Trustee, and to the MRC, an amount equal to any amounts theretofore withdrawn by the Trustee from the MRC Reserve Accounts under Section 5.10(a)(2) of the Indenture to pay deficiencies in the Debt Service Fund (but not including any transfers to the Special Redemption Account or otherwise to optionally redeem Bonds under Section 2.04(c) or (d) of the Indenture or to purchase and cancel or defease Bonds), until the MRC has been fully reimbursed for all amounts so withdrawn by the Trustee; provided that if the balance of funds available for such purpose is insufficient to make such payments in full to the Issue Date Partners, the Funding Date Partners and the MRC, then it shall be paid to the Issue Date Partners and the Funding Date Partners (on one hand) and the MRC (on the other hand) on a pro rata basis. (b) Second, to the Partnership, the Prepayment Benefit (if any) for the Monthly Period ended on such Indenture Disbursement Date. (c) Third, the remaining balance distributed as follows: (i) To Bangor Hydro: (A) one-third (1/3) of the Allocable Funds LESS (B) any amount deposited in the MRC Retention Subaccount by the Trustee under Section 5.03(10)(i) of the Indenture, and LESS (C) any amount deposited in the Borrower Retention Subaccount by the Trustee under Section 5.03(10)(ii) of the Indenture. (ii) To or at the direction of the MRC: (A) one-third (1/3) of the Allocable Funds LESS (B) any amount deposited to the MRC Prepayment Account by the Trustee under Section 5.03(10)(iii) of the Indenture; provided, however, that if the Partnership receives written direction from the MRC not less than five (5) Business Days prior to the Indenture Distribution Date that all or any designated portion of such payment should be transferred by the Trustee to the MRC Prepayment Account or the Special Redemption Account, the Partnership shall direct the Trustee to effect such retention or transfer; (iii) To the Partnership: (A) one-third (1/3) of the Allocable Funds LESS (B) any amounts deposited to the Borrower Reserve Account by the Trustee under Section 5.03(10)(iv) of the Indenture. Examples of the Partnership's directions to the Trustee regarding the distribution of the Revenue Fund Balance remaining after Reserve Deposits among the parties hereto is attached as Exhibit A. Section 5. CLOSING DATE ADJUSTMENTS. The parties hereto agree that following the date hereof, they will calculate an amount that would have been distributed to the parties hereto, assuming that the issuance and delivery of the Bonds (and the defeasance of the Prior Bonds), had occurred at the end of business on April 30, 1998, and the Partnership will distribute among the Partnership, the MRC and Bangor Hydro such amount within 45 days after June 30, 1998 or as soon thereafter as sufficient funds are available. Section 6. DISTRIBUTION OF INDENTURE RESIDUAL. Under Section 5.15 of the Indenture, upon the payment and discharge in full of all of the Bonds, and after application and other payments as described in clauses (i) through (iv) of Section 5.15 of the Indenture, the Trustee shall pay the balance remaining under the Indenture (the "Indenture Residual") to or at the direction of the Partnership. The parties hereto agree that the Partnership shall direct the Trustee to disburse the Indenture Residual as follows: (i) Revenue Fund, one-third paid to the Partnership, one-third paid to Bangor Hydro and one-third paid to the MRC. (ii) Debt Service Fund (excluding the Special Redemption Account), one-third paid to the Partnership, one-third paid to Bangor Hydro and one-third paid to the MRC. (iii) Special Redemption Account, paid to the Partnership. (iv) Operating Account in the Operating Fund (after retention by the Partnership of an amount necessary for working capital purposes), one-third paid to the Partnership, one-third paid to Bangor Hydro and one-third paid to the MRC. (v) Operating Reserve Account in the Operating Fund, one-third paid to Bangor Hydro, one-third paid to the MRC and one-third paid to the Issue Date Partners. (vi) Capital Improvement Fund, one-third paid to Bangor Hydro, one-third paid to the MRC and one-third paid to the Issue Date Partners. (vii) Capital Reserve Fund, one-third paid to Bangor Hydro, one-third paid to the MRC and one-third paid to the Issue Date Partners. (viii) MRC Reserve Accounts, to the MRC. (ix) Borrower Retention Subaccount, to the Issue Date Partners. (x) Borrower Reserve Account, to the Funding Date Partners. Amounts paid to the Issue Date Partners under clauses (v), (vi), (vii) and (ix) above shall be paid 71.28574% to PMC and 28.71426% to ENI. Amounts paid to the Funding Date Partners under clause (x) above, shall be paid to each Funding Date Partner in proportion to the fraction the numerator of which is the cumulative sum of (a) the amount credited to the Borrower Reserve Account on each Indenture Distribution Date multiplied by (b) that Funding Date Partner's aggregate GP Sharing Ratio with respect to the general partners' aggregate interest (currently 10%) and LP Sharing Ratio with respect to the limited partners' aggregate interest (currently 90%) as of such date and the denominator of which is the aggregate principal amount credited to the Borrower Reserve Account over the life of the Bonds. Section 7. OPTIONAL REDEMPTION, PURCHASE OR DEFEASANCE OF BONDS. At any time and from time to time (but not more frequently than once in each Calendar Quarter): (a) upon notice from the MRC, the Partnership shall direct the Trustee to transfer all or any designated portion of money on deposit in the MRC Retention Subaccount or the MRC Prepayment Account (in a minimum increment of $5,000 or any multiple thereof) to the Special Redemption Account of the Debt Service Fund to be used to optionally redeem Series 1998B Special Term Bonds (in authorized denominations) on the earliest date practicable under Sections 2.04(d) and 5.07(iv) of the Indenture; (b) the MRC may (i) purchase Bonds in the open market, and direct the Partnership to tender such Bonds to the Trustee for cancellation, or (ii) direct the Partnership to defease a designated portion of the Bonds in authorized denominations, or (iii) from and after July 1, 2008, instruct the Partnership to optionally redeem Bonds (in authorized denominations) on the earliest practicable date under Section 2.04(c) of the Indenture. If Bonds are to be defeased, all costs of defeasance shall be paid by funds in the MRC Prepayment Account from such amount and shall include all costs and expenses related to such defeasance, including the purchase price of Government Obligations, the costs and expenses of the Trustee, Bond Counsel, counsel to the Partnership, and any accounting or Rating Agency expenses. If Bonds are to be optionally redeemed pursuant to Section 2.04(c) of the Indenture, the redemption price, including any redemption premium, shall be paid from funds in the MRC Retention Subaccount or the MRC Prepayment Account. (c) Under Section 5.03(c)(10)(v) of the Indenture, at any time additional money may be paid to the Trustee for credit to the MRC Prepayment Account or for transfer to the Special Redemption Account. Upon receipt of any such additional money, accompanied by a written direction from the MRC to do so, the Partnership shall transfer such funds to the Trustee for credit to the Account so specified in the MRC s written direction; provided that amounts to be deposited in or transferred to the Special Redemption Account shall be in integral amounts of $5,000. (d) If the Partnership receives a written direction from the MRC to direct the Trustee to transfer amounts in either of the MRC Reserve Accounts to the Special Redemption Account or to pay all or a part of such amounts to the MRC in accordance with Section 5.06(c) of the Indenture, the Partnership will so direct the Trustee; provided that the amounts to be so transferred to the Special Redemption Account shall be in integral amounts of $5,000. Section 8. PREPAYMENT BENEFIT FOR DEBT SERVICE SAVINGS DUE TO EARLY RETIREMENT OF BONDS FROM MRC PREPAYMENT ACCOUNT. If any Series 1998B Special Term Bonds are optionally redeemed from funds deposited in or transferred to the Special Redemption Account, or if any Bonds are purchased by the MRC and tendered to the Trustee for cancellation, or defeased, in connection with an MRC direction given to the Partnership pursuant to Section 7 of this Agreement, the Partnership shall calculate the Prepayment Benefit for each Monthly Period, and shall provide such calculations to the MRC and Bangor Hydro. Absent manifest error, such calculations shall be deemed conclusive. Section 9. NOTICES. Except when telephonic notice is expressly authorized by this Agreement, any notice or other communication to any party in connection with this Agreement shall be in writing and shall be sent by manual delivery, overnight courier or United States mail (postage prepaid) or facsimile transmission (followed by a written confirmation sent by manual delivery, overnight courier or United States mail), addressed to such party at the address specified on the signature page hereof, or at such other address as such party shall have specified to the other parties hereto in writing. All periods of notice shall be measured from the date of delivery thereof if manually delivered, from the date of sending thereof if sent by facsimile transmission, from the first Business Day after the date of sending if sent by overnight courier, or from four days after the date of mailing if mailed; provided, however, that any notice to the Partnership from the MRC under Section 4(b) hereof shall be deemed to have been given only when received by the Partnership. Section 10. LIMITATION OF LIABILITY. Notwithstanding any other provision of this Agreement, and without waiving or foregoing any rights against the Partnership, there shall be no recourse against any general or limited partner of the Partnership or any of their respective affiliates, stockholders, partners, officers, directors, employees or agents, for any liability or obligations of the Partnership arising under this Agreement. The limitations on recourse set forth in this Section 10 shall survive termination of this Agreement and the full performance of the obligations of the Partnership hereunder. Section 11. MRC APPROVAL. The MRC acknowledges that the distributions to it pursuant to Section 4 hereof constitute the Performance Credits, that the calculation of such distributions might be interpreted as varying method defined in Article XVIII of the Extended Waste Disposal Agreements, and that such variation is contemplated in paragraph A of Article XVIII of the Extended Waste Disposal Agreements. The MRC hereby approves of the variation in calculating such Performance Credits. Section 12. MISCELLANEOUS PROVISIONS. (a) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. (b) GOVERNING LAW AND CONSTRUCTION; SEVERABILITY. The validity, construction and enforceability of this Agreement shall be governed by the internal laws of the State of Maine, without giving effect to the conflict of laws principles thereof. Whenever possible, each provision of this Agreement and any other statement, instrument or transaction contemplated hereby or thereby or relating hereto or thereto shall be interpreted in such manner as to be effective and valid under such applicable law, but, if any provision of this Agreement, the Indenture or any other statement, instrument or transaction contemplated hereby or thereby or relating hereto or thereto shall be held to be prohibited or invalid under such applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement or any other statement, instrument or transaction contemplated hereby or thereby or relating hereto or thereto. (c) CAPTIONS. The captions or headings herein are for convenience only and in no way define, limit or describe the scope or intent of any provision of this Agreement. (d) ENTIRE AGREEMENT. This Agreement and the Power Purchase Agreement, the Waste Disposal Agreements, the Warrants, the Bond Documents, the partnership agreement of the Partnership and the monitoring agreement between the MRC and Bangor Hydro embody the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and thereof. This Agreement supersedes all prior agreements and understandings relating to the subject matter hereof. Nothing contained in this Agreement or in any other document, expressed or implied, is intended to confer upon any Persons other than the parties hereto any rights, remedies, obligations or liabilities hereunder or thereunder. (e) COUNTERPARTS. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. Notice Address for Partnership: One copy to: PENOBSCOT ENERGY RECOVERY COMPANY, LIMITED PARTNERSHIP c/o KTI, Inc. 7000 Boulevard East By PERC Management Company Limited Guttenberg, NJ 07093 Partnership, a General Partner Attn: President By PERC, Inc., its general partner Fax No.: (201) 854-1771 Telephone No.: (201) 854-777 By: and Its: One copy to: By ENERGY NATIONAL, INC., Energy National, Inc. a General Partner c/o NRG Energy, Inc. 1221 Nicollet Mall, Suite 700 Minneapolis, MN By: Attn: Stan Marks Fax No.: (612) 373-5312 Its: Telephone No.: (612) 373-5455 and One copy to: Penobscot Energy Recovery Company, Limited Partnership Industrial Way Orrington, Maine Attn: Gary A. Stacey Fax No. (207) 825-4115 Telephone No.: (207) 825-4566 Notice Address for MRC: MUNICIPAL REVIEW COMMITTEE, INC. Municipal Review Committee, Inc. P.O. Box 2579 By: Bangor, Maine 04402 Attn: Clerk Its: Fax No.: (207) 942-3548 Telephone No.: (207) 942-6389 Notice Address for Bangor Hydro: BANGOR HYDRO-ELECTRIC COMPANY Bangor Hydro-Electric Company 33 State Street P.O. Box 932 By: Bangor, Maine 04402-0932 Attn: President Its: Fax No.: (207) 945-5621 Telephone No.: (207) 941-6653 EX-10 8 EXHIBIT 10(b) ELECTRIC RATE STABILIZATION BOND PROGRAM GUARANTY AGREEMENT This Guaranty Agreement dated as of June 1, 1998, (the "Guaranty") is given by BANGOR HYDRO-ELECTRIC COMPANY, a corporation organized and existing under the laws of the State of Maine (the "Guarantor") to THE CHASE MANHATTAN BANK, as Trustee (the "Trustee"). WHEREAS, the Authority has agreed with Penobscot Energy Recovery Company, Limited Partnership (the "Borrower") to issue its Series 1998 Electric Rate Stabilization Revenue Refunding Bonds, Series 1998A and Series 1998B (Penobscot Energy Recovery Company, LP) in the aggregate principal amount of $44,995,000 (the "1998 Bonds"), which will contemporaneously herewith be issued to finance a loan (the "Loan") from the Finance Authority of Maine (the "Authority") to the "Borrower" pursuant to a Loan Agreement dated as of June 1, 1998 (the "Agreement"); and WHEREAS, the Agreement will be assigned by the Authority to the Trustee (except for certain Unassigned Issuers Rights and Shared Rights as defined therein), contemporaneously with the execution thereof; and WHEREAS, the obligation of the Borrower to the Authority pursuant to the Agreement is evidenced by a promissory note of the Borrower to the Authority (the "Loan Note"); and WHEREAS, the Trustee has entered into a Trust Indenture with the Authority dated as of June 1, 1998 (the "Indenture"); and WHEREAS, in order to induce the Authority to make the Loan to the Borrower, the Guarantor is prepared to guarantee the payment and performance when due of the obligations of the Borrower to the Authority under the Loan Agreement; and WHEREAS, the Guarantor acknowledges that it will be benefited by the Authority making the Loan to the Borrower, which benefits include, inter alia, the reduction in certain payments required to be made by the Guarantor to the Borrower pursuant to a certain Power Purchase Agreement dated June 21, 1984 as amended by Amendment No. 1 dated as of March 29, 1986, as further amended by Amendment No. 2 to the Power Purchase Agreement which will be executed and delivered by the parties thereto contemporaneously herewith (as so amended, the "Power Purchase Agreement"); and WHEREAS, for the purpose of providing security for the payment of the Loan Note and other sums provided for in the Agreement, the Guarantor hereby agrees to guaranty the prompt and punctual payment of the Loan and other sums, as more fully set forth herein; and WHEREAS, Guarantor has agreed to certain terms and conditions set forth in the Commitment Letter dated December 16, 1997, as amended by Amendment to Commitment Letter dated March 26, 1998, and which are further set forth in the Indenture, which terms and conditions include the Guarantor funding a capital reserve fund for benefit of the 1998 Bonds and, in the event of the enforcement of the Guaranty, the provision of additional funds as provided in Article V of the Indenture, a copy of which Article V is attached hereto as Exhibit A. NOW, THEREFORE, in consideration of the premises and in order to induce the Authority to issue the 1998 Bonds and make the Loan, the Guarantor hereby covenants and agrees with the Trustee as follows: ARTICLE I REPRESENTATIONS AND WARRANTIES Section 1.1. Representations and Warranties. The Guarantor hereby represents and warrants as follows: (1) The Guarantor is a corporation duly organized, validly existing and in good standing under the laws of the State of Maine, has the corporate power and authority to own its property and assets, to carry on its business as now being conducted by it and to execute, deliver and perform this Guaranty. The Guarantor is duly qualified to do business in every jurisdiction, in which such qualification is necessary, including the State of Maine. (2) The execution, delivery and performance of this Guaranty and the consummation of the transactions herein contemplated have been duly authorized by all requisite corporate action on the part of the Guarantor and will not violate any provision of law, any order of any court or other agency of government or the certificate of incorporation or bylaws of the Guarantor, or any material provision of any indenture, agreement or other instrument to which the Guarantor is a party or by which it or any of its property is bound, or be in conflict with or result in a breach of or constitute (with due notice and/or lapse of time) a default under any such indenture, agreement or other instrument for which a waiver has not been obtained. (3) The acceptance by the Guarantor of its obligations hereunder will result in a material financial benefit to the Guarantor. (4) This Guaranty and the Power Purchase Agreement constitute valid and legally binding obligations of the Guarantor, enforceable in accordance with their terms. (5) There is no action or proceeding pending or to the knowledge of the Guarantor, threatened against the Guarantor before any court or administrative agency that which, if determined adversely to the Guarantor would materially adversely affect the ability of the Guarantor to perform its obligations hereunder, except as may be disclosed in its filings with the Securities and Exchange Commission. (6) The Guarantor has obtained all authorizations, approvals or other actions required by any governmental authority or regulatory body which is required for due execution, delivery and performance by the Guarantor of this Guaranty and the Power Purchase Agreement. (7) The Guarantor has fulfilled its obligations under the minimum funding standards of ERISA with respect to any employee pension benefit plan which is covered by Title 4 of ERISA, which is the subject of the minimum funding standard under Section 412 of the Internal Revenue Code, and as to which the Guarantor may have liability (or with respect to a multi-employer Plan has made all required contributions) and is in compliance in all material respects with applicable provisions of ERISA. ARTICLE II COVENANTS AND AGREEMENTS Section 2.1. The Guaranty. (A) The Guarantor hereby unconditionally guaranties to the Trustee for the benefit of the holder of the 1998 Bonds and to and for the benefit of the Authority as holder of the Loan Note to the extent of this Guaranty, as limited by Section 2.1(C) hereof, the full and prompt payment of the principal of and interest on the 1998 Bonds and all other sums due and payable whether by acceleration or otherwise, when and as the same shall become due, whether by demand or at the stated maturity thereof, by acceleration or otherwise (the "Obligation"). (B) The Guarantor hereby expressly acknowledges and agrees to the terms of Article V of the Indenture, which terms are incorporated herein to the extent such terms affect or create obligation of the Guarantor to pay the obligation and creates rights of the Trustee to enforce this Guaranty. (C) The Guarantor further agrees that each of its undertakings in subsection 2.1(A) and 2.1(B) above constitutes an absolute, unconditional, present and continuing guaranty provided, however, that the obligation of the Guarantor to pay such Obligation shall be limited to the highest possible debt service payable on the 1998 Bonds in such Bond Year, including principal, interest and applicable fees and costs, which amount may be reimbursed pursuant to the terms of Section 5.03(9) and Section 5.11 of the Indenture and if so reimbursed, the amount covered by its Guaranty may subsequently be drawn again. The Guarantor waives any right to require that any resort be had by the Trustee to (i) any particular security or other Guaranty held by the Authority or the Trustee (except as otherwise provided in the Indenture) or (ii) the performance of any obligation of the Authority or Trustee under the Indenture. (D) If the Borrower shall default in payment of the Obligation, the Guarantor, upon demand by the Trustee without notice other than such demand and without the necessity of further action on their respective parts, or Guarantor's successors or assigns, as the case may be, will promptly and fully comply with the efforts of the Trustee to enforce this Guaranty. The Guarantor will pay all reasonable costs and expenses, including attorneys' fees, paid or incurred by the Trustee in connection with the enforcement of the obligations of the Guarantor under this Guaranty. All payments by the Guarantor shall be made in any coin or currency of the United States of America which on the respective dates of payment thereof is legal tender for the payment of public and private debts within two (2) Business Days of receipt of demand from the Trustee. Section 2.2. Absolute and Unconditional Guaranty. The obligations of the Guarantor under this Guaranty are absolute and unconditional and shall remain in full force and effect until every payment, obligation or liability guaranteed hereunder shall have been fully and finally paid, and, to the extent permitted by law, such obligations shall not be affected, modified, released, or impaired by any state of facts or the happening from time to time of any event including, without limitation, any of the following, whether or not with notice to, or the consent of, the Guarantor: (1) the termination, cancellation, invalidity, irregularity, illegality or unenforceability of, or any defect in, the Indenture, any of the 1998 Bonds, this Guaranty, the Power Purchase Agreement, the Agreement, the Loan Note or any other Financing Documents; (2) the compromise, settlement, release, extension, indulgence, change, modification or termination of any or all of the obligations, covenants or agreements of the Agreement, the Loan Note, the Indenture, the 1998 Bonds, the Power Purchase Agreement, any other guaranties, or any other Financing Documents; (3) the failure to give notice to the Guarantor of the occurrence of any Event of Default under the terms and provisions of this Guaranty, the Indenture, the Agreement, the Power Purchase Agreement, the Loan Note or any other Financing Documents; (4) the waiver of the payment, performance or observance by the Authority or the Trustee of any of the obligations, conditions, covenants or agreements of any or all of them contained in this Guaranty, the Indenture, the 1998 Bonds, the Agreement, the Loan Note or any other Financing Documents by the Authority or the Trustee, as the case may be; (5) the extension of the time for payment of the principal of, premium if any, or interest on the 1998 Bonds or the principal of, or interest on the 1998 Bonds or any other amounts that are due or may become due under the Financing Documents or of the time for performance of any other obligations, covenants or agreements under or arising out of the Financing Documents; (6) the modification or amendment (whether material or otherwise) of any duty, obligation, covenant or agreement set forth in the Indenture, the 1998 Bonds, or any of the Financing Documents; (7) any failure, omission, delay or lack thereof on the part of the Authority or the Trustee to assert or exercise any right, power or remedy conferred on either of them in the Indenture, the 1998 Bonds, this Guaranty, the Agreement, or any other Financing Documents; (8) the voluntary or involuntary liquidation, dissolution, merger, consolidation, sale or other disposition of all or substantially all the assets, marshalling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition with creditors, or other similar proceedings affecting the Guarantor, any other guarantors, or the Borrower, the Authority or the Trustee, or any or all of the assets of any of them, or any allegation or contest of the validity of the Indenture, the 1998 Bonds, or any of the Financing Documents, including this Guaranty, in any such proceeding; it is specifically understood, consented and agreed to that this Guaranty shall remain and continue in full force and effect and shall be enforceable against the Guarantor to the same extent and with the same force and effect as if such proceedings had not been instituted; and it is the intent and purpose of this Guaranty that the Guarantor shall and does hereby waive all rights and benefits which might accrue to the Guarantor by reason of any such proceedings, and without limiting the generality of the foregoing, it is further the intent and purpose of this Guaranty that the liability of the Guarantor shall not be in any way limited by the filing of any bankruptcy involving the Borrower, but rather shall in all respects continue and extend to include, by way of example and not limitation, post- filing interests and costs, including reasonable attorney's fees; (9) to the extent permitted by law, the release or discharge of the Guarantor from the performance or observance of any obligation, covenant or agreement contained in this Guaranty by operation of law or the addition or release of any other guarantor; (10) the default or failure of any other guarantor fully to perform any of its obligations set forth in any other guaranty; (11) any release, substitution, replacement, destruction, loss or impairment of the security pledged under the Financing Documents; (12) any failure of the Authority or the Trustee to mitigate damages resulting from any default by the Borrower under the Financing Documents; (13) any other circumstances which might otherwise constitute a legal or equitable discharge or defense of a surety or a guarantor; or (14) any other act of commission or omission or any other occurrence whatsoever, whether similar or dissimilar to the foregoing. Section 2.3. [Reserved] Section 2.4. Corporation. Guarantor covenants and agrees that there shall be no amendments or changes to the Articles of Incorporation or other charter forming Guarantor, a corporation, or the Bylaws governing its operation, which will in any manner affect the Financing Documents. Section 2.5. Good Standing. The Guarantor warrants that it is and will be during the term of this Agreement incorporated and in good standing under the laws of the State. Section 2.6. Indemnification Covenants. (A) The Guarantor agrees to protect, defend and hold harmless the Authority and its officers, members, directors, agents, servants and employees (each an "Indemnified Party") from any claim, demand, suit or action or other proceeding whatsoever by any person or entity whatsoever, arising or purportedly arising from or in connection with the Guaranty or the transactions contemplated thereby or actions taken thereunder, except for any bad faith, willful misconduct material misrepresentation or gross negligence on the part of the Indemnified Party. (B) All covenants, stipulations, promises, agreements and obligations of the Authority contained herein shall be deemed to be the covenants, stipulations, promises, agreements and obligations of the Authority and not of any member, officer, director, agent or employee of the Authority in his or her individual capacity, and no recourse shall be had for the payment of any claim based thereon or hereunder against any member, officer or employee of the Authority or any natural person executing the 1998 Bonds. (C) In case any action shall be brought against one or more of the Indemnified Party's based upon any of the above and in respect of which indemnity may be sought against the Guarantor, such Indemnified Party shall notify the Guarantor in writing, enclosing a copy of all papers served, but the omission so to notify the Guarantor of any such action shall not relieve it of any liability which it may have to any Indemnified Party other than under this Section 2.6. In case any such action shall be brought against any Indemnified Party and it shall notify the Guarantor and the Borrower of the commencement thereof, the Guarantor shall be entitled to participate in and, to the extent that it shall wish, to assume the defense thereof with counsel satisfactory to such Indemnified Party, and after notice from the Guarantor to such Indemnified Party of the Guarantor's election so to assume the defense thereof the Guarantor shall not be liable to such Indemnified Party for any legal or other expenses, other than reasonable costs of investigation subsequently incurred by such Indemnified Party in connection with the defense thereof. The Indemnified Party shall have the right to employ its own counsel in any such action, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the employment of counsel by such Indemnified Party has been authorized by the Guarantor, (ii) the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between the Borrower and/or Guarantor and the Indemnified Party in the conduct or the defense of such action (in which case the Guarantor shall not have the right to direct the defense of such action on behalf of the Indemnified Party), or (iii) the Guarantor shall not in fact have employed counsel satisfactory to the Indemnified Party to assume the defense of such action. (D) The Guarantor also agrees to pay all reasonable and necessary out-of- pocket expenses of the Authority (including charges of counsel) in connection with the Guaranty and the enforcement of any rights thereunder, including, without limitation, any fees, charges and expenses (including charges of counsel). (E) The obligations of the Guarantor under this section shall survive the termination of this Guaranty. This section is not for the benefit of any person not an Indemnified Party, and no waiver of the Maine Tort Claims Act or other applicable law is intended. Section 2.7. [Reserved] Section 2.8. Default and Litigation Notification. Upon becoming aware of any condition or event which constitutes, or with the giving of notice or the passage of time would constitute, an Event of Default, the Guarantor immediately shall deliver to the Authority a notice stating the existence and nature thereof and specifying the corrective steps the Guarantor is taking with respect thereto. The Guarantor shall promptly notify the Authority of the commencement of any litigation, administrative, enforcement or other proceeding by or against it, or the threat thereof, in which an unfavorable outcome could materially affect the operation of the Guarantor or compliance with this Guaranty or the Power Purchase Agreement. Section 2.9. Notification Requirements. (A) The Guarantor must provide the Authority with copies of each filing and report made by the Guarantor or any subsidiary of a Guarantor with or to the Securities and Exchange Commission including, without limitation, all 10-Q, 10-K and 8-K Reports (other than registration statements that have not become effective under the Securities Act of 1933, filings and reports with respect to dividend reinvestment, employee benefits, or other similar plans, and filings pertaining to sales of or other transactions in securities of the Guarantor or any Subsidiary by persons other than the Guarantor or such Subsidiary), and of each communication from the Guarantor or any Subsidiary to public shareholders generally, promptly upon the filing or making thereof. The Guarantor must meet periodically with the Authority at the Authority s request to provide information on financial conditions (whether or not included in such filings) and any other issue raised by the Authority. (B) The Guarantor must provide to the Authority a copy of its Regulatory Update when each is distributed or any successor internal publication and such other information regarding pending or anticipated filings as the Authority may reasonably request. Section 2.10. Compliance with Law. The Guarantor will observe and comply in all material respects with all laws, regulations, ordinances, rules, and orders (including without limitation those relating to zoning, land use, environmental protection, air, water and land pollution, wetlands, health, equal opportunity, minimum wages, worker s compensation and employment practices) of any federal, state, municipal or other governmental authority except during any period during which the Guarantor at its expense and in its name shall be in good faith contesting its obligations to comply therewith. Section 2.11. Maine Public Utilities Proceedings. The Guarantor agrees, unless it is legally precluded, that it will file for appropriate rate relief from the Maine Public Utilities Commission in the event it is unable to make any payments or perform any financial obligation under this Guaranty. Section 2.12. Debt Limitation Covenant. The Guarantor must not incur any additional debt in excess of $15,000,000. ARTICLE III EVENTS OF DEFAULT AND REMEDIES Section 3.1. Events of Default. An "Event of Default" hereunder shall exist if any of the following occurs and is continuing: (1) the Guarantor defaults on the guaranty referred to in Section 2.1 hereof and such default continues for more than two (2) Business Days after demand is made by the Trustee; (2) the Guarantor fails to observe and perform any covenant, condition or agreement, other than that referred to in Sections 3.1(1) of this Guaranty, or of any instrument, document or agreement now or hereafter securing this Guaranty and such failure continues for more than thirty (30) days after written notice (which shall be deemed given upon facsimile transmission or three (3) Business Days after mailing of notice by first class mail, postage prepaid or certified mail) of such failure has been given to the Guarantor by the Trustee or if by reason of such default the same cannot be remedied within said thirty (30) days; (3) any warranty, representation or other statement by or on behalf of the Guarantor contained in this Guaranty or in any certificate, letter or other writing or instrument furnished or delivered to the Authority pursuant hereto or in connection herewith and in connection with the Financing Documents shall at any time proved to have been incorrect in any material respect when made, effective, or reaffirmed, as the case may be; (4) the entry of a decree or order for relief by a court having jurisdiction of the Guarantor in an involuntary case under the federal bankruptcy laws, as now or hereafter constituted, or any other applicable federal or state bankruptcy, insolvency or other similar law, or appointing a receiver, liquidator, assignee, custodian, trustee (or similar official) of the Guarantor or for any substantial part of any of its property, or ordering the winding-up or liquidation of any of its affairs and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days, or the commencement by the Guarantor of a voluntary case under the federal bankruptcy laws, as now constituted or hereinafter amended, or any other applicable federal or state bankruptcy insolvency or other similar law, or the consent by the Guarantor to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian (or other similar official) or the making by it of any assignment for the benefit of creditors, or the taking of corporate or other action by the Guarantor to authorize or effect any of the foregoing; (5) A final and unappealable judgment or order for the payment for money in excess of $1,000,000 or more shall be rendered against the Guarantor, such judgment or order shall continue unsatisfied and unpaid for a period of thirty (30) days. Section 3.2. Remedies Upon Default. Upon an Event of Default under Section 3.1 of this Guaranty, the Trustee shall have the right to proceed directly against the Guarantor without proceeding against or exhausting any other remedies which it may have and without resorting to security held, including, without limitation, the Capital Reserve Fund. Section 3.3. [Reserved] Section 3.4. Waiver of Notice of Non-Payment and Costs of Enforcement. The Guarantor hereby expressly waives presentment, demand, protest and notice of nonpayment and further waives notice from the Authority of its acceptance and reliance on this Guaranty. The Guarantor agrees to pay all costs, disbursements and expenses (including all reasonable attorneys' fees) which may be incurred by the Authority in enforcing or attempting to enforce this Guaranty and any security therefor following any default on the part of the Guarantor hereunder, whether the same shall be enforced by suit or otherwise. Section 3.5. The Authority Not Coguarantor. The Guarantor hereby acknowledges that (a) the Authority has established a Capital Reserve Fund under the Indenture in order to provide credit enhancement for the 1998 Bonds; (b) the Authority is not a coguarantor with the Guarantor, who shall have no right of contribution, indemnity or subrogation against the Authority; (c) all liability of the Guarantor under this Guaranty shall continue in full force and effect notwithstanding any payment by the Authority in the form of draws by the Trustee from the Capital Reserve Fund under the Indenture or payments by Financial Security Assurance Inc. under the Bond Insurance Policy provided to insure the 1998 Bonds or otherwise; and (d) all liability of the Guarantor under this Guaranty shall continue in full force and effect notwithstanding the fact that the Authority may have acquired rights against the Guarantor by assignment, subrogation or otherwise. ARTICLE IV MISCELLANEOUS Section 5.1. Amendment. This Guaranty may not be amended, changed, modified, altered or terminated without the concurring written consent of the Guarantor and the Authority. Section 5.2. Effective Date. The obligations of the Guarantor hereunder shall arise absolutely and unconditionally upon the issuance and initial delivery of the 1998 Bonds. Section 5.3. Remedies Not Exclusive. No remedy herein conferred upon or reserved to the Authority is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given under this Guaranty or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver in the event any provision contained in this Guaranty should be breached by any party and thereafter duly waived by any other party so empowered to act. Such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. No waiver, amendment, release or modification of this Guaranty shall be established by conduct, custom or course of dealing, but solely by an instrument in writing duly executed by the parties thereunto duly authorized by this Guaranty. Section 5.4. Notice. Except as otherwise provided herein, all notices or other communications hereunder shall be sufficiently given and shall be deemed given when delivered by hand delivery or on the third day following the day on which the same has been mailed, postage prepaid, by registered or certified mail addressed as follows: if to Guarantor: Bangor Hydro-Electric Company 33 State Street PO Box 932 Bangor, ME 04402-0932 Attention: Frederick Samp if to the Trustee: The Chase Manhattan Bank 73 Tremont Street Boston, MA 02108-3913 Attention: Corporate Trust Services Any party, by notice given hereunder, may designate a different address for future notices. Section 5.5. Counterparts. This Guaranty constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof and may be executed simultaneously in several counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Section 5.6. Severability. The invalidity or unenforceability of any one or more phrases, sentences, clauses, or Sections in this Guaranty contained, shall not affect the validity or enforceability of the remaining portions of this Guaranty, or any part thereof. Section 5.7. Governing Law. This Guaranty shall be governed by and construed in accordance with the laws of the State of Maine. Section 5.8. Successors and Assigns. This Guaranty shall be binding upon, inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns. Section 5.9. Reinstatement of Obligation. The obligations of the Guarantor under this Guaranty shall be reinstated to the extent of any payment made by the Borrower which must be returned by reason of the bankruptcy or insolvency of the Borrower or for any other reason. Section 5.10. Rules of Construction. (A) Words of the neuter gender shall be deemed and construed to include correlative words of the feminine and masculine genders. (B) Unless the context shall otherwise indicate, the term Guarantor shall include the plural as well as the singular number. (C) Terms used and not defined herein shall have the meanings set forth in the Agreement or in the Indenture to the extent such meaning is not incompatible with the context used herein. IN WITNESS WHEREOF, the Guarantor and the Trustee have caused this Guaranty to be executed, all as of the date first above written. WITNESS: BANGOR HYDRO-ELECTRIC COMPANY ______________________ __/s/__________________________________ By: Frederick S. Samp Its: Vice President - Finance & Law THE CHASE MANHATTAN BANK ______________________ _/s/___________________________________ By: Don Iacherri Its: Authorized Signer EX-10 9 EXHIBIT 10(c) AMENDMENT NO. 2 TO POWER PURCHASE AGREEMENT This Amendment No. 2 to Power Purchase Agreement ("Second Amendment") is entered into as of the 26th day of June , 1998 by and between PENOBSCOT ENERGY RECOVERY COMPANY, LIMITED PARTNERSHIP, a Maine limited partnership ("Seller"), and BANGOR HYDRO-ELECTRIC COMPANY, a Maine corporation ("Buyer"). W I T N E S S E T H: WHEREAS, Seller and Buyer are parties to a Power Purchase Agreement dated June 21, 1984 and amended by Amendment No. 1 dated March 24, 1986 (as amended, the "Agreement") for the sale by Seller and the purchase by Buyer of energy and capacity from Seller's Orrington, Maine waste-to-energy facility (the "Facility"); and WHEREAS, Seller has entered into certain long-term waste disposal agreements with numerous Maine municipalities, pursuant to a standard form First Amended and Restated Waste Disposal Agreement dated as of April 1, 1991 or shortly thereafter (the "First Waste Disposal Agreement") and intends to enter into a standard form Second Amended, Restated and Extended Waste Disposal Agreement (the "Second Waste Disposal Agreement") with many of the same municipalities as of the Closing (as hereinafter defined); and WHEREAS, those municipalities which are parties to the First Waste Disposal Agreement are known as the "Charter Municipalities"; and WHEREAS, those municipalities which become parties to the Second Waste Disposal Agreement are known as "Amending Charter Municipalities;" and WHEREAS, the Amending Charter Municipalities will be directly benefitted by this Agreement, because it is expected that the continuing sale of energy by Seller to Buyer will enable Seller to economically receive and process municipal solid waste under the Second Waste Disposal Agreement, which is expected to substantially assist the Amending Charter Municipalities in the discharge of their obligation to provide for the disposition of municipal solid waste discarded by their residents and businesses; and WHEREAS, in accordance with 35-A M.R.S.A. Section3156, Buyer has conclusively determined that (i) this Second Amendment provides near-term benefits to its rate payers that will be reflected in rates paid by the Buyer's customers; and (ii) as a result of this Second Amendment, potential future adverse rate impacts are not likely to be disproportionate to near- term gains; and (iii) this Second Amendment is consistent with 35-A M.R.S.A. Section3191; and (iv) this Second Amendment will not adversely impact the availability of a diverse and reliable mix of electric energy resources and will not significantly reduce the long-term electric energy or capacity resources available to Buyer and needed to meet future electric demand; and WHEREAS, consistent with 35-A M.R.S.A. Section3208(4), Buyer has conclusively determined that this Second Amendment will reduce the Buyer's potential stranded costs; and WHEREAS, at the request of Buyer, Seller is entering into a loan agreement (the "Bond Financing Agreement") with the Finance Authority of Maine ("FAME") to provide a loan to Seller pursuant to FAME's electric rate stabilization loan program, as defined in 10 M.R.S.A. Section963-A (7-A), by issuing bonds (the "New Bonds") to refinance and replace the existing loan provided to Seller from certain bonds issued by the Town of Orrington, Maine (the "Old Bonds"), which Old Bonds financed a portion of the construction of the Facility; and WHEREAS, this Amendment is being executed and delivered contingent upon the closing of the refinancing referred to in the preceding paragraph (the "Closing"); and WHEREAS, delivery of the New Bonds shall be conclusive evidence that the Closing has occurred; and WHEREAS, Seller, Municipal Review Committee, Inc. (the "MRC") and Buyer have approved the Bond Financing Agreement and the Trust Indenture (the "Trust Indenture") to be entered into as of the Closing between FAME and The Chase Manhattan Bank, as the trustee for the New Bonds (the "Bond Trustee"), pursuant to which the Bond Trustee will receive specified payments from Seller and Buyer at Closing to fund certain reserves held in trust by the Bond Trustee under the Trust Indenture; and WHEREAS, all Charter Municipalities are members of the MRC which is the designated agent for the Charter Municipalities and the Amending Charter Municipalities; and WHEREAS, Seller and Buyer understand that the Amending Charter Municipalities will receive certain benefits as a result of this Second Amendment and related transactions, and intend that the MRC shall be an express third party beneficiary hereunder for the benefit of the Amending Charter Municipalities to the extent provided herein; and WHEREAS, Buyer intends to issue warrants to the MRC or its designees for the benefit of Amending Charter Municipalities at the Closing; and WHEREAS, the MRC and Buyer are separately entering into an agreement as of the Closing regarding certain operating reports about the Facility to be prepared periodically by the MRC for which Buyer shall pay Forty Thousand Dollars ($40,000.00) annually (subject to annual adjustment in accordance with changes in the "CPI-U," so-called, published by the United States Bureau of Labor Statistics), payable Ten Thousand Dollar ($10,000.00) quarterly in advance; NOW THEREFORE, in consideration of the mutual covenants and promises set forth herein, and the consent of the MRC and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Seller and Buyer agree as follows: 1. It is the express intent of Seller and Buyer that the MRC possess an enforceable benefit for the Amending Charter Municipalities as a third party beneficiary of the Agreement. As a third party beneficiary, it is intended that the MRC shall have standing in any suit, bankruptcy, reorganization, arbitration, mediation or dispute resolution proceeding arising out of the Agreement to enforce any rights granted to the Amending Charter Municipalities or the MRC hereunder, or to seek damages from the breach of any obligations owed to the Amending Charter Municipalities and the MRC hereunder. 2. The following provisions of the Agreement shall not be materially amended, supplemented or modified without the express written consent of the MRC, which consent shall not be unreasonably withheld or delayed: Article II: Term Article III: Sale of Power Article IV: Billing and Payment Article IX: Deliveries Article XI: Continuity of Service Article XIII: Breach Article XIV: Assignment Article XV: Indemnity Article XVI: Liability, Dedication Article XVII: Force Majeure Article XIX: Representations and Warranties of the Parties Article XXI: Waiver Article XXIII: Choice of Law The First and Second Amendments to the Agreement 3. At the Closing Buyer will (a) deposit with the Bond Trustee for the benefit of Seller Six Million Dollars ($6,000,000.00) for credit to the Capital Reserve Fund established under the Trust Indenture and (b) a one-time payment of $151,393, which is an amount equal to interest at the rate of eight percent (8%) per annum on One Million Dollars ($1,000,000.00) over sixteen quarter-year periods, discounted at the same interest rate (together, the "Closing Payment"), for deposit under the terms of the Trust Indenture. Buyer will pay to the Bond Trustee for the benefit of Seller and the MRC, as agent for the Amending Charter Municipalities additional cash payments in the aggregate amount of Four Million Dollars ($4,000,000), for deposit under the terms of the Trust Indenture, in quarterly payments of Two Hundred Fifty Thousand Dollars ($250,000.00) due on the first day of each quarter for each quarter or part thereof (January, April, July, October) which occurs after the Closing, commencing October 1, 1998, until sixteen such quarterly payments have been made (the "Installment Payments," and together with the Closing Payment, the "Bangor Hydro Payments," and each date of such payment, the "Payment Date"). All Bangor Hydro Payments shall be made to the Bond Trustee but if a Bond Trustee is not serving in such capacity on a particular Payment Date then the Bangor Hydro Payment shall be made as Seller and the MRC shall direct Buyer in writing. The obligation of Buyer to make each of the Bangor Hydro Payments shall be absolute and unconditional, and Buyer shall not be entitled to any abatement, diminution, set off, abrogation, waiver or modification thereof nor to any termination of the Agreement by any reason whatsoever except as expressly provided herein, regardless of any rights of set-off, recoupment or counterclaim that Buyer might otherwise have against Seller or any other party or parties and regardless of any contingency, act of God, event or cause whatsoever. 4. Buyer and Seller each agree to pay by wire transfer of same day funds on the Closing Date or as soon thereafter as practicable, one-half (1/2) of the third party costs of restructuring the financing described above including but not limited to costs related to: (a) extension and termination of the letter of credit securing the Old Bonds, (b) retirement of the Old Bonds, (c) issuance of the New Bonds and loans related thereto, (d) obtaining FAME approval; and all of certain costs of other entities including, but not limited to, reasonable expenses incurred by the MRC, the Town of Orrington, bond counsel, FAME, the existing letter of credit banks, and the Bond Trustee, and their respective counsel, with credit for such portion thereof that may have been advanced by Buyer or Seller, respectively, prior to the Closing. 5. Subject to the satisfaction of the requirements contained in Paragraph 6 below, Seller shall pay to Buyer one-third (1/3) of any Distributable Cash (as such term is defined in the Second Waste Disposal Agreement), which is available for distribution in accordance with the Trust Agreement, but only to the extent permitted under the Bond Financing Agreement (each such payment a "Bangor Hydro Distribution"), as more particularly described in the Surplus Cash Agreement of even date herewith among Buyer, Seller, and the MRC. 6. Seller's obligation to make a Bangor Hydro Distribution to Buyer is contingent on Buyer making each Installment Payment as and when due and performing each of its other obligations set forth in the Agreement, as amended hereby. In the event of a payment default hereunder by Buyer, Buyer shall immediately rebate to the Bond Trustee (or if none, to Seller) all Bangor Hydro Distributions previously received by Buyer in an amount equal to the sum of the Bangor Hydro Payments (together with any other payments due hereunder) which have not been paid when due, which rebate amount (net of costs of collection) shall be distributed fifty percent (50%) to Seller and fifty percent (50%) to the MRC, as agent for the Amending Charter Municipalities. 7. In the event that Buyer's obligation to make payments under the Agreement is avoided, or otherwise reduced in amount, or delayed, or impaired in a bankruptcy, reorganization, or similar proceeding, Seller's obligation to make any further Bangor Hydro Distributions shall cease, and Seller and the MRC shall have valid and enforceable claims against Buyer in the aggregate amount of all Bangor Hydro Distributions previously paid to Buyer, net of any reserves funded by Bangor Hydro Payments and held by the Bond Trustee under the Trust Indenture, in addition to any other claims for damages or other claims Seller and the MRC may possess. 8. Article V of the Agreement is amended as follows: To Seller: Penobscot Energy Recovery Company, Limited Partnership P.O. Box 96 Industrial Way Orrington, ME 04475 Attention: Plant Manager With a copy (which shall not constitute notice) to: Gordon F. Grimes, Esq. Bernstein, Shur, Sawyer & Nelson 100 Middle Street P.O. Box 9729 Portland, ME 04104-5029 To Buyer: President Bangor Hydro-Electric Company 33 State Street P. O. Box 932 Bangor, ME 04402-0932 To Municipal Review Committee, Inc.: Municipal Review Committee, Inc. Eastern Maine Development Corporation One Cumberland Place Bangor, ME 04401 With a copy (which shall not constitute notice) to: Thomas M. Brown, Esq. Eaton, Peabody, Bradford & Veague, P.A. Fleet Center - Exchange Street P.O. Box 1210 Bangor, ME 04402-1210 Monthly billing statements to Buyer shall be sent to: Assistant Treasurer Bangor Hydro-Electric Company 33 State Street P.O. Box 932 Bangor, ME 04402-0932 9. Article IX of the Agreement is amended by adding the following at the end of the last sentence of the first paragraph: "...until such time as retail access is permitted pursuant to 35-A M.R.S.A. Section3202 or any successor statute. Thereafter Seller may (without waiving any right to continue buying from Buyer from time to time thereafter) purchase such power as permitted by statute, which shall be delivered by Buyer if requested by Seller." 10. Article XIII(A) of the Agreement is amended by adding the following at the end of the first sentence: "...and in addition Buyer shall pay all Bangor Hydro Payments set forth in paragraphs 6 and 7 of the Second Amendment hereof." 11. Article XIV of the Agreement is amended by adding the following words after the words "that the Trustee to which this Agreement is assigned" in the second sentence thereof: "..., upon taking possession of the Facility after foreclosure of its liens on and security interests therein,... 12. Article XV of the Agreement is amended by inserting the following immediately after the first sentence thereof: "Notwithstanding the above, no limitation appearing in the preceding sentence will be construed to limit payment of the amounts described in paragraphs 6 and 7 of the Second Amendment hereof." 13. Article XVI is amended by adding the following to Section A: "...except obligations to the MRC as provided for herein." 14. Article XXIV of the Agreement is amended by adding the following: "...other than such terms and conditions referred to in documents referred to in the Second Amendment." Buyer acknowledges that any default under the Agreement referenced in the 16th WHEREAS clause hereof shall not be a default under this Agreement or in any way excuse performance by Buyer hereunder or give rise to any rights of offset with respect thereto. In all other respects, the Agreement shall remain in full force and effect in accordance with the terms thereof, and Seller and Buyer each hereby reaffirms its respective obligations thereunder. IN WITNESS WHEREOF, Seller and Buyer have caused this Amendment No. 2 to be executed as of the date first written above. WITNESS: Penobscot Energy Recovery Company, Limited Partnership By: PERC Management Company Limited Partnership, its General Partner By: PERC, Inc. its General Partner ________________________________ By:_____________________________________ Name: Martin J. Sergi Its President By: Energy National, Inc., its General Partner ________________________________ By:_____________________________________ Name: Michael J. Young Its Secretary Bangor Hydro-Electric Company _________________________________ By:______________________________________ Name: Carroll R. Lee Its Senior Vice President and Chief Operating Officer EX-10 10 EXHIBIT 10(d) AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT ------------------- DATED as of June 29, 1998 between BANGOR HYDRO-ELECTRIC COMPANY and BANKBOSTON, N.A., as Administrative Agent for the Banks and FLEET NATIONAL BANK, as Documentation Agent for the Banks TABLE OF CONTENTS Section 1. DEFINITIONS AND RULES OF INTERPRETATION. . Section 1.1. Definitions. Section 1.2. Rules of Interpretation. Section 2. THE REVOLVING CREDIT FACILITY. . . . . . . Section 2.1. Commitment to Lend. Section 2.2. Commitment Fee. Section 2.3. Reduction of Total Commitment. Section 2.4. The Revolving Credit Notes. Section 2.5. Interest on Revolving Credit Loans. Section 2.6. Requests for Revolving Credit Loans. Section 2.7. Conversion Options. Section 2.7.1. Conversion to Different Type of Revolving Credit Loan. Section 2.7.2. Continuation of Type of Revolving Credit Loan. Section 2.7.3. LIBOR Rate Loans. Section 2.8. Funds for Revolving Credit Loan. Section 2.8.1. Funding Procedures. Section 2.8.2. Advances by Administrative Agent. Section 2.9. Settlements. Section 2.9.1. General. Section 2.9.2. Failure to Make Funds Available. Section 2.9.3. No Effect on Other Banks. Section 3. REPAYMENT OF THE REVOLVING CREDIT LOANS. . Section 3.1. Maturity. Section 3.2. Mandatory Repayments of Revolving Credit Loans. Section 3.3. Optional Repayments of Revolving Credit Loans. Section 4. THE TERM LOAN. . . . . . . . . . . . . . . Section 4.1. Commitment to Lend. Section 4.2. The Term Notes. Section 4.3. Schedule of Installment Payments of Principal of Term Loan. Section 4.4. Optional Prepayment of Term Loan. Section 4.5. Mandatory Prepayment of Term Loan. Section 4.6. Interest on Term Loan. Section 4.6.1. Interest Rates. Section 4.6.2. Notification by Borrower. Section 4.6.3. Amounts, etc. Section 5. LETTERS OF CREDIT. . . . . . . . . . . . . Section 5.1. Letter of Credit Commitments. Section 5.1.1. Commitment to Issue Letters of Credit. Section 5.1.2. Letter of Credit Applications. Section 5.1.3. Terms of Letters of Credit. Section 5.1.4. Reimbursement Obligations of Banks. Section 5.1.5. Participations of Banks. Section 5.2. Reimbursement Obligation of the Borrower. Section 5.3. Letter of Credit Payments. Section 5.4. Obligations Absolute. Section 5.5. Reliance by Issuer. Section 5.6. Letter of Credit Fee. Section 6. CERTAIN GENERAL PROVISIONS. . . . . . . . . Section 6.1. Fees. Section 6.2. Funds for Payments. Section 6.2.1. Payments to Administrative Agent. Section 6.2.2. No Offset, etc. Section 6.3. Computations. Section 6.4. Inability to Determine LIBOR Rate. Section 6.5. Illegality. Section 6.6. Additional Costs, etc. Section 6.7. Capital Adequacy. Section 6.8. Certificate. Section 6.9. Indemnity. Section 6.10. Interest After Default. Section 6.10.1. Overdue Amounts. Section 6.10.2. Replacement Banks; Mitigation. Section 7. COLLATERAL SECURITY. . . . . . . . . . . . Section 7.1. Security of Borrower. Section 8. REPRESENTATIONS AND WARRANTIES. . . . . . . Section 8.1. Corporate Authority. Section 8.1.1. Incorporation; Good Standing. Section 8.1.2. Authorization. Section 8.1.3. Enforceability. Section 8.2. Governmental Approvals. Section 8.3. Title to Properties; Leases. Section 8.4. Financial Statements and Projections. Section 8.4.1. Fiscal Year. Section 8.4.2. Financial Statements. Section 8.4.3. Projections. Section 8.5. No Material Changes, etc. Section 8.6. Franchises, Patents, Copyrights, etc. Section 8.7. Litigation. Section 8.8. No Materially Adverse Contracts, etc. Section 8.9. Compliance with Other Instruments, Laws, etc. Section 8.10. Tax Status. Section 8.11. No Event of Default. Section 8.12. Holding Company and Investment Company Acts. Section 8.13. Absence of Financing Statements, etc. Section 8.14. Perfection of Security Interest. Section 8.15. Certain Transactions. Section 8.16. Compliance with ERISA. Section 8.17. Regulations U and X. Section 8.18. Subsidiaries, etc. Section 8.19. Year 2000 Problem. Section 8.20. Disclosure. Section 8.21. Collateral Bonds; Mortgages. Section 9. AFFIRMATIVE COVENANTS OF THE BORROWER. . . Section 9.1. Punctual Payment. Section 9.2. Maintenance of Office. Section 9.3. Records and Accounts. Section 9.4. Financial Statements, Certificates and Information. Section 9.5. Notices. Section 9.5.1. Defaults. Section 9.5.2. Environmental Events. Section 9.5.3. Notification of Claim against Collateral Bonds. Section 9.5.4. Notice of Litigation and Judgments. Section 9.6. Corporate Existence; Maintenance of Properties. Section 9.7. Insurance. Section 9.8. Taxes. Section 9.9. Inspection of Properties and Books, etc. Section 9.9.1. General. Section 9.9.2. Communications with Accountants. Section 9.10. Compliance with Laws, Contracts, Licenses, and Permits. Section 9.11. Employee Benefit Plans. Section 9.12. Use of Proceeds. Section 9.13. Bank Accounts. Section 9.14. Further Assurances. Section 9.15. Sale of Generating Assets. Section 9.16. Status. Section 10. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. Section 10.1. Restrictions on Indebtedness. Section 10.2. Restrictions on Liens. Section 10.3. Restrictions on Investments. Section 10.4. Merger, Consolidation and Disposition of Assets. Section 10.4.1. Mergers and Acquisitions. Section 10.4.2. Disposition of Assets. Section 10.5. Sale and Leaseback. Section 10.6. Employee Benefit Plans. Section 10.7. Business Activities. Section 10.8. Fiscal Year. Section 10.9. Transactions with Affiliates. Section 10.10. Negative Pledges. Section 10.11. Nuclear Acquisitions. Section 10.12. Amendments to Bonds, Etc.. Section 11. FINANCIAL COVENANTS OF THE BORROWER. . . . Section 11.1. Consolidated Net Worth. Section 11.2. Consolidated Fixed Charge Ratio. Section 11.3. Consolidated Total Debt Ratio. Section 11.4. Dividends. Section 12. CLOSING CONDITIONS. . . . . . . . . . . . Section 12.1. Loan Documents. Section 12.2. Certified Copies of Charter Documents. Section 12.3. Corporate Action. Section 12.4. Incumbency Certificate. Section 12.5. Validity of Liens. Section 12.6. Registration and Amendment of Collateral Bonds. Section 12.7. Supplemental Indenture. Section 12.8. Certificates of Insurance. Section 12.9. Opinions of Counsel. Section 12.10. Payment of Fees. Section 12.11. Chase Assignment. Section 12.12. Certified Approvals. Section 12.13. Asset Sale. Section 12.14. Financial Statements and Projections. Section 13. CONDITIONS TO ALL BORROWINGS. . . . . . . Section 13.1. Representations True; No Event of Default. Section 13.2. No Legal Impediment. Section 13.3. Governmental Regulation. Section 13.4. Proceedings and Documents. Section 14. EVENTS OF DEFAULT; ACCELERATION; ETC. . . Section 14.1. Events of Default and Acceleration. Section 14.2. Termination of Commitments. Section 14.3. Remedies. Section 14.4. Distribution of Collateral Bonds Proceeds. Section 15. SETOFF. . . . . . . . . . . . . . . . . . Section 16. THE AGENTS. . . . . . . . . . . . . . . . Section 16.1. Authorization. Section 16.2. Employees and Administrative Agents. Section 16.3. No Liability. Section 16.4. No Representations. Section 16.5. Payments. Section 16.5.1. Payments to Administrative Agent. Section 16.5.2. Distribution by Administrative Agent. Section 16.5.3. Delinquent Banks. Section 16.6. Holders of Notes. Section 16.7. Indemnity. Section 16.8. Administrative Agent as Bank. Section 16.9. Resignation. Section 16.10. Notification of Defaults and Events of Default. Section 16.11. Duties in the Case of Enforcement. Section 17. EXPENSES AND INDEMNIFICATION. . . . . . . Section 17.1. Expenses. Section 17.2. Indemnification. Section 17.3. Survival. Section 18. SURVIVAL OF COVENANTS, ETC. . . . . . . . Section 19. ASSIGNMENT AND PARTICIPATION. . . . . . . Section 19.1. Conditions to Assignment by Banks. Section 19.2. Certain Representations and Warranties; Limitations; Covenants. Section 19.3. Register. Section 19.4. New Notes. Section 19.5. Participations. Section 19.6. Disclosure. Section 19.7. Assignee or Participant Affiliated with the Borrower. Section 19.8. Miscellaneous Assignment Provisions. Section 19.9. Assignment by Borrower. Section 20. NOTICES, ETC. . . . . . . . . . . . . . . Section 21. GOVERNING LAW. . . . . . . . . . . . . . . Section 22. HEADINGS. . . . . . . . . . . . . . . . . Section 23. COUNTERPARTS. . . . . . . . . . . . . . . Section 24. ENTIRE AGREEMENT, ETC. . . . . . . . . . . Section 25. WAIVER OF JURY TRIAL. . . . . . . . . . . Section 26. CONSENTS, AMENDMENTS, WAIVERS, ETC. . . . Section 27. SEVERABILITY. . . . . . . . . . . . . . . SCHEDULES AND EXHIBITS Exhibit A -- Form of Revolving Credit Note Exhibit B -- Form of Loan Request Exhibit C -- Form of Term Note Exhibit D -- Form of Compliance Certificate Exhibit E -- Form of Assignment & Acceptance Exhibit F -- Forms of Opinions Exhibit G -- Guarantees of the Borrower Exhibit H Bangor Energy Intercreditor Agreement Schedule 1 -- Banks Schedule 8.2 -- Governmental Approvals Schedule 8.7 -- Litigation Schedule 8.18 -- Subsidiaries Schedule 10.1 -- Existing Indebtedness Schedule 10.2 -- Existing Liens Schedule 10.3 -- Existing Investments AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT ------------------- This AMENDED AND RESTATED REVOLVING CREDIT AND TERM LOAN AGREEMENT is made as of June 29 1998, by and among BANGOR HYDRO-ELECTRIC COMPANY (the "Borrower"), a Maine corporation having its principal place of business at 33 State Street, Bangor, Maine 04402, and BANKBOSTON, N.A., a national banking association, and the other lending institutions listed on SCHEDULE 1 and BANKBOSTON, N.A. as administrative agent for itself and such other lending institutions (the "Administrative Agent") and FLEET NATIONAL BANK, a national banking association, as documentation agent (the "Documentation Agent" and collectively with the Administrative Agent, the "Agents". WHEREAS, pursuant to a certain Credit Agreement dated as of June 30, 1995 (the "Chase Credit Agreement"), among the Borrower, the banks named therein (such banks collectively referred to as the "Prior Lenders"), and Chase Manhattan Bank as the administrative agent thereof (the "Prior Administrative Agent"), the Prior Lenders have made revolving credit and term loans to the Borrower (the "Original Loans"); WHEREAS, the Prior Lenders have assigned all of their rights, interests and obligations under the Chase Credit Agreement to the Banks pursuant the Assignment and Acceptance dated as of June 29, 1998 between the Prior Lenders and the Banks; WHEREAS, the Borrower, the Agents and the Banks wish to amend and restate the Chase Credit Agreement as set forth below; NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged (these recitals being an integral part of this Credit Agreement), the Borrower, the Banks and the Agents hereby agree that, as of the date hereof, the Chase Credit Agreement shall be hereby amended and restated in its entirety; the Commitments and Commitment Percentages of the Banks shall be as set forth on Schedule 1 hereto; and BKB shall become the new Administrative Agent under the amended and restated Credit Agreement. Section 1. DEFINITIONS AND RULES OF INTERPRETATION. Section 1.1. Definitions. The following terms shall have the meanings set forth in this Section 1 or elsewhere in the provisions of this Credit Agreement referred to below: ACQUISITION DOCUMENTS. Collectively, the Rate Schedule Agreement dated March 31, 1998, the Unitil Contract Assignment dated March 31, 1998, the Service Agreement dated March 31, 1998 and all agreements and documents delivered pursuant thereto under the Bangor Energy Loan Agreement. AFFILIATE. Any Person that would be considered to be an affiliate of the Borrower under Rule 144(a) of the Rules and Regulations of the Securities and Exchange Commission, as in effect on the date hereof, if the Borrower were issuing securities. ADMINISTRATIVE AGENT. BankBoston, N.A. acting as administrative agent for the Banks. ADMINISTRATIVE AGENT'S HEAD OFFICE. The Administrative Agent's head office located at 100 Federal Street, Boston, Massachusetts 02110, or at such other location as the Administrative Agent may designate by notice to the Borrower from time to time. ADMINISTRATIVE AGENT'S SPECIAL COUNSEL. Bingham Dana LLP or such other counsel as may be approved by the Administrative Agent. APPLICABLE L/C RATE. With respect to each Letter of Credit on any date, the applicable letter of credit rate as set forth in the Pricing Table based upon the Status on such date. APPLICABLE MARGIN. With respect to each Loan on any date, the applicable interest rate margin as set forth in the Pricing Table based upon the Status on such date. ASSIGNMENT AND ACCEPTANCE. See Section 19.1. BALANCE SHEET DATE. December 31, 1997. BANGOR ENERGY GUARANTY. The Guaranty dated as of March 31, 1998, by the Borrower in favor of BKB, as agent for itself and the other banks party to the Bangor Energy Loan Agreement. BANGOR ENERGY INTERCREDITOR AGREEMENT. The Intercreditor Agreement dated as of March 31, 1998, between BKB, as agent for the Bangor Energy Banks, and the Administrative Agent as successor to the Prior Administrative Agent, as agent for the Banks, and attached hereto as EXHIBIT H. BANGOR ENERGY LIENS. The liens of Bangor Energy Resale, Inc. permitted under the Bangor Energy Loan Agreement. BANGOR ENERGY LOAN AGREEMENT. The Term Loan Agreement dated as of March 31, 1998, as amended from time to time, among Bangor Energy Resale, Inc., the banks named therein (the "Bangor Energy Banks") and BKB, as agent for the Bangor Energy Banks. BANGOR ENERGY STOCK PLEDGE. The Amended and Restated Stock Pledge Agreement dated as of the date hereof, between the Borrower and the Administrative Agent on behalf of the Banks. Banks. BKB and the other lending institutions listed on Schedule 1 hereto and any other Person who becomes an assignee of any rights and obligations of a Bank pursuant to Section 19. Base Rate. The higher of (i) the annual rate of interest announced from time to time by BKB at its head office in Boston, Massachusetts, as its "base rate" and (ii) one-half of one percent (1/2%) above the Federal Funds Effective Rate. For the purposes of this definition, "Federal Funds Effective Rate" shall mean for any day, the rate per annum equal to the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from three funds brokers of recognized standing selected by the Administrative Agent. Base Rate Loans. Revolving Credit Loans and all or any portion of the Term Loan bearing interest calculated by reference to the Base Rate plus the Applicable Margin. BKB. BankBoston, N.A., a national banking association, in its individual capacity. Borrower. As defined in the preamble hereto. Business Day. Any day on which banking institutions in Boston, Massachusetts, are open for the transaction of banking business and, in the case of LIBOR Rate Loans, also a day which is a LIBOR Business Day. Capitalized Leases. Leases under which the Borrower or any of its Subsidiaries is the lessee or obligor, the discounted future rental payment obligations under which are required to be capitalized on the balance sheet of the lessee or obligor in accordance with GAAP. Chase Assignment. The Assignment and Acceptance dated as of June 29, 1998 among the Prior Lenders and the Banks. Chase L/C. The Irrevocable Letter of Credit Number T- 247520 granted by Chase Manhattan Bank (as successor to Chemical Bank) on August 2, 1995, in favor of State Street Bank and Trust Company, as trustee. Chase Revolver: The revolving credit loans made to the Borrower pursuant to the Credit Agreement dated as of June 30, 1995, among the Borrower, the banks named therein, Chase Manhattan Bank as administrative agent, and Fleet Bank of Maine and BKB, as co-agents. Chase Term Loan: The term loan made to the Borrower pursuant to the Credit Agreement dated as of June 30, 1995, among the Borrower, the banks named therein, Chase Manhattan Bank as administrative agent, and Fleet Bank of Maine and BKB, as co-agents. Closing Date. The first date on which the conditions set forth in Section 12 have been satisfied and any Revolving Credit Loans and the Term Loan are to be made or any Letter of Credit is to be issued hereunder. Co-Arrangers. BancBoston Securities Inc. and Fleet National Bank. Code. The Internal Revenue Code of 1986. Collateral Bonds. The amended non-interest bearing First Mortgage Bonds, Collateral Series due 2001, of the Borrower in the original principal amount of $82,500,000, pledged to the Administrative Agent for the benefit of the Banks. Commission. The Public Utilities Commission of the State of Maine. Commitment. With respect to each Bank, the amount set forth on Schedule 1 hereto as the amount of such Bank's commitment to make Revolving Credit Loans to, and to participate in the issuance, extension and renewal of Letters of Credit for the account of, the Borrower, as the same may be reduced from time to time; or if such commitment is terminated pursuant to the provisions hereof, zero. Commitment Fee Rate. The applicable commitment fee rate as set forth in the Pricing Table based upon the Status on the date the commitment fee is due. Commitment Percentage. With respect to each Bank, the percentage set forth on Schedule 1 hereto as such Bank's percentage of the aggregate Commitments of all of the Banks. Company Balance Sheet Date. March 31, 1998. Consolidated or consolidated. With reference to any term defined herein, shall mean that term as applied to the accounts of the Borrower and its Subsidiaries, consolidated in accordance with GAAP. Consolidated Adjusted EBIT. For any period, Consolidated Net Income (or deficit) for such period (a) plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income (or deficit) for such period, the sum of (i) total income tax expense and (ii) interest expense, amortization or write-off of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans) and (b) minus, to the extent included in Consolidated Net Income (or deficit) for such period, the amount which would appear in accordance with GAAP on a statement of income of the Borrower and its consolidated Subsidiaries opposite the heading "Allowance for equity funds used during construction" (or any similar item). Consolidated Fixed Charges. For any period, (a) total cash interest expense (including that attributable to capital lease obligations) of the Borrower and its Subsidiaries for such period with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries, including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers acceptance financing, determined on a consolidated basis in accordance with GAAP plus (b) to the extent subtracted in arriving at the amount described in clause (a) above, the amount which would appear in accordance with GAAP on a statement of income of the Borrower and its consolidated Subsidiaries for such period opposite the heading "Allowance for borrowed funds used during construction" (or any similar item). Consolidated Fixed Charge Ratio. For any period, the ratio of (a) Consolidated Adjusted EBIT for such period to (b) Consolidated Fixed Charges for such period. Consolidated Net Income (or deficit). For any period, the net income (or loss) of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary) in which the Borrower or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation or any law, rule, regulation or order applicable to such Subsidiary. Consolidated Net Worth. At any date of determination, with respect to any Person, (a) the stated capital of the common stock of such Person plus (b) additional paid-in capital in respect of such common stock plus (c) retained earnings (or minus accumulated deficit) of such Person, determined on a consolidated basis in accordance with GAAP. Consolidated Total Capitalization. At any date of determination, the sum of (a) Consolidated Total Debt at such date, and (b) the aggregate of all amounts which would appear in accordance with GAAP on a balance sheet of the Borrower and its consolidated Subsidiaries at such date opposite the headings "Common stock investment", "Preferred stock" and "Preferred stock subject to mandatory redemption" or any similar items. Consolidated Total Debt. At any date of determination, the aggregate principal amount of all Indebtedness which would appear in accordance with GAAP on a balance sheet of the Borrower and its consolidated Subsidiaries at such date. Consolidated Total Debt Ratio. At any date of determination, the ratio of (a) Consolidated Total Debt at such date to (b) Consolidated Total Capitalization at such date. Conversion Request. A notice given by the Borrower to the Administrative Agent of the Borrower's election to convert or continue a Loan in accordance with Section 2.7. Credit Agreement. This Amended and Restated Revolving Credit and Term Loan Agreement, including the Schedules and Exhibits hereto, as amended from time to time. Default. See Section 14.1. Delinquent Bank. See Section 16.5.3. Disclosure Documents. The Borrower s financial statements referred to in Section 8.4.2, 1997 Form 10-K and report to stockholders for the first quarter of 1998. Distribution. The declaration or payment of any dividend on or in respect of any shares of any class of capital stock of the Borrower, other than dividends payable solely in shares of common stock of the Borrower; the purchase, redemption, or other retirement of any shares of any class of capital stock of the Borrower, directly or indirectly through a Subsidiary of the Borrower or otherwise; the return of capital by the Borrower to its shareholders as such; or any other distribution on or in respect of any shares of any class of capital stock of the Borrower. Documentation Agent. Fleet National Bank, acting as documentation agent for the Banks. Dollars or $. Dollars in lawful currency of the United States of America. Domestic Lending Office. Initially, the office of each Bank designated as such in Schedule 1 hereto; and, after such Bank has provided the Borrower and the Administrative Agent with written notice of a change in the office, such other office of such Bank, if any, located within the United States that will be making or maintaining Base Rate Loans. Drawdown Date. The date on which any Revolving Credit Loan or the Term Loan is made or is to be made, and the date on which any Revolving Credit Loan is converted or continued in accordance with Section 2.7 or all or any portion of the Term Loan is converted or continued in accordance with Section 4.6. Eligible Assignee. Any of (i) a commercial bank organized under the laws of the United States, or any State thereof or the District of Columbia, and having total assets in excess of $1,000,000,000; (ii) a savings and loan association or savings bank organized under the laws of the United States, or any State thereof or the District of Columbia, and having a net worth of at least $100,000,000, calculated in accordance with GAAP; (iii) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (the "OECD"), or a political subdivision of any such country, and having total assets in excess of $1,000,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of the OECD; (iv) the central bank of any country which is a member of the OECD; and (v) if, but only if, any Event of Default has occurred and is continuing, any other bank, insurance company, commercial finance company or other financial institution or Person (not being an individual), in each case approved by the Administrative Agent, such approval not to be unreasonably withheld. Employee Benefit Plan. Any employee benefit plan within the meaning of Section 3(3) of ERISA maintained of contributed to by the Borrower or any ERISA Affiliate, other than a Guaranteed Pension Plan or a Multiemployer Plan. Environmental Laws. Any judgment, decree, order, law, license, rule or regulation pertaining to environmental matters, including those arising under the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986, the Federal Water Pollution Control Act, the Federal Clean Air Act, the Toxic Substances Control Act or any United States, state or local or any other statute, regulation, ordinance, order or decree relating to health, safety or the environment. ERISA. The Employee Retirement Income Security Act of 1974. ERISA Affiliate. Any Person which is treated as a single employer with the Borrower under Section 414 of the Code. ERISA Reportable Event. A reportable event with respect to a Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the regulations promulgated thereunder. Event of Default. See Section 14.1. FAME Loan Agreement. The Loan Agreement dated as of June 1, 1995, between the Borrower and the Finance Authority of Maine. First Mortgage Bonds. The bonds issued pursuant to the Mortgage. General and Refunding Mortgage Indenture. The General and Refunding Mortgage Indenture and Deed of Trust dated June 1, 1995, as amended and supplemented as of the Closing Date, between the Company and Chase Manhattan Bank, as trustee. GAAP. (i) When used in Section 11, whether directly or indirectly through reference to a capitalized term used therein, means (A) principles that are consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and (B) to the extent consistent with such principles, the accounting practice of the Borrower reflected in its financial statements for the year ended on the Balance Sheet Date, and (ii) when used in general, other than as provided above, means principles that are (A) consistent with the principles promulgated or adopted by the Financial Accounting Standards Board and its predecessors, as in effect from time to time, and (B) consistently applied with past financial statements of the Borrower adopting the same principles, provided that in each case referred to in this definition of "GAAP" a certified public accountant would, insofar as the use of such accounting principles is pertinent, be in a position to deliver an unqualified opinion (other than a qualification regarding changes in GAAP) as to financial statements in which such principles have been properly applied. Generating Asset Transaction(s). The sale of any generating, transmission or power marketing resources assets owned by the Borrower or any of its Subsidiaries or Affiliates resulting in net cash sale proceeds to the Borrower of $500,000 or more on an after tax basis. Guaranteed Pension Plan. Any employee pension benefit plan within the meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate the benefits of which are guaranteed on termination in full or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer Plan. Hazardous Substances. Any hazardous waste, as defined by 42 U.S.C. Section 6903(5), any hazardous substances as defined by 42 U.S.C. Section 9601(14), any pollutant or contaminant as defined by 42 U.S.C. Section 9601(33) or any toxic substance, oil or hazardous materials or other chemicals or substances regulated by any Environmental Laws. Indebtedness. At any date, as to any Person, (a) all indebtedness or other obligations of such Person for borrowed money, for letters of credit opened for the account of such person, or for the deferred purchase price of property or services, or with respect to lease obligations that are required to be capitalized on the balance sheet of such Person in accordance with GAAP, (b) all indebtedness or other obligations of any other Person for borrowed money or for the deferred purchase price of property or services, the payment or collection of which such Person has guaranteed (except by reason of endorsement for collection and endorsements in the ordinary course of business) or in respect of which such Person is liable, contingently or otherwise, including, without limitation, liability by way of agreement to purchase, to provided funds for payment, to supply funds to or otherwise to invest in such other Person, or otherwise to assure a creditor against loss, and (c) all indebtedness or other obligations of any other Person for borrowed money or for the deferred purchase price of property or services secured by (or for which the holder of such indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, deed of trust, pledge, lien security interest or other charge or encumbrance upon or in property (including, without limitation, accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such indebtedness or obligations. It is understood that Interest Rate Protection Agreements and commodities hedge agreement shall not constitute Indebtedness for the purposes of this Credit Agreement. Interest Payment Date. (i) As to any Base Rate Loan, the last day of the calendar month with respect to interest accrued during such calendar month, including, without limitation, the calendar month which includes the Drawdown Date of such Base Rate Loan; and (ii) as to any LIBOR Rate Loan in respect of which the Interest Period is (A) 3 months or less, the last day of such Interest Period and (B) more than 3 months, the date that is 3 months from the first day of such Interest Period and, in addition, the last day of such Interest Period. Interest Period. With respect to each Revolving Credit Loan or all or any relevant portion of the Term Loan, (i) initially, the period commencing on the Drawdown Date of such Loan and ending on the last day of one of the periods set forth below, as selected by the Borrower in a Loan Request or as otherwise required by the terms of this Credit Agreement (A) for any Base Rate Loan, the last day of the calendar month; and (B) for any LIBOR Rate Loan, 1, 2, 3, or 6 months; and (ii) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Revolving Credit Loan or all or such portion of the Term Loan and ending on the last day of one of the periods set forth above, as selected by the Borrower in a Conversion Request; provided that all of the foregoing provisions relating to Interest Periods are subject to the following: (a) if any Interest Period with respect to a LIBOR Rate Loan would otherwise end on a day that is not a LIBOR Business Day, that Interest Period shall be extended to the next succeeding LIBOR Business Day unless the result of such extension would be to carry such Interest Period into another calendar month, in which event such Interest Period shall end on the immediately preceding LIBOR Business Day; (b) if any Interest Period with respect to a Base Rate Loan would end on a day that is not a Business Day, that Interest Period shall end on the next succeeding Business Day; (c) if the Borrower shall fail to give notice as provided in Section 2.7, the Borrower shall be deemed to have requested a conversion of the affected LIBOR Rate Loan to a Base Rate Loan and the continuance of all Base Rate Loans as Base Rate Loans on the last day of the then current Interest Period with respect thereto; (d) any Interest Period relating to any LIBOR Rate Loan that begins on the last LIBOR Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last LIBOR Business Day of a calendar month; and (e) no Interest Period shall extend beyond the Revolving Credit Loan Maturity Date (if comprising a Revolving Credit Loan) or the Term Loan Maturity Date (if comprising the Term Loan or a portion thereof). Interest Rate Protection Agreements. Any interest rate protection agreement, interest rate swap, interest rate cap or other interest rate hedge arrangement entered into with one of the Banks. Investments. All expenditures made and all liabilities incurred (contingently or otherwise) for the acquisition of stock or Indebtedness of, or for loans, advances, capital contributions or transfers of property to, or in respect of any guaranties (or other obligations as described under Indebtedness), or obligations of, any Person. In determining the aggregate amount of Investments outstanding at any particular time: (i) the amount of any Investment represented by a guaranty shall be taken at not less than the principal amount of the obligations guaranteed and still outstanding; (ii) there shall be included as an Investment all interest accrued with respect to Indebtedness constituting an Investment unless and until such interest is paid; (iii) there shall be deducted in respect of each such Investment any amount received as a return of capital (but only by repurchase, redemption, retirement, repayment, liquidating dividend or liquidating distribution); (iv) there shall not be deducted in respect of any Investment any amounts received as earnings on such Investment, whether as dividends, interest or otherwise, except that accrued interest included as provided in the foregoing clause (ii) may be deducted when paid; and (v) there shall not be deducted from the aggregate amount of Investments any decrease in the value thereof. Letter of Credit. See Section 5.1.1. Letter of Credit Application. See Section 5.6. Letter of Credit Fee. See Section 5.1.1. Letter of Credit Participation. See Section 5.1.4. Level I Status. With respect to (i) the Revolving Credit Loans, the Status that exists on any date if on such date the Borrower has a long-term senior secured debt or corporate credit rating (whether or not published) of BBB or better by S&P and, unless the Borrower is then unrated by Moody s, Baa1 or better by Moody's, and (ii) the Term Loan, the Status that exists on any date if on such date the Borrower has a long-term senior secured debt or corporate credit rating (whether or not published) of BBB- or better by S&P and, unless the Borrower is then unrated by Moody's, Baa2 or better by Moody's. Level II Status. With respect to (i) the Revolving Credit Loans, the Status that exists on any date if on such date Level I Status does not exist, and the Borrower has a long-term senior secured debt or corporate credit rating (whether or not published) of BBB- or better by S&P and, unless the Borrower is then unrated by Moody's, Baa2 or better by Moody's, and (ii) the Term Loan, the Status that exists on any date if on such date Level I Status does not exist, and the Borrower has a long-term senior secured debt or corporate credit rating (whether or not published) of BB- or better by S&P and, unless the Borrower is then unrated by Moody's, Baa3 or better by Moody's. Level III Status. With respect to (i) the Revolving Credit Loans, the Status that exists on any date if on such date neither Level I nor Level II Status exists, and the Borrower has a long-term senior secured debt or corporate credit rating (whether or not published) of BB+ or better by S&P and, unless the Borrower is then unrated by Moody's, Ba1 or better by Moody's, and (ii) the Term Loan, the Status that exists on any date if on such date neither Level I nor Level II Status exists, or if the Status is lower than Level II. Level IV Status. With respect to the Revolving Credit Loans, the Status that exists on any date if on such date neither Level I nor Level II Status nor Level III Status exists, and the Borrower has a long-term senior secured debt or corporate credit rating (whether or not published) of BB or better by S&P and, unless the Borrower is then unrated by Moody's, Ba2 or better by Moody's. Level V Status. With respect to the Revolving Credit Loans, the Status that exists on any date if on such date neither Level I nor Level II Status nor Level III Status not Level IV Status exists, and the Borrower has a long-term senior secured debt or corporate credit rating (whether or not published) of BB- or better by S&P and, unless the Borrower is then unrated by Moody's, Ba3 or better by Moody's. Level VI Status. With respect to the Revolving Credit Loans, the Status that exists on any date if on such date neither Level I nor Level II Status nor Level III Status nor Level IV nor Level V Status exists. LIBOR Business Day. Any day on which commercial banks are open for international business (including dealings in Dollar deposits) in Boston and London or such other eurodollar interbank market as may be selected by the Administrative Agent in its sole discretion acting in good faith. LIBOR Lending Office. Initially, the office of each Bank designated as such in Schedule 1 hereto; thereafter, and, after such Bank has provided the Borrower and the Agent with written notice of a change in the office, such other office of such Bank, that shall be making or maintaining LIBOR Rate Loans. LIBOR Rate. For any Interest Period with respect to a LIBOR Rate Loan, the rate of interest equal to (a) the rate determined by the Agent at which Dollar deposits for such Interest Period are offered based on information presented on Telerate Page 3750 as of 11:00 a.m. London time on the second LIBOR Business Day prior to the first day of such Interest Period, divided by (b) a number equal to 1.00 minus the LIBOR Reserve Rate, if applicable. LIBOR Rate Loans. Revolving Credit Loans and all or any portion of the Term Loan bearing interest calculated by reference to the LIBOR Rate plus the Applicable Margin. LIBOR Reserve Rate. For any day with respect to a LIBOR Rate Loan, the maximum rate (expressed as a decimal) at which any Bank subject thereto would be required to maintain reserves under Regulation D of the Board of Governors of the Federal Reserve System (or any successor or similar regulations relating to such reserve requirements) against "Eurocurrency Liabilities" (as that term is used in Regulation D), if such liabilities were outstanding. The LIBOR Reserve Rate shall be adjusted automatically on and as of the effective date of any change in the LIBOR Reserve Rate. Loan Documents. This Credit Agreement, the Notes, the Letter of Credit Applications, the Letters of Credit, the Security Documents, the Chase Assignment and the Bangor Energy Intercreditor Agreement. Loan Request. See Section 2.6. Loans. The Revolving Credit Loans and the Term Loan. Majority Banks. As of any date, the Banks holding at least sixty-six and two-thirds percent (66 2/3%) of the outstanding principal amount of the Notes on such date; and if no such principal is outstanding, the Banks whose aggregate Commitments constitutes at least sixty-six and two-thirds percent (66 2/3%) of the Total Commitment. Maximum Drawing Amount. The maximum aggregate amount that the beneficiaries may at any time draw under outstanding Letters of Credit, as such aggregate amount may be reduced from time to time pursuant to the terms of the Letters of Credit. Moody's. Moody's Investors Service, Inc. and its successors. Mortgage. The Mortgage and Deed of Trust of the Borrower to City Bank Farmers Trust Company (of which Citibank, N.A., a national banking association, is the successor), as trustee, dated as of July 1, 1936, as amended and supplemented as of the Closing Date. Multiemployer Plan. Any multiemployer plan within the meaning of Section 3(37) of ERISA maintained or contributed to by the Borrower or any ERISA Affiliate. Notes. The Term Notes and the Revolving Credit Notes. Obligations. All indebtedness, obligations and liabilities of the Borrower to any of the Banks and the Administrative Agent, individually or collectively, existing on the date of this Credit Agreement or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, in each case arising or incurred under this Credit Agreement or any of the other Loan Documents or in respect of any of the Loans made or Reimbursement Obligations incurred or any of the Notes, Letter of Credit Application, Letter of Credit or other instruments at any time evidencing any thereof, or Interest Rate Protection Agreements. outstanding. With respect to the Loans, the aggregate unpaid principal thereof as of any date of determination. PBGC. The Pension Benefit Guaranty Corporation created by Section 4002 of ERISA and any successor entity or entities having similar responsibilities. PERC. Penobscot Energy Recovery Company Limited Partnership, a Maine limited partnership. PERC Closing Date. The date on which the principal agreements relating to the PERC Restructuring shall have been executed by each of the parties thereto. PERC Contract. The power purchase agreement dated as of June 21, 1984, as amended, between the Borrower and PERC. PERC Restructuring. The restructuring of the power purchase agreement between the Borrower and PERC in connection with the refinancing by PERC of its waste-to- energy facility in Orrington, Maine through a series of agreements among the Borrower, PERC and certain other parties thereto, pursuant to the terms of which the Borrower will become obligated to make an initial payment to PERC of $6,000,000 on the PERC Closing Date. Permitted Liens. Liens, security interests and other encumbrances permitted by Section 10.2. Person. Any individual, corporation, partnership, trust, unincorporated association, business, or other legal entity, and any government or any governmental agency or political subdivision thereof. Pledge Agreement. The Amended and Restated Bond Pledge and Security Agreement dated as of the date hereof, executed by the Borrower in favor of the Administrative Agent for the benefit of the Banks. Pollution Control Bonds. The revenue bonds designated The Industrial Development Authority of the State of New Hampshire Variable Rate Demand Pollution Control Revenue Bonds (Bangor Hydro-Electric Company Project) Series 1983. Preferred Stock. Any and all shares, interest, participations or other equivalents (however designated) of capital stock of a corporation, excluding common stock, any and all equivalent ownership interests in a Person (other than a corporation), and any and all warrants or options to purchase any of the foregoing. Pricing Table: Revolving Credit Loans Term Loan | | | | Status Applicable Applicable| Applicable Applicable| Applicable Commitment LIBOR Base Rate LIBOR Base Rate L/C Rate Fee Rate Margin Margin Margin Margin (per (per annum) (per (per (per (per annum) annum) annum) annum) annum) Level I 0.75% 0.00% 2.00% 1.00 0.75% 0.25% Level II 1.25% 0.25% 2.50% 1.50% 1.25% 0.375% Level III 1.75% 0.75% 3.50% 1.50% 1.75% 0.50% Level IV 2.00% 1.00% 2.00% 0.50% Level V 2.50% 1.50% 2.50% 0.625% Level VI 3.50% 1.50% 3.50% 0.625% Rate Schedule Agreement. That certain agreement dated October 30, 1997 by and between the Borrower and Bangor Energy Resale, Inc. pursuant to which the Borrower has agreed to provide energy to Bangor Energy Resale, Inc. in connection with the servicing of the Unitil Contract. Record. The grid attached to a Note, or the continuation of such grid, or any other similar record, including computer records, maintained by any Bank with respect to any Loan referred to in such Note. Register. See Section 19.3. Reimbursement Obligation. The Borrower's obligation to reimburse the Administrative Agent and the Banks on account of any drawing under any Letter of Credit as provided in Section 5.2. Related Fund. With respect to any Bank which is a fund that invests in loans, any other fund that invests in loans and is managed by the same investment advisor as such Bank or by an Affiliate of such Bank. Release. Shall have the meaning specified in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section Section 9601 et seq. ("CERCLA") and the term "Disposal" (or "Disposed") shall have the meaning specified in the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section Section 6901 et seq. ("RCRA") and regulations promulgated thereunder; provided, that in the event that either CERCLA or RCRA is amended so as to broaden the meaning of any term defined thereby, such broader meaning shall apply as of the effective date of such amendment and provided further, that to the extent that the laws of the State of Maine establish a meaning for "Release" or "Disposal" which is broader than specified in either CERCLA or RCRA, such broader meaning shall apply. Revolving Credit Loan Maturity Date. June 29, 2001. Revolving Credit Loans. Revolving credit loans made or to be made by the Banks to the Borrower pursuant to Section 2. Revolving Credit Note Record. A Record with respect to a Revolving Credit Note. Revolving Credit Notes. See Section 2.4. S & P. Standard & Poor s Ratings Group and its successors. Second Mortgage Bonds. The bonds issued pursuant to the General and Refunding Mortgage Indenture. Security Documents. The Pledge Agreement, the Mortgage, the Supplemental Indenture, the Collateral Bonds and the Bangor Energy Stock Pledge and all other instruments and documents, required to be executed or delivered pursuant to any Security Document. Service Agreement. The Service Agreement dated as of March 31, 1998 between the Borrower and Bangor Energy Resale, Inc., as amended. Settlement. The making or receiving of payments, in immediately available funds, by the Banks, to the extent necessary to cause each Bank's actual share of the outstanding amount of Revolving Credit Loans (after giving effect to any Loan Request) to be equal to such Bank's Commitment Percentage of the outstanding amount of such Revolving Credit Loans (after giving effect to any Loan Request), in any case where, prior to such event or action, the actual share is not so equal. Settlement Amount. See Section 2.9.1. Settlement Date. (a) The Drawdown Date relating to any Loan Request, (b) Friday of each week, or if a Friday is not a Business Day, the Business Day immediately following such Friday, (c) at the option of the Administrative Agent, on any Business Day following a day on which the account officers of the Administrative Agent active upon the Borrower's account become aware of the existence of an Event of Default, (d) any Business Day on which the amount of Revolving Credit Loans outstanding from BKB plus BKB's Commitment Percentage of the sum of the Maximum Drawing Amount and any Unpaid Reimbursement Obligations is equal to or greater than BKB's Commitment Percentage of the Total Commitment, (e) the Business Day immediately following any Business Day on which the amount of Revolving Credit Loans outstanding increases or decreases by more than $500,000 as compared to the previous Settlement Date, (f) any day on which any conversion of a Base Rate Loan to a LIBOR Rate Loan occurs, or (g) any Business Day on which (i) the amount of outstanding Revolving Credit Loans decreases and (ii) the amount of the Administrative Agent's Revolving Credit Loans outstanding equals zero Dollars ($0). Settling Bank. See Section 2.9.1. Status. The existence of Level I Status, Level II Status, Level III Status, Level IV Status, Level V Status or Level VI Status, as the case may be. Subsidiary. Any corporation, association, trust, or other business entity of which the designated parent shall at any time own directly or indirectly through a Subsidiary or Subsidiaries at least a majority (by number of votes) of the outstanding Voting Stock. Substantial Part. With respect to any Person, refers to assets sold, leased or otherwise transferred at any time on or after January 1, 1997 pursuant to any one or more transactions (whether or not related) which, in the aggregate (including any assets sold, leased or otherwise transferred by any Subsidiary of such Person during such period), have a fair market value, or yield gross proceeds, in excess of $5,000,000 in any a calendar year, excluding any such transaction in the ordinary course of business pursuant to which equipment is sold and replaced with equipment having an equivalent or higher value within 30 days after such sale. It is understood that (i) the transfer of the Unitil Contract pursuant to the Unitil Contract Assignment shall be disregarded for the purposes of this definition, but that contract rights and receivables shall otherwise constitute "assets" for the purposes of this definition, and (ii) the Generating Asset Transactions shall be disregarded for the purposes of this definition. Supplemental Indenture. See Section 12.7. Telerate Page 3750. The display of interest settlement rates (commonly known as LIBOR) for Dollar deposits in London designated as Page 3750 (British Bankers Association (BBA) LIBOR rates) of the Dow Jones Markets Services (or any other page that replaces Page 3750 and displays BBA London interbank settlement rates for Dollar deposits). Term Loan. The term loan made or to be made by the Banks to the Borrower on the Closing Date in the aggregate principal amount of $45,000,000 subject to the conditions stated in Section 4.1. Term Loan Exposure. With respect to each Bank, the amount set forth on Schedule 1 hereto as the amount of such Bank's commitment to make Term Loans to the Borrower, as the same may be reduced from time to time; or if such commitment is terminated pursuant to the provisions hereof, zero. Term Loan Percentage. With respect to each Bank, the percentage set forth on Schedule 1 hereto as such Bank's percentage of the aggregate Term Loan Exposure of all of the Banks. Term Loan Maturity Date. June 29, 2000. Term Notes. See Section 4.2. Term Note Record. A Record with respect to a Term Note. Total Commitment. The sum of the Commitments of the Banks, as in effect from time to time. Type. As to any Revolving Credit Loan or all or any portion of the Term Loan, its nature as a Base Rate Loan or a LIBOR Rate Loan. Uniform Customs. With respect to any Letter of Credit, the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500 or any successor version thereto adopted by the Administrative Agent in the ordinary course of its business as a letter of credit issuer and in effect at the time of issuance of such Letter of Credit. Unitil Contract. The Power Sales Agreement between Unitil Power Corp. and the Borrower, dated March 26, 1986 and amended by the Amendment to March 26, 1986 Power Sales Agreement dated April 29, 1993 and the Second Amendment to Power Sales Agreement dated March 1, 1995, which Unitil Contract has been assigned by the Borrower to Bangor Energy Resale, Inc. on or prior to March 31, 1998 pursuant to the Unitil Contract Assignment. Unitil Contract Assignment. The Assignment and Assumption Agreement between the Borrower and Bangor Energy Resale, Inc., dated as of March 31, 1998, pursuant to which the Borrower assigned all of its right, title and obligations under the Unitil Contract to Bangor Energy Resale, Inc. Unpaid Reimbursement Obligation. Any Reimbursement Obligation for which the Borrower does not reimburse the Administrative Agent and the Banks on the date specified in, and in accordance with, Section 5.2. Voting Stock. Stock or similar interests, of any class or classes (however designated), the holders of which are at the time entitled, as such holders, to vote for the election of a majority of the directors (or persons performing similar functions) of the corporation, association, trust or other business entity involved, whether or not the right so to vote exists by reason of the happening of a contingency. Section 1.2. Rules of Interpretation. (a) A reference to any document or agreement shall include such document or agreement as amended, modified or supplemented from time to time in accordance with its terms and the terms of this Credit Agreement. (b) The singular includes the plural and the plural includes the singular. (c) A reference to any law includes any amendment or modification to such law. (d) A reference to any Person includes its permitted successors and permitted assigns. (e) Accounting terms not otherwise defined herein have the meanings assigned to them by GAAP applied on a consistent basis by the accounting entity to which they refer. (f) The words "include", "includes" and "including" are not limiting. (g) All terms not specifically defined herein or by GAAP, which terms are defined in the Uniform Commercial Code as in effect in the State of New York, have the meanings assigned to them therein, with the term "instrument" being that defined under Article 9 of the Uniform Commercial Code. (h) Reference to a particular "Section " refers to that Section of this Credit Agreement unless otherwise indicated. (i) The words "herein", "hereof", "hereunder" and words of like import shall refer to this Credit Agreement as a whole and not to any particular Section or subdivision of this Credit Agreement. (j) Unless otherwise expressly indicated, in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including," the words "to" and "until" each mean "to but excluding," and the word "through" means "to and including." (k) This Credit Agreement and the other Loan Documents may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are, however, cumulative and are to be performed in accordance with the terms thereof. (l) This Credit Agreement and the other Loan Documents are the result of negotiation among, and have been reviewed by counsel to, among others, the Administrative Agent and the Borrower and are the product of discussions and negotiations among all parties. Accordingly, this Credit Agreement and the other Loan Documents are not intended to be construed against the Administrative Agent or any of the Banks merely on account of the Administrative Agent's or any Bank's involvement in the preparation of such documents. Section 2. THE REVOLVING CREDIT FACILITY. Section 2.1. Commitment to Lend. Subject to the terms and conditions set forth in this Credit Agreement, each of the Banks severally agrees to lend to the Borrower and the Borrower may borrow, repay, and reborrow from time to time from the Closing Date up to but not including the Revolving Credit Loan Maturity Date upon notice by the Borrower to the Administrative Agent given in accordance with Section 2.6, such sums as are requested by the Borrower up to a maximum aggregate amount outstanding (after giving effect to all amounts requested) at any one time equal to such Bank's Commitment minus such Bank's Commitment Percentage of the sum of the Maximum Drawing Amount and all Unpaid Reimbursement Obligations, provided that the sum of the outstanding amount of the Revolving Credit Loans (after giving effect to all amounts requested) plus the Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall not at any time exceed the Total Commitment. The Revolving Credit Loans shall be made pro rata in accordance with each Bank's Commitment Percentage. Each request for a Revolving Credit Loan hereunder shall constitute a representation and warranty by the Borrower that the conditions set forth in Section 12 and Section 13, in the case of the initial Revolving Credit Loans to be made on the Closing Date, and Section 13, in the case of all other Revolving Credit Loans, have been satisfied on the date of such request. Section 2.2. Commitment Fee. The Borrower agrees to pay to the Administrative Agent for the accounts of the Banks in accordance with their respective Commitment Percentages a commitment fee calculated at the Commitment Fee Rate on the average daily amount during each calendar quarter or portion thereof from the date hereof to the Revolving Credit Loan Maturity Date by which the Total Commitment minus the sum of the Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceeds the outstanding amount of Revolving Credit Loans during such calendar quarter. The commitment fee shall be payable quarterly in arrears on the first day of each calendar quarter for the immediately preceding calendar quarter commencing on the first such date following the date hereof, with a final payment on the Revolving Credit Maturity Date or any earlier date on which the Commitments shall terminate. Section 2.3. Reduction of Total Commitment. The Borrower shall have the right at any time and from time to time upon five (5) Business Days prior written notice to the Administrative Agent to reduce by $5,000,000 or in integral multiples of $1,000,000 in excess of $5,000,000 or terminate entirely the Total Commitment, whereupon the Commitments of the Banks shall be reduced pro rata in accordance with their respective Commitment Percentages of the amount specified in such notice or, as the case may be, terminated. Promptly after receiving any notice of the Borrower delivered pursuant to this Section 2.3, the Administrative Agent will notify the Banks of the substance thereof. Upon the effective date of any such reduction or termination, the Borrower shall pay to the Administrative Agent for the respective accounts of the Banks the full amount of any commitment fee then accrued on the amount of the reduction. No reduction or termination of the Commitments may be reinstated. Section 2.4. The Revolving Credit Notes. (a) The Revolving Credit Loans shall be evidenced by separate amended and restated promissory notes of the Borrower in substantially the form of Exhibit A hereto (each a "Revolving Credit Note"), dated as of the Closing Date or the effective date of any future assignment made pursuant to Section 19 hereof and completed with appropriate insertions. One Revolving Credit Note shall be payable to the order of each Bank in a principal amount equal to such Bank's Commitment and representing the obligation of the Borrower to pay to such Bank such principal amount or, if less, the outstanding amount of all Revolving Credit Loans made by such Bank, plus interest accrued thereon, as set forth below. The Borrower irrevocably authorizes each Bank to make or cause to be made, at or about the time of the Drawdown Date of any Revolving Credit Loan or at the time of receipt of any payment of principal on such Bank's Revolving Credit Note, an appropriate notation on such Bank's Revolving Credit Note Record reflecting the making of such Revolving Credit Loan or (as the case may be) the receipt of such payment. The outstanding amount of the Revolving Credit Loans set forth on such Bank's Revolving Credit Note Record shall, absent manifest error, be prima facie evidence of the principal amount thereof owing and unpaid to such Bank, but the failure to record, or any error in so recording, any such amount on such Bank's Revolving Credit Note Record shall not limit or otherwise affect the obligations of the Borrower hereunder or under any Revolving Credit Note to make payments of principal of or interest on any Revolving Credit Note when due. (b) Upon receipt of an affidavit of an officer of any Bank as to the loss, theft, destruction or mutilation of such Bank s Revolving Credit Note, and, in the case of any such loss, theft, destruction or mutilation, upon surrender and cancellation of such Revolving Credit Note, the Borrower will issue, in lieu thereof, a replacement Revolving Credit Note for such Bank in the same principal amount thereof and otherwise of like tenor. Section 2.5. Interest on Revolving Credit Loans. Except as otherwise provided in Section 6.10, (a) Each Base Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at the Base Rate plus the Applicable Margin. (b) Each LIBOR Rate Loan shall bear interest for the period commencing with the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at the LIBOR Rate plus the Applicable Margin determined for such Interest Period. (c) The Borrower promises to pay interest on each Revolving Credit Loan in arrears on each Interest Payment Date with respect thereto. Section 2.6. Requests for Revolving Credit Loans. The Borrower shall give to the Administrative Agent written notice in the form of Exhibit B hereto (or telephonic notice confirmed in a writing in the form of Exhibit B hereto) of each Revolving Credit Loan requested hereunder (a "Loan Request") no later than (i) 10:00 a.m.(Boston time) on the Business Day of the proposed Drawdown Date of any Base Rate Loan and (ii) 12:00 noon (Boston time) three (3) LIBOR Business Days prior to the proposed Drawdown Date of any LIBOR Rate Loan. Each such notice shall specify (A) the principal amount of the Revolving Credit Loan requested, (B) the proposed Drawdown Date of such Revolving Credit Loan, (C) in the case of LIBOR Rate Loans the Interest Period for such Revolving Credit Loan and (D) the Type of such Revolving Credit Loan. Promptly upon receipt of any such notice, the Administrative Agent shall notify each of the Banks thereof. Each Loan Request shall be irrevocable and binding on the Borrower and shall obligate the Borrower to accept the Revolving Credit Loan requested from the Banks on the proposed Drawdown Date. Each Loan Request shall be in a minimum aggregate amount of $500,000 or an integral multiple thereof. Section 2.7. Conversion Options. Section 2.7.1. Conversion to Different Type of Revolving Credit Loan. The Borrower may elect from time to time to convert any outstanding Revolving Credit Loan to a Revolving Credit Loan of another Type, provided that (i) with respect to any such conversion of a Revolving Credit Loan to a Base Rate Loan, the Borrower shall give the Administrative Agent at least two (2) Business Days prior written notice of such election; (ii) with respect to any such conversion of a Base Rate Loan to a LIBOR Rate Loan, the Borrower shall give the Administrative Agent at least three (3) LIBOR Business Days prior written notice of such election; (iii) with respect to any such conversion of a LIBOR Rate Loan into a Revolving Credit Loan of another Type, such conversion shall only be made on the last day of the Interest Period with respect thereto and (iv) no Loan may be converted into a LIBOR Rate Loan when any Default or Event of Default has occurred and is continuing or if such conversion is not permitted by Section 2.7.3. On the date on which such conversion is being made each Bank shall take such action as is necessary to transfer its Commitment Percentage of such Revolving Credit Loans to its Domestic Lending Office or its LIBOR Lending Office, as the case may be. All or any part of outstanding Revolving Credit Loans of any Type may be converted into a Revolving Credit Loan of another Type as provided herein, provided that any partial conversion shall be in an aggregate principal amount of $500,000 or an integral multiple thereof. Each Conversion Request relating to the conversion of a Revolving Credit Loan to a LIBOR Rate Loan shall be irrevocable by the Borrower. Section 2.7.2. Continuation of Type of Revolving Credit Loan. Any Revolving Credit Loan of any Type may be continued as a Revolving Credit Loan of the same Type upon the expiration of an Interest Period with respect thereto by compliance by the Borrower with the notice provisions contained in Section 2.7.1; provided that no LIBOR Rate Loan may be continued as such when any Event of Default has occurred and is continuing, but shall be automatically converted to a Base Rate Loan on the last day of the first Interest Period relating thereto ending during the continuance of any Event of Default of which officers of the Administrative Agent active upon the Borrower's account have actual knowledge. In the event that the Borrower fails to provide any such notice with respect to the continuation of any LIBOR Rate Loan as such, then such LIBOR Rate Loan shall be automatically converted to a Base Rate Loan on the last day of such Interest Period. The Administrative Agent shall notify the Banks promptly when any such automatic conversion contemplated by this Section 2.7 is scheduled to occur. Section 2.7.3. LIBOR Rate Loans. Any conversion to or from LIBOR Rate Loans shall be in such amounts and be made pursuant to such elections so that, after giving effect thereto, the aggregate principal amount of all LIBOR Rate Loans having the same Interest Period shall not be less than $500,000 or an integral multiple thereof. Section 2.8. Funds for Revolving Credit Loan. Section 2.8.1. Funding Procedures. Not later than 11:00 a.m. (Boston time) on the proposed Drawdown Date of any Revolving Credit Loans, each of the Banks will make available to the Administrative Agent, at the Administrative Agent's Head Office, in immediately available funds, the amount of such Bank's Commitment Percentage of the amount of the requested Revolving Credit Loans. Upon receipt from each Bank of such amount, and upon receipt of the documents required by Section Section 12 and 13 and the satisfaction of the other conditions set forth therein, to the extent applicable, the Administrative Agent will make available to the Borrower the aggregate amount of such Revolving Credit Loans made available to the Administrative Agent by the Banks. The failure or refusal of any Bank to make available to the Administrative Agent at the aforesaid time and place on any Drawdown Date the amount of its Commitment Percentage of the requested Revolving Credit Loans shall not relieve any other Bank from its several obligation hereunder to make available to the Administrative Agent the amount of such other Bank's Commitment Percentage of any requested Revolving Credit Loans. Section 2.8.2. Advances by Administrative Agent. The Administrative Agent may, unless notified to the contrary by any Bank prior to a Drawdown Date, assume that such Bank has made available to the Administrative Agent on such Drawdown Date the amount of such Bank's Commitment Percentage of the Revolving Credit Loans to be made on such Drawdown Date, and the Administrative Agent may (but it shall not be required to), in reliance upon such assumption, make available to the Borrower a corresponding amount. If any Bank makes available to the Administrative Agent such amount on a date after such Drawdown Date, such Bank shall pay to the Administrative Agent on demand an amount equal to the product of (i) the average computed for the period referred to in clause (iii) below, of the weighted average interest rate paid by the Administrative Agent for federal funds acquired by the Administrative Agent during each day included in such period, times (ii) the amount of such Bank's Commitment Percentage of such Revolving Credit Loans, times (iii) a fraction, the numerator of which is the number of days that elapse from and including such Drawdown Date to the date on which the amount of such Bank's Commitment Percentage of such Revolving Credit Loans shall become immediately available to the Administrative Agent, and the denominator of which is 365. A statement of the Administrative Agent submitted to such Bank with respect to any amounts owing under this paragraph shall be prima facie evidence of the amount due and owing to the Administrative Agent by such Bank. If the amount of such Bank's Commitment Percentage of such Revolving Credit Loans is not made available to the Administrative Agent by such Bank within three (3) Business Days following such Drawdown Date, the Administrative Agent shall be entitled to recover such amount from the Borrower on demand, with interest thereon at the rate per annum applicable to the Revolving Credit Loans made on such Drawdown Date. Section 2.9. Settlements. Section 2.9.1. General. On each Settlement Date, the Administrative Agent shall, not later than 11:00 a.m. (Boston time), give telephonic or facsimile notice (i) to the Banks and the Borrower of the respective outstanding amount of Revolving Credit Loans made by the Administrative Agent on behalf of the Banks from the immediately preceding Settlement Date through the close of business on the prior day and the amount of any LIBOR Rate Loans to be made (following the giving of notice pursuant to Section 2.6.1(ii)) on such date pursuant to a Loan Request and (ii) to the Banks of the amount (a "Settlement Amount") that each Bank (a "Settling Bank") shall pay to effect a Settlement of any Revolving Credit Loan. A statement of the Administrative Agent submitted to the Banks and the Borrower or to the Banks with respect to any amounts owing under this Section 2.9 shall be prima facie evidence of the amount due and owing. Each Settling Bank shall, not later than 3:00 p.m. (Boston time) on such Settlement Date, effect a wire transfer of immediately available funds to the Administrative Agent in the amount of the Settlement Amount for such Settling Bank. All funds advanced by any Bank as a Settling Bank pursuant to this Section 2.9 shall for all purposes be treated as a Revolving Credit Loan made by such Settling Bank to the Borrower and all funds received by any Bank pursuant to this Section 2.9 shall for all purposes be treated as repayment of amounts owed with respect to Revolving Credit Loans made by such Bank. In the event that any bankruptcy, reorganization, liquidation, receivership or similar cases or proceedings in which the Borrower is a debtor prevent a Settling Bank from making any Revolving Credit Loan to effect a Settlement as contemplated hereby, such Settling Bank will make such dispositions and arrangements with the other Banks with respect to such Revolving Credit Loans, either by way of purchase of participations, distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Bank's share of the outstanding Revolving Credit Loans being equal, as nearly as may be, to such Bank's Commitment Percentage of the outstanding amount of the Revolving Credit Loans. Section 2.9.2. Failure to Make Funds Available. The Administrative Agent may, unless notified to the contrary by any Settling Bank prior to a Settlement Date, assume that such Settling Bank has made or will make available to the Administrative Agent on such Settlement Date the amount of such Settling Bank's Settlement Amount, and the Administrative Agent may (but it shall not be required to), in reliance upon such assumption, make available to the Borrower a corresponding amount. If any Settling Bank makes available to the Administrative Agent such amount on a date after such Settlement Date, such Settling Bank shall pay to the Administrative Agent on demand an amount equal to the product of (i) the average computed for the period referred to in clause (iii) below, of the weighted average interest rate paid by the Administrative Agent for federal funds acquired by the Administrative Agent during each day included in such period, times (ii) the amount of such Settlement Amount, times (iii) a fraction, the numerator of which is the number of days that elapse from and including such Settlement Date to the date on which the amount of such Settlement Amount shall become immediately available to the Administrative Agent, and the denominator of which is 360. A statement of the Administrative Agent submitted to such Settling Bank with respect to any amounts owing under this Section 2.9.2 shall be prima facie evidence of the amount due and owing to the Administrative Agent by such Settling Bank. If such Settling Bank's Settlement Amount is not made available to the Administrative Agent by such Settling Bank within three (3) Business Days following such Settlement Date, the Administrative Agent shall be entitled to recover such amount from the Borrower on demand, with interest thereon at the rate per annum applicable to the Revolving Credit Loans as of such Settlement Date. Section 2.9.3. No Effect on Other Banks. The failure or refusal of any Settling Bank to make available to the Administrative Agent at the aforesaid time and place on any Settlement Date the amount of such Settling Bank's Settlement Amount shall not (i) relieve any other Settling Bank from its several obligations hereunder to make available to the Administrative Agent the amount of such other Settling Bank's Settlement Amount or (ii) impose upon any Bank, other than the Settling Bank so failing or refusing, any liability with respect to such failure or refusal or otherwise increase the Commitment of such other Bank. Section 3. REPAYMENT OF THE REVOLVING CREDIT LOANS. Section 3.1. Maturity. The Borrower promises to pay on the Revolving Credit Loan Maturity Date, and there shall become absolutely due and payable on the Revolving Credit Loan Maturity Date, all of the Revolving Credit Loans outstanding on such date, together with any and all accrued and unpaid interest thereon. Section 3.2. Mandatory Repayments of Revolving Credit Loans. If at any time the sum of the outstanding amount of the Revolving Credit Loans, the Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceeds the Total Commitment, then the Borrower shall immediately pay the amount of such excess to the Administrative Agent for the respective accounts of the Banks for application: first, to any Unpaid Reimbursement Obligations; second, to the Revolving Credit Loans; and third, to provide to the Administrative Agent cash collateral for Reimbursement Obligations as contemplated by Section 5.2(b) and (c). Each payment of any Unpaid Reimbursement Obligations or prepayment of Revolving Credit Loans shall be allocated among the Banks, in proportion, as nearly as practicable, to each Reimbursement Obligation or (as the case may be) the respective unpaid principal amount of each Bank's Revolving Credit Note, with adjustments to the extent practicable to equalize any prior payments or repayments not exactly in proportion. Section 3.3. Optional Repayments of Revolving Credit Loans. The Borrower shall have the right, at its election, to repay the outstanding amount of the Revolving Credit Loans, as a whole or in part, without premium or penalty (but subject to Section 6.9), provided that the Borrower shall give the Administrative Agent, no later than 10:00 a.m., Boston time, at least five (5) Business Days prior written notice of any proposed prepayment pursuant to this Section 3.3 of Base Rate Loans, and five (5) LIBOR Business Days notice of any proposed prepayment pursuant to this Section 3.3 of LIBOR Rate Loans, in each case specifying the proposed date of prepayment of Revolving Credit Loans and the principal amount to be prepaid. Each such partial prepayment of the Revolving Credit Loans shall be in an integral multiple of $500,000, shall be accompanied by the payment of accrued interest on the principal prepaid to the date of prepayment and shall be applied, in the absence of instruction by the Borrower, first to the principal of Base Rate Loans and then to the principal of LIBOR Rate Loans, at the Administrative Agent's option. Each partial prepayment shall be allocated among the Banks, in proportion, as nearly as practicable, to the respective unpaid principal amount of each Bank's Revolving Credit Note, with adjustments to the extent practicable to equalize any prior repayments not exactly in proportion. Section 4. THE TERM LOAN. Section 4.1. Commitment to Lend. Subject to the terms and conditions set forth in this Credit Agreement, each Bank agrees to lend to the Borrower on the Closing Date the amount listed on Schedule 1 hereto of the principal amount of $45,000,000, provided that if the PERC Closing Date shall not have occurred on or prior to the Closing Date, $6,000,000 of such amount will be withheld and will be provided to the Borrower on the PERC Closing Date, provided that the Administrative Agent receives evidence that the PERC Restructuring will be on terms substantially the same as those set forth in the Borrower s 1997 annual report, and provided further that the PERC Closing Date will occur no later than December 31, 1998. If the PERC Restructuring has not occurred on such terms by December 31, 1998, the principal amount stated above will be automatically reduced to $39,000,000. Section 4.2. The Term Notes. (a) The Term Loan shall be evidenced by separate amended and restated promissory notes of the Borrower in substantially the form of Exhibit C hereto (each a "Term Note"), dated the Closing Date or the effective date of any future assignment made pursuant to Section 19 hereof and completed with appropriate insertions. One Term Note shall be payable to the order of each Bank in a principal amount equal to such Bank's Term Loan Exposure set forth on Schedule 1 and representing the obligation of the Borrower to pay to such Bank such principal amount. The Borrower irrevocably authorizes each Bank to make or cause to be made a notation on such Bank's Term Note Record reflecting the original principal amount of such Bank's Term Loan Exposure and, at or about the time of such Bank's receipt of any principal payment on such Bank's Term Note, an appropriate notation on such Bank's Term Note Record reflecting such payment. The aggregate unpaid amount set forth on such Bank's Term Note Record shall, absent manifest error, be prima facie evidence of the principal amount thereof owing and unpaid to such Bank, but the failure to record, or any error in so recording, any such amount on such Bank's Term Note Record shall not affect the obligations of the Borrower hereunder or under any Term Note to make payments of principal of and interest on any Term Note when due. Notwithstanding the foregoing, the final principal payment shall be adjusted to reflect any amount not advanced to the Borrower. (b) Upon receipt of an affidavit of an officer of any Bank as to the loss, theft, destruction or mutilation of such Bank's Term Note, and, in the case of any such loss, theft, destruction or mutilation, upon surrender and cancellation of such Term Note, the Borrower will issue, in lieu thereof, a replacement Term Note for such Bank in the same principal amount thereof and otherwise of like tenor. Section 4.3. Schedule of Installment Payments of Principal of Term Loan. The Borrower promises to pay to the Administrative Agent for the account of the Banks the principal amount of the Term Loan in three (3) consecutive payments of $3,000,000, such installments to be due and payable on September 30, 1999, December 31, 1999, and March 31, 2000, with a final payment on the Term Loan Maturity Date in an amount equal to the unpaid balance of the Term Loan. Section 4.4. Optional Prepayment of Term Loan. The Borrower shall have the right at any time to prepay the Term Notes on or before the Term Loan Maturity Date, as a whole, or in part, upon not less than three (3) Business Days prior written notice to the Administrative Agent, without premium or penalty, provided that (i) each partial prepayment shall be in the principal amount of $5,000,000 or in integral multiples of $1,000,000 in excess thereof, and (ii) each partial prepayment shall be allocated among the Banks, in proportion, as nearly as practicable, to the respective outstanding amount of each Bank's Term Note, with adjustments to the extent practicable to equalize any prior prepayments not exactly in proportion. Any prepayment of principal of the Term Loan shall include all interest accrued to the date of prepayment and shall be applied against the scheduled installments of principal due on the Term Loan in the inverse order of maturity. No amount repaid with respect to the Term Loan may be reborrowed. Section 4.5. Mandatory Prepayments of Term Loan. Upon the closing of a Generating Asset Transaction, the net cash proceeds thereof received by the Borrower or any of its Subsidiaries shall be used to prepay the Term Loan. Any prepayment of principal of the Term Loan shall include all interest accrued to the date of prepayment and shall be applied against the scheduled installments of principal due on the Term Loan in the inverse order of maturity. Section 4.6. Interest on Term Loan. Section 4.6.1. Interest Rates. Except as otherwise provided in Section 6.10, the Term Loan shall bear interest during each Interest Period relating to all or any portion of the Term Loan at the following rates, provided that no interest shall accrue on the $6,000,000 holdback until the Banks have advanced such amount: (a) To the extent that all or any portion of the Term Loan bears interest during such Interest Period at the Base Rate, the Term Loan or such portion shall bear interest during such Interest Period at the Base Rate plus the Applicable Margin. (b) To the extent that all or any portion of the Term Loan bears interest during such Interest Period at the LIBOR Rate, the Term Loan or such portion shall bear interest during such Interest Period at the LIBOR Rate plus the Applicable Margin. The Borrower promises to pay interest on the Term Loan or any portion thereof outstanding during each Interest Period in arrears on each Interest Payment Date applicable to such Interest Period. Section 4.6.2. Notification by Borrower. The Borrower shall notify the Administrative Agent, such notice to be irrevocable, at least three (3) LIBOR Business Days prior to the Drawdown Date of the Term Loan if all or any portion of the Term Loan is to bear interest at the LIBOR Rate. After the Term Loan has been made, the provisions of Section 2.7 shall apply mutatis mutandis with respect to all or any portion of the Term Loan so that the Borrower may have the same interest rate options with respect to all or any portion of the Term Loan as it would be entitled to with respect to the Revolving Credit Loans. Section 4.6.3. Amounts, etc. Any portion of the Term Loan bearing interest at the LIBOR Rate relating to any Interest Period shall be in the amount of $500,000 or an integral multiple thereof. No Interest Period relating to the Term Loan or any portion thereof bearing interest at the LIBOR Rate shall extend beyond the date on which a regularly scheduled installment payment of the principal of the Term Loan is to be made unless a portion of the Term Loan at least equal to the amount of such installment payment has an Interest Period ending on such date or is then bearing interest at the Base Rate. Section 5. LETTERS OF CREDIT. Section 5.1. Letter of Credit Commitments. Section 5.1.1. Commitment to Issue Letters of Credit. Subject to the terms and conditions hereof and the execution and delivery by the Borrower of a letter of credit application on the Administrative Agent's customary form (a "Letter of Credit Application"), the Administrative Agent on behalf of the Banks and in reliance upon the agreement of the Banks set forth in Section 5.1.4 and upon the representations and warranties of the Borrower contained herein, agrees, in its individual capacity, to issue, extend and renew for the account of the Borrower one or more standby or documentary letters of credit (individually, a "Letter of Credit"), in such form as may be requested from time to time by the Borrower and agreed to by the Administrative Agent; provided, however, that, after giving effect to such request, (a) the sum of the aggregate Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall not exceed $15,000,000 at any one time and (b) the sum of (i) the Maximum Drawing Amount on all Letters of Credit, (ii) all Unpaid Reimbursement Obligations, and (iii) the amount of all Revolving Credit Loans outstanding shall not exceed the Total Commitment. Any Letter of Credit requested by the Borrower hereunder shall not be required to be issued by the Administrative Agent earlier than (x) three Business Days after its receipt of a Letter of Credit Application therefor in the case of Letters of Credit issued in support of the Pollution Control Revenue Bonds or (y) one Business Day after its receipt of a Letter of Credit Application therefor in the case of Letters of Credit issued in connection with fuel hedge contracts, and all such other certificates, documents and other papers and information relating thereto. Section 5.1.2. Letter of Credit Applications. Each Letter of Credit Application shall be completed to the satisfaction of the Administrative Agent. In the event that any provision of any Letter of Credit Application shall be inconsistent with any provision of this Credit Agreement, then the provisions of this Credit Agreement shall, to the extent of any such inconsistency, govern. Section 5.1.3. Terms of Letters of Credit. Each Letter of Credit issued, extended or renewed hereunder shall, among other things, (i) provide for the payment of sight drafts for honor thereunder when presented in accordance with the terms thereof and when accompanied by the documents described therein, and (ii) have an expiry date no later than the Revolving Credit Loan Maturity Date. Each Letter of Credit so issued, extended or renewed shall be subject to the Uniform Customs. Section 5.1.4. Reimbursement Obligations of Banks. Each Bank severally agrees that it shall be absolutely liable, without regard to the occurrence of any Default or Event of Default or any other condition precedent whatsoever, to the extent of such Bank's Commitment Percentage, to reimburse the Administrative Agent on demand for the amount of each draft paid by the Administrative Agent under each Letter of Credit to the extent that such amount is not reimbursed by the Borrower pursuant to Section 5.2 (such agreement for a Bank being called herein the "Letter of Credit Participation" of such Bank). Section 5.1.5. Participations of Banks. Each such payment made by a Bank shall be treated as the purchase by such Bank of a participating interest in the Borrower's Reimbursement Obligation under Section 5.2 in an amount equal to such payment. Each Bank shall share in accordance with its participating interest in any interest which accrues pursuant to Section 5.2. Section 5.2. Reimbursement Obligation of the Borrower. In order to induce the Administrative Agent to issue, extend and renew each Letter of Credit and the Banks to participate therein, the Borrower hereby agrees to reimburse or pay to the Administrative Agent, for the account of the Administrative Agent or (as the case may be) the Banks, with respect to each Letter of Credit issued, extended or renewed by the Administrative Agent hereunder, (a) except as otherwise expressly provided in Section 5.2(b) and (c), and upon notice thereof from the Administrative Agent, on each date that any draft presented under such Letter of Credit is honored by the Administrative Agent, or the Administrative Agent otherwise makes a payment with respect thereto, (i) the amount paid by the Administrative Agent under or with respect to such Letter of Credit, and (ii) the amount of any taxes, fees, charges or other costs and expenses whatsoever incurred by the Administrative Agent or any Bank in connection with any payment made by the Administrative Agent or any Bank under, or with respect to, such Letter of Credit, (b) upon the reduction (but not termination) of the Total Commitment to an amount less than the Maximum Drawing Amount, an amount equal to such difference, which amount shall be held by the Administrative Agent for the benefit of the Banks and the Administrative Agent as cash collateral for all Reimbursement Obligations, and (c) upon the termination of the Total Commitment, or the acceleration of the Reimbursement Obligations with respect to all Letters of Credit in accordance with Section 14, an amount equal to the then Maximum Drawing Amount on all Letters of Credit, which amount shall be held by the Administrative Agent for the benefit of the Banks and the Administrative Agent as cash collateral for all Reimbursement Obligations. Each such payment shall be made to the Administrative Agent at the Administrative Agent's Head Office in immediately available funds. Interest on any and all amounts remaining unpaid by the Borrower under this Section 5.2 at any time from the date such amounts become due and payable (whether as stated in this Section 5.2, by acceleration or otherwise) until payment in full (whether before or after judgment) shall be payable to the Administrative Agent on demand at the rate specified in Section 6.10 for overdue principal on the Revolving Credit Loans. Section 5.3. Letter of Credit Payments. If any draft shall be presented or other demand for payment shall be made under any Letter of Credit, the Administrative Agent shall promptly notify the Borrower of the date and amount of the draft presented or demand for payment and of the date and time when it expects to pay such draft or honor such demand for payment. If the Borrower fails to reimburse the Administrative Agent as provided in Section 5.2 on or before the date that such draft is paid or other payment is made by the Administrative Agent, the Administrative Agent may at any time thereafter notify the Banks of the amount of any such Unpaid Reimbursement Obligation. No later than 3:00 p.m. (Boston time) on the Business Day next following the receipt of such notice, each Bank shall make available to the Administrative Agent, at the Administrative Agent's Head Office, in immediately available funds, such Bank's Commitment Percentage of such Unpaid Reimbursement Obligation, together with an amount equal to the product of (i) the average, computed for the period referred to in clause (iii) below, of the weighted average interest rate paid by the Administrative Agent for federal funds acquired by the Administrative Agent during each day included in such period, times (ii) the amount equal to such Bank's Commitment Percentage of such Unpaid Reimbursement Obligation, times (iii) a fraction, the numerator of which is the number of days that elapse from and including the date the Administrative Agent paid the draft presented for honor or otherwise made payment to the date on which such Bank's Commitment Percentage of such Unpaid Reimbursement obligation shall become immediately available to the Administrative Agent, and the denominator of which is 360. The responsibility of the Administrative Agent to the Borrower and the Banks shall be only to determine that the documents (including each draft) delivered under each Letter of Credit in connection with such presentment shall be in conformity in all material respects with such Letter of Credit. Section 5.4. Obligations Absolute. The Borrower's obligations under this Section 5 shall be absolute and unconditional under any and all circumstances and irrespective of the occurrence of any Default or Event of Default or any condition precedent whatsoever or any setoff, counterclaim or defense to payment which the Borrower may have or have had against the Administrative Agent, any Bank or any beneficiary of a Letter of Credit. The Borrower further agrees with the Administrative Agent and the Banks that the Administrative Agent and the Banks shall not be responsible for, and the Borrower's Reimbursement Obligations under Section 5.2 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even if such documents should in fact prove to be in any or all respects invalid, fraudulent or forged, or any dispute between or among the Borrower, the beneficiary of any Letter of Credit or any financing institution or other party to which any Letter of Credit may be transferred or any claims or defenses whatsoever of the Borrower against the beneficiary of any Letter of Credit or any such transferee. The Administrative Agent and the Banks shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except to the extent resulting from the gross negligence or willful misconduct on the part of the Administrative Agent or any of the Banks. The Borrower agrees that any action taken or omitted by the Administrative Agent or any Bank under or in connection with each Letter of Credit and the related drafts and documents, if done in good faith, shall be binding upon the Borrower and shall not result in any liability on the part of the Administrative Agent or any Bank to the Borrower, except to the extent resulting from the gross negligence or willful misconduct on the part of the Administrative Agent or any of the Banks. Section 5.5. Reliance by Issuer. To the extent not inconsistent with Section 5.4, the Administrative Agent shall be entitled to rely, and shall be fully protected in relying upon, any Letter of Credit, draft, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel, independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Credit Agreement unless it shall first have received such advice or concurrence of the Majority Banks as it reasonably deems appropriate or it shall first be indemnified to its reasonable satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Credit Agreement in accordance with a request of the Majority Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Banks and all future holders of the Revolving Credit Notes or of a Letter of Credit Participation. Section 5.6. Letter of Credit Fee. The Borrower shall, on the date of issuance or any extension or renewal of any Letter of Credit pay a fee (in each case, a "Letter of Credit Fee") to the Administrative Agent (i) in respect of each standby Letter of Credit an amount equal to the Applicable L/C Rate of the face amount of such standby Letter of Credit, plus an amount equal to one-eighth percent (1/8%) per annum of the face amount of such standby Letter of Credit which shall be for the account of the Administrative Agent, as a fronting fee, and the balance of which Letter of Credit Fee shall be for the accounts of the Banks in accordance with their respective Commitment Percentages. In respect of each Letter of Credit, the Borrower shall also pay to the Administrative Agent for the Administrative Agent's own account, at such other time or times as such charges are customarily made by the Administrative Agent, the Administrative Agent's customary issuance, amendment, negotiation or document examination and other administrative fees as in effect from time to time. Section 5.7. Letter of Credit Standard of Care. The Borrower agrees that any action taken or omitted by the Administrative Agent under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York, shall be binding on the Borrower and shall not result in any liability of the Administrative Agent to the Borrower. Section 6. CERTAIN GENERAL PROVISIONS. Section 6.1. Fees. The Borrower agrees to pay to the Administrative Agent, for the account of the Administrative Agent and the Documentation Agent, all fees at the times and in the amounts set forth the fee letter dated June 1, 1998 among the Borrower, the Administrative Agent, the Documentation Agent and BancBoston Securities Inc. (the "Fee Letter"). Section 6.2. Funds for Payments. Section 6.2.1. Payments to Administrative Agent. All payments of principal, interest, Reimbursement Obligations, commitment fees, Letter of Credit Fees and any other amounts due hereunder or under any of the other Loan Documents shall be made to the Administrative Agent, for the respective accounts of the Banks and the Administrative Agent, at the Administrative Agent's Head Office or at such other location in the Boston, Massachusetts, area that the Administrative Agent may from time to time designate in a notice to the Borrower, in each case in immediately available funds. Section 6.2.2. No Offset, etc. All payments by the Borrower hereunder and under any of the other Loan Documents shall be made without recoupment, setoff or counterclaim and free and clear of and without deduction for any income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions, withholdings, now or hereafter imposed, levied or collected, withheld or assessed by any governmental authority, agency or instrumentality excluding, in the case of the Administrative Agent and each Bank, net income and franchise taxes imposed on the Administrative Agent or such Bank by the jurisdiction under the laws of which such Administrative Agent or such Bank is organized or any political subdivision thereof or taxing or other authority therein unless the Borrower is compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Borrower will pay to the Administrative Agent, for the account of the Banks or (as the case may be) the Administrative Agent, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the Banks or the Administrative Agent to receive the same net amount which the Banks or the Administrative Agent would have received on such due date had no such obligation been imposed upon the Borrower. The Borrower will deliver promptly to the Administrative Agent, to the extent available, certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Document, provided however that the foregoing obligation to pay such additional amounts shall not apply: (i) to any payment to a Bank if such Bank is not, on the date hereof (or on the date it becomes a Bank under this Agreement) and on the date of any change in the lending office of such Bank identified after its execution, entitled by virtue of its status as a non-resident alien to submit either a Form 1001 (relating to such Bank and entitling it to a complete exemption from withholding on all interest to be received by it hereunder in respect of the Loans) or Form 4224 (relating to all interest to be received by such Bank hereunder in respect of Loans) of the U.S. Department of Treasury, or (ii) to any item referred to in the preceding sentence that would not have been imposed but for the failure by such Bank to comply with applicable certification, information, documentation or other reporting requirements concerning the nationality, residence, identity or connections of such Bank with the United States if such compliance is required by statute or regulation of the United States as a precondition to relief or exemption from such item. Section 6.3. Computations. All computations of interest on the Loans and of commitment fees, Letter of Credit Fees or other fees shall, unless otherwise expressly provided herein, be calculated on the basis of a 360-day year for the actual days elapsed, and all computations of interest on any Base Rate Loan shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. Except as otherwise provided in the definition of the term "Interest Period" with respect to LIBOR Rate Loans, whenever a payment hereunder or under any of the other Loan Documents becomes due on a day that is not a Business Day, the due date for such payment shall be extended to the next succeeding Business Day, and interest shall accrue during such extension. The outstanding amount of the Loans as reflected on the Revolving Credit Note Records and the Term Note Records from time to time shall, absent manifest error, be considered correct and binding on the Borrower unless within five (5) Business Days after receipt of any notice by the Administrative Agent or any of the Banks of such outstanding amount, the Administrative Agent or such Bank shall notify the Borrower to the contrary. Section 6.4. Inability to Determine LIBOR Rate. In the event, prior to the commencement of any Interest Period relating to any LIBOR Rate Loan, the Administrative Agent shall determine or be notified by the Majority Banks that adequate and reasonable methods do not exist for ascertaining the LIBOR Rate that would otherwise determine the rate of interest to be applicable to any LIBOR Rate Loan during any Interest Period, the Administrative Agent shall forthwith give notice of such determination (which shall be conclusive and binding on the Borrower and the Banks) to the Borrower and the Banks. In such event (i) any Loan Request or Conversion Request with respect to LIBOR Rate Loans shall be automatically withdrawn and shall be deemed a request for Base Rate Loans, (ii) each LIBOR Rate Loan will automatically, on the last day of the then current Interest Period relating thereto, become a Base Rate Loan, and (iii) the obligations of the Banks to make LIBOR Rate Loans shall be suspended until the Administrative Agent determines that the circumstances giving rise to such suspension no longer exist, whereupon the Administrative Agent shall so notify the Borrower and the Banks. Section 6.5. Illegality. Notwithstanding any other provisions herein, if subsequent to the Closing Date, the adoption of or change in any present or future law, regulation, treaty or directive or in the interpretation or application thereof shall make it unlawful for any Bank to make or maintain LIBOR Rate Loans, such Bank shall forthwith give notice of such circumstances to the Borrower and the other Banks and thereupon (i) the commitment of such Bank to make LIBOR Rate Loans or convert Loans of another Type to LIBOR Rate Loans shall forthwith be suspended and (ii) such Bank's Revolving Credit Loans then outstanding as LIBOR Rate Loans, if any, shall be converted automatically to Base Rate Loans on the last day of each Interest Period applicable to such LIBOR Rate Loans or within such earlier period as may be required by law. The Borrower hereby agrees promptly to pay the Administrative Agent for the account of such Bank, upon demand by such Bank, any additional amounts as may be required pursuant to Section 6.9. Section 6.6. Additional Costs, etc. If subsequent to the Closing Date, the adoption of or change in any present or future applicable law, which expression, as used herein, includes statutes, rules and regulations thereunder and interpretations thereof by any competent court or by any governmental or other regulatory body or official charged with the administration or the interpretation thereof and requests, directives, instructions and notices at any time or from time to time hereafter made upon or otherwise issued to any Bank or the Administrative Agent by any central bank or other fiscal, monetary or other authority (whether or not having the force of law), shall: (a) subject any Bank or the Administrative Agent to any tax, levy, impost, duty, charge, fee, deduction or withholding of any nature with respect to this Credit Agreement, the other Loan Documents, any Letters of Credit, such Bank's Revolving Credit Note or Term Note, such Bank s Commitment or the Loans (other than taxes based upon or measured by the income or profits of such Bank or the Administrative Agent or any franchise tax imposed by such Bank s or the Administrative Agent s jurisdiction of incorporation or organization, or the location of its lending office, hereinafter referred to as "Income Taxes"), or (b) materially change the basis of taxation (except for changes in Income Taxes) of payments to any Bank of the principal of or the interest on its Notes or any other amounts payable to any Bank or the Administrative Agent under this Credit Agreement or any of the other Loan Documents, or (c) impose or increase or render applicable (other than to the extent specifically provided for elsewhere in this Credit Agreement) any special deposit, reserve, assessment, liquidity, capital adequacy or other similar requirements (whether or not having the force of law) against assets held by, or deposits in or for the account of, or loans by, or letters of credit issued by, or commitments of an office of any Bank, or (d) impose on any Bank or the Administrative Agent any other conditions or requirements with respect to this Credit Agreement, the other Loan Documents, any Letters of Credit, or such Bank's Notes, and the result of any of the foregoing is (i) to increase the cost to any Bank of making, funding, issuing, renewing, extending or maintaining such Bank's Notes or any Letter of Credit, or (ii) to reduce the amount of principal, interest, Reimbursement Obligation or other amount payable to such Bank or the Administrative Agent hereunder on account of such Bank's Notes or any Letter of Credit, or (iii) to require such Bank or the Administrative Agent to make any payment or to forego any interest or Reimbursement Obligation or other sum payable hereunder, the amount of which payment or foregone interest or Reimbursement Obligation or other sum is calculated by reference to the gross amount of any sum receivable or deemed received by such Bank or the Administrative Agent from the Borrower hereunder, then, and in each such case, the Borrower will, upon demand made by such Bank or (as the case may be) the Administrative Agent at any time and from time to time and as often as the occasion therefor may arise, pay to such Bank or the Administrative Agent such additional amounts as will be sufficient to compensate such Bank or the Administrative Agent for such additional cost, reduction, payment or foregone interest or Reimbursement Obligation or other sum. Section 6.7. Capital Adequacy. If after the date hereof any Bank determines that (i) the adoption of or change in any law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) regarding capital requirements for banks or bank holding companies or any change in the interpretation or application thereof by a court or governmental authority with appropriate jurisdiction, in each case subsequent to the Closing Date, or (ii) compliance by such Bank or any corporation controlling such Bank with any such adoption of or change in, law, governmental rule, regulation, policy, guideline or directive (whether or not having the force of law) of any such entity regarding capital adequacy, has the effect of reducing the return on such Bank's Notes to a level below that which such Bank could have achieved but for such adoption, change or compliance (taking into consideration such Bank's then existing policies with respect to capital adequacy and assuming full utilization of such entity's capital) by any amount deemed by such Bank to be material, then such Bank may notify the Borrower of such fact. To the extent that the amount of such reduction in the return on capital is not reflected in the Base Rate, the Borrower and such Bank shall thereafter attempt to negotiate in good faith, within thirty (30) days of the day on which the Borrower receives such notice, an adjustment payable hereunder that will adequately compensate such Bank in light of these circumstances. If the Borrower and such Bank are unable to agree to such adjustment within thirty (30) days of the date on which the Borrower receives such notice, then commencing on the date of such notice (but not earlier than the effective date of any such increased capital requirement), the fees payable hereunder shall increase by an amount that will, in such Bank's reasonable determination, provide adequate compensation. Each Bank shall allocate such cost increases among its customers in good faith and on an equitable basis. Section 6.8. Certificate. Each Bank shall notify the Borrower of any event entitling such Bank to compensation under Section 6.6 or 6.7 as promptly as practicable, but in any event within 60 days, after such Bank obtains actual knowledge thereof; provided that (i) if any Bank fails to give such notice within 60 days after it obtains actual knowledge of such an event, such Bank shall, with respect to compensation payable pursuant to Section 6.6 or 6.7 in respect of any costs resulting form such event, only be entitled to payment under such Section 6.6 or 6.7, as applicable, for costs incurred from and after the date 60 days prior to the date that such Bank does give such notice and (ii) each Bank will designate a different lending office for the Loans of such Bank if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the sole opinion of such Bank, be disadvantageous to such Bank. A certificate setting forth any additional amounts payable pursuant to Section 6.6 or 6.7 and a brief explanation of such amounts which are due, submitted by any Bank or the Agent to the Borrower, shall be conclusive, absent manifest error, that such amounts are due and owing. Section 6.9. Reasonable Efforts to Mitigate. Each Bank agrees that as promptly as practicable after it becomes aware of the occurrence of an event or the existence of a condition that would cause it to be affected under Section Section 6.4, 6.5, 6.6 or 6.7, such Bank will give notice thereof to the Borrower, with a copy to the Administrative Agent, and, to the extent so requested by the Borrower and not inconsistent with such Bank's internal policies, such Bank shall use reasonable efforts and take such actions as are reasonably appropriate if as a result thereof the additional moneys which would otherwise be required to be paid to such Bank pursuant to such subSection s would be materially reduced, or the illegality or other adverse circumstances which would otherwise require a conversion of such Loans or result in the inability to make such Loans pursuant to such Section s would cease to exist, and in each case if, as determined by such Bank in its sole discretion, the taking such actions would not adversely affect such Loans or such Bank or otherwise be disadvantageous to such Bank. To the extent practicable and applicable, each Bank shall allocate such cost increases among its customers in good faith and on an equitable basis. Section 6.10. Indemnity. The Borrower agrees to indemnify each Bank and to hold each Bank harmless from and against any loss, cost or expense (including, such loss or expense associated with terminating any interest rate protection arrangements entered into between the Borrower and any Bank) that such Bank may sustain or incur as a consequence of (i) default by the Borrower in payment of the principal amount of or any interest on any LIBOR Rate Loans as and when due and payable, including any such loss or expense arising from interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain its LIBOR Rate Loans, (ii) default by the Borrower in making a borrowing or conversion after the Borrower has given (or is deemed to have given) a Loan Request, notice (in the case of all or any portion of the Term Loan pursuant to Section 4.6.2) or a Conversion Request relating thereto in accordance with Section 2.6 or Section 2.7 (other than as a result of the operation of Section 6.4) or (iii) the making of any payment of a LIBOR Rate Loan or the making of any conversion of any such Loan to a Base Rate Loan on a day that is not the last day of the applicable Interest Period with respect thereto, including interest or fees payable by such Bank to lenders of funds obtained by it in order to maintain any such Loans. Such loss or reasonable expense shall exclude any loss of profits or margin applicable to such LIBOR Rate Loan but shall include an amount equal to the excess, if any, as reasonably determined by each Bank of (i) its cost of obtaining the funds for the LIBOR Rate Loan being paid, prepaid, converted, not converted, or not borrowed, as the case may be (based on the LIBOR Rate) for the period from the date of such payment, prepayment, conversion, or failure to borrow or convert, as the case may be, to the last day of the Interest Period for such portion of the Term Loan (or, in the case of a failure to borrow, the Interest Period for such portion of the Term Loan which would have commenced on the date of such failure to borrow) over (ii) the amount of interest (as reasonably determined by such Bank) that would be realized by such Bank in re-employing the funds so paid, prepaid, converted, or not borrowed, converted, or prepaid for such period or Interest Period, as the case may be, which determinations shall be prima facie correct and binding, absent manifest error. Section 6.11. Interest After Default. Section 6.11.1. Overdue Amounts. Overdue principal and (to the extent permitted by applicable law) interest on the Loans or fees payable hereunder or under any of the other Loan Documents shall, following the expiration of the applicable grace period, if any, bear interest compounded monthly and payable on demand at a rate per annum equal to two percent (2.00%) above the Base Rate plus the Applicable Margin until such amount shall be paid in full (after as well as before judgment). Section 6.11.2. Replacement Banks; Mitigation. (a) Within thirty (30) days after (i) any Bank has demanded compensation from the Borrower pursuant to Section Section 6.2.2, 6.6 or 6.7 hereof, or (ii) there shall have occurred a change in law with respect to any Bank as a consequence of which it shall become unlawful for such Bank to make a LIBOR Rate Loan on any Drawdown Date, as described in the previous Section 6.5 (any such Bank described in the foregoing clauses (i) or (ii) is hereinafter defined as an "Affected Bank"), the Borrower may request that the other Banks (the "Non-Affected Banks") acquire all, but not less than all, of the Affected Bank s Notes and assume all, but not less than all, of the Affected Bank s Notes. If the Borrower so requests, the Non-Affected Banks may elect to acquire all of the Affected Bank s Notes and assume all of the Affected Bank s Notes. If the Non-Affected Banks do not elect to acquire and assume all of the Affected Bank s Notes, the Borrower may designate a replacement bank or banks (which must be an Eligible Assignee), which must be reasonably satisfactory to the Agent, to acquire and assume that portion of the Notes of the Affected Bank not being acquired and assumed by the Non-Affected Banks. The provisions of Section 19 hereof shall apply to all reallocations pursuant to this Section 6.10.2, and the Affected Bank and the Non-Affected Banks and/or replacement banks which are to acquire the Notes of the Affected Bank shall execute and deliver to the Agent, in accordance with the provisions of Section 19 hereof, such Assignments and Acceptances and other instruments, as are required pursuant to Section 19 hereof to give effect to such reallocations; provided, however, the Borrower shall, or shall cause the assignee Bank to pay, the registration fee set forth in Section 19.3. On the effective date of the applicable Assignment and Acceptances, the Borrower shall pay to the Affected Bank all interest accrued on its Notes up to but excluding such date, along with any fees payable to such Affected Bank hereunder up to but excluding such date, including, without limitation, any amounts that would have been payable pursuant to Section 6.9 hereof in connection with prepayment. (b) If (i) any Bank shall request compensation under Section 6.6 or Section 6.7 hereof, (ii) any Bank deliver a notice described in Section 6.5 hereof or (iii) the Borrower is required to pay any additional amount to any Bank or any governmental authority on account of the Bank pursuant to Section 6.2.2 or Section 6.6, such Bank agrees to use reasonable efforts (consistent with legal policy and regulatory restrictions) to change its Domestic Lending Office or LIBOR Lending Office, as the case may be, to avoid or minimize any amounts otherwise payable under Section Section 6.2.2, 6.6 or 6.7 or enable it to withdraw a notice given pursuant to Section 6.5, in each case solely if such change can be made in a manner so that such Bank, in its sole determination, suffers no legal, economic or regulatory disadvantage deemed by such Bank in its sole discretion to be significant. Section 7. COLLATERAL SECURITY. Section 7.1. Security of Borrower. The Obligations shall be secured by a perfected first priority security interest (subject only to Permitted Liens) in the Collateral Bonds of the Borrower and the stock of Bangor Energy Resale, Inc. (subject to the provisions of the Bangor Energy Intercreditor Agreement), pursuant to the terms of the Security Documents to which the Borrower is a party. Section 8. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Banks and the Administrative Agent as follows: Section 8.1. Corporate Authority. Section 8.1.1. Incorporation; Good Standing. Each of the Borrower and its Subsidiaries (i) is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation, (ii) has all requisite corporate power to own its property and conduct its business as now conducted and as presently contemplated, and (iii) is in good standing as a foreign corporation and is duly authorized to do business in each jurisdiction where such qualification is necessary except where a failure to be so qualified would not have a materially adverse effect on the business, assets or financial condition of the Borrower and its Subsidiaries, taken as a whole. Section 8.1.2. Authorization. The execution, delivery and performance of this Credit Agreement and the other Loan Documents to which the Borrower is or is to become a party and transactions in connection with the Loan Documents (i) are within the corporate authority of such Person, (ii) have been duly authorized by all necessary corporate proceedings, (iii) do not conflict with or result in any material breach or contravention of any provision of law, statute, rule or regulation to which the Borrower is subject or any judgment, order, writ, injunction, license or permit applicable to the Borrower and (iv) do not conflict with any provision of the corporate charter or bylaws of, or any agreement or other instrument binding upon, the Borrower. Section 8.1.3. Enforceability. The execution and delivery of this Credit Agreement and the other Loan Documents to which the Borrower is or is to become a party will result in valid and legally binding obligations of such Person enforceable against it in accordance with the respective terms and provisions hereof and thereof, except as limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to creditors' rights and except to the extent that availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought. Section 8.2. Governmental Approvals. Except for the approvals identified in Schedule 8.2, (which approvals either have been obtained or cannot be obtained prior to the Closing Date in each case as noted on such schedule), no action by, and no notice to or filing with, any federal, state or local governmental authority or regulatory body is or will be required for the due execution, delivery and performance by the Borrower of this Credit Agreement or the Loan Documents or any of the transactions in connection with the Credit Agreement and the other Loan Documents. The Borrower shall take all necessary action to maintain and keep in effect all of the approvals identified in Schedule 8.2. Section 8.3. Title to Properties; Leases. The Borrower and its Subsidiaries each has good and sufficient title to all real property and all machinery and equipment owned by it and owns or possesses adequate rights to use all real property and all machinery and equipment necessary tot he conduct of its business, all free and clear of liens other than Permitted Liens. The Borrower enjoys peaceful and undisturbed possession under all of its leases with respect to materially important properties held under lease, and all of such leases are in full force and effect. Section 8.4. Financial Statements and Projections. Section 8.4.1. Fiscal Year. The Borrower and each of its Subsidiaries has a fiscal year which is the twelve months ending on December 31 of each calendar year. Section 8.4.2. Financial Statements. There has been furnished to the Administrative Agent a consolidated balance sheet of the Borrower and its Subsidiaries as at the Company Balance Sheet Date, and a consolidated statement of income of the Borrower and its Subsidiaries for the fiscal year then ended, certified by Coopers & Lybrand. Such balance sheet and statement of income have been prepared in accordance with GAAP and fairly present in all material respects the financial condition of the Borrower as at the close of business on the date thereof and the results of operations for the fiscal year then ended. There are no contingent liabilities of the Borrower or any of its Subsidiaries as of such date involving material amounts, known to the officers of the Borrower, which were not disclosed in such balance sheet and the notes related thereto or in the Disclosure Documents. Section 8.4.3. Projections. The projections of the annual operating budgets of the Borrower, balance sheets and cash flow statements for the fiscal years 1998 to 2001, copies of which have been delivered to the Administrative Agent, disclose all material assumptions made with respect to general economic, financial and market conditions used in formulating such projections. To the knowledge of the Borrower, no facts exist that (individually or in the aggregate) would result in any material change in any of such projections. The projections are based upon reasonable estimates and assumptions, have been prepared on the basis of the assumptions stated therein and reflect the reasonable estimates of the Borrower of the results of operations and other information projected therein. Notwithstanding the foregoing, the Administrative Agent and the Banks recognize that such projections as to future events are not to be viewed as facts and that actual results during the period covered may differ from the projected results. Section 8.5. No Material Changes, etc. Since the Company Balance Sheet Date there has occurred no materially adverse change in the financial condition or business of the Borrower and its Subsidiaries as shown on or reflected in the consolidated balance sheet of the Borrower and its Subsidiaries as at the Company Balance Sheet Date, or the consolidated statement of income for the fiscal year then ended, other than changes in the ordinary course of business that have not had any materially adverse effect on the business or financial condition of the Borrower or any of its Subsidiaries. Since the Company Balance Sheet Date, the Borrower has not made any Distribution other than (a) as permitted pursuant to Section 11.4 and disclosed to the Banks, or (b) Distributions with respect to preferred stock. Section 8.6. Franchises, Patents, Copyrights, etc. Each of the Borrower and its Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade names, licenses and permits, and rights in respect of the foregoing, adequate for the conduct of its business substantially as now conducted without known conflict with any rights of others. Section 8.7. Litigation. As of the Closing Date, except as set forth in Schedule 8.7 hereto, there are no actions, suits, proceedings or investigations of any kind pending or threatened in writing against the Borrower or any of its Subsidiaries before any court, tribunal or administrative agency or board that, if adversely determined, might, either in any case or in the aggregate, materially adversely affect the properties, assets, financial condition or business of the Borrower and its Subsidiaries as a whole, or result in any substantial liability not adequately covered by insurance, or for which adequate reserves are not maintained on the consolidated balance sheet of the Borrower and its Subsidiaries, or which question the validity of this Credit Agreement or any of the other Loan Documents, or any action taken or to be taken pursuant hereto or thereto. Section 8.8. No Materially Adverse Contracts, etc. Except as disclosed in the Disclosure Documents, n either the Borrower nor any of its Subsidiaries is subject to any charter, corporate or other legal restriction, or any judgment, decree, order, rule or regulation that has or is expected, in the judgement of the Borrower s officers to have a materially adverse effect on the business, assets or financial condition of the Borrower and its Subsidiaries taken as a whole. Neither the Borrower nor any of its Subsidiaries is a party to any contract or agreement that has or is expected, in the judgment of the Borrower's officers, to have any materially adverse effect on the business of the Borrower and its Subsidiaries, taken as a whole. Section 8.9. Compliance with Other Instruments, Laws, etc. Neither the Borrower nor any of its Subsidiaries is in violation of any provision of its charter documents, bylaws, or any agreement or instrument to which it is subject or by which it or any of its properties is bound or any decree, order, judgment, statute, license, rule or regulation, in any of the foregoing cases in a manner that would materially and adversely affect the financial condition, properties or business of the Borrower and its Subsidiaries, taken as a whole. Section 8.10. Tax Status. The Borrower has made or filed all federal and state income and all other material tax returns, reports and declarations required by any jurisdiction to which it is subject; has paid all taxes and other governmental assessments and charges shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and by appropriate proceedings; and has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply in accordance with GAAP. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Borrower know of no basis for any such claim. Section 8.11. No Event of Default. No Default or Event of Default has occurred and is continuing. Section 8.12. Holding Company Act. The Borrower is exempt from the provisions of the Public Utility Holding Company Act of 1935 and the rules promulgated thereunder other than Section 9(a)(2) thereof, and is not a "subsidiary" or an "affiliate" of any "holding company" as such terms are defined in the act. The Borrower is not subject to any other law, rule or regulation which in any way restricts its ability to incur Indebtedness pursuant to this Credit Agreement. Section 8.13. Absence of Financing Statements, etc. Except with respect to Permitted Liens, there is no financing statement, security agreement, chattel mortgage, real estate mortgage or other document filed or recorded with any filing records, registry or other public office, that purports to cover, affect or give notice of any present or possible future lien on, or security interest in, any assets or property of the Borrower or any of its Subsidiaries or any rights relating thereto. Section 8.14. Perfection of Security Interest. All filings, assignments, pledges and deposits of documents or instruments have been made and all other actions have been taken that are necessary, under applicable law, to establish and perfect the Administrative Agent's security interest in the Collateral Bonds. The Collateral Bonds and the Administrative Agent's rights with respect to the Collateral Bonds are not subject to any setoff, claims, withholdings or other defenses. The Collateral Bonds are free from any lien, security interest, encumbrance and any other claim or demand, except for Permitted Liens. Section 8.15. Certain Transactions. Except for the transactions expressly contemplated by the Acquisition Documents and except for arm's length transactions pursuant to which the Borrower or any of its Subsidiaries makes payments in the ordinary course of business upon terms no less favorable than the Borrower or such Subsidiary, as applicable, could obtain from third parties, none of the officers, directors, or employees of the Borrower or any of its Subsidiaries is presently a party to any transaction with the Borrower or any of its Subsidiaries (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Borrower, any corporation, partnership, trust or other entity, in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner. Section 8.16. Compliance with ERISA. The Borrower has satisfied the minimum funding standards under ERISA with respect to its plans and is in compliance in all material respects with the presently applicable provisions of ERISA. Section 8.17. Regulations U and X. No portion of any Loan is to be used, and no portion of any Letter of Credit is to be obtained, for the purpose of purchasing or carrying any "margin security" or "margin stock" as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224. Section 8.18. Subsidiaries, etc. Attached hereto as Schedule 8.18 is a statement showing the names of all the Subsidiaries of the Borrower as of the Closing Date, the amount of the capital stock of each and the amount thereof owned by the Borrower, and the business of each. All shares of each such Subsidiary owned by the Borrower have been duly and validly issued and are fully paid and nonassessable, are free and clear of all liens other than Permitted Liens and there are no outstanding options, warrants or other rights to purchase or securities convertible into or exchangeable for shares of capital stock of any such Subsidiary. Section 8.19. Year 2000 Problem. The Borrower and its Subsidiaries have reviewed the areas within their businesses and operations which could be adversely affected by, and have developed or are developing a program to address on a timely basis, the "Year 2000 Problem" (i.e. the risk that computer applications used by the Borrower or any of its Subsidiaries may be unable to recognize and perform properly date-sensitive functions involving certain dates prior to and any date after December 31, 1999). Based upon such review, the Borrower reasonably believes that the "Year 2000 Problem" will not have any materially adverse effect on the business or financial condition of the Borrower and its Subsidiaries, taken as a whole. Section 8.20. Disclosure. The written information provided by the Borrower to the Administrative Agent or the Banks pursuant to the Loan Documents does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. There is no fact known to the Borrower which materially adversely affects, or which is reasonably likely in the future to materially adversely affect, the business, assets or financial condition of the Borrower and its Subsidiaries taken as a whole, exclusive of effects resulting from changes in general economic conditions, legal standards or regulatory conditions. Section 8.21. Collateral Bonds; Mortgages. (a) The Collateral Bonds pledged to the Administrative Agent on behalf of the Banks are the valid and binding legal obligations of the Borrower, entitled in all respects to the security of the Mortgage. (b) The transfer and registration requirements for assigning all security interest in the Collateral Bonds to the Administrative Agent have been met. (c) There is currently no default under either the Mortgage or the General and Refunding Mortgage Indenture, and no default under, or conflict with, such agreements will be caused by execution of the Loan Documents. (d) True and correct copies of the Mortgage and the General and Refunding Mortgage Indenture, each as amended and supplemented as of the Closing Date, have been provided to the Banks. (e) No further action is necessary for the Administrative Agent s lien on the Collateral Bonds to be effective, and no further action is either necessary or desirable in order for such lien to inure to the benefit of the Administrative Agent on behalf of the Banks. (f) On or before each December 1, the Borrower shall deliver to the Administrative Agent a copy of the legal opinion required under the Mortgage. (g) The Collateral Bonds have been properly endorsed and certificated by the trustee and reissued in the name of the Administrative Agent. (h) All parties entitled to notice under the Mortgage or the General and Refunding Mortgage Indenture of the pledge of the Collateral Bonds, the execution and delivery of the Supplemental Indenture and the amendment of the Collateral Bonds have received proper notice (as defined in such mortgage), or have validly waived such notice. (i) No consents of third parties other than those obtained are necessary to grant the Administrative Agent the rights contemplated under the Pledge Agreement or to pledge the Collateral Bonds, execute and deliver the Supplemental Indenture or amend the Collateral Bonds. Section 9. AFFIRMATIVE COVENANTS OF THE BORROWER. The Borrower covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank has any obligation to make any Loans or the Administrative Agent has any obligation to issue, extend or renew any Letters of Credit: Section 9.1. Punctual Payment. The Borrower will duly and punctually pay or cause to be paid the principal and interest on the Loans, all Reimbursement Obligations, the Letter of Credit Fees, the commitment fees, the Administrative Agent's fee and all other amounts provided for in this Credit Agreement and the other Loan Documents to which the Borrower is a party, all in accordance with the terms of this Credit Agreement and such other Loan Documents. Section 9.2. Maintenance of Office. The Borrower will maintain its chief executive office at 33 State Street, Bangor, Maine 04401, or at such other place in the United States of America as the Borrower shall designate upon written notice to the Administrative Agent, where notices, presentations and demands to or upon the Borrower in respect of the Loan Documents to which the Borrower is a party may be given or made. Section 9.3. Records and Accounts. The Borrower will (i) keep, and cause each of its Subsidiaries to keep, true and accurate records and books of account in which full, true and correct entries will be made in accordance with GAAP, (ii) maintain adequate accounts and reserves for all taxes (including income taxes), depreciation, depletion, obsolescence and amortization of its properties and the properties of its Subsidiaries, and all other proper reserves, and (iii) at all times engage Coopers & Lybrand or other independent certified public accountants of nationally recognized standing reasonably satisfactory to the Administrative Agent as the independent certified public accountants of the Borrower and its Subsidiaries and will not permit more than thirty (30) days to elapse between the cessation of such firm's (or any successor firm's) engagement as the independent certified public accountants of the Borrower and its Subsidiaries and the appointment in such capacity of a successor firm as shall be satisfactory to the Administrative Agent. Section 9.4. Financial Statements, Certificates and Information. The Borrower will deliver to each of the Banks: (a) as soon as practicable, but in any event not later than one-hundred (100) days after the end of each fiscal year of the Borrower, the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such year, and the related consolidated statements of cash flows, operations and retained earnings for such year, each setting forth in comparative form the figures for the previous fiscal year and all such consolidated statements to be in reasonable detail, prepared in accordance with GAAP, and certified without qualification by Coopers & Lybrand or by other independent certified public accountants of nationally recognized standing reasonably satisfactory to the Administrative Agent, together with a written statement from such accountants to the effect that, in making the examination necessary to said certification, they have obtained no knowledge of any Default or Event of Default, or, if such accountants shall have obtained knowledge of any then existing Default or Event of Default they shall disclose in such statement any such Default or Event of Default; provided that such accountants shall not be liable to the Banks for failure to obtain knowledge of any Default or Event of Default; (b) as soon as practicable, but in any event not later than fifty (50) days after the end of each of the first three fiscal quarters of the Borrower, copies of the unaudited consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such quarter, and the related consolidated statement of income and consolidated statement of cash flow for the portion of the Borrower's fiscal year then elapsed, all in reasonable detail and prepared in accordance with GAAP, together with a certification by the principal financial or accounting officer of the Borrower that the information contained in such financial statements fairly presents, in all material respects, the financial position of the Borrower and its Subsidiaries on the date thereof (subject to year-end adjustments); (c) simultaneously with the delivery of the financial statements referred to in subSection s (a) and (b) above, a statement certified by the principal financial or accounting officer of the Borrower in substantially the form of Exhibit D hereto and setting forth in reasonable detail computations evidencing compliance with the covenants contained in Section 11 and (if applicable) reconciliations to reflect changes in GAAP since the Company Balance Sheet Date; (d) contemporaneously with the filing or mailing thereof, copies of all material of a financial nature filed with the Securities and Exchange Commission or sent to the stockholders of the Borrower; (e) from time to time upon the reasonable request of the Administrative Agent, projections of the Borrower updating those projections delivered to the Banks and referred to in Section 8.4.3 or, if applicable, updating any later such projections delivered in response to a request pursuant to this Section 9.4(f); (f) promptly upon entering into any material long-term commitment for additional capacity for, or sale agreement concerning, the generation or transmission of electric energy in connection with a transaction requiring the approval of the Commission (or which would require such approval but for a specific exception with respect to transactions with any "co-generator" or "small power producer", as such terms are defined in Chapter 172 of Title 35 of the Maine Revised Statutes), notice of such commitment, together with a brief description of the nature thereof, the amount thereof and the approximate dates on which expenditures under such commitment are to be made and any changes in any of the foregoing upon the effectiveness thereof; (g) promptly upon the Borrower s knowledge thereof, notice of (1) any material amendment of the terms of any joint ownership agreement, joint venture, partnership, plant construction or similar agreement or arrangement for the ownership, construction or operation of electric generating facilities to which the Company is a party, and (2) any material default by any party to such agreement or arrangement; (h) (1) on or about June 30 and December 31 of each year, a letter from S&P setting forth the Borrower s long-term senior secured debt or corporate credit rating then in effect and (2) within two Business Days after the occurrence thereof, written notice of any change in Status; provided that the failure to provide such notice shall not delay or otherwise affect any change in the Applicable Margin or the Commitment Fee Rate which is to occur upon a change in Status pursuant to the terms of this Credit Agreement; and (i) from time to time such other financial data and information (including accountants, management letters) as the Administrative Agent may reasonably request. Section 9.5. Notices. Section 9.5.1. Defaults. The Borrower will promptly notify the Administrative Agent in writing of the occurrence of any Default or Event of Default. Section 9.5.2. Environmental Events. The Borrower will promptly give notice to the Administrative Agent (i) of any violation of any Environmental Law that the Borrower or any of its Subsidiaries reports in writing or is reportable by such Person in writing (or for which any written report supplemental to any oral report is made) to any federal, state or local environmental agency and (ii) upon becoming aware thereof, of any inquiry, proceeding, investigation, or other action, including a notice from any agency of potential environmental liability, of any federal, state or local environmental agency or board, that is reasonably expected to materially adverse affect the assets, liabilities, financial conditions or operations of the Borrower and its Subsidiaries taken as a whole, or the Administrative Agent's security interests pursuant to the Security Documents. Section 9.5.3. Notification of Claim against Collateral Bonds. The Borrower will, immediately upon becoming aware thereof, notify the Administrative Agent in writing of any setoff, claims (including environmental claims), withholdings or other defenses to which any of the Collateral Bonds, or the Administrative Agent's rights with respect to the Collateral Bonds, are subject, other than Permitted Liens. Section 9.5.4. Notice of Litigation and Judgments. The Borrower will, and will cause each of its Subsidiaries to, give notice to the Administrative Agent in writing within fifteen (15) days of becoming aware of any litigation or proceedings threatened in writing or any pending litigation and proceedings affecting the Borrower or any of its Subsidiaries or to which the Borrower or any of its Subsidiaries is or becomes a party involving an uninsured claim against the Borrower or any of its Subsidiaries that could reasonably be expected to have a materially adverse effect on the Borrower and its Subsidiaries taken as a whole and stating the nature and status of such litigation or proceedings. The Borrower will, and will cause each of its Subsidiaries to, give notice to the Administrative Agent and each of the Banks, in writing, in form and detail reasonably satisfactory to the Administrative Agent, within ten (10) days of any unpaid judgment not covered by insurance, final or otherwise, against the Borrower or any of its Subsidiaries in an amount in excess of $200,000. Section 9.6. Corporate Existence; Maintenance of Properties. The Borrower will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights and its corporate and public utility franchises, rights, licenses and permits necessary for the conduct of its business and those of its Subsidiaries and will not convert to a limited liability company or a limited liability partnership. It (i) will cause all of its properties and those of its Subsidiaries used or useful in the conduct of its business or the business of its Subsidiaries to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment, and (ii) will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Borrower may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided that nothing in this Section 9.6 shall prevent (i) the Borrower from discontinuing the operation and maintenance of any of its properties or any of those of its Subsidiaries if such discontinuance is, in the judgment of the Borrower, desirable in the conduct of its or their business and that do not in the aggregate materially adversely affect the business of the Borrower and its Subsidiaries on a consolidated basis, or (ii) the Generating Asset Transaction(s), provided that non-cash sales shall be on terms reasonably acceptable to the Agents, or, if such terms are not reasonably acceptable to the Agents, the Borrower shall make a principal payment in respect of the Term Loan in the amount of the fair market value of such non-cash consideration. Section 9.7. Insurance. The Borrower will, and will cause each of its Subsidiaries to, maintain with financially sound and reputable insurers insurance with respect to its properties and business against such casualties and contingencies in such amounts as shall be in accordance with the general practices of businesses engaged in similar activities in similar geographic areas and in amounts. Section 9.8. Taxes. The Borrower will, and will cause each of its Subsidiaries to, duly pay and discharge, or cause to be paid and discharged, before the same shall become overdue, all taxes, assessments and other governmental charges imposed upon it and its real properties, sale and activities, or any part thereof, or upon the income or profits therefrom, as well as all claims for labor, materials, or supplies, which if unpaid might by law become a lien or charge upon any of its property, except any such taxes, assessments, charges or claims which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall be maintained; provided, however, that any such tax, assessment, charge, levy or claim need not be paid if the validity or amount thereof shall currently be contested in good faith by appropriate proceedings and if the Borrower or such Subsidiary shall have set aside on its books adequate reserves with respect thereto; and provided, further, that the Borrower and each Subsidiary shall pay all such taxes, assessments, charges, levies or claims forthwith upon the commencement of proceedings to foreclose any lien which may have attached as security therefor. Section 9.9. Inspection of Properties and Books, etc. The Borrower shall permit the Banks, through the Administrative Agent or any of its other designated representatives, to visit and inspect any of the properties of the Borrower or any of its Subsidiaries, to examine the books of account of the Borrower and its Subsidiaries (and to make copies thereof and extracts therefrom), and to discuss the affairs, finances and accounts of the Borrower and its Subsidiaries with, and to be advised as to the same by, its and their officers, all at such reasonable times and intervals as the Administrative Agent or any Bank may reasonably request. Section 9.10. Compliance with Laws, Contracts, Licenses, and Permits. The Borrower will comply with (a) the provisions of its charter documents and by-laws and (b)(i) all agreements and instruments by which it or any of its properties may be bound, and (ii) all applicable laws and regulations (including Environmental Laws), decrees, orders and judgments ("Applicable Laws"), except, where failure to so comply is not reasonably expected to have a materially adverse effect on the Borrower and its Subsidiaries, taken as a whole. If at any time while any Note or the Loans are outstanding, any authorization, consent, approval, permit or license from any officer, agency or instrumentality of any government shall become necessary or required in order that the Borrower may fulfill any of its obligations hereunder or under any of the Loan Documents, the Borrower will immediately take or cause to be taken all reasonable steps to obtain such authorization, consent, approval, permit or license and furnish the Agent with evidence thereof. Section 9.11. Employee Benefit Plans. If and when the Borrower or any Subsidiary gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute ground for a termination of such Plan under Title IV of ERISA or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC. Section 9.12. Use of Proceeds. The proceeds of (a) the Revolving Credit Loans shall be used for working capital, for purposes associated with the Chase Assignment and general corporate purposes, and (b) the Term Loan shall be used for working capital, and for purposes associated with the Chase Assignment and to refinance the PERC Contract. Section 9.13. Further Assurances. The Borrower will, and will cause each of its Subsidiaries to, cooperate with the Administrative Agent and execute such further instruments and documents as the Administrative Agent shall reasonably request to carry out to its satisfaction the transactions contemplated by this Credit Agreement and the other Loan Documents. Section 9.14. Sale of Generating Assets. The Borrower will actively pursue the sale of substantially all of its generating assets, provided that non-cash sales shall be on terms reasonably acceptable to the Agents, or, if such terms are not reasonably acceptable to the Agents, the Borrower shall make a principal payment in respect of the Term Loan in the amount of the fair market value of such non-cash consideration. Section 9.15. Status. The Borrower will maintain a private senior secured debt or corporate credit rating with either S&P or Moody s, or both. In addition, upon the reasonable request by the Administrative Agent, the Borrower shall obtain in writing from either S&P or Moody s such senior secured debt or corporate credit rating and disclose such rating to the Administrative Agent. Section 10. CERTAIN NEGATIVE COVENANTS OF THE BORROWER. The Borrower covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank has any obligation to make any Loans or the Administrative Agent has any obligations to issue, extend or renew any Letters of Credit: Section 10.1. Restrictions on Indebtedness. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any Indebtedness other than the following: (a) Indebtedness to the Banks and the Administrative Agent arising under any of the Loan Documents; (b) endorsements for collection, deposit or negotiation and warranties of products or services, in each case incurred in the ordinary course of business; (c) Indebtedness incurred in connection with the acquisition after the date hereof of any real or personal property by the Borrower or such Subsidiary or under any Capitalized Lease, provided that the aggregate principal amount of such Indebtedness of the Borrower shall not exceed the aggregate amount of $5,000,000 at any one time; (d) Indebtedness existing on the date hereof and listed and described on Schedule 10.1 hereto, or described in the Disclosure Documents, and any refinancing thereof, having covenants and maturities no less favorable to the Borrower than the Indebtedness being refinanced, and which does not increase the principal amount of the Indebtedness being refinanced; (e) Indebtedness of a Subsidiary of the Borrower existing on the date hereof to the Borrower; (f) the Bangor Energy Guaranty; (g) non-recourse Indebtedness of any Subsidiary participating in the planned joint venture with SEMPRA Energy Solutions; (h) guarantees of the Borrower of scheduled payments of principal ad interest (not to exceed $4,200,000 in the aggregate in any fiscal year of the Borrower) in respect of Indebtedness of PERC, but only on the scheduled dates, and at the rates, as originally in effect (it being understood that the making of such guarantee shall be subject to prior review by the Administrative Agent of the documentation in respect thereof for the purpose of establishing compliance with the requirements of this paragraph); (i) guarantees of the Borrower of the indebtedness of others, as set forth in Exhibit G, but only to the extent and upon the terms indicated; (j) Indebtedness with respect to the Chase L/C until replacement by a Letter of Credit hereunder; and (k) any unsecured Indebtedness not otherwise permitted by this Section 10.1 in an aggregate principal amount not to exceed at any one time the sum of (i) $5,000,000 plus (ii) an amount equal to 50% of the aggregate amount of any reductions in the Commitments made pursuant to Section 2.3. Section 10.2. Restrictions on Liens. The Borrower will not, and will not permit any of its Subsidiaries to, (i) create or incur or suffer to be created or incurred or to exist any lien, encumbrance, mortgage, pledge, charge, restriction or other security interest of any kind upon any of its property or assets of any character whether now owned or hereafter acquired, or upon the income or profits therefrom; or (ii) create, assume or suffer to exist any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of the interest of a vendor or a lessor under any conditional sale agreement, financing lease or other title retention agreement relating to any asset; provided that the Borrower or any of its Subsidiaries may create or incur or suffer to be created or incurred or to exist, any of the following (the "Permitted Liens"): (a) liens in favor of the Borrower on all or part of the assets of Subsidiaries of the Borrower securing Indebtedness owing by Subsidiaries of the Borrower to the Borrower; (b) liens to secure taxes, assessments and other government charges in respect of obligations not overdue or liens on properties to secure claims for labor, material or supplies in respect of obligations not overdue, or which are being contested in good faith by appropriate proceedings diligently conducted an with respect to which adequate reserves are being maintained in accordance with GAAP so long as such liens are not being foreclosed; (c) deposits or pledges made in connection with, or to secure payment of, workmen's compensation, unemployment insurance, old age pensions or other social security obligations; (d) liens on properties in respect of judgments or awards that have been in force for less than the applicable period for taking an appeal so long as execution is not levied thereunder or in respect of which the Borrower or such Subsidiary shall at the time in good faith be prosecuting an appeal or proceedings for review and in respect of which a stay of execution shall have been obtained pending such appeal or review; (e) liens of carriers, warehousemen, mechanics and materialmen, and other like liens on properties, in existence less than 120 days from the date of creation thereof in respect of obligations not overdue, or which are being contested in good faith by appropriate proceedings diligently conducted an with respect to which adequate reserves are being maintained in accordance with GAAP so long as such liens are not being foreclosed; (f) liens existing on the date hereof and listed on Schedule 10.2 hereto or in the Disclosure Documents; (g) purchase money security interests in or purchase money mortgages on real or personal property acquired after the date hereof to secure purchase money Indebtedness of the type and amount permitted by Section 10.1(c), incurred in connection with the acquisition of such property, which security interests or mortgages cover only the real or personal property so acquired, not to exceed $5,000,000 in the aggregate; (h) liens in favor of the Administrative Agent for the benefit of the Banks and the Administrative Agent under the Loan Documents, other than the Mortgage; (i) liens created by the Mortgage securing bonds issued under and in accordance with the requirements of the Mortgage as such Mortgage may be amended from time to time, provided, however, no such amendment or supplement thereof shall without the consent of all of the Banks amend or supplement the Mortgage (1) to include categories of property or property interests of the Borrower not already included pursuant to the terms of such Mortgage as in effect on the date hereof, or (2) to permit the Borrower to withdraw "Deposited Cash" or execute "Bonds" in excess of seventy-five percent (75%) of the amount by which the actual cost or fair value (whichever is lower) of "property additions" shall exceed "property retirements", as set forth in Section 27 of the Mortgage as in effect on the date hereof. For purposes of this Section 10.2(i) only, "Deposited Cash", "Bonds", "property additions" and "property retirements" shall have the respective definition of such terms as defined in the Mortgage on the date hereof; (j) second liens created pursuant to the General and Refunding Mortgage Indenture; (k) Bangor Energy Liens; (m) liens existing on any property at the time of acquisition thereof by the Borrower or any Subsidiary or liens on property of a corporation existing at the time such corporation becomes a Subsidiary and in each case not created in connection with or in contemplation of such acquisition or event, as the case may be, whether or not assumed, provided that in each case such lien shall apply and attach only to the property originally subject thereto and improvements constructed thereon; (n) liens for the sole purpose of extending, renewing or replacing (or successively extending, renewing or replacing) in whole or in part the Indebtedness secured by any lien permitted by paragraphs (f) and (m) of this Section 10.2, provided that the principal amount of Indebtedness secured thereby shall not exceed the principal amount of Indebtedness so secured at the time of such extension, renewal or replacement, and that such extension, renewal or replacement lien shall be limited to all or a part of the property which secured the Indebtedness so extended, renewed or replaced (plus improvements on such property); (o) deposits to secure the performance of obligations (other than obligations for the payment of borrowed money) incurred in the ordinary course of business; (p) banker's liens arising by operation of law and other banker's possessory liens arising in the ordinary course of business other than for the purpose of securing obligations for the payment of borrowed money (including, without limitation, obligations arising from drafts accepted representing extensions of credit to or for the benefit of the Borrower); (q) liens incurred in connection with equipment or vehicle financing leases having an aggregate purchase cost to the lessors not to exceed $5,000,000; (r) minor defects and irregularities in the title (including easements, rights of way, restrictions or other similar nonmonetary charges) to any real property of the Borrower or any Subsidiary which have no material adverse effect on the use or disposition thereof by the Borrower or such Subsidiary; and (s) liens with respect to cash collateral pledged to back the Chase L/C until replacement by a Letter of Credit hereunder. Section 10.3. Restrictions on Investments. The Borrower will not, and will not permit any of its Subsidiaries to, make or permit to exist or to remain outstanding any Investment except Investments in: (a) marketable direct or guaranteed obligations of the United States of America that mature within one (1) year from the date of purchase by the Borrower; (b) demand deposits, certificates of deposit, time deposits or repurchase agreements which are fully insured or are issued by commercial banks organized under the laws of the United States of America or any state thereof and having total assets in excess of $1,000,000,000; (c) securities commonly known as "commercial paper" issued by a corporation organized and existing under the laws of the United States of America or any state thereof that at the time of purchase have been rated and the ratings for which are not less than "P 1" if rated by Moody's Investors Service, Inc., and not less than "A 1" if rated by S&P's Rating Group; (d) Investments existing on the date hereof and listed on Schedule 10.3 hereto or described in the Disclosure Documents; (e) Investments with respect to Indebtedness permitted by Section 10.1(f); (f) Investments by the Borrower in Subsidiaries of the Borrower not to exceed $500,000 during the term of this Credit Agreement; (g) Investments in Persons who are principally engaged, or who propose principally to engage, in the generation or transmission of electricity or in water storage development, provided that the aggregate amount expended pursuant to this paragraph (g) shall not exceed $500,000 during the term of this Credit Agreement; (h) Investments in Persons for the purpose of promoting the sale, installation and maintenance of products that consume electricity, provided that the aggregate amount expended pursuant to this paragraph (h) shall not exceed $500,000 during the term of this Credit Agreement; (i) Investments in Persons participating in the implementation of non-regulated energy-related business, including the Home Security business, provided that any such Investments shall not in the aggregate principal amount exceed $500,000 during the term of this Credit Agreement; (j) services pursuant to the Service Agreement with Bangor Energy Resale, Inc.; (k) Investments by any Subsidiary participating in the planned joint venture with SEMPRA Energy Solutions, provided that the aggregate amount expended pursuant to this paragraph (k) shall not exceed $700,000 during 1998; and (l) other Investments by any Subsidiary participating in the planned joint venture with SEMPRA Energy Solutions on terms acceptable to the Agents. Section 10.4. Merger, Consolidation and Disposition of Assets. Section 10.4.1. Mergers and Acquisitions. The Borrower will not, and will not permit any of its Subsidiaries to, become a party to any merger or consolidation, or agree to or effect any asset acquisition or stock acquisition (other than the acquisition of assets in the ordinary course of business consistent with past practices or as otherwise expressly permitted hereunder) except the merger or consolidation of one or more of the Subsidiaries of the Borrower with and into the Borrower, or the merger or consolidation of two or more Subsidiaries of the Borrower, or as permitted in Section 10.3. Section 10.4.2. Disposition of Assets. The Borrower will not (i) sell, lease or otherwise transfer all or a Substantial Part of its assets during the term of this Credit Agreement, and (ii) permit any Subsidiary to transfer all or a Substantial Part of its assets to any person other than the Borrower or a wholly owned Subsidiary, provided that the Generating Asset Transaction(s) shall be permitted under this Section 10.4.2. Section 10.5. Sale and Leaseback. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any arrangement, directly or indirectly, whereby the Borrower or any Subsidiary of the Borrower shall sell or transfer any property owned by it in order then or thereafter to lease such property or lease other property that the Borrower or any Subsidiary of the Borrower intends to use for substantially the same purpose as the property being sold or transferred. Section 10.6. Business Activities. The Borrower will not, and will not permit any of its Subsidiaries to, engage directly or indirectly (whether through Subsidiaries or otherwise) in any type of business other than the businesses conducted by them on the Closing Date and in related businesses, provided that the proposed sale of the Borrower s generating assets and the planned joint venture with SEMPRA Energy Solutions to invest in the gas distribution business, each on terms reasonably acceptable to the Administrative Agent and the Documentation Agent, will not constitute a change in business. Section 10.7. Fiscal Year. The Borrower will not, and will not permit any of it Subsidiaries to, change the date of the end of its fiscal year from that set forth in Section 8.4.1. Section 10.8. Transactions with Affiliates. Except as expressly permitted by the Acquisition Documents, the Borrower will not engage in any transaction with any Affiliate (other than with its Subsidiaries or for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such Affiliate or, to the knowledge of the Borrower, any corporation, partnership, trust or other entity in which any such Affiliate has a substantial interest or is an officer, director, trustee or partner, on terms more favorable to such Person than would have been obtainable on an arm's-length basis in the ordinary course of business. Section 10.9. Nuclear Acquisitions. The Borrower will not, and will not permit any of its Subsidiaries to, purchase or otherwise acquire direct or indirect ownership of any nuclear plant. Section 10.10. Amendments to Bonds, etc. Except as contemplated hereby, the Borrower will not amend, supplement, or otherwise modify, or consent to any amendment, supplement or other modification to (a) the General and Refunding Mortgage Indenture (including Section 7.05(b) therein), the Second Mortgage Bonds, or First Mortgage Bonds (other than those held by the Administrative Agent), or any agreement entered into by the Borrower in connection therewith (provided that the foregoing will not prohibit (i) the issuance of any supplemental indenture in respect of the General and Refunding Mortgage Indenture for the sole purpose of providing for the issuance of refinancing Indebtedness expressly permitted by Section 10.1 or (ii) modifications to the General and Refunding Mortgage Indenture made for the sole purpose of perfecting under applicable law the liens contemplated thereby), or (b) the terms of any Preferred Stock. The Borrower will not make any optional payment or prepayment on or optional redemption, purchase or defeasance of (a) any Second Mortgage Bond, (b) any Indebtedness under the FAME Loan Agreement, (c) any Preferred Stock, or (d) the First Mortgage Bonds (other than those held by the Administrative Agent). Section 11. FINANCIAL COVENANTS OF THE BORROWER. The Borrower covenants and agrees that, so long as any Loan, Unpaid Reimbursement Obligation, Letter of Credit or Note is outstanding or any Bank has any obligation to make any Loans or the Administrative Agent has any obligation to issue, extend or renew any Letters of Credit: Section 11.1. Consolidated Net Worth. The Borrower will not permit Consolidated Net Worth to be less than the amounts set forth opposite the periods set forth below: Period Amount Closing Date through $103,000,000 12/31/98 1/1/99 through 12/31/99 $110,000,000 Thereafter $120,000,000 Section 11.2. Consolidated Fixed Charge Ratio. The Borrower will not permit the Consolidated Fixed Charge Ratio for any period of four consecutive fiscal quarters ending on any date set forth below to be less than the ratio set forth opposite such date: Date Ratio 6/30/98 - 9/30/98 1.00 12/31/98 1.25 Thereafter 1.50 Section 11.3. Consolidated Total Debt Ratio. The Borrower will not permit the Consolidated Total Debt Ratio for the periods set forth below to exceed the ratio set forth opposite such period: Period Ratio Closing Date through 0.74 12/31/98 1/1/99 through 12/31/99 0.68 Thereafter 0.65 Section 11.4. Dividends. During any fiscal year of the Borrower commencing after December 31, 1997, the Borrower shall not declare or pay any dividend (other than dividends payable solely in common stock of the Borrower) on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any shares of any class of common stock of the Borrower or any warrants or options to purchase any such common stock, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of the Borrower or any Subsidiary. Notwithstanding the foregoing, the Borrower may declare or otherwise become obligated to make dividend payments not to exceed (a) sixty percent (60%) of earnings applicable to common stock for each fiscal year until the Term Loan is paid in full, and (b) after the Term Loan is paid in full, dividend payments shall not exceed seventy percent (70%) of earnings applicable to common stock for each fiscal year. This Section 11.4 shall not prohibit the payment of a dividend that would otherwise be prohibited hereunder if (i) such dividend is made within 45 days of the declaration thereof and (ii) this Section 11.4 would not have prohibited the payment of such dividend at the time of its declaration. Section 12. CLOSING CONDITIONS. The obligations of the Banks to make the initial Revolving Credit Loans and the Term Loan and of the Administrative Agent to issue any initial Letters of Credit shall be subject to the satisfaction of the following conditions precedent: Section 12.1. Loan Documents. Each of the Loan Documents shall have been duly executed and delivered by the respective parties thereto, shall be in full force and effect and shall be in form and substance satisfactory to the Administrative Agent. Section 12.2. Certified Copies of Charter Documents. The Administrative Agent shall have received from the Borrower a copy, certified by a duly authorized officer of such Person to be true and complete on the Closing Date, of each of (i) its charter or other incorporation documents as in effect on such date of certification, and (ii) its by- laws as in effect on such date. Section 12.3. Corporate Action. All corporate action necessary for the valid execution, delivery and performance by the Borrower of this Credit Agreement and the other Loan Documents to which it is or is to become a party shall have been duly and effectively taken, and evidence thereof satisfactory to the Administrative Agent shall have been provided to the Administrative Agent. Section 12.4. Incumbency Certificate. The Administrative Agent shall have received from the Borrower an incumbency certificate, dated as of the Closing Date, signed by a duly authorized officer of the Borrower, and giving the name and bearing a specimen signature of each individual who shall be authorized in the name and on behalf of the Borrower: (i) to sign each of the Loan Documents to which the Borrower is or is to become a party; (ii) to make Loan Requests and Conversion Requests and to apply for Letters of Credit; and (iii) to give notices and to take other action on its behalf under the Loan Documents. Section 12.5. Validity of Liens. The Security Documents shall be effective to create in favor of the Administrative Agent a legal, valid and enforceable first security interest in and lien upon the Collateral Bonds. All filings, recordings, deliveries of instruments and other actions necessary or desirable in the opinion of the Administrative Agent to protect and preserve such security interests shall have been duly effected. The Administrative Agent shall have received evidence thereof in form and substance satisfactory to the Administrative Agent. Section 12.6. Registration and Amendment of Collateral Bonds. The Administrative Agent shall have received a certificate evidencing the registration of the Collateral Bonds, which shall have a maturity date of June 30, 2001, in the name of the Administrative Agent along with all necessary consents from third parties. Section 12.7. Supplemental Indenture. Each of the Banks and the Administrative Agent shall have received an amended Supplemental Indenture (the "Supplemental Indenture") to the Mortgage in form and substance satisfactory to the Banks and the Administrative Agent, providing for the amendment of the Collateral Bonds, along with any necessary consents. Section 12.8. Opinions of Counsel. Each of the Banks and the Administrative Agent shall have received a favorable legal opinion(s) addressed to the Banks and the Administrative Agent, dated as of the Closing Date, in form and substance satisfactory to the Banks and the Administrative Agent, from: (a) Andrew Landry, general counsel of the Borrower substantially in the form of Exhibit F-1 attached hereto; (b) Winthrop, Stimson, Putnam & Roberts, New York counsel to the Borrower substantially in the form of Exhibit F-2 attached hereto; and (c) Eaton, Peabody, Bradford & Veague, special Maine counsel to the Administrative Agent substantially in the form of Exhibit F-3 attached hereto. Section 12.9. Payment of Fees. The Borrower shall have paid to the Administrative Agent the remainder of the closing fee pursuant to Section 6.1. Section 12.10. Chase Assignment. The Administrative Agent shall have received the Chase Assignment from the Prior Lenders, indicating the amount of the loan obligations of the Borrower under the Chase Revolver and the Chase Term Loan to be assigned on the Closing Date, and assigning all Collateral Bonds, other collateral, mortgages, deeds of trust and security interests granted by the Borrower in favor of The Chase Manhattan Bank. Section 12.11. Certified Approvals. The Administrative Agent shall have received a certified copy of the order from the Commission authorizing the entering into, execution, delivery and performance of the Loan Documents, and all other approvals of third parties necessary to authorize the same. Section 12.12. Asset Sale. The Administrative Agent shall have received a report from Reed Consulting Group indicating that the proposed asset sale is likely to provide an amount acceptable to the Agents. Section 12.13. Financial Statements and Projections. The Administrative Agent shall have received copies of (a) the consolidated audited financial statements for the Borrower and its Subsidiaries for the period ended December 31, 1997 and unaudited financial statements for the March 31, 1998 quarter, and (b) the financial projections referred to in Section 8.4.3. Section 13. CONDITIONS TO ALL BORROWINGS. The obligations of the Banks to make any Loan, including the Revolving Credit Loan and the Term Loan, and of the Administrative Agent to issue, extend or renew any Letter of Credit, in each case whether on or after the Closing Date, shall also be subject to the satisfaction of the following conditions precedent: Section 13.1. Representations True; No Event of Default. Each of the representations and warranties of the Borrower contained in this Credit Agreement, the other Loan Documents or in any document or instrument delivered pursuant to or in connection with this Credit Agreement shall be true as of the date as of which they were made and shall also be true at and as of the time of the making of such Loan or the issuance, extension or renewal of such Letter of Credit, with the same effect as if made at and as of that time (except to the extent of changes resulting from transactions contemplated or permitted by this Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such representations and warranties relate expressly to an earlier date) and no Default or Event of Default shall have occurred and be continuing. Section 13.2. No Legal Impediment. No change shall have occurred after the Closing Date in any law or regulations thereunder or interpretations thereof that in the reasonable opinion of any Bank would make it illegal for such Bank to make such Loan or to participate in the issuance, extension or renewal of such Letter of Credit or in the reasonable opinion of the Administrative Agent would make it illegal for the Administrative Agent to issue, extend or renew such Letter of Credit. Section 13.3. Governmental Regulation. Each Bank shall have received such statements in substance and form reasonably satisfactory to such Bank as such Bank shall require for the purpose of compliance with any applicable regulations of the Comptroller of the Currency or the Board of Governors of the Federal Reserve System. Section 13.4. Proceedings and Documents. The Administrative Agent and the Administrative Agent's Special Counsel shall have received all information and such counterpart originals or certified or other copies of such documents as the Administrative Agent may have reasonably requested in accordance with the terms hereof. Section 14. EVENTS OF DEFAULT; ACCELERATION; ETC. Section 14.1. Events of Default and Acceleration. If any of the following events ("Events of Default" or, if the giving of notice or the lapse of time or both is required, then, prior to such notice or lapse of time, "Defaults") shall occur: (a) the Borrower shall fail to pay any principal of the Loans or any Reimbursement Obligation when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment; (b) the Borrower shall fail to pay any interest on the Loans, any Letter of Credit Fee, the commitment fee, or the Agent's fee due hereunder or under any of the other Loan Documents, when the same shall become due and payable, whether at the stated date of maturity or any accelerated date of maturity or at any other date fixed for payment within three (3) days after the same shall become due and payable; (c) the Borrower shall fail to comply with any of its covenants contained in Section 9.6, 10 or 11; (d) the Borrower shall fail to perform any term, covenant or agreement contained herein or in any of the other Loan Documents (other than those specified elsewhere in this Section 14.1) for fifteen (15) days after written notice of such failure has been given to the Borrower by the Administrative Agent; (e) any representation or warranty of the Borrower in this Credit Agreement or any of the other Loan Documents or in any other document or instrument delivered pursuant to or in connection with this Credit Agreement shall prove to have been false in any material respect upon the date when made or deemed to have been made or repeated; (f) the Borrower or any of its Subsidiaries shall fail to pay at maturity, or within any applicable period of grace, any obligation for borrowed money or credit received or in respect of any Capitalized Leases in excess of $500,000 (other than the Loan Documents), or fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing borrowed money or credit received or in respect of any Capitalized Leases in excess of $500,000 for such period of time as would permit (assuming the giving of appropriate notice if required) the holder or holders thereof or of any obligations issued thereunder to accelerate the maturity thereof; (g) the Borrower or any of its Subsidiaries shall make an assignment for the benefit of creditors, or admit in writing its inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of the Borrower or any of its Subsidiaries or of any substantial part of the assets of the Borrower or any of its Subsidiaries or shall commence any case or other proceeding relating to the Borrower or any of its Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any of the foregoing, or if any such petition or application shall be filed or any such case or other proceeding shall be commenced against the Borrower or any of its Subsidiaries and the Borrower or any of its Subsidiaries shall indicate its approval thereof, consent thereto or acquiescence therein or such petition or application shall not have been dismissed within sixty (60) days following the filing thereof; (h) a decree or order is entered appointing any such trustee, custodian, liquidator or receiver or adjudicating the Borrower or any of its Subsidiaries bankrupt or insolvent, or approving a petition in any such case or other proceeding, or a decree or order for relief is entered in respect of the Borrower or any Subsidiary of the Borrower in an involuntary case under federal bankruptcy laws as now or hereafter constituted; (i) there shall remain in force, undischarged, unsatisfied and unstayed for more than sixty (60) days, any final unpaid judgment (from which all appeals have been taken and determined or as to which all time for appeals has lapsed) against the Borrower or any of its Subsidiaries which, with other outstanding final judgments shall continue unsatisfied and in effect, (net of uncontested insurance coverage) against the Borrower or any of its Subsidiaries exceeding in the aggregate $500,000; (j) the holders of First Mortgage Bonds shall accelerate the maturity of all or any part of the First Mortgage Bonds, or the First Mortgage Bonds (other than the Collateral Bonds) shall be prepaid, redeemed or repurchased in whole or in part; (k) if any of the Loan Documents shall be cancelled, terminated, revoked or rescinded or the Administrative Agent's security interests, mortgages or liens in a substantial portion of the Collateral Bonds shall cease to be perfected, or shall cease to have the priority contemplated by the Security Documents, in each case otherwise than in accordance with the terms thereof, or any action at law, suit or in equity or other legal proceeding to cancel, revoke or rescind any of the Loan Documents shall be commenced by or on behalf of the Borrower as a party thereto or any of its stockholders, or any court or any other governmental or regulatory authority or agency of competent jurisdiction shall make a determination that, or issue a judgment, order, decree or ruling to the effect that, any one or more of the Loan Documents is illegal, invalid or unenforceable in accordance with the terms thereof; (l) the Borrower or any ERISA Affiliate shall fail to pay when due an amount or amounts aggregating in excess of $100,000 which it shall have become liable to pay to the PBGC or to an Employee Benefit Plan under Title IV of ERISA; or notice of intent to terminate an Employee Benefit Plan or Employee Benefit Plans having an aggregate Unfunded Vested Liability in excess of $500,000 shall be filed pursuant to Title IV of ERISA by the Borrower; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or cause a trustee to be appointed to administer any such Employee Benefit Plan or Employee Benefit Plans or a proceeding shall be instituted by a fiduciary of any such Employee Benefit Plan or Employee Benefit Plans to enforce Section 515 of ERISA and such proceeding shall not have been dismissed within 30 days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that such Employee Benefit Plan or Employee Benefit Plans must be terminated; (m) the Borrower or any of its Subsidiaries shall be enjoined, restrained or in any way prevented by the order of any court or any administrative or regulatory agency from conducting any material part of its business and such order shall continue in effect for more than sixty (60) days; or (n) (i) a judgement creditor shall obtain possession of any material portion of the mortgaged property (the "Mortgaged Property") referred to in the Mortgage by any means, including, without limitation, levy, distraint, replevin or self-help, (ii) any foreclosure or other remedial action in respect of or affecting the Mortgaged Property shall be commenced by or on behalf of the holders of the Second Mortgage Bonds or the trustee under the General and Refunding Mortgage Indenture, (iii) any material portion of the Mortgage Property shall be taken by eminent domain or condemnation, (iv) the Mortgage shall cease to be in full force and effect or the Borrower shall disavow its obligations thereunder or shall contest the validity or enforceability thereof, (v) the trustee under the Mortgage (the "First Mortgage Trustee") shall cease, in respect of any material portion of the Mortgaged Property, to have a valid and perfected first priority security interest therein, (vi) the security interest of the First Mortgage Trustee in any material portion of the Mortgaged Property shall otherwise become impaired or unenforceable, or (vii) any provision of the Mortgage, the Supplemental Indenture or the Collateral Bonds shall be amended, supplemented, waived or otherwise modified in any respect except to the extent expressly permitted by the Pledge Agreement. then, and in any such event, so long as the same may be continuing, the Administrative Agent may, and upon the request of the Majority Banks shall, by notice in writing to the Borrower declare all amounts owing with respect to this Credit Agreement, the Notes and the other Loan Documents and all Reimbursement Obligations to be, and they shall thereupon forthwith become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; provided that in the event of any Event of Default specified in Section Section 14.1(g), 14.1(h) or 14.1(j), all such amounts shall become immediately due and payable automatically and without any requirement of notice from the Administrative Agent or any Bank. Section 14.2. Termination of Commitments. If any one or more of the Events of Default specified in Section 14.1(g), Section 14.1(h) or Section 14.1(j) shall occur, any unused portion of the credit hereunder shall forthwith terminate and each of the Banks shall be relieved of all further obligations to make Loans to the Borrower and the Administrative Agent shall be relieved of all further obligations to issue, extend or renew Letters of Credit. If any other Event of Default shall have occurred and be continuing, the Administrative Agent may and, upon the request of the Majority Banks, shall, by notice to the Borrower, terminate the unused portion of the credit hereunder, and upon such notice being given such unused portion of the credit hereunder shall terminate immediately and each of the Banks shall be relieved of all further obligations to make Loans and the Administrative Agent shall be relieved of all further obligations to issue, extend or renew Letters of Credit. No termination of the credit hereunder shall relieve the Borrower of any of the Obligations. Section 14.3. Remedies. In case any one or more of the Events of Default shall have occurred and be continuing, and whether or not the Banks shall have accelerated the maturity of the Loans pursuant to Section 14.1, each Bank, if owed any amount with respect to the Loans or the Reimbursement Obligations, may, with the consent of the Majority Banks but not otherwise, proceed to protect and enforce its rights by suit in equity, action at law or other appropriate proceeding, whether for the specific performance of any covenant or agreement contained in this Credit Agreement and the other Loan Documents or any instrument pursuant to which the Obligations to such Bank are evidenced, including as permitted by applicable law the obtaining of the ex parte appointment of a receiver, and, if such amount shall have become due, by declaration or otherwise, proceed to enforce the payment thereof or any other legal or equitable right of such Bank. No remedy herein conferred upon any Bank or the Administrative Agent or the holder of any Note or purchaser of any Letter of Credit Participation is intended to be exclusive of any other remedy and each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or any other provision of law. Section 14.4. Distribution of Collateral Bonds Proceeds. In the event that, following the occurrence or during the continuance of any Event of Default, the Administrative Agent or any Bank, as the case may be, receives any monies in connection with the enforcement of any the Security Documents, or otherwise with respect to the realization upon any of the Collateral Bonds, such monies shall be distributed for application as follows: (a) First, to the payment of, or (as the case may be) the reimbursement of the Administrative Agent for or in respect of all reasonable costs, expenses, disbursements and losses which shall have been incurred or sustained by the Administrative Agent in connection with the collection of such monies by the Administrative Agent, for the exercise, protection or enforcement by the Administrative Agent of all or any of the rights, remedies, powers and privileges of the Administrative Agent and the Banks under this Credit Agreement or any of the other Loan Documents or in respect of the Collateral Bonds or in support of any provision of adequate indemnity to the Administrative Agent against any taxes or liens which by law shall have, or may have, priority over the rights of the Administrative Agent to such monies; (b) Second, to all other Obligations then due and payable to be shared pro rata among the Banks in accordance with their respective Commitment Percentages and Term Loan Percentages; provided, however, that distributions shall be made (A) pari passu among Obligations with respect to the Agent's fee payable pursuant to Section 6.1 and all other Obligations and (B) with respect to each type of Obligation owing to the Banks, such as interest, principal, fees and expenses, among the Banks pro rata; (c) Third, upon payment and satisfaction in full or other provisions for payment in full satisfactory to the Banks and the Administrative Agent of all of the Obligations, to the payment of any obligations required to be paid pursuant to Section 9-504(1)(c) of the Uniform Commercial Code of the State of New York; and (d) Fourth, the excess, if any, shall be returned to the Borrower or to such other Persons as are entitled thereto. Section 15. SETOFF. Regardless of the adequacy of any collateral, during the continuance of any Event of Default, any deposits or other sums credited by or due from any of the Banks to the Borrower and any securities or other property of the Borrower in the possession of such Bank may be applied to or set off by such Bank against the payment of Obligations then due and payable of the Borrower to such Bank. Each of the Banks agrees with each other Bank that if such Bank shall receive from the Borrower, whether by voluntary payment, exercise of the right of setoff, counterclaim, cross action, enforcement of the claim evidenced by the Notes held by, or constituting Reimbursement Obligations owed to, such Bank by proceedings against the Borrower at law or in equity or by proof thereof in bankruptcy, reorganization, liquidation, receivership or similar proceedings, or otherwise, and shall retain and apply to the payment of the Note or Notes held by, or Reimbursement Obligations owed to, such Bank any amount in excess of its ratable portion of the payments received by all of the Banks with respect to the Notes held by, and Reimbursement Obligations owed to, all of the Banks, such Bank will make such disposition and arrangements with the other Banks with respect to such excess, either by way of distribution, pro tanto assignment of claims, subrogation or otherwise as shall result in each Bank receiving in respect of the Notes held by it or Reimbursement Obligations owed it, its proportionate payment as contemplated by this Credit Agreement; provided that if all or any part of such excess payment is thereafter recovered from such Bank, such disposition and arrangements shall be rescinded and the amount restored to the extent of such recovery, but without interest. Such Bank shall notify the Borrower and the Agent and the other Banks promptly after exercising any right of setoff. Section 16. THE AGENTS. Section 16.1. Authorization. (a) The Administrative Agent is authorized to take such action on behalf of each of the Banks and to exercise all such powers as are hereunder and under any of the other Loan Documents and any related documents delegated to the Administrative Agent, together with such powers as are reasonably incident thereto, provided that no duties or responsibilities not expressly assumed herein or therein shall be implied to have been assumed by the Administrative Agent. (b) The relationship between the Administrative Agent and each of the Banks is that of an independent contractor. The use of the term "Administrative Agent" is for convenience only and is used to describe, as a form of convention, the independent contractual relationship between the Administrative Agent and each of the Banks. Nothing contained in this Credit Agreement nor the other Loan Documents shall be construed to create an agency, trust or other fiduciary relationship between the Administrative Agent and any of the Banks. (c) As an independent contractor empowered by the Banks to exercise certain rights and perform certain duties and responsibilities hereunder and under the other Loan Documents, the Administrative Agent is nevertheless a "representative" of the Banks, as that term is defined in Article 1 of the Uniform Commercial Code, for purposes of actions for the benefit of the Banks and the Administrative Agent with respect to all collateral security and guaranties contemplated by the Loan Documents. Such actions include the designation of the Administrative Agent as "secured party", "mortgagee" or the like on all financing statements and other documents and instruments, whether recorded or otherwise, relating to the attachment, perfection, priority or enforcement of any security interests, mortgages or deeds of trust in collateral security intended to secure the payment or performance of any of the Obligations, all for the benefit of the Banks and the Administrative Agent. (d) The Documentation Agent shall not have any right, power, obligation, liability, responsibility or duty under this Credit Agreement in such capacity, other than those applicable to all Banks as Banks. Section 16.2. Employees and Agents. The Administrative Agent may exercise its powers and execute its duties by or through employees or agents and shall be entitled to take, and to rely on, advice of counsel concerning all matters pertaining to its rights and duties under this Credit Agreement and the other Loan Documents. Section 16.3. No Liability. Neither the Administrative Agent nor any of its shareholders, directors, officers or employees nor any other Person assisting them in their duties nor any Administrative Agent or employee thereof, shall be liable for any waiver, consent or approval given or any action taken, or omitted to be taken, in good faith by it or them hereunder or under any of the other Loan Documents, or in connection herewith or therewith, or be responsible for the consequences of any oversight or error of judgment whatsoever, except that the Administrative Agent or such other Person, as the case may be, may be liable for losses due to its willful misconduct or gross negligence. Section 16.4. No Representations. The Administrative Agent shall not be responsible for the execution or validity or enforceability of this Credit Agreement, the Notes, the Letters of Credit, any of the other Loan Documents or any instrument at any time constituting, or intended to constitute, collateral security for the Notes, or for the value of any such collateral security or for the validity, enforceability or collectability of any such amounts owing with respect to the Notes, or for any recitals or statements, warranties or representations made herein or in any of the other Loan Documents or in any certificate or instrument hereafter furnished to it by or on behalf of the Borrower, or be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements herein or in any instrument at any time constituting, or intended to constitute, collateral security for the Notes or to inspect any of the properties, books or records of the Borrower or any of its Subsidiaries. The Administrative Agent shall not be bound to ascertain whether any notice, consent, waiver or request delivered to it by the Borrower or any holder of any of the Notes shall have been duly authorized or is true, accurate and complete. The Administrative Agent has not made nor does it now make any representations or warranties, express or implied, nor does it assume any liability to the Banks, with respect to the credit worthiness or financial conditions of the Borrower or any of its Subsidiaries. Each Bank acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Bank, and based upon such information and documents as it has deemed appropriate, made its own credit analysis and decision to enter into this Credit Agreement. Section 16.5. Payments. Section 16.5.1. Payments to Administrative Agent. A payment by the Borrower to the Administrative Agent hereunder or any of the other Loan Documents for the account of any Bank shall constitute a payment to such Bank. The Administrative Agent agrees promptly to distribute to each Bank such Bank's pro rata share of payments received by the Administrative Agent for the account of the Banks except as otherwise expressly provided herein or in any of the other Loan Documents. Section 16.5.2. Distribution by Administrative Agent. If in the opinion of the Administrative Agent the distribution of any amount received by it in such capacity hereunder, under the Notes or under any of the other Loan Documents might involve it in liability, it may refrain from making distribution until its right to make distribution shall have been adjudicated by a court of competent jurisdiction. If a court of competent jurisdiction shall adjudge that any amount received and distributed by the Administrative Agent is to be repaid, each Person to whom any such distribution shall have been made shall either repay to the Administrative Agent its proportionate share of the amount so adjudged to be repaid or shall pay over the same in such manner and to such Persons as shall be determined by such court. Section 16.5.3. Delinquent Banks. Notwithstanding anything to the contrary contained in this Credit Agreement or any of the other Loan Documents, any Bank that fails (i) to make available to the Administrative Agent its pro rata share of any Loan or to purchase any Letter of Credit Participation or (ii) to comply with the provisions of Section 15 with respect to making dispositions and arrangements with the other Banks, where such Bank's share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Banks, in each case as, when and to the full extent required by the provisions of this Credit Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall be deemed a Delinquent Bank until such time as such delinquency is satisfied. A Delinquent Bank shall be deemed to have assigned any and all payments due to it from the Borrower, whether on account of outstanding Loans, interest, fees or otherwise, to the remaining nondelinquent Banks for application to, and reduction of, their respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations. The Delinquent Bank hereby authorizes the Administrative Agent to distribute such payments to the nondelinquent Banks in proportion to their respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations. A Delinquent Bank shall be deemed to have satisfied in full a delinquency when and if, as a result of application of the assigned payments to all outstanding Loans and Unpaid Reimbursement Obligations of the nondelinquent Banks, the Banks' respective pro rata shares of all outstanding Loans and Unpaid Reimbursement Obligations and have returned to those in effect immediately prior to such delinquency and without giving effect to the nonpayment causing such delinquency. Section 16.6. Holders of Notes. The Administrative Agent may deem and treat the payee of any Note or the purchaser of any Letter of Credit Participation as the absolute owner or purchaser thereof for all purposes hereof until it shall have been furnished in writing with a different name by such payee or by a subsequent holder, assignee or transferee. Section 16.7. Indemnity. The Banks ratably agree hereby to indemnify and hold harmless the Administrative Agent and its affiliates from and against any and all claims, actions and suits (whether groundless or otherwise), losses, damages, costs, expenses (including any expenses for which the Administrative Agent or such affiliate has not been reimbursed by the Borrower as required by Section 17), and liabilities of every nature and character arising out of or related to this Credit Agreement, the Notes, or any of the other Loan Documents or the transactions contemplated or evidenced hereby or thereby, or the Administrative Agent's actions taken hereunder or thereunder, except to the extent that any of the same shall be directly caused by the Administrative Agent's willful misconduct or gross negligence. Section 16.8. Administrative Agent as Bank. In its individual capacity, BKB shall have the same obligations and the same rights, powers and privileges in respect to its Commitment and the Loans made by it, and as the holder of any of the Notes and as the purchaser of any Letter of Credit Participations, as it would have were it not also the Administrative Agent. Section 16.9. Resignation. The Administrative Agent may resign at any time by giving sixty (60) days prior written notice thereof to the Banks and the Borrower. Upon any such resignation, the Majority Banks shall have the right to appoint a successor Administrative Agent. Unless an Event of Default shall have occurred and be continuing, such successor Administrative Agent shall be reasonably acceptable to the Borrower. If no successor Administrative Agent shall have been so appointed by the Majority Banks and approved by the Borrower and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent's giving of notice of resignation, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a financial institution having a rating of not less than A or its equivalent by S&P. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation, the provisions of this Credit Agreement and the other Loan Documents shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as Administrative Agent. Section 16.10. Notification of Defaults and Events of Default. Each Bank hereby agrees that, upon learning of the existence of a Default or an Event of Default, it shall promptly notify the Administrative Agent thereof. The Administrative Agent hereby agrees that upon receipt of any notice under this Section 16.10 it shall promptly notify the other Banks of the existence of such Default or Event of Default. Section 16.11. Duties in the Case of Enforcement. In case one of more Events of Default have occurred and shall be continuing, and whether or not acceleration of the Obligations shall have occurred, the Administrative Agent shall, if (i) so requested by the Majority Banks and (ii) the Banks have provided to the Administrative Agent such additional indemnities and assurances against expenses and liabilities as the Administrative Agent may reasonably request, proceed to enforce the provisions of the Security Documents authorizing the sale or other disposition of all or any part of the Collateral Bonds and exercise all or any such other legal and equitable and other rights or remedies as it may have in respect of such Collateral Bonds. The Majority Banks may direct the Administrative Agent in writing as to the method and the extent of any such sale or other disposition, the Banks hereby agreeing to indemnify and hold the Administrative Agent, harmless from all liabilities incurred in respect of all actions taken or omitted in accordance with such directions, provided that the Administrative Agent need not comply with any such direction to the extent that the Administrative Agent reasonably believes the Administrative Agent's compliance with such direction to be unlawful or commercially unreasonable in any applicable jurisdiction. Section 17. EXPENSES AND INDEMNIFICATION. Section 17.1. Expenses. The Borrower agrees to pay (i) the reasonable costs of producing and reproducing this Credit Agreement, the other Loan Documents and the other agreements and instruments mentioned herein, (ii) any taxes payable by the Administrative Agent or any of the Banks on or with respect to the transactions contemplated by this Credit Agreement in accordance with Section 6.2.2 (the Borrower hereby agreeing to indemnify the Administrative Agent and each Bank with respect thereto), (iii) the reasonable fees, expenses and disbursements of the Administrative Agent's Special Counsel or any local counsel to the Administrative Agent incurred in connection with the preparation, syndication, administration or interpretation of the Loan Documents and other instruments mentioned herein, each closing hereunder, any amendments, modifications, approvals, consents or waivers hereto or hereunder, or the cancellation of any Loan Document upon payment in full in cash of all of the Obligations or pursuant to any terms of such Loan Document for providing for such cancellation, (iv) the reasonable out-of-pocket fees, expenses and disbursements of the Administrative Agent or any of its affiliates incurred by the Administrative Agent or such affiliate in connection with the preparation, syndication, administration or interpretation of the Loan Documents and other instruments mentioned herein, (v) any reasonable out-of-pocket fees, costs, expenses and bank charges, including bank charges for returned checks, incurred by the Administrative Agent in establishing, maintaining or handling agency accounts, lock box accounts and other accounts for the collection of any of the Collateral Bonds or the stock of Bangor Energy Resale, Inc.; and (vi) all reasonable out-of-pocket expenses (including without limitation reasonable attorneys' fees and costs, and reasonable consulting, accounting, appraisal, investment banking and similar professional fees and charges) incurred by any Bank or the Administrative Agent in connection with (A) the enforcement of or preservation of rights under any of the Loan Documents against the Borrower or the administration thereof after the occurrence of a Default or Event of Default and (B) any litigation, proceeding or dispute whether arising hereunder or otherwise, in any way related to any Bank's or the Administrative Agent's relationship with the Borrower hereunder. Notwithstanding the foregoing, the Borrower shall have no obligation hereunder to the Administrative Agent or any Bank with respect to any costs or expenses arising from the gross negligence or willful misconduct of the Administrative Agent or such Bank, as the case may be. Section 17.2. Indemnification. The Borrower agrees to indemnify and hold harmless the Administrative Agent, the Documentation Agent, the Co- Arrangers, their affiliates and the Banks from and against any and all liabilities, losses, damages and expense of every nature and character resulting from any and all claims, actions and suits whether groundless or otherwise, arising out of this Credit Agreement or any of the other Loan Documents or the transactions contemplated hereby including, without limitation, (i) any actual or proposed use by the Borrower of the proceeds of any of the Loans or Letters of Credit, (ii) the Borrower entering into or performing this Credit Agreement or any of the other Loan Documents or (iii) with respect to the Borrower and its Subsidiaries and their respective properties and assets, the violation of any Environmental Law, the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release or threatened release of any Hazardous Substances or any action, suit, proceeding or investigation brought or threatened with respect to any Hazardous Substances (including, but not limited to, claims with respect to wrongful death, personal injury or damage to property), in each case including, without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding except for the gross negligence or willful misconduct of the party indemnified. In litigation, or the preparation therefor, the Banks and the Administrative Agent and its affiliates shall be entitled to select their own counsel and, in addition to the foregoing indemnity, the Borrower agrees to pay promptly the reasonable fees and expenses of such counsel. Notwithstanding anything to the contrary herein, the Borrower shall not be responsible for (i) the cost of more than one counsel for the Administrative Agent and its affiliates, and any Bank (that is not the Administrative Agent) and its affiliates, respectively, or (ii) settlements, waivers or releases made without Borrower s consent. If, and to the extent that the obligations of the Borrower under this Section 17.2 are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment in satisfaction of such obligations which is permissible under applicable law. Section 17.3. Survival. The covenants contained in this Section 17 shall survive payment or satisfaction in full of all other Obligations. Section 18. SURVIVAL OF COVENANTS, ETC. All covenants, agreements, representations and warranties made herein, in the Notes, in any of the other Loan Documents or in any documents or other papers delivered by or on behalf of the Borrower or any of its Subsidiaries pursuant hereto shall be deemed to have been relied upon by the Banks and the Administrative Agent, notwithstanding any investigation heretofore or hereafter made by any of them, and shall survive the making by the Banks of any of the Loans and the issuance, extension or renewal of any Letters of Credit, as herein contemplated, and shall continue in full force and effect so long as any Letter of Credit or any amount due under this Credit Agreement or the Notes or any of the other Loan Documents remains outstanding or any Bank has any obligation to make any Loans or the Administrative Agent has any obligation to issue, extend or renew any Letter of Credit, and for such further time as may be otherwise expressly specified in this Credit Agreement. All statements contained in any certificate or other paper delivered to any Bank or the Administrative Agent at any time by or on behalf of the Borrower or any of its Subsidiaries pursuant hereto or in connection with the transactions contemplated hereby shall constitute representations and warranties by the Borrower hereunder. Section 19. ASSIGNMENT AND PARTICIPATION. Section 19.1. Conditions to Assignment by Banks. Except as provided herein, each Bank may assign to one or more Eligible Assignees all or a portion of its interests, rights and obligations under this Credit Agreement (including all or a portion of its Commitment Percentage and Commitment and/or its Term Loan Percentage and Term Loan Exposure, and the same portion of the Loans at the time owing to it and the Notes held by it and, if applicable, its participating interest in the risk relating to any Letters of Credit); provided that (i) each of the Administrative Agent and, unless an Event of Default shall have occurred and be continuing, the Borrower shall have given its prior written consent to such assignment, which consent will not be unreasonably withheld, (ii) each such assignment shall be of a constant, and not a varying, percentage of all the assigning Bank's rights and obligations under this Credit Agreement, (iii) each assignment shall be in a minimum amount of $5,000,000 or, if a Bank s total Commitment and/or Term Loan Exposure is less than $5,000,000, in a minimum amount equal to such Bank s total Commitment and/or Term Loan Exposure, (iv) the parties to such assignment shall execute and deliver to the Administrative Agent, for recording in the Register (as hereinafter defined), an Assignment and Acceptance, substantially in the form of Exhibit E hereto (an "Assignment and Acceptance"), together with any Notes subject to such assignment, (v) so long as no Event of Default exists, the Administrative Agent and the Documentation Agent (or their affiliates) shall retain, free of any such assignment, an amount of not less than $5,000,000, and (vi) any Bank may at any time, and from time to time, assign to any branch, lending office, affiliate of such Bank or Related Fund all or any part of its rights and obligations under the Loan Documents by notice to the Administrative Agent and the Borrower. Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignment and Acceptance, which effective date shall be at least five (5) Business Days after the execution thereof, (i) the assignee thereunder shall be a party hereto and, to the extent provided in such Assignment and Acceptance, have the rights and obligations of a Bank hereunder, and (ii) the assigning Bank shall, to the extent provided in such assignment and upon payment to the Administrative Agent of the registration fee referred to in Section 19.3, be released from its obligations under this Credit Agreement. Section 19.2. Certain Representations and Warranties; Limitations; Covenants. By executing and delivering an Assignment and Acceptance, the parties to the assignment thereunder confirm to and agree with each other and the other parties hereto as follows: (a) other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim, the assigning Bank makes no representation or warranty, express or implied, and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or the attachment, perfection or priority of any security interest or mortgage, (b) the assigning Bank makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower and its Subsidiaries or any other Person primarily or secondarily liable in respect of any of the Obligations, or the performance or observance by the Borrower or any other Person primarily or secondarily liable in respect of any of the Obligations of any of their obligations under this Credit Agreement or any of the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (c) such assignee confirms that it has received a copy of this Credit Agreement, together with copies of the most recent financial statements referred to in Section 8.4 and Section 9.4 and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (d) such assignee will, independently and without reliance upon the assigning Bank, the Administrative Agent or any other Bank and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement; (e) such assignee represents and warrants that it is an Eligible Assignee; (f) such assignee appoints and authorizes the Administrative Agent to take such action as Administrative Agent on its behalf and to exercise such powers under this Credit Agreement and the other Loan Documents as are delegated to the Administrative Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; (g) such assignee agrees that it will perform in accordance with their terms all of the obligations that by the terms of this Credit Agreement are required to be performed by it as a Bank; (h) such assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; (i) if applicable, such assignee acknowledges that it has made arrangements with the assigning Bank satisfactory to such assignee with respect to its pro rata share of Letter of Credit Fees in respect of outstanding Letters of Credit; and (j) if such assignee is not incorporated or organized under the laws of the United States of America or a state thereof or the District of Columbia (a "Non-U.S. Bank"), such assignee agrees that it will deliver to the Borrower and the Administrative Agent two duly completed copies of United States Internal Revenue Service Form 1001 or 4224 or successor applicable form, as the case may be, certifying in each case that such Non-U.S. Bank is entitled to receive payments under this Agreement and the Notes payable to it, without deduction or withholding of any United States federal income taxes. Each Non-U.S. Bank that so delivers a Form 1001 or 4224 pursuant to the preceding sentence further undertakes to deliver to each of the Borrower and the Administrative Agent two further copies of Form 1001 or 4224 or successor applicable form, or other manner of certification, as the case may be, on or before the date that any such letter or form expires or becomes obsolete or after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower, and such extensions or renewals thereof as may reasonably be requested by the Borrower, certifying in the case of a Form 1001 or 4224 that such Non-U.S. Bank is entitled to receive payments under this Agreement and the Notes without deduction or withholding of any United States federal income taxes, unless in any such case an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Non-U.S. Bank from duly completing and delivering any such form with respect to it and such Non-U.S. Bank advises the Borrower that it is not capable of receiving payments without any deduction or withholding of United States federal income tax. Section 19.3. Register. The Administrative Agent shall maintain a copy of each Assignment and Acceptance delivered to it and a register or similar list (the "Register") for the recordation of the names and addresses of the Banks and the Commitment Percentage of, and principal amount of the Term Loan and the Revolving Credit Loans owing to and Letter of Credit Participations purchased by, the Banks from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Banks may treat each Person whose name is recorded in the Register as a Bank hereunder for all purposes of this Credit Agreement. The Register shall be available for inspection by the Borrower and the Banks at any reasonable time and from time to time upon reasonable prior notice. Upon each such recordation, the assigning Bank agrees to pay to the Administrative Agent a registration fee in the sum of $3,500, provided that such registration fee shall not be required for assignments pursuant to Section 19.1(vi). Section 19.4. New Notes. Upon its receipt of an Assignment and Acceptance executed by the parties to such assignment, together with each Note subject to such assignment, the Administrative Agent shall (i) record the information contained therein in the Register, and (ii) give prompt notice thereof to the Borrower and the Banks (other than the assigning Bank). Within five (5) Business Days after receipt of such notice, the Borrower, at its own expense, shall execute and deliver to the Administrative Agent, in exchange for each surrendered Note, a new Note to the order of such Eligible Assignee in an amount equal to the amount assumed by such Eligible Assignee pursuant to such Assignment and Acceptance and, if the assigning Bank has retained some portion of its obligations hereunder, a new Note to the order of the assigning Bank in an amount equal to the amount retained by it hereunder. Such new Notes shall provide that they are replacements for the surrendered Notes, shall be in an aggregate principal amount equal to the aggregate principal amount of the surrendered Notes, shall be dated the effective date of such in Assignment and Acceptance and shall otherwise be substantially the form of the assigned Notes. The surrendered Notes shall be cancelled and returned to the Borrower. Section 19.5. Participations. Each Bank may sell participations to one or more banks or other entities in all or a portion of such Bank's rights and obligations under this Credit Agreement and the other Loan Documents; provided that (i) each such participation shall be in an amount of not less than $2,500,000, (ii) any such sale or participation shall not affect the rights and duties of the selling Bank hereunder to the Borrower, (iii) the only rights granted to the participant pursuant to such participation arrangements with respect to waivers, amendments or modifications of the Loan Documents shall be the rights to approve waivers, amendments or modifications that would reduce the principal of or the interest rate on any Loans, extend the term or increase the amount of the Commitment and/or Term Loan Exposure of such Bank as it relates to such participant, reduce the amount of any commitment fees or Letter of Credit Fees to which such participant is entitled or extend any regularly scheduled payment date for principal or interest, and (iv) the Borrower shall not be obligated to pay any such Bank any greater amount pursuant to Section 6.2.2, Section 6.6, Section 6.7 or Section 6.9 in respect of the amount of the participation transferred by such transferor Bank to such participant than had no such transfer occurred. Section 19.6. Disclosure. The Borrower agrees that in addition to disclosures made in accordance with standard and customary banking practices any Bank may disclose information obtained by such Bank pursuant to this Credit Agreement to assignees or participants and potential assignees or participants hereunder; provided that such assignees or participants or potential assignees or participants shall agree (i) to treat in confidence such information unless such information otherwise becomes public knowledge, (ii) not to disclose such information to a third party, except as required by law or legal process and (iii) not to make use of such information for purposes of transactions unrelated to such contemplated assignment or participation. Section 19.7. Assignee or Participant Affiliated with the Borrower. If any assignee Bank is an Affiliate of the Borrower, then any such assignee Bank shall have no right to vote as a Bank hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or other modifications to any of the Loan Documents or for purposes of making requests to the Administrative Agent pursuant to Section 14.1 or Section 14.2, and the determination of the Majority Banks shall for all purposes of this Credit Agreement and the other Loan Documents be made without regard to such assignee Bank's interest in any of the Loans or Reimbursement Obligations. If any Bank sells a participating interest in any of the Loans or Reimbursement Obligations to a participant, and such participant is the Borrower or an Affiliate of the Borrower, then such transferor Bank shall promptly notify the Administrative Agent of the sale of such participation. A transferor Bank shall have no right to vote as a Bank hereunder or under any of the other Loan Documents for purposes of granting consents or waivers or for purposes of agreeing to amendments or modifications to any of the Loan Documents or for purposes of making requests to the Administrative Agent pursuant to Section 14.1 or Section 14.2 to the extent that such participation is beneficially owned by the Borrower or any Affiliate of the Borrower, and the determination of the Majority Banks shall for all purposes of this Credit Agreement and the other Loan Documents be made without regard to the interest of such transferor Bank in the Loans or Reimbursement Obligations to the extent of such participation. Section 19.8. Miscellaneous Assignment Provisions. Any assigning Bank shall retain its rights to be indemnified pursuant to Section 17 with respect to any claims or actions arising prior to the date of such assignment. If any assignee Bank is not incorporated under the laws of the United States of America or any state thereof, it shall, prior to the date on which any interest or fees are payable hereunder or under any of the other Loan Documents for its account, deliver to the Borrower and the Administrative Agent certification as to its exemption from deduction or withholding of any United States federal income taxes. Anything contained in this Section 19 to the contrary notwithstanding, any Bank may at any time pledge all or any portion of its interest and rights under this Credit Agreement (including all or any portion of its Notes) to any of the twelve Federal Reserve Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such pledge or the enforcement thereof shall release the pledgor Bank from its obligations hereunder or under any of the other Loan Documents. Section 19.9. Assignment by Borrower. The Borrower shall not assign or transfer any of its rights or obligations under any of the Loan Documents without the prior written consent of each of the Banks. Section 19.10. Confidentiality. Each of the Banks and the Administrative Agent agrees, on behalf of itself and each of its affiliates, directors, officers, employees and representatives, to use reasonable precautions to keep confidential, in accordance with their customary procedures for handling confidential information of the same nature and in accordance with safe and sound banking practices, any non-public information supplied to it by the Borrower pursuant to this Agreement that is identified by such Person as being "confidential" or "for internal use only" at the time the same is delivered to the Banks or the Agent, provided that nothing herein shall limit the disclosure of any such information (a) after such information shall have become public other than through a violation of this Section 19.10, (b) to the extent required by statute, rule, regulation or judicial process, (c) to counsel for any of the Banks or the Agent, (d) to bank examiners or any other regulatory authority having jurisdiction over any Bank or the Agent, or to auditors or accountants, (e) to the Agent or any Bank, (f) if required pursuant to legal process in connection with any litigation to which any one or more of the Banks or the Agent is a party, or in connection with the enforcement of rights or remedies hereunder or under any other Loan Document, or (g) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant agrees to be bound by the provisions of Section 19.6. Section 20. NOTICES, ETC. Except as otherwise expressly provided in this Credit Agreement, all notices and other communications made or required to be given pursuant to this Credit Agreement or the Notes or any Letter of Credit Applications shall be in writing and shall be delivered in hand, mailed by United States registered or certified first class mail, postage prepaid, sent by overnight courier, or sent by telegraph, telecopy or facsimile and confirmed by delivery via courier or postal service, addressed as follows: (a) if to the Borrower, at 33 State Street, Bangor, Maine 04401, Attention: Frederick S. Samp, Telecopy: 207-990-6963, or at such other address for notice as the Borrower shall last have furnished in writing to the Person giving the notice; (b) if to the Administrative Agent, at 100 Federal Street, Boston, Massachusetts 02110, Attention: Mr. Michael M. Parker, Managing Director, Telecopy: 617-434-3652, or such other address for notice as the Administrative Agent shall last have furnished in writing to the Person giving the notice; and (c) if to any Bank, at such Bank's address set forth on Schedule 1 hereto, or such other address for notice as such Bank shall have last furnished in writing to the Person giving the notice. Any such notice or demand shall be deemed to have been duly given or made and to have become effective (i) if delivered by hand, overnight courier or facsimile to a responsible officer of the party to which it is directed, at the time of the receipt thereof by such officer or the sending of such facsimile along with receipt of confirmation and (ii) if sent by registered or certified first-class mail, postage prepaid, on the third Business Day following the mailing thereof. Section 21. GOVERNING LAW. THIS AGREEMENT AND, EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED THEREIN, EACH OF THE OTHER LOAN DOCUMENTS ARE CONTRACTS UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW Section 5-1401, BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF SAID STATE OF NEW YORK. THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER IN ACCORDANCE WITH LAW AT THE ADDRESS SPECIFIED IN Section 20. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT. Section 22. HEADINGS. The captions in this Credit Agreement are for convenience of reference only and shall not define or limit the provisions hereof. Section 23. COUNTERPARTS. This Credit Agreement and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when executed and delivered shall be an original, and all of which together shall constitute one instrument. In proving this Credit Agreement it shall not be necessary to produce or account for more than one such counterpart signed by the party against whom enforcement is sought. Section 24. ENTIRE AGREEMENT, ETC. The Loan Documents and any other documents executed in connection herewith or therewith express the entire understanding of the parties with respect to the transactions contemplated hereby. Neither this Credit Agreement nor any term hereof may be changed, waived, discharged or terminated, except as provided in Section 26. Section 25. WAIVER OF JURY TRIAL. Each of the Administrative Agent, the Banks and the Borrower hereby waive its right to a jury trial with respect to any action or claim arising out of any dispute in connection with this Credit Agreement, the Notes or any of the other Loan Documents, any rights or obligations hereunder or thereunder or the performance of which rights and obligations. Except as prohibited by law, all parties to this Credit Agreement hereby waive any right they may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. The Borrower (a) certifies that no representative, agent or attorney of any Bank or the Administrative Agent has represented, expressly or otherwise, that such Bank or the Administrative Agent would not, in the event of litigation, seek to enforce the foregoing waivers and (b) acknowledges that the Administrative Agent and the Banks have been induced to enter into this Agreement, the other Loan Documents to which it is a party by, among other things, the waivers and certifications contained herein. Section 26. CONSENTS, AMENDMENTS, WAIVERS, ETC. Any consent or approval required or permitted by this Credit Agreement to be given by the Banks may be given, and any term of this Credit Agreement, the other Loan Documents or any other instrument related hereto or mentioned herein may be amended, and the performance or observance by the Borrower of any terms of this Credit Agreement, the other Loan Documents or such other instrument or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Borrower and the written consent of the Majority Banks. Notwithstanding the foregoing, the rate of interest on the Notes (other than interest accruing pursuant to Section 6.10.2 following the effective date of any waiver by the Majority Banks of the Default or Event of Default relating thereto) hereunder, and the amount of the Commitments of the Banks and the amount of commitment fee or Letter of Credit Fees and the amount and time and any other term or condition or application of any mandatory prepayment under Section 4.5, may not be changed without the written consent of the Borrower and the written consent all of the Banks; the Revolving Credit Loan Maturity Date and the Term Loan Maturity Date may not be postponed without the written consent of all of the Banks; any substantial portion of the Collateral (as defined in the Pledge Agreement) may not be released without the written consent of all of the Banks except (a) to the extent expressly contemplated by the Supplemental Indenture and the Pledge Agreement and (b) to the extent the aggregate principal amount of the Collateral Bonds exceeds one-hundred and ten percent (110%) of the sum of the aggregate Revolving Credit Commitments and the outstanding principal amount of the Term Loans; this Section 26 and the definition of Majority Banks may not be amended, without the written consent of all of the Banks; and the amount of the Agent's Fee or any Letter of Credit Fees payable for the Administrative Agent's account and Section 16 may not be amended without the written consent of the Administrative Agent. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of the Administrative Agent or any Bank in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall entitle the Borrower to other or further notice or demand in similar or other circumstances. Section 27. SEVERABILITY. The provisions of this Credit Agreement are severable and if any one clause or provision hereof shall be held invalid or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in such jurisdiction, and shall not in any manner affect such clause or provision in any other jurisdiction, or any other clause or provision of this Credit Agreement in any jurisdiction. Section 28. TRANSITIONAL ARRANGEMENTS. Section 28.1. Chase Credit Agreement Superseded. This Credit Agreement shall supersede the Chase Credit Agreement in its entirety, except as provided in this Section 28. On the Closing Date, the rights and obligations of the parties under the Chase Credit Agreement and the "Revolving Credit Notes" and the "Term Notes" as defined therein shall be subsumed within and be governed by this Credit Agreement and the Revolving Credit Notes and Term Notes, respectively. Section 28.2. Return and Cancellation of Notes. Upon its receipt of the Notes to be delivered hereunder on the Closing Date, each Bank will promptly return to the Borrower, marked "Canceled", the "Revolving Credit Notes" and the "Term Notes" of the Borrower held by such Bank as a Prior Lender pursuant to, and as defined in, the Chase Credit Agreement, if any. Section 28.3. Interest and Fees Under Superseded Agreement. All interest and all commitment, facility and other fees and expenses owing or accruing under or in respect of the Chase Credit Agreement shall be calculated as of the Closing Date in accordance with the Transitional Arrangements Letter and the Borrower shall be responsible for such fees, including any breakage fees. Section 28.4. No Claims Under Chase Credit Agreement. Each Bank wishes (and the Borrower agrees) to eliminate any possibility that any past conditions, acts, omissions, events, circumstances or matters would impair or otherwise adversely affect such Bank's rights, interests, contracts, collateral security or remedies. Therefore, the Borrower unconditionally releases, waives and forever discharges (i) any and all liabilities, obligations, duties, promises or indebtedness of any kind of such Bank or Prior Lender to the Borrower regarding the execution, delivery or performance of the Chase Credit Agreement or any of the other Loan Documents (as defined in the Chase Credit Agreement), except the obligations to be performed by such Bank for the Borrower as expressly stated in this Credit Agreement and the other Loan Documents (as defined in this Credit Agreement), and (ii) all claims, offsets, causes of action, suits or defenses of any kind whatsoever (if any), whether known or unknown, which the Borrower might otherwise have against such Bank or Prior Lender or any of their directors, offices, employees or agents, in either case (i) or (ii), on account of any condition, act, omission, event, contract, liability, obligation, indebtedness, claim cause of action, defense, circumstance or matter of any kind whatsoever which existed, arose or occurred at any time prior to the date hereof regarding the execution, delivery or performance of the Chase Credit Agreement or any of the Loan Documents (as defined in the Chase Credit Agreement). Section 28.5. Interbank Settlements. On the Closing Date, each of the Banks shall pay to each of the Prior Lenders such amounts as may be necessary so as to result in the outstanding amount of Loans made by each Bank being equal to such Bank's Commitment Percentage and/or Term Loan Percentage of the aggregate amount of Loans outstanding as of the Closing Date. The Borrower and the Banks hereby agree that all amounts paid to any Bank or Prior Lender by any other Bank in connection with interbank settlements with respect to Loans outstanding immediately prior to the date hereof shall be deemed to constitute Loans under the Credit Agreement. Section 28.6. Intercreditor Agreement with Bangor Energy Banks. The Banks hereby agree to, ratify and confirm the Bangor Energy Intercreditor Agreement on the terms set forth therein, and further confirm that any matters concerning such agreement or the intercreditor arrangements set forth therein shall be governed by the provisions of the Bangor Energy Intercreditor Agreement. [THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.] IN WITNESS WHEREOF, the undersigned have duly executed this Credit Agreement as of the date first set forth above. BANGOR HYDRO-ELECTRIC COMPANY By: Name: Title: BANKBOSTON, N.A., individually and as Administrative Agent By: Name: Title: FLEET NATIONAL BANK, individually and as Documentation Agent By: Name: Title: PEOPLES HERITAGE BANK By: Name: Title: BANK OF SCOTLAND By: Name: Title: DEEPROCK & COMPANY By: Eaton Vance Management, as Investment Advisor By: Name: Title: CYPRESSTREE INVESTMENT MANAGEMENT COMPANY, INC. As: Attorney-in-Fact and on behalf of First Allmerica Financial Life Insurance Company as Portfolio Manager By: Name: Title: KZH-CYPRESSTREE-1 CORPORATION By: Name: Title: CYPRESSTREE BOSTON PARTNERS By: Name: Title: -----END PRIVACY-ENHANCED MESSAGE-----