UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-1055
FLORIDA PUBLIC UTILITIES COMPANY
(Exact name of registrant as specified in its charter)
Florida 59-0539080
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 South Dixie Highway, West Palm Beach, FL 33401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (561) 832-2461
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, par value $1.50 per share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment of this Form 10-K.[ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, computed by reference to the closing price on March 8, 2002, was
$53,903,615.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
At March 8, 2002, there were 2,894,931 common shares outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Florida Public Utilities Company's Proxy Statement for the
May 14,2002 Annual Meeting of Shareholders are incorporated by reference in
Part III hereof.
PART I
Item 1. Business
General
The Company was incorporated on April 29, 1925 under the 1925 Florida
Corporation Law and is continuing its corporate existence pursuant to such
law and its Certificate of Reincorporation, as amended. Recently the Company
has been proactive in looking for opportunities to purchase small gas
companies to assist in growth. In 2001 two acquisitions took place adding
approximately 7,300 customers. The cost of the acquisitions was less than
10% of assets.
Financial Information about Segments
(For additional information see segments in the Notes to Financial
Statements.)
2001 2000 1999
Revenues
Electric $39,050 $39,304 $37,544
Natural Gas 44,729 38,270 30,287
Propane Gas 5,399 4,380 3,866
Water 2,965 2,805 2,401
Consolidated 92,143 84,759 74,098
Operating income
excluding income tax
Electric $ 2,893 $ 3,016 $ 3,173
Natural Gas 3,295 3,789 3,493
Propane Gas 431 264 393
Water 897 932 739
Consolidated 7,516 8,001 7,798
Identifiable assets
Electric $37,753 $36,911 $35,384
Natural Gas 52,734 42,564 38,355
Propane Gas 10,728 5,648 4,999
Water 9,579 9,038 7,199
Common 29,195 14,885 10,606
Consolidated 139,989 109,046 96,543
Description of Business
Florida Public Utilities Company (FPU or the Company) is regulated by the
Florida Public Service Commission (FPSC), except for propane gas service
supplied by it's wholly owned subsidiary Flo-Gas Corporation, and provides
natural and propane gas service, electric service and water service to
consumers in Florida. The Company is comprised of the following four
divisions and number of customers as of December 31, 2001:(1) South Florida
division serves natural gas to 29,498 customers and propane gas to 5,939
customers; (2) Central Florida division serves 15,944 natural gas customers
and 2,876 propane customers; (3) Northwest Florida division provides
electricity to 12,181 customers; and (4) Northeast Florida division serves
13,811 electric customers and 6,966 water customers and 1,323 propane
customers.
The economy of the South Florida division relies somewhat on the migration of
seasonal residents and tourists during the winter season. Providing stability
in South Florida is primarily gas use by small commercial and residential
customers. Seasonal residents and tourist continue to play a role in the
Central Florida Division; however the I-4 corridor, particularly in Seminole
County's Lake Mary/Heathrow area, is producing a greater amount of large
business parks, individual corporate buildings and call centers. Volusia
County's economy still seems to be dominated by small and privately owned
businesses with the major employers being Florida Power and Florida Power &
Light which own and operate three power plants in the area. The Northwest
Division growth relies on the economies in Jackson, Calhoun and Liberty
Counties. All three are dependant upon a variety of agricultural industries
mainly involved with timber, peanuts, cotton and beef production. However,
the largest employers within the three counties are the Federal, State and
County governments involved in correction and rehabilitation centers. There
are also a number of smaller industries. Northeast Florida's economy is
centered around two large paper mills: ITT Rayonier, Inc. and Jefferson
Smurfit Corp. The beach area, Amelia Island, is noted for its fine beaches
and resort amenities.
The populations for each division, based on counties in which the service
areas are located, as reported by the Untied States Census Bureau, for the
year 2000, are as follows:
South Florida (Palm Beach, Martin, & Broward Counties) 2,881,000
Central Florida (Seminole, Marion, Orange, Levy, Citrus, 2,116,000
& Volusia Counties)
Northwest Florida (Jackson, Calhoun & Liberty Counties) 67,000
Northeast Florida (Nassau County) 58,000
In Northeast Florida, two large paper mills accounted for 12.1% of total 2001
electric division's operating revenues and 5.2% of the Company's total
operating revenues. However, such mills accounted for 4.8% of total 2001
electric division gross profit and 1.6% of the Company's total gross profit.
Natural Gas
The Company receives its total supply of natural gas at twelve City Gate
Stations connected to Florida Gas Transmission Company's (FGT) pipeline
system. FGT is owned by Citrus Corporation who is jointly owned by Enron
Corporation and El Paso Corporation. Due to the joint ownership of FGT, there
has been no direct effect on FPU's operations from Enron's bankruptcy. There
currently is another interstate natural gas transmission system under
construction which will terminate in areas near the Company's existing
distribution systems that may have potential for increasing competition in
the area of interstate pipeline deliveries of natural gas to the Florida
market. Natural Gas is primarily composed of methane which is a colorless,
odorless, fuel that burns cleaner than many other traditional fossil fuels.
Odorant, which enables one to readily detect a gas leak is added by the
interstate transmission company and FPU. Natural gas is one of the most
popular forms of energy today. It is used for heating, cooling, production
of electricity and it finds many uses in industry. Increasingly, natural gas
is being used in combination with other fuels to improve their environmental
performance and decrease pollution.
The Company has the adequate redundancy of gate stations in each distribution
system to assure high levels of continuous service to our customers. The
vast majority of the natural gas the Company distributes is purchased in the
Gulf Coast region both onshore and offshore. The Company has not experienced
any supply availability issues, or shortage, of natural gas in recent history,
nor does it expect any shortages in years to come. In fact the U.S.
Department of Energy estimates that there is more than a 60 year supply
of natural gas reserves.
(See web site: http://www.fe.doe.gov/education/index.html).
FGT is the sole natural gas pipeline serving peninsular Florida and is under
the jurisdiction of the Federal Energy Regulatory Commission (FERC). The
Company uses FGT solely as a carrier of natural gas. All gas supplies for the
Company's traditional sales markets are independently procured by the Company
using gas marketers and producers. The Company's transportation customers
are responsible for obtaining their own gas supplies and arranging for
pipeline transportation.
The Company has continued to be in full compliance with the Gas Industry
Standards Board's (GISB) standards. The GISB was formed to develop a uniform
nationwide network of natural gas producers, marketers, gathering systems,
pipelines, distribution companies and customers. The GISB's standards place
all participants on the same time schedules for procurement, capacity
transactions, invoicing, etc. It caused the network to be fully available
twenty-four hours per day, 365 days per year.
The Company has gained vast experience directly contracting for gas supplies
with marketers and producers while contracting for transportation services
from FGT. This experience appropriately postured the Company to be effective
in operating within an unbundled industry environment. The Company has
maintained the lowest overall cost of gas of all distribution companies
regulated by the FPSC. Furthermore, the Company has minimized its charges
from FGT by releasing (or subletting) a large portion of its unused capacity
and by keeping pipeline imbalances to a minimum, the Company has avoided
punitive pipeline charges. All fuel costs and associated savings are passed
along to our traditional sales customers. Additionally, the Company has
actively reduced demand charges it pays for the pipeline capacity by
"subletting" unused capacity, for short-terms, to other shippers on FGT's
system. The Company continues to be one of Florida's lowest cost suppliers
of natural gas.
The Company continued its activity in Off-System Sales since receiving
approval for the appropriate tariff from the Florida Public Service Commission
(FPSC). Off-System Sales allow the Company to broaden its market to include
any customer within the state of Florida who currently uses natural gas.
Since inception, Off-Systems Sales have been transacted between the Company
and national marketers, electric generators, other gas distributors and
agricultural firms, to name a few. The tariff permits for profit sharing
between the Company and its customers. The Company will explore future
opportunities to keep its total cost of gas as low as possible.
In 2001, the national natural gas market's price volatility stabilized
after experiencing unprecedented high levels of volatility and price in the
cost of gas. The Company, through its Purchased Gas Adjustment (PGA)
mechanism, collected the actual cost of gas from its customers during 2001
for any 2000 under collections. The Company's natural gas sales are affected
by weather which results in higher gas sales, per day, during the winter
period than during the summer season. The Company's customer portfolio is
quite diverse, with the largest customers using natural gas for the generation
of electricity. The Company is not dependent on a single natural gas customer
for a significant percentage of its total revenue.
The Company has filed the appropriate unbundled tariffs to give its
commercial natural gas customers the option of purchasing their gas supplies
from third parties. Even though FPU has had the overall lowest gas costs in
the Florida market, third party suppliers may be able to offer our customers
additional programs which a regulated gas company cannot offer. Furthermore,
by purchasing their gas supplies from third parties, our commercial customers
may avoid certain taxes and fees which FPU is required to collect on the sale
of natural gas. The Company's operating results would not be affected as the
Company realizes the same operating margin regardless of whether the customer
purchases the gas from the Company or uses our system to transport the gas.
The Company officially offered unbundled services to commercial customers on
August 1, 2001. The FPSC allows the Company to be reimbursed by its customers
for the incremental cost of providing unbundled services.
Electricity
The Company provides electrical service to customers in Jackson, Calhoun,
Liberty and Nassau counties in Florida.
Wholesale electricity is purchased from two suppliers, The Southern Company
and Jacksonville Electric Authority. In 1996, long-term purchased power
contracts were executed with both suppliers that will continue through 2007.
The Southern Company provides electrical power to the Northwest Division and
the Jacksonville Electric Authority provides electrical power to the Northeast
Division. Less than 1% of the Company's power supply is purchased on an as
available basis from a self-generating paper mill located in Fernandina
Beach. These long-term contracts allow the Company to offer customers the
lowest rates in the State of Florida.
The Company is not a generating utility, which results in environmental
regulations having minimal effect on our operations.
Both the Northwest and Northeast Divisions are located in northern Florida
which experiences a variety of weather patterns. Hot summers and cold winters
ensure that electrical sales are not extremely seasonal in nature.
The Company has no dependence upon any major customers. No single customer
accounts for more than 10% of electric sales or profit.
The electric utility industry has not been deregulated in the State of
Florida. All customers within a given service or franchise area purchase
from the single electricity provider in that area.
Propane
Florida Public Utilities purchases it's supply of propane gas from several
different wholesale companies such as Dynegy, Propane Resources, Sea3 of
Tampa and Harper Industries. Propane is transported to Florida via ocean-going
barges to seaport terminals in Tampa and Ft. Lauderdale, by railcar and
through the Dixie Pipeline ending at Alma, Georgia. The propane supply
infrastructure is more than adequate to meet the needs of the industry in
Florida for the foreseeable future.
Propane is a non-pollutant, therefore it is not effected by environmental
regulations. However, propane is a hazardous material and as such is subject
to strict code enforcement and safety requirements as outlined in the National
Fire Protection Code 58, Code 54 and various other state and local codes.
The sales volume of propane is effected by the season, tourism, weather, and
the influx of temporary residents. Florida typically has a tourist season
that coincides with the winter season. Approximately 40% of all propane
volumes are sold during the winter season which begins in November and ends
in March. The propane division's sales volumes and revenues are closely
balanced between residential and commercial customers. One of the strategies
of the Company is to become less weather dependant by concentrating on the
marketing of appliances that are not used for heating air. Water heaters are
an excellent way to become less weather reliant. The propane division does
not have any one customer that represents more than five percent of the
overall sales volume or more than two percent of overall revenues.
There is significant competition in the propane business. Our propane
business competes directly with other distributors of propane, natural gas
and electric. Consolidation in the propane industry will continue to provide
Florida Public Utilities with opportunities to expand market share. FPU
competes on the basis of fair priced energy and excellent customer service.
Regulation
The Florida Public Service Commission, pursuant to State Statutes, has
authority encompassing natural gas and electric rates, conditions of service,
the issuance of securities and certain other matters affecting the operations
of the Company. The water segment of the business was subject to FPSC
regulation until September 17, 2001 when the Board of Nassau County rescinded
the FPSC jurisdiction.
Franchises
We hold franchises in most of the incorporated municipalities and in one of
the counties (Jackson County) where we provide natural gas, electric and
water services. These franchises generally have terms from 15 to 30 years and
terminate at various dates. We are in negotiations with some municipalities in
which our franchises have lapsed. We continue to provide services in these
municipalities and do not anticipate any interruption in our service.
Employees
On December 31, 2001 the Company had 358 employees, of whom 101 were covered
under union contracts with two labor unions, the International Brotherhood of
Electrical Workers and the International Chemical Workers Union.
Research Expenditures and Environmental Regulations
Environmental regulations do not have a material impact on the company. The
Company does not engage in research activities.
Competition
Generally, in municipalities and other areas where the Company provides
natural gas, electric and water services, no other utility directly renders
such service. Propane gas has several propane competitors competing on price
and service.
Item 2. Properties
The Company's properties consist primarily of distribution systems and related
facilities. At December 31, 2001 the Company owned 22 miles of electric
transmission lines and 1,034 miles of electric distribution lines. The gas
properties distribute gas through 1,358 miles of gas main. The water property
consists of deep wells, pumping equipment, water treatment facilities and a
distribution system. The propane gas systems operated by the Company's
subsidiary have bulk storage facilities and tank installations on the
customers' premises.
Certain properties of the Company and the shares of Flo-Gas Corporation, a
wholly-owned subsidiary, are subject to a lien collateralizing the funded
indebtedness of the Company under its Mortgage Indenture.
Item 3. Legal Proceedings
In the area of environmental matters the Company has several contamination
sites in various stages of assessment investigation; see "Contingencies" in
the Notes. The Company believes that all future contamination assessment and
remedial costs, legal fees and other related costs will not be in excess of
the rate relief granted the Company and insurance settlement proceeds
received.
On or about October 18, 2000, Violet Skipper, PC Buyers, Inc. and Thomas Wade
Skipper filed suit against FPU in the Circuit Court for Palm Beach County,
Florida. The case was later transferred to Jackson County, Florida. The
lawsuit alleged that FPU failed to properly install and/or maintain
electrical power lines, utility poles and related equipment which allegedly
caused a fire that spread to and eventually destroyed a warehouse/office
facility that was owned by Violet Skipper, that housed the place of business
of the corporate plaintiff and that contained property therein owned by all
the plaintiffs. The warehouse/office facility was located in Jackson County,
Florida. Plaintiffs alleged damages in excess of $1,000,000. FPU has denied
the claims in the complaint and is vigorously defending the claims on the
theory that the alleged fire started within the warehouse/office facility and
not at or in FPU's electrical equipment.
On or about August 13, 2001, Darrell Glenn filed suit against FPU in the
Circuit Court for Palm Beach County, Florida. The case was later moved to
Nassau County, Florida where it is pending. The lawsuit alleged that the
employee of a painting subcontractor was shocked and injured on May 16, 2001
while painting electrical equipment at FPU's step-down site in Fernandina
Beach, Florida. His employer was operating under an agreement that required
it to supervise its own workers. The plaintiff claims FPU was negligent and
that its negligence caused his injuries to his torso which experienced some
degree of burn. The plaintiff has not specified an amount of claim, but FPU
intends to bring the subcontractor into this action as a third-party defendant
and seek indemnification and contribution from the subcontractor. FPU intends
to vigorously defend this claim and to pursue the third-party claim against
the subcontractor.
In the event that the Company does not prevail in these suits, there
may be a material adverse effect on the financial statements. However,
FPU believes there are meritorious defenses to the pending litigation
discussed above but is unable to provide an evaluation of the likelihood of
an unfavorable outcome or provide an estimate of the amount or range of
potential loss.
The Company is also involved with other various claims and litigation
incidental to its business. In the opinion of management, none of these
incidental claims and litigation will have a material adverse effect on the
Company's results of operations or its financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
QUARTERLY STOCK PRICES AND DIVIDENDS PAID
The Company's common shares are traded on the American Stock Exchange
under the symbol FPU. The quarterly cash dividends paid and the reported
price range per share of FPU common stock for the most recent two years
were as follows:
2001 2000
------ ------
Low - High Low - High
STOCK PRICES
Quarter ended
March 31 $14.05 - $16.20 $13.13 - $17.13
June 30 14.40 - 17.49 13.19 - 19.50
September 30 15.20 - 17.26 15.63 - 17.88
December 31 15.60 - 17.35 13.75 - 16.75
DIVIDENDS PAID
January 1 $ 0.18 $ 0.17
April 1 0.18 0.17
July 1 0.185 0.18
October 1 0.185 0.18
On March 8, 2002, there were approximately 2,674 holders of the Registrant's
Common Stock including individual participants in security position listing.
It is the Company's intent to continue to pay quarterly dividends in the
foreseeable future. The dividend policy is reviewed on an ongoing basis and
is dependent upon the Company's expectation of future earnings, cash flow,
financial condition, capital requirements and other factors.
The Company's Fifteenth Supplemental Indenture of Mortgage and Deed of Trust
restricts the amount that is available for cash dividends. At December 31,
2001 approximately $2,900,000 of retained earnings were free of such
restriction.
Recent Sales of unregistered securities
On November 14, 2001 the Company sold Palm Beach County Florida Industrial
Development Revenue Bonds in the amount of $14,000,000. Edward D. Jones
& Co., L.P. was underwriter for the bond issue. The aggregate offering price
was $14,000,000, with payments relating to the issue of $420,000 in
underwriting fees and $349,426 for insurance premiums. The bond proceeds are
restricted and held in trust until construction expenditures are actually
incurred by the company. (See "Liquidity and Capital Resources" under Item 7
for additional information). The Company issued its First Mortgage Bond,
4.9% Series due 2031 on November 1, 2001 in the aggregate principal amount of
$14,000,000 as security for the $14,000,000 Palm Beach Industrial Development
Revenue Development Bonds. The pledged bond constitutes the Fifteenth Series
of the Company's First Mortgage Bonds.
The exemption from registration is under the authority of Section 382 of the
Securities Act of 1933, based on the bond being issued by a state and local
government.
Item 6. Selected Financial Data (in thousands, except per share data)
Years Ended December 31, 2001 2000 1999 1998 1997
------------------------------------------------------------------------
Revenues $92,143 $84,759 $74,098 $76,192 $78,134
Gross profit 32,776 31,143 29,342 28,491 26,679
Net income 3,052 3,288 3,529(1) 3,068 3,191(1)
Earnings per common share 1.06 1.16 1.17(1) 1.02 1.07(1)
Dividends per common share 0.73 0.70 0.66 0.62 0.60
Total assets 139,989 109,046 96,543 92,406 89,050
Utility plant - net 97,329 84,200 78,272 75,227 72,724
Current debt 20,430 17,900 13,000 8,200 7,600
Long-term debt 52,500 23,500 23,500 23,500 23,500
Common shareholders' equity 29,329 27,510 25,866 27,622 26,189
Notes to the Selected Financial Data:
(1) 1997 and 1999 include gains after income taxes from the sale of
non-utility real property of $83, $0.03 per share (1999) and
$522, $0.18 per share (1997).
The acquisitions in late 2001 added approximately $10,700 to total Assets
and$3,975 to Utility Plant - Net.
Revenue recorded in the 2001 year from the acquisitions late in the year
was approximately $326.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This discussion should be read in conjunction with the Notes to Consolidated
Financial Statements contained herein. In the following discussion, all
comparisons are with the corresponding items in the prior year.
RESULTS OF OPERATIONS
Overview
The Company is organized into three regulated business segments,
natural gas, electric and water and one non-regulated business segment,
propane gas. The gas and electric segments aggregate approximately 91% of
total gross profit.
From the Florida Public Service Commission's (FPSC) perspective the Company
operates four distinct regulated "entities" consisting of Northwest Florida
(Marianna) electric, Northeast Florida (Fernandina Beach) electric, Northeast
Florida (Fernandina Beach) water, and natural gas. The Company considers the
Northwest and Northeast electric divisions one electric segment. The Company
last received rate increases in the regulated entities as follows: natural
gas operations, May 1995; Northwest Florida electric division, February 1994;
Northeast Florida electric division, February 1989; and Northeast Florida
water in May 2001. The FPSC stopped regulating the water segment of the
Company's business on September 17, 2001 due to a resolution passed by Nassau
County (for additional information see "Business and Regulation" in the Notes
to Consolidated Financial Statements).
The Company's strategic initiative is to concentrate on developing deeper
relationships with our customers, including builders and developers. We are
approaching them as a total energy company, not just a supplier of gas or
electricity. Included in the strategy is a plan to increase the rate of
future growth by concentrating on increasing customers and territories using
improved marketing programs, along with a goal of acquiring small energy
related companies, particularly propane companies. During 2001 the Company
made two gas acquisitions, totaling less than 10% of assets, that added
approximately 7,300 customers.
Definitions:
Gross Profit. Gross Profit, defined as gross operating revenues less fuel
costs, conservation and unbundling costs, and taxes based on revenues that
are passed through to customers, provides a more meaningful basis for
evaluating our utility operations. Fuel, conservation, and unbundling costs
along with taxes passed through to customers have no effect on results of
operations and fluctuations in such costs distort the relationship of gross
operating revenues between periods. Gross profit is the net revenue retained
by the Company for operating purposes.
Summary of Gross profits
(in thousands) 2001 2000 1999
------- ------- -------
Natural gas $15,854 $15,430 $14,484
Propane gas 3,106 2,712 2,673
Electric 10,980 10,321 9,890
Water 2,836 2,680 2,295
Contributing to variations in gross profit are the effects of seasonal
weather conditions, the timing of rate increases, acquisitions, and the
migration of winter residents and tourists to Florida during the winter
season.
Operating Expenses. Operating expenses exclude fuel costs, conservation
and unbundling costs, and taxes based on revenues that are passed through
to customers. These operating expenses have no effect on results of
operations as they are passed on directly to customers and fluctuations in
such costs distort the relationship of operating expenses between periods.
These costs are grouped on a separate line of the income statement as "Cost
of fuel and taxes based on revenues".
Discussion:
Natural and Propane Gas Service
Natural gas service gross profit increased $424,000 in 2001 principally due
to a 4% increase in average customers, an increase in transportation revenues
of $216,000, a $91,000 increase relating to the December 14, 2001 asset
purchase of the South Florida Natural Gas Company that was part of the
Atlantic Utilities purchase, and new late payment fees. The Company began
charging late fees in 2001 adding over $161,000 in additional gross profit.
Consumption was down for the year by 3%, excluding transportation and
off-system sales, primarily due to weak demand in the last quarter of the
year caused by mild weather conditions and decreased tourism. Looking
forward, we expect the asset purchase will add approximately another
$1,347,000 annually to gross profit.
A gas line project for a generation facility located in Palm Beach County was
constructed during 2001 and completed in February 2002. The total cost, with
resulting increase to total assets, is anticipated to be approximately
$5,800,000, with $3,100,000 expended and recorded in 2001. The Company has a
30-year agreement that will realize an 11.17% return on the net invested cost
of the project, which began billing in February 2002. We expect that total
revenue will increase approximately $1,113,000 in 2002, $1,184,000 in 2003,
and $1,159,000 in 2004, decreasing yearly as construction costs are
depreciated. Because the project does not involve purchasing gas, the gross
profit will increase by approximately the same amounts (99.5% of the revenue).
After operating costs, interest, and income taxes, we anticipate this project
to increase net income by approximately $368,000 in 2002, $347,000 in 2003,
and $335,000 in 2004, decreasing yearly during the 30-year agreement.
A large volume transportation customer is connecting during 2002 with an
anticipated annual load of 1,825,000 therms. The customer plans to expand
and possibly double the load at sometime in the future. The estimated
construction cost to serve the customer is $20,000. They expect to be using
gas beginning in May 2002. The estimated revenue for 2002 is around $186,000
with the complete year in 2003 estimated to be $280,000. Because the project
does not involve purchasing gas, the gross profit will increase by
approximately the same amounts (99.5% of the revenue). There should be
minimal impact to any additional operating cost. We anticipate this customer
will increase future net income by approximately $115,000 for the partial
year in 2002 and $175,000 for 2003.
Propane gas gross profit increased $394,000 in 2001 due to a 4% increase in
average customers that resulted in a 22% increase in consumption, and the
addition of late payment fees. The start up of the Northeast division's
(Fernandina Beach) propane operations amounted to $136,000 of the increase,
including the effect of acquiring Z-Gas, a propane company, on October 29,
2001. Z-Gas is expected to add approximately another $90,000 annually to the
gross profit next year. Impacting the increase in 2001 was increased bulk
commercial customers in the South Florida division, resulting in a 68%
increase in consumption and $131,000 of gross profit. New late fees that
began in 2001 amounted to $25,000. As the Northeast propane start up
business continues it is expected to generate additional gross profit to
cover operating costs in the near future.
Natural gas operating expenses, excluding income taxes, increased $918,000
in 2001. General and administrative expenses increased $284,000 and are
discussed separately in the administrative expenses section. Increased
distribution expenses of $124,000 related to increased payroll and higher
costs of performing line locations and supporting growth. Customer accounts
expense increased $33,000 due to added payroll and other expenses associated
with the new customer information and billing system and growth, along with
an additional $147,000 in bad debts. Additional efforts and procedures are
being implemented to reduce future bad debt expense. Sales expenses were up
$158,000 due to staffing of marketing positions for expanding marketing
efforts. Increased property taxes reflecting increased plant and increased
valuations, along with additional payroll taxes associated with increased
payroll expense added $175,000 to operating expenses. The Atlantic
acquisition will increase future expenses.
Propane gas operating expenses, excluding income taxes, increased $226,000
in 2001. Changes to administrative expenses were nominal. The start up of
the new Northeast (Fernandina Beach) propane operation added $158,000 of the
increased expense. In addition, $23,000 was for increased labor expenses
associated with delivery of gas relating to growth, $12,000 was for increased
payroll associated with the new billing system and increased bad debts, and
$20,000 of the increase related to new marketing efforts to obtain additional
customers. The Z-Gas and Atlantic acquisitions will increase future expenses.
Natural gas service gross profit increased $946,000 in 2000. Transportation
revenues accounted for $404,000 of the increase as certain customers are
opting to purchase their own gas and use our system to transport the gas to
their location. The Company realizes the same gross profit regardless of
whether the customer purchases the gas from us or uses our system to transport
the gas. Excluding the approximate 600 customers in the Central Florida
division that converted from propane to natural gas in 2000, the remaining
$542,000 increase in gross profit was due principally to an approximate 2.3%
increase in average customers as compared with 1999. Consumption increased
in greater proportion to the increase in customers due to winter weather
colder than 1999. Propane gas gross profit increased $39,000 as compared with
1999. Average customers increased 1.0% from 1999 to 2000, excluding the
effect of those customers who converted to natural gas.
In 2000, operating expenses increased $818,000, or 6%, excluding income taxes.
Other than the general increases in all classifications of expense, there were
increases in gas line locating expenses, expenses related to increasing the
gas pressure in our mains and services, expenses attributable to the
implementation of a new customer information system, and start-up expenses
attributable to the propane gas service in Fernandina Beach, which commenced
October 1, 2000. Additional marketing staff and customer service costs, also
contributed to increased expenses.
Electric Service
Electric service gross profit increased $659,000 in 2001. Average customers
grew by 2% for the year with the consumption per customer relatively flat.
The customer growth accounted for approximately $200,000 of the increase, with
new late fees that started during the year adding $134,000. A decrease in the
prior year's gross profit of $305,000 for pending refunds to customers for over
earnings accounted for part of this increase. The Company did not have any over
earnings adjustment in 2001 and does not expect to ordinarily over earn in the
future.
Operating expenses, excluding income taxes, increased $783,000 in 2001.
General and administrative costs increased $447,000 which is discussed below
in the administrative section. Maintenance expenses increased by $126,000 due
to substation maintenance work of $150,000 (including labor) and $55,000 for
overhead conductors including overhead line balancing relating to cold weather
early in the year in the Northeast division. Lower maintenance expenses in the
Northwest division offset these increases. Customer accounts expenses
increased over $58,000 due to additional payroll related to the new customer
information and billing system and growth, along with an additional $25,000
in bad debts. Additional efforts and procedures are being implemented to
reduce future bad debt expense.
In 2000, electric service gross profit increased $431,000. Average
customers increased approximately 3% which was the major factor contributing
to the gross profit increase. There were provisions for rate refunds in both
the current and prior year.
In 2000, operating expenses increased $588,000, or about 9%. In addition to
across the board increases in all classifications of expense, there were
increases in expenses attributable to the implementation of a new customer
information system and increases in all areas of maintenance expense,
including tree trimming costs.
Water Service
Gross profit from the water segment in 2001 accounts for less than 9% of the
Company's total gross profit and is not materially significant. Gross profit
increased $156,000 due to 2% customer growth and a rate increase on
May 17, 2001 that added approximately $225,000 gross profit annually.
Expenses for operations were up in 2001 by $191,000 primarily due to
increased administrative expenses of $82,000, customer service expenses of
$34,000, property and payroll taxes of $44,000, and water treatment expenses
of $11,000. The administrative expenses are discussed below. The customer
service increase was to support growth and a new customer information and
billing system. Water treatment expenses included adjusting chlorine systems
to coordinate with a new plant. In addition, there was increased labor
expenses as required by increased regulation and growth with the positions
recovered in the recent rate cases approved by the FPSC.
Gross profit from the water segment in 2000 accounts for less than 9% of the
Company's total gross profit and is not materially significant. Gross profit
increased by $386,000 primarily due to customer growth and a rate increase on
April 1, 2000 that added approximately $363,000 to the annual gross profit.
In 2000, operation expenses increased $192,000. In addition to across the
board increases in all classifications of expense, additional expenses were
incurred that were recovered in the rate increase.
Administrative Expenses
Administrative expenses for 2001 increased $813,000. Growth and the cost of a
more sophisticated billing system caused most of the increase. Also, payroll
expenses increased $195,000 due to replacing two management positions and
hiring two safety directors. The safety directors should assist in lowering
workman's compensation insurance costs and lost time. Other expenses that
increased were medical insurance costs of $60,000, pension cost of $175,000,
and employee benefit costs of $48,000.
In 2000, the administrative expenses are included in the discussion of each
segment as part of their increased operating expenses.
Interest Charges and Other Interest charges consist of interest on bonds,
short-term borrowings and customer deposits. Interest charges on long-term
debt increased due to two additional bond issues totaling $29,000,000. On
September 27, 2001 there was a $15,000,000 bond issued and on November
14, 2001 there was a $14,000,000 bond issued. Short-term interest expense
decreased primarily due to decreased interest rates, although it is effected
by fluctuations in the amounts borrowed under the line of credit. For
detailed information see "Notes Payable" and "Capitalization" in the notes
to financial statements.
Mergers and Acquisitions
In October 2001, Florida Public Utilities Company acquired Z-Gas Company,
Inc., a propane gas service distribution company in a stock for stock
transaction valued at approximately $600,000. The transaction involved the
issuance of 31,960 shares of the company's stock and $20,000 of cash. The
acquisition was accounted for under the purchase method of accounting. The
merger added about 1,000 customers to the propane operation in the Northeast
Florida Division.
In December 2001, Florida Public Utilities Company acquired certain net assets
of Atlantic Utilities, the Florida operation of Southern Union Company in a
cash transaction valued at approximately $10,000,000. Approximately $250,000
of the purchase price was withheld pending title clearance for real property
in Lauderhill. The acquisition was accounted for under the purchase method of
accounting. Atlantic Utilities served about 4,400 natural gas customers in New
Smyrna Beach and about 1,900 propane customers in central and south Florida.
Based on preliminary estimates, the excess of the consideration paid over the
estimated fair value, or the depreciated original cost for regulated entities,
of net assets acquired of approximately $5,900,000 was recorded as goodwill
and according to Financial Accounting Standards (FAS) Nos. 141 and 142 is
not being amortized. There could be amortization if intangibles other than
goodwill are identified. FPU is in the process of obtaining additional
supporting documentation from the seller of Atlantic Utilities to refine the
purchase price. For additional information concerning the acquisitions, see
"Mergers and Acquisitions" in Notes to Consolidated Financial Information.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Net cash provided by operating activities was $7,639,000 in 2001, $6,834,000 in
2000, and $7,543,000 in 1999. The increase in 2001 is primarily the result of
a reduction in accounts receivables due to increased collection efforts and
going from a $902,000 under recovery of energy costs to an over collection of
$1,456,000, offset by a reduction to accounts payable due to lower energy
bills. Most of the decrease in 2000 relates to the escalation of fuel prices
which caused accounts receivable and accounts payable to increase and fuel
costs to go from over recovery of $1,306,000 in 1999 to under recovery of
$902,000 in 2000.
Cash flows used from investing activities for construction averaged about $8.1
million through the five years ending 1999. For the 2001 year, $13,962,000
was spent due to several projects in addition to normal construction. A
project under contract with a generation facility, located in Palm Beach
County, began involving the construction of a gas line to the facility. The
estimated cost of constructing the line is $5,800,000, with approximately
$3,100,000 expended in 2001. Completion is expected in 2002. Proceeds from
the Palm Beach County municipal bonds, discussed in the "New Bond Issues"
section below, will be used to finance the project. Also approximately
$1,500,000 was spent to rebuild a 138KV electric line and $538,000 to
construct a new office in the Central Florida division. In 2000 there was
additional capitalized costs over normal expenditures of $1,348,000 relating
to the new customer information system.
In 2001, cash flows used by investing activities other than construction
projects included acquisitions of two companies amounting to $9,875,000 and
a $8,808,000 increase for restricted funds placed in long-term investments
that will be used for future construction expenditures in Palm Beach County
(see the "New Bond Issues" section below for details). The acquisitions were
financed from proceeds of the First Mortgage bonds detailed below.
Since portions of the Company's business are seasonal throughout the year,
short-term debt is used to meet working capital requirements. The Company also
borrows under lines of credit to finance portions of its capital expenditures,
pending refinancing at a later date through the issuance of equity or
long-term debt, depending upon prevailing market conditions.
The Company has a $20,000,000 line of credit with its primary bank of which
at December 31, 2001, $2,070,000 is available and a $2,500,000 line of credit
with a secondary bank which is all fully borrowed. The primary line provides
for interest at LIBOR plus fifty basis points and the line of credit at the
second bank is at LIBOR plus thirty basis points. The Company has reserved
$1,000,000 as a contingency for major storm repairs in the Northwest Florida
electric division. The weighted average interest rates at December 31, 2001,
2000, and 1999 were approximately 2.4%, 7.1%, and 6.3% respectively.
The Company has no material commitments for construction expenditures, with
the exception of $2,700,000 committed for the Lake Worth generation project
that will be funded from the restricted funds held in long-term investments
(see new bond issues). Capital expenditures for 2002 have been budgeted
for $13,426,000, of which approximately $8,700,000 will be funded from cash
and operating activities and, $4,800,000 from the restricted bond issue. For
additional information see "Notes Payable" and "Capitalization" in the Notes.
The Company anticipates that future construction expenditures and potential
acquisitions will require additional debt and/or equity financing, most
likely in 2002 or 2003. Most recently the Company used debt financing for all
cash requirements, including acquisitions because of the favorable interest
rate environment. The Company will issue equity or long-term debt depending
upon prevailing market conditions and availability. The Company does not use
any off-balance sheet financing structures and does not have any partnerships
or synthetic leases.
Long-term debt has sinking fund payments that begin in 2008. Lines of credit
are for generally a year and are renewed annually.
New Bond Issues
The Company's 1942 Indenture of Mortgage and Deed of Trust, which is a mortgage
on all real and personal property, permits the issuance of additional bonds
based upon a calculation of unencumbered net real and personal property. At
December 31, 2001, such calculation would permit the issuance of approximately
$25,000,000 of additional bonds.
Florida Public Utilities Company (FPU) filed an application on December 12,
2000, seeking Commission approval pursuant to Section 366.04, Florida
Statutesand Chapter 25-8, Florida
Administrative Code, to issue and sell and/or exchange any combination of
long-term debt, short-term notes and equity securities and/or to assume
liabilities or obligations as guarantor, endorser or surety during calendar
year 2001. FPU filed an amendment to its original application on January 19,
2001, which increased the dollar amount of its authority to $60 million in
long-term debt, short-term notes and equity securities, or any combination
thereof. Notice of FPU's application was given in the Florida Administrative
Weekly on February 9, 2001. The Company received approval from the Florida
Public Service Commission to issue a total aggregate debt amount not to
exceed $60 million on March 14, 2001. On April 17, 2001, stockholders
approved an amendment to the Company's Certificate of Reincorporation to
increase the authorized shares of Common Stock from 3,500,000 to 6,000,000
shares.
The Company issued its First Mortgage Bond, 6.85% Series due 2031 on September
27, 2001 in the aggregate principal amount of $15,000,000 as security for
the 6.85% Secured Insured Quarterly Notes, due October 1, 2031 (IQ Notes).
Interest on the pledged bond accrues at the rate of 6.85% per annum payable
quarterly in arrears on January 1, April 1, July 1 and October 1 of each year,
payable initially on January 1, 2002. The pledge bond constitutes the
Fourteenth Series of the Company's First Mortgage Bonds.
The Company issued $14,000,000 of Palm Beach County municipal bonds
(Industrial Development Revenue Bonds) on November 14, 2001 to finance
development in the area. The interest rate on the thirty-year callable
bonds is 4.90%. The bond proceeds are restricted and held in trust until
construction expenditures are actually incurred by the company and will be
available from the trustee as construction is performed in the county during
2001, 2002, and 2003. In 2001 $5,362,000 was drawn from the restricted funds
held by the trustee, leaving $8,008,000 available after closing costs.
$4,800,000 is expected to be used in 2002. The Company issued its First
Mortgage Bond, 4.9% Series due 2031 on November 1, 2001 in the aggregate
principal amount of $14,000,000 as security for the $14,000,000 Palm Beach
Industrial Development Revenue Development Bonds. The pledged bond
constitutes the Fifteenth Series of the Company's First Mortgage Bonds.
Impact of Recent Accounting Standards
Financial Accounting Standard No. 133 and 138
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments
and Hedging Activities" as amended by SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities." The Statement
establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded
in other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. The statement requires that changes
in the derivatives' fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. The effects of applying SFAS
Nos. 133 and 138 through December 31, 2001 were not material to the
Company's financial statements and are not expected to effect future
operations as the Company does not expect to enter into significant
derivative instruments.
Financial Accounting Standard No. 141 and 142
In July 2001, the FASB issued SFAS No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001 and eliminates the pooling-of-interests method
of accounting. SFAS No. 142 specifies that, among other things, intangible
assets with an indefinite useful life and goodwill will no longer be
amortized. The standard requires goodwill to be periodically tested for
impairment and written down to fair value if considered impaired. The
provisions of SFAS No. 142 are effective for fiscal years beginning after
December 15, 2001, and are effective for interim periods in the initial year
of adoption. The effects of adopting SFAS Nos. 141 and 142 on the recent
acquisitions required use of the purchase method and resulted in goodwill
that will have to be tested for impairment beginning in 2002.
Financial Accounting Standard No. 143
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." The statement requires that the fair value of an
asset retirement obligation be recognized in the period in which it is
incurred and the associated asset retirement costs capitalized as part of
the carrying amount of the long-lived asset. The asset retirement cost is
subsequently allocated to expense using a systematic and rational method
over its useful life. SFAS No. 143 is effective for fiscal years beginning
after June 15, 2002. Management is in the process of evaluating the impact
of implementing SFAS 143 and feels that other than changing the methodology
of depreciation and increasing administrative efforts, the effect on
operating results will be immaterial and feels the impact on the regulated
portion of the business, if any, would be an allowable item for recovery in
the Company's rates.
Financial Accounting Standard No. 144
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." The statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
The statement supercedes, with exceptions, SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
SFAS No. 144 is effective for fiscal years beginning after December 15, 2001.
Management is in the process of evaluating the impact of implementing SFAS 144
and is unable to estimate the effect, if any, on the Company's financial
statements but feels the regulated portion of an impact, if any, would be an
allowable item for recovery in the Company's rates.
OTHER
Effects of Inflation
The Company's tariffs associated with its utility operating divisions provide
for fuel clauses through which rates charged to customers are adjusted for
changes in the cost of fuel on a reasonably current basis. Increases in other
utility costs and expenses not otherwise offset by increases in revenues or
reductions in other expenses could have an adverse effect on earnings due to
the time lag associated with obtaining regulatory approval to recover such
increased costs and expenses, and the uncertainty of whether regulatory
commissions will allow full recovery of such increased costs and expenses.
Forward Looking Information
This report contains forward looking information that is intended to qualify
for the safe harbor provided by the Private Securities Litigation Reform Act of
1995. Although the Company believes that its expectations are based on
reasonable assumptions, actual results could differ materially from those
currently anticipated. Factors that could cause actual results to differ from
those anticipated include, but are not limited to, the effects of regulatory
actions, competition, future economic conditions and weather.
Critical Accounting Policies
The Company prepares its financial statements in accordance with the
provisions of Statement of Financial Accounting Standards No. 71 -
"Accounting for the Effects of Certain Types of Regulation" (SFAS 71).
In general, SFAS 71 recognizes that accounting for rate-regulated enterprises
should reflect the relationship of costs and revenues introduced by rate
regulation. As a result, a regulated utility may defer recognition of a cost
(a regulatory asset) or recognize an obligation (a regulatory liability) if it
is probable that, through the rate making process, there will be a
corresponding increase or decrease in revenues.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
All financial instruments held by the Company were entered into for purposes
other than for trading. The Company has market risk exposure only from the
potential loss in fair value resulting from reasonably possible changes in
interest rates. The Company has no exposure relating to commodity prices
because the Company, under its regulatory jurisdictions, is fully compensated
for the actual costs of commodities (primarily natural gas and electricity)
and also passes through fluctuations in propane costs to customers. The
Company has no exposure to equity risk as it does not hold any equity
instruments. The Company's exposure to interest rate risk is limited to
investments held in escrow for environmental costs, investments from
restricted bond proceeds, and long-term debt. The investments held in escrow
for environmental costs have gained in market value by $49,000 as of December
31, 2001 and mature from 2001 to 2004. We expect to hold these securities
until maturity. The restricted funds will be used during the next two years.
Therefore, the Company does not believe it has material market risk exposure
related to these instruments. The cost of long-term debt is included as a
recovered cost in revenue for the regulated operations and as such the Company
is reimbursed for interest costs. Therefore, disclosure of the change in fair
value due to reasonably possible near term changes in interest rates is not
meaningful.
Item 8. Financial Statements and Supplementary Data
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share data)
Years Ended December 31
-------------------------
2001 2000 1999
Revenues ------ ------ ------
Electric $39,050 $39,304 $37,544
Natural gas 44,729 38,270 30,287
Propane gas 5,399 4,380 3,866
Water 2,965 2,805 2,401
------- ------- -------
Total revenues 92,143 84,759 74,098
Cost of fuel and taxes
based on revenues 59,367 53,616 44,756
------- ------- -------
Gross profit 32,776 31,143 29,342
------- ------- -------
Operating Expenses
Operations 14,718 13,139 12,013
Maintenance 3,165 3,013 2,763
Depreciation and amortization 4,839 4,698 4,557
Taxes other than income taxes 2,538 2,292 2,211
Income taxes 1,249 1,473 1,628
------- ------- -------
Total operating expenses 26,509 24,615 23,172
------- ------- -------
Operating Income 6,267 6,528 6,170
------- ------- -------
Interest Charges and Other
Merchandise and service revenue (2,571) (1,815) (1,599)
Merchandise and service expenses 2,316 1,762 1,572
Other income (427) (372) (401)
Other deductions 30 23 26
Gain from sale of
non-utility property (15) - (134)
Long-term debt 2,606 2,235 2,235
Short-term borrowings 826 962 473
Customer deposits and other interest 159 290 260
Income taxes on interest
charges and other 291 155 209
------- ------- -------
Total interest charges and other 3,215 3,240 2,641
------- ------- -------
Net Income 3,052 3,288 3,529
Preferred Stock Dividends 29 29 29
------- ------- -------
Earnings for Common Shares $3,023 $3,259 $3,500
======= ======= =======
Earnings Per Common Share $ 1.06 $ 1.16 $ 1.17
Dividends Paid Per Common Share 0.73 0.70 0.66
Average Shares Outstanding 2,851,305 2,819,510 2,995,721
See Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEETS
(in thousands) December 31
-------------------
ASSETS 2001 2000
-------- --------
Utility Plant
Electric $ 57,212 $ 53,642
Natural gas 68,528 56,464
Propane gas 8,993 6,628
Water 12,079 11,512
Common 4,844 4,657
-------- --------
Total 151,656 132,903
Less accumulated depreciation 54,327 48,703
-------- --------
Net utility plant 97,329 84,200
-------- --------
Current Assets
Cash 3,198 66
Accounts receivable 7,169 9,970
Allowance for uncollectible accounts (131) (162)
Unbilled Receivable 1,482 1,431
Inventories (at average or unit cost) 3,343 2,884
Prepayments and deferrals 670 910
Under recovery of fuel costs - 788
Under recovery of conservation
and unbundling 343 115
-------- --------
Total current assets 16,074 16,002
-------- --------
Other Assets
Investments held in escrow
for environmental costs 3,417 2,876
Restricted Bond Proceeds 8,008 -
Deferred charges 9,260 5,968
Goodwill 5,901 -
-------- --------
Total other assets 26,586 8,844
-------- --------
Total $139,989 $109,046
======== ========
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $ 29,329 $ 27,510
Preferred stock 600 600
Long-term debt 52,500 23,500
-------- --------
Total capitalization 82,429 51,610
-------- --------
Current Liabilities
Notes payable 20,430 17,900
Accounts payable 5,637 10,337
Insurance accrued 2,257 2,389
Interest accrued 877 625
Other accruals and payables 3,186 3,062
Over recovery of fuel costs 1,800 -
Customer deposits 4,454 4,192
-------- --------
Total current liabilities 38,641 38,505
-------- --------
Other Liabilities
Deferred income taxes 7,308 7,437
Unamortized investment tax credits 861 975
Environmental liability 5,237 5,306
Regulatory tax liabilities 1,548 1,653
Customer advances for construction 2,011 1,965
Storm damage 1,954 1,595
-------- --------
Total other liabilities 18,919 18,931
-------- --------
Total $139,989 $109,046
======== ========
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(dollars in thousands)
December 31,
------------------
2001 2000
------ ------
Common Shareholders' Equity
Common stock, $1.50 par value, authorized
6,000,000 shares and issued 3,236,975,
shares in 2001; authorized 3,500,000 and
issued 3,224,672 shares in 2000 $4,856 $4,837
Paid-in capital 9,902 9,661
Retained earnings 19,386 18,461
Treasury stock - at cost (350,691 shares
in 2001 and 396,867 in 2000) (4,815) (5,449)
------- -------
Total common shareholders' equity 29,329 27,510
------- -------
Preferred Stock
4 3/4% Series A, $100 par value,
redemption price $106, authorized
and outstanding 6,000 shares 600 600
------- -------
Long-Term Debt
First mortgage bonds
Series
9.57% due 2018 10,000 10,000
10.03% due 2018 5,500 5,500
9.08 % due 2022 8,000 8,000
4.90 % due 2031 14,000 -
6.85 % due 2031 15,000 -
------- -------
Total long-term debt 52,500 23,500
------- -------
Total Capitalization $82,429 $51,610
======= =======
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
(dollars in thousands)
Common Stock
------------------ Treasury
Shares Aggregate Paid-in Retained Treasury Shares
Issued Par Value Capital Earnings Shares Cost
------- --------- ------- -------- -------- --------
Balances as of
December 31, 1998 3,200,860 $4,801 $9,065 $15,686 200,945 $(1,930)
Net income 3,529
Dividends (2,011)
Stock plans 11,341 18 279 (9,593) 34
Purchase of
treasury shares 218,464 (3,605)
--------- ------- ------- ------- -------- -------
Balances as of
December 31, 1999 3,212,201 4,819 9,344 17,204 409,816 (5,501)
Net income 3,288
Dividends (2,031)
Stock plans 12,471 18 317 (12,949) 52
Balances as of --------- ------- ------- ------- -------- -------
December 31, 2000 3,224,672 4,837 9,661 18,461 396,867 (5,449)
Net income 3,052
Dividends (2,127)
Stock Issuance
due to Acquisitions (31,960) 439
Stock plans 12,303 19 241 (14,216) 195
Balances as of --------- ------- ------- ------- -------- -------
December 31, 2001 3,236,975 $4,856 $9,902 $19,386 350,691 $(4,815)
========= ======= ======= ======= ======== =======
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) Years Ended December 31,
----------------------------------
2001 2000 1999
------ ------ ------
Cash Flows from Operating Activities
Net income $ 3,052 $ 3,288 $ 3,529
Adjustments to reconcile net income
to net cash from operating activities
Depreciation 4,839 4,698 4,557
Deferred income taxes (231) 375 641
Bad debt expense 417 206 162
Investment tax credits (114) (117) (130)
Other 28 (46) 133
Gain on sale of non-utility property - - (134)
Effects of changes in
Receivables 2,443 (3,184) (515)
Unbilled Receivable 19 (235) 92
Inventories and prepayments 76 (1007) (260)
Accounts payable and accruals (4,143) 6,550 519
Over (under) recovery of
fuel costs 2,358 (2,208) 446
Area expansion program
deferred costs (804) (576) (945)
Environmental liability (82) 106 (424)
Other (219) (1,016) (128)
Net cash provided by ------ ------ ------
operating activities 7,639 6,834 7,543
------ ------ ------
Cash Flows from Investing Activities
Construction expenditures (13,962) (10,543) (8,177)
Payment for purchase of
Atlantic Company (9,792) - -
Payment for purchase of
Z Gas Company, net of cash acquired (83) - -
Customer advances for construction 39 320 313
Purchase of restricted
long-term investment (8,008) 1 256
Deposit held in escrow for
dividend payment (541) - -
Proceeds from sale of non-utility
property - - 154
------ ------ ------
Net cash used by investing activities (32,347) (10,222) (7,454)
------ ------ ------
Cash Flows from Financing Activities
Short-term borrowings - net 2,530 4,900 4,800
Long-term borrowings - net of costs 27,022 - -
Proceeds from common stock plans 390 387 331
Dividends paid (2,102) (1,998) (2,014)
Purchase of treasury shares - - (3,605)
Net cash provided by ------ ------ ------
(used by) financing activities 27,840 3,289 (488)
------ ------ ------
Net Increase (Decrease) in Cash 3,132 (99) (399)
Cash at Beginning of Year 66 165 564
------ ------ ------
Cash at End of Year $ 3,198 $ 66 $ 165
====== ====== ======
Supplemental Cash Flow Information
Cash was paid during the
years as follows:
Interest $ 3,379 $ 3,399 $ 2,792
Income Taxes 1,396 1,958 1,188
Non-cash investing and financing activities
Purchase of Z-Gas company through
issuance of 31,960 shares of
common stock $ 503 - -
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summary of Significant Accounting and Reporting Policies
Business and Regulation Florida Public Utilities Company (the Company) is an
operating public utility engaged principally in the purchase, transmission,
distribution and sale of electricity and in the purchase, transmission,
distribution, sale and transportation of natural gas. The Company is subject
to the jurisdiction of the Florida Public Service Commission (FPSC) with
respect to its electric, natural gas and water operations. The FPSC stopped
regulating the water segment of the Company's business on September 17, 2001
due to a resolution passed by Nassau County (see additional discussion below).
The suppliers of electrical power to the Northwest Florida division and of
natural gas to the natural gas divisions are subject to the jurisdiction of
the Federal Energy Regulatory Commission (FERC). The Northeast Florida
division is supplied most of its electrical power by a municipality which is
exempt from FERC and FPSC regulation. The Company also distributes propane
gas through a non-regulatedsubsidiary. The Company's accounting policies and
practices conform to generally accepted accounting principles as applied to
regulated public utilities and are in accordance with the accounting
requirements and rate making practices of the FPSC.
The Company prepares its financial statements in accordance with the provisions
of Statement of Financial Accounting Standards No. 71 - "Accounting for the
Effects of Certain Types of Regulation" (SFAS 71). In general, SFAS 71
recognizes that accounting for rate regulated enterprises should reflect the
relationship of costs and revenues introduced by rate regulation. As a result,
a regulated utility may defer recognition of a cost (a regulatory asset) or
recognize an obligation (a regulatory liability) if it is probable that,
through the rate making process, there will be a corresponding increase or
decrease in future revenues. Accordingly, the Company has recognized certain
regulatory assets and regulatory liabilities in the consolidated balance
sheets. The Company believes that the FPSC will continue to allow the Company
to recover such items through its rates. A summary of such items is as
follows (in thousands):
2001 2000
Assets
Deferred development costs $ 2,518 $ 1,714
Under recovery of fuel
costs, conservation and unbundling 343 903
Unamortized piping and conversion costs 1,227 1,336
Unamortized loss on reacquired debt 302 325
------ ------
Total Regulatory Assets $ 4,390 $ 4,278
====== ======
Liabilities
Regulatory tax liabilities $ 1,548 $ 1,653
Environmental liability 5,237 5,306
Storm damage 1,954 1,595
Over recovery of fuel costs 1,800 -
------ ------
Total Regulatory Liabilities $10,539 $ 8,554
====== ======
Deferred development costs and unamortized loss on reacquired debt are
included in deferred charges in the consolidated balance sheets.
The Company has agreed with the FPSC staff to limit its earned return on equity
for its regulated electric and natural gas operations. The disposition of any
excess earnings is left to the discretion of the FPSC, with alternatives
including a refund to customers, additional contributions to storm damage
reserves, or the reduction of any depreciation reserve deficiency. The excess
earnings for 1997, 1998 and 1999 at one of the Company's electric divisions
were ordered by the FPSC to be added to that division's storm damage reserve.
Since that last order on the 1999 disposition of excess earnings, the FPSC has
allowed the company the automatic flexibility of funding the storm damage
reserves each year thereafter through use of the excess earnings and allowing
additional storm damage accruals up to a cap in those reserves of $1,500,000
and $1,400,000 in the Northeast and Northwest electric divisions, respectively.
In 2001, the Company funded it's Northeast division electric storm reserve
with an additional $237,000 relating to 2000 excess earnings. In 2001, the
Company did not expect any excess earnings and accordingly has not funded any
additional amounts to its storm damage reserves. As of the end of 2001, the
Northeast and Northwest electric storm reserves were at approximately
$1,200,000 and $750,000, respectively.
In 1999, the Company filed for a water rate increase with the FPSC and had a
rate increase effective April 2000, with an expected increase in annual
revenues of $381,000. The Company filed for a limited proceeding rate increase
in its water rates with the FPSC in 2000. The rates became effective May 2001
and they are expected to increase annual revenues by $236,000 or an overall
8.86% increase to rates.
The FPSC stopped regulating the water segment of the Company's business on
September 17, 2001 due to Nassau County adopting resolution No. 2001-128 that
rescinded the jurisdiction of the FPSC over investor owned water and wastewater
utilities in the County. Under Florida law there is a "grandfather"
application process under which a utility, subject to such a jurisdictional
change, is entitled to receive a certificate of authorization from the County
for the same service as certified by the Commission. In such process, the
utility is also entitled to have "grandfathered" all rates and charges,
regulations and procedures, and rate base until thereafter lawfully changed.
The Company is in process of working with the County board on a regulatory
agreement.It is unknown what effect, if any, the change or regulatory body
will have on the water operations or what additional action the Company will
take in this regard.
The Company filed the appropriate unbundled tariffs to give its commercial
natural gas customers the option of purchasing their gas supplies from third
parties. The Company officially offered unbundled services to commercial
customers on August 1, 2001. Even though FPU has had the overall lowest gas
costs in the Florida market, third party suppliers may be able to offer our
customers additional programs which a regulated gas company cannot offer.
Furthermore, by purchasing their gas supplies from third parties, our
commercial customers may avoid certain taxes and fees which FPU is required to
collect on the sale of natural gas. The Company's operating results will
not be affected as the Company realizes the same gross profit regardless of
whether the customer purchases the gas from us or uses our system to transport
the gas. The FPSC approved various mechanisms, which will allow the Company
to be reimbursed for the incremental cost of providing unbundled services.
Revenues
The Company records utility revenues as service is provided and bills
its customers monthly on a cycle billing basis. Accordingly, at the end of
each month, the Company accrues for estimated unbilled revenues.
The rates of the Company include base revenues, fuel adjustment charges and the
pass-through of certain governmental imposed taxes based on revenues. The base
revenues are determined by the FPSC and remain constant until a request for an
increase in such rates is filed and approved by the FPSC. From the FPSC's
perspective, the Company operates four distinct entities (Northwest Florida
electric, Northeast Florida electric, Northeast Florida water, and natural
gas). Thus, for the Company to recover through rate relief the effects of
inflation and construction expenditures for all such entities, a request for an
increase in base revenues would require the filing of four separate rate cases.
The water segment of the business was subject to FPSC regulation until
September 17, 2001, when the Board of Nassau County rescinded the FPSC
jurisdiction.Fuel adjustment charges are estimated for customer billing
purposes and any under/over-recovery difference between the incurred cost of
fuel and estimated amounts billed to customers is deferred for future recovery
or refund and either charged or credited to customers. Interest accrues on
such under/over-recoveries and is included in the subsequent adjustment.
Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, Flo-Gas Corporation. All significant intercompany
balances and transactions have been eliminated.
Certain reclassifications have been made to the prior years' financial
statements and other financial information contained herein to conform with the
2001 presentation.
Utility Plant and Depreciation
Utility plant is stated at original cost. The costs of additions to utility
plant include contracted services, direct labor, transportation, and materials.
The costs of units of property retired are removed from utility plant, and such
costs plus removal costs, less salvage, are charged to accumulated
depreciation. Maintenance and repairs of property and replacement and renewal
of items determined not to be units of property are charged to operating
expenses. Substantially all of the utility plant and the shares of Flo-Gas
Corporation collateralize the Company's First Mortgage Bonds.
Depreciation is computed using the composite straight-line method at rates
prescribed by the FPSC for financial accounting purposes. Such rates are based
on estimated service lives of the various classes of property. Depreciation
provisions on average depreciable property approximate 3.4% in 2001, 3.6% in
2000 and 3.7% in 1999.
Income Taxes
Deferred income taxes are provided on all significant temporary differences
between the financial statements and tax basis of assets and liabilities at
currently enacted tax rates. Investment tax credits have been deferred and
are amortized based upon the average useful life of the related property in
accordance with the rate treatment.
Use of Estimates
Inherent in the accounting process is the use of estimates when preparing
financial statements in accordance with accounting principals generally
accepted in the United States of America. Actual results could differ from
these estimates. The Company has used estimates in the preparation of its
financial statements including the accrual for uninsured liability claims.
The Company is self-insured for certain liability claims and therefore accrues
for estimated losses occurring from both asserted and unasserted claims. The
estimate for unasserted claims arising from unreported incidents is based on an
analysis of historical claims data and judgment. The accrual for such claims
was approximately $600,000 at December 31, 2001.Management believes that its
accrual for potential liability claims is adequate.
Notes Payable
The Company has a $20,000,000 line of credit with its primary bank of which at
December 31, 2001, $2,070,000 is available and a $2,500,000 line of credit with
a secondary bank which is all fully borrowed. The primary line and note
provide for interest at LIBOR plus fifty basis points and the line of credit
at the second bank is at LIBOR plus thirty basis points. The Company has
reserved $1,000,000 as a contingency for major storm repairs in the Northwest
Florida electric division. The weighted average interest rates at
December 31, 2001, 2000, and 1999 were approximately 2.4%, 7.1%, and 6.3%
respectively.
Mergers and Acquisitions
In October 2001, the Company acquired Z-Gas Company, Inc., a propane gas
service distribution company in a stock for stock transaction valued at
approximately $600,000. The transaction involved the issuance of 31,960 shares
of the Company's stock and approximately $20,000 cash. The acquisition was
accounted for under the purchase method of accounting. The purchase added
about 1,000 customers to the propane operation in the Northeast Florida
Division.
In December 2001, the Company acquired certain net assets of Atlantic
Utilities, the Florida operation of Southern Union Company in a cash
transaction valued at approximately $10,000,000. Approximately $250,000 of the
purchase price was withheld pending title clearance for real property in
Lauderhill. The acquisition was accounted for under the purchase method
of accounting. Atlantic Utilities served about 4,400 natural gas customers in
New Smyrna Beach and about 1,900 propane customers in central and south
Florida.
Based on preliminary estimates, the excess of the consideration paid over the
estimated fair value, or the depreciated original cost for regulated entities,
of net assets acquired of approximately $5,900,000 was recorded as goodwill and
according to Financial Accounting Standards (FAS) Nos. 141 and 142 is not
being amortized. There could be amortization if intangibles other than goodwill
are identified. FPU is in the process of obtaining additional supporting
documentation from the seller of Atlantic Utilities to refine the purchase
price.
The estimated fair market values of assets acquired and liabilities assumed
are summarized in the following table:
Fair Market Value of Assets Acquired and Liabilities Assumed
(In Thousands)
- ------------------------------------------------------------------------
Atlantic
Utilities Z-Gas
- ------------------------------------------------------------------------
Assets
Utility Plant
Natural Gas $4,830 $ -
Propane Gas 1,006 333
Accumulated Depreciation
and Amortization (2,195) -
------ ------
Net Utility Plant 3,641 333
------ ------
Current Assets
Cash 0 14
Accounts Receivable 150 40
Allowance for Uncollectable
Accounts (15) (17)
Inventories 278 17
------ ------
Total Current Assets 413 54
------ ------
Other Assets
Goodwill 5,685 216
Deferred Charges 342 -
------ ------
Total Other Assets 6,027 216
------ ------
Liabilities
Current Liabilities
Interest Accrued (12) -
Other Accruals and Payables (10) (3)
Customer Deposits (260) -
------ ------
Current Liabilities (282) (3)
------ ------
Other Liabilities
Customer Advances for Construction (7) -
------ ------
Total Other Liabilities (7) 0
------ ------
Acquisition Cost $9,792 $ 600
====== ======
The net utility plant for the natural gas business represents the depreciated
original cost according to the regulatory guidelines. For Atlantic Utilities,
approximately $3,127 of the goodwill relates to natural gas regulated
operations and $2,558 relates to propane operations. All of the Z-Gas goodwill
relates to propane operations.
The following unaudited pro forma information combines the consolidated results
of operations of Florida Public Utilities Company with those of Z-Gas and
Atlantic Utilities as if these acquisitions had occurred at the beginning of
2000.
The pro forma results are not necessarily an indication of the results that
would have been achieved had the transactions been consummated as of the date
indicated, or that may be achieved in the future.
Pro Forma Results
(IN THOUSANDS EXCEPT FOR PER-SHARE AMOUNTS)
- -----------------------------------------------------------------------
Year Ended December 31, 2001 2000
- -----------------------------------------------------------------------
Revenues $98,061 $88,989
Cost of Fuel and Taxes Based on Revenues 62,689 55,481
------- -------
Gross Profit $35,372 $33,508
Operating Income $ 7,103 $ 7,021
Net Income $ 3,800 $ 3,693
Earnings for Common Shares $ 3,771 $ 3,664
Average Shares Outstanding 2,877,938 2,851,470
Earnings per Common Share $1.31 $1.28
2001 amounts include actual November and December for Z-Gas and
December 15-31, 2001 for Atlantic Utilities.
Capitalization
Common Shares Reserved The Company has reserved 88,725 common shares for
issuance under the Dividend Reinvestment Plan and 33,984 common shares for
issuance under the Employee Stock Purchase Plan.
Dividend Restriction The Indenture of Mortgage and Deed of Trust and
supplements thereto provide for restriction of the payment of cash dividends.
At December 31, 2001 approximately $2,900,000 of retained earnings were free
of such restriction.
Maturities of Long-Term Debt Sinking fund payments are scheduled to begin in
2008.
Bond Proceeds The Company issued its First Mortgage Bond, 6.85% Series due
2031 on September 27, 2001 in the aggregate principal amount of $15,000,000
as security for the 6.85% Secured Insured Quarterly Notes, due October 1, 2031
(IQ Notes). Interest on the pledged bond accrues at the rate of 6.85% per
annum payable quarterly in arrears on January 1, April 1, July 1 and October 1
of each year, payable initially on January 1, 2002. The pledge bond
constitutes the Fourteenth Series of the Company's First Mortgage Bonds.
Restricted Bond Proceeds The Company issued $14,000,000 of Palm Beach County
tax free municipal bonds (Industrial Development Revenue Bonds) on
November 14, 2001 to finance development in the area. The interest rate on the
thirty-year callable bonds is 4.90%. The bond proceeds are restricted and held
in trust until construction expenditures are actually incurred by the Company
and will be available from the trustee as construction is performed in the
County during 2001, 2002, and 2003. In 2001 $5,362,000 was drawn from the
restricted funds held by the trustee, leaving $8,008,000 available after
closing costs. The Company issued its First Mortgage Bond, 4.9% Series due
2031 on November 1, 2001 in the aggregate principal amount of $14,000,000 as
security for the $14,000,000 Palm Beach Industrial Development Revenue
Development Bonds. The pledged bond constitutes the Fifteenth Series of the
Company's First Mortgage Bonds.
Segment Information
The Company is organized into three regulated business segments: natural gas,
electric and water and one non-regulated business segment, propane gas. There
are no material inter-segment sales or transfers.
Identifiable assets are those assets used in the Company's operations in each
business segment. Common assets are principally cash and overnight
investments, deferred tax assets and common plant.
Business segment information for 2001, 2000 and 1999 is summarized as follows
(in thousands):
2001 2000 1999
------ ------ ------
Revenues
Electric $39,050 $39,304 $37,544
Natural Gas 44,729 38,270 30,287
Propane Gas 5,399 4,380 3,866
Water 2,965 2,805 2,401
------ ------ ------
Consolidated 92,143 84,759 74,098
Operating income
excluding income tax
Electric $ 2,893 $ 3,016 $ 3,173
Natural Gas 3,295 3,789 3,493
Propane Gas 431 264 393
Water 897 932 39
------ ------ ------
Consolidated 7,516 8,001 7,798
Identifiable assets
Electric $37,753 $36,911 $35,384
Natural Gas 52,734 42,564 38,355
Propane Gas 10,728 5,648 4,999
Water 9,579 9,038 7,199
Common 29,195 14,885 10,606
------ ------ ------
Consolidated 139,989 109,046 96,543
Depreciation and
amortization
Electric $ 2,070 $ 1,969 $ 1,863
Natural Gas 1,963 2,027 1,998
Propane Gas 322 284 303
Water 300 282 260
Common 184 136 133
------ ------ ------
Consolidated 4,839 4,698 4,557
Construction expenditures
Electric $ 4,418 $ 3,015 $ 2,774
Natural Gas 7,508 3,300 3,337
Propane Gas 1,147 757 384
Water 520 2,100 1,462
Common 369 1,371 220
------ ------ ------
Consolidated 13,962 10,543 8,177
Income tax expense
Electric $ 397 $ 475 $ 621
Natural Gas 547 728 729
Propane Gas 84 26 87
Water 222 244 191
Common 290 155 209
------ ------ ------
Consolidated 1,540 1,628 1,837
Income Taxes
The provision (benefit) for income taxes consists of the following
(in thousands):
2001 2000 1999
------ ------ ------
Current payable
Federal $ 1,362 $ 1,039 $ 954
State 232 177 163
------ ------ ------
1,594 1,216 1,117
------ ------ ------
Deferred
Federal (210) 299 526
State (21) 75 115
------ ------ ------
(231) (374) (641)
------ ------ ------
Investment tax credit (114) (117) (130)
------ ------ ------
Total - operating 1,249 1,473 1,628
Included in interest
charges and other 291 155 209*
------ ------ ------
Total $ 1,540 $ 1,628 $ 1,837
====== ====== ======
*Includes income tax of $51 on gain from the sale of non-utility property.
The difference between the effective income tax rate and the statutory federal
income tax rate applied to pretax income is accounted for as follows
(in thousands):
2001 2000 1999
------ ------ ------
Federal income tax
at statutory rate $ 1,561 $ 1,671 $ 1,824
State income taxes,
net of federal benefit 139 166 183
Investment tax credit (114) (117) (130)
Other (46) (92) (40)
------ ------ ------
Total provision for income
taxes $ 1,540 $ 1,628 $ 1,837
====== ====== ======
The tax effects of temporary differences producing accumulated deferred
income taxes in the accompanying consolidated balance sheets are as follows
(in thousands):
2001 2000
------ ------
Deferred tax assets
Environmental $ 2,125 $ 1,997
Other 235 446
------ ------
Total deferred tax assets 2,360 2,443
------ ------
Deferred tax liabilities
Utility plant related 8,748 8,654
Under recovery of fuel costs 320 798
Other 600 428
------ ------
Total deferred tax liabilities 9,668 9,880
------ ------
Net deferred income taxes $ 7,308 $ 7,437
====== ======
Employee Benefit Plans
Florida Public Utilities Company sponsors a qualified pension plan and
postretirement medical and life benefit plans for its employees. The life plan
obligations are de minimis and not reflected in the Company's disclosures.
The following tables provide a reconciliation of the changes in the plans'
benefit obligations and fair value of assets over the 2-year period ending
December 31, 2001, and a statement of the funded status as of December 31 of
both years:
Pension Benefits Other Benefits
2001 2000 2001 2000
Reconciliation of
Benefit Obligation
Prior year obligation
at December 31 $26,186,445 $21,126,637 $ 1,875,972 $ 1,707,660
Service cost 901,220 971,596 77,425 87,596
Interest cost 1,780,967 1,694,069 103,649 118,285
Participant
contributions 0 0 15,625 12,144
Plan amendments 295,554 3,911,439 0 0
Actuarial (gain) loss (1,844,718) (454,127) (590,995) 19,331
Acquisitions
(divestitures) 0 0 0 0
Benefit payments (1,155,419) (1,063,169) (71,308) (69,044)
Curtailments 0 0 0 0
Settlements 0 0 0 0
Current year ---------- ---------- ---------- ----------
obligation at
December 31 $26,164,049 $26,186,445 $ 1,410,368 $ 1,875,972
========== ========== ========= =========
Reconciliation of Fair Value of Plan Assets
Prior year fair value
of plan assets at
December 31 $35,113,920 $36,385,130 $ 0 $ 0
Actual return on
plan assets (1,951,083) (208,041) 0 0
Acquisitions
(divestitures) 0 0 0 0
Employer contributions 0 0 55,683 56,900
Participant contributions 0 0 15,625 12,144
Benefit payments (1,155,419) (1,063,169) (71,308) (69,044)
Settlements 0 0 0 0
---------- ---------- ---------- ----------
Current year fair value
of plan assets at
December 31 $32,007,418 $35,113,920 $ 0 $ 0
========== ========== ========== ==========
Funded Status
Funded status at
December 31 $ 5,843,369 $ 8,927,475 $(1,410,368) $(1,875,972)
Unrecognized transition
(asset) obligation 0 0 471,846 514,742
Unrecognized prior
service cost 7,006,373 7,432,834 0 0
Unrecognized
(gain) loss (10,578,578) (14,335,325) (397,442) 188,775
---------- ----------- --------- ----------
Net amount
recognized - prepaid
/ (liability) $ 2,271,164 $ 2,024,984 $(1,335,964) $(1,172,455)
========== =========== ========= ==========
The following table provides the components of net periodic benefit cost for
the plans for fiscal years 2001, 2000, and 1999:
Pension Benefits Other Benefits
2001 2000 1999 2001 2000 1999
Service cost $ 901,220 $ 971,596 $ 770,799 $ 77,425 $ 87,596 $ 71,840
Interest cost 1,780,967 1,694,069 1,368,995 103,649 118,285 108,789
Expected return
on plan assets (2,821,040) (2,785,633) (2,170,746) 0 0 0
Amortization of
transition (asset)
obligation 0 (183,269) (183,276) 42,896 42,896 42,896
Amortization
of prior
service cost 722,015 716,418 422,358 0 0 0
Amortization of
net (gain) loss (829,342) (875,582) (474,402) (4,778) 1,001 262
--------- --------- --------- -------- -------- --------
Net periodic
benefit cost $(246,180) $ (462,401) $ (266,272) $219,192 $249,778 $223,787
Curtailment
(gain) loss 0 0 0 0 0 0
Settlement
(gain) Loss 0 0 0 0 0 0
--------- --------- --------- -------- -------- --------
Net periodic
benefit cost after
curtailments
and settlements $ (246,180) $(462,401) $ (266,272) $219,192 $249,778 $223,787
========== ========= ========= ======== ======== ========
The prior service costs are amortized on a straight-line basis over the average
remaining service period of active participants.Gains and losses in excess of
10% of the greater of the benefit obligation and the market-related value of
assets are amortized over the average remaining service period of active
participants.
The pension plan is noncontributory; the postretirement medical plan is
contributory with participants' contributions subject to adjustment annually.
The accounting for the health care plan anticipates future cost-sharing changes
to the written plan such that retiree contributions will increase over time at
the same rate as the total plan cost.
The assumptions used in the measurement of the Company's benefit obligation are
shown in the following table:
Pension Benefits Other Benefits
2001 2000 1999 2001 2000 1999
Weighted-average Assumptions as of December 31
Discount rate 7.25% 7.00% 7.00% 7.25% 7.00% 7.00%
Expected return
on plan assets 8.50% 8.50% 8.50% N/A N/A N/A
Rate of compensation
increase 4.50% 5.50% 5.50% N/A N/A N/A
For measurement purposes, the annual rate of increase in the per capita cost
of covered health care benefits during 2001 was 6.50%. These rates were assumed
to decrease gradually each year to a rate of 5.00% for 2007 and remain at that
level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A 1% change in assumed health care cost
trend rates would have the following effects:
1% Increase 1% Decrease
Effect on total of service and
interest cost components of net
periodic postretirement health
care benefit cost $ 22,876 $ (19,248)
Effect on the health care component
of the accumulated postretirement
benefit obligation $ 163,306 $(139,472)
Health Plan
The Company is principally self-insured for its employee and retiree medical
insurance plan. The Company's health care liability under the plan is limited
to $100,000 per individual per year, with a maximum total liability
of $1,184,275.
A reserve for future benefit payments for active employees is maintained at a
level sufficient to provide for estimated outstanding claims under the plan net
of amounts contributed by employees. Net health care benefits paid by the
Company for active employees were approximately $629,000, $509,000, and
$516,000 for 2001, 2000 and 1999, respectively.
Employee Stock Purchase Plan
The Company's Employee Stock Purchase Plan offers common stock at a discount to
qualified employees. During 2001, 2000 and 1999, 11,774, 10,849, and 8,193
shares, respectively, were issued under the Plan for aggregate consideration
of $162,000, $165,000, and $116,000, respectively.
Dividend Reinvestment Plan
During 2001, 2000 and 1999, 12,303, 12,471, and 11,341 shares, respectively,
were issued under the Company's Dividend Reinvestment Plan for aggregate
consideration of $196,000, $193,000, and $193,000, respectively.
Financial Instruments
The carrying amounts reported in the balance sheet for restricted bond
proceeds, notes payable, taxes accrued and other accrued liabilities
approximate fair value. The Company's investments held in escrow for
environmental costs have gained in market value by $49,000 as of
December 31, 2001. The Company's debt is not rated by an agency. The older
bonds contain "make whole" provisions that would negate any value fluctuations
in interest rates. Additionally, the cost of long-term debt is included as a
recovered cost in revenue for the regulated operations and as such the Company
is reimbursed for interest costs. Therefore, disclosure of the change in fair
value due to reasonably possible near term changes in interest rates is not
meaningful. However, the current bonds outstanding were issued in 1988, 1992,
and 2001 and since that time interest rates have declined, and thus it is
reasonable to assume that the fair value of existing first mortgage bonds
would be more than their carrying value.
Contingencies
The Company is subject to federal and state legislation with respect to soil,
groundwater and employee health and safety matters and to environmental
regulations issued by the Florida Department of Environmental Protection
(FDEP), the United States Environmental Protection Agency (EPA) and other
federal and state agencies. Except as discussed below, the Company does
not expect to incur material future expenditures for compliance with
existing environmental laws and regulations.
Insurance Claims and Rate Relief
The Company notified its insurance carriers of environmental impacts detected
at the former gasification plant sites discussed above. As a result of
negotiations with the Company's major insurance carriers that concluded in
1997, such carriers agreed to pay settlement proceeds totaling approximately
$4,300,000 for certain environmental costs. Most recently, in September 1999,
certain British based insurers agreed to settle claims in the approximate total
amount of $7,630. Since 1991, the FPSC has also allowed the Company to recover
through rate relief environmental expenses of $2,356,000 at the rate of
approximately $240,000 per year as an addition to the insurance reserve; the
increases to the reserve ended in February 2001.
West Palm Beach Site
The Company is currently conducting a contamination assessment investigation of
a parcel of property owned by it in West Palm Beach, Florida, upon which the
Company previously operated a gasification plant. After a preliminary
contamination assessment investigation indicated soil and groundwater impacts,
the Company entered into a consent order with the FDEP. The consent order
requires the Company to delineate the extent of soil and groundwater impacts
associated with the prior operation of the gasification plant and requires the
Company to remediate such soil and groundwater impacts, if necessary. In
June 1992, the Company commenced a contamination assessment investigation. A
Contamination Assessment Report ("CAR") was submitted to FDEP in December 1995,
and a CAR Addendum was submitted to FDEP in April 2000. Additional field
investigations were performed in 2001 in response to FDEP comments to the CAR
Addendum.
On December 28, 2001, the Company submitted a Supplemental CAR Addendum
("SCARA") to FDEP for review and comment. The Company is awaiting comments
from FDEP regarding the SCARA. Prior to the review and approval of the SCARA
by FDEP, it is not possible to determine the complete extent or cost of
remedial action, if any, which may be required. However, a revised preliminary
estimate from the Company's environmental consultant projected that total
contamination assessment and remediation costs for this site may reach
approximately $4,354,000. A portion of the on-site impacts have been
determined to be eligible for reimbursement from a state fund and the FDEP has
determined that a portion of the work conducted off-site may be eligible for
reimbursement under state law.
Sanford Site
The Company owns a parcel of property located in Sanford, Florida, upon which
a gasification plant was operated prior to the Company's acquisition of the
property. FDEP required the Company to conduct a contamination assessment of
the property to determine whether contamination was present as a result of the
operation of the gasification plant. A preliminary investigation revealed soil
impacts on the property. Thereafter, in cooperation with four former owners
and operators of the gasification plant, the Company participated in the
funding of an initial contamination assessment investigation, the results of
which are set forth in a Contamination Assessment Report delivered to FDEP on
February 4, 1994. On July 11, 1997, EPA notified the Company of its potential
liability under applicable federal laws for further assessment and remediation
of the site. Similar notices were sent by EPA to four former owners and
operators of the site. On or about March 25, 1998, the Company and the four
former owners and operators (collectively, the "Group") and the EPA executed
an Administrative Order on Consent ("AOC") that obligated the Group to
implement a Remedial Investigation/Feasibility Study ("RI/FS") task and to pay
EPA's past and future oversight costs for the RI/FS. The Group also entered
into a Participation Agreement and an Escrow Agreement on or about
April 13, 1998. These agreements govern the manner and means by which all
parties will satisfy their respective obligations under the AOC for the
RI/FS task. The Company agreed to pay approximately 13.7% of the cost
for the RI/FS. Fieldwork for the RI/FS was initiated in 1998. A final RI
report was submitted to EPA in July 1999. The Group also submitted a Baseline
Risk Assessment to EPA in January 2000, including an Ecological Risk Assessment
("ERA"). Additional fieldwork will be required to complete the ERA at a total
estimated cost of less than $50,000. The Company's share of the additional ERA
work is 13.7%.
On July 5, 2000, EPA issued a Record of Decision ("ROD") approving the final
remedial action for contaminated soils at the site ("OU1 Remedy"). The total
estimated cost for the OU1 Remedy ranges from $5,593,000 to $5,760,000. On
June 12, 2001, EPA issued a ROD approving the final remedial action for
contaminated groundwater at the site ("OU2Remedy"). The present worth
cost estimate for the OU2 Remedy is $320,252. The Group is currently
negotiating a remedial design/remedial action ("RD/RA") Consent Decree with EPA
to provide for the implementation of the OU1 Remedy and OU2 Remedy. It is
reasonable to anticipate at this time that the Decree will not be effective
until July or August 2002. Pursuant to the Consent Decree, pre-remedial design
fieldwork will be performed to assist in the design of the final remedy for OU1
and OU2. The cost of the additional field and design work is approximately
$375,000. Upon EPA's approval of the final design, the Group will be obligated
to implement the remedy for OU1 and OU2 at an estimated combined cost, as noted
above, of approximately $6,000,000. The Consent Decree also obligates the
Group to reimburse EPA's past costs of approximately $215,000 and EPA's
future oversight costs. Pursuant to the terms and conditions of the Second
Participation Agreement entered into by the Company and other members of the
Group on August 1, 2000, the Company's share of costs for the additional field
and design work, implementation of the OU1 Remedy and OU2 Remedy, and payment
of EPA's past and future oversight costs for the RD/RA tasks is 10.5%.
The Company believes that all future contamination assessment and remedial
costs, legal fees and other related costs will not be in excess of the rate
relief granted the Company and insurance settlement proceeds received.
On or about October 18, 2000, Violet Skipper, PC Buyers, Inc. and Thomas Wade
Skipper filed suit against FPU in the Circuit Court for Palm Beach County,
Florida. The case was later transferred to Jackson County, Florida. The
lawsuit alleged that FPU failed to properly install and/or maintain electrical
power lines, utility poles and related equipment which allegedly caused a fire
that spread to and eventually destroyed a warehouse/office facility that was
owned by Violet Skipper, that housed the place of business of the corporate
plaintiff and that contained property therein owned by all the plaintiffs. The
warehouse/office facility was located in Jackson County, Florida. Plaintiffs
alleged damages in excess of $1,000,000. FPU has denied the claims in the
complaint and is vigorously defending the claims on the theory that the alleged
fire started within the warehouse/office facility and not at or in FPU's
electrical equipment.
On or about August 13, 2001, Darrell Glenn filed suit against FPU in the
Circuit Court for Palm Beach County, Florida. The case was later moved to
Nassau County, Florida where it is pending. The lawsuit alleged that the
employee of a painting subcontractor was shocked and injured on May 16, 2001
while paining electrical equipment at FPU's step-down site in Fernandina Beach,
Florida. His employer was operating under an agreement that required it to
supervise its own workers. The plaintiff claims FPU was negligent and that its
negligence caused his injuries to his torso which experienced some degree of
burn. The plaintiff has not specified an amount of claim but FPU intends to
bring the subcontractor into this action as a third-party defendant and seek
indemnification and contribution from the subcontractor. FPU intends to
vigorously defend this claim and to pursue the third-party claim against
the subcontractor.
In the event that the Company does not prevail in these suits, there may be a
material adverse effect on the financial statements. However, FPU believes
there are meritorious defenses to the pending litigation discussed above but
is unable to provide an evaluation of the likelihood of an unfavorable outcome
or provide an estimate of the amount or range of potential loss.
The Company is also involved with other various claims and litigation
incidential to its business. In the opinion of managment, none of these
incidental claims and litigation will have a material adverse effect on
the Company's results of operations or its financial condition.
Commitments
To ensure a reliable supply of power and natural gas at competitive prices, the
Company has entered into long-term purchase and transportation contracts with
various suppliers and producers, which expire at various dates through 2015.
Purchase prices under these contracts are determined by formulas either based
on market prices or at fixed prices. At December 31, 2001, the Company has firm
purchase and transportation commitments adequate to supply its expected future
sales requirements. The Company is committed to pay demand or similar fixed
charges of approximately $4,805,000 annually through 2010 related to these
agreements. Substantially all costs incurred under these agreements are
recoverable from customers through fuel adjustment clause mechanisms.
Financial Accounting Standard No. 133 and 138
Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments
and Hedging Activities" as amended by SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities." The Statement
establishes accounting and reporting standards requiring that every derivative
instrument (including certain derivative instruments embedded in other
contracts) be recorded in the balance sheet as either an asset or liability
measured at its fair value. The statement requires that changes in the
derivatives' fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. The effects of applying SFAS Nos. 133 and
138 through December 31, 2001 were not material to the Company's financial
statements and are not expected to effect future operations as the Company does
not expect to enter into significant derivative instruments.
Financial Accounting Standard No. 141 and 142
In July 2001, the FASB issued SFAS No. 141, "Business Combinations," and SFAS
No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that
the purchase method of accounting be used for all business combinations
initiated after June 30, 2001 and eliminates the pooling-of-interests method
of accounting. SFAS No. 142 specifies that, among other things, intangible
assets with an indefinite useful life and goodwill will no longer be amortized.
The standard requires goodwill to be periodically tested for impairment and
written down to fair value if considered impaired. The provisions of SFAS
No. 142 are effective for fiscal years beginning after December 15, 2001,
and are effective for interim periods in the initial year of adoption.
The effects of adopting SFAS Nos. 141 and 142 on the recent acquisitions
required use of the purchase method and resulted in goodwill that will
have to be tested for impairment beginning in 2002.
Financial Accounting Standard No. 143
In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." The statement requires that the fair value of an asset retirement
obligation be recognized in the period in which it is incurred and the
associated asset retirement costs capitalized as part of the carrying amount of
the long-lived asset. The asset retirement cost is subsequently allocated to
expense using a systematic and rational method over its useful life. SFAS
No. 143 is effective for fiscal years beginning after June 15, 2002.
Management is in the process of evaluating the impact of implementing SFAS 143
and feels that other than changing the methodology of depreciation and
increasing administrative efforts, the effect on operating results will be
immaterial and feels the impact on the regulated portion of the business, if
any, would be an allowable item for recovery in the Company's rates.
Financial Accounting Standard No. 144
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets." The statement addresses financial accounting
and reporting for the impairment or disposal of long-lived assets. The
statement supercedes, with exceptions" SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
SFAS No. 144 is effective forfiscal years beginning after December 15, 2001.
Management is in the process of evaluating the impact of implementing SFAS 144
and is unable to estimate the effect, if any, on the Company's financial
statements but feels the regulated portion of an impact, if any, would be an
allowable item for recovery in the Company's rates.
Quarterly Financial Data (Unaudited)
The quarterly financial data presented below reflects the influence of, among
other things, seasonal weather conditions, the timing of rate increases and the
migration of winter residents and tourists to central and southern Florida
during the winter season (in thousands, except per share amounts):
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
2001
Revenues $31,100 $22,497 $19,421 $19,125
Gross profit 9,171 7,863 7,602 8,140
Operating income
exc. income tax 3,023 1,544 1,428 1,521
Net income 1,503 480 538 531
Earnings per share 0.53 0.17 0.19 0.18
2000
Revenues $21,468 $19,539 $20,182 $23,570
Gross profit 8,621 7,301 7,223 7,998
Operating income
exc. income tax 2,928 1,590 1,485 1,998
Net income 1,413 539 480 856
Earnings per share 0.50 0.19 0.17 0.30
INDEPENDENT AUDITORS' REPORT
To the Directors and Shareholders of Florida Public Utilities Company:
We have audited the accompanying consolidated balance sheets and statements of
capitalization of Florida Public Utilities Company and its wholly owned
subsidiary, Flo-Gas Corporation, as of December 31, 2001 and 2000, and the
related consolidated statements of income, common shareholders' equity and cash
flows for each of the three years in the period ended December 31, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Florida Public Utilities Company
and its wholly owned subsidiary, Flo-Gas Corporation at December 31, 2001 and
2000, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Certified Public Accountants
West Palm Beach, Florida
February 25, 2002
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning directors and nominees of the Registrant is included
under the caption "Nominees and Continuing Directors" in the Registrant's
Proxy Statement for the 2001 Annual Meeting of Shareholders and is
incorporated by reference herein. The following table sets forth certain
information about the executive officers of the Registrant as of
March 9, 2001.
Name Age Position Date
John T. English 58 Chief Executive Officer 1998 - Present
President 1997 - Present
Chief Operating Officer 1997 - 2000
Charles L. Stein 52 Senior Vice President 1997 - Present
Chief Operating Officer 2001 - Present
Jack R. Brown 67 Corporate Secretary 1988 - Present
Vice President 2001 - Present
Treasurer 1988 - 2000
George M. Bachman 42 Chief Financial Officer
and Treasurer 2001 - Present
Controller 1996 - 2000
Mr. English was Senior Vice President from 1993 preceding his appointment as
President and Chief Operating Officer.
Mr. Stein was Vice President from 1993 preceding his appointment as Senior Vice
President.
There are no family relationships between the executive officers.
All executive officers are elected for a one-year term.
Item 11. Executive Compensation
Information concerning executive compensation is included under the caption
"Executive Compensation" in the Registrant's Proxy Statement and is
incorporated by reference herein.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information concerning the security ownership of certain of the Registrant's
beneficial owners and management is included under the captions "Security
Ownership of Certain Beneficial Owners" and "Nominees and Continuing
Directors" in the Registrant's Proxy Statement and is incorporated by
reference herein.
Item 13. Certain Relationships and Related Transactions
There were no transactions with management in 2001.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
The following consolidated financial statements of Florida
Public Utilities Company are included herein and in the
Registrant's 2001 Annual Report to Shareholders.
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Capitalization
Consolidated Statements of Common Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Independent Auditors' Report
2. Financial Statement Schedules
All schedules are omitted because of the absence of the
conditions under which they are required or because the
required information is included in the financial statements
and related notes thereto.
3. Exhibits
See exhibit index following signatures.
(b) Reports on Form 8-K.
A form 8-K was filed December 20, 2001 announcing a press
release concerning the purchase of the assets of Atlantic
Utilities from Southern Union Company.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
FLORIDA PUBLIC UTILITIES COMPANY
By /s/ George M Bachman Date: March 11, 2002
-----------------------------------------------------------------------
George M Bachman, Chief Financial Officer
(Duly Authorized Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the date indicated.
/s/ John T. English Date: March 11, 2002
----------------------------------------------------------------------
John T. English
President, Chief Executive Officer, and Director
/s/ Ellen Tracy Benoit Date: March 11, 2002
----------------------------------------------------------------------
Ellen Tracy Benoit
Director
/s/ Richard C. Hitchins Date: March 11, 2002
----------------------------------------------------------------------
Richard C. Hitchins
Director
/s/ Paul L. Maddock, Jr. Date: March 11, 2002
----------------------------------------------------------------------
Paul L. Maddock, Jr.
Director
/s/ Rudy E. Schupp Date: March 11, 2002
----------------------------------------------------------------------
Rudy E. Schupp
Director
FLORIDA PUBLIC UTILITIES COMPANY
EXHIBIT INDEX
(a) Exhibits
Regulation S-K
Item Number
- -----------
4(a)* - Indenture of Mortgage and Deed of Trust of the Company dated
as of September 1, 1942 (Exhibit 7-A to Registration
No. 2-6087 is hereby incorporated by reference).
4(b) - Fourteenth Supplemental Indenture dated September 1, 2001.
4(c) - Fifteenth Supplemental Indenture dated November 1, 2001.
10(a) - Credit Agreement between Florida Public Utilities Company
and Bank of America dated September 17,2001.
10(b) - Contract for the transportation of natural gas between
Florida Public Utilities Company and Lake Worth
Generation, LLC dated July 21, 2000.
10(c)* - Second amendment to Second Amended and Restated Credit
Agreement between Florida Public Utilities Company and Sun
Bank/South Florida, National Association dated
April 30, 2000.
10(d)* - Contract for the transportation of natural gas between
Florida Public Utilities Company and Florida Gas
Transmission Company under Service Agreement for
Firm Transportation Service dated June 1, 1992
(Exhibit 10-b to Form S-2 for July 1992, File No.0-1055,
is hereby incorporated by reference).
10(e)* - Contract for the transportation of natural gas between
Florida Public Utilities Company and Florida Gas
Transmission Company under interruptible Transportation
Service Agreement dated February 23, 1990
(Exhibit 10-c to Form S-2, for July 1992,File No. 0-1055,
is hereby incorporated by reference).
10(f)* - Contract for the transportation of natural gas between
Florida Public Utilities Company and the City of Lake Worth
dated March 25, 1992 (Exhibit 10-f to Form S-2 for
July 1992, File No. 0-1055, is hereby incorporated by
reference).
10(g)* - Contract for the purchase of electric power between Florida
Public Utilities Company and Jacksonville Electric
Authority dated January 29, 1996.
10(h)* - Contract for the purchase of electric power between Florida
Public Utilities Company and Gulf Power Company effective
November 21, 1996.
10(i)* - Contract for the purchase of as-available capacity and
energy between Florida Public Utilities Company and
Container Corporation of America dated September 19, 1985
(Exhibit 10-i to Form S-2 for July 1992, File No. 0-1055,
is hereby incorporated by reference).
10(j)* - Contract for the sale of electric service between Florida
Public Utilities Company and Container Corporation of
America dated August 26, 1982 (Exhibit 10-j to Form S-2 for
July 1992, File No. 0-1055, is hereby incorporated by
reference).
10(k)* - Contract for the sale of electric service between Florida
Public Utilities Company and ITT Rayonier Inc. Dated April
1, 1982 (Exhibit 10-k to Form S-2 for July 1992, File
No. 0-1055, is hereby incorporated by reference).
10(l)* - Employment agreement between Florida Public Utilities
Company and John T. English, effective through
May 31, 2003.
10(m)* - Employment agreements between Florida Public Utilities
Company and Charles L. Stein, Jack R. Brown and George M.
Bachman, effective through May 31, 2003. Essentially
identical to the agreement in Item 10(m) above.
10(n)* - Form of Stock Purchase and Sale Agreement between Florida
Public Utilities Company and three persons who, upon
termination of two trusts, will become the record and
beneficial owners of an aggregate of 313,554 common shares
of the Registrant (Exhibit 10-p to Form S-2 for July 1992,
File No. 0-1055, is hereby incorporated by reference).
13.* - Quarterly report of Form 10-Q for the three months ended
September 30, 2001 (Form 10-Q for September 2001, File
No.0-1055, is hereby incorporated by reference).
21.* - Subsidiary of the registrant
23. - Independent auditors' consent
* Incorporated by reference from indicated exhibits of the 2000 annual report
EXHIBIT 4(b)
Fourteenth Supplemental Indenture dated September 1, 2001
This is a Security Agreement covering Personal Property
as well as a Mortgage upon Real Estate and Other Property
FOURTEENTH SUPPLEMENTAL INDENTURE
THIS FOURTEENTH SUPPLEMENTAL INDENTURE, dated for convenience as of
September 1, 2001 (the "Fourteenth Supplemental Indenture") between FLORIDA
PUBLIC UTILITIES COMPANY, as Debtor (its Federal tax number being 58-0466330),
a Florida corporation (hereinafter sometimes called the "Company"), whose
mailing address is P.O. Box 3395, West Palm Beach, Florida 33402-3395, and the
address of its principal place of business is 401 South Dixie Highway, West
Palm Beach, Florida 33401, party of the first part, and SUNTRUST BANK (as
successor to Continental Illinois National Bank and Trust Co. of Chicago
and First National Bank in Palm Beach, hereinafter sometimes called the
"Trustee"), as Mortgagee and Secured Party (its Federal tax number being
59-1424500), a corporation duly organized and existing under the laws of the
State of Georgia, having a place of business at 225 East Robinson Street,
Suite 250, P.O. Box 44, Orlando, Florida 32802-0044.
WHEREAS, the Company has heretofore executed and delivered to the Trustee an
Indenture of Mortgage and Deed of Trust dated as of September 1, 1942
(hereinafter called the "Original Indenture"), to secure, as provided therein,
its bonds (in the Original Indenture and herein called the "Bonds"), to be
designated generally as its "First Mortgage Bonds", and to be issued in one or
more series as provided in the Original Indenture; and
WHEREAS, the Company has heretofore executed and delivered to the Trustee
thirteen indentures supplemental to the Original Indenture as follows: the
First Supplemental Indenture dated as of December 1, 1945 (hereinafter
sometimes called the "First Supplemental Indenture"), the Second Supplemental
Indenture dated as of March 1, 1948 (hereinafter sometimes called the "Second
Supplemental Indenture"), the Third Supplemental Indenture dated as of
August 1, 1954 (hereinafter sometimes called the "Third Supplemental
Indenture"), the Fourth Supplemental Indenture dated as of August 1, 1956
(hereinafter sometimes called the "Fourth Supplemental Indenture"), the Fifth
Supplemental Indenture dated as of September , 1958 (hereinafter sometimes
called the "Fifth Supplemental Indenture"), the Sixth Supplemental Indenture
dated as of July 1, 1959 (hereinafter sometimes called the "Sixth Supplemental
Indenture"), the Seventh Supplemental Indenture dated as of June 1, 1963
(hereinafter sometimes called the "Seventh Supplemental Indenture"), the Eighth
Supplemental Indenture dated as of June 1, 1965 (hereinafter sometimes called
the "Eighth Supplemental Indenture"), the Ninth Supplemental Indenture dated
as of July 1, 1972(hereinafter sometimes called the "Ninth Supplemental
Indenture"), the Tenth Supplemental Indenture dated as of July 1, 1975
(hereinafter sometimes called the "Tenth Supplemental Indenture"), the
Eleventh Supplemental Indenture dated as of June 1, 1983 (hereinafter
sometimes called the "Eleventh Supplemental Indenture"), the Twelfth
Supplemental Indenture dated as of May 1, 1988, the Twelfth Supplemental
Indenture dated as of May 1, 1988 (hereinafter sometimes called the "Twelfth
Supplemental Indenture") and the Thirteenth Supplemental Indenture dated
as of June 1, 1992 (hereinafter sometimes called the "Thirteenth Supplemental
Indenture"), each of which supplemental indentures provided for the creation
of a new series of First Mortgage Bonds and said First, Second, Sixth, Twelfth
and Thirteenth Supplemental Indentures modified certain provisions of the
Original Indenture and the First Supplemental Indenture; and
WHEREAS, pursuant to the Original Indenture, as so supplemented and modified,
there have been executed, authenticated, delivered and issued and there are
outstanding as of the date of execution of this Fourteenth Supplemental
Indenture, First Mortgage Bonds of series and principal amounts as follows:
TITLE ISSUED OUTSTANDING
10.03% Series due 2018 $ 5,500,000 $ 5,500,000
9.57% Series due 2018 $ 10,000,000 $10,000,000
9.08% Series due 2022 $ 8,000,000 $ 8,000,000
which constitute the only Bonds outstanding under the Original Indenture, as
supplemented and modified by the First, Second, Sixth, Twelfth and Thirteenth
Supplemental Indentures and as supplemented by the Third, Fourth, Fifth,
Seventh, Eighth, Ninth, Tenth and Eleventh Supplemental Indentures; and
WHEREAS, the Board of Directors of the Company has established pursuant to
2.03 of said Original Indenture a new series of Bonds to be designated First
Mortgage Bonds, 6.85% Series due 2031 (hereinafter sometimes referred to as
the "Bonds of the 2031 Series") in the principal amount of Fifteen Million
Dollars ($15,000,000) and has authorized the issue of said Bonds pursuant to
the provisions of Article 3 of the Original Indenture, as supplemented and
modified; and
WHEREAS, since the execution and delivery by the Company of the Thirteenth
Supplemental Indenture, the Company has acquired certain additional properties
which by the terms of the Original Indenture, as supplemented and modified,
are subject to the lien thereof; and
WHEREAS, 16.01 of the Original Indenture provides, among other things, that
the Company may execute and file with the Trustee and the Trustee at the
request of the Company shall join in indentures supplemental to the
Original Indenture and which thereafter shall form a part thereof, for the
purposes, among others, of (a) describing the terms of any new series of
Bonds as established by resolution of the Board of Directors of the Company
pursuant to 2.03 of the Original Indenture, (b) subjecting to the lien of the
Original Indenture, as supplemented and modified, or perfecting the lien
thereof upon, any additional properties of any character, (c) adding to
the covenants and agreements of the Company such further covenants or
agreements as the Board of Directors of the Company shall consider to be
for the protection of the trust estate and of the holders of the Bonds and
(d) providing for modifications in the Original Indenture, subject to certain
conditions; and
WHEREAS, the Company is making provisions for the issuance and sale of its
Secured Insured Quarterly Notes due 2031 (the "Notes"), to be issued under
an Indenture of Trust (the "Note Indenture") to be dated as of
September 1, 2001 between the Company and SunTrust Bank as trustee (the
"Note Trustee") and to be secured by Bonds of the 2031 Series (as defined
below); and
WHEREAS, the Company desires to execute this Fourteenth Supplemental Indenture
and hereby requests the Trustee to join in this Fourteenth Supplemental
Indenture for the purpose of describing the terms of the Bonds of the 2031
Series and of subjecting to the lien of the Original Indenture, as
supplemented and modified, the additional properties acquired by the Company
since the execution and delivery of the Thirteenth Supplemental Indenture, of
modifying certain provisions of the Original Indenture, as supplemented and
modified, (the Original Indenture, as supplemented and modified by the First,
Second, Sixth, Twelfth, Thirteenth and by this Fourteenth Supplemental
Indenture and as supplemented by the Third, Fourth, Fifth, Seventh, Eighth,
Ninth, Tenth and Eleventh Supplemental Indentures being herein sometimes called
the "Indenture") and of adding to the covenants and agreements of the Company
in the Indenture contained other covenants and agreements hereafter to be
observed by the Company; and
WHEREAS, all conditions necessary to authorize the execution, delivery and
recording of this Fourteenth Supplemental Indenture and to make this Fourteenth
Supplemental Indenture a valid and binding Indenture of Mortgage for the
security of the Bonds of the Company issued or to be issued under the Indenture
have been complied with or have been done or performed.
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the payment
of the principal of and premium, if any, and interest on all Bonds at any time
issued and outstanding under the Indenture, according to their tenor, purport
and effect, and to secure the performance and observance of all the covenants
and conditions in said Bonds and in the Indenture contained and for and in
consideration of the premises and of the mutual covenants herein contained
and of the purchase and acceptance of the Bonds of the 2031 Series by the
holders or registered owners thereof, and of the sum of One Dollar ($1.00)
lawful money of the United States of America duly paid to the Company by the
Trustee at or before the ensealing and delivery hereof, and for other valuable
considerations, the receipt whereof is hereby acknowledged, Florida Public
Utilities Company has executed and delivered this Fourteenth Supplemental
Indenture, and has granted, bargained, sold, aliened, remised, released,
conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed,
and by these presents does grant, bargain, sell, alien, remise, release,
convey, assign, transfer, mortgage, pledge, set over and confirm unto SunTrust
Bank, a Georgia corporation, as Trustee, and to its successor in the trust,
and to its assigns forever, all property real, personal or mixed, described
in the Original Indenture and thereby conveyed or mortgaged or intended so to
be,including all such property acquired since the execution and delivery of
said Original Indenture which by the terms of said Original Indenture, the
First Supplemental Indenture, the Second Supplemental Indenture, the Third
Supplemental Indenture, the Fourth Supplemental Indenture, the Fifth
Supplemental Indenture, the Sixth Supplemental Indenture, the Seventh
Supplemental Indenture, the Eighth Supplemental Indenture, the Ninth
Supplemental Indenture, the Tenth Supplemental Indenture, the Eleventh
Supplemental Indenture, Twelfth Supplemental Indenture, Thirteenth
Supplemental Indenture, and this Fourteenth Supplemental Indenture is subjected
or is intended to be subjected to the lien of the Indenture.
Together with all and singular the tenements, hereditaments and appurtenances
belonging or in anywise appertaining to the aforesaid properties or any part
thereof, with the reversion and reversions, remainder and remainders, tolls,
rents, revenues, issues, income, product and profits thereof, and all the
estate, right, title, interest and claim whatsoever, at law as well as in
equity, which the Company now has or may hereafter acquire in and to the
aforesaid properties and every part and parcel thereof.
Expressly Excepting and Excluding, however, from this Fourteenth Supplemental
Indenture and from the lien and operation of the Indenture:
(a) any and all property of the character expressly excepted and
excluded from (i) the Original Indenture and from the lien and
operation thereof by subdivisions (b) to (h), both inclusive,
of Part IX of Schedule A thereto and (ii) the Original Indenture
as supplemented and modified by the First, Second, Sixth, Twelfth
and Thirteenth Supplemental Indentures and as supplemented by the
Third, Fourth, Fifth, Seventh, Eighth, Ninth, Tenth and Eleventh
Supplemental Indentures and from the lien and operation thereof as
provided in the Granting Clauses of said First, Second, Third,
Fourth, Fifth, Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh,
Twelfth and Thirteenth Supplemental Indentures; and
(b) all property which has been released by the Trustee or otherwise
disposed of by the Company free from the lien of the Original
Indenture, as supplemented and modified by the First, Second,
Sixth, Twelfth and Thirteenth Supplemental Indentures and as
supplemented by the Third, Fourth, Fifth, Seventh, Eighth,
Ninth, Tenth and Eleventh Supplemental Indentures, in accordance
with the provisions thereof.
TO HAVE AND TO HOLD all said properties, real, personal and mixed, mortgaged,
pledged or conveyed by the Company as aforesaid, or intended so to be, unto
the 'Trustee, and their successors in the Trust and their assigns forever.
SUBJECT, HOWEVER, to the exceptions and reservations and matters hereinabove
recited; and to any permitted liens as defined in 1.05(a) of the Original
Indenture, and liens existing on any property hereafter acquired by the Company
at the time of such acquisition and permitted by 5.04 of the Original
Indenture, as modified by the First Supplemental Indenture.
IN TRUST, NEVERTHELESS, upon the terms and trusts in the Indenture set forth
for the equal and proportionate benefit and security of all present and future
holders of the Bonds and coupons issued and to be issued under the Indenture,
or any of them, without preference or priority of any said Bonds or coupons
over any others thereof, or of the Bonds and coupons of any particular series
over the Bonds and coupons of any other series, by reason of priority in the
time of issue, sale or negotiation thereof or by reason of the purpose of
issue or otherwise howsoever, except as otherwise provided in 9.29 of the
Original Indenture.
AND THIS INDENTURE FURTHER WITNESSETH, that the Company for itself and its
successors, does hereby covenant and agree to and with the Trustee and their
successors in said trust, for the benefit of those who shall hold the Bonds
and coupons of any of them, as follows:
ARTICLE 1
BONDS OF THE 2031 SERIES
Section 1.01. Establishment of Bonds of the 2031 Series. There shall be, and is
hereby created a new series of Bonds, known as and entitled "First Mortgage
Bonds, 6.85% Series due 2031", and the form thereof shall be substantially
as hereinafter set forth in 1.04 hereof.
The principal amount of the 2031 Series is limited to Fifteen Million Dollars
($15,000,000) in principal amount of such Bonds to be initially issued upon
compliance by the Company with the provisions of 3.03 and/or 3.04 of the
Original Indenture, as supplemented and modified, and to the Bonds of the
2031 Series issued in exchange or substitution for outstanding Bonds of said
Series under the provisions of the Original Indenture and of this Fourteenth
Supplemental Indenture.
Section 1.02. Terms of the Bonds of the 2031 Series. The definitive Bonds of
the 2031 Series shall be issued only as registered Bonds without coupons of
the denomination of $1,000 or any multiple thereof, numbered RN 1 upwards.
Notwithstanding the provisions of 2.08 of the Indenture or any other
provisions of the Indenture, the date of authentication of the first
Bonds of the 2031 Series issued upon original issuance shall be the
date of the commencement of the first interest period for Bonds of
the 2031 Series. All Bonds of the 2031 Series shall mature October 1, 2031,
and shall bear interest at the rate of 6.85% per annum until the payment of the
principal thereof, such interest to be payable quarterly on October 1,
October 1, October 1 and October 1 in each year commencing October 1, 2002;
provided, however, that the Company shall receive certain credits against
principal and interest as set forth in Section 2.1 hereof. Subject to the
provisions of Section 2.1 below, both principal of and interest on the
Bonds of the 2031 Series will be paid in any coin or currency of the United
States of America which at the time of payment is legal tender for the payment
of public and private debts. Principal of, premium, if any, and interest on
Bonds of the 2031 Series will be payable at the principal corporate trust
office of the Trustee in the City of Orlando, Florida, except that, in the
case of the redemption as a whole at any time of Bonds of the 2031 Series then
outstanding, the Company may designate in the redemption notice other offices
or agencies at which, at the option of the registered holders, Bonds of the
2031 Series may be surrendered for redemption and payment. Interest on the
Bonds of the 2031 Series may be paid by checks payable to the order of the
respective holders entitled thereto, and mailed by the Trustee by first class
mail, postage prepaid, to such holders at their respective registered addresses
as shown on the Bond register for the Bonds of the 2031 Series, in each case to
the holder of record on the record date as hereinbelow defined.
The person in whose name any Bond of the 2031 Series is registered at the close
of business on any record date (as hereinbelow defined) with respect to any
interest payment date shall be entitled to receive the interest payable on such
interest payment date notwithstanding the cancellation of such Bond of the 2031
Series upon any transfer or exchange thereof (including any exchange effected
as an incident to a partial redemption thereof) subsequent to the record date
and prior to such interest payment date, except that, if and to the extent
that the Company shall default in the payment of the interest due on such
interest payment date, then the registered holders of Bonds of the 2031 Series
on such record date shall have no further right to or claim in respect of such
defaulted interest as such registered holders on such record date, and the
persons entitled to receive payment of any defaulted interest thereafter
payable or paid on any Bonds of the 2031 Series shall be the registered holders
of such Bonds of the 2031 Series on the record date for payment of such
defaulted interest. The term "record date" as used in this 1.02, and in the
form of the Bonds of the 2031 Series, with respect to any interest payment
date applicable to the Bonds of the 2031 Series, shall mean the October 15
next preceding a October 1 interest payment date, or the March 15 next
preceding an October 1 interest payment date, or the October 15 next preceding
a October 1 payment, or the October 15 next preceding an October 1 interest
payment date, as the case may be, or such record date established for defaulted
interest as hereinafter provided.
In case of failure by the Company to pay any interest when due the claim for
such interest shall be deemed, to have been transferred by transfer of any
Bond of the 2031 Series registered on the books of the Company and the
Company, by not less than 10 days written notice to bondholders, may fix a
subsequent record date for determination of holders entitled to payment of
such interest. Such provision for establishment of subsequent record date,
however, shall in no way affect the rights of bondholders or of the Trustee
consequent on any default.
Except as provided in this 1.02, every Bond of the 2031 Series shall be dated
as provided in 2.08 of the Original Indenture. However, so long as there is no
existing default in the payment of interest on the Bonds of the 2031 Series,
all Bonds of the 2031 Series authenticated by the Trustee between the record
date for any interest payment date and such interest payment date shall be
dated such interest payment date and shall bear interest from such interest
payment date; provided, however, that if and to the extent that the Company
shall default in the interest due on such interest payment date, then any such
Bond of the 2031 Series shall bear interest from the January 1, April 1,
July 1 or October 1, as the case may be, to which interest has been paid,
unless such interest payment date is October 1, 2001, in which case from the
date of authentication of the first Bonds of the 2031 Series issued upon
original issuance. Bonds of the 2031 Series shall be transferable and
exchangeable, but only as provided in the Indenture and the Note Indenture.
Notwithstanding the provisions of 2.06 of the Original Indenture no charge
shall be made for any exchange of Bonds of the 2031 Series for other Bonds
of the 2031 Series of different authorized denominations or for any transfer
of Bonds of the 2031 Series, except that the Company at its option may require
the payment of a sum sufficient to reimburse it for any tax or other
governmental charge incident thereto.
The Trustee hereunder shall, by virtue of its office as such Trustee, be the
registrar and transfer agent of the Company for the purpose of registering
and transferring Bonds of the 2031 Series. Neither the Company nor the Trustee
shall be required to make transfers or exchanges of Bonds of the 2031 Series
for a period of ten days next preceding any designation of Bonds of the 2031
Series to be redeemed and neither the Company nor the Trustee shall be
required to make transfers or exchanges of any bonds designated in whole
for redemption or that part of any bond designated in part for redemption.
Section 1.03. Redemption Provisions for Bonds of the 2031 Series. Subject to
the provisions of the Note Indenture, the Bonds of the 2031 Series shall be
subject to redemption prior to maturity as a whole at any time or in part from
time to time at the option of the Company on or after October 1, 2006, at the
following redemption prices, subject to the terms and conditions set forth in
this Fourteenth Supplemental Indenture:
If redeemed during the 12-month period beginning October 1:
Year Redemption Price
2006 101%
Thereafter 100%
The Company will deliver notice to each holder of the Bonds of the 2031 Series
to be redeemed (by telecopy or other same-day written communication confirmed
by the recipient, on a date at no less than 30 or more than 60 days prior to
the date fixed for redemption of the Bonds of the 2031 Series) of the premium,
if any, applicable to such redemption and the calculations, in reasonable
detail, used to determine the amount of any such premium.
Section 1.04. Form of Bonds of the 2031 Series. The Bonds of the 2031 Series
and the Trustee's authentication certificate to be executed on the Bonds of
said Series, shall be in substantially the following form:
[FORM OF FACE OF BOND OF THE 2031 SERIES]
No. RN $15,000,000
FLORIDA PUBLIC UTILITIES COMPANY
Incorporated under the laws of the State of Florida
First Mortgage Bond, 6.85% Series due 2031
Due October 1, 2031
FLORIDA PUBLIC UTILITIES COMPANY, a Florida corporation (hereinafter sometimes
called the "Company", which term shall include any successor corporation as
defined in the Indenture hereinafter mentioned), for value received, hereby
promises to pay to Suntrust Bank, as trustee under the Indenture of Trust
dated as of September 1, 2001, between the Company and such trustee
(the "Trustee") or registered assigns, Fifteen Million Dollars ($15,000,000)
on October 1, 2031, and to pay to the registered owner hereof interest thereon
from the date hereof if prior to January 1, 2002, or from the interest payment
date next preceding the date of this bond, or from the date of this bond if it
be an interest payment date, whichever date is the later, at the rate of six
and eighty-five one hundreds per centum (6.85%) per annum, quarterly on the
first day of January, on the first day of April, on the first day of July and
on the first day of October in each year until payment of the principal hereof.
The principal of, and the premium, if any, and the interest on, this bond will
be paid in lawful money of the United States of America at the office of
SunTrust Bank, a Georgia corporation (hereinafter sometimes called the
"Trustee") in the City of Orlando, Florida, or of its successor in trust,
and interest thereon will be paid in like lawful money at said office of
the Trustee; provided, however, that interest on this bond may be paid (i)
by check payable to the order of the registered holder entitled thereto and
mailed by the Trustee by first class mail, postage prepaid, to such holder
at his address as shown on the bond register for bonds of this series, or
(ii) as otherwise provided by an agreement of the Company with such holder
complying with Section 5.01 of the Fourteenth Supplemental Indenture
(hereinafter described); provided, however, that any such payments of principal
and interest shall be subject to receipt of certain credits against such
payment obligations as set forth in the Fourteenth Supplemental Indenture
dated as of September 1, 2001 referred to below.
This bond shall not become or be valid or obligatory for any purpose until the
authentication hereon shall have been signed by the Trustee.
The provisions of this bond are continued on the reverse hereof and such
continued provisions shall for all purposes have the same effect as though
fully set forth at this place.
IN WITNESS WHEREOF, FLORIDA PUBLIC UTILITIES COMPANY has caused these presents
to be executed in its name and behalf by its President or a Vice President and
its corporate seal to be hereunto affixed and attested by its Secretary or an
Assistant Secretary, all as of ________________________.
FLORIDA PUBLIC UTILITIES COMPANY,
/s/ John T. English
------------------------
John T. English
President, Chief Executive Officer, and
Director
ATTEST
/s/ Jack Brown
- ------------------------
Jack Brown
Vice President, and Secretary
[FORM OF REVERSE OF BOND OF THE 2031 SERIES]
This Bond is one of the bonds, of a series designated as First Mortgage Bonds,
6.85% Series due 2031 (hereinafter sometimes referred to as "Bonds of the 2031
Series"), of an authorized issue of bonds of the Company; known as First
Mortgage Bonds, not limited as to maximum aggregate principal amount
except as otherwise provided in the Indenture hereinafter mentioned, all issued
or issuable in one or more series (which several series may be of different
denominations, dates and tenor) under and equally secured (except in so far
as any sinking fund, improvement fund or other fund established in accordance
with the provisions of said Indenture may afford additional security for the
bonds of any specific series) by an Indenture dated as of September 1, 1942,
duly executed and delivered by the Company to SunTrust Bank, as Trustee, as
modified by the First Supplemental Indenture, dated as of December 1, 1945,
by the Second Supplemental Indenture, dated as of March 1, 1948, by the Sixth
Supplemental Indenture, dated as of July 1, 1959, by the Twelfth Supplemental
Indenture, dated as of May 1, 1988, by the Thirteenth Supplemental Indenture,
dated as of June 1, 1992, and by the Fourteenth Supplemental Indenture, dated
as of September 1, 2001, and as supplemented by all other indentures
supplemental thereto, to which Indenture and all indentures supplemental
thereto (herein sometimes collectively referred to as the "Indenture")
reference is hereby made for a description of the property mortgaged and
pledged as security for said bonds, the rights and remedies of the registered
owner of this bond in regard thereto, the terms and conditions upon which said
bonds are secured thereby, the terms and conditions upon which said bonds may
be issued thereunder and the rights, immunities and obligations of the Trustee
under the said Indenture. This bond shall be deemed to be a contract made under
the laws of the State of Florida, and for all purposes shall be governed by and
construed in accordance with the laws of said State.
Subject to the provisions of the Note Indenture, the Bonds of the 2031 Series
shall be subject to redemption prior to maturity as a whole at any time or in
part from time to time at the option of the Company on or after
October 1, 2006, at the following redemption prices:
If redeemed during the 12-month period beginning October 1:
Year Redemption Price
2006 101%
Thereafter 100%
The Company will deliver notice to each holder of the Bonds of the 2031 Series
to be redeemed (by telecopy or other same-day written communication confirmed
by the recipient, on a date no less than 30 days or more than 60 days prior to
the date fixed for redemption of the Bonds of the 2031 Series) of the premium,
if any, applicable to such redemption and the calculations, in reasonable
detail, used to determined the amount of any such premium.
Prior notice of the redemption of the Bonds of the 2031 Series (unless waived
as provided in the Indenture) shall be given by mailing such notice by first
class mail, postage prepaid, to the respective registered holders of such
bonds not less than thirty (30) nor more than sixty (60) days prior to the
redemption date; and otherwise as provided in Article 4 of the Original
Indenture and 1.03 of the Fourteenth Supplemental Indenture.
If this bond or any portion thereof (One Thousand Dollars ($1,000) or a
multiple thereof) is called for redemption and payment duly provided for as
specified in said Indenture, this bond or such portion thereof that is so
redeemed shall cease to be entitled to the lien and security interest of said
Indenture from and after the date payment is so provided and shall cease to
bear interest from and after the date fixed for redemption.
In the event of the selection for redemption of a portion only of the principal
of this bond, payment of the redemption price will be made only (a) upon
presentation of this bond for notation hereon of such payment of the portion of
the principal of this bond so called for redemption, or (b) upon surrender of
this bond in exchange for a bond or bonds in registered form (but only of
authorized denominations), for the unredeemed balance of the principal of this
bond, or (c) upon issuance of a check or upon the making of a wire transfer in
the amount of the portions of the principal amount so redeemed payable to the
order of the registered holder entitled thereto and, in the case of a check,
mailed by the Trustee by first class mail, postage prepaid, to such holder at
his address as shown on the bond register for Bonds of the 2031 Series,
provided that in either case the holder shall have entered into an agreement
with the Company as required by Section 5.01 of the Fourteenth Supplemental
Indenture.
To the extent permitted and as provided in said Indenture, modifications or
alterations of said Indenture, or of any indenture supplemental thereto, and
of the bonds issued thereunder, and of the rights and obligations of the
Company and the rights of the bearers or registered owners of the bonds
and coupons, may be made with the consent of the Company and with the written
approvals or consents of the bearers or registered owners of not less than
seventy-five per centum (75%) in principal amount of the bonds outstanding,
including, if more than one series of bonds shall be at the time outstanding,
not less than sixty per centum (60%) in principal amount of each series,
provided, however, that no such alteration or modification shall, without
the written approval or consent of the bearer or registered owner of any
bond affected thereby, (a) impair or affect the right of such bearer or
registered owner to receive payment of the principal of and premium, if any,
and interest on any bond at the specified rate, on or after the respective due
dates expressed in any bond, or to institute suit for the enforcement of any
such payment on or after such respective dates, (b) permit the creation of any
lien prior to or on a parity with the lien of said Indenture, or (c) reduce the
percentage of the principal amount of the bonds upon the approval or consent of
the bearers or registered owners of which modifications or alterations may be
affected as aforesaid.
This bond is transferable, but only as provided in the Indenture and in the
Indenture of Trust dated as of September 1, 2001 between the Company and the
Trustee, by the registered owner hereof in person or by his duly authorized
attorney, at said office of the Trustee upon surrender of this bond for
cancellation, duly endorsed with signature guaranteed, and thereupon a new
registered bond or bonds of like aggregate principal amount will be issued
to the transferee in exchange herefor, and the registered owner of this bond
at his option may surrender the same for cancellation at said office and
receive in exchange herefor the same aggregate principal amount of registered
bonds of the same series but of other authorized denominations. No charge
shall be made for any exchange of bonds of this series for other bonds of
different authorized denominations or for any transfer of this bond, except
that the Company at its option may require the payment of a sum sufficient
to reimburse it for any tax or other governmental charge incident thereto.
Neither the Company nor the Trustee shall be required to make transfers or
exchanges of Bonds of the 2031 Series for a period of ten (10) days next
preceding any designation of bonds of said series to be redeemed, and neither
the Company nor the Trustee shall be required to make transfers or exchanges
of any bonds designated in whole for redemption or that part of any bond
designated in part for redemption. Subject to the provisions of the Fourteenth
Supplemental Indenture, if this bond is surrendered for any transfer or
exchange between the record date for any regular interest payment date and such
interest payment date, the new bond will be dated such interest payment date.
If this bond is surrendered for any transfer or exchange between such record
date and such interest payment date, the Fourteenth Supplemental Indenture
provides that in the event of any default in payment of the interest due on
such payment date, such interest shall not be payable to the holder of the
bond on the original record date but shall be paid to the registered holder of
such bond on the subsequent record date established for payment of such
defaulted interest.
In case a default as defined in said Indenture shall occur, the principal of
this bond may become or be declared due and payable before maturity in the
manner and with the effect provided in said Indenture. The holders, however, of
certain specified percentages of the bonds at the time outstanding, including
in certain cases specified percentages of bonds of particular series, may in
the cases, to the extent and under the conditions provided in said Indenture,
waive past defaults thereunder and the consequences of such defaults.
No recourse shall be had for the payment of the principal of or premiums, if
any, or interest on this bond, or for any claim based hereon, or otherwise in
respect hereof or of said Indenture, to or against any incorporator,
stockholder, director or officer, past, present or future, as such, of the
Company, or of any predecessor or successor corporation, either directly or
through the Company, or such predecessor or successor corporation, under any
constitution or statute or rule of law, or by the enforcement of any assessment
or penalty, or otherwise, all such liabilities of incorporators, stockholders,
directors and officers, as such, being waived and released by the holder and
owner hereof by the acceptance of this bond and being likewise waived and
released by the terms of said Indenture.
[FORM OF ENDORSEMENT OF BONDS OF THE 2031 SERIES
WITH RESPECT TO PAYMENTS ON ACCOUNT OF PRINCIPAL]
PAYMENTS ON ACCOUNT OF PRINCIPAL
DATE AMOUNT PAID BALANCE OF SIGNATURE
PRINCIPAL AMOUNT
UNPAID
FORM OF AUTHENTICATION CERTIFICATE FOR BONDS OF THE 2031 SERIES
This bond is one of the bonds of the series designated
therein, referred to in the within-mentioned Indenture.
SUNTRUST BANK, TRUSTEE,
/s/ Authorized SunTrust Employee
- ---------------------------------
Authorized SunTrust Employee
Section 1.05. Renewal and Replacement Fund. Notwithstanding the provision of
1.06 of the First Supplemental Indenture, as modified by 2.02 of the Second
Supplemental Indenture, that the covenants contained therein shall continue
only so long as any of the First Mortgage Bonds, 3-1/4% Series due 1975
(hereinafter sometimes called the "Bonds of the 1975 Series") shall remain
outstanding, the Company hereby covenants that the covenants made by the
Company in said 1.06, as so modified, shall also continue so long as any of
the Bonds of the 2031 Series shall remain outstanding.
Section 1.06. Restriction on Payment of Dividends on Common Stock. The
Company hereby covenants and agrees that, so long as any Bonds of the 2031
Series remain outstanding, the Company shall not (a) declare or pay any
dividend (other than dividends payable in capital stock of the Company),
or make any distribution on any shares of Common Stock of the Company, or
(b) purchase or otherwise retire for a consideration (other than in exchange
for, or from the proceeds of, other shares of capital stock of the Company and
other than any class of preferred stock required to be purchased, redeemed or
otherwise retired for any sinking or purchase fund for such class of stock) any
shares of capital stock of the Company, if the aggregate amount so distributed
or expended after December 31, 2000 would exceed the aggregate amount of the
Company's net income available for dividends on its Common Stock accumulated
after December 31, 2000, plus the sum of $2,500,000.
Net income of the Company available for dividends on its Common Stock for the
purpose of this Section shall mean the gross earnings of the Company, less all
proper deductions for operating expenses, taxes (including income, excess
profits and other taxes based on or measured by income or undistributed
earnings or income for the determination of liability in respect of which
the amount payable by the Company by way of interest is a deductible item),
interest charges and other appropriate items, including provisions for
maintenance, and provision for retirements, depreciation or
obsolescence in an amount not less than the appropriation for
renewals and replacements, as defined in 1.06 of the First Supplemental
Indenture as amended by 2.02 of the Second Supplemental Indenture, after
provision for all dividends accrued on any outstanding stock of the Company
having preference over the Common Stock as to dividends, and otherwise
determined in accordance with generally accepted accounting principles,
provided, however, that in determining the net income of the Company for the
purposes of this Section no deduction or adjustment shall be made for or in
respect of (a) expenses in connection with the redemption or retirement of any
securities issued by the Company, including any amount paid in excess of the
principal amount or par or stated value of securities redeemed or retired or,
in the event that such redemption or retirement is effected with the proceeds
of sale of other securities of the Company, interest or dividends on the
securities redeemed or retired from the date on which the funds required for
such redemption or retirement are deposited in trust for such purpose to the
date of redemption or retirement; (b) profits or losses from sales of property
or other capital assets, or taxes on or in respect of any such profits; (c)
any earned surplus adjustment (including tax adjustments) applicable to any
period prior to January 1, 2002; and (d) amortization or elimination of utility
plant adjustment accounts or other intangibles.
Section 1.07. Extension of Certain Covenants to Bonds of the 2031 Series.
Notwithstanding the provisions of 1.08 of the First Supplemental Indenture
that the covenants contained therein shall continue only so long as any of the
Bonds of the 1975 Series shall remain outstanding, the Company hereby covenants
that the covenants made by the Company in said 1.08 as modified by 2.05 of
the Second Supplemental Indenture, shall also continue so long as any of the
Bonds of the 2031 Series shall remain outstanding. Section 1.08. Duration of
Effectiveness of Article 1. This Article shall be in force and effect only so
long as any of the Bonds of the 2031 Series are outstanding.
ARTICLE II
CREDITS WITH RESPECT TO BONDS OF THE 2031 SERIES
Section 2.01. In addition to any other credit, payment or satisfaction to
which the Company is entitled with respect to the Bonds of the 2031 Series, the
Company shall be entitled to credits against amounts otherwise payable in
respect of the Bonds of the 2031 Series in an amount corresponding to (i) the
principal amount of any of the Company's Notes issued under the Note Indenture
surrendered to the Note Trustee by the Company, or purchased by the Note
Trustee, for cancellation, (ii) the amount of money held by the Note Trustee
and available and designated for the payment of principal of, and/or interest
on, the Notes, regardless of the source of payment to the Note Trustee of such
moneys and (iii) the amount by which principal of and interest due on the Bonds
of the 2031 Series exceeds principal of and interest due on the Notes. The
Note Trustee shall make notation on such Bonds authorized hereby of any such
credit.
Section 2.02. A certificate of the Company signed by the President of any Vice
President, and attested to by the Secretary or any Assistant Secretary, and
consented to by the Note Trustee, stating that the Company is entitled to
a credit under Section 2.01 hereof or that Bonds of the 2031 Series have been
canceled, and setting forth the basis therefor in reasonable detail, shall be
conclusive evidence of such entitlement, and the Trustee shall accept such
certificate as such evidence without further investigation or verification of
the matters stated therein.
Section 2.03. Notwithstanding anything in this Supplemental Indenture to the
contrary the obligation of the Company to make payment with respect to the
principal and premium, if any, and interest on the Bonds of the 2031 Series
shall be deemed satisfied and discharged if at any time: (x) the Company shall
have paid or caused to be paid the principal of and premium, if any, and
interest on all the outstanding Notes, as and when the same shall have become
due and payable, (y) the Company shall have delivered to the Note Trustee for
cancellation all outstanding Notes, or (z) the Company shall have irrevocably
deposited or caused to be irrevocably deposited with the Note Trustee as trust
funds the entire amount in (A) cash, (B) U.S. Government obligations maturing
as to principal and interest in such amounts and at such times as will insure
the availability of cash, or (C) a combination of cash and U.S. Government
obligations, in any case sufficient, without reinvestment, as certified by an
independent public accounting firm of national reputation in a written
certification delivered to the Trustee, to pay at maturity or the
applicable redemption date (provided that notice of redemption shall have been
duly given or irrevocable provision satisfactory to the Note Trustee shall have
been duly made for the giving of any notice of redemption) all outstanding
Notes, including principal and any premium and interest due or to become due to
such date of maturity, as the case may be.
When obligation of the Company to make payment with respect to the principal of
and premium, if any, and interest on the Bonds of the 2031 Series shall be
satisfied or deemed satisfied pursuant to this Section 2.03 hereof, the holders
of Bonds of the 2031 Series shall, upon written request of the Company, deliver
without cost to the Company all of the Bonds of the 2031 Series, together with
such appropriate instruments of transfer or release as may be reasonably
requested by the Company. All Bonds of the 2031 Series delivered to the
Company in accordance with this Section 2.03 shall be delivered by the Company
to the Trustee for cancellation.
ARTICLE 3
ADDITIONAL COVENANTS OF THE COMPANY
Section 3.01. Notwithstanding the provisions of 1.07(4) of the Original
Indenture, as modified by 2.05(a) of the First Supplemental Indenture and
2.03 of the Second Supplemental Indenture, that the definition contained in
said 1.07(4), as so modified, shall continue so long as any Bonds of the 1975
Series or First Mortgage Bonds, 3-3/4% Series due 1978 (hereinafter sometimes
called the "Bonds of the 1978 Series") shall be outstanding, the Company here
by covenants that the definition contained in said 1.07(4) as modified as
aforesaid shall also apply to Bonds of the 2031 Series and continue in effect
so long as any Bonds of the 2031 Series shall remain outstanding.
Section 3.02. Notwithstanding the provisions of 1.07(7) of the Original
Indenture, as modified by 2.05(c) of the First Supplemental Indenture and
2.04 of the Second Supplemental Indenture, that the definition contained in
said 1.07(7), as so modified, shall continue so long as any of the Bonds of
the 1975 Series or Bonds of the 1978 Series shall be outstanding, the Company
hereby covenants that the definition contained in said 1.07(7) as modified
as aforesaid shall also apply to Bonds of the 2031 Series and continue in
effect so long as any Bonds of the 2031 Series shall remain outstanding.
ARTICLE 4
MODIFICATION OF THE ORIGINAL INDENTURE
Paragraph (3) of 1.06 of the Original Indenture as modified by 2.04 of the
First Supplemental Indenture is hereby amended by deleting from paragraph (3)
the words "two and one-half (2-1/2) times" and substituting in place
thereof the words "two (2) times" and the acceptance of any Bond of the Bonds
of the 2031 Series by the holder thereof shall be deemed to constitute a
consent to such amendment; provided, however, that such amendment shall not
become effective until (a) a further Supplemental Indenture making it effective
shall have been executed with the consent of the holders of not less than 75%
in principal amount of the Bonds outstanding, including the holders of not
less than 60% in principal amount of the Bonds of each series, at the time
outstanding, other than Bonds of the 2031 Series and Bonds of any other
series in respect of which the Supplemental Indenture creating the series
provides that the acceptance of the Bonds of such series by the holder
thereof shall be deemed to constitute a consent to such amendment, or (b)
none of the Bonds of any series other than Bonds of the 2031 Series and any
such other series shall be outstanding.
ARTICLE 5
BONDS OUTSTANDING
The total aggregate principal amount of First Mortgage Bonds of the Company
issued and outstanding and presently to be issued and outstanding under the
provisions of, and secured by the Indenture, will be $38,500,000; namely -
$10,000,000 principal amount of First Mortgage Bonds, 9.57% Series due 2018
now issued and outstanding, $5,500,000 principal amount of First Mortgage
Bonds, 10.03% Series due 2018 now issued and outstanding, $8,000,000 principal
amount of First Mortgage Bonds, 9.08% Series due 2022 and $15,000,000 principal
amount of First Mortgage Bonds, 6.85% Series due 2031 to be issued upon
compliance by the Company with the provisions of 3.03, 3.04 and/or 3.05 of
the Original Indenture, as supplemented and modified.
ARTICLE 6
SUNDRY PROVISIONS
Section 6.01. The Company may enter into an agreement with the holder of any
registered Bond without coupons of any series providing for the payment to
such holder of the principal of and the premium, if any, and interest on such
Bond or any part thereof at a place other than the offices or agencies therein
specified and in a manner specified therein including payment by wire transfer,
and for the making of notation, if any, as to principal payments on such Bond
by such holder or by an agent of the Company or of the Trustee. The Trustee
is authorized to approve any such agreement, and shall not be liable for any
act or omission to act on the part of the Company, any such holder or any agent
of the Company in connection with any such agreement.
Section 6.02. This Fourteenth Supplemental Indenture is executed and shall be
construed as an indenture supplemental to the Original Indenture, as
supplemented and modified, and shall form a part thereof, and the Original
Indenture, as heretofore supplemented and modified and as hereby supplemented
and modified, is hereby ratified, approved and confirmed.
Section 6.03. The recitals contained in this Fourteenth Supplemental Indenture
are made by the Company and not by the Trustee and all of the provisions
contained in the Indenture, in respect of the rights, privileges, immunities,
powers and duties of the Trustee shall be applicable in respect hereof as fully
and with like effect as if set forth herein in full.
Section 6.04. Whenever reference is herein in this Fourteenth Supplemental
Indenture made to a Section or Article of the Original Indenture, the First
Supplemental Indenture, the Second Supplemental Indenture, the Third
Supplemental Indenture, the Fourth Supplemental Indenture, the Fifth
Supplemental Indenture, the Sixth Supplemental Indenture, the Seventh
Supplemental Indenture, the Eighth Supplemental Indenture, the Ninth
Supplemental Indenture, the Tenth Supplemental Indenture, the Eleventh
Supplemental Indenture, the Twelfth Supplemental Indenture and the
Thirteenth Supplemental Indenture and such Section or Article has been
modified, then such reference shall be to such Section or Article so modified
whether or not expressly so stated. Section 6.05. Nothing in this Fourteenth
Supplemental Indenture expressed or implied is intended or shall be construed
to give to any person other than the Company, the Trustee, and the holders of
the Bonds issued hereunder, any legal or equitable right, remedy or claim under
or in respect of the Original Indenture, the First Supplemental Indenture,
Second Supplemental Indenture, the Third Supplemental Indenture, the Fourth
Supplemental Indenture, the Fifth Supplemental Indenture, the Sixth
Supplemental Indenture, the Seventh Supplemental Indenture, the Eighth
Supplemental Indenture, the Ninth Supplemental Indenture, the Tenth
Supplemental Indenture, the Eleventh Supplemental Indenture, Twelfth
Supplemental Indenture, the Thirteenth Supplemental Indenture, or this
Fourteenth Supplemental Indenture or any covenant, condition or provision
therein or herein or in the Bonds contained; and all such covenants,
conditions and provisions are and shall be held to be for the sole and
exclusive benefit of the Company, the Trustee and the holders of the Bonds and
coupons issued hereunder.
Section 6.06. The titles of Articles and any wording on the cover of this
Fourteenth Supplemental Indenture are inserted for convenience only and
are not a part thereof.
Section 6.07. All the covenants, stipulations, promises and agreements in this
Fourteenth Supplemental Indenture contained made by or on behalf of the Company
or of the Trustee shall inure to and bind their respective successors and
assigns.
Section 6.08. Although this Fourteenth Supplemental Indenture is dated for
convenience and for the purpose of reference as of September 1, 2002, the
actual date or dates of execution by the Company and by the Trustee are as
indicated by their respective acknowledgements hereto annexed.
Section 6.09. In order to facilitate the recording or filing of this Fourteenth
Supplemental Indenture, the same may be simultaneously executed in several
counterparts, each of which shall be deemed to be an original, and such
counterparts shall together constitute but one and the same instrument.
Section 6.10. This Fourteenth Supplemental Indenture and each Bond of the 2031
Series shall be deemed to be a contract made under the laws of the State of
Florida, and for all purposes shall be governed by and construed in accordance
with the laws of said State. Nothing contained in this 6.10 shall be deemed in
any manner to impair any of the rights of holders of any bonds previously
issued under the Indenture.
IN WITNESS WHEREOF, FLORIDA PUBLIC UTILITIES COMPANY has caused this Fourteenth
Supplemental Indenture to be signed in its corporate name and behalf by its
President or one of its Vice Presidents and its corporate seal to be hereunto
affixed and attested by its Secretary or one of its Assistant Secretaries; and
SUNTRUST BANK in token of its acceptance of the trust hereby created has
caused this Fourteenth Supplemental Indenture to be signed in its name and
behalf by its President or one of its Vice Presidents or Second Vice Presidents
and its seal to be hereunto affixed and attested by one of its Trust Officers,
in token of its acceptance of the trust; all as of the day and year first
above written.
FLORIDA PUBLIC UTILITIES COMPANY
(Corporate Seal)
/s/ John T. English
- ------------------------
John T. English
President, Chief Executive Officer, and
Director
ATTEST
/s/ Jack Brown
- ------------------------
Jack Brown
Vice President, and Secretary
SUNTRUST BANK
(Seal)
By: / s / SunTrust Vice President
-----------------------------------
SunTrust Vice President
Attest: / s / SunTrust Trust Officer
--------------------------------
SunTrust Trust Officer
STATE OF FLORIDA )
) SS:
COUNTY OF PALM BEACH )
Before the undersigned, a Notary Public in and for said State and County, duly
qualified, commissioned and sworn, personally came JOHN T. ENGLISH and
JACK R. BROWN, each to me well known to be the identical persons described in
and who executed the foregoing instrument and to be President and Secretary,
respectively, of FLORIDA PUBLIC UTILITIES COMPANY, the corporation described
in and which executed said instrument; and the said JOHN T. ENGLISH
acknowledged and declared that he as President of said corporation and being
duly authorized by it, freely and voluntarily, signed its name and caused its
corporate seal to be affixed to and executed said instrument in the name of,
for and on behalf of said corporation and as and for its act and deed. And the
said JACK R. BROWN, acknowledged and declared that he as Secretary of said
corporation, being duly authorized by it, freely and voluntarily affixed the
corporate seal of said corporation to said instrument and executed and
attested said instrument in the name of, for and on behalf of said corporation
and as and for its act and deed.
IN TESTIMONY WHEREOF, I do hereunto set my hand and official seal at the City
of West Palm Beach in said State and County this ______ day of_________ , 2001.
-----------------------------
(Notarial Seal)
STATE OF FLORIDA )
) SS:
COUNTY OF ORANGE )
Before the undersigned, a Notary Public in and for said State and County, duly
qualified, commissioned and sworn, personally came ___________________ and
_____________________, each to me well known to be the identical persons
described in and who executed the foregoing instrument and to be a Vice
President and Trust Officer, respectively, of SUNTRUST BANK described in and
which executed said instrument; and the said __________________________
acknowledged and declared that he as Vice President of said corporation and
being duly authorized by it, freely and voluntarily, signed its name and
affixed its seal to and executed said instrument in the name of, for and on
behalf of said corporation and as and for its act and deed. And said
______________________ acknowledged and declared that he as a Trust Officer
of said corporation, being duly authorized by it, freely and voluntarily
attested the execution and ensealing of said instrument in the name of, for
and on behalf of said corporation and as and for its act and deed.
IN TESTIMONY WHEREOF, I do here unto set my hand and official seal at the City
of Orlando in said State and County this ______ day of ___________ ,2001.
_____________________________
(Notarial Seal)
EXHIBIT 4(c)
Fifteenth Supplemental Indenture dated November 1, 2001
This is a Security Agreement covering Personal Property
as well as a Mortgage upon Real Estate and Other Property
FIFTEENTH SUPPLEMENTAL INDENTURE
THIS FIFTEENTH SUPPLEMENTAL INDENTURE, dated for convenience as of
November 1, 2001 (the "Fifteenth Supplemental Indenture") between FLORIDA
PUBLIC UTILITIES COMPANY, as Debtor (its Federal tax number being 58-0466330),
a Florida corporation (hereinafter sometimes called the "Company"), whose
mailing address is P.O. Box 3395, West Palm Beach, Florida 33402-3395, and the
address of its principal place of business is 401 South Dixie Highway, West
Palm Beach, Florida 33401, party of the first part, and SUNTRUST BANK (as
successor to Continental Illinois National Bank and Trust Co. of Chicago and
First National Bank in Palm Beach, hereinafter sometimes called the
"Trustee"), as Mortgagee and Secured Party (its Federal tax number being
59-1424500), a corporation duly organized and existing under the laws of the
State of Georgia, having a place of business at 225 East Robinson Street,
Suite 250, P.O. Box 44, Orlando, Florida 32802-0044.
WHEREAS, the Company has heretofore executed and delivered to the Trustee an
Indenture of Mortgage and Deed of Trust dated as of September 1, 1942
(hereinafter called the "Original Indenture"), to secure, as provided
therein, its bonds (in the Original Indenture and herein called the "Bonds"),
to be designated generally as its "First Mortgage Bonds", and to be issued in
one or more series as provided in the Original Indenture; and
WHEREAS, the Company has heretofore executed and delivered to the Trustee
fourteen indentures supplemental to the Original Indenture as follows: the
First Supplemental Indenture dated as of December 1, 1945 (hereinafter
sometimes called the "First Supplemental Indenture"), the Second Supplemental
Indenture dated as of March 1, 1948 (hereinafter sometimes called the "Second
Supplemental Indenture"), the Third Supplemental Indenture dated as of
August 1, 1954 (hereinafter sometimes called the "Third Supplemental
Indenture"), the Fourth Supplemental Indenture dated as of August 1, 1956
(hereinafter sometimes called the "Fourth Supplemental Indenture"), the Fifth
Supplemental Indenture dated as of September , 1958 (hereinafter sometimes
called the "Fifth Supplemental Indenture"), the Sixth Supplemental Indenture
dated as of July 1, 1959 (hereinafter sometimes called the "Sixth Supplemental
Indenture"), the Seventh Supplemental Indenture dated as of June 1, 1963
(hereinafter sometimes called the "Seventh Supplemental Indenture"), the
Eighth Supplemental Indenture dated as of June 1, 1965 (hereinafter sometimes
called the "Eighth Supplemental Indenture"), the Ninth Supplemental Indenture
dated as of July 1, 1972 (hereinafter sometimes called the "Ninth Supplemental
Indenture"), the Tenth Supplemental Indenture dated as of July 1, 1975
(hereinafter sometimes called the "Tenth Supplemental Indenture"), the Eleventh
Supplemental Indenture dated as of June 1, 1983 (hereinafter sometimes called
the "Eleventh Supplemental Indenture"), the Twelfth Supplemental Indenture
dated as of May 1, 1988, the Twelfth Supplemental Indenture dated as of
May 1, 1988 (hereinafter sometimes called the "Twelfth Supplemental
Indenture"), the Thirteenth Supplemental Indenture dated as of June 1, 1992
(hereinafter sometimes called the "Thirteenth Supplemental Indenture") and the
Fourteenth Supplemental Indenture dated as of September 1, 2001 (hereinafter
sometimes called the "Fourteenth Supplemental Indenture") each of which
supplemental indentures provided for the creation of a new series of First
Mortgage Bonds and said First, Second, Sixth, Twelfth, Thirteenth and
Fourteenth Supplemental Indentures modified certain provisions of the Original
Indenture and the First Supplemental Indenture; and
WHEREAS, pursuant to the Original Indenture, as so supplemented and modified,
there have been executed, authenticated, delivered and issued and there are
outstanding as of the date of execution of this Fifteenth Supplemental
Indenture, First Mortgage Bonds of series and principal amounts as follows:
TITLE ISSUED OUTSTANDING
10.03% Series due 2018 $ 5,500,000 $ 5,500,000
9.57% Series due 2018 $10,000,000 $10,000,000
9.08% Series due 2022 $ 8,000,000 $ 8,000,000
6.85% Series due 2031 $15,000,000 $15,000,000
which constitute the only Bonds outstanding under the Original Indenture, as
supplemented and modified by the First, Second, Sixth, Twelfth, Thirteenth and
Fourteenth Supplemental Indentures and as supplemented by the Third, Fourth,
Fifth, Seventh, Eighth, Ninth, Tenth and Eleventh Supplemental Indentures; and
WHEREAS, the Board of Directors of the Company has established pursuant to
2.03 of said Original Indenture a new series of Bonds to be designated First
Mortgage Bonds, 4.9% Series due 2031 (hereinafter sometimes referred to as the
"Bonds of the 2031 Series") in the principal amount of Fourteen Million
Dollars ($14,000,000) and has authorized the issue of said Bonds pursuant to
the provisions of Article 3 of the Original Indenture, as supplemented and
modified; and
WHEREAS, 16.01 of the Original Indenture provides, among other things, that
the Company may execute and file with the Trustee and the Trustee at the
request of the Company shall join in indentures supplemental to the Original
Indenture and which thereafter shall form a part thereof, for the purposes,
among others describing the terms of any new series of Bonds as established
by resolution of the Board of Directors of the Company pursuant to 2.03 of
the Original Indenture; and
WHEREAS, the Company proposes to enter into a Loan Agreement (the "Loan
Agreement") with Palm Beach County, Florida (the "County") to provide for the
payment of a proposed issue by the County of $14,000,000 principal amount of
Industrial Development Revenue Bonds (Florida Public Utilities Company
Project) Series 2001, dated November 1, 2001 (the "2001 Bonds") issued
pursuant to an Indenture of Trust dated as of November 1, 2001 (the "Series
2001 Indenture") between the County and SunTrust Bank, as trustee (the "Series
2001 Trustee"), for the purpose of providing funds to pay the costs of certain
gas line and system improvements of the Company, pursuant to the provisions of
Section 159, Part II, Florida Statutes, as amended;
WHEREAS, the Company desires to secured the 2001 Bonds with the Bonds of the
2031 Series (as defined below); and
WHEREAS, the Company desires to execute this Fifteenth Supplemental Indenture
and hereby requests the Trustee to join in this Fifteenth Supplemental
Indenture for the purpose of describing the terms of the Bonds of the 2031
Series (the Original Indenture, as supplemented and modified by the First,
Second, Sixth, Twelfth, Thirteenth and Fourteenth Supplemental Indenture and
as supplemented by the Third, Fourth, Fifth, Seventh, Eighth, Ninth, Tenth,
Eleventh and this Fifteenth Supplemental Indentures being herein sometimes
called the "Indenture") and of adding to the covenants and agreements of the
Company in the Indenture contained other covenants and agreements hereafter to
be observed by the Company; and
WHEREAS, all conditions necessary to authorize the execution, delivery and
recording of this Fifteenth Supplemental Indenture and to make this Fifteenth
Supplemental Indenture a valid and binding Indenture of Mortgage for the
security of the Bonds of the Company issued or to be issued under the
Indenture have been complied with or have been done or performed.
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in order to secure the payment
of the principal of and premium, if any, and interest on all Bonds at any time
issued and outstanding under the Indenture, according to their tenor, purport
and effect, and to secure the performance and observance of all the covenants
and conditions in said Bonds and in the Indenture contained and for and in
consideration of the premises and of the mutual covenants herein contained and
of the purchase and acceptance of the Bonds of the 2031 Series by the holders
or registered owners thereof, and of the sum of One Dollar ($1.00) lawful
money of the United States of America duly paid to the Company by the Trustee
at or before the ensealing and delivery hereof, and for other valuable
considerations, the receipt whereof is hereby acknowledged, Florida Public
Utilities Company has executed and delivered this Fifteenth Supplemental
Indenture, and has granted, bargained, sold, aliened, remised, released,
conveyed, assigned, transferred, mortgaged, pledged, set over and confirmed,
and by these presents does grant, bargain, sell, alien, remise, release,
convey, assign, transfer, mortgage, pledge, set over and confirm unto SunTrust
Bank, a Georgia corporation, as Trustee, and to its successor in the trust,
and to its assigns forever, all property real, personal or mixed, described
in the Original Indenture and thereby conveyed or mortgaged or intended so to
be, including all such property acquired since the execution and delivery of
said Original Indenture which by the terms of said Original Indenture, the
First Supplemental Indenture, the Second Supplemental Indenture, the Third
Supplemental Indenture, the Fourth Supplemental Indenture, the Fifth
Supplemental Indenture, the Sixth Supplemental Indenture, the Seventh
Supplemental Indenture, the Eighth Supplemental Indenture, the Ninth
Supplemental Indenture, the Tenth Supplemental Indenture, the Eleventh
Supplemental Indenture, Twelfth Supplemental Indenture, Thirteenth
Supplemental Indenture, the Fourteenth Supplemental Indenture and this
Fifteenth Supplemental Mortgage is subjected or is intended to be subjected
to the lien of the Indenture.
Together with all and singular the tenements, hereditaments and appurtenances
belonging or in anywise appertaining to the aforesaid properties or any part
thereof, with the reversion and reversions, remainder and remainders, tolls,
rents, revenues, issues, income, product and profits thereof, and all the
estate, right, title, interest and claim whatsoever, at law as well as in
equity, which the Company now has or may hereafter acquire in and to the
aforesaid properties and every part and parcel thereof.
Expressly Excepting and Excluding, however, from this Fifteenth Supplemental
Indenture and from the lien and operation of the Indenture:
(a) any and all property of the character expressly excepted and excluded
from (i) the Original Indenture and from the lien and operation thereof by
subdivisions (b) to (h), both inclusive, of Part IX of Schedule A thereto and
(ii) the Original Indenture as supplemented and modified by the First, Second,
Sixth, Twelfth, Thirteenth and Fourteenth Supplemental Indentures and as
supplemented by the Third, Fourth, Fifth, Seventh, Eighth, Ninth, Tenth and
Eleventh Supplemental Indentures and from the lien and operation thereof as
provided in the Granting Clauses of said First, Second, Third, Fourth, Fifth,
Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth and Thirteenth
Supplemental Indentures; and
(b) all property which has been released by the Trustee or otherwise
disposed of by the Company free from the lien of the Original Indenture, as
supplemented and modified by the First, Second, Sixth, Twelfth and Thirteenth
Supplemental Indentures and as supplemented by the Third, Fourth, Fifth,
Seventh, Eighth, Ninth, Tenth and Eleventh Supplemental Indentures, in
accordance with the provisions thereof.
TO HAVE AND TO HOLD all said properties, real, personal and mixed, mortgaged,
pledged or conveyed by the Company as aforesaid, or intended so to be, unto
the Trustee, and their successors in the Trust and their assigns forever.
SUBJECT, HOWEVER, to the exceptions and reservations and matters hereinabove
recited; and to any permitted liens as defined in 1.05(a) of the Original
Indenture, and liens existing on any property hereafter acquired by the
Company at the time of such acquisition and permitted by 5.04 of the Original
Indenture, as modified by the First Supplemental Indenture.
IN TRUST, NEVERTHELESS, upon the terms and trusts in the Indenture set forth
for the equal and proportionate benefit and security of all present and future
holders of the Bonds and coupons issued and to be issued under the Indenture,
or any of them, without preference or priority of any said Bonds or coupons
over any others thereof, or of the Bonds and coupons of any particular series
over the Bonds and coupons of any other series, by reason of priority in the
time of issue, sale or negotiation thereof or by reason of the purpose of
issue or otherwise howsoever, except as otherwise provided in 9.29 of the
Original Indenture.
AND THIS INDENTURE FURTHER WITNESSETH, that the Company for itself and its
successors, does hereby covenant and agree to and with the Trustee and their
successors in said trust, for the benefit of those who shall hold the Bonds
and coupons of any of them, as follows:
ARTICLE 1
BONDS OF THE 2031 SERIES
Section 1.01. Establishment of Bonds of the 2031 Series. There shall be, and
is hereby created a new series of Bonds, known as and entitled "First Mortgage
Bonds, 4.9% Series due 2031", and the form thereof shall be substantially as
hereinafter set forth in 1.04 hereof.
The principal amount of the 2031 Series is limited to Fourteen Million Dollars
($14,000,000) in principal amount of such Bonds to be initially issued upon
compliance by the Company with the provisions of 3.03 and/or 3.04 of the
Original Indenture, as supplemented and modified, and to the Bonds of the 2031
Series issued in exchange or substitution for outstanding Bonds of said Series
under the provisions of the Original Indenture and of this Fifteenth
Supplemental Indenture.
Section 1.02. Terms of the Bonds of the 2031 Series. The definitive Bonds of
the 2031 Series shall be issued only as registered Bonds without coupons of
the denomination of $1,000 or any multiple thereof, numbered RN 1 upwards.
Notwithstanding the provisions of 2.08 of the Indenture or any other
provisions of the Indenture, the date of authentication of the first Bonds of
the 2031 Series issued upon original issuance shall be the date of the
commencement of the first interest period for Bonds of the 2031 Series. All
Bonds of the 2031 Series shall mature November 1, 2031, and shall bear
interest at the rate of 4.9% per annum until the payment of the principal
thereof, such interest to be payable semi-annually on the business day next
preceding the first day of May and on the business day next preceding the
first day of November of each year, commencing on the business day next
preceding the first day of May 2002; provided, however, that the Company
shall receive certain credits against principal and interest as set forth in
Article II hereof. Subject to the provisions of Article II below, both
principal of and interest on the Bonds of the 2031 Series will be paid in
any coin or currency of the United States of America which at the time of
payment is legal tender for the payment of public and private debts. Principal
of, premium, if any, and interest on Bonds of the 2031 Series will be payable
at the principal corporate trust office of the Trustee in the City of Orlando,
Florida, except that, in the case of the redemption as a whole at any time of
Bonds of the 2031 Series then outstanding, the Company may designate in the
redemption notice other offices or agencies at which, at the option of the
registered holders, Bonds of the 2031 Series may be surrendered for redemption
and payment. Interest on the Bonds of the 2031 Series may be paid by checks
payable to the order of the respective holders entitled thereto, and mailed by
the Trustee by first class mail, postage prepaid, to such holders at their
respective registered addresses as shown on the Bond register for the Bonds
of the 2031 Series, in each case to the holder of record on the record date as
hereinbelow defined.
The person in whose name any Bond of the 2031 Series is registered at the
close of business on any record date (as hereinbelow defined) with respect to
any interest payment date shall be entitled to receive the interest payable
on such interest payment date notwithstanding the cancellation of such Bond of
the 2031 Series upon any transfer or exchange thereof (including any exchange
effected as an incident to a partial redemption thereof) subsequent to the
record date and prior to such interest payment date, except that, if and to
the extent that the Company shall default in the payment of the interest due
on such interest payment date, then the registered holders of Bonds of the
2031 Series on such record date shall have no further right to or claim in
respect of such defaulted interest as such registered holders on such record
date, and the persons entitled to receive payment of any defaulted interest
thereafter payable or paid on any Bonds of the 2031 Series shall be the
registered holders of such Bonds of the 2031 Series on the record date for
payment of such defaulted interest. The term "record date" as used in this
1.02, and in the form of the Bonds of the 2031 Series, with respect to any
interest payment date applicable to the Bonds of the 2031 Series, shall mean
the October 15 next preceding an interest payment date occurring on a business
day next preceding the first day of November, or the April 15 next preceding
an interest payment date occurring on a business day next preceding the first
day of May, or such record date established for defaulted interest as
hereinafter provided.
In case of failure by the Company to pay any interest when due the claim for
such interest shall be deemed, to have been transferred by transfer of any
Bond of the 2031 Series registered on the books of the Company and the
Company, by not less than 10 days written notice to bondholders, may fix a
subsequent record date for determination of holders entitled to payment of
such interest. Such provision for establishment of subsequent record date,
however, shall in no way affect the rights of bondholders or of the Trustee
consequent on any default.
Except as provided in this 1.02, every Bond of the 2031 Series shall be
dated as provided in 2.08 of the Original Indenture. However, so long as
there is no existing default in the payment of interest on the Bonds of the
2031 Series, all Bonds of the 2031 Series authenticated by the Trustee
between the record date for any interest payment date and such interest
payment date shall be dated such interest payment date and shall bear interest
from such interest payment date; provided, however, that if and to the extent
that the Company shall default in the interest due on such interest payment
date, then any such Bond of the 2031 Series shall bear interest from the May 1
or November 1, as the case may be, to which interest has been paid, unless
such interest payment date is November 1, 2001, in which case from the date of
authentication of the first Bonds of the 2031 Series issued upon original
issuance. Bonds of the 2031 Series shall be transferable and exchangeable,
but only as provided in the Indenture.
Notwithstanding the provisions of 2.06 of the Original Indenture no charge
shall be made for any exchange of Bonds of the 2031 Series for other Bonds of
the 2031 Series of different authorized denominations or for any transfer of
Bonds of the 2031 Series, except that the Company at its option may require
the payment of a sum sufficient to reimburse it for any tax or other
governmental charge incident thereto.
The Trustee hereunder shall, by virtue of its office as such Trustee, be the
registrar and transfer agent of the Company for the purpose of registering
and transferring Bonds of the 2031 Series. Neither the Company nor the Trustee
shall be required to make transfers or exchanges of Bonds of the 2031 Series
for a period of ten days next preceding any designation of Bonds of the 2031
Series to be redeemed and neither the Company nor the Trustee shall be
required to make transfers or exchanges of any bonds designated in whole for
redemption or that part of any bond designated in part for redemption.
Section 1.03. Redemption Provisions for Bonds of the 2031 Series. The Bonds
of the 2031 Series shall only be redeemable at the price and on the conditions
stated in the form of bond set forth in Section 1.04 herein.
Section 1.04. Form of Bonds of the 2031 Series. The Bonds of the 2031 Series
and the Trustee's authentication certificate to be executed on the Bonds of
said Series, shall be in substantially the following form:
[FORM OF FACE OF BOND OF THE 2031 SERIES]
No. RN $14,000,000
FLORIDA PUBLIC UTILITIES COMPANY
Incorporated under the laws of the State of Florida
First Mortgage Bond, 4.9% Series due 2031
Due November 1, 2031
FLORIDA PUBLIC UTILITIES COMPANY, a Florida corporation (hereinafter sometimes
called the "Company", which term shall include any successor corporation as
defined in the Indenture hereinafter mentioned), for value received, hereby
promises to pay to Suntrust Bank, as trustee (the "Series 2001 Trustee")
under that certain Indenture of Trust dated as of November 1, 2001 by and
between Palm Beach County, Florida (the "County") and the Series 2001 Trustee
(the 'Series 2001 Indenture"), or registered assigns, Fourteen Million Dollars
($14,000,000) on November 1, 2031, and to pay to the registered owner hereof
interest thereon from the interest payment date next preceding the date of
this bond (or, if this bond be dated prior to May 1, 2002 from November 1,
2001), at the rate of 4.9% per annum, semiannually on the business day next
preceding the first day of May and on the business day next preceding the
first day of November in each year, commencing on the business day next
preceding the first day of May, 2002.
This bond is issued under that certain Indenture of Mortgage and Deed of Trust
dated as of September 1, 1942, duly executed and delivered by the Company to
SunTrust Bank (as successor to Continental Illinois National Bank and Trust
Co. of Chicago and First National Bank in Palm Beach), as trustee (the
"Trustee"), as modified by the First Supplemental Indenture, dated as of
December 1, 1945, by the Second Supplemental Indenture, dated as of March 1,
1948, by the Sixth Supplemental Indenture, dated as of July 1, 1959, by the
Twelfth Supplemental Indenture, dated as of May 1, 1988, by the Thirteenth
Supplemental Indenture, dated as of June 1, 1992, and by the Fourteenth
Supplemental Indenture, dated as of September 1, 2001, and as supplemented by
all other indentures supplemental thereto including the Fifteenth Supplemental
Indenture, dated as of November 1, 2001 (the "Fifteenth Supplemental
Indenture") (herein sometimes collectively referred to as the "Indenture".)
The principal of, and the premium, if any, and the interest on, this bond will
be paid in lawful money of the United States of America at the office of the
Trustee in the City of Orlando, Florida, or of its successor in trust, and
interest thereon will be paid in like lawful money at said office of the
Trustee; provided, however, that interest on this bond may be paid (i) by
check payable to the order of the registered holder entitled thereto and
mailed by the Trustee by first class mail, postage prepaid, to such holder at
his address as shown on the bond register for bonds of this series, or (ii) as
otherwise provided by an agreement of the Company with such holder complying
with Section 6.01 of the Fifteenth Supplemental Indenture; provided, however,
that any such payments of principal and interest shall be subject to receipt
of certain credits against such payment obligations as set forth in Article II
of the Fifteenth Supplemental Indenture.
This bond shall not become or be valid or obligatory for any purpose until the
authentication hereon shall have been signed by the Trustee.
The provisions of this bond are continued on the reverse hereof and such
continued provisions shall for all purposes have the same effect as though
fully set forth at this place.
IN WITNESS WHEREOF, FLORIDA PUBLIC UTILITIES COMPANY has caused these presents
to be executed in its name and behalf by its President or a Vice President and
its corporate seal to be hereunto affixed and attested by its Secretary or an
Assistant Secretary, all as of November 1, 2001.
FLORIDA PUBLIC UTILITIES COMPANY,
/s/ John T. English
- ------------------------
John T. English
President, Chief Executive Officer, and
Director
ATTEST
/s/ Jack Brown
- ------------------------
Jack Brown
Vice President, and Secretary
[FORM OF REVERSE OF BOND OF THE 2031 SERIES]
This Bond is one of the bonds, of a series designated as First Mortgage Bonds,
4.9% Series due 2031 (hereinafter sometimes referred to as "Bonds of the 2031
Series"), of an authorized issue of bonds of the Company; known as First
Mortgage Bonds, not limited as to maximum aggregate principal amount except as
otherwise provided in the Indenture, all issued or issuable in one or more
series (which several series may be of different denominations, dates and
tenor) under and equally secured (except in so far as any sinking fund,
improvement fund or other fund established in accordance with the provisions
of said Indenture may afford additional security for the bonds of any
specific series) by the Indenture. Reference is hereby made to the Indenture
for a description of the property mortgaged and pledged as security for said
bonds, the rights and remedies of the registered owner of this bond in regard
thereto, the terms and conditions upon which said bonds are secured thereby,
the terms and conditions upon which said bonds may be issued thereunder and
the rights, immunities and obligations of the Trustee under the said Indenture.
This bond shall be deemed to be a contract made under the laws of the State of
Florida, and for all purposes shall be governed by and construed in accordance
with the laws of said State.
The Company has entered into a Loan Agreement with the County to provide for
the payment of an issue by the County of its $14,000,000 principal amount of
Industrial Development Revenue Bonds (Florida Public Utilities Company
Project) Series 2001 (the "Series 2001 Bonds"), issued pursuant to the Series
2001 Indenture, for the purpose of providing funds to pay the costs of certain
gas line improvements of the Company, pursuant to Chapter 159, Part II,
Florida Statutes, as amended.
All of the Bonds of the 2031 Series have been issued in the name of the Series
2001 Trustee, as trustee under the Series 2001 Indenture, in satisfaction of
payments required to be made by the Company pursuant to the Loan Agreement and
to evidence its obligations to make such payments.
Subject to the provisions of the Series 2001 Indenture, the Bonds of the 2031
Series shall be subject to redemption prior to maturity as a whole at any time
or in part from time to time at the option of the Company on or after November
1, 2008, at the following redemption prices:
Period (Both Date Inclusive) Redemption Price
November 1, 2008 to October 31, 2009 102%
November 1, 2009 to October 31, 2010 101%
November 1, 2010 and thereafter 100%
Pursuant to the Loan Agreement, the Company has covenanted that it will
purchase 2001 Bonds on the death of any registered owner under the conditions
and subject to the limitations set forth in Section 5 of the form of 2001
Bond attached to the Series 2001 Indenture as Exhibit A. If the Company shall
fail to purchase any 2001 Bond required to be purchased by it on the death of
a registered holder of any 2001 Bond required to be purchased as provided in
Section 5 of such form of 2001 Bond, then the Trustee will redeem Bonds of the
2031 Series to the extent of the Company's failure to purchase such 2001 Bond,
on the date scheduled for such purchase, at a price equal to 100% of the face
principal amount of the Bonds of the 2031 Series so to be redeemed, plus
accrued interest to the redemption date.
So long as the trustee under the Series 2001 Indenture is the holder of all
the Bonds of the 2031 Series, upon cancellation in full or in part of any of
the 2001 Bonds (or provision for payment thereof having been made in
accordance with the provisions of the Series 2001 Indenture) and payment of
all fees and charges of the trustee thereunder, such trustee may, in lieu of
surrendering Bonds of the 2031 Series for redemption and issuance of the
Bonds of the 2031 Series, make an appropriate endorsement thereon of the
particulars of any such partial redemption and the amount of Bonds of the 2031
Series then remaining outstanding.
The Bonds of the 2031 Series are subject to special mandatory redemption
("Mandatory Redemption on Determination of Taxability"), in whole, or in part
as described below, at any time prior to maturity at a redemption price equal
to the principal amount thereof to be redeemed plus accrued interest to the
redemption date if on any day within 120 days after the Company receives
written notice from a registered owner or former registered owner of a
2001 Bond or the Series 2001 Trustee of a final determination by the Internal
Revenue Service or a court of competent jurisdiction that, as a result of a
failure by the Company to perform any of its agreements in the Loan Agreement
or the inaccuracy of any of its representations in the Loan Agreement or any
certificate submitted pursuant to the Series 2001 Indenture, the interest paid
or to be paid on any 2001 Bond is or was includable in the gross income of the
owner of any such Bond for Federal income tax purposes. No such determination
will be considered final unless the registered owner or former registered
owner involved in the determination gives the Company, Series 2001 Trustee
and the Trustee under the Indenture prompt written notice of the commencement
of the proceedings resulting in the determination and offers the Company,
subject to the Company's agreeing to pay all expenses of the proceeding and to
indemnify such registered owner against all liabilities that might result from
it, the opportunity to control the defense of the proceeding, and either the
Company does not agree within 30 days to pay the expenses, indemnify such
registered owner and control the defense or the Company exhausts or chooses
not to exhaust available procedures to contest or obtain review of the result
of the proceedings. Fewer than all the Bonds of the 2031 Series may be
redeemed if redemption of fewer than all would result in the interest payable
on the 2001 Bonds remaining outstanding being not includable in the gross
income for Federal income tax purposes of any owner. If fewer than all Bonds
of the 2031 Series are to be redeemed, the Trustee will select the Bonds of
the 2031 Series to be redeemed by lot as provided in the Indenture or by such
other method acceptable to the Trustee as may be specified in an Opinion of
Tax Counsel. If this redemption occurs in accordance with the terms of the
Series 2001 Indenture, such failure by the Company to perform any of its
agreements in the Loan Agreement or inaccuracy of any of its representations
in the Loan Agreement or any certificate submitted pursuant to the Series 2001
Indenture shall not in and of itself constitute an Event of Default under the
Series 2001 Indenture, the Bonds of the 2031 Series, the 2001 Bonds or the
Indenture. Any such redemptions shall be at a price equal to 100% of the face
principal amount of the Bonds of the 2031 Series so to be redeemed, plus
accrued interest to the redemption date.
The Company will deliver notice to each holder of the Bonds of the 2031 Series
to be redeemed (by telecopy or other same-day written communication confirmed
by the recipient, on a date no less than 30 days or more than 60 days prior to
the date fixed for redemption of the Bonds of the 2031 Series) of the premium,
if any, applicable to such redemption and the calculations, in reasonable
detail, used to determined the amount of any such premium.
Prior notice of the redemption of the Bonds of the 2031 Series (unless waived
as provided in the Indenture) shall be given by mailing such notice by first
class mail, postage prepaid, to the respective registered holders of such
bonds not less than thirty (30) nor more than sixty (60) days prior to the
redemption date; and otherwise as provided in Article 4 of the Original
Indenture.
If this bond or any portion thereof (One Thousand Dollars ($1,000) or a
multiple thereof) is called for redemption and payment duly provided for as
specified in said Indenture, this bond or such portion thereof that is so
redeemed shall cease to be entitled to the lien and security interest of said
Indenture from and after the date payment is so provided and shall cease to
bear interest from and after the date fixed for redemption.
In the event of the selection for redemption of a portion only of the
principal of this bond, payment of the redemption price will be made only
(a) upon presentation of this bond for notation hereon of such payment of the
portion of the principal of this bond so called for redemption, or (b) upon
surrender of this bond in exchange for a bond or bonds in registered form
(but only of authorized denominations), for the unredeemed balance of the
principal of this bond, or (c) upon issuance of a check or upon the making of
a wire transfer in the amount of the portions of the principal amount so
redeemed payable to the order of the registered holder entitled thereto and,
in the case of a check, mailed by the Trustee by first class mail, postage
prepaid, to such holder at his address as shown on the bond register for Bonds
of the 2031 Series, provided that in either case the holder shall have entered
into an agreement with the Company as required by Section 6.01 of the
Fifteenth Supplemental Indenture.
To the extent permitted and as provided in said Indenture, modifications or
alterations of said Indenture, or of any indenture supplemental thereto, and
of the bonds issued thereunder, and of the rights and obligations of the
Company and the rights of the bearers or registered owners of the bonds and
coupons, may be made with the consent of the Company and with the written
approvals or consents of the bearers or registered owners of not less than
seventy-five per centum (75%) in principal amount of the bonds outstanding,
including, if more than one series of bonds shall be at the time outstanding,
not less than sixty per centum (60%) in principal amount of each series,
provided, however, that no such alteration or modification shall, without
the written approval or consent of the bearer or registered owner of any bond
affected thereby, (a) impair or affect the right of such bearer or registered
owner to receive payment of the principal of and premium, if any, and interest
on any bond at the specified rate, on or after the respective due dates
expressed in any bond, or to institute suit for the enforcement of any such
payment on or after such respective dates, (b) permit the creation of any lien
prior to or on a parity with the lien of said Indenture, or (c) reduce the
percentage of the principal amount of the bonds upon the approval or consent
of the bearers or registered owners of which modifications or alterations may
be affected as aforesaid.
This bond is transferable, but only as provided in the Indenture, by the
registered owner hereof in person or by his duly authorized attorney, at said
office of the Trustee upon surrender of this bond for cancellation, duly
endorsed with signature guaranteed, and thereupon a new registered bond or
bonds of like aggregate principal amount will be issued to the transferee in
exchange herefor, and the registered owner of this bond at his option may
surrender the same for cancellation at said office and receive in exchange
herefor the same aggregate principal amount of registered bonds of the same
series but of other authorized denominations. No charge shall be made for any
exchange of bonds of this series for other bonds of different authorized
denominations or for any transfer of this bond, except that the Company at
its option may require the payment of a sum sufficient to reimburse it for
any tax or other governmental charge incident thereto.
Neither the Company nor the Trustee shall be required to make transfers or
exchanges of Bonds of the 2031 Series for a period of ten (10) days next
preceding any designation of bonds of said series to be redeemed, and neither
the Company nor the Trustee shall be required to make transfers or exchanges
of any bonds designated in whole for redemption or that part of any bond
designated in part for redemption. Subject to the provisions of the Fifteenth
Supplemental Indenture, if this bond is surrendered for any transfer or
exchange between the record date for any regular interest payment date and
such interest payment date, the new bond will be dated such interest payment
date. If this bond is surrendered for any transfer or exchange between such
record date and such interest payment date, the Fifteenth Supplemental
Indenture provides that in the event of any default in payment of the
interest due on such payment date, such interest shall not be payable to the
holder of the bond on the original record date but shall be paid to the
registered holder of such bond on the subsequent record date established for
payment of such defaulted interest.
In case a default as defined in said Indenture shall occur, the principal of
this bond may become or be declared due and payable before maturity in the
manner and with the effect provided in said Indenture. The holders, however,
of certain specified percentages of the bonds at the time outstanding,
including in certain cases specified percentages of bonds of particular
series, may in the cases, to the extent and under the conditions provided in
said Indenture, waive past defaults thereunder and the consequences of such
defaults.
No recourse shall be had for the payment of the principal of or premiums, if
any, or interest on this bond, or for any claim based hereon, or otherwise in
respect hereof or of said Indenture, to or against any incorporator,
stockholder, director or officer, past, present or future, as such, of the
Company, or of any predecessor or successor corporation, either directly or
through the Company, or such predecessor or successor corporation, under any
constitution or statute or rule of law, or by the enforcement of any
assessment or penalty, or otherwise, all such liabilities of incorporators,
stockholders, directors and officers, as such, being waived and released by
the holder and owner hereof by the acceptance of this bond and being likewise
waived and released by the terms of said Indenture.
[FORM OF ENDORSEMENT OF BONDS OF THE 2031 SERIES
WITH RESPECT TO PAYMENTS ON ACCOUNT OF PRINCIPAL]
PAYMENTS ON ACCOUNT OF PRINCIPAL
BALANCE OF
PRINCIPAL AMOUNT
DATE AMOUNT PAID UNPAID SIGNATURE
FORM OF AUTHENTICATION CERTIFICATE FOR BONDS OF THE 2031 SERIES
This bond is one of the bonds of the series designated
therein, referred to in the within-mentioned Indenture.
SUNTRUST BANK, TRUSTEE,
By:____________________
Authorized Officer
Section 1.05. Renewal and Replacement Fund. Notwithstanding the provision of
1.06 of the First Supplemental Indenture, as modified by 2.02 of the Second
Supplemental Indenture, that the covenants contained therein shall continue
only so long as any of the First Mortgage Bonds, 3-1/4% Series due 1975
(hereinafter sometimes called the "Bonds of the 1975 Series") shall remain
outstanding, the Company hereby covenants that the covenants made by the
Company in said 1.06, as so modified, shall also continue so long as any of
the Bonds of the 2031 Series shall remain outstanding.
[Section 1.06. Restriction on Payment of Dividends on Common Stock. The
Company hereby covenants and agrees that, so long as any Bonds of the 2031
Series remain outstanding, the Company shall not (a) declare or pay any
dividend (other than dividends payable in capital stock of the Company), or
make any distribution on any shares of Common Stock of the Company, or (b)
purchase or otherwise retire for a consideration (other than in exchange for,
or from the proceeds of, other shares of capital stock of the Company and
other than any class of preferred stock required to be purchased, redeemed or
otherwise retired for any sinking or purchase fund for such class of stock)
any shares of capital stock of the Company, if the aggregate amount so
distributed or expended after December 31, 2000 would exceed the aggregate
amount of the Company's net income available for dividends on its Common Stock
accumulated after December 31, 2000, plus the sum of $2,500,000.
Net income of the Company available for dividends on its Common Stock for the
purpose of this Section shall mean the gross earnings of the Company, less all
proper deductions for operating expenses, taxes (including income, excess
profits and other taxes based on or measured by income or undistributed
earnings or income for the determination of liability in respect of which
the amount payable by the Company by way of interest is a deductible item),
interest charges and other appropriate items, including provisions for
maintenance, and provision for retirements, depreciation or obsolescence in an
amount not less than the appropriation for renewals and replacements, as
defined in 1.06 of the First Supplemental Indenture as amended by 2.02 of
the Second Supplemental Indenture, after provision for all dividends accrued on
any outstanding stock of the Company having preference over the Common Stock
as to dividends, and otherwise determined in accordance with generally
accepted accounting principles, provided, however, that in determining the net
income of the Company for the purposes of this Section no deduction or
adjustment shall be made for or in respect of (a) expenses in connection with
the redemption or retirement of any securities issued by the Company,
including any amount paid in excess of the principal amount or par or stated
value of securities redeemed or retired or, in the event that such redemption
or retirement is effected with the proceeds of sale of other securities of
the Company, interest or dividends on the securities redeemed or retired
from the date on which the funds required for such redemption or retirement
are deposited in trust for such purpose to the date of redemption or
retirement; (b) profits or losses from sales of property or other capital
assets, or taxes on or in respect of any such profits; (c) any earned surplus
adjustment (including tax adjustments) applicable to any period prior to
January 1, 2002; and (d) amortization or elimination of utility plant
adjustment accounts or other intangibles.]
Section 1.07. Extension of Certain Covenants to Bonds of the 2031 Series.
Notwithstanding the provisions of 1.08 of the First Supplemental Indenture
that the covenants contained therein shall continue only so long as any of
the Bonds of the 1975 Series shall remain outstanding, the Company hereby
covenants that the covenants made by the Company in said 1.08 as modified
by 2.05 of the Second Supplemental Indenture, shall also continue so long
as any of the Bonds of the 2031 Series shall remain outstanding.
Section 1.08. Duration of Effectiveness of Article 1. This Article shall be
in force and effect only so long as any of the Bonds of the 2031 Series are
outstanding.
ARTICLE II
CREDITS WITH RESPECT TO BONDS OF THE 2031 SERIES
Section 2.01 The Company covenants and agrees that it will duly and
punctually pay to the Holder of the Bonds of the 2031 Series the
principal, premium (if any) and interest of said bonds at the dates and
place and in the manner provided in such bonds. Provided, however:
(a) Payments of the principal of, premium, if any, and interest on the
2001 Bonds may be made with moneys in the Bond Fund established pursuant to
the Series 2001 Indenture relating to the 2001 Bonds, including any monies in
such Fund and constituting proceeds on investments, as provided in the Loan
Agreement and the Series 2001 Indenture. Money in said Bond Fund constituting
proceeds from the sale of the 2001 Bonds or earnings on investments which have
been set aside by the Series 2001 Trustee under the Series 2001 Indenture at
the request of the Company for payment of the principal of (whether at
maturity or upon redemption), premium, if any, or interest on any 2001 Bond
shall be credited against the obligation of the Company to pay the principal
of, premium, if any, or interest on Bonds of the 2031 Series.
(b) The principal amount of any of the 2001 Bonds acquired by the Company
and delivered to the Series 2001 Trustee shall be credited against the
obligation of the Company to pay the principal of the Bonds of the 2031 Series
at maturity on November 1, 2031.
The Company shall promptly inform the Trustee of all payments made and credit
availed of pursuant to this Section with respect to its obligations on Bonds
of the 2031 Series. The Trustee, however, shall not be required to recognize
any payment made or credit availed of pursuant to this Section as a payment on
the Bonds of the 2031 Series until it shall have received a certificate from
the Series 2001 Trustee specifying the amount of such payment or credit and
stating that such payment or credit has been applied against payments required
on the 2001 Bonds. In addition, the certificate shall specify the interest or
principal obligations with respect to which the payment or credit was applied.
ARTICLE 3
ADDITIONAL COVENANTS OF THE COMPANY
Section 3.01. Notwithstanding the provisions of 1.07(4) of the Original
Indenture, as modified by 2.05(a) of the First Supplemental Indenture and
2.03 of the Second Supplemental Indenture, that the definition contained in
said 1.07(4), as so modified, shall continue so long as any Bonds of the 1975
Series or First Mortgage Bonds, 3-3/4% Series due 1978 (hereinafter sometimes
called the "Bonds of the 1978 Series") shall be outstanding, the Company
hereby covenants that the definition contained in said 1.07(4) as modified
as aforesaid shall also apply to Bonds of the 2031 Series and continue in
effect so long as any Bonds of the 2031 Series shall remain outstanding.
Section 3.02. Notwithstanding the provisions of 1.07(7) of the Original
Indenture, as modified by 2.05(c) of the First Supplemental Indenture and
2.04 of the Second Supplemental Indenture, that the definition contained in
said 1.07(7), as so modified, shall continue so long as any of the Bonds of
the 1975 Series or Bonds of the 1978 Series shall be outstanding, the Company
hereby covenants that the definition contained in said 1.07(7) as modified
as aforesaid shall also apply to Bonds of the 2031 Series and continue in
effect so long as any Bonds of the 2031 Series shall remain outstanding.
ARTICLE IV
CONCERNING BOND INSURER OF 2001 BONDS
Section 4.01 Payments made by Bond Insurer. In determining whether an event
of default has occurred under the Indenture, the Trustee shall not give effect
to any payments made by AMBAC Assurance Corporation (the "Bond Insurer"), the
issuer of a Financial Guaranty Insurance Policy guaranteeing payment of
principal of, and interest on, the 2001 Bonds.
Section 4.02 Written Consent of the Bond Insurer Required Prior to Certain
Amendments to the Indenture; Notice to Rating Agencies.
(a) In addition to the applicable requirements of the Indenture, the
Indenture may be amended from time to time, except with respect to (i) the
principal, premium, if any, or interest payable upon the Bonds of the 2031
Series, (ii) the interest payment dates, date of maturity or redemption
provisions of the Bonds of the 2031 Series, (iii) the security interest and
lien granted under the Indenture, and (iv) this Article IV, without the
prior written consent of the Bond Insurer. Nothing herein contained shall
require any consent by the Bond Insurer to any supplemental indenture which
authorizes the issuance of any new series of bonds under the Indenture, so
long as such supplemental indenture does not otherwise amend the Indenture as
described in the foregoing provisions of this subsection (a).
(b) In the case of any amendment to the Indenture requiring the prior
written consent of the Bond Insurer by virtue of Section 4.01(a) above,
written notice of such amendment shall also be given by the Company to
Standard and Poor's Corporation, Moody's Investors Service, Inc., and Fitch
Investors Service.
ARTICLE 5
BONDS OUTSTANDING
The total aggregate principal amount of First Mortgage Bonds of the Company
issued and outstanding and presently to be issued and outstanding under the
provisions of, and secured by the Indenture, will be $53,100,000; namely -
$10,000,000 principal amount of First Mortgage Bonds, 9.57% Series due 2018
now issued and outstanding, $5,500,000 principal amount of First Mortgage
Bonds, 10.03% Series due 2018 now issued and outstanding, $8,000,000
principal amount of First Mortgage Bonds, 9.08% Series due 2022, $15,000,000
principal amount of First Mortgage Bonds, 6.85% Series due 2031 now issued and
outstanding and $14,000,000 principal amount of First Mortgage Bonds, 4.9%
Series due 2031 to be issued upon compliance by the Company with the
provisions of 3.03, 3.04 and/or 3.05 of the Original Indenture, as
supplemented and modified.
ARTICLE 6
SUNDRY PROVISIONS
Section 6.01. The Company may enter into an agreement with the holder of any
registered Bond without coupons of any series providing for the payment to
such holder of the principal of and the premium, if any, and interest on
such Bond or any part thereof at a place other than the offices or agencies
therein specified and in a manner specified therein including payment by wire
transfer, and for the making of notation, if any, as to principal payments on
such Bond by such holder or by an agent of the Company or of the Trustee. The
Trustee is authorized to approve any such agreement, and shall not be liable
for any act or omission to act on the part of the Company, any such holder or
any agent of the Company in connection with any such agreement.
Section 6.02. This Fifteenth Supplemental Indenture is executed and shall be
construed as an indenture supplemental to the Original Indenture, as
supplemented and modified, and shall form a part thereof, and the Original
Indenture, as heretofore supplemented and modified and as hereby supplemented
and modified, is hereby ratified, approved and confirmed.
Section 6.03. The recitals contained in this Fifteenth Supplemental Indenture
are made by the Company and not by the Trustee and all of the provisions
contained in the Indenture, in respect of the rights, privileges, immunities,
powers and duties of the Trustee shall be applicable in respect hereof as fully
and with like effect as if set forth herein in full.
Section 6.04. Whenever reference is herein in this Fifteenth Supplemental
Indenture made to a Section or Article of the Original Indenture, the First
Supplemental Indenture, the Second Supplemental Indenture, the Third
Supplemental Indenture, the Fourth Supplemental Indenture, the Fifth
Supplemental Indenture, the Sixth Supplemental Indenture, the Seventh
Supplemental Indenture, the Eighth Supplemental Indenture, the Ninth
Supplemental Indenture, the Tenth Supplemental Indenture, the Eleventh
Supplemental Indenture, the Twelfth Supplemental Indenture, the Thirteenth
Supplemental Indenture and the Fourteenth Supplemental Indenture and such
Section or Article has been modified, then such reference shall be to such
Section or Article so modified whether or not expressly so stated.
Section 6.05. Nothing in this Fifteenth Supplemental Indenture expressed or
implied is intended or shall be construed to give to any person other than the
Company, the Trustee, and the holders of the Bonds issued hereunder, any legal
or equitable right, remedy or claim under or in respect of the Original
Indenture, the First SupplementalIndenture, Second Supplemental Indenture,
the Third Supplemental Indenture, the Fourth Supplemental Indenture, the
Fifth Supplemental Indenture, the Sixth Supplemental Indenture, the Seventh
Supplemental Indenture, the Eighth Supplemental Indenture, the Ninth
Supplemental Indenture, the Tenth Supplemental Indenture, the Eleventh
Supplemental Indenture, Twelfth Supplemental Indenture, the Thirteenth
Supplemental Indenture, the Fourteenth Supplemental Indenture or this Fifteenth
Supplemental Indenture or any covenant, condition or provision therein or
herein or in the Bonds contained; and all such covenants, conditions and
provisions are and shall be held to be for the sole and exclusive benefit of
the Company, the Trustee and the holders of the Bonds and coupons issued
hereunder. Provided however, the covenants, conditions and provisions set
forth in Article IV hereof shall also be for the benefit and protection of
the Bond Insurer.
Section 6.06. The titles of Articles and any wording on the cover of this
Fifteenth Supplemental Indenture are inserted for convenience only and are
not a part thereof.
Section 6.07. All the covenants, stipulations, promises and agreements in
this Fifteenth Supplemental Indenture contained made by or on behalf of the
Company or of the Trustee shall inure to and bind their respective successors
and assigns.
Section 6.08. Although this Fifteenth Supplemental Indenture is dated for
convenience and for the purpose of reference as of November 1, 2001, the
actual date or dates of execution by the Company and by the Trustee are as
indicated by their respective acknowledgements hereto annexed.
Section 6.09. In order to facilitate the recording or filing of this Fifteenth
Supplemental Indenture, the same may be simultaneously executed in several
counterparts, each of which shall be deemed to be an original, and such
counterparts shall together constitute but one and the same instrument.
Section 6.10. This Fifteenth Supplemental Indenture and each Bond of the 2031
Series shall be deemed to be a contract made under the laws of the State of
Florida, and for all purposes shall be governed by and construed in accordance
with the laws of said State. Nothing contained in this 6.10 shall be deemed in
any manner to impair any of the rights of holders of any bonds previously
issued under the Indenture.
IN WITNESS WHEREOF, FLORIDA PUBLIC UTILITIES COMPANY has caused this Fifteenth
Supplemental Indenture to be signed in its corporate name and behalf by its
President or one of its Vice Presidents and its corporate seal to be hereun
to affixed and attested by its Secretary or one of its Assistant Secretaries;
and SUNTRUST BANK in token of its acceptance of the trust hereby created has
caused this Fifteenth Supplemental Indenture to be signed in its name and
behalf by its President or one of its Vice Presidents or Second Vice Presidents
and its seal to be hereunto affixed and attested by one of its Trust Officers,
in token of its acceptance of the trust; all as of the day and year first above
written.
FLORIDA PUBLIC UTILITIES COMPANY
(Corporate Seal)
/s/ John T. English
- ------------------------
John T. English
President, Chief Executive Officer, and
Director
ATTEST
/s/ Jack Brown
- ------------------------
Jack Brown
Vice President, and Secretary
SUNTRUST BANK
(Seal)
By: / s / SunTrust Vice President
-----------------------------
SunTrust Vice President
STATE OF FLORIDA )
) SS:
COUNTY OF PALM BEACH )
Before the undersigned, a Notary Public in and for said State and County, duly
qualified, commissioned and sworn, personally came JOHN T. ENGLISH and
JACK R. BROWN, each to me well known to be the identical persons described in
and who executed the foregoing instrument and to be President and Secretary,
respectively, of FLORIDA PUBLIC UTILITIES COMPANY, the corporation described
in and which executed said instrument; and the said JOHN T. ENGLISH
acknowledged and declared that he as President of said corporation and being
duly authorized by it, freely and voluntarily, signed its name and caused its
corporate seal to be affixed to and executed said instrument in the name of,
for and on behalf of said corporation and as and for its act and deed. And the
said JACK R.BROWN, acknowledged and declared that he as Secretary of said
corporation, being duly authorized by it, freely and voluntarily affixed the
corporate seal of said corporation to said instrument and executed and attested
said instrument in the name of, for and on behalf of said corporation and as
and for its act and deed.
IN TESTIMONY WHEREOF, I do hereunto set my hand and official seal at the City
of West Palm Beach in said State and County this _____ day of _______ , 2001.
_______________________
(Notarial Seal)
STATE OF FLORIDA )
) SS:
COUNTY OF ORANGE )
Before the undersigned, a Notary Public in and for said State and County, duly
qualified, commissioned and sworn, personally came ________________________,
to me well known to be the identical person described in and who executed the
foregoing instrument and to be a Vice President of SUNTRUST BANK described in
and which executed said instrument; and the said _______________ acknowledged
and declared that she as Vice President of said corporation and being duly
authorized by it, freely and voluntarily, signed her name and affixed its
seal to and executed said instrument in the name of, for and on behalf of
said corporation and as and for its act and deed.
IN TESTIMONY WHEREOF, I do here unto set my hand and official seal at the
City of Orlando in said State and County this __________ day of ________ ,2001.
_______________________
(Notarial Seal)
EXHIBIT 10(a)
CREDIT AGREEMENT Between Florida Public Utilities and Bank of America
COMMERCIAL PLEDGE AGREEMENT
Grantor: Florida Public Utilities Company Lender: Bank of America,N.A.
401 South Dixie Highway c/o FL Commercial Loan Processing
West Palm Beach, FL 33401 FL9-100-03-15
P.O. Box 40329
Jacksonville, FL 32203-0329
THIS COMMERCIAL PLEDGE AGREEMENT dated September 17, 2001, Is made and executed
between Florida Public Utilities Company ("Grantor') and Bank of America, N.A.
("Lender").
GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants lo
Lender a security Interest In the Collateral to secure the Indebtedness and
agree that Lender shall have the rights stated In this Agreement with respect
to the Collateral, In addition to all other rights which Lender may have by
law.
COLLATERAL DESCRIPTION. The word "Collateral as used In this Agreement means
Grantors present and future rights, title and interest in and to, together with
any and all present and future additions thereto, substitutions therefore, and
replacements thereof, together with any and all present and future certificates
and/or instruments evidencing any Bonds and further together with all Income
and Proceeds as described herein:
Investment Account #8812S2 held with Banc of America Investment Services,Inc.
Bonds
RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a
right of setoff in all Grantor's accounts with Lender (whether checking,
savings, or some other account). This includes all accounts Grantor holds
jointly with someone else and all accounts Grantor may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Grantor authorizes Lender, to the
extent permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts.
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. Grantor
represents and warrants to Lender that:
Ownership. Grantor Is the lawful owner of the Collateral free and clear of
all security interests, liens, encumbrances and claims of others except as
disclosed to and accepted by Lender in writing prior to execution of this
Agreement.
Right to Pledge. Grantor has the full right, power and authority to enter
into this Agreement and to pledge the Collateral.
Authority; Binding Effect. Grantor has the full right, power and authority
to enter Into this Agreement and to grant a security interest in the
Collateral to Lender. This Agreement Is binding upon Grantor as well as
Grantor's successors and assigns, and is legally enforceable in accordance
with its terms. The foregoing representations and warranties, and all other
representations and warranties contained in this Agreement are and shall be
continuing in nature and shall remain in full force and effect until such
time as this Agreement is terminated or cancelled as provided herein.
No Further Grantor has not, and shall not, sell, assign, transfer, encumber
or otherwise dispose of any of Grantor's rights in the Collateral except as
provided in this Agreement.
No Defaults. There are no defaults existing under the Collateral, and there
are no offsets or counterclaims to the same. Grantor will strictly and
promptly perform each of the terms, conditions, covenants and agreements, if
any, contained in the Collateral which are to be performed by Grantor.
No Violation. The execution and delivery of this Agreement will not violate
any law or agreement governing Grantor or to which Grantor is a party, and
its certificate or articles of incorporation and bylaws do not prohibit any
term or condition of this Agreement.
Financing Statements. Grantor authorizes Lender to file a UCC-1 financing
statement, or alternatively, a copy of this Agreement to perfect Lenders
security Interest. At Lender's request, Grantor additionally agrees to sign
all other documents that are necessary to perfect, protect, and continue
Lender's security interest in the Property. Grantor will pay all filing
fees, title transfer fees, and other fees and costs involved unless
prohibited by law or unless Lender is required by law to pay such fees and
costs. Grantor irrevocably appoints Lender to execute financing statements
and documents of title in Grantor's name and to execute all documents
necessary to transfer title if there is a default. Lender may file a copy of
this Agreement as a financing statement. If Grantor changes Grantor's name
or address, or the name or address of any person granting a security interest
under this Agreement changes, Grantor will promptly notify the Lender of such
change.
LENDER'S RIGHTS AND OBLIGATIONS WITH RESPECT TO THE COLLATERAL. Lender may
hold the Collateral until all Indebtedness has been paid and satisfied.
Thereafter Lender may deliver the Collateral to Grantor or to any other owner
of the Collateral. Lender shall have the following rights in addition to all
other rights Lender may have by law:
Maintenance and Protection of Collateral. Lender may, but shall not be
obligated to, take such steps as it deems necessary or desirable to protect,
maintain, insure, store, or care for the Collateral, including paying of any
liens or claims against the Collateral. This may include such things as
hiring other people, such as attorneys, appraisers or other experts. Lender
may charge Grantor for any cost incurred in so doing. When applicable law
provides more than one method of perfection of Lender's security Interest,
Lender may choose the method(s) to be used. If the Collateral consists of
stock, bonds or other investment property for which no certificate has been
issued, Grantor agrees, at Lender's request, either to request issuance of an
appropriate certificate or to give instructions on Lender's forms to the
issuer, transfer agent, mutual fund company, or broker, as the case may be,
to record on its books or records Lender's security interest in the
Collateral.
Income and Proceeds from the Collateral. Lender may receive all Income and
Proceeds and add it to the Collateral. Grantor agrees to deliver to Lender
immediately upon receipt, in the exact form received and without commingling
with other property, all Income and Proceeds from the Collateral which may be
received by, paid, or delivered to Grantor or for Grantor's account, whether
as an addition to, in discharge of, in substitution of, or in exchange for
any of the Collateral.
Application of Cash. At Lender's option, Lender may apply any cash, whether
included in the Collateral or received as Income and Proceeds or through
liquidation, sale, or retirement, of the Collateral, to the satisfaction of
the Indebtedness or such portion thereof as Lender shall choose, whether or
not matured.
Transactions with Others. Lender may (1) extend time for payment or other
performance, (2) grant a renewal or change in terms or conditions, or (3)
compromise, compound or release any obligation, with any one or more
Obligors, endorsers, or Guarantors of the Indebtedness as Lender deems
advisable, without obtaining the prior written consent of Grantor, and no
such act or failure to act shall affect Lender's rights against Grantor or
the Collateral.
All Collateral Secures Indebtedness. All Collateral shall be security for
the Indebtedness, whether the Collateral is located at one or more offices or
branches of Lender. This will be the case whether or not the office or
branch where Grantor obtained Grantor's loan knows about the Collateral or
relies upon the Collateral as security.
Collection of Collateral. Lender at Lender's option may, but need not,
collect the Income and Proceeds directly from the Obligors. Grantor
authorizes and dir@ the Obligors, If Lender decides to collect the Income and
Proceeds, to pay and deliver to Lender all Income and Proceeds from the
Collateral and to accept Lender's receipt for the payments.
Power of Attorney. Grantor irrevocably appoints Lender as Grantor's
aftorney-4@fact, with full power of substitution, (a) to demand, collect,
receive, receipt for, sue and recover all Income and Proceeds and other sums
of money and other property which may now or hereafter become due, owing or
payable from the Obligors in accordance with the terms of the Collateral; lb)
to execute, sign and endorse any and all instruments, receipts, checks,
drafts and warrants issued in payment for the Collateral; (c) to settle or
compromise any and all claims arising under the Collateral, and in the place
and stead of Grantor, execute and deliver Grantor's release and acquittance
for Grantor; (d) to file any claim or claims or to take any action or
institute or take part in any proceedings, either in Lender's own name or In
the name of Grantor, or otherwise, which in the discretion of Lender may seem
to be necessary or advisable; and (a) to execute in Grantor's name and to
deliver to the Obligors on Grantor's behalf, at the time and in the manner
specified by the Collateral, any necessary instruments or documents.
Perfection of Secure Interest. Upon Lender's request, Grantor will deliver
to Lender any and all of the documents evidencing or constituting the
Collateral. When applicable law provides more than one method of perfection
of Lender's security interest, Lender may choose the method(s) to be used.
Upon Lender's request, Grantor will sign and deliver any writings necessary
to perfect Lender's security interest. Grantor hereby appoints Lender as
Grantor's irrevocable aftorney-4ri-fact for the purpose of executing any
documents necessary to perfect, amend, or to continue the security interest
granted in this Agreement or to demand termination of filings of other
secured parties. This Is a continuing Security Agreement and will continue
In effect even though all or any part of the Indebtedness Is paid In full and
even though for a period of lime Grantor may not be Indebted to Lender.
LENDER'S EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lendees interest in the Collateral or if Grantor fails to
comply with any provision of this Agreement or any Related Documents, Including
but not limited to Grantor's failure to discharge or pay when due any amounts
Grantor Is required to discharge or pay under this Agreement or any Related
Documents, Lender on Grantor's behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Collateral and paying all
costs for insuring, maintaining and preserving the Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Grantor. AJI such expenses will become a
part of the Indebtedness and, at Lender's option, will (A) be payable on
demand; (8) be added to the balance of the Note and be apportioned among and
be payable with any installment payments to become due during either (1) the
term of any applicable Insurance policy; or (2) the remaining term of the Note;
or (C) be treated as a balloon payment which will be due and payable at the
Note's maturity. The Agreement also will secure payment of these amounts. Such
right shall be in addition to all other rights and remedies to which Lender may
be entitled upon Default.
LIMITATIONS ON OBLIGATIONS-OF LENDER. Lender shall use ordinary reasonable
care in the physical preservation and custody of the Collateral In Lender's
possession, but shall have no other obligation to protect the Collateral or its
value. In particular, but without limitation, Lender shall have no
responsibility for (A) any depreciation In value of the Collateral or for the
collection or protection of any Income and Proceeds from the Collateral, (S)
preservation of rights against parties to the Collateral or against third
persons, (C) ascertaining any maturities, calls, conversions, exchanges,
offers, tenders, or similar matters relating to any of the Collateral, or (D)
Informing Grantor about any of the above, whether or not Lender has or is
deemed to have knowledge of such matters. Except as provided above, Lender
shall have no liability for depreciation or deterioration of the Collateral.
DEFAULT. Each of the following shall constitute an Event of Default under this
Agreement:
Payment Default. Grantor fails to make any payment when due under the
Indebtedness.
Other Defaults. Grantor fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or in any of
the Related Documents or to comply with or to perform any term, obligation,
covenant or condition contained in any other agreement between Lender and
Grantor.
Default In Favor of Third Parties. Should Grantor or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Grantor's property or Grantor's or any
Grantor's ability to repay the Indebtedness or perform their respective
obligations under this Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by Grantor or on Grantor's behalf under this Agreement or
the Related Documents is false or misleading in any material respect, either
now or at the time made or furnished or becomes false or misleading at any
time thereafter.
Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
document to create a valid and perfected security interest or lien) at any
time and for any reason.
Insolvency. The dissolution or termination of Grantor's existence as a going
business, the Insolvency of Grantor, the appointment of a receiver for any
part of Grantor's property, any assignment for the benefit of creditors, any
type of creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against any collateral securing the Indebtedness. This
Includes a garnishment of any of Grantor's accounts, Including deposit
accounts, with Lender. However, this Event of Default shall not apply if
there is a good faith dispute by Grantor as to the validity or reasonableness
of the claim which is the basis of the creditor or forfeiture proceeding and
If Grantor gives Lender written notice of the creditor or forfeiture
proceeding and deposits with Lender monies or a surety bond for the creditor
or forfeiture proceeding, in an amount determined by Lender, In Its sole
discretion, as being an adequate reserve or bond for the dispute.
Events Affecting Guarantor. Any of the preceding events occurs with respect
to guarantor, endorser, surety, or accommodation party of any of the
Indebtedness or guarantor, endorser, surety, or accommodation party dies or
becomes Incompetent or revokes or disputes the validity of, or liability
under, any Guaranty of the Indebtedness.
Adverse Change. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
Insecurity. Lender in good faith believes itself insecure.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender may exercise any one or more of the
following rights and remedies:
Accelerate Indebtedness. Declare all Indebtedness, including any prepayment
penalty which Grantor would be required to pay, immediately due and payable,
without notice of any kind to Grantor.
Collect the Collateral. Collect any of the Collateral and, at Lander's
option and to the extent permitted by applicable law, retain possession of
the Collateral while suing on the Indebtedness.
Sell the Collateral. Sell the Collateral, at Lander's discretion, as a unit
or in parcels, at one or more public or private sales. Unless the Collateral
is perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Lender shall give or mail to
Grantor, and other persons as required by law, notice at least ten (10) days
in advance of the time and place of any public sale, or of the time after
which any private sale may be made. However, no notice need be provided to
any person who, after an Event of Default occurs, enters into and
authenticates an agreement waiving that person's right to notification of
sale. Grantor agrees that any requirement of reasonable notice as to Grantor
is satisfied if Lender mails notice by ordinary mail addressed to Grantor at
the last address Grantor has given Lender in writing. If a public sale is
held, there shall be sufficient compliance with all requirements of notice to
the public by a single publication in any newspaper of general circulation in
the county where the Collateral is located, setting forth the time and place
of sale and a brief description of the property to be sold. Lender may be a
purchaser at any public sale.
Sell Securities. Sell any securities included in the Collateral in a manner
consistent with applicable federal and state securities laws. If, because of
restrictions under such laws, Lender is unable, or believes Lender is unable,
to sell the securities in an open market transaction, Grantor agrees that
Lender will have no obligation to delay sale until the securities can be
registered. Then Lender may make a private sale to one or more persons or to
a restricted group of persons, even though such sale may result in a price
that is less favorable than might be obtained in an open market transaction.
Such a sale will be considered commercially reasonable. If any securities
held as Collateral are 'restricted securities' as defined In the Rules of the
Securities and Exchange Commission (such as Regulation D or Rule 144) or the
rules of state securities departments under state "Blue Sky' laws, or if
Grantor or any other owner of the Collateral Is an affiliate of the issuer of
the securities, Grantor agrees that neither Grantor, nor any member of
Grantor's family, nor any other person signing this Agreement will sell or
dispose of any securities of such issuer without obtaining Lender's prior
written consent.
Rights and Remedies with Respect to Investment Property, Financial Assets and
Related Collateral. In addition to other rights and remedies granted under
this Agreement and under applicable law, Lender may exercise any or all of
the following rights and remedies: (1) register with any issuer or broker or
other securities intermediary any of the Collateral consisting of investment
property or financial assets (collectively herein, 'investment property) In
Lender's sole name or in the name of Lender's broker, agent or nominee; (2)
cause any issuer, broker or other securities intermediary to deliver to
Lender any of the Collateral consisting of securities, or Investment property
capable of being delivered; (3) enter into a control agreement or power of
attorney with any issuer or securities intermediary with respect to any
Collateral consisting of investment property, on such terms as Lender may
deem appropriate, in its sole discretion, including without limitation, an
agreement granting to Lender any of the rights provided hereunder without
further notice to or consent by Grantor; (4) execute any such control
agreement on Grantor's behalf and in Grantor's name, and hereby irrevocably
appoints Lender as agent and aftorney-4@fact, coupled with an Interest, for
the purpose of executing such control agreement on Grantor's behalf; (5)
exercise any and all rights of Lender under any such control agreement or
power of attorney; (6) exercise any voting, conversion, registration,
purchase, option, or other rights with respect to any Collateral; (7)
collect, with or without legal action, and issue receipts concerning any
notes, checks, drafts, remittances or distributions that are paid or payable
with respect to any Collateral consisting of investment property. Any
control agreement entered with respect to any investment property shall
contain the following provisions, at Lender's discretion. Lender shall be
authorized to instruct the issuer, broker or other securities intermediary to
take or to refrain from taking such actions with respect to the investment
property as Lender may instruct, without further notice to or consent by
Grantor. Such actions may include without limitation the issuance of
entitlement orders, account instructions, general trading or buy or sell
orders, transfer and redemption orders, and stop loss orders. Lender shall
be further entitled to Instruct the issuer, broker or securities intermediary
to sell or to liquidate any investment property, or to pay the cash surrender
or account termination value with respect to any and all investment property,
and to deliver all such payments and liquidation proceeds to Lender. Any
such control agreement shall contain such authorizations as are necessary to
place Lender in .control' of such investment collateral, as contemplated
under the provisions of the Uniform Commercial Code, and shall fully
authorize Lender to issue 'entitlement orders' concerning the transfer,
redemption, liquidation or disposition of investment collateral, in
conformance with the provisions of the Uniform Commercial Code.
Foreclosure. Maintain a judicial suit for foreclosure and sale of the
Collateral.
Transfer Title. Effect transfer of title upon sale of all or part of the
Collateral. For this purpose, Grantor irrevocably appoints Lender as
Grantor's attorney-4n-fact to execute endorsements, assignments and
instruments in the name of Grantor and each of them (if more than one) as
shall be necessary or reasonable.
Other Rights and Remedies. Have and exercise any or all of the rights and
remedies of a secured creditor under the provisions of the Uniform Commercial
Code, at law, in equity, or otherwise
Application of Proceeds. Apply any cash which is part of the Collateral, or
which is received from the collection or sale of the Collateral, to
reimbursement of any expenses, including any costs for registration of
securities, commissions incurred in connection with a sale, reasonable
attorneys' fees and court costs, whether or not there is a lawsuit and
including any fees on appeal, incurred by Lender in connection with the
collection and sale of such Collateral and to the payment of the Indebtedness
of Grantor to Lender, with any excess funds to be paid to Grantor as the
interests of Grantor may appear. Grantor agrees, to the extent permitted by
law, to pay any deficiency after application of the proceeds of the
Collateral to the Indebtedness.
Election of Remedies. Except as may be prohibited by applicable law, all of
Lander's rights and remedies, whether evidenced by this Agreement, the
Related Documents, or by any other writing, shall be cumulative and may be
exercised singularly or concurrently. Election by Lender to pursue any
remedy shall not exclude pursuit of any other remedy, and an election to make
expenditures or to take action to perform an obligation of Grantor under this
Agreement, after Grantor's failure to perform, shall not affect Lender's
right to declare a default and exercise its remedies.
ARBITRATION. (a) This paragraph concerns the resolution of any controversies or
claims between the parties, whether arising in contract, tort or by statute,
including but not limited to controversies or claims that arise out of or
relate to: (I) this agreement (including any renewals, extensions or
modifications); or (II) any document related to this agreement; (collectively
a 'Claim'). (b) At the request of any party to this agreement, any Claim shall
be resolved by binding arbitration in accordance with the Federal Arbitration
Act (Title 9, U. S. Code) (the 'Act). The Act will apply even though this
agreement provides that it is governed by the law of a specified state.
(c) Arbitration proceedings will be determined in accordance with the Act,
the applicable rules and procedures for the arbitration of disputes of JAMS or
any successor thereof (JAMS), and the terms of this paragraph. In the event of
any inconsistency, the terms of this paragraph shall control.
(d) The arbitration shall be administered by JAMS and conducted, unless
otherwise required by law, in any U. S. state where real or tangible personal
property collateral for this credit Is located or if there is no such
collateral, in the state specified In the governing law section of this
agreement. All Claims shall be determined by one arbitrator; however, if
Claims exceed $5,000,000, upon the request of any party, the Claims shall be
decided by three arbitrators. All arbitration hearings shall commence within
90 days of the demand for arbitration and close within 90 days of commencement
and the award of the arbitrator(s) shall be issued within 30 days of the close
of the hearing. However, the arbitrator(s), upon a showing of good cause, may
extend the commencement of the hearing for up to an additional 60 days. The
arbitrator(s) shall provide a concise written statement of reasons for the
award. The arbitration award may be submitted to any court having jurisdiction
to be confirmed and enforced.
(a) The arbitrator(s) will have the authority to decide whether any Claim
is barred by the statute of limitations and, if so, to dismiss the arbitration
on that basis. For purposes of the application of the statute of limitations,
the serace on JAMS under applicable JAMS rules of a notice of Claim is the
equivalent of the filing of a lawsuit. Any dispute concerning this arbitration
provision or whether a Claim is arbitratable shall be determined by the
arbitrator(s). The arbitrator(s) shall have the power to award legal fees
pursuant to the terms of this agreement.
(@ This paragraph does not limit the right of any party to: (I) exercise
self-help remedies, such as but not limited to, setoff; (it) initiate judicial
or nonjudicial foreclosure against any real or personal property collateral;
(III) exercise any judicial or power of sale rights, or (iv) act in a court
of law to obtain an interim remedy, such as but not limited to, injunctive
relief, writ of possession or appointment of a receiver, or additional or
supplementary remedies.
(g) The filing of a court action is not intended to constitute a waiver of
the right of any party, including the suing party, thereafter to require
submittal of the Claim to arbitration.
ADDITIONAL DEFAULTS. Each of the following shall constitute an event of
default (Event of Default') under this Agreement:
Event of Default Under Related Documents. A default or event of default occurs
under the terms of any Related Document executed by Borrower or any guarantor,
pledgor, accommodation party or other obligor.
Revocation or Termination of Trust. If any Borrower, grantor, guarantor,
pledgor, accommodation party or other obligor on the indebtedness secured
hereunder or any of the related documents is a trust or the trustee(s) of a
trust, such trust is revoked or otherwise terminated or all or a substantial
part of such trust's assets are distributed or otherwise disposed of, or In the
case of a revocable trust, the grantor of such trust dies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the party or parties
sought to be charged or bound by the alteration or amendment.
Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of Lender's
costs and expenses, including Lender's reasonable attorneys' fees and Lender's
legal expenses, Incurred In connection with the enforcement of this Agreement.
Lender may hire or pay someone else to help enforce this Agreement, and
Grantor shall pay the costs and expenses of such enforcement. Costs and
expenses Include Lender's reasonable attorneys' fees and legal expenses
whether or not there Is a lawsuit, Including reasonable attorneys' fees and
legal expenses for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated post-
judgment collection services. Grantor also shall pay all court costs and such
additional fees as may be directed by the court.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
Choice of Venue. If there is a lawsuit, Grantor agrees upon Lender's request
to submit to the jurisdiction of the courts of any County, State of Florida.
No Waiver by Lender. Lender shall not be deemed to have waived any rights
under this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender In exercising any right
shall operate as a waiver of such right or any other right. A waiver by
Lender of a provision of this Agreement shall not prejudice or constitute a
waiver of Lender's right otherwise to demand strict compliance with that
provision or any other provision of this Agreement. No prior waiver by
Lender, nor any course of dealing between Lender and Grantor, shall constitute
a waiver of any of Lender's rights or of any of Grantor's obligations as to
any future transactions. Whenever the consent of Lender Is required under
this Agreement, the granting of such consent by Lender In any Instance shall
not constitute continuing consent to subsequent instances where such consent
is required and in all cases such consent may be granted or withheld in the
sole discretion of Lender.
Notices. Any notice required to be given under this Agreement shall be given
in writing, and shall be effective when actually delivered, when actually
received by telefacsimile (unless otherwise required by law), when deposited
with a nationally recognized overnight courier, or, If mailed, when deposited
In the United States mail, as first class, certified or registered mail
postage prepaid, directed to the addresses shown near the beginning of this
Agreement. Any party may change its address for notices under this Agreement
by giving written notice to the other parties, specifying that the purpose of
the notice Is to change the party's address. For notice purposes, Grantor
agrees to keep Lender Informed at all times of Grantor's current address.
Unless otherwise provided or required by law, If there is more than one
Grantor, any notice given by Lender to any Grantor is deemed to be notice
given to all Grantors.
Severability. If a court of competent jurisdiction finds any provision of
this Agreement to be Illegal, Invalid, or unenforceable as to any
circumstance, that finding shall not make the offending provision illegal,
Invalid, or unenforceable as to any other circumstance. If feasible, the
offending provision shall be considered modified so that it becomes legal,
valid and enforceable. If the offending provision cannot be so modified, it
shall be considered deleted from this Agreement. Unless otherwise required by
law, the illegai4, Invalidity, or unenforceability of any provision of this
Agreement shall not affect the legality, validity or enforceability of any
other provision of this Agreement.
Successors and Assigns. Subject to any limitations stated In this Agreement
on transfer of Grantor's Interest, this Agreement shall be binding upon and
inure to the benefit of the parties, their successors and assigns. If
ownership of the Collateral becomes vested In a person other than Grantor,
Lender, without notice to Grantor, may deal with Grantor's successors with
reference to this Agreement and the Indebtedness by way of forbearance or
extension without releasing Grantor from the obligations of this Agreement or
liability under the Indebtedness.
Time Is of the Essence. Time is of the essence in the performance of this
Agreement.
Waive Jury. All parties to this Agreement hereby waive the right to any jury
trial In any action, proceeding, or counterclaim brought by any party against
any other party.
DEFINITIONS. The following capitalized words and terms shall have the
following meanings when used in this Agreement. Unless specifically stated
to the contrary, all references to dollar amounts shall mean amounts in lawful
money of the United States of America. Words and terms used in the singular
shall include the plural, and the plural shall include the singular, as the
context may require. Words and terms not otherwise defined in this Agreement
shall have the meanings attributed to such terms in the Uniform Commercial
Code:
Agreement. The word "Agreement means this Commercial Pledge Agreement, as
this Commercial Pledge Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this Commercial
Pledge Agreement from time to time.
Borrower. The word 'Borrower' means Florida Public Utilities Company, and
all other persons and entities signing the Note in whatever capacity.
Collateral. The word "Collateral" means all of Grantor's right, title and
Interest in and to all the Collateral as described in the Collateral
Description section of this Agreement.
Default. The word 'Default means the Default set forth in this Agreement in
the section titled 'Default".
Event of Default. The words 'Event of Default mean any of the events of
default set forth in this Agreement in the default section of this Agreement.
Grantor. The word "Grantor' means Florida Public Utilities Company.
Guaranty. The word "Guaranty' means the guaranty from guarantor, endorser,
surety, or accommodation party to Lender, including without limitation a
guaranty of all or part of the Note.
Income and Proceeds. The words 'Income and Proceeds" mean all present and
future income, proceeds, earnings, increases, and substitutions from or for
the Collateral of every kind and nature, including without limitation all
payments, interest, profits, distributions, benefits, rights, options,
warrants, dividends, stock dividends, stock splits, stock rights, regulatory
dividends, subscriptions, monies, claims for money due and to become due,
proceeds of any Insurance on the Collateral, shares of stock of different par
value or no par value issued in substitution or exchange for shares included
in the Collateral, and all other property Grantor is entitled to receive on
account of such Collateral, including accounts, documents, instruments,
chaftel paper, and general intangibles.
Indebtedness. The word 'Indebtedness' means the Indebtedness evidenced by
the Note or Related Documents, including all principal and Interest together
with all other Indebtedness and costs and expenses for which Grantor is
responsible under this Agreement or under any of the Related Documents.
Lender. The word 'Lender' means Bank of America, N.A. , Its successors and
assigns.
Note. The word 'Note' means the Note executed by Grantor In the principal
amount of $2,500,000.00 dated September 17, 2001, together with all renewals
of, extensions of, modifications of, refinancings of, consolidations of, and
substitutions for the note or credit agreement.
Obligor. The word 'Obligor' means without limitation any and all persons
obligated to pay money or to perform some other act under the Collateral.
Property. The word 'Property' means all of Grantor's right, title and
Interest In and to all the Property as described in the 'Collateral
Description" section of this Agreement.
Related Documents. The words 'Related Documents" mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the Indebtedness.
GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL PLEDGE
AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED SEPTEMBER 17,2001.
GRANTOR:
By,
/ s / George, M. Bachman ,
- --------------------------
George M. Bachman
CFO & Treasurer of Florida
Public, Utilities Company
Exhibit 10(b)
Lake Worth Generation LLC and FPUC
GAS TRANSPORTATION AGREEMENT
THIS AGREEMENT is made and entered into this 21st day of July, 2000,
between Florida Public Utilities Company ("FPUC"), a Florida corporation, and
Lake Worth Generation, LLC ("LWG"), a limited liability company organized under
the laws of Delaware. FPUC and LWG may be referred to as "the Parties" to this
Agreement.
RECITALS
WHEREAS, FPUC operates facilities for the distribution of natural gas in
the State of Florida; and
WHEREAS, LWG is developing a power generation project ("the Project") in
Lake Worth, Florida; and
WHEREAS, as a result of the Project and related contractual arrangements,
LWG will require transportation of natural gas from the Delivery Point on the
Florida Gas Transmission system to the site of the Project; and
WHEREAS, LWG has requested FPUC to: (1) construct certain pipeline
facilities (the "LWG Lateral," as defined in Article 1 below); (2) receive
certain quantities of natural gas for the account(s) of LWG and/or the other
Project Parties from Florida Gas Transmission ("FGT"); (3) transport such
natural gas on the "LWG Lateral" (as defined in Article 1, below); and (4)
redeliver such natural gas to the Redelivery Point (as defined in Article 1,
below); and
WHEREAS, FPUC is willing to construct the LWG Lateral and to provide such
transportation service through the LWG Lateral in accordance with the terms
hereof;
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements set forth herein, the Parties to this Agreement agree as follows:
ARTICLE 1
DEFINITIONS
As used herein, the following terms shall have the meanings set forth
below:
"Affiliate" shall mean a corporation or other entity that directly or
indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, another corporation or entity.
"Agreement" shall mean this contract, including the exhibits attached
hereto, as the same may be amended from time to time.
"Annual Period" shall mean any one of a succession of consecutive 12-month
periods, the first of which shall begin on the Commencement Date, provided that
such date is the first day of a calendar month, or otherwise on the first day
of the month immediately following the month in which the Commencement Date
occurs.
"Base Term" shall have the meaning set forth in Section 2.1.
"Btu" shall mean the amount of heat required to raise the temperature of
one pound of water from 59?F to 60?F at a constant pressure of 14.73 p.s.i.a.
"Commencement Date" shall mean either the day which falls 12 months after
LWG provides FPUC written release to begin construction of the LWG Lateral, or
the date on which the LWG Lateral is complete and ready for service, whichever
is later. Notwithstanding the above, in the event the LWG Lateral is completed
in less than 12 months after LWG provides FPUC the written release to commence
construction, and LWG elects to receive gas through the LWG Lateral prior to
the expiration of the 12 month period, then the "Commencement Date" shall be
the date LWG first receives gas through the LWG Lateral.
"Contribution In Aid of Construction" or "CIAC" for the purposes of this
Agreement shall mean a cash payment made by LWG to FPUC to reduce the capital
investment that FPUC to the extent required by the FPSC, would otherwise be
required to make in order to construct the LWG Lateral. If LWG pays CIAC to
FPUC, then the Final Adjusted Construction Cost used in the Cost of Service and
the Facilities Charge will be reduced accordingly, such that the charges
recover only the investment in the LWG Lateral that is exclusive of the CIAC.
"Cost of Service" shall mean the derivation of revenues, to be paid by
LWG to FPUC through the transportation charges delineated herein, that will
recover FPUC's costs of operating and maintaining the LWG lateral and provide
FPUC with the agreed upon return of 11.17% on its undepreciated investment in
the construction of the LWG Lateral. The transportation charges that will
recover the Cost of Service are identified in Section 7 of this Agreement. The
Cost of Service is based upon the cost to construct the LWG Lateral and the
rate of return, expenses and annual adjustment factors agreed to by the
parties. It is developed, quantified and shown on Exhibit A to this
Agreement.
"Day" shall mean FGT's delivery gas day, currently a period of twenty-four
(24) consecutive hours beginning and ending at 9:00 a.m. Central Clock Time,
as defined by FGT and as may be amended by FGT from time to time in its FERC-
approved tariff.
"Delivery Point" shall mean the point at which the LWG Lateral is connected
to the fitting on the outlet side of the FGT Facilities to be installed at a
location on the FGT system as shown on Exhibit B1.
"?F" shall mean degree(s) Fahrenheit.
"Facilities Charge" shall mean the fixed and declining charges described in
Section 7.1.
"FERC" shall mean the Federal Energy Regulatory Commission or any successor
agency having like jurisdiction.
"FGT" shall mean Florida Gas Transmission Company, a Delaware corporation,
and its successors and assigns.
"FGT Facilities" shall mean tap(s) on the FGT mainline, and piping,
measuring equipment, valves (including emergency shutdown valves), remote
telemetry units, controllers, regulators and any other equipment necessary to
interconnect the LWG Lateral with FGT, as described in Section 7.3.
"Final Adjusted Construction Cost" means the Preliminary Construction Cost
adjusted to reflect the changes and adjustments to the Preliminary Construction
Cost pursuant to this Agreement.
"Force Majeure" shall have the meaning set forth in Section 9.2.
"FPSC" shall mean the Florida Public Service Commission or any successor
agency having like jurisdiction within the State of Florida.
"Gas" shall mean natural and/or residual gas in any mixture of hydrocarbons
or of hydrocarbons and noncombustible gases, including odorant, in a gaseous
state, consisting essentially of methane and meeting the quality specifications
which FGT requires with regard to deliveries into its system.
"Lender" shall mean any person or entity lending money to LWG for the
construction, operation, maintenance, repair, or alteration of the Project, any
person or entity providing funds for the refinancing or the taking-out of such
loans, and the nominees or designees of any such persons or entities.
"Letter of Credit" shall have the meaning set forth in Section 4.8.
"LWG Lateral" shall mean the pipe, fittings, regulators, cocks, valves,
vaults, vents, connectors, appliances and apparatus of every kind and nature
installed by FPUC to transport Gas from the Delivery Point to the Redelivery
Point, including all additions, replacements, improvements, substitutions, and
increments thereto, and all related personal and/or tangible property and all
real property interests necessary for the operation, maintenance and
modification of such facilities, as more particularly described in Exhibit
B2 hereto.
"Mcf" shall mean 1,000 Standard Cubic Feet of Gas.
"Month" shall mean a calendar month.
"Party" or "Parties" shall mean FPUC and LWG, as the case may be, and their
successors and assigns.
"Preliminary Construction Cost" means the estimated total cost (exclusive
of up-front costs) that FPUC will incur to finance, construct and place in
service the LWG Lateral. The Preliminary Construction Cost, shown on
Exhibit A, Cost of Service, is based upon a bid or bids received by FPUC,
FPUC's own costs of construction and the cost of the FGT Facilities.
"Project" shall mean LWG's Gas-fired electric generation facility with a
planned initial net electrical generating capacity of approximately 210 MW, and
including a potential expansion phase that would increase the capacity to a
total of approximately 500 MW, including the boilers, turbines, generators and
all appurtenant structures, equipment and real property interests owned or
leased by LWG, to be located within the City of Lake Worth's power and water
utility complex located on College Street in Lake Worth, Florida, as shown on
Exhibit B3 hereto.
"Project Party" or "Project Parties" shall include LWG, an Affiliate of
LWG, the City of Lake Worth, and/or any entity that both supplies gas to and
purchases electrical energy from the Project.
"p.s.i.a." shall mean pounds per square inch absolute.
"p.s.i.g." shall mean pounds per square inch gauge.
"Redelivery Point" shall mean the point at which the LWG Lateral is
connected to LWG's fitting on the outlet flange of FPUC's valve to be installed
within the City of Lake Worth's power and water utility complex located on
College Street in Lake Worth, Florida, as described on Exhibit B4 hereto.
"Renewal Term" shall have the meaning set forth in Section 2.2.
"Renewal Term Charge" shall mean the charges applicable to the provision of
the transportation services provided by FPUC hereunder in the event LWG elects
to extend the Agreement for a period of ten years pursuant to Section 2.2. The
Renewal Term Charge shall be as provided in Section 7.10.
"Standard Cubic Foot of Gas" shall mean the amount of Gas which occupies
one cubic foot of space when the Gas is at a pressure of 14.73 p.s.i.a. and a
temperature of 60?F.
"Tariff" shall mean FPUC's Natural Gas Tariff currently filed with the
FPSC, as such tariff may be amended with approval of the FPSC from time to
time.
ARTICLE 2
TERM
2.1 Base Term. Subject to all other provisions, conditions, and
limitations hereof, this Agreement shall be effective on the date first set
forth above, and shall continue in full force and effect for a period of thirty
(30) Annual Periods from the Commencement Date (the "Base Term").
2.2 Renewal Term. At its option, LWG may elect to extend the term of this
Agreement by one period of 10 years or such other period to which the Parties
may mutually agree. With respect to such extension, LWG may exercise its right
to extend by providing notice to FPUC of its election at least eighteen months
prior to the date on which the Base Term is scheduled to terminate. If LWG
elects to extend the agreement pursuant to this section, during said extension
LWG shall pay FPUC the Renewal Term Charge as provided in Section 7.10.
2.3 Early Termination. Notwithstanding the foregoing:
A. Should the FPSC fail to approve this Agreement on terms acceptable
to both Parties, either Party shall have the right, within fifteen (15) days of
the effective date of any such final FPSC order, to terminate this Agreement
upon thirty (30) days' prior notice to the other Party; provided however, that
any FPSC approval shall be deemed to be acceptable if it does not materially
alter the terms and conditions of this Agreement. Such a material alteration
would include, but would not be limited to, failure by the FPSC to approve the
11.17% return on investment negotiated by the parties to be used in calculating
the Cost of Service for purposes of this Agreement.
B. LWG shall have the right to terminate this Agreement upon thirty
(30) days' prior notice to FPUC, upon the occurrence of any of the following
events: (i) LWG fails to obtain construction and/or permanent financing for the
Project on terms acceptable to LWG in its sole discretion; (ii) LWG permanently
discontinues the development and/or operation of the Project in its sole
discretion; (iii) FPUC experiences an event of force majeure that continues for
a period of six months or more, as more fully described in Article 9.
C. Termination of this Agreement for any reason, including those set
forth in this Section 2.3, and in Section 9.4 shall not relieve LWG of its
obligations to pay certain amounts expended by FPUC. If termination occurs
prior to the delivery by LWG to FPUC of a written release to commence
construction, LWG's obligation shall be limited to the "up-front" expenses
incurred by FPUC for obtaining an estimate from FGT of the cost of the FGT
Facilities, the designing and permitting of the LWG Lateral, and legal fees and
costs incurred in obtaining regulatory approval, except that LWG's
responsibility for said "Up-Front Expenses" shall not exceed the amount
provided in Section 6.1 in the aggregate in any event. In the event
termination occurs after the delivery of the release to commence construction,
LWG shall be obligated to pay FPUC (1) any up-front expenses described above
(up to the amount described in Section 6.1) not already reimbursed, plus (2)
the amount, if any, expended or committed to be expended by FPUC to construct
the LWG Lateral and to procure materials, net of any depreciation applied to
said construction costs. FPUC agrees to utilize all reasonable measures to
mitigate its costs in the event of early termination.
ARTICLE 3
PIPELINE FACILITIES
3.1 Construction. In order to provide service under this Agreement it will
be necessary for FPUC to construct the LWG Lateral. Unless expressly
authorized in writing by LWG upon terms agreed on by both parties, the LWG
Lateral shall be dedicated solely to the purpose of providing transportation
services under this Agreement. The parties understand and agree that, in
implementing the Project, LWG may act as the agent for other Project Parties
who require transportation service through the LWG Lateral from the Delivery
Point to the Redelivery Point. FPUC agrees that LWG may serve as the agent for
others, provided LWG promptly notifies FPUC of any such agency and LWG
continues to be directly responsible (except in the event of an assignment
permitted herein) for the payment of all charges for transportation service and
for providing the security required by the terms of this Agreement. FPUC shall
obtain all necessary permits, rights-of-way and any other authorizations
required to construct the LWG Lateral. Subject to receipt of all necessary
approvals, including approval of this Agreement by the FPSC, FPUC shall
construct the LWG Lateral from the Delivery Point to the Redelivery Point as
required to provide service under this Agreement. Following the date the
conditions precedent identified as 12.1(1), 12.1(2), 12.1(3) and 12.2(1) have
been satisfied, but in no event later than February 15, 2001, LWG shall provide
FPUC a written release to commence construction in substantially the form
attached as Exhibit C. Section 13.1, "Notice and Service"; shall apply
to the delivery of the written release. FPUC obligates itself to complete the
LWG Lateral and place it in service within 12 months of receiving the release
to commence construction, said obligation to be excused only if the delay is
the result of an event of Force Majeure.
3.2 Capacity. The LWG Lateral shall be designed, constructed, operated
and maintained so as to not exceed a maximum allowable operating pressure
("MAOP") of 975 p.s.i.g., and shall have the capability of transporting at
least 4,070 Mcf per hour to the Redelivery Point at a minimum pressure of 450
p.s.i.g. LWG shall be entitled to receive transportation service equal to the
total capacity of the LWG Lateral, subject to the terms and conditions herein.
For the initial phase of the Project, LWG shall require up to 2,427 Mcf per
hour at the Redelivery Point at a minimum pressure of 450 p.s.i.g. LWG shall
provide advance notice of no less than 180 days prior to exceeding 2,427 Mcf
per hour.
3.3 Ownership. The LWG Lateral shall be designed, constructed, owned,
operated and maintained by FPUC, and shall remain the property of FPUC upon
termination or expiration of this Agreement.
3.4 Compliance With Applicable Law. FPUC shall operate and maintain the
LWG Lateral in accordance with applicable federal, state and local laws,
ordinances and regulations, including, without limitation, any environmental
laws, rules, ordinances or regulations.
3.5 Pipeline Relocation. In the event relocation of all or a part of the
LWG Lateral is sought by a governmental entity, an owner of property for which
FPUC holds a permit, license, right-of-way or an easement, a licensor, FGT, or
similarly situated entity, FPUC shall take all reasonably available measures to
avoid the necessity of relocation. In addition, FPUC shall promptly notify LWG
of the possibility of relocation so that LWG may assist in efforts to avoid the
relocation and otherwise act to protect its interests in a timely manner. If
relocation is required, LWG shall be responsible to reimburse FPUC for
the actual costs of relocating the LWG Lateral, but only if FPUC has exhausted
all reasonable measures available to FPUC to avoid such relocation requirement
and only if the requirement of relocation is not due to the fault or
negligence of FPUC. LWG understands that during a required relocation FPUC may
not be able to flow gas to the Project through the LWG Lateral. FPUC shall use
all reasonably available means to minimize any interruption of flow through the
LWG Lateral during relocation. FPUC agrees to work diligently and
cooperatively with LWG to find other means of flowing gas to the Project in
that event. During any relocation LWG shall continue to be obligated to make
the payments delineated in Article 7.
If FPUC identifies an action on its part which could obviate-in whole or in
part-the necessity of relocation, but which would require FPUC to incur costs
to implement, FPUC shall promptly notify LWG of the proposed action and the
cost that FPUC would incur to implement the action. If LWG directs FPUC to
undertake the measure, FPUC shall do so, and LWG shall reimburse FPUC for the
related costs.
If the costs of a required relocation or of avoiding relocation are projected
to exceed $50,000, the Parties will coordinate a reasonable payment schedule
such that FPUC is paid prior to incurring the cost.
ARTICLE 4
TRANSPORTATION OF GAS
4.1 LWG's Responsibility. LWG, or the entities for whom LWG acts as agent,
or their authorized representatives, shall make all necessary arrangements with
other parties for transportation of Gas to the delivery point to be redelivered
by FPUC to the Redelivery Point at the Project site. FPUC shall have no
responsibility under this agreement for obtaining pipeline capacity on FGT's
system or for transportation of gas prior to receipt of such Gas from FGT at
the Delivery Point.
4.2 Quantities of Gas. FPUC agrees to receive from FGT at the Delivery
Point daily quantities of Gas, specified in Section 3.2 of this Agreement and
as nominated by LWG, other Project Parties , or their agents, and to redeliver
such quantities of Gas to the Project Parties at the Redelivery Point. FPUC
shall be under no obligation and shall have no responsibility to redeliver
quantities of Gas on any Day greater than or less than the quantities received
from FGT at the Delivery Point on such Day. In the event of a dispute
regarding the quantities of Gas received and/or redelivered under this Section
4.2, the Parties agree to use the meter installed by FGT at the Delivery Point
and generally accepted natural gas utility practices to determine the
quantities received and/or redelivered hereunder. LWG may, at its option and
expense, install, operate and maintain one or more check meters downstream of
the Redelivery Point to check the FGT meter at the Delivery Point. Such check
meters shall be for check purposes, and shall not be used in the measurement of
gas under this Agreement, but shall be used for the purposes of verifying the
FGT measurement of gas as between FGT and LWG or other Project Parties.
4.3 Interruption of Service. FPUC shall provide "Firm" quality
transportation service to LWG, and the parties for whom LWG acts as agent, at
all times, excepting only (1) events of Force Majeure; (2) interruptions as
necessary to avoid unsafe situations; and (3) necessary relocations, as
provided in Section 3.5. An exercise by FPUC of the right to terminate service
in the event of default by LWG and failure to cure shall not constitute an
interruption of service within the meaning of this subsection.
4.4 Delivery Pressure. FPUC agrees to contract with FGT on terms that
obligate FGT to guarantee a minimum pressure at the Delivery Point of 525
p.s.i.g., at a pressure no greater than 625 p.s.i.g., or at such lower pressure
that enables FPUC to operate the LWG Lateral so as to deliver the Gas to the
Redelivery Point at a pressure of no less than 450 p.s.i.g. LWG shall be
responsible for installing and maintaining (1) regulators at the Redelivery
Point to reduce the pressure to that of the Project's requirements and (2)
over-pressure protection devices to protect LWG's facilities downstream of the
Redelivery Point in the event of a delivery pressure up to the MAOP of 975
p.s.i.g.
4.5 No Treatment of Gas. FPUC will not compress, heat, scrub, strip, or
treat gas tendered from FGT, with the exception of providing additional
odorization prior to delivery to the Project site.
4.6 Shrinkage. There is to be no shrinkage in the quantity of natural gas
received from FGT and delivered to the Project. Measurement of quantities
delivered shall be based on the measurement data provided by FGT.
4.7 Nominations. It shall be the responsibility of LWG and/or the other
Project Parties to nominate expected natural gas quantities for each day
directly to FGT. LWG and/or the other Project Parties shall notify FPUC in
writing if they authorize a third party to exercise such function. Said
entities shall follow FGT's rules and regulations for the purpose of providing
nominations. Intra-day changes in scheduled quantities shall be allowed to the
extent permitted by FGT. During the term of this Agreement LWG or another
Project Party shall be FGT's Delivery Point Operator. LWG, the other Project
Parties, and/or their authorized representatives shall be responsible for
meeting scheduling obligations on FGT, and shall be responsible for any
imbalance between quantities scheduled and quantities delivered, and any
charges or penalties connected therewith. LWG, the other Project Parties,
and/or their authorized representatives shall promptly notify FPUC of daily
nominations and any changes thereto via facsimile or by such other means as may
be agreed to by the Parties. Upon request of FPUC following termination of
this Agreement, LWG or the other Project Party serving as Delivery Point
operator shall cooperate with FPUC in good faith to achieve, to the extent
possible, an assignment of the Delivery Point operator agreement to FPUC.
4.8 Security. No later than the date on which LWG provides FPUC the
written release to commence construction, LWG shall provide to FPUC an
irrevocable Letter of Credit ("LC") in a form substantially similar to
Exhibit D issued by a bank or institution reasonably acceptable to FPUC. The
initial amount of the LC shall be the Preliminary Construction Cost for the LWG
Lateral, less any CIAC, plus the amount of $37,900. Upon determination of the
Final Adjusted Construction Cost, the required LC amount shall be the Final
Adjusted Construction Cost, less any CIAC, plus the amount of $37,900. Each
year on the anniversary of the Commencement Date, provided there has been no
default by either party, the required LC will be modified as follows. The
amount of the LC will be recalculated by (1) subtracting the amount of
depreciation applied to the LWG Lateral during the prior annual period, and (2)
increasing the original $37,900 component of the beginning LC annually by a
factor of 3%, applied on a compounded basis. If at any time LWG terminates
this Agreement, or if FPUC terminates this Agreement as the result of a default
by LWG, and LWG fails to pay FPUC the amounts due FPUC from LWG upon
termination, FPUC may then draw on the LC to the extent of the amount owed.
In addition, in the event the LC is not renewed as required by the terms of
this Agreement, FPUC may draw on the LC. In the event the LC is drawn by FPUC
as a result of LWG's failure to renew on a timely basis, LWG shall have 30 days
following receipt of written notice from FPUC within which to replace the LC.
If LWG replaces the LC as provided above, FPUC shall promptly thereafter refund
to LWG the amount drawn by FPUC. LWG's replacement of the original LC as
provided above shall cure LWG's failure to renew the required LC and this
Agreement will continue in accordance with its terms.
ARTICLE 5
TITLE, CONTROL AND INDEMNIFICATION
5.1 Good and Merchantable Title to Gas. LWG warrants that it and/or the
other Project Parties for the purposes of this Agreement will hold good and
merchantable title to all Gas delivered to FPUC by FGT for their respective
accounts at the Delivery Point.
A. LWG will indemnify FPUC and save it harmless from all suits, actions,
debts, accounts, damages, costs including reasonable attorney's fees, losses,
and expenses arising out of the adverse claim of any person or persons to said
Gas, or title thereto, for any royalties, taxes, licenses, fees or charges
which are applicable prior to the time of delivery of said Gas to FPUC and
after redelivery by FPUC to the Redelivery Point.
B. FPUC will indemnify LWG and save it harmless from all suits, actions,
debts, accounts, damages, costs, including reasonable attorney's fees, losses,
and expenses arising out of the adverse claim of any person or persons to said
Gas, or title thereto, for any royalties, taxes, licenses, fees or charges
which are applicable while said Gas is in FPUC's possession and control prior
to the time of redelivery of said Gas to the Project.
5.2 Control. FPUC shall be deemed to be in control and possession of the
Gas to be transported by it upon delivery of such Gas at the Delivery Point
and until it shall have been redelivered to LWG and/or the other Project
Parties at the Redelivery Point; and LWG and each other Project Party receiving
gas shall be deemed to be in control and possession of its respective Gas prior
to such delivery to FPUC and after such redelivery at the Redelivery Point.
Each Party, while deemed to be in control and possession of such Gas, shall be
responsible for, and will indemnify and hold the other harmless from, any and
all claims, actions, suits, including attorney's fees, arising out of or
relating in any way to custody and control of such Gas.
ARTICLE 6
UP-FRONT EXPENSES
6.1 Up-Front Expenses. LWG agrees to pay FPUC for services by FPUC
rendered in connection with the cost of obtaining an estimate from FGT of the
cost of the FGT Facilities, designing and permitting the LWG Lateral, and the
legal fees and costs of obtaining regulatory approval of the LWG Lateral, up to
an amount not to exceed $55,500 plus the amount invoiced by FGT to FPUC to file
for and obtain permits necessary to construct FGT's portion of the FGT
Facilities. A portion of the said amount of Up-Front Expenses is intended to
cover the potential cost of a performance bond to secure the performance of the
contractor to whom FPUC awarded the bid for construction of the LWG Lateral.
The cost of the performance bond shall not exceed $40,000. FPUC shall not
incur the expense of the performance bond prior to September 1, 2000. FPUC
will bill LWG monthly, based on actual expenditures, adjusted to include
overheads associated with the aforesaid designing and permitting. Such
reimbursements shall not constitute CIAC.
ARTICLE 7
TRANSPORTATION CHARGES
7.1 Facilities Charge. The following charges are based on and derived from
Exhibit A, "Cost of Service." Beginning on the Commencement Date and on the
first day of each month thereafter during the Base Term, LWG shall pay FPUC a
Facilities Charge consisting of "fixed" and "declining"components. The "fixed"
component of $25,648.33 per month, as such amount may be adjusted pursuant to
Section 7.5, Section 7.9 or Section 7.11, shall compensate FPUC for
depreciation expenses, property taxes, and other taxes associated with the
construction and ownership of the LWG Lateral. The "declining" component per
month of the Facilities Charge shall be one twelfth of the annual amount shown
in the schedule of charges contained in Exhibit A, page 6 (initially $69,240.42
per month), as such amount may be adjusted pursuant to Section 7.5,
Section 7.9, or Section 7.11. In the event that the Commencement Date falls
on a date other than the first day of a month, the Facilities Charge for that
initial period shall be reduced proportionately.
7.2 The Facilities Charge includes only FPUC's charges for transportation
service associated with Gas transported and redelivered under this Agreement
and does not include any charges for transportation service by FGT or any other
entity transporting Gas prior to delivery to FPUC at the Delivery Point.
7.3 The Facilities Charge includes an estimate ($699,582) of the cost of
the FGT Facilities to be paid for by FPUC. It is understood and agreed by the
parties that, if and to the extent the actual cost of the FGT Facilities borne
by FPUC differs from the estimate of $699,582 used to calculate the Facilities
Charge, the difference will increase or reduce the Final Adjusted Construction
Cost used in the Cost of Service calculation.
7.4 It is the intent of the Parties that there be no CIAC. If a CIAC is
required by the FPSC, it shall include a tax gross-up on the CIAC based upon
FPUC's Federal tax rate to the extent that such CIAC is taxable. To the extent
that LWG supplies any CIAC, the construction cost used to calculate the
Facilities Charge shall be reduced by the amount of the CIAC.
7.5 The beginning levels of the fixed and declining components of the
Facilities Charges have been calculated on the basis of the Preliminary
Construction Cost. The Preliminary Construction Cost includes financing costs
and construction interest. If the FPSC disallows capitalization of those
items, they shall be removed from the Preliminary Construction Cost and LWG
shall pay them as they are incurred and billed by FPUC. Such payments shall not
constitute CIAC under Section 7.4 or up-front expenses under Section 6.1. In
the event the actual costs associated with constructing the LWG Lateral,
including the cost of the FGT Facilities, differ from the Preliminary
Construction Cost, FPUC shall determine the Final Adjusted Construction Cost
and the fixed and declining component of the Facilities Charge shall be
increased or decreased by the percentage amount that the Final Adjusted
Construction Cost is above or below the Preliminary Construction Cost.
However, the adjustment for construction costs other than the cost of the FGT
Facilities shall not be greater than 10% above or less than 10% below the
estimate used in the Preliminary Construction Costs. 7.6 LWG shall pay FPUC
each month an Operations and Maintenance Charge designed to compensate FPUC for
the annual costs of operating and maintaining the LWG Lateral. The details of
the operations and maintenance expenses are delineated in Exhibit A, entitled
the "Cost of Service Study". The beginning Operations and Maintenance Charge
shall be $6,312.17 monthly. There shall be an annual adjustment in the
Operations and Maintenance Charge based upon the United States Department
of Labor Bureau of Labor Statistics CPI-U Series #CUUR0000SA0. If actions by
LWG or another Project Party necessitate an increase in the operating hours of
FPUC's Gas Supply Department for the purpose of providing service under this
Agreement, such increased cost will be billed to LWG in addition to the
Operations and Maintenance Charge and paid by LWG monthly. The Operations and
Maintenance Charge includes the current cost of maintaining a license to cross
the CSX Railroad right-of-way. It is understood and agreed by the Parties
that to the extent right-of-way costs and related fees imposed by any
municipalities traversed by the LWG Lateral or by owners of the property for
which FPUC holds permits, licenses, easements or rights-of-way total in excess
of $2,500 per year, as adjusted in the preceding paragraph, such fees in excess
of $2,500 will be added to the Operations and Maintenance Charge. LWG shall
assign to FPUC an easement on the City of Lake Worth's power and water
utility complex located on College Street in Lake Worth, Florida, necessary
to construct, operate, and maintain the LWG Lateral on such site that LWG holds
or receives from the City of Lake Worth.
7.7 In the event the delivered cost of odorant exceeds 125% of the amount
of such costs included in the Operations and Maintenance Charge, as adjusted by
the index identified in Section 7.6, then the increment by which such costs
exceed the 125% level shall be added to the Operations and Maintenance Charge.
7.8 Start-up. During start-up procedures associated with placing the LWG
Lateral in service, LWG shall be responsible for providing gas used in purging
the line and for creating line pack. In addition, LWG shall provide water used
in the hydrostatic testing of the LWG Lateral. FPUC shall employ good utility
practices designed to minimize the cost associated with start-up testing and
procedures.
7.9 Effect of change in law. If a change in law, or a change in regulations
having the force of law, requires FPUC to purchase and install new or
additional facilities or equipment for compliance or to incur additional direct
costs of operating the LWG Lateral beyond those included in the Cost of
Service, LWG shall be responsible for bearing the cost of FPUC's compliance
with such requirement. FPUC shall be responsible for employing good utility
practices and other reasonably available means for minimizing the cost of
compliance. The Parties will determine whether the cost associated with the
new legal requirement shall be borne through adjustments to charges or through
a CIAC, based on circumstances at the time the cost is identified and
quantified.
7.10 Renewal Term Charge. If LWG decides to exercise its right to renew this
Agreement for a Renewal Term, it shall notify FPUC in writing of its election
to renew at least eighteen months prior to the expiration of the Base Term.
Section 13.1, Notice and Service, shall apply to the delivery of such notice.
Upon delivery by LWG of notice of its decision to renew, the Parties shall
negotiate in good faith the charges for transportation service that will apply
during the Renewal Term. In such negotiations the Parties will take into
account (1) the condition of the LWG Lateral, and any improvements and/or
repairs needed to enable FPUC to continue to provide service under the
Agreement; (2) the level of operations and maintenance expense necessary to
operate and maintain the LWG Lateral during the Renewal Term; (3) the level
of margin above actual operations and maintenance expense that would provide a
fair and reasonable benefit to FPUC and FPUC's other customers; and other
relevant considerations. If the Parties fail to agree to the charges that will
be applicable to the Renewal Term within 60 days of the receipt by FPUC of
LWG's notice of the decision to renew, the Parties will submit the matter to
the FPSC or, if applicable, a successor agency having similar regulatory
jurisdiction over the transportation of natural gas as provided under this
Agreement for resolution. If no governmental agency has such jurisdiction over
the transportation of natural gas as provided under this Agreement at the time
the Agreement is renewed, the Parties shall submit the matter to arbitration in
the manner delineated in Section 11.6. In the event the rates applicable to
the Renewal Term are undetermined at the time the Renewal Term begins, FPUC
shall continue to provide service under the Agreement and LWG shall pay the
charges in effect at the time the Base Term expired on an interim basis.
Once the Renewal Term charges have been determined, they will, to the extent
allowed by law, relate back to the beginning of the Renewal Term and the
interim charges will be trued up accordingly.
7.11 Taxes. If, during the term of this Agreement, the Federal Government,
or any State, municipality or subdivision of such State, should increase any
present tax or fees or levy any additional tax or fees relating to the service
provided by FPUC under this Agreement, any such additional tax or fees directly
attributable to such service and actually paid by FPUC shall be added to the
fixed component of the Facilities Charge, and in such event FPUC shall provide
to LWG supporting documentation with any bill or statement. In the event that
Florida state sales tax is levied on the labor expense of FPUC's contractors
associated with the construction of the LWG Lateral, the amount of such sales
tax shall be paid by LWG.
7.12 Except for the specific adjustment factors and items delineated
herein, FPUC and LWG agree that they will not seek to adjust the Facilities
Charge or the Operations and Maintenance Charge during the Base Term. If
another party seeks to modify either charge, FPUC and LWG agree to support the
rates agreed to herein by demonstrating the appropriateness of the rates in
light of (a) the binding bids FPUC obtained as the basis for the cost of
construction; (b) the cost of service analysis on which the Facilities Charge
is based; (c) the benefits of this transaction derived by other customers of
FPUC; and (d) other relevant considerations supporting the concept and level of
the contract rates agreed to by the parties.
7.13 FERC Order No. 636 Transition Costs. LWG shall not be liable under
this Agreement for any costs directly or indirectly associated with FGT's
compliance with FERC Order No. 636 (57 Fed. Reg. 13,267 (April 16, 1992), III
FERC Stats. And Regs. 30,939(1992)), which are incurred by or allocated to
FPUC under FPUC's service agreements with FGT, and FPUC shall take no
affirmative action seeking to impose upon LWG under this Agreement any Order
No. 636 - related charges which are incurred by or allocated to FPUC under its
service agreements with FGT.
7.14 Information for Audit. LWG shall have the right to review and audit
during normal business hours on reasonable prior notice, and at its own
expense, FPUC's records relating to the Final Adjusted Construction Cost and
any increase in costs on which FPUC exercises the right to modify the
Facilities Charge or the Operation and Maintenance Charge pursuant to
adjustments contemplated by this Section.
ARTICLE 8
APPLICABILITY OF TARIFF
8.1 The Miscellaneous General Information section, the Technical Terms and
Abbreviations, and the Rules and Regulations (excluding Item 7, Extensions) of
FPUC's Gas Tariff, including any amendments thereto which become effective
during the term of this Agreement, are hereby incorporated into this Agreement
and made a part hereof for all purposes. Any and all other provisions of such
Tariff are specifically waived by the Parties. In the event of any conflict
between the terms of said tariff provisions and specific provisions of this
Agreement, the latter shall prevail.
ARTICLE 9
FORCE MAJEURE
9.1 Suspension of Performance. In the event of either Party, FPUC or LWG,
being rendered unable wholly or in part by Force Majeure to carry out its
obligations under this Agreement, other than to make payments due hereunder, it
is agreed that on such Party giving notice and full particulars of such Force
Majeure to the other Party as soon as possible after the occurrence of the
cause relied on, then the obligations of the Party giving such notice, so
far as they are affected by such Force Majeure, shall be suspended during the
continuance of any inability so caused but for no longer period, and such cause
shall as far as possible be remedied with all reasonable dispatch. If an event
of Force Majeure occurs, in addition to pursuing a remedy to the cause of the
event, the party experiencing the event of Force Majeure agrees to use its best
efforts to avoid or mitigate any adverse impacts associated with the event of
Force Majeure. Such efforts shall include, but shall not be limited to,
exploring an alternative means of transporting gas.
9.2 Definition. The term "Force Majeure", as employed herein, shall mean
acts of God, strikes, lockouts or other industrial disturbances, acts of the
public enemy, wars, blockades, insurrections, riots, epidemics, landslides,
hurricanes, lightning, earthquakes, fires, storms of unusual magnitude, floods
greater than the recorded 25-year flood, washouts, arrests and restraints of
government and people, civil disturbances, explosions, breakage or freezing of
or accidents to the Pipeline Facilities, and any other cause, whether of the
kind herein enumerated or otherwise, not within the control of the Party
claiming suspension and which by the exercise of due diligence such Party is
unable to prevent or overcome; such term shall likewise include: (a) in those
instances where either Party is required to maintain, or, in the event of a
required relocation of all or a portion of the LWG Lateral, to obtain
servitude, rights of way grants, permits, or licenses to enable such
Party to fulfill its obligations hereunder, the inability of such Party
to maintain or acquire, or the delays on the part of such Party in maintaining
or acquiring, at reasonable cost and after the exercise of due diligence, such
servitudes, rights of way grants, permits, or licenses; and (b) in those
instances where either party is required to furnish materials and supplies
for the purpose of constructing or maintaining facilities or is required to
secure grants or permissions from any governmental agency to enable such Party
to acquire, or the delays on the part of such Party in acquiring, at reasonable
cost and after the exercise of due diligence, such materials and supplies,
permits and permissions.
9.3 Settlement of Strikes. It is understood and agreed that the settlement
of strikes or lockouts shall be entirely within the discretion of the Party
having the difficulty, and that the above requirement that any Force Majeure
shall be remedied with all reasonable dispatch shall not require the settlement
of strikes or lockouts when such course is inadvisable in the discretion of the
Party having the difficulty.
9.4 If an event of Force Majeure experienced by FPUC continues for a period
of six months or longer, LWG shall have the right, at its option, to terminate
this agreement. In the event LWG invokes its right to terminate under this
provision, it will be obligated to compensate FPUC consistent with the
provisions of Section 2.3. In addition, upon exercise of LWG's termination
rights under Section 9.4 hereunder, FPUC shall cooperate with LWG and any new
contractor engaged by LWG to complete construction of the LWG Lateral to ensure
a smooth and efficient transfer of the work in progress, including, but not
limited to (1) convey to LWG all pipe, equipment and materials purchased or
installed with respect to construction of the LWG Lateral, (2) to the extent
possible assignment of permits, easements and rights of way related thereto,
(3) to the extent possible termination of subcontracts entered into by FPUC on
terms satisfactory to LWG, or at LWG's request, to the extent possible
assignment of subcontract to LWG on terms satisfactory to LWG, (4) delivery to
LWG of all drawings, purchase orders and other contract documents related to
the LWG Lateral. All deliveries hereunder shall be made free and clear of
liens, encumbrances and security interests, except those created by LWG.
ARTICLE 10
AGREEMENT TO COOPERATE IN THE
EVENT OF COMPETITIVE ALTERNATIVE
In the event an additional interstate pipeline is built in the vicinity of
the Project, and LWG requests an interconnection with the alternative
interstate pipeline, FPUC agrees to cooperate with LWG in the evaluation of
the construction of a lateral to the alternative pipeline. FPUC will negotiate
an agreement with LWG in good faith for the construction of such a lateral and
the transportation of gas from a delivery point on the alternative interstate
pipeline to a redelivery point at the Project site on terms substantially
similar to those of this agreement. The development of an alternative lateral
shall not affect the obligation of LWG to pay for the LWG Lateral pursuant to
Article 7 and the other relevant provisions of this agreement.
ARTICLE 11
DISPUTE RESOLUTION
11.1 Purpose and Scope.
A. The Parties agree that any dispute arising under this Agreement which is
not subject to the exclusive jurisdiction of the FPSC shall be resolved solely
by application of the procedures set forth in this Article 11. The procedures
set forth herein may be modified by agreement of the Parties with respect to
any particular dispute which is subject to these procedures.
B. Each Party shall continue to perform its obligations under this Agreement
pending final resolution of any dispute which is subject to these procedures.
All applicable statutes of limitation and defenses based upon the passage of
time shall be tolled while the procedures specified in this Article 11 are
pending. The Parties shall take such action, if any, as may be required to
effectuate such tolling.
11.2 Commencement of Dispute Resolution Proceeding. A dispute subject to the
procedures provided herein shall be resolved in a dispute resolution proceeding
("DRP"). A DRP shall be commenced by either party giving written notice to the
other of the matter in dispute.
11.3 Negotiations. Within ten (10) days after delivery of such notice,
authorized officers of the Parties shall meet at a mutually acceptable time and
place in or near Lake Worth, Florida to exchange relevant information and to
attempt to resolve the dispute through good faith negotiations. Requests for
information shall be reasonable; responses shall be prompt and complete. If the
matter is not resolved within thirty (30) days after delivery of the notice to
commence, the DRP shall proceed to mediation.
11.4 Mediation.
A. Within forty (40) days after delivery of the notice to commence
the DRP, the Parties shall attempt to agree on the selection of a mediator with
professional experience in natural gas and electric generation issues (the
"Mediator"), or, failing such agreement, the Parties shall select a Mediator
from the Center from Public Resources' Panel of Neutrals or other agreed upon
registry of persons skilled in dispute resolution. The Parties shall bear
equally the costs of the mediator.
B. Within twenty (20) days after selection of the Mediator, the
Parties shall meet at a mutually acceptable time and place to present their
positions to the Mediator. At lease five (5) days prior to such meeting, each
Party shall submit to the Mediator and to the other Party a statement of
position on the issues remaining in dispute and a summary of the evidence and
arguments supporting its position.
C. The Mediator shall prescribe the order of, and appropriate time
limits for, the Parties' presentations at the meeting. The Mediator may
request the Parties to provide additional information or arguments in support
of their positions at or following the meeting. The Mediator, with the
agreement of the Parties, may schedule additional mediation meetings.
D. The Mediator shall not have any ex parte communication with either
of the Parties.
11.5 Mediator's Recommended Decision.
A. If the Parties fail to resolve all disputed issues through the
mediation process described above, the Mediator shall submit to them, within
thirty (30) days after the final mediation meeting a draft recommended
decision. The Parties may submit to the Mediator their comments on the draft
recommended decision within fifteen (15) days after its issuance, and each
Party shall submit a copy of such comments to the other Party. The Mediator
shall submit to the Parties a final decision on all remaining issues within
fifteen (15) days after receipt of any comments by the Parties.
B. The Parties agree to be bound by the Mediator's final decision,
except that either Party may, within fifteen (15) days after the issuance of
the Mediator's final decision file a petition with the FPSC seeking review of
the decision solely on the grounds that such decision: (i) was procured by
corruption, fraud or undue means; (ii) was the result of evident partiality or
misconduct by the Mediator; or (iii) would, if given effect, be unlawful under
the laws of the State of Florida. If the FPSC makes any such finding, the
Mediator's decision shall be given no effect, and the FPSC shall issue its own
decision on the issues remaining the dispute.
11.6 Arbitration Agreement
A. If a dispute arises under this Agreement at a time when the FPSC no
longer has regulatory jurisdiction over the intrastate transportation of
natural gas, the Parties agree that in that event the dispute will be subject
to arbitration under the commercial arbitration rules of the American
Arbitration Association, and the following provisions shall govern in lieu of
Sections 11.1 through 11.5.
B. If a dispute should arise under this contract, either Party may
within 30 days make a demand for arbitration by filing a demand in writing with
theother Party.
C. The Parties may agree on one arbitrator, but in the event that they
cannot agree, there shall be three arbitrators, one named in writing by each of
the parties within 14 days after the demand for arbitration is made and a third
to be chosen by the two named. Should either party refuse or neglect to join
in the appointment of the arbitrator, the arbitrators shall be appointed in
accordance with the provisions of the commercial arbitration rules.
D. All arbitration hearings, and all judicial proceedings to enforce
any of the provisions of this agreement, shall take place in Palm Beach County,
Florida. The hearing before the arbitrators of the matter to be arbitrated
shall be at the time and place within the County as selected by the
arbitrators. Notice shall be given and the hearing conducted in accordance with
the provisions of the commercial arbitration rules. The arbitrators shall hear
and determine the matter and shall execute and acknowledge their award in
writing and deliver a copy to each of the parties by registered or certified
mail.
E. If there is only one arbitrator, his or her decision shall be
binding and conclusive on the parties. If there are three arbitrators, the
decision of any two shall be binding and conclusive. The submission of a
dispute to the arbitrator(s) and the rendering of the arbitrator(s)' decision
shall be a condition precedent to any right of legal action on the dispute. A
judgment confirming the award of the arbitrators may be rendered by any court
having jurisdiction; or the court may vacate, modify, or correct the award.
F. The costs and expenses of arbitration, including the fees of the
arbitrators, shall be borne by the non-prevailing Party or in such proportions
as the arbitrators shall determine.
11.7. Confidentiality. All communications by the Parties or their
representatives with respect to a dispute which is the subject of a DRP shall
be privileged and confidential and shall not be disclosed or admissible in
evidence, unless: (i) they bear directly on allegations that the Mediator's
decision should be rejected for reasons of fraud, corruption, misconduct or
evident partiality; or (ii) the FPSC or a court of competent jurisdiction
determines that such disclosure is necessary.
ARTICLE 12
CONDITIONS PRECEDENT
12.1. The following conditions precedent must be satisfied before FPUC
will have any obligations under this Agreement:
(1) Approval of this Agreement by a final order of the Florida
Public Service Commission;
(2) Receipt of all permits and authorizations necessary to
construct the LWG Lateral, including those necessary for the
construction of the FGT Facilities. FPUC shall file all
applications for such permits within 15 days of the execution
of this Agreement, and shall make all reasonable efforts to
secure them within 60 days of the execution of this Agreement;
(3) Execution of an agreement between FPUC and FGT for the
construction of the FGT Facilities reasonably acceptable to
FPUC; and
(4) Receipt of a written release from LWG, in substantially
the form shown in Exhibit C, and delivered in accordance
with Section 13.1, directing FPUC to commence construction.
12.2. The following conditions precedent must be satisfied before
LWG will have any obligations under this Agreement other than the
obligation to reimburse FPUC for up-front expenses, as provided in
Section 2.3(C).
(1) The Project, or any portion thereof, has achieved a financial
closing satisfactory to LWG in its sole discretion; and
(2) LWG has delivered to FPUC a written release to commence
construction of the LWG Lateral.
ARTICLE 13
MISCELLANEOUS
13.1 Notice and Service. All notices, consents or approvals
required or permitted to be given hereunder shall be in writing
and shall be deemed given to a Party at its address set forth
below, or to such other address as any Party may designate from
time to time by notice to the other Party given in accordance
herewith: (i) upon delivery in person; (ii) on the third (3rd)
business day after mailing by registered or certified mail,
postage prepaid; (iii) on the next business day after timely
delivery to an overnight common carrier service, service fee
payable by the sending Party, for next-day delivery; or (iv) on
the date of facsimile transmission by telephone line provided
such transmission is followed by delivery of a copy of such
notice within twenty-four (24) hours pursuant to clauses (i) or
(iii):
LWG: Manager, Lake Worth Generation LLC
245 Winter Street, Suite 300
Waltham, MA 02451
Fax # 781-370-1594
FPUC: Division Manager, WPB
Florida Public Utilities Company
401 South Dixie Highway
West Palm Beach, FL 33401
General Fax #561-833-8562
Gas Supply Fax # 561-838-1713
or such other address or fax numbers as such Party may hereafter specify for
the purposes by notice to the other Party.
13.2 Captions. The captions in this Agreement are for the convenience of
the Parties in identifications of the provisions hereof and are not intended to
be inclusive, definitive or to affect the meaning, content or scope of this
Agreement.
13.3 Assignment. This Agreement shall be binding upon and inure to the
benefit of the respective successors and permitted assigns of the Parties. The
respective rights and obligations of either Party hereto shall not be
assignable without the consent of the other Party, and such consent shall not
be unreasonably withheld. Notwithstanding the foregoing, LWG is expressly
permitted to assign this Agreement without further approval by FPUC to any
Lender, to any limited or general partnership in which LWG is a partner, and to
any Project Party. LWG shall provide notice of 30 days prior to any such
assignment. Any assignee shall be entitled to all rights and shall be
liable for all obligations under the Agreement, including all payment
obligations.
13.4 Cooperation with Lender.
A. FPUC agrees that in connection with the collateral assignment by
LWG to Lender, it will execute an appropriate consent to such assignment as
reasonably requested by such Lender acknowledging, in effect, that this
agreement has been duly authorized and is valid and enforceable against FPUC
and does not conflict with any law binding upon FPUC or its articles of
incorporation or by-laws, that this Agreement is in full force and effect,
that FPUC will not agree to any amendment to this Agreement without Lender's
approval in writing, that it will deliver to Lender a copy of each notice of
default and will give Lender a reasonable opportunity (in any event not less
than thirty (30) days) to cure, that it will not terminate this Agreement
without giving Lender prior notice, and that in the event Lender succeeds to
the interest of LWG under this Agreement by reason of the exercise of its
rights under its loan documentation with LWG, FPUC will accept performance
by Lender or its successor or assigns notwithstanding any restriction under
or in accordance with this Agreement. FPUC also agrees, upon request of LWG,
to furnish to Lender a reasonable opinion of counsel to FPUC with respect to
the enforceability of the Agreement against FPUC. Notwithstanding the
foregoing FPUC shall not be obligated to agree to any modification requested by
Lender or take any action to benefit Lender if such modification or action
would result in a material adverse effect upon FPUC.
B. The Parties recognize that this Agreement is subject to approval by
Lender and if any such Lender requires any reasonable modification to the
provisions of this Agreement, LWG shall request that FPUC consent to such
modification. FPUC may withhold its consent if the requested modification is:
(i) made after LWG and Lender have entered into a credit facility and the
Lender has authorized the release of funds under such credit facility; (ii)
inconsistent with the regulatory requirements of the FPSC or any other body
having jurisdiction over the Parties; or (iii) will have a material adverse
effect on FPUC.
13.5 Consents and Approvals. Consents and approvals contemplated by this
Agreement shall not be unreasonably delayed or withheld.
13.6 Governing Law. The interpretation and performance of this Agreement
shall be in accordance with the laws of the State of Florida. The Parties
agree that the appropriate venue for the filing of any judicial action shall
be in Palm Beach County, Florida.
13.7 Applicable Law.
A. This Agreement shall be subject to all of the rules,
regulations, and orders of any duly constituted federal or state regulatory
authorities having jurisdiction hereof. The Parties shall comply at all times
with all applicable federal, state, municipal, and other laws, ordinances and
regulations. FPUC and /or LWG will furnish any information or execute any
documents required by any duly constituted federal or state regulatory
authority in connection with the performance of this Agreement.
B. In the event this Agreement or any provisions herein shall be
found contrary to or in conflict with any such law, order, directive, rule or
regulation, the latter shall be deemed to control, but nothing in this
Agreement shall prevent either Party from contesting the validity of any such
law, order, directive, rule or regulation, nor shall anything in this Agreement
be construed to require either Party to waive its respective rights to assert
the lack of jurisdiction of any governmental agency other than the FPSC over
this Agreement or any Party thereof. In the event of such contestation, and
unless otherwise prohibited from doing so, FPUC shall continue to transport
and LWG shall continue to take Gas pursuant to the terms of this Agreement.
In the event any law, order, directive, rule, or regulation shall prevent
either party from performing hereunder, then neither party shall have any
obligation to the other during the period that performance is precluded.
13.8 Filing with FPSC. Not later than five (5) business days after
execution of this Agreement by both Parties, the Parties shall file this
Agreement with the FPSC for approval.
13.9 Entire Agreement. This Agreement supersedes any and all oral or
written agreements and understandings heretofore made relating to the subject
matters herein and constitutes the entire agreement and understanding of the
Parties relating to the subject matters herein.
13.10 Severability. If any provision of this Agreement becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision; provided, however, that if such severability materially changes the
economic benefits of this Agreement to either Party, the Parties shall
negotiate an equitable adjustment in the provisions of this Agreement in good
faith.
13.11 Survival of Obligations. LWG's obligation with respect to payments
and the Letter of Credit required under Section 4.8 of this Agreement, and
LWG's and FPUC's obligations with respect to indemnification under this
Agreement shall survive termination or expiration of this Agreement. LWG's
obligation with respect to the Letter of Credit required under Section 4.8 of
this Agreement shall survive assignment of this Agreement until a replacement
letter of credit on similar terms and conditions as the Letter of Credit is put
in place by LWG's assignee.
13.12 Legal Fees. In the event of litigation between the Parties arising
out of or in connection with this Agreement, then the reasonable attorneys'
fees and costs of the Party prevailing in such litigation shall be paid by the
other Party.
13.13. Amendments. No amendment or modification of the terms of this
Agreement shall be binding on FPUC or LWG unless reduced in writing and signed
by both Parties.
13.14 Counterparts. This Agreement may be executed in counterparts, and
each executed counterpart shall have the same force and effect as an original
instrument.
THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK
IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by
their respective officers thereunto duly authorized as of the date first stated
above.
WITNESS:
_______________________________ LAKE WORTH GENERATION, LLC
Name:
By: ________________________________
Title: _______________________________
WITNESS:
_________________________________ FLORIDA PUBLIC UTILITIES COMPANY
Name:
By: _______________________________
Title:______________________________
EXHIBIT A
COST OF SERVICE
EXHIBIT D
FORM OF LETTER OF CREDIT
(LETTERHEAD OF ISSUING BANK)
IRREVOCABLE LETTER OF CREDIT
NO. __________________
DATE _______________
BENEFICIARY: Florida Public Utilities Company
APPLICANT: Lake Worth Generation, LLC
Dear Beneficiary:
At the request of , and for the account of Lake Worth Generation, LLC,
("LWG") we hereby establish in your favor our Irrevocable Letter of Credit No.
_________ ("Letter of Credit") whereby, subject to the terms and conditions
contained herein, you hereby are irrevocably authorized to draw on us by your
draft or drafts at sight, an aggregate amount not to exceed
_____________________) (the "Stated Amount") , effective immediately and
expiring on the Expiration Date (as hereinafter defined). This Letter of
Credit is established pursuant to that certain Gas Transportation Agreement,
dated as of July 21, 2000, ("the Gas Transportation Agreement") between you and
LWG.
Funds under this Letter of Credit shall be available to you upon
presentation to us of (i) a Sight Draft drawn on us in the form of Exhibit A
hereto in the amount of such demand (which shall not exceed the Stated Amount)
and (ii) a Drawing Certificate in the form of Exhibit B hereto executed by your
authorized representative.
Presentation of any such Sight Draft and Drawing Certificate shall be
made at our office located at _________________________________________,
Attention: ___________________. We hereby agree that any Sight Draft drawn
under and in compliance with the terms of this Letter of Credit shall be duly
honored by us upon delivery of the above-specified Drawing Certificate, if
presented on or before the Expiration Date at the office specified above. If
a drawing is made by you hereunder at or prior to 3:00 p.m., Eastern Standard
Time, on a Business Day, and provided that such drawing and the documents
presented in connection therewith conform to the terms and conditions hereof,
payment shall be made to you of the amount specified, in immediately available
funds, on the immediately following Business Day by a transfer to your account
number __________________ maintained at ___________________________ or at such
other account at such other financial institution of which you notify us in
writing. As used herein, "Business Day" shall mean any day other than a
Saturday, Sunday or day or which banking institutions in the States
of _______________ or __________________ are authorized or required by law to
close.
This Letter of Credit shall expire and shall be delivered to us for
cancellation on the Expiration Date which shall be the earliest to occur of:
(a) ___(Insert expiration date of LC here)_____;
(b) the date you or your account have been paid the full Stated
Amount; or
(c) the date on which we have received your certificate to the effect
that you have received a substitute Letter of Credit complying with
the requirements of the Gas Transportation Agreement.
The Stated Amount of this Letter of Credit shall be modified in
accordance with the Gas Transportation Agreement on each anniversary of the
Commencement Date to reflect (i) the revised portion of the investment after
accumulated depreciation of the LWG Lateral, and (ii) the application of a
factor of 3% to the amount of $37,900 on a compound basis, all as set forth and
described in Section 4.8 of the Gas Transportation Agreement. It shall
automatically reduce on the date any demand for payment hereunder is honored,
in an amount equal to the amount of such payment. The Stated Amount of this
Letter of Credit, once reduced, shall not be reinstated.
This Letter of Credit shall be interpreted in accordance with the
Uniform Customs and Practice for Documentary Credits, 1993 Revision,
International Chamber of Commerce Publication No. 500, and any successor
thereto. This Letter of Credit shall be supplemented by the laws of the
State of______________, including (except as otherwise provided herein) the
Uniform Commercial Code as in effect in such State (to the extent that such
laws are consistent with this Letter of Credit). Communications with respect
to this Letter of Credit shall be in writing and shall be addressed to
(Issuing Bank) Attention: ____________________, specifically referring therein
to ____________________, Irrevocable Letter of Credit No.____________.
Only you or your permitted assigns under the Gas Transportation
Agreement may draw upon this Letter of Credit. Upon the payment to you and
your account ofthe full aggregate Stated Amount specified herein, we shall be
fully discharged of our obligations under this Letter of Credit.
The Letter of Credit sets forth in full the terms of our undertaking.
Reference in this Letter of Credit to other documents or instruments is for
identification purposes only and such reference shall not modify or affect the
terms hereof or cause such documents or instruments to be deemed incorporated
herein.
Very truly yours,
(Issuing Bank)
By: ________________________________
Authorized Signature
Attachment A to Letter of Credit
--------------------------------
SIGHT DRAFT
- -----------
Date: _____________________
TO: (Issuing Bank)
Attention:
Reference No.:
Re: (Issuing Bank), Irrevocable Letter of Credit No. ______________.
On Sight
Pay to the order of Florida Public Utilities Company or its assign(s)
in immediately available funds ___________________ U.S. Dollars ( U.S. $) on
the following business day, if this Sight Draft is presented prior to
3:00 p.m., _________________ time on the immediately preceding business day,
pursuant to Irrevocable Letter of Credit No. _________ of _________, by
transfer to account number at your office located at _______________________.
________________________________
By:_____________________________
Name:
Title:
Attachment B to Letter of Credit
--------------------------------
DRAWING CERTIFICATE
- -------------------
TO: (Issuing Bank)
Attention:
A. This is a Drawing Certificate under Irrevocable Letter of Credit
No. ___________ (the "Letter of Credit").
B. I, ______________, an authorized representative of Florida Public
Utilities Company, (the "Company"), do hereby certify to ________,
that:
C. In Accordance with the terms and conditions of (i) that certain Gas
Transportation Agreement dated as of July 21, 2000 between the
Company and LWG (the "Gas Transportation Agreement"), __________
Dollars ($_____________).
4. The amount demanded hereby represents the amount due and payable to
the Company by LWG as the result of a default by LWG on its
obligations under the Gas Transportation Agreement, failure to cure
the default and termination of the Agreement by FPUC pursuant to
its rights under the Gas Transportation Agreement.
E. This drawing is made pursuant to Irrevocable Letter of
Credit No. _______ issued by_____________________ to the Company.
IN WITNESS WHEREOF, The __________ has executed and delivered this
Drawing Certificate this _______ day of________, 20__.
_____________________________
Attest:________________________ By: ___________________________
Name:________________________ Name:__________________________
Title:_________________________ Title:_________________________
EXHIBIT C
RELEASE TO COMMENCE CONSTRUCTION
TO: Division Manager - West Palm Beach
Florida Public Utilities Company
401 South Dixie Highway
West Palm Beach, FL 33401
Pursuant to Section 3.1 of the Gas Transportation Agreement between
Florida Public Utilities Company ("FPUC") and Lake Worth Generation, LLC
("LWG"), dated July 21, 2000, LWG hereby confirms that the Conditions Precedent
under Section 12.2(1) of the Agreement has been achieved and hereby releases
FPUC to commence construction of the LWG Lateral, as defined in Article 1 and
described in Exhibit B2 to said Agreement.
_____________________________
Lake Worth Generation, LLC
By: __________________________
Date: ________________________
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 333-63532 on Form S-3 and Registration Statement No. 333-63942 on Form S-8
of Florida Public Utilities Company, of our report dated February 25, 2002,
appearing in this Annual Report on Form 10-K of Florida Public Utilities
Company for the year ended December 31, 2001.
DELOITTE & TOUCHE LLP
West Palm Beach, Florida
March 15, 2002