Exhibit 10.22
COST ALLOCATION AGREEMENT
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AGREEMENT made effective as of October 1, 1996 by and between ENERGYNORTH,
INC., a New Hampshire corporation (EnergyNorth); ENERGYNORTH NATURAL GAS, INC.,
a New Hampshire corporation (ENGI); ENERGYNORTH PROPANE, INC., a New Hampshire
corporation (Propane); ENERGYNORTH REALTY, INC., a New Hampshire corporation
(Realty); ENI RESOURCES, INC., a New Hampshire corporation (Resources); and
BROKEN BRIDGE CORPORATION, a New Hampshire corporation (BBC). (ENGI, Propane,
Realty, Resources and BBC are collectively referred to as the Subsidiaries.)
WHEREAS, EnergyNorth is the owner of one hundred percent (100%) of the
issued and outstanding shares of common stock of each of the Subsidiaries; and,
WHEREAS, EnergyNorth is fully equipped and staffed to furnish centralized
services to the Subsidiaries related to the problems and operations of the
Subsidiaries; and,
WHEREAS, EnergyNorth's operations are for the exclusive benefit of any or
all of the Subsidiaries; and,
WHEREAS, the purchase of goods or services by the Subsidiaries on a
centralized basis will enable the Subsidiaries to realize substantial economic
and other benefits through the efficient use of personnel and equipment,
coordination of analysis and planning and access to specialized personnel and
equipment,
NOW THEREFORE, in consideration of the mutual agreements set forth below,
the parties to this Agreement hereby agree (i) that EnergyNorth will render to
or
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procure for all or any of them as each of them requires, and each of the
Subsidiaries will purchase at EnergyNorth's cost, the administrative,
supervisory and various other goods and services hereinafter described; and (ii)
that all operating costs of EnergyNorth and the costs of such goods and services
rendered or procured by any of the Subsidiaries wholly or partially for the
benefit of EnergyNorth or one or more of the other Subsidiaries, will be
apportioned among the Subsidiaries as specified below.
I. GOODS AND SERVICES PROVIDED BY ENERGYNORTH
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EnergyNorth agrees to furnish or procure the following services and such
other goods or services as the parties to this Agreement may from time to time
request. This Agreement shall not be construed to require EnergyNorth to hire
personnel which, in its judgment, are unnecessary, nor to require any party to
this Agreement to utilize goods or services it does not require. Any subsidiary
which does not use the goods and services of EnergyNorth shall not be assessed
costs therefor as provided by this Agreement. (By way of example only, Propane
does not require rate services and therefore will not allocated any expenses
associated therewith.) EnergyNorth shall not be obligated to perform any
services without reasonable notice.
A. Accounting and Auditing
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EnergyNorth will advise and assist in accounting and auditing matters
and the formulation of accounting practices and methods of procedure,
including but not limited to the maintenance of general books and the
preparation and furnishing of annual and interim financial and related
reports as well as the coordination of the annual examination by
independent accountants.
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B. Forecasts
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EnergyNorth will advise and assist in the preparation of the forecast
and forecast review and control.
C. Corporate Records
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EnergyNorth will advise and assist in the preparation of corporate
records including, as necessary, the preparation of stockholders' and
directors' votes and resolutions, the filing with governmental authorities
of all documents necessary for the continuance of the corporate existence
of the Subsidiaries and the maintenance of minutes of the meetings of their
stockholders and directors.
D. Regulatory Matters
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EnergyNorth will advise and assist in all regulatory matters.
E. Human Resources
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EnergyNorth will advise and assist with employee relations matters
including but limited to employee recruitment, placement, training,
compensation, safety, labor relations, employee benefits and health and
welfare.
F. Public Relations
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EnergyNorth will advise and assist in matters relating to the
dissemination of information to customers, employees, investors and other
interested groups and to the public at large including the preparation, as
necessary, of booklets, press releases and other materials.
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G. Insurance
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EnergyNorth will advise and assist in general insurance matters
including the procurement and administration of insurance policies.
H. Tax Matters
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EnergyNorth will advise and assist in connection with the preparation
and filing of tax returns and in connection with other tax compliance
matters.
I. Financial Services
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EnergyNorth will advise and assist in financial matters including but
not limited to cash management, loan procurement, bank relations, issuance
of securities and financing of capital requirements.
J. Engineering
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EnergyNorth will advise and assist with engineering plans for
replacement and/or enlargement of existing facilities to meet the demands
for service and daily plant operations.
K. Gas Purchases and Transportation Contracts
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EnergyNorth will advise and assist in negotiations for all gas and
transportation services required to meet customer demands.
L. Construction
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EnergyNorth will advise and assist in construction matters including
but not limited to the standardization, selection and implementation of
equipment,
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materials and corrosion controls; the selection of contractors and training
programs; and providing advice and assistance for compliance with all
governmental regulations.
M. Operations
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EnergyNorth will advise and assist with the standardization and
implementation of practices where appropriate, including but not limited to
employee training and safety procedures and customer service. EnergyNorth
will also advise and assist in matters relating to distribution and
production, including the best utilization of gas supplies.
N. Rates
-----
EnergyNorth will advise and assist in all rate and other regulatory
matters before the New Hampshire Public Utilities Commission, the Federal
Energy Regulatory Commission or other entities with regulatory jurisdiction
over any of the Subsidiaries.
O. Purchasing
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EnergyNorth will advise and assist with the standardization, purchase
and storage of all materials and supplies, and will purchase such materials
and supplies as appropriate to effectuate this Agreement.
P. Data Processing
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EnergyNorth will advise and assist in the selection and use of data
processing equipment, systems development and design, training, conversion
and planning.
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Q. Marketing
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EnergyNorth will advise and assist in the policy development and
direction of marketing, including but not limited to training; specialized
residential, commercial and industrial services; and assistance in pricing
services.
R. Executive and Administrative
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EnergyNorth will advise and assist with management and administration
of all relevant aspects of the business.
S. Miscellaneous
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EnergyNorth will advise and assist with any other administrative or
supervisory services not described above and will procure such other goods
and services as may be required for the proper management and operation of
the Subsidiaries.
II. COMPENSATION
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The parties hereto agree that all activities undertaken, and all costs and
expenses incurred by EnergyNorth, are undertaken and incurred for the exclusive
benefit of the Subsidiaries or any combination of the Subsidiaries. The parties
further agree that certain costs and expenses incurred by one of the
Subsidiaries may exclusively or partially benefit one or more of the other
Subsidiaries. In order to fully compensate EnergyNorth for all of its costs and
expenses, and in order to compensate
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the Subsidiaries for costs and expenses incurred by them that exclusively or
partially benefit one or more of the other Subsidiaries, the parties agree as
follows:
A. Non-allocable costs and expenses
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All costs and expenses of any kind incurred by EnergyNorth, and all
significant costs (other than de minimis costs and expenses) incurred by
one of the Subsidiaries that benefits another one of the Subsidiaries (to
the extent that such costs and expenses can be identified as having been
incurred for the exclusive benefit of such Subsidiaries) will be charged
directly to the benefiting subsidiary if that subsidiary benefits
exclusively from such cost or expense. Costs and expenses that exclusively
benefit a subsidiary and which shall be allocated directly to the
benefiting subsidiary shall include personnel expense that is identified
through time sheets, lease and other office expense associated with the
personnel whose time is allocated according to time sheets, and all
salaries, wages, benefits and overhead expenses associated with such
personnel.
B. Allocable costs and expenses
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Except where the parties to this Agreement determine that such an
allocation would be inequitable, all costs and expenses of any kind
incurred by EnergyNorth, and all costs and expenses (other than de minimis
costs and expenses) incurred by any of the Subsidiaries that benefit one
of the other Subsidiaries, to the extent that such costs and expenses
cannot be attributed exclusively to any one of the Subsidiaries pursuant to
paragraph II.A. above, will be allocated and charged to the Subsidiaries
according to the following formula:
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1. A subsidiary's allocation shall be the average of the following
three ratios. Each of the three ratios shall be rounded to the
nearest tenth of one percent:
x. Xxxxx investment in fixed assets of the subsidiary to the
total of all Subsidiaries; provided however, that for
Propane "gross investment in fixed assets" shall be
construed to include the gross value of the property
transferred to it as of June 30, 1987; and,
b. Total number of customers of the subsidiary, calculated as
of September 30 of the prior fiscal year to the total for
all of the Subsidiaries; and,
c. Net income of the subsidiary to the total for all the
Subsidiaries times two.
2. The final allocation percentage for each subsidiary will be
rounded to the nearest whole percent.
3. Each subsidiary's allocation percentage, as described above,
shall be updated annually, effective October 1, based on ratios
calculated by using the preceding fiscal year's actual gross
investment in fixed assets, actual total number of customers as
of September 30, and actual net income.
C. Calculation and recording of costs and expenses
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Without limiting those costs and expenses to be allocated according to
the formula described in paragraph II.B.1 above, and by way of example
only, the following costs and expenses, to the extent they do not
exclusively benefit a specific subsidiary or Subsidiaries, will be
allocated pursuant to the three-part formula:
1. Insurance premiums or other fees or costs
2. Legal and professional fees and costs
3. Computer and data processing costs
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4. All other administrative or operating costs
D. Notwithstanding the above, any of the Subsidiaries that does not
benefit from a cost or expense incurred by EnergyNorth shall not be
assessed a charge therefor. (By way of example only, EnergyNorth does not
incur New Hampshire Public Utilities Commission regulatory commission costs
and expenses on behalf of Propane, and therefore Propane will not be
allocated any expenses associated therewith.)
III. ADDITION OF NEW PARTIES
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The parties agree that the cost allocation methodology set forth in this
Agreement shall apply to each of them and to any subsidiary of EnergyNorth that
may be formed in the future.
IV. EFFECTIVE DATE AND TERMINATION
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A. This Agreement shall be effective as of October 1, 1996, subject to
any required regulatory approvals.
B. This Agreement may be terminated, upon not less than sixty (60) days
written notice, by any party; provided, however, that this Agreement shall be
terminated automatically if it shall become invalid or illegal under any state
law or under any rule, regulation or order of any other state body having
jurisdiction and shall be modified to the extent that performance under this
Agreement may conflict with any rule, regulation or order of any governmental
body having jurisdiction.
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IN WITNESS WHEREOF, the parties hereof have caused this Agreement to be
executed effective as of the date and year first above written.
ENERGYNORTH, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxx
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Title: Chief Financial Officer
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ENERGYNORTH NATURAL GAS, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxx
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Title: Chief Financial Officer
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ENERGYNORTH PROPANE, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxx
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Title: Chief Financial Officer
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ENERGYNORTH REALTY, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxx
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Title: Chief Financial Officer
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ENI RESOURCES, INC.
By: /s/ Xxxxxxxx X. Xxxxxxxx
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Title: Chief Financial Officer
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BROKEN BRIDGE CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxxxx
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Title: Chief Financial Officer
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XXXXX XX XXX XXXXXXXXX
XXXXXX XX XXXXXXXXX
Xx this 11th day of April, 1997, Xxxxxxxx X. Xxxxxxxx, known to me or
satisfactorily proven to be such person, appeared before me and swore under oath
that the attached Cost Allocation Agreement is a true and complete copy of the
original.
/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx, Notary Public
My Commission Expires 9/12/2001
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