<PAGE> 1
File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
(the Act)
NEW ENGLAND ELECTRIC SYSTEM (NEES)
MASSACHUSETTS ELECTRIC COMPANY (Mass. Electric)
THE NARRAGANSETT ELECTRIC COMPANY (Narragansett)
NEW ENGLAND POWER COMPANY (Power Company)
(Names of companies filing this statement)
25 Research Drive, Westborough, Massachusetts 01582
(Address of principal executive offices)
NEW ENGLAND ELECTRIC SYSTEM
(Name of top registered holding company parent
of the participating companies herein)
Michael E. Jesanis Kirk L. Ramsauer
Vice President and Treasurer Associate General Counsel
25 Research Drive 25 Research Drive
Westborough, MA 01582 Westborough, MA 01582
(Names and addresses of agents for service)
<PAGE> 2
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS
THE COMPANIES
New England Electric System (NEES) is a registered holding company under
the Public Utility Holding Company Act of 1935 (1935 Act). New England Power
Company (the Power Company), Massachusetts Electric Company (Mass. Electric),
and The Narragansett Electric Company (Narragansett) are wholly owned
subsidiaries of NEES and are hereinafter referred to as the Subsidiaries.
NEES and the Subsidiaries seek authorization for the solicitation of
proxies for Special Subsidiary Stockholder Meetings, the amendment of the
corporate documents providing for the rights of certain Subsidiary preferred
stocks and tender offers for Subsidiary preferred stock.
The Power Company, a Massachusetts corporation, is qualified to do
business as a foreign corporation in the states of New Hampshire, Vermont,
Maine, Connecticut, and Rhode Island, inter alia. The Power Company's business
is principally generating, purchasing, transmitting, and selling electric energy
in wholesale quantities. In 1996, 95% of the Power Company's all-requirement
revenue from the sale of electricity was derived from sales for resale to
affiliated companies and 5% from sales for resale to municipal and other
utilities. The Power Company's equity consists of 6,449,896 shares of common
stock, $100 par value, 75,020 shares of 6% Cumulative Preferred Stock, $100 par
value, and 321,640 shares of Dividend Series Preferred Stock, $100 par value.
The Dividend Series Preferred Stock is issued in four series as follows:
<TABLE>
<CAPTION>
Series Shares Authorized
------ -----------------
<S> <C> <C>
4.56% 100,000
4.60% 80,140
4.64% 41,500
6.08% 100,000
</TABLE>
There is also authorized a class of Preferred Stock - Cumulative, $25 par value,
of which there are no series currently outstanding. All of the common stock is
owned by NEES; all of the preferred stock is owned by the public and traded in
over-the-counter markets. The common stock and 6% preferred share general voting
rights. The other preferred have limited voting rights.
Mass. Electric is a retail electric utility incorporated and doing
business solely in Massachusetts. Electric service is provided to approximately
960,000 customers in 146 cities and towns having a population of approximately
2,160,000. Mass. Electric's equity consists of 2,398,111 shares of common stock,
$25 par value, 600,000 shares of Preferred Stock - Cumulative, $25 par value,
and 350,000 shares of Dividend Series Preferred Stock, $100 par value. The
preferred stock is issued in four series as follows:
<TABLE>
<CAPTION>
Series Shares Authorized
------ -----------------
<S> <C> <C>
Preferred Stock - Cumulative
6.84% 600,000
Dividend Series
4.44% 75,000
4.76% 75,000
6.99% 200,000
</TABLE>
<PAGE> 3
All of the common stock is owned by NEES. All of the preferred stock is owned by
the public and is traded in over-the-counter markets. The preferred have only
limited voting rights.
Narragansett is an electric utility incorporated and doing business solely
in Rhode Island. Its business is the distribution and sale of electricity at
retail. Electric service is provided to approximately 330,000 customers in 27
cities and towns having a population of approximately 725,000. Narragansett's
equity consists of 1,132,487 shares of common stock, $50 par value, and 730,000
shares of Cumulative Preferred Stock, $50 par value. The preferred stock is
issued in three series as follows:
<TABLE>
<CAPTION>
Series Shares Authorized
------ -----------------
<S> <C> <C>
4.50% 180,000
4.64% 150,000
6.95% 400,000
</TABLE>
All of the common stock is owned by NEES. All of the preferred stock is owned by
the public and is traded in over-the-counter markets. The preferred have only
limited voting rights.
THE SOLICITATIONS
The Power Company
The Power Company proposes to solicit proxies from the holders of its
Dividend Series Preferred Stock and common stock and to amend the Power Company
Provisions (as defined below) in order to eliminate the provision restricting
the ability of the Power Company to incur certain unsecured indebtedness.
In October 1996, the NEES Companies announced their intention to divest
their generation business. (The separate sale of the oil and gas properties by
the Power Company's affiliate, New England Energy Incorporated (NEEI), is
necessary in connection therewith.) This decision was due to a combination of
factors relating to the restructuring of the electric utility industry. On
August 6, 1997, the NEES Companies reached an agreement to sell the non-nuclear
generation business to USGen New England, Inc. for approximately $1.65 billion,
subject to various adjustments. In order to facilitate this transition to a
competitive electric industry, the Power Company may need -- prior to the
completion of the sale of its generating plants -- to buy out existing contracts
with independent power producers, or to pay the difference between monies owed
by NEEI and the proceeds from the sale of NEEI's remaining oil and gas
properties. The exact dollar amount of these obligations is not yet
determinable, but they may be significant. Given the changing nature of the
company, putting in place long-term financial instruments to provide the
necessary moneys may not be a cost-effective procedure. Therefore, the Power
Company believes it must increase its flexibility in meeting its cash needs.
The Power Company will substantially reduce its capitalization and retire
its outstanding General and Refunding Mortgage bonds through call or defeasance.
The Power Company anticipates issuing its new long-term debt in the form of
debentures, which are unsecured. Absent the Proposed Amendment, these debentures
would not be permitted by the Provisions, without prior approval by the
preferred shareholders.
If the Proposed Amendment is adopted, the Power Company will have
increased flexibility (i) to choose among different types of debt financing and
(ii) to finance projects using the most cost effective means. The availability
and
<PAGE> 4
flexibility of unsecured debt is necessary, in the estimation of NEES and the
Power Company, to take full advantage of changing conditions in the securities
markets.
Mass. Electric
Mass. Electric proposes to solicit proxies from the holders of its
preferred stock and common stock and to amend the Mass. Electric Provisions (as
defined below) in order to eliminate the provision restricting the ability of
Mass. Electric to incur certain unsecured indebtedness.
Although Mass. Electric will not be divesting itself of significant assets
as is the Power Company, it believes that the prudent use of unsecured debt is
important to the effective financial management of its business. Unsecured debt
provides flexibility in meeting temporary fluctuations in cash requirements, can
be used when unfavorable conditions prevail in the market for long-term capital,
acts as a bridge between issues of permanent capital, and may present more
flexibility in terms and conditions than secured debt. If the Proposed Amendment
is adopted, Mass. Electric will have increased flexibility (i) to choose among
different types of debt financing and (ii) to finance projects using the most
cost effective means. The availability and flexibility of unsecured debt is
necessary to take full advantage of changing conditions in the securities and
financial markets.
In addition, although Mass. Electric's earnings currently are sufficient
to meet the earnings coverage tests that must be satisfied before issuing
additional first mortgage bonds and preferred stock, other utilities have been
unable to issue mortgage bonds during certain periods because of restrictive
covenants in their mortgages. Any inability by Mass. Electric to issue first
mortgage bonds or preferred stock in the future, combined with the inability to
issue additional unsecured debt, would limit its financing options to more
costly securities, including additional common equity.
Narragansett
Narragansett proposes to solicit proxies from the holders of its preferred
stock and common stock and to amend the Narragansett Provisions (as defined
below) in order to eliminate the provision restricting the ability of
Narragansett to incur certain unsecured indebtedness.
Although Narragansett's participation in the divestiture of System
generation will not have an impact on it of the magnitude of the Power
Company's, Narragansett believes that the prudent use of unsecured debt is
important to the effective financial management of its business. Unsecured debt
provides flexibility in meeting temporary fluctuations in cash requirements, can
be used when unfavorable conditions prevail in the market for long-term capital,
acts as a bridge between issues of permanent capital, and may present more
flexibility in terms and conditions than secured debt. If the Proposed Amendment
is adopted, Narragansett will have increased flexibility (i) to choose among
different types of debt financing and (ii) to finance projects using the most
cost effective means. The availability and flexibility of unsecured debt is
necessary to take full advantage of changing conditions in the securities and
financial markets.
In addition, although Narragansett's earnings currently are sufficient to
meet the earnings coverage tests that must be satisfied before issuing
additional first mortgage bonds and preferred stock, other utilities have been
unable to issue mortgage bonds during certain periods because of restrictive
covenants in their mortgages. Any inability by Narragansett to issue first
mortgage bonds or preferred stock in the future, combined with the inability to
issue additional unsecured debt, would limit its financing options to more
costly securities, including additional common equity.
<PAGE> 5
Details of Power Company Proxy Solicitation
The Power Company proposes to solicit proxies from the holders of its
outstanding shares of Dividend Series Preferred Stock and common stock (the
Proxy Solicitation) for use at a special meeting of its stockholders (the
Special Meeting) to consider a proposed amendment to the Power Company's By-Laws
and Articles of Organization (the Power Company Provisions) to eliminate Article
I, Section 4E(4), which restricts the amount of unsecured debt issuable by the
Power Company (the Proposed Amendment). If the Proposed Amendment is adopted,
the Power Company intends to make a special cash payment to each Dividend Series
Preferred Stockholder who voted his or her shares in favor of the Proposed
Amendment, provided that such shares have not been tendered pursuant to the
concurrent cash tender offer described below.
No proxies will be solicited from the holders of the 6% cumulative
Preferred.
The Power Company has outstanding 6,449,896 shares of common stock, $100
par value, all of which are held by NEES. The Power Company common stock shares
general voting rights with the 6% Cumulative Preferred, $100 par value, of which
there are 75,020 shares outstanding. The Power Company's other outstanding
preferred stock consists of 321,640 shares of Dividend Series Preferred Stock,
par value $100 per share, issued in four series, all of which are traded
over-the-counter. The Dividend Series Preferred Stock does not have general
voting rights but has limited rights. There is also authorized a class of
Preferred Stock - Cumulative, $25 par value, of which there are no series
currently outstanding. The Proposed Amendment will require the approval of 2/3
of the Power Company Dividend Series Preferred Stock voting as a class and the
approval of 2/3 of the Power Company common and 6% Cumulative Preferred Stock
voting as a class. The common stock and the preferred stock are entitled to one
vote per share on the matters described herein and constitute the Power
Company's only outstanding securities entitled to vote on the Proposed
Amendment.
Article 1, Section 4E(4) of the Power Company Provisions provides that,
without a vote of a majority of the outstanding Dividend Series Preferred Stock
and Preferred Stock - Cumulative (voting as a single class), the company will
not:
issue any unsecured notes, debentures or other securities representing
unsecured indebtedness, or assume any such unsecured securities, for
purposes other than the redemption or other retirement of outstanding
shares of all series of the Dividend Series Preferred Stock and the
Preferred Stock - Cumulative, if immediately after such issue or assumption
the total principal amount of all unsecured notes, debentures or other
securities representing unsecured indebtedness issued or assumed by the
corporation and then outstanding (including unsecured securities then to be
issued or assumed but excluding unsecured securities theretofore so voted
for by holders of Dividend Series Preferred Stock and Preferred Stock -
Cumulative) (the "Unsecured Indebtedness") would exceed twenty per cent
(20%) of the aggregate of (i) the total principal amount of all bonds and
other securities representing secured indebtedness issued or assumed by the
corporation and then outstanding and (ii) the capital, premium and retained
earnings of the corporation as then stated on the books of account of the
corporation; provided, however, that after July 1, 1976, short-term
unsecured indebtedness shall not exceed ten per cent (10%) of such
aggregate of (i) and (ii) above; and provided, further, that after July 1,
1976, in the event unsecured securities representing short-term unsecured
indebtedness (excluding unsecured securities theretofore so voted for by
the holders of dividend
<PAGE> 6
Series Preferred Stock and Preferred Stock - Cumulative) exceed ten per
cent (10%) of such aggregate of (i) and (ii) above, no unsecured securities
representing unsecured indebtedness shall be issued or assumed (except for
the purpose of redemption or other retirement of outstanding shares of all
series of the Dividend Series Preferred Stock and the Preferred Stock -
Cumulative) unless such ratio of short-term unsecured indebtedness
immediately after such issue or assumption is to be not over ten per cent
(10%) of such aggregate of (i) and (ii) above. "Short-term unsecured
indebtedness" as used herein means unsecured indebtedness of an original
maturity of less than ten years and "long-term unsecured indebtedness"
means unsecured indebtedness of an original maturity of ten years or more.
For the purposes hereof, when any long-term unsecured indebtedness becomes
due within ten years, or when any long-term unsecured indebtedness is to be
retired within ten years through a sinking fund or otherwise, such
long-term unsecured indebtedness, in each case, shall be considered
short-term unsecured indebtedness; provided, however, that any long-term
unsecured indebtedness of a single maturity (except as provided above in
respect of a sinking fund therefor), or the last maturity of any long-term
unsecured indebtedness of serial maturities, shall not be considered
short-term unsecured indebtedness until due within five years.
The Power Company proposes to delete the above section in its entirety;
conforming changes to cross references elsewhere in the Provisions will also be
made.
If the Proposed Amendment is adopted, the Power Company intends to make a
special cash payment of $1.00 per share (each, a Cash Payment) to each Power
Company Dividend Series Preferred Stockholder of any Series whose shares of the
Dividend Series Preferred Stock are properly voted at the Special Meeting (in
person by ballot or by proxy) in favor of the Proposed Amendment, provided that
such Shares are not tendered pursuant to the Offer (described below). The Power
Company will disburse the Cash Payments out of its general funds, promptly after
adoption of the Power Company Proposed Amendment.
Details of Mass. Electric Proxy Solicitation
Mass. Electric proposes to solicit proxies from the holders of its
outstanding shares of Dividend Series Preferred Stock and common stock (the
Proxy Solicitation) for use at a special meeting of its stockholders (the
Special Meeting) to consider a proposed amendment to Mass. Electric's By-Laws
and Articles of Organization (the Mass. Electric Provisions) to eliminate
Article I, Section 4E(4), which restricts the amount of unsecured debt issuable
by Mass. Electric (the Proposed Amendment). If the Proposed Amendment is
adopted, Mass. Electric intends to make a special cash payment to each Dividend
Series Preferred Stockholder who voted his or her shares in favor of the
Proposed Amendment, provided that such shares have not been tendered pursuant to
the concurrent cash tender offer described below.
Mass. Electric has outstanding 2,398,111 shares of common stock, $25 par
value, all of which are held by NEES. Mass. Electric's outstanding preferred
stock consists of 350,000 shares of Dividend Series Preferred Stock, par value
$100 per share, issued in three series and 600,000 shares of Preferred Stock
Cumulative, $25 par value, of which there is one series outstanding, all of
which are traded over-the-counter. The preferred stock does not have general
voting rights but has limited rights. The Proposed Amendment will require the
approval of 2/3 of the Mass. Electric preferred stock voting as a class and the
approval of 2/3 of the Mass. Electric common voting as a class. The common stock
and the Dividend Series Preferred Stock are entitled to one vote per share and
the Preferred Stock - Cumulative is entitled to a quarter vote per share on the
matters described herein and constitute Mass. Electric's only outstanding
securities entitled to vote on the proposed amendment.
<PAGE> 7
Article XVIII, Section 4E(4) of the Mass. Electric Provisions provides
that, without a vote of a majority of the outstanding Dividend Series Preferred
Stock and Preferred Stock - Cumulative (voting as a single class), the company
will not:
issue or assume any unsecured notes, debentures or other securities
representing unsecured indebtedness for purposes other than (x) the
refunding of outstanding unsecured indebtedness theretofore issued or
assumed by the corporation resulting in maturities later than the maturity
of the indebtedness being refunded or (y) the reacquisition, redemption or
other retirement of any indebtedness which reacquisition, redemption or
other retirement has been authorized under the provisions of the Public
Utility Holding company Act of 1935, if, immediately after such issue or
assumption, the total principal amount of all unsecured notes, debentures
or other securities representing both long and short-term unsecured
indebtedness issued or assumed by the corporation and then to be
outstanding (but excluding unsecured indebtedness theretofore so voted for
by holders of Preferred Stock and Preferred Stock Cumulative) would exceed
twenty per cent (20%) of total capitalization, or if, immediately after
such issue or assumption, such short-term unsecured indebtedness issued or
assumed by the corporation after September 30, 1998 and then to be
outstanding (but excluding short-term unsecured indebtedness theretofore so
voted for by holders of Preferred Stock and Preferred Stock - Cumulative)
would exceed ten per cent (10%) of total capitalization; provided, however,
that in the event such short-term unsecured indebtedness (but excluding
short-term unsecured indebtedness theretofore so voted for by holders of
Preferred Stock and Preferred Stock Cumulative) exceeds such latter limit,
no unsecured securities representing unsecured indebtedness shall be issued
or assumed (except for the purposes specified in clauses (x) and (y) above)
unless such ratio of short-term unsecured indebtedness immediately after
such issue or assumption is not in excess of such limit.
"Short-term unsecured indebtedness" as used in this subsection E(4)
means unsecured indebtedness of an original maturity of less than ten years
and "long-term unsecured indebtedness" means unsecured indebtedness of
an original maturity of ten years or more. For the purposes hereof, when
any long-term unsecured indebtedness becomes due within five years, or when
any long-term unsecured indebtedness is to be retired within five years
through a sinking fund or otherwise, such long-term unsecured indebtedness,
in each case, shall be considered short-term unsecured indebtedness.
"Total capitalization" as used in this subsection E(4) means the aggregate
of (i) the total principal amount of all bonds and other securities
representing secured indebtedness issued or assumed by the
corporation and then outstanding and (ii) the capital, premium and
surplus of the corporation as then stated on the books of account of the
corporation.
Mass. Electric proposes to delete the above section in its entirety;
conforming changes to cross references elsewhere in the Provisions will also be
made.
If the Proposed Amendment is adopted, Mass. Electric intends to make a
special cash payment of $1.00 per share to each Mass. Electric Dividend Series
Preferred Stockholder of any Series and 25 cents per share to the Preferred
Stock - Cumulative holders whose shares are properly voted at the Special
Meeting (in person by ballot or by proxy) in favor of the Proposed Amendment,
provided that such Shares are not tendered pursuant to the Offer (described
below). The payments are each referred to as a Cash Payment. Mass. Electric will
disburse the Cash Payments out of its general funds, promptly after adoption of
the Mass. Electric Proposed Amendment.
<PAGE> 8
Details of Narragansett Proxy Solicitation
Narragasett proposes to solicit proxies from the holders of its
outstanding shares of Preferred Stock and common stock (the Proxy Solicitation)
for use at a special meeting of its stockholders (the Special Meeting) to
consider a proposed amendment to Narragansett's Preferred Stock Provisions (the
Narragansett Provisions) to delete subparagraph 10(d) which restricts the amount
of unsecured debt issuable by Narragansett (the Proposed Amendment). If the
Proposed Amendment is adopted, Narragansett intends to make a special cash
payment to each Preferred Stockholder who voted his or her shares in favor of
the Proposed Amendment, provided that such shares have not been tendered
pursuant to the concurrent cash tender offer described below.
Narragansett has outstanding 1,132,487 shares of common stock, $50 par
value, all of which are held by NEES. Narragansett's outstanding preferred stock
consists of 730,000 shares of Cumulative Preferred Stock, $50 par value, issued
in three series, all of which are traded over-the-counter. The preferred stock
does not have general voting rights but has limited rights. The Proposed
Amendment will require the approval of 2/3 of the preferred stock voting as a
class, the approval of 75% of the preferred shares present or represented at the
meeting, and the approval of a majority of the Narragansett common voting as a
class. The common stock and the preferred stock are entitled to one vote per
share on the matters described herein and constitute Narragansett's only
outstanding securities entitled to vote on the Proposed Amendment.
Section 10(d) of the Preferred Stock Provisions adopted at a special
meeting of the common stockholders and directors on March 4, 1971, and March 15,
1971, respectively, (the Narragansett Provisions) provides that, without a vote
of a majority of the outstanding preferred stock (voting as a single class), the
company will not:
issue any unsecured notes, debentures or other securities representing
unsecured indebtedness, or assume any such unsecured securities, for
purposes other than the refunding of outstanding unsecured securities
theretofore issued or assumed by the Company resulting in equal or longer
maturities or the redemption or other retirement of all outstanding shares
of the Preferred Stock, if, immediately after such issue or assumption, the
total principal amount of all unsecured notes, debentures or other
securities representing unsecured indebtedness issued or assumed by the
Company and then outstanding (including the unsecured securities then to be
issued or assumed) but excluding unsecured securities theretofore so
consented to by holders of Preferred Stock, would exceed ten per cent (10%)
of the aggregate of (i) the total principal amount of all bonds and other
securities representing secured indebtedness issued or assumed by the
Company and then outstanding and (ii) the capital and surplus of the
Company as then stated on the books of account of the Company.
Narragansett proposes to delete the above section in its entirety.
If the Proposed Amendment is adopted, Narragansett intends to make a
special cash payment of 50 cents per share (each, a Cash Payment) to each
Narragansett Preferred Stockholder of any Series whose shares are properly voted
at the Special Meeting (in person by ballot or by proxy) in favor of the
Proposed Amendment, provided that such Shares are not tendered pursuant to the
Offer (described below). Narragansett will disburse the Cash Payments out of its
general funds, promptly after adoption of the Narragansett Proposed Amendment.
ELECTION PROCEDURES
<PAGE> 9
The Power Company
As noted, adoption of the Proposed Amendment requires the affirmative
votes of the holders of not less than two-thirds of the outstanding shares of
each of (1) the Dividend Series Preferred Stock of all Series, voting together
as one class, and (2) the Common Stock and 6% Cumulative Preferred voting as a
class. NEES will vote its shares of the Power Company common stock, which
represents over 98% of the shares with general voting rights, in favor of the
Proposed Amendment; therefore, no proxies will be solicited from the holders of
the 6% Cumulative Preferred. Abstentions and broker non-votes in respect of the
Proposed Amendment will have the effect of votes against the Proposed Amendment.
The Power Company has engaged Georgeson & Company Inc. (Georgeson) to act
as information agent in connection with the Proxy Solicitations for a fee and
reimbursement of reasonable out-of-pocket expenses expected not to exceed
approximately $10,000.
Mass. Electric
As noted, adoption of the Proposed Amendment requires the affirmative
votes of not less than two-thirds of the outstanding shares of each of (1) the
Preferred Stock - Cumulative and Dividend Series Preferred Stock of all Series,
voting together as one class, and (2) the common stock voting as a class. NEES
will vote its shares of the Mass. Electric Common Stock in favor of the Proposed
Amendment. Abstentions and broker non-votes in respect of the Proposed Amendment
will have the effect of votes against the Proposed Amendment.
Mass. Electric has engaged Georgeson to act as information agent in
connection with the Proxy Solicitations for a fee and reimbursement of
reasonable out-of-pocket expenses expected not to exceed approximately $10,000.
Narragansett
As noted, adoption of the Proposed Amendment requires the affirmative
votes of the holders of (1) not less than 2/3 of the outstanding shares of each
of the preferred stock of all Series, voting together as one class, (2) 75% of
the preferred shares present or represented at the meeting, and (3) a majority
of the common stock. NEES will vote its shares of the Narragansett Common Stock
in favor of the Proposed Amendment. Abstentions and broker non-votes in respect
of the Proposed Amendment will have the effect of votes against the Proposed
Amendment.
Narragansett has engaged Georgeson to act as information agent in
connection with the Proxy Solicitations for a fee and reimbursement of
reasonable out-of-pocket expenses expected not to exceed approximately $10,000.
THE TENDER OFFERS
Concurrently with or shortly before the Proxy Solicitation for a
Subsidiary, NEES may make an offer (the Offer) to the holders of that
Subsidiary's outstanding preferred stock of each series to acquire for cash any
and all shares thereof, at cash purchase prices which NEES anticipates will
include a market premium for each series. NEES anticipates that each such Offer
for each series of preferred stock will be scheduled to expire at 5:00 P.M.
(Eastern Standard time) on the date of the applicable Special Meeting (the
Expiration Date), unless such Offer is extended. A condition to an Offer will be
that preferred stockholders who tender their shares pursuant to the Offer vote
in favor of or consent to the applicable Proposed Amendment. In that event, any
shares not voted in favor of the Proposed Amendment will be deemed withdrawn and
<PAGE> 10
not validly tendered. (As noted below, proxies need not be solicited from the 6%
Cumulative Preferred of the Power Company.) Consummation of the Offer may be
contingent upon the Proposed Amendment being approved and adopted at the
applicable Special Meeting currently scheduled for December 12, 1997.
Benefits of the Offer
NEES and the Subsidiaries believe that the purchase of the Shares at this
time represents an attractive economic opportunity that will benefit NEES, its
shareholders, and its Subsidiaries. In addition, the Offer gives Preferred
Shareholders the opportunity to sell their Shares at a price which NEES believes
to be a premium to the market price on the date of the announcement of the Offer
and without the usual transaction costs associated with a sale.
NEES and the Subsidiaries further believe that the terms of purchase for
the outstanding shares of the Preferred Stock pursuant to the Offer will benefit
NEES's investors and the System's utility customers by (1) contributing to the
elimination of the provisions concerning unsecured indebtedness (with the
attendant benefits described above, and (2) acquiring and retiring of
outstanding shares of the preferred stock and their potential replacement with
comparatively less expensive financing alternatives.
More specifically, assuming only a 50% overall success rate for the
Offers, the estimated net present value after-tax savings over a ten-year period
to the Power Company, Mass. Electric, and Narragansett total approximately $900
thousand, $2 million, and $1 million, respectively (based on purchased shares
being refinanced with tax-deductible securities at prevailing rates on the date
hereof), including expenses incurred in connection with the Offers and the Proxy
Solicitations (i.e., Cash Payments, the applicable Purchase Prices paid for
validly tendered and accepted Shares, and the other fees and expenses listed in
Item 2). A success rate for the Offers higher than the 50% rate assumed above
has the potential to generate even further cash savings.
Given the significant savings in financing cost and the elimination of the
restriction on unsecured indebtedness, Applicants are committed to using their
best efforts to consummate the transaction. However, there can be no assurance
of success.
In that regard, as stated above, in the event the Proposed Amendment is
not adopted at the Special Meetings, NEES may elect, subject to applicable law,
to waive the Offer condition that such Proposed Amendment(s) be adopted at the
Special Meeting. In that case, as promptly as practicable after NEES's waiver
thereof and purchase of shares validly tendered pursuant to the Offer, each
Subsidiary anticipates that it would call another special meeting of its common
and preferred stockholders and solicit proxies for the same purpose to secure
the requisite vote of both classes of stockholders to amend the Subsidiary's
Provisions as proposed. At that meeting, NEES would vote any Shares previously
acquired by it pursuant to an Offer or otherwise (together with shares held by
it of common stock) in favor of such proposed amendment to the Provisions,
thereby maximizing its prospects for adoption in that event. In contrast, if the
Subsidiary, rather than NEES, had acquired its shares pursuant to the Offer,
upon acquisition thereof any such shares would be deemed treasury shares under
applicable state law and, as such, the Subsidiary would be precluded from voting
those shares under any circumstance.
TERMS OF THE OFFER
The Power Company
Concurrently with the commencement of the proxy solicitations, subject to
the terms and conditions stated in the Offer to Purchase and Proxy Statement,
the
<PAGE> 11
proxies and the accompanying Letters of Transmittal (collectively, the Offer
Documents), NEES proposes to make the Offer, pursuant to which it will offer to
acquire from the holders of the Dividend Series Preferred Stock of each Series
any and all Shares of that Series at the following cash purchase prices:
<TABLE>
<CAPTION>
Series Purchase Price
------ --------------
<S> <C> <C>
4.56% $
4.60% $
4.64% $
6.08% $
</TABLE>
Although the vote of the 6% Cumulative Preferred is not required for the
Proposed Amendment, NEES proposes to extend the Offer to Purchase to those
shareholders at the following cash purchase price: $____________
(Each of the above prices is a Purchase Price).
The offer for any one Series is independent of the offer for any other Series or
for shares of any other Subsidiary.
Mass. Electric
Concurrently with the commencement of the Proxy Solicitation, subject to
the terms and conditions stated in the Offer to Purchase and Proxy Statement,
the proxies and the accompanying Letters of Transmittal (collectively, the Offer
Documents), NEES proposes to make the Offer, pursuant to which it will offer to
acquire from the holders of the Preferred Stock - Cumulative and the Dividend
Series Preferred Stock of each Series any and all Shares of that Series at the
following cash purchase prices:
<TABLE>
<CAPTION>
Series Purchase Price
------ --------------
<S> <C> <C>
Preferred Stock Cumulative
6.84% $
Dividend Series Preferred
4.44% $
4.76% $
6.99% $
</TABLE>
(each of the above, a Purchase Price).
The offer for any one Series is independent of the offer for any other Series or
for shares of any other Subsidiary.
Narragansett
Concurrently with the commencement of the Proxy Solicitation, subject to
the terms and conditions stated in the Offer to Purchase and Proxy Statement,
the proxies and the accompanying Letters of Transmittal (collectively, the Offer
Documents), NEES proposes to make the Offer, pursuant to which it will offer to
acquire from the holders of the preferred stock of each Series any and all
Shares of that Series at the following cash purchase prices:
<TABLE>
<CAPTION>
Series Purchase Price
------ --------------
<S> <C> <C>
4.50% $
4.64% $
</TABLE>
<PAGE> 12
<TABLE>
<S> <C> <C>
6.95% $
</TABLE>
(each of the above, a Purchase Price).
The offer for any one Series is independent of the offer for any other Series or
for shares of any other Subsidiary.
PROCEDURES FOR TENDERS
NEES anticipates that the Offer for each Series of Preferred Stock will be
scheduled to expire at 5:00 P.M. (Eastern Standard time) on the date of the
applicable Special Meetings. As noted below, the Expiration Date may be extended
under certain circumstances. The applicable Purchase Price and the other terms
and conditions of the Offer apply equally to all preferred stockholders of the
respective Series. The Offer is not conditioned upon any minimum number of
Shares of the applicable Series being tendered, but is conditioned, among other
things, on the Proposed Amendment being adopted at the Special Meeting.
To tender shares in accordance with the terms of the Offer Documents, the
tendering preferred stockholder must either (1) send to IBJ Schroder Bank &
Trust Company, in its capacity as depositary for the Offer (the Depositary), a
properly completed and duly executed Letter of Transmittal and Proxy or
facsimile thereof for that Series, together with any required signature
guarantees and any other documents required by the Letter of Transmittal and
Proxy (and either (a) tender certificates for the Shares to the Depositary at
one of its addresses specified in the Offer Documents, or (b) deliver such
Shares pursuant to the procedures for book-entry transfer described in the Offer
Documents (confirmation of such delivery must be received by the Depositary), in
each case by the Expiration Date); or (2) comply with a guaranteed delivery
procedure specified in the Offer Documents. Tenders of Shares made pursuant to
the Offer may be withdrawn at any time prior to the Expiration Date. Thereafter,
such tenders are irrevocable, subject to certain exceptions identified in the
Offer Documents.
Preferred stockholders will not be under any obligation to tender Shares
pursuant to the Offers; the Offers will not constitute a notice of redemption of
any Series pursuant to the Provisions. Nor will the Offers operate to waive any
option each Subsidiary has to redeem Shares. For the applicable redemption
provisions, see Exhibits A-1, A-3, A-4, and A-7.
NEES's obligation to proceed with the Offers and to accept for payment and
to pay for any Shares tendered is subject to various conditions enumerated in
the Offer Documents, and may include, among other conditions, that the Proposed
Amendments be adopted and that the Commission issue an order under the 1935 Act
authorizing the proposed transactions.
At any time or from time to time, NEES may extend the Expiration Date
applicable to any Series by giving notice of such extension to the Depositary,
without extending the Expiration Date for any other Series. During any such
extension, all Shares of the applicable Series previously tendered will remain
subject to the Offer, and may be withdrawn at any time prior to the extended
Expiration Date.
Conversely, NEES may elect in its sole discretion to terminate one or more
Offers prior to the scheduled Expiration Date and not accept for payment and pay
for any Shares tendered, subject to applicable provisions of Rule 13e-4 under
the Exchange Act requiring NEES either to pay the consideration offered or to
return the Shares tendered promptly after the termination or withdrawal of the
Offer(s), upon the occurrence of any of the conditions to closing enumerated in
the Offering Documents, by giving notice of such termination to the Depositary
and making a public announcement thereof.
Subject to compliance with applicable law, NEES further reserves the right
in the Offer Documents, in its sole discretion, to amend the Offers in any
<PAGE> 13
respect by making a public announcement thereof. If NEES materially changes the
terms of the Offers or the information concerning the Offers, or if NEES waives
a material condition of an Offer (such as the condition that the Proposed
Amendment be adopted at the Special Meeting), NEES will extend the Expiration
Date to the extent required by the applicable provisions of Rule 13e-4 under the
Exchange Act. Those provisions require that the minimum period during which an
issuer tender offer must remain open following material changes in the terms of
the offer or information concerning the offer (other than a change in price, a
change in percentage of securities sought, or a change in the dealer's
soliciting fee) will depend on the facts and circumstances, including the
relative materiality of such terms or information. If an Offer is scheduled to
expire at any time earlier than the expiration of a period ending on the tenth
business day from, and including, the date that NEES notifies the preferred
stockholders that it will (a) decrease the number of Shares of any Series of
preferred being sought, (b) increase or decrease the consideration being offered
in said Offer to holders of any Series of Preferred, or (c) increase or decrease
the soliciting dealers' fees, the Expiration Date will be extended until the
expiration of such period of ten business days.
Shares validly tendered to the Depositary pursuant to an Offer and not
withdrawn in accordance with the procedures set forth in the Offer Documents
will be held by NEES until the Expiration Date (or returned in the event the
Offer is terminated). Subject to the terms and conditions of the Offers, as
promptly as practicable after the Expiration Date, NEES will accept for payment
(and thereby purchase) and pay for Shares validly tendered and not withdrawn.
NEES will pay for Shares that it has purchased pursuant to the Offers by
depositing the applicable Purchase Price with the Depositary, which will act as
agent for the tendering Stockholders for the purpose of receiving payment from
NEES and transmitting payment to tendering Stockholders. NEES will pay all stock
transfer taxes, if any, payable on account of its acquisition of Shares pursuant
to an Offer, except in certain circumstances where special payment or delivery
procedures are utilized in conformance with the applicable Letters of
Transmittal and Proxy.
With respect to Shares validly tendered and accepted for payment by
NEES, each tendering preferred stockholder will be entitled to receive as
consideration from NEES only the applicable Purchase Price (which NEES
anticipates will reflect a premium over the current market price at the
commencement of the relevant Offer). Any such holder will not be entitled to
receive, with respect to such tendered Shares, additional consideration in the
form of a Cash Payment described above. Preferred Stockholders who wish to
tender their Shares pursuant to an Offer are required to vote in favor of the
Proposed Amendment; moreover, the Offers may be conditioned upon the Proposed
Amendment being adopted at the Special Meetings.
As noted immediately above, subject to the terms and conditions of an
Offer, Shares validly tendered and not withdrawn will be accepted for payment
and paid for by NEES as promptly as practicable after the Expiration Date.
If the Proposed Amendment is not adopted at the Special Meeting of a
Subsidiary, NEES may elect, but is not obligated, to waive such condition,
subject to applicable law. In that case, as promptly as practicable after NEES's
waiver thereof and purchase of any Shares validly tendered pursuant to the
Offer, the Subsidiaries anticipate that said Subsidiary would call another
special meeting and solicit proxies therefrom for the same purpose as in the
instant proceeding, i.e., to secure the requisite affirmative vote of
stockholders to amend the Provisions to eliminate the restriction on unsecured
indebtedness. At that meeting, NEES would vote any Shares acquired by it
pursuant to an Offer or otherwise (as well as all of its shares of Common Stock)
to eliminate the restriction on unsecured indebtedness.
If the Proposed Amendment is adopted at that meeting, and in any event
within one year from the Expiration Date (including any potential extension
thereto pursuant to the Offer), NEES will promptly after such meeting or at the
<PAGE> 14
expiration of such one-year period, as applicable, either (a) sell the Shares to
the issuing Subsidiary at the Purchase Price plus expenses paid therefor
pursuant to the Offer or (b) donate the Shares to the issuing Subsidiary as a
capital contribution, and the issuing Subsidiary will thereupon retire and
cancel such Shares.
Following the Expiration Date and the consummation of the purchase of
Shares pursuant to an Offer, NEES may determine to purchase additional Shares on
the open market, in privately negotiated transactions, through one or more
tender offers, or otherwise. NEES will not undertake any such transactions
without receipt of any required Commission authorizations under the 1935 Act.
Likewise, in the event such a further special meeting is necessary, a Subsidiary
would not undertake any associated proxy solicitation and amendment of its
Provisions prior to receipt of any required Commission authorizations under the
1935 Act in a separate proceeding.
Merrill Lynch, Pierce, Fenner & Smith Incorporated will act as dealer
manager for NEES in connection with the Offer. NEES has agreed to pay the dealer
manager a fee of .5% of par per share for each share of the Preferred tendered,
accepted for payment, and paid for pursuant to an Offer. The Subsidiaries have
agreed to pay the dealer manager a fee of .5% of par for each share that is not
tendered but which votes in favor of the Proposed Amendment. NEES has agreed to
reimburse the dealer manager for its reasonable out-of-pocket expenses,
including attorneys' fees.
In addition, NEES has agreed to pay soliciting brokers and dealers a
fee of 1.5% of par per share for each share of Preferred tendered, accepted for
payment, and paid for pursuant to the Offer and for each Share not tendered but
voted in favor of the Proposed Amendments; except that for transactions with
beneficial owners equal to or exceeding 2,500 shares, the solicitation fees will
be 1% of par.
Any fee payable for transactions equal to or exceeding 2,500 shares
shall be payable 80% to the dealer manager and 20% to any soliciting dealer
(which may be the dealer manager). No such fee shall be payable to a soliciting
dealer in respect of shares (a) beneficially owned by such soliciting dealer or
(b) registered in the name of such soliciting dealer as nominee when such Shares
are being tendered for the benefit of one or more beneficial owners identified
in the applicable Letter of Transmittal or in the applicable Notice of Solicited
Tenders (including in the materials provided to brokers and dealers).
SOURCE AND AMOUNT OF FUNDS
Assuming that NEES purchases all outstanding Preferred Stock of the
Subsidiaries pursuant to the Offers, the total amount required by NEES to
purchase such shares will be approximately $135 million, exclusive of the
payment of accrued dividends, but including fees and other expenses. NEES
intends to fund the Offers through the use of its general funds (which, in the
ordinary course, include funds from the Power Company, Mass. Electric, and
Narragansett) and funds borrowed pursuant to NEES' committed lines of credit,
including any bank revolving credit agreements. The interest rates depend upon
the timing, amount of borrowings, and market rates at that time. NEES currently
has regulatory authority to borrow $100 million and is seeking to increase that
amount. NEES has not had occasion to borrow monies for a number of years.
PURCHASE BY, OR CONTRIBUTION TO, THE SUBSIDIARIES OF THE SHARES
As noted above, subject to the terms and conditions of an Offer, shares
validly tendered and not withdrawn will be accepted for payment and paid for by
NEES as promptly as practicable after the Expiration Date. If the Proposed
Amendment is adopted at the Special Meeting, promptly after consummation of the
<PAGE> 15
Offer, either the issuing Subsidiary will purchase the shares sold to NEES
pursuant to the Offer at the relevant Purchase Price plus expenses incurred in
the Offer or NEES will donate the Shares to that Subsidiary as a capital
contribution. The Subsidiary will thereupon retire and cancel such Shares.
EWG OR FUCO OWNERSHIP
Neither NEES nor any of its subsidiaries has an ownership interest in
an exempt wholesale generator (EWG) or a foreign utility company (FUCO) as
defined in Sections 32 and 33 of the 1935 Act. Additionally, neither NEES nor
any subsidiary thereof is a party to, or has any rights under, a service, sales,
or construction agreement with an EWG or FUCO. NEES and the subsidiaries thereof
shall comply with the requirements of Rule 53 of the Act in connection with EWG
and FUCO acquisitions and financings. Further, any capital contribution to a
Subsidiary of preferred stock will not be used for the acquisition of an
interest in an EWG or a FUCO.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
Other than the Cash Payments and the applicable Purchase Prices, the
fees, commissions, and expenses to be incurred, directly or indirectly, by the
Applicants or any associate company thereof in connection with the proposed
transactions, assuming the tender and acceptance of 100% of the Shares, are
estimated as follows:
<TABLE>
<S> <C>
SEC filing fees $ 27,000
New England Power Service Company 30,000
Outside counsel fees, including
counsel for the Dealer Manager 100,000
Information agent fees 30,000
Dealer manager fees 700,000
Depositary fees 40,000
Broker/dealer fees 1,300,000
Printing, mailing, stock transfer taxes
and miscellaneous fees 100,000
----------
TOTAL $2,327,000
</TABLE>
ITEM 3. APPLICABLE STATUTORY PROVISIONS
Section 12(e) of the 1935 Act and Rules 62 and 65 thereunder are
applicable to the Proxy Solicitations.
Section 12(e) of the 1935 Act and Rule 65 thereunder are and Section
6(a)(2) may be deemed applicable to Cash Payments.
Section 6(a)(2) of the 1935 Act is applicable to the Proposed
Amendments. Sections 9(a) and 10 of the 1935 Act and Rule 51 thereunder are
applicable to the acquisition by NEES of Shares pursuant to the Offers; NEES
hereby represents that the conditions of Rule 51 will be satisfied in respect of
the acquisition by NEES of Shares pursuant to the Offers.
Sections 9(a), 10, 12(c), and 12(d) of the 1935 Act and Rules 43 and 44
thereunder are applicable to the sale to the Subsidiaries of the Shares acquired
<PAGE> 16
by NEES pursuant to the Offers. NEES considers that the proposed capital
contributions are subject to the provisions of Section 12 of the 1935 Act and
Rule 45 thereunder.
To the extent that the Commission's "Statement of Policy Regarding
Preferred Stock Subject to the Public Utility Holding Company Act of 1935" may
be applicable to the Proposed Amendments, the Applicants hereby request that an
exception for such Statement of Policy be granted.
ITEM 4. REGULATORY APPROVAL
Other than the jurisdiction of the Commission under the 1935 Act and
the Exchange Act, no other state or federal regulatory agency has jurisdiction
over the proposed transactions.
Except for exemptions from the requirements of Rule 13e-3 and
Regulation 14A available to the Applicants, Applicants will comply fully with
all requirements of the Exchange Act and the rules and regulations thereunder
applicable to the Proxy Solicitations and the Offer, and acknowledge that any
Commission authorization granted under the 1935 Act is conditioned upon such
compliance.
ITEM 5. PROCEDURE
The Applicants request that the Commission issue the order authorizing
the Proxy Solicitation and issue and publish no later than November 6, 1997, the
requisite notice under Rule 23 with respect to the filing of this
Application-Declaration, such notice to specify a date not later than December
4, 1997, as the date after which a second order granting and permitting this
Application-Declaration to become effective may be entered by the Commission and
the Commission enter not later than December 8, 1997, an appropriate second
order granting and permitting this Application-Declaration to become effective.
The Applicants request the appropriate and timely action be taken by
the Commission in this matter in order to permit consummation of the proposed
transactions in accordance with the schedule outlined above.
The Applicants (i) do not request a recommended decision by a hearing
officer, (ii) do not request a recommended decision by any other responsible
officer of the Commission, (iii) hereby specify that the Division of Investment
Management may assist in the preparation of the Commission's decision, and (iv)
hereby request that there be no 30-day waiting period between the date of
issuance of the Commission's Order and the date on which it is to become
effective.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits:
A-1 Articles of Organization of the Power Company as amended
through June 27, 1987 (Exhibit 3(a) to 1988 Form 10-K, File
No. 0-1229).
A-2 By-Laws of the Power Company as amended May 10, 1995 (Exhibit
3(b) to 1995 Form 10-K, File No. 0-1229).
A-3 Articles of Organization of Mass. Electric as amended through
November 15, 1993 (Exhibit 3(a) to 1993 Form 10-K, File No.
0-5464).
A-4 By-Laws of Mass. Electric as amended through September 15,
1993 (Exhibit 3(b) to 1993 Form 10-K, File No. 0-5464).
<PAGE> 17
A-5 Articles of Incorporation of Narragansett as amended June 9,
1988 (Exhibit 3(a) to 1988 Form 10-K, File No. 0-898).
A-6 By-Laws of Narragansett (Exhibit 3 to 1980 Form 10-K, File No.
0- 898).
A-7 Preference Provisions of Narragansett, as amended, dated March
23, 1993 (Exhibit 4(c) to 1993 NEES Form 10-K, File No.
1-3446).
B-1 Draft Offer to Purchase and Proxy Statement and Information
Statement for the Power Company.
B-2 Draft Notice of Special Meeting of the Power Company (attached
as part of Exhibit B-1).
B-3a Draft Form of Letter of Transmittal for Dividend Series
Preferred of the Power Company.
B-3b Draft Form of Letter of Transmittal for 6% Cumulative
Preferred of the Power Company.
B-4 Draft Offer to Purchase and Proxy Statement for Mass.
Electric.
B-5 Draft Notice of Special Meeting of Mass. Electric (attached as
part of Exhibit B-4).
B-6a Draft Form of Letter of Transmittal for Dividend Series
Preferred of Mass. Electric.
B-6b Draft Form of Letter of Transmittal for Preferred Stock -
Cumulative of Mass. Electric.
B-7 Draft Offer to Purchase and Proxy Statement for Narragansett.
B-8 Draft Notice of Special Meeting of Narragansett (attached as
part of Exhibit B-7).
B-9 Draft Form of Letter of Transmittal of Narragansett.
* F Opinion of counsel.
27.1 Financial Data Schedule for NEES.
27.2 Consolidated Financial Data Schedule for NEES.
27.3 Financial Data Schedule for The Power Company.
27.4 Financial Data Schedule for Mass. Electric.
27.5 Financial Data Schedule for Narragansett.
H Form of notice and order permitting proxy solicitation.
(b) Financial Statements
1-A Balance Sheet of NEES at June 30, 1997, Actual (Parent Company
Only)
1-B Statement of Income and Retained Earnings for NEES for twelve
months ended June 30, 1997, Actual (Parent Company Only)
2-A Consolidated Balance Sheet of NEES at June 30, 1997, Actual
and Pro Forma
<PAGE> 18
2-B Statement of Consolidated Income for NEES for twelve months
ended June 30, 1997, Actual and Pro Forma
3-A Balance Sheet of the Power Company at June 30, 1997, Actual
and Pro Forma
3-B Statement of Income and Retained Earnings for the Power
Company for twelve months ended June 30, 1997, Actual and Pro
Forma
4-A Balance Sheet of Mass. Electric at June 30, 1997, Actual and
Pro Forma
4-B Statement of Income and Retained Earnings for Mass. Electric
for twelve months ended June 30, 1997, Actual and Pro Forma
5-A Balance Sheet of Narragansett at June 30, 1997, Actual and Pro
Forma
5-B Statement of Income and Retained Earnings for Narragansett for
twelve months ended June 30, 1997, Actual and Pro Forma
* To be filed by amendment
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
The proposed transactions do not involve a major Federal action
significantly affecting the quality of the human environment.
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned companies have duly caused this statement to be signed
on its behalf by the undersigned thereunto duly authorized.
New England Electric System
By /s/ Michael E. Jesanis
---------------------------------
Treasurer
New England Power Company
By /s/ John G. Cochrane
---------------------------------
Assistant Treasurer
Massachusetts Electric Company
By /s/ Michael E. Jesanis
---------------------------------
Treasurer
The Narragansett Electric Company
By /s/ John G. Cochrane
---------------------------------
Assistant Treasurer
Date: November 6, 1997
The name "New England Electric System" means the trustee or trustees for the
time being (as trustee or trustees but not personally) under an agreement and
declaration of trust dated January 2, 1926, as amended, which is hereby referred
to, and a copy of which as amended has been filed with the Secretary of The
Commonwealth of Massachusetts. Any agreement, obligation or liability made,
entered into or incurred by or on behalf of New England Electric System binds
only its trust estate, and no shareholder, director, trustee, officer or agent
thereof assumes or shall be held to any liability therefor.
<PAGE> 20
EXHIBIT INDEX
(a) Exhibits:
A-1 Articles of Organization of the Power Company as amended
through June 27, 1987 (Exhibit 3(a) to 1988 Form 10-K, File
No. 0-1229).
A-2 By-Laws of the Power Company as amended May 10, 1995 (Exhibit
3(b) to 1995 Form 10-K, File No. 0-1229).
A-3 Articles of Organization of Mass. Electric as amended through
November 15, 1993 (Exhibit 3(a) to 1993 Form 10-K, File No.
0-5464).
A-4 By-Laws of Mass. Electric as amended through September 15,
1993 (Exhibit 3(b) to 1993 Form 10-K, File No. 0-5464).
A-5 Articles of Incorporation of Narragansett as amended June 9,
1988 (Exhibit 3(a) to 1988 Form 10-K, File No. 0-898).
A-6 By-Laws of Narragansett (Exhibit 3 to 1980 Form 10-K, File No.
0- 898).
A-7 Preference Provisions of Narragansett, as amended, dated March
23, 1993 (Exhibit 4(c) to 1993 NEES Form 10-K, File No.
1-3446).
B-1 Draft Offer to Purchase and Proxy Statement and Information
Statement for the Power Company.
B-2 Draft Notice of Special Meeting of the Power Company (attached
as part of Exhibit B-1).
B-3a Draft Form of Letter of Transmittal for Dividend Series
Preferred of the Power Company.
B-3b Draft Form of Letter of Transmittal for 6% Cumulative
Preferred of the Power Company.
B-4 Draft Offer to Purchase and Proxy Statement for Mass.
Electric.
B-5 Draft Notice of Special Meeting of Mass. Electric (attached as
part of Exhibit B-4).
B-6a Draft Form of Letter of Transmittal for Dividend Series
Preferred of Mass. Electric.
B-6b Draft Form of Letter of Transmittal for Preferred Stock -
Cumulative of Mass. Electric.
B-7 Draft Offer to Purchase and Proxy Statement for Narragansett.
B-8 Draft Notice of Special Meeting of Narragansett (attached as
part of Exhibit B-7).
B-9 Draft Form of Letter of Transmittal of Narragansett.
* F Opinion of counsel.
<PAGE> 21
27.1 Financial Data Schedule for NEES.
27.2 Consolidated Financial Data Schedule for NEES.
27.3 Financial Data Schedule for The Power Company.
27.4 Financial Data Schedule for Mass. Electric.
27.5 Financial Data Schedule for Narragansett.
H Form of notice and order permitting proxy solicitation.
(b) Financial Statements
1-A Balance Sheet of NEES at June 30, 1997, Actual (Parent Company
Only)
1-B Statement of Income and Retained Earnings for NEES for twelve
months ended June 30, 1997, Actual (Parent Company Only)
2-A Consolidated Balance Sheet of NEES at June 30, 1997, Actual
and Pro Forma
2-B Statement of Consolidated Income for NEES for twelve months
ended June 30, 1997, Actual and Pro Forma
3-A Balance Sheet of the Power Company at June 30, 1997, Actual
and Pro Forma
3-B Statement of Income and Retained Earnings for the Power
Company for twelve months ended June 30, 1997, Actual and Pro
Forma
4-A Balance Sheet of Mass. Electric at June 30, 1997, Actual and
Pro Forma
4-B Statement of Income and Retained Earnings for Mass. Electric
for twelve months ended June 30, 1997, Actual and Pro Forma
5-A Balance Sheet of Narragansett at June 30, 1997, Actual and Pro
Forma
5-B Statement of Income and Retained Earnings for Narragansett for
twelve months ended June 30, 1997, Actual and Pro Forma
* To be filed by amendment
<PAGE> 1
OFFER TO PURCHASE AND PROXY STATEMENT AND INFORMATION STATEMENT
LOGO
NEW ENGLAND ELECTRIC SYSTEM
OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF THE FOLLOWING SERIES OF PREFERRED STOCK OF
NEW ENGLAND POWER COMPANY
100,000 SHARES, DIVIDEND SERIES PREFERRED STOCK, 4.56% SERIES AT A PURCHASE
PRICE OF $ . PER SHARE CUSIP NUMBER 644188 10 4
80,140 SHARES, DIVIDEND SERIES PREFERRED STOCK, 4.60% SERIES AT A PURCHASE
PRICE OF $ . PER SHARE CUSIP NUMBER 644188 20 3
41,500 SHARES, DIVIDEND SERIES PREFERRED STOCK, 4.64% SERIES AT A PURCHASE
PRICE OF $ . PER SHARE CUSIP NUMBER 644188 70 8
100,000 SHARES, DIVIDEND SERIES PREFERRED STOCK, 6.08% SERIES AT A PURCHASE
PRICE OF $ . PER SHARE CUSIP NUMBER 644188 40 1
75,020 SHARES, 6% CUMULATIVE PREFERRED STOCK AT A PURCHASE PRICE OF $ . PER
SHARE CUSIP NUMBER 644188 30 2
------------------------
NEW ENGLAND POWER COMPANY
PROXY STATEMENT AND INFORMATION STATEMENT
25 RESEARCH DRIVE, WESTBOROUGH, MASSACHUSETTS 01582
SPECIAL MEETING OF STOCKHOLDERS
DECEMBER 12, 1997
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD
TIME, ON FRIDAY, DECEMBER 12, 1997, UNLESS THE OFFER IS EXTENDED.
New England Electric System, a Massachusetts voluntary association (NEES),
invites the holders of shares of each series of Dividend Series Preferred Stock
(Dividend Series Preferred) listed above and the 6% Cumulative Preferred Stock
(the 6% Cumulative Preferred) (each such series or class a Series of Preferred
or a Series, and each holder thereof a Preferred Shareholder) of New England
Power Company, a Massachusetts corporation and direct utility subsidiary of NEES
(the Power Company or the Company), to tender any and all of their shares of a
Series of Preferred (the Shares) for purchase at the purchase price per Share
listed above, plus dividends, net to the seller in cash, upon the terms and
subject to the conditions set forth in this Offer to Purchase and Proxy
Statement and Information Statement (the Booklet) and in the accompanying Letter
of Transmittal for the 6% Cumulative Preferred and Letter of Transmittal and
Proxy for the Dividend Series Preferred (collectively, the Letter of Transmittal
and Proxy) (which together constitute the Offer). NEES will purchase all Shares
validly tendered and not withdrawn, upon the terms and subject to the conditions
of the Offer. See Terms of the Offer -- Certain Conditions of the Offer and
Terms of the Offer -- Extension of Tender Period; Termination; Amendments.
THE OFFER FOR EACH SERIES OF DIVIDEND SERIES PREFERRED AND THE OFFER FOR THE
6% CUMULATIVE PREFERRED ARE NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES OF
ANY SERIES BEING TENDERED AND EACH IS INDEPENDENT OF THE OFFER FOR ANY OTHER
SERIES OF DIVIDEND SERIES PREFERRED OR THE 6% CUMULATIVE PREFERRED. THE OFFER,
HOWEVER, IS CONDITIONED UPON, AMONG OTHER THINGS, THE APPROVAL AND ADOPTION OF
THE PROPOSED AMENDMENT, AS DESCRIBED BELOW, AT THE SPECIAL MEETING OF
SHAREHOLDERS. SEE TERMS OF THE OFFER -- CERTAIN CONDITIONS OF THE OFFER.
Concurrently with the Offer, the Board of Directors of the Power Company is
soliciting proxies from the Dividend Series Preferred Stockholders for use at
the Special Meeting of Shareholders of the Power Company to be held at the Power
Company's principal office, 25 Research Drive, Westborough, Massachusetts, on
December 12, 1997 at 4:30 p.m., Eastern Standard Time, or any adjournment or
postponement of such meeting (the Special Meeting). THE BOARD OF DIRECTORS IS
NOT ASKING HOLDERS OF THE 6% CUMULATIVE PREFERRED FOR A PROXY, AND THEY ARE
REQUESTED NOT TO SEND A PROXY. THEY MAY, HOWEVER, PARTICIPATE IN THE OFFER. The
Special Meeting is being held to consider an amendment (the Proposed Amendment)
to the Power Company's By-Laws and Articles of Organization (together, the
Provisions) which would remove from the Provisions a limitation on the Power
Company's ability to issue unsecured debt without the prior approval of the
Preferred. DIVIDEND SERIES PREFERRED SHAREHOLDERS WHO WISH TO TENDER THEIR
SHARES MUST VOTE IN FAVOR OF THE PROPOSED AMENDMENT. THE OFFER IS FURTHER
CONDITIONED UPON THE APPROVAL AND ADOPTION OF THE PROPOSED AMENDMENT AT THE
SPECIAL MEETING. IF THE PROPOSED AMENDMENT IS APPROVED AND ADOPTED BY THE POWER
COMPANY'S SHAREHOLDERS, THE POWER COMPANY WILL MAKE A SPECIAL CASH PAYMENT (AS
DEFINED HEREIN) IN THE AMOUNT OF $1.00 PER SHARE TO EACH DIVIDEND SERIES
PREFERRED SHAREHOLDER WHO VOTED IN FAVOR OF THE PROPOSED AMENDMENT BUT DID NOT
TENDER SUCH SHARES PURSUANT TO THE OFFER. THOSE DIVIDEND SERIES PREFERRED
SHAREHOLDERS WHO VALIDLY TENDER THEIR SHARES WILL BE ENTITLED ONLY TO THE
PURCHASE PRICE PER SHARE LISTED ABOVE BUT NOT THE SPECIAL CASH PAYMENT.
------------------------
THE POWER COMPANY'S BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE PROPOSED
AMENDMENT.
------------------------
This Booklet is first being mailed to Preferred Shareholders on or about
November 7, 1997.
------------------------
The Company will pay to a Soliciting Dealer (as defined herein) a
solicitation fee for any Shares tendered, accepted for payment and paid for
pursuant to the Offer, subject to certain conditions. See Fees and Expenses Paid
to Dealers.
------------------------
NEITHER NEES, THE POWER COMPANY, THEIR RESPECTIVE BOARDS OF DIRECTORS, ANY
OF THEIR RESPECTIVE OFFICERS, NOR ANY OTHER PERSONS AUTHORIZED BY THEM MAKES ANY
RECOMMENDATION TO ANY PREFERRED SHAREHOLDER AS TO WHETHER TO TENDER ANY OR ALL
SHARES. EACH PREFERRED SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
------------------------
Each Series of Preferred is traded in the over-the-counter market (the OTC)
and is not listed on any national securities exchange. Through October 31, 1997,
the last reported sale prices for the 4.56% Series, the 4.60% Series, the 4.64%
Series, the 6.08% Series, and the 6.00% Series, were $70.15, $70.25, $70.25,
$92.12, and $89.00, respectively, as reported by the Nasdaq Stock Market, Inc.
Preferred Shareholders are urged to obtain a current market quotation, if
available, for their Shares.
------------------------
Questions or requests for assistance may be directed to Georgeson & Company
Inc. (Georgeson or the Information Agent) or to Merrill Lynch & Co. (Merrill
Lynch or the Dealer Manager) at their respective telephone numbers and addresses
set forth on the back cover of this Booklet. Requests for additional copies of
this Booklet, the Letter of Transmittal and Proxy, or other tender offer or
proxy materials may be directed to the Information Agent, and such copies will
be furnished promptly at the Power Company's expense. Preferred Shareholders may
also contact their local broker, dealer, commercial bank, or trust company for
assistance concerning the Offer.
------------------------
The Dealer Manager for the Offer is:
MERRILL LYNCH & CO.
November 6, 1997
<PAGE> 2
IMPORTANT
Any Preferred Shareholder desiring to accept the Offer and tender any or
all Shares should, on or prior to the Expiration Date (as defined below), either
(i) request such Preferred Shareholders broker, dealer, commercial bank, trust
company, or other nominee to effect the transaction for such Preferred
Shareholders pursuant to the procedure for book-entry transfer set forth below
under Terms of the Offer -- Procedure for Tendering Shares, or (ii) complete and
sign the Letter of Transmittal and Proxy in accordance with the instructions in
the Letter of Transmittal and Proxy, and mail or deliver it, the certificates
for such Shares, and any other required documents to IBJ Schroder Bank & Trust
Company (the Depositary). A Preferred Shareholder whose Shares are registered in
the name of a broker, dealer, commercial bank, trust company, or other nominee
must contact such broker, dealer, commercial bank, trust company, or other
nominee if such Preferred Shareholder desires to tender such Shares. Any
Preferred Shareholder who desires to tender Shares and whose certificates for
such Shares are not immediately available, or who cannot comply in a timely
manner with the procedure for book-entry transfer, should tender such Shares by
following the procedures for guaranteed delivery set forth below under Terms of
the Offer -- Procedure for Tendering Shares -- Guaranteed Proxy Procedure.
EACH SERIES OF PREFERRED HAS ITS OWN LETTER OF TRANSMITTAL AND PROXY, AND
ONLY THE APPLICABLE LETTER OF TRANSMITTAL AND PROXY FOR SUCH SERIES OF PREFERRED
OR A NOTICE OF GUARANTEED DELIVERY MAY BE USED TO TENDER SHARES OF SUCH SERIES
OF PREFERRED.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE RELATED LETTER OF TRANSMITTAL AND PROXY. IF GIVEN OR MADE, SUCH
RECOMMENDATION AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY NEES OR THE POWER COMPANY.
2
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY............................................................................... 4
PURPOSE OF THE OFFER, PROPOSED AMENDMENT, AND PROXY SOLICITATION...................... 7
Industry Restructuring.............................................................. 7
Purpose of the Offer................................................................ 7
Proposed Amendment.................................................................. 7
Other Information................................................................... 8
TERMS OF THE OFFER.................................................................... 8
Number of Shares; Purchase Prices; Expiration Date; Dividends....................... 8
Procedure for Tendering Shares...................................................... 9
Withdrawal Rights................................................................... 11
Acceptance of Shares for Payment and Payment of Purchase Price and Dividends........ 12
Certain Conditions of the Offer..................................................... 12
Extension of Tender Period; Termination; Amendments................................. 14
Certain Effects of the Offer........................................................ 15
Other Information................................................................... 16
PROPOSED AMENDMENT AND PROXY SOLICITATION............................................. 18
Notice of Special Meeting of Stockholders........................................... 18
Special Meeting..................................................................... 19
Proxies............................................................................. 19
Relationship to the Offer; Special Cash Payments.................................... 19
Voting Securities, Rights and Procedures............................................ 20
Security Ownership of Certain Beneficial Owners and Management...................... 20
DESCRIPTION OF THE PROPOSED AMENDMENT................................................. 21
Explanation of the Proposed Amendment............................................... 21
Reasons for the Proposed Amendment.................................................. 22
Recommendation of Board of Directors................................................ 23
Certain Effects of the Proposed Amendment........................................... 23
Other Matters....................................................................... 23
PRICE RANGE OF SHARES; DIVIDENDS...................................................... 24
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS........................................ 25
Tax Considerations for Tendering Preferred Shareholders............................. 25
Tax Considerations for Non-Tendering Preferred Shareholders......................... 26
Tax Considerations of Accrued and Unpaid Dividends Payment.......................... 26
Tax Considerations of Special Cash Payment.......................................... 26
Backup Withholding.................................................................. 27
SOURCE AND AMOUNT OF FUNDS............................................................ 27
TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES..................................... 27
FEES AND EXPENSES PAID TO DEALERS..................................................... 28
Dealer Manager Fees................................................................. 28
Solicited Tender Fees............................................................... 28
Stock Transfer Taxes................................................................ 29
SUMMARY OF FINANCIAL INFORMATION...................................................... 29
CERTAIN INFORMATION REGARDING NEES AND THE POWER COMPANY; INCORPORATION BY
REFERENCE........................................................................... 30
MISCELLANEOUS......................................................................... 31
</TABLE>
3
<PAGE> 4
SUMMARY
The following summary is provided solely for the convenience of the
Preferred Shareholders. This summary is not intended to be complete and is
qualified in its entirety by reference to the full text and more specific
details contained in this Booklet and the Letter of Transmittal and Proxy and
any amendments hereto or thereto. Preferred Shareholders are urged to read these
documents in their entirety. Each of the capitalized terms used in this summary
and not defined herein has the meaning set forth elsewhere in this Booklet.
The Companies.............. NEES, 25 Research Drive, Westborough, Massachusetts
01582, is a registered holding company under the
Public Utility Holding Company Act of 1935, as
amended (the Holding Company Act), which owns,
directly or indirectly, all of the outstanding
common stock of its electric utility subsidiaries,
including the Power Company. The service area of
NEES' electric utility subsidiaries covers portions
of Massachusetts, New Hampshire, and Rhode Island.
The name "New England Electric System" means the
trustee or trustees for the time being (as trustee
or trustees but not personally) under an agreement
and declaration of trust dated January 2, 1926, as
amended, which is hereby referred to, and a copy of
which as amended has been filed with the Secretary
of the Commonwealth of Massachusetts. Any
agreement, obligation or liability made, entered
into or incurred by or on behalf of New England
Electric System binds only its trust estate, and no
shareholder, director, trustee, officer or agent
thereof assumes or shall be held to any liability
therefor.
The Power Company, 25 Research Drive, Westborough,
Massachusetts 01582, is a utility primarily engaged
in the generation, purchase, transmission, and sale
of electric energy in wholesale quantities. In
1996, 95% of the Power Company's all-requirement
revenue from the sale of electricity was derived
from sales for resale to affiliated companies and
5% from sales for resale to municipal and other
utilities. See Purpose of the Offer, Proposed
Amendment, and Proxy Solicitation -- Industry
Restructuring.
The Shares................. 4.56% Dividend Series Preferred Stock, $100 par
value, CUSIP
Number 644188 10 4
4.60% Dividend Series Preferred Stock, $100 par
value, CUSIP
Number 644188 20 3
4.64% Dividend Series Preferred Stock, $100 par
value, CUSIP
Number 644188 70 8
6.08% Dividend Series Preferred Stock, $100 par
value, CUSIP
Number 644188 40 1
6.00% Cumulative Preferred Stock, $100 par value,
CUSIP
Number 644188 30 2
The Offer and Purchase
Price...................... Offer to purchase any or all shares of each Series
of Preferred listed below at the price set forth
below.
$ . for 4.56% Series
$ . for 4.60% Series
$ . for 4.64% Series
$ . for 6.08% Series
$ . for 6.00% Series
Dividends.................. If declared by the Board, tendering Preferred
Shareholders will be entitled to the regular
quarterly dividend for the entire quarterly period
through December 31, 1997.
4
<PAGE> 5
Independent Offer.......... The Offer for each Series of Dividend Series
Preferred and the Offer for the 6% Cumulative
Preferred are not conditioned upon any minimum
number of Shares of any Series being tendered and
each is independent of the Offer for any other
Series of Dividend Series Preferred or the 6%
Cumulative Preferred. The Offer, however, is
conditioned upon, among other things, the approval
and adoption of the Proposed Amendment, as
described below, at the Special Meeting. See Terms
of the Offer -- Certain Conditions of the Offer. It
is a condition to the Offer that Dividend Series
Preferred Shareholders who tender their shares must
vote in favor of the Proposed Amendment. NEES will
not be required to accept or pay for tendered
Shares if the Proposed Amendment is not approved
and unless certain other conditions are met.
Expiration Date of the
Offer...................... The Offer expires at 5:00 p.m., Eastern Standard
Time, on December 12, 1997, unless extended (the
Expiration Date).
How to Tender Shares....... See Terms of the Offer -- Procedure for Tendering
Shares. For further information, call the
Information Agent or the Dealer Manager or consult
your broker for assistance.
Withdrawal Rights.......... Tendered Shares of any Series of Preferred may be
withdrawn at any time until the Expiration Date
with respect to such Series of Preferred and,
unless previously accepted for payment, may also be
withdrawn after January 12, 1998. See Terms of the
Offer -- Withdrawal Rights. A withdrawal of a
tender does not in and of itself revoke a proxy.
Purpose of the Offer....... NEES is making the Offer because NEES believes that
the purchase of Shares is economically attractive
to the Power Company, and indirectly to NEES and
its shareholders, in light of recent developments
in its industry and alternatives currently
available to it. In addition, the Offer gives
Preferred Shareholders the opportunity to sell
their Shares at a price which NEES believes to be a
premium over the market price and without the usual
transaction costs associated with a market sale.
See Purpose of the Offer, Proposed Amendment, and
Proxy Solicitation -- Purpose of the Offer
and -- Industry Restructuring; Terms of the
Offer -- Certain Effects of the Offer.
Certain Effects of the
Offer...................... Preferred Shareholders should consider carefully
the possible effects of consummation of the Offer
on the liquidity of any Shares which are not
tendered and on voting power and redemption rights.
See Purpose of the Offer, Proposed Amendment, and
Proxy Solicitation -- Other Information and Terms
of the Offer -- Voting Power.
Brokerage Commissions...... Not payable by Preferred Shareholders.
Solicitation Fee........... NEES will pay to each designated Soliciting Dealer
a solicitation fee of $1.50 per Share for any
Shares tendered, accepted for payment, and paid for
pursuant to the Offer and for each Dividend Series
Preferred Share not tendered but voted in favor of
the Proposed Amendment (except that for
transactions for beneficial owners equal to or
exceeding 2,500 Shares of all Series of Preferred
combined, NEES will pay a solicitation fee of $1.00
per Share, of which at least eighty percent (80%)
shall be paid to the Dealer Manager). A Soliciting
Dealer will not be entitled to a solicitation fee
for Shares beneficially owned by such Soliciting
Dealer. See Fees and Expenses Paid to
Dealers -- Solicited Tender Fees.
5
<PAGE> 6
Proposed Amendment......... Concurrently with the Offer, the Board of Directors
of the Power Company is soliciting proxies from
Dividend Series Preferred Stockholders for use at
the Special Meeting. Proxies are not being
solicited from holders of 6% Cumulative Preferred
Stock. The Special Meeting is being held to
consider the Proposed Amendment to the Provisions
which would remove a provision that limits the
Power Company's ability to issue unsecured debt
without the approval of the holders of a majority
of the outstanding Dividend Series Preferred and
Preferred Stock -- Cumulative. If the Proposed
Amendment is approved by the Dividend Series
Preferred Shareholders, the Power Company's ability
to issue or assume unsecured indebtedness will no
longer be subject to the approval of any Shares
that remain outstanding after the consummation of
the Offer. See Purpose of the Offer, Proposed
Amendment, Proxy Solicitation -- Purpose of the
Offer and -- Other Information; Terms of the
Offer -- Certain Effects of the Offer -- Voting
Power; and Proposed Amendment and Proxy
Solicitation -- Certain Effects of the Proposed
Amendment.
Record Date................ November 12, 1997
Special Cash Payment....... Preferred Shareholders of record who do not tender
their Shares have the right to vote for or against
the Proposed Amendment. If the Proposed Amendment
is approved and adopted by the Power Company's
Preferred Shareholders, the Power Company will make
a special cash payment of $1.00 per Share to each
Dividend Series Preferred Shareholder who voted in
favor of the Proposed Amendment but who did not
tender his or her Shares (the Special Cash
Payment). Special Cash Payments will not be made to
holders of the 6% Cumulative Preferred. Preferred
Shareholders who validly tender their Shares will
be entitled only to the purchase price per Share
listed on the front cover of this Booklet plus an
amount in cash equivalent to any dividends declared
prior to the Payment Date (as defined herein).
Stock Transfer Tax......... Except as described herein, NEES will pay or cause
to be paid any stock transfer taxes with respect to
the sale and transfer of any Shares to it or its
order pursuant to the Offer. See Instruction 6 of
the applicable Letter of Transmittal and Proxy. See
Terms of the Offer -- Acceptance of Shares for
Payment and Payment of Purchase Price and
Dividends.
Payment Date............... Promptly after the Expiration Date or any extension
thereof.
Further Information........ Additional copies of this Booklet and the
applicable Letter of Transmittal and Proxy may be
obtained by contacting Georgeson, Wall Street
Plaza, New York, New York 10005, telephone (800)
223-2064 (toll-free) and (212) 440-9800 (banks and
brokers). Questions about the Offer should be
directed to Merrill Lynch at (888) ML4-TNDR (toll-
free) ((888) 654-8637 (toll-free)).
6
<PAGE> 7
PURPOSE OF THE OFFER, PROPOSED AMENDMENT,
AND PROXY SOLICITATION
The Offer and the Proposed Amendment constitute an integrated strategic
response by NEES and the Power Company to an anticipated restructuring of the
capitalization of the Power Company arising from the expected sale of the Power
Company's generation business.
INDUSTRY RESTRUCTURING
On October 1, 1996, the NEES companies announced their intention to divest
their generation business. The decision to divest the generation business was
due to a combination of factors relating to the restructuring of the electric
utility industry. On August 5, 1997, the NEES Companies reached an agreement to
sell the non-nuclear generation business to USGen New England, Inc., an exempt
wholesale generator, for approximately $1.65 billion, subject to various
adjustments. The sale is subject to approval by various state and federal
regulatory agencies, which may take six to twelve months. One of the conditions
to the sale is that all regulatory approvals must be obtained within eighteen
months. As a part of the divestiture plan, the Power Company will endeavor, at a
later date, to sell, or otherwise transfer, its minority interest in four
nuclear power plants. The assets being disposed of constitute more than half of
the assets of the Power Company. Thereafter, the transmission business of the
Power Company will be the Company's primary business. The NEES companies have
announced that reductions in the number of employees would occur as a result of
the sales.
As a result of the divestiture, the Power Company's asset base and
capitalization will be reduced substantially. The Power Company has
approximately $700 million of mortgage bonds outstanding. The bond indenture
restricts the sale of the trust property in its entirety or substantially in its
entirety. The proposed sale of the Power Company's generation business will
require that the Power Company (a) amend the bond indenture or (b) either
defease or call the bonds in connection with the proposed sale. Any defeasance
of bonds would be effected by the deposit of cash representing principal and
interest to the maturity date or interest, principal, and general redemption
premium to an earlier redemption date. The Power Company requires flexibility in
restructuring its capital structure following this reduction in assets and
reduced need for capital. The Offer and the Proposed Amendment are designed to
provide such flexibility.
For a more complete description of these transactions, see the documents
filed by NEES and the Power Company with the SEC pursuant to the Exchange Act,
as described below.
PURPOSE OF THE OFFER
NEES believes that the purchase of the Shares at this time in conjunction
with the Proposed Amendment represents an attractive economic opportunity that
will benefit NEES, its shareholders, the Power Company, and the NEES companies'
utility customers by (1) contributing to the elimination of the provisions
concerning unsecured indebtedness, and (2) retiring outstanding shares of the
Power Company's Preferred Stock in contemplation of their potential replacement
with comparatively less expensive financing alternatives.
In addition, the Offer gives Preferred Shareholders the opportunity to sell
their Shares at a price which NEES believes to be a premium to the market price
on the date of the announcement of the Offer and without the usual transaction
costs associated with a sale.
PROPOSED AMENDMENT
In response to these changes in the industry, and as discussed further
below under Proposed Amendment and Proxy Solicitation -- Reasons for the
Proposed Amendment, the Power Company seeks to amend the Provisions to eliminate
a limitation on the Power Company's ability to issue unsecured debt without the
approval of the holders of a majority of the outstanding Dividend Series
Preferred Stock and Preferred Stock -- Cumulative.
Among other things, if the Proposed Amendment is passed, the Power Company
may substantially increase its short-term, unsecured indebtedness to meet cash
needs related to the divestiture of its generation
7
<PAGE> 8
business. The Power Company currently anticipates that its long-term debt
following the reduction of its current capitalization and the adoption of the
Proposed Amendment will take the form of debentures (or unsecured bonds).
In order to facilitate the transition to a competitive environment, the
Power Company may establish one or more subsidiaries and transfer to them
certain "stranded" assets and related revenue streams.
OTHER INFORMATION
The Provisions provide that without a vote of at least a majority of the
votes entitled to be cast by the holders of the Dividend Series Preferred Stock
and the Preferred Stock - Cumulative of all Series then outstanding, voting as a
single class, the Power Company shall not merge or consolidate with or into any
other corporation or corporations or sell, lease, or dispose of all or
substantially all its assets, unless such merger, consolidation or sale, lease,
or disposition, or the issuance and assumption of all securities to be issued or
assumed in connection therewith, shall have been ordered, approved, or permitted
by the SEC under the provisions of the Holding Company Act or by any successor
commission or regulatory authority of the United States of America having
jurisdiction in the premises under said Act or by any court of the United States
having such jurisdiction. In the absence of any relevant decisional authority or
legislative history, it is unclear whether the SEC has jurisdiction to grant
such approval in the case of a sale by a regulated wholesale electric company,
such as the Power Company, to an exempt wholesale generating company, such as
USGen New England. The Power Company may either (i) submit a no-action letter to
the SEC seeking confirmation that the staff of the SEC would not take action
against the Power Company if no approval under the Holding Company Act were
sought, or (ii) file for approval under the Holding Company Act.
If the SEC determines that it does have jurisdiction, and gives its
approval, the only stockholder approval to be sought will be the approval of the
common and 6% Cumulative Preferred, voting together as a single class, as
required by Massachusetts law. NEES holds a sufficient number of shares of
common stock to ensure that such approval will be obtained.
If the SEC determines that it does not have jurisdiction, the Power Company
will need to obtain the approval of the holders of the Dividend Series Preferred
Stock (and any Preferred Stock - Cumulative) then outstanding as described
above. NEES would vote any Shares tendered pursuant to the Offer, or otherwise
acquired by NEES, in favor of the sale. If such approval were not to be obtained
NEES and the Power Company would consider all alternatives then available to
them, including further tenders, purchases of shares in the open market, or
redemptions of shares.
TERMS OF THE OFFER
NUMBER OF SHARES; PURCHASE PRICES; EXPIRATION DATE; DIVIDENDS
Upon the terms and subject to the conditions described herein and in the
applicable Letter of Transmittal and Proxy, NEES will purchase any and all
Shares that are validly tendered on or prior to the Expiration Date (and not
properly withdrawn in accordance with the procedures set forth under Withdrawal
Rights) at the purchase price per Share listed on the front cover of this
Booklet for the Shares tendered, plus an amount in cash equivalent to any
dividends declared prior to the Expiration Date, net to the seller in cash. See
Certain Conditions of the Offer and Extension of Tender Period; Termination;
Amendments.
THE OFFER FOR EACH SERIES OF PREFERRED IS NOT CONDITIONED UPON ANY MINIMUM
NUMBER OF SHARES OF SUCH SERIES BEING TENDERED AND IS INDEPENDENT OF THE OFFER
FOR ANY OTHER SERIES. THE OFFER, HOWEVER, IS CONDITIONED UPON, AMONG OTHER
THINGS, APPROVAL AND ADOPTION OF THE PROPOSED AMENDMENT, AS DESCRIBED HEREIN, AT
THE SPECIAL MEETING. SEE CERTAIN CONDITIONS OF THE OFFER.
The Offer is being sent to all persons in whose names Shares are registered
on the books of the Power Company as of the close of business on November 3,
1997, as well as to all persons in whose names Shares are
8
<PAGE> 9
registered on November 12, 1997, the Record Date. Only a record holder of Shares
on the Record Date may vote in person or by proxy at the Special Meeting. No
record date is fixed for determining which persons are permitted to tender
Shares. Any person who is the beneficial owner but not the record holder of
Shares on the Record Date must arrange for the record transfer of such Shares
prior to tendering. The Shares will trade "with proxy" during the period which
begins two days prior to the Record Date and which will end at the close of
business on the Expiration Date, as further discussed under Proposed Amendment
and Proxy Solicitation -- Voting Securities, Rights, and Procedures.
With respect to each Series of Preferred, the Expiration Date is the later
of 5:00 p.m. Eastern Standard Time, on Friday, December 12, 1997 or the latest
time and date to which the Offer with respect to such Series of Preferred is
extended. NEES expressly reserves the right, in its sole discretion, and at any
time and/or from time to time, to extend the period of time during which the
Offer for any Series is open, by giving oral or written notice of such extension
to the Depositary and making a public announcement thereof, without extending
the period of time during which the Offer for any other Series is open. There is
no assurance whatsoever that NEES will exercise its right to extend the Offer
for any Series of Preferred. If NEES decides, in its sole discretion, to (i)
decrease the number of Shares of any Series being sought, (ii) increase or
decrease the consideration offered in the Offer to holders of any Series, or
(iii) increase or decrease the Soliciting Dealers' fees and, at the time that
notice of such increase or decrease is first published, sent, or given to
holders of such Series in the manner specified herein, the Offer for such Series
is scheduled to expire at any time earlier than the tenth business day from the
date that such notice is first so published, sent, or given, such Offer will be
extended until the expiration of such ten-business-day period. For purposes of
the Offer, a business day means any day other than a Saturday, Sunday, or
Federal holiday and consists of the time period from 12:01 a.m. through 12:00
midnight, Eastern Standard Time.
NO ALTERNATIVE, CONDITIONAL, OR CONTINGENT TENDERS WILL BE ACCEPTED.
Tendering Preferred Shareholders will be entitled to any dividends declared
prior to the Expiration Date.
PROCEDURE FOR TENDERING SHARES
To tender Shares of any Series of Preferred pursuant to the Offer, the
tendering owner of Shares must either:
(a) send to the Depositary (at one of its addresses set forth on the
back cover of this Booklet) a properly completed and duly executed Letter
of Transmittal and Proxy, together with any required signature guarantees
and any other documents required by the Letter of Transmittal and Proxy
(and either (i) tender certificates for the Shares to the Depositary at one
of its addresses or (ii) deliver such Shares pursuant to the procedures for
book-entry transfer described herein (and a confirmation of such delivery
must be received by the Depositary (a Book-Entry Confirmation)), in each
case on or prior to the Expiration Date); or
(b) comply with the guaranteed delivery procedure described under
Guaranteed Delivery Procedure below.
A tender of Shares made pursuant to any method of delivery set forth herein
or in the Letter of Transmittal and Proxy will constitute a binding agreement
between the tendering holder and NEES upon the terms and subject to the
conditions of the Offer.
The Depositary will establish an account with respect to the Shares of each
Series of Preferred at The Depository Trust Company and the Philadelphia
Depository Trust Company (each a Book-Entry Transfer Facility) for purposes of
the Offer within two business days after the date of this Booklet, and any
financial institution that is a participant in the system of the Book-Entry
Transfer Facility may make delivery of Shares by causing the Book-Entry Transfer
Facility to transfer such Shares into the Depositary's account in accordance
with the procedures of the Book-Entry Transfer Facility. Although delivery of
Shares may be effected through book-entry transfer, such delivery must be
accompanied by either (i) a properly completed and duly executed Letter of
Transmittal and Proxy, together with any required signature guarantees and any
other required documents or (ii) an Agent's Message (as hereinafter defined)
and, in any case, must be
9
<PAGE> 10
received by the Depositary at one of its addresses set forth on the back cover
of this Booklet on or prior to the Expiration Date. DELIVERY OF SUCH LETTER OF
TRANSMITTAL AND PROXY AND ANY OTHER REQUIRED DOCUMENTS TO A BOOK-ENTRY TRANSFER
FACILITY OR TO NEES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility, received by the Depositary, and forms a part of the
Book-Entry Confirmation when the tender is initiated, which states that the
Book-Entry Transfer Facility has received an express acknowledgment from a
participant in such Book-Entry Transfer Facility tendering Shares that the
participant has received and agrees to be bound by the terms of the Letter of
Transmittal and Proxy and that NEES may enforce such agreement against the
participant.
Except as otherwise provided below, all signatures on a Letter of
Transmittal and Proxy must be guaranteed by a firm that is a member of a
registered national securities exchange or the National Association of
Securities Dealers, Inc. (the NASD), or by a commercial bank or trust company
having an office or correspondent in the United States that is a participant in
an approved Signature Guarantee Medallion Program (each of the foregoing being
referred to as an Eligible Institution). Signatures on a Letter of Transmittal
and Proxy need not be guaranteed if (a) the Letter of Transmittal and Proxy is
signed by the registered owner of the Shares tendered therewith and such owner
has not completed the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on the Letter of Transmittal and Proxy
or (b) such Shares are tendered for the account of an Eligible Institution. See
Instructions 1 and 5 of the Letter of Transmittal and Proxy. If Shares are
registered in the name of a person other than the signatory on the Letter of
Transmittal and Proxy, or if unpurchased Shares are to be issued to a person
other than the registered holder(s), the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered holder(s) appear on the Shares with the
signature(s) on the Shares or stock powers guaranteed as stated above. See
Instructions 4 and 7 to the Letter of Transmittal and Proxy.
Guaranteed Delivery Procedure. If a Preferred Shareholder desires to
tender Shares pursuant to the Offer and such Shareholder's certificates are not
immediately available or the procedures for book-entry transfer cannot be
completed on a timely basis or time will not permit all required documents to
reach the Depositary on or prior to the Expiration Date, such Shares may
nevertheless be tendered if all of the following guaranteed delivery procedures
are complied with:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by NEES and the Power Company
herewith, is received (with any required signatures or signature
guarantees) by the Depositary as provided below on or prior to the
Expiration Date; and
(iii) the certificates for all tendered Shares in proper form for
transfer or a Book-Entry Confirmation with respect to all tendered Shares,
together with a properly completed and duly executed Letter of Transmittal
and any other documents required by the Letter of Transmittal and Proxy,
are received by the Depositary no later than three New York Stock Exchange,
Inc. (NYSE) trading days after the date of execution of such Notice of
Guaranteed Delivery. A NYSE trading day is any day on which the NYSE is
open for business.
The Notice of Guaranteed Delivery may be either delivered by hand or mailed
to the Depositary and must include an endorsement by an Eligible Institution in
the form set forth in such Notice of Guaranteed Delivery.
In all cases, Shares shall not be deemed validly tendered unless a properly
completed and duly executed Letter of Transmittal or, if applicable, an Agent's
Message, is received by the Depositary.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer in all cases will be made only after timely
receipt by the Depositary of certificates for (or an Agent's Message with
respect to) such Shares, a Letter of Transmittal and Proxy, properly completed
and duly
10
<PAGE> 11
executed, with any required signature guarantees, and all other documents
required by the Letter of Transmittal and Proxy.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. BECAUSE IT
IS THE TIME OF RECEIPT, NOT THE TIME OF MAILING, WHICH DETERMINES WHETHER A
TENDER HAS BEEN MADE PRIOR TO THE EXPIRATION DATE, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY.
TO AVOID FEDERAL INCOME TAX BACKUP WITHHOLDING EQUAL TO 31% OF THE GROSS
PAYMENTS MADE PURSUANT TO THE OFFER, EACH TENDERING PREFERRED SHAREHOLDER WHO IS
A UNITED STATES PERSON MUST NOTIFY THE DEPOSITARY OF THE CORRECT TAXPAYER
IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION BY PROPERLY
COMPLETING AND EXECUTING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF
TRANSMITTAL AND PROXY (OR, IN THE CASE OF A FOREIGN SHAREHOLDER, FORM W-8
OBTAINABLE FROM THE DEPOSITARY). SEE CERTAIN U.S. FEDERAL INCOME TAX
CONSIDERATIONS.
EACH PREFERRED SHAREHOLDER IS URGED TO CONSULT WITH SUCH PREFERRED
SHAREHOLDER'S OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF THE OFFER.
All questions as to the form of documents and the validity, eligibility
(including the time of receipt), and acceptance for payment of any tender of
Shares will be determined by NEES, in its sole discretion, and its determination
will be final and binding. NEES reserves the absolute right to reject any or all
tenders of Shares that (i) it determines are not in proper form or (ii) the
acceptance for payment of or payment for which may, in the opinion of NEES's
counsel, be unlawful. NEES also reserves the absolute right to waive any defect
or irregularity in any tender of Shares. None of NEES, the Power Company, the
Dealer Manager, the Depositary, the Information Agent, or any other person will
be under any duty to give notice of any defect or irregularity in tenders, nor
shall any of them incur any liability for failure to give any such notice. Any
condition to the Offer may be waived by NEES, in whole or in part, at any time
and from time to time in its sole discretion.
WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
on or prior to the Expiration Date. Thereafter, such tenders are irrevocable,
except that they may be withdrawn after January 12, 1998, unless previously
accepted for payment as provided in this Booklet.
To be effective, a written notice of withdrawal must be timely received by
the Depositary, at one of its addresses set forth on the back cover of this
Booklet, and must specify the name of the person who tendered the Shares of such
Series of Preferred to be withdrawn and the number of Shares to be withdrawn. If
the Shares to be withdrawn have been delivered to the Depositary, a signed
notice of withdrawal with signatures guaranteed by an Eligible Institution
(except in the case of Shares tendered by an Eligible Institution) must be
submitted prior to the release of such Shares. In addition, such notice must
specify, in the case of Shares tendered by delivery of certificates, the name of
the registered owner (if different from that of the tendering Shareholder) and
the serial numbers shown on the particular certificates evidencing the Shares to
be withdrawn or, in the case of Shares tendered by book-entry transfer, the name
and number of the account at the Book-Entry Transfer Facility to be credited
with the withdrawn Shares and the name of the registered holder (if different
from the name of such account). Withdrawals may not be rescinded, and Shares
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be re-tendered by again following one of
the procedures described in Terms of the Offer -- Procedure for Tendering Shares
at any time on or prior to the Expiration Date.
11
<PAGE> 12
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by NEES, in its sole discretion, and
its determination will be final and binding. None of NEES, the Power Company,
the Dealer Manager, the Depositary, the Information Agent, or any other person
will be under any duty to give notification of any defect or irregularity in any
notice of withdrawal or will incur any liability for failure to give any such
notification.
ACCEPTANCE OF SHARES FOR PAYMENT AND PAYMENT OF PURCHASE PRICE AND DIVIDENDS
Upon the terms and subject to the conditions of the Offer, and as promptly
as practicable after the Expiration Date, NEES will accept for payment (and
thereby purchase) and pay for Shares validly tendered and not withdrawn as
permitted in Terms of the Offer -- Withdrawal Rights. Thereafter, payment for
all Shares validly tendered on or prior to the Expiration Date and accepted
pursuant to the Offer will be made by the Depositary by check as promptly as
practicable after the Expiration Date. In all cases, payment for Shares accepted
for payment pursuant to the Offer will be made promptly but only after timely
receipt by the Depositary of certificates for such Shares (or an Agent's
Message), a properly completed and duly executed Letter of Transmittal and
Proxy, and any other required documents.
For purposes of the Offer, NEES will be deemed to have accepted for payment
(and thereby purchased) Shares that are validly tendered and not withdrawn as,
if, and when it gives oral or written notice to the Depositary of its acceptance
for payment of such Shares. NEES will pay for Shares that it has purchased
pursuant to the Offer by depositing the purchase price (plus an amount in cash
equivalent to any dividends declared thereon prior to the Payment Date) with the
Depositary, which will act as agent for tendering Preferred Shareholders for the
purpose of receiving payment from NEES and transmitting payment to the tendering
Shareholders. Under no circumstances will interest be paid on amounts to be paid
to tendering Preferred Shareholders, regardless of any delay in making such
payment.
Certificates for all Shares not validly tendered will be returned or, in
the case of Shares tendered by book-entry transfer, such Shares will be credited
to an account maintained with the Book-Entry Transfer Facility, as promptly as
practicable, without expense to the tendering Preferred Shareholder.
If certain events occur, NEES may not be obligated to purchase Shares
pursuant to the Offer. See Terms of the Offer -- Certain Conditions of the
Offer.
NEES will pay or cause to be paid any stock transfer taxes with respect to
the sale and transfer of any Shares to it or its order pursuant to the Offer.
If, however, payment of the purchase price is to be made to, or Shares not
tendered or not purchased are to be registered in the name of, any person other
than the registered owner, or if tendered Shares are registered in the name of
any person other than the person signing the Letter of Transmittal and Proxy,
the amount of any stock transfer taxes (whether imposed on the registered owner,
such other person, or otherwise) payable on account of the transfer to such
person will be deducted from the purchase price unless satisfactory evidence of
the payment of such taxes, or exemption therefrom, is submitted. See Instruction
6 of the accompanying Letter of Transmittal and Proxy.
CERTAIN CONDITIONS OF THE OFFER
NEES WILL NOT BE REQUIRED TO ACCEPT FOR PAYMENT OR PAY FOR ANY SHARES OF
ANY SERIES TENDERED IF THE PROPOSED AMENDMENT IS NOT APPROVED AND ADOPTED AT THE
SPECIAL MEETING OR IF THE TENDERING DIVIDEND SERIES PREFERRED STOCKHOLDER DID
NOT VOTE IN FAVOR OF THE PROPOSED AMENDMENT.
In addition, notwithstanding any other provision of the Offer, NEES will
not be required to accept for payment or pay for any Shares tendered, and may
terminate or amend the Offer (by oral or written notice to the Depositary and
timely public announcement) or may postpone (subject to the requirements of the
Securities Exchange Act of 1934, as amended (the Exchange Act) for prompt
payment for or return of Shares) the acceptance for payment of, or payment for,
Shares tendered, if at any time after November 5,
12
<PAGE> 13
1997, and at or before the Expiration Date, any of the following shall have
occurred (which shall not have been waived by NEES):
(a) there shall have been threatened, instituted, or pending any
action or proceeding by any government or governmental, regulatory, or
administrative agency, authority, or tribunal or any other person, domestic
or foreign, or before any court, authority, agency, or tribunal that (i)
challenges the acquisition of Shares pursuant to the Offer or otherwise in
any manner relates to or affects the Offer or (ii) in the reasonable
judgment of NEES, would or might materially and adversely affect the
business, condition (financial or otherwise), income, operations, or
prospects of NEES and its subsidiaries taken as a whole, or otherwise
materially impair in any way the contemplated future conduct of the
business of NEES or any of its subsidiaries or materially impair the
Offer's contemplated benefits to NEES;
(b) there shall have been any action threatened, pending, or taken, or
approval withheld, or any statute, rule, regulation, judgment, order, or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced, or deemed to be applicable to the Offer or NEES or any
of its subsidiaries, by any legislative body, court, authority, agency, or
tribunal that, in NEES's reasonable judgment, would or might directly or
indirectly (i) make the acceptance for payment of, or payment for, some or
all of the Shares illegal or otherwise restrict or prohibit consummation of
the Offer; (ii) delay or restrict the ability of NEES, or render NEES
unable, to accept for payment or pay for some or all of the Shares; (iii)
materially impair the contemplated benefits of the Offer to NEES or the
Power Company (including materially increasing the effective interest cost
of certain types of unsecured debt); or (iv) materially affect the
business, condition (financial or otherwise), income, operations, or
prospects of NEES and its subsidiaries taken as a whole, or otherwise
materially impair in any way the contemplated future conduct of the
business of NEES or any of its subsidiaries;
(c) there shall have occurred (i) any significant decrease in the
market price of the Shares; (ii) any change in the general political,
market, economic, or financial conditions in the United States or abroad
that, in the reasonable judgment of NEES, would or might have a material
adverse effect on NEES's business, operations, prospects, or ability to
obtain financing generally or the trading in the Shares or equity
securities of NEES; (iii) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation on, or any event that, in NEES's reasonable judgment, would or
might affect the extension of credit by lending institutions in the United
States; (iv) the commencement or escalation of war, armed hostilities, or
other international or national calamity directly or indirectly involving
the United States; (v) any general suspension of trading in, or limitation
on prices for, securities on any national securities exchange or in the
over-the-counter market; (vi) in the case of any of the foregoing existing
at the time of the commencement of the Offer, in NEES's reasonable
judgment, a material acceleration or worsening thereof; (vii) any decline
in either the Dow Jones Industrial Average or the Standard and Poor's
Composite 500 Stock Index by an amount in excess of 10% measured from the
close of business on November 5, 1997; or (viii) a decline in the ratings
accorded any of NEES's or the Power Company's securities by Standard &
Poor's, a division of The McGraw Hill Companies (S&P), Moody's Investors
Service, Inc. (Moody's), or Duff & Phelps, Inc. (D&P), or an announcement
by S&P, Moody's, or D&P that it has placed any such rating under
surveillance or review with negative implications;
(d) any tender or exchange offer with respect to some or all of the
Shares (other than the Offer) or any equity securities of NEES, or a
merger, acquisition, or other business combination proposal for NEES, shall
have been proposed, announced, or made by any person or entity;
(e) there shall have occurred any event or events that have resulted,
or, in NEES's reasonable judgment, may result, in an actual or threatened
change in the business, condition (financial or otherwise), income,
operations, stock ownership, or prospects of NEES and its subsidiaries; or
(f) the SEC shall have withheld approval, under the Holding Company
Act, of the acquisition of the Shares by NEES pursuant to the Offer or the
approval and adoption of the Proposed Amendment at the Special Meeting;
13
<PAGE> 14
and, in the sole judgment of NEES, such event or events make it undesirable or
inadvisable to proceed with the Offer or with such acceptance for payment or
payment. With respect to the approval of the SEC referenced in clause (f) above,
the SEC must find that the acquisition of the Shares by NEES is not detrimental
to the public interest or the interests of the investors or consumers, and that
the consideration paid in connection with the acquisition and the adoption of
the Proposed Amendment, including fees, commissions, and other remuneration, is
reasonable.
The foregoing conditions (including the condition that the Proposed
Amendment be approved and adopted at the Special Meeting) are for the sole
benefit of NEES and may be asserted by NEES regardless of the circumstances
(including any action or inaction by NEES) giving rise to any such condition,
and any such condition may be waived by NEES, in whole or in part, at any time
and from time to time in its sole discretion. A decision by NEES to terminate or
otherwise amend the Offer, following the occurrence of any of the foregoing,
with respect to one Series will not create an obligation on behalf of NEES to
terminate or otherwise amend in a similar manner the Offer with respect to any
other Series. The failure by NEES at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time. Any determination by NEES concerning the events described above will be
final and binding on all parties.
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS
NEES expressly reserves the right, in its sole discretion, and at any time
and from time to time on or prior to the Expiration Date, to extend the period
of time during which the Offer for any Series is open by giving oral or written
notice of such extension to the Depositary, without extending the period of time
during which the Offer for any other Series is open. There can be no assurance,
however, that NEES will exercise its right to extend the Offer for any Series.
During any such extension, all Shares of the subject Series previously tendered
will remain subject to the Offer, except to the extent that such Shares may be
withdrawn as set forth in Withdrawal Rights.
NEES also expressly reserves the right, in its sole discretion, to, among
other things, terminate the Offer and not accept for payment or pay for any
Shares tendered, subject to Rule 13e-4(f)(5) under the Exchange Act, which
requires NEES either to pay the consideration offered or to return the Shares
tendered promptly after the termination or withdrawal of the Offer upon the
occurrence of any of the conditions specified in Certain Conditions of the Offer
by giving oral or written notice of such termination to the Depositary, and
making a public announcement thereof.
Subject to compliance with applicable law, NEES further reserves the right,
in its sole discretion, to amend the Offer in any respect. Amendments to the
Offer may be made at any time and from time to time effected by public
announcement thereof, such announcement, in the case of an extension, to be
issued no later than 9:00 a.m., Eastern Standard Time, on the next business day
after the previously scheduled Expiration Date. Any public announcement made
pursuant to the Offer will be disseminated promptly to Preferred Shareholders
affected thereby in a manner reasonably designed to inform such Preferred
Shareholders of such change. Without limiting the manner in which NEES may
choose to make a public announcement, except as required by applicable law, NEES
shall have no obligation to publish, advertise, or otherwise communicate any
such public announcement other than by making a release to the Dow Jones News
Service.
If NEES materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, NEES
will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) under the Exchange Act. Those rules require that the minimum period
during which the Offer must remain open following material changes in the terms
of the Offer or information concerning the Offer (other than a change in price,
a change in percentage of securities sought, or a change in the dealer's
solicitation fee) will depend on the facts and circumstances, including the
relative materiality of such terms or information. The SEC has stated that, in
its view, an offer should remain open for a minimum of five business days from
the date that a notice of such a material change is first published, sent, or
given. If the Offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from, and including, the
date that NEES publishes, sends, or gives to Preferred Shareholders a notice
that it will
14
<PAGE> 15
(i) increase or decrease the price it will pay for Shares, (ii) decrease the
percentage of Shares it seeks, or (iii) increase or decrease the soliciting
dealers' fees, the Offer will be extended until the expiration of such period of
ten business days.
THE OFFER FOR EACH SERIES OF PREFERRED IS INDEPENDENT OF THE OFFER FOR ANY
OTHER SERIES OF PREFERRED. IF NEES EXTENDS OR AMENDS ANY OFFER WITH RESPECT TO
ONE SERIES OF PREFERRED FOR ANY REASON, NEES WILL HAVE NO OBLIGATION TO EXTEND
THE OFFER FOR ANY OTHER SERIES OF PREFERRED.
CERTAIN EFFECTS OF THE OFFER
Shares validly tendered to the Depositary pursuant to the Offer and not
withdrawn in accordance with the procedures set forth herein shall be held until
the Expiration Date (or returned to the extent the Offer is terminated in
accordance herewith). To the extent that the Proposed Amendment is approved and
the Shares tendered are accepted for payment and paid for in accordance with the
terms hereof, NEES intends either to sell its Shares to the Power Company or to
donate the Shares to the Power Company as a capital contribution. At that time,
it is expected that the Power Company will retire and cancel the Shares.
However, in the event the Proposed Amendment is not adopted at the Special
Meeting, NEES may elect, but is not obligated, to waive, subject to applicable
law, such condition. The Power Company anticipates that, subsequent to that
waiver and purchase of the Shares, it would call another special meeting of its
shareholders and solicit proxies therefrom for an amendment substantially
similar to the Proposed Amendment. At that meeting, NEES would vote any Shares
acquired by it pursuant to the Offer or otherwise (together with its shares of
common stock) in favor of such amendment, thereby maximizing the prospects for
the adoption of such amendment.
Voting Power. If any approval of the proposed divestiture of the Power
Company's generation business is required on the part of the Dividend Series
Preferred Shareholders, the tender of Shares pursuant to the Offer or any
subsequent purchases of Shares by NEES will tend to diminish the aggregate
voting power of the remaining Dividend Series Preferred Shareholders. As
discussed under Purpose of the Offer, Proposed Amendment, and Proxy
Solication -- Other Information, the Power Company may require the approval of a
majority of the Dividend Shares Preferred Stock and Preferred
Stock -- Cumulative of all series then outstanding, voting as a single class, in
connection with the sale of its non-nuclear business. NEES may elect to retain
any Shares acquired by it pursuant to the Offer and vote such Shares at a later,
separate, special meeting in favor of the sale, thereby maximizing the prospects
of securing the necessary vote.
Trading and Liquidity. Any purchase of Shares by NEES will reduce the
number of Shares of each of the Series of Preferred that might otherwise trade
publicly or become available for purchase and/or sale and will likely reduce the
number of owners of Shares of each of the Series of Preferred, which could
adversely affect the liquidity and sale value of the Shares not purchased in the
Offer.
To the extent that Shares of any Series of Preferred are tendered and
accepted for payment in the Offer, the trading market for Shares of such Series
that remain outstanding may be significantly more limited, which might adversely
affect the liquidity, market value, and price volatility of such Shares. Equity
securities with a smaller outstanding market value available for trading (the
float) may command a lower price than would comparable equity securities with a
greater float. Therefore, the market price for Shares that are not tendered in
the Offer may be affected adversely to the extent that the amount of Shares
purchased pursuant to the Offer reduces the float. The reduced float may also
make the trading price of the Shares that are not tendered and accepted for
payment more volatile. Holders of the remaining Shares may attempt to obtain
quotations for the Shares from their brokers, through the Electronic Bulletin
Board, or otherwise; however, there can be no assurance that any trading market
will exist for such Shares following consummation of the Offer. To the extent a
market continues to exist for the Shares after the Offer, the Shares may trade
at a discount compared to present trading, depending on the market for Shares
with similar features, the performance of the Power Company, and other factors.
There is no assurance that an active market in the Shares will exist and no
assurance as to the prices at which the Shares may trade.
The Dividend Series Preferred Stock is currently registered under Section
12(g) of the Exchange Act. If the Dividend Series Preferred Stock is no longer
held by more than 300 owners of record, the Power Company
15
<PAGE> 16
may apply to the SEC for termination of such registration. Such termination
would substantially reduce the information required to be furnished by the Power
Company to holders of Dividend Series Preferred Stock and could make certain
provisions of the Exchange Act no longer applicable to the Power Company. The
registration of the 6% Cumulative Preferred Stock was terminated in June 1994.
As of September 29, 1997, there were 38 registered holders of the 4.56%
Series, 91 registered holders of the 4.60% Series, 1 registered holder of the
4.64% Series, 60 registered holders of the 6.08% Series, and 194 registered
holders of the 6% Cumulative Preferred.
Future Purchases or Redemption of Shares. Preferred Shareholders are not
under any obligation to tender Shares pursuant to the Offer. The Offer does not
constitute a notice of redemption of any Series of Dividend Series Preferred
pursuant to the Power Company's Provisions, neither does NEES or the Power
Company intend to effect any such redemption by making the Offer. Further, the
Offer does not constitute a waiver by the Power Company of any option it has to
redeem Shares.
Shares which are not tendered will continue to be subject to their current
redemption and liquidation provisions. The various series of the Dividend Series
Preferred Stock are redeemable in whole or in part upon not less than thirty
days' notice at the applicable redemption prices plus accrued dividends through
the date fixed for redemption. The redemption prices for the 4.56% Series, the
4.60% Series, the 4.64% Series, and the 6.08% Series are $104.08, $101.00,
$102,56, and $102.34, respectively. There are no sinking funds for any of the
Dividend Series Preferred Stock. The Provisions do not provide for redemption of
the 6% Cumulative Preferred. The Preferred Stockholders have no preemptive or
conversion rights.
Upon liquidation, dissolution, or winding up of the affairs of the Power
Company or any distribution of capital of the Power Company, owners of the
Dividend Series Preferred Shares would be entitled to receive an amount equal to
the full distributive amounts fixed therefor together with accrued dividends
through the date fixed for the payment of such distributive amounts. In case any
liquidation, dissolution, or winding up of the Power Company is voluntary,
Dividend Series Preferred Shareholders shall be entitled to receive said
redemption prices plus accrued dividends; if involuntary, to $100 per Share plus
accrued dividends through the date fixed for the payment of such distributive
amounts. In the case of any liquidation, dissolution, or winding up of the Power
Company, voluntary or involuntary, 6% Cumulative Preferred owners shall be
entitled to receive $100 per Share plus accrued dividends through the date fixed
for the payment of such distributive amounts. The contemplated disposition of
the Power Company's generation assets will not be deemed to be a liquidation of
the Power Company.
After the consummation of the Offer, NEES or the Power Company may purchase
additional Shares on the open market, in privately negotiated transactions,
through one or more tender offers, or otherwise. Any such purchases may be on
the same terms as, or on terms which are more or less favorable to holders of
Shares than, the terms of the Offer. However, Rule 13e-4(f)(6) under the
Exchange Act prohibits NEES and its affiliates (including the Power Company)
from purchasing any Shares of a Series of Preferred, other than pursuant to the
Offer, until at least ten business days after the Expiration Date with respect
to that Series of Preferred. Any future purchases of Shares by NEES or the Power
Company would depend on many factors, including the market price of the Shares,
NEES's business and financial position, and legal restrictions on NEES's ability
to purchase Shares, as well as general economic and market conditions.
OTHER INFORMATION
As discussed under "Purpose of the Offer, Proposed Amendment, and Proxy
Solicitation -- Industry Restructuring" and in the documents incorporated by
reference, the Power Company is divesting itself of or attempting to divest
itself of its generation business. This process will result in reductions in
employees and reallocation of executive responsibilities. As further discussed
under "Purpose of the Offer, Proposed Amendment, and Proxy
Solicitation -- Industry Restructuring" and in the documents incorporated by
reference, in light of the changes to the utility industry, NEES and the Power
Company have considered various strategies to enhance their competitive
position, including business combinations with other companies. Except as
disclosed herein and in the documents incorporated by reference, neither NEES
nor the Power Company has plans or proposals that would relate to or result in
(a) the acquisition by any person or entity of
16
<PAGE> 17
additional securities of the Power Company or the disposition of securities of
the Power Company, other than in the ordinary course of business; (b) an
extraordinary corporate transaction, such as a merger, reorganization, or
liquidation, involving the Power Company or any of its subsidiaries; (c) a sale
or transfer of a material amount of assets of the Power Company or any of its
subsidiaries; (d) any change in the present Board or management of the Power
Company; (e) any material change in the present dividend rate or policy, or
indebtedness or capitalization of the Power Company; (f) any other material
change in the Power Company's corporate structure or business; (g) any change in
the Power Company's Provisions or any actions that may impede the acquisition of
control of the Power Company by any person; (h) a class of equity securities of
the Power Company being delisted from a national securities exchange or no
longer authorized to be quoted on the OTC; (i) a class of equity securities of
the Power Company becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Exchange Act; or (j) the suspension of the Power
Company's obligation to file reports pursuant to Section 15(d) of the Exchange
Act.
17
<PAGE> 18
PROPOSED AMENDMENT AND PROXY SOLICITATION
LOGO
NEW ENGLAND POWER COMPANY
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
25 RESEARCH DRIVE
WESTBOROUGH, MASSACHUSETTS 01582
NOVEMBER 6, 1997
To the Holders of Common Stock,
6% Cumulative Preferred Stock, and
Dividend Series Preferred Stock of
NEW ENGLAND POWER COMPANY
You are hereby notified that the Special Meeting of Stockholders of New
England Power Company will be held in the Directors Room, 25 Research Drive,
Westborough, Massachusetts, on December 12, 1997, at 4:30 p.m., Eastern Standard
Time, for the following purposes:
1. Amendment of the Articles of Organization and By-laws to delete in
its entirety Article I, Section 4E(4), limiting the Power Company's ability
to issue unsecured indebtedness; and
2. Transaction of such other business as may be appropriate and
incidental to the foregoing purposes or which may properly come before the
meeting or any adjourned session thereof.
Stockholders entitled to vote will be determined on the basis of the
records of the Company at the close of business November 12, 1997.
The accompanying material contains further information about the matters to
be considered at the meeting.
By order of the Board of Directors.
ROBERT KING WULFF
Clerk
18
<PAGE> 19
SPECIAL MEETING
This Booklet is first being mailed on or about November 7, 1997 to the
Preferred Shareholders of the Power Company in connection with the solicitation
of proxies by the Board of Directors of the Power Company (the Board) for use at
the Special Meeting. At the Special Meeting, the shareholders of record of the
Power Company will vote upon the Proposed Amendment to the Provisions. The Board
of Directors is not asking holders of the 6% Cumulative Preferred for a proxy,
and they are requested not to send a proxy. They are entitled, however, to
attend and vote at the Special Meeting and to give proxies to others in
accordance with applicable law.
PROXIES
THE PROXY INCLUDED IN THE LETTER OF TRANSMITTAL AND PROXY IS SOLICITED FROM
THE HOLDERS OF DIVIDEND SERIES PREFERRED STOCK BY THE POWER COMPANY'S BOARD,
WHICH RECOMMENDS VOTING FOR THE PROPOSED AMENDMENT. All shares of the Power
Company's common stock will be voted in favor of the Proposed Amendment. THE
BOARD IS NOT ASKING HOLDERS OF THE 6% CUMULATIVE PREFERRED STOCK FOR A PROXY AND
THEY ARE REQUESTED NOT TO SEND A PROXY. Shares of the Power Company's Dividend
Series Preferred Stock represented by properly executed proxies received at or
prior to the Special Meeting will be voted in accordance with the instructions
thereon. If no instructions are indicated, duly executed proxies will be voted
in accordance with the recommendation of the Board. It is not anticipated that
any other matters will be brought before the Special Meeting. However, the
enclosed proxy gives discretionary authority to the proxy holders named therein
should any other matters be presented at the Special Meeting, and it is the
intention of the proxy holders to act on any other matters in accordance with
their best judgment.
Execution of a proxy will not prevent a Preferred Shareholder from
attending the Special Meeting and voting in person. Any Preferred Shareholder
giving a proxy may revoke it at any time before it is voted by delivering to the
Clerk of the Power Company written notice of revocation bearing a later date
than the proxy, by delivering a duly executed proxy bearing a later date, or by
voting in person by ballot at the Special Meeting. A proxy may not be revoked
for shares tendered pursuant to the Offer, unless the tender is withdrawn.
Withdrawal of Shares tendered pursuant to the Offer will not revoke a properly
executed proxy.
RELATIONSHIP TO THE OFFER; SPECIAL CASH PAYMENT
As noted above, the Offer and Proposed Amendment constitute an integrated
strategy of NEES and the Power Company in anticipation of the restructuring of
the capitalization of the Power Company arising from the expected sale of its
generation business. See Purpose of the Offer, Proposed Amendment, and Proxy
Solicitation.
Dividend Series Preferred Shareholders who wish to tender their Shares
pursuant to the Offer are required to vote in favor of the Proposed Amendment.
Further, the Offer is conditioned upon the approval and adoption of the Proposed
Amendment at the Special Meeting.
Subject to the terms and conditions set forth in this Booklet, if (but only
if) the Proposed Amendment is approved and adopted by the Power Company's
shareholders, the Power Company will make a Special Cash Payment in the amount
of $1.00 per Share to each Dividend Series Preferred Shareholder of record who
voted in favor of the Proposed Amendment, provided that such Shares have not
been tendered pursuant to the Offer. The Power Company intends to make the
Special Cash Payment although there is no binding legal precedent as to the
permissibility of such payments and there can be no assurance as to how a court
would rule on the question. If a Dividend Series Preferred Shareholder votes
against the Proposed Amendment or abstains, such Preferred Shareholder shall not
be entitled to the Special Cash Payment (regardless of whether the Proposed
Amendment is approved and adopted). The Special Cash Payment will be paid out of
the Power Company's general funds promptly after the Proposed Amendment shall
have become effective. However, no accrued interest will be paid on the Special
Cash Payment regardless of any delay in making such payments.
19
<PAGE> 20
VOTING SECURITIES, RIGHTS, AND PROCEDURES
Only holders of record of the Power Company's outstanding voting securities
at the close of business on November 12, 1997, the Record Date (or their legal
representatives or attorneys-in-fact), will be entitled to vote in person or by
proxy at the Special Meeting and to receive the Special Cash Payment from the
Power Company. Any beneficial holder of Shares who is not the registered holder
of such Shares as of the Record Date (as would be the case for any beneficial
holder whose Shares are registered in the name of such holder's broker, dealer,
commercial bank, trust company, or other nominee) must arrange with the holder
of record on the Record Date to execute and deliver a proxy form on such
beneficial owner's behalf. If a beneficial holder of Shares intends to attend
the Special Meeting and vote in person, such beneficial holder must obtain a
legal proxy form from his or her broker, dealer, commercial bank, trust company,
or other nominee.
The Dividend Series Preferred Stock will trade, during the period which
begins two days prior to the Record Date and which will end at the close of
business on the Expiration Date, in the over-the-counter market under the
symbols "NEEAT" for the 4.56% Series, "NEEDT" for the 4.60% Series, "NEEFT" for
the 4.64% Series, and "NEEGT" for the 6.08% Series, indicating that such Shares
are trading "with proxy." A Dividend Series Preferred Shareholder who acquires
such Shares during this period must obtain, or have his or her authorized
representative obtain, an assignment of proxy (which is included in the
applicable Letter of Transmittal and Proxy) at settlement from the seller. The
NASD and The Depository Trust Company have issued notices informing their
members and participants that such Shares will trade "with proxy" and that
settlement of all trades during the period described above should include an
assignment of proxy from the seller.
The Power Company's authorized voting securities consist of common stock,
6% Cumulative Preferred, and Dividend Series Preferred Stock. There are four
series of the Dividend Series Preferred Stock currently outstanding. There is
also authorized a class of Preferred Stock -- Cumulative of which there are no
shares currently outstanding. The common stock and 6% Cumulative Preferred share
general voting rights and vote together as a single class. The four series of
Dividend Series Preferred Stock vote together as a single class. Each share of
stock has one vote per share. The Shares outstanding as of the Record Date are
as follows:
<TABLE>
<CAPTION>
CLASS SHARES OUTSTANDING
------------------------------------------------------------ ------------------
<S> <C>
Common...................................................... 6,449,896
6% Cumulative Preferred..................................... 75,020
---------
Total voting as a single class.............................. 6,524,916
Dividend Series Preferred
4.56%..................................................... 100,000
4.60%..................................................... 80,140
4.64%..................................................... 41,500
6.08%..................................................... 100,000
---------
Total voting as a single class.............................. 321,640
</TABLE>
The affirmative vote of the holders of more than two-thirds of the
outstanding shares of each of the Power Company's (i) common stock and 6%
Cumulative Preferred, voting together as a single class, and (ii) Dividend
Series Preferred Stock, all Series voting together as a single class, is
required to approve the Proposed Amendment to be presented at the Special
Meeting. Abstentions and broker non-votes will have the same effect as votes
cast against the Proposed Amendment. NEES has advised the Power Company that it
intends to vote all of the outstanding shares of common stock of the Power
Company in favor of the Proposed Amendment.
There are no rights of appraisal in connection with the Proposed Amendment.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As noted above, NEES owns all the outstanding common stock of the Power
Company.
20
<PAGE> 21
Pursuant to Section 13(d) of the Exchange Act, a beneficial owner of a
security is any person who directly or indirectly has or shares voting or
investment power over such security. No person or group is known by management
of the Power Company to be the beneficial owner of more than 5% of the
outstanding shares of the Power Company's 6% Cumulative Preferred Stock, or of
any Series of its Dividend Series Preferred Stock, as of the Record Date.
NEES and the Power Company's directors and executive officers do not
beneficially own any Shares as of the Record Date. The beneficial ownership of
NEES's common shares held by each Power Company director, as well as Power
Company directors and executive officers as a group, as of October 1, 1997 is
set forth in the following table.
<TABLE>
<CAPTION>
NAME SHARES
--------------------------------------------------------------------------- -------
<S> <C>
Lawrence E. Bailey......................................................... 4,963
Joan T. Bok................................................................ 17,504
Alfred D. Houston.......................................................... 13,688
Cheryl A. LaFleur.......................................................... 3,162
John F. Malley............................................................. 3,737
John W. Rowe............................................................... 23,105
Arnold H. Turner........................................................... 4,225
Directors and officers as a group (representing less than 1% of the
outstanding Shares)...................................................... 117,811
</TABLE>
- ---------------
Listed below is the only person or group known to NEES as of October 1,
1997, to beneficially own 5% or more of NEES's common shares. However, T. Rowe
Price Trust Company disclaims beneficial ownership of all such shares. The
amount of common shares listed below is as of September 8, 1997.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP COMMON SHARES
- --------------------------------------------- --------------------------------- -------------
<S> <C> <C>
T. Rowe Price Trust Company.................. 5,358,604 shares as trustee for 8.3%
100 East Pratt Street Company employee benefits plans
Baltimore, MD 21202
</TABLE>
DESCRIPTION OF THE PROPOSED AMENDMENT
THE FOLLOWING STATEMENTS, UNLESS THE CONTEXT OTHERWISE REQUIRES, ARE
SUMMARIES OF THE SUBSTANCE OR GENERAL EFFECT OF A SECTION OF THE PROVISIONS, AND
ARE QUALIFIED IN THEIR ENTIRETY BY THE PROVISIONS (AS DESCRIBED BELOW).
EXPLANATION OF THE PROPOSED AMENDMENT
The purpose of the Proxy Solicitation is the elimination of a section of
the Provisions which restricts the ability of the Power Company to incur certain
unsecured indebtedness.
ARTICLE 1, Section 4E(4) of the Provisions provides that, without a vote of
a majority of the outstanding Dividend Series Preferred Stock and Preferred
Stock -- Cumulative (voting together as a single class), the Company will not:
issue any unsecured notes, debentures or other securities representing
unsecured indebtedness, or assume any such unsecured securities, for
purposes other than the redemption or other retirement of outstanding
shares of all series of the Dividend Series Preferred Stock and the
Preferred Stock -- Cumulative, if immediately after such issue or
assumption the total principal amount of all unsecured notes, debentures
or other securities representing unsecured indebtedness issued or
assumed by the corporation and then outstanding (including unsecured
securities then to be issued or assumed but excluding unsecured
securities theretofore so voted for by holders of Dividend Series
Preferred Stock and Preferred Stock -- Cumulative) (the "Unsecured
Indebtedness") would
21
<PAGE> 22
exceed twenty per cent (20%) of the aggregate of (i) the total principal
amount of all bonds and other securities representing secured
indebtedness issued or assumed by the corporation and then outstanding
and (ii) the capital, premium and retained earnings of the corporation
as then stated on the books of account of the corporation; provided,
however, that after July 1, 1976, short-term unsecured indebtedness
shall not exceed ten per cent (10%) of such aggregate of (i) and (ii)
above; and provided, further, that after July 1, 1976, in the event
unsecured securities representing short-term unsecured indebtedness
(excluding unsecured securities theretofore so voted for by the holders
of dividend Series Preferred Stock and Preferred Stock -- Cumulative)
exceed ten per cent (10%) of such aggregate of (i) and (ii) above, no
unsecured securities representing unsecured indebtedness shall be issued
or assumed (except for the purpose of redemption or other retirement of
outstanding shares of all series of the Dividend Series Preferred Stock
and the Preferred Stock -- Cumulative) unless such ratio of short-term
unsecured indebtedness immediately after such issue or assumption is to
be not over ten per cent (10%) of such aggregate of (i) and (ii) above.
"Short-term unsecured indebtedness" as used herein means unsecured
indebtedness of an original maturity of less than ten years and
"long-term unsecured indebtedness" means unsecured indebtedness of an
original maturity of ten years or more. For the purposes hereof, when
any long-term unsecured indebtedness becomes due within ten years, or
when any long-term unsecured indebtedness is to be retired within ten
years through a sinking fund or otherwise, such long-term unsecured
indebtedness, in each case, shall be considered short-term unsecured
indebtedness; provided, however, that any long-term unsecured
indebtedness of a single maturity (except as provided above in respect
of a sinking fund therefor), or the last maturity of any long-term
unsecured indebtedness of serial maturities, shall not be considered
short-term unsecured indebtedness until due within five years.
The Power Company proposes to delete the above section in its entirety;
conforming changes to cross references elsewhere in the Provisions will also be
made.
REASONS FOR THE PROPOSED AMENDMENT
In October 1996 the NEES Companies announced their intention to divest
their generating business. (The separate sale of the oil and gas properties by
the Power Company's affiliate, New England Energy Incorporated (NEEI), is
necessary in connection therewith.) This decision was due to a combination of
factors relating to the restructuring of the electric utility industry. On
August 6, 1997, the NEES Companies reached an agreement to sell the non-nuclear
generating business to USGen New England, Inc. See Purpose of the Offer,
Proposed Amendment, and Proxy Solicitation -- Industry Restructuring. In order
to facilitate this transition to a competitive electric industry, the Power
Company may need -- prior to the completion of the sale of its generating
plants -- to buy out existing contracts with independent power producers or to
pay the difference between monies owed by NEEI and the proceeds from the sale of
NEEI's remaining oil and gas properties. The exact dollar amount of these
obligations is not yet determinable, but they may be significant. Given the
changing nature of the company, putting in place long-term financial instruments
to provide the necessary moneys may not be a cost-effective procedure.
Therefore, the Power Company believes it must increase its flexibility in
meeting its cash needs.
As discussed under Purpose of the Offer, Proposed Amendment, and Proxy
Solicitation -- Industry Restructuring, the Power Company will probably
substantially reduce its capitalization and retire its outstanding General and
Refunding Mortgage bonds through call or defeasance. The Power Company
anticipates issuing its new long-term debt in the form of debentures, which are
unsecured. Absent the Proposed Amendment, these debentures would not be
permitted by the Provisions, without prior approval by the Preferred
Shareholders.
If the Proposed Amendment is adopted, the Power Company will have increased
flexibility (i) to choose among different types of debt financing and (ii) to
finance projects using the most cost effective means. The availability and
flexibility of unsecured debt is necessary, in the estimation of NEES and the
Power Company, to take full advantage of changing conditions in the securities
markets.
22
<PAGE> 23
RECOMMENDATION OF BOARD OF DIRECTORS
IT IS FOR ALL THE ABOVE REASONS THAT THE POWER COMPANY'S BOARD BELIEVES THE
BEST LONG-TERM INTERESTS OF THE PREFERRED SHAREHOLDERS ARE SERVED BY, AND
ENCOURAGES DIVIDEND SERIES PREFERRED SHAREHOLDERS TO VOTE FOR, THE ADOPTION OF
THE PROPOSED AMENDMENT.
The Proposed Amendment to the Provisions and the Offer are subject to
approval by the SEC under the Holding Company Act. NEES and the Power Company
have filed a declaration with the SEC with respect to the Proposed Amendment and
the acquisition of the Shares by NEES pursuant to the Offer.
CERTAIN EFFECTS OF THE PROPOSED AMENDMENT
If the Proposed Amendment becomes effective, Dividend Series Preferred
Shareholders of Shares that are not tendered and purchased pursuant to the Offer
will no longer be entitled to the benefits of the debt limitation provision. As
discussed above, the unsecured debt limitation provision places restrictions on
the Power Company's ability to issue or assume unsecured indebtedness. Although
future Power Company debt instruments may contain certain restrictions on the
Power Company's ability to issue or assume debt, any such restrictions may be
waived and the increased flexibility afforded the Power Company by the deletion
of the debt limitation provision may permit the Power Company to take certain
actions that may increase the credit risks with respect to the Power Company,
adversely affecting the market price and credit rating of the remaining Shares
or that may otherwise be materially adverse to the interests of the remaining
Dividend Series Preferred Shareholders.
OTHER MATTERS
The foregoing is the only business which management intends to present or
is advised that others will present for action at the Special Meeting or any
adjournment thereof. If any other matters should properly come before the
Special Meeting, the proxies for NEES and for any other stockholders who have
sent in their proxies will be voted by the persons named therein, or their
substitutes, in accordance with their judgment.
The expense of preparing and mailing this Booklet and the incidental
expenses of soliciting the Dividend Series Preferred Stockholders will be paid
by the Power Company. The Power Company has engaged Georgeson & Company, Inc. to
act as Information Agent in connection with the solicitation of proxies for a
fee of approximately $6,000 plus reimbursement of reasonable out-of-pocket
expenses. The Power Company has requested that brokers, dealers, and other
custodians, nominees, and fiduciaries forward solicitation materials to the
beneficial owners of shares of the Power Company's Dividend Series Preferred
Stock held of record by such persons and will reimburse such brokers and other
fiduciaries for their reasonable out-of-pocket expenses incurred in connection
therewith. In addition to the use of the mails, proxies from holders of Dividend
Series Preferred Stock may be solicited by officers and regular employees
connected with the Power Company or its affiliates, personally or by telephone
or telegraph, without any additional compensation. The Information Agent has not
been retained to make, and will not make, solicitations or recommendations in
connection with the Proposed Amendment.
While the Power Company has no audit committee, its parent NEES has an
audit committee which recommends an independent auditor to audit the accounts of
the parent and its subsidiaries. Coopers and Lybrand have been auditors of the
Power Company for many years and their selection as auditors for the current
year was approved at the Annual Meeting on April 16, 1997. It is not expected
that representatives of Coopers and Lybrand will be present at the Special
Meeting on December 12, 1997, but they will be available on short notice to
attend, to answer questions regarding the Proposed Amendment, if any holder of
Shares so requests in writing prior to December 10, 1997.
23
<PAGE> 24
PRICE RANGE OF SHARES; DIVIDENDS
On August 15, 1996, the Power Company repurchased 58,500 shares of the
4.64% Series of Preferred at a price of $69.62 per Share. The Power Company has
made no other purchases of any of the Series of Preferred which are the subject
of this tender offer since January 1, 1995.
Each Series of Preferred is traded in the OTC and is not listed on any
national securities exchange. Trading in the Shares has generally been sporadic.
PREFERRED SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS, IF
AVAILABLE, FOR THE SHARES.
The following table sets forth the high and low sales prices of each Series
of Preferred, as reported by the Nasdaq Stock Market, Inc., and the cash
dividends paid thereon for the fiscal quarters indicated.
DIVIDENDS AND PRICE RANGES OF PREFERRED STOCK
BY QUARTERS (1997, 1996, AND 1995)
<TABLE>
<CAPTION>
1997 - QUARTERS 1996 - QUARTERS 1995 - QUARTERS
------------------------------- ------------------------------- -------------------------------
1ST 2ND 3RD 4TH* 1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6% CUMULATIVE PREFERRED STOCK
($100 Par Value)
Dividends Paid Per Share........ $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50 $1.50
Market Price Per Share (OTC)
-- High....................... 84.05 85.50 88.50 92.00 87.75 80.30 83.55 84.875 75.00 80.80 83.60 86.625
-- Low........................ 79.75 81.50 82.125 84.50 78.75 77.00 77.125 77.25 64.75 70.50 73.50 77.00
DIVIDEND SERIES PREFERRED STOCK:
4.56% SERIES
Dividends Paid Per Share........ $1.14 $1.14 $1.14 $1.14 $1.14 $1.14 $1.14 $1.14 $1.14 $1.14 $1.14 $1.14
Market Price Per Share (OTC)
-- High....................... 66.625 68.85 70.15 65.875 69.20 63.975 63.975 68.55 54.75 62.90 62.625 69.80
-- Low........................ 61.125 62.75 63.125 65.875 62.00 59.00 59.00 59.25 52.00 53.00 58.75 56.50
4.60% SERIES
Dividends Paid Per Share........ $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15 $1.15
Market Price Per Share (OTC)
-- High....................... 67.125 66.25 70.25 -- 70.40 64.50 66.825 69.15 58.25 65.40 64.10 69.25
-- Low........................ 61.125 63.75 65.125 -- 58.25 59.12 59.50 59.75 55.50 55.00 56.75 56.625
4.64% SERIES
Dividends Paid Per Share........ $1.16 $1.16 $1.16 $1.16 $1.16 $1.16 $1.16 $1.16 $1.16 $1.16 $1.16 $1.16
Market Price Per Share (OTC)
-- High....................... 69.69 71.20 70.85 -- 63.35 60.00 60.00 67.25 -- 62.70 63.30 --
-- Low........................ 69.69 68.65 64.375 -- 62.70 31.25 60.00 59.50 -- 60.91 63.30 --
6.08% SERIES
Dividends Paid Per Share........ $1.52 $1.52 $1.52 $1.52 $1.52 $1.52 $1.52 $1.52 $1.52 $1.52 $1.52 $1.52
Market Price Per Share (OTC)
-- High....................... 90.97 88.50 91.25 92.12 93.07 84.725 88.35 91.47 78.70 85.90 87.70 90.90
-- Low........................ 85.00 86.00 86.50 87.625 78.00 81.625 78.75 79.125 71.25 72.00 79.25 82.75
</TABLE>
- ---------------
* Prices through October 31
Note -- The above bid and asked quotations represent prices between dealers and
do not represent actual transactions. A dash indicates that a quotation was not
available.
Dividends for a Series of Preferred are payable when, as and if declared by
the Power Company's Board of Directors at the rate per annum included in such
title of the Series of Preferred. Tendering Preferred Shareholders will be
entitled to the regular quarterly dividend for the entire quarterly period
through December 31, 1997, if declared by the Board.
24
<PAGE> 25
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
EACH HOLDER OF SHARES IS URGED TO CONSULT AND RELY UPON SUCH HOLDER'S OWN
TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO THE HOLDER OF TENDERING
SHARES PURSUANT TO THE OFFER.
In the opinion of Hale and Dorr LLP, tax counsel to NEES and the Power
Company, the following summary describes the principal United States Federal
income tax consequences of sales of Shares pursuant to the Offer and the receipt
of Special Cash Payments in connection with the approval and adoption of the
Proposed Amendment. This summary is based on the Internal Revenue Code of 1986,
as amended to the date hereof (the "Code"), administrative pronouncements,
judicial decisions and existing and proposed Treasury Regulations, changes to
any of which subsequent to the date of this Booklet may adversely affect the tax
consequences described herein, possibly on a retroactive basis. This summary is
addressed to Preferred Shareholders who hold Shares as capital assets within the
meaning of Section 1221 of the Code. This summary does not discuss all of the
tax consequences that may be relevant to a Preferred Shareholder in light of
such Preferred Shareholder's particular circumstances or to Preferred
Shareholders subject to special rules (including certain financial institutions,
tax-exempt organizations, insurance companies, dealers in securities or
currencies, foreign persons or entities selling Shares pursuant to the Offer who
own or have owned, actually or constructively, more than five percent of the
outstanding amount of such Shares, Preferred Shareholders who acquired their
Shares pursuant to the exercise of stock options or other compensation
arrangements with the Power Company or Preferred Shareholders holding the Shares
as part of a conversion transaction, as part of a hedge or hedging transaction,
or as a position in a straddle for tax purposes). Preferred Shareholders should
consult their tax advisors with regard to the application of the United States
Federal income tax laws to their particular situations as well as any tax
consequences arising under the laws of any state, local or foreign taxing
jurisdiction.
As used herein, the term "United States Holder" means an owner of a Share
that is (i) for United States Federal income tax purposes a citizen or resident
of the United States; (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof; (iii) an estate, or, for taxable years beginning on or
before December 31, 1996, in general, any trust, the income of which is subject
to United States Federal income taxation regardless of its source; or (iv) for
taxable years beginning after December 31, 1996, any trust if a court within the
United States is able to exercise primary supervision over the administration of
such trust and one or more United States fiduciaries have the authority to
control all substantial decisions of such trust. A "Non-United States Holder" is
a Preferred Shareholder that is not a United States Holder.
TAX CONSIDERATIONS FOR TENDERING PREFERRED SHAREHOLDERS
Characterization of the Sale. A sale of Shares by a Preferred Shareholder
pursuant to the Offer will be a taxable transaction for Federal income tax
purposes. For U.S. Federal income tax purposes, a portion of the purchase price
per Share paid to Tendering Preferred Shareholders equal in amount to the
Special Cash Payment (payable to Preferred Shareholders who vote in favor of the
Proposed Amendment, but who do not tender their Shares) will be taxed in the
same manner as the Special Cash Payment received by Non-Tendering Preferred
Shareholders (see Tax Considerations of Special Cash Payment). The balance of
the Purchase Price per Share paid to Preferred Shareholders will be taxed as an
amount received in exchange for Shares resulting in gain or loss as described in
the following two paragraphs.
United States Holders. A United States Holder will recognize gain or loss
equal to the difference between the tax basis of such Holder's Shares and the
amount of cash received from NEES in exchange therefor. A United States Holder's
gain or loss will be long-term capital gain or loss if the holding period for
the Shares is more than one year as to the date of the sale of such Shares. The
excess of net long-term capital gains over net short-term capital losses is
taxed at a lower rate than ordinary income for certain non-corporate taxpayers.
Capital gain on Shares held by noncorporate taxpayers for more than eighteen
months prior to the date of the sale of such Shares will be subject to a reduced
tax rate. The distinction between long-term capital
25
<PAGE> 26
gain or loss and short-term gain or loss is also relevant for purposes of, among
other things, limitations on the deductibility of capital losses.
Non-United States Holders. Any gain realized upon the sale of Shares by a
Non-United States Holder pursuant to the Offer generally will not be subject to
United States Federal income tax unless (i) such gain is effectively connected
with a trade or business in the United States of the Non-United States Holder,
or (ii) in the case of a Non-United States Holder who is an individual, such
individual is present in the United States for 183 days or more in the taxable
year of such sale and certain other conditions are met.
A Non-United States Holder with gain described in clause (i) above will be
taxed on the net gain derived from the sale at regular graduated United States
Federal income tax rates. If a Non-United States Holder that is a foreign
corporation has gain described under clause (i) above, it may also be subject to
an additional "branch profits tax" at a 30% rate (or such lower rate as may be
specified by an applicable income tax treaty). Unless an applicable tax treaty
provides otherwise, an individual Non-United States Holder described in clause
(ii) above will be subject to a flat 30% tax on the gain derived from the sale,
which may be offset by United States capital losses (notwithstanding the fact
that the individual is not considered a resident of the United States).
TAX CONSIDERATIONS FOR NON-TENDERING PREFERRED SHAREHOLDERS
Non-Tendering Preferred Shareholders, whether or not they receive Special
Cash Payments, will not recognize any taxable gain or loss with respect to the
Shares as a result of the modification of the Provisions by the Proposed
Amendment.
TAX CONSIDERATIONS OF ACCRUED AND UNPAID DIVIDENDS PAYMENT
Payment of accrued and unpaid dividends received by the tendering Preferred
Shareholder with respect to rights to dividends declared prior to the Offer will
be treated as dividends to the extent of the Preferred Shareholder's allocable
portion of the Power Company's current and accumulated earnings and profits as
determined under United States Federal income tax principles and not as proceeds
from the sale of such Shares. Such dividend payments will be taxed to the
Preferred Shareholder in the same manner as prior dividend payments have
customarily been taxed.
TAX CONSIDERATIONS OF SPECIAL CASH PAYMENT
United States Holders. There is no direct authority concerning the Federal
income tax consequences of the receipt of Special Cash Payments. The Power
Company will, for information reporting purposes, treat Special Cash Payments as
ordinary non-dividend income to recipient United States Holders.
Non-United States Holders. The Power Company will treat Special Cash
Payments paid to a Non-United States Holder of Shares as subject to withholding
of United States Federal income tax at a 30% rate. However, Special Cash
Payments that are effectively connected with the conduct of a trade or business
by the Non-United States Holder within the United States are not subject to the
withholding tax (provided such Non-United States Holder provides two originals
of Internal Revenue Service ("IRS") Form 4224 stating that such Special Cash
Payments are so effectively connected), but instead are subject to United States
Federal income tax on a net income basis at applicable graduated individual or
corporate rates. Any such effectively connected Special Cash Payments received
by a foreign corporation may, under certain circumstances, be subject to an
additional "branch profits tax" at a 30% rate (or such lower rate as may be
specified by an applicable income tax treaty).
A Non-United States Holder of Shares eligible for a reduced rate of United
States withholding tax pursuant to an income tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
IRS.
26
<PAGE> 27
BACKUP WITHHOLDING
ANY TENDERING PREFERRED SHAREHOLDER WHO FAILS TO COMPLETE AND SIGN THE
SUBSTITUTE FORM W-9 THAT IS INCLUDED IN THE APPLICABLE LETTER OF TRANSMITTAL
(OR, IN THE CASE OF A FOREIGN PREFERRED SHAREHOLDER, FORM W-8 OBTAINABLE FROM
THE DEPOSITARY) MAY BE SUBJECT TO A REQUIRED FEDERAL INCOME TAX BACKUP
WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAYABLE TO SUCH PREFERRED SHAREHOLDER
PURSUANT TO THE OFFER. To prevent backup United States Federal income tax
withholding with respect to the purchase price of Shares purchased pursuant to
the Offer, a United States Holder must provide the Depositary with the Preferred
Shareholder's correct taxpayer identification number and certify that the
Preferred Shareholder is not subject to backup withholding of Federal income tax
by completing the Substitute Form W-9 included in the applicable Letter of
Transmittal. Certain Preferred Shareholders (including, among others, all
corporations and certain foreign shareholders) are exempt from backup
withholding. For a corporate United States Holder to qualify for such exemption,
such Preferred Shareholder must provide the Depositary with a properly completed
and executed Substitute Form W-9 attesting to its exempt status. In order for a
foreign Preferred Shareholder to qualify as an exempt recipient, the foreign
holder must submit a Form W-8, Certificate of Foreign Status, signed under
penalties of perjury, attesting to that Preferred Shareholder's exempt status. A
copy of Form W-8 may be obtained from the Depositary.
Unless a Preferred Shareholder provides the appropriate certification,
under the applicable law and regulations concerning "backup withholding" of
United States Federal income tax, the Depositary will be required to withhold
and will withhold, 31% of the gross proceeds otherwise payable to such Preferred
Shareholder or other payee. The amount of any backup withholding from a payment
to a Preferred Shareholder will be allowed as a credit against such Preferred
Shareholder's United States Federal income tax liability and may entitle such
Preferred Shareholder to a refund, provided that the required information is
furnished to the IRS.
SOURCE AND AMOUNT OF FUNDS
Assuming that NEES purchases all outstanding Shares of each Series of
Preferred pursuant to the Offer, the total amount required by NEES to purchase
such Shares will be approximately $40 million exclusive of the payment of
accrued but unpaid dividends, but including fees and other expenses. NEES
intends to fund the Offer through the use of its general funds (which, in the
ordinary course, include funds from the Power Company) and possibly funds
borrowed pursuant to NEES's committed lines of credit, including any bank
revolving credit agreements. The interest rates on any such borrowing will
depend upon the timing and amount of borrowings and market rates at that time.
NEES currently has regulatory authority to borrow $100 million and is seeking to
increase that amount. NEES has not had occasion to borrow money for a number of
years.
The Power Company sells commercial paper directly to commercial paper
dealers who reoffer the commercial paper to investors.
TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES
Each of NEES and the Power Company has been advised by its directors and
executive officers that no directors or executive officers of the respective
companies own any Shares. Based upon the companies' records and upon information
provided to each company by its directors and executive officers, neither
company nor, to the knowledge of either, any of their subsidiaries, affiliates,
directors, or executive officers, or any associates of the foregoing, has
engaged in any transactions involving Shares during the 40 business days
preceding the date hereof. Neither company nor, to the knowledge of either, any
of their directors or executive officers or any associate of the foregoing is a
party to any contract, arrangement, understanding, or relationship relating
directly or indirectly to the Offer with any other person or entity with respect
to any securities of the Power Company.
27
<PAGE> 28
FEES AND EXPENSES PAID TO DEALERS
DEALER MANAGER FEES
Merrill Lynch will act as the Dealer Manager for NEES in connection with
the Offer. NEES has agreed to pay the Dealer Manager a fee of $.50 per Share for
any Shares tendered, accepted for payment, and paid for pursuant to the Offer
and a fee of $.50 per Share for any Shares that are not tendered pursuant to the
Offer but which vote in favor of the Proposed Amendment. The Dealer Manager will
also be reimbursed by NEES for its reasonable out-of-pocket expenses, including
attorneys' fees, and will be indemnified against certain liabilities, including
certain liabilities under the federal securities laws, in connection with the
Offer. The Dealer Manager has rendered, is currently rendering, and is expected
to continue to render various investment banking and other advisory services to
NEES and the Power Company. The Dealer Manager has received, and will continue
to receive, customary compensation from NEES and the Power Company for such
services. NEES has retained IBJ Schroder Bank & Trust Company as Depositary and
Georgeson & Company, Inc. as Information Agent in connection with the Offer. The
Depositary and the Information Agent will receive reasonable and customary
compensation for their services and will also be reimbursed for reasonable
out-of-pocket expenses, including attorney fees. Neither the Depositary nor the
Information Agent has been retained to make solicitations or recommendations in
connection with the Offer.
SOLICITED TENDER FEES
Upon the terms and subject to the conditions of the Offer and pursuant to
Instruction 10 of the accompanying Letter of Transmittal and Proxy, NEES will
pay to designated brokers and dealers a solicitation fee of $1.50 per Share for
any Shares tendered, accepted for payment, and paid for pursuant to the Offer
and for each share of Dividend Series Preferred Stock not tendered but voted in
favor of the Proposed Amendment (except that for transactions for beneficial
owners equal to or exceeding 2,500 Shares, NEES will pay a solicitation fee of
$1.00 per Share, of which eighty percent (80%) shall be paid to the Dealer
Manager and twenty percent (20%) to the Soliciting Dealer (which may be the
Dealer Manager)). With respect to fees payable pursuant to this paragraph
involving transactions for beneficial owners whose ownership is less than 2,500
Shares, any fees payable hereunder shall be paid in full to the Dealer Manager
unless a Soliciting Dealer is designated (as described below), in which case
such fee shall be payable in full to such designated Soliciting Dealer (which
designated Soliciting Dealer may be the Dealer Manager). The Letters of
Transmittal and Proxy must include the name of an entity which obtained the
tender or proxy and which is either (a) a broker or dealer in securities,
including the Dealer Manager in its capacity as a broker or dealers, which is a
member of any national securities exchange or of the National Association of
Securities Dealers, Inc. (NASD), (b) a foreign broker or dealer not eligible for
membership in the NASD which agrees to conform to the NASD's Rules of Fair
Practice in soliciting tenders outside the United States to the same extent as
though it were an NASD member, or (c) a bank or trust company (each of which is
referred to herein as a Soliciting Dealer). No solicitation fee shall be payable
to a Soliciting Dealer with respect to the tender of Shares or delivery of a
proxy unless the Letter of Transmittal and Proxy accompanying such tender or
delivery of a proxy designates such Soliciting Dealer. No solicitation fee shall
be payable to a Soliciting Dealer in respect of Shares registered in the name of
such Soliciting Dealer unless such Shares are held by such Soliciting Dealer as
nominee and such Shares are being tendered or delivered for the benefit of one
or more beneficial owners identified on the Letter of Transmittal and Proxy or
on the Notice of Solicited Tenders. No solicitation fee shall be payable to a
Soliciting Dealer if such Soliciting Dealer is required for any reason to
transfer the amount of such fee to a depositing holder (other than itself). No
solicitation fee shall be paid to a Soliciting Dealer with respect to Shares
tendered or delivered for such Soliciting Dealer's own account. Soliciting
Dealers will not be entitled to a solicitation fee for Shares beneficially owned
by such Soliciting Dealer. No broker, dealer, bank, trust company, or fiduciary
shall be deemed to be the agent of NEES, the Power Company, the Depositary, the
Information Agent, or the Dealer Manager for purposes of the Offer.
Soliciting Dealers will include any of the organizations described in
clauses (a), (b), and (c) above even when the activities of such organizations
in connection with the Offer consist solely of forwarding to clients materials
relating to the Offer, including the Letter of Transmittal and Proxy, and
tendering Shares or delivering as
28
<PAGE> 29
directed by beneficial owners thereof. No Soliciting Dealer is required to make
any recommendation to holders of Shares as to whether to tender or refrain from
tendering in the Offer. No assumption is made, in making payment to any
Soliciting Dealer, that its activities in connection with the Offer included any
activities other than those described above, and for all purposes noted in all
materials relating to the Offer, the term "solicit" shall be deemed to mean no
more than processing shares tendered or forwarding to customers materials
regarding the Offer.
STOCK TRANSFER TAXES
NEES will pay all stock transfer taxes, if any, payable on account of the
acquisition of Shares by NEES pursuant to the Offer, except in certain
circumstances where special payment or delivery procedures are utilized pursuant
to Instruction 6 of the accompanying Letter of Transmittal and Proxy.
SUMMARY OF FINANCIAL INFORMATION
Set forth below is certain historical financial information of the Power
Company and its subsidiaries. The historical financial information (other than
the ratios of earnings to fixed charges) was derived from the audited financial
statements included in the Power Company's Annual Report on Form 10-K for the
year ended December 31, 1996 and the unaudited consolidated financial statements
included in the Power Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997.
CONDENSED INCOME STATEMENT DATA:
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ---------------------
1996 1995 1997 1996
---------- ---------- -------- --------
(THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C>
Operating Revenues........................... $1,600,309 $1,570,539 $834,097 $775,461
Operating Income............................. 203,761 185,413 80,680 94,905
Allowance for Borrowed and Equity Funds
Used During Construction (credit).......... (591) (19,225) (651) (267)
Net Income................................... 152,483 151,427 57,460 67,741
Preferred Stock Dividend Requirements........ 2,574 3,433 1,037 1,536
Earnings Applicable to Common Stock.......... 149,909 147,994 56,423 66,205
Ratio of Earnings to Fixed Charges........... 5.19 4.99 5.23(a) 5.17(a)
</TABLE>
- ---------------
(a) Ratio for the twelve months ended June 30.
CONDENSED BALANCE SHEET DATA (AT END OF PERIOD):
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, JUNE 30,
------------------------- -------------------------
1996 1995 1997 1996
---------- ---------- ---------- ----------
(THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Net Utility Plant in Service.............. $1,873,457 $1,908,697 $1,876,155 $1,883,431
Construction Work in Progress............. 36,836 41,566 25,142 59,028
Cash and Cash Equivalents................. 3,046 2,607 738 251
Other Current Assets...................... 329,996 348,516 351,684 353,192
Other Assets.............................. 404,380 346,957 374,703 325,189
---------- ---------- ---------- ----------
$2,647,715 $2,648,343 $2,628,422 $2,621,091
========== ========== ========== ==========
LIABILITIES:
Common Equity............................. $ 906,205 $ 889,136 $ 898,129 $ 890,060
Cumulative Preferred Stock................ 39,666 60,516 39,666 45,516
Long-term Debt (less amounts due within
one year)............................... 733,006 735,440 647,613 735,900
Current Liabilities....................... 285,641 355,953 369,822 351,653
Other Liabilities......................... 683,197 607,298 673,192 597,962
---------- ---------- ---------- ----------
$2,647,715 $2,648,343 $2,628,422 $2,621,091
========== ========== ========== ==========
</TABLE>
29
<PAGE> 30
CERTAIN INFORMATION REGARDING NEES AND THE POWER COMPANY;
INCORPORATION BY REFERENCE
The Power Company, a Massachusetts corporation qualified to do business as
a foreign corporation in the states of New Hampshire, Vermont, Maine,
Connecticut, and Rhode Island, is a wholly owned subsidiary of NEES. The Power
Company's business is principally generating, purchasing, transmitting, and
selling electric energy in wholesale quantities. In 1996, 95% of the Power
Company's all-requirement revenue from the sale of electricity was derived from
sales for resale to affiliated companies and 5% from sales for resale to
municipal and other utilities. See Purpose of the Offer, Proposed Amendment, and
Proxy Solicitation -- Industry Restructuring.
NEES and the Power Company are subject to the informational requirements of
the Exchange Act and in accordance therewith file reports and other information
with the SEC. Such reports and other information may be inspected and copied at
the public reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511; and Seven World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section of the
SEC, 450 Fifth Street, N.W., Washington D.C. 20549 at prescribed rates. The SEC
maintains a Web site at http://www.sec.gov containing reports, proxy and
information statements, and other information regarding registrants that file
electronically with the SEC, including NEES and the Power Company. Reports,
proxy materials, and other information about NEES are also available at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005. In connection with the Offer NEES has filed an Issuer Tender Offer
Statement on Schedule 13E-4 with the SEC that includes certain additional
information relating to the Offer. NEES's Schedule 13E-4 will not be available
at the SEC's regional offices.
The following documents, which have heretofore been filed by NEES and the
Power Company with the SEC pursuant to the Exchange Act, are incorporated by
reference herein and shall be deemed a part hereof:
(1) Annual Report on Form 10-K for the year ended December 31, 1996,
which contains or incorporates by reference financial statements and
financial statement schedules of NEES and the Power Company as of December
31, 1996, and for each of the three years in the period ended December 31,
1996, and incorporates by reference or includes the related reports of
Coopers & Lybrand, independent certified public accountants;
(2) Quarterly reports on Form 10-Q for NEES for the quarters ended
March 31, 1997 and June 30, 1997;
(3) Quarterly reports on Form 10-Q for the Power Company for the
quarters ended March 31, 1997 and June 30, 1997;
(4) Reports on Form 8-K for NEES for the periods ended April 14, 1997,
May 20, 1997, and August 6, 1997; and
(5) Reports on Form 8-K for the Power Company for the periods ended
April 14, 1997, May 20, 1997, and August 6, 1997.
All reports filed by NEES and the Power Company with the SEC pursuant to
these sections subsequent to the date of this Booklet and prior to the
Expiration Date (or any extension thereof) shall be incorporated herein by
reference and shall be deemed a part hereof on the date of filing of such
documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Booklet to the extent that a statement contained herein or
in any other subsequently filed documents which is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Booklet.
NEES and the Power Company hereby undertake to provide without charge to
each person to whom a copy of this Booklet has been delivered, upon the written
or oral request of such person, a copy of any or all of
30
<PAGE> 31
the documents referred to above which have been or may be incorporated by
reference in this Booklet, other than exhibits to such documents. Written or
oral requests for such copies should be directed to the Treasurer, New England
Power Company, 25 Research Drive, Westborough, Massachusetts 01582, telephone
(508) 389-2000.
The information relating to NEES and the Power Company contained in this
Booklet does not purport to be comprehensive and should be read together with
the information contained in the documents incorporated by reference.
MISCELLANEOUS
The Offer is not being made to, nor will NEES accept tenders from, owners
of Shares in any jurisdiction in which the Offer or its acceptance would not be
in compliance with the laws of such jurisdiction. NEES is not aware of any
jurisdiction where the making of the Offer or the tender of Shares would not be
in compliance with applicable law. If NEES becomes aware of any jurisdiction
where the making of the Offer or the tender of Shares is not in compliance with
any applicable law, NEES will make a good faith effort to comply with such law.
If, after such good faith effort, NEES cannot comply with such law, the Offer
will not be made to (nor will tenders be accepted from or on behalf of) the
owners of Shares residing in such jurisdiction. In any jurisdiction in which the
securities, blue sky, or other laws require the Offer to be made by a licensed
broker or dealer, the Offer will be deemed to be made on NEES's behalf by one or
more registered brokers or dealers licensed under the laws of such jurisdiction.
NEW ENGLAND ELECTRIC SYSTEM
NEW ENGLAND POWER COMPANY
The name "New England Electric System" means the trustee or trustees for the
time being (as trustee or trustees but not personally) under an agreement and
declaration of trust dated January 2, 1926, as amended, which is hereby referred
to, and a copy of which as amended has been filed with the Secretary of the
Commonwealth of Massachusetts. Any agreement, obligation or liability made,
entered into or incurred by or on behalf of New England Electric System binds
only its trust estate, and no shareholder, director, trustee, officer or agent
thereof assumes or shall be held to any liability therefore.
31
<PAGE> 32
The Letter of Transmittal and Proxy and, if applicable, certificates for
Shares should be sent or delivered by each tendering or voting Preferred
Shareholder of the Power Company or such Preferred Shareholders broker, dealer,
bank, or trust company to the Depositary at one of its addresses set forth
below.
The Depositary is:
IBJ SCHRODER BANK & TRUST COMPANY
By Mail:
P.O. Box 84
Bowling Green Station
New York, New York 10274-0084
Attn: Reorganization Department
By Facsimile:
(212) 858-2611
By Hand or Overnight Delivery
One State Street
New York, New York 10004
Attn: Reorganization Department
Securities Processing Window SC-1
To Confirm:
(212) 858-2103
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective telephone numbers and addresses
listed below. Requests for additional copies of this Booklet, the Letter of
Transmittal and Proxy, or other tender offer or proxy materials may be directed
to the Information Agent and such copies will be furnished promptly at the
companies' expense. Preferred Shareholders may also contact their local broker,
dealer, commercial bank, trust company, or other nominee for assistance
concerning the Offer.
THE INFORMATION AGENT:
(LOGO)
Wall Street Plaza
New York, New York 10005
(800) 223-2064 (toll-free)
Banks and Brokers call collect:
(212) 440-9800
THE DEALER MANAGER:
MERRILL LYNCH & CO.
World Financial Center
250 Vesey Street
New York, New York 10281
(888) ML4-TNDR (toll-free)
(888) 654-8637 (toll-free)
ATTENTION
Preferred Shareholders who have lost certificates, please call Boston
EquiServe, L.P., the Transfer Agent, at (617) 575-2000 for assistance.
<PAGE> 1
LETTER OF TRANSMITTAL AND PROXY
RELATING TO
SHARES OF 4.56% SERIES OF DIVIDEND SERIES PREFERRED STOCK
OF
NEW ENGLAND POWER COMPANY
TENDERED PURSUANT TO THE OFFER TO PURCHASE FOR CASH
BY
NEW ENGLAND ELECTRIC SYSTEM,
DATED NOVEMBER 6, 1997,
FOR PURCHASE AT A PURCHASE PRICE OF
$ PER SHARE
AND/OR
VOTED PURSUANT TO THE PROXY AND INFORMATION STATEMENT,
DATED NOVEMBER 6, 1997,
OF
[NEW ENGLAND POWER COMPANY LOGO] NEW ENGLAND POWER COMPANY
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME,
ON FRIDAY, DECEMBER 12, 1997, UNLESS THE OFFER IS EXTENDED (THE EXPIRATION
DATE).
THE PROXY CONTAINED IN THIS DOCUMENT IS IN RESPECT OF THE SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON FRIDAY, DECEMBER 12, 1997, OR ON SUCH DATE TO WHICH
THE MEETING IS ADJOURNED OR POSTPONED.
To: IBJ Schroder Bank & Trust Company (the Depositary)
By First-Class Mail:
IBJ Schroder Bank & Trust Company
P.O. Box 8-1
Bowling Green Station
New York, New York 10274
Attn: Reorganization Department
By Facsimile:
(212) 858-2611
By Hand or Overnight Delivery:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attn: Reorganization Department
Securities Processing Window SC-1
To Confirm:
(212) 858-2103
ATTENTION
THIS LETTER OF TRANSMITTAL AND PROXY IS TO BE USED BY BOTH (1) PREFERRED
SHAREHOLDERS WHO ARE TENDERING AND VOTING SHARES PURSUANT TO THE OFFER AND (2)
PREFERRED SHAREHOLDERS WHO ARE ONLY VOTING ON THE PROPOSED AMENDMENT AND NOT
TENDERING SHARES.
ANY PREFERRED SHAREHOLDER WHO HAS ANY QUESTIONS AS TO HOW TO COMPLETE THIS
LETTER OF TRANSMITTAL AND PROXY SHOULD CONTACT THE INFORMATION AGENT AT (800)
223-2064 (TOLL-FREE) AND FOR BANKS AND BROKERS (212) 440-9918 (CALL COLLECT).
<PAGE> 2
All capitalized terms used herein and not defined herein have the meanings
ascribed to them in the Offer to Purchase and Proxy Statement and Information
Statement.
DIVIDEND SERIES PREFERRED SHAREHOLDERS (INCLUDING DIVIDEND SERIES PREFERRED
SHAREHOLDERS WHO ACQUIRE SHARES SUBSEQUENT TO THE RECORD DATE) WILL NOT BE ABLE
TO VALIDLY TENDER THEIR SHARES UNLESS THEY HAVE SUBMITTED A DULY COMPLETED,
VALID AND UNREVOKED PROXY INDICATING THEIR VOTE FOR THE PROPOSED AMENDMENT OR
INDICATE IN THE ACCOMPANYING PROXY THEIR INTENTION TO VOTE FOR THE PROPOSED
AMENDMENT AT THE SPECIAL MEETING. NEW ENGLAND ELECTRIC SYSTEM, A MASSACHUSETTS
VOLUNTARY ASSOCIATION (NEES), WILL NOT BE REQUIRED TO ACCEPT FOR PAYMENT OR PAY
FOR ANY SHARES TENDERED IF THE PROPOSED AMENDMENT IS NOT APPROVED AND ADOPTED AT
THE SPECIAL MEETING. PREFERRED SHAREHOLDERS HAVE THE RIGHT TO VOTE ON THE
PROPOSED AMENDMENT REGARDLESS OF WHETHER THEY TENDER THEIR SHARES BY CASTING
THEIR VOTE AND SIGNING THE PROXY CONTAINED WITHIN THIS LETTER OF TRANSMITTAL AND
PROXY OR BY VOTING IN PERSON AT THE SPECIAL MEETING. IF THE PROPOSED AMENDMENT
IS APPROVED AND ADOPTED, NEW ENGLAND POWER COMPANY, A MASSACHUSETTS CORPORATION
AND DIRECT SUBSIDIARY OF NEES (THE POWER COMPANY), WILL MAKE A SPECIAL CASH
PAYMENT TO EACH DIVIDEND SERIES PREFERRED SHAREHOLDER WHO VOTED IN FAVOR OF THE
PROPOSED AMENDMENT, PROVIDED THAT THEIR SHARES ARE NOT TENDERED PURSUANT TO THE
OFFER.
DIVIDEND SERIES PREFERRED SHAREHOLDERS WHO PURCHASE OR WHOSE PURCHASE
SETTLES OR IS REGISTERED AFTER THE CLOSE OF BUSINESS ON NOVEMBER 12, 1997 (THE
RECORD DATE) AND WHO WISH TO TENDER IN THE OFFER MUST ARRANGE WITH THEIR SELLER
TO RECEIVE A DULY COMPLETED, VALID AND UNREVOKED PROXY (WHICH MAY BE IN THE FORM
OF AN IRREVOCABLE ASSIGNMENT OF PROXY AS SET FORTH IN THIS LETTER OF TRANSMITTAL
AND PROXY) FROM THE HOLDER ON THE RECORD DATE OF SUCH SHARES. IN ORDER TO
FACILITATE RECEIPT OF PROXIES, SHARES SHALL, DURING THE PERIOD WHICH COMMENCES
NOVEMBER 10, 1997 (TWO BUSINESS DAYS PRIOR TO THE RECORD DATE) AND WHICH WILL
END AT THE CLOSE OF BUSINESS ON THE EXPIRATION DATE, TRADE IN THE
OVER-THE-COUNTER MARKET WITH A PROXY PROVIDING THE TRANSFEREE WITH THE RIGHT TO
VOTE SUCH ACQUIRED SHARES IN THE PROXY SOLICITATION.
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY.
NOTE: IF SHARES ARE BEING TENDERED, THE REMAINDER OF THIS LETTER OF TRANSMITTAL
AND PROXY MUST BE COMPLETED, INCLUDING THE SUBSTITUTE FORM W-9 BELOW. IF
SHARES ARE NOT BEING TENDERED, YOU NEED ONLY COMPLETE THE BOXES BELOW
TITLED "PROXY" (OR, IF APPLICABLE, "IRREVOCABLE PROXY") AND
"SIGNATURES(S) OF REGISTERED HOLDER(S)" AND THE SUBSTITUTE FORM W-9.
The name "New England Electric System" means the trustee or trustees for
the time being (as trustee or trustees but not personally) under an agreement
and declaration of trust dated January 2, 1926, as amended, which is hereby
referred to, and a copy of which as amended has been filed with the Secretary of
the Commonwealth of Massachusetts. Any agreement, obligation or liability made,
entered into or incurred by or on behalf of New England Electric System binds
only its trust estate, and no shareholder, director, trustee, officer or agent
thereof assumes or shall be held to any liability therefor.
2
<PAGE> 3
PLEASE COMPLETE:
- -------------------------------------------------------------------------------
PROXY
The undersigned hereby appoints John G. Cochrane, Michael E. Jeganis, and
Robert King Wulff, or any of them, as proxies, each with the power to appoint
his substitute, and hereby authorizes them to represent and to vote as
designated hereunder and in their discretion with respect to any other business
properly brought before the Special Meeting, all the shares (Shares) of 4.56%
Series of Dividend Series Preferred Stock of New England Power Company (the
Power Company) which the undersigned is entitled to vote at the Special Meeting
of Shareholders to be held on Friday, December 12, 1997, or any adjournment(s)
or postponement(s) thereof.
NOTE: IF YOU ARE VOTING BUT NOT TENDERING SHARES, DO NOT SEND ANY SHARE
CERTIFICATES WITH THIS LETTER OF TRANSMITTAL AND PROXY.
THIS LETTER OF TRANSMITTAL AND PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF THE POWER COMPANY. The proxy contained herein, when properly
executed, will be voted in the manner directed herein by the undersigned
shareholder(s). If no direction is made, the proxy will be voted FOR Item 1.
INDICATE YOUR VOTE BY AN (X). THE BOARD OF DIRECTORS OF THE POWER COMPANY
RECOMMENDS VOTING FOR ITEM 1.
HOLDERS OF SHARES WHO WISH TO TENDER THEIR SHARES MUST VOTE "FOR" THE
PROPOSED AMENDMENT EITHER BY SUBMITTING THIS PROXY OR BY VOTING AT THE SPECIAL
MEETING.
ITEM 1.
To amend the Articles of Organization and By-laws to delete in its entirety
ARTICLE 1, Section 4E(4), limiting the Power Company's ability to issue
unsecured indebtedness.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
NOTE: IF SHARES ARE BEING VOTED "FOR" THE PROPOSED AMENDMENT, THE SUBSTITUTE
FORM W-9 BELOW SHOULD BE COMPLETED TO AVOID BACK-UP WITHHOLDING ON THE
SPECIAL CASH PAYMENT.
SHARES REPRESENTED BY ALL PROPERLY EXECUTED PROXIES WILL BE VOTED IN
ACCORDANCE WITH INSTRUCTIONS APPEARING ON THIS PROXY. IN THE ABSENCE OF SPECIFIC
INSTRUCTIONS, PROXIES WILL BE VOTED "FOR" THE PROPOSED AMENDMENT AND OTHERWISE
IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF THE POWER
COMPANY, AND IN THE DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTERS THAT
MAY PROPERLY COME BEFORE THE SPECIAL MEETING.
Any holder of Shares held of record on the Record Date in the name of
another holder must establish to the satisfaction of the Power Company such
holder's entitlement to exercise or transfer this Proxy. This will ordinarily
require an assignment by such record holder in blank, or if not in blank, to and
from each successive transferee, including the holder, with each signature
guaranteed by an Eligible Institution. A form of irrevocable assignment of proxy
has been provided herein.
Please check box if you plan to attend the Special Meeting. [ ]
- -------------------------------------------------------------------------------
3
<PAGE> 4
PLEASE COMPLETE IF APPLICABLE:
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED(1)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE USE PREADDRESSED LABEL OR FILL IN, IF
BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARE SHARE CERTIFICATE(S) AND SHARE(S) TENDERED/VOTED
CERTIFICATE(S) AND SHARE(S) TENDERED) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)(1)
- ------------------------------------------------------------------------------------------------------------------
NUMBER OF
TOTAL NUMBER SHARES NOT
OF SHARES TENDERED BUT
REPRESENTED NUMBER AS TO WHICH
SHARE CERTIFICATE BY SHARE OF SHARES PROXIES
NUMBER(S)(2) CERTIFICATE(S)(2) TENDERED(3) GIVEN ONLY
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Total Shares:
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) If tendering or voting Share(s), please fill in table exactly as
information appears on the Certificate(s).
(2) Need not be completed by Preferred Shareholders tendering by book-entry
transfer.
(3) Unless otherwise indicated, it will be assumed that all Shares represented
by any Certificate(s) delivered to the Depositary are being tendered and a
proxy is being delivered. See Instruction 4. You must vote "FOR" the
Proposed Amendment with respect to any Shares tendered.
- --------------------------------------------------------------------------------
NOTE: IF YOU ARE DELIVERING A PROXY BUT NOT TENDERING SHARES, DO NOT SEND ANY
SHARE CERTIFICATES.
4
<PAGE> 5
PLEASE COMPLETE IF APPLICABLE:
- --------------------------------------------------------------------------------
SIGNATURE(S) OF REGISTERED HOLDER(S)*
--------------------------------------------------------------------------
(SIGNATURE)
--------------------------------------------------------------------------
(SIGNATURE)
Dated:
------------------------------------------------------------------ , 1997
Name(s):
-----------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
--------------------------------------------------------
Address:
----------------------------------------------------------------------
------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Daytime Area Code and Telephone No.:
------------------------------------------
* Must be signed by the registered holder(s) exactly as name(s) appear(s) on
the stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, please set
forth full title and see Instruction 5.
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
---------------------------------------------------------
Name:
-------------------------------------------------------------------------
Name of Firm:
-----------------------------------------------------------------
(PLEASE PRINT)
Address of Firm:
--------------------------------------------------------------
------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.:
--------------------------------------------------
Dated:
----------------------------------------------------------------- , 1997
- --------------------------------------------------------------------------------
5
<PAGE> 6
IF SELLING SHARES ON OR AFTER NOVEMBER 10, 1997, A RECORD HOLDER MUST
COMPLETE THE FOLLOWING IRREVOCABLE PROXY.
PLEASE SIGN THIS TO IRREVOCABLY TRANSFER A PREFERRED STOCK PROXY TO A
SUBSEQUENT HOLDER OF PREFERRED STOCK WHO WAS NOT A HOLDER OF RECORD ON NOVEMBER
12, 1997.
- --------------------------------------------------------------------------------
IRREVOCABLE PROXY *
WITH RESPECT TO SHARES OF THE
4.56% SERIES OF DIVIDEND SERIES PREFERRED STOCK (THE SHARES) OF
NEW ENGLAND POWER COMPANY (THE POWER COMPANY)
The undersigned hereby irrevocably appoints:
------------------------------------
TYPE OR PRINT NAME OF TRANSFEREE
as attorney and proxy, with full power of substitution, to vote and otherwise
act for and in the name(s) of the undersigned with respect to the Shares
indicated below which were held of record by the undersigned on November 12,
1997, in the manner in which the undersigned would be entitled to vote and
otherwise act in respect of such Shares on any and all matters.
This proxy shall be effective whether or not the Shares indicated below are
tendered in the Offer.
This instrument supersedes and revokes any and all previous appointments of
proxies heretofore made by the undersigned with respect to the Shares indicated
below as to any and all matters. THIS PROXY IS IRREVOCABLE AND IS COUPLED WITH
AN INTEREST.
All authority conferred or agreed to be conferred herein shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, legal and
personal representatives, successors in interest and assigned of the
undersigned. The undersigned understands that tenders of Shares pursuant to any
of the procedures described in the Offer to Purchase and Proxy and Information
Statement and in this Letter of Transmittal and Proxy will constitute a binding
agreement between the undersigned and the Power Company upon the terms and
subject to the conditions of the Offer.
DESCRIPTION OF PREFERRED STOCK
<TABLE>
<CAPTION>
CERTIFICATE NUMBER(S) AGGREGATE NUMBER
(ATTACH LIST IF NECESSARY) OF SHARES
-------------------------- -------------------------
<S> <C> <C>
1.
---------------------------- ---------------------------
2.
---------------------------- ---------------------------
3.
---------------------------- ---------------------------
Total ---------------------------
</TABLE>
- ---------------
* This irrevocable proxy must be signed on the next page to be effective.
- --------------------------------------------------------------------------------
6
<PAGE> 7
- --------------------------------------------------------------------------------
IRREVOCABLE PROXY
SIGNATURE(S) OF RECORD OR AUTHORIZED SIGNATORY*
________________________________________________________________________________
(SIGNATURE)
________________________________________________________________________________
(PLEASE PRINT)
Dated: __________________________________________________________________ , 1997
Tax Identification or Social Security No(s) ____________________________________
________________________________________________________________________________
(SIGNATURE)
________________________________________________________________________________
(PLEASE PRINT)
Dated: __________________________________________________________________ , 1997
Tax Identification or Social Security No(s) ____________________________________
________________________________________________________________________________
* Must be signed by the registered holder(s) exactly as name(s) appear(s) on the
Record Date on the stock certificate(s) or on a security position listing or
by person(s) authorized to become registered holder(s) by certificates and
documents transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney_in_fact, officer of a corporation, agent or
other person acting in a fiduciary or representative capacity, please provide
the following information and see Instruction 5.
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:___________________________________________________________
Name: __________________________________________________________________________
(PLEASE PRINT)
Capacity (Full Title): _________________________________________________________
Name of Firm:___________________________________________________________________
(PLEASE PRINT)
Address of Firm: _______________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: ___________________________________________________
Dated: ___________________________________________________________________, 1997
- --------------------------------------------------------------------------------
7
<PAGE> 8
NOTE: IF SHARES ARE BEING TENDERED, THE REMAINDER OF THIS LETTER OF TRANSMITTAL
AND PROXY MUST BE COMPLETED, INCLUDING THE SUBSTITUTE FORM W-9 BELOW OR A FORM
W-8, AS APPLICABLE.
DELIVERY OF THIS LETTER OF TRANSMITTAL AND PROXY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER
THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN
THIS LETTER OF TRANSMITTAL AND PROXY IN THE APPROPRIATE SPACE THEREFOR PROVIDED
ABOVE AND, IF YOU ARE TENDERING ANY SHARES OR VOTING "FOR" THE PROPOSED
AMENDMENT, COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW OR A FORM W-8, AS
APPLICABLE. SEE INSTRUCTION 8 AND "IMPORTANT TAX INFORMATION" BELOW.
DO NOT SEND ANY CERTIFICATES TO NEES, THE POWER COMPANY, MERRILL LYNCH &
CO., OR GEORGESON & COMPANY, INC.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL AND PROXY SHOULD
BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL AND PROXY IS COMPLETED.
This Letter of Transmittal and Proxy is to be used if (a) Certificates are
to be forwarded herewith, (b) delivery of Shares is to be made by book-entry
transfer pursuant to the procedures set forth under the heading Terms of the
Offer -- Procedure for Tendering Shares in the Offer to Purchase and Proxy and
Information Statement (as defined below) or (c) Shares are being voted in
connection with the Offer.
Preferred Shareholders who wish to tender Shares but cannot deliver their
Shares and all other documents required hereby to the Depositary on or prior to
the Expiration Date must tender their Shares pursuant to the guaranteed delivery
procedure set forth under the heading Terms of the Offer -- Procedure for
Tendering Shares -- Guaranteed Delivery Procedure in the Offer to Purchase and
Proxy and Information Statement. See Instruction 2. DELIVERY OF DOCUMENTS TO
NEES, THE POWER COMPANY OR A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE A
VALID DELIVERY.
PLEASE COMPLETE:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
[ ] CHECK HERE IF TENDERED SHARES ARE ENCLOSED HEREWITH.
A HOLDER TENDERING SHARES PURSUANT TO THIS LETTER OF TRANSMITTAL AND PROXY MUST CHECK ONE
OF THE FOLLOWING BOXES:
[ ] A duly completed, valid and unrevoked proxy indicating a vote "FOR" the Proposed
Amendment is included herein.
[ ] A vote "FOR" the Proposed Amendment will be cast at the Special Meeting.
</TABLE>
- --------------------------------------------------------------------------------
8
<PAGE> 9
(BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE
FOLLOWING:
Name of tendering institution:
--------------------------------------------------------
(PLEASE PRINT)
Check applicable box: [ ] DTC [ ] PDTC
Account No.
-----------------------------------------------------------------------
Transaction Code No.
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY AND PROXY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of tendering Preferred Shareholder(s):
----------------------------------------
--------------------------------------------------------------------------------------
(PLEASE PRINT)
Date of execution of Notice of Guaranteed Delivery and Proxy:
-------------------------
Name of institution that guaranteed delivery:
-----------------------------------------
If delivery is by book-entry transfer:
Name of tendering institution:
-------------------------------------------------------
Account No.
----------------------------------------------- at [ ] DTC or [ ] PDTC
(CHECK ONE)
Transaction Code No.
-----------------------------------------------------------------
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
A HOLDER TENDERING SHARES PURSUANT TO THIS LETTER OF TRANSMITTAL AND PROXY MUST CHECK
ONE OF THE FOLLOWING BOXES:
[ ] A duly completed, valid and unrevoked proxy indicating a vote "FOR" the Proposed
Amendment was included with the Notice of Guaranteed Delivery and Proxy previously
sent to the Depositary.
[ ] A duly completed, valid and unrevoked proxy indicating a vote "FOR" the Proposed
Amendment is being delivered pursuant to a Notice of Guaranteed Delivery and Proxy
previously sent to the Depositary.
[ ] A vote "FOR" the Proposed Amendment will be cast at the Special Meeting.
- --------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 10
NOTE: SIGNATURES MUST BE PROVIDED ABOVE
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The above signed hereby tenders to NEES the shares in the amount set forth
in the box above labeled "Description of Shares Tendered" pursuant to NEES'
offer to purchase any and all of the outstanding shares of the 4.56% Series of
Dividend Series Preferred Stock (the Shares) of the Power Company, shown above
as to which this Letter of Transmittal and Proxy is applicable at the purchase
price per Share shown above (the Purchase Price), net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
and Proxy and Information Statement, dated November 6, 1997 (the Booklet),
receipt of which is hereby acknowledged, and in this Letter of Transmittal and
Proxy (which together constitutes the Offer). PREFERRED SHAREHOLDERS WHO WISH TO
TENDER THEIR SHARES PURSUANT TO THE OFFER MUST VOTE IN FAVOR OF THE PROPOSED
AMENDMENT TO THE POWER COMPANY'S BY-LAWS AND ARTICLES OF ORGANIZATION (THE
PROVISIONS), AS SET FORTH IN THE BOOKLET (THE PROPOSED AMENDMENT). THE OFFER IS
CONDITIONED UPON THE PROPOSED AMENDMENT BEING APPROVED AND ADOPTED AT THE
SPECIAL MEETING (AS DEFINED IN THE BOOKLET). See Proposed Amendment and Proxy
Solicitation, Terms of the Offer -- Extension of Tender Period; Termination;
Amendments and Terms of the Offer -- Certain Conditions of the Offer in the
Booklet.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), the above signed
hereby sells, assigns and transfers to, or upon the order of, NEES all right,
title and interest in and to all the Shares that are being tendered hereby and
hereby constitutes and appoints IBJ Schroder Bank & Trust Company (the
Depositary) the true and lawful agent and attorney-in-fact of the above signed
with respect to such Shares, with full power of substitution (such power of
attorney being an irrevocable power coupled with an interest), to (a) deliver
certificates for such Shares, or transfer ownership of such Shares on the
account books maintained by any of the Book-Entry Transfer Facilities, together,
in any such case, with all accompanying evidences of transfer and authenticity,
to or upon the order of NEES, (b) present such Shares for registration and
transfer on the books of the Power Company and (c) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares, all in
accordance with the terms of the Offer.
The above signed hereby represents and warrants that the above signed has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and that, when and to the extent the same are accepted for
payment by NEES, NEES will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, charges, encumbrances,
conditional sales agreements or other obligations relating to the sale or
transfer thereof, and the same will not be subject to any adverse claims. The
above signed will, upon request, execute and deliver any additional documents
deemed by the Depositary or NEES to be necessary or desirable to complete the
sale, assignment and transfer of the Shares tendered hereby.
All authority herein conferred or agreed to be conferred shall not be
affected by, and shall survive, the death or incapacity of the above signed, and
any obligations of the above signed hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the above signed. Except as
stated in the Offer, this tender is irrevocable.
The above signed understands that tenders of Shares pursuant to any one of
the procedures described under the heading Terms of the Offer -- Procedure for
Tendering Shares in the Booklet and in the instructions hereto will constitute
the above signed's acceptance of the terms and conditions of the Offer,
including the above signed's representation and warranty that (a) the above
signed has a net long position in the Shares being tendered within the meaning
of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended
(the Exchange Act), and (b) the tender of such Shares complies with Rule 14e-4.
NEES' acceptance for payment of Shares tendered pursuant to the Offer will
constitute a binding agreement between the above signed and NEES upon the terms
and subject to the conditions of the Offer.
10
<PAGE> 11
The above signed recognizes that, under certain circumstances set forth in
the Booklet, NEES may terminate or amend the Offer or may not be required to
purchase any of the Shares tendered hereby. In either event, the above signed
understands that certificate(s) for any Shares not tendered or not purchased
will be returned to the above signed.
Unless otherwise indicated in the box below under the heading "Special
Payment Instructions," please issue the check for the Purchase Price of any
Shares purchased, and/or return any Shares not tendered or not purchased, in the
name(s) of the above signed (and, in the case of Shares tendered by book-entry
transfer, by credit to the account at the Book-Entry Transfer Facility
designated above). Unless otherwise indicated in the box below under the heading
"Special Delivery Instructions," please mail the check for the Purchase Price of
any Shares purchased and/or any certificates for Shares not tendered or not
purchased (and accompanying documents, as appropriate) to the above signed at
the address shown below. In the event that both "Special Payment Instructions"
and "Special Delivery Instructions" are completed, please issue the check for
the Purchase Price of any Shares purchased and/or return any Shares not tendered
or not purchased in the name(s) of, and mail said check and/or any certificates
to, the person(s) so indicated. The above signed recognizes that NEES has no
obligation, pursuant to the "Special Payment Instructions," to transfer any
Shares from the name of the registered holder(s) thereof if NEES does not accept
for payment any of the Shares so tendered.
11
<PAGE> 12
--------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
SEE INSTRUCTIONS 4, 6, AND 7
To be completed ONLY if the check for the Purchase Price of Shares
purchased and/or certificates for Shares not tendered or not purchased are
to be issued in the name of someone other than the above signed.
Issue: [ ] Check [ ] Certificate(s) to:
Name ______________________________________________
(PLEASE PRINT)
Address ___________________________________________
___________________________________________________
(INCLUDE ZIP CODE)
___________________________________________________
(TAX IDENTIFICATION OR
SOCIAL SECURITY NUMBER)*
* SEE SUBSTITUTE FORM W_9 BELOW.
Credit Shares delivered by book_entry transfer and not purchased to
the Book_Entry Transfer Facility Account set forth below:
[ ] DTC [ ] PDTC
Account No.: ______________________________________________________
______________________________________________________
______________________________________________________
SPECIAL DELIVERY INSTRUCTIONS
SEE INSTRUCTIONS 4, 6, AND 7
To be completed ONLY if the check for the Purchase Price of Shares
purchased and/or certificates for Shares not tendered or not purchased are
to be mailed to someone other than the above signed or to the above signed
at an address other than that shown below the above signed's signature(s).
Mail: [ ] Check [ ] Certificate(s) to:
Name _____________________________________________
(PLEASE PRINT)
Address ___________________________________________
___________________________________________________
(INCLUDE ZIP CODE)
___________________________________________________
___________________________________________________
[ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN AND
WISH TO TENDER HAVE BEEN LOST, DESTROYED OR STOLEN. (SEE INSTRUCTION 12.)
Number of Shares represented by lost, destroyed or stolen certificates: ________
___________________
12
<PAGE> 13
SOLICITED TENDERS
(SEE INSTRUCTION 10)
As provided in the Offer to Purchase and Proxy Statement and Information
Statement and Instruction 10 to the Letter of Transmittal and Proxy, NEES will
pay to any Soliciting Dealer, as defined in Instruction 10, a solicitation fee
of $1.50 per Share for any Shares tendered, accepted for payment and paid
pursuant to the Offer and for any Shares not tendered but voted in favor of the
Proposed Amendment (except that for transactions for beneficial owners equal to
or exceeding 2,500 Shares, NEES will pay a solicitation fee of $1.00 per Share).
Solicitation fees payable in transactions for beneficial owners of 2,500 or more
Shares shall be paid 80% to the Dealer Manager and 20% to the Soliciting Dealers
(which may be the Dealer Manager). However, Soliciting Dealers will not be
entitled to a solicitation fee for Shares beneficially owned by such Soliciting
Dealer.
The undersigned represents that the Soliciting Dealer which solicited and
obtained this tender is:
Name of Firm:
-------------------------------------------------------------------
(PLEASE PRINT)
Name of Individual Broker or Financial Consultant:
------------------------------
Telephone Number of Broker or Financial Consultant:
-----------------------------
Identification Number (if known):
-----------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
The following to be completed ONLY if customer's Shares held in nominee
name are tendered. (ATTACH ADDITIONAL LIST IF NECESSARY.)
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------
NAME OF BENEFICIAL OWNER NUMBER OF SHARES TENDERED
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The acceptance of compensation by such Soliciting Dealer will constitute a
representation by it that (a) it has complied with the applicable requirements
of the Exchange Act and the applicable rules and regulations thereunder, in
connection with such solicitation; (b) it is entitled to such compensation for
such solicitation under the terms and conditions of the Offer (unless such
solicitation fee is directed to another Soliciting Dealer); (c) in soliciting
tenders of Shares, it has used no soliciting materials other than those
furnished by NEES; and (d) if it is a foreign broker or dealer not eligible for
membership in the National Association of Securities Dealers, Inc. (the NASD),
it has agreed to conform to the NASD's Rules of Fair Practice in making the
solicitations.
The payment of compensation to any Soliciting Dealer is dependent on such
Soliciting Dealer returning a Notice of Solicited Tenders to the Depositary.
(IF SHARES ARE BEING TENDERED AND/OR VOTED, PLEASE ALSO COMPLETE
SUBSTITUTE FORM W-9 BELOW OR A FORM W-8, AS APPLICABLE)
SIGN HERE:
----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF REGISTERED HOLDER(S))
13
<PAGE> 14
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal and Proxy must be guaranteed by a firm
that is a member of a registered national securities exchange or the NASD, or by
a commercial bank or trust company having an office or correspondent in the
United States which is a participant in an approved Signature Guarantee
Medallion Program (an Eligible Institution). Signatures on this Letter of
Transmittal and Proxy need not be guaranteed (a) if this Letter of Transmittal
and Proxy is signed by the registered holder(s) of the Shares (which term, for
purposes of this document, shall include any participant in one of the
Book-Entry Transfer Facilities whose name appears on a security position listing
as the owner of Shares) tendered herewith and such holder(s) has not completed
the box above under the heading "Special Payment Instructions" or the box above
under the heading "Special Delivery Instructions" on this Letter of Transmittal
and Proxy, (b) if such Shares are tendered for the account of an Eligible
Institution or (c) if this Letter of Transmittal and Proxy is being used solely
for the purpose of voting Shares which are not being tendered pursuant to the
Offer. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND PROXY AND SHARES. This Letter of
Transmittal and Proxy is to be used if (a) certificates are to be forwarded
herewith, (b) delivery of Shares is to be made by book-entry transfer pursuant
to the procedures set forth under the heading Terms of the Offer -- Procedure
for Tendering Shares in the Booklet or (c) Shares are being voted in connection
with the Offer. Certificates for all physically delivered Shares, or a
confirmation of a book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facilities of Shares delivered electronically, as well as a
properly completed and duly executed Letter of Transmittal and Proxy (or
facsimile thereof) and any other documents required by this Letter of
Transmittal and Proxy, must be received by the Depositary at one of its
addresses set forth on the front page of this Letter of Transmittal and Proxy on
or prior to the Expiration Date with respect to all Shares. Preferred
Shareholders who wish to tender their Shares yet who cannot deliver their Shares
and all other required documents to the Depositary on or prior to the Expiration
Date must tender their Shares pursuant to the guaranteed delivery procedure set
forth under the heading Terms of the Offer -- Procedure for Tendering Shares in
the Booklet. Pursuant to such procedure: (i) such tender must be made by or
through an Eligible Institution, (ii) a properly completed and duly executed
Notice of Guaranteed Delivery and Proxy in the form provided by NEES (with any
required signature guarantees) must be received by the Depositary on or prior to
the applicable Expiration Date and (iii) the certificates for all physically
delivered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at one of the Book-Entry Transfer Facilities of Shares
delivered electronically, as well as a properly completed and duly executed
Letter of Transmittal and Proxy (or facsimile thereof) and any other documents
required by this Letter of Transmittal and Proxy must be received by the
Depositary within three New York Stock Exchange (NYSE) trading days after the
date of execution of such Notice of Guaranteed Delivery and Proxy, all as
provided under the heading Terms of the Offer -- Procedure for Tendering Shares
in the Booklet. A NYSE trading day is any day on which the NYSE is open for
business.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
OPTION AND RISK OF THE TENDERING PREFERRED SHAREHOLDER. IF CERTIFICATES FOR
SHARES ARE SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED.
No alternative, conditional or contingent tenders will be accepted. See
Terms of the Offer -- Number of Shares; Purchase Price; Expiration Date;
Dividends in the Booklet. By executing this Letter of Transmittal and Proxy (or
facsimile thereof), the tendering Preferred Shareholder waives any right to
receive any notice of the acceptance for payment of the Shares.
3. VOTING. PREFERRED SHAREHOLDERS (INCLUDING PREFERRED SHAREHOLDERS WHO
ACQUIRE SHARES SUBSEQUENT TO THE RECORD DATE) WHO WISH TO TENDER THEIR SHARES
PURSUANT TO THE OFFER MUST VOTE IN FAVOR OF THE PROPOSED AMENDMENT TO THE POWER
COMPANY'S PROVISIONS, AS SET FORTH IN THE BOOKLET. THE OFFER IS CONDITIONED UPON
THE PROPOSED AMENDMENT BEING APPROVED AND
14
<PAGE> 15
ADOPTED AT THE SPECIAL MEETING. In addition, Preferred Shareholders have the
right to vote on the Proposed Amendment regardless of whether they tender their
Shares by casting their vote and duly executing the Proxy included in this
Letter of Transmittal and Proxy or by voting in person at the Special Meeting.
By executing a Notice of Guaranteed Delivery and Proxy, a Preferred Shareholder
is deemed to have tendered the Shares described in such Notice of Guaranteed
Delivery and Proxy and to have voted such Shares in accordance with the proxy
contained therein. If no vote is indicated on an otherwise properly executed
proxy contained within this Letter of Transmittal and Proxy (or within a Notice
of Guaranteed Delivery and Proxy), then all Shares in respect of such proxy will
be voted in favor of the Proposed Amendment. See Proposed Amendment and Proxy
Solicitation in the Booklet. The Offer is being sent to all persons in whose
names Shares are registered on the books of the Power Company on November 6,
1997 as well as to all persons in whose name Shares are registered on November
12, 1997, which is the Record Date. Preferred Shareholders who purchase or whose
purchase is registered after the Record Date and who wish to tender in the Offer
must arrange with their seller to receive a proxy from the holder of record on
the Record Date of such Shares. Any holder of Shares held of record on the
Record Date in the name of another holder must establish to the satisfaction of
the Power Company such holder's entitlement to exercise or transfer such Proxy.
This will ordinarily require an assignment by such record holder in blank, or if
not in blank, to and from each successive transferee, including the holder, with
each signature guaranteed by an Eligible Institution. See Instruction 5. In
order to facilitate receipt of proxies, Shares shall, during the period which
commences November 10, 1997 and which will end at the close of business on the
Expiration Date, trade in the over-the-counter market with a proxy providing the
transferee with the right to vote such acquired shares in the Proxy
Solicitation. No record date is fixed for determining which persons are
permitted to tender Shares. However, only the holders of record, or holders who
acquire an assignment of proxy from such holders, are permitted to vote for the
Proposed Amendment and thereby validly tender Shares pursuant to the Offer. Any
person who is the beneficial owner but not the record holder of Shares must
arrange for the record transfer of such Shares prior to tendering or direct the
record holder to tender on behalf of the beneficial holder.
4. PARTIAL TENDERS. NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY BOOK-
ENTRY TRANSFER. If fewer than all the Shares represented by any certificate
delivered to the Depositary are to be tendered, fill in the number of Shares
that are to be tendered in the box above under the heading "Description of
Shares Tendered." In such case, a new certificate for the remainder of the
Shares represented by the old certificate will be sent to the person(s) signing
this Letter of Transmittal and Proxy, unless otherwise provided in the box above
under the heading "Special Payment Instructions" or "Special Delivery
Instructions," as promptly as practicable following the expiration or
termination of the Offer. All Shares represented by certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL AND PROXY AND NOTICE OF GUARANTEED
DELIVERY AND PROXY; STOCK POWERS AND ENDORSEMENTS. If either this Letter of
Transmittal and Proxy or the Notice of Guaranteed Delivery and Proxy (together,
the Tender and Proxy Documents) is signed by the registered holder(s) of the
Shares tendered hereby, the signature(s) must correspond with the name(s) as
written on the face of the certificates without alteration, enlargement or any
change whatsoever.
If any of the Shares tendered or voted under either Tender and Proxy
Document is held of record by two or more persons, all such persons must sign
such Tender and Proxy Document. If any of the Shares tendered or voted under
either Tender and Proxy Document are registered in different names or different
certificates, it will be necessary to complete, sign and submit as many separate
Tender and Proxy Documents as there are different registrations of certificates.
If either Tender and Proxy Document is signed by the registered holder(s)
of the Shares tendered hereby, no endorsements of certificates or separate stock
powers are required unless payment of the Purchase Price is to be made to, or
Shares not tendered or not purchased are to be registered in the name of, any
person other than the registered holder(s). Signatures on any such certificates
or stock powers must be guaranteed by an Eligible Institution. See Instruction
1.
15
<PAGE> 16
If this Letter of Transmittal and Proxy is signed by a person other than
the registered holder(s) of the Shares tendered hereby, certificates must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on the certificates
for such Shares. Signature(s) on any such certificates or stock powers must be
guaranteed by an Eligible Institution. See Instruction 1.
If either Tender and Proxy Document or any certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to NEES of the authority of such person so to act must be
submitted.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, NEES
will pay or cause to be paid any stock transfer taxes with respect to the sale
and transfer of any Shares to it or its order pursuant to the Offer. If,
however, payment of the Purchase Price is to be made to, or Shares not tendered
or not purchased are to be registered in the name of, any person other than the
registered holder(s), or if tendered Shares are registered in the name of any
person other than the person(s) signing this Letter of Transmittal and Proxy,
the amount of any stock transfer taxes (whether imposed on the registered
holder(s), such other person or otherwise) payable on account of the transfer to
such person will be deducted from the Purchase Price unless satisfactory
evidence of the payment of such taxes, or exemption therefrom, is submitted.
Each Preferred Shareholder will be responsible for paying any income or gross
receipts taxes imposed by any jurisdiction by reason of the Special Cash Payment
(as defined in the Booklet) and/or the sale of the Shares in the Offer. See
Terms of the Offer -- Acceptance of Shares for Payment and Payment of Purchase
Price and Dividends and Certain U.S. Federal Income Tax Considerations in the
Booklet. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY TO
AFFIX TRANSFER TAX STAMPS TO THE CERTIFICATES REPRESENTING SHARES TENDERED
HEREBY.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
Purchase Price of any Shares purchased is to be issued in the name of, any
Shares not tendered or not purchased are to be returned to, and/or the check for
the Special Cash Payment is to be issued in the name of, a person other than the
person(s) signing this Letter of Transmittal and Proxy or if the check and/or
any certificate for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal and Proxy or
to an address other than that shown in the box above under the heading
"Description of Shares Tendered," then the "Special Payment Instructions" and/or
"Special Delivery Instructions" on this Letter of Transmittal and Proxy should
be completed. Preferred Shareholders tendering Shares by book-entry transfer
will have any Shares not accepted for payment returned by crediting the account
maintained by such Preferred Shareholder at the Book-Entry Transfer Facility
from which such transfer was made.
8. SUBSTITUTE FORM W-9 AND FORM W-8. A tendering and/or voting Preferred
Shareholder is required to provide the Depositary with either a correct Taxpayer
Identification Number (TIN) on Substitute Form W-9, which is provided under
"Important Tax Information" below, or a properly completed Form W-8 unless
exempt therefrom. Failure to provide the information on either Substitute Form
W-9 or Form W-8 may subject the tendering and/or voting Preferred Shareholder to
31% federal income tax backup withholding on the payment of the Purchase Price
for the Shares or on the Special Cash Payment. The tendering and/or voting
Preferred Shareholder may write "Applied For" in Part I of Substitute Form W-9
and sign the "Certificate of Awaiting Taxpayer Identification Number" of
Substitute Form W-9 if the Preferred Shareholder has not been issued a TIN and
has applied for a number or intends to apply for a number in the near future. If
"Applied For" is written in Part I of Substitute Form W-9 and the "Certificate
of Awaiting Taxpayer Identification Number" of Substitute Form W-9 is signed and
the Depositary is not provided with a TIN by the time of payment, the Depositary
will withhold 31% on all payments of the Purchase Price for the Shares or the
Special Cash Payment thereafter until a TIN is provided to the Depositary.
16
<PAGE> 17
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or requests
for assistance may be directed to the Information Agent or the Dealer Manager at
their respective telephone numbers and addresses listed below. Requests for
additional copies of the Booklet, this Letter of Transmittal and Proxy, or other
tender offer materials may be directed to the Information Agent or the Dealer
Manager and such copies will be furnished promptly at NEES' expense. Preferred
Shareholders may also contact their local broker, dealer, commercial bank or
trust company for assistance concerning the Offer.
10. SOLICITED TENDERS. Upon the terms and subject to the conditions of the
Offer and this Instruction, NEES will pay to designated brokers and dealers a
solicitation fee of $1.50 per Share for any Shares tendered, accepted for
payment, and paid for pursuant to the Offer and for share of Dividend Series
Preferred Stock not tendered by voted in favor on the Proposed Amendment (except
that for transactions for beneficial owners equal to or exceeding 2,500 Shares,
NEES will pay a solicitation fee of $1.00 per Share, of which at least eighty
percent (80%) shall be paid to the Dealer Manager and twenty percent (20%) to
the Soliciting Dealer (which may be the Dealer Manager)). With respect to fees
payable pursuant to this paragraph involving transactions for beneficial owners
whose ownership is less than 2,500 Shares, any fees payable hereunder shall be
paid in full to the Dealer Manager unless a Soliciting Dealer is designated (as
described below), in which case such fee shall be payable in full to such
designated Soliciting Dealer (which designated Soliciting Dealer may be the
Dealer Manager). The Letters of Transmittal and Proxy must include the name of
an entity which obtained the tender or proxy and which is either (a) a broker or
dealer in securities, including the Dealer Manager in its capacity as a broker
or dealer, which is a member of any national securities exchange or of the
National Association of Securities Dealers, Inc. (NASD), (b) a foreign broker or
dealer not eligible for membership in the NASD which agrees to conform to the
NASD's Rules of Fair Practice in soliciting tenders outside the United States to
the same extent as though it were an NASD member, or (c) a bank or trust company
(each of which is referred to herein as a Soliciting Dealer). No solicitation
fee shall be payable to a Soliciting Dealer with respect to the tender of Shares
or delivery of a proxy unless the Letter of Transmittal and Proxy accompanying
such tender or delivery of a proxy designates such Soliciting Dealer. No
solicitation fee shall be payable to a Soliciting Dealer in respect of Shares
registered in the name of such Soliciting Dealer unless such Shares are held by
such Soliciting Dealer as nominee and such Shares are being tendered or
delivered for the benefit of one or more beneficial owners identified on the
Letter of Transmittal or on the Notice of Solicited Tenders. No solicitation fee
shall be payable to a Soliciting Dealer if such Soliciting Dealer is required
for any reason to transfer the amount of such fee to a depositing holder (other
than itself). No solicitation fee shall be paid to a Soliciting Dealer with
respect to Shares tendered or delivered for such Soliciting Dealer's own
account. Soliciting Dealers will not be entitled to a solicitation fee for
Shares beneficially owned by such Soliciting Dealer. No broker, dealer, bank,
trust company, or fiduciary shall be deemed to be the agent of NEES, the Power
Company, the Depositary, the Information Agent, or the Dealer Manager for
purposes of the Offer.
Soliciting Dealers will include any of the organizations described in
clauses (a), (b), and (c) above even when the activities of such organizations
in connection with the Offer consist solely of forwarding to clients materials
relating to the Offer, including the Letter of Transmittal, and tendering Shares
or delivering as directed by beneficial owners thereof. No Soliciting Dealer is
required to make any recommendation to holders of Shares as to whether to tender
or refrain from tendering in the Offer. No assumption is made, in making payment
to any Soliciting Dealer, that its activities in connection with the Offer
included any activities other than those described above, and for all purposes
noted in all materials relating to the Offer, the term "solicit" shall be deemed
to mean no more than processing shares tendered or forwarding to customers
materials regarding the Offer.
17
<PAGE> 18
11. IRREGULARITIES. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance of any tender
of Shares will be determined by NEES, in its sole discretion, and its
determination shall be final and binding. NEES reserves the absolute right to
reject any and all tenders of Shares that it determines are not in proper form
or the acceptance for payment of or payment for Shares that may, in the opinion
of NEES' counsel, be unlawful. NEES also reserves the absolute right to waive
any of the conditions to the Offer or any defect or irregularity in any tender
of Shares and NEES' interpretation of the terms and conditions of the Offer
(including these instructions) shall be final and binding. Unless waived, any
defects or irregularities in connection with tenders must be cured within such
time as NEES shall determine. None of NEES, the Dealer Manager, the Depositary,
the Information Agent or any other person shall be under any duty to give notice
of any defect or irregularity in tenders nor shall any of them incur any
liability for failure to give any such notice. Tenders will not be deemed to
have been made until all defects and irregularities have been cured or waived.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate
representing Shares has been lost, destroyed or stolen, the Preferred
Shareholder should promptly notify the Depositary by checking the box above
immediately following the "Special Payment Instructions/Special Delivery
Instructions" and indicating the number of Shares lost, destroyed or stolen. The
Preferred Shareholder will then be instructed as to the procedures that must be
taken in order to replace the certificate. The tender of Shares pursuant to this
Letter of Transmittal and Proxy will not be valid unless on or prior to the
Expiration Date: (a) such procedures have been completed and a replacement
certificate for the Shares has been delivered to the Depositary or (b) a Notice
of Guaranteed Delivery and Proxy has been delivered to the Depositary. See
Instruction 2.
IMPORTANT: THIS LETTER OF TRANSMITTAL AND PROXY (OR A FACSIMILE COPY HEREOF),
DULY EXECUTED, TOGETHER WITH, IF APPLICABLE, CERTIFICATES OR CONFIRMATION OF A
BOOK-ENTRY TRANSFER, AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE
DEPOSITARY, OR, IF APPLICABLE, THE NOTICE OF GUARANTEED DELIVERY AND PROXY MUST
BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE.
18
<PAGE> 19
IMPORTANT TAX INFORMATION
Under Federal income tax law, a Preferred Shareholder whose tendered Shares
are accepted for payment, or who will receive a Special Cash Payment as a result
of voting in favor of the Proposed Amendment, is required to provide the
Depositary (as payer) with either such Preferred Shareholder's correct TIN on
Substitute Form W-9 below or a properly completed Form W-8. If such Preferred
Shareholder is an individual, the TIN is such Preferred Shareholder's social
security number. For businesses and other entities, the number is the Federal
employer identification number. If the Depositary is not provided with the
correct TIN or properly completed Form W-8, the Preferred Shareholder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
(a) payments that are made to such Preferred Shareholder with respect to Shares
purchased pursuant to the Offer or (b) Special Cash Payments made to a Preferred
Shareholder with respect to Shares voted pursuant to the proxy solicitation may
be subject to backup withholding. The Form W-8 can be obtained from the
Depositary. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" below for additional instructions.
If Federal income tax backup withholding applies, the Depositary is
required to withhold 31% of any payments made to the Preferred Shareholder.
Backup withholding is not an additional tax. Rather, the Federal income tax
liability of persons subject to backup withholding will be reduced by the amount
of the tax withheld. If withholding results in an overpayment of taxes, a refund
may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9 AND FORM W-8
To avoid backup withholding on payments that are made to a Preferred
Shareholder with respect to Shares purchased pursuant to the Offer or on Special
Cash Payments, the Preferred Shareholder is required to notify the Depositary of
his or her correct TIN by completing the Substitute Form W-9 below certifying
that the TIN provided on Substitute Form W-9 is correct and that (a) the
Preferred Shareholder has not been notified by the Internal Revenue Service that
he or she is subject to Federal income tax backup withholding as a result of
failure to report all interest or dividends or (b) the Internal Revenue Service
has notified the Preferred Shareholder that he or she is no longer subject to
Federal income tax backup withholding. Foreign Preferred Shareholders must
submit a properly completed Form W-8 in order to avoid the applicable backup
withholding; provided, however, that backup withholding will not apply to
foreign Preferred Shareholders subject to 30% (or lower treaty rate) withholding
on gross payments received pursuant to the Offer or on the Special Cash
Payments.
WHAT NUMBER TO GIVE THE DEPOSITARY
The Preferred Shareholder is required to give the Depositary the social
security number or employer identification number of the registered owner of the
Shares. If the Shares are in more than one name or are not in the name of the
actual owner, consult the "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" below for additional guidance on
which number to report.
19
<PAGE> 20
SEE "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9" FOR ADDITIONAL INSTRUCTIONS.
SUBSTITUTE
FORM W-9
<TABLE>
<CAPTION>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------
PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY, AS DEPOSITARY
- ----------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE
FORM W-9 BOX AT RIGHT AND CERTIFY BY SIGNING AND ----------------------
DATING BELOW.
---------------------------------------- Social Security Number
or Employer
NAME (Please Print) Identification
Number
(If Awaiting TIN write
---------------------------------------- "Applied for")
------------------------
PAYER'S REQUEST FOR ADDRESS
TAXPAYER IDENTIFICATION PART II -- For Payees
NUMBER (TIN) NOT subject to backup
---------------------------------------- withholding, see the
CITY STATE ZIP CODE "Guidelines for Cer-
tification of Taxpayer
Identification Number
on Substitute Form
DEPARTMENT OF THE TREASURY W-9" and complete as
INTERNAL REVENUE SERVICE instructed therein
---------------------------------------------------------------------------------------------
</TABLE>
PART III -- CERTIFICATION: -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because: (a) I am exempt
from backup withholding, or (b) I have not been notified by the Internal
Revenue Service (IRS) that I am subject to backup withholding as a result
of a failure to report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup withholding.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE DATE , 1997
------------------------------------ --------------------------------
</TABLE>
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have
been notified by the IRS that you are currently subject to backup withholding
because of underreporting interest or dividends on your tax return. However,
if after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS that you are no longer subject
to backup withholding do not cross out item (2). Also see instructions in the
enclosed Guidelines.
- --------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WRITE "APPLIED FOR"
IN PART I OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver such an application in the near future. I
understand that if I do not provide a taxpayer identification number within
sixty (60) days, 31% of all reportable payments made to me thereafter will be
withheld until I provide a number.
<TABLE>
<CAPTION>
<S> <C>
-------------------------------------------- -------------------------------------, 1997
SIGNATURE DATE
</TABLE>
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE "GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9"
FOR ADDITIONAL DETAILS.
20
<PAGE> 21
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE.
PURPOSE OF FORM. A person who is required to file an information return
with the IRS must obtain your correct taxpayer identification number (TIN) to
report income paid to you, real estate transactions, mortgage interest you paid,
the acquisition or abandonment of secured property, or contributions you made to
an IRA. Use Form W-9 to furnish your correct TIN to the requester (the person
asking you to furnish your TIN) and, when applicable, (1) to certify that the
TIN you are furnishing is correct (or that you are waiting for a number to be
issued), (2) to certify that you are not subject to backup withholding, and (3)
to claim exemption from backup withholding if you are an exempt payee.
Furnishing your correct TIN and making the appropriate certifications will
prevent certain payments from being subject to backup withholding.
NOTE: IF A REQUESTER GIVES YOU A FORM OTHER THAN W-9 TO REQUEST YOUR TIN,
YOU MUST USE THE REQUESTER'S FORM.
HOW TO OBTAIN A TIN. If you do not have a TIN, apply for one immediately.
To apply, get Form SS-5, Application for a Social Security Card (for
Individuals), from your local office of the Social Security Administration, or
Form SS-4, Application for Employer Identification Number (for businesses and
all other entities), from your local IRS office.
To complete Form W-9 if you do not have a TIN, write "Applied for" in the
space for the TIN in Part 1, sign and date the form, and give it to the
requester. Generally, you will than have 60 days to obtain a TIN and furnish it
to the requester. If the requester does not receive your TIN within 60 days,
backup withholding, if applicable, will begin and continue until you furnish
your TIN to the requester. For reportable interest or dividend payments, the
payor must exercise one of the following options concerning backup withholding
during this 60-day period. Under option (1), a payor must backup withhold on any
withdrawals you make from your account after 7 business days after the requester
receives this form back from you. Under option (2), the payor must backup
withhold on any reportable interest or dividend payments made to your account,
regardless of whether you make any withdrawals. The backup withholding under
option (2) must begin no later than 7 business days after the requester receives
this form back. Under option (2), the payor is required to refund the amounts
withheld if your certified TIN is received within the 60-day period and you were
not subject to backup withholding during that period.
NOTE: WRITING "APPLIED FOR" ON THE FORM MEANS THAT YOU HAVE ALREADY APPLIED
FOR A TIN OR THAT YOU INTEND TO APPLY FOR ONE IN THE NEAR FUTURE.
As soon as you receive your TIN, complete another Form W-9, include your
TIN, sign and date the form, and give it to the requester.
WHAT IS BACKUP WITHHOLDING? -- Persons making certain payments to you must
withhold and pay to the IRS 31% of such payments under certain conditions. This
is called "backup withholding." Payments that could be subject to backup
withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee compensation, and certain payments
from fishing boat operators, but do not include real estate transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
(1) You do not furnish your TIN to the requester, or
(2) The IRS notifies the requester that you furnished an incorrect TIN, or
(3) You are notified by the IRS that you are subject to withholding because
you failed to report all your interest and dividends on your tax return (for
reportable interest and dividends only), or
(4) You do not certify to the requester that you are not subject to backup
withholding under 3 above, (for reportable interest and dividend accounts opened
after 1983 only), or
(5) You do not certify your TIN.
Except as explained in 5 above, other reportable payments are subject to
backup withholding only if 1 or 2 above applies. Certain payees and payments are
exempt from backup withholding and information reporting. See Payees and
Payments Exempt From Backup Withholding, below, and Exempt Payees and Payments
under Signing the Certification, below if you are an exempt payee.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING. The following is a list
of payees exempt from backup withholding and for which no information reporting
is required. For interest and dividends, all listed payees are exempt except as
listed in item (9). For broker transactions, payees listed in items (1) through
(13) and a person registered under the Investment Advisers Act of 1940 who
regularly acts as a broker are exempt. Payments subject to reporting under
sections 6041 and 6041A are generally exempt from backup withholding only if
made to payees described in items (1) through (7), except a corporation that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (2) through (6) are
21
<PAGE> 22
exempt from backup withholding for barter exchange transactions and patronage
dividends.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), an IRA, or a
custodial account under section 402(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporation Secretaries,
Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividend and patronage dividends generally not subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
- Section 404(k) payments made by an ESOP.
Payments of interest generally not subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: YOU MAY BE SUBJECT TO BACKUP WITHHOLDING IF THIS INTEREST IS $600 OR
MORE AND IS PAID IN THE COURSE OF THE PAYER'S TRADE OR BUSINESS AND YOU HAVE NOT
PROVIDED YOUR CORRECT TIN TO THE PAYER.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid to you.
Other types of payments generally not subject to backup withholding include:
- Wages.
- Distributions from a pension, annuity, profit-sharing or stock bonus plan,
or an IRA.
- Distributions from an owner-employee plan.
- Certain surrenders of life insurance contracts.
- Gambling winnings, if withholding is required under section 3402(q).
However, if withholding is not required under section 3402(q), backup
withholding applies if the payee fails to furnish a TIN.
- Real estate transactions reportable under section 6045.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045,
6049, 6050A, and 6050N, and the regulations under those sections.
PENALTIES
FAILURE TO FURNISH TIN. If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
MISUSE OF TINS. If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
SPECIFIC INSTRUCTIONS
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
22
<PAGE> 23
NAME -- If you are an individual, you must generally provide the name shown
on your social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security Administration
of the name change, please enter your first name, the last name shown on your
social security card, and your new last name.
NUMBER -- If you are a sole proprietor, you must furnish your individual
name and either your SSN or EIN. You may also enter your business name or "doing
business as" name on the business name line. Enter your name(s) as shown on your
social security card and/or as it was used to apply for your EIN on Form SS-4.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
SIGNING THE "PART III -- CERTIFICATION" ON THE SUBSTITUTE FORM W-9
(1) INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984 AND
BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983 -- You are required to furnish
your correct TIN, but you are not required to sign the certification.
(2) INTEREST, DIVIDEND, BROKER, AND BARTER EXCHANGE ACCOUNTS OPENED AFTER
1983 AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983 -- You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out item 2 in the certification before signing the form.
(3) REAL ESTATE TRANSACTIONS. You must sign the certification. You may
cross out item 2 of the certification.
(4) OTHER PAYMENTS. You are required to furnish your correct TIN, but you
are not required to sign the certification unless you have been notified that
you have previously given an incorrect TIN. Other payments include payments made
in the course of the requester's trade or business for rents, royalties, goods
(other than bills for merchandise), medical and health care services (including
payments to corporations), payments to a nonemployee for services (including
attorney and accounting fees), and payments to certain fishing boat crew
members.
(5) MORTGAGE INTEREST PAID BY YOU, ACQUISITION OR ABANDONMENT OF SECURED
PROPERTY, OR IRA CONTRIBUTIONS. You are required to furnish your correct TIN,
but you are not required to sign the certification.
(6) EXEMPT PAYEES AND PAYMENTS. If you are exempt from backup withholding,
you should complete this form to avoid possible erroneous backup withholding.
Enter your correct TIN in Part I, write "EXEMPT" in the block in Part II, and
sign and date the form. If you are a nonresident alien or foreign entity not
subject to backup withholding, give the requester a complete Form W-8,
Certificate of Foreign Status.
(7) TIN "APPLIED FOR." Follow the instructions under How To Obtain a TIN, on
page 1, and sign and date this form.
SIGNATURE: For a joint account, only the person whose TIN is shown in Part 1
should sign.
PRIVACY ACT NOTICE: Section 6109 requires you to furnish your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property, or contributions you made to an
IRA. The IRS uses the numbers for identification purposes and to help verify the
accuracy of your tax return. You must provide your TIN whether or not you are
required to file a tax return. Payers must generally withhold 31% of taxable
interest, dividends, and certain other payments to a payee who does not furnish
a TIN to a payor. Certain penalties may also apply.
23
<PAGE> 24
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
<TABLE>
<CAPTION>
- ---------------------------------------------------
For this type of account: Give name and SSN of:
- ---------------------------------------------------
<C> <S> <C>
1. Individual The individual
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, the
first individual on
the account(1)
3. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
4. a. The usual revocable The grantor-trustee(1)
savings trust
(grantor is also
trustee)
b. So-called trust The actual owner(1)
account that is not
a legal or valid
trust under state
law
5. Sole proprietorship The owner(3)
- ---------------------------------------------------
<CAPTION>
- ---------------------------------------------------
For this type of account: Give name and SSN of:
- ---------------------------------------------------
<C> <S> <C>
6. A valid trust, estate, Legal entity(4)
or pension trust
7. Corporate The corporation
8. Association, club, The organization
religious, charitable,
educational, or other
tax-exempt
organization
9. Partnership The partnership
10. A broker or registered The broker or nominee
nominee
11. Account with the The public entity.
Department of
Agriculture in the
name of a public
entity (such as a
state or local
government, school
district, or prison)
that receives
agricultural program
payments.
- ---------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's SSN.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your SSN or EIN.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless the
legal entity itself is not designated in the account title.)
NOTE: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
24
<PAGE> 25
Any questions or requests for assistance or additional copies of Booklets,
this Letter of Transmittal and Proxy, the Notice of Guaranteed Delivery and
Proxy or other materials may be directed to the Information Agent at the address
and telephone number set forth below.
THE INFORMATION AGENT:
[GEORGESON & COMPANY LOGO]
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
(800) 223-2064 (CALL TOLL-FREE)
BANKS AND BROKERS CALL COLLECT:
(212) 440-9918
Preferred Shareholders may contact the Dealer Manager at its address and
telephone number set forth below with any questions regarding the terms of the
Offer and solicitation of proxies. In addition, Preferred Shareholders may also
contact their broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Offer and solicitation of proxies.
THE DEALER MANAGER:
MERRILL LYNCH & CO.
WORLD FINANCIAL CENTER
250 VESEY STREET
NEW YORK, NEW YORK 10281
(888) ML4-TNDR (TOLL-FREE)
(888) 654-8637 (TOLL-FREE)
<PAGE> 1
LETTER OF TRANSMITTAL
RELATING TO
SHARES OF 6% CUMULATIVE PREFERRED STOCK
OF
[NEW ENGLAND POWER COMPANY LOGO] NEW ENGLAND POWER COMPANY
TENDERED PURSUANT TO THE OFFER TO PURCHASE FOR CASH
BY
NEW ENGLAND ELECTRIC SYSTEM,
DATED NOVEMBER 6, 1997,
FOR PURCHASE AT A PURCHASE PRICE OF
$ PER SHARE
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME,
ON FRIDAY, DECEMBER 12, 1997, UNLESS THE OFFER IS EXTENDED (THE EXPIRATION
DATE).
- --------------------------------------------------------------------------------
To: IBJ Schroder Bank & Trust Company (the Depositary)
By First-Class Mail:
IBJ Schroder Bank & Trust Company
P.O. Box 8-1
Bowling Green Station
New York, New York 10274
Attn: Reorganization Department
By Facsimile:
(212) 858-2611
By Hand or Overnight Delivery:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attn: Reorganization Department
Securities Processing Window SC-1
To Conform:
(212) 858-2103
ATTENTION
THIS LETTER OF TRANSMITTAL IS TO BE USED BY PREFERRED SHAREHOLDERS WHO ARE
TENDERING SHARES PURSUANT TO THE OFFER.
ANY PREFERRED SHAREHOLDER WHO HAS ANY QUESTIONS AS TO HOW TO COMPLETE THIS
LETTER OF TRANSMITTAL SHOULD CONTACT THE INFORMATION AGENT AT (800) 223-2064
(TOLL FREE AND FOR BANKS AND BROKERS (212) 440-9918 (CALL COLLECT.
<PAGE> 2
All capitalized terms used herein and not defined herein have the meanings
ascribed to them in the Offer to Purchase and Proxy Statement and Information
Statement.
NEW ENGLAND ELECTRIC SYSTEM, A MASSACHUSETTS VOLUNTARY ASSOCIATION (NEES),
WILL NOT BE REQUIRED TO ACCEPT FOR PAYMENT OR PAY FOR ANY SHARES TENDERED IF THE
PROPOSED AMENDMENT IS NOT APPROVED AND ADOPTED AT THE SPECIAL MEETING. 6%
CUMULATIVE PREFERRED SHAREHOLDERS HAVE THE RIGHT TO VOTE ON THE PROPOSED
AMENDMENT REGARDLESS OF WHETHER THEY TENDER THEIR SHARES BY VOTING IN PERSON AT
THE SPECIAL MEETING.
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY.
NOTE: IF SHARES ARE BEING TENDERED, THE REMAINDER OF THIS LETTER OF TRANSMITTAL
MUST BE COMPLETED, INCLUDING THE SUBSTITUTE FORM W-9 BELOW.
The name "New England Electric System" means the trustee or trustees for the
time being (as trustee or trustees but not personally) under an agreement and
declaration of trust dated January 2, 1926, as amended, which is hereby referred
to, and a copy of which as amended has been filed with the Secretary of the
Commonwealth of Massachusetts. Any agreement, obligation or liability made,
entered into or incurred by or on behalf of New England Electric System binds
only its trust estate, and no shareholder, director, trustee, officer or agent
thereof assumes or shall be held to any liability therefor.
2
<PAGE> 3
PLEASE COMPLETE IF APPLICABLE.
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED(1)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE USE PREADDRESSED LABEL OR FILL IN, IF
BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARE SHARE CERTIFICATE(S) AND SHARE(S) TENDERED/VOTED
CERTIFICATE(S) AND SHARE(S) TENDERED) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)(1)
- ---------------------------------------------------------------------------------------------------------------------
NUMBER OF
TOTAL NUMBER SHARES NOT
OF SHARES TENDERED BUT
REPRESENTED NUMBER AS TO WHICH
SHARE CERTIFICATE BY SHARE OF SHARES PROXIES
NUMBER(S)(2) CERTIFICATE(S)(2) TENDERED(3) GIVEN ONLY
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Total Shares:
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) If tendering or voting Share(s), please fill in table exactly as
information appears on the Certificate(s).
(2) Need not be completed by Preferred Shareholders tendering by book-entry
transfer.
(3) Unless otherwise indicated, it will be assumed that all Shares represented
by any Certificate(s) delivered to the Depositary are being tendered. See
Instruction 4.
- --------------------------------------------------------------------------------
3
<PAGE> 4
PLEASE COMPLETE IF APPLICABLE.
- --------------------------------------------------------------------------------
SIGNATURE(S) OF REGISTERED HOLDER(S)*
--------------------------------------------------------------------------
(SIGNATURE)
--------------------------------------------------------------------------
(SIGNATURE)
Dated:
---------------------------------------------------------------- , 1997
Name(s):
----------------------------------------------------------------------
------------------------------------------------------------------------------
------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
--------------------------------------------------------
Address:
----------------------------------------------------------------------
------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Daytime Area Code and Telephone No.:
------------------------------------------
* Must be signed by the registered holder(s) exactly as name(s) appear(s) on
the stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or
other person acting in a fiduciary or representative capacity, please set
forth full title and see Instruction 5.
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
---------------------------------------------------------
Name:
-------------------------------------------------------------------------
Name of Firm:
-----------------------------------------------------------------
(PLEASE PRINT)
Address of Firm:
--------------------------------------------------------------
------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.:
--------------------------------------------------
Dated:
----------------------------------------------------------------- , 1997
------------------------------------------------------------------------------
4
<PAGE> 5
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN THE
ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER
OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED ABOVE AND COMPLETE THE
SUBSTITUTE FORM W-9 SET FORTH BELOW OR A FORM W-8, AS APPLICABLE. SEE
INSTRUCTION 8 AND "IMPORTANT TAX INFORMATION" BELOW.
DO NOT SEND ANY CERTIFICATES TO NEES, NEW ENGLAND POWER COMPANY, A
MASSACHUSETTS CORPORATION AND DIRECT SUBSIDIARY OF NEES (THE POWER COMPANY),
MERRILL LYNCH & CO., OR GEORGESON & COMPANY, INC.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used if (i) Certificates are to be
forwarded herewith or (ii) delivery of Shares (as defined below) is to be made
by book-entry transfer pursuant to the procedures set forth under the heading
Terms of the Offer -- Procedure for Tendering Shares in the Offer to Purchase
and Proxy and Information Statement (as defined below).
Preferred Shareholders who wish to tender Shares but cannot deliver their
Shares and all other documents required hereby to the Depositary on or prior to
the Expiration Date must tender their Shares pursuant to the guaranteed delivery
procedure set forth under the heading Terms of the Offer -- Procedure for
Tendering Shares -- Guaranteed Delivery Procedure in the Offer to Purchase and
Proxy and Information Statement. See Instruction 2. DELIVERY OF DOCUMENTS TO
NEES, THE POWER COMPANY OR A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE A
VALID DELIVERY.
5
<PAGE> 6
PLEASE COMPLETE:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
[ ] CHECK HERE IF TENDERED SHARES ARE ENCLOSED HEREWITH.
</TABLE>
- --------------------------------------------------------------------------------
(BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE
FOLLOWING:
Name of tendering institution:
----------------------------------------------------
(PLEASE PRINT)
Check applicable box: [ ] DTC [ ] PDTC
Account No.
-----------------------------------------------------------------------
Transaction Code No.
--------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of tendering Preferred Shareholder(s):
-------------------------------------
-----------------------------------------------------------------------------------
(PLEASE PRINT)
Date of execution of Notice of Guaranteed Delivery:
----------------------------------
Name of institution that guaranteed delivery:
----------------------------------------
If delivery is by book-entry transfer:
Name of tendering institution:
-------------------------------------------------------
Account No.
------------------------------------------------- at [ ] DTC or [ ] PDTC
(CHECK ONE)
Transaction Code No.
-----------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
6
<PAGE> 7
NOTE: SIGNATURES MUST BE PROVIDED ABOVE
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The above signed hereby tenders to NEES the shares in the amount set forth
in the box above labeled "Description of Shares Tendered" pursuant to NEES'
offer to purchase any and all of the outstanding shares of the 6% Cumulative
Preferred Stock (the Shares) of the Power Company shown above to which this
Letter of Transmittal is applicable at the purchase price per Share shown above
(the Purchase Price), net to the seller in cash, upon the terms and subject to
the conditions set forth in the Offer to Purchase and Proxy and Information
Statement, dated November 6, 1997 (the Booklet), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which together constitutes the
Offer). THE OFFER IS CONDITIONED UPON THE PROPOSED AMENDMENT BEING APPROVED AND
ADOPTED AT THE SPECIAL MEETING (AS DEFINED IN THE BOOKLET). See Proposed
Amendment and Proxy Solicitation, Terms of the Offer -- Extension of Tender
Period; Termination; Amendments and Terms of the Offer -- Certain Conditions of
the Offer in the Booklet.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), the above signed
hereby sells, assigns and transfers to, or upon the order of, NEES all right,
title and interest in and to all the Shares that are being tendered hereby and
hereby constitutes and appoints IBJ Schroder Bank & Trust Company (the
Depositary) the true and lawful agent and attorney-in-fact of the above signed
with respect to such Shares, with full power of substitution (such power of
attorney being an irrevocable power coupled with an interest), to (a) deliver
certificates for such Shares, or transfer ownership of such Shares on the
account books maintained by any of the Book-Entry Transfer Facilities, together,
in any such case, with all accompanying evidences of transfer and authenticity,
to or upon the order of NEES, (b) present such Shares for registration and
transfer on the books of the Power Company and (c) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares, all in
accordance with the terms of the Offer.
The above signed hereby represents and warrants that the above signed has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and that, when and to the extent the same are accepted for
payment by NEES, NEES will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, charges, encumbrances,
conditional sales agreements or other obligations relating to the sale or
transfer thereof, and the same will not be subject to any adverse claims. The
above signed will, upon request, execute and deliver any additional documents
deemed by the Depositary or NEES to be necessary or desirable to complete the
sale, assignment and transfer of the Shares tendered hereby.
All authority herein conferred or agreed to be conferred shall not be
affected by, and shall survive, the death or incapacity of the above signed, and
any obligations of the above signed hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the above signed. Except as
stated in the Offer, this tender is irrevocable.
The above signed understands that tenders of Shares pursuant to any one of
the procedures described under the heading Terms of the Offer -- Procedure for
Tendering Shares in the Booklet and in the instructions hereto will constitute
the above signed's acceptance of the terms and conditions of the Offer,
including the above signed's representation and warranty that (a) the above
signed has a net long position in the Shares being tendered within the meaning
of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended
(the Exchange Act), and (b) the tender of such Shares complies with Rule 14e-4.
NEES' acceptance for payment of Shares tendered pursuant to the Offer will
constitute a binding agreement between the above signed and NEES upon the terms
and subject to the conditions of the Offer.
The above signed recognizes that, under certain circumstances set forth in
the Booklet, NEES may terminate or amend the Offer or may not be required to
purchase any of the Shares tendered hereby. In either event, the above signed
understands that certificate(s) for any Shares not tendered or not purchased
will be returned to the above signed.
7
<PAGE> 8
Unless otherwise indicated in the box below under the heading "Special
Payment Instructions," please issue the check for the Purchase Price of any
Shares purchased, and/or return any Shares not tendered or not purchased, in the
name(s) of the above signed (and, in the case of Shares tendered by book-entry
transfer, by credit to the account at the Book-Entry Transfer Facility
designated above). Unless otherwise indicated in the box below under the heading
"Special Delivery Instructions," please mail the check for the Purchase Price of
any Shares purchased and/or any certificates for Shares not tendered or not
purchased (and accompanying documents, as appropriate) to the above signed at
the address shown below. In the event that both "Special Payment Instructions"
and "Special Delivery Instructions" are completed, please issue the check for
the Purchase Price of any Shares purchased and/or return any Shares not tendered
or not purchased in the name(s) of, and mail said check and/or any certificates
to, the person(s) so indicated. The above signed recognizes that NEES has no
obligation, pursuant to the "Special Payment Instructions," to transfer any
Shares from the name of the registered holder(s) thereof if NEES does not accept
for payment any of the Shares so tendered.
8
<PAGE> 9
<TABLE>
<S> <C>
- -------------------------------------------------- --------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
SEE INSTRUCTIONS 4, 6, AND 7 SEE INSTRUCTIONS 4, 6, AND 7
To be completed ONLY if the check for To be completed ONLY if the check for the
the Purchase Price of Shares purchased Purchase Price of Shares purchased and/or
and/or certificates for Shares not tendered certificates for Shares not tendered or not
or not purchased are to be issued in the purchased are to be mailed to someone other
name of someone other than the above signed. than the above signed or to the above signedat
an address other than that shown below the
above signed's signature(s).
Issue: [ ] Check [ ] Certificate(s) to: Mail: [ ] Check [ ] Certificate(s) to:
Name Name
------------------------------------------- -------------------------------------------
(PLEASE PRINT) (PLEASE PRINT)
Address Address
---------------------------------------- ----------------------------------------
----------------------------------------------- -----------------------------------------------
(INCLUDE ZIP CODE) (INCLUDE ZIP CODE)
----------------------------------------------- -----------------------------------------------
(TAX IDENTIFICATION OR
SOCIAL SECURITY NUMBER)*
* SEE SUBSTITUTE FORM W-9 BELOW.
Credit Shares delivered by book-entry
transfer and not purchased to the Book-Entry
Transfer Facility Account set forth below:
[ ] DTC [ ] PDTC
Account No.:
-----------------------------------------------
- -------------------------------------------------- --------------------------------------------------
</TABLE>
[ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN AND
WISH TO TENDER HAVE BEEN LOST, DESTROYED OR STOLEN. (SEE INSTRUCTION 12.)
Number of Shares represented by lost, destroyed or stolen
certificates:
--------------------------------------
9
<PAGE> 10
SOLICITED TENDERS
(SEE INSTRUCTION 10)
As provided in the Offer to Purchase and Proxy and Information Statement
and Instruction 10 to the Letter of Transmittal, NEES will pay to any Soliciting
Dealer, as defined in Instruction 10, a solicitation fee of $1.50 per Share for
any Shares tendered, accepted for payment and paid pursuant to the Offer (except
that for transactions for beneficial owners equal to or exceeding 2,500 Shares,
NEES will pay a solicitation fee of $1.00 per Share). Solicitation fees payable
in transactions for beneficial owners of 2,500 or more Shares shall be paid 80%
to the Dealer Manager and 20% to the Soliciting Dealers (which may be the Dealer
Manager). However, Soliciting Dealers will not be entitled to a solicitation fee
for Shares beneficially owned by such Soliciting Dealer.
The undersigned represents that the Soliciting Dealer which solicited and
obtained this tender is:
Name of Firm:
------------------------------------------------------------------
(PLEASE PRINT)
Name of Individual Broker or Financial Consultant:
-----------------------------
Telephone Number of Broker or Financial Consultant:
----------------------------
Identification Number (if known):
----------------------------------------------
Address:
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
The following to be completed ONLY if customer's Shares held in nominee
name are tendered. (ATTACH ADDITIONAL LIST IF NECESSARY.)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
NAME OF BENEFICIAL OWNER NUMBER OF SHARES TENDERED
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
</TABLE>
The acceptance of compensation by such Soliciting Dealer will constitute a
representation by it that (a) it has complied with the applicable requirements
of the Exchange Act and the applicable rules and regulations thereunder, in
connection with such solicitation; (b) it is entitled to such compensation for
such solicitation under the terms and conditions of the Offer (unless such
solicitation fee is directed to another Soliciting Dealer); (c) in soliciting
tenders of Shares, it has used no soliciting materials other than those
furnished by NEES; and (d) if it is a foreign broker or dealer not eligible for
membership in the National Association of Securities Dealers, Inc. (the NASD),
it has agreed to conform to the NASD's Rules of Fair Practice in making the
solicitations.
The payment of compensation to any Soliciting Dealer is dependent on such
Soliciting Dealer returning a Notice of Solicited Tenders to the Depositary.
(IF SHARES ARE BEING TENDERED, PLEASE ALSO COMPLETE
SUBSTITUTE FORM W-9 BELOW OR A FORM W-8, AS APPLICABLE)
SIGN HERE:
----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF REGISTERED HOLDER(S))
10
<PAGE> 11
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a firm that is a
member of a registered national securities exchange or the NASD, or by a
commercial bank or trust company having an office or correspondent in the United
States which is a participant in an approved Signature Guarantee Medallion
Program (an Eligible Institution). Signatures on this Letter of Transmittal need
not be guaranteed (a) if this Letter of Transmittal is signed by the registered
holder(s) of the Shares (which term, for purposes of this document, shall
include any participant in one of the Book-Entry Transfer Facilities whose name
appears on a security position listing as the owner of Shares) tendered herewith
and such holder(s) has not completed the box above under the heading "Special
Payment Instructions" or the box above under the heading "Special Delivery
Instructions" on this Letter of Transmittal or (b) if such Shares are tendered
for the account of an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES. This Letter of
Transmittal is to be used if (a) certificates are to be forwarded herewith or
(b) delivery of Shares is to be made by book-entry transfer pursuant to the
procedures set forth under the heading Terms of the Offer -- Procedure for
Tendering Shares in the Booklet. Certificates for all physically delivered
Shares, or a confirmation of a book-entry transfer into the Depositary's account
at the Book-Entry Transfer Facilities of Shares delivered electronically, as
well as a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth on the front page of this Letter of Transmittal on or prior to the
Expiration Date with respect to all Shares. Preferred Shareholders who wish to
tender their Shares yet who cannot deliver their Shares and all other required
documents to the Depositary on or prior to the Expiration Date must tender their
Shares pursuant to the guaranteed delivery procedure set forth under the heading
Terms of the Offer -- Procedure for Tendering Shares in the Booklet. Pursuant to
such procedure: (i) such tender must be made by or through an Eligible
Institution, (ii) a properly completed and duly executed Notice of Guaranteed
Delivery in the form provided by NEES (with any required signature guarantees)
must be received by the Depositary on or prior to the applicable Expiration Date
and (iii) the certificates for all physically delivered Shares, or a
confirmation of a book-entry transfer into the Depositary's account at one of
the Book-Entry Transfer Facilities of Shares delivered electronically, as well
as a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by this Letter of Transmittal must be
received by the Depositary by 5:00 p.m. (New York City time) within three New
York Stock Exchange (NYSE) trading days after the date of execution of such
Notice of Guaranteed Delivery, all as provided under the heading Terms of the
Offer -- Procedure for Tendering Shares in the Booklet. A NYSE trading day is
any day on which the NYSE is open for business.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
OPTION AND RISK OF THE TENDERING PREFERRED SHAREHOLDER. IF CERTIFICATES FOR
SHARES ARE SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED.
No alternative, conditional or contingent tenders will be accepted. See
Terms of the Offer -- Number of Shares; Purchase Price; Expiration Date;
Dividends in the Booklet. By executing this Letter of Transmittal (or facsimile
thereof), the tendering Preferred Shareholder waives any right to receive any
notice of the acceptance for payment of the Shares.
3. VOTING. THE OFFER IS CONDITIONED UPON THE PROPOSED AMENDMENT BEING
APPROVED AND ADOPTED AT THE SPECIAL MEETING. In addition, Preferred Shareholders
have the right to vote on the Proposed Amendment regardless of whether they
tender their Shares by voting in person at the Special Meeting. By executing a
Notice of Guaranteed Delivery, a Preferred Shareholder is deemed to have
tendered the Shares described in such Notice of Guaranteed Delivery. The Offer
is being sent to all persons in whose names Shares are registered on the books
of the Power Company on November 6, 1997 as well as to all persons in whose name
Shares are registered on November 12, 1997, which is the Record
11
<PAGE> 12
Date. No record date is fixed for determining which persons are permitted to
tender Shares. However, only the holders of record, or holders who acquire an
assignment of proxy from such holders, are permitted to vote on the Proposed
Amendment. Any person who is the beneficial owner but not the record holder of
Shares must arrange for the record transfer of such Shares prior to tendering or
direct the record holder to tender on behalf of the beneficial holder.
4. PARTIAL TENDERS. NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY BOOK-
ENTRY TRANSFER. If fewer than all the Shares represented by any certificate
delivered to the Depositary are to be tendered, fill in the number of Shares
that are to be tendered in the box above under the heading "Description of
Shares Tendered." In such case, a new certificate for the remainder of the
Shares represented by the old certificate will be sent to the person(s) signing
this Letter of Transmittal, unless otherwise provided in the box above under the
heading "Special Payment Instructions" or "Special Delivery Instructions," as
promptly as practicable following the expiration or termination of the Offer.
All Shares represented by certificates delivered to the Depositary will be
deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL AND NOTICE OF GUARANTEED DELIVERY;
STOCK POWERS AND ENDORSEMENTS. If either this Letter of Transmittal or the
Notice of Guaranteed Delivery (together, the Tender Documents) is signed by the
registered holder(s) of the Shares tendered hereby, the signature(s) must
correspond with the name(s) as written on the face of the certificates without
alteration, enlargement or any change whatsoever.
If any of the Shares tendered under either Tender Document is held of
record by two or more persons, all such persons must sign such Tender Document.
If any of the Shares tendered or voted under either Tender Document are
registered in different names or different certificates, it will be necessary to
complete, sign and submit as many separate Tender Documents as there are
different registrations of certificates.
If either Tender Document is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock powers
are required unless payment of the Purchase Price is to be made to, or Shares
not tendered or not purchased are to be registered in the name of, any person
other than the registered holder(s). Signatures on any such certificates or
stock powers must be guaranteed by an Eligible Institution. See Instruction 1.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, certificates must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on the certificates
for such Shares. Signature(s) on any such certificates or stock powers must be
guaranteed by an Eligible Institution. See Instruction 1.
If either Tender Document or any certificate or stock power is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
NEES of the authority of such person so to act must be submitted.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, NEES
will pay or cause to be paid any stock transfer taxes with respect to the sale
and transfer of any Shares to it or its order pursuant to the Offer. If,
however, payment of the Purchase Price is to be made to, or Shares not tendered
or not purchased are to be registered in the name of, any person other than the
registered holder(s), or if tendered Shares are registered in the name of any
person other than the person(s) signing this Letter of Transmittal, the amount
of any stock transfer taxes (whether imposed on the registered holder(s), such
other person or otherwise) payable on account of the transfer to such person
will be deducted from the Purchase Price unless satisfactory evidence of the
payment of such taxes, or exemption therefrom, is submitted. See Terms of the
Offer -- Acceptance of Shares for Payment and Payment of Purchase Price and
Dividends and Certain U.S. Federal Income Tax Considerations in the Booklet.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY TO AFFIX
TRANSFER TAX STAMPS TO THE CERTIFICATES REPRESENTING SHARES TENDERED HEREBY.
12
<PAGE> 13
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
Purchase Price of any Shares purchased is to be issued in the name of, and/or
any Shares not tendered or not purchased are to be returned to, a person other
than the person(s) signing this Letter of Transmittal or if the check and/or any
certificate for Shares not tendered or not purchased are to be mailed to someone
other than the person(s) signing this Letter of Transmittal or to an address
other than that shown in the box above under the heading "Description of Shares
Tendered," then the "Special Payment Instructions" and/or "Special Delivery
Instructions" on this Letter of Transmittal should be completed. Preferred
Shareholders tendering Shares by book-entry transfer will have any Shares not
accepted for payment returned by crediting the account maintained by such
Preferred Shareholder at the Book-Entry Transfer Facility from which such
transfer was made.
8. SUBSTITUTE FORM W-9 AND FORM W-8. A tendering Preferred Shareholder is
required to provide the Depositary with either a correct Taxpayer Identification
Number (TIN) on Substitute Form W-9, which is provided under "Important Tax
Information" below, or a properly completed Form W-8 unless exempt therefrom.
Failure to provide the information on either Substitute Form W-9 or Form W-8 may
subject the tendering and/or voting Preferred Shareholder to 31% federal income
tax backup withholding on the payment of the Purchase Price for the Shares or on
the Special Cash Payment. The tendering and/or voting Preferred Shareholder may
write "Applied For" in Part I of Substitute Form W-9 and sign the "Certificate
of Awaiting Taxpayer Identification Number" of Substitute Form W-9 if the
Preferred Shareholder has not been issued a TIN and has applied for a number or
intends to apply for a number in the near future. If "Applied For" is written in
Part I of Substitute Form W-9 and the "Certificate of Awaiting Taxpayer
Identification Number" of Substitute Form W-9 is signed and the Depositary is
not provided with a TIN by the time of payment, the Depositary will withhold 31%
on all payments of the Purchase Price for the Shares until a TIN is provided to
the Depositary.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or requests
for assistance may be directed to the Information Agent or the Dealer Manager at
their respective telephone numbers and addresses listed below. Requests for
additional copies of the Booklet, this Letter of Transmittal, or other tender
offer materials may be directed to the Information Agent or the Dealer Manager
and such copies will be furnished promptly at NEES' expense. Preferred
Shareholders may also contact their local broker, dealer, commercial bank or
trust company for assistance concerning the Offer.
10. SOLICITED TENDERS. Upon the terms and subject to the conditions of the
Offer and this instruction, NEES will pay a solicitation fee of $1.50 per Share
(except that for transactions for beneficial owners equal to or exceeding 2,500
Shares, NEES will pay a solicitation fee of $1.00 per Share of which at least
eighty percent (80%) shall be paid to the Dealer Manager and twenty percent
(20%) to the Soliciting Dealer (which may be the Dealer Manager)). With respect
to fees payable pursuant to this paragraph involving transactions for beneficial
owners whose ownership is less than 2,500 Shares, any fees payable hereunder
shall be paid in full to the Dealer Manager unless a Soliciting Dealer is
designated (as described below), in which case such fee shall be payable in full
to such designated Soliciting Dealer (which designated Soliciting Dealer may be
the Dealer Manager). The Letters of Transmittal must include the name of an
entity which) for any Shares tendered, accepted for payment and paid pursuant to
the Offer obtained the tender, the name of (a) any broker or dealer in
securities, including the Dealer Manager in its capacity as a broker or dealer,
which is a member of any national securities exchange or of the NASD, (b) a
foreign broker or dealer not eligible for membership in the NASD which agrees to
conform to the NASD's Rules of Fair Practice in soliciting tenders outside the
United States to the same extent as though it were an NASD member, or (c) bank
or trust company (each of which is referred to herein as a Soliciting Dealer).
No solicitation fee shall be payable to a Soliciting Dealer with respect to the
tender of Shares by a holder unless the Letter of Transmittal accompanying such
tender designates such Soliciting Dealer. No solicitation fee shall be payable
to a Soliciting Dealer in respect of Shares registered in the name of such
Soliciting Dealer unless such Shares are held by such Soliciting Dealer as
nominee and such Shares are being tendered, for the benefit of one or more
beneficial owners identified on the Letter of Transmittal or on the Notice of
Solicited Tenders. No solicitation fee shall be payable to a Soliciting Dealer
if such Soliciting Dealer is required for any reason to transfer the amount of
such fee to a depositing holder (other than itself). No solicitation fee shall
be paid to a Soliciting Dealer with respect to Shares tendered or proxies
tendered for such Soliciting Dealer's own account. A Soliciting Dealer shall not
be
13
<PAGE> 14
entitled to a solicitation fee for Shares beneficially owned by such Soliciting
Dealer. No broker, dealer, bank, trust company or other nominee shall be deemed
to be the agent of NEES, the Power Company, the Depositary, the Dealer Manager
or the Information Agent for purposes of the Offer.
Soliciting Dealers will include any of the organizations described in
clauses (a), (b) and (c) above even when the activities of such organizations in
connection with the Offer consist solely of forwarding to clients materials
relating to the Offer, including the Letter of Transmittal and tendering Shares
as directed by beneficial owners thereof. No Soliciting Dealer is authorized to
make any recommendation to holders of Shares as to whether to tender or refrain
from tendering in the Offer. No assumption is made, in making payment to any
Soliciting Dealer, that its activities in connection with the Offer included any
activities other than those described above, and for all purposes noted in all
materials relating to the Offer, the term "solicit" shall be deemed to mean no
more than processing shares tendered or forwarding to customers materials
regarding the Offer.
11. IRREGULARITIES. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance of any tender
of Shares will be determined by NEES, in its sole discretion, and its
determination shall be final and binding. NEES reserves the absolute right to
reject any and all tenders of Shares that it determines are not in proper form
or the acceptance for payment of or payment for Shares that may, in the opinion
of NEES' counsel, be unlawful. NEES also reserves the absolute right to waive
any of the conditions to the Offer or any defect or irregularity in any tender
of Shares and NEES' interpretation of the terms and conditions of the Offer
(including these instructions) shall be final and binding. Unless waived, any
defects or irregularities in connection with tenders must be cured within such
time as NEES shall determine. None of NEES, the Dealer Manager, the Depositary,
the Information Agent or any other person shall be under any duty to give notice
of any defect or irregularity in tenders nor shall any of them incur any
liability for failure to give any such notice. Tenders will not be deemed to
have been made until all defects and irregularities have been cured or waived.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate
representing Shares has been lost, destroyed or stolen, the Preferred
Shareholder should promptly notify the Depositary by checking the box above
immediately following the "Special Payment Instructions/Special Delivery
Instructions" and indicating the number of Shares lost, destroyed or stolen. The
Preferred Shareholder will then be instructed as to the procedures that must be
taken in order to replace the certificate. The tender of Shares pursuant to this
Letter of Transmittal will not be valid unless on or prior to the Expiration
Date: (a) such procedures have been completed and a replacement certificate for
the Shares has been delivered to the Depositary or (b) a Notice of Guaranteed
Delivery has been delivered to the Depositary. See Instruction 2.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY HEREOF), DULY
EXECUTED, TOGETHER WITH, IF APPLICABLE, CERTIFICATES OR CONFIRMATION OF A
BOOK-ENTRY TRANSFER, AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE
DEPOSITARY, OR, IF APPLICABLE, THE NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE.
14
<PAGE> 15
IMPORTANT TAX INFORMATION
Under Federal income tax law, a Preferred Shareholder whose tendered Shares
are accepted for payment is required to provide the Depositary (as payer) with
either such Preferred Shareholder's correct TIN on Substitute Form W-9 below or
a properly completed Form W-8. If such Preferred Shareholder is an individual,
the TIN is such Preferred Shareholder's social security number. For businesses
and other entities, the number is the Federal employer identification number. If
the Depositary is not provided with the correct TIN or properly completed Form
W-8, the Preferred Shareholder may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, payments that are made to such Preferred
Shareholder with respect to Shares purchased pursuant to the Offer may be
subject to backup withholding. The Form W-8 can be obtained from the Depositary.
See the enclosed "Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9" below for additional instructions.
If Federal income tax backup withholding applies, the Depositary is
required to withhold 31% of any payments made to the Preferred Shareholder.
Backup withholding is not an additional tax. Rather, the Federal income tax
liability of persons subject to backup withholding will be reduced by the amount
of the tax withheld. If withholding results in an overpayment of taxes, a refund
may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9 AND FORM W-8
To avoid backup withholding on payments that are made to a Preferred
Shareholder with respect to Shares purchased pursuant to the Offer, the
Preferred Shareholder is required to notify the Depositary of his or her correct
TIN by completing the Substitute Form W-9 below certifying that the TIN provided
on Substitute Form W-9 is correct and that (a) the Preferred Shareholder has not
been notified by the Internal Revenue Service that he or she is subject to
Federal income tax backup withholding as a result of failure to report all
interest or dividends or (b) the Internal Revenue Service has notified the
Preferred Shareholder that he or she is no longer subject to Federal income tax
backup withholding. Foreign Preferred Shareholders must submit a properly
completed Form W-8 in order to avoid the applicable backup withholding;
provided, however, that backup withholding will not apply to foreign Preferred
Shareholders subject to 30% (or lower treaty rate) withholding on gross payments
received pursuant to the Offer.
WHAT NUMBER TO GIVE THE DEPOSITARY
The Preferred Shareholder is required to give the Depositary the social
security number or employer identification number of the registered owner of the
Shares. If the Shares are in more than one name or are not in the name of the
actual owner, consult the "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" below for additional guidance on
which number to report.
15
<PAGE> 16
SEE "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9" FOR ADDITIONAL INSTRUCTIONS.
SUBSTITUTE
FORM W-9
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------
PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY, AS DEPOSITARY
- ----------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE
FORM W-9 BOX AT RIGHT AND CERTIFY BY SIGNING AND ----------------------
DATING BELOW.
---------------------------------------- Social Security Number
or Employer
NAME (Please Print) Identification
Number
(If Awaiting TIN write
PAYER'S REQUEST FOR "Applied for")
TAXPAYER IDENTIFICATION ----------------------------------------------------------------
NUMBER (TIN) ADDRESS PART II -- For Payees
NOT subject to backup
withholding, see the
---------------------------------------- "Guidelines for Cer-
CITY STATE ZIP CODE tification of Taxpayer
Identification Number
on Substitute Form
DEPARTMENT OF THE TREASURY W-9" and complete as
INTERNAL REVENUE SERVICE instructed therein
---------------------------------------------------------------------------------------------
</TABLE>
PART III -- CERTIFICATION: -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because: (a) I am exempt
from backup withholding, or (b) I have not been notified by the Internal
Revenue Service (IRS) that I am subject to backup withholding as a result
of a failure to report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup withholding.
SIGNATURE DATE , 1997
--------------------------- --------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have
been notified by the IRS that you are currently subject to backup withholding
because of underreporting interest or dividends on your tax return. However,
if after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS that you are no longer subject
to backup withholding do not cross out item (2). Also see instructions in the
enclosed Guidelines.
- --------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WRITE "APPLIED FOR"
IN PART I OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver such an application in the near future. I
understand that if I do not provide a taxpayer identification number within
sixty (60) days, 31% of all reportable payments made to me thereafter will be
withheld until I provide a number.
---------------------------------------- ----------------------------, 1997
SIGNATURE DATE
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE "GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9"
FOR ADDITIONAL DETAILS.
16
<PAGE> 17
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE.
PURPOSE OF FORM. A person who is required to file an information return
with the IRS must obtain your correct taxpayer identification number (TIN) to
report income paid to you, real estate transactions, mortgage interest you paid,
the acquisition or abandonment of secured property, or contributions you made to
an IRA. Use Form W-9 to furnish your correct TIN to the requester (the person
asking you to furnish your TIN) and, when applicable, (1) to certify that the
TIN you are furnishing is correct (or that you are waiting for a number to be
issued), (2) to certify that you are not subject to backup withholding, and (3)
to claim exemption from backup withholding if you are an exempt payee.
Furnishing your correct TIN and making the appropriate certifications will
prevent certain payments from being subject to backup withholding.
NOTE: IF A REQUESTER GIVES YOU A FORM OTHER THAN W-9 TO REQUEST YOUR TIN,
YOU MUST USE THE REQUESTER'S FORM.
HOW TO OBTAIN A TIN. If you do not have a TIN, apply for one immediately.
To apply, get Form SS-5, Application for a Social Security Card (for
Individuals), from your local office of the Social Security Administration, or
Form SS-4, Application for Employer Identification Number (for businesses and
all other entities), from your local IRS office.
To complete Form W-9 if you do not have a TIN, write "Applied for" in the
space for the TIN in Part 1, sign and date the form, and give it to the
requester. Generally, you will than have 60 days to obtain a TIN and furnish it
to the requester. If the requester does not receive your TIN within 60 days,
backup withholding, if applicable, will begin and continue until you furnish
your TIN to the requester. For reportable interest or dividend payments, the
payor must exercise one of the following options concerning backup withholding
during this 60-day period. Under option (1), a payor must backup withhold on any
withdrawals you make from your account after 7 business days after the requester
receives this form back from you. Under option (2), the payor must backup
withhold on any reportable interest or dividend payments made to your account,
regardless of whether you make any withdrawals. The backup withholding under
option (2) must begin no later than 7 business days after the requester receives
this form back. Under option (2), the payor is required to refund the amounts
withheld if your certified TIN is received within the 60-day period and you were
not subject to backup withholding during that period.
NOTE: WRITING "APPLIED FOR" ON THE FORM MEANS THAT YOU HAVE ALREADY APPLIED
FOR A TIN OR THAT YOU INTEND TO APPLY FOR ONE IN THE NEAR FUTURE.
As soon as you receive your TIN, complete another Form W-9, include your
TIN, sign and date the form, and give it to the requester.
WHAT IS BACKUP WITHHOLDING? -- Persons making certain payments to you must
withhold and pay to the IRS 31% of such payments under certain conditions. This
is called "backup withholding." Payments that could be subject to backup
withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee compensation, and certain payments
from fishing boat operators, but do not include real estate transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
(1) You do not furnish your TIN to the requester, or
(2) The IRS notifies the requester that you furnished an incorrect TIN, or
(3) You are notified by the IRS that you are subject to withholding because
you failed to report all your interest and dividends on your tax return (for
reportable interest and dividends only), or
(4) You do not certify to the requester that you are not subject to backup
withholding under 3 above, (for reportable interest and dividend accounts opened
after 1983 only), or
(5) You do not certify your TIN.
Except as explained in 5 above, other reportable payments are subject to
backup withholding only if 1 or 2 above applies. Certain payees and payments are
exempt from backup withholding and information reporting. See Payees and
Payments Exempt From Backup Withholding, below, and Exempt Payees and Payments
under Signing the Certification, below if you are an exempt payee.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING. The following is a list
of payees exempt from backup withholding and for which no information reporting
is required. For interest and dividends, all listed payees are exempt except as
listed in item (9). For broker transactions, payees listed in items (1) through
(13) and a person registered under the Investment Advisers Act of 1940 who
regularly acts as a broker are exempt. Payments subject to reporting under
sections 6041 and 6041A are generally exempt from backup withholding only if
made to payees described in items (1) through (7), except a corporation that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (2) through (6) are
17
<PAGE> 18
exempt from backup withholding for barter exchange transactions and patronage
dividends.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), an IRA, or a
custodial account under section 402(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporation Secretaries,
Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividend and patronage dividends generally not subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
- Section 404(k) payments made by an ESOP.
Payments of interest generally not subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: YOU MAY BE SUBJECT TO BACKUP WITHHOLDING IF THIS INTEREST IS $600 OR
MORE AND IS PAID IN THE COURSE OF THE PAYER'S TRADE OR BUSINESS AND YOU HAVE NOT
PROVIDED YOUR CORRECT TIN TO THE PAYER.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid to you.
Other types of payments generally not subject to backup withholding include:
- Wages.
- Distributions from a pension, annuity, profit-sharing or stock bonus plan,
or an IRA.
- Distributions from an owner-employee plan.
- Certain surrenders of life insurance contracts.
- Gambling winnings, if withholding is required under section 3402(q).
However, if withholding is not required under section 3402(q), backup
withholding applies if the payee fails to furnish a TIN.
- Real estate transactions reportable under section 6045.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045,
6049, 6050A, and 6050N, and the regulations under those sections.
PENALTIES
FAILURE TO FURNISH TIN. If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
MISUSE OF TINS. If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
SPECIFIC INSTRUCTIONS
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
18
<PAGE> 19
NAME -- If you are an individual, you must generally provide the name shown
on your social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security Administration
of the name change, please enter your first name, the last name shown on your
social security card, and your new last name.
NUMBER -- If you are a sole proprietor, you must furnish your individual
name and either your SSN or EIN. You may also enter your business name or "doing
business as" name on the business name line. Enter your name(s) as shown on your
social security card and/or as it was used to apply for your EIN on Form SS-4.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
SIGNING THE "PART III -- CERTIFICATION" ON THE SUBSTITUTE FORM W-9
(1) INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984 AND
BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983 -- You are required to furnish
your correct TIN, but you are not required to sign the certification.
(2) INTEREST, DIVIDEND, BROKER, AND BARTER EXCHANGE ACCOUNTS OPENED AFTER
1983 AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983 -- You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out item 2 in the certification before signing the form.
(3) REAL ESTATE TRANSACTIONS. You must sign the certification. You may
cross out item 2 of the certification.
(4) OTHER PAYMENTS. You are required to furnish your correct TIN, but you
are not required to sign the certification unless you have been notified that
you have previously given an incorrect TIN. Other payments include payments made
in the course of the requester's trade or business for rents, royalties, goods
(other than bills for merchandise), medical and health care services (including
payments to corporations), payments to a nonemployee for services (including
attorney and accounting fees), and payments to certain fishing boat crew
members.
(5) MORTGAGE INTEREST PAID BY YOU, ACQUISITION OR ABANDONMENT OF SECURED
PROPERTY, OR IRA CONTRIBUTIONS. You are required to furnish your correct TIN,
but you are not required to sign the certification.
(6) EXEMPT PAYEES AND PAYMENTS. If you are exempt from backup withholding,
you should complete this form to avoid possible erroneous backup withholding.
Enter your correct TIN in Part I, write "EXEMPT" in the block in Part II, and
sign and date the form. If you are a nonresident alien or foreign entity not
subject to backup withholding, give the requester a complete Form W-8,
Certificate of Foreign Status.
(7) TIN "APPLIED FOR." Follow the instructions under How To Obtain a TIN, on
page 1, and sign and date this form.
SIGNATURE: For a joint account, only the person whose TIN is shown in Part 1
should sign.
PRIVACY ACT NOTICE: Section 6109 requires you to furnish your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property, or contributions you made to an
IRA. The IRS uses the numbers for identification purposes and to help verify the
accuracy of your tax return. You must provide your TIN whether or not you are
required to file a tax return. Payers must generally withhold 31% of taxable
interest, dividends, and certain other payments to a payee who does not furnish
a TIN to a payor. Certain penalties may also apply.
19
<PAGE> 20
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
<TABLE>
<CAPTION>
- --------------------------------------------------- ---------------------------------------------------
For this type of account: Give name and SSN of: For this type of account: Give name and SSN of:
- --------------------------------------------------- ---------------------------------------------------
<S> <C> <C> <C>
1. Individual The individual 6. A valid trust, estate, Legal entity(4)
2. Two or more The actual owner of or pension trust
individuals (joint the account or, if 7. Corporate The corporation
account) combined funds, the 8. Association, club, The organization
first individual on religious, charitable,
the account(1) educational, or other
3. Custodian account of a The minor(2) tax-exempt organization
minor (Uniform Gift to 9. Partnership The partnership
Minors Act) 10. A broker or registered The broker or nominee
4. a. The usual revocable The grantor-trustee(1) nominee
savings trust 11. Account with the The public entity.
(grantor is also Department of
trustee) Agriculture in the name
b. So-called trust The actual owner(1) of a public entity (such
account that is not as a state or local
a legal or valid government, school
trust under state district, or prison)
law that receives
5. Sole proprietorship The owner(3) agricultural program
payments.
- --------------------------------------------------- ---------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's SSN.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your SSN or EIN.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless the
legal entity itself is not designated in the account title.)
NOTE: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
20
<PAGE> 21
Any questions or requests for assistance or additional copies of the
Booklet, this Letter of Transmittal, the Notice of Guaranteed Delivery or other
materials may be directed to the Information Agent at the address and telephone
number set forth below.
THE INFORMATION AGENT:
[GEORGESON & COMPANY LOGO]
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
(800) 223-2064 (CALL TOLL-FREE)
BANKS AND BROKERS CALL COLLECT:
(212) 440-9918
Preferred Shareholders may contact the Dealer Manager at its address and
telephone number set forth below with any questions regarding the terms of the
Offer and solicitation of proxies. In addition, Preferred Shareholders may also
contact their broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Offer and solicitation of proxies.
THE DEALER MANAGER:
MERRILL LYNCH & CO.
WORLD FINANCIAL CENTER
250 VESEY STREET
NEW YORK, NEW YORK 10281
(888) ML4-TNDR (TOLL-FREE)
(888) 654-8637 (TOLL-FREE)
<PAGE> 1
OFFER TO PURCHASE AND PROXY STATEMENT
LOGO
NEW ENGLAND ELECTRIC SYSTEM
OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF THE FOLLOWING SERIES OF PREFERRED STOCK OF
MASSACHUSETTS ELECTRIC COMPANY
75,000 SHARES, DIVIDEND SERIES PREFERRED STOCK, $100 PAR VALUE, 4.44% SERIES AT
A PURCHASE PRICE OF $ . PER SHARE CUSIP NUMBER 575634 20 9
75,000 SHARES, DIVIDEND SERIES PREFERRED STOCK, $100 PAR VALUE, 4.76% SERIES AT
A PURCHASE PRICE OF $ . PER SHARE CUSIP NUMBER 575634 30 8
200,000 SHARES, DIVIDEND SERIES PREFERRED STOCK, $100 PAR VALUE, 6.99% SERIES AT
A PURCHASE PRICE OF $ . PER SHARE CUSIP NUMBER 575634 70 4
600,000 SHARES, PREFERRED STOCK -- CUMULATIVE, $25 PAR VALUE, 6.84% SERIES AT A
PURCHASE PRICE OF $ . PER SHARE CUSIP NUMBER 575634 80 3
------------------------
MASSACHUSETTS ELECTRIC COMPANY
PROXY STATEMENT
25 RESEARCH DRIVE, WESTBOROUGH, MASSACHUSETTS 01582
SPECIAL MEETING OF STOCKHOLDERS
DECEMBER 12, 1997
------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD
TIME, ON FRIDAY, DECEMBER 12, 1997, UNLESS THE OFFER IS EXTENDED.
------------------------
New England Electric System, a Massachusetts voluntary association (NEES),
invites the holders of each series of Preferred Stock listed above (each a
Series of Preferred or a Series, and each holder thereof a Preferred
Shareholder) of Massachusetts Electric Company, a Massachusetts corporation and
direct utility subsidiary of NEES (Mass. Electric or the Company), to tender any
and all of their shares of any Series of Preferred (the Shares) for purchase at
the purchase price per Share listed above, plus accrued dividends, net to the
seller in cash, upon the terms and subject to the conditions set forth in this
Offer to Purchase and Proxy Statement (the Booklet) and in the accompanying
Letter of Transmittal and Proxy (which together constitute the Offer). NEES will
purchase all Shares validly tendered and not withdrawn, upon the terms and
subject to the conditions of the Offer. See Terms of the Offer -- Certain
Conditions of the Offer and Terms of the Offer -- Extension of Tender Period;
Termination; Amendments.
THE OFFER FOR A SERIES OF PREFERRED IS NOT CONDITIONED UPON ANY MINIMUM
NUMBER OF SHARES OF ANY SERIES BEING TENDERED AND EACH IS INDEPENDENT OF THE
OFFER FOR ANY OTHER SERIES OF PREFERRED. THE OFFER, HOWEVER, IS CONDITIONED
UPON, AMONG OTHER THINGS, THE APPROVAL AND ADOPTION OF THE PROPOSED AMENDMENT,
AS DESCRIBED BELOW, AT THE SPECIAL MEETING OF SHAREHOLDERS. SEE TERMS OF THE
OFFER -- CERTAIN CONDITIONS OF THE OFFER.
Concurrently with the Offer, the Board of Directors of Mass. Electric is
soliciting proxies from the Preferred Shareholders for use at the Special
Meeting of Shareholders of Mass. Electric to be held at Mass. Electric's
principal office, 25 Research Drive, Westborough, Massachusetts, on December 12,
1997 at 4:30 p.m., Eastern Standard Time, or any adjournment or postponement of
such meeting (the Special Meeting). The Special Meeting is being held to
consider an amendment (the Proposed Amendment) to Mass. Electric's By-Laws and
Articles of Organization (the Provisions), which would remove from the
Provisions a limitation on Mass. Electric's ability to issue unsecured debt
without the prior approval of the Preferred Shareholders. PREFERRED SHAREHOLDERS
WHO WISH TO TENDER THEIR SHARES MUST VOTE IN FAVOR OF THE PROPOSED AMENDMENT.
THE OFFER IS FURTHER CONDITIONED UPON THE APPROVAL AND ADOPTION OF THE PROPOSED
AMENDMENT AT THE SPECIAL MEETING. IF THE PROPOSED AMENDMENT IS APPROVED AND
ADOPTED BY MASS. ELECTRIC'S PREFERRED SHAREHOLDERS, MASS. ELECTRIC WILL MAKE A
SPECIAL CASH PAYMENT (AS DEFINED HEREIN) IN THE AMOUNT OF $1.00 PER SHARE TO
EACH DIVIDEND SERIES PREFERRED SHAREHOLDER AND $.25 PER SHARE TO EACH PREFERRED
STOCK -- CUMULATIVE SHAREHOLDER WHO VOTED IN FAVOR OF THE PROPOSED AMENDMENT,
BUT DID NOT TENDER SUCH SHARES PURSUANT TO THE OFFER. THOSE PREFERRED
SHAREHOLDERS WHO VALIDLY TENDER THEIR SHARES WILL BE ENTITLED ONLY TO THE
PURCHASE PRICE PER SHARE LISTED ABOVE BUT NOT THE SPECIAL CASH PAYMENT.
------------------------
MASS. ELECTRIC'S BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE PROPOSED
AMENDMENTS.
------------------------
This Booklet is first being mailed to Preferred Shareholders on or about
November 7, 1997.
------------------------
The Company will pay to a Soliciting Dealer (as defined herein) a
solicitation fee for any Shares tendered, accepted for payment, and paid for
pursuant to the Offer and for each Share not tendered but voted in favor of the
Proposed Amendment, subject to certain conditions. See Fees and Expenses Paid to
Dealers.
------------------------
NEITHER NEES, MASS. ELECTRIC, THEIR RESPECTIVE BOARDS OF DIRECTORS, ANY OF
THEIR RESPECTIVE OFFICERS, NOR ANY OTHER PERSON AUTHORIZED BY THEM MAKES ANY
RECOMMENDATION TO ANY PREFERRED SHAREHOLDER AS TO WHETHER TO TENDER ANY OR ALL
SHARES. EACH PREFERRED SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
------------------------
Each Series of Preferred is traded in the over-the-counter market (the OTC)
and is not listed on any national securities exchange. Through October 31, 1997,
the last reported sales prices for the 4.44% Series, the 4.76% Series, the 6.99%
Series, and the 6.84% Series were $68.00, $73.05, $108.50, and $24.75,
respectively, as reported by the Nasdaq Stock Market, Inc. Preferred
Shareholders are urged to obtain a current market quotation, if available, for
their Shares.
------------------------
Questions or requests for assistance may be directed to Georgeson & Company,
Inc. (Georgeson or the Information Agent) or to Merrill Lynch & Co. (Merrill
Lynch or the Dealer Manager) at their respective telephone numbers and addresses
set forth on the back cover of this Booklet. Requests for additional copies of
this Booklet, the Letter of Transmittal and Proxy, or other tender offer or
proxy materials may be directed to the Information Agent, and such copies will
be furnished promptly at Mass. Electric's expense. Preferred Shareholders may
also contact their local broker, dealer, commercial bank, or trust company for
assistance concerning the Offer.
------------------------
The Dealer Manager for the Offer is:
MERRILL LYNCH & CO.
November 6, 1997
<PAGE> 2
IMPORTANT
Any Preferred Shareholder desiring to accept the Offer and tender any or
all Shares should, on or prior to the Expiration Date (as defined below), either
(i) request such Preferred Shareholder's broker, dealer, commercial bank, trust
company, or other nominee to effect the transaction for such Preferred
Shareholder pursuant to the procedure for book-entry transfer set forth below
under Terms of the Offer -- Procedure for Tendering Shares, or (ii) complete
and sign the Letter of Transmittal and Proxy in accordance with the instructions
in the Letter of Transmittal and Proxy, and mail or deliver it, the certificates
for such Shares, and any other required documents to IBJ Schroder Bank & Trust
Company (the Depositary). A Preferred Shareholder whose Shares are registered in
the name of a broker, dealer, commercial bank, trust company, or other nominee
must contact such broker, dealer, commercial bank, trust company, or other
nominee if such Preferred Shareholder desires to tender such Shares. Any
Preferred Shareholder who desires to tender Shares and whose certificates for
such Shares are not immediately available, or who cannot comply in a timely
manner with the procedure for book-entry transfer, should tender such Shares by
following the procedures for guaranteed delivery set forth below under Terms of
the Offer -- Procedure for Tendering Shares -- Guaranteed Delivery Procedure.
EACH SERIES OF PREFERRED HAS ITS OWN LETTER OF TRANSMITTAL AND PROXY, AND
ONLY THE APPLICABLE LETTER OF TRANSMITTAL AND PROXY FOR SUCH SERIES OF PREFERRED
OR A NOTICE OF GUARANTEED DELIVERY MAY BE USED TO TENDER SHARES OF SUCH SERIES
OF PREFERRED.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE RELATED LETTER OF TRANSMITTAL AND PROXY. IF GIVEN OR MADE, SUCH
RECOMMENDATION AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY NEES OR MASS. ELECTRIC.
2
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SUMMARY............................................................................... 4
PURPOSE OF THE OFFER, PROPOSED AMENDMENT, AND PROXY SOLICITATION...................... 7
Proposed Amendment.................................................................. 7
Purpose of the Offer................................................................ 7
TERMS OF THE OFFER.................................................................... 7
Number of Shares; Purchase Prices; Expiration Date; Dividends....................... 7
Procedure for Tendering Shares...................................................... 8
Withdrawal Rights................................................................... 10
Acceptance of Shares for Payment and Payment of Purchase Price and Dividends........ 10
Certain Conditions of the Offer..................................................... 11
Extension of Tender Period; Termination; Amendments................................. 13
Certain Effects of the Offer........................................................ 13
Other Information................................................................... 15
PROPOSED AMENDMENT AND PROXY SOLICITATION............................................. 16
Notice of Special Meeting of Stockholders........................................... 16
Special Meeting..................................................................... 17
Proxies............................................................................. 17
Relationship to the Offer; Special Cash Payment..................................... 17
Voting Securities, Rights and Procedures............................................ 17
Security Ownership of Certain Beneficial Owners and Management...................... 18
DESCRIPTION OF THE PROPOSED AMENDMENT................................................. 19
Explanation of the Proposed Amendment............................................... 19
Reasons for the Proposed Amendment.................................................. 20
Recommendation of Board of Directors................................................ 20
Certain Effects of the Proposed Amendment........................................... 21
Other Matters....................................................................... 21
PRICE RANGE OF SHARES; DIVIDENDS...................................................... 22
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS........................................ 23
Tax Considerations for Tendering Preferred Shareholders............................. 23
Tax Considerations for Non-Tendering Preferred Shareholders......................... 24
Tax Considerations of Accrued and Unpaid Dividends Payment.......................... 24
Tax Considerations of Special Cash Payment.......................................... 24
Backup Withholding.................................................................. 25
SOURCE AND AMOUNT OF FUNDS............................................................ 25
TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES..................................... 25
FEES AND EXPENSES PAID TO DEALERS..................................................... 26
Dealer Manager Fees................................................................. 26
Solicited Tender Fees............................................................... 26
Stock Transfer Taxes................................................................ 27
SUMMARY OF FINANCIAL INFORMATION...................................................... 28
CERTAIN INFORMATION REGARDING NEES AND MASS. ELECTRIC; INCORPORATION BY REFERENCE..... 29
MISCELLANEOUS......................................................................... 30
</TABLE>
3
<PAGE> 4
SUMMARY
The following summary is provided solely for the convenience of the
Preferred Shareholders. This summary is not intended to be complete and is
qualified in its entirety by reference to the full text and more specific
details contained in this Booklet and the Letter of Transmittal and Proxy and
any amendments hereto or thereto. Preferred Shareholders are urged to read these
documents in their entirety. Each of the capitalized terms used in this summary
and not defined herein has the meaning set forth elsewhere in this Booklet.
The Companies.............. NEES, 25 Research Drive, Westborough, Massachusetts
01582, is a registered holding company under the
Public Utility Holding Company Act of 1935, as
amended (the Holding Company Act), which owns,
directly or indirectly, all of the outstanding
common stock of its electric utility subsidiaries,
including Mass. Electric. The service area of NEES'
electric utility subsidiaries covers portions of
Massachusetts, New Hampshire, and Rhode Island. The
name "New England Electric System" means the
trustee or trustees for the time being (as trustee
or trustees but not personally) under an agreement
and declaration of trust dated January 2, 1926, as
amended, which is hereby referred to, and a copy of
which as amended has been filed with the Secretary
of the Commonwealth of Massachusetts. Any
agreement, obligation or liability made, entered
into or incurred by or on behalf of New England
Electric System binds only its trust estate, and no
shareholder, director, trustee, officer or agent
thereof assumes or shall be held to any liability
therefor.
Mass. Electric, 25 Research Drive, Westborough,
Massachusetts 01582, is a retail electric utility
incorporated and doing business solely in
Massachusetts. Electric service is provided to
approximately 960,000 customers in 146 cities and
towns having a population of approximately
2,160,000.
The Shares................. 4.44% Dividend Series Preferred Stock, $100 par
value,
CUSIP Number 575634 20 9
4.76% Dividend Series Preferred Stock, $100 par
value,
CUSIP Number 575634 30 8
6.99% Dividend Series Preferred Stock, $100 par
value,
CUSIP Number 575634 70 4
6.84% Preferred Stock - Cumulative, $25 par value,
CUSIP Number 575634 80 3
The Offer and Purchase
Price...................... Offer to purchase any or all shares of each Series
of Preferred listed below at the price set forth
below.
$ . for 4.44% Series
$ . for 4.76% Series
$ . for 6.99% Series
$ . for 6.84% Series
Dividends.................. NEES will pay to tendering Preferred Shareholders
any accrued dividends through the Expiration Date
(as defined herein).
Independent Offer.......... The Offer for a Series of Preferred is not
conditioned upon any minimum number of Shares of
any Series being tendered and each is independent
of the Offer for any other Series of Preferred. The
Offer, however, is conditioned upon, among other
things, the approval and adoption of the Proposed
Amendment, as described below, at the Special
Meeting. See Terms of the Offer -- Certain
Conditions of the Offer. It is a condition to the
Offer that Preferred Shareholders who tender their
Shares must vote
4
<PAGE> 5
in favor of the Proposed Amendment. NEES will not
be required to accept or pay for tendered Shares if
the Proposed Amendment is not approved and unless
certain other conditions are met.
Expiration Date of the
Offer...................... The Offer expires at 5:00 p.m., Eastern Standard
Time, on December 12, 1997, unless extended (the
Expiration Date).
How to Tender Shares....... See Terms of the Offer -- Procedure for Tendering
Shares. For further information, call the
Information Agent or the Dealer Manager or consult
your broker for assistance.
Withdrawal Rights.......... Tendered Shares of any Series of Preferred may be
withdrawn at any time until the Expiration Date
with respect to such Series of Preferred and,
unless previously accepted for payment, may also be
withdrawn after January 12, 1998. See Terms of the
Offer -- Withdrawal Rights. A withdrawal of a
tender does not in and of itself revoke a proxy.
Purpose of the Offer....... NEES is making the Offer because NEES believes that
the purchase of Shares is economically attractive
to Mass. Electric and indirectly to NEES and its
shareholders. In addition, the Offer gives
Preferred Shareholders the opportunity to sell
their Shares at a price which NEES believes to be a
premium over the market price and without the usual
transaction costs associated with a market sale.
See Purpose of the Offer, Proposed Amendment, and
Proxy Solicitation -- Purpose of the Offer; and
Terms of the Offer -- Certain Effects of the Offer.
Brokerage Commissions...... Not payable by Preferred Shareholders.
Solicitation Fee........... NEES will pay to each designated Soliciting Dealer
(as defined herein) a solicitation fee of (i) $1.50
per Share for any Dividend Series Preferred Stock
and (ii) $0.375 per Share for any Preferred
Stock -- Cumulative tendered, accepted for payment,
and paid for pursuant to the Offer and for each
Share not tendered but voted in favor of the
Proposed Amendment (except that for transactions
for beneficial owners equal to or exceeding 2,500
Shares of all Series of Preferred combined, NEES
will pay a solicitation fee of (i) $1.00 per Share
for any Dividend Series Preferred Shares and (ii)
$0.25 per Share for any Preferred Stock --
Cumulative Shares, of which at least eighty percent
(80%) shall be paid to the Dealer Manager). A
Soliciting Dealer will not be entitled to a
solicitation fee for Shares beneficially owned by
such Soliciting Dealer. See Fees and Expenses Paid
to Dealers -- Solicited Tender Fees.
Proposed Amendment......... Concurrently with the Offer, the Board of Directors
of Mass. Electric is soliciting proxies from the
Preferred Shareholders for use at the Special
Meeting. The Special Meeting is being held to
consider the Proposed Amendment to the Provisions
which would remove a provision that limits Mass.
Electric's ability to issue unsecured debt. If the
Proposed Amendment is approved by the Preferred
Shareholders, Mass. Electric's ability to issue or
assume unsecured indebtedness will no longer be
subject to approval of any Shares that remain
outstanding after the consummation of the Offer.
See Purpose of the Offer, Proposed Amendment, and
Proxy Solicitation -- Purpose of the Offer; and
Proposed Amendment and Proxy
Solicitation -- Certain Effects of the Proposed
Amendment.
Record Date................ November 12, 1997.
5
<PAGE> 6
Special Cash Payment....... Preferred Shareholders of record who do not tender
their Shares have the right to vote for or against
the Proposed Amendment. If the Proposed Amendment
is approved and adopted by Mass. Electric's
Preferred Shareholders, Mass. Electric will make a
Special Cash Payment of $1.00 per Share to each
Dividend Series Preferred Shareholder and $.25 per
Share to each Preferred Stock -- Cumulative
Shareholder who voted in favor of the Proposed
Amendment but who did not tender such Shares (the
Special Cash Payment). Preferred Shareholders who
validly tender their Shares will be entitled only
to the purchase price per Share listed on the front
cover of this Booklet plus an amount in cash
equivalent to any dividends accrued through the
Expiration Date (as defined herein).
Stock Transfer Tax......... Except as described herein, NEES will pay or cause
to be paid any stock transfer taxes with respect to
the sale and transfer of any Shares to it or its
order pursuant to the Offer. See Instruction 6 of
the applicable Letter of Transmittal and Proxy. See
Terms of the Offer -- Acceptance of Shares for
Payment and Payment of Purchase Price and
Dividends.
Payment Date............... Promptly after the Expiration Date or any extension
thereof.
Further Information........ Additional copies of this Booklet and the
applicable Letter of Transmittal and Proxy may be
obtained by contacting Georgeson, Wall Street
Plaza, New York, New York 10005, telephone (800)
223-2064 (toll-free) and (212) 440-9800 (banks and
brokers). Questions about the Offer should be
directed to Merrill Lynch at (888) ML4-TNDR
(toll-free) ((888)-654-8637 (toll-free)).
6
<PAGE> 7
PURPOSE OF THE OFFER, PROPOSED AMENDMENT,
AND PROXY SOLICITATION
The Offer and the Proposed Amendment constitute an integrated strategic
response by NEES and Mass. Electric to the need to achieve greater flexibility
in their financing.
PURPOSE OF THE OFFER
NEES believes that the purchase of the Shares at this time in conjunction
with the Proposed Amendment represents an attractive economic opportunity that
will benefit NEES, its shareholders, Mass. Electric, and Mass. Electric's
utility customers by (1) contributing to the elimination of the provisions
concerning unsecured indebtedness and (2) retiring of outstanding Shares of
Mass. Electric's Preferred Stock in contemplation of their potential replacement
with comparatively less expensive financing alternatives.
In addition, the Offer gives Preferred Shareholders the opportunity to sell
their Shares at a price which NEES believes to be a premium to the market price
on the date of the announcement of the Offer and without the usual transaction
costs associated with such a sale.
PROPOSED AMENDMENT
In order to increase its financial flexibility and to better face the
challenges of a competitive electric industry, and as discussed further under
Proposed Amendment and Proxy Solicitation -- Reasons for the Proposed Amendment,
Mass. Electric seeks to amend the Provisions to eliminate the limitation on the
Company's ability to issue unsecured debt without the approval of a majority
vote of the holders of the Preferred, voting together as a single class.
TERMS OF THE OFFER
NUMBER OF SHARES; PURCHASE PRICES; EXPIRATION DATE; DIVIDENDS
Upon the terms and subject to the conditions described herein and in the
applicable Letter of Transmittal and Proxy, NEES will purchase any and all
Shares that are validly tendered on or prior to the Expiration Date (and not
properly withdrawn in accordance with the procedures set forth under Withdrawal
Rights) at the purchase price per Share listed on the front cover of this
Booklet for the Shares tendered, plus accrued dividends for the Shares tendered
through the Expiration Date, net to the seller in cash. See Certain Conditions
of the Offer and Extension of Tender Period; Termination; Amendments.
THE OFFER FOR A SERIES OF PREFERRED IS NOT CONDITIONED UPON ANY MINIMUM
NUMBER OF SHARES OF SUCH SERIES BEING TENDERED AND IS INDEPENDENT OF THE OFFER
FOR ANY OTHER SERIES. THE OFFER, HOWEVER, IS CONDITIONED UPON, AMONG OTHER
THINGS, APPROVAL AND ADOPTION OF THE PROPOSED AMENDMENT, AS DESCRIBED HEREIN, AT
THE SPECIAL MEETING. SEE CERTAIN CONDITIONS OF THE OFFER.
The Offer is being sent to all persons in whose names Shares are registered
on the books of Mass. Electric as of the close of business on November 3, 1997,
as well as to all persons in whose names Shares are registered on November 12,
1997, the Record Date. Only a record holder of Shares on the Record Date may
vote in person or by proxy at the Special Meeting. No record date is fixed for
determining which persons are permitted to tender Shares. Any person who is the
beneficial owner but not the record holder of Shares on the Record Date must
arrange for the record transfer of such Shares prior to tendering. The Shares
will trade "with proxy" during the period which begins two days prior to the
Record Date and which will end at the close of business on the Expiration Date,
as further discussed under Proposed Amendment and Proxy Solicitation -- Voting
Securities, Rights and Procedures.
With respect to each Series, the Expiration Date is the later of 5:00 p.m.,
Eastern Standard Time, on Friday, December 12, 1997 or the latest time and date
to which the Offer with respect to such Series of
7
<PAGE> 8
Preferred is extended. NEES expressly reserves the right, in its sole
discretion, and at any time and/or from time to time, to extend the period of
time during which the Offer for any Series is open, by giving oral or written
notice of such extension to the Depositary and making a public announcement
thereof, without extending the period of time during which the Offer for any
other Series is open. There is no assurance whatsoever that NEES will exercise
its right to extend the Offer for any Series. If NEES decides, in its sole
discretion, to (i) decrease the number of Shares of any Series being sought,
(ii) increase or decrease the consideration offered in the Offer to holders of
any Series, or (iii) increase or decrease the Soliciting Dealers' fees and, at
the time that notice of such increase or decrease is first published, sent, or
given to holders of such Series in the manner specified herein, the Offer for
such Series is scheduled to expire at any time earlier than the tenth business
day from the date that such notice is first so published, sent, or given, such
Offer will be extended until the expiration of such ten-business-day period. For
purposes of the Offer, a business day means any day other than a Saturday,
Sunday, or Federal holiday and consists of the time period from 12:01 a.m.
through 12:00 midnight, Eastern Standard Time.
NO ALTERNATIVE, CONDITIONAL, OR CONTINGENT TENDERS WILL BE ACCEPTED.
NEES will pay to tendering Preferred Shareholders any accrued dividends
through the Expiration Date.
PROCEDURE FOR TENDERING SHARES
To tender Shares of any Series of Preferred pursuant to the Offer, the
tendering owner of Shares must either:
(a) send to the Depositary (at one of its addresses set forth on the
back cover of this Booklet) a properly completed and duly executed Letter
of Transmittal and Proxy, together with any required signature guarantees
and any other documents required by the Letter of Transmittal and Proxy
(and either (i) tender certificates for the Shares to the Depositary at one
of its addresses or (ii) deliver such Shares pursuant to the procedures for
book-entry transfer described herein (and a confirmation of such delivery
must be received by the Depositary (a Book-Entry Confirmation)), in each
case on or prior to the Expiration Date); or
(b) comply with the guaranteed delivery procedure described under
Guaranteed Delivery Procedure below.
A tender of Shares made pursuant to any method of delivery set forth herein
or in the Letter of Transmittal and Proxy will constitute a binding agreement
between the tendering holder and NEES upon the terms and subject to the
conditions of the Offer.
The Depositary will establish an account with respect to the Shares of each
Series of Preferred at The Depository Trust Company and the Philadelphia
Depository Trust Company (each a Book-Entry Transfer Facility) for purposes of
the Offer within two business days after the date of this Booklet, and any
financial institution that is a participant in the system of the Book-Entry
Transfer Facility may make delivery of Shares by causing the Book-Entry Transfer
Facility to transfer such Shares into the Depositary's account in accordance
with the procedures of the Book-Entry Transfer Facility. Although delivery of
Shares may be effected through book-entry transfer, such delivery must be
accompanied by either (i) a properly completed and duly executed Letter of
Transmittal and Proxy, together with any required signature guarantees and any
other required documents or (ii) an Agent's Message (as hereinafter defined)
and, in any case, must be received by the Depositary at one of its addresses set
forth on the back cover of this Booklet on or prior to the Expiration Date.
DELIVERY OF SUCH LETTER OF TRANSMITTAL AND PROXY AND ANY OTHER REQUIRED
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY OR TO NEES DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility, received by the Depositary, and forms a part of the
Book-Entry Confirmation when the tender is initiated, which states that the
Book-Entry Transfer Facility has received an express acknowledgment from a
participant in such Book-Entry Transfer Facility tendering Shares that the
participant has received and agrees to be bound by the terms of the Letter of
Transmittal and Proxy and that NEES may enforce such agreement against the
participant.
8
<PAGE> 9
Except as otherwise provided below, all signatures on a Letter of
Transmittal and Proxy must be guaranteed by a firm that is a member of a
registered national securities exchange or the National Association of
Securities Dealers, Inc. (the NASD), or by a commercial bank or trust company
having an office or correspondent in the United States that is a participant in
an approved Signature Guarantee Medallion Program (each of the foregoing being
referred to as an Eligible Institution). Signatures on a Letter of Transmittal
and Proxy need not be guaranteed if (a) the Letter of Transmittal and Proxy is
signed by the registered owner of the Shares tendered therewith and such owner
has not completed the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on the Letter of Transmittal and Proxy
or (b) such Shares are tendered for the account of an Eligible Institution. See
Instructions 1 and 5 of the Letter of Transmittal and Proxy. If Shares are
registered in the name of a person other than the signatory on the Letter of
Transmittal and Proxy, or if unpurchased Shares are to be issued to a person
other than the registered holder(s), the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered holder(s) appear on the Shares with the
signature(s) on the Shares or stock powers guaranteed as stated above. See
Instructions 4, 6, and 7 to the Letter of Transmittal and Proxy.
Guaranteed Delivery Procedure. If a Preferred Shareholder desires to
tender Shares pursuant to the Offer and such Shareholder's certificates are not
immediately available or the procedures for book-entry transfer cannot be
completed on a timely basis or time will not permit all required documents to
reach the Depositary on or prior to the Expiration Date, such Shares may
nevertheless be tendered if all of the following guaranteed delivery procedures
are complied with:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by NEES and Mass. Electric
herewith, is received (with any required signatures or signature
guarantees) by the Depositary as provided below on or prior to the
Expiration Date; and
(iii) the certificates for all tendered Shares in proper form for
transfer or a Book-Entry Confirmation with respect to all tendered Shares,
together with a properly completed and duly executed Letter of Transmittal
and any other documents required by the Letter of Transmittal and Proxy,
are received by the Depositary no later than three New York Stock Exchange,
Inc. (NYSE) trading days after the date of execution of such Notice of
Guaranteed Delivery. A NYSE trading day is any day on which the NYSE is
open for business.
The Notice of Guaranteed Delivery may be either delivered by hand or mailed
to the Depositary and must include an endorsement by an Eligible Institution in
the form set forth in such Notice of Guaranteed Delivery.
In all cases, Shares shall not be deemed validly tendered unless a properly
completed and duly executed Letter of Transmittal and Proxy or, if applicable,
an Agent's Message, is received by the Depositary.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer in all cases will be made only after timely
receipt by the Depositary of certificates for (or an Agent's Message with
respect to) such Shares, a Letter of Transmittal and Proxy, properly completed
and duly executed, with any required signature guarantees, and all other
documents required by the Letter of Transmittal and Proxy.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. BECAUSE IT
IS THE TIME OF RECEIPT, NOT THE TIME OF MAILING, WHICH DETERMINES WHETHER A
TENDER HAS BEEN MADE PRIOR TO THE EXPIRATION DATE, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY.
TO AVOID FEDERAL INCOME TAX BACKUP WITHHOLDING EQUAL TO 31% OF THE GROSS
PAYMENTS MADE PURSUANT TO THE OFFER, EACH TENDERING PREFERRED
9
<PAGE> 10
SHAREHOLDER WHO IS A UNITED STATES PERSON MUST NOTIFY THE DEPOSITARY OF THE
CORRECT TAXPAYER IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION BY
PROPERLY COMPLETING AND EXECUTING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER
OF TRANSMITTAL AND PROXY (OR, IN THE CASE OF A FOREIGN SHAREHOLDER, FORM W-8
OBTAINABLE FROM THE DEPOSITARY). SEE CERTAIN U.S. FEDERAL INCOME TAX
CONSIDERATIONS.
EACH PREFERRED SHAREHOLDER IS URGED TO CONSULT WITH SUCH PREFERRED
SHAREHOLDER'S OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF THE OFFER.
All questions as to the form of documents and the validity, eligibility
(including the time of receipt), and acceptance for payment of any tender of
Shares will be determined by NEES, in its sole discretion, and its determination
will be final and binding. NEES reserves the absolute right to reject any or all
tenders of Shares that (i) it determines are not in proper form or (ii) the
acceptance for payment of or payment for which may, in the opinion of NEES's
counsel, be unlawful. NEES also reserves the absolute right to waive any defect
or irregularity in any tender of Shares. None of NEES, Mass. Electric, the
Dealer Manager, the Depositary, the Information Agent, or any other person will
be under any duty to give notice of any defect or irregularity in tenders, nor
shall any of them incur any liability for failure to give any such notice. Any
condition to the Offer may be waived by NEES, in whole or in part, at any time
and from time to time in its sole discretion.
WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
on or prior to the Expiration Date. Thereafter, such tenders are irrevocable,
except that they may be withdrawn after January 12, 1998, unless previously
accepted for payment as provided in this Booklet.
To be effective, a written notice of withdrawal must be timely received by
the Depositary, at one of its addresses set forth on the back cover of this
Booklet, and must specify the name of the person who tendered the Shares to be
withdrawn and the number of Shares to be withdrawn. If the Shares to be
withdrawn have been delivered to the Depositary, a signed notice of withdrawal
with signatures guaranteed by an Eligible Institution (except in the case of
Shares tendered by an Eligible Institution) must be submitted prior to the
release of such Shares. In addition, such notice must specify, in the case of
Shares tendered by delivery of certificates, the name of the registered owner
(if different from that of the tendering Shareholder) and the serial numbers
shown on the particular certificates evidencing the Shares to be withdrawn or,
in the case of Shares tendered by book-entry transfer, the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares and the name of the registered holder (if different from the
name of such account). Withdrawals may not be rescinded, and Shares withdrawn
will thereafter be deemed not validly tendered for purposes of the Offer.
However, withdrawn Shares may be re-tendered by again following one of the
procedures described in Terms of the Offer -- Procedure for Tendering Shares at
any time on or prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by NEES, in its sole discretion, and
its determination will be final and binding. None of NEES, Mass. Electric, the
Dealer Manager, the Depositary, the Information Agent, or any other person will
be under any duty to give notification of any defect or irregularity in any
notice of withdrawal or will incur any liability for failure to give any such
notification.
ACCEPTANCE OF SHARES FOR PAYMENT AND PAYMENT OF PURCHASE PRICE AND DIVIDENDS
Upon the terms and subject to the conditions of the Offer, and as promptly
as practicable after the Expiration Date, NEES will accept for payment (and
thereby purchase) and pay for Shares validly tendered and not withdrawn as
permitted in Terms of the Offer -- Withdrawal Rights. Thereafter, payment for
all Shares validly tendered on or prior to the Expiration Date and accepted
pursuant to the Offer will be made by the Depositary by check as promptly as
practicable after the Expiration Date. In all cases, payment for Shares accepted
for payment pursuant to the Offer will be made promptly but only after timely
receipt by the
10
<PAGE> 11
Depositary of certificates for such Shares (or an Agent's Message), a properly
completed and duly executed Letter of Transmittal and Proxy, and any other
required documents.
For purposes of the Offer, NEES will be deemed to have accepted for payment
(and thereby purchased) Shares that are validly tendered and not withdrawn as,
if, and when it gives oral or written notice to the Depositary of its acceptance
for payment of such Shares. NEES will pay for Shares that it has purchased
pursuant to the Offer by depositing the purchase price therefor (plus accrued
and unpaid dividends thereon) with the Depositary, which will act as agent for
tendering Preferred Shareholders for the purpose of receiving payment from NEES
and transmitting payment to the tendering Shareholders. Under no circumstances
will interest be paid on amounts to be paid to tendering Preferred Shareholders,
regardless of any delay in making such payment.
Certificates for all Shares not validly tendered will be returned or, in
the case of Shares tendered by book-entry transfer, such Shares will be credited
to an account maintained with the Book-Entry Transfer Facility, as promptly as
practicable, without expense to the tendering Preferred Shareholder.
If certain events occur, NEES may not be obligated to purchase Shares
pursuant to the Offer. See Certain Conditions of the Offer.
NEES will pay or cause to be paid any stock transfer taxes with respect to
the sale and transfer of any Shares to it or its order pursuant to the Offer.
If, however, payment of the purchase price is to be made to, or Shares not
tendered or not purchased are to be registered in the name of, any person other
than the registered owner, or if tendered Shares are registered in the name of
any person other than the person signing the Letter of Transmittal and Proxy,
the amount of any stock transfer taxes (whether imposed on the registered owner,
such other person, or otherwise) payable on account of the transfer to such
person will be deducted from the purchase price unless satisfactory evidence of
the payment of such taxes, or exemption therefrom, is submitted. See Instruction
6 of the accompanying Letter of Transmittal and Proxy.
CERTAIN CONDITIONS OF THE OFFER
NEES WILL NOT BE REQUIRED TO ACCEPT FOR PAYMENT OR PAY FOR ANY SHARES OF
ANY SERIES TENDERED IF THE PROPOSED AMENDMENT IS NOT APPROVED AND ADOPTED AT THE
SPECIAL MEETING OR IF THE TENDERING PREFERRED SHAREHOLDER DID NOT VOTE IN FAVOR
OF THE PROPOSED AMENDMENT.
In addition, notwithstanding any other provision of the Offer, NEES will
not be required to accept for payment or pay for any Shares tendered, and may
terminate or amend the Offer (by oral or written notice to the Depositary and
timely public announcement) or may postpone (subject to the requirements of the
Securities Exchange Act of 1934, as amended (the Exchange Act), for prompt
payment for or return of Shares) the acceptance for payment of, or payment for,
Shares tendered, if at any time after November 5, 1997, and on or prior to the
Expiration Date, any of the following shall have occurred (which shall not have
been waived by NEES):
(a) there shall have been threatened, instituted, or pending any
action or proceeding by any government or governmental, regulatory or
administrative agency, authority, or tribunal or any other person, domestic
or foreign, or before any court, authority, agency, or tribunal that (i)
challenges the acquisition of Shares pursuant to the Offer or otherwise in
any manner relates to or affects the Offer or (ii) in the reasonable
judgment of NEES, would or might materially and adversely affect the
business, condition (financial or otherwise), income, operations, or
prospects of NEES and its subsidiaries taken as a whole, or otherwise
materially impair in any way the contemplated future conduct of the
business of NEES or any of its subsidiaries or materially impair the
Offer's contemplated benefits to NEES;
(b) there shall have been any action threatened, pending, or taken, or
approval withheld, or any statute, rule, regulation, judgment, order, or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced, or deemed to be applicable to the Offer or NEES or any
of its subsidiaries, by any legislative body, court, authority, agency, or
tribunal that, in NEES's reasonable judgment, would or might directly or
indirectly (i) make the acceptance for payment of, or payment for,
11
<PAGE> 12
some or all of the Shares illegal or otherwise restrict or prohibit
consummation of the Offer; (ii) delay or restrict the ability of NEES, or
render NEES unable, to accept for payment or pay for some or all of the
Shares; (iii) materially impair the contemplated benefits of the Offer to
NEES or Mass. Electric (including materially increasing the effective
interest cost of certain types of unsecured debt); or (iv) materially
affect the business, condition (financial or otherwise), income,
operations, or prospects of NEES and its subsidiaries taken as a whole, or
otherwise materially impair in any way the contemplated future conduct of
the business of NEES or any of its subsidiaries;
(c) there shall have occurred (i) any significant decrease in the
market price of the Shares; (ii) any change in the general political,
market, economic, or financial conditions in the United States or abroad
that, in the reasonable judgment of NEES, would or might have a material
adverse effect on NEES's business, operations, prospects, or ability to
obtain financing generally or the trading in the Shares or equity
securities of NEES; (iii) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation on, or any event that, in NEES's reasonable judgment, would or
might affect the extension of credit by lending institutions in the United
States; (iv) the commencement or escalation of war, armed hostilities, or
other international or national calamity directly or indirectly involving
the United States; (v) any general suspension of trading in, or limitation
on prices for, securities on any national securities exchange or in the
over-the-counter market; (vi) in the case of any of the foregoing existing
at the time of the commencement of the Offer, in NEES's reasonable
judgment, a material acceleration or worsening thereof; (vii) any decline
in either the Dow Jones Industrial Average or the Standard and Poor's
Composite 500 Stock Index by an amount in excess of 10% measured from the
close of business on November 5, 1997; or (viii) a decline in the ratings
accorded any of NEES's or Mass. Electric's securities by Standard & Poor's,
a division of The McGraw Hill Companies (S&P), Moody's Investors Service,
Inc. (Moody's), or Duff & Phelps, Inc. (D&P) or an announcement by S&P,
Moody's, or D&P that it has placed any such rating under surveillance or
review with negative implications;
(d) any tender or exchange offer with respect to some or all of the
Shares (other than the Offer) or any equity securities of NEES, or a
merger, acquisition, or other business combination proposal for NEES, shall
have been proposed, announced, or made by any person or entity;
(e) there shall have occurred any event or events that have resulted,
or, in NEES's reasonable judgment, may result, in an actual or threatened
change in the business, condition (financial or otherwise), income,
operations, stock ownership, or prospects of NEES and its subsidiaries; or
(f) the SEC shall have withheld approval, under the Holding Company
Act, of the acquisition of the Shares by NEES pursuant to the Offer or the
approval and adoption of the Proposed Amendment at the Special Meeting;
and, in the sole judgment of NEES, such event or events make it undesirable or
inadvisable to proceed with the Offer or with such acceptance for payment or
payment. With respect to the approval of the SEC referenced in clause (f) above,
the SEC must find that the acquisition of the Shares by NEES is not detrimental
to the public interest or the interests of the investors or consumers, and that
the consideration paid in connection with the acquisition and the adoption of
the Proposed Amendment, including fees, commissions, and other remuneration, is
reasonable.
The foregoing conditions (including the condition that the Proposed
Amendment be approved and adopted at the Special Meeting) are for the sole
benefit of NEES and may be asserted by NEES regardless of the circumstances
(including any action or inaction by NEES) giving rise to any such condition,
and any such condition may be waived by NEES, in whole or in part, at any time
and from time to time in its sole discretion. A decision by NEES to terminate or
otherwise amend the Offer, following the occurrence of any of the foregoing,
with respect to one Series will not create an obligation on behalf of NEES to
terminate or otherwise amend in a similar manner the Offer with respect to any
other Series. The failure by NEES at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time. Any determination by NEES concerning the events described above will be
final and binding on all parties.
12
<PAGE> 13
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS
NEES expressly reserves the right, in its sole discretion, and at any time
and from time to time on or prior to the Expiration Date, to extend the period
of time during which the Offer for any Series is open by giving oral or written
notice of such extension to the Depositary, without extending the period of time
during which the Offer for any other Series is open. There can be no assurance,
however, that NEES will exercise its right to extend the Offer for any Series.
During any such extension, all Shares of the subject Series previously tendered
will remain subject to the Offer, except to the extent that such Shares may be
withdrawn as set forth in Withdrawal Rights.
NEES also expressly reserves the right, in its sole discretion, to, among
other things, terminate the Offer and not accept for payment or pay for any
Shares tendered, subject to Rule 13e-4(f)(5) under the Exchange Act, which
requires NEES either to pay the consideration offered or to return the Shares
tendered promptly after the termination or withdrawal of the Offer upon the
occurrence of any of the conditions specified in Certain Conditions of the Offer
by giving oral or written notice of such termination to the Depositary, and
making a public announcement thereof.
Subject to compliance with applicable law, NEES further reserves the right,
in its sole discretion, to amend the Offer in any respect. Amendments to the
Offer may be made at any time and from time to time effected by public
announcement thereof, such announcement, in the case of an extension, to be
issued no later than 9:00 a.m., Eastern Standard Time, on the next business day
after the previously scheduled Expiration Date. Any public announcement made
pursuant to the Offer will be disseminated promptly to Preferred Shareholders
affected thereby in a manner reasonably designed to inform such Preferred
Shareholders of such change. Without limiting the manner in which NEES may
choose to make a public announcement, except as required by applicable law, NEES
shall have no obligation to publish, advertise, or otherwise communicate any
such public announcement other than by making a release to the Dow Jones News
Service.
If NEES materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, NEES
will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) under the Exchange Act. Those rules require that the minimum period
during which the Offer must remain open following material changes in the terms
of the Offer or information concerning the Offer (other than a change in price,
a change in percentage of securities sought, or a change in the dealer's
solicitation fee) will depend on the facts and circumstances, including the
relative materiality of such terms or information. The SEC has stated that, in
its view, an offer should remain open for a minimum of five business days from
the date that a notice of such a material change is first published, sent, or
given. If the Offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from, and including, the
date that NEES publishes, sends, or gives to Preferred Shareholders a notice
that it will (i) increase or decrease the price it will pay for Shares, (ii)
decrease the percentage of Shares it seeks, or (iii) increase or decrease the
soliciting dealers' fees, the Offer will be extended until the expiration of
such period of ten business days.
THE OFFER FOR EACH SERIES OF PREFERRED IS INDEPENDENT OF THE OFFER FOR ANY
OTHER SERIES. IF NEES EXTENDS OR AMENDS ANY OFFER WITH RESPECT TO ONE SERIES OF
PREFERRED FOR ANY REASON, NEES WILL HAVE NO OBLIGATION TO EXTEND THE OFFER FOR
ANY OTHER SERIES OF PREFERRED.
CERTAIN EFFECTS OF THE OFFER
Shares validly tendered to the Depositary pursuant to the Offer and not
withdrawn in accordance with the procedures set forth herein shall be held until
the Expiration Date (or returned to the extent the Offer is terminated in
accordance herewith). To the extent that the Proposed Amendment is approved and
the Shares tendered are accepted for payment and paid for in accordance with the
terms hereof, NEES intends either to sell its Shares to Mass. Electric or to
donate the Shares to Mass. Electric as a capital contribution. At that time, it
is expected that Mass. Electric will retire and cancel the Shares. However, in
the event the Proposed Amendment is not adopted at the Special Meeting, NEES may
elect, but is not obligated, to waive, subject to applicable law, such
condition. Mass. Electric anticipates that, subsequent to that waiver and
purchase of the
13
<PAGE> 14
Shares, it would call another special meeting of its shareholders and solicit
proxies therefrom for an amendment substantially similar to the Proposed
Amendment. At that meeting, NEES would vote any Shares acquired by it pursuant
to the Offer or otherwise (together with its shares of common stock) in favor of
such amendment, thereby maximizing the prospects for the adoption of such
amendment.
Trading and Liquidity. Any purchase of Shares by NEES will reduce the
number of Shares of each of the Series of Preferred that might otherwise trade
publicly or become available for purchase or sale and will likely reduce the
number of owners of Shares of each of the Series of Preferred, which could
adversely affect the liquidity and sale value of the Shares not purchased in the
Offer.
To the extent that Shares of any Series of the Preferred are tendered and
accepted for payment in the Offer, the trading market for Shares of such Series
that remain outstanding may be significantly more limited, which might adversely
affect the liquidity, market value, and price volatility of such Shares. Equity
securities with a smaller outstanding market value available for trading (the
float) may command a lower price than would comparable equity securities with a
greater float. Therefore, the market price for Shares that are not tendered in
the Offer may be affected adversely to the extent that the amount of Shares
purchased pursuant to the Offer reduces the float. The reduced float may also
make the trading price of the Shares that are not tendered and accepted for
payment more volatile. Holders of the remaining Shares may attempt to obtain
quotations for the Shares from their brokers, through the Electronic Bulletin
Board, or otherwise; however, there can be no assurance that any trading market
will exist for such Shares following consummation of the Offer. To the extent a
market continues to exist for the Shares after the Offer, the Shares may trade
at a discount compared to present trading, depending on the market for Shares
with similar features, the performance of Mass. Electric, and other factors.
There is no assurance that an active market in the Shares will exist and no
assurance as to the prices at which the Shares may trade.
The Shares are currently registered under Section 12(g) of the Exchange
Act. If the Shares are no longer held by more than 300 owners of record, Mass.
Electric may apply to the SEC for termination of such registration. Such
termination would substantially reduce the information required to be furnished
by Mass. Electric to holders of the Preferred Stock and could make certain
provisions of the Exchange Act no longer applicable to Mass. Electric.
As of September 29, 1997, there were 17 registered holders of the 4.44%
Series, 27 registered holders of the 4.76% Series, 1 registered holder of the
6.99% Series, and 15 registered holders of the 6.84% Series.
Future Purchases or Redemption of Shares. Preferred Shareholders are not
under any obligation to tender Shares pursuant to the Offer. The Offer does not
constitute a notice of redemption of any Series of Preferred pursuant to Mass.
Electric's Provisions, neither does NEES or Mass. Electric intend to effect any
such redemption by making the Offer. Further, the Offer does not constitute a
waiver by Mass. Electric of any option it has to redeem Shares.
Shares which are not tendered will continue to be subject to their current
redemption and liquidation provisions. The various Series of the Preferred are
redeemable in whole or in part upon not less than thirty days' notice at the
applicable redemption prices plus accrued dividends through the date fixed for
redemption. The redemption prices for the 4.44% Series and the 4.76% Series are
$104.068 and $103.730, respectively. The 6.99% Series is redeemable after August
1, 2003 at a price equal to $103.50. The 6.84% Series is redeemable after
October 1, 1998 at a price equal to $25.80. There are no sinking funds for any
of the Series of Preferred. The Preferred Shareholders have no preemptive or
conversion rights.
Upon liquidation, dissolution, or winding up of the affairs of Mass.
Electric or any distribution of capital of Mass. Electric, owners of the Shares
of each Series of Preferred would be entitled to receive an amount equal to the
full distributive amounts fixed therefor together with accrued dividends through
the date fixed for the payment of such distributive amounts. In case any
liquidation, dissolution, or winding up of Mass. Electric is voluntary, owners
of the Shares of each Series of Preferred shall be entitled to receive said
redemption prices plus accrued dividends through the date fixed for the payment
of such distributive amounts; if involuntary, to $100 per Share for Dividend
Series Preferred Stock and $25 for Preferred Stock -- Cumulative plus in each
case accrued dividends through the date fixed for the payment of such
distributive amounts.
14
<PAGE> 15
After the consummation of the Offer, NEES or Mass. Electric may purchase
additional Shares on the open market, in privately negotiated transactions,
through one or more tender offers, or otherwise. Any such purchases may be on
the same terms as, or on terms which are more or less favorable to holders of
Shares than, the terms of the Offer. However, Rule 13e-4(f)(6) under the
Exchange Act prohibits NEES and its affiliates (including Mass. Electric) from
purchasing any Shares of a Series of Preferred, other than pursuant to the
Offer, until at least ten business days after the Expiration Date with respect
to that Series of Preferred. Any future purchases of Shares by NEES or Mass.
Electric would depend on many factors, including the market price of the Shares,
NEES's business and financial position, and legal restrictions on NEES's ability
to purchase Shares, as well as general economic and market conditions.
OTHER INFORMATION
As discussed in the documents incorporated herein by reference, the NEES
companies are divesting themselves of or attempting to divest themselves of
their generation business. This process will result in reductions in employees
and may result in reallocation of executive and Board responsibilities. Although
Mass. Electric itself has no generation facilities, it expects to be impacted by
this process. Further, the NEES companies have considered various strategies to
enhance their competitive business, including business combinations with other
companies. Except as disclosed herein and in the documents incorporated by
reference, neither NEES nor Mass. Electric has plans or proposals that would
relate to or result in (a) the acquisition by any person or entity of additional
securities of Mass. Electric or the disposition of securities of Mass. Electric,
other than in the ordinary course of business; (b) an extraordinary corporate
transaction, such as a merger, reorganization, or liquidation, involving Mass.
Electric; (c) a sale or transfer of a material amount of assets of Mass.
Electric; (d) any change in the present Board or management of Mass. Electric;
(e) any material change in the present dividend rate or policy, or indebtedness
or capitalization of Mass. Electric; (f) any other material change in Mass.
Electric's corporate structure or business; (g) any change in the Provisions or
any actions that may impede the acquisition of control of Mass. Electric by any
person; (h) a class of equity securities of Mass. Electric being no longer
authorized to be quoted on the OTC; (i) a class of equity securities of Mass.
Electric becoming eligible for termination of registration pursuant to Section
12(g)(4) of the Exchange Act; or (j) the suspension of Mass. Electric's
obligation to file reports pursuant to Section 15(d) of the Exchange Act.
15
<PAGE> 16
PROPOSED AMENDMENT AND PROXY SOLICITATION
LOGO
MASSACHUSETTS ELECTRIC COMPANY
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
25 RESEARCH DRIVE
WESTBOROUGH, MASSACHUSETTS 01582
NOVEMBER 6, 1997
To the Holders of Common Stock, Preferred Stock -- Cumulative and Dividend
Series Preferred Stock of
MASSACHUSETTS ELECTRIC COMPANY
You are hereby notified that the Special Meeting of Stockholders of
Massachusetts Electric Company will be held in the Directors Room, 25 Research
Drive, Westborough, Massachusetts, on December 12, 1997, at 4:30 p.m., Eastern
Standard Time, for the following purposes:
1. Amendment of the Articles of Organization and By-laws to delete in
its entirety Article XVIII, Section 4E(4), limiting Mass. Electric's
ability to issue unsecured indebtedness; and
2. Transaction of such other business as may be appropriate and
incidental to the foregoing purposes or which may properly come before the
meeting or any adjourned session thereof.
Stockholders entitled to vote will be determined on the basis of the
records of the Company at the close of business on November 12, 1997.
The accompanying material contains further information about the matters to
be considered at the meeting.
By order of the Board of Directors.
ROBERT KING WULFF
Clerk
16
<PAGE> 17
SPECIAL MEETING
This Booklet is first being mailed on or about November 7, 1997 to the
Preferred Shareholders of Mass. Electric in connection with the solicitation of
proxies by the Board of Directors of Mass. Electric (the Board) for use at the
Special Meeting. At the Special Meeting, the Preferred Shareholders of record of
Mass. Electric will vote upon the Proposed Amendment to its Provisions.
PROXIES
THE PROXY INCLUDED IN THE LETTER OF TRANSMITTAL AND PROXY IS SOLICITED FROM
THE HOLDERS OF THE PREFERRED STOCK BY THE BOARD, WHICH RECOMMENDS VOTING FOR THE
PROPOSED AMENDMENT. All shares of Mass. Electric's common stock will be voted in
favor of the Proposed Amendment. Shares of Mass. Electric's Preferred Stock
represented by properly executed proxies received at or prior to the Special
Meeting will be voted in accordance with the instructions thereon. If no
instructions are indicated, duly executed proxies will be voted in accordance
with the recommendation of the Board. It is not anticipated that any other
matters will be brought before the Special Meeting. However, the enclosed proxy
gives discretionary authority to the proxy holders named therein should any
other matters be presented at the Special Meeting, and it is the intention of
the proxy holders to act on any other matters in accordance with their best
judgment.
Execution of a proxy will not prevent a Preferred Shareholder from
attending the Special Meeting and voting in person. Any Preferred Shareholder
giving a proxy may revoke it at any time before it is voted by delivering to the
Clerk of Mass. Electric written notice of revocation bearing a later date than
the proxy, by delivering a duly executed proxy bearing a later date, or by
voting in person by ballot at the Special Meeting. Withdrawal of Shares tendered
pursuant to the Offer will not revoke a properly executed proxy.
RELATIONSHIP TO THE OFFER; SPECIAL CASH PAYMENT
As noted above, the Offer and Proposed Amendment constitute an integrated
strategy of NEES and Mass. Electric to achieve greater flexibility in their
financing. See Purpose of the Offer, Proposed Amendment, and Proxy Solicitation.
Preferred Shareholders who wish to tender their Shares pursuant to the
Offer are required to vote in favor of the Proposed Amendment. Further, the
Offer is conditioned upon the Proposed Amendment being approved and adopted at
the Special Meeting.
Subject to the terms and conditions set forth in this Booklet, if (but only
if) the Proposed Amendment is approved and adopted by Mass. Electric's
shareholders, Mass. Electric will make a Special Cash Payment in the amount of
$1.00 per Share to each Dividend Series Preferred Shareholder of record and $.25
per Share to each Preferred Stock -- Cumulative Shareholder of record who voted
in favor of the Proposed Amendment, provided that such Shares have not been
tendered pursuant to the Offer. Mass. Electric intends to make the Special Cash
Payment although there is no binding legal precedent as to the permissibility of
such payment and there can be no assurance as to how a court would rule on the
question. If a Preferred Shareholder votes against the Proposed Amendment or
abstains, such Preferred Shareholder shall not be entitled to the Special Cash
Payment (regardless of whether the Proposed Amendment is approved and adopted).
The Special Cash Payment will be paid out of Mass. Electric's general funds
promptly after the Proposed Amendment shall have become effective. However, no
accrued interest will be paid on the Special Cash Payment regardless of any
delay in making such payments.
VOTING SECURITIES, RIGHTS, AND PROCEDURES
Only holders of record of Mass. Electric's voting securities at the close
of business on November 12, 1997, the Record Date (or their legal
representatives or attorneys-in-fact), will be entitled to vote in person or by
proxy at the Special Meeting and to receive the Special Cash Payment from Mass.
Electric. Any beneficial holder of Shares who is not the registered holder of
such Shares as of the Record Date (as would be the case for any beneficial
holder whose Shares are registered in the name of such holder's broker, dealer,
commercial bank, trust company, or other nominee) must arrange with the holder
of record on the Record Date to execute
17
<PAGE> 18
and deliver a proxy form on such beneficial owner's behalf. If a beneficial
holder of Shares intends to attend the Special Meeting and vote in person, such
beneficial holder must obtain a legal proxy form from the beneficial holder's
broker, dealer, commercial bank, trust company, or other nominee.
The Shares will trade, during the period which begins two days prior to the
Record Date and which will end at the close of business on the Expiration Date,
in the over-the-counter market under the symbols "MSSDT" for the 4.44% Series,
"MSSGT" for the 4.76% Series, "MSSIT" for the 6.99% Series, and "MSSJT" for the
6.84% Series, indicating that such Shares are trading "with proxy." A Preferred
Shareholder who acquires Shares during this period must obtain, or have his or
her authorized representative obtain, an assignment of proxy (which is included
in the applicable Letter of Transmittal and Proxy) at settlement from the
seller. The NASD and The Depository Trust Company have issued notices informing
their members and participants that the Shares will trade "with proxy" and that
settlement of all trades during the period described above should include an
assignment of proxy from the seller.
Mass. Electric's outstanding voting securities consist of common stock,
Dividend Series Preferred Stock, and Preferred Stock -- Cumulative. There are
three series of Dividend Series Preferred Stock currently outstanding. There is
only one series of Preferred Stock -- Cumulative. The common stock votes as one
class. The three series of Dividend Series Preferred Stock and the one series of
Preferred Stock -- Cumulative will vote together as a single class. The Shares
outstanding as of the Record Date, and the vote to which each Share is entitled
in consideration of the Proposed Amendment, are as follows:
<TABLE>
<CAPTION>
CLASS SHARES OUTSTANDING VOTES PER SHARE
--------------------------------------------------- ------------------ ---------------
<S> <C> <C>
Common............................................. 6,449,896 one
Dividend Series Preferred
4.44%............................................ 75,000 one
4.76%............................................ 75,000 one
6.99%............................................ 200,000 one
Preferred Stock -- Cumulative
6.84%............................................ 600,000 one-quarter
Total Preferred Votes
voting as a class................................ 500,000
</TABLE>
The affirmative vote of more than two-thirds of the outstanding shares of
each of Mass. Electric's (i) common stock voting as a class, and (ii) Dividend
Series Preferred Stock and Preferred Stock -- Cumulative, all series voting
together as a single class, is required to approve the Proposed Amendment to be
presented at the Special Meeting. Abstentions and broker non-votes will have the
same effect as votes cast against the Proposed Amendment. NEES has advised Mass.
Electric that it intends to vote all of the outstanding shares of common stock
of Mass. Electric in favor of the Proposed Amendment.
There are no rights of appraisal in connection with the Proposed Amendment.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As noted above, NEES owns all the outstanding common stock of Mass.
Electric.
Pursuant to Section 13(d) of the Exchange Act, a beneficial owner of a
security is any person who directly or indirectly has or shares voting or
investment power over such security. No person or group is known by management
of Mass. Electric to be the beneficial owner of more than 5% of the outstanding
shares of Mass. Electric's Preferred Stock as of the Record Date.
18
<PAGE> 19
NEES and Mass. Electric's directors and executive officers do not
beneficially own any Shares as of the Record Date. The beneficial ownership of
NEES's common shares held by each Mass. Electric director, as well as Mass.
Electric directors and executive officers as a group, as of October 1, 1997, is
set forth in the following table.
<TABLE>
<CAPTION>
NAME SHARES
--------------------------------------------------------------------------- --------
<S> <C>
Urville J. Beaumont........................................................ 308
Joan T. Bok................................................................ 17,504
Sally L. Collins........................................................... 310
Kalyan K. Ghosh............................................................ 53
Charles B. Housen.......................................................... 20
Robert L. McCabe........................................................... 9,924
Patricia McGovern.......................................................... 167
John F. Reilly............................................................. 310
Lawrence J. Reilly......................................................... 2,861
John W. Rowe............................................................... 23,105
Nancy H. Sala.............................................................. 8,013
Richard P. Sergel.......................................................... 8,723
Roslyn M. Watson........................................................... 310
Directors and officers as a group (representing less than 1% of the
outstanding Shares)...................................................... 132,425
</TABLE>
Listed below is the only person or group known to NEES as of October 1,
1997, to beneficially own 5% or more of NEES's common shares. However, T. Rowe
Price Trust Company disclaims beneficial ownership of all such shares. The
amount of common shares listed below is as of September 8, 1997.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP COMMON SHARES
- ---------------------------------------------------- ------------------------- -------------
<S> <C> <C>
T. Rowe Price Trust Company......................... 5,358,604 shares as 8.3%
trustee
100 East Pratt Street for Company employee
Baltimore, MD 21202 benefits plans
</TABLE>
DESCRIPTION OF THE PROPOSED AMENDMENT
THE FOLLOWING STATEMENTS, UNLESS THE CONTEXT OTHERWISE REQUIRES, ARE
SUMMARIES OF THE SUBSTANCE OR GENERAL EFFECT OF A SECTION OF THE PROVISIONS, AND
ARE QUALIFIED IN THEIR ENTIRETY BY THE PROVISIONS (AS DESCRIBED BELOW).
EXPLANATION OF THE PROPOSED AMENDMENT
The purpose of the Proxy Solicitation is the elimination of the section in
the Provisions restricting the ability of Mass. Electric to incur certain
unsecured indebtedness.
ARTICLE XVIII, Section 4E(4) of the Provisions provides that, without a
vote of a majority of the outstanding Dividend Series Preferred Stock and
Preferred Stock -- Cumulative (voting together as a single class), Mass.
Electric will not:
issue or assume any unsecured notes, debentures or other securities
representing unsecured indebtedness for purposes other than (x) the
refunding of outstanding unsecured indebtedness theretofore issued or
assumed by the corporation resulting in maturities later than the maturity
of the indebtedness being refunded or (y) the reacquisition, redemption or
other retirement of any indebtedness which reacquisition, redemption or
other retirement has been authorized under the provisions of the Public
Utility Holding Company Act of 1935, if, immediately after such issue or
assumption, the total principal amount of all unsecured notes, debentures
or other securities representing both long and short-term unsecured
indebtedness issued or assumed by the corporation and then to be
outstanding (but excluding unsecured
19
<PAGE> 20
indebtedness theretofore so voted for by holders of Preferred Stock and
Preferred Stock -- Cumulative) would exceed twenty per cent (20%) of total
capitalization, or if, immediately after such issue or assumption, such
short-term unsecured indebtedness issued or assumed by the corporation
after September 30, 1998 and then to be outstanding (but excluding
short-term unsecured indebtedness theretofore so voted for by holders of
Preferred Stock and Preferred Stock -- Cumulative) would exceed ten per
cent (10%) of total capitalization; provided, however, that in the event
such short-term unsecured indebtedness (but excluding short-term unsecured
indebtedness theretofore so voted for by holders of Preferred Stock and
Preferred Stock -- Cumulative) exceeds such latter limit, no unsecured
securities representing unsecured indebtedness shall be issued or assumed
(except for the purposes specified in clauses (x) and (y) above) unless
such ratio of short-term unsecured indebtedness immediately after such
issue or assumption is not in excess of such limit.
"Short-term unsecured indebtedness" as used in this subsection E(4)
means unsecured indebtedness of an original maturity of less than ten years
and "long-term unsecured indebtedness" means unsecured indebtedness of an
original maturity of ten years or more. For the purposes hereof, when any
long-term unsecured indebtedness becomes due within five years, or when any
long-term unsecured indebtedness is to be retired within five years through
a sinking fund or otherwise, such long-term unsecured indebtedness, in each
case, shall be considered short-term unsecured indebtedness. "Total
capitalization" as used in this subsection E(4) means the aggregate of (i)
the total principal amount of all bonds and other securities representing
secured indebtedness issued or assumed by the corporation and then
outstanding and (ii) the capital, premium and surplus of the corporation as
then stated on the books of account of the corporation.
It is proposed to delete the above section in its entirety; conforming changes
to cross references elsewhere in the Provisions will also be made.
REASONS FOR THE PROPOSED AMENDMENT
Mass. Electric believes that the prudent use of unsecured debt is important
to the effective financial management of its business. Unsecured debt provides
flexibility in meeting temporary fluctuations in cash requirements, can be used
when unfavorable conditions prevail in the market for long-term capital, acts as
a bridge between issues of permanent capital, and may present more flexibility
in terms and conditions than secured debt. If the Proposed Amendment is adopted,
Mass. Electric will have increased flexibility (i) to choose among different
types of debt financing and (ii) to finance projects using the most cost
effective means. The availability and flexibility of unsecured debt is necessary
to take full advantage of changing conditions in the securities and financial
markets.
In addition, although Mass. Electric's earnings currently are sufficient to
meet the earnings coverage tests that must be satisfied before issuing
additional first mortgage bonds and preferred stock, other utilities have been
unable to issue mortgage bonds during certain periods because of restrictive
covenants in their mortgages. Any inability by Mass. Electric to issue first
mortgage bonds or preferred stock in the future, combined with the inability to
issue additional unsecured debt, would limit its financing options to more
costly securities, including additional common equity.
RECOMMENDATION OF BOARD OF DIRECTORS
IT IS FOR ALL THE ABOVE REASONS THAT MASS. ELECTRIC'S BOARD BELIEVES THE
BEST LONG-TERM INTERESTS OF THE PREFERRED SHAREHOLDERS ARE SERVED BY, AND
ENCOURAGES PREFERRED SHAREHOLDERS TO VOTE FOR, THE ADOPTION OF THE PROPOSED
AMENDMENTS.
The Proposed Amendment to the Provisions and the Offer are subject to
approval by the SEC under the Holding Company Act. NEES and Mass. Electric have
filed a declaration with the SEC with respect to the Proposed Amendment and the
acquisition of the Shares by NEES pursuant to the Offer.
20
<PAGE> 21
CERTAIN EFFECTS OF THE PROPOSED AMENDMENT
If the Proposed Amendment becomes effective, Preferred Shareholders of
Shares that are not tendered and purchased pursuant to the Offer will no longer
be entitled to the benefits of the unsecured debt limitation provision. As
discussed above, the debt limitation provision places restrictions on Mass.
Electric's ability to issue or assume unsecured indebtedness. Although future
Mass. Electric debt instruments may contain certain restrictions on Mass.
Electric's ability to issue or assume debt, any such restrictions may be waived
and the increased flexibility afforded Mass. Electric by the deletion of the
debt limitation provision may permit Mass. Electric to take certain actions that
may increase the credit risks with respect to Mass. Electric, adversely
affecting the market price and credit rating of the remaining Shares, or that
may otherwise be materially adverse to the interests of the remaining Preferred
Shareholders.
OTHER MATTERS
The foregoing is the only business which management intends to present or
is advised that others will present for action at the Special Meeting or any
adjournment thereof. If any other matters should properly come before the
Special Meeting, the proxies for NEES and for any other stockholders who have
sent in their proxies will be voted by the persons named therein, or their
substitutes, in accordance with their judgment.
The expense of preparing and mailing this Booklet and the incidental
expenses of soliciting the Preferred Shareholders will be paid by Mass.
Electric. Mass. Electric has engaged Georgeson to act as Information Agent in
connection with the solicitation of proxies for a fee of $6,000 plus
reimbursement of reasonable out-of-pocket expenses. Mass. Electric has requested
that brokers, dealers, and other custodians, nominees, and fiduciaries forward
solicitation materials to the beneficial owners of Shares held of record by such
persons and will reimburse such brokers and other fiduciaries for their
reasonable out-of-pocket expenses incurred in connection therewith. In addition
to the use of the mails, proxies from holders of the Preferred Stock may be
solicited by officers and regular employees connected with Mass. Electric or its
affiliates, personally or by telephone or telegraph, without any additional
compensation. The Information Agent has not been retained to make, and will not
make, solicitations or recommendations in connection with the Proposed
Amendment.
While Mass. Electric has no audit committee, its parent NEES has an audit
committee which recommends an independent auditor to audit the accounts of the
parent and its subsidiaries. Coopers and Lybrand have been auditors of Mass.
Electric for many years and their selection as auditors for the current year was
approved at the Annual Meeting on March 19, 1997. It is not expected that
representatives of Coopers and Lybrand will be present at the Special Meeting on
December 12, 1997, but they will be available on short notice to attend to
answer questions regarding the Proposed Amendment, if any holder of Shares so
requests in writing prior to December 10, 1997.
21
<PAGE> 22
PRICE RANGE OF SHARES; DIVIDENDS
Trading in the Shares has generally been sporadic. Each Series of Preferred
is traded in the OTC and is not listed on any national securities exchange.
PREFERRED SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS, IF
AVAILABLE, FOR THE SHARES.
The following table sets forth the high and low sales prices of each Series
of Preferred and Preferred Stock -- Cumulative as reported by the Nasdaq Stock
Market, Inc., and the cash dividends paid thereon for the fiscal quarters
indicated.
DIVIDENDS AND PRICE RANGES OF PREFERRED STOCK
BY QUARTERS (1997, 1996 AND 1995)
<TABLE>
<CAPTION>
1997 - QUARTERS 1996 - QUARTERS
--------------------------------------- ------------------------------------------
1ST 2ND 3RD 4TH* 1ST 2ND 3RD 4TH
--------- --------- --------- --------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DIVIDEND SERIES PREFERRED STOCK:
4.44% SERIES
Dividends Paid Per Share.......... $ 1.11 $ 1.11 $ 1.11 $ 1.11 $ 1.11 $ 1.11 $ 1.11 $ 1.11
Market Price Per Share (OTC)
-- High......................... 68.68 64.75 69.125 69.75 61.00 62.225 65.40 58.00
-- Low.......................... 58.00 59.50 64.25 68.00 61.00 58.00 58.00 58.00
4.76% SERIES
Dividends Paid Per Share.......... $ 1.19 $ 1.19 $ 1.19 $ 1.19 $ 1.19 $ 1.19 $ 1.19 $ 1.19
Market Price Per Share (OTC)
-- High......................... 71.608 67.70 73.50 -- 71.00 67.25 69.15 74.52
-- Low.......................... 62.00 63.875 64.125 -- 63.50 62.00 62.625 62.00
6.99% SERIES
Dividends Paid Per Share.......... $ 1.7475 $ 1.7475 $ 1.7475 $ 1.7475 $ 1.7475 $ 1.7475 $ 1.7475 $ 1.7475
Market Price Per Share (OTC)
-- High......................... -- -- -- 108.50 103.50 97.32 100.125 105.29
-- Low.......................... -- -- -- 100.00 96.00 97.32 100.125 100.25
PREFERRED STOCK -- CUMULATIVE
6.84% SERIES
Dividends Paid Per Share.......... $ 0.4275 $ 0.4275 $ 0.4275 $ 0.4275 $ 0.4275 $ 0.4275 $ 0.4275 $ 0.4275
Market Price Per Share (OTC)
-- High......................... 24.875 25.25 25.25 25.125 26.15 24.15 24.75 24.75
-- Low.......................... 23.875 23.90 24.25 24.50 22.75 21.00 22.125 23.125
<CAPTION>
1995 - QUARTERS
-------------------------------------------
1ST 2ND 3RD 4TH
--------- ---------- --------- ---------
<S> <C> <C> <C> <C>
DIVIDEND SERIES PREFERRED STOCK:
4.44% SERIES
Dividends Paid Per Share..........$ 1.11 $ 1.11 $ 1.11 $ 1.11
Market Price Per Share (OTC)
-- High......................... 58.125 59.50 64.05 58.00
-- Low.......................... 48.25 54.25 56.75 58.00
4.76% SERIES
Dividends Paid Per Share..........$ 1.19 $ 1.19 $ 1.19 $ 1.19
Market Price Per Share (OTC)
-- High......................... 53.50 70.50 68.70 67.875
-- Low.......................... 53.50 54.50 60.25 63.00
6.99% SERIES
Dividends Paid Per Share..........$ 1.7475 $ 1.7475 $ 1.7475 $ 1.7475
Market Price Per Share (OTC)
-- High......................... -- 102.00 -- 105.39
-- Low.......................... -- 97.875 -- 104.50
PREFERRED STOCK -- CUMULATIVE
6.84% SERIES
Dividends Paid Per Share..........$ 0.4275 $ 0.4275 $ 0.4275 $ 0.4275
Market Price Per Share (OTC)
-- High......................... 21.90 25.58 24.60 25.75
-- Low.......................... 19.50 20.875 22.95 23.625
</TABLE>
- ---------------
* Prices through October 31
Note -- The above bid and asked quotations represent prices between dealers and
do not represent actual transactions. A dash indicates that a quotation was not
available.
Dividends for a Series of Preferred are payable when, as and if declared by
Mass. Electric's Board at the rate per annum included in such title of the
Series of Preferred. NEES will pay to tendering Preferred Shareholders any
accrued dividends through the Expiration Date.
22
<PAGE> 23
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
EACH HOLDER OF SHARES IS URGED TO CONSULT AND RELY UPON SUCH HOLDER'S OWN
TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO THE HOLDER OF TENDERING
SHARES PURSUANT TO THE OFFER.
In the opinion of Hale and Dorr LLP, tax counsel to NEES and Mass.
Electric, the following summary describes the principal United States Federal
income tax consequences of sales of Shares pursuant to the Offer, the receipt of
accrued and unpaid dividends and the receipt of Special Cash Payments in
connection with the approval and adoption of the Proposed Amendment. This
summary is based on the Internal Revenue Code of 1986, as amended to the date
hereof (the "Code"), administrative pronouncements, judicial decisions and
existing and proposed Treasury Regulations, changes to any of which subsequent
to the date of this Booklet may adversely affect the tax consequences described
herein, possibly on a retroactive basis. This summary is addressed to Preferred
Shareholders who hold Shares as capital assets within the meaning of Section
1221 of the Code. This summary does not discuss all of the tax consequences that
may be relevant to a Preferred Shareholder in light of such Preferred
Shareholder's particular circumstances or to Preferred Shareholders subject to
special rules (including certain financial institutions, tax-exempt
organizations, insurance companies, dealers in securities or currencies, foreign
persons or entities selling Shares pursuant to the Offer who own or have owned,
actually or constructively, more than five percent of the outstanding amount of
such Shares, Preferred Shareholders who acquired their Shares pursuant to the
exercise of stock options or other compensation arrangements with Mass. Electric
or Preferred Shareholders holding the Shares as part of a conversion
transaction, as part of a hedge or hedging transaction, or as a position in a
straddle for tax purposes). Preferred Shareholders should consult their tax
advisors with regard to the application of the United States Federal income tax
laws to their particular situations as well as any tax consequences arising
under the laws of any state, local or foreign taxing jurisdiction.
As used herein, the term "United States Holder" means an owner of a Share
that is (i) for United States Federal income tax purposes a citizen or resident
of the United States; (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof; (iii) an estate, or, for taxable years beginning on or
before December 31, 1996, in general, any trust, the income of which is subject
to United States Federal income taxation regardless of its source; or (iv) for
taxable years beginning after December 31, 1996, any trust if a court within the
United States is able to exercise primary supervision over the administration of
such trust and one or more United States fiduciaries have the authority to
control all substantial decisions of such trust. A "Non-United States Holder" is
a Preferred Shareholder that is not a United States Holder.
TAX CONSIDERATIONS FOR TENDERING PREFERRED SHAREHOLDERS
Characterization of the Sale. A sale of Shares by a Preferred Shareholder
pursuant to the Offer will be a taxable transaction for Federal income tax
purposes. For U.S. Federal income tax purposes, a portion of the purchase price
per Share paid to Tendering Preferred Shareholders equal in amount to the
Special Cash Payment (payable to Preferred Shareholders who vote in favor of the
Proposed Amendment, but who do not tender their Shares) will be taxed in the
same manner as the Special Cash Payment received by Non-Tendering Preferred
Shareholders (see Tax Considerations of Special Cash Payment). The balance of
the Purchase Price per Share paid to Preferred Shareholders will be taxed as an
amount received in exchange for Shares resulting in gain or loss as described in
the following two paragraphs.
United States Holders. A United States Holder will recognize gain or loss
equal to the difference between the tax basis of such Holder's Shares and the
amount of cash received from NEES in exchange therefor. A United States Holder's
gain or loss will be long-term capital gain or loss if the holding period for
the Shares is more than one year as to the date of the sale of such Shares. The
excess of net long-term capital gains over net short-term capital losses is
taxed at a lower rate than ordinary income for certain non-corporate taxpayers.
Capital gain on Shares held by non-corporate taxpayers for more than eighteen
months prior to the date of the sale of such Shares will be subject to a reduced
tax rate. The distinction between long-term capital
23
<PAGE> 24
gain or loss and short-term gain or loss is also relevant for purposes of, among
other things, limitations on the deductibility of capital losses.
Non-United States Holders. Any gain realized upon the sale of Shares by a
Non-United States Holder pursuant to the Offer generally will not be subject to
United States Federal income tax unless (i) such gain is effectively connected
with a trade or business in the United States of the Non-United States Holder,
or (ii) in the case of a Non-United States Holder who is an individual, such
individual is present in the United States for 183 days or more in the taxable
year of such sale and certain other conditions are met.
A Non-United States Holder with gain described in clause (i) above will be
taxed on the net gain derived from the sale at regular graduated United States
Federal income tax rates. If a Non-United States Holder that is a foreign
corporation has gain described under clause (i) above, it may also be subject to
an additional "branch profits tax" at a 30% rate (or such lower rate as may be
specified by an applicable income tax treaty). Unless an applicable tax treaty
provides otherwise, an individual Non-United States Holder described in clause
(ii) above will be subject to a flat 30% tax on the gain derived from the sale,
which may be offset by United States capital losses (notwithstanding the fact
that the individual is not considered a resident of the United States).
TAX CONSIDERATIONS FOR NON-TENDERING PREFERRED SHAREHOLDERS
Non-Tendering Preferred Shareholders, whether or not they receive Special
Cash Payments, will not recognize any taxable gain or loss with respect to the
Shares as a result of the modification of the Provisions by the Proposed
Amendment.
TAX CONSIDERATIONS OF ACCRUED AND UNPAID DIVIDENDS PAYMENT
Payment of accrued and unpaid dividends received by the tendering Preferred
Shareholder with respect to rights to dividends declared prior to the Offer will
be treated as dividends to the extent of the Preferred Shareholder's allocable
portion of Mass. Electric's current and accumulated earnings and profits as
determined under United States Federal income tax principles and not as proceeds
from the sale of such Shares. Such dividend payments will be taxed to the
Preferred Shareholder in the same manner as prior dividend payments have
customarily been taxed.
TAX CONSIDERATIONS OF SPECIAL CASH PAYMENT
United States Holders. There is no direct authority concerning the Federal
income tax consequences of the receipt of Special Cash Payments. Mass. Electric
will, for information reporting purposes, treat Special Cash Payments as
ordinary non-dividend income to recipient United States Holders.
Non-United States Holders. Mass. Electric will treat Special Cash Payments
paid to a Non-United States Holder of Shares as subject to withholding of United
States Federal income tax at a 30% rate. However, Special Cash Payments that are
effectively connected with the conduct of a trade or business by the Non-United
States Holder within the United States are not subject to the withholding tax
(provided such Non-United States Holder provides two originals of Internal
Revenue Service ("IRS") Form 4224 stating that such Special Cash Payments are so
effectively connected), but instead are subject to United States Federal income
tax on a net income basis at applicable graduated individual or corporate rates.
Any such effectively connected Special Cash Payments received by a foreign
corporation may, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate (or such lower rate as may be specified by an
applicable income tax treaty).
A Non-United States Holder of Shares eligible for a reduced rate of United
States withholding tax pursuant to an income tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
IRS.
24
<PAGE> 25
BACKUP WITHHOLDING
ANY TENDERING PREFERRED SHAREHOLDER WHO FAILS TO COMPLETE AND SIGN THE
SUBSTITUTE FORM W-9 THAT IS INCLUDED IN THE APPLICABLE LETTER OF TRANSMITTAL
(OR, IN THE CASE OF A FOREIGN PREFERRED SHAREHOLDER, FORM W-8 OBTAINABLE FROM
THE DEPOSITARY) MAY BE SUBJECT TO A REQUIRED FEDERAL INCOME TAX BACKUP
WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAYABLE TO SUCH PREFERRED SHAREHOLDER
PURSUANT TO THE OFFER. To prevent backup United States Federal income tax
withholding with respect to the purchase price of Shares purchased pursuant to
the Offer, a United States Holder must provide the Depositary with the Preferred
Shareholder's correct taxpayer identification number and certify that the
Preferred Shareholder is not subject to backup withholding of Federal income tax
by completing the Substitute Form W-9 included in the applicable Letter of
Transmittal. Certain Preferred Shareholders (including, among others, all
corporations and certain foreign shareholders) are exempt from backup
withholding. For a corporate United States Holder to qualify for such exemption,
such Preferred Shareholder must provide the Depositary with a properly completed
and executed Substitute Form W-9 attesting to its exempt status. In order for a
foreign Preferred Shareholder to qualify as an exempt recipient, the foreign
holder must submit a Form W-8, Certificate of Foreign Status, signed under
penalties of perjury, attesting to that Preferred Shareholder's exempt status. A
copy of Form W-8 may be obtained from the Depositary.
Unless a Preferred Shareholder provides the appropriate certification,
under the applicable law and regulations concerning "backup withholding" of
United States Federal income tax, the Depositary will be required to withhold,
and will withhold, 31% of the gross proceeds otherwise payable to such Preferred
Shareholder or other payee. The amount of any backup withholding from a payment
to a Preferred Shareholder will be allowed as a credit against such Preferred
Shareholder's United States Federal income tax liability and may entitle such
Preferred Shareholder to a refund, provided that the required information is
furnished to the IRS.
SOURCE AND AMOUNT OF FUNDS
Assuming that NEES purchases all outstanding Shares of each Series of
Preferred pursuant to the Offer, the total amount required by NEES to purchase
such Shares will be approximately $55 million, exclusive of the payment of
accrued dividends, but including fees and other expenses. NEES intends to fund
the Offer through the use of its general funds (which, in the ordinary course,
include funds from Mass. Electric) and funds borrowed pursuant to NEES'
committed lines of credit, including any bank revolving credit agreements. The
interest rates depend upon the timing, amount of borrowings, and market rates at
that time. NEES currently has regulatory authority to borrow $100 million and is
seeking to increase that amount.
Mass. Electric sells commercial paper directly to commercial paper dealers
who reoffer the commercial paper to investors.
TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES
Each of NEES and Mass. Electric has been advised by its directors and
executive officers that no directors or executive officers of the respective
companies own any Shares. Based upon the companies' records and upon information
provided to each company by its directors and executive officers, neither
company nor, to the knowledge of either, any of their subsidiaries, affiliates,
directors, or executive officers, or any associates of the foregoing, has
engaged in any transactions involving Shares during the 40 business days
preceding the date hereof. Neither company nor, to the knowledge of either, any
of their directors or executive officers or any associate of the foregoing is a
party to any contract, arrangement, understanding, or relationship relating
directly or indirectly to the Offer with any other person or entity with respect
to any securities of Mass. Electric.
25
<PAGE> 26
FEES AND EXPENSES PAID TO DEALERS
DEALER MANAGER FEES
Merrill Lynch will act as Dealer Manager for NEES in connection with the
Offer. NEES has agreed to pay the Dealer Manager a fee of $0.50 for each Share
of Dividend Series Preferred Stock and $0.125 for each Share of Preferred
Stock -- Cumulative tendered, accepted for payment, and paid for pursuant to the
Offer and a fee of $0.50 for each Share of Dividend Series Preferred Stock and
$0.125 for each Share of Preferred Stock -- Cumulative that are not tendered
pursuant to the Offer but which vote in favor of the Proposed Amendment. The
Dealer Manager will also be reimbursed by NEES for its reasonable out-of-pocket
expenses, including attorneys' fees, and will be indemnified against certain
liabilities, including certain liabilities under the federal securities laws, in
connection with the Offer. The Dealer Manager has rendered, is currently
rendering, and is expected to continue to render various investment banking and
other advisory services to NEES and Mass. Electric. The Dealer Manager has
received, and will continue to receive, customary compensation from NEES and
Mass. Electric for such services. NEES has retained IBJ Schroder Bank & Trust
Company as Depositary and Georgeson & Company, Inc. as Information Agent in
connection with the Offer. The Depositary and the Information Agent will receive
reasonable and customary compensation for their services and will also be
reimbursed for reasonable out-of-pocket expenses, including attorney fees.
Neither the Depositary nor the Information Agent has been retained to make
solicitations or recommendations in connection with the Offer.
SOLICITED TENDER FEES
Upon the terms and subject to the conditions of the Offer and pursuant to
Instruction 10 of the accompanying Letter of Transmittal and Proxy, NEES will
pay to designated brokers and dealers a solicitation fee of (i) $1.50 per Share
for any Dividend Series Preferred Stock and (ii) $0.375 per Share for Shares of
Preferred Stock -- Cumulative tendered, accepted for payment, and paid for
pursuant to the Offer and for each such Share not tendered but voted in favor of
the Proposed Amendment (except that for transactions for beneficial owners equal
to or exceeding 2,500 Shares, NEES will pay a solicitation fee of (i) $1.00 per
Share for any Dividend Series Preferred Stock and (ii) $0.25, per Share for any
Preferred Stock -- Cumulative, of which eighty percent (80%) shall be paid to
the Dealer Manager and twenty percent (20%) to the Soliciting Dealer (which may
be the Dealer Manager)). With respect to fees payable pursuant to this paragraph
involving transactions for beneficial owners whose ownership is less than 2,500
Shares, any fees payable hereunder shall be paid in full to the Dealer Manager
unless a Soliciting Dealer is designated (as described below), in which case
such fee shall be payable in full to such designated Soliciting Dealer (which
designated Soliciting Dealer may be the Dealer Manager). The Letters of
Transmittal and Proxy must include the name of an entity which obtained the
tender or proxy and which is either (a) a broker or dealer in securities,
including the Dealer Manager in its capacity as a broker or dealer, which is a
member of a national securities exchange or of the NASD, (b) a foreign broker or
dealer not eligible for membership in the NASD which agrees to conform to the
NASD's Rules of Fair Practice in soliciting tenders outside the United States to
the same extent as though it were an NASD member, or (c) a bank or trust company
(each of which is referred to herein as a Soliciting Dealer). No solicitation
fee shall be payable to a Soliciting Dealer with respect to the tender of Shares
by a holder unless the Letter of Transmittal and Proxy accompanying such tender
designates such Soliciting Dealer. No solicitation fee shall be payable to a
Soliciting Dealer in respect of Shares registered in the name of such Soliciting
Dealer unless such Shares are held by such Soliciting Dealer as nominee and such
Shares are being tendered for the benefit of one or more beneficial owners
identified on the Letter of Transmittal and Proxy or on the Notice of Solicited
Tenders. No solicitation fee shall be payable to a Soliciting Dealer if such
Soliciting Dealer is required for any reason to transfer the amount of such fee
to a depositing holder (other than itself). No solicitation fee shall be paid to
a Soliciting Dealer with respect to Shares tendered for such Soliciting Dealer's
own account. Soliciting Dealers will not be entitled to a solicitation fee for
Shares beneficially owned by such Soliciting Dealer. No broker, dealer, bank,
trust company, or other nominee shall be deemed to be the agent of NEES, Mass.
Electric, the Depositary, the Information Agent, or the Dealer Manager for
purposes of the Offer.
26
<PAGE> 27
Soliciting Dealers will include any of the organizations described in
clauses (a), (b), and (c) above even when the activities of such organizations
in connection with the Offer consist solely of forwarding to clients materials
relating to the Offer, including the Letter of Transmittal and Proxy and
tendering Shares as directed by beneficial owners thereof. No Soliciting Dealer
is authorized to make any recommendation to holders of Shares as to whether to
tender or refrain from tendering in the Offer. No assumption is made, in making
payment to any Soliciting Dealer, that its activities in connection with the
Offer included any activities other than those described above, and for all
purposes noted in all materials relating to the Offer, the term "solicit" shall
be deemed to mean no more than processing shares tendered or forwarding to
customers materials regarding the Offer.
STOCK TRANSFER TAXES
NEES will pay all stock transfer taxes, if any, payable on account of the
acquisition of Shares by NEES pursuant to the Offer, except in certain
circumstances where special payment or delivery procedures are utilized pursuant
to Instruction 6 of the accompanying Letter of Transmittal and Proxy.
27
<PAGE> 28
SUMMARY OF FINANCIAL INFORMATION
Set forth below is certain historical financial information of Mass.
Electric. The historical financial information (other than the ratios of
earnings to fixed charges) was derived from the audited financial statements
included in Mass. Electric's Annual Report on Form 10-K for the year ended
December 31, 1996 and the unaudited consolidated financial statements included
in Mass. Electric's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997.
CONDENSED INCOME STATEMENT DATA:
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- -----------------------
1996 1995 1997 1996
---------- ---------- -------- --------
(THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C>
Operating Revenues......................... $1,538,537 $1,505,676 $775,060 $749,298
Operating Income........................... 71,961 61,670 43,938 34,470
Allowance for Borrowed and Equity Funds
Used During Construction (credit)........ (740) (657) (216) (464)
Net Income................................. 37,926 29,101 23,989 16,190
Preferred Stock Dividend Requirements...... 3,114 3,114 1,557 1,557
Earnings Applicable to Common Stock........ 34,812 25,987 22,432 14,633
Ratio of Earnings to Fixed Charges......... 2.82 2.45 3.12(a) 2.85(a)
</TABLE>
- ---------------
(a) Ratio for the twelve months ended June 30.
CONDENSED BALANCE SHEET DATA (AT END OF PERIOD):
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, JUNE 30,
------------------------- ---------------------------
1996 1995 1997 1996
---------- ---------- ---------- ----------
(THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Net Utility Plant in Service............ $1,079,311 $1,020,358 $1,089,964 $1,046,636
Construction Work in Progress........... 9,119 21,118 17,608 18,628
Cash and Cash Equivalents............... 2,356 1,840 1,163 997
Other Current Assets.................... 233,453 234,694 215,786 222,861
Other Assets............................ 66,019 65,090 51,047 61,147
---------- ---------- ---------- ----------
$1,390,258 $1,343,100 $1,375,568 $1,350,269
========== ========== ========== ==========
LIABILITIES:
Common Equity........................... $ 427,061 $ 411,433 $ 432,706 $ 415,275
Cumulative Preferred Stock.............. 50,000 50,000 50,000 50,000
Long-term Debt (less amounts due within
one year)............................. 343,321 353,267 333,415 338,356
Current Liabilities..................... 329,748 278,012 329,396 308,013
Other Liabilities....................... 240,128 250,388 230,051 238,625
---------- ---------- ---------- ----------
$1,390,258 $1,343,100 $1,375,568 $1,350,269
========== ========== ========== ==========
</TABLE>
28
<PAGE> 29
CERTAIN INFORMATION REGARDING NEES AND MASS. ELECTRIC;
INCORPORATION BY REFERENCE
Mass. Electric, a Massachusetts corporation, is a wholly owned subsidiary
of NEES. Mass. Electric is a retail electric utility incorporated and doing
business solely in Massachusetts. Electric service is provided to approximately
960,000 customers in 146 cities and towns having a population of approximately
2,160,000.
NEES and Mass. Electric are subject to the informational requirements of
the Exchange Act and in accordance therewith file reports and other information
with the SEC. Such reports and other information may be inspected and copied at
the public reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511; and Seven World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section of the
SEC, 450 Fifth Street, N.W., Washington D.C. 20549 at prescribed rates. The SEC
maintains a Web site at http://www.sec.gov containing reports, proxy, and other
information regarding registrants that file electronically with the SEC,
including NEES and Mass. Electric. Reports, proxy materials, and other
information about NEES are also available at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005. In connection with the
Offer NEES has filed an Issuer Tender Offer Statement on Schedule 13E-4 with the
SEC that includes certain additional information relating to the Offer. NEES's
Schedule 13E-4 will not be available at the SEC's regional offices.
The following documents, which have heretofore been filed by NEES and Mass.
Electric with the SEC pursuant to the Exchange Act, are incorporated by
reference herein and shall be deemed a part hereof:
(1) Annual report on Form 10-K for the year ended December 31, 1996,
which contains or incorporates by reference financial statements and
financial statement schedules of NEES and Mass. Electric as of December 31,
1996, and for each of the three years in the period ended December 31,
1996, incorporates by reference or includes the related reports of Coopers
& Lybrand, independent certified public accountants;
(2) Quarterly reports on Form 10-Q for NEES for the quarters ended
March 31, 1997 and June 30, 1997;
(3) Quarterly reports on Form 10-Q for Mass. Electric for the quarters
ended March 31, 1997 and June 30, 1997;
(4) Reports on Form 8-K for NEES for the periods ended April 14, 1997,
May 20, 1997, and August 6, 1997; and
(5) Reports on Form 8-K for Mass. Electric for the periods ended May
20, 1997 and August 6, 1997.
All reports filed by NEES and Mass. Electric with the SEC pursuant to these
sections subsequent to the date of this Booklet and prior to the Expiration Date
(or any extension thereof) shall be incorporated herein by reference and shall
be deemed a part hereof on the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Booklet to the extent that a statement contained herein or
in any other subsequently filed documents which is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Booklet.
NEES and Mass. Electric hereby undertake to provide without charge to each
person to whom a copy of this Booklet has been delivered, upon the written or
oral request of such person, a copy of any or all of the documents referred to
above which have been or may be incorporated by reference in this Booklet, other
than exhibits to such documents. Written or oral requests for such copies should
be directed to the Treasurer, Massachusetts Electric Company, 25 Research Drive,
Westborough, Massachusetts 01582, telephone (508) 389-2000.
29
<PAGE> 30
The information relating to NEES and Mass. Electric contained in this
Booklet does not purport to be comprehensive and should be read together with
the information contained in the documents incorporated by reference.
MISCELLANEOUS
The Offer is not being made to, nor will NEES accept tenders from, owners
of Shares in any jurisdiction in which the Offer or its acceptance would not be
in compliance with the laws of such jurisdiction. NEES is not aware of any
jurisdiction where the making of the Offer or the tender of Shares would not be
in compliance with applicable law. If NEES becomes aware of any jurisdiction
where the making of the Offer or the tender of Shares is not in compliance with
any applicable law, NEES will make a good faith effort to comply with such law.
If, after such good faith effort, NEES cannot comply with such law, the Offer
will not be made to (nor will tenders be accepted from or on behalf of) the
owners of Shares residing in such jurisdiction. In any jurisdiction in which the
securities, blue sky, or other laws require the Offer to be made by a licensed
broker or dealer, the Offer will be deemed to be made on NEES's behalf by one or
more registered brokers or dealers licensed under the laws of such jurisdiction.
NEW ENGLAND ELECTRIC SYSTEM
MASSACHUSETTS ELECTRIC COMPANY
The name "New England Electric System" means the trustee or trustees for the
time being (as trustee or trustees but not personally) under an agreement and
declaration of trust dated January 2, 1926, as amended, which is hereby referred
to, and a copy of which as amended has been filed with the Secretary of the
Commonwealth of Massachusetts. Any agreement, obligation or liability made,
entered into or incurred by or on behalf of New England Electric System binds
only its trust estate, and no shareholder, director, trustee, officer or agent
thereof assumes or shall be held to any liability therefor.
30
<PAGE> 31
The Letter of Transmittal and Proxy and, if applicable, certificates for
Shares should be sent or delivered by each tendering or voting Preferred
Shareholder of Mass. Electric or such Preferred Shareholder's broker, dealer,
bank, or trust company to the Depositary at one of its addresses set forth
below.
The Depositary is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C>
By Mail: By Hand or Overnight Delivery:
P.O. Box 84 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn: Reorganization Department
Attn: Reorganization Department Securities Processing Window SC-1
By Facsimile: To Confirm:
(212) 858-2611 (212) 858-2103
</TABLE>
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective telephone numbers and addresses
listed below. Requests for additional copies of this Booklet, the Letter of
Transmittal and Proxy, or other tender offer or proxy materials may be directed
to the Information Agent and such copies will be furnished promptly at the
companies' expense. Preferred Shareholders may also contact their broker,
dealer, commercial bank, trust company, or other nominee for assistance
concerning the Offer.
The Information Agent:
[GEORGESON AND COMPANY INC. LOGO]
Wall Street Plaza
New York, New York 10005
(800) 223-2064 (toll-free)
Banks and Brokers call collect:
(212) 440-9800
The Dealer Manager:
MERRILL LYNCH & CO.
World Financial Center
250 Vesey Street
New York, New York 10281
(888)-ML4-TNDR (toll-free)
(888) 654-8637 (toll-free)
ATTENTION
Preferred Shareholders who have lost certificates, please call Boston
EquiServe, L.P., the Transfer Agent, at (617) 575-2000 for assistance.
<PAGE> 1
LETTER OF TRANSMITTAL AND PROXY
RELATING TO
SHARES OF 4.44% SERIES OF DIVIDEND SERIES PREFERRED STOCK
OF
MASSACHUSETTS ELECTRIC COMPANY
TENDERED PURSUANT TO THE OFFER TO PURCHASE FOR CASH
BY
NEW ENGLAND ELECTRIC SYSTEM,
DATED NOVEMBER 6, 1997,
FOR PURCHASE AT A PURCHASE PRICE OF
$ PER SHARE
AND/OR
VOTED PURSUANT TO THE PROXY STATEMENT,
DATED NOVEMBER 6, 1997,
OF
[MASSACHUSETTS ELECTRIC COMPANY LOGO] MASSACHUSETTS ELECTRIC COMPANY
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME,
ON FRIDAY, DECEMBER 12, 1997, UNLESS THE OFFER IS EXTENDED (THE EXPIRATION
DATE).
- --------------------------------------------------------------------------------
THE PROXY CONTAINED IN THIS DOCUMENT IS IN RESPECT OF THE SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON FRIDAY, DECEMBER 12, 1997, OR ON SUCH DATE TO WHICH
THE MEETING IS ADJOURNED OR POSTPONED.
To: IBJ Schroder Bank & Trust Company (the Depositary)
By First-Class Mail: By Hand or Overnight Delivery:
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
P.O. Box 8-1 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274 Attn: Reorganization Department
Attn: Reorganization Department Securities Processing Window SC-1
By Facsimile: To Confirm:
(212) 858-2611 (212) 858-2103
ATTENTION
THIS LETTER OF TRANSMITTAL AND PROXY IS TO BE USED BY BOTH (1) PREFERRED
SHAREHOLDERS WHO ARE TENDERING AND VOTING SHARES PURSUANT TO THE OFFER AND
(2) PREFERRED SHAREHOLDERS WHO ARE ONLY VOTING ON THE PROPOSED AMENDMENT AND NOT
TENDERING SHARES.
ANY PREFERRED SHAREHOLDER WHO HAS ANY QUESTIONS AS TO HOW TO COMPLETE THIS
LETTER OF TRANSMITTAL AND PROXY SHOULD CONTACT THE INFORMATION AGENT AT
(800) 223-2064 (TOLL-FREE) AND FOR BANKS AND BROKERS (212) 440-9918 (CALL
COLLECT).
<PAGE> 2
All capitalized terms used herein and not defined herein have the meanings
ascribed to them in the Offer to Purchase and Proxy Statement.
DIVIDEND SERIES PREFERRED SHAREHOLDERS (INCLUDING DIVIDEND SERIES PREFERRED
SHAREHOLDERS WHO ACQUIRE SHARES SUBSEQUENT TO THE RECORD DATE) WILL NOT BE ABLE
TO VALIDLY TENDER THEIR SHARES UNLESS THEY HAVE SUBMITTED A DULY COMPLETED,
VALID AND UNREVOKED PROXY INDICATING THEIR VOTE FOR THE PROPOSED AMENDMENT OR
INDICATE IN THE ACCOMPANYING PROXY THEIR INTENTION TO VOTE FOR THE PROPOSED
AMENDMENT AT THE SPECIAL MEETING. NEW ENGLAND ELECTRIC SYSTEM, A MASSACHUSETTS
VOLUNTARY ASSOCIATION (NEES), WILL NOT BE REQUIRED TO ACCEPT FOR PAYMENT OR PAY
FOR ANY SHARES TENDERED IF THE PROPOSED AMENDMENT IS NOT APPROVED AND ADOPTED AT
THE SPECIAL MEETING. PREFERRED SHAREHOLDERS HAVE THE RIGHT TO VOTE ON THE
PROPOSED AMENDMENT REGARDLESS OF WHETHER THEY TENDER THEIR SHARES BY CASTING
THEIR VOTE AND SIGNING THE PROXY CONTAINED WITHIN THIS LETTER OF TRANSMITTAL AND
PROXY OR BY VOTING IN PERSON AT THE SPECIAL MEETING. IF THE PROPOSED AMENDMENT
IS APPROVED AND ADOPTED, MASSACHUSETTS ELECTRIC COMPANY, A MASSACHUSETTS
CORPORATION AND A DIRECT UTILITY SUBSIDIARY OF NEES (MASS. ELECTRIC), WILL MAKE
A SPECIAL CASH PAYMENT TO EACH DIVIDEND SERIES PREFERRED SHAREHOLDER WHO VOTED
IN FAVOR OF THE PROPOSED AMENDMENT, PROVIDED THAT THEIR SHARES ARE NOT TENDERED
PURSUANT TO THE OFFER.
DIVIDEND SERIES PREFERRED SHAREHOLDERS WHO PURCHASE OR WHOSE PURCHASE
SETTLES OR IS REGISTERED AFTER THE CLOSE OF BUSINESS ON NOVEMBER 12, 1997 (THE
RECORD DATE) AND WHO WISH TO TENDER IN THE OFFER MUST ARRANGE WITH THEIR SELLER
TO RECEIVE A DULY COMPLETED, VALID AND UNREVOKED PROXY (WHICH MAY BE IN THE FORM
OF AN IRREVOCABLE ASSIGNMENT OF PROXY AS SET FORTH IN THIS LETTER OF TRANSMITTAL
AND PROXY) FROM THE HOLDER ON THE RECORD DATE OF SUCH SHARES. IN ORDER TO
FACILITATE RECEIPT OF PROXIES, SHARES SHALL, DURING THE PERIOD WHICH COMMENCES
NOVEMBER 10, 1997 (TWO BUSINESS DAYS PRIOR TO THE RECORD DATE) AND WHICH WILL
END AT THE CLOSE OF BUSINESS ON THE EXPIRATION DATE, TRADE IN THE
OVER-THE-COUNTER MARKET WITH A PROXY PROVIDING THE TRANSFEREE WITH THE RIGHT TO
VOTE SUCH ACQUIRED SHARES IN THE PROXY SOLICITATION.
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY.
NOTE: IF SHARES ARE BEING TENDERED, THE REMAINDER OF THIS LETTER OF TRANSMITTAL
AND PROXY MUST BE COMPLETED, INCLUDING THE SUBSTITUTE FORM W-9 BELOW. IF
SHARES ARE NOT BEING TENDERED, YOU NEED ONLY COMPLETE THE BOXES BELOW
TITLED "PROXY" (OR, IF APPLICABLE, "IRREVOCABLE PROXY") AND
"SIGNATURES(S) OF REGISTERED HOLDER(S)" AND THE SUBSTITUTE FORM W-9.
The name "New England Electric System" means the trustee or trustees for the
time being (as trustee or trustees but not personally) under an agreement and
declaration of trust dated January 2, 1926, as amended, which is hereby referred
to, and a copy of which as amended has been filed with the Secretary of the
Commonwealth of Massachusetts. Any agreement, obligation or liability made,
entered into or incurred by or on behalf of New England Electric System binds
only its trust estate, and no shareholder, director, trustee, officer or agent
thereof assumes or shall be held to any liability therefor.
2
<PAGE> 3
PLEASE COMPLETE:
- --------------------------------------------------------------------------------
PROXY
The undersigned hereby appoints John G. Cochrane, Michael E. Jeganis, and
Robert King Wulff, or any of them, as proxies, each with the power to appoint
his substitute, and hereby authorizes them to represent and to vote as
designated hereunder and in their discretion with respect to any other business
properly brought before the Special Meeting, all the shares (Shares) of 4.44%
Series of Dividend Series Preferred Stock of Massachusetts Electric Company
(Mass. Electric) which the undersigned is entitled to vote at the Special
Meeting of Shareholders to be held on Friday, December 12, 1997, or any
adjournment(s) or postponement(s) thereof.
NOTE: IF YOU ARE VOTING BUT NOT TENDERING SHARES, DO NOT SEND ANY SHARE
CERTIFICATES WITH THIS LETTER OF TRANSMITTAL AND PROXY.
THIS LETTER OF TRANSMITTAL AND PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF MASS. ELECTRIC. The proxy contained herein, when properly
executed, will be voted in the manner directed herein by the undersigned
shareholder(s). If no direction is made, the proxy will be voted FOR Item 1.
INDICATE YOUR VOTE BY AN (X). THE BOARD OF DIRECTORS OF MASS. ELECTRIC
RECOMMENDS VOTING FOR ITEM 1.
HOLDERS OF SHARES WHO WISH TO TENDER THEIR SHARES MUST VOTE "FOR" THE
PROPOSED AMENDMENT EITHER BY SUBMITTING THIS PROXY OR BY VOTING AT THE SPECIAL
MEETING.
ITEM 1.
To amend the Articles of Organization and By-laws to delete in its entirety
ARTICLE XVIII, Section 4E(4), limiting Mass. Electric's ability to issue
unsecured indebtedness.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
NOTE: IF SHARES ARE BEING VOTED "FOR" THE PROPOSED AMENDMENT, THE SUBSTITUTE
FORM W-9 BELOW SHOULD BE COMPLETED TO AVOID BACK-UP WITHHOLDING ON THE
SPECIAL CASH PAYMENT.
SHARES REPRESENTED BY ALL PROPERLY EXECUTED PROXIES WILL BE VOTED IN
ACCORDANCE WITH INSTRUCTIONS APPEARING ON THIS PROXY. IN THE ABSENCE OF SPECIFIC
INSTRUCTIONS, PROXIES WILL BE VOTED "FOR" THE PROPOSED AMENDMENT AND OTHERWISE
IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF MASS.
ELECTRIC, AND IN THE DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING.
Any holder of Shares held of record on the Record Date in the name of
another holder must establish to the satisfaction of Mass. Electric such
holder's entitlement to exercise or transfer this Proxy. This will ordinarily
require an assignment by such record holder in blank, or if not in blank, to and
from each successive transferee, including the holder, with each signature
guaranteed by an Eligible Institution. A form of irrevocable assignment of proxy
has been provided herein.
Please check box if you plan to attend the Special Meeting. [ ]
- --------------------------------------------------------------------------------
3
<PAGE> 4
PLEASE COMPLETE IF APPLICABLE:
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED(1)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE USE PREADDRESSED LABEL OR FILL IN, IF
BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARE SHARE CERTIFICATE(S) AND SHARE(S) TENDERED/VOTED
CERTIFICATE(S) AND SHARE(S) TENDERED) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)(1)
------------------------------------------------------------------------------------------------------------------
NUMBER OF
TOTAL NUMBER SHARES NOT
OF SHARES TENDERED BUT
REPRESENTED NUMBER AS TO WHICH
SHARE CERTIFICATE BY SHARE OF SHARES PROXIES
NUMBER(S)(2) CERTIFICATE(S)(2) TENDERED(3) GIVEN ONLY
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Total Shares:
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) If tendering or voting Share(s), please fill in table exactly as
information appears on the Certificate(s).
(2) Need not be completed by Preferred Shareholders tendering by book-entry
transfer.
(3) Unless otherwise indicated, it will be assumed that all Shares represented
by any Certificate(s) delivered to the Depositary are being tendered and a
proxy is being delivered. See Instruction 4. You must vote "FOR" the
Proposed Amendment with respect to any Shares tendered.
- --------------------------------------------------------------------------------
NOTE: IF YOU ARE DELIVERING A PROXY BUT NOT TENDERING SHARES, DO NOT SEND ANY
SHARE CERTIFICATES.
4
<PAGE> 5
PLEASE COMPLETE IF APPLICABLE:
- --------------------------------------------------------------------------------
SIGNATURE(S) OF REGISTERED HOLDER(S)*
- --------------------------------------------------------------------------------
(SIGNATURE)
- --------------------------------------------------------------------------------
(SIGNATURE)
Dated: , 1997
--------------------------------------------------------------------
Name(s):
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
----------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Daytime Area Code and Telephone No.:
--------------------------------------------
* Must be signed by the registered holder(s) exactly as name(s) appear(s) on the
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in
a fiduciary or representative capacity, please set forth full title and see
Instruction 5.
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
-----------------------------------------------------------
Name:
---------------------------------------------------------------------------
Name of Firm:
-------------------------------------------------------------------
(PLEASE PRINT)
Address of Firm:
----------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.:
----------------------------------------------------
Dated: , 1997
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
<PAGE> 6
IF SELLING SHARES ON OR AFTER NOVEMBER 10, 1997, A RECORD HOLDER MUST
COMPLETE THE FOLLOWING IRREVOCABLE PROXY.
PLEASE SIGN THIS TO IRREVOCABLY TRANSFER A PREFERRED STOCK PROXY TO A
SUBSEQUENT HOLDER OF PREFERRED STOCK WHO WAS NOT A HOLDER OF RECORD ON NOVEMBER
12, 1997.
- --------------------------------------------------------------------------------
IRREVOCABLE PROXY *
WITH RESPECT TO SHARES OF THE
4.44% SERIES OF DIVIDEND SERIES PREFERRED STOCK (THE SHARES) OF
MASSACHUSETTS ELECTRIC COMPANY (MASS. ELECTRIC)
The undersigned hereby irrevocably appoints:
------------------------------------
TYPE OR PRINT NAME OF TRANSFEREE
as attorney and proxy, with full power of substitution, to vote and otherwise
act for and in the name(s) of the undersigned with respect to the Shares
indicated below which were held of record by the undersigned on November 12,
1997, in the manner in which the undersigned would be entitled to vote and
otherwise act in respect of such Shares on any and all matters.
This proxy shall be effective whether or not the Shares indicated below are
tendered in the Offer.
This instrument supersedes and revokes any and all previous appointments of
proxies heretofore made by the undersigned with respect to the Shares indicated
below as to any and all matters. THIS PROXY IS IRREVOCABLE AND IS COUPLED WITH
AN INTEREST.
All authority conferred or agreed to be conferred herein shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, legal and
personal representatives, successors in interest and assigned of the
undersigned. The undersigned understands that tenders of Shares pursuant to any
of the procedures described in the Offer to Purchase and Proxy Statement and in
this Letter of Transmittal and Proxy will constitute a binding agreement between
the undersigned and Mass. Electric upon the terms and subject to the conditions
of the Offer.
DESCRIPTION OF PREFERRED STOCK
<TABLE>
<CAPTION>
CERTIFICATE NUMBER(S) AGGREGATE NUMBER
(ATTACH LIST IF NECESSARY) OF SHARES
- -------------------------- --------------------------
<S> <C>
1.
- -------------------------- --------------------------
2.
- -------------------------- --------------------------
3.
- -------------------------- --------------------------
Total
--------------------------
</TABLE>
- ---------------
* This irrevocable proxy must be signed on the next page to be effective.
- --------------------------------------------------------------------------------
6
<PAGE> 7
- --------------------------------------------------------------------------------
IRREVOCABLE PROXY
SIGNATURE(S) OF RECORD OR AUTHORIZED SIGNATORY*
- --------------------------------------------------------------------------------
(SIGNATURE)
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Dated: 1997
--------------------------------------------------------------------,
Tax Identification or Social Security No(s)
-------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE)
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Dated: 1997
---------------------------------------------------------------------,
Tax Identification or Social Security No(s)
-------------------------------------
* Must be signed by the registered holder(s) exactly as name(s) appear(s) on the
Record Date on the stock certificate(s) or on a security position listing or
by person(s) authorized to become registered holder(s) by certificates and
documents transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, agent or
other person acting in a fiduciary or representative capacity, please provide
the following information and see Instruction 5.
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
-----------------------------------------------------------
Name: --------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title):
----------------------------------------------------------
Name of Firm:
-------------------------------------------------------------------
(PLEASE PRINT)
Address of Firm:
----------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.:
----------------------------------------------------
Dated: 1997
---------------------------------------------------------------------,
- --------------------------------------------------------------------------------
7
<PAGE> 8
NOTE: IF SHARES ARE BEING TENDERED, THE REMAINDER OF THIS LETTER OF TRANSMITTAL
AND PROXY MUST BE COMPLETED, INCLUDING THE SUBSTITUTE FORM W-9 BELOW OR A FORM
W-8, AS APPLICABLE.
DELIVERY OF THIS LETTER OF TRANSMITTAL AND PROXY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER
THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN
THIS LETTER OF TRANSMITTAL AND PROXY IN THE APPROPRIATE SPACE THEREFOR PROVIDED
ABOVE AND, IF YOU ARE TENDERING ANY SHARES OR VOTING "FOR" THE PROPOSED
AMENDMENT, COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW OR A FORM W-8, AS
APPLICABLE. SEE INSTRUCTION 8 AND "IMPORTANT TAX INFORMATION" BELOW.
DO NOT SEND ANY CERTIFICATES TO NEES, MASS. ELECTRIC, MERRILL LYNCH & CO.,
OR GEORGESON & COMPANY, INC.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL AND PROXY SHOULD
BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL AND PROXY IS COMPLETED.
This Letter of Transmittal and Proxy is to be used if (a) certificates are
to be forwarded herewith (b) delivery of Shares is to be made by book-entry
transfer pursuant to the procedures set forth under the heading Terms of the
Offer -- Procedure for Tendering Shares in the Offer to Purchase and Proxy
Statement (as defined below) or (c) Shares are being voted in connection with
the Offer.
Preferred Shareholders who wish to tender Shares but cannot deliver their
Shares and all other documents required hereby to the Depositary on or prior to
the Expiration Date must tender their Shares pursuant to the guaranteed delivery
procedure set forth under the heading Terms of the Offer -- Procedure for
Tendering Shares -- Guaranteed Delivery Procedure in the Offer to Purchase and
Proxy Statement. See Instruction 2. DELIVERY OF DOCUMENTS TO NEES, MASS.
ELECTRIC OR A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE A VALID DELIVERY.
PLEASE COMPLETE:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE ENCLOSED HEREWITH.
A HOLDER TENDERING SHARES PURSUANT TO THIS LETTER OF TRANSMITTAL AND PROXY
MUST CHECK ONE OF THE FOLLOWING BOXES:
[ ] A duly completed, valid and unrevoked proxy indicating a vote "FOR" the
Proposed Amendment is included herein.
[ ] A vote "FOR" the Proposed Amendment will be cast at the Special Meeting.
- --------------------------------------------------------------------------------
8
<PAGE> 9
(BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE
FOLLOWING:
Name of tendering institution:
-----------------------------------------------------------
(PLEASE PRINT)
Check applicable box: [ ] DTC [ ] PDTC
Account No.
------------------------------------------------------------------------------
Transaction Code No.
---------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY AND PROXY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of tendering Preferred Shareholder(s):
-------------------------------------------
-----------------------------------------------------------------------------------------
(PLEASE PRINT)
Date of execution of Notice of Guaranteed Delivery and Proxy:
----------------------------
Name of institution that guaranteed delivery:
--------------------------------------------
If delivery is by book-entry transfer:
Name of tendering institution:
-----------------------------------------------------------
Account No.
------------------------------------------------------- at [ ] DTC or [ ] PDTC
(CHECK ONE)
Transaction Code No.
---------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A HOLDER ELECTING TO TENDER SHARES PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND PROXY
MUST CHECK ONE OF THE FOLLOWING BOXES:
[ ] A duly completed, valid and unrevoked proxy indicating a vote "FOR" the Proposed
Amendment was included with the Notice of Guaranteed Delivery and Proxy previously sent
to the Depositary.
[ ] A duly completed, valid and unrevoked proxy indicating a vote "FOR" the Proposed
Amendment is being delivered pursuant to a Notice of Guaranteed Delivery and Proxy
previously sent to the Depositary.
[ ] A vote "FOR" the Proposed Amendment will be cast at the Special Meeting.
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE> 10
NOTE: SIGNATURES MUST BE PROVIDED ABOVE
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The above signed hereby tenders to NEES the shares in the amount set forth
in the box above labeled "Description of Shares Tendered" pursuant to NEES'
offer to purchase any and all of the outstanding shares of the 4.44% Series of
Dividend Series Preferred Stock (the Shares) of Mass. Electric, shown above as
to which this Letter of Transmittal and Proxy is applicable at the purchase
price per Share shown above (the Purchase Price), net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
and Proxy Statement, dated November 6, 1997 (the Booklet), receipt of which is
hereby acknowledged, and in this Letter of Transmittal and Proxy (which together
constitute the Offer). PREFERRED SHAREHOLDERS WHO WISH TO TENDER THEIR SHARES
PURSUANT TO THE OFFER MUST VOTE IN FAVOR OF THE PROPOSED AMENDMENT TO THE POWER
COMPANY'S BY-LAWS AND ARTICLES OF ORGANIZATION (THE PROVISIONS), AS SET FORTH IN
THE BOOKLET (THE PROPOSED AMENDMENT). THE OFFER IS CONDITIONED UPON THE PROPOSED
AMENDMENT BEING APPROVED AND ADOPTED AT THE SPECIAL MEETING (AS DEFINED IN THE
BOOKLET). See Proposed Amendment and Proxy Solicitation, Terms of the
Offer -- Extension of Tender Period; Termination; Amendments and Terms of the
Offer -- Certain Conditions of the Offer in the Booklet.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), the above signed
hereby sells, assigns and transfers to, or upon the order of, NEES all right,
title and interest in and to all the Shares that are being tendered hereby and
hereby constitutes and appoints IBJ Schroder Bank & Trust Company (the
Depositary) the true and lawful agent and attorney-in-fact of the above signed
with respect to such Shares, with full power of substitution (such power of
attorney being an irrevocable power coupled with an interest), to (a) deliver
certificates for such Shares, or transfer ownership of such Shares on the
account books maintained by any of the Book-Entry Transfer Facilities, together,
in any such case, with all accompanying evidences of transfer and authenticity,
to or upon the order of NEES, (b) present such Shares for registration and
transfer on the books of Mass. Electric and (c) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares, all in
accordance with the terms of the Offer.
The above signed hereby represents and warrants that the above signed has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and that, when and to the extent the same are accepted for
payment by NEES, NEES will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, charges, encumbrances,
conditional sales agreements or other obligations relating to the sale or
transfer thereof, and the same will not be subject to any adverse claims. The
above signed will, upon request, execute and deliver any additional documents
deemed by the Depositary or NEES to be necessary or desirable to complete the
sale, assignment and transfer of the Shares tendered hereby.
All authority herein conferred or agreed to be conferred shall not be
affected by, and shall survive, the death or incapacity of the above signed, and
any obligations of the above signed hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the above signed. Except as
stated in the Offer, this tender is irrevocable.
The above signed understands that tenders of Shares pursuant to any one of
the procedures described under the heading Terms of the Offer -- Procedure for
Tendering Shares in the Booklet and in the instructions hereto will constitute
the above signed's acceptance of the terms and conditions of the Offer,
including the above signed's representation and warranty that (a) the above
signed has a net long position in the Shares being tendered within the meaning
of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended
(the Exchange Act), and (b) the tender of such Shares complies with Rule 14e-4.
NEES' acceptance for payment of Shares tendered pursuant to the Offer will
constitute a binding agreement between the above signed and NEES upon the terms
and subject to the conditions of the Offer.
10
<PAGE> 11
The above signed recognizes that, under certain circumstances set forth in
the Booklet, NEES may terminate or amend the Offer or may not be required to
purchase any of the Shares tendered hereby. In either event, the above signed
understands that certificate(s) for any Shares not tendered or not purchased
will be returned to the above signed.
Unless otherwise indicated in the box below under the heading "Special
Payment Instructions," please issue the check for the Purchase Price of any
Shares purchased, and/or return any Shares not tendered or not purchased, in the
name(s) of the above signed (and, in the case of Shares tendered by book-entry
transfer, by credit to the account at the Book-Entry Transfer Facility
designated above). Unless otherwise indicated in the box below under the heading
"Special Delivery Instructions," please mail the check for the Purchase Price of
any Shares purchased and/or any certificates for Shares not tendered or not
purchased (and accompanying documents, as appropriate) to the above signed at
the address shown below. In the event that both "Special Payment Instructions"
and "Special Delivery Instructions" are completed, please issue the check for
the Purchase Price of any Shares purchased and/or return any Shares not tendered
or not purchased in the name(s) of, and mail said check and/or any certificates
to, the person(s) so indicated. The above signed recognizes that NEES has no
obligation, pursuant to the "Special Payment Instructions," to transfer any
Shares from the name of the registered holder(s) thereof if NEES does not accept
for payment any of the Shares so tendered.
11
<PAGE> 12
PLEASE COMPLETE IF APPLICABLE:
- --------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
SEE INSTRUCTIONS 4, 6, AND 7
To be completed ONLY if the check for the Purchase Price of Shares
purchased and/or certificates for Shares not tendered or not purchased are
to be issued in the name of someone other than the above signed.
Issue: [ ] Check [ ] Certificate(s) to:
Name
-----------------------------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------------------------
--------------------------------------------------------------
(INCLUDE ZIP CODE)
--------------------------------------------------------------
(TAX IDENTIFICATION OR
SOCIAL SECURITY NUMBER)*
* SEE SUBSTITUTE FORM W-9 BELOW.
Credit Shares delivered by book-entry transfer and not purchased to the
Book-Entry Transfer Facility Account set forth below:
[ ] DTC [ ] PDTC
Account No:
----------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
SEE INSTRUCTIONS 4, 6, AND 7
To be completed ONLY if the check for the Purchase Price of Shares
purchased and/or certificates for Shares not tendered or not purchased are
to be mailed to someone other than the above signed or to the above signed
at an address other than that shown below the above signed's signature(s).
Mail: [ ] Check [ ] Certificate(s) to:
Name
-----------------------------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------------------------
--------------------------------------------------------------
(INCLUDE ZIP CODE)
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN AND
WISH TO TENDER HAVE BEEN LOST, DESTROYED OR STOLEN. (SEE INSTRUCTION 12.)
Number of Shares represented by lost,
destroyed or stolen certificates:
------------------------
12
<PAGE> 13
SOLICITED TENDERS
(SEE INSTRUCTION 10)
As provided in the Offer to Purchase and Proxy Statement and Instruction 10
to the Letter of Transmittal and Proxy, NEES will pay to any Soliciting Dealer,
as defined in Instruction 10, a solicitation fee of $1.50 per Share for any
Shares tendered, accepted for payment and paid pursuant to the Offer and for any
Shares not tendered but voted in favor of the Proposed Amendment (except that
for transactions for beneficial owners equal to or exceeding 2,500 Shares, NEES
will pay a solicitation fee of $1.00 per Share). Solicitation fees payable in
transactions for beneficial owners of 2,500 or more Shares shall be paid 80% to
the Dealer Manager and 20% to the Soliciting Dealers (which may be the Dealer
Manager). However, Soliciting Dealers will not be entitled to a solicitation fee
for Shares beneficially owned by such Soliciting Dealer.
The undersigned represents that the Soliciting Dealer which solicited and
obtained this tender is:
Name of Firm:
-------------------------------------------------------------------
(PLEASE PRINT)
Name of Individual Broker or Financial Consultant:
------------------------------
Telephone Number of Broker or Financial Consultant:
-----------------------------
Identification Number (if known):
-----------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
The following to be completed ONLY if customer's Shares held in nominee
name are tendered. (ATTACH ADDITIONAL LIST IF NECESSARY.)
<TABLE>
<S> <C>
NAME OF BENEFICIAL OWNER NUMBER OF SHARES TENDERED
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
The acceptance of compensation by such Soliciting Dealer will constitute a
representation by it that (a) it has complied with the applicable requirements
of the Exchange Act and the applicable rules and regulations thereunder, in
connection with such solicitation; (b) it is entitled to such compensation for
such solicitation under the terms and conditions of the Offer (unless such
solicitation fee is directed to another Soliciting Dealer); (c) in soliciting
tenders of Shares, it has used no soliciting materials other than those
furnished by NEES; and (d) if it is a foreign broker or dealer not eligible for
membership in the National Association of Securities Dealers, Inc. (the NASD),
it has agreed to conform to the NASD's Rules of Fair Practice in making the
solicitations.
The payment of compensation to any Soliciting Dealer is dependent on such
Soliciting Dealer returning a Notice of Solicited Tenders to the Depositary.
(IF SHARES ARE BEING TENDERED AND/OR VOTED, PLEASE ALSO COMPLETE
SUBSTITUTE FORM W-9 BELOW OR A FORM W-8, AS APPLICABLE)
SIGN HERE:----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF REGISTERED HOLDER(S))
13
<PAGE> 14
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal and Proxy must be guaranteed by a firm
that is a member of a registered national securities exchange or the NASD, or by
a commercial bank or trust company having an office or correspondent in the
United States which is a participant in an approved Signature Guarantee
Medallion Program (an Eligible Institution). Signatures on this Letter of
Transmittal and Proxy need not be guaranteed (a) if this Letter of Transmittal
and Proxy is signed by the registered holder(s) of the Shares (which term, for
purposes of this document, shall include any participant in one of the
Book-Entry Transfer Facilities whose name appears on a security position listing
as the owner of Shares) tendered herewith and such holder(s) has not completed
the box above under the heading "Special Payment Instructions" or the box above
under the heading "Special Delivery Instructions" on this Letter of Transmittal
and Proxy, (b) if such Shares are tendered for the account of an Eligible
Institution or (c) if this Letter of Transmittal and Proxy is being used solely
for the purpose of voting Shares which are not being tendered pursuant to the
Offer. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND PROXY AND SHARES. This Letter of
Transmittal and Proxy is to be used if (a) certificates are to be forwarded
herewith, (b) delivery of Shares is to be made by book-entry transfer pursuant
to the procedures set forth under the heading Terms of the Offer -- Procedure
for Tendering Shares in the Booklet or (c) Shares are being voted in connection
with the Offer. Certificates for all physically delivered Shares, or a
confirmation of a book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facilities of Shares delivered electronically, as well as a
properly completed and duly executed Letter of Transmittal and Proxy (or
facsimile thereof) and any other documents required by this Letter of
Transmittal and Proxy, must be received by the Depositary at one of its
addresses set forth on the front page of this Letter of Transmittal and Proxy on
or prior to the Expiration Date with respect to all Shares. Preferred
Shareholders who wish to tender their Shares yet who cannot deliver their Shares
and all other required documents to the Depositary on or prior to the Expiration
Date must tender their Shares pursuant to the guaranteed delivery procedure set
forth under the heading Terms of the Offer -- Procedure for Tendering Shares in
the Booklet. Pursuant to such procedure: (i) such tender must be made by or
through an Eligible Institution, (ii) a properly completed and duly executed
Notice of Guaranteed Delivery and Proxy in the form provided by NEES (with any
required signature guarantees) must be received by the Depositary on or prior to
the applicable Expiration Date and (iii) the certificates for all physically
delivered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at one of the Book-Entry Transfer Facilities of Shares
delivered electronically, as well as a properly completed and duly executed
Letter of Transmittal and Proxy (or facsimile thereof) and any other documents
required by this Letter of Transmittal and Proxy must be received by the
Depositary within three New York Stock Exchange (NYSE) trading days after the
date of execution of such Notice of Guaranteed Delivery and Proxy, all as
provided under the heading Terms of the Offer -- Procedure for Tendering Shares
in the Booklet. A NYSE trading day is any day on which the NYSE is open for
business.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
OPTION AND RISK OF THE TENDERING PREFERRED SHAREHOLDER. IF CERTIFICATES FOR
SHARES ARE SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED.
No alternative, conditional or contingent tenders will be accepted. See
Terms of the Offer -- Number of Shares; Purchase Price; Expiration Date;
Dividends in the Booklet. By executing this Letter of Transmittal and Proxy (or
facsimile thereof), the tendering Preferred Shareholder waives any right to
receive any notice of the acceptance for payment of the Shares.
3. VOTING. PREFERRED SHAREHOLDERS (INCLUDING PREFERRED SHAREHOLDERS WHO
ACQUIRE SHARES SUBSEQUENT TO THE RECORD DATE) WHO WISH TO TENDER THEIR SHARES
PURSUANT TO THE OFFER MUST VOTE IN FAVOR OF THE PROPOSED AMENDMENT TO MASS.
ELECTRIC'S PROVISIONS, AS SET FORTH IN THE BOOKLET. THE OFFER IS CONDITIONED
UPON THE PROPOSED AMENDMENT BEING APPROVED AND
14
<PAGE> 15
ADOPTED AT THE SPECIAL MEETING. In addition, Preferred Shareholders have the
right to vote on the Proposed Amendment regardless of whether they tender their
Shares by casting their vote and duly executing the Proxy included in this
Letter of Transmittal and Proxy or by voting in person at the Special Meeting.
By executing a Notice of Guaranteed Delivery and Proxy, a Preferred Shareholder
is deemed to have tendered the Shares described in such Notice of Guaranteed
Delivery and Proxy and to have voted such Shares in accordance with the proxy
contained therein. If no vote is indicated on an otherwise properly executed
proxy contained within this Letter of Transmittal and Proxy (or within a Notice
of Guaranteed Delivery and Proxy), then all Shares in respect of such proxy will
be voted in favor of the Proposed Amendment. See "Proposed Amendment and Proxy
Solicitation" in the Booklet. The Offer is being sent to all persons in whose
names Shares are registered on the books of Mass. Electric on November 6, 1997
as well as to all persons in whose name Shares are registered on November 12,
1997, which is the Record Date. Preferred Shareholders who purchase or whose
purchase is registered after the Record Date and who wish to tender in the Offer
must arrange with their seller to receive a proxy from the holder of record on
the Record Date of such Shares. Any holder of Shares held of record on the
Record Date in the name of another holder must establish to the satisfaction of
Mass. Electric such holder's entitlement to exercise or transfer such Proxy.
This will ordinarily require an assignment by such record holder in blank, or if
not in blank, to and from each successive transferee, including the holder, with
each signature guaranteed by an Eligible Institution. See Instruction 5. In
order to facilitate receipt of proxies, Shares shall, during the period which
commences November 10, 1997 and which will end at the close of business on the
Expiration Date, trade in the over-the-counter market with a proxy providing the
transferee with the right to vote such acquired shares in the Proxy
Solicitation. No record date is fixed for determining which persons are
permitted to tender Shares. However, only the holders of record, or holders who
acquire an assignment of proxy from such holders, are permitted to vote for the
Proposed Amendment and thereby validly tender Shares pursuant to the Offer. Any
person who is the beneficial owner but not the record holder of Shares must
arrange for the record transfer of such Shares prior to tendering or direct the
record holder to tender on behalf of the beneficial holder.
4. PARTIAL TENDERS. NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY BOOK-
ENTRY TRANSFER. If fewer than all the Shares represented by any certificate
delivered to the Depositary are to be tendered, fill in the number of Shares
that are to be tendered in the box above under the heading "Description of
Shares Tendered." In such case, a new certificate for the remainder of the
Shares represented by the old certificate will be sent to the person(s) signing
this Letter of Transmittal and Proxy, unless otherwise provided in the box above
under the heading "Special Payment Instructions" or "Special Delivery
Instructions," as promptly as practicable following the expiration or
termination of the Offer. All Shares represented by certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL AND PROXY AND NOTICE OF GUARANTEED
DELIVERY AND PROXY; STOCK POWERS AND ENDORSEMENTS. If either this Letter of
Transmittal and Proxy or the Notice of Guaranteed Delivery and Proxy (together,
the Tender and Proxy Documents) is signed by the registered holder(s) of the
Shares tendered hereby, the signature(s) must correspond with the name(s) as
written on the face of the certificates without alteration, enlargement or any
change whatsoever.
If any of the Shares tendered or voted under either Tender and Proxy
Document is held of record by two or more persons, all such persons must sign
such Tender and Proxy Document. If any of the Shares tendered or voted under
either Tender and Proxy Document are registered in different names or different
certificates, it will be necessary to complete, sign and submit as many separate
applicable Tender and Proxy Documents as there are different registrations of
certificates.
If either Tender and Proxy Document is signed by the registered holder(s)
of the Shares tendered hereby, no endorsements of certificates or separate stock
powers are required unless payment of the Purchase Price is to be made to, or
Shares not tendered or not purchased are to be registered in the name of, any
person other than the registered holder(s). Signatures on any such certificates
or stock powers must be guaranteed by an Eligible Institution. See
Instruction 1.
15
<PAGE> 16
If this Letter of Transmittal and Proxy is signed by a person other than
the registered holder(s) of the Shares tendered hereby, certificates must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on the certificates
for such Shares. Signature(s) on any such certificates or stock powers must be
guaranteed by an Eligible Institution. See Instruction 1.
If either Tender and Proxy Document or any certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to NEES of the authority of such person so to act must be
submitted.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, NEES
will pay or cause to be paid any stock transfer taxes with respect to the sale
and transfer of any Shares to it or its order pursuant to the Offer. If,
however, payment of the Purchase Price is to be made to, or Shares not tendered
or not purchased are to be registered in the name of, any person other than the
registered holder(s), or if tendered Shares are registered in the name of any
person other than the person(s) signing this Letter of Transmittal and Proxy,
the amount of any stock transfer taxes (whether imposed on the registered
holder(s), such other person or otherwise) payable on account of the transfer to
such person will be deducted from the Purchase Price unless satisfactory
evidence of the payment of such taxes, or exemption therefrom, is submitted.
Each Preferred Shareholder will be responsible for paying any income or gross
receipts taxes imposed by any jurisdiction by reason of the Special Cash Payment
(as defined in the Booklet) and/or the sale of the Shares in the Offer. See
Terms of the Offer -- Acceptance of Shares for Payment and Payment of Purchase
Price and Dividends and Certain U.S. Federal Income Tax Considerations in the
Booklet. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY TO
AFFIX TRANSFER TAX STAMPS TO THE CERTIFICATES REPRESENTING SHARES TENDERED
HEREBY.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
Purchase Price of any Shares purchased is to be issued in the name of, any
Shares not tendered or not purchased are to be returned to, and/or the check for
the Special Cash Payment is to be issued in the name of, a person other than the
person(s) signing this Letter of Transmittal and Proxy or if the check and/or
any certificate for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal and Proxy or
to an address other than that shown in the box above under the heading
"Description of Shares Tendered," then the "Special Payment Instructions" and/or
"Special Delivery Instructions" on this Letter of Transmittal and Proxy should
be completed. Preferred Shareholders tendering Shares by book-entry transfer
will have any Shares not accepted for payment returned by crediting the account
maintained by such Preferred Shareholder at the Book-Entry Transfer Facility
from which such transfer was made.
8. SUBSTITUTE FORM W-9 AND FORM W-8. A tendering and/or voting Preferred
Shareholder is required to provide the Depositary with either a correct Taxpayer
Identification Number (TIN) on Substitute Form W-9, which is provided under
"Important Tax Information" below, or a properly completed Form W-8 unless
exempt therefrom. Failure to provide the information on either Substitute Form
W-9 or Form W-8 may subject the tendering and/or voting Preferred Shareholder to
31% federal income tax backup withholding on the payment of the Purchase Price
for the Shares or on the Special Cash Payment. The tendering and/or voting
Preferred Shareholder may write "Applied For" in Part I of Substitute Form W-9
and sign the "Certificate of Awaiting Taxpayer Identification Number" of
Substitute Form W-9 if the Preferred Shareholder has not been issued a TIN and
has applied for a number or intends to apply for a number in the near future. If
"Applied For" is written in Part I of Substitute Form W-9 and the "Certificate
of Awaiting Taxpayer Identification Number" of Substitute Form W-9 is signed and
the Depositary is not provided with a TIN by the time of payment, the Depositary
will withhold 31% on all payments of the Purchase Price for the Shares or the
Special Cash Payment thereafter until a TIN is provided to the Depositary.
16
<PAGE> 17
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or requests
for assistance may be directed to the Information Agent or the Dealer Manager at
their respective telephone numbers and addresses listed below. Requests for
additional copies of the Booklet, this Letter of Transmittal and Proxy, or other
tender offer materials may be directed to the Information Agent or the Dealer
Manager and such copies will be furnished promptly at NEES' expense. Preferred
Shareholders may also contact their local broker, dealer, commercial bank or
trust company for assistance concerning the Offer.
10. SOLICITED TENDERS. Upon the terms and subject to the conditions of the
Offer and this Instruction, NEES will pay to designated brokers and dealers a
solicitation fee of $1.50 per Share for any Shares tendered, accepted for
payment, and paid for pursuant to the Offer and for share of Dividend Series
Preferred Stock not tendered by voted in favor on the Proposed Amendment (except
that for transactions for beneficial owners equal to or exceeding 2,500 Shares,
NEES will pay a solicitation fee of $1.00 per Share, of which at least eighty
percent (80%) shall be paid to the Dealer Manager and twenty percent (20%) to
the Soliciting Dealer (which may be the Dealer Manager)). With respect to fees
payable pursuant to this paragraph involving transactions for beneficial owners
whose ownership is less than 2,500 Shares, any fees payable hereunder shall be
paid in full to the Dealer Manager unless a Soliciting Dealer is designated (as
described below), in which case such fee shall be payable in full to such
designated Soliciting Dealer (which designated Soliciting Dealer may be the
Dealer Manager). The Letter of Transmittal and Proxy must include the name of an
entity which obtained the tender or proxy and which is either (a) a broker or
dealer in securities, including the Dealer Manager in its capacity as a broker
or dealer, which is a member of any national securities exchange or of the
National Association of Securities Dealers, Inc. (NASD), (b) a foreign broker or
dealer not eligible for membership in the NASD which agrees to conform to the
NASD's Rules of Fair Practice in soliciting tenders outside the United States to
the same extent as though it were an NASD member, or (c) a bank or trust company
(each of which is referred to herein as a Soliciting Dealer). No solicitation
fee shall be payable to a Soliciting Dealer with respect to the tender of Shares
or delivery of a proxy unless the Letter of Transmittal and Proxy accompanying
such tender or delivery of a proxy designates such Soliciting Dealer. No
solicitation fee shall be payable to a Soliciting Dealer in respect of Shares
registered in the name of such Soliciting Dealer unless such Shares are held by
such Soliciting Dealer as nominee and such Shares are being tendered or
delivered for the benefit of one or more beneficial owners identified on the
Letter of Transmittal or on the Notice of Solicited Tenders. No solicitation fee
shall be payable to a Soliciting Dealer if such Soliciting Dealer is required
for any reason to transfer the amount of such fee to a depositing holder (other
than itself). No solicitation fee shall be paid to a Soliciting Dealer with
respect to Shares tendered or delivered for such Soliciting Dealer's own
account. Soliciting Dealers will not be entitled to a solicitation fee for
Shares beneficially owned by such Soliciting Dealer. No broker, dealer, bank,
trust company, or fiduciary shall be deemed to be the agent of NEES, the Power
Company, the Depositary, the Information Agent, or the Dealer Manager for
purposes of the Offer.
Soliciting Dealers will include any of the organizations described in
clauses (a), (b), and (c) above even when the activities of such organizations
in connection with the Offer consist solely of forwarding to clients materials
relating to the Offer, including the Letter of Transmittal, and tendering Shares
or delivering as directed by beneficial owners thereof. No Soliciting Dealer is
required to make any recommendation to holders of Shares as to whether to tender
or refrain from tendering in the Offer. No assumption is made, in making payment
to any Soliciting Dealer, that its activities in connection with the Offer
included any activities other than those described above, and for all purposes
noted in all materials relating to the Offer, the term "solicit" shall be deemed
to mean no more than processing shares tendered or forwarding to customers
materials regarding the Offer.
17
<PAGE> 18
11. IRREGULARITIES. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance of any tender
of Shares will be determined by NEES, in its sole discretion, and its
determination shall be final and binding. NEES reserves the absolute right to
reject any and all tenders of Shares that it determines are not in proper form
or the acceptance for payment of or payment for Shares that may, in the opinion
of NEES' counsel, be unlawful. NEES also reserves the absolute right to waive
any of the conditions to the Offer or any defect or irregularity in any tender
of Shares and NEES' interpretation of the terms and conditions of the Offer
(including these instructions) shall be final and binding. Unless waived, any
defects or irregularities in connection with tenders must be cured within such
time as NEES shall determine. None of NEES, the Dealer Manager, the Depositary,
the Information Agent or any other person shall be under any duty to give notice
of any defect or irregularity in tenders nor shall any of them incur any
liability for failure to give any such notice. Tenders will not be deemed to
have been made until all defects and irregularities have been cured or waived.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate
representing Shares has been lost, destroyed or stolen, the Preferred
Shareholder should promptly notify the Depositary by checking the box above
immediately following the "Special Payment Instructions/Special Delivery
Instructions" and indicating the number of Shares lost, destroyed or stolen. The
Preferred Shareholder will then be instructed as to the procedures that must be
taken in order to replace the certificate. The tender of Shares pursuant to this
Letter of Transmittal and Proxy will not be valid unless on or prior to the
Expiration Date: (a) such procedures have been completed and a replacement
certificate for the Shares has been delivered to the Depositary or (b) a Notice
of Guaranteed Delivery and Proxy has been delivered to the Depositary. See
Instruction 2.
IMPORTANT: THIS LETTER OF TRANSMITTAL AND PROXY (OR A FACSIMILE COPY HEREOF),
DULY EXECUTED, TOGETHER WITH, IF APPLICABLE, CERTIFICATES OR CONFIRMATION OF A
BOOK-ENTRY TRANSFER, AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE
DEPOSITARY, OR, IF APPLICABLE, THE NOTICE OF GUARANTEED DELIVERY AND PROXY MUST
BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE.
18
<PAGE> 19
IMPORTANT TAX INFORMATION
Under Federal income tax law, a Preferred Shareholder whose tendered Shares
are accepted for payment, or who will receive a Special Cash Payment as a result
of voting in favor of the Proposed Amendment, is required to provide the
Depositary (as payer) with either such Preferred Shareholder's correct TIN on
Substitute Form W-9 below or a properly completed Form W-8. If such Preferred
Shareholder is an individual, the TIN is such Preferred Shareholder's social
security number. For businesses and other entities, the number is the Federal
employer identification number. If the Depositary is not provided with the
correct TIN or properly completed Form W-8, the Preferred Shareholder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
(a) payments that are made to such Preferred Shareholder with respect to Shares
purchased pursuant to the Offer or (b) Special Cash Payments made to a Preferred
Shareholder with respect to Shares voted pursuant to the proxy solicitation may
be subject to backup withholding. The Form W-8 can be obtained from the
Depositary. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" below for additional instructions.
If Federal income tax backup withholding applies, the Depositary is
required to withhold 31% of any payments made to the Preferred Shareholder.
Backup withholding is not an additional tax. Rather, the Federal income tax
liability of persons subject to backup withholding will be reduced by the amount
of the tax withheld. If withholding results in an overpayment of taxes, a refund
may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9 AND FORM W-8
To avoid backup withholding on payments that are made to a Preferred
Shareholder with respect to Shares purchased pursuant to the Offer or on Special
Cash Payments, the Preferred Shareholder is required to notify the Depositary of
his or her correct TIN by completing the Substitute Form W-9 below certifying
that the TIN provided on Substitute Form W-9 is correct and that (a) the
Preferred Shareholder has not been notified by the Internal Revenue Service that
he or she is subject to Federal income tax backup withholding as a result of
failure to report all interest or dividends or (b) the Internal Revenue Service
has notified the Preferred Shareholder that he or she is no longer subject to
Federal income tax backup withholding. Foreign Preferred Shareholders must
submit a properly completed Form W-8 in order to avoid the applicable backup
withholding; provided, however, that backup withholding will not apply to
foreign Preferred Shareholders subject to 30% (or lower treaty rate) withholding
on gross payments received pursuant to the Offer or on the Special Cash
Payments.
WHAT NUMBER TO GIVE THE DEPOSITARY
The Preferred Shareholder is required to give the Depositary the social
security number or employer identification number of the registered owner of the
Shares. If the Shares are in more than one name or are not in the name of the
actual owner, consult the "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" below for additional guidance on
which number to report.
19
<PAGE> 20
SEE "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9" FOR ADDITIONAL INSTRUCTIONS.
SUBSTITUTE
FORM W-9
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY, AS DEPOSITARY
- -----------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE -------------------------------------
FORM W-9 BOX AT RIGHT AND CERTIFY BY SIGNING AND
DATING BELOW. Social Security Number
---------------------------------------- or Employer
PAYER'S REQUEST FOR Identification
TAXPAYER IDENTIFICATION NAME (Please Print) Number
NUMBER (TIN) (If Awaiting TIN write
"Applied for")
---------------------------------------- --------------------------------------
ADDRESS PART II -- For Payees
NOT subject to backup
withholding, see the
---------------------------------------- "Guidelines for Cer-
CITY STATE ZIP CODE tification of Taxpayer
Identification Number
DEPARTMENT OF THE TREASURY on Substitute Form
INTERNAL REVENUE SERVICE W-9" and complete as
instructed therein
----------------------------------------------------------------------------------------------------------
PART III -- CERTIFICATION: -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number (or I am
waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service (IRS)
that I am subject to backup withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified me that I am no longer subject
to backup withholding.
SIGNATURE DATE , 1997
----------------------------------- ------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified
by the IRS that you are currently subject to backup withholding because of underreporting
interest or dividends on your tax return. However, if after being notified by the IRS that
you were subject to backup withholding you received another notification from the IRS that
you are no longer subject to backup withholding do not cross out item (2). Also see
instructions in the enclosed Guidelines.
- -----------------------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WRITE "APPLIED FOR"
IN PART I OF SUBSTITUTE FORM W-9.
-------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver such an application in the near future. I
understand that if I do not provide a taxpayer identification number within
sixty (60) days, 31% of all reportable payments made to me thereafter will be
withheld until I provide a number.
-------------------------------------------- -------------------------, 1997
SIGNATURE DATE
-------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE "GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9"
FOR ADDITIONAL DETAILS.
20
<PAGE> 21
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE.
PURPOSE OF FORM. A person who is required to file an information return
with the IRS must obtain your correct taxpayer identification number (TIN) to
report income paid to you, real estate transactions, mortgage interest you paid,
the acquisition or abandonment of secured property, or contributions you made to
an IRA. Use Form W-9 to furnish your correct TIN to the requester (the person
asking you to furnish your TIN) and, when applicable, (1) to certify that the
TIN you are furnishing is correct (or that you are waiting for a number to be
issued), (2) to certify that you are not subject to backup withholding, and
(3) to claim exemption from backup withholding if you are an exempt payee.
Furnishing your correct TIN and making the appropriate certifications will
prevent certain payments from being subject to backup withholding.
NOTE: IF A REQUESTER GIVES YOU A FORM OTHER THAN W-9 TO REQUEST YOUR TIN,
YOU MUST USE THE REQUESTER'S FORM.
HOW TO OBTAIN A TIN. If you do not have a TIN, apply for one immediately.
To apply, get Form SS-5, Application for a Social Security Card (for
Individuals), from your local office of the Social Security Administration, or
Form SS-4, Application for Employer Identification Number (for businesses and
all other entities), from your local IRS office.
To complete Form W-9 if you do not have a TIN, write "Applied for" in the
space for the TIN in Part 1, sign and date the form, and give it to the
requester. Generally, you will than have 60 days to obtain a TIN and furnish it
to the requester. If the requester does not receive your TIN within 60 days,
backup withholding, if applicable, will begin and continue until you furnish
your TIN to the requester. For reportable interest or dividend payments, the
payor must exercise one of the following options concerning backup withholding
during this 60-day period. Under option (1), a payor must backup withhold on any
withdrawals you make from your account after 7 business days after the requester
receives this form back from you. Under option (2), the payor must backup
withhold on any reportable interest or dividend payments made to your account,
regardless of whether you make any withdrawals. The backup withholding under
option (2) must begin no later than 7 business days after the requester receives
this form back. Under option (2), the payor is required to refund the amounts
withheld if your certified TIN is received within the 60-day period and you were
not subject to backup withholding during that period.
NOTE: WRITING "APPLIED FOR" ON THE FORM MEANS THAT YOU HAVE ALREADY APPLIED
FOR A TIN OR THAT YOU INTEND TO APPLY FOR ONE IN THE NEAR FUTURE.
As soon as you receive your TIN, complete another Form W-9, include your
TIN, sign and date the form, and give it to the requester.
WHAT IS BACKUP WITHHOLDING? -- Persons making certain payments to you must
withhold and pay to the IRS 31% of such payments under certain conditions. This
is called "backup withholding." Payments that could be subject to backup
withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee compensation, and certain payments
from fishing boat operators, but do not include real estate transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
(1) You do not furnish your TIN to the requester, or
(2) The IRS notifies the requester that you furnished an incorrect TIN, or
(3) You are notified by the IRS that you are subject to withholding because
you failed to report all your interest and dividends on your tax return (for
reportable interest and dividends only), or
(4) You do not certify to the requester that you are not subject to backup
withholding under 3 above, (for reportable interest and dividend accounts opened
after 1983 only), or
(5) You do not certify your TIN.
Except as explained in 5 above, other reportable payments are subject to
backup withholding only if 1 or 2 above applies. Certain payees and payments are
exempt from backup withholding and information reporting. See Payees and
Payments Exempt From Backup Withholding, below, and Exempt Payees and Payments
under Signing the Certification, below if you are an exempt payee.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING. The following is a list
of payees exempt from backup withholding and for which no information reporting
is required. For interest and dividends, all listed payees are exempt except as
listed in item (9). For broker transactions, payees listed in items (1) through
(13) and a person registered under the Investment Advisers Act of 1940 who
regularly acts as a broker are exempt. Payments subject to reporting under
sections 6041 and 6041A are generally exempt from backup withholding only if
made to payees described in items (1) through (7), except a corporation that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (2) through (6) are
21
<PAGE> 22
exempt from backup withholding for barter exchange transactions and patronage
dividends.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), an IRA, or a
custodial account under section 402(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporation Secretaries,
Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividend and patronage dividends generally not subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
- Section 404(k) payments made by an ESOP.
Payments of interest generally not subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: YOU MAY BE SUBJECT TO BACKUP WITHHOLDING IF THIS INTEREST IS $600 OR
MORE AND IS PAID IN THE COURSE OF THE PAYER'S TRADE OR BUSINESS AND YOU HAVE NOT
PROVIDED YOUR CORRECT TIN TO THE PAYER.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid to you.
Other types of payments generally not subject to backup withholding include:
- Wages.
- Distributions from a pension, annuity, profit-sharing or stock bonus plan,
or an IRA.
- Distributions from an owner-employee plan.
- Certain surrenders of life insurance contracts.
- Gambling winnings, if withholding is required under section 3402(q).
However, if withholding is not required under section 3402(q), backup
withholding applies if the payee fails to furnish a TIN.
- Real estate transactions reportable under section 6045.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045,
6049, 6050A, and 6050N, and the regulations under those sections.
PENALTIES
FAILURE TO FURNISH TIN. If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
MISUSE OF TINS. If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
SPECIFIC INSTRUCTIONS
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
22
<PAGE> 23
NAME -- If you are an individual, you must generally provide the name shown
on your social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security Administration
of the name change, please enter your first name, the last name shown on your
social security card, and your new last name.
NUMBER -- If you are a sole proprietor, you must furnish your individual
name and either your SSN or EIN. You may also enter your business name or "doing
business as" name on the business name line. Enter your name(s) as shown on your
social security card and/or as it was used to apply for your EIN on Form SS-4.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
SIGNING THE "PART III -- CERTIFICATION" ON THE SUBSTITUTE FORM W-9
(1) INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984 AND
BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983 -- You are required to furnish
your correct TIN, but you are not required to sign the certification.
(2) INTEREST, DIVIDEND, BROKER, AND BARTER EXCHANGE ACCOUNTS OPENED AFTER
1983 AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983 -- You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out item 2 in the certification before signing the form.
(3) REAL ESTATE TRANSACTIONS. You must sign the certification. You may
cross out item 2 of the certification.
(4) OTHER PAYMENTS. You are required to furnish your correct TIN, but you
are not required to sign the certification unless you have been notified that
you have previously given an incorrect TIN. Other payments include payments made
in the course of the requester's trade or business for rents, royalties, goods
(other than bills for merchandise), medical and health care services (including
payments to corporations), payments to a nonemployee for services (including
attorney and accounting fees), and payments to certain fishing boat crew
members.
(5) MORTGAGE INTEREST PAID BY YOU, ACQUISITION OR ABANDONMENT OF SECURED
PROPERTY, OR IRA CONTRIBUTIONS. You are required to furnish your correct TIN,
but you are not required to sign the certification.
(6) EXEMPT PAYEES AND PAYMENTS. If you are exempt from backup withholding,
you should complete this form to avoid possible erroneous backup withholding.
Enter your correct TIN in Part I, write "EXEMPT" in the block in Part II, and
sign and date the form. If you are a nonresident alien or foreign entity not
subject to backup withholding, give the requester a complete Form W-8,
Certificate of Foreign Status.
(7) TIN "APPLIED FOR." Follow the instructions under How To Obtain a TIN, on
page 1, and sign and date this form.
SIGNATURE: For a joint account, only the person whose TIN is shown in Part 1
should sign.
PRIVACY ACT NOTICE: Section 6109 requires you to furnish your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property, or contributions you made to an
IRA. The IRS uses the numbers for identification purposes and to help verify the
accuracy of your tax return. You must provide your TIN whether or not you are
required to file a tax return. Payers must generally withhold 31% of taxable
interest, dividends, and certain other payments to a payee who does not furnish
a TIN to a payer. Certain penalties may also apply.
23
<PAGE> 24
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
<TABLE>
<CAPTION>
- ---------------------------------------------------
For this type of account: Give name and SSN of:
- ---------------------------------------------------
<C> <S> <C>
1. Individual The individual
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, the
first individual on
the account(1)
3. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
4. a. The usual revocable The grantor-trustee(1)
savings trust
(grantor is also
trustee)
b. So-called trust The actual owner(1)
account that is not
a legal or valid
trust under state
law
5. Sole proprietorship The owner(3)
- ---------------------------------------------------
<CAPTION>
- ---------------------------------------------------
For this type of account: Give name and SSN of:
- ---------------------------------------------------
<C> <S> <C>
6. A valid trust, estate, Legal entity(4)
or pension trust
7. Corporate The corporation
8. Association, club, The organization
religious, charitable,
educational, or other
tax-exempt
organization
9. Partnership The partnership
10. A broker or registered The broker or nominee
nominee
11. Account with the The public entity.
Department of
Agriculture in the
name of a public
entity (such as a
state or local
government, school
district, or prison)
that receives
agricultural program
payments.
- ---------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's SSN.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your SSN or EIN.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless the
legal entity itself is not designated in the account title.)
NOTE: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
24
<PAGE> 25
Any questions or requests for assistance or additional copies of the
Booklet, this Letter of Transmittal and Proxy, the Notice of Guaranteed Delivery
and Proxy or other materials may be directed to the Information Agent at the
address and telephone number set forth below.
THE INFORMATION AGENT:
[GEORGESON & COMPANY INC. LOGO]
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
(800) 223-2064 (CALL TOLL-FREE)
BANKS AND BROKERS CALL COLLECT:
(212) 440-9918
Preferred Shareholders may contact the Dealer Manager at its address and
telephone number set forth below with any questions regarding the terms of the
Offer and solicitation of proxies. In addition, Preferred Shareholders may also
contact their broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Offer and solicitation of proxies.
THE DEALER MANAGER:
MERRILL LYNCH & CO.
WORLD FINANCIAL CENTER
250 VESEY STREET
NEW YORK, NEW YORK 10281
(888) ML4-TNDR (TOLL-FREE)
(888) 654-8637 (TOLL-FREE)
<PAGE> 1
LETTER OF TRANSMITTAL AND PROXY
RELATING TO
SHARES OF 6.84% PREFERRED STOCK -- CUMULATIVE
OF
MASSACHUSETTS ELECTRIC COMPANY
TENDERED PURSUANT TO THE OFFER TO PURCHASE FOR CASH
BY
NEW ENGLAND ELECTRIC SYSTEM,
DATED NOVEMBER 6, 1997,
FOR PURCHASE AT A PURCHASE PRICE OF
$ PER SHARE
AND/OR
VOTED PURSUANT TO THE PROXY STATEMENT,
DATED NOVEMBER 6, 1997,
OF
[MASSACHUSETTS ELECTRIC COMPANY LOGO] MASSACHUSETTS ELECTRIC COMPANY
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME,
ON FRIDAY, DECEMBER 12, 1997, UNLESS THE OFFER IS EXTENDED (THE EXPIRATION
DATE).
- --------------------------------------------------------------------------------
THE PROXY CONTAINED IN THIS DOCUMENT IS IN RESPECT OF THE SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON FRIDAY, DECEMBER 12, 1997, OR ON SUCH DATE TO WHICH
THE MEETING IS ADJOURNED OR POSTPONED.
To: IBJ Schroder Bank & Trust Company (the Depositary)
By First-Class Mail: By Hand or Overnight Delivery:
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
P.O. Box 8-1 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274 Attn: Reorganization Department
Attn: Reorganization Department Securities Processing Window SC-1
By Facsimile: To Conform:
(212) 858-2611 (212) 858-2103
ATTENTION
THIS LETTER OF TRANSMITTAL AND PROXY IS TO BE USED BY BOTH (1) PREFERRED
SHAREHOLDERS WHO ARE TENDERING AND VOTING SHARES PURSUANT TO THE OFFER AND
(2) PREFERRD SHAREHOLDERS WHO ARE ONLY VOTING ON THE PROPOSED AMENDMENT AND NOT
TENDERING SHARES.
ANY PREFERRED SHAREHOLDER WHO HAS ANY QUESTIONS AS TO HOW TO COMPLETE THIS
LETTER OF TRANSMITTAL AND PROXY SHOULD CONTACT THE INFORMATION AGENT AT
(800) 223-2064 (TOLL-FREE) AND FOR BANKS AND BROKERS (212) 440-9918 (CALL
COLLECT).
<PAGE> 2
All capitalized terms used herein and not defined herein have the meanings
ascribed to them in the Offer to Purchase and Proxy Statement.
PREFERRED SHAREHOLDERS (INCLUDING PREFERRED SHAREHOLDERS WHO ACQUIRE SHARES
SUBSEQUENT TO THE RECORD DATE) WILL NOT BE ABLE TO VALIDLY TENDER THEIR SHARES
UNLESS THEY HAVE SUBMITTED A DULY COMPLETED, VALID AND UNREVOKED PROXY
INDICATING THEIR VOTE FOR THE PROPOSED AMENDMENT OR INDICATE IN THE ACCOMPANYING
PROXY THEIR INTENTION TO VOTE FOR THE PROPOSED AMENDMENT AT THE SPECIAL MEETING.
NEW ENGLAND ELECTRIC SYSTEM, A MASSACHUSETTS VOLUNTARY ASSOCIATION (NEES), WILL
NOT BE REQUIRED TO ACCEPT FOR PAYMENT OR PAY FOR ANY SHARES TENDERED IF THE
PROPOSED AMENDMENT IS NOT APPROVED AND ADOPTED AT THE SPECIAL MEETING. PREFERRED
SHAREHOLDERS HAVE THE RIGHT TO VOTE ON THE PROPOSED AMENDMENT REGARDLESS OF
WHETHER THEY TENDER THEIR SHARES BY CASTING THEIR VOTE AND SIGNING THE PROXY
CONTAINED WITHIN THIS LETTER OF TRANSMITTAL AND PROXY OR BY VOTING IN PERSON AT
THE SPECIAL MEETING. IF THE PROPOSED AMENDMENT IS APPROVED AND ADOPTED,
MASSACHUSETTS ELECTRIC COMPANY, A MASSACHUSETTS CORPORATION AND DIRECT UTILITY
SUBSIDIARY OF NEES (MASS. ELECTRIC), WILL MAKE A SPECIAL CASH PAYMENT TO EACH
DIVIDEND SERIES PREFERRED SHAREHOLDER WHO VOTED IN FAVOR OF THE PROPOSED
AMENDMENT, PROVIDED THAT THEIR SHARES ARE NOT TENDERED PURSUANT TO THE OFFER.
PREFERRED SHAREHOLDERS WHO PURCHASE OR WHOSE PURCHASE SETTLES OR IS
REGISTERED AFTER THE CLOSE OF BUSINESS ON NOVEMBER 12, 1997 (THE RECORD DATE)
AND WHO WISH TO TENDER IN THE OFFER MUST ARRANGE WITH THEIR SELLER TO RECEIVE A
DULY COMPLETED, VALID AND UNREVOKED PROXY (WHICH MAY BE IN THE FORM OF AN
IRREVOCABLE ASSIGNMENT OF PROXY AS SET FORTH IN THIS LETTER OF TRANSMITTAL AND
PROXY) FROM THE HOLDER ON THE RECORD DATE OF SUCH SHARES. IN ORDER TO FACILITATE
RECEIPT OF PROXIES, SHARES SHALL, DURING THE PERIOD WHICH COMMENCES NOVEMBER 10,
1997 (TWO BUSINESS DAYS PRIOR TO THE RECORD DATE) AND WHICH WILL END AT THE
CLOSE OF BUSINESS ON THE EXPIRATION DATE, TRADE IN THE OVER-THE-COUNTER MARKET
WITH A PROXY PROVIDING THE TRANSFEREE WITH THE RIGHT TO VOTE SUCH ACQUIRED
SHARES IN THE PROXY SOLICITATION.
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY.
NOTE: IF SHARES ARE BEING TENDERED, THE REMAINDER OF THIS LETTER OF TRANSMITTAL
AND PROXY MUST BE COMPLETED, INCLUDING THE SUBSTITUTE FORM W-9 BELOW. IF
SHARES ARE NOT BEING TENDERED, YOU NEED ONLY COMPLETE THE BOXES BELOW
TITLED "PROXY" (OR, IF APPLICABLE, "IRREVOCABLE PROXY") AND
"SIGNATURES(S) OF REGISTERED HOLDER(S)" AND THE SUBSTITUTE FORM W-9.
The name "New England Electric System" means the trustee or trustees for
the time being (as trustee or trustees but not personally) under an agreement
and declaration of trust dated January 2, 1926, as amended, which is hereby
referred to, and a copy of which as amended has been filed with the Secretary of
the Commonwealth of Massachusetts. Any agreement, obligation or liability made,
entered into or incurred by or on behalf of New England Electric System binds
only its trust estate, and no shareholder, director, trustee, officer or agent
thereof assumes or shall be held to any liability therefor.
2
<PAGE> 3
PLEASE COMPLETE:
- --------------------------------------------------------------------------------
PROXY
The undersigned hereby appoints John E. Cochrane, Michael E. Jeganis and
Robert King Wulff, or any of them, as proxies, each with the power to appoint
his substitute, and hereby authorizes them to represent and to vote as
designated hereunder and in their discretion with respect to any other business
properly brought before the Special Meeting, all the shares (Shares) of 6.84%
Preferred Stock -- Cumulative of Massachusetts Electric Company (Mass. Electric)
which the undersigned is entitled to vote at the Special Meeting of Shareholders
to be held on Friday, December 12, 1997, or any adjournment(s) or
postponement(s) thereof.
NOTE: IF YOU ARE VOTING BUT NOT TENDERING SHARES, DO NOT SEND ANY SHARE
CERTIFICATES WITH THIS LETTER OF TRANSMITTAL AND PROXY.
THIS LETTER OF TRANSMITTAL AND PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF MASS. ELECTRIC. The proxy contained herein, when properly
executed, will be voted in the manner directed herein by the undersigned
shareholder(s). If no direction is made, the proxy will be voted FOR Item 1.
INDICATE YOUR VOTE BY AN (X). THE BOARD OF DIRECTORS OF MASS. ELECTRIC
RECOMMENDS VOTING FOR ITEM 1.
HOLDERS OF SHARES WHO WISH TO TENDER THEIR SHARES MUST VOTE "FOR" THE
PROPOSED AMENDMENT EITHER BY SUBMITTING THIS PROXY OR BY VOTING AT THE SPECIAL
MEETING.
ITEM 1.
To amend the Articles of Organization and By-laws to delete in its entirety
ARTICLE XVIII, Section 4E(4), limiting the Mass. Electric's ability to issue
unsecured indebtedness.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
NOTE: IF SHARES ARE BEING VOTED "FOR" THE PROPOSED AMENDMENT, THE SUBSTITUTE
FORM W-9 BELOW SHOULD BE COMPLETED TO AVOID BACK-UP WITHHOLDING ON THE
SPECIAL CASH PAYMENT.
SHARES REPRESENTED BY ALL PROPERLY EXECUTED PROXIES WILL BE VOTED IN
ACCORDANCE WITH INSTRUCTIONS APPEARING ON THIS PROXY. IN THE ABSENCE OF SPECIFIC
INSTRUCTIONS, PROXIES WILL BE VOTED "FOR" THE PROPOSED AMENDMENT AND OTHERWISE
IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF MASS.
ELECTRIC, AND IN THE DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING.
Any holder of Shares held of record on the Record Date in the name of
another holder must establish to the satisfaction of Mass. Electric such
holder's entitlement to exercise or transfer this Proxy. This will ordinarily
require an assignment by such record holder in blank, or if not in blank, to and
from each successive transferee, including the holder, with each signature
guaranteed by an Eligible Institution. A form of irrevocable assignment of proxy
has been provided herein.
Please check box if you plan to attend the Special Meeting. [ ]
- --------------------------------------------------------------------------------
3
<PAGE> 4
PLEASE COMPLETE IF APPLICABLE:
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED(1)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE USE PREADDRESSED LABEL OR FILL IN, IF
BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARE SHARE CERTIFICATE(S) AND SHARE(S) TENDERED/VOTED
CERTIFICATE(S) AND SHARE(S) TENDERED) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)(1)
- ------------------------------------------------------------------------------------------------------------------
NUMBER OF
TOTAL NUMBER SHARES NOT
OF SHARES TENDERED BUT
REPRESENTED NUMBER AS TO WHICH
SHARE CERTIFICATE BY SHARE OF SHARES PROXIES
NUMBER(S)(2) CERTIFICATE(S)(2) TENDERED(3) GIVEN ONLY
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Total Shares:
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) If tendering or voting Share(s), please fill in table exactly as
information appears on the Certificate(s).
(2) Need not be completed by Preferred Shareholders tendering by book-entry
transfer.
(3) Unless otherwise indicated, it will be assumed that all Shares represented
by any Certificate(s) delivered to the Depositary are being tendered and a
proxy is being delivered. See Instruction 4. You must vote "FOR" the
Proposed Amendment with respect to any Shares tendered.
- --------------------------------------------------------------------------------
NOTE: IF YOU ARE DELIVERING A PROXY BUT NOT TENDERING SHARES, DO NOT SEND ANY
SHARE CERTIFICATES.
4
<PAGE> 5
PLEASE COMPLETE IF APPLICABLE:
- --------------------------------------------------------------------------------
SIGNATURE(S) OF REGISTERED HOLDER(S)*
________________________________________________________________________________
(SIGNATURE)
________________________________________________________________________________
(SIGNATURE)
Dated: _________________________________________________________________ , 1997
Name(s): _______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT)
Capacity (full title): _________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
Daytime Area Code and Telephone No.: _________________________________________
* Must be signed by the registered holder(s) exactly as name(s) appear(s) on the
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney_in_fact, officer of a corporation or other person acting in
a fiduciary or representative capacity, please set forth full title and see
Instruction 5.
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature: __________________________________________________________
Name: __________________________________________________________________________
Name of Firm: __________________________________________________________________
(PLEASE PRINT)
Address of Firm: _______________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: ___________________________________________________
Dated: __________________________________________________________________ , 1997
- --------------------------------------------------------------------------------
5
<PAGE> 6
IF SELLING SHARES ON OR AFTER NOVEMBER 10, 1997, A RECORD HOLDER MUST
COMPLETE THE FOLLOWING IRREVOCABLE PROXY.
PLEASE SIGN THIS TO IRREVOCABLY TRANSFER A PREFERRED STOCK PROXY TO A
SUBSEQUENT HOLDER OF PREFERRED STOCK WHO WAS NOT A HOLDER OF RECORD ON NOVEMBER
12, 1997.
- --------------------------------------------------------------------------------
IRREVOCABLE PROXY *
WITH RESPECT TO SHARES OF THE
6.84% PREFERRED STOCK -- CUMULATIVE (THE SHARES) OF
MASSACHUSETTS ELECTRIC COMPANY (MASS. ELECTRIC)
The undersigned hereby irrevocably appoints:
------------------------------------
TYPE OR PRINT NAME OF TRANSFEREE
as attorney and proxy, with full power of substitution, to vote and otherwise
act for and in the name(s) of the undersigned with respect to the Shares
indicated below which were held of record by the undersigned on November 12,
1997, in the manner in which the undersigned would be entitled to vote and
otherwise act in respect of such Shares on any and all matters.
This proxy shall be effective whether or not the Shares indicated below are
tendered in the Offer.
This instrument supersedes and revokes any and all previous appointments of
proxies heretofore made by the undersigned with respect to the Shares indicated
below as to any and all matters. THIS PROXY IS IRREVOCABLE AND IS COUPLED WITH
AN INTEREST.
All authority conferred or agreed to be conferred herein shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, legal and
personal representatives, successors in interest and assigned of the
undersigned. The undersigned understands that tenders of Shares pursuant to any
of the procedures described in the Offer to Purchase and Proxy Statement and in
this Letter of Transmittal and Proxy will constitute a binding agreement between
the undersigned and Mass. Electric upon the terms and subject to the conditions
of the Offer.
DESCRIPTION OF PREFERRED STOCK
<TABLE>
<CAPTION>
CERTIFICATE NUMBER(S)
(ATTACH LIST IF NECESSARY) AGGREGATE NUMBER OF SHARES
- ------------------------- -------------------------
<S> <C> <C>
1.
- ------------------------- -------------------------
2.
- ------------------------- -------------------------
3.
- ------------------------- -------------------------
Total -------------------------
</TABLE>
- ---------------
* This irrevocable proxy must be signed on the next page to be effective.
- --------------------------------------------------------------------------------
6
<PAGE> 7
- --------------------------------------------------------------------------------
IRREVOCABLE PROXY
SIGNATURE(S) OF RECORD OR AUTHORIZED SIGNATORY*
- --------------------------------------------------------------------------------
(SIGNATURE)
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Dated: 1997
--------------------------------------------------------------------,
Tax Identification or Social Security No(s)
-------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE)
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Dated: 1997
--------------------------------------------------------------------,
Tax Identification or Social Security No(s)
-------------------------------------
* Must be signed by the registered holder(s) exactly as name(s) appear(s) on the
Record Date on the stock certificate(s) or on a security position listing or
by person(s) authorized to become registered holder(s) by certificates and
documents transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, agent or
other person acting in a fiduciary or representative capacity, please provide
the following information and see Instruction 5.
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
-----------------------------------------------------------
Name:
---------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title):
----------------------------------------------------------
Name of Firm:
-------------------------------------------------------------------
(PLEASE PRINT)
Address of Firm:
----------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.:
----------------------------------------------------
Dated: 1997
--------------------------------------------------------------------,
- --------------------------------------------------------------------------------
7
<PAGE> 8
NOTE: IF SHARES ARE BEING TENDERED, THE REMAINDER OF THIS LETTER OF TRANSMITTAL
AND PROXY MUST BE COMPLETED, INCLUDING THE SUBSTITUTE FORM W-9 BELOW OR A FORM
W-8, AS APPLICABLE.
DELIVERY OF THIS LETTER OF TRANSMITTAL AND PROXY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER
THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN
THIS LETTER OF TRANSMITTAL AND PROXY IN THE APPROPRIATE SPACE THEREFOR PROVIDED
ABOVE AND, IF YOU ARE TENDERING ANY SHARES OR VOTING "FOR" THE PROPOSED
AMENDMENT, COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW OR A FORM W-8, AS
APPLICABLE. SEE INSTRUCTION 8 AND "IMPORTANT TAX INFORMATION" BELOW.
DO NOT SEND ANY CERTIFICATES TO NEES, MASS. ELECTRIC, MERRILL LYNCH & CO.,
OR GEORGESON & COMPANY, INC.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL AND PROXY SHOULD
BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL AND PROXY IS COMPLETED.
This Letter of Transmittal and Proxy is to be used if (a) Certificates are
to be forwarded herewith, (b) delivery of Shares is to be made by book-entry
transfer pursuant to the procedures set forth under the heading Terms of the
Offer -- Procedure for Tendering Shares in the Offer to Purchase and Proxy
Statement (as defined below) or (c) Shares are being voted in connection with
the Offer.
Preferred Shareholders who wish to tender Shares but cannot deliver their
Shares and all other documents required hereby to the Depositary on or prior to
the Expiration Date must tender their Shares pursuant to the guaranteed delivery
procedure set forth under the heading Terms of the Offer -- Procedure for
Tendering Shares -- Guaranteed Delivery Procedure in the Offer to Purchase and
Proxy Statement. See Instruction 2. DELIVERY OF DOCUMENTS TO NEES, MASS.
ELECTRIC OR A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE A VALID DELIVERY.
PLEASE COMPLETE:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE ENCLOSED HEREWITH.
A HOLDER TENDERING SHARES PURSUANT TO THIS LETTER OF TRANSMITTAL AND PROXY
MUST CHECK ONE OF THE FOLLOWING BOXES:
[ ] A duly completed, valid and unrevoked proxy indicating a vote "FOR" the
Proposed Amendment is included herein.
[ ] A vote "FOR" the Proposed Amendment will be cast at the Special Meeting.
- --------------------------------------------------------------------------------
8
<PAGE> 9
(BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
<TABLE>
<S> <C>
[
] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE
FOLLOWING:
Name of tendering institution:
------------------------------------------------------------------------------
(PLEASE PRINT)
Check applicable box: [ ] DTC [ ] PDTC
Account No.
---------------------------------------------------------------------------
Transaction Code No.
-----------------------------------------------------------------
] [CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY AND PROXY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of tendering Preferred Shareholder(s):
-------------------------------------
-----------------------------------------------------------------------------------------
(PLEASE PRINT)
Date of execution of Notice of Guaranteed Delivery and Proxy:
---------------------
Name of institution that guaranteed delivery:
-----------------------------------------
If delivery is by book-entry transfer:
Name of tendering institution:
---------------------------------------------------------
Account No. --------------------------------------------------------------------- at [
] DTC or [ ] PDTC
(CHECK ONE)
Transaction Code No.
-----------------------------------------------------------------
A HOLDER ELECTING TO TENDER SHARES PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND PROXY
MUST CHECK ONE OF THE FOLLOWING BOXES:
[ ] A duly completed, valid and unrevoked proxy indicating a vote "FOR" the Proposed
Amendment was included with the Notice of Guaranteed Delivery and Proxy previously sent
to the Depositary.
[ ] A duly completed, valid and unrevoked proxy indicating a vote "FOR" the Proposed
Amendment is being delivered pursuant to a Notice of Guaranteed Delivery and Proxy
previously sent to the Depositary.
[ ] A vote "FOR" the Proposed Amendment will be cast at the Special Meeting.
</TABLE>
9
<PAGE> 10
NOTE: SIGNATURES MUST BE PROVIDED ABOVE
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The above signed hereby tenders to NEES the shares in the amount set forth
in the box above labeled "Description of Shares Tendered" pursuant to NEES'
offer to purchase any and all of the outstanding shares of the 6.84% Preferred
Stock -- Cumulative (the Shares) of Mass. Electric shown above as to which this
Letter of Transmittal and Proxy is applicable at the purchase price per Share
shown above (the Purchase Price), net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase and Proxy
Statement, dated November 6, 1997 (the Booklet), receipt of which is hereby
acknowledged, and in this Letter of Transmittal and Proxy (which together
constitute the Offer). PREFERRED SHAREHOLDERS WHO WISH TO TENDER THEIR SHARES
PURSUANT TO THE OFFER MUST VOTE IN FAVOR OF THE PROPOSED AMENDMENT TO MASS.
ELECTRIC'S BY-LAWS AND ARTICLES OF ORGANIZATION (THE PROVISIONS), AS SET FORTH
IN THE BOOKLET (THE PROPOSED AMENDMENT). THE OFFER IS CONDITIONED UPON THE
PROPOSED AMENDMENT BEING APPROVED AND ADOPTED AT THE SPECIAL MEETING (AS DEFINED
IN THE BOOKLET). See Proposed Amendment and Proxy Solicitation, Terms of the
Offer -- Extension of Tender Period; Termination; Amendments and Terms of the
Offer -- Certain Conditions of the Offer in the Booklet.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), the above signed
hereby sells, assigns and transfers to, or upon the order of, NEES all right,
title and interest in and to all the Shares that are being tendered hereby and
hereby constitutes and appoints IBJ Schroder Bank & Trust Company (the
Depositary) the true and lawful agent and attorney-in-fact of the above signed
with respect to such Shares, with full power of substitution (such power of
attorney being an irrevocable power coupled with an interest), to (a) deliver
certificates for such Shares, or transfer ownership of such Shares on the
account books maintained by any of the Book-Entry Transfer Facilities, together,
in any such case, with all accompanying evidences of transfer and authenticity,
to or upon the order of NEES, (b) present such Shares for registration and
transfer on the books of Mass. Electric and (c) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares, all in
accordance with the terms of the Offer.
The above signed hereby represents and warrants that the above signed has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and that, when and to the extent the same are accepted for
payment by NEES, NEES will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, charges, encumbrances,
conditional sales agreements or other obligations relating to the sale or
transfer thereof, and the same will not be subject to any adverse claims. The
above signed will, upon request, execute and deliver any additional documents
deemed by the Depositary or NEES to be necessary or desirable to complete the
sale, assignment and transfer of the Shares tendered hereby.
All authority herein conferred or agreed to be conferred shall not be
affected by, and shall survive, the death or incapacity of the above signed, and
any obligations of the above signed hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the above signed. Except as
stated in the Offer, this tender is irrevocable.
The above signed understands that tenders of Shares pursuant to any one of
the procedures described under the heading Terms of the Offer -- Procedure for
Tendering Shares in the Booklet and in the instructions hereto will constitute
the above signed's acceptance of the terms and conditions of the Offer,
including the above signed's representation and warranty that (a) the above
signed has a net long position in the Shares being tendered within the meaning
of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended
(the Exchange Act), and (b) the tender of such Shares complies with Rule 14e-4.
NEES' acceptance for payment of Shares tendered pursuant to the Offer will
constitute a binding agreement between the above signed and NEES upon the terms
and subject to the conditions of the Offer.
10
<PAGE> 11
The above signed recognizes that, under certain circumstances set forth in
the Booklet, NEES may terminate or amend the Offer or may not be required to
purchase any of the Shares tendered hereby. In either event, the above signed
understands that certificate(s) for any Shares not tendered or not purchased
will be returned to the above signed.
Unless otherwise indicated in the box below under the heading "Special
Payment Instructions," please issue the check for the Purchase Price of any
Shares purchased, and/or return any Shares not tendered or not purchased, in the
name(s) of the above signed (and, in the case of Shares tendered by book-entry
transfer, by credit to the account at the Book-Entry Transfer Facility
designated above). Unless otherwise indicated in the box below under the heading
"Special Delivery Instructions," please mail the check for the Purchase Price of
any Shares purchased and/or any certificates for Shares not tendered or not
purchased (and accompanying documents, as appropriate) to the above signed at
the address shown below. In the event that both "Special Payment Instructions"
and "Special Delivery Instructions" are completed, please issue the check for
the Purchase Price of any Shares purchased and/or return any Shares not tendered
or not purchased in the name(s) of, and mail said check and/or any certificates
to, the person(s) so indicated. The above signed recognizes that NEES has no
obligation, pursuant to the "Special Payment Instructions," to transfer any
Shares from the name of the registered holder(s) thereof if NEES does not accept
for payment any of the Shares so tendered.
11
<PAGE> 12
PLEASE COMPLETE IF APPLICABLE:
- --------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
SEE INSTRUCTIONS 4, 6, AND 7
To be completed ONLY if the check for the Purchase Price of Shares
purchased and/or certificates for Shares not tendered or not purchased are
to be issued in the name of someone other than the above signed.
Issue: [ ] Check [ ] Certificate(s) to:
Name
----------------------------------------------------------------------
(PLEASE PRINT)
Address
-------------------------------------------------------------------
- ------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
- ------------------------------------------------------------------------------
(TAX IDENTIFICATION OR
SOCIAL SECURITY NUMBER)*
* SEE SUBSTITUTE FORM W-9 BELOW.
Credit Shares delivered by book-entry transfer and not purchased to
the Book-Entry Transfer Facility Account set forth below:
[ ] DTC [ ] PDTC
Account No.:
- ------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
SEE INSTRUCTIONS 4, 6, AND 7
To be completed ONLY if the check for the Purchase Price of Shares
purchased and/or certificates for Shares not tendered or not purchased are
to be mailed to someone other than the above signed or to the above signed
at an address other than that shown below the above signed's signature(s).
Mail: [ ] Check [ ] Certificate(s) to:
Name
----------------------------------------------------------------------
(PLEASE PRINT)
Address
-------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN AND
WISH TO TENDER HAVE BEEN LOST, DESTROYED OR STOLEN. (SEE INSTRUCTION 12.)
Number of Shares represented by lost, destroyed or stolen
certificates:
------------------------------------------------------------
12
<PAGE> 13
SOLICITED TENDERS
(SEE INSTRUCTION 10)
As provided in the Booklet and Instruction 10 to the Letter of Transmittal
and Proxy, NEES will pay to any Soliciting Dealer, as defined in Instruction 10,
a solicitation fee of $.375 per Share for any Shares tendered, accepted for
payment and paid pursuant to the Offer and for any Shares not tendered but voted
in favor of the Proposed Amendment (except that for transactions for beneficial
owners equal to or exceeding 2,500 Shares, NEES will pay a solicitation fee of
$.25 per Share). Solicitation fees payable in transactions for beneficial owners
of 2,500 or more Shares shall be paid 80% to the Dealer Manager and 20% to the
Soliciting Dealers (which may be the Dealer Manager). However, Soliciting
Dealers will not be entitled to a solicitation fee for Shares beneficially owned
by such Soliciting Dealer.
The undersigned represents that the Soliciting Dealer which solicited and
obtained this tender is:
Name of Firm: __________________________________________________________________
(PLEASE PRINT)
Name of Individual Broker or Financial Consultant:______________________________
Telephone Number of Broker or Financial Consultant: ____________________________
Identification Number (if known): ______________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
The following to be completed ONLY if customer's Shares held in nominee
name are tendered. (ATTACH ADDITIONAL LIST IF NECESSARY.)
<TABLE>
__________________________________________________________________________________________________________________
<S> <C>
NAME OF BENEFICIAL OWNER NUMBER OF SHARES TENDERED
__________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________
</TABLE>
The acceptance of compensation by such Soliciting Dealer will constitute a
representation by it that (a) it has complied with the applicable requirements
of the Exchange Act and the applicable rules and regulations thereunder, in
connection with such solicitation; (b) it is entitled to such compensation for
such solicitation under the terms and conditions of the Offer (unless such
solicitation fee is directed to another Soliciting Dealer); (c) in soliciting
tenders of Shares, it has used no soliciting materials other than those
furnished by NEES; and (d) if it is a foreign broker or dealer not eligible for
membership in the National Association of Securities Dealers, Inc. (the NASD),
it has agreed to conform to the NASD's Rules of Fair Practice in making the
solicitations.
The payment of compensation to any Soliciting Dealer is dependent on such
Soliciting Dealer returning a Notice of Solicited Tenders to the Depositary.
(IF SHARES ARE BEING TENDERED AND/OR VOTED, PLEASE ALSO COMPLETE
SUBSTITUTE FORM W-9 BELOW OR A FORM W-8, AS APPLICABLE)
SIGN HERE: _____________________________________________________________________
________________________________________________________________________________
(SIGNATURE(S) OF REGISTERED HOLDER(S))
13
<PAGE> 14
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal and Proxy must be guaranteed by a firm
that is a member of a registered national securities exchange or the NASD, or by
a commercial bank or trust company having an office or correspondent in the
United States which is a participant in an approved Signature Guarantee
Medallion Program (an Eligible Institution). Signatures on this Letter of
Transmittal and Proxy need not be guaranteed (a) if this Letter of Transmittal
and Proxy is signed by the registered holder(s) of the Shares (which term, for
purposes of this document, shall include any participant in one of the
Book-Entry Transfer Facilities whose name appears on a security position listing
as the owner of Shares) tendered herewith and such holder(s) has not completed
the box above under the heading "Special Payment Instructions" or the box above
under the heading "Special Delivery Instructions" on this Letter of Transmittal
and Proxy, (b) if such Shares are tendered for the account of an Eligible
Institution or (c) if this Letter of Transmittal and Proxy is being used solely
for the purpose of voting Shares which are not being tendered pursuant to the
Offer. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND PROXY AND SHARES. This Letter of
Transmittal and Proxy is to be used if (a) certificates are to be forwarded
herewith, (b) delivery of Shares is to be made by book-entry transfer pursuant
to the procedures set forth under the heading Terms of the Offer -- Procedure
for Tendering Shares in the Booklet or (c) Shares are being voted in connection
with the Offer. Certificates for all physically delivered Shares, or a
confirmation of a book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facilities of Shares delivered electronically, as well as a
properly completed and duly executed Letter of Transmittal and Proxy (or
facsimile thereof) and any other documents required by this Letter of
Transmittal and Proxy, must be received by the Depositary at one of its
addresses set forth on the front page of this Letter of Transmittal and Proxy on
or prior to the Expiration Date with respect to all Shares. Preferred
Shareholders who wish to tender their Shares yet who cannot deliver their Shares
and all other required documents to the Depositary on or prior to the Expiration
Date must tender their Shares pursuant to the guaranteed delivery procedure set
forth under the heading Terms of the Offer -- Procedure for Tendering Shares in
the Booklet. Pursuant to such procedure: (i) such tender must be made by or
through an Eligible Institution, (ii) a properly completed and duly executed
Notice of Guaranteed Delivery and Proxy in the form provided by NEES (with any
required signature guarantees) must be received by the Depositary on or prior to
the applicable Expiration Date and (iii) the certificates for all physically
delivered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at one of the Book-Entry Transfer Facilities of all Shares
delivered electronically, as well as a properly completed and duly executed
Letter of Transmittal and Proxy (or facsimile thereof) and any other documents
required by this Letter of Transmittal and Proxy must be received by the
Depositary within three New York Stock Exchange (NYSE) trading days after the
date of execution of such Notice of Guaranteed Delivery and Proxy, all as
provided under the heading Terms of the Offer -- Procedure for Tendering Shares
in the Booklet. A NYSE trading day is any day on which the NYSE is open for
business.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
OPTION AND RISK OF THE TENDERING PREFERRED SHAREHOLDER. IF CERTIFICATES FOR
SHARES ARE SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED.
No alternative, conditional or contingent tenders will be accepted. See
Terms of the Offer -- Number of Shares; Purchase Price; Expiration Date;
Dividends in the Booklet. By executing this Letter of Transmittal and Proxy (or
facsimile thereof), the tendering Preferred Shareholder waives any right to
receive any notice of the acceptance for payment of the Shares.
3. VOTING. PREFERRED SHAREHOLDERS (INCLUDING PREFERRED SHAREHOLDERS WHO
ACQUIRE SHARES SUBSEQUENT TO THE RECORD DATE) WHO WISH TO TENDER THEIR SHARES
PURSUANT TO THE OFFER MUST VOTE IN FAVOR OF THE PROPOSED AMENDMENT TO THE MASS.
ELECTRIC'S PROVISIONS, AS SET FORTH IN THE BOOKLET.
14
<PAGE> 15
THE OFFER IS CONDITIONED UPON THE PROPOSED AMENDMENT BEING APPROVED AND ADOPTED
AT THE SPECIAL MEETING. In addition, Preferred Shareholders have the right to
vote on the Proposed Amendment regardless of whether they tender their Shares by
casting their vote and duly executing the Proxy included in this Letter of
Transmittal and Proxy or by voting in person at the Special Meeting. By
executing a Notice of Guaranteed Delivery and Proxy, a Preferred Shareholder is
deemed to have tendered the Shares described in such Notice of Guaranteed
Delivery and Proxy and to have voted such Shares in accordance with the proxy
contained therein. If no vote is indicated on an otherwise properly executed
proxy contained within this Letter of Transmittal and Proxy (or within a Notice
of Guaranteed Delivery and Proxy), then all Shares in respect of such proxy will
be voted in favor of the Proposed Amendment. See Proposed Amendment and Proxy
Solicitation in the Booklet. The Offer is being sent to all persons in whose
names Shares are registered on the books of Mass. Electric on November 6, 1997
as well as to all persons in whose name Shares are registered on November 12,
1997, which is the Record Date. Preferred Shareholders who purchase or whose
purchase is registered after the Record Date and who wish to tender in the Offer
must arrange with their seller to receive a proxy from the holder of record on
the Record Date of such Shares. Any holder of Shares held of record on the
Record Date in the name of another holder must establish to the satisfaction of
Mass. Electric such holder's entitlement to exercise or transfer such Proxy.
This will ordinarily require an assignment by such record holder in blank, or if
not in blank, to and from each successive transferee, including the holder, with
each signature guaranteed by an Eligible Institution. See Instruction 5. In
order to facilitate receipt of proxies, Shares shall, during the period which
commences November 10, 1997 and which will end at the close of business on the
Expiration Date, trade in the over-the-counter market with a proxy providing the
transferee with the right to vote such acquired shares in the Proxy
Solicitation. No record date is fixed for determining which persons are
permitted to tender Shares. However, only the holders of record, or holders who
acquire an assignment of proxy from such holders, are permitted to vote for the
Proposed Amendment and thereby validly tender Shares pursuant to the Offer. Any
person who is the beneficial owner but not the record holder of Shares must
arrange for the record transfer of such Shares prior to tendering or direct the
record holder to tender on behalf of the beneficial holder.
4. PARTIAL TENDERS. NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY BOOK-
ENTRY TRANSFER. If fewer than all the Shares represented by any certificate
delivered to the Depositary are to be tendered, fill in the number of Shares
that are to be tendered in the box above under the heading "Description of
Shares Tendered." In such case, a new certificate for the remainder of the
Shares represented by the old certificate will be sent to the person(s) signing
this Letter of Transmittal and Proxy, unless otherwise provided in the box above
under the heading "Special Payment Instructions" or "Special Delivery
Instructions," as promptly as practicable following the expiration or
termination of the Offer. All Shares represented by certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL AND PROXY AND NOTICE OF GUARANTEED
DELIVERY AND PROXY; STOCK POWERS AND ENDORSEMENTS. If either this Letter of
Transmittal and Proxy or the Notice of Guaranteed Delivery and Proxy (together,
the Tender and Proxy Documents) is signed by the registered holder(s) of the
Shares tendered hereby, the signature(s) must correspond with the name(s) as
written on the face of the certificates without alteration, enlargement or any
change whatsoever.
If any of the Shares tendered or voted under either Tender and Proxy
Document is held of record by two or more persons, all such persons must sign
such Tender and Proxy Document. If any of the Shares tendered or voted under
either Tender and Proxy Document are registered in different names or different
certificates, it will be necessary to complete, sign and submit as many separate
applicable Tender and Proxy Documents as there are different registrations of
certificates.
If either Tender and Proxy Document is signed by the registered holder(s)
of the Shares tendered hereby, no endorsements of certificates or separate stock
powers are required unless payment of the Purchase Price is to be made to, or
Shares not tendered or not purchased are to be registered in the name of, any
person other than the registered holder(s). Signatures on any such certificates
or stock powers must be guaranteed by an Eligible Institution. See Instruction
1.
15
<PAGE> 16
If this Letter of Transmittal and Proxy is signed by a person other than
the registered holder(s) of the Shares tendered hereby, certificates must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on the certificates
for such Shares. Signature(s) on any such certificates or stock powers must be
guaranteed by an Eligible Institution. See Instruction 1.
If either Tender and Proxy Document or any certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to NEES of the authority of such person so to act must be
submitted.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, NEES
will pay or cause to be paid any stock transfer taxes with respect to the sale
and transfer of any Shares to it or its order pursuant to the Offer. If,
however, payment of the Purchase Price is to be made to, or Shares not tendered
or not purchased are to be registered in the name of, any person other than the
registered holder(s), or if tendered Shares are registered in the name of any
person other than the person(s) signing this Letter of Transmittal and Proxy,
the amount of any stock transfer taxes (whether imposed on the registered
holder(s), such other person or otherwise) payable on account of the transfer to
such person will be deducted from the Purchase Price unless satisfactory
evidence of the payment of such taxes, or exemption therefrom, is submitted.
Each Preferred Shareholder will be responsible for paying any income or gross
receipts taxes imposed by any jurisdiction by reason of the Special Cash Payment
(as defined in the Booklet) and/or the sale of the Shares in the Offer. See
Terms of the Offer -- Acceptance of Shares for Payment and Payment of Purchase
Price and Dividends and Certain U.S. Federal Income Tax Considerations in the
Booklet. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY TO
AFFIX TRANSFER TAX STAMPS TO THE CERTIFICATES REPRESENTING SHARES TENDERED
HEREBY.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
Purchase Price of any Shares purchased is to be issued in the name of, any
Shares not tendered or not purchased are to be returned to, and/or the check for
the Special Cash Payment is to be issued in the name of, a person other than the
person(s) signing this Letter of Transmittal and Proxy or if the check and/or
any certificate for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal and Proxy or
to an address other than that shown in the box above under the heading
"Description of Shares Tendered," then the "Special Payment Instructions" and/or
"Special Delivery Instructions" on this Letter of Transmittal and Proxy should
be completed. Preferred Shareholders tendering Shares by book-entry transfer
will have any Shares not accepted for payment returned by crediting the account
maintained by such Preferred Shareholder at the Book-Entry Transfer Facility
from which such transfer was made.
8. SUBSTITUTE FORM W-9 AND FORM W-8. A tendering and/or voting Preferred
Shareholder is required to provide the Depositary with either a correct Taxpayer
Identification Number (TIN) on Substitute Form W-9, which is provided under
"Important Tax Information" below, or a properly completed Form W-8 unless
exempt therefrom. Failure to provide the information on either Substitute Form
W-9 or Form W-8 may subject the tendering and/or voting Preferred Shareholder to
31% federal income tax backup withholding on the payment of the Purchase Price
for the Shares or on the Special Cash Payment. The tendering and/or voting
Preferred Shareholder may write "Applied For" in Part I of Substitute Form W-9
and sign the "Certificate of Awaiting Taxpayer Identification Number" of
Substitute Form W-9 if the Preferred Shareholder has not been issued a TIN and
has applied for a number or intends to apply for a number in the near future. If
"Applied For" is written in Part I of Substitute Form W-9 and the "Certificate
of Awaiting Taxpayer Identification Number" of Substitute Form W-9 is signed and
the Depositary is not provided with a TIN by the time of payment, the Depositary
will withhold 31% on all payments of the Purchase Price for the Shares or the
Special Cash Payment thereafter until a TIN is provided to the Depositary.
16
<PAGE> 17
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or requests
for assistance may be directed to the Information Agent or the Dealer Manager at
their respective telephone numbers and addresses listed below. Requests for
additional copies of the Booklet, this Letter of Transmittal and Proxy, or other
tender offer materials may be directed to the Information Agent or the Dealer
Manager and such copies will be furnished promptly at NEES' expense. Preferred
Shareholders may also contact their local broker, dealer, commercial bank or
trust company for assistance concerning the Offer.
10. SOLICITED TENDERS. Upon the terms and subject to the conditions of the
Offer this Instruction, NEES will pay to designated brokers and dealers a
solicitation fee of $.375 per Share for any Shares tendered, accepted for
payment, and paid for pursuant to the Offer and for share of Dividend Series
Preferred Stock not tendered by voted in favor on the Proposed Amendment (except
that for transactions for beneficial owners equal to or exceeding 2,500 Shares,
NEES will pay a solicitation fee of $.25 per Share, of which at least eighty
percent (80%) shall be paid to the Dealer Manager and twenty percent (20%) to
the Soliciting Dealer (which may be the Dealer Manager)). With respect to fees
payable pursuant to this paragraph involving transactions for beneficial owners
whose ownership is less than 2,500 Shares, any fees payable hereunder shall be
paid in full to the Dealer Manager unless a Soliciting Dealer is designated (as
described below), in which case such fee shall be payable in full to such
designated Soliciting Dealer (which designated Soliciting Dealer may be the
Dealer Manager). The Letters of Transmittal and Proxy must include the name of
an entity which obtained the tender or proxy and which is either (a) a broker or
dealer in securities, including the Dealer Manager in its capacity as a broker
or dealers, which is a member of any national securities exchange or of the
National Association of Securities Dealers, Inc. (NASD), (b) a foreign broker or
dealer not eligible for membership in the NASD which agrees to conform to the
NASD's Rules of Fair Practice in soliciting tenders outside the United States to
the same extent as though it were an NASD member, or (c) a bank or trust company
(each of which is referred to herein as a Soliciting Dealer). No solicitation
fee shall be payable to a Soliciting Dealer with respect to the tender of Shares
or delivery of a proxy unless the Letter of Transmittal and Proxy accompanying
such tender or delivery of a proxy designates such Soliciting Dealer. No
solicitation fee shall be payable to a Soliciting Dealer in respect of Shares
registered in the name of such Soliciting Dealer unless such Shares are held by
such Soliciting Dealer as nominee and such Shares are being tendered or
delivered for the benefit of one or more beneficial owners identified on the
Letter of Transmittal or on the Notice of Solicited Tenders. No solicitation fee
shall be payable to a Soliciting Dealer if such Soliciting Dealer is required
for any reason to transfer the amount of such fee to a depositing holder (other
than itself). No solicitation fee shall be paid to a Soliciting Dealer with
respect to Shares tendered or delivered for such Soliciting Dealer's own
account. Soliciting Dealers will not be entitled to a solicitation fee for
Shares beneficially owned by such Soliciting Dealer. No broker, dealer, bank,
trust company, or fiduciary shall be deemed to be the agent of NEES, the Power
Company, the Depositary, the Information Agent, or the Dealer Manager for
purposes of the Offer.
Soliciting Dealers will include any of the organizations described in
clauses (a), (b), and (c) above even when the activities of such organizations
in connection with the Offer consist solely of forwarding to clients materials
relating to the Offer, including the Letter of Transmittal, and tendering Shares
or delivering as directed by beneficial owners thereof. No Soliciting Dealer is
required to make any recommendation to holders of Shares as to whether to tender
or refrain from tendering in the Offer. No assumption is made, in making payment
to any Soliciting Dealer, that its activities in connection with the Offer
included any activities other than those described above, and for all purposes
noted in all materials relating to the Offer, the term "solicit" shall be deemed
to mean no more than processing shares tendered or forwarding to customers
materials regarding the Offer.
17
<PAGE> 18
11. IRREGULARITIES. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance of any tender
of Shares will be determined by NEES, in its sole discretion, and its
determination shall be final and binding. NEES reserves the absolute right to
reject any and all tenders of Shares that it determines are not in proper form
or the acceptance for payment of or payment for Shares that may, in the opinion
of NEES' counsel, be unlawful. NEES also reserves the absolute right to waive
any of the conditions to the Offer or any defect or irregularity in any tender
of Shares and NEES' interpretation of the terms and conditions of the Offer
(including these instructions) shall be final and binding. Unless waived, any
defects or irregularities in connection with tenders must be cured within such
time as NEES shall determine. None of NEES, the Dealer Manager, the Depositary,
the Information Agent or any other person shall be under any duty to give notice
of any defect or irregularity in tenders nor shall any of them incur any
liability for failure to give any such notice. Tenders will not be deemed to
have been made until all defects and irregularities have been cured or waived.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate
representing Shares has been lost, destroyed or stolen, the Preferred
Shareholder should promptly notify the Depositary by checking the box above
immediately following the "Special Payment Instructions/Special Delivery
Instructions" and indicating the number of Shares lost, destroyed or stolen. The
Preferred Shareholder will then be instructed as to the procedures that must be
taken in order to replace the certificate. The tender of Shares pursuant to this
Letter of Transmittal and Proxy will not be valid unless on or prior to the
Expiration Date: (a) such procedures have been completed and a replacement
certificate for the Shares has been delivered to the Depositary or (b) a Notice
of Guaranteed Delivery and Proxy has been delivered to the Depositary. See
Instruction 2.
IMPORTANT: THIS LETTER OF TRANSMITTAL AND PROXY (OR A FACSIMILE COPY HEREOF),
DULY EXECUTED, TOGETHER WITH, IF APPLICABLE, CERTIFICATES OR CONFIRMATION OF A
BOOK-ENTRY TRANSFER, AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE
DEPOSITARY, OR, IF APPLICABLE, THE NOTICE OF GUARANTEED DELIVERY AND PROXY MUST
BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE.
18
<PAGE> 19
IMPORTANT TAX INFORMATION
Under Federal income tax law, a Preferred Shareholder whose tendered Shares
are accepted for payment, or who will receive a Special Cash Payment as a result
of voting in favor of the Proposed Amendment, is required to provide the
Depositary (as payer) with either such Preferred Shareholder's correct TIN on
Substitute Form W-9 below or a properly completed Form W-8. If such Preferred
Shareholder is an individual, the TIN is such Preferred Shareholder's social
security number. For businesses and other entities, the number is the Federal
employer identification number. If the Depositary is not provided with the
correct TIN or properly completed Form W-8, the Preferred Shareholder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
(a) payments that are made to such Preferred Shareholder with respect to Shares
purchased pursuant to the Offer or (b) Special Cash Payments made to a Preferred
Shareholder with respect to Shares voted pursuant to the proxy solicitation may
be subject to backup withholding. The Form W-8 can be obtained from the
Depositary. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" below for additional instructions.
If Federal income tax backup withholding applies, the Depositary is
required to withhold 31% of any payments made to the Preferred Shareholder.
Backup withholding is not an additional tax. Rather, the Federal income tax
liability of persons subject to backup withholding will be reduced by the amount
of the tax withheld. If withholding results in an overpayment of taxes, a refund
may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9 AND FORM W-8
To avoid backup withholding on payments that are made to a Preferred
Shareholder with respect to Shares purchased pursuant to the Offer or on Special
Cash Payments, the Preferred Shareholder is required to notify the Depositary of
his or her correct TIN by completing the Substitute Form W-9 below certifying
that the TIN provided on Substitute Form W-9 is correct and that (a) the
Preferred Shareholder has not been notified by the Internal Revenue Service that
he or she is subject to Federal income tax backup withholding as a result of
failure to report all interest or dividends or (b) the Internal Revenue Service
has notified the Preferred Shareholder that he or she is no longer subject to
Federal income tax backup withholding. Foreign Preferred Shareholders must
submit a properly completed Form W-8 in order to avoid the applicable backup
withholding; provided, however, that backup withholding will not apply to
foreign Preferred Shareholders subject to 30% (or lower treaty rate) withholding
on gross payments received pursuant to the Offer or on the Special Cash
Payments.
WHAT NUMBER TO GIVE THE DEPOSITARY
The Preferred Shareholder is required to give the Depositary the social
security number or employer identification number of the registered owner of the
Shares. If the Shares are in more than one name or are not in the name of the
actual owner, consult the "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" below for additional guidance on
which number to report.
19
<PAGE> 20
SEE "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9" FOR ADDITIONAL INSTRUCTIONS.
SUBSTITUTE
FORM W-9
<TABLE>
- ----------------------------------------------------------------------------------------------
PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY, AS DEPOSITARY
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE
FORM W-9 BOX AT RIGHT AND CERTIFY BY SIGNING AND -----------------------
DATING BELOW. Social Security Number
---------------------------------------- or Employer
PAYER'S REQUEST FOR Identification
TAXPAYER IDENTIFICATION NAME (Please Print) Number
NUMBER (TIN) (If Awaiting TIN write
"Applied for")
---------------------------------------- -----------------------
ADDRESS PART II -- For Payees
NOT subject to backup
withholding, see the
---------------------------------------- "Guidelines for Cer-
CITY STATE ZIP CODE tification of Taxpayer
Identification Number
on Substitute Form
DEPARTMENT OF THE TREASURY W-9" and complete as
INTERNAL REVENUE SERVICE instructed therein
---------------------------------------------------------------------------------------------
PART III -- CERTIFICATION: -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number (or I am waiting
for a number to be issued to me), and
(2) I am not subject to backup withholding either because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service (IRS) that I
am subject to backup withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding.
SIGNATURE DATE , 1997
----------------------------------- ------------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have
been notified by the IRS that you are currently subject to backup withholding
because of underreporting interest or dividends on your tax return. However,
if after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS that you are no longer subject
to backup withholding do not cross out item (2). Also see instructions in the
enclosed Guidelines.
---------------------------------------------------------------------------------------------
</TABLE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WRITE "APPLIED FOR"
IN PART I OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver such an application in the near future. I
understand that if I do not provide a taxpayer identification number within
sixty (60) days, 31% of all reportable payments made to me thereafter will be
withheld until I provide a number.
-------------------------------- -----------------------------------, 1997
SIGNATURE DATE
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE "GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9"
FOR ADDITIONAL DETAILS.
20
<PAGE> 21
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE.
PURPOSE OF FORM. A person who is required to file an information return
with the IRS must obtain your correct taxpayer identification number (TIN) to
report income paid to you, real estate transactions, mortgage interest you paid,
the acquisition or abandonment of secured property, or contributions you made to
an IRA. Use Form W-9 to furnish your correct TIN to the requester (the person
asking you to furnish your TIN) and, when applicable, (1) to certify that the
TIN you are furnishing is correct (or that you are waiting for a number to be
issued), (2) to certify that you are not subject to backup withholding, and (3)
to claim exemption from backup withholding if you are an exempt payee.
Furnishing your correct TIN and making the appropriate certifications will
prevent certain payments from being subject to backup withholding.
NOTE: IF A REQUESTER GIVES YOU A FORM OTHER THAN W-9 TO REQUEST YOUR TIN,
YOU MUST USE THE REQUESTER'S FORM.
HOW TO OBTAIN A TIN. If you do not have a TIN, apply for one immediately.
To apply, get Form SS-5, Application for a Social Security Card (for
Individuals), from your local office of the Social Security Administration, or
Form SS-4, Application for Employer Identification Number (for businesses and
all other entities), from your local IRS office.
To complete Form W-9 if you do not have a TIN, write "Applied for" in the
space for the TIN in Part 1, sign and date the form, and give it to the
requester. Generally, you will than have 60 days to obtain a TIN and furnish it
to the requester. If the requester does not receive your TIN within 60 days,
backup withholding, if applicable, will begin and continue until you furnish
your TIN to the requester. For reportable interest or dividend payments, the
payor must exercise one of the following options concerning backup withholding
during this 60-day period. Under option (1), a payor must backup withhold on any
withdrawals you make from your account after 7 business days after the requester
receives this form back from you. Under option (2), the payor must backup
withhold on any reportable interest or dividend payments made to your account,
regardless of whether you make any withdrawals. The backup withholding under
option (2) must begin no later than 7 business days after the requester receives
this form back. Under option (2), the payor is required to refund the amounts
withheld if your certified TIN is received within the 60-day period and you were
not subject to backup withholding during that period.
NOTE: WRITING "APPLIED FOR" ON THE FORM MEANS THAT YOU HAVE ALREADY APPLIED
FOR A TIN OR THAT YOU INTEND TO APPLY FOR ONE IN THE NEAR FUTURE.
As soon as you receive your TIN, complete another Form W-9, include your
TIN, sign and date the form, and give it to the requester.
WHAT IS BACKUP WITHHOLDING? -- Persons making certain payments to you must
withhold and pay to the IRS 31% of such payments under certain conditions. This
is called "backup withholding." Payments that could be subject to backup
withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee compensation, and certain payments
from fishing boat operators, but do not include real estate transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
(1) You do not furnish your TIN to the requester, or
(2) The IRS notifies the requester that you furnished an incorrect TIN, or
(3) You are notified by the IRS that you are subject to withholding because
you failed to report all your interest and dividends on your tax return (for
reportable interest and dividends only), or
(4) You do not certify to the requester that you are not subject to backup
withholding under 3 above, (for reportable interest and dividend accounts opened
after 1983 only), or
(5) You do not certify your TIN.
Except as explained in 5 above, other reportable payments are subject to
backup withholding only if 1 or 2 above applies. Certain payees and payments are
exempt from backup withholding and information reporting. See Payees and
Payments Exempt From Backup Withholding, below, and Exempt Payees and Payments
under Signing the Certification, below if you are an exempt payee.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING. The following is a list
of payees exempt from backup withholding and for which no information reporting
is required. For interest and dividends, all listed payees are exempt except as
listed in item (9). For broker transactions, payees listed in items (1) through
(13) and a person registered under the Investment Advisers Act of 1940 who
regularly acts as a broker are exempt. Payments subject to reporting under
sections 6041 and 6041A are generally exempt from backup withholding only if
made to payees described in items (1) through (7), except a corporation that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (2) through (6) are
21
<PAGE> 22
exempt from backup withholding for barter exchange transactions and patronage
dividends.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), an IRA, or a
custodial account under section 402(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporation Secretaries,
Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividend and patronage dividends generally not subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
- Section 404(k) payments made by an ESOP.
Payments of interest generally not subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: YOU MAY BE SUBJECT TO BACKUP WITHHOLDING IF THIS INTEREST IS $600 OR
MORE AND IS PAID IN THE COURSE OF THE PAYER'S TRADE OR BUSINESS AND YOU HAVE NOT
PROVIDED YOUR CORRECT TIN TO THE PAYER.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid to you.
Other types of payments generally not subject to backup withholding include:
- Wages.
- Distributions from a pension, annuity, profit-sharing or stock bonus plan,
or an IRA.
- Distributions from an owner-employee plan.
- Certain surrenders of life insurance contracts.
- Gambling winnings, if withholding is required under section 3402(q).
However, if withholding is not required under section 3402(q), backup
withholding applies if the payee fails to furnish a TIN.
- Real estate transactions reportable under section 6045.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045,
6049, 6050A, and 6050N, and the regulations under those sections.
PENALTIES
FAILURE TO FURNISH TIN. If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
MISUSE OF TINS. If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
SPECIFIC INSTRUCTIONS
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
22
<PAGE> 23
NAME -- If you are an individual, you must generally provide the name shown
on your social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security Administration
of the name change, please enter your first name, the last name shown on your
social security card, and your new last name.
NUMBER -- If you are a sole proprietor, you must furnish your individual
name and either your SSN or EIN. You may also enter your business name or "doing
business as" name on the business name line. Enter your name(s) as shown on your
social security card and/or as it was used to apply for your EIN on Form SS-4.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
SIGNING THE "PART III -- CERTIFICATION" ON THE SUBSTITUTE FORM W-9
(1) INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984 AND
BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983 -- You are required to furnish
your correct TIN, but you are not required to sign the certification.
(2) INTEREST, DIVIDEND, BROKER, AND BARTER EXCHANGE ACCOUNTS OPENED AFTER
1983 AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983 -- You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out item 2 in the certification before signing the form.
(3) REAL ESTATE TRANSACTIONS. You must sign the certification. You may
cross out item 2 of the certification.
(4) OTHER PAYMENTS. You are required to furnish your correct TIN, but you
are not required to sign the certification unless you have been notified that
you have previously given an incorrect TIN. Other payments include payments made
in the course of the requester's trade or business for rents, royalties, goods
(other than bills for merchandise), medical and health care services (including
payments to corporations), payments to a nonemployee for services (including
attorney and accounting fees), and payments to certain fishing boat crew
members.
(5) MORTGAGE INTEREST PAID BY YOU, ACQUISITION OR ABANDONMENT OF SECURED
PROPERTY, OR IRA CONTRIBUTIONS. You are required to furnish your correct TIN,
but you are not required to sign the certification.
(6) EXEMPT PAYEES AND PAYMENTS. If you are exempt from backup withholding,
you should complete this form to avoid possible erroneous backup withholding.
Enter your correct TIN in Part I, write "EXEMPT" in the block in Part II, and
sign and date the form. If you are a nonresident alien or foreign entity not
subject to backup withholding, give the requester a complete Form W-8,
Certificate of Foreign Status.
(7) TIN "APPLIED FOR." Follow the instructions under How To Obtain a TIN, on
page 1, and sign and date this form.
SIGNATURE: For a joint account, only the person whose TIN is shown in Part 1
should sign.
PRIVACY ACT NOTICE: Section 6109 requires you to furnish your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property, or contributions you made to an
IRA. The IRS uses the numbers for identification purposes and to help verify the
accuracy of your tax return. You must provide your TIN whether or not you are
required to file a tax return. Payers must generally withhold 31% of taxable
interest, dividends, and certain other payments to a payee who does not furnish
a TIN to a payor. Certain penalties may also apply.
23
<PAGE> 24
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
<TABLE>
<CAPTION>
- --------------------------------------------------- ---------------------------------------------------
For this type of account: Give name and SSN of: For this type of account: Give name and SSN of:
- --------------------------------------------------- ---------------------------------------------------
<C> <S> <C> <C> <C> <C>
1. Individual The individual 6. A valid trust, estate, Legal entity(4)
2. Two or more The actual owner of or pension trust
individuals (joint the account or, if 7. Corporate The corporation
account) combined funds, the 8. Association, club, The organization
first individual on religious, charitable,
the account(1) educational, or other
3. Custodian account of a The minor(2) tax-exempt
minor (Uniform Gift to organization
Minors Act) 9. Partnership The partnership
4. a. The usual revocable The grantor-trustee(1) 10. A broker or registered The broker or nominee
savings trust nominee
(grantor is also 11. Account with the The public entity.
trustee) Department of
b. So-called trust The actual owner(1) Agriculture in the
account that is not name of a public
a legal or valid entity (such as a
trust under state state or local
law government, school
5. Sole proprietorship The owner(3) district, or prison)
that receives
agricultural program
payments.
- --------------------------------------------------- --------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's SSN.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your SSN or EIN.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless the
legal entity itself is not designated in the account title.)
NOTE: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
24
<PAGE> 25
Any questions or requests for assistance or additional copies of the
Booklet, this Letter of Transmittal and Proxy, the Notice of Guaranteed Delivery
and Proxy or other materials may be directed to the Information Agent at the
address and telephone number set forth below.
THE INFORMATION AGENT:
[GEORGESON & COMPANY INC. LOGO]
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
(800) 223-2064 (CALL TOLL-FREE)
BANKS AND BROKERS CALL COLLECT:
(212) 440-9918
Preferred Shareholders may contact the Dealer Manager at its address and
telephone number set forth below with any questions regarding the terms of the
Offer and solicitation of proxies. In addition, Preferred Shareholders may also
contact their broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Offer and solicitation of proxies.
THE DEALER MANAGER:
MERRILL LYNCH & CO.
WORLD FINANCIAL CENTER
250 VESEY STREET
NEW YORK, NEW YORK 10281
(888) ML4-TNDR (TOLL-FREE)
(888) 654-8637 (TOLL-FREE)
<PAGE> 1
OFFER TO PURCHASE AND PROXY STATEMENT
LOGO
NEW ENGLAND ELECTRIC SYSTEM
OFFER TO PURCHASE FOR CASH
ANY AND ALL OUTSTANDING SHARES OF THE FOLLOWING SERIES OF PREFERRED STOCK OF
THE NARRAGANSETT ELECTRIC COMPANY
180,000 SHARES, PREFERRED STOCK, 4.50% SERIES AT A PURCHASE PRICE OF $ . PER
SHARE CUSIP NUMBER 631005 20 4
150,000 SHARES, PREFERRED STOCK, 4.64% SERIES AT A PURCHASE PRICE OF $ . PER
SHARE CUSIP NUMBER 631005 30 3
400,000 SHARES, PREFERRED STOCK, 6.95% SERIES AT A PURCHASE PRICE OF $ . PER
SHARE CUSIP NUMBER 631005 50 1
------------------------
THE NARRAGANSETT ELECTRIC COMPANY
PROXY STATEMENT
280 MELROSE STREET, PROVIDENCE, RHODE ISLAND 02901
SPECIAL MEETING OF STOCKHOLDERS
DECEMBER 12, 1997
------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD
TIME, ON FRIDAY, DECEMBER 12, 1997, UNLESS THE OFFER IS EXTENDED.
------------------------
New England Electric System, a Massachusetts voluntary association (NEES),
invites the holders of each series of Preferred Stock listed above (each a
Series of Preferred or a Series, and each holder thereof a Preferred
Shareholder) of The Narragansett Electric Company, a Rhode Island corporation
and direct utility subsidiary of NEES (Narragansett or the Company), to tender
any and all of their shares of a Series of Preferred (the Shares) for purchase
at the purchase price per Share listed above, plus accrued dividends, net to the
seller in cash, upon the terms and subject to the conditions set forth in this
Offer to Purchase and Proxy Statement (the Booklet) and in the accompanying
Letter of Transmittal and Proxy (which together constitute the Offer). NEES will
purchase all Shares validly tendered and not withdrawn, upon the terms and
subject to the conditions of the Offer. See Terms of the Offer -- Certain
Conditions of the Offer and Terms of the Offer -- Extension of Tender Period;
Termination; Amendments.
THE OFFER FOR A SERIES OF PREFERRED IS NOT CONDITIONED UPON ANY MINIMUM
NUMBER OF SHARES OF ANY SERIES BEING TENDERED AND EACH IS INDEPENDENT OF THE
OFFER FOR ANY OTHER SERIES OF PREFERRED. THE OFFER, HOWEVER, IS CONDITIONED
UPON, AMONG OTHER THINGS, THE APPROVAL AND ADOPTION OF THE PROPOSED AMENDMENT,
AS DESCRIBED BELOW, AT THE SPECIAL MEETING OF SHAREHOLDERS. SEE TERMS OF THE
OFFER -- CERTAIN CONDITIONS OF THE OFFER.
Concurrently with the Offer, the Board of Directors of Narragansett is
soliciting proxies from the Preferred Shareholders for use at the Special
Meeting of Shareholders of Narragansett to be held at Narragansett's principal
office, 280 Melrose Street, Providence, Rhode Island, on December 12, 1997 at
4:30 p.m. Eastern Standard Time, or any adjournment or postponement of such
meeting (the Special Meeting). The Special Meeting is being held to consider an
amendment (the Proposed Amendment) to Narragansett's Preferred Stock Provisions
(the Provisions) which would remove from the Provisions a limitation on
Narragansett's ability to issue unsecured debt without the prior approval of the
Preferred Shareholders. PREFERRED SHAREHOLDERS WHO WISH TO TENDER THEIR SHARES
PURSUANT TO THE OFFER MUST VOTE IN FAVOR OF THE PROPOSED AMENDMENT. THE OFFER IS
FURTHER CONDITIONED UPON THE APPROVAL AND ADOPTION OF THE PROPOSED AMENDMENT AT
THE SPECIAL MEETING. IF THE PROPOSED AMENDMENT IS APPROVED AND ADOPTED BY
NARRAGANSETT'S PREFERRED SHAREHOLDERS, NARRAGANSETT WILL MAKE A SPECIAL CASH
PAYMENT (AS DEFINED HEREIN) IN THE AMOUNT OF $.50 PER SHARE TO EACH PREFERRED
SHAREHOLDER WHO VOTED IN FAVOR OF THE PROPOSED AMENDMENT, BUT DID NOT TENDER
SUCH SHARES PURSUANT TO THE OFFER. THOSE SHAREHOLDERS WHO VALIDLY TENDER THEIR
SHARES WILL BE ENTITLE ONLY TO THE PURCHASE PRICE PER SHARE LISTED ABOVE BUT NOT
THE SPECIAL CASH PAYMENT.
------------------------
NARRAGANSETT'S BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE PROPOSED
AMENDMENTS.
------------------------
This Booklet is first being mailed to Preferred Shareholders on or about
November 7, 1997.
------------------------
The Company will pay to a Soliciting Dealer (as defined herein) a
solicitation fee for any Shares tendered, accepted for payment, and paid for
pursuant to the Offer and for each Share not tendered but voted in favor of the
Proposed Amendment, subject to certain conditions. See Fees and Expenses Paid to
Dealers.
------------------------
NEITHER NEES, NARRAGANSETT, THEIR RESPECTIVE BOARDS OF DIRECTORS, ANY OF
THEIR RESPECTIVE OFFICERS, NOR ANY OTHER PERSON AUTHORIZED BY THEM MAKES ANY
RECOMMENDATION TO ANY PREFERRED SHAREHOLDER AS TO WHETHER TO TENDER ANY OR ALL
SHARES. EACH PREFERRED SHAREHOLDER MUST MAKE HIS OR HER OWN DECISION AS TO
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
------------------------
Each Series of Preferred is traded in the over-the-counter market (the OTC)
and is not listed on any national securities exchange. Through October 31,
1997, the last reported sales prices for the 4.50% Series, the 4.64% Series, and
the 6.95% Series were $32.75, $35.375, and $51.375, respectively, as reported by
the Nasdaq Stock Market, Inc. Preferred Shareholders are urged to obtain a
current market quotation, if available, for their Shares.
------------------------
Questions or requests for assistance may be directed to Georgeson & Company,
Inc. (Georgeson or the Information Agent) or to Merrill Lynch & Co. (Merrill
Lynch or the Dealer Manager) at their respective telephone numbers and addresses
set forth on the back cover of this Booklet. Requests for additional copies of
this Booklet, the Letter of Transmittal and Proxy, or other tender offer or
proxy materials may be directed to the Information Agent, and such copies will
be furnished promptly at Narragansett's expense. Preferred Shareholders may also
contact their local broker, dealer, commercial bank, or trust company for
assistance concerning the Offer.
------------------------
The Dealer Manager for the Offer is:
MERRILL LYNCH & CO.
November 6, 1997
<PAGE> 2
IMPORTANT
Any Preferred Shareholder desiring to accept the Offer and tender any or
all Shares should, on or prior to the Expiration Date (as defined below), either
(i) request such Preferred Shareholder's broker, dealer, commercial bank, trust
company, or other nominee to effect the transaction for such Preferred
Shareholder pursuant to the procedure for book-entry transfer set forth below
under Terms of the Offer -- Procedure for Tendering Shares, or (ii) complete and
sign the Letter of Transmittal and Proxy in accordance with the instructions in
the Letter of Transmittal and Proxy, and mail or deliver it, the certificates
for such Shares, and any other required documents to IBJ Schroder Bank & Trust
Company (the Depositary). A Preferred Shareholder whose Shares are registered in
the name of a broker, dealer, commercial bank, trust company, or other nominee
must contact such broker, dealer, commercial bank, trust company, or other
nominee if such Preferred Shareholder desires to tender such Shares. Any
Preferred Shareholder who desires to tender Shares and whose certificates for
such Shares are not immediately available, or who cannot comply in a timely
manner with the procedure for book-entry transfer, should tender such Shares by
following the procedures for guaranteed delivery set forth below under Terms of
the Offer -- Procedure for Tendering Shares -- Guaranteed Delivery Procedure.
EACH SERIES OF PREFERRED HAS ITS OWN LETTER OF TRANSMITTAL AND PROXY, AND
ONLY THE APPLICABLE LETTER OF TRANSMITTAL AND PROXY FOR SUCH SERIES OF PREFERRED
OR A NOTICE OF GUARANTEED DELIVERY MAY BE USED TO TENDER SHARES OF SUCH SERIES
OF PREFERRED.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE RELATED LETTER OF TRANSMITTAL AND PROXY. IF GIVEN OR MADE, SUCH
RECOMMENDATION AND SUCH INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY NEES OR NARRAGANSETT.
2
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY............................................................................... 4
PURPOSE OF THE OFFER, PROPOSED AMENDMENT, AND PROXY SOLICITATION...................... 7
Purpose of the Offer................................................................ 7
Proposed Amendment.................................................................. 7
TERMS OF THE OFFER.................................................................... 7
Number of Shares; Purchase Prices; Expiration Date; Dividends....................... 7
Procedure for Tendering Shares...................................................... 8
Withdrawal Rights................................................................... 10
Acceptance of Shares for Payment and Payment of Purchase Price and Dividends........ 10
Certain Conditions of the Offer..................................................... 11
Extension of Tender Period; Termination; Amendments................................. 13
Certain Effects of the Offer........................................................ 13
Other Information................................................................... 15
PROPOSED AMENDMENT AND PROXY SOLICITATION............................................. 16
Notice of Special Meeting of Stockholders........................................... 16
Special Meeting..................................................................... 17
Proxies............................................................................. 17
Relationship to the Offer; Special Cash Payments.................................... 17
Voting Securities, Rights and Procedures............................................ 17
Security Ownership of Certain Beneficial Owners and Management...................... 18
DESCRIPTION OF THE PROPOSED AMENDMENT................................................. 19
Explanation of the Proposed Amendment............................................... 19
Reasons for the Proposed Amendment.................................................. 19
Recommendation of Board of Directors................................................ 20
Certain Effects of the Proposed Amendment........................................... 20
Other Matters....................................................................... 20
PRICE RANGE OF SHARES; DIVIDENDS...................................................... 21
DIVIDENDS AND PRICE RANGES OF PREFERRED STOCK......................................... 21
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS........................................ 21
Tax Considerations for Tendering Preferred Shareholders............................. 22
Tax Considerations for Non-Tendering Preferred Shareholders......................... 23
Tax Considerations of Accrued and Unpaid Dividends Payment.......................... 23
Tax Considerations of Special Cash Payment.......................................... 23
Backup Withholding.................................................................. 23
SOURCE AND AMOUNT OF FUNDS............................................................ 24
TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES..................................... 24
FEES AND EXPENSES PAID TO DEALERS..................................................... 24
Dealer Manager Fees................................................................. 24
Solicited Tender Fees............................................................... 25
Stock Transfer Taxes................................................................ 25
SUMMARY OF FINANCIAL INFORMATION...................................................... 26
CERTAIN INFORMATION REGARDING NEES AND NARRAGANSETT; INCORPORATION BY REFERENCE....... 26
MISCELLANEOUS......................................................................... 28
</TABLE>
3
<PAGE> 4
SUMMARY
The following summary is provided solely for the convenience of the
Preferred Shareholders. This summary is not intended to be complete and is
qualified in its entirety by reference to the full text and more specific
details contained in this Booklet and the Letter of Transmittal and Proxy and
any amendments hereto or thereto. Preferred Shareholders are urged to read these
documents in their entirety. Each of the capitalized terms used in this summary
and not defined herein has the meaning set forth elsewhere in this Booklet.
The Companies.............. NEES, 25 Research Drive, Westborough, Massachusetts
01582, is a registered holding company under the
Public Utility Holding Company Act of 1935, as
amended (the Holding Company Act), which owns,
directly or indirectly, all of the outstanding
common stock of its electric utility subsidiaries,
including Narragansett. The service area of NEES'
electric utility subsidiaries covers portions of
Massachusetts, New Hampshire, and Rhode Island. The
name "New England Electric System" means the
trustee or trustees for the time being (as trustee
or trustees but not personally) under an agreement
and declaration of trust dated January 2, 1926, as
amended, which is hereby referred to, and a copy of
which as amended has been filed with the Secretary
of the Commonwealth of Massachusetts. Any
agreement, obligation or liability made, entered
into or incurred by or on behalf of New England
Electric System binds only its trust estate, and no
shareholder, director, trustee, officer or agent
thereof assumes or shall be held to any liability
therefor.
Narragansett, 280 Melrose Street, Providence, Rhode
Island, is an electric utility incorporated and
doing business solely in Rhode Island. Its business
is the distribution and sale of electricity at
retail. Electric service is provided to
approximately 330,000 customers in 27 cities and
towns having a population of approximately 725,000.
The Shares................. 4.50% Series Preferred Stock, $50 par value,
CUSIP Number 631005 20 4
4.64% Series Preferred Stock, $50 par value,
CUSIP Number 631005 30 3
6.95% Series Preferred Stock, $50 par value,
CUSIP Number 631005 50 1
The Offer and Purchase
Price...................... Offer to purchase any or all shares of each Series
of Preferred listed below at the price set forth
below.
$ . for 4.50% Series
$ . for 4.64% Series
$ . for 6.95% Series
Dividends.................. NEES will pay to tendering Preferred Shareholders
any accrued dividends through the Expiration Date
(as defined herein).
Independent Offer.......... The Offer for a series of Preferred is not
conditioned upon any minimum number of Shares of
any Series being tendered and each is independent
of the Offer for any other series of Preferred. The
Offer, however, is conditioned upon, among other
things, the approval and adoption of the Proposed
Amendment, as described below, at the Special
Meeting. See Terms of the Offer -- Certain
Conditions of the Offer. It is a condition of the
Offer that Preferred Shareholders who tender their
Shares must vote in favor of the Proposed
Amendment. NEES will not be required to accept or
pay for tendered Shares if the Proposed Amendment
is not approved and unless certain other conditions
are met.
4
<PAGE> 5
Expiration Date of the
Offer...................... The Offer expires at 5:00 p.m., Eastern Standard
Time, on, December 12, 1997, unless extended (the
Expiration Date).
How to Tender Shares....... See Terms of the Offer -- Procedure for Tendering
Shares. For further information, call the
Information Agent or the Dealer Manager or consult
your broker for assistance.
Withdrawal Rights.......... Tendered Shares of any Series of Preferred may be
withdrawn at any time until the Expiration Date
with respect to such Series of Preferred and,
unless previously accepted for payment, may also be
withdrawn after January 12, 1998. See Terms of the
Offer -- Withdrawal Rights. A withdrawal of a
tender does not in and of itself revoke a proxy.
Purpose of the Offer....... NEES is making the Offer because NEES believes that
the purchase of Shares is economically attractive
to Narragansett and indirectly to NEES and its
shareholders. In addition, the Offer gives
Preferred Shareholders the opportunity to sell
their Shares at a price which NEES believes to be a
premium over the market price and without the usual
transaction costs associated with a market sale.
See Purpose of the Offer, Proposed Amendment, and
Proxy Solicitation -- Purpose of the Offer and
Terms of the Offer -- Certain Effects of the Offer.
Brokerage Commissions...... Not payable by Preferred Shareholders.
Solicitation Fee........... NEES will pay to each designated Soliciting Dealer
(as defined herein) a solicitation fee of $.75 per
Share for any Shares tendered, accepted for
payment, and paid for pursuant to the Offer and for
each Share not tendered but voted in favor of the
Proposed Amendment (except that for transactions
for beneficial owners equal to or exceeding 2,500
Shares of all Series of Preferred combined, NEES
will pay a solicitation fee of $.50 per Share of
which at least eighty percent (80%) shall be paid
to the Dealer Manager). A Soliciting Dealer will
not be entitled to a solicitation fee for Shares
beneficially owned by such Soliciting Dealer. See
Fees and Expenses Paid to Dealers -- Solicited
Tender Fees.
Proposed Amendment......... Concurrently with the Offer, the Board of Directors
of Narragansett is soliciting proxies from the
Preferred Shareholders for use at the Special
Meeting of Shareholders of Narragansett. The
Special Meeting is being held to consider the
Proposed Amendment to Narragansett's Provisions
which would remove a provision that limits
Narragansett's ability to issue unsecured debt. If
the Proposed Amendment is approved by the Preferred
Shareholders, Narragansett's ability to issue or
assume unsecured indebtedness will no longer be
subject to approval of any Shares that remain
outstanding after the consummation of the Offer.
See Purpose of the Offer, Proposed Amendment, and
Proxy Solicitation -- Purpose of the Offer and
Proposed Amendment and Proxy Solicitation --
Certain Effects of the Proposed Amendment.
Record Date................ November 12, 1997
Special Cash Payment....... Preferred Shareholders of record as of the Record
Date who do not tender their Shares have the right
to vote for or against the Proposed Amendment. If
the Proposed Amendment is approved and adopted by
Narragansett's Preferred Shareholders, Narragansett
will make a Special Cash Payment of $.50 per Share
to each Preferred Shareholder who voted in favor of
the Proposed Amendment but who did not tender such
Shares (the Special Cash Payment). Preferred
Shareholders who validly
5
<PAGE> 6
tender their Shares will be entitled only to the
purchase price per Share listed on the front cover
of this Booklet plus an amount in cash equivalent
to any dividends accrued through the Expiration
Date (as defined herein).
Stock Transfer Tax......... Except as described herein, NEES will pay or cause
to be paid any stock transfer taxes with respect to
the sale and transfer of any Shares to it or its
order pursuant to the Offer. See Instruction 6 of
the applicable Letter of Transmittal and Proxy. See
Terms of the Offer -- Acceptance of Shares for
Payment and Payment of Purchase Price and
Dividends.
Payment Date............... Promptly after the Expiration Date or any extension
thereof.
Further Information........ Additional copies of this Booklet and the
applicable Letter of Transmittal and Proxy may be
obtained by contacting Georgeson, Wall Street
Plaza, New York, New York 10005, telephone (800)
223-2064 (toll-free) and (212) 440-9800 (banks and
brokers). Questions about the Offer should be
directed to Merrill Lynch at (888) ML4-TNDR (toll-
free) ((888)-654-8637 (toll-free)).
6
<PAGE> 7
PURPOSE OF THE OFFER, PROPOSED AMENDMENT,
AND PROXY SOLICITATION
The Offer and the Proposed Amendment constitute an integrated strategic
response by NEES and Narragansett to the need to achieve greater flexibility in
their financing.
PURPOSE OF THE OFFER
NEES believes that the purchase of the Shares at this time in conjunction
with the Proposed Amendment represents an attractive economic opportunity that
will benefit NEES, its shareholders, Narragansett, and Narragansett's utility
customers by (1) contributing to the elimination of the provisions concerning
unsecured indebtedness and (2) retiring of outstanding Shares of Narragansett's
Preferred Stock in contemplation of their potential replacement with
comparatively less expensive financing alternatives.
In addition, the Offer gives Preferred Shareholders the opportunity to sell
their Shares at a price which NEES believes to be a premium to the market price
on the date of the announcement of the Offer and without the usual transaction
costs associated with such a sale.
PROPOSED AMENDMENT
In order to increase its financial flexibility and to better face the
challenges of a competitive electric industry, and as discussed further under
Proposed Amendment and Proxy Solicitation -- Reasons for the Proposed Amendment,
Narragansett seeks to amend the Provisions to eliminate the limitation on the
Company's ability to issue unsecured debt without the approval of the holders of
a majority of the Preferred, voting together as a single class.
TERMS OF THE OFFER
NUMBER OF SHARES; PURCHASE PRICES; EXPIRATION DATE; DIVIDENDS
Upon the terms and subject to the conditions described herein and in the
applicable Letter of Transmittal and Proxy, NEES will purchase any and all
Shares that are validly tendered on or prior to the applicable Expiration Date
(and not properly withdrawn in accordance with the procedures set forth under
Withdrawal Rights) at the purchase price per Share listed on the front cover of
this Booklet for the Shares tendered, plus accrued dividends for the Shares
tendered through the Expiration Date, net to the seller in cash. See Certain
Conditions of the Offer and Extension of Tender Period; Termination; Amendments.
THE OFFER FOR A SERIES OF PREFERRED IS NOT CONDITIONED UPON ANY MINIMUM
NUMBER OF SHARES OF SUCH SERIES BEING TENDERED AND IS INDEPENDENT OF THE OFFER
FOR ANY OTHER SERIES. THE OFFER, HOWEVER, IS CONDITIONED UPON, AMONG OTHER
THINGS, APPROVAL AND ADOPTION OF THE PROPOSED AMENDMENT, AS DESCRIBED HEREIN, AT
THE SPECIAL MEETING. SEE CERTAIN CONDITIONS OF THE OFFER.
The Offer is being sent to all persons in whose names Preferred Shares are
registered on the books of Narragansett as of the close of business on November
3, 1997, as well as to all persons in whose names Shares are registered on
November 12, 1997, the Record Date. Only a record holder of Shares on the Record
Date (as defined herein) may vote in person or by proxy at the Special Meeting.
No record date is fixed for determining which persons are permitted to tender
Shares. Any person who is the beneficial owner but not the record holder of
Shares on the Record Date must arrange for the record transfer of such Shares
prior to tendering. The Shares will trade "with proxy" during the period which
begins two days prior to the Record Date and which will end at the close of
business on the Expiration Date, as further discussed under Proposed Amendment
and Proxy Solicitation -- Voting Securities, Rights and Procedures.
With respect to each Series, the Expiration Date is the later of 5:00 p.m.,
Eastern Standard Time, on Friday, December 12, 1997 or the latest time and date
to which the Offer with respect to such series of
7
<PAGE> 8
Preferred is extended. NEES expressly reserves the right, in its sole
discretion, and at any time and/or from time to time, to extend the period of
time during which the Offer for any Series is open, by giving oral or written
notice of such extension to the Depositary and making a public announcement
thereof, without extending the period of time during which the Offer for any
other Series is open. There is no assurance whatsoever that NEES will exercise
its right to extend the Offer for any Series. If NEES decides, in its sole
discretion, to (i) decrease the number of Shares of any Series being sought,
(ii) increase or decrease the consideration offered in the Offer to holders of
any Series, or (iii) increase or decrease the Soliciting Dealers' fees and, at
the time that notice of such increase or decrease is first published, sent, or
given to holders of such Series in the manner specified herein, the Offer for
such Series is scheduled to expire at any time earlier than the tenth business
day from the date that such notice is first so published, sent, or given, such
Offer will be extended until the expiration of such ten-business-day period. For
purposes of the Offer, a business day means any day other than a Saturday,
Sunday, or Federal holiday and consists of the time period from 12:01 a.m.
through 12:00 midnight, Eastern Standard Time.
NO ALTERNATIVE, CONDITIONAL, OR CONTINGENT TENDERS WILL BE ACCEPTED.
NEES will pay to tendering Preferred Shareholders any accrued dividends
through the Expiration Date.
PROCEDURE FOR TENDERING SHARES
To tender Shares of any Series of Preferred pursuant to the Offer, the
tendering owner of Shares must either:
(a) send to the Depositary (at one of its addresses set forth on the
back cover of this Booklet) a properly completed and duly executed Letter
of Transmittal and Proxy, together with any required signature guarantees
and any other documents required by the Letter of Transmittal and Proxy
(and either (i) tender certificates for the Shares to the Depositary at one
of its addresses or (ii) deliver such Shares pursuant to the procedures for
book-entry transfer described herein (and a confirmation of such delivery
must be received by the Depositary (a Book-Entry Confirmation)), in each
case on or prior to the Expiration Date); or
(b) comply with the guaranteed delivery procedure described under
Guaranteed Delivery Procedure below.
A tender of Shares made pursuant to any method of delivery set forth herein
or in the Letter of Transmittal and Proxy will constitute a binding agreement
between the tendering holder and NEES upon the terms and subject to the
conditions of the Offer.
The Depositary will establish an account with respect to the Shares of each
Series of Preferred at The Depository Trust Company and the Philadelphia
Depository Trust Company (each a Book-Entry Transfer Facility) for purposes of
the Offer within two business days after the date of this Booklet, and any
financial institution that is a participant in the system of the Book-Entry
Transfer Facility may make delivery of Shares by causing the Book-Entry Transfer
Facility to transfer such Shares into the Depositary's account in accordance
with the procedures of the Book-Entry Transfer Facility. Although delivery of
Shares may be effected through book-entry transfer, such delivery must be
accompanied by either (i) a properly completed and duly executed Letter of
Transmittal and Proxy, together with any required signature guarantees and any
other required documents or (ii) an Agent's Message (as hereinafter defined)
and, in any case, must be received by the Depositary at one of its addresses set
forth on the back cover of this Booklet on or prior to the Expiration Date.
DELIVERY OF SUCH LETTER OF TRANSMITTAL AND PROXY AND ANY OTHER REQUIRED
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY OR TO NEES DOES NOT CONSTITUTE
DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility, received by the Depositary, and forms a part of the
Book-Entry Confirmation when the tender is initiated, which states that the
Book-Entry Transfer Facility has received an express acknowledgment from a
participant in such Book-Entry Transfer Facility tendering Shares that the
participant has received and agrees to be bound by the terms of the Letter of
Transmittal and Proxy and that NEES may enforce such agreement against the
participant.
8
<PAGE> 9
Except as otherwise provided below, all signatures on a Letter of
Transmittal and Proxy must be guaranteed by a firm that is a member of a
registered national securities exchange or the National Association of
Securities Dealers, Inc. (the NASD), or by a commercial bank or trust company
having an office or correspondent in the United States that is a participant in
an approved Signature Guarantee Medallion Program (each of the foregoing being
referred to as an Eligible Institution). Signatures on a Letter of Transmittal
and Proxy need not be guaranteed if (a) the Letter of Transmittal and Proxy is
signed by the registered owner of the Shares tendered therewith and such owner
has not completed the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on the Letter of Transmittal and Proxy
or (b) such Shares are tendered for the account of an Eligible Institution. See
Instructions 1 and 5 of the Letter of Transmittal and Proxy. If Shares are
registered in the name of a person other than the signatory on the Letter of
Transmittal and Proxy, or if unpurchased Shares are to be issued to a person
other than the registered holder(s), the certificates must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or names of the registered holder(s) appear on the Shares with the
signature(s) on the Shares or stock powers guaranteed as stated above. See
Instructions 4, 6, and 7 to the Letter of Transmittal and Proxy.
Guaranteed Delivery Procedure. If a Preferred Shareholder desires to
tender Shares pursuant to the Offer and such Shareholder's certificates are not
immediately available or the procedures for book-entry transfer cannot be
completed on a timely basis or time will not permit all required documents to
reach the Depositary on or prior to the Expiration Date, such Shares may
nevertheless be tendered if all of the following guaranteed delivery procedures
are complied with:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by NEES and Narragansett
herewith, is received (with any required signatures or signature
guarantees) by the Depositary as provided below on or prior to the
Expiration Date; and
(iii) the certificates for all tendered Shares in proper form for
transfer or a Book-Entry Confirmation with respect to all tendered Shares,
together with a properly completed and duly executed Letter of Transmittal
and any other documents required by the Letter of Transmittal and Proxy,
are received by the Depositary no later than three New York Stock Exchange,
Inc. (NYSE) trading days after the date of execution of such Notice of
Guaranteed Delivery. A NYSE trading day is any day on which the NYSE is
open for business.
The Notice of Guaranteed Delivery may be either delivered by hand or mailed
to the Depositary and must include an endorsement by an Eligible Institution in
the form set forth in such Notice of Guaranteed Delivery.
In all cases, Shares shall not be deemed validly tendered unless a properly
completed and duly executed Letter of Transmittal and Proxy or, if applicable,
an Agent's Message, is received by the Depositary.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer in all cases will be made only after timely
receipt by the Depositary of certificates for (or an Agent's Message with
respect to) such Shares, a Letter of Transmittal and Proxy, properly completed
and duly executed, with any required signature guarantees, and all other
documents required by the Letter of Transmittal and Proxy.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
OPTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. BECAUSE IT
IS THE TIME OF RECEIPT, NOT THE TIME OF MAILING, WHICH DETERMINES WHETHER A
TENDER HAS BEEN MADE PRIOR TO THE EXPIRATION DATE, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY.
TO AVOID FEDERAL INCOME TAX BACKUP WITHHOLDING EQUAL TO 31% OF THE GROSS
PAYMENTS MADE PURSUANT TO THE OFFER, EACH TENDERING PREFERRED SHAREHOLDER WHO IS
A UNITED STATES PERSON MUST NOTIFY THE DEPOSITARY OF
9
<PAGE> 10
THE CORRECT TAXPAYER IDENTIFICATION NUMBER AND PROVIDE CERTAIN OTHER INFORMATION
BY PROPERLY COMPLETING AND EXECUTING THE SUBSTITUTE FORM W-9 INCLUDED IN THE
LETTER OF TRANSMITTAL AND PROXY (OR, IN THE CASE OF A FOREIGN SHAREHOLDER, FORM
W-8 OBTAINABLE FROM THE DEPOSITARY). SEE CERTAIN U.S. FEDERAL INCOME TAX
CONSIDERATIONS.
EACH PREFERRED SHAREHOLDER IS URGED TO CONSULT WITH SUCH PREFERRED
SHAREHOLDER'S OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF THE OFFER.
All questions as to the form of documents and the validity, eligibility
(including the time of receipt), and acceptance for payment of any tender of
Shares will be determined by NEES, in its sole discretion, and its determination
will be final and binding. NEES reserves the absolute right to reject any or all
tenders of Shares that (i) it determines are not in proper form or (ii) the
acceptance for payment of or payment for which may, in the opinion of NEES's
counsel, be unlawful. NEES also reserves the absolute right to waive any defect
or irregularity in any tender of Shares. None of NEES, Narragansett, the Dealer
Manager, the Depositary, the Information Agent, or any other person will be
under any duty to give notice of any defect or irregularity in tenders, nor
shall any of them incur any liability for failure to give any such notice. Any
condition to the Offer may be waived by NEES, in whole or in part, at any time
and from time to time in its sole discretion.
WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer may be withdrawn at any time
on or prior to the Expiration Date. Thereafter, such tenders are irrevocable,
except that they may be withdrawn after January 12, 1998, unless previously
accepted for payment as provided in this Booklet.
To be effective, a written notice of withdrawal must be timely received by
the Depositary, at one of its addresses set forth on the back cover of this
Booklet, and must specify the name of the person who tendered the Shares to be
withdrawn and the number of Shares to be withdrawn. If the Shares to be
withdrawn have been delivered to the Depositary, a signed notice of withdrawal
with signatures guaranteed by an Eligible Institution (except in the case of
Shares tendered by an Eligible Institution) must be submitted prior to the
release of such Shares. In addition, such notice must specify, in the case of
Shares tendered by delivery of certificates, the name of the registered owner
(if different from that of the tendering Shareholder) and the serial numbers
shown on the particular certificates evidencing the Shares to be withdrawn or,
in the case of Shares tendered by book-entry transfer, the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares and the name of the registered holder (if different from the
name of such account). Withdrawals may not be rescinded, and Shares withdrawn
will thereafter be deemed not validly tendered for purposes of the Offer.
However, withdrawn Shares may be re-tendered by again following one of the
procedures described in Terms of the Offer -- Procedure for Tendering Shares at
any time on or prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by NEES, in its sole discretion, and
its determination will be final and binding. None of NEES, Narragansett, the
Dealer Manager, the Depositary, the Information Agent, or any other person will
be under any duty to give notification of any defect or irregularity in any
notice of withdrawal or will incur any liability for failure to give any such
notification.
ACCEPTANCE OF SHARES FOR PAYMENT AND PAYMENT OF PURCHASE PRICE AND DIVIDENDS
Upon the terms and subject to the conditions of the Offer, and as promptly
as practicable after the Expiration Date, NEES will accept for payment (and
thereby purchase) and pay for Shares validly tendered and not withdrawn as
permitted in Terms of the Offer -- Withdrawal Rights. Thereafter, payment for
all Shares validly tendered on or prior to the Expiration Date and accepted
pursuant to the Offer will be made by the Depositary by check as promptly as
practicable after the Expiration Date. In all cases, payment for Shares accepted
for payment pursuant to the Offer will be made promptly but only after timely
receipt by the
10
<PAGE> 11
Depositary of certificates for such Shares (or an Agent's Message), a properly
completed and duly executed Letter of Transmittal and Proxy, and any other
required documents.
For purposes of the Offer, NEES will be deemed to have accepted for payment
(and thereby purchased) Shares that are validly tendered and not withdrawn as,
if, and when it gives oral or written notice to the Depositary of its acceptance
for payment of such Shares. NEES will pay for Shares that it has purchased
pursuant to the Offer by depositing the purchase price therefor (plus accrued
and unpaid dividends thereon) with the Depositary, which will act as agent for
tendering Preferred Shareholders for the purpose of receiving payment from NEES
and transmitting payment to the tendering Shareholders. Under no circumstances
will interest be paid on amounts to be paid to tendering Preferred Shareholders,
regardless of any delay in making such payment.
Certificates for all Shares not validly tendered will be returned or, in
the case of Shares tendered by book-entry transfer, such Shares will be credited
to an account maintained with the Book-Entry Transfer Facility, as promptly as
practicable, without expense to the tendering Preferred Shareholder.
If certain events occur, NEES may not be obligated to purchase Shares
pursuant to the Offer. See Certain Conditions of the Offer.
NEES will pay or cause to be paid any stock transfer taxes with respect to
the sale and transfer of any Shares to it or its order pursuant to the Offer.
If, however, payment of the purchase price is to be made to, or Shares not
tendered or not purchased are to be registered in the name of, any person other
than the registered owner, or if tendered Shares are registered in the name of
any person other than the person signing the Letter of Transmittal and Proxy,
the amount of any stock transfer taxes (whether imposed on the registered owner,
such other person, or otherwise) payable on account of the transfer to such
person will be deducted from the purchase price unless satisfactory evidence of
the payment of such taxes, or exemption therefrom, is submitted. See Instruction
6 of the accompanying Letter of Transmittal and Proxy.
CERTAIN CONDITIONS OF THE OFFER
NEES WILL NOT BE REQUIRED TO ACCEPT FOR PAYMENT OR PAY FOR ANY SHARES OF
ANY SERIES TENDERED IF THE PROPOSED AMENDMENTS ARE NOT APPROVED AND ADOPTED AT
THE SPECIAL MEETING OR IF THE TENDERING PREFERRED SHAREHOLDER DID NOT VOTE IN
FAVOR OF THE PROPOSED AMENDMENT.
In addition, notwithstanding any other provision of the Offer, NEES will
not be required to accept for payment or pay for any Shares tendered, and may
terminate or amend the Offer (by oral or written notice to the Depositary and
timely public announcement) or may postpone (subject to the requirements of the
Securities Exchange Act of 1934, as amended (the Exchange Act) for prompt
payment for or return of Shares) the acceptance for payment of, or payment for,
Shares tendered, if at any time after November 5, 1997, and on or prior to the
Expiration Date, any of the following shall have occurred (which shall not have
been waived by NEES):
(a) there shall have been threatened, instituted, or pending any
action or proceeding by any government or governmental, regulatory, or
administrative agency, authority, or tribunal or any other person, domestic
or foreign, or before any court, authority, agency, or tribunal that (i)
challenges the acquisition of Shares pursuant to the Offer or otherwise in
any manner relates to or affects the Offer or (ii) in the reasonable
judgment of NEES, would or might materially and adversely affect the
business, condition (financial or otherwise), income, operations, or
prospects of NEES and its subsidiaries taken as a whole, or otherwise
materially impair in any way the contemplated future conduct of the
business of NEES or any of its subsidiaries or materially impair the
Offer's contemplated benefits to NEES;
(b) there shall have been any action threatened, pending, or taken, or
approval withheld, or any statute, rule, regulation, judgment, order, or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced, or deemed to be applicable to the Offer or NEES or any
of its subsidiaries, by any legislative body, court, authority, agency, or
tribunal that, in NEES's reasonable judgment, would or might directly or
indirectly (i) make the acceptance for payment of, or payment for,
11
<PAGE> 12
some or all of the Shares illegal or otherwise restrict or prohibit
consummation of the Offer; (ii) delay or restrict the ability of NEES, or
render NEES unable, to accept for payment or pay for some or all of the
Shares; (iii) materially impair the contemplated benefits of the Offer to
NEES or Narragansett (including materially increasing the effective
interest cost of certain types of unsecured debt); or (iv) materially
affect the business, condition (financial or otherwise), income,
operations, or prospects of NEES and its subsidiaries taken as a whole, or
otherwise materially impair in any way the contemplated future conduct of
the business of NEES or any of its subsidiaries;
(c) there shall have occurred (i) any significant decrease in the
market price of the Shares; (ii) any change in the general political,
market, economic, or financial conditions in the United States or abroad
that, in the reasonable judgment of NEES, would or might have a material
adverse effect on NEES's business, operations, prospects, or ability to
obtain financing generally or the trading in the Shares or equity
securities of NEES; (iii) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation on, or any event that, in NEES's reasonable judgment, would or
might affect the extension of credit by lending institutions in the United
States; (iv) the commencement or escalation of war, armed hostilities, or
other international or national calamity directly or indirectly involving
the United States; (v) any general suspension of trading in, or limitation
on prices for, securities on any national securities exchange or in the
over-the-counter market; (vi) in the case of any of the foregoing existing
at the time of the commencement of the Offer, in NEES's reasonable
judgment, a material acceleration or worsening thereof; (vii) any decline
in either the Dow Jones Industrial Average or the Standard and Poor's
Composite 500 Stock Index by an amount in excess of 10% measured from the
close of business on November 5, 1997; or (viii) a decline in the ratings
accorded any of NEES's or Narragansett's securities by Standard & Poor's, a
division of The McGraw Hill Companies (S&P), Moody's Investors Service,
Inc. (Moody's), or Duff & Phelps, Inc. (D&P) or an announcement by S&P,
Moody's, or D&P that it has placed any such rating under surveillance or
review with negative implications;
(d) any tender or exchange offer with respect to some or all of the
Shares (other than the Offer) or any equity securities of NEES, or a
merger, acquisition, or other business combination proposal for NEES, shall
have been proposed, announced, or made by any person or entity;
(e) there shall have occurred any event or events that have resulted,
or, in NEES's reasonable judgment, may result, in an actual or threatened
change in the business, condition (financial or otherwise), income,
operations, stock ownership, or prospects of NEES and its subsidiaries; or
(f) the SEC shall have withheld approval, under the Holding Company
Act, of the acquisition of the Shares by NEES pursuant to the Offer or the
approval and adoption of the Proposed Amendment at the Special Meeting;
and, in the sole judgment of NEES, such event or events make it undesirable or
inadvisable to proceed with the Offer or with such acceptance for payment or
payment. With respect to the approval of the SEC referenced in clause (f) above,
the SEC must find that the acquisition of the Shares by NEES is not detrimental
to the public interest or the interests of the investors or consumers, and that
the consideration paid in connection with the acquisition and the adoption of
the Proposed Amendment, including fees, commissions, and other remuneration, is
reasonable.
The foregoing conditions (including the condition that the Proposed
Amendment be approved and adopted at the Special Meeting) are for the sole
benefit of NEES and may be asserted by NEES regardless of the circumstances
(including any action or inaction by NEES) giving rise to any such condition,
and any such condition may be waived by NEES, in whole or in part, at any time
and from time to time in its sole discretion. A decision by NEES to terminate or
otherwise amend the Offer, following the occurrence of any of the foregoing,
with respect to one Series will not create an obligation on behalf of NEES to
terminate or otherwise amend in a similar manner the Offer with respect to any
other Series. The failure by NEES at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time. Any determination by NEES concerning the events described above will be
final and binding on all parties.
12
<PAGE> 13
EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS
NEES expressly reserves the right, in its sole discretion, and at any time
and from time to time on or prior to the Expiration Date, to extend the period
of time during which the Offer for any Series is open by giving oral or written
notice of such extension to the Depositary, without extending the period of time
during which the Offer for any other Series is open. There can be no assurance,
however, that NEES will exercise its right to extend the Offer for any Series.
During any such extension, all Shares of the subject Series previously tendered
will remain subject to the Offer, except to the extent that such Shares may be
withdrawn as set forth in Withdrawal Rights.
NEES also expressly reserves the right, in its sole discretion, to, among
other things, terminate the Offer and not accept for payment or pay for any
Shares tendered, subject to Rule 13e-4(f)(5) under the Exchange Act, which
requires NEES either to pay the consideration offered or to return the Shares
tendered promptly after the termination or withdrawal of the Offer upon the
occurrence of any of the conditions specified in Certain Conditions of the Offer
by giving oral or written notice of such termination to the Depositary, and
making a public announcement thereof.
Subject to compliance with applicable law, NEES further reserves the right,
in its sole discretion, to amend the Offer in any respect. Amendments to the
Offer may be made at any time and from time to time effected by public
announcement thereof, such announcement, in the case of an extension, to be
issued no later than 9:00 a.m., Eastern Standard Time, on the next business day
after the previously scheduled Expiration Date. Any public announcement made
pursuant to the Offer will be disseminated promptly to Preferred Shareholders
affected thereby in a manner reasonably designed to inform such Preferred
Shareholders of such change. Without limiting the manner in which NEES may
choose to make a public announcement, except as required by applicable law, NEES
shall have no obligation to publish, advertise, or otherwise communicate any
such public announcement other than by making a release to the Dow Jones News
Service.
If NEES materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, NEES
will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) under the Exchange Act. Those rules require that the minimum period
during which the Offer must remain open following material changes in the terms
of the Offer or information concerning the Offer (other than a change in price,
a change in percentage of securities sought, or a change in the dealer's
solicitation fee) will depend on the facts and circumstances, including the
relative materiality of such terms or information. The SEC has stated that, in
its view, an offer should remain open for a minimum of five business days from
the date that a notice of such a material change is first published, sent, or
given. If the Offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from, and including, the
date that NEES publishes, sends, or gives to Preferred Shareholders a notice
that it will (i) increase or decrease the price it will pay for Shares, (ii)
decrease the percentage of Shares it seeks, or (iii) increase or decrease the
soliciting dealers' fees, the Offer will be extended until the expiration of
such period of ten business days.
THE OFFER FOR EACH SERIES OF PREFERRED IS INDEPENDENT OF THE OFFER FOR ANY
OTHER SERIES. IF NEES EXTENDS OR AMENDS ANY OFFER WITH RESPECT TO ONE SERIES OF
PREFERRED FOR ANY REASON, NEES WILL HAVE NO OBLIGATION TO EXTEND THE OFFER FOR
ANY OTHER SERIES OF PREFERRED.
CERTAIN EFFECTS OF THE OFFER
Shares validly tendered to the Depositary pursuant to the Offer and not
withdrawn in accordance with the procedures set forth herein shall be held until
the Expiration Date (or returned to the extent the Offer is terminated in
accordance herewith). To the extent that the Proposed Amendment is approved and
the Shares tendered are accepted for payment and paid for in accordance with the
terms hereof, NEES intends either to sell its Shares to Narragansett or to
donate the Shares to Narragansett as a capital contribution. At that time, it is
expected that Narragansett will retire and cancel the Shares. However, in the
event the Proposed Amendment is not adopted at the Special Meeting, NEES may
elect, but is not obligated, to waive, subject to applicable law, such
condition. Narragansett anticipates that, subsequent to that waiver and purchase
of the
13
<PAGE> 14
Shares, it would call another special meeting of its shareholders and solicit
proxies therefrom for an amendment substantially similar to the Proposed
Amendment. At that meeting, NEES would vote any Shares acquired by it pursuant
to the Offer or otherwise (together with its shares of common stock) in favor of
such amendment, thereby maximizing the prospects for the adoption of such
amendment.
Trading and Liquidity. Any purchase of Shares by NEES will reduce the
number of Shares of each of the Series of Preferred that might otherwise trade
publicly or become available for purchase or sale and will likely reduce the
number of owners of Shares of each of the Series of Preferred, which could
adversely affect the liquidity and sale value of the Shares not purchased in the
Offer.
To the extent that Shares of any Series of Preferred are tendered and
accepted for payment in the Offer, the trading market for Shares of such Series
that remain outstanding may be significantly more limited, which might adversely
affect the liquidity, market value, and price volatility of such Shares. Equity
securities with a smaller outstanding market value available for trading (the
float) may command a lower price than would comparable equity securities with a
greater float. Therefore, the market price for Shares that are not tendered in
the Offer may be affected adversely to the extent that the amount of Shares
purchased pursuant to the Offer reduces the float. The reduced float may also
make the trading price of the Shares that are not tendered and accepted for
payment more volatile. Holders of the remaining Shares may attempt to obtain
quotations for the Shares from their brokers, through the Electronic Bulletin
Board, or otherwise; however, there can be no assurance that any trading market
will exist for such Shares following consummation of the Offer. To the extent a
market continues to exist for the Shares after the Offer, the Shares may trade
at a discount compared to present trading, depending on the market for Shares
with similar features, the performance of Narragansett, and other factors. There
is no assurance that an active market in the Shares will exist and no assurance
as to the prices at which the Shares may trade.
The Shares are currently registered under Section 12(g) of the Exchange
Act. If the Shares are no longer held by more than 300 owners of record,
Narragansett may apply to the SEC for termination of such registration. Such
termination would substantially reduce the information required to be furnished
by Narragansett to holders of the Preferred Stock and could make certain
provisions of the Exchange Act no longer applicable to Narragansett.
As of September 29, 1997, there were 422 registered holders of the 4.50%
Series, 71 registered holders of the 4.64% Series, and 1 registered holder of
the 6.95% Series.
Future Purchases or Redemption of Shares. Preferred Shareholders are not
under any obligation to tender Shares pursuant to the Offer. The Offer does not
constitute a notice of redemption of any Series of Preferred pursuant to
Narragansett's Provisions, neither does NEES or Narragansett intend to effect
any such redemption by making the Offer. Further, the Offer does not constitute
a waiver by Narragansett of any option it has to redeem Shares.
Shares which are not tendered will continue to be subject to their current
redemption and liquidation provisions. The various series of the Preferred Stock
are redeemable in whole or in part upon not less than thirty days' notice at the
applicable redemption prices plus accrued dividends through the date fixed for
redemption. The redemption prices for the 4.50% Series and the 4.64% Series are
$55.00 and $52.125, respectively. The 6.95% Series is redeemable after August 1,
2003 at a price equal to $51.74. There are no sinking funds for any of the
Series of Preferred. The Preferred Shareholders have no preemptive or conversion
rights.
Upon liquidation, dissolution, or winding up of the affairs of Narragansett
or any distribution of capital of Narragansett, owners of the Shares of each
Series of Preferred would be entitled to receive an amount equal to the full
distributive amounts fixed therefor together with accrued dividends through the
date fixed for the payment of such distributive amounts. In case any
liquidation, dissolution, or winding up of Narragansett is voluntary, owners of
the Shares of each Series of Preferred shall be entitled to receive the
redemption prices for their Series plus accrued dividends through the date fixed
for the payment of such distributive amounts; if involuntary, to $50 per Share
plus accrued dividends through the date fixed for the payment of such
14
<PAGE> 15
distributive amounts. Any divestiture of Narragansett's generation assets would
not be deemed to be a liquidation.
After the consummation of the Offer, NEES or Narragansett may purchase
additional Shares on the open market, in privately negotiated transactions,
through one or more tender offers, or otherwise. Any such purchases may be on
the same terms as, or on terms which are more or less favorable to holders of
Shares than, the terms of the Offer. However, Rule 13e-4(f)(6) under the
Exchange Act prohibits NEES and its affiliates (including Narragansett) from
purchasing any Shares of a Series of Preferred, other than pursuant to the
Offer, until at least ten business days after the Expiration Date with respect
to that Series of Preferred. Any future purchases of Shares by NEES or
Narragansett would depend on many factors, including the market price of the
Shares, NEES's business and financial position, and legal restrictions on NEES's
ability to purchase Shares, as well as general economic and market conditions.
OTHER INFORMATION
As discussed in the documents incorporated herein by reference, the NEES
companies, including Narragansett, are divesting themselves of or attempting to
divest themselves of their generation business. No approval of the Preferred
Shareholders is required in connection with such divestiture. This process will
result in reductions in employees and may result in reallocation of executive
and Board responsibilities. Further, the NEES companies have considered various
strategies to enhance their competitive business, including business
combinations with other companies. Except as disclosed herein and in the
documents incorporated by reference, neither NEES nor Narragansett has plans or
proposals that would relate to or result in (a) the acquisition by any person or
entity of additional securities of Narragansett or the disposition of securities
of Narragansett, other than in the ordinary course of business; (b) an
extraordinary corporate transaction, such as a merger, reorganization, or
liquidation, involving Narragansett; (c) a sale or transfer of a material amount
of assets of Narragansett; (d) any change in the present Board or management of
Narragansett; (e) any material change in the present dividend rate or policy, or
indebtedness or capitalization of Narragansett; (f) any other material change in
Narragansett's corporate structure or business; (g) any change in Narragansett's
Charter or Provisions or any actions that may impede the acquisition of control
of Narragansett by any person; (h) a class of equity securities of Narragansett
being no longer authorized to be quoted on the OTC; (i) a class of equity
securities of Narragansett becoming eligible for termination of registration
pursuant to Section 12(g)(4) of the Exchange Act; or (j) the suspension of
Narragansett's obligation to file reports pursuant to Section 15(d) of the
Exchange Act.
15
<PAGE> 16
PROPOSED AMENDMENT AND PROXY SOLICITATION
[NARRAGANSETT ELECTRIC COMPANY LOGO]
THE NARRAGANSETT ELECTRIC COMPANY
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
280 MELROSE STREET
PROVIDENCE, RHODE ISLAND 02901
NOVEMBER 6, 1997
To the Holders of Common Stock and Preferred Stock of
THE NARRAGANSETT ELECTRIC COMPANY
You are hereby notified that the Special Meeting of Stockholders of The
Narragansett Electric Company will be held in the Board Room, 280 Melrose
Street, Providence, Rhode Island, on December 12, 1997, at 4:30 p.m., Eastern
Standard Time, for the following purposes:
1. To delete in its entirety subparagraph 10(d) from the Preferred
Stock Provisions as previously amended of Narragansett, limiting
Narragansett's ability to issue unsecured indebtedness.
2. Transaction of such other business as may be appropriate and
incidental to the foregoing purposes or which may properly come before the
meeting or any adjourned session thereof.
Stockholders entitled to vote will be determined on the basis of the
records of the Company at the close of business on November 12, 1997.
The accompanying material contains further information about the matters to
be considered at the meeting.
By order of the Board of Directors.
THOMAS G. ROBINSON
Secretary
16
<PAGE> 17
SPECIAL MEETING
This Booklet is first being mailed on or about November 7, 1997 to the
Preferred Shareholders of Narragansett in connection with the solicitation of
proxies by the Board of Directors of Narragansett (the Board) for use at the
Special Meeting. At the Special Meeting, the Preferred Shareholders of record of
Narragansett will vote upon the Proposed Amendment to its Provisions.
PROXIES
THE PROXY INCLUDED IN THE LETTER OF TRANSMITTAL AND PROXY IS SOLICITED FROM
THE HOLDERS OF THE PREFERRED STOCK BY THE BOARD, WHICH RECOMMENDS VOTING FOR THE
PROPOSED AMENDMENT. All shares of Narragansett's common stock will be voted in
favor of the Proposed Amendment. Shares of Narragansett's Preferred Stock
represented by properly executed proxies received at or prior to the Special
Meeting will be voted in accordance with the instructions thereon. If no
instructions are indicated, duly executed proxies will be voted in accordance
with the recommendation of the Board. It is not anticipated that any other
matters will be brought before the Special Meeting. However, the enclosed proxy
gives discretionary authority to the proxy holders named therein should any
other matters be presented at the Special Meeting, and it is the intention of
the proxy holders to act on any other matters in accordance with their best
judgment.
Execution of a proxy will not prevent a Preferred Shareholder from
attending the Special Meeting and voting in person. Any Preferred Shareholder
giving a proxy may revoke it at any time before it is voted by delivering to the
Secretary of Narragansett written notice of revocation bearing a later date than
the proxy, by delivering a duly executed proxy bearing a later date, or by
voting in person by ballot at the Special Meeting. Withdrawal of Shares tendered
pursuant to the Offer will not revoke a properly executed proxy.
RELATIONSHIP TO THE OFFER; SPECIAL CASH PAYMENTS
As noted above, the Offer and Proposed Amendment constitute an integrated
strategy of NEES and Narragansett to achieve greater flexibility in their
financing. See Purpose of the Offer, Proposed Amendment, and Proxy Solicitation.
Preferred Shareholders who wish to tender their Shares pursuant to the
Offer are required to vote in favor of the Proposed Amendment. Further, the
Offer is conditioned upon the Proposed Amendment being approved and adopted at
the Special Meeting.
Subject to the terms and conditions set forth in this Booklet, if (but only
if) the Proposed Amendment is approved and adopted by Narragansett's
shareholders, Narragansett will make a Special Cash Payment in the amount of
$.50 per Share to each Preferred Shareholder of record who voted in favor of the
Proposed Amendment, provided that such Shares have not been tendered pursuant to
the Offer. Narragansett intends to make the Special Cash Payment although there
is no binding legal precedent as to the permissibility of such payment and there
can be no assurance as to how a court would rule on the question. If a Preferred
Shareholder votes against the Proposed Amendment or abstains, such Preferred
Shareholder shall not be entitled to the Special Cash Payment (regardless of
whether the Proposed Amendment is approved and adopted). The Special Cash
Payment will be paid out of Narragansett's general funds promptly after the
Proposed Amendment shall have become effective. However, no accrued interest
will be paid on the Special Cash Payments regardless of any delay in making such
payments.
VOTING SECURITIES, RIGHTS, AND PROCEDURES
Only holders of record of Narragansett's voting securities at the close of
business on November 12, 1997, the Record Date (or their legal representatives
or attorneys-in-fact), will be entitled to vote in person or by proxy at the
Special Meeting and to receive the Special Cash Payment from Narragansett. Any
beneficial holder of Shares who is not the registered holder of such Shares as
of the Record Date (as would be the case for any beneficial holder whose Shares
are registered in the name of such holder's broker, dealer, commercial bank,
trust company, or other nominee) must arrange with the holder of record on the
Record Date to execute and deliver a proxy form on such beneficial owner's
behalf. If a beneficial holder of Shares intends to attend
17
<PAGE> 18
the Special Meeting and vote in person, such beneficial holder must obtain a
legal proxy form from the beneficial holder's broker, dealer, commercial bank,
trust company, or other nominee.
The Shares will trade, during the period which begins two days prior to the
Record Date and which will end at the close of business on the Expiration Date,
in the over-the-counter market under the symbols "NRGAT" for the 4.50% Series,
"NRGCT" for the 4.64% Series, and "NRGET" for the 6.95% Series, indicating that
such Shares are trading "with proxy." A Preferred Shareholder who acquires
Shares during this time period must obtain, or have his or her authorized
representative obtain, an assignment of proxy (which is included in the
applicable Letter of Transmittal and Proxy) at settlement from the seller. The
NASD and The Depository Trust Company have issued notices informing their
members and participants that the Shares will trade "with proxy" and that
settlement of all trades during the period described above should include an
assignment of proxy from the seller.
Narragansett's outstanding voting securities consist of common stock and
Preferred Stock. There are three series of Preferred Stock currently
outstanding. The common stock votes as one class. The three series of Preferred
Stock will vote together as a single class. Each share of stock has one vote per
share. The Shares outstanding as of the Record Date are as follows:
<TABLE>
<CAPTION>
CLASS SHARES OUTSTANDING
-------------------------------------------- ------------------
<S> <C>
Common...................................... 1,132,487
Preferred
4.50%..................................... 180,000
4.64%..................................... 150,000
6.95%..................................... 400,000
---------
Total Preferred........................ 730,000
</TABLE>
The Proposed Amendment will require the approval of two-thirds of the
Preferred Stock voting as a single class, the approval of 75% of the Preferred
Shares present or represented at the meeting, and the approval of a majority of
the Narragansett common voting as a class. Abstentions and broker non-votes will
have the same effect as votes cast against the Proposed Amendment. NEES has
advised Narragansett that it intends to vote all of the outstanding shares of
common stock of Narragansett in favor of the Proposed Amendment.
There are no rights of appraisal in connection with the Proposed Amendment.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As noted above, NEES owns all the outstanding common stock of Narragansett.
Pursuant to Section 13(d) of the Exchange Act, a beneficial owner of a
security is any person who directly or indirectly has or shares voting or
investment power over such security. No person or group is known by management
of Narragansett to be the beneficial owner of more than 5% of the outstanding
Shares of Narragansett's Cumulative Preferred Stock as of the Record Date.
NEES and Narragansett's directors and executive officers do not
beneficially own any Shares as of the Record Date. The beneficial ownership of
NEES's common shares held by each Narragansett director, as well as Narragansett
directors and executive officers as a group, as of October 1, 1997, is set forth
in the following table.
<TABLE>
<CAPTION>
NAME SHARES
---------------------------------------------------------------------------- -------
<S> <C>
Joan T. Bok................................................................. 17,504
Stephen A. Cardi............................................................ 360
Richard W. Frost............................................................ 7,154
Frances H. Gammell.......................................................... 310
Joseph J. Kirby............................................................. 310
Robert L. McCabe............................................................ 9,924
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
NAME SHARES
---------------------------------------------------------------------------- -------
<S> <C>
Richard Nadeau.............................................................. 4,353
Lawrence J. Reilly.......................................................... 2,861
John W. Rowe................................................................ 23,105
Michael F. Ryan............................................................. 430
Richard P. Sergel........................................................... 8,723
William E. Trueheart........................................................ 310
William Watkins, Jr......................................................... 5,481
Directors and officers as a group (representing less
than 1% of the outstanding Shares)........................................ 110,670
</TABLE>
Listed below is the only person or group known to NEES as of October 1,
1997, to beneficially own 5% or more of NEES's common shares. However, T. Rowe
Price Trust Company disclaims beneficial ownership of all such shares. The
amount of common shares listed below is as of September 8, 1997.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE PERCENT OF
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP COMMON SHARES
- ---------------------------------------------- -------------------------------- -------------
<S> <C> <C>
T. Rowe Price Trust Company................... 5,358,604 shares as trustee for 8.3%
100 East Pratt Street Company employee benefits plans
Baltimore, MD 21202
</TABLE>
DESCRIPTION OF THE PROPOSED AMENDMENT
The following statements, unless the context otherwise requires, are
summaries of the substance or general effect of a section of the Provisions, and
are qualified in their entirety by the Provisions (as described below).
EXPLANATION OF THE PROPOSED AMENDMENT
The purpose of the Proxy Solicitation is the elimination of the section in
the Provisions restricting the ability of Narragansett to incur certain
unsecured indebtedness.
Subparagraph 10(d) of the Preferred Stock Provisions, as amended at
meetings of the preferred stockholders, common stockholders, and directors on
February 4, 1993, March 16, 1993, and March 23, 1993, respectively, provides
that, without a vote of a majority of the outstanding Dividend Series Preferred
Stock (voting as a single class), Narragansett will not:
issue any unsecured notes, debentures or other securities representing
unsecured indebtedness, or assume any such unsecured securities, for
purposes other than the refunding of outstanding unsecured securities
theretofore issued or assumed by the Company resulting in equal or longer
maturities or the redemption or other retirement of all outstanding shares
of the Preferred Stock, if, immediately after such issue or assumption, the
total principal amount of all unsecured notes, debentures or other
securities representing unsecured indebtedness issued or assumed by the
Company and then outstanding (including the unsecured securities then to be
issued or assumed) but excluding unsecured securities theretofore so
consented to by holders of Preferred Stock, would exceed ten per cent (10%)
of the aggregate of (i) the total principal amount of all bonds and other
securities representing secured indebtedness issued or assumed by the
Company and then outstanding and (ii) the capital and surplus of the
Company as then stated on the books of account of the Company.
It is proposed to delete the above section in its entirety; conforming changes
to cross references elsewhere in the Provisions will also be made.
REASONS FOR THE PROPOSED AMENDMENT
Narragansett believes that the prudent use of unsecured debt is important
to the effective financial management of its business. Unsecured debt provides
flexibility in meeting temporary fluctuations in cash
19
<PAGE> 20
requirements, can be used when unfavorable conditions prevail in the market for
long-term capital, acts as a bridge between issues of permanent capital, and may
present more flexibility in terms and conditions than secured debt. If the
Proposed Amendment is adopted, Narragansett will have increased flexibility (i)
to choose among different types of debt financing and (ii) to finance projects
using the most cost effective means. The availability and flexibility of
unsecured debt is necessary to take full advantage of changing conditions in the
securities and financial markets.
In addition, although Narragansett's earnings currently are sufficient to
meet the earnings coverage tests that must be satisfied before issuing
additional first mortgage bonds and preferred stock, other utilities have been
unable to issue mortgage bonds during certain periods because of restrictive
covenants in their mortgages. Any inability by Narragansett to issue first
mortgage bonds or preferred stock in the future, combined with the inability to
issue additional unsecured debt, would limit its financing options to more
costly securities, including additional common equity.
RECOMMENDATION OF BOARD OF DIRECTORS
IT IS FOR ALL THE ABOVE REASONS THAT NARRAGANSETT'S BOARD BELIEVES THE BEST
LONG-TERM INTERESTS OF THE PREFERRED SHAREHOLDERS ARE SERVED BY, AND ENCOURAGES
PREFERRED SHAREHOLDERS TO VOTE FOR, THE ADOPTION OF THE PROPOSED AMENDMENT.
The Proposed Amendment to the Provisions and the Offer are subject to
approval by the SEC under the Holding Company Act. NEES and Narragansett have
filed a declaration with the SEC with respect to the Proposed Amendment and the
acquisition of the Shares by NEES pursuant to the Offer.
CERTAIN EFFECTS OF THE PROPOSED AMENDMENT
If the Proposed Amendment becomes effective, Preferred Shareholders of
Shares that are not tendered and purchased pursuant to the Offer will no longer
be entitled to the benefits of the unsecured debt limitation provision. As
discussed above, the debt limitation provision places restrictions on
Narragansett's ability to issue or assume unsecured indebtedness. Although
future Narragansett debt instruments may contain certain restrictions on
Narragansett's ability to issue or assume debt, any such restrictions may be
waived and the increased flexibility afforded Narragansett by the deletion of
the debt limitation provision may permit Narragansett to take certain actions
that may increase the credit risks with respect to Narragansett, adversely
affecting the market price and credit rating of the remaining Shares, or that
may otherwise be materially adverse to the interests of the remaining Preferred
Shareholders.
OTHER MATTERS
The foregoing is the only business which management intends to present or
is advised that others will present for action at the Special Meeting or any
adjournment thereof. If any other matters should properly come before the
Special Meeting, the proxies for NEES and for any other stockholders who have
sent in their proxies will be voted by the persons named therein, or their
substitutes, in accordance with their judgment.
The expense of preparing and mailing this Booklet and the incidental
expenses of soliciting the Preferred Shareholders will be paid by Narragansett.
Narragansett has engaged Georgeson to act as Information Agent in connection
with the solicitation of proxies for a fee of $6,000 plus reimbursement of
reasonable out-of-pocket expenses. Narragansett has requested that brokers,
dealers, and other custodians, nominees, and fiduciaries forward solicitation
materials to the beneficial owners of Shares held of record by such persons and
will reimburse such brokers and other fiduciaries for their reasonable
out-of-pocket expenses incurred in connection therewith. In addition to the use
of the mails, proxies from holders of the Preferred Stock may be solicited by
officers and regular employees connected with Narragansett or its affiliates,
personally or by telephone or telegraph, without any additional compensation.
The Information Agent has not been retained to make, and will not make,
solicitations or recommendations in connection with the Proposed Amendment.
While Narragansett has no audit committee, its parent NEES has an audit
committee which recommends an independent auditor to audit the accounts of the
parent and its subsidiaries. Coopers and Lybrand
20
<PAGE> 21
have been auditors of Narragansett for many years and their selection as
auditors for the current year was approved at the Annual Meeting on March 18,
1997. It is not expected that representatives of Coopers and Lybrand will be
present at the Special Meeting on December 12, 1997, but they will be available
on short notice to attend to answer questions regarding the Proposed Amendment,
if any holder of Shares so requests in writing prior to December 10, 1997.
PRICE RANGE OF SHARES; DIVIDENDS
Each Series of Preferred is traded in the OTC and is not listed on any
national securities exchange. Trading in the Shares has generally been sporadic.
PREFERRED SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS, IF
AVAILABLE, FOR THE SHARES.
The following table sets forth the high and low sales prices of each Series
of Preferred as reported by the Nasdaq Stock Market, Inc., and the cash
dividends paid thereon for the fiscal quarters indicated.
DIVIDENDS AND PRICE RANGES OF PREFERRED STOCK
BY QUARTERS (1997, 1996 AND 1995)
<TABLE>
<CAPTION>
1997 - QUARTERS 1996 - QUARTERS 1995 - QUARTERS
--------------------------------------- --------------------------------------- ---------------------------------------
1ST 2ND 3RD 4TH* 1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
--------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PREFERRED
STOCK:
4.50%
SERIES
Dividends
Paid Per
Share.... $0.5625 $0.5625 $0.5625 $0.5625 $0.5625 $0.5625 $0.5625 $0.5625 $0.5625 $0.5625 $0.5625 $0.5625
Market
Price
Per
Share
(OTC)
- -- High... 31.60 32.125 33.000 34.00 33.00 31.00 32.000 33.00 27.25 30.30 31.75 31.50
-- Low... 29.25 30.000 30.625 32.125 27.50 26.74 28.875 29.00 24.75 25.00 29.00 29.00
4.64%
SERIES
Dividends
Paid Per
Share.... $0.58 $0.58 $0.58 $0.58 $0.58 $0.58 $0.58 $0.58 $0.58 $0.58 $0.58 $0.58
Market
Price
Per
Share
(OTC)
- -- High... 34.125 35.375 36.31 37.50 35.250 32.825 34.175 34.85 29.50 32.00 33.625 35.50
-- Low... 30.875 31.750 32.50 33.125 30.625 30.750 29.750 30.25 26.00 26.75 30.125 30.50
6.95%
SERIES
Dividends
Paid Per
Share.... $0.86875 $0.86875 $0.86875 $0.86875 $0.86875 $0.86875 $0.86875 $0.86875 $0.86875 $0.86875 $0.86875 $0.86875
Market
Price
Per
Share
(OTC)
- -- High... 52.00 51.375 -- -- -- -- -- 52.75 43.83 51.50 49.860 51.375
-- Low... 52.00 51.375 -- -- -- -- -- 52.51 42.25 48.75 47.875 51.000
</TABLE>
- ---------------
* Prices through October 31
Note -- The above bid and asked quotations represent prices between dealers and
do not represent actual transactions. A dash indicates that a quotation was not
available.
Dividends for a Series of Preferred are payable when, as, and if declared
by Narragansett's Board at the rate per annum included in the title of the
Series of Preferred. NEES will pay to tendering Preferred Shareholders any
accrued dividends through the Expiration Date.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
EACH HOLDER OF SHARES IS URGED TO CONSULT AND RELY UPON SUCH HOLDER'S OWN
TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO THE HOLDER OF TENDERING
SHARES PURSUANT TO THE OFFER.
In the opinion of Hale and Dorr LLP, tax counsel to NEES and Narragansett,
the following summary describes the principal United States Federal income tax
consequences of sales of Shares pursuant to the Offer, the receipt of accrued
and unpaid dividends and the receipt of Special Cash Payments in connection with
the approval and adoption of the Proposed Amendment. This summary is based on
the Internal Revenue
21
<PAGE> 22
Code of 1986, as amended to the date hereof (the "Code"), administrative
pronouncements, judicial decisions and existing and proposed Treasury
Regulations, changes to any of which subsequent to the date of this Booklet may
adversely affect the tax consequences described herein, possibly on a
retroactive basis. This summary is addressed to Preferred Shareholders who hold
Shares as capital assets within the meaning of Section 1221 of the Code. This
summary does not discuss all of the tax consequences that may be relevant to a
Preferred Shareholder in light of such Preferred Shareholder's particular
circumstances or to Preferred Shareholders subject to special rules (including
certain financial institutions, tax-exempt organizations, insurance companies,
dealers in securities or currencies, foreign persons or entities selling Shares
pursuant to the Offer who own or have owned, actually or constructively, more
than five percent of the outstanding amount of such Shares, Preferred
Shareholders who acquired their Shares pursuant to the exercise of stock options
or other compensation arrangements with Narragansett or Preferred Shareholders
holding the Shares as part of a conversion transaction, as part of a hedge or
hedging transaction, or as a position in a straddle for tax purposes). Preferred
Shareholders should consult their tax advisors with regard to the application of
the United States Federal income tax laws to their particular situations as well
as any tax consequences arising under the laws of any state, local or foreign
taxing jurisdiction.
As used herein, the term "United States Holder" means an owner of a Share
that is (i) for United States Federal income tax purposes a citizen or resident
of the United States; (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof; (iii) an estate, or, for taxable years beginning on or
before December 31, 1996, in general, any trust, the income of which is subject
to United States Federal income taxation regardless of its source; or (iv) for
taxable years beginning after December 31, 1996, any trust if a court within the
United States is able to exercise primary supervision over the administration of
such trust and one or more United States fiduciaries have the authority to
control all substantial decisions of such trust. A "Non-United States Holder" is
a Preferred Shareholder that is not a United States Holder.
TAX CONSIDERATIONS FOR TENDERING PREFERRED SHAREHOLDERS
Characterization of the Sale. A sale of Shares by a Preferred Shareholder
pursuant to the Offer will be a taxable transaction for Federal income tax
purposes. For U.S. Federal income tax purposes, a portion of the purchase price
per Share paid to Tendering Preferred Shareholders equal in amount to the
Special Cash Payment (payable to Preferred Shareholders who vote in favor of the
Proposed Amendment, but who do not tender their Shares) will be taxed in the
same manner as the Special Cash Payment received by Non-Tendering Preferred
Shareholders (see Tax Considerations of Special Cash Payment). The balance of
the Purchase Price per Share paid to Preferred Shareholders will be taxed as an
amount received in exchange for Shares resulting in gain or loss described in
the following two paragraphs.
United States Holders. A United States Holder will recognize gain or loss
equal to the difference between the tax basis of such Holder's Shares and the
amount of cash received from NEES in exchange therefor. A United States Holder's
gain or loss will be long-term capital gain or loss if the holding period for
the Shares is more than one year as to the date of the sale of such Shares. The
excess of net long-term capital gains over net short-term capital losses is
taxed at a lower rate than ordinary income for certain non-corporate taxpayers.
Capital gain on Shares held by noncorporate taxpayers for more than eighteen
months prior to the date of the sale of such Shares will be subject to a reduced
tax rate. The distinction between long-term capital gain or loss and short-term
gain or loss is also relevant for purposes of, among other things, limitations
on the deductibility of capital losses.
Non-United States Holders. Any gain realized upon the sale of Shares by a
Non-United States Holder pursuant to the Offer generally will not be subject to
United States Federal income tax unless (i) such gain is effectively connected
with a trade or business in the United States of the Non-United States Holder,
or (ii) in the case of a Non-United States Holder who is an individual, such
individual is present in the United States for 183 days or more in the taxable
year of such sale and certain other conditions are met.
A Non-United States Holder with gain described in clause (i) above will be
taxed on the net gain derived from the sale at regular graduated United States
Federal income tax rates. If a Non-United States Holder that
22
<PAGE> 23
is a foreign corporation has gain described under clause (i) above, it may also
be subject to an additional "branch profits tax" at a 30% rate (or such lower
rate as may be specified by an applicable income tax treaty). Unless an
applicable tax treaty provides otherwise, an individual Non-United States Holder
described in clause (ii) above will be subject to a flat 30% tax on the gain
derived from the sale, which may be offset by United States capital losses
(notwithstanding the fact that the individual is not considered a resident of
the United States).
TAX CONSIDERATIONS FOR NON-TENDERING PREFERRED SHAREHOLDERS
Non-Tendering Preferred Shareholders, whether or not they receive Special
Cash Payments, will not recognize any taxable gain or loss with respect to the
Shares as a result of the modification of the Provisions by the Proposed
Amendment.
TAX CONSIDERATIONS OF ACCRUED AND UNPAID DIVIDENDS PAYMENT
Payment of accrued and unpaid dividends received by the tendering Preferred
Shareholder with respect to rights to dividends declared prior to the Offer will
be treated as dividends to the extent of the Preferred Shareholder's allocable
portion of the Power Company's current and accumulated earnings and profits as
determined under United States Federal income tax principles and not as proceeds
from the sale of such Shares. Such dividend payments will be taxed to the
Preferred Shareholder in the same manner as prior dividend payments have
customarily been taxed.
TAX CONSIDERATIONS OF SPECIAL CASH PAYMENT
United States Holders. There is no direct authority concerning the Federal
income tax consequences of the receipt of Special Cash Payments. Narragansett
will, for information reporting purposes, treat Special Cash Payments as
ordinary non-dividend income to recipient United States Holders.
Non-United States Holders. Narragansett will treat Special Cash Payments
paid to a Non-United States Holder of Shares as subject to withholding of United
States Federal income tax at a 30% rate. However, Special Cash Payments that are
effectively connected with the conduct of a trade or business by the Non-United
States Holder within the United States are not subject to the withholding tax
(provided such Non-United States Holder provides two originals of Internal
Revenue Service ("IRS") Form 4224 stating that such Special Cash Payments are so
effectively connected), but instead are subject to United States Federal income
tax on a net income basis at applicable graduated individual or corporate rates.
Any such effectively connected Special Cash Payments received by a foreign
corporation may, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate (or such lower rate as may be specified by an
applicable income tax treaty).
A Non-United States Holder of Shares eligible for a reduced rate of United
States withholding tax pursuant to an income tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for refund with the
IRS.
BACKUP WITHHOLDING
ANY TENDERING PREFERRED SHAREHOLDER WHO FAILS TO COMPLETE AND SIGN THE
SUBSTITUTE FORM W-9 THAT IS INCLUDED IN THE APPLICABLE LETTER OF TRANSMITTAL
(OR, IN THE CASE OF A FOREIGN PREFERRED SHAREHOLDER, FORM W-8 OBTAINABLE FROM
THE DEPOSITARY) MAY BE SUBJECT TO A REQUIRED FEDERAL INCOME TAX BACKUP
WITHHOLDING OF 31% OF THE GROSS PROCEEDS PAYABLE TO SUCH PREFERRED SHAREHOLDER
PURSUANT TO THE OFFER. To prevent backup United States Federal income tax
withholding with respect to the purchase price of Shares purchased pursuant to
the Offer, a United States Holder must provide the Depositary with the Preferred
Shareholder's correct taxpayer identification number and certify that the
Preferred Shareholder is not subject to backup withholding of Federal income tax
by completing the Substitute Form W-9 included in the applicable Letter of
Transmittal. Certain Preferred Shareholders (including, among others, all
corporations and certain foreign shareholders)
23
<PAGE> 24
are exempt from backup withholding. For a corporate United States Holder to
qualify for such exemption, such Preferred Shareholder must provide the
Depositary with a properly completed and executed Substitute Form W-9 attesting
to its exempt status. In order for a foreign Preferred Shareholder to qualify as
an exempt recipient, the foreign holder must submit a Form W-8, Certificate of
Foreign Status, signed under penalties of perjury, attesting to that Preferred
Shareholder's exempt status. A copy of Form W-8 may be obtained from the
Depositary.
Unless a Preferred Shareholder provides the appropriate certification,
under the applicable law and regulations concerning "backup withholding" of
United States Federal income tax, the Depositary will be required to withhold,
and will withhold, 31% of the gross proceeds otherwise payable to such Preferred
Shareholder or other payee. The amount of any backup withholding from a payment
to a Preferred Shareholder will be allowed as a credit against such Preferred
Shareholder's United States Federal income tax liability and may entitle such
Preferred Shareholder to a refund, provided that the required information is
furnished to the IRS.
SOURCE AND AMOUNT OF FUNDS
Assuming that NEES purchases all outstanding Shares of each Series of
Preferred pursuant to the Offer, the total amount required by NEES to purchase
such Shares will be approximately $40 million, exclusive of the payment of
accrued dividends, but including fees and other expenses. NEES intends to fund
the Offer through the use of its general funds (which, in the ordinary course,
include funds from Narragansett) and funds borrowed pursuant to NEES' committed
lines of credit, including any bank revolving credit agreements. The interest
rates depend upon the timing, amount of borrowings, and market rates at that
time. NEES currently has regulatory authority to borrow $100 million and is
seeking to increase that amount. NEES has not had occasion to borrow monies for
a number of years.
Narragansett sells commercial paper directly to commercial paper dealers
who reoffer the commercial paper to investors.
TRANSACTIONS AND AGREEMENTS CONCERNING THE SHARES
Each of NEES and Narragansett has been advised by its directors and
executive officers that no directors or executive officers of the respective
companies own any Shares. Based upon the companies' records and upon information
provided to each company by its directors and executive officers, neither
company nor, to the knowledge of either, any of their subsidiaries, affiliates,
directors, or executive officers, or any associates of the foregoing, has
engaged in any transactions involving Shares during the 40 business days
preceding the date hereof. Neither company nor, to the knowledge of either, any
of their directors or executive officers or any associate of the foregoing is a
party to any contract, arrangement, understanding, or relationship relating
directly or indirectly to the Offer with any other person or entity with respect
to any securities of Narragansett.
FEES AND EXPENSES PAID TO DEALERS
DEALER MANAGER FEES
Merrill Lynch will act as Dealer Manager for NEES in connection with the
Offer. NEES has agreed to pay the Dealer Manager a fee of $.25 per Share for any
Shares tendered, accepted for payment, and paid for pursuant to the Offer and a
fee of $.25 per Share for any Shares that are not tendered pursuant to the Offer
but which vote in favor of the Proposed Amendment. The Dealer Manager will also
be reimbursed by NEES for its reasonable out-of-pocket expenses, including
attorneys' fees, and will be indemnified against certain liabilities, including
certain liabilities under the federal securities laws, in connection with the
Offer. The Dealer Manager has rendered, is currently rendering, and is expected
to continue to render various investment banking and other advisory services to
NEES and Narragansett. The Dealer Manager has received, and will continue to
receive, customary compensation from NEES and Narragansett for such services.
NEES has retained IBJ Schroder Bank & Trust Company as Depositary and Georgeson
& Company, Inc. as Information
24
<PAGE> 25
Agent in connection with the Offer. The Depositary and the Information Agent
will receive reasonable and customary compensation for their services and will
also be reimbursed for reasonable out-of-pocket expenses, including attorney
fees. Neither the Depositary nor the Information Agent has been retained to make
solicitations or recommendations in connection with the Offer.
SOLICITED TENDER FEES
Upon the terms and subject to the conditions of the Offer and pursuant to
Instruction 10 of the accompanying Letter of Transmittal and Proxy, NEES will
pay to designated brokers and dealers a solicitation fee of $.75 per Share for
any Shares tendered, accepted for payment, and paid for pursuant to the Offer
and for each Share not tendered but voted in favor of the Propsoed Amendment
(except that for transactions for beneficial owners equal to or exceeding 2,500
Shares, NEES will pay a solicitation fee of $.50 per Share, of which eighty
percent (80%) shall be paid to the Dealer Manager and twenty percent (20%) to
the Soliciting Dealer (which may be the Dealer Manager)). With respect to fees
payable pursuant to this paragraph involving transactions for beneficial owners
whose ownership is less than 2,500 Shares, any fees payable hereunder shall be
paid in full to the Dealer Manager unless a Soliciting Dealer is designated (as
described below), in which case such fee shall be payable in full to such
designated Soliciting Dealer (which designated Soliciting Dealer may be the
Dealer Manager). The Letters of Transmittal and Proxy must include the name of
an entity which obtained the tender or proxy and which is either (a) a broker or
dealer in securities, including the Dealer Manager in its capacity as a broker
or dealer, which is a member of a national securities exchange or of the
National Association of Securities Dealers, Inc. (NASD), (b) a foreign broker or
dealer not eligible for membership in the NASD which agrees to conform to the
NASD's Rules of Fair Practice in soliciting tenders outside the United States to
the same extent as though it were an NASD member, or (c) a bank or trust company
(each of which is referred to herein as a Soliciting Dealer). No solicitation
fee will be paid with respect to the vote of a Preferred Shareholder. No
solicitation fee shall be payable to a Soliciting Dealer with respect to the
tender of Shares, or delivery of a proxy unless the Letter of Transmittal and
Proxy accompanying such tender, or delivery of a proxy designates such
Soliciting Dealer. No solicitation fee shall be payable to a Soliciting Dealer
in respect of Shares registered in the name of such Soliciting Dealer unless
such Shares are held by such Soliciting Dealer as nominee and such Shares are
being tendered or delivered for the benefit of one or more beneficial owners
identified on the Letter of Transmittal or on the Notice of Solicited Tenders.
No solicitation fee shall be payable to a Soliciting Dealer if such Soliciting
Dealer is required for any reason to transfer the amount of such fee to a
depositing holder (other than itself). No solicitation fee shall be paid to a
Soliciting Dealer with respect to Shares tendered or delivered for such
Soliciting Dealer's own account. Soliciting Dealers will not be entitled to a
solicitation fee for Shares beneficially owned by such Soliciting Dealer. No
broker, dealer, bank, trust company, or other nominee shall be deemed to be the
agent of NEES, Narragansett, the Depositary, the Information Agent, or the
Dealer Manager for purposes of the Offer.
Soliciting Dealers will include any of the organizations described in
clauses (a), (b), and (c) above even when the activities of such organizations
in connection with the Offer consist solely of forwarding to clients materials
relating to the Offer, including the Letter of Transmittal and tendering Shares
as directed by beneficial owners thereof. No Soliciting Dealer is authorized to
make any recommendation to holders of Shares as to whether to tender or refrain
from tendering in the Offer. No assumption is made, in making payment to any
Soliciting Dealer, that its activities in connection with the Offer included any
activities other than those described above, and for all purposes noted in all
materials relating to the Offer, the term "solicit" shall be deemed to mean no
more than processing shares tendered or forwarding to customers materials
regarding the Offer.
STOCK TRANSFER TAXES
NEES will pay all stock transfer taxes, if any, payable on account of the
acquisition of Shares by NEES pursuant to the Offer, except in certain
circumstances where special payment or delivery procedures are utilized pursuant
to Instruction 6 of the accompanying Letter of Transmittal.
25
<PAGE> 26
SUMMARY OF FINANCIAL INFORMATION
Set forth below is certain historical financial information of
Narragansett. The historical financial information (other than the ratios of
earnings to fixed charges) was derived from the audited financial statements
included in Narragansett's Annual Report on Form 10-K for the year ended
December 31, 1996 and the unaudited consolidated financial statements included
in Narragansett's Quarterly Report on Form 10-Q for the quarter ended June 30,
1997.
CONDENSED INCOME STATEMENT DATA:
<TABLE>
<CAPTION>
(UNAUDITED)
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------- ---------------------
1996 1995 1997 1996
-------- -------- -------- --------
(THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C>
Operating Revenues.............................. $503,585 $499,113 $251,360 $243,755
Operating Income................................ 43,511 42,425 23,222 20,531
Allowance for Borrowed and Equity Funds Used
During Construction (credit).................. (263) (1,967) (58) (220)
Net Income...................................... 22,954 23,910 12,778 9,407
Preferred Stock Dividend Requirements........... 2,143 2,143 1,072 1,072
Earnings Applicable to Common Stock............. 20,811 21,767 11,706 8,335
Ratio of Earnings to Fixed Charges.............. 2.69 2.68 3.06(a) 2.58(a)
</TABLE>
- ---------------
(a) Ratio for the twelve months ended June 30.
CONDENSED BALANCE SHEET DATA (AT END OF PERIOD):
<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, JUNE 30,
--------------------- ---------------------
1996 1995 1997 1996
-------- -------- -------- --------
(THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS:
Net Utility Plant in Service.................... $554,791 $526,515 $556,915 $544,340
Construction Work in Progress................... 5,392 8,733 6,836 5,949
Cash and Cash Equivalents....................... 1,727 1,999 1,385 859
Other Current Assets............................ 88,211 102,206 84,110 92,016
Other Assets.................................... 56,881 60,168 54,672 59,917
-------- -------- -------- --------
$707,002 $699,621 $703,918 $703,081
======== ======== ======== ========
LIABILITIES:
Common Equity................................... $256,772 $245,021 $259,418 $247,977
Cumulative Preferred Stock...................... 36,500 36,500 36,500 36,500
Long-term Debt (less amounts due within one
year)......................................... 178,517 210,892 173,574 185,958
Current Liabilities............................. 126,688 107,500 129,338 132,868
Other Liabilities............................... 108,525 99,708 105,088 99,778
-------- -------- -------- --------
$707,002 $699,621 $703,918 $703,081
======== ======== ======== ========
</TABLE>
CERTAIN INFORMATION REGARDING NEES AND NARRAGANSETT;
INCORPORATION BY REFERENCE
Narragansett, a Rhode Island corporation, is a wholly owned subsidiary of
NEES. Narragansett provides approximately 330,000 customers with electric
service at retail. Its service territory, which includes urban, suburban, and
rural areas, covers about 839 square miles or 80% of the area of Rhode Island,
and encompasses
26
<PAGE> 27
27 cities and towns including the cities of Providence, East Providence,
Cranston, and Warwick. The population of the area is about 725,000 (1990 Census)
which represents about 72% of the total population of the state.
NEES and Narragansett are subject to the informational requirements of the
Exchange Act and in accordance therewith file reports and other information with
the SEC. Such reports and other information may be inspected and copied at the
public reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549; 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511; and Seven World Trade Center, Suite 1300, New York, New York 10048.
Copies of such material can be obtained from the Public Reference Section of the
SEC, 450 Fifth Street, N.W., Washington D.C. 20549 at prescribed rates. The SEC
maintains a Web site at http://www.sec.gov containing reports, proxy statements,
and other information regarding registrants that file electronically with the
SEC, including NEES and Narragansett. Reports, proxy materials, and other
information about NEES are also available at the offices of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005. In connection with the
Offer NEES has filed an Issuer Tender Offer Statement on Schedule 13E-4 with the
SEC that includes certain additional information relating to the Offer. NEES's
Schedule 13E-4 will not be available at the SEC's regional offices.
The following documents, which have heretofore been filed by NEES and
Narragansett with the SEC pursuant to the Exchange Act, are incorporated by
reference herein and shall be deemed a part hereof:
(1) Annual report on Form 10-K for the year ended December 31, 1996,
which contains or incorporates by reference financial statements and
financial statement schedules of NEES and Narragansett as of December 31,
1996, and for each of the three years in the period ended December 31,
1996, incorporates by reference or includes the related reports of Coopers
& Lybrand, independent certified public accountants;
(2) Quarterly reports on Form 10-Q for NEES for the quarters ended
March 31, 1997 and June 30, 1997;
(3) Quarterly reports on Form 10-Q for Narragansett for the quarters
ended March 31, 1997 and June 30, 1997;
(4) Reports on Form 8-K for NEES for the periods ended April 14, 1997,
May 20, 1997, and August 6, 1997; and
(5) Reports on Form 8-K for Narragansett for the periods ended July 3,
1997 and August 6, 1997.
All reports filed by NEES and Narragansett with the SEC pursuant to these
sections subsequent to the date of this Booklet and prior to the Expiration Date
(or any extension thereof) shall be incorporated herein by reference and shall
be deemed a part hereof on the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Booklet to the extent that a statement contained herein or
in any other subsequently filed documents which is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Booklet.
NEES and Narragansett hereby undertake to provide without charge to each
person to whom a copy of this Booklet has been delivered, upon the written or
oral request of such person, a copy of any or all of the documents referred to
above which have been or may be incorporated by reference in this Booklet, other
than exhibits to such documents. Written or oral requests for such copies should
be directed to the Treasurer, The Narragansett Electric Company, 25 Research
Drive, Westborough, Massachusetts 01582, telephone (508) 389-2000.
The information relating to NEES and Narragansett contained in this Booklet
does not purport to be comprehensive and should be read together with the
information contained in the documents incorporated by reference.
27
<PAGE> 28
MISCELLANEOUS
The Offer is not being made to, nor will NEES accept tenders from, owners
of Shares in any jurisdiction in which the Offer or its acceptance would not be
in compliance with the laws of such jurisdiction. NEES is not aware of any
jurisdiction where the making of the Offer or the tender of Shares would not be
in compliance with applicable law. If NEES becomes aware of any jurisdiction
where the making of the Offer or the tender of Shares is not in compliance with
any applicable law, NEES will make a good faith effort to comply with such law.
If, after such good faith effort, NEES cannot comply with such law, the Offer
will not be made to (nor will tenders be accepted from or on behalf of) the
owners of Shares residing in such jurisdiction. In any jurisdiction in which the
securities, blue sky, or other laws require the Offer to be made by a licensed
broker or dealer, the Offer will be deemed to be made on NEES's behalf by one or
more registered brokers or dealers licensed under the laws of such jurisdiction.
NEW ENGLAND ELECTRIC SYSTEM
THE NARRAGANSETT ELECTRIC COMPANY
The name "New England Electric System" means the trustee or trustees for the
time being (as trustee or trustees but not personally) under an agreement and
declaration of trust dated January 2, 1926, as amended, which is hereby referred
to, and a copy of which as amended has been filed with the Secretary of the
Commonwealth of Massachusetts. Any agreement, obligation or liability made,
entered into or incurred by or on behalf of New England Electric System binds
only its trust estate, and no shareholder, director, trustee, officer or agent
thereof assumes or shall be held to any liability therefor.
28
<PAGE> 29
The Letter of Transmittal and Proxy and, if applicable, certificates for
Shares should be sent or delivered by each tendering or voting Preferred
Shareholder of Narragansett or such Preferred Shareholder's broker, dealer,
bank, or trust company to the Depositary at one of its addresses set forth
below.
The Depositary is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C>
By Mail: By Hand or Overnight Delivery:
P.O. Box 84 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274-0084 Attn: Reorganization Department
Attn: Reorganization Department Securities Processing Window SC-1
By Facsimile: To Confirm:
(212) 858-2611 (212) 858-2103
</TABLE>
Any questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective telephone numbers and addresses
listed below. Requests for additional copies of this Booklet, the Letter of
Transmittal and Proxy, or other tender offer or proxy materials may be directed
to the Information Agent and such copies will be furnished promptly at the
companies' expense. Preferred Shareholders may also contact their broker,
dealer, commercial bank, trust company, or other nominee for assistance
concerning the Offer.
The Information Agent:
(LOGO)
Wall Street Plaza
New York, New York 10005
(800) 223-2064 (toll-free)
Banks and Brokers call collect:
(212) 440-9800
The Dealer Manager:
MERRILL LYNCH & CO.
World Financial Center
250 Vesey Street
New York, New York 10281
(888) ML4-TNDR (toll-free)
(888) 654-8637 (toll-free)
ATTENTION
Preferred Shareholders who have lost certificates, please call Boston
EquiServe, The Transfer Agent, at (617) 575-2000 for assistance.
<PAGE> 1
LETTER OF TRANSMITTAL AND PROXY
RELATING TO
SHARES OF 4.50% SERIES OF PREFERRED STOCK
OF
THE NARRAGANSETT ELECTRIC COMPANY
TENDERED PURSUANT TO THE OFFER TO PURCHASE FOR CASH
BY
NEW ENGLAND ELECTRIC SYSTEM,
DATED NOVEMBER 6, 1997,
FOR PURCHASE AT A PURCHASE PRICE OF
$ PER SHARE
AND/OR
VOTED PURSUANT TO THE PROXY STATEMENT,
DATED NOVEMBER 6, 1997,
OF
[LOGO] THE NARRAGANSETT ELECTRIC COMPANY
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME,
ON FRIDAY, DECEMBER 12, 1997, UNLESS THE OFFER IS EXTENDED (THE EXPIRATION
DATE).
THE PROXY CONTAINED IN THIS DOCUMENT IS IN RESPECT OF THE SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON FRIDAY, DECEMBER 12, 1997, OR ON SUCH DATE TO WHICH
THE MEETING IS ADJOURNED OR POSTPONED.
To: IBJ Schroder Bank & Trust Company (the Depositary)
By First-Class Mail: By Hand or Overnight Delivery:
IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company
P.O. Box 8-1 One State Street
Bowling Green Station New York, New York 10004
New York, New York 10274 Attn: Reorganization Department
Attn: Reorganization Department Securities Processing Window SC-1
By Facsimile: To Conform:
(212) 858-2611 (212) 858-2103
ATTENTION
THIS LETTER OF TRANSMITTAL AND PROXY IS TO BE USED BY BOTH (1) PREFERRED
SHAREHOLDERS WHO ARE TENDERING AND VOTING SHARES PURSUANT TO THE OFFER AND (2)
PREFERRED SHAREHOLDERS WHO ARE ONLY VOTING ON THE PROPOSED AMENDMENT AND NOT
TENDERING SHARES.
ANY PREFERRED SHAREHOLDER WHO HAS ANY QUESTIONS AS TO HOW TO COMPLETE THIS
LETTER OF TRANSMITTAL AND PROXY SHOULD CONTACT THE INFORMATION AGENT AT (800)
223-2064 (TOLL FREE) AND FOR BANKS AND BROKERS (212) 440-9918 (CALL COLLECT).
<PAGE> 2
All capitalized terms used herein and not defined herein have the meanings
ascribed to them in the Offer to Purchase and Proxy Statement.
PREFERRED SHAREHOLDERS (INCLUDING PREFERRED SHAREHOLDERS WHO ACQUIRE SHARES
SUBSEQUENT TO THE RECORD DATE) WILL NOT BE ABLE TO VALIDLY TENDER THEIR SHARES
UNLESS THEY HAVE SUBMITTED A DULY COMPLETED, VALID AND UNREVOKED PROXY
INDICATING THEIR VOTE FOR THE PROPOSED AMENDMENT OR INDICATE IN THE ACCOMPANYING
PROXY THEIR INTENTION TO VOTE FOR THE PROPOSED AMENDMENT AT THE SPECIAL MEETING.
NEW ENGLAND ELECTRIC SYSTEM, A MASSACHUSETTS VOLUNTARY ASSOCIATION (NEES), WILL
NOT BE REQUIRED TO ACCEPT FOR PAYMENT OR PAY FOR ANY SHARES TENDERED IF THE
PROPOSED AMENDMENT IS NOT APPROVED AND ADOPTED AT THE SPECIAL MEETING. PREFERRED
SHAREHOLDERS HAVE THE RIGHT TO VOTE ON THE PROPOSED AMENDMENT REGARDLESS OF
WHETHER THEY TENDER THEIR SHARES BY CASTING THEIR VOTE AND SIGNING THE PROXY
CONTAINED WITHIN THIS LETTER OF TRANSMITTAL AND PROXY OR BY VOTING IN PERSON AT
THE SPECIAL MEETING. IF THE PROPOSED AMENDMENT IS APPROVED AND ADOPTED, THE
NARRAGANSETT ELECTRIC COMPANY, A RHODE ISLAND CORPORATION AND A DIRECT UTILITY
SUBSIDIARY OF NEES (NARRAGANSETT), WILL MAKE A SPECIAL CASH PAYMENT TO EACH
PREFERRED SHAREHOLDER WHO VOTED IN FAVOR OF THE PROPOSED AMENDMENT, PROVIDED
THAT THEIR SHARES ARE NOT TENDERED PURSUANT TO THE OFFER.
PREFERRED SHAREHOLDERS WHO PURCHASE OR WHOSE PURCHASE SETTLES OR IS
REGISTERED AFTER THE CLOSE OF BUSINESS ON NOVEMBER 12, 1997 (THE RECORD DATE)
AND WHO WISH TO TENDER IN THE OFFER MUST ARRANGE WITH THEIR SELLER TO RECEIVE A
DULY COMPLETED, VALID AND UNREVOKED PROXY (WHICH MAY BE IN THE FORM OF AN
IRREVOCABLE ASSIGNMENT OF PROXY AS SET FORTH IN THIS LETTER OF TRANSMITTAL AND
PROXY) FROM THE HOLDER ON THE RECORD DATE OF SUCH SHARES. IN ORDER TO FACILITATE
RECEIPT OF PROXIES, SHARES SHALL, DURING THE PERIOD WHICH COMMENCES NOVEMBER 10,
1997 (TWO BUSINESS DAYS PRIOR TO THE RECORD DATE) AND WHICH WILL END AT THE
CLOSE OF BUSINESS ON THE EXPIRATION DATE, TRADE IN THE OVER-THE-COUNTER MARKET
WITH A PROXY PROVIDING THE TRANSFEREE WITH THE RIGHT TO VOTE SUCH ACQUIRED
SHARES IN THE PROXY SOLICITATION.
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY.
NOTE: IF SHARES ARE BEING TENDERED, THE REMAINDER OF THIS LETTER OF TRANSMITTAL
AND PROXY MUST BE COMPLETED, INCLUDING THE SUBSTITUTE FORM W-9 BELOW. IF
SHARES ARE NOT BEING TENDERED, YOU NEED ONLY COMPLETE THE BOXES BELOW
TITLED "PROXY" (OR, IF APPLICABLE, "IRREVOCABLE PROXY") AND
"SIGNATURES(S) OF REGISTERED HOLDER(S)" AND THE SUBSTITUTE FORM W-9.
The name "New England Electric System" means the trustee or trustees for the
time being (as trustee or trustees but not personally) under an agreement and
declaration of trust dated January 2, 1926, as amended, which is hereby referred
to, and a copy of which as amended has been filed with the Secretary of the
Commonwealth of Massachusetts. Any agreement, obligation or liability made,
entered into or incurred by or on behalf of New England Electric System binds
only its trust estate, and no shareholder, director, trustee, officer or agent
thereof assumes or shall be held to any liability therefor.
2
<PAGE> 3
PLEASE COMPLETE:
- --------------------------------------------------------------------------------
PROXY
The undersigned hereby appoints John G. Cochrane, Craig L. Eaton, Richard
Nadeau and Robert King Wulff, or any of them, as proxies, each with the power to
appoint his substitute, and hereby authorizes them to represent and to vote as
designated hereunder and in their discretion with respect to any other business
properly brought before the Special Meeting, all the shares (Shares) of 4.50%
Series of Preferred Stock of The Narragansett Electric Company (Narragansett)
which the undersigned is entitled to vote at the Special Meeting of Shareholders
to be held on Friday, December 12, 1997, or any adjournment(s) or
postponement(s) thereof.
NOTE: IF YOU ARE VOTING BUT NOT TENDERING SHARES, DO NOT SEND ANY SHARE
CERTIFICATES WITH THIS LETTER OF TRANSMITTAL AND PROXY.
THIS LETTER OF TRANSMITTAL AND PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF NARRAGANSETT. The proxy contained herein, when properly executed,
will be voted in the manner directed herein by the undersigned shareholder(s).
If no direction is made, the proxy will be voted FOR Item 1.
INDICATE YOUR VOTE BY AN (X). THE BOARD OF DIRECTORS OF NARRAGANSETT
RECOMMENDS VOTING FOR ITEM 1.
HOLDERS OF SHARES WHO WISH TO TENDER THEIR SHARES MUST VOTE "FOR" THE
PROPOSED AMENDMENT EITHER BY SUBMITTING THIS PROXY OR BY VOTING AT THE SPECIAL
MEETING.
ITEM 1.
To delete in its entirety Subparagraph 10(d) from the Preferred Stock
Provisions (as previously amended) of Narragansett, limiting Narragansett's
ability to issue unsecured indebtedness.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
NOTE: IF SHARES ARE BEING VOTED "FOR" THE PROPOSED AMENDMENT, THE SUBSTITUTE
FORM W-9 BELOW SHOULD BE COMPLETED TO AVOID BACK-UP WITHHOLDING ON THE
SPECIAL CASH PAYMENT.
SHARES REPRESENTED BY ALL PROPERLY EXECUTED PROXIES WILL BE VOTED IN
ACCORDANCE WITH INSTRUCTIONS APPEARING ON THIS PROXY. IN THE ABSENCE OF SPECIFIC
INSTRUCTIONS, PROXIES WILL BE VOTED "FOR" THE PROPOSED AMENDMENT AND OTHERWISE
IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF
NARRAGANSETT, AND IN THE DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING.
Any holder of Shares held of record on the Record Date in the name of
another holder must establish to the satisfaction of Narragansett such holder's
entitlement to exercise or transfer this Proxy. This will ordinarily require an
assignment by such record holder in blank, or if not in blank, to and from each
successive transferee, including the holder, with each signature guaranteed by
an Eligible Institution. A form of irrevocable assignment of proxy has been
provided herein.
Please check box if you plan to attend the Special Meeting. [ ]
- --------------------------------------------------------------------------------
3
<PAGE> 4
PLEASE COMPLETE IF APPLICABLE:
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED(1)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE USE PRE ADDRESSED LABEL OR FILL IN, IF
BLANK, EXACTLY AS NAME(S) APPEAR(S) ON SHARE SHARE CERTIFICATE(S) AND SHARE(S) TENDERED/VOTED
CERTIFICATE(S) AND SHARE(S) TENDERED) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)(1)
- ---------------------------------------------------------------------------------------------------------------------
NUMBER OF
TOTAL NUMBER SHARES NOT
OF SHARES TENDERED BUT
REPRESENTED NUMBER AS TO WHICH
SHARE CERTIFICATE BY SHARE OF SHARES PROXIES
NUMBER(S)(2) CERTIFICATE(S)(2) TENDERED(3) GIVEN ONLY
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
---------------------------------------------------------------------
Total Shares:
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) If tendering or voting Share(s), please fill in table exactly as
information appears on the Certificate(s).
(2) Need not be completed by Preferred Shareholders tendering by book-entry
transfer.
(3) Unless otherwise indicated, it will be assumed that all Shares represented
by any Certificate(s) delivered to the Depositary are being tendered and a
proxy is being delivered. See Instruction 4. You must vote "FOR" the
Proposed Amendment with respect to any Shares tendered.
- --------------------------------------------------------------------------------
NOTE: IF YOU ARE DELIVERING A PROXY BUT NOT TENDERING SHARES, DO NOT SEND ANY
SHARE CERTIFICATES.
4
<PAGE> 5
PLEASE COMPLETE IF APPLICABLE:
- --------------------------------------------------------------------------------
SIGNATURE(S) OF REGISTERED HOLDER(S)*
- --------------------------------------------------------------------------------
(SIGNATURE)
- --------------------------------------------------------------------------------
(SIGNATURE)
Dated: , 1997
--------------------------------------------------------------------
Name(s):
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
----------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Daytime Area Code and Telephone No.:
--------------------------------------------
* Must be signed by the registered holder(s) exactly as name(s) appear(s) on the
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in
a fiduciary or representative capacity, please set forth full title and see
Instruction 5.
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
-----------------------------------------------------------
Name:
---------------------------------------------------------------------------
Name of Firm:
-------------------------------------------------------------------
(PLEASE PRINT)
Address of Firm:
----------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.:
----------------------------------------------------
Dated: , 1997
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
<PAGE> 6
IF SELLING SHARES ON OR AFTER NOVEMBER 10, 1997, A RECORD HOLDER MUST
COMPLETE THE FOLLOWING IRREVOCABLE PROXY.
PLEASE SIGN THIS TO IRREVOCABLY TRANSFER A PREFERRED STOCK PROXY TO A
SUBSEQUENT HOLDER OF PREFERRED STOCK WHO WAS NOT A HOLDER OF RECORD ON NOVEMBER
12, 1997.
- --------------------------------------------------------------------------------
IRREVOCABLE PROXY *
WITH RESPECT TO SHARES OF THE
4.50% SERIES OF PREFERRED STOCK (THE SHARES) OF
THE NARRAGANSETT ELECTRIC COMPANY (NARRAGANSETT)
The undersigned hereby irrevocably appoints:
------------------------------------
TYPE OR PRINT NAME OF TRANSFEREE
as attorney and proxy, with full power of substitution, to vote and otherwise
act for and in the name(s) of the undersigned with respect to the Shares
indicated below which were held of record by the undersigned on November 12,
1997, in the manner in which the undersigned would be entitled to vote and
otherwise act in respect of such Shares on any and all matters.
This proxy shall be effective whether or not the Shares indicated below are
tendered in the Offer.
This instrument supersedes and revokes any and all previous appointments of
proxies heretofore made by the undersigned with respect to the Shares indicated
below as to any and all matters. THIS PROXY IS IRREVOCABLE AND IS COUPLED WITH
AN INTEREST.
All authority conferred or agreed to be conferred herein shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, legal and
personal representatives, successors in interest and assigned of the
undersigned. The undersigned understands that tenders of Shares pursuant to any
of the procedures described in the Offer to Purchase and Proxy Statement and in
this Letter of Transmittal and Proxy will constitute a binding agreement between
the undersigned and Narragansett upon the terms and subject to the conditions of
the Offer.
DESCRIPTION OF PREFERRED STOCK
<TABLE>
<CAPTION>
CERTIFICATE NUMBER(S) AGGREGATE NUMBER
(ATTACH LIST IF NECESSARY) OF SHARES
- -------------------------- ----------------
<S> <C>
1.
------------------------ --------------------------
2.
------------------------ --------------------------
3.
------------------------ --------------------------
Total
--------------------------
</TABLE>
- ---------------
* This irrevocable proxy must be signed on the next page to be effective.
- --------------------------------------------------------------------------------
6
<PAGE> 7
- --------------------------------------------------------------------------------
IRREVOCABLE PROXY
SIGNATURE(S) OF RECORD OR AUTHORIZED SIGNATORY*
- --------------------------------------------------------------------------------
(SIGNATURE)
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Dated: , 1997
--------------------------------------------------------------------
Tax Identification or Social Security No(s)
-------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE)
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Dated: , 1997
--------------------------------------------------------------------
Tax Identification or Social Security No(s)
-------------------------------------
* Must be signed by the registered holder(s) exactly as name(s) appear(s) on the
Record Date on the stock certificate(s) or on a security position listing or
by person(s) authorized to become registered holder(s) by certificates and
documents transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, agent or
other person acting in a fiduciary or representative capacity, please provide
the following information and see Instruction 5.
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
-----------------------------------------------------------
Name:
---------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title):
----------------------------------------------------------
Name of Firm:
-------------------------------------------------------------------
(PLEASE PRINT)
Address of Firm:
----------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.:
----------------------------------------------------
Dated: , 1997
-------------------------------------------------------------------
- --------------------------------------------------------------------------------
7
<PAGE> 8
NOTE: IF SHARES ARE BEING TENDERED, THE REMAINDER OF THIS LETTER OF TRANSMITTAL
AND PROXY MUST BE COMPLETED, INCLUDING THE SUBSTITUTE FORM W-9 BELOW OR A FORM
W-8, AS APPLICABLE.
DELIVERY OF THIS LETTER OF TRANSMITTAL AND PROXY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER
THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN
THIS LETTER OF TRANSMITTAL AND PROXY IN THE APPROPRIATE SPACE THEREFOR PROVIDED
ABOVE AND, IF YOU ARE TENDERING ANY SHARES OR VOTING "FOR" THE PROPOSED
AMENDMENT, COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW OR A FORM W-8, AS
APPLICABLE. SEE INSTRUCTION 8 AND "IMPORTANT TAX INFORMATION" BELOW.
DO NOT SEND ANY CERTIFICATES TO NEES, NARRAGANSETT, MERRILL LYNCH & CO., OR
GEORGESON & COMPANY, INC.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL AND PROXY SHOULD
BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL AND PROXY IS COMPLETED.
This Letter of Transmittal and Proxy is to be used if (a) Certificates are
to be forwarded herewith, (b) delivery of Shares is to be made by book-entry
transfer pursuant to the procedures set forth under the heading Terms of the
Offer -- Procedure for Tendering Shares in the Offer to Purchase and Proxy
Statement (as defined below) or (c) Shares are being voted in connection with
the Offer.
Preferred Shareholders who wish to tender Shares but cannot deliver their
Shares and all other documents required hereby to the Depositary on or prior to
the Expiration Date must tender their Shares pursuant to the guaranteed delivery
procedure set forth under the heading Terms of the Offer -- Procedure for
Tendering Shares -- Guaranteed Delivery Procedure in the Offer to Purchase and
Proxy Statement. See Instruction 2. DELIVERY OF DOCUMENTS TO NEES, NARRAGANSETT
OR A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE A VALID DELIVERY.
PLEASE COMPLETE:
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE ENCLOSED HEREWITH.
A HOLDER TENDERING SHARES PURSUANT TO THIS LETTER OF TRANSMITTAL AND PROXY
MUST CHECK ONE OF THE FOLLOWING BOXES:
[ ] A duly completed, valid and unrevoked proxy indicating a vote "FOR" the
Proposed Amendment is included herein.
[ ] A vote "FOR" the Proposed Amendment will be cast at the Special Meeting.
- --------------------------------------------------------------------------------
8
<PAGE> 9
(BOXES BELOW FOR USE BY ELIGIBLE INSTITUTIONS ONLY)
<TABLE>
<S> <C>
- ---------------------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE
FOLLOWING:
Name of tendering institution:
-----------------------------------------------------------
(PLEASE PRINT)
Check applicable box: [ ] DTC [ ] PDTC
Account No.
------------------------------------------------------------------------------
Transaction Code No.
---------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY AND PROXY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of tendering Preferred Shareholder(s):
-------------------------------------------
-----------------------------------------------------------------------------------------
(PLEASE PRINT)
Date of execution of Notice of Guaranteed Delivery and Proxy:
----------------------------
Name of institution that guaranteed delivery:
--------------------------------------------
If delivery is by book-entry transfer:
Name of tendering institution:
-----------------------------------------------------------
Account No. at [ ] DTC or [ ] PDTC
-------------------------------------------------------- (CHECK ONE)
Transaction Code No.
---------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
A HOLDER ELECTING TO TENDER SHARES PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND PROXY
MUST CHECK ONE OF THE FOLLOWING BOXES:
[ ] A duly completed, valid and unrevoked proxy indicating a vote "FOR" the Proposed
Amendment was included with the Notice of Guaranteed Delivery and Proxy previously sent
to the Depositary.
[ ] A duly completed, valid and unrevoked proxy indicating a vote "FOR" the Proposed
Amendment is being delivered pursuant to a Notice of Guaranteed Delivery and Proxy
previously sent to the Depositary.
[ ] A vote "FOR" the Proposed Amendment will be cast at the Special Meeting.
</TABLE>
- --------------------------------------------------------------------------------
9
<PAGE> 10
NOTE: SIGNATURES MUST BE PROVIDED ABOVE
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The above signed hereby tenders to NEES the shares in the amount set forth
in the box above labeled "Description of Shares Tendered" pursuant to NEES'
offer to purchase any and all of the outstanding shares of the 4.50% Series of
Preferred Stock (the Shares) of Narragansett, shown above as to which this
Letter of Transmittal and Proxy is applicable at the purchase price per Share
shown above (the Purchase Price), net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase and Proxy
Statement, dated November 6, 1997 (the Booklet), receipt of which is hereby
acknowledged, and in this Letter of Transmittal and Proxy (which together,
constitute the Offer). PREFERRED SHAREHOLDERS WHO WISH TO TENDER THEIR SHARES
PURSUANT TO THE OFFER MUST VOTE IN FAVOR OF THE PROPOSED AMENDMENT TO
NARRAGANSETT'S PREFERRED STOCK PROVISIONS AS PREVIOUSLY AMENDED ON MARCH 23,
1993 (THE PROVISIONS), AS SET FORTH IN THE BOOKLET (THE PROPOSED AMENDMENT). THE
OFFER IS CONDITIONED UPON THE PROPOSED AMENDMENT BEING APPROVED AND ADOPTED AT
THE SPECIAL MEETING (AS DEFINED IN THE BOOKLET). See Proposed Amendment and
Proxy Solicitation, Terms of the Offer -- Extension of Tender Period;
Termination; Amendments and Terms of the Offer -- Certain Conditions of the
Offer in the Booklet.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of any such extension or amendment), the above signed
hereby sells, assigns and transfers to, or upon the order of, NEES all right,
title and interest in and to all the Shares that are being tendered hereby and
hereby constitutes and appoints IBJ Schroder Bank & Trust Company (the
Depositary) the true and lawful agent and attorney-in-fact of the above signed
with respect to such Shares, with full power of substitution (such power of
attorney being an irrevocable power coupled with an interest), to (a) deliver
certificates for such Shares, or transfer ownership of such Shares on the
account books maintained by any of the Book-Entry Transfer Facilities, together,
in any such case, with all accompanying evidences of transfer and authenticity,
to or upon the order of NEES, (b) present such Shares for registration and
transfer on the books of Narragansett and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of such Shares, all in accordance
with the terms of the Offer.
The above signed hereby represents and warrants that the above signed has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and that, when and to the extent the same are accepted for
payment by NEES, NEES will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, charges, encumbrances,
conditional sales agreements or other obligations relating to the sale or
transfer thereof, and the same will not be subject to any adverse claims. The
above signed will, upon request, execute and deliver any additional documents
deemed by the Depositary or NEES to be necessary or desirable to complete the
sale, assignment and transfer of the Shares tendered hereby.
All authority herein conferred or agreed to be conferred shall not be
affected by, and shall survive, the death or incapacity of the above signed, and
any obligations of the above signed hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the above signed. Except as
stated in the Offer, this tender is irrevocable.
The above signed understands that tenders of Shares pursuant to any one of
the procedures described under the heading Terms of the Offer -- Procedure for
Tendering Shares in the Booklet and in the instructions hereto will constitute
the above signed's acceptance of the terms and conditions of the Offer,
including the above signed's representation and warranty that (a) the above
signed has a net long position in the Shares being tendered within the meaning
of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended
(the Exchange Act), and (b) the tender of such Shares complies with Rule 14e-4.
NEES' acceptance for payment of Shares tendered pursuant to the Offer will
constitute a binding agreement between the above signed and NEES upon the terms
and subject to the conditions of the Offer.
10
<PAGE> 11
The above signed recognizes that, under certain circumstances set forth in
the Booklet, NEES may terminate or amend the Offer or may not be required to
purchase any of the Shares tendered hereby. In either event, the above signed
understands that certificate(s) for any Shares not tendered or not purchased
will be returned to the above signed.
Unless otherwise indicated in the box below under the heading "Special
Payment Instructions," please issue the check for the Purchase Price of any
Shares purchased, and/or return any Shares not tendered or not purchased, in the
name(s) of the above signed (and, in the case of Shares tendered by book-entry
transfer, by credit to the account at the Book-Entry Transfer Facility
designated above). Unless otherwise indicated in the box below under the heading
"Special Delivery Instructions," please mail the check for the Purchase Price of
any Shares purchased and/or any certificates for Shares not tendered or not
purchased (and accompanying documents, as appropriate) to the above signed at
the address shown below. In the event that both "Special Payment Instructions"
and "Special Delivery Instructions" are completed, please issue the check for
the Purchase Price of any Shares purchased and/or return any Shares not tendered
or not purchased in the name(s) of, and mail said check and/or any certificates
to, the person(s) so indicated. The above signed recognizes that NEES has no
obligation, pursuant to the "Special Payment Instructions," to transfer any
Shares from the name of the registered holder(s) thereof if NEES does not accept
for payment any of the Shares so tendered.
11
<PAGE> 12
PLEASE COMPLETE IF APPLICABLE:
- --------------------------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
SEE INSTRUCTIONS 4, 6, AND 7
To be completed ONLY if the check for the Purchase Price of Shares
purchased and/or certificates for Shares not tendered or not purchased are
to be issued in the name of someone other than the above signed.
Issue: [ ] Check [ ] Certificate(s) to:
Name
-------------------------------------------------------------------
(PLEASE PRINT)
Address
----------------------------------------------------------------
-----------------------------------------------------------------------
(INCLUDE ZIP CODE)
-----------------------------------------------------------------------
(TAX IDENTIFICATION OR
SOCIAL SECURITY NUMBER)*
* SEE SUBSTITUTE FORM W-9 BELOW.
Credit Shares delivered by book-entry transfer and not purchased to
the Book-Entry Transfer Facility Account set forth below:
[ ] DTC [ ] PDTC
Account No.:
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
SEE INSTRUCTIONS 4, 6, AND 7
To be completed ONLY if the check for the Purchase Price of Shares
purchased and/or certificates for Shares not tendered or not purchased are
to be mailed to someone other than the above signed or to the above signed
at an address other than that shown below the above signed's signature(s).
Mail: [ ] Check [ ] Certificate(s) to:
Name
-------------------------------------------------------------------
(PLEASE PRINT)
Address
----------------------------------------------------------------
-----------------------------------------------------------------------
(INCLUDE ZIP CODE)
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN AND
WISH TO TENDER HAVE BEEN LOST, DESTROYED OR STOLEN. (SEE INSTRUCTION 12.)
Number of Shares represented by lost, destroyed or stolen certificates:
--------------------------------------
12
<PAGE> 13
SOLICITED TENDERS
(SEE INSTRUCTION 10)
As provided in the Booklet and Instruction 10 to the Letter of Transmittal
and Proxy, NEES will pay to any Soliciting Dealer, as defined in Instruction 10,
a solicitation fee of $.75 per Share for any Shares tendered, accepted for
payment and paid pursuant to the Offer and for any Shares not tendered but voted
in favor of the Proposed Amendment (except that for transactions for beneficial
owners equal to or exceeding 2,500 Shares, NEES will pay a solicitation fee of
$.50 per Share). Solicitation fees payable in transactions for beneficial owners
of 2,500 or more Shares shall be paid 80% to the Dealer Manager and 20% to the
Soliciting Dealers (which may be the Dealer Manager). However, Soliciting
Dealers will not be entitled to a solicitation fee for Shares beneficially owned
by such Soliciting Dealer.
The undersigned represents that the Soliciting Dealer which solicited and
obtained this tender is:
Name of Firm:
-------------------------------------------------------------------
(PLEASE PRINT)
Name of Individual Broker or Financial Consultant:
------------------------------
Telephone Number of Broker or Financial Consultant:
-----------------------------
Identification Number (if known):
-----------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
The following to be completed ONLY if customer's Shares held in nominee
name are tendered. (ATTACH ADDITIONAL LIST IF NECESSARY.)
<TABLE>
<S> <C>
NAME OF BENEFICIAL OWNER NUMBER OF SHARES TENDERED
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The acceptance of compensation by such Soliciting Dealer will constitute a
representation by it that (a) it has complied with the applicable requirements
of the Exchange Act and the applicable rules and regulations thereunder, in
connection with such solicitation; (b) it is entitled to such compensation for
such solicitation under the terms and conditions of the Offer (unless such
solicitation fee is directed to another Soliciting Dealer); (c) in soliciting
tenders of Shares, it has used no soliciting materials other than those
furnished by NEES; and (d) if it is a foreign broker or dealer not eligible for
membership in the National Association of Securities Dealers, Inc. (the NASD),
it has agreed to conform to the NASD's Rules of Fair Practice in making the
solicitations.
The payment of compensation to any Soliciting Dealer is dependent on such
Soliciting Dealer returning a Notice of Solicited Tenders to the Depositary.
(IF SHARES ARE BEING TENDERED AND/OR VOTED, PLEASE ALSO COMPLETE
SUBSTITUTE FORM W-9 BELOW OR A FORM W-8, AS APPLICABLE)
SIGN HERE:
----------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF REGISTERED HOLDER(S))
13
<PAGE> 14
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal and Proxy must be guaranteed by a firm
that is a member of a registered national securities exchange or the NASD, or by
a commercial bank or trust company having an office or correspondent in the
United States which is a participant in an approved Signature Guarantee
Medallion Program (an Eligible Institution). Signatures on this Letter of
Transmittal and Proxy need not be guaranteed (a) if this Letter of Transmittal
and Proxy is signed by the registered holder(s) of the Shares (which term, for
purposes of this document, shall include any participant in one of the
Book-Entry Transfer Facilities whose name appears on a security position listing
as the owner of Shares) tendered herewith and such holder(s) has not completed
the box above under the heading "Special Payment Instructions" or the box above
under the heading "Special Delivery Instructions" on this Letter of Transmittal
and Proxy, (b) if such Shares are tendered for the account of an Eligible
Institution or (c) if this Letter of Transmittal and Proxy is being used solely
for the purpose of voting Shares which are not being tendered pursuant to the
Offer. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND PROXY AND SHARES. This Letter of
Transmittal and Proxy is to be used if (a) certificates are to be forwarded
herewith, (b) delivery of Shares is to be made by book-entry transfer pursuant
to the procedures set forth under the heading Terms of the Offer -- Procedure
for Tendering Shares in the Booklet or (c) Shares are being voted in connection
with the Offer. Certificates for all physically delivered Shares, or a
confirmation of a book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facilities of Shares delivered electronically, as well as a
properly completed and duly executed Letter of Transmittal and Proxy (or
facsimile thereof) and any other documents required by this Letter of
Transmittal and Proxy, must be received by the Depositary at one of its
addresses set forth on the front page of this Letter of Transmittal and Proxy on
or prior to the Expiration Date with respect to all Shares. Preferred
Shareholders who wish to tender their Shares yet who cannot deliver their Shares
and all other required documents to the Depositary on or prior to the Expiration
Date must tender their Shares pursuant to the guaranteed delivery procedure set
forth under the heading Terms of the Offer -- Procedure for Tendering Shares in
the Booklet. Pursuant to such procedure: (i) such tender must be made by or
through an Eligible Institution, (ii) a properly completed and duly executed
Notice of Guaranteed Delivery and Proxy in the form provided by NEES (with any
required signature guarantees) must be received by the Depositary on or prior to
the applicable Expiration Date and (iii) the certificates for all physically
delivered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at one of the Book-Entry Transfer Facilities of Shares
delivered electronically, as well as a properly completed and duly executed
Letter of Transmittal and Proxy (or facsimile thereof) and any other documents
required by this Letter of Transmittal and Proxy must be received by the
Depositary within three New York Stock Exchange (NYSE) trading days after the
date of execution of such Notice of Guaranteed Delivery and Proxy, all as
provided under the heading Terms of the Offer -- Procedure for Tendering Shares
in the Booklet. A NYSE trading day is any day on which the NYSE is open for
business.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
OPTION AND RISK OF THE TENDERING PREFERRED SHAREHOLDER. IF CERTIFICATES FOR
SHARES ARE SENT BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED.
No alternative, conditional or contingent tenders will be accepted. See
Terms of the Offer -- Number of Shares; Purchase Price; Expiration Date;
Dividends in the Booklet. By executing this Letter of Transmittal and Proxy (or
facsimile thereof), the tendering Preferred Shareholder waives any right to
receive any notice of the acceptance for payment of the Shares.
3. VOTING. PREFERRED SHAREHOLDERS (INCLUDING PREFERRED SHAREHOLDERS WHO
ACQUIRE SHARES SUBSEQUENT TO THE RECORD DATE) WHO WISH TO TENDER THEIR SHARES
PURSUANT TO THE OFFER MUST VOTE IN FAVOR OF THE PROPOSED AMENDMENT TO
NARRAGANSETT'S PROVISIONS, AS SET FORTH IN THE BOOKLET. THE OFFER IS CONDITIONED
UPON THE PROPOSED AMENDMENT BEING APPROVED AND
14
<PAGE> 15
ADOPTED AT THE SPECIAL MEETING. In addition, Preferred Shareholders have the
right to vote on the Proposed Amendment regardless of whether they tender their
Shares by casting their vote and duly executing the Proxy included in this
Letter of Transmittal and Proxy or by voting in person at the Special Meeting.
By executing a Notice of Guaranteed Delivery and Proxy, a Preferred Shareholder
is deemed to have tendered the Shares described in such Notice of Guaranteed
Delivery and Proxy and to have voted such Shares in accordance with the proxy
contained therein. If no vote is indicated on an otherwise properly executed
proxy contained within this Letter of Transmittal and Proxy (or within a Notice
of Guaranteed Delivery and Proxy), then all Shares in respect of such proxy will
be voted in favor of the Proposed Amendment. See Proposed Amendment and Proxy
Solicitation in the Booklet. The Offer is being sent to all persons in whose
name Shares are registered on the books of Narragansett on November 6, 1997 as
well as to all persons in whose name Shares are registered on November 12, 1997,
which is the Record Date. Preferred Shareholders who purchase or whose purchase
is registered after the Record Date and who wish to tender in the Offer must
arrange with their seller to receive a proxy from the holder of record on the
Record Date of such Shares. Any holder of Shares held of record on the Record
Date in the name of another holder must establish to the satisfaction of
Narragansett such holder's entitlement to exercise or transfer such Proxy. This
will ordinarily require an assignment by such record holder in blank, or if not
in blank, to and from each successive transferee, including the holder, with
each signature guaranteed by an Eligible Institution. See Instruction 5. In
order to facilitate receipt of proxies, Shares shall, during the period which
commences November 10, 1997 and which will end at the close of business on the
Expiration Date, trade in the over-the-counter market with a proxy providing the
transferee with the right to vote such acquired shares in the Proxy
Solicitation. No record date is fixed for determining which persons are
permitted to tender Shares. However, only the holders of record, or holders who
acquire an assignment of proxy from such holders, are permitted to vote for the
Proposed Amendment and thereby validly tender Shares pursuant to the Offer. Any
person who is the beneficial owner but not the record holder of Shares must
arrange for the record transfer of such Shares prior to tendering or direct the
record holder to tender on behalf of the beneficial holder.
4. PARTIAL TENDERS. NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY BOOK-
ENTRY TRANSFER. If fewer than all the Shares represented by any certificate
delivered to the Depositary are to be tendered, fill in the number of Shares
that are to be tendered in the box above under the heading "Description of
Shares Tendered." In such case, a new certificate for the remainder of the
Shares represented by the old certificate will be sent to the person(s) signing
this Letter of Transmittal and Proxy, unless otherwise provided in the box above
under the heading "Special Payment Instructions" or "Special Delivery
Instructions," as promptly as practicable following the expiration or
termination of the Offer. All Shares represented by certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL AND PROXY AND NOTICE OF GUARANTEED
DELIVERY AND PROXY; STOCK POWERS AND ENDORSEMENTS. If either this Letter of
Transmittal and Proxy or the Notice of Guaranteed Delivery and Proxy (together,
the Tender and Proxy Documents) is signed by the registered holder(s) of the
Shares tendered hereby, the signature(s) must correspond with the name(s) as
written on the face of the certificates without alteration, enlargement or any
change whatsoever.
If any of the Shares tendered or voted under either Tender and Proxy
Document is held of record by two or more persons, all such persons must sign
such Tender and Proxy Document. If any of the Shares tendered or voted under
either Tender and Proxy Document are registered in different names or different
certificates, it will be necessary to complete, sign and submit as many separate
Tender and Proxy Documents as there are different registrations of certificates.
If either Tender and Proxy Document is signed by the registered holder(s)
of the Shares tendered hereby, no endorsements of certificates or separate stock
powers are required unless payment of the Purchase Price is to be made to, or
Shares not tendered or not purchased are to be registered in the name of, any
person other than the registered holder(s). Signatures on any such certificates
or stock powers must be guaranteed by an Eligible Institution. See
Instruction 1.
15
<PAGE> 16
If this Letter of Transmittal and Proxy is signed by a person other than
the registered holder(s) of the Shares tendered hereby, certificates must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on the certificates
for such Shares. Signature(s) on any such certificates or stock powers must be
guaranteed by an Eligible Institution. See Instruction 1.
If either Tender and Proxy Document or any certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and proper evidence
satisfactory to NEES of the authority of such person so to act must be
submitted.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, NEES
will pay or cause to be paid any stock transfer taxes with respect to the sale
and transfer of any Shares to it or its order pursuant to the Offer. If,
however, payment of the Purchase Price is to be made to, or Shares not tendered
or not purchased are to be registered in the name of, any person other than the
registered holder(s), or if tendered Shares are registered in the name of any
person other than the person(s) signing this Letter of Transmittal and Proxy,
the amount of any stock transfer taxes (whether imposed on the registered
holder(s), such other person or otherwise) payable on account of the transfer to
such person will be deducted from the Purchase Price unless satisfactory
evidence of the payment of such taxes, or exemption therefrom, is submitted.
Each Preferred Shareholder will be responsible for paying any income or gross
receipts taxes imposed by any jurisdiction by reason of the Special Cash Payment
(as defined in the Booklet) and/or the sale of the Shares in the Offer. See
Terms of the Offer -- Acceptance of Shares for Payment and Payment of Purchase
Price and Dividends and Certain U.S. Federal Income Tax Considerations in the
Booklet. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY TO
AFFIX TRANSFER TAX STAMPS TO THE CERTIFICATES REPRESENTING SHARES TENDERED
HEREBY.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
Purchase Price of any Shares purchased is to be issued in the name of, any
Shares not tendered or not purchased are to be returned to, and/or the check for
the Special Cash Payment is to be issued in the name of, a person other than the
person(s) signing this Letter of Transmittal and Proxy or if the check and/or
any certificate for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal and Proxy or
to an address other than that shown in the box above under the heading
"Description of Shares Tendered," then the "Special Payment Instructions" and/or
"Special Delivery Instructions" on this Letter of Transmittal and Proxy should
be completed. Preferred Shareholders tendering Shares by book-entry transfer
will have any Shares not accepted for payment returned by crediting the account
maintained by such Preferred Shareholder at the Book-Entry Transfer Facility
from which such transfer was made.
8. SUBSTITUTE FORM W-9 AND FORM W-8. A tendering and/or voting Preferred
Shareholder is required to provide the Depositary with either a correct Taxpayer
Identification Number (TIN) on Substitute Form W-9, which is provided under
"Important Tax Information" below, or a properly completed Form W-8 unless
exempt therefrom. Failure to provide the information on either Substitute Form
W-9 or Form W-8 may subject the tendering and/or voting Preferred Shareholder to
31% federal income tax backup withholding on the payment of the Purchase Price
for the Shares or on the Special Cash Payment. The tendering and/or voting
Preferred Shareholder may write "Applied For" in Part I of Substitute Form W-9
and sign the "Certificate of Awaiting Taxpayer Identification Number" of
Substitute Form W-9 if the Preferred Shareholder has not been issued a TIN and
has applied for a number or intends to apply for a number in the near future. If
"Applied For" is written in Part I of Substitute Form W-9 and the "Certificate
of Awaiting Taxpayer Identification Number" of Substitute Form W-9 is signed and
the Depositary is not provided with a TIN by the time of payment, the Depositary
will withhold 31% on all payments of the Purchase Price for the Shares or the
Special Cash Payment thereafter until a TIN is provided to the Depositary.
16
<PAGE> 17
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Any questions or requests
for assistance may be directed to the Information Agent or the Dealer Manager at
their respective telephone numbers and addresses listed below. Requests for
additional copies of the Booklet, this Letter of Transmittal and Proxy, or other
tender offer materials may be directed to the Information Agent or the Dealer
Manager and such copies will be furnished promptly at NEES' expense. Preferred
Shareholders may also contact their local broker, dealer, commercial bank or
trust company for assistance concerning the Offer.
10. SOLICITED TENDERS. Upon the terms an subject to the conditions of the
Offer and this Instructing, NEES will pay a solicitation fee of $.75 per Share
for any Shares tendered, accepted for payment and paid pursuant to the Offer and
for any Shares not tendered but voted in favor of the Proposed Amendment of
which at least eighty percent (80%) shall be paid to the Dealer Manager and
twenty percent (20%) to the Soliciting Dealer (which may be the Dealer
Manager)). With respect to fees payable pursuant to this paragraph involving
transactions for beneficial owners whose ownership is less than 2,500 Shares,
any fees payable hereunder shall be paid in full to the Dealer Manager unless a
Soliciting Dealer is designated (as described below), in which case such fee
shall be payable in full to such designated Soliciting Dealer (which designated
Soliciting Dealer may be the Dealer Manager). The Letters of Transmittal and
Proxy must include the name of an entity which obtained the tender or proxy and
which is either, (a) a broker or dealer in securities, including the Dealer
Manager in its capacity as a broker or dealers, which is a member of any
national securities exchange or of the National Association of Securities
Dealers, Inc. (NASD), (b) a foreign broker or dealer not eligible for membership
in the NASD which agrees to conform to the NASD's Rules of Fair Practice in
soliciting tenders outside the United States to the same extent as though it
were an NASD member, or (c) a bank or trust company (each of which is referred
to herein as a Soliciting Dealer). No solicitation fee shall be payable to a
Soliciting Dealer with respect to the tender of Shares or delivery of a proxy
unless the Letter of Transmittal and Proxy accompanying such tender or delivery
of a proxy designates such Soliciting Dealer. No solicitation fee shall be
payable to a Soliciting Dealer in respect of Shares registered in the name of
such Soliciting Dealer unless such Shares are held by such Soliciting Dealer as
nominee and such Shares are being tendered or delivered for the benefit of one
or more beneficial owners identified on the Letter of Transmittal or on the
Notice of Solicited Tenders. No solicitation fee shall be payable to a
Soliciting Dealer if such Soliciting Dealer is required for any reason to
transfer the amount of such fee to a depositing holder (other than itself). No
solicitation fee shall be paid to a Soliciting Dealer with respect to Shares
tendered or delivered for such Soliciting Dealer's own account. Soliciting
Dealers will not be entitled to a solicitation fee for Shares beneficially owned
by such Soliciting Dealer. No broker, dealer, bank, trust company or fiduciary
shall be deemed to be the agent of NEES, the Power Company, the Depositary, the
Information Agent or the Dealer Manager for purposes of the Offer.
Soliciting Dealers will include any of the organizations described in
clauses (a), (b) and (c) above even when the activities of such organizations in
connection with the Offer consist solely of forwarding to clients materials
relating to the Offer, including the Letter of Transmittal and tendering Shares
or delivering as directed by beneficial owners thereof. No Soliciting Dealer is
required to make any recommendation to holders of Shares as to whether to tender
or refrain from tendering in the Offer. No assumption is made, in making payment
to any Soliciting Dealer, that its activities in connection with the Offer
included any activities other than those described above, and for all purposes
noted in all materials relating to the Offer, the term "solicit" shall be deemed
to mean no more than processing shares tendered or forwarding to customers
materials regarding the Offer.
17
<PAGE> 18
11. IRREGULARITIES. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance of any tender
of Shares will be determined by NEES, in its sole discretion, and its
determination shall be final and binding. NEES reserves the absolute right to
reject any and all tenders of Shares that it determines are not in proper form
or the acceptance for payment of or payment for Shares that may, in the opinion
of NEES' counsel, be unlawful. NEES also reserves the absolute right to waive
any of the conditions to the Offer or any defect or irregularity in any tender
of Shares and NEES' interpretation of the terms and conditions of the Offer
(including these instructions) shall be final and binding. Unless waived, any
defects or irregularities in connection with tenders must be cured within such
time as NEES shall determine. None of NEES, the Dealer Manager, the Depositary,
the Information Agent or any other person shall be under any duty to give notice
of any defect or irregularity in tenders nor shall any of them incur any
liability for failure to give any such notice. Tenders will not be deemed to
have been made until all defects and irregularities have been cured or waived.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate
representing Shares has been lost, destroyed or stolen, the Preferred
Shareholder should promptly notify the Depositary by checking the box above
immediately following the "Special Payment Instructions/Special Delivery
Instructions" and indicating the number of Shares lost, destroyed or stolen. The
Preferred Shareholder will then be instructed as to the procedures that must be
taken in order to replace the certificate. The tender of Shares pursuant to this
Letter of Transmittal and Proxy will not be valid unless on or prior to the
Expiration Date: (a) such procedures have been completed and a replacement
certificate for the Shares has been delivered to the Depositary or (b) a Notice
of Guaranteed Delivery and Proxy has been delivered to the Depositary. See
Instruction 2.
IMPORTANT: THIS LETTER OF TRANSMITTAL AND PROXY (OR A FACSIMILE COPY HEREOF),
DULY EXECUTED, TOGETHER WITH, IF APPLICABLE, CERTIFICATES OR CONFIRMATION OF A
BOOK-ENTRY TRANSFER, AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE
DEPOSITARY, OR, IF APPLICABLE, THE NOTICE OF GUARANTEED DELIVERY AND PROXY MUST
BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE.
18
<PAGE> 19
IMPORTANT TAX INFORMATION
Under Federal income tax law, a Preferred Shareholder whose tendered Shares
are accepted for payment, or who will receive a Special Cash Payment as a result
of voting in favor of the Proposed Amendment, is required to provide the
Depositary (as payer) with either such Preferred Shareholder's correct TIN on
Substitute Form W-9 below or a properly completed Form W-8. If such Preferred
Shareholder is an individual, the TIN is such Preferred Shareholder's social
security number. For businesses and other entities, the number is the Federal
employer identification number. If the Depositary is not provided with the
correct TIN or properly completed Form W-8, the Preferred Shareholder may be
subject to a $50 penalty imposed by the Internal Revenue Service. In addition,
(a) payments that are made to such Preferred Shareholder with respect to Shares
purchased pursuant to the Offer or (b) Special Cash Payments made to a Preferred
Shareholder with respect to Shares voted pursuant to the proxy solicitation may
be subject to backup withholding. The Form W-8 can be obtained from the
Depositary. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" below for additional instructions.
If Federal income tax backup withholding applies, the Depositary is
required to withhold 31% of any payments made to the Preferred Shareholder.
Backup withholding is not an additional tax. Rather, the Federal income tax
liability of persons subject to backup withholding will be reduced by the amount
of the tax withheld. If withholding results in an overpayment of taxes, a refund
may be obtained.
PURPOSE OF SUBSTITUTE FORM W-9 AND FORM W-8
To avoid backup withholding on payments that are made to a Preferred
Shareholder with respect to Shares purchased pursuant to the Offer or on Special
Cash Payments, the Preferred Shareholder is required to notify the Depositary of
his or her correct TIN by completing the Substitute Form W-9 below certifying
that the TIN provided on Substitute Form W-9 is correct and that (a) the
Preferred Shareholder has not been notified by the Internal Revenue Service that
he or she is subject to Federal income tax backup withholding as a result of
failure to report all interest or dividends or (b) the Internal Revenue Service
has notified the Preferred Shareholder that he or she is no longer subject to
Federal income tax backup withholding. Foreign Preferred Shareholders must
submit a properly completed Form W-8 in order to avoid the applicable backup
withholding; provided, however, that backup withholding will not apply to
foreign Preferred Shareholders subject to 30% (or lower treaty rate) withholding
on gross payments received pursuant to the Offer or on the Special Cash
Payments.
WHAT NUMBER TO GIVE THE DEPOSITARY
The Preferred Shareholder is required to give the Depositary the social
security number or employer identification number of the registered owner of the
Shares. If the Shares are in more than one name or are not in the name of the
actual owner, consult the "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" below for additional guidance on
which number to report.
19
<PAGE> 20
SEE "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9" FOR ADDITIONAL INSTRUCTIONS.
SUBSTITUTE
FORM W-9
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------
PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY, AS DEPOSITARY
- ------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE
FORM W-9 BOX AT RIGHT AND CERTIFY BY SIGNING AND --------------------------
DATING BELOW.
---------------------------------------- Social Security Number
PAYER'S REQUEST FOR or Employer Identification
TAXPAYER IDENTIFICATION NAME (Please Print) Number
NUMBER (TIN) (If Awaiting TIN write
"Applied for")
---------------------------------------- --------------------------
DEPARTMENT OF THE TREASURY ADDRESS
INTERNAL REVENUE SERVICE PART II -- For Payees
NOT subject to backup
---------------------------------------- withholding, see the
CITY STATE ZIP CODE "Guidelines for Cer-
tification of Taxpayer
Identification Number
on Substitute Form
W-9" and complete as
instructed therein
- ------------------------------------------------------------------------------------------------
</TABLE>
PART III -- CERTIFICATION: -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because: (a) I am exempt
from backup withholding, or (b) I have not been notified by the Internal
Revenue Service (IRS) that I am subject to backup withholding as a result
of a failure to report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup withholding.
SIGNATURE DATE , 1997
--------------------------- ------------------------
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have
been notified by the IRS that you are currently subject to backup withholding
because of underreporting interest or dividends on your tax return. However,
if after being notified by the IRS that you were subject to backup withholding
you received another notification from the IRS that you are no longer subject
to backup withholding do not cross out item (2). Also see instructions in the
enclosed Guidelines.
- --------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WRITE "APPLIED FOR"
IN PART I OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(b) I intend to mail or deliver such an application in the near future. I
understand that if I do not provide a taxpayer identification number within
sixty (60) days, 31% of all reportable payments made to me thereafter will be
withheld until I provide a number.
----------------------------------- -----------------------------, 1997
SIGNATURE DATE
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU. PLEASE REVIEW THE "GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9"
FOR ADDITIONAL DETAILS.
20
<PAGE> 21
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
SECTION REFERENCES ARE TO THE INTERNAL REVENUE CODE.
PURPOSE OF FORM. A person who is required to file an information return
with the IRS must obtain your correct taxpayer identification number (TIN) to
report income paid to you, real estate transactions, mortgage interest you paid,
the acquisition or abandonment of secured property, or contributions you made to
an IRA. Use Form W-9 to furnish your correct TIN to the requester (the person
asking you to furnish your TIN) and, when applicable, (1) to certify that the
TIN you are furnishing is correct (or that you are waiting for a number to be
issued), (2) to certify that you are not subject to backup withholding, and
(3) to claim exemption from backup withholding if you are an exempt payee.
Furnishing your correct TIN and making the appropriate certifications will
prevent certain payments from being subject to backup withholding.
NOTE: IF A REQUESTER GIVES YOU A FORM OTHER THAN W-9 TO REQUEST YOUR TIN,
YOU MUST USE THE REQUESTER'S FORM.
HOW TO OBTAIN A TIN. If you do not have a TIN, apply for one immediately.
To apply, get Form SS-5, Application for a Social Security Card (for
Individuals), from your local office of the Social Security Administration, or
Form SS-4, Application for Employer Identification Number (for businesses and
all other entities), from your local IRS office.
To complete Form W-9 if you do not have a TIN, write "Applied for" in the
space for the TIN in Part 1, sign and date the form, and give it to the
requester. Generally, you will than have 60 days to obtain a TIN and furnish it
to the requester. If the requester does not receive your TIN within 60 days,
backup withholding, if applicable, will begin and continue until you furnish
your TIN to the requester. For reportable interest or dividend payments, the
payor must exercise one of the following options concerning backup withholding
during this 60-day period. Under option (1), a payor must backup withhold on any
withdrawals you make from your account after 7 business days after the requester
receives this form back from you. Under option (2), the payor must backup
withhold on any reportable interest or dividend payments made to your account,
regardless of whether you make any withdrawals. The backup withholding under
option (2) must begin no later than 7 business days after the requester receives
this form back. Under option (2), the payor is required to refund the amounts
withheld if your certified TIN is received within the 60-day period and you were
not subject to backup withholding during that period.
NOTE: WRITING "APPLIED FOR" ON THE FORM MEANS THAT YOU HAVE ALREADY APPLIED
FOR A TIN OR THAT YOU INTEND TO APPLY FOR ONE IN THE NEAR FUTURE.
As soon as you receive your TIN, complete another Form W-9, include your
TIN, sign and date the form, and give it to the requester.
WHAT IS BACKUP WITHHOLDING? -- Persons making certain payments to you must
withhold and pay to the IRS 31% of such payments under certain conditions. This
is called "backup withholding." Payments that could be subject to backup
withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee compensation, and certain payments
from fishing boat operators, but do not include real estate transactions.
If you give the requester your correct TIN, make the appropriate
certifications, and report all your taxable interest and dividends on your tax
return, your payments will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
(1) You do not furnish your TIN to the requester,
or
(2) The IRS notifies the requester that you furnished an incorrect TIN, or
(3) You are notified by the IRS that you are subject to withholding because
you failed to report all your interest and dividends on your tax return (for
reportable interest and dividends only), or
(4) You do not certify to the requester that you are not subject to backup
withholding under 3 above, (for reportable interest and dividend accounts opened
after 1983 only), or
(5) You do not certify your TIN.
Except as explained in 5 above, other reportable payments are subject to
backup withholding only if 1 or 2 above applies. Certain payees and payments are
exempt from backup withholding and information reporting. See Payees and
Payments Exempt From Backup Withholding, below, and Exempt Payees and Payments
under Signing the Certification, below if you are an exempt payee.
PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING. The following is a list
of payees exempt from backup withholding and for which no information reporting
is required. For interest and dividends, all listed payees are exempt except as
listed in item (9). For broker transactions, payees listed in items (1) through
(13) and a person registered under the Investment Advisers Act of 1940 who
regularly acts as a broker are exempt. Payments subject to reporting under
sections 6041 and 6041A are generally exempt from backup withholding only if
made to payees described in items (1) through (7), except a corporation that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (2) through (6) are
21
<PAGE> 22
exempt from backup withholding for barter exchange transactions and patronage
dividends.
(1) A corporation.
(2) An organization exempt from tax under section 501(a), an IRA, or a
custodial account under section 402(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporation Secretaries,
Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividend and patronage dividends generally not subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
- Section 404(k) payments made by an ESOP.
Payments of interest generally not subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: YOU MAY BE SUBJECT TO BACKUP WITHHOLDING IF THIS INTEREST IS $600 OR
MORE AND IS PAID IN THE COURSE OF THE PAYER'S TRADE OR BUSINESS AND YOU HAVE NOT
PROVIDED YOUR CORRECT TIN TO THE PAYER.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid to you.
Other types of payments generally not subject to backup withholding include:
- Wages.
- Distributions from a pension, annuity, profit-sharing or stock bonus plan,
or an IRA.
- Distributions from an owner-employee plan.
- Certain surrenders of life insurance contracts.
- Gambling winnings, if withholding is required under section 3402(q).
However, if withholding is not required under section 3402(q), backup
withholding applies if the payee fails to furnish a TIN.
- Real estate transactions reportable under section 6045.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045,
6049, 6050A, and 6050N, and the regulations under those sections.
PENALTIES
FAILURE TO FURNISH TIN. If you fail to furnish your correct TIN to a
requester, you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not to willful neglect.
CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a $500 penalty.
CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
MISUSE OF TINS. If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
SPECIFIC INSTRUCTIONS
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
22
<PAGE> 23
NAME -- If you are an individual, you must generally provide the name shown
on your social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security Administration
of the name change, please enter your first name, the last name shown on your
social security card, and your new last name.
NUMBER -- If you are a sole proprietor, you must furnish your individual
name and either your SSN or EIN. You may also enter your business name or "doing
business as" name on the business name line. Enter your name(s) as shown on your
social security card and/or as it was used to apply for your EIN on Form SS-4.
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
SIGNING THE "PART III -- CERTIFICATION" ON THE SUBSTITUTE FORM W-9
(1) INTEREST, DIVIDEND, AND BARTER EXCHANGE ACCOUNTS OPENED BEFORE 1984 AND
BROKER ACCOUNTS CONSIDERED ACTIVE DURING 1983 -- You are required to furnish
your correct TIN, but you are not required to sign the certification.
(2) INTEREST, DIVIDEND, BROKER, AND BARTER EXCHANGE ACCOUNTS OPENED AFTER
1983 AND BROKER ACCOUNTS CONSIDERED INACTIVE DURING 1983 -- You must sign the
certification or backup withholding will apply. If you are subject to backup
withholding and you are merely providing your correct TIN to the requester, you
must cross out item 2 in the certification before signing the form.
(3) REAL ESTATE TRANSACTIONS. You must sign the certification. You may
cross out item 2 of the certification.
(4) OTHER PAYMENTS. You are required to furnish your correct TIN, but you
are not required to sign the certification unless you have been notified that
you have previously given an incorrect TIN. Other payments include payments made
in the course of the requester's trade or business for rents, royalties, goods
(other than bills for merchandise), medical and health care services (including
payments to corporations), payments to a nonemployee for services (including
attorney and accounting fees), and payments to certain fishing boat crew
members.
(5) MORTGAGE INTEREST PAID BY YOU, ACQUISITION OR ABANDONMENT OF SECURED
PROPERTY, OR IRA CONTRIBUTIONS. You are required to furnish your correct TIN,
but you are not required to sign the certification.
(6) EXEMPT PAYEES AND PAYMENTS. If you are exempt from backup withholding,
you should complete this form to avoid possible erroneous backup withholding.
Enter your correct TIN in Part I, write "EXEMPT" in the block in Part II, and
sign and date the form. If you are a nonresident alien or foreign entity not
subject to backup withholding, give the requester a complete Form W-8,
Certificate of Foreign Status.
(7) TIN "APPLIED FOR." Follow the instructions under How To Obtain a TIN, on
page 1, and sign and date this form.
SIGNATURE: For a joint account, only the person whose TIN is shown in Part 1
should sign.
PRIVACY ACT NOTICE: Section 6109 requires you to furnish your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property, or contributions you made to an
IRA. The IRS uses the numbers for identification purposes and to help verify the
accuracy of your tax return. You must provide your TIN whether or not you are
required to file a tax return. Payers must generally withhold 31% of taxable
interest, dividends, and certain other payments to a payee who does not furnish
a TIN to a payor. Certain penalties may also apply.
23
<PAGE> 24
WHAT NAME AND NUMBER TO GIVE THE REQUESTER
<TABLE>
<CAPTION>
- -------------------------------------------------------
For this type of account: Give name and SSN of:
- -------------------------------------------------------
<C> <S> <C>
1. Individual The individual
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, the
first individual on
the account(1)
3. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
4. a. The usual revocable The grantor-trustee(1)
savings trust
(grantor is also
trustee)
b. So-called trust The actual owner(1)
account that is not
a legal or valid
trust under state
law
5. Sole proprietorship The owner(3)
- -------------------------------------------------------
<CAPTION>
- -------------------------------------------------------
For this type of account: Give name and SSN of:
- -------------------------------------------------------
<C> <S> <C>
6. A valid trust, estate, Legal entity(4)
or pension trust
7. Corporate The corporation
8. Association, club, The organization
religious, charitable,
educational, or other
tax-exempt
organization
9. Partnership The partnership
10. A broker or registered The broker or nominee
nominee
11. Account with the The public entity.
Department of
Agriculture in the
name of a public
entity (such as a
state or local
government, school
district, or prison)
that receives
agricultural program
payments.
- -------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's SSN.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your SSN or EIN.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless the
legal entity itself is not designated in the account title.)
NOTE: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
24
<PAGE> 25
Any questions or requests for assistance or additional copies of the
Booklet, this Letter of Transmittal and Proxy, the Notice of Guaranteed Delivery
and Proxy or other materials may be directed to the Information Agent at the
address and telephone number set forth below.
THE INFORMATION AGENT:
[GEORGESON & COMPANY LOGO]
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
(800) 223-2064 (CALL TOLL-FREE)
BANKS AND BROKERS CALL COLLECT:
(212) 440-9918
Preferred Shareholders may contact the Dealer Manager at its address and
telephone number set forth below with any questions regarding the terms of the
Offer and solicitation of proxies. In addition, Preferred Shareholders may also
contact their broker, dealer, commercial bank, trust company or other nominee
for assistance concerning the Offer and solicitation of proxies.
THE DEALER MANAGER:
MERRILL LYNCH & CO.
WORLD FINANCIAL CENTER
250 VESEY STREET
NEW YORK, NEW YORK 10281
(888) ML4-TNDR (TOLL-FREE)
(888) 654-8637 (TOLL-FREE)
<PAGE> 1
Exhibit H
New England Electric System, New England Power Company, The Narragansett
Electric Company, and Massachusetts Electric Company
Notice of Proposal to Amend Corporate Documents and Acquire Preferred Shares
pursuant to Cash Tender Offer; Order Authorizing Proxy Solicitation
New England Electric System (NEES), a registered holding company, and
its utility subsidiaries: New England Power Company, a Massachusetts corporation
(the Power Company), Massachusetts Electric Company, a Massachusetts corporation
(Mass. Electric), and The Narragansett Electric Company, a Rhode Island
corporation (Narragansett) (the Power Company, Mass. Electric, and Narragansett
sometimes hereinafter collectively, the Subsidiaries), have filed an
application-declaration under sections 6(a), 9(a), 10, and 12 of the 1935 Act
and rules 43, 44, 45, 62, and 65 thereunder.
The Power Company's equity consists of 6,449,896 shares of common
stock, $100 par value, 75,020 shares of 6% Cumulative Preferred Stock, $100 par
value, and 321,640 shares of Dividend Series Preferred Stock, $100 par value.
The Dividend Series Preferred Stock is issued in four series as follows:
<TABLE>
<CAPTION>
Series Shares Authorized
------ -----------------
<S> <C>
4.56% 100,000
4.60% 80,140
4.64% 41,500
6.08% 100,000
</TABLE>
There is also authorized a class of Preferred Stock - Cumulative, $25 par value,
of which there are no series currently outstanding. All of the common stock is
owned by NEES; all of the preferred stock is owned by the public and traded in
over-the-counter markets. The common stock and 6% preferred share general voting
rights.
The Power Company's Articles of Organization and By-laws (the Power
Company Provisions) currently provide that, without the consent of the holders
of a majority of the outstanding Dividend Series Preferred Stock and Preferred
Stock Cumulative (voting as a single class), the Power Company shall not issue
or assume any evidence of unsecured indebtedness (except for redemption of
outstanding shares of all series of said stock), if the total amount thereof
(exclusive of certain unsecured indebtedness) immediately after such issue would
exceed 20% of total secured indebtedness, capital, premium, and retained
earnings, of which 20% not more than one-half shall be short-term unsecured
indebtedness.
Mass. Electric's equity consists of 2,398,111 shares of common stock,
$25 par value, 600,000 shares of Preferred Stock - Cumulative, $25 par value,
and 350,000 shares of Dividend Series Preferred Stock, $100 par value. The
preferred stock is issued in four series as follows:
<TABLE>
<CAPTION>
Series Shares Authorized
------ -----------------
<S> <C>
Preferred Stock - Cumulative
6.84% 600,000
Dividend Series
4.44% 75,000
4.76% 75,000
6.99% 200,000
</TABLE>
<PAGE> 2
All of the common stock is owned by NEES. All of the preferred stock is owned by
the public and is traded in over-the-counter markets.
Mass. Electric's Articles of Organization and By-laws (Mass. Electric
Provisions) currently provide that, without a vote of a majority of the
outstanding Dividend Series Preferred Stock and Preferred Stock - Cumulative
(voting as a single class), Mass. Electric will not issue or assume any
unsecured indebtedness (except for redemption of outstanding shares of all
series of preferred stock), if the total amount of such indebtedness (exclusive
of certain unsecured indebtedness) immediately after such issue would exceed 20%
of Total Capitalization, or if, immediately after such issue, the total amount
of such short-term unsecured indebtedness (exclusive of certain short-term
unsecured indebtedness) issued or assumed by the Company after September 30,
1998, would exceed 10% of Total Capitalization.
Narragansett's equity consists of 1,132,487 shares of common stock, $50
par value, and 730,000 shares of Cumulative Preferred Stock, $50 par value. The
preferred stock is issued in three series as follows:
<TABLE>
<CAPTION>
Series Shares Authorized
------ -----------------
<S> <C>
4.50% 180,000
4.64% 150,000
6.95% 400,000
</TABLE>
All of the common stock is owned by NEES. All of the preferred stock is owned by
the public and is traded in over-the-counter markets.
Narragansett's Preferred Stock Provisions adopted at special meetings
of the common stockholders and directors (the Narragansett Provisions), provide
that, without a vote of a majority of the outstanding preferred stock (voting as
a single class), Narragansett will not issue or assume any unsecured
indebtedness (except for redemption of outstanding shares of all series of
preferred stock) if the total amount of such indebtedness (exclusive of certain
unsecured indebtedness) immediately after such issue would exceed 10% of all
secured indebtedness and capital and surplus of the Company.
Each Subsidiary proposes to solicit proxies (a Proxy Solicitation) from
the holders of its outstanding shares of Preferred Stock of each Series and
Common Stock for use at a special meeting of its stockholders to be held on or
about December 12, 1997 (Special Meeting) to consider a proposed amendment to
its Provisions that would eliminate the Subsidiary's Restriction Provision (the
Proposed Amendment). The Power Company is not asking holders of the 6%
Cumulative Preferred for a proxy; they may, however, participate in the Offer
described below.
Adoption of the Power Company Proposed Amendment will require the
affirmative vote of the holders of more than 2/3 of the outstanding shares of
each of the Power Company's (1) common stock and 6% Cumulative Preferred voting
together as a single class and (ii) Dividend Series Preferred Stock, all series
voting together as a single class.
Adoption of the Mass. Electric Proposed Amendment will require the
affirmative vote of the holders of more than 2/3 of the outstanding shares of
each of Mass. Electric's (i) common stock voting as a class and (ii) Dividend
Series Preferred Stock and Preferred Stock - Cumulative, all series voting
together as a class. In calculating such vote, each share of Dividend Series
Preferred Stock shall be counted as one and each share of Preferred Stock
Cumulative shall be counted as one-quarter.
Adoption of the Narragansett Proposed Amendment will require the
affirmative vote of the holders of more than 2/3 of the outstanding shares of
Narragansett's Preferred Stock voting as a single class, the approval of 75% of
<PAGE> 3
the Preferred Shares present or represented at the meeting, and the approval of
a majority of the Narragansett Common voting as a class.
NEES will vote its shares of Common Stock in favor of each of the
Proposed Amendments. The Subsidiaries have engaged Georgeson & Company, Inc. to
act as information agent in connection with the Proxy Solicitations for a fee
plus reimbursement of reasonable out-of-pocket expenses.
If a Proposed Amendment is adopted, the Power Company, Narragansett,
and Mass. Electric will each make a special cash payment of one percent of par
per share (a Special Cash Payment) to each Preferred Stockholder of any Series
(other than the 6% Cumulative Preferred stock of the Power Company), any of
whose shares of Preferred Stock (each a Share) are properly voted at the Special
Meeting (in person by ballot or by proxy) in favor of such Proposed Amendment,
provided that such Shares have not been tendered pursuant to the Offer described
below. The Power Company, Narragansett, and Mass. Electric will disburse Special
Cash Payments out of their general funds, promptly after adoption of a Proposed
Amendment.
Concurrently with the commencement of the Proxy Solicitation for a
Subsidiary, subject to the terms and conditions stated in the relevant offering
documents, NEES proposes to make an offer (the Offer) to the holders of that
Subsidiary's preferred stock of each series to acquire any and all shares at the
cash purchase prices to be specified in the Offer (subject to potential increase
or decrease pursuant to the terms of the Offer) together with any unpaid
dividends accrued through the payment date (each such purchase price and, when
applicable, accrued dividend, collectively, a Purchase Price). NEES anticipates
that the Offer for each Series of Preferred Stock will be scheduled to expire at
5:00 P.M. (Eastern Standard time) on the date of the Special Meeting, i.e., on
or about December 12, 1997 (the Expiration Date).
The Offer consists of separate offers for each of the five Series of
the Power Company Preferred Stock, the three Series of the Narragansett
Preferred Stock and the four Series of the Mass. Electric Preferred Stock, with
the offer for any one Series being independent of the offer for any other
Series. The applicable Purchase Price and the other terms and conditions of the
Offer apply equally to all preferred stockholders of the respective series. The
Offer is not conditioned upon any minimum number of Shares of the applicable
Series being tendered, but is conditioned, among other things, on the Proposed
Amendment being adopted at the Special Meeting.
To tender Shares in accordance with the terms of the offering
documents, the tendering preferred stockholder must either (1) send to IBJ
Schroder Bank & Trust Company, in its capacity as depositary for the Offer
(Depositary), a properly completed and duly executed Letter of Transmittal and
Proxy, together with any required signature guarantees and any other documents
required by the Letter of Transmittal and Proxy, and (either (a) tender
certificates for the Shares to the Depositary at one of its addresses specified
in the offering documents, or (b) delivery such Shares pursuant to the
procedures for book-entry transfer described in the offering documents
(confirmation of such delivery must be received by the Depositary), in each case
by the Expiration Date); or (2) comply with a guaranteed delivery procedure
specified in the offering documents. Tenders of Shares made pursuant to the
Offer may be withdrawn at any time prior to the Expiration Date. Thereafter,
such tenders are irrevocable, subject to certain exceptions identified in the
offering documents.
NEES' obligation to proceed with the Offers and to accept for payment
and to pay for any Shares tendered is subject to various conditions enumerated
in the offering documents, including, among other conditions, that the Proposed
Amendments be adopted and that the Commission issue an order under the 1935 Act
authorizing the proposed transactions.
At any time or from time to time, NEES may extend the Expiration Date
applicable to any Series by giving notice of such extension to the Depositary,
without extending the Expiration Date for any other Series. During any such
<PAGE> 4
extension, all Shares of the applicable Series previously tendered will remain
subject to the Offer, and may be withdrawn at any time prior to the Expiration
Date as extended.
Conversely, NEES may elect in its sole discretion to terminate one or
more Offers prior to the scheduled Expiration Date and not accept for payment
and pay for any Shares tendered, subject to applicable provisions of Rule 13e-4
under the Exchange Act requiring NEES either to pay the consideration offered or
to return the Shares tendered promptly after the termination or withdrawal of
the Offer(s), upon the occurrence of any of the conditions to closing enumerated
in the offering documents, by giving notice of such termination to the
Depositary and making a public announcement thereof.
Subject to compliance with applicable law, NEES further reserves the
right in the offering documents, in its sole discretion, to amend the Offers in
any respect by making a public announcement thereof. If NEES materially changes
the terms of the Offers or the information concerning the Offers, or if it
waives a material condition of an Offer, NEES will extend the Expiration Date to
the extent required by the applicable provisions of Rule 13e-4 under the
Exchange Act. Those provisions require that the minimum period during which an
issuer tender offer must remain open following material changes in the terms of
the offer or information concerning the offer (other than a change in price, a
change in percentage of securities sought, or a change in the dealer's
soliciting fee) will depend on the facts and circumstances, including the
relative materiality of such terms or information. If an Offer is scheduled to
expire at any time earlier than the expiration of a period ending on the tenth
business day from, and including, the date that NEES notifies preferred
stockholders that it will (a) decrease the number of Shares of any series of
preferred being sought, (b) increase or decrease the consideration being offered
in said offer, or (c) increase or decrease soliciting dealer's fees, the
Expiration Date will be extended until the expiration of such period of ten
business days.
Shares validly tendered to the Depositary pursuant to an Offer and not
withdrawn in accordance with the procedures set forth in the offering documents
will be held by NEES until the Expiration Date (or returned in the event the
Offer is terminated). Subject to the terms and conditions of the Offers, as
promptly as practicable after the Expiration Date, NEES will accept for payment
(and thereby purchase) and pay for Shares validly tendered and not withdrawn.
NEES will pay for Shares that it has purchased pursuant to the Offer by
depositing the applicable Purchase Price with the Depositary, which will act as
agent for the tendering stockholders for the purpose of receiving payment from
NEES and transmitting payment to tendering stockholders. NEES will pay all stock
transfer taxes, if any, payable on account of its acquisition of Shares pursuant
to the Offer, except in certain circumstances where special payment or delivery
procedures are utilized in conformance with the applicable Letters of
Transmittal.
With respect to Shares validly tendered and accepted for payment by
NEES, each tendering preferred stockholder will be entitled to receive as
consideration from NEES only the applicable Purchase Price (which NEES
anticipates will reflect a premium over the current market price at the
commencement of the relevant offers). Any such holder will not be entitled to
receive with respect to such tendered Shares additional consideration in the
form of the Special Cash Payment.
As noted above, subject to the terms and conditions of an Offer, Shares
validly tendered and not withdrawn will be accepted for payment and paid for by
NEES as promptly as practicable after the Expiration Date.
If a Proposed Amendment is not adopted at the Special Meeting, NEES may
elect, but is not obligated, to waive such condition, subject to applicable law.
In that case, as promptly as practicable after NEES' waiver thereof and purchase
of any Shares validly tendered pursuant to the Offer, the Subsidiaries
anticipate that said Subsidiaries would call another special meeting and solicit
proxies therefrom for the same purpose as in the instant proceeding, i.e., to
secure the requisite affirmative vote of stockholders to amend the Provisions to
eliminate the restriction on unsecured indebtedness. At that meeting, NEES would
vote any
<PAGE> 5
Shares acquired by it pursuant to the Offer or otherwise (as well as all of its
shares of Common Stock) to eliminate the restriction on unsecured indebtedness.
If the Proposed Amendment is adopted at that meeting, and in any event within
one year from the Expiration Date (including any potential extension thereto
pursuant to the Offer), NEES will promptly after such meeting or at the
expiration of such one-year period, as applicable, either sell the Shares to the
issuing Subsidiary at the Purchase Price plus expenses paid therefor pursuant to
the Offer or donate the Shares to the issuing Subsidiary as a capital
contribution, and the issuing Subsidiary will thereupon retire and cancel such
Shares.
Merrill Lynch, Pierce, Fenner & Smith Incorporated will act as dealer
manager for NEES in connection with the Offers. NEES proposes to agree to pay
the dealer manager a fee of .5% of par per share for each shares tendered,
accepted for payment, and paid for pursuant to the Offer, and to reimburse the
dealer managers for their reasonable out-of-pocket expenses, including
attorneys' fees. The Subsidiaries have agreed to pay the dealer manager a fee of
.5% of par for each share that is not tendered but which votes in favor of the
Proposed Amendment. NEES has agreed to reimburse the dealer manager for its
reasonable out-of-pocket expenses, including attorneys' fees. In addition, NEES
proposes to pay soliciting brokers and dealers a separate fee for any Shares
tendered, accepted for payment, and paid for pursuant to the Offer.
In October 1996, the NEES Companies announced their intention to divest
their generation business. (The separate sale of the oil and gas properties by
the Power Company's affiliate, New England Energy Incorporated (NEEI), is
necessary in connection therewith.) This decision was due to a combination of
factors relating to the restructuring of the electric utility industry. On
August 5, 1997, the NEES Companies reached an agreement to sell the non-nuclear
generation business to U.S. Generating Company for approximately $1.65 billion,
subject to various adjustments. In order to facilitate this transition to a
competitive electric industry, the Power Company may need -- prior to the
completion of the sale of its generating plants -- to buy out existing contracts
with independent power producers, or to pay the difference between monies owed
its affiliate, New England Energy Incorporated (NEEI) and the proceeds from the
sale of NEEI's remaining oil and gas properties. The exact dollar amount of
these obligations is not yet determinable, but they may be significant. Given
the changing nature of the company, putting in place long-term financial
instruments to provide the necessary moneys may not be a cost-effective
procedure. Therefore, the Power Company believes it must increase its
flexibility in meeting its cash needs. The Power Company will probably
substantially reduce its capitalization and retire its outstanding General and
Refunding Mortgage bonds through call or defeasance. The Power Company
anticipates issuing its new long-term debt in the form of debentures, which are
unsecured. Absent the Proposed Amendment, these debentures would not be
permitted by the Provisions without prior approval by the preferred
shareholders. If the Proposed Amendment is adopted, the Power Company will have
increased flexibility (i) to choose among different types of debt financing and
(ii) to finance projects using the most cost effective means. The availability
and flexibility of unsecured debt is necessary, in the estimation of NEES and
the Power Company, to take full advantage of changing conditions in securities
and financial markets.
Although Mass. Electric will not be divesting itself of significant
assets as is the Power Company, it believes that the prudent use of unsecured
debt is important to the effective financial management of its business.
Unsecured debt provides flexibility in meeting temporary fluctuations in cash
requirements, can be used when unfavorable conditions prevail in the market for
long-term capital, acts as a bridge between issues of permanent capital, and may
provide more flexibility in terms and cost than secured debt. If the Proposed
Amendment is adopted, Mass. Electric will have increased flexibility (i) to
choose among different types of debt financing and (ii) to finance projects
using the most cost effective means. The availability and flexibility of
unsecured debt is necessary to take full advantage of changing conditions in
securities and financial markets.
<PAGE> 6
Although Narragansett's participation in the divestiture of System
generation will not have an impact on it of the magnitude of the Power
Company's, Narragansett believes that the prudent use of unsecured debt is
important to the effective financial management of its business. Unsecured debt
provides flexibility in meeting temporary fluctuations in cash requirements, can
be used when unfavorable conditions prevail in the market for long-term capital,
acts as a bridge between issues of permanent capital, and may provide more
flexibility in terms and cost than secured debt. If the Proposed Amendment is
adopted, Narragansett will have increased flexibility (i) to choose among
different types of debt financing and (ii) to finance projects using the most
cost effective means. The availability and flexibility of unsecured debt is
necessary to take full advantage of changing conditions in securities markets.
NEES and the Subsidiaries believe that the purchase of the Shares at
this time represents an attractive economic opportunity that will benefit NEES,
its shareholders, and its Subsidiaries. In addition, the Offer gives Preferred
Shareholders the opportunity to sell their Shares at a price which NEES believes
to be a premium to the market price on the date of the announcement of the Offer
and without the usual transaction costs associated with a sale. NEES and the
Subsidiaries further believe that the terms of purchase for the outstanding
shares of the Preferred Stock pursuant to the Offer will benefit NEES's
investors and the System's utility customers by (1) contributing to the
elimination of the provisions concerning unsecured indebtedness (with the
attendant benefits described above), and (2) acquiring and retiring of
outstanding shares of the preferred stock and their potential replacement with
comparatively less expensive financing alternatives.
As noted, the Subsidiaries propose to submit the Proposed Amendment for
consideration and action at special meetings of stockholders scheduled to take
place on or about December 12, 1997 and, in connection therewith, to solicit
proxies from the holders of their capital stock. The Subsidiaries request that
the effectiveness of the application-declaration with respect to the
solicitation of proxies for voting by their stockholders on the Proposed
Amendments be permitted to become effective forthwith, pursuant to Rule 62(d).
It appearing to the Commission that the application-declaration
regarding the proposed solicitation of proxies should be permitted to become
effective forthwith, pursuant to Rule 62(d):
IT IS ORDERED, that the application-declaration regarding the proposed
solicitation of proxies be, and it hereby is, permitted to become effective
forthwith pursuant to Rule 62 and subject to the terms and conditions prescribed
in Rule 24 under the 1935 Act.
For the Commission, by the Division of Investment Management, pursuant
to delegated authority.
<PAGE> 1
1-A
NEW ENGLAND ELECTRIC SYSTEM
(Parent Company Only)
Balance Sheet
At June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
------
(In Thousands)
Investments:
<S> <C>
Common stocks of subsidiaries, at equity $1,647,286
Notes of subsidiaries 42,310
Other investments 3,886
----------
Total investments 1,693,482
==========
Current assets:
Cash 12
Temporary cash investments - subsidiary company 7,100
Accounts receivable from subsidiaries 527
Interest and dividends receivable of subsidiaries 48,140
Other current assets 48
----------
Total current assets 55,827
----------
Deferred federal income taxes 2,978
----------
$1,752,287
==========
CAPITALIZATION AND LIABILITIES
------------------------------
Common share equity:
Common shares, par value $1 per share:
Authorized - 150,000,000 shares $ 64,969
Issued - 64,969,652 shares 736,567
Paid-in capital
Retained earnings (including $643,084,000 of
undistributed subsidiary earnings) 904,826
----------
Total common share equity $1,706,362
==========
Current liabilities:
Accounts payable (including $2,000 to subsidiaries) 2,489
Other accrued expenses 1,538
Dividends payable 34,403
----------
Total current liabilities 38,403
----------
Other reserves and deferred credits 7,495
----------
$1,752,287
==========
</TABLE>
<PAGE> 1
1-B
NEW ENGLAND ELECTRIC SYSTEM
(Parent Company Only)
Statement of Income
Twelve Months Ended June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
Equity in earnings of subsidiaries $ 212,844
Interest income - subsidiaries 754
---------
Total income from subsidiaries 213,598
Other income 104
---------
Total income 213,702
Corporate and fiscal expenses (includes $1,764,000 for cost
of services billed by an affiliated company) 7,065
Federal income tax benefit (434)
---------
Income before interest 207,071
Interest 305
---------
Net income $ 206,766
=========
Statement of Retained Earnings
Retained earnings at beginning of period $ 851,389
Net income 206,766
Dividends declared on common shares (153,329)
---------
Retained earnings at end of period $ 904,826
=========
</TABLE>
<PAGE> 1
2-A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Consolidated Balance Sheet
At June 30, 1997
(Actual and Pro Forma)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS Actual Adjustments Pro Forma
------ ---------- ----------- -----------
(In Thousands)
<S> <C> <C>
Utility plant, at original cost $5,783,877 $5,783,877
Less accumulated provisions for
depreciation and amortization 1,921,852 1,921,852
---------- ---------- ----------
3,862,025 3,862,025
Construction work in progress 50,178 50,178
---------- ---------- ----------
Net utility plant 3,912,203 3,912,203
---------- ---------- ----------
Oil and gas properties, at full cost 1,291,288 1,291,288
Less accumulated provision for amortization 1,114,345 1,114,345
---------- ---------- ----------
Net oil and gas properties 176,943 176,943
---------- ---------- ----------
Investments:
Nuclear power companies, at equity 49,464 49,464
Other subsidiaries, at equity 43,213 43,213
Other investments 103,101 103,101
---------- ---------- ----------
Total investments 195,778 195,778
---------- ---------- ----------
Current assets:
Cash 3,955 3,955
Accounts receivable, less reserves of $20,793,000 229,588 229,588
Unbilled revenues 63,100 63,100
Fuel, materials, and supplies, at average cost 80,362 80,362
Prepaid and other current assets 78,209 78,209
---------- ---------- ----------
Total current assets 455,214 455,214
---------- ---------- ----------
Deferred charges and other assets 403,566 403,566
---------- ---------- ----------
$5,143,704 $5,143,704
========== ========== ==========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common share equity:
Common shares, par value $1 per share:
Authorized - 150,000,000 shares
Outstanding - 64,969,652 shares $ 64,970 64,970
Paid-in capital 736,773 $ (206) 736,567
Retained earnings 904,825 (3,646) 901,179
Treasury stock - 149,238 shares (5,185) (5,185)
Unrealized gain on securities, net 2,684 2,864
---------- ---------- ----------
Total common share equity 1,704,067 (3,852) 1,700,215
Minority interests in consolidated subsidiaries 46,195 46,195
Cumulative preferred stock of subsidiaries 126,166 (126,166) --
Long-term debt 1,484,542 1,484,542
---------- ---------- ----------
Total capitalization 3,360,970 (130,018) 3,230,952
---------- ---------- ----------
Current liabilities:
Long-term debt due within one year 104,710 104,710
Short-term debt 170,825 130,018 300,843
Accounts payable 127,793 127,793
Accrued taxes 25,357 25,357
Accrued interest 24,632 24,632
Dividends payable 37,350 37,350
Other current liabilities 132,434 132,434
---------- ---------- ----------
Total current liabilities 623,101 130,018 753,119
---------- ---------- ----------
Deferred federal and state income taxes 724,712 724,712
Unamortized investment tax credits 90,728 90,728
Other reserves and deferred credits 344,193 344,193
---------- ---------- ----------
$5,143,704 $ 0 $5,143,704
========== ========== ==========
</TABLE>
<PAGE> 2
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
The pro forma adjustments to show the estimated effect of the proposed
transactions on the foregoing Consolidated Balance Sheet at June 30, 1997 are
as follows:
<TABLE>
<S> <C>
Debit - Cumulative Preferred Stock of Subsidiaries $126,166,000
Debit - Paid-in Capital $ 206,400
Credit - Retained Earnings $ 3,646,148
Credit - Short-Term Debt $130,018,548
</TABLE>
To reflect the proposed issue of $37,854,748 of short-term debt, the
proceeds of which are to be used for the retirement of $39,666,000 of preferred
stock of New England Power Company, Massachusetts Electric Company, and The
Narragansett Electric Company, subsidiaries of New England Electric System, net
of outstanding premium on capital stock and net loss on retirement.
<PAGE> 1
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
Statement of Consolidated Income
Twelve Months Ended June 30, 1997
(Actual and Pro Forma)
(Unaudited)
<TABLE>
<CAPTION>
Actual Adjustments Pro Forma
----------- ----------- -----------
(In Thousands)
<S> <C> <C> <C>
Operating revenue $ 2,429,139 $ 2,429,139
----------- ------- -----------
Operating expenses:
Fuel for generation 373,324 373,324
Purchased electric energy 530,530 530,530
Other operation 524,489 524,489
Maintenance 131,403 131,403
Depreciation and amortization 240,618 240,618
Taxes, other than income taxes 145,063 145,063
Income taxes 138,137 $(2,844) 135,293
----------- ------- -----------
Total operating expenses 2,083,564 (2,844) 2,080,720
----------- ------- -----------
Operating income 345,575 2,844 348,419
Other income:
Equity in income of generating
companies 9,978 9,978
Other income (expense), net (12,435) (12,435)
----------- ------- -----------
Operating and other income 343,118 2,844 345,962
----------- ------- -----------
Interest:
Interest on long-term debt 109,638 109,638
Other interest 16,562 7,801 24,363
Allowance for borrowed funds used
during construction (2,328) (2,328)
----------- ------- -----------
Total interest 123,872 7,801 131,673
----------- ------- -----------
Income after interest 219,246 (4,957) 214,289
Preferred dividends and net loss on
reacquisition of preferred stock 5,964 (3,686) 2,278
Minority interests 6,791 6,791
----------- ------- -----------
Net income $ 206,491 $(1,271) $ 205,220
=========== ======= ===========
Average common shares 64,949,413 64,949,413
Net income per average common share $3.18 $3.16
Dividends declared per share $2.36 $2.36
</TABLE>
Statement of Consolidated Retained Earnings
Twelve Months Ended June 30, 1997
(Actual and Pro Forma)
(Unaudited)
<TABLE>
<CAPTION>
Actual Adjustments Pro Forma
----------- ----------- -----------
(In Thousands)
<S> <C> <C> <C>
Retained earnings at beginning
of period $ 850,939 $ 850,939
Net income 206,491 $(1,271) 205,220
Dividends declared on common shares (153,055) (153,055)
Premium on redemption of preferred
stock 450 450
----------- ------- -----------
Retained earnings at end of period $ 904,825 $(1,271) $ 903,554
=========== ======= ===========
</TABLE>
<PAGE> 2
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
The pro forma adjustments to show the estimated effect of the proposed
transactions as applied to the foregoing Consolidated Statement of Income and
Consolidated Statement of Retained Earnings for the twelve months ended
June 30, 1997 are as follows:
Increase - Other Interest $7,801,113
To reflect interest on $130,018,548 of short-term debt, calculated at an annual
rate of 6.00 percent.
Decrease - Income taxes $2,843,499
To reflect the income tax effects as a result of the above adjustment, as well
as the tax impacts of a $342,000 preferred dividends tax deduction no longer
applicable as a result of the pro forma adjustments.
Decrease - Preferred dividends and net gain on reacquisition
of preferred stock $3,686,176
To reflect twelve-months effect on dividends by the retirement of $126,166,000
of preferred stock of New England Power Company, Massachusetts Electric Company,
and The Narragansett Electric Company, subsidiaries of New England Electric
System, of $7,332,324, net of $3,646,148 net loss on such retirement.
<PAGE> 1
NEW ENGLAND POWER COMPANY
Balance Sheet
At June 30, 1997
(Actual and Pro Forma)
(Unaudited)
ASSETS
------
<TABLE>
<CAPTION>
Actual Adjustments Pro Forma
------ ----------- ---------
(In Thousands)
<S> <C> <C> <C>
Utility plant, at original cost $3,033,643 $3,033,643
Less accumulated provisions for depreciation
and amortization 1,157,488 1,157,488
---------- ---------- ----------
1,876,155 1,876,155
Construction work in progress 25,142 25,142
---------- ---------- ----------
Net utility plant 1,901,297 1,901,297
---------- ---------- ----------
Investments:
Nuclear power companies, at equity 49,464 49,464
Non-utility property and other investments 30,783 30,783
---------- ---------- ----------
Total investments 80,247 80,247
---------- ---------- ----------
Current assets:
Cash 738 738
Accounts receivable:
Affiliated companies 219,936 219,936
Accrued NEEI revenues 16,888 16,888
Others 26,984 26,984
Fuel, materials, and supplies, at
average cost 64,817 64,817
Prepaid and other current assets 23,059 23,059
---------- ---------- ----------
Total current assets 352,422 352,422
---------- ---------- ----------
Deferred charges and other assets 294,456 294,456
---------- ---------- ----------
$2,628,422 $2,628,422
========== ========== ==========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common stock, par value $20 per share,
authorized and outstanding 6,449,896 shares $ 128,998 $ 128,998
Premiums on capital stocks 86,779 $ (141) 86,638
Other paid-in capital 289,818 1,952 291,770
Retained earnings 392,534 392,534
---------- ---------- ----------
Total common equity 898,129 1,811 899,940
Cumulative preferred stock, par value
$100 per share 39,666 (39,666) -
Long-term debt 647,613 647,613
---------- ---------- ----------
Total capitalization 1,585,408 (37,855) 1,547,553
---------- ---------- ----------
Current liabilities:
Long-term debt due in one year 53,000 53,000
Short-term debt (including ($5,700,000
to affiliates) 132,925 37,855 170,780
Accounts payable (including $22,331,000
to affiliates) 124,953 124,953
Accrued liabilities:
Taxes 1,719 1,719
Interest 8,760 8,760
Other accrued expenses 12,991 12,991
Dividends payable 35,474 35,474
---------- ---------- ----------
Total current liabilities 369,822 37,855 407,677
---------- ---------- ----------
Deferred federal and state income taxes 378,083 378,083
Unamortized investment tax credits 54,475 54,475
Other reserves and deffered credits 240,634 240,634
---------- ---------- ----------
$2,628,422 $ 0 $2,628,422
========== ========== ==========
</TABLE>
<PAGE> 2
NEW ENGLAND POWER COMPANY
The pro forma adjustments to show the estimated effect of the proposed
transactions on the foregoing Balance Sheet at June 30, 1997 are as follows:
<TABLE>
<S> <C>
Debit - Preferred Stock $39,666,000
Debit - Premium on Capital Stock $ 141,050
Credit - Other Paid-in-Capital $ 1,952,302
Credit - Short-Term Debt $37,854,748
</TABLE>
To reflect the proposed issue of $37,854,748 of short-term debt, the
proceeds of which are to be used for the retirement of $39,660,000 of preferred
stock, net of outstanding premium on capital stock and net gain on retirement.
<PAGE> 1
NEW ENGLAND POWER COMPANY
Statement of Income
Twelve Months Ended June 30, 1997
(Actual and Pro Forma)
(Unaudited)
<TABLE>
<CAPTION>
Actual Adjustments Pro Forma
---------- ----------- ----------
(In Thousands)
<S> <C> <C> <C>
Operating revenue, principally from affiliates $1,658,945 $1,658,945
---------- ------- ----------
Operating expenses:
Fuel for generation 381,343 381,343
Purchased electric energy 530,026 530,026
Other operation 227,397 227,397
Maintenance 82,652 82,652
Depreciation and amortization 94,584 94,584
Taxes, other than income taxes 67,490 67,490
Income taxes 85,917 $ (828) 85,089
---------- ------- ----------
Total operating expenses 1,469,409 (828) 1,468,581
---------- ------- ----------
Operating income 189,536 828 190,364
Other income:
Equity in income of nuclear power companies 4,962 4,962
Other income (expense), net (2,673) (2,673)
---------- ------- ----------
Operating and other income 191,825 828 192,653
---------- ------- ----------
Interest:
Interest on long-term debt 43,474 43,474
Other interest 7,124 2,271 9,395
Allowance for borrowed funds used during
construction -- credit (975) (975)
---------- ------- ----------
Total interest 49,623 2,271 51,894
---------- ------- ----------
Net income $ 142,202 $(1,443) $ 140,759
========== ======= ==========
</TABLE>
Statement of Retained Earnings
Twelve Months ended June 30, 1997
(Actual and Pro Forma)
(Unaudited)
<TABLE>
<CAPTION>
Actual Adjustments Pro Forma
---------- ----------- ----------
(In Thousands)
<S> <C> <C> <C>
Retained earnings at beginning of period $ 386,242 $ 386,242
Net income 142,202 $(1,443) 140,759
Dividends declared on cumulative preferred stock (2,075) 2,075 --
Dividends declared on common stock (133,835) (133,835)
---------- ------- ----------
Retained earnings at end of period $ 392,534 $ 632 $ 393,166
========== ======= ==========
</TABLE>
<PAGE> 2
NEW ENGLAND POWER COMPANY
The pro forma adjustments to show the estimated effect of the proposed
transactions as applied to the foregoing Statement of Income and Statement of
Retained Earnings for the twelve months ended June 30, 1997 are as follows:
Increase - Other Interest $2,271,285
To reflect interest on $37,854,748 of short-term debt, calculated at an annual
rate of 6.00 percent.
Decrease - Income taxes $827,911
To reflect the income tax effects as a result of the above adjustment, as well
as the tax impacts of a $180,000 preferred dividends tax deduction no longer
applicable as a result of the pro forma adjustments.
Decrease - Dividends declared on cumulative preferred stock $2,075,324
To reflect twelve-months effect of the retirement of $39,666,000 of preferred
stock.
<PAGE> 1
MASSACHUSETTS ELECTRIC COMPANY
Balance Sheet
At June 30, 1997
(Actual and Pro Forma)
(Unaudited)
<TABLE>
<CAPTION>
ASSETS Actual Adjustments Pro Forma
------ ---------- ----------- ----------
<S> <C> <C> <C>
Utility plant, at original cost $1,536,422 $1,536,422
Less accumulated provisions for depreciation 446,458 446,458
---------- -------- ----------
1,089,964 1,089,964
Construction work in progress 17,608 17,608
---------- -------- ----------
Net utility plant 1,107,572 1,107,572
---------- -------- ----------
Current assets:
Cash 1,163 1,163
Accounts receivable:
From sales of electric energy 145,463 145,463
Other (including $2,323,000 from affiliates) 3,076 3,076
Less reserves for doubtful accounts 14,539 14,539
---------- -------- ----------
134,000 134,000
Unbilled revenues 46,284 46,284
Materials and supplies, at average cost 9,031 9,031
Prepaid and other current assets 26,471 26,471
---------- -------- ----------
Total current assets 216,949 216,949
---------- -------- ----------
Deferred charges and other assets 51,047 51,047
---------- -------- ----------
$1,375,568 $1,375,568
========== ======== ==========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common stock, par value $25 per share, authorized
and outstanding 2,398,111 shares $ 59,953 $ 59,953
Premiums on capital stocks 45,862 $ 105 45,967
Other paid-in capital 155,310 155,310
Retained earnings 171,581 (4,088) 167,493
---------- -------- ----------
Total common equity 432,706 (3,983) 428,723
Cumulative preferred stock 50,000 (50,000) --
Long-term debt 333,415 333,415
---------- -------- ----------
Total capitalization 816,121 (53,983) 762,138
---------- -------- ----------
Current liabilities:
Long-term debt due in one year 25,000 25,000
Short-term debt (including $5,700,000 to affiliates) 30,125 53,983 84,108
Accounts payable (including $164,905,000
to affiliates) 174,802 174,802
Accrued liabilities:
Taxes 5,323 5,323
Interest 9,154 9,154
Other accrued expenses 75,004 75,004
Customer deposits 4,413 4,413
Dividends payable 5,575 5,575
---------- -------- ----------
Total current liabilities 329,396 53,983 383,379
---------- -------- ----------
Deferred federal and state income taxes 170,592 170,592
Unamortized investment tax credits 16,015 16,015
Other reserves and deferred credits 43,444 43,444
---------- -------- ----------
$1,375,568 $ 0 $1,375,568
========== ======== ==========
</TABLE>
<PAGE> 2
MASSACHUSETTS ELECTRIC COMPANY
The pro forma adjustments to show the estimated effect of the proposed
transactions on the foregoing Balance Sheet at June 30, 1997 are as follows:
<TABLE>
<S> <C>
Debit - Preferred Stock $50,000,000
Credit - Discount on Capital Stock $104,650
Debit - Retained Earnings $4,088,150
Credit - Short-Term Debt $53,983,500
</TABLE>
To reflect the proposed issue of $53,983,500 of short-term debt, the
proceeds of which are to be used for the retirement of $50,000,000 of preferred
stock, net of outstanding discount on capital stock and net loss on retirement.
<PAGE> 1
MASSACHUSETTS ELECTRIC COMPANY
Statement of Income
Twelve Months Ended June 30, 1997
(Actual and Pro Forma)
(Unaudited)
<TABLE>
<CAPTION>
Actual Adjustments Pro Forma
------ ----------- ---------
(In Thousands)
<S> <C> <C> <C>
Operating revenue $1,564,299 $1,564,299
---------- ------- ----------
Operating expenses:
Purchased electric energy, principally from
New England Power Company, an affiliate 1,131,008 1,131,008
Other operation 210,141 210,141
Maintenance 32,109 32,109
Depreciation 48,358 48,358
Taxes, other than income taxes 30,990 30,990
Income taxes 30,264 $(1,271) 28,993
---------- ------- ----------
Total operating expenses 1,482,870 (1,271) 1,481,599
---------- ------- ----------
Operating income 81,429 1,271 82,700
Other income (expense), net (1,243) (1,243)
---------- ------- ----------
Operating and other income 80,186 1,271 81,457
---------- ------- ----------
Interest:
Interest on long-term debt 27,715 27,715
Other interest 7,238 3,239 10,477
Allowance for borrowed funds used during
construction - credit (492) (492)
---------- ------- ----------
Total interest 34,461 3,239 37,700
---------- ------- ----------
Net income $ 45,725 $(1,968) $ 43,757
========== ======= ==========
</TABLE>
Statement of Retained Earnings
Twelve Months Ended June 30, 1997
(Actual and Pro Forma)
(Unaudited)
<TABLE>
<CAPTION>
Actual Adjustments Pro Forma
------ ----------- ---------
(In Thousands)
<S> <C> <C> <C>
Retained earnings at beginning of period $154,150 $154,150
Net income 45,725 $(1,968) 43,757
Dividends declared on cumulative preferred stock (3,114) 3,114 -
Dividends declared on common stock (25,180) (25,180)
Premium on redemption of preferred stock (4,088) (4,088)
-------- ------- --------
Retained earnings at end of period $171,581 $(2,942) $168,639
======== ======= ========
</TABLE>
<PAGE> 2
MASSACHUSETTS ELECTRIC COMPANY
The pro forma adjustments to show the estimated effect of the proposed
transactions as applied to the foregoing Statement of Income and Statement of
Retained Earnings for the twelve months ended June 30, 1997 are as follows:
Increase - Other Interest $3,239,010
To reflect interest on $53,983,500 of short-term debt, calculated at an annual
rate of 6.00 percent.
Decrease - Income taxes $1,270,502
To reflect the income tax effects as a result of the above adjustment.
Decrease - Dividends declared on cumulative preferred stock $3,114,000
To reflect twelve-months effect of the retirement of $50,000,000 of preferred
stock
Decrease - Premium on redemption of preferred stock $4,088,000
To reflect the net loss on retirement of $50,000,000 of preferred stock.
<PAGE> 1
THE NARRAGANSETT ELECTRIC COMPANY
Balance Sheet
At June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
ASSETS Actual Adjustments Pro Forma
------ ------ ----------- ---------
(In Thousands)
<S> <C> <C> <C>
Utility plant, at original cost $750,188 $750,188
Less accumulated provisions for depreciation 193,273 193,273
-------- -------- --------
556,915 556,915
Construction work in progress 6,836 6,836
-------- -------- --------
Net utility plant 563,751 563,751
-------- -------- --------
Current assets:
Cash 1,385 1,385
Accounts receivable:
From sales of electric energy 50,351 50,351
Other (including $1,296,000 from affiliates) 2,684 2,684
Less reserves for doubtful accounts 5,884 5,884
-------- -------- --------
47,151 47,151
Unbilled revenues 16,200 16,200
Fuel, materials and supplies, at average cost 4,208 4,208
Prepaid and other current assets 16,551 16,551
-------- -------- --------
Total current assets 85,495 85,495
-------- -------- --------
Deferred charges and other assets 54,672 54,672
-------- -------- --------
$703,918 $703,918
======== ======== ========
CAPITALIZATION AND LIABILITIES
--------------------------------
Capitalization:
Common stock, par value $50 per share,
authorized and outstanding 1,132,487 shares $ 56,624 $ (170) $ 56,624
Premiums on preferred stocks 170 --
Other paid-in capital 80,000 80,000
Retained earnings 122,624 (1,510) 121,114
-------- -------- --------
Total common equity 259,418 (1,680) 257,738
Cumulative preferred stock 36,500 (36,500) --
Long-term debt 173,574 173,574
-------- -------- --------
Total capitalization 469,492 (38,180) 431,312
-------- -------- --------
Current liabilities:
Long-term debt due in one year 12,500 12,500
Short-term debt (including $5,725,000 to
affiliates) 24,900 38,180 63,080
Accounts payable (including $47,929,000
to affiliates) 51,729 51,729
Accrued liabilities:
Taxes 4,788 4,788
Interest 4,919 4,919
Other accrued expenses 18,521 18,521
Customer deposits 5,783 5,783
Dividends payable 6,198 6,198
-------- -------- --------
Total current liabilities 129,338 38,180 167,518
-------- -------- --------
Deferred federal income taxes 81,191 81,191
Unamortized investment tax credits 7,270 7,270
Other reserves and deferred credits 16,627 16,627
-------- -------- --------
$703,918 $ 0 $703,918
======== ======== ========
</TABLE>
<PAGE> 2
THE NARRAGANSETT ELECTRIC COMPANY
The pro forma adjustments to show the estimated effect of the proposed
transactions on the foregoing Balance Sheet at June 30, 1997 are as follows:
Debit - Preferred Stock $36,500,000
Debit - Premium on Capital Stock $170,000
Debit - Retained Earnings $1,510,300
Credit - Short-Term Debt $38,180,300
To reflect the proposed issue of $38,180,300 of short-term debt, the
proceeds of which are to be used for the retirement of $36,500,000 of preferred
stock, net of outstanding discount on capital stock and net loss on retirement.
<PAGE> 1
THE NARRAGANSETT ELECTRIC COMPANY
Statement of Income
Twelve Months Ended June 30, 1997
(Actual and Pro Forma)
(Unaudited)
<TABLE>
<CAPTION>
Actual Adjustments Pro Forma
-------- ----------- ---------
(In Thousands)
<S> <C> <C> <C>
Operating revenue $511,190 $511,190
-------- -------- --------
Operating expenses:
Fuel for generation and purchased electric
energy (principally from New England
Power Company, an affiliate) 304,036 304,036
Other operation 71,669 71,669
Maintenance 11,802 11,802
Depreciation 25,245 25,245
Taxes, other than federal income taxes 37,950 37,950
Federal income taxes 14,286 $ (745) 13,541
-------- -------- --------
Total operating expenses 464,988 (745) 464,243
-------- -------- --------
Operating income 46,202 745 46,947
Other income:
Other income (expense), net (681) (681)
-------- -------- --------
Operating and other income 45,521 745 46,266
-------- -------- --------
Interest:
Interest on long-term debt 17,104 17,104
Other interest 2,193 2,291 4,484
Allowance for borrowed funds used during
construction - credit (101) (101)
-------- -------- --------
Total interest 19,196 $ 2,291 $ 21,487
-------- -------- --------
Net income $ 26,325 $ (1,546) $ 24,779
======== ======== ========
</TABLE>
Statement of Retained Earnings
Twelve Months Ended June 30, 1997
(Actual and Pro Forma)
(Unaudited)
<TABLE>
<CAPTION>
Actual Adjustments Pro Forma
-------- ----------- ---------
(In Thousands)
<S> <C> <C> <C>
Retained earnings at beginning of period $111,183 $111,183
Net income 26,325 $ (1,546) 24,779
Dividends declared on cumulative
preferred stock (2,143) 2,143 --
Dividends declared on common stock (12,741) (12,741)
Premium on redemption of preferred stock (1,510) (1,510)
-------- -------- --------
Retained earnings at end of period $122,624 $ (913) $121,711
======== ======== ========
</TABLE>
<PAGE> 2
THE NARRAGANSETT ELECTRIC COMPANY
The pro forma adjustments to show the estimated effect of the proposed
transactions as applied to the foregoing Statement of Income and Statement of
Retained Earnings for the twelve months ended June 30, 1997 are as follows:
Increase - Interest on Short-Term Debt $2,290,818
To reflect interest on $38,180,300 of short-term debt, calculated at an annual
rate of 6.00 percent.
Decrease - Income taxes $745,086
To reflect the income tax effects as a result of the above adjustment, as well
as the tax impacts of a $162,000 preferred dividends tax deduction no longer
applicable as a result of the pro forma adjustments.
Decrease - Dividends declared on cumulative preferred stock $2,143,000
To reflect twelve-months effect of the retirement of $36,500,000 of preferred
stock
Decrease - Premium on redemption of preferred stock $1,510,300
To reflect the net loss on retirement of $50,000,000 of preferred stock.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND RELATED STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS OF NEW
ENGLAND ELECTRIC SYSTEM (PARENT COMPANY), AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000071297
<NAME> NEW ENGLAND ELECTRIC SYSTEM (PARENT COMPANY)
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 1,693,482
<TOTAL-CURRENT-ASSETS> 55,827
<TOTAL-DEFERRED-CHARGES> 2,978
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,752,287
<COMMON> 64,969
<CAPITAL-SURPLUS-PAID-IN> 736,567
<RETAINED-EARNINGS> 904,826
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,706,362
0
0
<LONG-TERM-DEBT-NET> 0
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 45,925
<TOT-CAPITALIZATION-AND-LIAB> 1,752,287
<GROSS-OPERATING-REVENUE> 0
<INCOME-TAX-EXPENSE> (434)
<OTHER-OPERATING-EXPENSES> 7,065
<TOTAL-OPERATING-EXPENSES> 6,631
<OPERATING-INCOME-LOSS> (6,631)
<OTHER-INCOME-NET> 213,702
<INCOME-BEFORE-INTEREST-EXPEN> 207,071
<TOTAL-INTEREST-EXPENSE> 305
<NET-INCOME> 206,766
0
<EARNINGS-AVAILABLE-FOR-COMM> 206,766
<COMMON-STOCK-DIVIDENDS> 153,329
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 173,514
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND RELATED CONSOLIDATED STATEMENTS OF INCOME,
RETAINED EARNINGS AND CASH FLOWS OF NEW ENGLAND ELECTRIC SYSTEM, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<NAME> NEW ENGLAND ELECTRIC SYSTEM - CONSOLIDATED
<SUBSIDIARY>
<NUMBER> 1
<NAME> NEES CONSOLIDATED
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 3,912,203 3,912,203
<OTHER-PROPERTY-AND-INVEST> 372,721 372,721
<TOTAL-CURRENT-ASSETS> 455,214 455,214
<TOTAL-DEFERRED-CHARGES> 403,566 <F1> 403,566 <F1>
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 5,143,704 5,143,704
<COMMON> 64,970 64,970
<CAPITAL-SURPLUS-PAID-IN> 736,773 736,567
<RETAINED-EARNINGS> 904,825 901,179
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,704,067 <F3> 1,700,215 <F3>
0 0
126,166 <F2> 0 <F2>
<LONG-TERM-DEBT-NET> 1,484,542 1,484,542
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 170,825 300,843
<LONG-TERM-DEBT-CURRENT-PORT> 104,710 104,710
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,553,394 1,553,394
<TOT-CAPITALIZATION-AND-LIAB> 5,143,704 5,143,704
<GROSS-OPERATING-REVENUE> 2,429,139 2,429,139
<INCOME-TAX-EXPENSE> 138,137 135,293
<OTHER-OPERATING-EXPENSES> 1,945,427 1,945,427
<TOTAL-OPERATING-EXPENSES> 2,083,564 2,080,720
<OPERATING-INCOME-LOSS> 345,575 348,419
<OTHER-INCOME-NET> (2,457) (2,457)
<INCOME-BEFORE-INTEREST-EXPEN> 343,118 345,962
<TOTAL-INTEREST-EXPENSE> 123,872 131,673
<NET-INCOME> 206,491 205,220
7,332 <F2> 0 <F2>
<EARNINGS-AVAILABLE-FOR-COMM> 206,491 205,220
<COMMON-STOCK-DIVIDENDS> 153,055 153,055
<TOTAL-INTEREST-ON-BONDS> 109,638 109,638
<CASH-FLOW-OPERATIONS> 518,544 517,872
<EPS-PRIMARY> 3.18 3.16
<EPS-DILUTED> 3.18 3.16
<FN>
<F1>Total deferred charges include other assets.
<F2>Preferred stock reflects preferred stock of subsidiaries. Preferred stock
dividends reflect preferred stock dividends of subsidiaries.
<F3>Total common stockholders equity is reflected net of treasury stock at cost and
unrealized gain on securities.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND RELATED STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS OF NEW
ENGLAND POWER COMPANY, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 2
<NAME> NEW ENGLAND POWER COMPANY
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 1,901,297 1,901,297
<OTHER-PROPERTY-AND-INVEST> 80,247 80,247
<TOTAL-CURRENT-ASSETS> 352,422 352,422
<TOTAL-DEFERRED-CHARGES> 294,456 <F1> 294,456 <F1>
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 2,628,422 2,628,422
<COMMON> 128,998 128,998
<CAPITAL-SURPLUS-PAID-IN> 376,597 378,408
<RETAINED-EARNINGS> 392,534 392,534
<TOTAL-COMMON-STOCKHOLDERS-EQ> 898,129 899,940
0 0
39,666 0
<LONG-TERM-DEBT-NET> 647,613 647,613
<SHORT-TERM-NOTES> 5,700 5,700
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 127,225 165,080
<LONG-TERM-DEBT-CURRENT-PORT> 53,000 53,000
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 857,089 857,089
<TOT-CAPITALIZATION-AND-LIAB> 2,628,422 2,628,422
<GROSS-OPERATING-REVENUE> 1,658,945 1,658,945
<INCOME-TAX-EXPENSE> 85,917 85,089
<OTHER-OPERATING-EXPENSES> 1,383,492 1,383,492
<TOTAL-OPERATING-EXPENSES> 1,469,409 1,468,581
<OPERATING-INCOME-LOSS> 189,536 190,364
<OTHER-INCOME-NET> 2,289 2,289
<INCOME-BEFORE-INTEREST-EXPEN> 191,825 192,653
<TOTAL-INTEREST-EXPENSE> 49,623 51,894
<NET-INCOME> 142,202 140,759
2,075 0
<EARNINGS-AVAILABLE-FOR-COMM> 140,127 140,759
<COMMON-STOCK-DIVIDENDS> 133,835 133,835
<TOTAL-INTEREST-ON-BONDS> 43,474 43,474
<CASH-FLOW-OPERATIONS> 250,484 249,104
<EPS-PRIMARY> 0 <F2> 0 <F2>
<EPS-DILUTED> 0 <F2> 0 <F2>
<FN>
<F1>Total deferred charges include other assets.
<F2>Per share data is not relevant because the Company's common stock is
wholly-owned by New England Electric System.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND RELATED STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS OF
MASSACHUSETTS ELECTRIC COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 3
<NAME> MASSACHUSETTS ELECTRIC COMPANY
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 1,107,572 1,107,572
<OTHER-PROPERTY-AND-INVEST> 0 0
<TOTAL-CURRENT-ASSETS> 216,949 216,949
<TOTAL-DEFERRED-CHARGES> 51,047 <F1> 51,047 <F1>
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 1,375,568 1,375,568
<COMMON> 59,953 59,953
<CAPITAL-SURPLUS-PAID-IN> 201,172 201,277
<RETAINED-EARNINGS> 171,581 167,493
<TOTAL-COMMON-STOCKHOLDERS-EQ> 432,706 428,723
0 0
50,000 0
<LONG-TERM-DEBT-NET> 333,415 333,415
<SHORT-TERM-NOTES> 5,700 5,700
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 24,425 78,408
<LONG-TERM-DEBT-CURRENT-PORT> 25,000 25,000
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 504,322 504,322
<TOT-CAPITALIZATION-AND-LIAB> 1,375,568 1,375,568
<GROSS-OPERATING-REVENUE> 1,564,299 1,564,299
<INCOME-TAX-EXPENSE> 30,264 28,993
<OTHER-OPERATING-EXPENSES> 1,452,606 1,452,606
<TOTAL-OPERATING-EXPENSES> 1,482,870 1,481,599
<OPERATING-INCOME-LOSS> 81,429 82,700
<OTHER-INCOME-NET> (1,243) (1,243)
<INCOME-BEFORE-INTEREST-EXPEN> 80,186 81,457
<TOTAL-INTEREST-EXPENSE> 34,461 37,700
<NET-INCOME> 45,725 43,757
3,114 0
<EARNINGS-AVAILABLE-FOR-COMM> 42,611 43,757
<COMMON-STOCK-DIVIDENDS> 25,180 25,180
<TOTAL-INTEREST-ON-BONDS> 27,715 27,715
<CASH-FLOW-OPERATIONS> 129,530 127,562
<EPS-PRIMARY> 0 <F2> 0 <F2>
<EPS-DILUTED> 0 <F2> 0 <F2>
<FN>
<F1>Total deferred charges include other assets.
<F2>Per share date is not relevant because the Company's common stock is
wholly-owned by New England Electric system.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND RELATED STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS OF THE
NARRAGANSETT ELECTRIC COMPANY, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 4
<NAME> THE NARRAGANSETT ELECTRIC COMPANY
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 563,751 563,751
<OTHER-PROPERTY-AND-INVEST> 0 0
<TOTAL-CURRENT-ASSETS> 85,495 85,495
<TOTAL-DEFERRED-CHARGES> 54,672 <F1> 54,672 <F1>
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 703,918 703,918
<COMMON> 56,624 56,624
<CAPITAL-SURPLUS-PAID-IN> 80,170 80,000
<RETAINED-EARNINGS> 122,624 121,114
<TOTAL-COMMON-STOCKHOLDERS-EQ> 259,418 257,738
0 0
36,500 0
<LONG-TERM-DEBT-NET> 173,574 173,574
<SHORT-TERM-NOTES> 5,725 5,725
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 19,175 57,355
<LONG-TERM-DEBT-CURRENT-PORT> 12,500 12,500
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 197,026 197,026
<TOT-CAPITALIZATION-AND-LIAB> 703,918 703,918
<GROSS-OPERATING-REVENUE> 511,190 511,190
<INCOME-TAX-EXPENSE> 14,286 13,541
<OTHER-OPERATING-EXPENSES> 450,702 450,702
<TOTAL-OPERATING-EXPENSES> 464,988 464,243
<OPERATING-INCOME-LOSS> 46,202 46,947
<OTHER-INCOME-NET> (681) (681)
<INCOME-BEFORE-INTEREST-EXPEN> 45,521 46,266
<TOTAL-INTEREST-EXPENSE> 19,196 21,487
<NET-INCOME> 26,325 24,779
2,143 0
<EARNINGS-AVAILABLE-FOR-COMM> 24,182 24,779
<COMMON-STOCK-DIVIDENDS> 12,741 12,741
<TOTAL-INTEREST-ON-BONDS> 17,104 17,104
<CASH-FLOW-OPERATIONS> 69,021 67,629
<EPS-PRIMARY> 0 <F2> 0 <F2>
<EPS-DILUTED> 0 <F2> 0 <F2>
<FN>
<F1>Total deferred sharges include other assets.
<F2>Per share data is not relevant because the Company's common stock is
wholly-owned by New England Electric System.
</FN>
</TABLE>
