<PAGE>
File No. 30-33
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-5-S
ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1996
Filed pursuant to the
Public Utility Holding Company Act of 1935 by
LOGO NEW ENGLAND ELECTRIC SYSTEM
25 Research Drive, Westborough, Massachusetts 01582
<PAGE>
<TABLE>
Item 1. SYSTEM COMPANIES AND INVESTMENT THEREIN AS OF DECEMBER 31, 1996 (1)
<CAPTION>
Value Per
Books of
Percent of Issuer and
Number of Voting Power Carrying
Name of Company Common Shares (100% unless Value
(and abbreviation used herein) Owned Specified) to Owner
- ------------------------------ ------------- ------------ ---------
(000's)
<S> <C> <C> <C>
New England Electric System
(Voluntary Association) (NEES) None
Granite State Electric Company
(Granite) 60,400 $ 19,685
Granite State Energy, Inc.
(Granite State Energy) (2) 1,000 (155)
Unsecured Debt - 355
Massachusetts Electric
Company (Mass Electric) 2,398,111 427,165
Nantucket Electric Company
(Nantucket) (3) 1 4,166
The Narragansett Electric
Company (Narragansett) 1,132,487 256,602
Narragansett Energy Resources
Company (NERC) 25 988
Unsecured Debt - 750
NEES Energy, Inc. (NEES Energy) (4) 1,000 (1,508)
Unsecured Debt - 4,505
New England Electric Resources,
Inc. (NEERI) 1,000 (5,320)
Unsecured Debt - 8,449
New England Hydro-Transmission
Electric Company, Inc. (NEHTEC) 2,017,352 53.97 28,554
New England Hydro-Transmission
Corporation (NEHTC) 9,935 53.97 18,549
New England Electric Transmission
Corporation (NEET) 120 3,244
New England Energy
Incorporated (NEEI) (5) 2,500 (24,457)
Unsecured debt - 20,997
New England Power Service Company (NEPSCO) 3 18,189
New England Power Company (NEP) 6,449,896 98.85 906,064
----------
$1,686,822
==========
New England Hydro Finance Company
(NEHFC) (6) 504 53.97 $ 5
NERC
Ocean State Power (7) - 35.69 $ 19,777
Ocean State Power II (7) - 35.69 $ 15,386
NEES Energy
AllEnergy Marketing Company, LLC
(AllEnergy) (8) - 50 $ 1,716
NEERI
NEERI International (9) 2 $ 0
NEP
Connecticut Yankee Atomic
Power Company 52,500 15 $ 15,914
Maine Yankee Atomic
Power Company 100,000 20 $ 14,460
Vermont Yankee Nuclear Power
Corporation 80,002 20 $ 10,627
Yankee Atomic Electric
Company 46,020 30 $ 6,901
NEES Communications, Inc. (NEESCom) (10)
New England Wholesale Electric Company (11)*
<FN>
- --------------------
*Inactive.
</FN>
</TABLE>
<PAGE>
(1) Attached as Exhibit E.1. hereto is a schedule showing investments
during the year ended December 31, 1996 in the NEES Money Pool,
through which certain System companies lend to or borrow from
other System companies (Commission File Nos. 70-8261, 70-8453,
70-8679, and 70-8901).
(2) Granite State Energy, a New Hampshire Corporation, was formed on
April 22, 1996 as a wholly-owned nonutility subsidiary of NEES
which provides a range of energy and related services, including
but not limited to sales of electric energy, audits, power
quality, fuel supply, repair, maintenance, construction, design,
engineering, and consulting.
(3) Nantucket was incorporated on April 12, 1905 under the laws of
Massachusetts, and was acquired by NEES on March 26, 1996.
Nantucket provides electric service at retail to approximately
8,300 customers. Its service territory is limited to the Island
and Town of Nantucket.
(4) NEES Energy, a Massachusetts Corporation, was formed on June 14,
1996 as a wholly-owned nonutility marketing subsidiary of NEES.
(5) Samedan/NEEI Exploration Company is a partnership engaged in oil
and gas exploration and development. NEEI owns a 50% interest in
the partnership and had invested $730,221,570 in the partnership
as of December 31, 1996.
(6) NEHFC has two shareholders, NEHTEC and NEHTC, which each have a
50% interest. The tabulation shown above reflects NEES' indirect
ownership in NEHFC.
(7) Both Ocean State Power and Ocean State Power II are general
partnerships; NERC owns a 20% equity interest in each.
(8) AllEnergy, a Massachusetts Limited Liability Corporation, was
formed on September 18, 1996. NEES Energy owns a 50% interest in
ALLEnergy, an energy marketing joint venture between NEES Energy
and a wholly-owned subsidiary of Eastern Enterprises, a regional
gas holding company.
(9) NEERI International was formed on July 19, 1996 under the laws of
the Cayman Islands as a wholly-owned nonutility subsidiary of
NEERI which will serve as a holding company for NEERI's
capitalized international projects.
(10) NEESCom is a wholly-owned, nonutility subsidiary of NEES which
provides telecommunications and information-related products and
services, and was formed under the laws of Massachusetts on August
2, 1996. NEESCom was not yet capitalized as of December 31, 1996.
(11) Incorporated in 1972; not yet capitalized.
Item 2. ACQUISITION OR SALES OF UTILITY ASSETS
(None to be reported.)
Item 3. ISSUE, SALE, PLEDGE, GUARANTEE OR ASSUMPTION OF SYSTEM SECURITIES
(None to be reported.)
<PAGE>
<TABLE>
Item 4. ACQUISITION, REDEMPTION OR RETIREMENT OF SYSTEM SECURITIES
<CAPTION>
Calendar Year 1996
------------------
Name of Company
Acquiring,
Redeeming Number of Shares
or Retiring or Principal Amount Commission
Securities ------------------------ Authorization
(Issuer unless Redeemed or (Release No.
Name of Issuer otherwise noted) Acquired Retired (1) Consideration or Other)
-------------- ---------------- -------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
GRANITE
Unsecured Note $1,000,000 $1,000,000 23595, 24272 & (B)
GRANITE STATE ENERGY
Sub. Promissory Note NEES $355,000 $355,000 26520
NEHFC
Secured Notes $11,520,000 $11,520,000 25304 & (B)
NEEI
Sub. Promissory Note NEES $4,771,136 $4,771,136 (A)
Sub. Promissory Note $4,000,000 $4,000,000 (A)
NEES ENERGY
Sub. Promissory Note NEES $4,505,000 $4,505,000 26520 & 26633
NEET
Common Stock 20 shares $548,934 24162
Secured Note $4,624,000 $4,624,000 24162
NEP
Bonds $57,850,000 $58,447,000 (B)
Preferred Stock $20,850,000 $19,531,770 (B)
NARRAGANSETT
Bonds $2,000,000 $2,260,000 (B)
NEERI
Sub. Promissory Note NEES $5,050,000 $ 5,050,000 (C)
NERC
Sub. Promissory Note NEES $1,085,000 $1,085,000 (D)
Sub. Promissory Note $1,000,000 $1,000,000 (D)
<FN>
- --------------------
(1) Securities were extinguished.
(A) SEC Release No. 24847 and Rule 45(b)(3).
(B) Rule 42.
(C) SEC Release No. 25261, 26017, 26057, 26235, 26277, & 26291
(D) SEC Release No. 24960, 24727, 25313, & 26397
</FN>
</TABLE>
<PAGE>
<TABLE>
Item 5. INVESTMENTS IN SECURITIES OF NONSYSTEM COMPANIES
As of December 31, 1996.
<CAPTION> Number of
Shares or General
Principal Percent Nature Carrying
Amount Voting of Issuer's Value
Name of Owner Name of Issuer Security Owned Owned Power Business to Owner
- ------------- -------------- -------------- --------- ------- ----------- -----------
(in
thous.)
<S> <C> <C> <C> <C> <C> <C>
NEES UNITIL Corporation Capital Stock 34,400 shs. 0.8 Public $303
no par value Utility
Three Two business Stocks $ 74
Subsidiaries development
(A) corporations
<FN>
- --------------------
(A) Mass. Electric, Narragansett, and NEP.
</TABLE>
<PAGE>
<TABLE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1996.
(Note A)
<CAPTION> Mass
NEES Granite Elec Narra NEEI NEERI NEET NEP NEPSCO NEHTC NEHTEC NERC NEHFC
---- ------- ---- ----- ---- ----- ---- --- ------ ----- ------ ---- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Andrew H. Aitken VP VP s
- ---------------------------------------------------------------------------------------------------------------------------------
John Amoroso
245 S. Main Street, Hopedale, MA VP s
- ---------------------------------------------------------------------------------------------------------------------------------
Cynthia A. Arcate
9 Lowell Road, Salem, NH VP s
- ---------------------------------------------------------------------------------------------------------------------------------
Lawrence E. Bailey VP VP s
- ---------------------------------------------------------------------------------------------------------------------------------
Thomas J. Bascetta
P.O. Box 5426,
W. Lebanon, NH D f
- ---------------------------------------------------------------------------------------------------------------------------------
Urville J. Beaumont
8 Samoset Dr., Salem, NH D f
- ---------------------------------------------------------------------------------------------------------------------------------
Joan T. Bok
One International Pl., Suite 2115
Boston, MA D ChB D D D D D D D D f D D D D
- ---------------------------------------------------------------------------------------------------------------------------------
Robert J. Brill s
- ---------------------------------------------------------------------------------------------------------------------------------
William M. Bulger
18 Tremont St., Boston, MA D f
- ---------------------------------------------------------------------------------------------------------------------------------
Marilyn R. Campbell
79 Brady Avenue, Salem, NH D f
- ---------------------------------------------------------------------------------------------------------------------------------
Stephen A. Cardi
400 Lincoln Ave., Warwick, RI D f
- ---------------------------------------------------------------------------------------------------------------------------------
John G. Cochrane T T T VP s T T T T
- ---------------------------------------------------------------------------------------------------------------------------------
Eric P. Cody VP s
- ---------------------------------------------------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1996.
(Note A)
Granite
State Nantucket NEERI NEES NEES
Energy Electric International Comm. Energy
------ --------- ------------- ---- ------
Andrew H. Aitken
- -----------------------------------------------------------------------------------------
John Amoroso
245 S. Main Street, Hopedale, MA VP
- -----------------------------------------------------------------------------------------
Cynthia A. Arcate
9 Lowell Road, Salem, NH
- -----------------------------------------------------------------------------------------
Lawrence E. Bailey
- -----------------------------------------------------------------------------------------
Thomas J. Bascetta
P.O. Box 5426,
W. Lebanon, NH
- -----------------------------------------------------------------------------------------
Urville J. Beaumont
8 Samoset Dr., Salem, NH
- -----------------------------------------------------------------------------------------
Joan T. Bok
One International Pl., Suite 2115
Boston, MA D D D D
- -----------------------------------------------------------------------------------------
Robert J. Brill C
- -----------------------------------------------------------------------------------------
William M. Bulger
18 Tremont St., Boston, MA
- -----------------------------------------------------------------------------------------
Marilyn R. Campbell
79 Brady Avenue, Salem, NH
- -----------------------------------------------------------------------------------------
Stephen A. Cardi
400 Lincoln Ave., Warwick, RI
- -----------------------------------------------------------------------------------------
John G. Cochrane T T T T
- -----------------------------------------------------------------------------------------
Eric P. Cody
- -----------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1996 (continued).
(Note A)
Mass
NEES Granite Elec Narra NEEI NEERI NEET NEP NEPSCO NEHTC NEHTEC NERC NEHFC
---- ------- ---- ----- ---- ----- ---- --- ------ ----- ------ ---- -----
Sally L. Collins
23 Ridgewood Terrace,
Northampton, MA D f
- ---------------------------------------------------------------------------------------------------------------------------------
Dan C. Delurey VP s
- ---------------------------------------------------------------------------------------------------------------------------------
John H. Dickson
95 Sawyer Rd., Waltham, MA
- ---------------------------------------------------------------------------------------------------------------------------------
Jeffrey A. Donahue P D VP VP s VP VP
- ---------------------------------------------------------------------------------------------------------------------------------
Peter G. Flynn VP s
- ---------------------------------------------------------------------------------------------------------------------------------
David Fredericks
2 Fairgrounds Rd., Nant., MA
- ---------------------------------------------------------------------------------------------------------------------------------
Richard W. Frost
280 Melrose St., Providence, RI VP s
- ---------------------------------------------------------------------------------------------------------------------------------
Frances H. Gammell
200 Providence Street, P.O. Box 1007
W. Warwick, RI D f
- ---------------------------------------------------------------------------------------------------------------------------------
Dr. Kalyan K. Ghosh
486 Chandler St., Worcester, MA D f
- ---------------------------------------------------------------------------------------------------------------------------------
Don F. Goodwin VP s
- ---------------------------------------------------------------------------------------------------------------------------------
Gregory A. Hale s
- ---------------------------------------------------------------------------------------------------------------------------------
George W. Harris
Ledge Road, Pelham, NH D f
- ---------------------------------------------------------------------------------------------------------------------------------
Nicholas D. N. Harvey, Jr.
41 S. Park Street, Hanover, NH D f
- ---------------------------------------------------------------------------------------------------------------------------------
David L. Holt E-VP s
- ---------------------------------------------------------------------------------------------------------------------------------
Charles B. Housen
120 E. Main Street, Erving, MA D f
- ---------------------------------------------------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1996 (continued).
(Note A)
Granite
State Nantucket NEERI NEES NEES
Energy Electric International Comm. Energy
------ --------- ------------- ---- ------
Sally L. Collins
23 Ridgewood Terrace,
Northampton, MA
- -----------------------------------------------------------------------------------------
Dan C. Delurey
- -----------------------------------------------------------------------------------------
John H. Dickson
95 Sawyer Rd., Waltham, MA P D
- -----------------------------------------------------------------------------------------
Jeffrey A. Donahue VP
- -----------------------------------------------------------------------------------------
Peter G. Flynn
- -----------------------------------------------------------------------------------------
David Fredericks
2 Fairgrounds Rd., Nant., MA VP s
- -----------------------------------------------------------------------------------------
Richard W. Frost
280 Melrose St., Providence, RI
- -----------------------------------------------------------------------------------------
Frances H. Gammell
200 Providence Street, P.O. Box 1007
W. Warwick, RI
- -----------------------------------------------------------------------------------------
Dr. Kalyan K. Ghosh
486 Chandler St., Worcester, MA
- -----------------------------------------------------------------------------------------
Don F. Goodwin
- -----------------------------------------------------------------------------------------
Gregory A. Hale S C
- -----------------------------------------------------------------------------------------
George W. Harris
Ledge Road, Pelham, NH
- -----------------------------------------------------------------------------------------
Nicholas D. N. Harvey, Jr.
41 S. Park Street, Hanover, NH
- -----------------------------------------------------------------------------------------
David L. Holt P D
- -----------------------------------------------------------------------------------------
Charles B. Housen
120 E. Main Street, Erving, MA
- -----------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1996 (continued).
(Note A)
Mass
NEES Granite Elec Narra NEEI NEERI NEET NEP NEPSCO NEHTC NEHTEC NERC NEHFC
---- ------- ---- ----- ---- ----- ---- --- ------ ----- ------ ---- -----
Alfred D. Houston E-VP VP T D P D D D D P s D D D D
- ---------------------------------------------------------------------------------------------------------------------------------
Michael E. Jesanis T T T T s
- ---------------------------------------------------------------------------------------------------------------------------------
Paul L. Joskow
7 Chilton Street, Brookline, MA D f
- ---------------------------------------------------------------------------------------------------------------------------------
James Joynt
2 Fairgrounds Rd., Nant., MA
- ---------------------------------------------------------------------------------------------------------------------------------
David C. Kennedy VP s
- ---------------------------------------------------------------------------------------------------------------------------------
Joseph J. Kirby
23 Broad Street, Westerly, RI D f
- ---------------------------------------------------------------------------------------------------------------------------------
John M. Kucharski
45 William Street, Wellesley, MA D f
- ---------------------------------------------------------------------------------------------------------------------------------
Edward H. Ladd
125 Claybrook Rd., Dover, MA D f
- ---------------------------------------------------------------------------------------------------------------------------------
Cheryl A. LaFleur VP S D D D VP D VP Ds D D D D
- ---------------------------------------------------------------------------------------------------------------------------------
Shannon M. Larson
280 Melrose St., Providence, RI VP s
- ---------------------------------------------------------------------------------------------------------------------------------
John L. Levett VP s
- ---------------------------------------------------------------------------------------------------------------------------------
John F. Malley VP s P D
- ---------------------------------------------------------------------------------------------------------------------------------
Paul R. Marshall
1101 Turnpike St., No. Andover, MA S s S S
- ---------------------------------------------------------------------------------------------------------------------------------
Robert L. McCabe
280 Melrose St., Providence, RI D P s
- ---------------------------------------------------------------------------------------------------------------------------------
Joshua A. McClure
P.O. Box 1119, Westerly, RI D f
- ---------------------------------------------------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1996 (continued).
(Note A)
Granite
State Nantucket NEERI NEES NEES
Energy Electric International Comm. Energy
------ --------- ------------- ---- ------
Alfred D. Houston D D D D VP D
- -----------------------------------------------------------------------------------------
Michael E. Jesanis
- -----------------------------------------------------------------------------------------
Paul L. Joskow
7 Chilton Street, Brookline, MA
- -----------------------------------------------------------------------------------------
James Joynt
2 Fairgrounds Rd., Nant., MA VP s
- -----------------------------------------------------------------------------------------
David C. Kennedy D
- -----------------------------------------------------------------------------------------
Joseph J. Kirby
23 Broad Street, Westerly, RI
- -----------------------------------------------------------------------------------------
John M. Kucharski
45 William Street, Wellesley, MA
- -----------------------------------------------------------------------------------------
Edward H. Ladd
125 Claybrook Rd., Dover, MA
- -----------------------------------------------------------------------------------------
Cheryl A. LaFleur D D D
- -----------------------------------------------------------------------------------------
Shannon M. Larson
280 Melrose St., Providence, RI
- -----------------------------------------------------------------------------------------
John L. Levett P
- -----------------------------------------------------------------------------------------
John F. Malley
- -----------------------------------------------------------------------------------------
Paul R. Marshall
1101 Turnpike St., No. Andover, MA
- -----------------------------------------------------------------------------------------
Robert L. McCabe
280 Melrose St., Providence, RI
- -----------------------------------------------------------------------------------------
Joshua A. McClure
P.O. Box 1119, Westerly, RI
- -----------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1996 (continued).
(Note A)
Mass
NEES Granite Elec Narra NEEI NEERI NEET NEP NEPSCO NEHTC NEHTEC NERC NEHFC
---- ------- ---- ----- ---- ----- ---- --- ------ ----- ------ ---- -----
Howard W. McDowell D T Co Co Co Co Co s Co Co Co Co
- ---------------------------------------------------------------------------------------------------------------------------------
Patricia McGovern
400 Atlantic Avenue, Boston, MA D f
- ---------------------------------------------------------------------------------------------------------------------------------
Robert H. McLaren VP s
- ---------------------------------------------------------------------------------------------------------------------------------
Howard R. Mortenson
P.O. Box 885, Charlestown, NH D f
- ---------------------------------------------------------------------------------------------------------------------------------
Charles H. Moser VP s
- ---------------------------------------------------------------------------------------------------------------------------------
Richard Nadeau
280 Melrose St., Providence, RI VP s
- ---------------------------------------------------------------------------------------------------------------------------------
Chester O. Paradise VP s
- ---------------------------------------------------------------------------------------------------------------------------------
Lydia M. Pastuszek
1101 Turnpike St.,
No. Andover, MA P D s VP
- ---------------------------------------------------------------------------------------------------------------------------------
Anthony C. Pini VP s
- ---------------------------------------------------------------------------------------------------------------------------------
Kirk L. Ramsauer C s C C
- ---------------------------------------------------------------------------------------------------------------------------------
John F. Reilly
1 Merrimack Plaza, Lowell, MA D f
- ---------------------------------------------------------------------------------------------------------------------------------
Lawrence J. Reilly P D s
- ---------------------------------------------------------------------------------------------------------------------------------
Thomas G. Robinson S s
- ---------------------------------------------------------------------------------------------------------------------------------
Thomas E. Rogers VP s
- ---------------------------------------------------------------------------------------------------------------------------------
Christopher E. Root VP s
- ---------------------------------------------------------------------------------------------------------------------------------
John W. Rowe P D D D Ch D D D Ch D Ch D s D D D D
- ---------------------------------------------------------------------------------------------------------------------------------
Michael F. Ryan
280 Melrose St., Providence, RI VP s
- ---------------------------------------------------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1996 (continued).
(Note A)
Granite
State Nantucket NEERI NEES NEES
Energy Electric International Comm. Energy
------ --------- ------------- ---- ------
Howard W. McDowell T
- -----------------------------------------------------------------------------------------
Patricia McGovern
400 Atlantic Avenue, Boston, MA
- -----------------------------------------------------------------------------------------
Robert H. McLaren
- -----------------------------------------------------------------------------------------
Howard R. Mortenson
P.O. Box 885, Charlestown, NH
- -----------------------------------------------------------------------------------------
Charles H. Moser
- -----------------------------------------------------------------------------------------
Richard Nadeau
280 Melrose St., Providence, RI
- -----------------------------------------------------------------------------------------
Chester O. Paradise
- -----------------------------------------------------------------------------------------
Lydia M. Pastuszek
1101 Turnpike St.,
No. Andover, MA
- -----------------------------------------------------------------------------------------
Anthony C. Pini
- -----------------------------------------------------------------------------------------
Kirk L. Ramsauer C
- -----------------------------------------------------------------------------------------
John F. Reilly
1 Merrimack Plaza, Lowell, MA
- -----------------------------------------------------------------------------------------
Lawrence J. Reilly P D
- -----------------------------------------------------------------------------------------
Thomas G. Robinson
- -----------------------------------------------------------------------------------------
Thomas E. Rogers VP
- -----------------------------------------------------------------------------------------
Christopher E. Root
- -----------------------------------------------------------------------------------------
John W. Rowe D D P D
- -----------------------------------------------------------------------------------------
Michael F. Ryan
280 Melrose St., Providence, RI
- -----------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1996 (continued).
(Note A)
Mass
NEES Granite Elec Narra NEEI NEERI NEET NEP NEPSCO NEHTC NEHTEC NERC NEHFC
---- ------- ---- ----- ---- ----- ---- --- ------ ----- ------ ---- -----
George M. Sage
P.O. Box 9527, Providence, RI D f
- ---------------------------------------------------------------------------------------------------------------------------------
Nancy H. Sala
939 Southbridge St.,
Worcester, MA VP s
- ---------------------------------------------------------------------------------------------------------------------------------
Richard P. Sergel Sr-VP Ch D Ch D Ch D D D s
- ---------------------------------------------------------------------------------------------------------------------------------
Dennis E. Snay
170 Medford St., Malden, MA VP s
- ---------------------------------------------------------------------------------------------------------------------------------
Charles E. Soule
50 O'Neill Drive,
Westboro, MA D f
- ---------------------------------------------------------------------------------------------------------------------------------
Jeffrey D. Tranen Sr-VP VP D D P D P D D s P D P D D P D
- ---------------------------------------------------------------------------------------------------------------------------------
William E. Trueheart
1 Waterhouse St., Apt.1,
Cambridge, MA D f
- ---------------------------------------------------------------------------------------------------------------------------------
Arnold H. Turner VP VP s VP VP VP
- ---------------------------------------------------------------------------------------------------------------------------------
Jeffrey W. VanSant VP VP s
- ---------------------------------------------------------------------------------------------------------------------------------
William Watkins, Jr.
280 Melrose Street,
Providence, RI E-VP s
- ---------------------------------------------------------------------------------------------------------------------------------
Roslyn M. Watson
25 Braddock Park, Boston, MA D f
- ---------------------------------------------------------------------------------------------------------------------------------
Wendy Watts
2 Fairgrounds Rd., Nant., MA
- ---------------------------------------------------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1996 (continued).
(Note A)
Granite
State Nantucket NEERI NEES NEES
Energy Electric International Comm. Energy
------ --------- ------------- ---- ------
George M. Sage
P.O. Box 9527, Providence, RI
- -----------------------------------------------------------------------------------------
Nancy H. Sala
939 Southbridge St.,
Worcester, MA
- -----------------------------------------------------------------------------------------
Richard P. Sergel
- -----------------------------------------------------------------------------------------
Dennis E. Snay
170 Medford St., Malden, MA
- -----------------------------------------------------------------------------------------
Charles E. Soule
50 O'Neill Drive,
Westboro, MA
- -----------------------------------------------------------------------------------------
Jeffrey D. Tranen D D
- -----------------------------------------------------------------------------------------
William E. Trueheart
1 Waterhouse St., Apt.1,
Cambridge, MA
- -----------------------------------------------------------------------------------------
Arnold H. Turner
- -----------------------------------------------------------------------------------------
Jeffrey W. VanSant
- -----------------------------------------------------------------------------------------
William Watkins, Jr.
280 Melrose Street,
Providence, RI
- -----------------------------------------------------------------------------------------
Roslyn M. Watson
25 Braddock Park, Boston, MA
- -----------------------------------------------------------------------------------------
Wendy Watts
2 Fairgrounds Rd., Nant., MA S s
- -----------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1996 (continued).
(Note A)
Mass
NEES Granite Elec Narra NEEI NEERI NEET NEP NEPSCO NEHTC NEHTEC NERC NEHFC
---- ------- ---- ----- ---- ----- ---- --- ------ ----- ------ ---- -----
Anne Wexler
1317 F Street, N.W., Suite 600
Washington, DC D f
- ---------------------------------------------------------------------------------------------------------------------------------
John A. Wilson, Jr.
49 Madison Ave.,
No. Kingston, RI D f
- ---------------------------------------------------------------------------------------------------------------------------------
James Q. Wilson
32910 Camino de Buena Ventura,
Malibu, CA D f
- ---------------------------------------------------------------------------------------------------------------------------------
James R. Winoker
222 Richmond Street
Providence, RI D f
- ---------------------------------------------------------------------------------------------------------------------------------
Robert King Wulff C C S C s S
- ---------------------------------------------------------------------------------------------------------------------------------
Geraldine M. Zipser C s
- ---------------------------------------------------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1996 (continued).
(Note A)
Granite
State Nantucket NEERI NEES NEES
Energy Electric International Comm. Energy
------ --------- ------------- ---- ------
Anne Wexler
1317 F Street, N.W., Suite 600
Washington, DC
- -----------------------------------------------------------------------------------------
John A. Wilson, Jr.
49 Madison Ave.,
No. Kingston, RI
- -----------------------------------------------------------------------------------------
James Q. Wilson
32910 Camino de Buena Ventura,
Malibu, CA
- -----------------------------------------------------------------------------------------
James R. Winoker
222 Richmond Street
Providence, RI
- -----------------------------------------------------------------------------------------
Robert King Wulff
- -----------------------------------------------------------------------------------------
Geraldine M. Zipser S
- -----------------------------------------------------------------------------------------
Key: Ch-Chairman; ChB-Chairman of the Board; VCh-Vice Chairman; D-Director; P-President; E-VP-Executive Vice President;
Sr-VP-Senior Vice President; VP-F-Vice President--Finance; VP-Vice President; T-Treasurer; Co-Controller; C-Clerk;
S-Secretary; s-Salary; f-Fee.
Note A: Address is 25 Research Drive, Westborough, Massachusetts 01582 unless otherwise indicated.
</TABLE>
<PAGE>
<TABLE>
Item 6. OFFICERS AND DIRECTORS
Part II. Financial Connections as of December 31, 1996.
<CAPTION>
Position
Name and Held in
Name of Location of Financial Applicable
Officer or Financial Institution Exemption
Director Institution (g) Rule
---------- ----------- ----------- ----------
<S> <C> <C> <C>
William M. Bulger Citizens Bank of Massachusetts D a
Boston, MA
Joseph J. Kirby The Washington Trust Co., C c
Westerly, RI
The Washington Trust Bancorp,
Inc., Westerly, RI C c
John M. Kucharski State Street Boston Corp., D a
Boston, MA
Robert L. McCabe Citizen Savings Bank, D c,f
Providence, RI
John F. Reilly Family Bank, D c
Haverhill, MA
John W. Rowe First National Bank of Boston, D a,c,d,e,f
Boston, MA
Bank of Boston Corporation, D a,c,d,e,f
Boston, MA
Charles E. Soule Westboro Savings Bank T a
Westboro, MA
William Watkins, Jr. Rhode Island Hospital Trust D f
National Bank,
Providence, RI
Roslyn M. Watson The Dreyfus Laurel Funds, T d
New York, NY
American Express Centurion D d
Bank, Wilmington, DE
<FN>
- --------------------
a - Rule 70(a)
b - Rule 70(b)
c - Rule 70(c)
d - Rule 70(d)
e - Rule 70(e)
f - Rule 70(f)
g - C-Chairman & CEO; D-Director; T-Trustee
</FN>
</TABLE>
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part III.
Disclosures made in proxy statements and annual reports on Form 10-K,
filed in 1997, follow:
<TABLE>
NEES SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term
Compen-
Annual Compensation (b) sation
----------------------- ---------
Other Restricted
Name and Annual Share All Other
Principal Salary Bonus Compensa- Awards Compensa-
Position (a) Year ($) ($)(c) tion ($)(d) ($)(e) tion ($)(f)
- ------------ ---- ------ ------ ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
John W. Rowe, 1996 537,600 287,896 9,093 370,288 4,891 (g)
President 1995 537,600 427,213 9,568 0 4,750
and Chief 1994 501,156 284,540 9,517 160,974 4,526
Executive
Officer
Alfred D. 1996 335,016 167,306 6,265 182,267 4,649 (h)
Houston, 1995 262,800 177,663 5,753 0 4,180
Executive 1994 244,860 132,370 5,501 62,040 4,027
Vice
President
Jeffrey D. 1996 220,116 110,284 5,486 138,020 3,684 (i)
Tranen, 1995 200,100 143,254 5,268 0 3,578
Senior Vice 1994 187,356 98,357 5,049 45,804 3,466
President
Richard P. 1996 212,700 110,724 5,366 138,376 3,535 (j)
Sergel, 1995 184,956 139,373 4,877 0 3,424
Senior Vice 1994 168,600 94,801 4,934 44,352 3,324
President
Cheryl A. 1996 165,624 89,477 4,059 106,020 3,251 (k)
LaFleur, 1995 125,616 107,617 116 0 2,721
Vice 1994 113,344 71,117 116 25,609 2,633
President and
Secretary
</TABLE>
(a) Officers of NEES also hold various positions with subsidiary companies.
Compensation for these positions is included in this table.
(b) Includes deferred compensation in category and year earned.
(c) The bonus figures represent: cash bonuses under an incentive
compensation plan; the all-employee Goals Program; the variable match of
the Incentive Thrift Plan including related deferred compensation plan
matches; special cash bonuses; and unrestricted shares under the
Incentive Share Plan. See descriptions under Plan Summaries.
<PAGE>
For 1996 and 1994 the bonus amounts were all cash or contributions to
the Incentive Thrift Plan, including related deferred compensation plan
matches. In 1995 Mr. Rowe's bonus was $276,728 cash and contributions,
and $150,485 in shares; Mr. Houston's bonus was $123,160 cash and
contributions and $54,503 in shares; Mr. Tranen's bonus was $99,403 cash
and contributions and $43,851 in shares; Mr. Sergel's bonus was $96,649
in cash and contributions and $42,724 in shares; and Ms. LaFleur's bonus
was $84,370 in cash and contributions and $23,247 in shares.
(d) Includes amounts reimbursed by NEES for the payment of taxes on certain
noncash benefits.
(e) As more fully described in the Compensation Committee Report on
Executive Compensation, special share bonus awards were made in 1996.
Under the terms of those awards, the share values were mandatorily
deferred until the executive's termination of employment.
No awards vested during 1996 under the Company's Long-Term Performance
Share Award Plan. See Long Term Incentive Plan - Awards in Last Fiscal
Year.
The incentive share awards for the named executives made for 1994 and
1996 were in the form of restricted shares (with a five-year
restriction) or deferred share equivalents, deferred for receipt for at
least five years, at the executive's option. As cash dividends are
declared, the number of deferred share equivalents will be increased as
if the dividends were reinvested in shares. See also Payments Upon a
Change in Control below. The shares awarded for 1995 were not
restricted and the value of the awards is included in the bonus column.
As of December 31, 1996, the following executive officers held the
amount of restricted and deferred share equivalents with the value
indicated: Mr. Rowe 27,022 shares, $942,392 value; Mr. Houston 10,014
shares, $349,238 value; Mr. Tranen 7,719 shares, $269,200 value; and Mr.
Sergel 7,471 shares, $260,551 value; and Ms. LaFleur 4,774 shares,
$166,493 value. The value was calculated by multiplying the closing
market price on December 31, 1996, by the number of shares.
(f) Includes Company contributions to life insurance and the Incentive
Thrift Plan that are not bonus contributions including related deferred
compensation plan match. See description under Plan Summaries. The
life insurance contribution is calculated based on the value of term
life insurance for the named individuals. The premium costs for most of
these policies have been or will be recovered by the Company.
(g) For Mr. Rowe, the type and amount of compensation in 1996 is as follows:
$ 3,000 for contributions to the thrift plan and $1,891 for life
insurance.
(h) For Mr. Houston, the type and amount of compensation in 1996 is as
follows: $3,000 for contributions to the thrift plan and $1,649 for
life insurance.
(i) For Mr. Tranen, the type and amount of compensation in 1996 is as
follows: $3,000 for contributions to the thrift plan and $684 for life
insurance.
(j) For Mr. Sergel, the type and amount of compensation in 1996 is as
follows: $3,000 for contributions to the thrift plan and $535 for life
insurance.
(k) For Ms. LaFleur, the type and amount of compensation in 1996 is as
follows: $3,000 for contributions to the thrift plan and $251 for life
insurance.
<PAGE>
<TABLE> NEP
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensa-
Annual Compensation (b) tion
-------------------------- ---------
Other Restricted
Name and Annual & Deferred All Other
Principal Compensa- Share Compensa-
Position Year Salary Bonus tion Awards tion
(a) ($) ($)(c) ($)(d) ($)(e) ($)(f)
- ---------- ---- ------- ------ --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
John W. 1996 180,096 96,445 3,046 124,047 1,638(g)
Rowe 1995 157,070 124,818 2,795 0 1,387
Chairman 1994 211,598 119,716 4,018 67,966 1,911
Jeffrey D. 1996 200,684 100,548 5,002 125,836 3,358(h)
Tranen 1995 188,884 135,224 4,972 0 3,377
President 1994 187,356 98,357 5,049 45,804 3,466
Lawrence E. 1996 151,956 101,667 116 0 3,776(i)
Bailey 1995 144,720 92,328 116 0 3,598
Vice 1994 140,471 66,510 116 27,484 3,952
President
John F. 1996 133,394 104,885 116 0 3,141(j)
Malley 1995 127,236 96,261 116 0 2,907
Vice 1994 117,169 65,474 116 27,469 2,996
President
Arnold H. 1996 128,172 89,185 116 0 2,849(k)
Turner 1995 128,172 65,439 116 0 2,276
Vice 1994 124,428 52,888 116 21,747 2,849
President
</TABLE>
(a) Certain officers of NEP are also officers of NEES and various other
System companies.
(b) Includes deferred compensation in category and year earned.
(c) The bonus figure represents: cash bonuses under an incentive
compensation plan, the all-employee goals program, the variable match of
the incentive thrift plan, including related deferred compensation plan
matches, special cash bonuses, and unrestricted shares under the
incentive share plan. See descriptions under Plan Summaries.
(d) Includes amounts reimbursed by NEP for the payment of taxes.
(e) Special share bonuses were made to a limited number of executives in
1996. Under the terms of those awards, the share values were
mandatorily deferred until the executives' termination of employment.
No awards vested during 1996 under the Long-Term Performance Share Award
Plan.
The incentive share awards for the named executives made for 1994 were
in the form of restricted shares (with a five-year restriction) or
deferred share equivalents, deferred for receipt for at least five
years, at the executive's option. In 1996 awards for NEES officers were
similarly restricted. As cash dividends are declared, the number of
deferred share equivalents will be increased as if the dividends were
reinvested in shares. None of the shares awarded for 1995 were
restricted.
<PAGE>
As of December 31, 1996, the following executive officers held the
amount of restricted and deferred shares with the value indicated: Mr.
Rowe 27,022 shares, $942,392 value; Mr. Tranen 7,719 shares, $269,200
value; Mr. Bailey 3,220 shares, $112,298 value; Mr. Malley 2,834 shares,
$98,836 value; and Mr. Turner 2,774 shares, $96,743 value. The value
was calculated by multiplying the closing market price on December 31,
1996 by the number of shares.
(f) Includes NEP contributions to life insurance and the incentive thrift
plan that are not bonus contributions, including any related deferred
compensation plan match. See description under Plan Summaries. The
life insurance contribution is calculated based on the value of term
life insurance for the named individuals. The premium costs for most of
these policies have been or will be recovered by NEP.
(g) For Mr. Rowe, the amount and type of compensation in 1996 is as follows:
$1,005 for contributions to the thrift plan and $633 for life insurance.
(h) For Mr. Tranen, the amount and type of compensation in 1996 is as
follows: $2,735 for contributions to the thrift plan and $623 for life
insurance.
(i) For Mr. Bailey, the amount and type of compensation in 1996 is as
follows: $3,000 for contributions to the thrift plan and $776 for life
insurance.
(j) For Mr. Malley, the amount and type of compensation in 1996 is as
follows: $2,668 for contributions to the thrift plan, and $474 for life
insurance.
(k) For Mr. Turner, the amount and type of compensation in 1996 is as
follows: $2,051 for contributions to the thrift plan and $798 for life
insurance.
<PAGE>
<TABLE> MASS. ELECTRIC
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensa-
Annual Compensation (b) tion
-------------------------- ---------
Other Restricted
Name and Annual & Deferred All Other
Principal Compensa- Share Compensa-
Position Year Salary Bonus tion Awards tion
(a) ($) ($)(c) ($)(d) ($)(e) ($)(f)
- ---------- ---- ------- ------ --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard P. 1996 135,213 70,388 3,411 87,965 2,247(g)
Sergel 1995 123,480 93,047 3,256 0 2,285
Chairman 1994 113,021 63,550 3,307 29,731 2,228
Lawrence J. 1996 96,163 70,177 2,467 46,082 2,250(h)
Reilly 1995 38,561 34,985 37 0 986
President 1994 25,576 16,917 26 6,136 563
Eric P. 1996 124,186 79,124 116 0 2,876(i)
Cody 1995 67,714 40,590 70 0 1,548
Vice 1994 74,318 37,144 74 15,371 1,726
President
Nancy H. 1996 118,251 65,493 116 0 2,730(j)
Sala 1995 115,524 59,932 116 0 2,498
Vice 1994 107,621 39,318 116 16,129 2,493
President
Anthony C. 1996 114,058 66,117 113 17,258 2,580(k)
Pini 1995 111,300 59,993 116 0 2,403
Vice 1994 105,884 43,465 116 17,688 2,454
President
</TABLE>
(a) Certain officers of Mass. Electric are also officers of NEES and various
other System companies.
(b) Includes deferred compensation in category and year earned.
(c) The bonus figure represents: cash bonuses under an incentive
compensation plan, the all-employee goals program, the variable match of
the incentive thrift plan, and unrestricted shares under the incentive
share plan or special share bonuses. See descriptions under Plan
Summaries.
(d) Includes amounts reimbursed by Mass. Electric for the payment of taxes.
(e) Special share bonuses were made to a limited number of executives in
1996. Under the terms of those awards, the share values were
mandatorily deferred until the executives' termination of employment.
No awards vested during 1996 under the Long-Term Performance Share Award
Plan.
The incentive share awards for the named executives made for 1994 were
in the form of restricted shares (with a five-year restriction) or
deferred share equivalents, deferred for receipt for at least five
years, at the executive's option. In 1996 awards for NEES officers were
similarly restricted. As cash dividends are declared, the number of
deferred share equivalents will be increased as if the dividends were
reinvested in shares. None of the shares awarded for 1995 were
restricted.
<PAGE>
As of December 31, 1996, the following executive officers held the
amount of restricted and deferred shares with the value indicated: Mr.
Sergel 7,471 shares, $260,551 value; Mr. Reilly 4,677 shares, $163,110
value; Mr. Cody 2,714 shares, $94,651 value; Ms. Sala 1,639 shares,
$57,160 value; and Mr. Pini 1,640 shares, $57,195 value. The value was
calculated by multiplying the closing market price on December 31, 1996
by the number of shares.
(f) Includes Mass. Electric contributions to life insurance and the
incentive thrift plan that are not bonus contributions, including any
related deferred compensation plan match. See description under Plan
Summaries. The life insurance contribution is calculated based on the
value of term life insurance for the named individuals. The premium
costs for most of these policies have been or will be recovered by Mass.
Electric.
(g) For Mr. Sergel, the type and amount of compensation in 1996 is as
follows: $1,907 for contributions to the thrift plan and $340 for life
insurance.
(h) For Mr. Reilly, the type and amount of compensation in 1996 is as
follows: $1,923 for contributions to the thrift plan and $327 for life
insurance.
(i) For Mr. Cody, the type and amount of compensation in 1996 is as follows:
$2,484 for contributions to the thrift plan and $392 for life insurance.
(j) For Ms. Sala, the type and amount of compensation in 1996 is as follows:
$2,365 for contributions to the thrift plan and $365 for life insurance.
(k) For Mr. Pini, the type and amount of compensation in 1996 is as follows:
$2,281 for contributions to the thrift plan and $299 for life insurance.
<PAGE>
<TABLE>
NARRAGANSETT
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensa-
Annual Compensation (b) tion
-------------------------- ---------
Other Restricted
Name and Annual & Deferred All Other
Principal Compensa- Share Compensa-
Position Year Salary Bonus tion Awards tion
(a) ($) ($)(c) ($)(d) ($)(e) ($)(f)
- ---------- ---- ------- ------ --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard P. 1996 70,998 36,959 1,791 46,188 1,180(g)
Sergel 1995 54,821 41,310 1,446 0 1,015
Chairman 1994 50,319 26,293 1,472 13,237 992
Robert L. 1996 127,388 88,905 4,819 50,308 3,424(h)
McCabe 1995 152,407 111,785 4,206 0 4,851
President 1994 140,785 68,784 4,457 28,576 4,256
William 1996 132,012 84,081 119 0 4,509(i)
Watkins, 1995 128,172 77,967 119 0 4,054
Jr. 1994 124,428 62,799 115 26,136 6,186
Executive
Vice
President
Richard W. 1996 108,432 57,680 119 0 2,888(j)
Frost 1995 103,272 48,972 119 0 2,787
Vice 1994 99,300 34,269 115 13,629 2,706
President
Richard 1996 100,884 24,830 119 0 3,004(k)
Nadeau 1995 95,838 15,500 119 0 2,902
Vice 1994 91,572 11,272 115 3,267 3,037
President
</TABLE>
(a) Certain officers of Narragansett are also officers of NEES and various
other System companies.
(b) Includes deferred compensation in category and year earned.
(c) The bonus figure represents: cash bonuses under an incentive
compensation plan, the all-employee goals program, the variable match of
the incentive thrift plan, and unrestricted shares under the incentive
share plan or special share bonuses. See descriptions under Plan
Summaries.
(d) Includes amounts reimbursed by Narragansett for the payment of taxes.
(e) Special share bonuses were made to a limited number of executives in
1996. Under the terms of those awards, the share values were
mandatorily deferred until the executives' termination of employment.
No awards vested during 1996 under the Long-Term Performance Share Award
Plan.
The incentive share awards for the named executives made for 1994 were
in the form of restricted shares (with a five-year restriction) or
deferred share equivalents, deferred for receipt for at least five
<PAGE>
years, at the executive's option. In 1996 awards for NEES officers were
similarly restricted. As cash dividends are declared, the number of
deferred share equivalents will be increased as if the dividends were
reinvested in shares. None of the shares awarded for 1995 were
restricted.
As of December 31, 1996, the following executive officers held the
amount of restricted and deferred shares with the value indicated: Mr.
Sergel 7,471 shares, $260,551 value; Mr. McCabe 6,027 shares, $210,192
value; Mr. Watkins 2,490 shares, $86,839 value; Mr. Frost 895 shares,
$31,213 value; and Mr. Nadeau 201 shares, $7,010 value. The value was
calculated by multiplying the closing market price on December 31, 1996
by the number of shares.
(f) Includes Narragansett contributions to life insurance and the incentive
thrift plan that are not bonus contributions, including any related
deferred compensation plan match. See description under Plan Summaries.
The life insurance contribution is calculated based on the value of term
life insurance for the named individuals. The premium costs for most of
these policies have been or will be recovered by Narragansett.
(g) For Mr. Sergel, the type and amount of compensation in 1996 is as
follows: $1,001 for contributions to the thrift plan and $179 for life
insurance.
(h) For Mr. McCabe, the type and amount of compensation in 1996 is as
follows: $2,165 for contributions to the thrift plan and $1,259 for
life insurance.
(i) For Mr. Watkins, the type and amount of compensation in 1996 is as
follows: $2,640 for contributions to the thrift plan and $1,869 for
life insurance.
(j) For Mr. Frost, the type and amount of compensation in 1996 is as
follows: $2,169 for contributions to the thrift plan and $719 for life
insurance.
(k) For Mr. Nadeau, the type and amount of compensation in 1996 is as
follows: $2,018 for contributions to the thrift plan and $986 for life
insurance.
Security Ownership
------------------
The following table lists the holdings of NEES common shares as of March
1, 1997 by NEES, NEP, Mass. Electric, and Narragansett directors, the
executive officers named in the Summary Compensation Tables, and all directors
and executive officers, as a group.
<PAGE>
Shares Deferred
Beneficially Share
Name Owned (a) Equivalents(b)
- ---- ----------- --------------
Joan T. Bok 17,111
William M. Bulger 100 129
Alfred D. Houston 13,235 8,892
Paul L. Joskow 2,719
John M. Kucharski 2,500
Edward H. Ladd 5,789
Cheryl A. LaFleur 2,543 4,603
Joshua A. McClure 2,010 251
John W. Rowe 22,677 20,419
George M. Sage 3,300
Richard P. Sergel 8,413 6,692
Charles E. Soule 1,196 2,875
Jeffrey D. Tranen 8,141 6,764
Anne Wexler 2,176
James Q. Wilson 3,002
James R. Winoker 1,500
Urville J. Beaumont 293
Eric P. Cody 2,435 2,044
Sally L. Collins 295
Kalyan K. Ghosh 51 242
Charles B. Housen 18
Patricia McGovern 161
Anthony C. Pini 8,413 1,113
John F. Reilly 296
Lawrence J. Reilly 2,738 4,469
Nancy H. Sala 7,749 (c) 1,538
Roslyn M. Watson 296 181
Stephen A. Cardi 294
Richard W. Frost 6,805 472
Frances H. Gammell 296 292
Joseph J. Kirby 295
Robert L. McCabe 9,532 5,022
Richard Nadeau 4,115
William E. Trueheart 296 702
Willliam Watkins, Jr. 5,512 2,185
John A. Wilson, Jr. 658
Lawrence E. Bailey 5,200 2,485
John F. Malley 4,988 2,566
Arnold H. Turner 4,048 1,985
All directors and
executive officers,
as a group (51 persons) 211,480 (d) 88,981 (d)
(a) Number of shares beneficially owned includes: (i) shares directly
owned by certain relatives with whom directors or officers share
voting or investment power; (ii) shares held of record individually
by a director or officer or jointly with others or held in the name
of a bank, broker, or nominee for such individual's account; (iii)
shares in which certain directors or officers maintain exclusive or
shared investment or voting power whether or not the securities are
held for their benefit; and (iv) with respect to the executive
officers, allocated shares in the Incentive Thrift Plan described
below.
(b) Deferred share equivalents are held under the Deferred Compensation
Plan or pursuant to individual deferral agreements. Under the Plan
or deferral agreements, executives may elect to defer cash
compensation and share awards. There are various deferral periods
available under the plans. At the end of the deferral period, the
compensation may be paid out in NEES common shares, cash, or a
combination thereof. The rights of the executives to payment are
those of general, unsecured creditors. While deferred, the shares do
<PAGE>
not have voting rights or other rights associated with
ownership. As cash dividends are declared, the number of deferred
share equivalents will be increased as if the dividends were
reinvested in NEES common shares. Deferred share equivalents for
directors are held under the Directors Deferred Compensation Plan.
See Board Structure and Compensation for a description of that plan.
Potential share awards under the Long-Term Performance Share Award
Plan are not included in this table.
(c) Ms. Sala disclaims a beneficial ownership interest in 260 shares held
under the Uniform Gift to Minors Act.
(d) Amount is less than 1% of the total number of shares of the Company
outstanding.
Listed below are the only persons or groups known to the System as of
March 10, 1997 to beneficially own 5% or more of NEES common shares.
However, T. Rowe Price Trust Company disclaims beneficial ownership of all
such shares. The quantity of shares listed below is as of December 31,
1996.
Amount and Nature
Name and Address of of Beneficial Percent of
Beneficial Owner Ownership Common Shares
------------------- ----------------- --------------
T. Rowe Price Trust Company 5,268,184 shares as 8.1%
100 East Pratt Street trustee for
Baltimore, MD 21202 System employee
benefits plans,
including those
discussed herein.
Franklin Resources, Inc. 4,592,700 shares 7.1%
777 Mariners Island Blvd.
San Mateo, CA 94403-7777
Contracts and Transactions with System Companies
------------------------------------------------
During 1996, Mr. Joskow did consulting work for NEES or subsidiaries of
NEES under a separate consulting contract for which he was paid
approximately $41,000. These consulting services were not related to his
duties as a Board member. NEES and its subsidiaries retain from time to
time National Economic Research Associates, Inc. (NERA). During 1996, NERA
invoiced subsidiaries of NEES for approximately $245,000.00 to prepare
testimony and reports on regulatory matters. Mr. Joskow is a special
consultant to NERA.
Mrs. Bok serves as a consultant to NEES. Under the terms of her
contract, she receives an annual retainer of $100,000. Mrs. Bok also
serves as a director for each of NEES' direct subsidiaries. She has agreed
to waive the normal fees and annual retainers otherwise payable for
services by nonemployees on these boards and receives in lieu thereof a
single annual stipend of $60,000.
The construction company of Mr. Stephen A. Cardi, a director of
Narragansett, was paid approximately $138,000 in 1996 pursuant to a
contract to provide gravel to Narragansett and approximately $2 million by
NEP in 1996 pursuant to a contract to construct Collier Point Park at
Manchester Street Station.
Compensation Committee Interlocks and Insider Participation
-----------------------------------------------------------
Mr. Winoker served as a member of NEES' Compensation Committee during
1996. A subsidiary of NEES entered into a three-year lease for office
space in 1996 with Belvoir Properties, Inc. (Belvoir) with an annual rent
<PAGE>
of $36,000. Belvoir also entered into a twenty-year lease with a
subsidiary of NEES for a parcel of land in Providence, Rhode Island with an
initial annual rent of $30,000.
Plan Summaries
--------------
A brief description of the various plans through which compensation and
benefits are provided to the named executive officers is presented below to
better enable shareholders to understand the information presented in the
tables shown earlier. The amounts of compensation and benefits provided to
the named executive officers under the plans described below (and charged
to the System Companies listed in the above tables) are presented in the
Summary Compensation Tables.
Goals Program
- -------------
The Goals Program covers all employees who have completed one year of
service with any NEES subsidiary. Goals are established annually. For
1996, these goals related to earnings per share, customer costs, safety,
absenteeism, demand-side management results, generating station
availability, transmission reliability, environmental and OSHA compliance,
and customer satisfaction. Some goals apply to all employees, while others
apply to particular functional groups. Depending upon the number of goals
met, and provided the minimum earnings goal is met, employees may earn a
cash bonus of 1% to 4-1/2% of their compensation.
Incentive Thrift Plan
- ---------------------
The Incentive Thrift Plan (a 401(k) program) provides for a match of
40% of up to the first 5% of base compensation contributed to the System's
Incentive Thrift Plan (shown under All Other Compensation in the Summary
Compensation Tables) and, based on an incentive formula tied to earnings
per share, may fully match the first 5% of base compensation contributed
(the additional amount, if any, is shown under Bonus in the Summary
Compensation Tables). Under Federal law, contributions to these plans are
limited. In 1996, the contribution amount was limited to $9,500.
Deferred Compensation Plan
- --------------------------
The Deferred Compensation Plan offers executives the opportunity to
defer base pay and bonuses. The plan offers the option of investing at the
prime rate or in NEES Shares; however, share bonuses may only be deferred
in a share account. Under Federal law, the Incentive Thrift Plan,
described above, is required to limit participant base compensation to
$150,000 in calculating the NEES match. Under the Deferred Compensation
Plan, NEES will make a contribution to an executive's share account
equivalent to the resultant reduction in his match under the Incentive
Thrift Plan.
Life Insurance
- --------------
NEES has established for certain senior executives life insurance plans
funded by individual policies. The combined death benefit under these
insurance plans is three times the participant's annual salary. These
plans are structured so that, over time, NEES should recover the cost of
the insurance premiums.
After termination of employment, Messrs. Rowe and Houston may elect,
commencing at age 55 or later, to receive an annuity income equal to 40% of
annual salary. In that event, the life insurance is reduced over fifteen
years to an amount equal to the participant's final annual salary. Due to
changes in the tax law, this plan was closed to new participants, and an
alternative was established with only a life insurance benefit. The
individuals listed in the NEES summary compensation table and Messrs.
McCabe and Reilly are in one or the other of these plans.
<PAGE>
Financial Counseling
- --------------------
NEES pays for personal financial counseling for senior executives. As
required by the IRS, a portion of the amount paid is reported as taxable
income for the executive. Financial counseling is also offered to other
employees through a limited number of seminars conducted at various locations
each year.
Other
- -----
NEES does not have any share option plans.
Long Term Incentive Plan - Awards in Last Fiscal Year
-----------------------------------------------------
The following tables show the potential awards, for those executive
officers named in the Summary Compensation Tables who participate in the plan,
under the Long-Term Performance Share Award Plan (more fully described in the
Compensation Committee Report on page 36) for the performance cycle commencing
January 1, 1996. The System's performance will be measured over the three-
year period ending December 31, 1998.
NEES
----
Estimated Future Payouts under Non-Stock Price-Based Plans
-----------------------------------------------------------
<TABLE>
<CAPTION>
Number of
Common
Share Performance
Name Equivalents(a) Period Threshold(b) Target(c)
- ---- ----------- --------- --------- ------
<S> <C> <C> <C> <C>
John W. Rowe 6,747 3 years 169 6,747
Alfred D. Houston 4,204 3 years 105 4,204
Jeffrey D. Tranen 2,763 3 years 69 2,763
Richard P. Sergel 2,670 3 years 67 2,670
Cheryl A. LaFleur 1,040 3 years 26 1,040
NEP
---
Estimated Future Payouts under Non-stock Price-based Plans
------------------------------------------------
Number of
Common Share Performance
Name Equivalents(a) Period Threshold(b) Target(c)
---- -------------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
John W. Rowe 6,747 3 years 169 6,747
Jeffrey D. Tranen 2,763 3 years 69 2,763
Lawrence E. Bailey 954 3 years 24 954
John F. Malley 839 3 years 21 839
Arnold H. Turner 805 3 years 21 805
<PAGE>
Mass Electric
---------------
Estimated Future Payouts under Non-stock Price-based Plans
------------------------------------------------
Number of
Common Share Performance
Name Equivalents(a) Period Threshold(b) Target(c)
---- -------------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
Richard P. Sergel 2,670 3 years 67 2,670
Lawrence J. Reilly 804 3 years 21 804
Eric P. Cody 782 3 years 20 782
Nancy H. Sala 448 3 years 12 448
Anthony C. Pini 442 3 years 11 442
Narragansett
------------
Estimated Future Payouts under Non-stock Price-based Plans
------------------------------------------------
Number of
Common Share Performance
Name Equivalents(a) Period Threshold(b) Target(c)
---- -------------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
Richard P. Sergel 2,670 3 years 67 2,670
Robert L. McCabe 1,108 3 years 28 1,108
William Watkins, Jr. 829 3 years 21 829
Richard W. Frost 409 3 years 11 409
</TABLE>
(a) Amounts are denominated in common share units. No dividends are
attributable to share units. At the end of the cycle, awards are paid
either in shares or in cash (valued at the five-day average price prior
to the January 15 following the close of the performance cycle).
(b) The awards in this column represent the threshold number of shares that
could be earned if the minimum attainment level is reached for one
factor. The minimum payout upon failure to achieve any of the goals
would be 0.
(c) The awards in this column represent the target (and maximum) number of
shares that could be earned if the maximum performance is achieved for
all factors.
The Long-Term Performance Share Award Plan provides awards based on
various measures of System performance over a three-year period. Each award
factor functions independently. The performance targets for each cycle are
set by the Compensation Committee. The measures of performance for this cycle
are: return on equity compared to the national group (60th- 75th percentile);
kilowatt-hour cost compared to regional group (67th-90th percentile); total
shareholder return compared to the regional group (60th- 75th percentile);
maintenance or improvement of bond ratings; and system service levels,
measured by customer satisfaction, system reliability, system availability,
and regulatory compliance. The national grouping is the utility group
formerly tracked by Duff & Phelps. The regional grouping is composed of New
England/New York regional utilities.
Retirement Plans
- ----------------
The following chart shows estimated annual benefits payable to executive
officers under the qualified pension plan and the supplemental retirement
plan, assuming retirement at age 65 in 1997.
<PAGE>
<TABLE>
PENSION PLAN TABLE
------------------
<CAPTION>
FIVE-YEAR 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
AVERAGE SERVICE SERVICE SERVICE SERVICE SERVICE SERVICE
COMPENSATION
- ------------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$ 300,000 60,400 87,600 114,900 141,300 167,800 184,500
$ 400,000 81,100 117,700 154,300 189,800 225,400 248,000
$ 500,000 101,800 147,700 193,700 238,300 283,000 311,400
$ 600,000 122,500 177,800 233,100 286,800 340,600 374,900
$ 700,000 143,200 207,800 272,500 335,300 398,200 438,300
$ 800,000 163,900 237,900 311,900 383,800 455,800 501,800
$ 900,000 184,600 267,900 351,300 432,300 513,400 565,200
$1,000,000 205,300 298,000 390,700 480,800 571,000 628,700
$1,100,000 226,000 328,000 430,000 529,300 628,600 692,100
$1,200,000 246,700 358,100 469,500 577,800 686,200 755,600
$1,300,000 267,400 388,100 509,000 626,300 743,800 819,000
$1,400,000 288,100 418,200 548,300 674,800 801,400 882,500
</TABLE>
For purposes of the retirement plans, Messrs. Rowe, Houston, Tranen, and
Sergel and Ms. LaFleur currently have 19, 34, 27, 18 and 11 credited years of
service, respectively. Messrs. Bailey, Malley, and Turner currently have 28,
25, and 31 credited years of service, respectively. Mr. Reilly, Mr. Cody, Ms.
Sala, and Mr. Pini currently have 15, 13, 27, and 18 credited years of
service, respectively. Messrs. McCabe, Watkins, Frost, and Nadeau currently
have 28, 24, 34, and 41 credited years of service, respectively.
Benefits under the pension plans are computed using formulae based on
percentages of highest average compensation computed over five consecutive
years. The compensation covered by the pension plan includes salary, bonus,
and incentive share awards. Long-Term Performance Share Awards will not be
included. The benefits listed in the pension table are not subject to
deduction for Social Security and are shown without any joint and survivor
benefits.
The pension plan table above does not include annuity payments to be
received in lieu of life insurance for Messrs. Rowe and Houston. The policies
are described above under Plan Summaries.
Under the Retirement Supplement Plan, participants receive an annual
adjustment to their pension benefits. The amount of the adjustment is equal
to the rate of interest on AAA bonds for the prior year less two percent (but
in no case more than the increase in the cost of living). Mr. Rowe is the
only active employee now participating in this plan.
The System covers the full cost of post-retirement health benefits for
the senior executives listed in the Summary Compensation Table.
Payments Upon a Change of Control
- ---------------------------------
NEES has agreements with certain of its executives, including those
named in the Summary Compensation Table, which provide severance benefits in
the event of certain terminations of employment following a Change in Control
of NEES (as defined below). (Mr. Tranen's contracts also provides severance
benefits in the event of a divestiture of all or a substantial portion of the
System's fossil fuel generating assets.) The terms of the agreements are for
three years with automatic annual extensions, unless terminated by the System.
If, following a Change of Control, the executive's employment is terminated
other than for cause (as defined) or if the executive terminates employment
for good reason (as defined), NEES will pay to the executive a lump sum cash
<PAGE>
payment equal to three times (two times for some executives) the sum of the
executive's most recent annual base compensation and the average of his or her
bonus amounts for the prior three years. If Mr. Rowe receives payments under
his severance agreement that would subject him to any federal excise tax due
under section 280G of the Internal Revenue Code, he will receive a cash
"gross-up" payment so he would be in the same net after-tax position he would
have been in had such excise tax not been applied. In addition, NEES will
provide disability and health benefits to the executive for two to three
years, provide such post-retirement health and welfare benefits as the
executive would have earned within such two to three years, and grant two or
three additional years of pension credit. Mr. Rowe would become eligible for
benefits under the Retirement Supplement Plan described below prior to the
five-year vesting term.
Change in Control, including potential change of control, occurs (1)
when any person becomes the beneficial owner of 20% of the voting securities
of NEES, (2) when the prior members of the Board no longer constitute a 2/3
majority of the Board, or (3) NEES enters into an agreement that could result
in a Change in Control.
Upon a change in control a participant in the deferred compensation plan
has the option of receiving a lump sum payment equal to the value of cash and
share accounts and the actuarial value of maximum value of future benefits
from the insurance related benefits under a prior plan, all less 10%.
The System's bonus plans, including the incentive compensation plans
described in the Compensation Committee report, the Incentive Thrift Plan, and
the Goals Program, provide for payments equal to the average of the bonuses
for the three prior years in the event of a Change of Control. This payment
would be made in lieu of the regular bonuses for the year in which the Change
in Control occurs. The Long-Term Performance Share Award Plan provides for a
cash payment equal to the value of the performance shares in the participant's
account times the average target achievement percentage for the Incentive
Thrift Plan for the three prior years. The System's Retirees Health and Life
Insurance Plan has provisions preventing changes in benefits adverse to the
participants for three years following a Change in Control. The Incentive
Share Plan and related Incentive Share Deferral Agreements provide that, upon
the occurrence of a change in control (defined more narrowly than in the other
plans), any restrictions on shares and account balances would cease.
In light of the changes in the utility industry, NEES determined that
executive officers, including those listed in the Summary Compensation Tables,
but excluding Mr. Rowe, would receive a benefit equal to either 1 or 1-1/2
times annual compensation, for a severance other than one for cause or
following a change in control.
New England Electric System Compensation
Committee Report on Executive Compensation
- ------------------------------------------
The System's total compensation package is designed to attract, retain,
and reward superior managers who are committed to solid financial performance
and who can also successfully lead the System as our industry becomes
increasingly competitive. The compensation package reflects the fact that
these managers' backgrounds are not necessarily limited to our System or
industry. Total compensation consists of Base Salary, Incentive Compensation
(performance based, at risk compensation), and Benefits. The Committee
periodically reviews each component of the System's executive compensation
program to ensure that pay levels and incentive opportunities are competitive
and that incentive opportunities are linked to System performance. The
System's general compensation philosophy is that (1) the Base Salary ranges
should be competitive, with individual salaries reflecting performance and
experience; (2) a significant portion of management compensation should be
tied to achievement of corporate goals in order to maintain a sharp focus on
corporate performance; (3) substantial portions of incentive compensation
should be in shares so as to consistently align the interest of management and
the System's shareholders and customers; and (4) an ever higher percentage of
total compensation should be at risk and share based as one moves upward
<PAGE>
through management. The compensation of Mr. Rowe, the Chief Executive
Officer, is based on these considerations.
Share Ownership Guidelines
- --------------------------
The System has long recognized the importance of consistent alignment of
executive interests with those of shareholders. In 1995, the Committee voted
that it is expected that executives will own shares or share equivalents to
certain minimum levels within five years of being subject to the requirement.
For Mr. Rowe, the level is 40,000 shares. In February 1997, the Committee
voted that Mr. Houston's level be raised to 25,000 shares. For the other
executives listed in the NEES Compensation Summary Table, the level is 15,000
shares. Other executives are expected to hold from 2,000 to 7,000 shares
depending on their compensation levels and bonus plans. In 1996, the NEES
Board of Directors voted that members of the Board were expected to own 2,500
shares within five years of being subject to that requirement.
To further reinforce the importance of executive share ownership, the
Committee has amended the Incentive Share Plan and the Long-Term Performance
Share Award Plan to provide that all shares awarded to System officers are
restricted for five years, unless deferred, at the officer's option, until
termination of service or ten years.
Compensation Decisions
- ----------------------
The NEES Board of Directors votes the compensation of Mr. Rowe, acting
upon recommendations of the Compensation Committee, which is described on page
38. The Committee reports its decisions to the NEES Board of Directors.
After meeting in executive session without Mr. Rowe, and discussing the
reports made by the Committee, the NEES Board of Directors has unanimously
accepted each of the recommendations described below made in 1996 and to date
in 1997. The Compensation Committee votes the compensation of all other
System executive officers listed in the Summary Compensation Table, as well as
other senior employees. The Board has ratified the compensation decisions for
these executive officers. Although System management may be present during
Committee discussions of officers' compensation, Committee decisions with
respect to the compensation of Mr. Rowe are reached in executive session. No
decision on the compensation of any executive officer is made in his or her
presence.
Under Section 162(m) of the Internal Revenue Code, tax deductions are
limited for compensation above $1 million. Mr. Rowe's total compensation of
$832,700 in cash and $377,068 in shares for 1996 exceeds $1 million; however,
the limitation of the Code does not apply to amounts deferred. Given the
mandatory deferral of his special and plan share bonuses, the Internal Revenue
Code provisions do not currently impact the System. Compensation for each of
the other executive officers is well below the $1 million threshold. The
Committee has not, therefore, had to address issues related to Section 162(m)
and does not expect to in the near future, but will continue to monitor these
issues.
Base Salary
- -----------
Base Salary levels are established after consideration of the
appropriate market to determine the salary range for a position. Extensive
salary survey analyses are compiled annually and presented to the Committee
for review. Salary ranges are then defined on the basis of those market
surveys. These surveys may include some of the same companies included in
incentive compensation plan comparisons or in the corporate performance chart.
In October 1996, after consideration of multiple surveys prepared by
various consulting organizations and industry groups, and taking into account
Mr. Rowe's experience, success, and record as a utility CEO, the Committee
recommended the base salary for Mr. Rowe be set at $597,600 for 1997. (Mr.
Rowe's base salary was last changed effective January 1995.) The Board
adopted this recommendation.
<PAGE>
In November 1996, the Committee reviewed the performance of each
individual in the compensation group below Mr. Rowe and the relative position
of these individuals compared to the market surveys discussed above, and,
after the Committee's subjective analysis of the performance of those
individuals, the Committee adopted salaries for this group.
Performance Based Incentive Compensation
- ----------------------------------------
Performance Based Incentive Compensation (at risk compensation or bonus)
is designed to deliver rewards above base salary, if the System and the
individual executives perform well.
Annual Target Plans
- -------------------
The incentive components of the annual target compensation plans are
based on formulae with difficult threshold targets. Under the formulae, in
order for any plan bonuses to be awarded, the System must achieve a return on
equity that places the System in the top 50% of the approximately 90 electric
utilities listed in the utility group formerly tracked by Duff & Phelps (the
National Grouping) or in the top 50% of the New England/New York regional
utilities (the Regional Grouping). See the Return on Equity graph, below.
The NEES Board of Directors, in response to extraordinary events, may enhance
or curtail the actual return on equity used to determine whether the System
met the targets. They did not do so for 1996. On February 24, 1997, the
Committee voted the bonuses under these plans.
For the maximum incentive to be awarded, the System must achieve a
return on equity in the top 25% of both the National and Regional Groupings
and the System's cost per kilowatt-hour must be the lowest or next lowest of a
selected group of New England electric utilities. In 1996, if only one of the
return on equity targets had been met, Mr. Rowe would have received a formula
bonus of 12% of base pay in cash and 7.2% in shares. The maximum would have
been 50% of base pay in cash and 30% in shares. Based on the performance
described below, his formula bonus (cash and shares) was 49.34% of base pay in
cash and 29.58% in shares.
For purposes of determining the bonus amount for 1996, the System placed
in the 72nd and the 88th percentiles in return on shareholder equity of the
National and Regional Groupings, respectively. The System placed second in
the Regional Grouping with respect to customer cost per kilowatt-hour in 1996.
No bonus awards would be made under the plans if earnings are not
sufficient to cover dividends, even if the return on equity targets had been
met.
Mr. Rowe's bonus under the plan is directly related to achievement of
the above described corporate targets. For 1996, the incentive compensation
plan bonuses of the other executives were additionally dependent upon the
achievement of individual goals.
The participants in the incentive compensation plans are awarded NEES
common shares under the Incentive Share Plan, approved by the shareholders in
1990. No discretion is exercised by the Committee in the awarding of shares
generated by the formulae. An individual's award of shares under the
Incentive Share Plan is a fixed percentage of her or his cash award for that
year from the incentive compensation plan in which she or he participates.
For Mr. Rowe, the percentage is 60%. If no cash award is made, no shares are
distributed under the formulae. Further, total plan awards of shares in any
calendar year cannot exceed one-half of one percent (0.5%) of the number of
outstanding shares at the end of the previous calendar year. (The incentive
plan shares awarded, including those restricted or deferred, for 1996 were
approximately 0.08% of the number of outstanding shares.) As noted above, the
Committee has restricted the share awards of System officers. The Committee
voted to approve the bonuses upon which the share awards are based on February
24, 1997.
<PAGE>
Special Share Award
- -------------------
The Committee believes that during 1996 certain officers of the System
accomplished significant results in leading industry restructuring in New
England in a way which protects the System's shareholders at a time when
utility investments are exposed to increased risk. In recognition of these
efforts, the Committee recommended to the Board a special share award of 6,000
shares for Mr. Rowe. This share award was conditioned on being deferred until
Mr. Rowe's termination of service with the System. The other officers listed
in the NEES summary table were also awarded shares that were also mandatorily
deferred.
Three-Year Target Plan
- ----------------------
In order to increase executive focus on multi-year performance, in 1995
the System established the Long-Term Performance Share Award Plan described
below. No payout was made in 1996 nor will be made under this plan until the
Spring of 1999.
Under this plan, awards are based upon various measures of System
performance over a three-year period. Each award factor or measurement
functions independently. The factors change from year to year and include
financial and operating performance. The factors may be related to those in
the incentive plans. The factors are established by the Committee at the
beginning of each cycle. All participants share the same factors and factor
weights. Performance is rated on rolling three-year periods, with a new cycle
beginning each year. An individual's potential award under the plan is a
fixed percentage of her or his base pay on the January 1 of the first year of
the plan measurement period. For Mr. Rowe, that percentage was 50%.
Percentages for other executives range from 15% to 50%. No dividends accrue
on the allocated shares until awarded. At the end of the three-year cycle,
the participant receives actual shares based upon the performance against the
various factors. For example, for the first cycle, 20% of the shares are
dependent upon total shareholder return compared to other regional utilities.
See Estimated Future Payouts under Non-Stock Price-Based Plans, below.
Benefits
- --------
The executive benefits are designed both to provide a competitive
package and to retain System flexibility in staffing management to meet
changing conditions.
Severance
- ---------
In November 1996 the Committee reviewed management severance benefits in
light of the changes in the utility industry. The Committee determined that,
executive officers (including those listed in the Summary Compensation Tables,
but excluding Messrs. Rowe and Houston) would receive a benefit equal to one
and one-half times annual compensation, for a severance other than one for
cause or following a change in control.
New England Electric System Compensation Committee
John M. Kucharski
George M. Sage
James R. Winoker
<PAGE>
Corporate Performance
---------------------
Total Return
- ------------
The following table shows total shareholder return for NEES (capital
appreciation plus reinvested dividends) for the years 1991 through 1996, as
compared to the Standard & Poor's 500 Index and the Edison Electric Institute
(EEI) Index of 100 investor-owned electric companies, assuming the investment
of $100 on December 31, 1991.
<TABLE>
<CAPTION>
NEES S & P 500 EEI Index
---- --------- ---------
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 127.84 137.11 107.50
1993 137.11 118.46 119.58
1994 120.25 120.03 105.74
1995 158.87 165.13 138.55
1996 149.20 203.05 140.22
</TABLE>
Note: The share price performance shown on the table above is not necessarily
indicative of future price performance.
Return on Equity
- ----------------
The following table shows the return on equity of NEES common shares for
the years 1992 through 1996 compared to a national grouping of approximately
90 electric utilities (those utilities listed in the utility group formerly
tracked by Duff & Phelps) and a regional grouping of utilities in the New York
and New England area. As discussed in the report of the Compensation
Committee, return on equity is a key driver of the System's incentive
compensation program.
<TABLE>
<CAPTION>
NEES National Regional
Grouping Grouping
---- -------- --------
<S> <C> <C> <C>
1992 12.58% 11.32% 11.84%
1993 12.64% 11.90% 11.41%
1994 12.73% 11.42% 11.40%
1995 12.78% 11.72% 10.43%
1996 12.58% 11.41% 11.13%
</TABLE>
Note: The return on equity shown for each grouping is the median at the date
of incentive compensation determination. The earnings performance
shown on the graph above is not necessarily indicative of future
performance.
NEES Board Structure and Compensation
-------------------------------------
NEES has an Executive Committee, an Audit Committee, a Compensation
Committee, a Corporate Responsibility Committee, and a Nominating Committee.
The committee memberships listed below are as of January 1, 1997.
The members of the Executive Committee are Mrs. Bok, Mr. Ladd, Mr. Rowe,
Mr. Sage, and Ms. Wexler. Mrs. Bok serves as the Chairman of this Committee.
During the intervals between meetings of the Board of Directors, the Executive
Committee has all the powers of the Board that may be delegated.
<PAGE>
The members of the Audit Committee are Messrs. Bulger, Joskow, Soule, and
Winoker. Mr. Joskow serves as the Chairman of this Committee. The Audit
Committee reviews with the independent public accountants the scope of their
audit and management's financial stewardship for the current and prior years.
This Committee also recommends to the NEES Board of Directors and to the
boards of the subsidiaries of NEES the independent public accountants to be
engaged for the coming year.
The members of the Compensation Committee are Messrs. Kucharski, Sage, and
Winoker. Mr. Sage serves as the Chairman of this Committee. The Compensation
Committee is responsible for executive compensation, including the
administration of certain of the System's incentive compensation plans.
The members of the Corporate Responsibility Committee are Mrs. Bok, Mr.
McClure, Mr. Rowe, Ms. Wexler, and Mr. Wilson. Mr. Wilson serves as the
Chairman of this Committee. The Corporate Responsibility Committee reviews
compliance with laws and regulations, offers guidance in considering public
policy issues, and helps to assure ethical conduct.
The members of the Nominating Committee are Mr. Ladd, Mr. Sage, and Ms.
Wexler. Mr. Ladd serves as Chairman of this Committee. The Nominating
Committee considers and evaluates director candidates, determines criteria and
procedures for selecting nonmanagement directors, and conducts periodic
reviews of director performance. This Committee also considers written
recommendations from shareholders for nominees to the Board.
The Chairman of the Executive Committee receives an annual retainer of
$7,000. Other members of the Executive Committee, except Mr. Rowe, receive an
annual retainer of $5,000. The Chairmen of the Audit, Compensation, and
Corporate Responsibility Committees each receive an annual retainer of $6,000.
Other members of these Committees, except Mr. Rowe, receive annual retainers
of $4,000. The Chairman of the Nominating Committee receives an annual
retainer of $2,000. There is no retainer for the other members of the
Nominating Committee. All directors participating in a Committee meeting,
except Mr. Rowe, receive a meeting fee of $850 plus expenses.
Members of the Board of Directors, except Mr. Rowe, receive annually a
retainer of $14,000 and 300 NEES common shares, and receive a meeting fee of
$850 plus expenses for each meeting attended.
NEES permits directors to defer all or a portion of any cash retainers,
meeting fees, and retainer shares under a deferred compensation plan. A
director may elect to defer to a Company Share Account or a Prime Rate
Account. While deferred, the shares do not have voting rights or other rights
associated with ownership. At the time of electing to defer compensation, the
director also elects whether to receive payment after ten years or upon
retirement, and, if upon retirement, whether in ten payments or a lump sum. A
special account is maintained on NEES' books showing the amounts deferred and
the interest accrued thereon. This plan also provides certain death and
disability benefits. Group life insurance of $80,000 is provided to each
member of the Board of Directors. Director contributions to qualified
charities are matched by NEES under a matching gift program, which has a
maximum limit of $3,500.
Pursuant to a director retirement plan, nonemployee directors who have
served on the Board of NEES for 5 years or more will receive a retirement
benefit upon the later of the director's retirement from the Board or age 60.
The benefit level is 100% of the annual retainer for directors who served on
the Board for 10 or more years and 75% of the annual retainer for directors
who served between 5 and 10 years. There are no death benefits under the
plan.
The Board of Directors held 10 meetings in 1996. The Executive, Audit,
Compensation, Corporate Responsibility, and Nominating Committees held 2, 3,
3, 3, and 2 meetings, respectively, in 1996.
<PAGE>
Mass. Electric, Narragansett, and NEP Directors' Compensation
- -------------------------------------------------------------
Members of the Mass. Electric and Narragansett Boards of Directors, except
employees of NEES System companies, i.e., Messrs. McCabe, L. J. Reilly, Rowe,
and Sergel, receive a quarterly retainer of $1,500, a meeting fee of $600 plus
expenses, and 50 NEES common shares each year. Since all members of the NEP
Board are employees of NEES System companies, no fees are paid for service on
the Board except as previously noted for Mrs. Bok.
Mass. Electric and Narragansett permit directors to defer all or a portion
of any cash retainers, meeting fees, and retainer shares under a deferred
compensation plan. A director may elect to defer to a NEES Share Account or a
Prime Rate Account. While deferred, the shares do not have voting rights or
other rights associated with ownership. At the time of electing to defer
compensation, the director also elects whether to receive payment after ten
years or upon retirement, and, if upon retirement, whether in ten payments or
a lump sum. Special accounts are maintained on Mass. Electric's and
Narragansett's books showing the amounts deferred and the interest or
dividends accrued thereon. Director contributions to qualified charities are
matched by the System under a matching gift program, which has a maximum limit
of $3,500.
Item 7. CONTRIBUTIONS AND PUBLIC RELATIONS
(1) None. Payments are made to certain employees and other persons, who
may act in the capacities enumerated in Item 7 for services rendered or
materials purchased, but such payments are not contributions.
(2) Year Ended December 31, 1996.
<TABLE>
<CAPTION>
Accounts Charged,
if any, per Books
Purpose of Disbursing
Name of Recipient or Beneficiary (A) Company Amount
- ------------------------------- ------- ----------------- ------
<S> <C> <C> <C>
Name of Company
---------------
Mass. Electric
--------------
Nashua River Watershed Council 930.20 $ 250.00
Connecticut River Watershed Council 930.20 $ 200.00
Massachusetts Electric & Gas Association 426.40 $ 90,383.00
Joyce & Joyce (B) 426.40 $ 80,000.00
Edison Electric Institute 426.40 $ 77,468.00
The Lowell Plan 426.10 $ 8,900.00
Massachusetts Taxpayers Foundation 426.10 $ 8,682.00
Business for Social Responsibility 426.10 $ 5,500.00
The Urban Institute 426.10 $ 5,000.00
The Alliance to Save Energy 426.10 $ 4,400.00
National Conference of Christians & Jews 426.10 $ 3,750.00
Pioneer Institute for Public Policy 426.10 $ 2,500.00
Merrimack River Watershed Council 426.10 $ 1,750.00
Council of State Governors 426.10 $ 1,500.00
The Northeast Corridor Initiative Inc. 426.10 $ 1,000.00
Financial Accounting Foundation 426.10 $ 790.00
EDP Economic Development 426.10 $ 500.00
Merrimack Valley Branch NAACP 426.10 $ 50.00
NEP
---
Gallagher Callahan and Gartrell (B) 426.40 $225,815.00
Alliance for Competitive Energy (B) 426.40 $ 92,482.00
Sullivan & Leshane, Inc. (B) 426.40 $ 77,223.00
<PAGE>
NEP (Cont.)
-----------
Edison Electric Institute 426.40 $ 33,804.00
Swidler & Berlin Chartered (B) 426.40 $ 18,261.00
Halloran & Sage (B) 426.40 $ 3,462.00
Save the Bay 426.10 $ 29,011.00
American Enterprise Institute 426.10 $ 20,000.00
Taunton River Watershed Alliance, Inc. 426.10 $ 10,000.00
Mass Taxpayers Foundation 426.10 $ 8,682.00
The Nature Conservancy 426.10 $ 6,000.00
The Alliance to Save Energy 426.10 $ 5,125.00
Resources for the Future 426.10 $ 5,000.00
Audubon Society of NH 426.10 $ 3,825.00
Business for Social Responsibility 426.10 $ 2,500.00
C.R.W.C. - River Fest 426.10 $ 2,500.00
The Northeast Corridor Initiative Inc. 426.10 $ 2,000.00
Vermont Archeological Society 426.10 $ 2,000.00
Business & Industry Association of NH 426.10 $ 1,875.00
Council on Economic Priorities 426.10 $ 1,000.00
Society for the Protection of NH Forest 426.10 $ 530.00
Deerfield River Watershed Association 426.10 $ 500.00
Nashua River Watershed Association 426.10 $ 500.00
Salem Conservation Commission 426.10 $ 500.00
Dunbarton Conservation Commission 426.10 $ 250.00
Windham Regional Commission 426.10 $ 250.00
The Alhambra Organization Lugo #13 426.10 $ 200.00
Mass. Forestry Association 426.10 $ 150.00
NH Timberland Owners Association 426.10 $ 100.00
National Resources Defense Council Inc. 426.10 $ 55.00
Southern Povert Law Center 426.10 $ 25.00
Union of Concerned Scientists 426.10 $ 25.00
Narragansett
------------
John G. Coffey, Esq. (B) 426.40 $ 40,000.00
McGovern, Noel & Benik, Inc. (B) 426.40 $ 30,000.00
M&P Strategic Communications (B) 426.40 $ 28,056.00
McMahon-Preston Communications (B) 426.40 $ 27,338.00
Edison Electric Institute 426.40 $ 26,762.00
Winsor Association Co. (B) 426.40 $ 26,000.00
R.I. Public Expenditure Council 426.10 $ 10,893.00
Providence Foundation 426.10 $ 7,000.00
Rhode Island Urban Project 426.10 $ 7,000.00
National Conference of Christians & Jews 426.10 $ 3,000.00
Urban Institute 426.10 $ 2,500.00
The Alliance to Save Energy 426.10 $ 2,000.00
Urban League of Rhode Island 426.10 $ 1,750.00
Keep Providence Beautiful 426.10 $ 1,500.00
Northeast Corridor Initiative 426.10 $ 1,440.00
Nature Conservancy 426.10 $ 1,000.00
Save the Bay 426.10 $ 525.00
Council of State Governments 426.10 $ 500.00
Financial Accounting Foundations 426.10 $ 360.00
Rhode Island Coalition for Affirmative Action 426.10 $ 150.00
U.S. Lighthouse Society 426.10 $ 70.00
Ocean Adoption Research Exchange 426.10 $ 25.00
Granite State
-------------
Gallagher Callahan and Gartrell (B) 426.40 $ 25,513.00
Edison Electric Institute 426.40 $ 2,817.00
Business and Industry Association of NH 426.10 $ 625.00
Urban Institute 426.10 $ 500.00
Business for Social Responsibility 426.10 $ 250.00
National Awareness Foundation 426.10 $ 250.00
The Alliance to Save Energy 426.10 $ 160.00
Financial Accounting Foundation 426.10 $ 30.00
<PAGE>
NEES
----
Massachusetts Business Roundtable 426.40 $ 700.00
Nantucket Electric Company
--------------------------
Nantucket Green Fund 426.1 $ 1,000.00
<FN>
- --------------------
(A) All such payments, unless otherwise noted, were subscriptions, dues,
and/or contributions.
(B) Payments for legislative services.
</TABLE>
Item 8. SERVICE, SALES AND CONSTRUCTION CONTRACTS
Part I.
<TABLE>
<CAPTION>
Serving Receiving Compensation
Transaction Company Company (1996)
- ----------- ------- --------- ------------
<S> <C> <C> <C>
Fuel Purchase Contract (1) NEEI NEP $64,549,407
Phase I Terminal Facility
Support Agreement (2) NEET NEP $ 1,828,362
Phase II Massachusetts Transmission NEHTEC NEP $ 7,579,978
Facilities Support Agreement (3)
Phase II New Hampshire Transmission NEHTC NEP $ 6,247,683
Facilities Support Agreement (4)
<FN>
- --------------------
(1) Contract dated 7/26/79 as amended was in effect at 12/31/96.
(2) Agreement dated 12/1/81 as amended was in effect at 12/31/96.
(3) Agreement dated 6/1/85 as amended was in effect at 12/31/96.
(4) Agreement dated 6/1/85 as amended was in effect at 12/31/96.
</FN>
</TABLE>
Part II.
See Item 6, Part III.
Part III.
None.
Item 9. WHOLESALE GENERATORS AND FOREIGN UTILITY COMPANIES
None.
Item 10. FINANCIAL STATEMENTS AND EXHIBITS
Financial Statements
- --------------------
NEES Consolidating Financial Statements (Supplement A-1) and Financial
Statements and Supporting Schedules of NEES and NEES subsidiaries consolidated
contained in the NEES 1996 Form 10-K (Supplement A-2).
<PAGE>
Exhibits
- --------
Unless otherwise indicated, the exhibits listed below are incorporated by
reference to the appropriate exhibit numbers and the commission file numbers
indicated in parenthesis.
A. Annual Reports:
1. a. Connecticut Yankee Atomic Power Company 1996 Annual Report to
Shareholders (Exhibit A.2.1 to Northeast Utilities' Form U-5-S,
File No. 30-246).
b. Connecticut Yankee Atomic Power Company 1996 FERC Form 1 (Exhibit
A.2.2 to Northeast Utilities' Form U-5-S, File No. 30-246).
2. a. Maine Yankee Atomic Power Company 1996 Annual Report (filed
herewith).
b. Maine Yankee Atomic Power Company 1996 FERC Form 1 (filed
herewith).
3. Massachusetts Electric Company, Form 10-K for the year ended
December 31, 1996 (File No. 0-5464).
4. The Narragansett Electric Company, Form 10-K for the year ended
December 31, 1996 (File No. 0-898).
5. New England Electric System, Form 10-K for the year ended
December 31, 1996 (File No. 1-3446).
6. New England Power Company, Form 10-K for the year ended December 31,
1996 (File No. 0-1229).
7. a. Vermont Yankee Nuclear Power Corporation 1996 Annual Report to
Stockholders (filed herewith).
b. Vermont Yankee Nuclear Power Corporation 1996 FERC Form 1 (filed
herewith).
8. a. Yankee Atomic Electric Company 1996 Annual Report to Stockholders
(filed herewith).
b. Yankee Atomic Electric Company 1996 FERC Form 1 (filed herewith).
9. New England Electric Transmission Corporation 1996 Annual Report
(filed herewith).
B. Corporate Documents:
1. AllEnergy Marketing Company, L.L.C.:
a. Limited Liability Company Agreement (Exhibit B-1 to Amendment
No. 1 to Form U-1, File No. 70-8921).
2. Granite State Electric Company:
a. Articles of Organization (Exhibit B.1.a to NEES 1983 Form U-5-S).
b. By-laws (Exhibit B.1.b to NEES 1983 Form U-5-S).
3. Granite State Energy, Inc.:
a. Certificate of Incorporation (Exhibit No. 3(i) to Certificate of
Notification, File No. 70-8803).
b. By-laws (Exhibit No. 3(ii) to Certificate of Notification, File
No. 70-8803).
<PAGE>
4. Massachusetts Electric Company:
a. Articles of Organization (Exhibit B.2.a to NEES 1983 Form U-5-
S); Articles of Amendment dated March 5, 1993, August 11, 1993,
September 20, 1993, and November 1, 1993 (Exhibit 3(a) to 1993
Form 10-K, File No. 0-5464).
b. By-laws (Filed herewith).
5. Nantucket Electric Company:
a. Articles of Organization (Exhibit A-6 filed under cover of Form
SE, File No. 70-8675).
b. By-laws (Exhibit A-7 filed under cover of Form SE, File No. 70-
8675).
6. The Narragansett Electric Company:
a. Charter (Exhibit B.3.a to NEES 1983 Form U-5-S); Amendment to
Charter dated June 9, 1988 (Exhibit B.3.a to NEES 1988
Form U-5-S).
b. By-laws (Exhibit 3 to 1980 Form 10-K, File No. 0-898).
c. Stockholders Votes re Preference Provisions as amended dated
March 23, 1993 (Exhibit 4(c) to NEES 1993 Form 10-K, File No.
1-3446).
7. Narragansett Energy Resources Company:
a. Articles of Incorporation (Exhibit B.4.a to NEES 1987 Form
U-5-S).
b. By-laws (Exhibit B.4.b to NEES 1995 Form U-5-S).
8. NEERI International:
a. Articles of Association (filed herewith).
b. Memorandum of Association (filed herewith).
9. NEES Communications, Inc.:
a. Articles of Organization (filed herewith).
b. By-laws (filed herewith).
10. NEES Energy, Inc.:
a. Certificate of Incorporation (Exhibit 3(i) to Certificate of
Notification, File No. 70-8803).
b. By-laws (Exhibit 3(ii) to Certificate of Notification, File No.
70-8803).
11. New England Electric Resources, Inc.:
a. Articles of Organization (Exhibit B.5.a to NEES 1993 Form U-5-
S).
b. By-Laws (Exhibit B.5.b to NEES 1993 Form U-5-S).
12. New England Electric System:
a. Agreement and Declaration of Trust (Exhibit 3 to NEES 1994 Form
10-K, File No. 1-3446).
13. New England Electric Transmission Corporation:
a. Restated Articles of Incorporation (Exhibit B.6.a to NEES 1983
Form U-5-S).
b. By-laws (Exhibit B.6.b to NEES 1983 Form U-5-S).
<PAGE>
14. New England Energy Incorporated:
a. Articles of Organization (Exhibit B.7.a to NEES 1983 Form U-5-
S); Articles of Amendment dated April 8, 1988 (Exhibit B.8.a to
NEES 1988 Form U-5-S).
b. By-laws (Exhibit B.8.b to NEES 1995 Form U-5-S).
15. New England Hydro Finance Company, Inc.
a. Articles of Organization (Exhibit B.9.a to NEES 1988 Form
U-5-S).
b. By-laws (Exhibit B.9.b to NEES 1995 Form U-5-S).
16. New England Hydro-Transmission Corporation
a. Articles of Incorporation (Exhibit B.8.a to NEES 1986 Form
U-5-S); Articles of Amendment dated January 18, 1989 (Exhibit
B.10.a to NEES 1988 Form U-5-S).
b. By-laws (Exhibit B.10.b to NEES 1988 Form U-5-S).
17. New England Hydro-Transmission Electric Company
a. Restated Articles of Organization dated January 13, 1989
(Exhibit B.11.a to NEES 1988 Form U-5-S).
b. By-laws (Exhibit B.11.b to NEES 1988 Form U-5-S).
18. New England Power Company:
a. Articles of Organization (Exhibit B.8.a to NEES 1983 Form U-5-
S); Articles of Amendment dated June 25, 1987 (Exhibit B.12.a to
NEES 1988 Form U-5-S).
b. By-laws (Exhibit 3(b) to 1995 Form 10-K, File No. 0-1229).
19. New England Power Service Company:
a. Articles of Organization (Exhibit B.9.a to NEES 1983 Form U-5-
S).
b. By-laws (Exhibit B.13.b to NEES 1988 Form 10-K,
File No. 0-1229).
C. Funded Debt:
1. Granite State Electric Company:
Note Agreement with John Hancock dated March 15, 1985 (Exhibit A
to Granite Certificate of Notification, File No. 70-6998).
Note Agreement with Teachers Insurance dated as of February 1,
1987 (Exhibit A to Granite Certificate of Notification, File No.
70-7288).
Note Agreement with Aid Association for Lutherans dated as of
October 1, 1991 (Exhibit C-1 to NEES 1991 Form U-5-S).
Note Agreement with First Colony Life Insurance Company dated as
of November 1, 1993 (Exhibit C-1 to NEES 1993 Form U-5-S).
Note Agreement with First Colony Life Insurance Company dated as
of July 1, 1995 (Exhibit A to Granite Certificate of
Notification, File No. 70-8625).
2. Massachusetts Electric Company:
First Mortgage Indenture and Deed of Trust, dated as of July 1,
1949, and twenty-one supplements thereto (Exhibit 7-A, File
No. 1-8019; Exhibit 7-B, File No. 2-8836; Exhibit 4-C, File No.
2-9593; Exhibit 4 to 1980 Form 10-K, File No. 2-8019; Exhibit 4
to 1982 Form 10-K, File No. 0-5464; Exhibit 4 to 1986 Form 10-K,
File No. 0-5464; Exhibit 4(a) to 1988 Form 10-K, File No.
<PAGE>
1-3446; Exhibit 4(a) to 1989 Form 10-K, File No. 1-3446; Exhibit
4(a) to 1992 Form 10-K, File No. 1-3446; Exhibit 4(a) to 1993
Form 10-K, File No. 1-3446; Exhibit 4(a) to 1995 NEES Form 10-K,
File No. 1-3446).
3. The Narragansett Electric Company:
First Mortgage Indenture and Deed of Trust, dated as of
September 1, 1944, and twenty-two supplements thereto (Exhibit
7-1, File No. 2-7042; Exhibit 7-B, File No. 2-7490; Exhibit 4-C,
File No. 2-9423; Exhibit 4-D, File No. 2-10056; Exhibit 4 to
1980 Form 10-K, File No. 0-898; Exhibit 4 to 1982 Form 10-K,
File No. 0-898; Exhibit 4 to 1983 Form 10-K, File No. 0-898;
Exhibit 4 to 1985 Form 10-K, File No. 0-898; Exhibit 4 to 1986
Form 10-K, File No. 0-898; Exhibit 4 to 1987 Form 10-K, File No.
0-898; Exhibit C-3 to NEES 1991 Form U-5-S; Exhibit 4(b) to 1992
Form 10-K, File No. 1-3446; Exhibit 4(b) to 1993 Form 10-K, File
No. 1-3446; Exhibit 4(b) to 1995 NEES Form 10-K, File No. 1-
3446).
4. New England Electric Transmission Corporation:
Note Agreement with PruCapital Management, Inc. et al. dated as
of September 1, 1986; Mortgage, Deed of Trust and Security
Agreement dated as of September 1, 1986 (Exhibit 10(g) to 1986
Form 10-K, File No. 1-3446).
5. New England Energy Incorporated:
Credit Agreement dated as of April 13, 1995 (Exhibit 10(e)(v) to
1995 NEES Form 10-K, File No. 1-3446).
6. New England Power Company:
a. General and Refunding Mortgage Indenture and Deed of Trust dated
as of January 1, 1977 and twenty supplements thereto
(Exhibit 4(b) to 1980 Form 10-K, File No. 0-1229; Exhibit 4(b)
to 1982 Form 10-K, File No. 0-1229; Exhibit 4(b) to 1983
Form 10-K, File No. 0-1229; Exhibit 4(b) to 1985 Form 10-K, File
No. 0-1229; Exhibit 4(b) to 1986 Form 10-K, File No. 0-1229;
Exhibit 4(b) to 1988 Form 10-K, File No. 0-1229; Exhibit
4(c)(ii) to 1989 Form 10-K, File No. 1-3446; Exhibit 4(c)(ii)
to 1990 Form 10-K, File No. 1-3446; Exhibit C.6.b to NEES 1991
Form U-5-S; Exhibit 4(c)(ii) to NEES 1992 Form 10-K, File No. 1-
3446; Exhibit 4(d) to NEES 1993 Form 10-K, File No. 1-3446;
Exhibit 4(d) to 1995 NEES Form 10-K, File No. 1-3446).
b. Loan Agreement with Massachusetts Industrial Finance Agency
dated as of March 15, 1980 and two supplements thereto
(Exhibit C.8.c to NEES 1983 Form U-5-S); Supplements dated as of
October 1, 1992 and September 1, 1993 (Exhibit C-6b to NEES 1993
Form U-5-S).
c. Loan Agreement with Business Finance Authority of the State of
New Hampshire (formerly the Industrial Development Authority of
the State of New Hampshire) dated as of November 15, 1983
(Exhibit C.8.d to NEES 1983 Form U-5-S); First Supplement dated
as of April 1, 1986 (Exhibit C.7.d to NEES 1986 Form U-5-S);
Second Supplement dated as of August 1, 1988 (Exhibit C.7.d to
NEES 1988 Form U-5-S); Third Supplement dated as of February 1,
1989; Fourth Supplement dated as of November 1, 1990 (Exhibit
C.6.d to NEES 1990 Form U-5-S); Fifth Supplement dated as of
June 15, 1991 (Exhibit C.6.d to NEES 1991 Form U-5-S); Sixth
Supplement dated as of January 1, 1993 (Exhibit C.6.d to NEES
1992 Form U-5-S); Seventh Supplement dated as of October 1, 1993
and Eighth Supplement dated as of December 1, 1993 (Exhibit
C.6.c to NEES 1993 Form U-5-S); Ninth Supplement dated as of
February 1, 1995 (Exhibit 6.c to NEES 1995 Form U-5-S), Tenth
Supplement dated as of January 15, 1996, Eleventh Supplement
dated as of January 15, 1996, and Twelfth Supplement dated as of
December 1, 1996 (filed herewith).
<PAGE>
d. Loan Agreement with the Connecticut Development Authority dated
as of October 15, 1985 (Exhibit C-8(h) to NEES 1985 Form
U-5-S).
7. Narragansett Energy Resources Company:
Note Agreements with Connecticut General Life Insurance Company,
CIGNA Property and Casualty Insurance Company, Insurance Company
of North America, and Life Insurance Company of North America,
dated November 30, 1995 (Exhibit A to NERC Certificate of
Notification, File No. 70-8671).
D. New England Electric System and Subsidiary Companies, Federal and State
Income Tax Allocation Agreement (Filed herewith).
E. 1. Schedule showing Money Pool investments for 1995 (filed herewith).
2. NEERI annual report on Modified Form U-13-60 (filed herewith).
3. Ocean State Power Financial Statements as of December 31, 1995 (filed
herewith).
4. Ocean State Power II Financial Statements as of December 31, 1995
(filed herewith).
5. OSP Finance Company Financial Statements as of December 31, 1995
(filed herewith).
6. Financial Statements of the New England Electric System Companies
Incentive Thrift Plan (Thrift Plan) (filed herewith).
7. Financial Statements of the New England Electric System Companies
Incentive Thrift Plan II (Thrift Plan II) (filed herewith).
8. Financial Statements of the Yankee Atomic Electric Company Thrift
Plan (filed herewith).
F. Schedules (filed herewith).
G. Financial Data Schedules (filed herewith).
H. None.
I. None.
<PAGE>
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.
SIGNATURE
New England Electric System, a registered holding company, has duly caused
this Annual Report, Form U-5-S, for the year ended December 31, 1996,
Commission's File No. 30-33 to be signed on its behalf, by the undersigned
thereunto duly authorized, pursuant to the requirements of the Public Utility
Holding Company Act of 1935.
NEW ENGLAND ELECTRIC SYSTEM
s/Michael E. Jesanis
By:
Michael E. Jesanis, Treasurer
Date: May 1, 1997
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ----------- ----------- ----
Supplement NEES Consolidating Balance Sheet, Filed
A-1 Consolidating Income and Retained Earnings herewith
Statements and Consolidating Statement of
Changes in Financial Position for the
year ended December 31, 1996
Supplement NEES Form 10-K for the year ended Filed under
A-2 December 31, 1996 cover of
Form SE
A.1.a Connecticut Yankee Atomic Power Company Incorporated
1996 Annual Report to Shareholders by reference
A.1.b Connecticut Yankee Atomic Power Company Incorporated
1996 FERC Form 1 by reference
A.2.a Maine Yankee Atomic Power Company Filed under
1996 Annual Report cover of
Form SE
A.2.b Maine Yankee Atomic Power Company Filed under
1996 FERC Form 1 cover of
Form SE
A.3 Massachusetts Electric Company Incorporated
Form 10-K for the year ended December 31, 1996 by reference
A.4 The Narragansett Electric Company Incorporated
Form 10-K for the year ended December 31, 1996 by reference
A.5 New England Electric System Incorporated
Form 10-K for the year ended December 31, 1996 by reference
A.6 New England Power Company Incorporated
Form 10-K for the year ended December 31, 1996 by reference
A.7.a Vermont Yankee Nuclear Power Corporation Filed under
1996 Annual Report to Stockholders cover of
Form SE
A.7.b Vermont Yankee Nuclear Power Corporation Filed under
1996 FERC Form 1 cover of
Form SE
A.8.a Yankee Atomic Electric Company Filed under
1996 Annual Report to Stockholders cover of
Form SE
A.8.b Yankee Atomic Electric Company Filed under
1996 FERC Form 1 cover of
Form SE
A.9 New England Electric Transmission Filed under
Corporation 1996 Annual Report cover of
Form SE
B.1.a AllEnergy Marketing Company, L.L.C. Incorporated
Limited Liability Company Agreement by reference
B.2.a Granite State Electric Company Incorporated
Articles of Organization by reference
B.2.b Granite State Electric Company Incorporated
By-laws by reference
B.3.a Granite State Energy, Inc. Incorporated
Certificate of Incorporation by reference
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ----------- ----------- ----
B.3.b Granite State Energy, Inc. Incorporated
By-laws by reference
B.4.a Massachusetts Electric Company Incorporated
Amendment to Articles of Organization by reference
B.4.b Massachusetts Electric Company Filed
By-laws herewith
B.5.a Nantucket Electric Company Incorporated
Articles of Organization by reference
B.5.b Nantucket Electric Company Incorporated
By-laws by reference
B.6.a The Narragansett Electric Company Incorporated
Amendment to Charter by reference
B.6.b The Narragansett Electric Company Incorporated
By-laws by reference
B.6.c The Narragansett Electric Company Incorporated
Stockholders Votes re Preference Provisions by reference
B.7.a Narragansett Energy Resources Company Incorporated
Articles of Incorporation by reference
B.7.b Narragansett Energy Resources Company Incorporated
By-laws by reference
B.8.a NEERI International Filed
Articles of Association herewith
B.8.b NEERI International Filed
Memorandum of Association herewith
B.9.a NEES Communications, Inc. Filed
Articles of Organization herewith
B.9.b NEES Communications, Inc. Filed
By-laws herewith
B.10.a NEES Energy, Inc. Incorporated
Certificate of Incorporation by reference
B.10.b NEES Energy, Inc. Incorporated
By-laws by reference
B.11.a New England Electric Resources, Inc. Incorporated
Articles of Organization by reference
B.11.b New England Electric Resources, Inc. Incorporated
By-laws by reference
B.12.a New England Electric System Incorporated
Agreement and Declaration of Trust by reference
B.13.a New England Electric Transmission Corporation Incorporated
Restated Articles of Incorporation by reference
B.13.b New England Electric Transmission Corporation Incorporated
By-laws by reference
B.14.a New England Energy Incorporated Incorporated
Amendment to Articles of Organization by reference
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ----------- ----------- ----
B.14.b New England Energy Incorporated Incorporated
By-laws by reference
B.15.a New England Hydro Finance Company, Inc. Incorporated
Articles of Organization by reference
B.15.b New England Hydro Finance Company, Inc. Incorporated
By-Laws by reference
B.16.a New England Hydro-Transmission Corporation Incorporated
Amendment to Articles of Incorporation by reference
B.16.b New England Hydro-Transmission Corporation Incorporated
By-laws by reference
B.17.a New England Hydro-Transmission Electric Company Incorporated
Restated Articles of Organization by reference
B.17.b New England Hydro-Transmission Electric Company Incorporated
By-laws by reference
B.18.a New England Power Company Incorporated
Amendment to Articles of Organization by reference
B.18.b New England Power Company Incorporated
By-laws by reference
B.19.a New England Power Service Company Incorporated
Articles of Organization by reference
B.19.b New England Power Service Company Incorporated
By-laws by reference
C.1 Granite State Electric Company Incorporated
Note Agreement with John Hancock by reference
Granite State Electric Company Incorporated
Note Agreement with Teachers Insurance by reference
Granite State Electric Company Incorporated
Note Agreement with Aid Association for by reference
Lutherans
Granite State Electric Company Incorporated
Note Agreement with First Colony Life by reference
Insurance Company
Granite State Electric Company Incorporated
Note Agreement with First Colony Life by reference
Insurance Company
C.2 Massachusetts Electric Company Incorporated
First Mortgage Indenture and Deed of Trust by reference
and twenty-one supplements thereto
C.3 The Narragansett Electric Company Incorporated
First Mortgage Indenture and Deed of Trust by reference
and twenty-two supplements thereto
C.4 New England Electric Transmission Corporation Incorporated
Note Agreement with PruCapital Management, Inc. by reference
et al.
C.5 New England Energy Incorporated Incorporated
Credit Agreement dated as of April 13, 1995 by reference
C.6.a New England Power Company General and Incorporated
Refunding Mortgage Indenture and Deed of Trust by reference
and twenty supplements thereto
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ----------- ----------- ----
C.6.b New England Power Company Incorporated
Loan Agreement with Massachusetts Industrial by reference
Finance Agency and four supplements thereto
C.6.c New England Power Company Incorporated
Loan Agreement with Business Finance Authority by reference
of the State of New Hampshire (formerly the
Industrial Development Authority of the State
of New Hampshire) and nine supplements thereto
Tenth supplement dated as of January 1, 1996, Filed
Eleventh supplement dated as of January 15, herewith
1996, and Twelfth supplement dated as of
December 1, 1996
C.6.d Loan Agreement with Connecticut Development Incorporated
Authority by reference
C.7 Narragansett Energy Resources Company Incorporated
Note Agreements by reference
D New England Electric System and Subsidiary Filed
Companies, Federal and State Income Tax herewith
Allocation Agreement
E.1 Money Pool investments for 1996 Filed
herewith
E.2 NEERI annual report on Modified Form U-13-60 Filed
herewith
E.3 Ocean State Power Financial Statements as of Filed
December 31, 1996 herewith
E.4 Ocean State Power II Financial Statements Filed
as of December 31, 1996 herewith
E.5 OSP Finance Company Financial Statements Filed
as of December 31, 1996 herewith
E.6 New England Electric System Companies Filed under
Incentive Thrift Plan Financial Statements cover of
Form SE
E.7 New England Electric System Companies Filed under
Incentive Thrift Plan II Financial Statements cover of
Form SE
E.8 Yankee Atomic Electric Company Filed under
Thrift Plan Financial Statements cover of
Form SE
F Schedules Filed under
cover of
Form SE
G Financial Data Schedules Filed
herewith
<PAGE>
SUPPLEMENT A-1
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
AT DECEMBER 31, 1996
CONSOLIDATING INCOME AND RETAINED EARNINGS STATEMENTS
FOR YEAR ENDED DECEMBER 31, 1996
CONSLIDATING STATEMENT OF CASH FLOWS
FOR YEAR ENDED DECEMBER 31, 1996
<PAGE>
<TABLE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
INDEX OF CONSOLIDATED WORKSHEETS
YEAR ENDED DECEMBER 31, 1996
<CAPTION>
Pages
-----
<S> <C>
Consolidating Balance Sheet, Adjustments and Eliminations............................. 1 - 2
Consolidating Statement of Income, Adjustments and Eliminations....................... 3 - 4
Consolidating Statement of Retained Earnings, Adjustments and Eliminations............ 5 - 6
Consolidating Statement of Cash Flows, Adjustments and Eliminations................... 7 - 8
INDEX OF INDIVIDUAL COMPANY STATEMENTS
Balance Statement Retained Statement of
Sheet of Income Earnings Cash Flows
------- --------- -------- ------------
<S> <C> <C> <C> <C>
NEW ENGLAND ELECTRIC SYSTEM (NEES) 1 3 5 7
GRANITE STATE ELECTRIC COMPANY (GRANITE STATE) 1 3 5 7
MASSACHUSETTS ELECTRIC COMPANY (MASS. ELECTRIC) 1 3 5 7
THE NARRAGANSETT ELECTRIC COMPANY (NARRA. ELECTRIC) 1 3 5 7
NEW ENGLAND POWER COMPANY (NEP) 1 3 5 7
NEW ENGLAND ENERGY INCORPORATED (NEEI) 1 3 5 7
NEW ENGLAND POWER SERVICE COMPANY (NEPSCO) 1 3 5 7
NEW ENGLAND HYDRO-TRANSMISSION ELECTRIC COMPANY,
INC. (NEHTECI) 1 3 5 7
NEW ENGLAND HYDRO-TRANSMISSION CORPORATION (NEHTC) 1 3 5 7
NARRAGANSETT ENERGY RESOURCES COMPANY (NERC) 1 3 5 7
NEW ENGLAND ENERGY RESOURCES, INC. (NEERI) 1 3 5 7
NANTUCKET ELECTRIC COMPANY (NANTUCK) 1 3 5 7
GRANITE STATE ENERGY (GS EN) 1 3 5 7
NEES ENERGY (NEES EN) 1 3 5 7
NEW ENGLAND ELECTRIC SYSTEM - TRUST (PARENT) 1 3 5 7
</TABLE>
<PAGE>
<TABLE>
Page 1A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 1996 (IN THOUSANDS)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets
Utility plant,
at original cost $66,460$1,509,896 $742,481 $2,991,797 $11,019 $220,197 $175,056
Less accumulated
depreciation and
amortization 18,925 430,585 187,690 1,118,341 52,783 34,946
------------------ -------- ---------- ---------- ------- -------- --------
47,535 1,079,311 554,791 1,873,456 11,019 167,414 140,110
Construction work in
progress 1,080 9,119 5,392 36,836
------------------ -------- ---------- ---------- ------- -------- --------
Net utility plant 48,615 1,088,430 560,183 1,910,292 11,019 167,414 140,110
------------------ -------- ---------- ---------- ------- -------- --------
Oil and gas properties $1,286,613
Less accumulated
amortization 1,079,038
Work in progress
----------
Net oil and gas
properties 207,575
----------
Investments in
nuclear power
companies, at equity 47,902
Investments in other
subsidiaries, at
equity
Other investments
at cost 865 9,213 4,049 30,591 49,887 5 5
Current assets 7,259 235,809 89,938 333,043 19,026 24,405 6,713 2,694
Deferred charges and
other assets 1,242 56,806 52,832 325,887 342 819 8,296 6,867
------------------ -------- ---------- ---------- ------- -------- --------
$57,981$1,390,258 $707,002 $2,647,715 $226,943 $86,130 $182,428 $149,676
================== ======== ========== ========== ======= ======== ========
<PAGE>
Page 1B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
NERC NEERI NANTUCKET GS EN NEES EN PARENT
---- ----- --------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Assets
Utility plant,
at original cost $37,489
Less accumulated
depreciation and
amortization 9,733
-------- ------ -------------------- ---------- ----------
27,756
Construction work in
progress 96
-------- ------ -------------------- ---------- ---------
Net utility plant 27,852
-------- ------ -------------------- ---------- ---------
Oil and gas properties
Less accumulated
amortization
Work in progress
-------- -------- -------------------- ---------- ---------
Net oil and gas
properties
---------- ---------
Investments in
nuclear power
companies, at equity
Investments in other
subsidiaries, at
equity 35,163 1,716 1,686,822
Other investments
at cost 1,475 108 3,828
Current assets 1,107 2,422 14,347 194 294 45,324
Deferred charges and
other assets (379) 1,266
-------- ------ -------------------- ---------- -----------
$35,891 $3,897 $43,573 $194 $2,010 $1,735,974
======== ====== ==================== ========== ===========
<PAGE>
Page 1C
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS NEES
& ELMINATIONS CONSOLIDATED
------------- ------------
<S> <C> <C>
Assets
Utility plant,
at original cost $61,439 $5,692,956
Less accumulated
depreciation and
amortization 1,853,003
--------- ---------
61,439 3,839,953
Construction work in
progress (4,129) 56,652
------ ----------
Net utility plant 57,310 3,896,605
------ ----------
Oil and gas properties (48) 1,286,661
Less accumulated
amortization (2,902) 1,081,940
Work in progress
------- ---------
Net oil and gas
properties 2,854 204,721
------- ---------
Investments in
nuclear power
companies, at equity 47,902
Investments in other
subsidiaries, at
equity 1,683,577 40,124
Other investments
at cost 3,627 96,399
Current assets 293,695 488,880
Deferred charges and
other assets 5,358 448,620
---------- ----------
$2,046,421 $5,223,251
========== ==========
</TABLE>
<PAGE>
Page 1D
<TABLE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- --------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capitalization and
liabilities
Common share equity $19,685 $427,061$256,772 $906,205 ($3,460) $18,189 $56,616 $36,779
Minority interests in
consolidated
subsidiaries
Cumulative preferred
stock 50,000 36,500 39,666
Long-term debt 15,000 343,321 178,517 733,006 149,000 84,570 51,920
------------------------------------ ---------- ------- -------- --------
Total capitalization 34,685 820,382 471,789 1,678,877 145,540 18,189 141,186 88,699
------------------------------------ ---------- ------- -------- --------
Current liabilities
Long-term debt due
within 1 year 30,000 32,500 3,000 6,960 4,560
Short-term debt 5,475 43,775 19,025 93,600 3,000
Other current
liabilities 10,870 255,973 75,163 189,041 6,429 25,020 5,313 3,440
------------------------------------ ---------- ------- -------- --------
Total current
liabilities 16,345 329,748 126,688 285,641 6,429 25,020 12,273 11,000
------------------------------------ ---------- ------- -------- --------
Deferred federal and
state income taxes 4,515 177,778 81,880 382,164 72,255 (10,160) 22,809 18,859
Unamortized investment
tax credits 961 16,566 7,517 55,486 6,160 3,237
Other reserves and
deferred credits 1,475 45,784 19,128 245,547 2,719 53,081 27,881
------------------------------------ ---------- ------- -------- --------
$57,981$1,390,258$707,002$2,647,715 $226,943 $86,130 $182,428 $149,676
==================================== ========== ======= ======== ========
<PAGE>
Page 1E
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 1995 (IN THOUSANDS)
(Continued)
NERC NEERI NANTUCKET GS EN NEES EN PARENT
---- ----- --------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Capitalization and
liabilities
Common share equity $1,738 $3,129 $4,166 $200 $2,997 $1,688,829
Minority interests in
consolidated
subsidiaries
Cumulative preferred
stock
Long-term debt 28,640 30,604
-------- ------- -------------------- ---------------------
Total capitalization 30,378 3,129 34,770 200 2,997 1,688,829
-------- ------- -------------------- ---------------------
Current liabilities
Long-term debt due
within 1 year 1,920 765
Short-term debt 1,500
Other current
liabilities 6 716 4,514 (6) (987) 42,653
-------- ------- -------------------- ---------------------
Total current
liabilities 1,926 716 6,779 (6) (987) 42,653
-------- ------- -------------------- ---------------------
Deferred federal and
state income taxes 1,766 52 468 (2,897)
Unamortized investment
tax credits 1,821 188
Other reserves and
deferred credits 1,368 7,389
-------- ------- -------------------- ---------- ----------
$35,891 $3,897 $43,573 $194 $2,010 $1,735,974
======== ======= ==================== ========== ==========
<PAGE>
Page 1F
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS NEES
& ELIMINATIONS CONSOLIDATED
-------------- ------------
<S> <C> <C>
Capitalization and
liabilities
Common share equity $1,733,489 $1,685,417
Minority interests in
consolidated
subsidiaries (46,293) 46,293
Cumulative preferred
stock 126,166
Long-term debt 1,614,578
---------- ----------
Total capitalization 1,687,196 3,472,454
---------- ----------
Current liabilities
Long-term debt due
within 1 year 79,705
Short-term debt 21,325 145,050
Other current
liabilities 280,290 337,855
---------- ----------
Total current
liabilities 301,615 562,610
---------- ----------
Deferred federal and
state income taxes (1,440) 750,929
Unamortized investment
tax credits 91,936
Other reserves and
deferred credits 59,050 345,322
---------- ----------
$2,046,421 $5,223,251
========== ==========
</TABLE>
<PAGE>
<TABLE>
Page 2A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET ADJUSTMENTS AND ELIMINATIONS
DECEMBER 31, 1996 (IN THOUSANDS)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debit
Common share equity 19,685 427,061 256,772 906,205 (3,650) 18,189 56,616 36,779
Short-term debt 5,475 5,275 5,300 5,275
Other current
liabilities 7,803 167,337 42,781 55,775 321 453 2,323 817
Other reserves and
deferred credits 4,691 53,963 2,719
Construction work in
progress 4,129
Oil and Gas properties 48
------- -------- -------- ---------- -------- ------- ------- -------
Total $32,963 $599,673 $309,544 $1,025,395 ($420) $18,642 $58,939 $37,596
======= ======== ======== ========== ======== ======= ======= =======
Credit
Minority interests in
consolidated
subsidiaries 27,776 18,517
Deferred charges and
other assets 4,691 2,990
Utility plant, at
original cost 61,439
Investments in other
subsidiaries, at
equity
Other investments at
cost 98 315 283 189 2,639 5 5
Deferred Federal and
State income taxes 1,440
Current assets 725 4,139 1,250 199,804 18,796 12,697 4,947 2,311
Accumulated
amortization
Oil and gas properties 2,902
------- -------- -------- ---------- -------- ------- ------- -------
Total $823 $4,454 $6,224 $261,432 $32,657 $15,336 $32,728 $20,833
======= ======== ======== ========== ======== ======= ======= =======
<PAGE>
Page 2B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET ADJUSTMENTS AND ELIMINATIONS
DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
NERC NEERI NANTUCKET GS EN NEES EN PARENT
---- ----- --------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Debit
Common share equity 1,738 3,129 4,166 200 2,997 3,602
Short-term debt
Other current
liabilities 278 1,344 846 80 11 121
Other reserves and
deferred credits 590 (2,913)
Construction work in
progress
Oil and gas properties
------ ------ ---------- -------- -------- --------
Total $1,816 $4,473 $5,602 $280 $3,008 $6,446
====== ====== ========== ======== ======== ========
Credit
Minority interests in
consolidated
subsidiaries
Deferred charges and
other assets 590 (2,913)
Utility plant, at
original cost
Investments in other
subsidiaries, at
equity 1,683,577
Other investments at
cost 93
Deferred Federal and
State income taxes
Current assets 1,084 881 1,874 2 45,185
Accumulated
amortization
Oil and gas properties
------ ------ ---------- -------- -------- ----------
Total $1,084 $881 $2,464 $0 $2 $1,732,172
====== ====== ========== ======== ======== ==========
<PAGE>
Page 2C
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET ADJUSTMENTS AND ELIMINATIONS
DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS
& ELIMINATIONS
--------------
<S> <C>
Debit
Common share equity $1,733,489
Short-term debt 21,325
Other current
liabilities 280,290
Oil and gas properties 48
Other reserves and
deferred credits 59,050
Construction work in
progress 4,129
----------
Total $2,104,157
==========
Credit
Minority interests in
consolidated
subsidiaries $46,293
Deferred charges and
other assets 5,358
Utility plant, at
original cost 61,439
Investments in other
subsidiaries, at
equity 1,683,577
Other investments at
cost 3,627
Deferred Federal and
State income taxes 1,440
Current assets 293,695
Accumulated
amortization
Oil and gas properties 2,902
----------
Total $2,104,157
==========
/TABLE
<PAGE>
<TABLE>
Page 3A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenue $67,906 $1,538,537 $503,585 $1,600,309 $52,171 $40,897 $33,715
-------- ---------- -------- ------------------ ---------------- --------
Operating expenses
Fuel for generation 342,545
Purchased electric energy 47,163 1,120,709 297,060 508,910
Other operation 9,772 211,663 71,625 203,456 4,443 4,822 10,344
Maintenance 2,260 31,102 13,009 79,118 1,074 119
Depreciation and amortization 2,309 47,357 27,899 104,209 46,261 8,884 5,880
Taxes, other than income
taxes 1,836 30,559 38,530 66,416 2,859 3,189
Income taxes 1,074 25,186 11,951 91,894 (637) 5,671 3,326
-------- ---------- -------- ------------------ ---------------- --------
Total operating expenses 64,414 1,466,576 460,074 1,396,548 50,067 23,310 22,858
-------- ---------- -------- ------------------ ---------------- --------
Operating income 3,492 71,961 43,511 203,761 2,104 17,587 10,857
Other income:
Allowance for equity funds
used during construction
Equity in income of
generating companies 5,159
Other income (expense), net (79) (1,213) (732) (1,851) (1,219) 1,839 110 41
-------- ---------- -------- ------------------ ---------------- --------
Operating and other income 3,413 70,748 42,779 207,069 885 1,839 17,697 10,898
-------- ---------- -------- ------------------ ---------------- --------
Interest:
Interest on long-term debt 1,340 27,089 17,205 45,111 2,290 8,734 5,398
Other interest 396 6,473 2,883 10,066 31 53
Allowance for borrowed funds
used during construction (27) (740) (263) (591)
-------- ---------- -------- ------------------ ---------------- --------
Total interest 1,709 32,822 19,825 54,586 2,290 8,765 5,451
-------- ---------- -------- ------------------ ---------------- --------
Income after interest 1,704 37,926 22,954 152,483 (1,405) 1,839 8,932 5,447
Preferred dividends of
subsidiaries 3,114 2,143 2,574
Minority interests
-------- ---------- -------- ------------------ ---------------- --------
Net income $1,704 $34,812 $20,811 $149,909($1,405) $1,839 $8,932 $5,447
======== ========== ======== ================== ================ ========
<PAGE>
Page 3B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1996(IN THOUSANDS)
(Continued)
NERC NEERI NANTUCKET GS EN NEES EN PARENT
---- ----- --------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Operating revenue $11,864 $299
------------------ -------- ------- -------- --------
Operating expenses
Fuel for generation 4,048
Purchased electric energy 299
Other operation 93 4,893 236 937 4,122
Maintenance 1,095 8
Depreciation and amortization 677
Taxes, other than income
taxes 286 3 (188) 35
Income taxes 152 (84) (808) (169)
------------------ -------- ------- -------- --------
Total operating expenses 93 11,151 454 (51) 3,988
------------------ -------- ------- -------- --------
Operating income (93) 713 (155) 51 (3,988)
Other income:
Allowance for equity funds
used during construction 114
Equity in income of
generating companies 5,174 (1,533) 40,354
Other income (expense), net 74 (3,608) (37) 173,042
------------------ -------- ------- -------- --------
Operating and other income 5,155 (3,608) 790 (155) (1,482) 209,408
------------------ -------- ------- -------- --------
Interest:
Interest on long-term debt 2,320 990
Other interest 70 25 316
Allowance for borrowed funds
used during construction (626)
------------------ -------- ------- -------- --------
Total interest 2,320 434 25 316
------------------ -------- ------- -------- --------
Income after interest 2,835 (3,608) 356 (155) (1,507) 209,092
Preferred dividends of
subsidiaries
Minority interests
------------------ -------- ------- -------- --------
Net income $2,835 ($3,608) $356 ($155) ($1,507) $209,092
================== ======== ======= ======== ========
<PAGE>
Page 3C
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1996(IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS NEES
& ELIMINATIONS CONSOLIDATED
-------------- ------------
<S> <C> <C>
Operating revenue $1,498,585 $2,350,698
---------- ----------
Operating expenses
Fuel for generation 11,599 334,994
Purchased electric energy 1,464,741 509,400
Other operation 25,316 501,090
Maintenance 127,785
Depreciation and amortization (2,903) 246,379
Taxes, other than income
taxes (208) 143,733
Income taxes (1,643) 139,199
---------- ---------
Total operating expenses 1,496,902 2,002,580
---------- ----------
Operating income 1,683 348,118
Other income:
Allowance for equity funds
used during construction 114
Equity in income of
generating companies 38,820 10,334
Other income (expense), net 174,533 (8,166)
---------- ----------
Operating and other income 215,150 350,286
---------- ----------
Interest:
Interest on long-term debt (2) 110,479
Other interest 786 19,527
Allowance for borrowed funds
used during construction (1) (2,246)
---------- ----------
Total interest 783 127,760
---------- ----------
Income after interest 214,367 222,526
Preferred dividends of
subsidiaries 1,368 6,463
Minority interests (7,127) 7,127
---------- ----------
Net income $220,126 $208,936
========== ==========
</TABLE>
<PAGE>
<TABLE>
Page 4A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
INCOME STATEMENT ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income:
Operating revenue $141 $4,980 $1,160 $1,458,714 $19,003 $7,580 $6,248
Allowance for equity funds
used during construction
Equity in income of
generating companies
Other income/(expense), net 4 15 14 10 (1,058) 176 112 61
Minority interests 4,427 2,700
------- ---------- -------- ---------- ------- ------ ------- ------
Expenses:
Fuel for generation (10,074) 21,648
Purchased electric energy 47,136 1,120,461 296,845
Other operation 24 1,365 38 20,630 (1,009) 659 3,427
Depreciation and
amotization (2,903)
Taxes, other than income (208)
Income taxes (1,021)
Interest on long-term debt 1 (3)
Other interest 108 225 222 221 3
Allowance for borrowed
funds used during
construction (1)
Preferred dividends of
subsidiaries 1,368
------- ---------- -------- ---------- ------- ------ ------- ------
Total ($47,123) ($1,117,056) ($285,857) $1,414,858 $23,086 $11,524 $112 $5,581
======= ========== ======== ========== ======= ====== ======= ======
<PAGE>
Page 4B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
INCOME STATEMENT ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
NERC NEERI NANTUCKET GS EN NEES EN PARENT
---- ----- --------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Income:
Operating revenue $758
Allowance for equity
funds used during
construction 114
Equity in income of
generating companies (1,534) 40,354
Other income/(expense), net 49 (97) 912 174,336
Minority interests
---------- -------- ---------- ------- ------ -------
Expenses:
Fuel for generation 25
Purchased electric energy 300
Other operation 181 1
Depreciation and
amortization
Taxes, other than income
Income taxes (622)
Interest on long-term debt
Other interest 6
Allowance for borrowed
funds used during
construction
Preferred dividends of
subsidiaries
---------- -------- ---------- ------- ------ --------
Total $49 $0 $563 ($301) $0 $214,690
========== ======== ========== ======= ====== =======
<PAGE>
Page 4C
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
INCOME STATEMENT ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS
& ELIMINATIONS
--------------
<S> <C>
Income:
Operating revenue 1,498,585
Allowance for equity funds
used during construction 114
Equity in income of
generating companies 38,820
Other income/(expense), net 174,533
Minority interests 7,127
----------
Expenses:
Fuel for generation 11,599
Purchased electric energy 1,464,741
Other operation 25,316
Depreciation and
amortization (2,903)
Taxes, other than income (208)
Income taxes (1,643)
Interest on long-term debt (2)
Other interest 786
Allowance for borrowed funds
used during construction (1)
Preferred dividends of
subsidiaries 1,368
----------
Total $220,126
==========
</TABLE>
<PAGE>
<TABLE>
Page 5A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retained earnings at
beginning of year $8,998 $150,308 $108,227 $385,309($23,302) $165 $2,900 $181
Additions:
Net income after preferred
dividends of subsidiaries 1,704 34,812 20,811 149,909 (1,405) 1,839 8,932 5,447
Deductions:
Common dividends 1,057 19,184 9,060 134,158 165 11,600 4,767
Premium on redemption of
common stock 450 13
------- -------- -------- ----------------- ------ ------- -------
Retained earnings at end
of year $9,645 $165,936 $119,978 $400,610($24,707) $1,839 $232 $848
======= ======== ======== ================= ====== ======= =======
<PAGE>
Page 5B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
NERC NEERI NANTUCKET GS EN NEES EN PARENT
---- ----- --------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Retained earnings at
beginning of year $102 ($1,713) $833,576
Additions:
Net income after preferred
dividends of subsidiaries 2,835 (3,608) 356 (155) (1,507) 209,092
Deductions:
Common dividends 2,000 153,328
Premium on redemption of
common stock
------- -------- ----------------- -------- --------
Retained earnings at end
of year $937 ($5,321) $356 ($155) ($1,507) $889,340
======= ======== ================= ======== ========
<PAGE>
Page 5C
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS NEES
& ELIMINATIONS CONSOLIDATED
-------------- ------------
<S> <C> <C>
Retained earnings at
beginning of year $633,222 $831,529
Additions:
Net income after preferred
dividends of subsidiaries 220,126 208,936
Deductions:
Common dividends 182,146 153,173
Premium on redemption of
common stock 463
-------- ---------
Retained earnings at end
of year $670,739 $887,292
========= ========
</TABLE>
<PAGE>
<TABLE>
Page 6A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF RETAINED EARNINGS - ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retained earnings at
beginning of year $8,998 $151,124 $108,588 $386,179($23,302) $165 $2,900 $181
Additions:
Net income after preferred
dividends of subsidiaries 1,704 34,812 20,811 149,909 (1,405) 1,839 8,932 5,447
Deductions:
Common dividends 1,057 19,184 9,060 134,158 165 11,600 4,767
Premium on redemption of
common stock 450 13
------- -------- -------- ----------------- ------ ------- -------
Retained earnings at end
of year $9,645 $166,752 $120,339 $401,480($24,707) $1,839 $232 $848
======= ======== ======== ================= ====== ======= =======
<PAGE>
Page 6B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF RETAINED EARNINGS - ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
NERC NEERI NANTUCKET GS EN NEES EN PARENT
---- ----- --------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Retained earnings at
beginning of year $102 ($1,713)
Additions:
Net income after preferred
dividends of subsidiaries 2,835 (3,608) 356 (155) (1,507) 156
Deductions:
Common dividends 1,999 156
Premium on redemption of
common stock
------- -------- -------- ------ -------- --------
Retained earnings at end
of year $938 ($5,321) $356 ($155) ($1,507) $0
======= ======== ======== ====== ======== ========
<PAGE>
Page 6C
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF RETAINED EARNINGS - ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS
& ELIMINATIONS
--------------
<S> <C>
Retained earnings at
beginning of year $633,222
Additions:
Net income after preferred
dividends of subsidiaries 220,126
Deductions:
Common dividends 182,146
Premium on redemption of
common stock 463
--------
Retained earnings at end
of year $670,739
========
</TABLE>
<PAGE>
<TABLE>
Page 7A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Activities:
Net Income $1,704 $37,926 $22,954 $152,483 ($1,405) $1,839 $8,932 $5,447
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Undistributed earnings of
subsidiaries
Depreciation and
amortization 2,309 47,357 27,899 108,339 46,261 8,884 5,880
Deferred income taxes and
investment tax credits-net 334 (7,850) 4,177 (7,458) (20,435) (4,663) 2,746 1,492
Allowance for funds used
during construction (27) (740) (263) (591)
Minority interests
Decrease (increase) in other
current assets 4 1,241 13,995 18,520 24,966 3,521 3,516 118
Increase (decrease) in
payables and other current
liabilities (423) 27,415 (11,361) (26,925) 2,231 (970) 673 385
Other, net (362) (2,430) 8,236 28,582 10,723 1 18
-------- --------- ------------------- ------------------ ----------------
Net cash provided by (used
in) operating activities $3,539 $102,919 $65,637 $272,950 $51,618 $10,450 $24,752 $13,340
-------- --------- ------------------- ------------------ ----------------
Investing Activities:
Plant expenditures,
excluding allowance for
funds used during
construction (3,576) (93,828) (52,574) (65,981)
Oil and gas exploration
and development (20,323)
Decrease (increase) in
other investments (76) (598) (181) (3,878) (2,721)
-------- --------- ------------------- ------------------ ----------------
Net cash provided by (used
in) investing activities ($3,652) ($94,426) ($52,755) ($69,859) ($20,323) ($2,721)
-------- --------- ------------------- ------------------ ----------------
<PAGE>
Page 7B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
NERC NEERI NANTUCKET GS EN NEES EN PARENT
---- ----- --------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Operating Activities:
Net Income $2,835 ($3,608) $356 ($156) ($1,509) $209,092
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Undistributed earnings of
subsidiaries (40,299)
Depreciation and
amortization 677
Deferred income taxes and
investment tax credits-net 90 (124) (60) 124
Allowance for funds used
during construction (740)
Minority interests
Decrease (increase) in other
current assets (159) (1,420) (11,354) (171) (2) (2,027)
Increase (decrease) in
payables and other current
liabilities (298) 563 1,825 (5) (987) 1,556
Other, net (35) 125 (513) 1,534 253
-------- --------- ------------------- ---------- --------
Net cash provided by (used
in) operating activities $2,433 ($4,464) ($9,809) ($332) ($964) $168,699
-------- --------- ------------------- ---------- --------
Investing Activities:
Plant expenditures,
excluding allowance for
funds used during
construction (17,906)
Oil and gas exploration
and development
Decrease (increase) in
other investments 1,328 (475) (3,250) (12,622)
-------- --------- ------------------- ---------- --------
Net cash provided by (used
in) investing activities $1,328 ($475) ($17,906) $0 ($3,250) ($12,622)
-------- --------- ------------------- ---------- --------
<PAGE>
Page 7C
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS NEES
& ELIMINATIONS CONSOLIDATED
-------------- ------------
<S> <C> <C>
Operating Activities:
Net Income $227,954 $208,936
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Undistributed earnings of
subsidiaries (40,299)
Depreciation and
amortization (2,902) 250,508
Deferred income taxes and
investment tax credits-net (1,299) (30,328)
Allowance for funds used
during construction (115) (2,246)
Minority interests (7,127) 7,127
Decrease (increase) in other
current assets 27,061 23,687
Increase (decrease) in
payables and other current
liabilities (30,752) 24,431
Other, net 5,677 40,455
---------- ----------
Net cash provided by (used
in) operating activities $178,198 $522,570
---------- ----------
Investing Activities:
Plant expenditures,
excluding allowance for
funds used during
construction 544 ($234,409)
Oil and gas exploration
and development 48 ($20,371)
Decrease (increase) in
other investments (12,164) ($10,309)
-------- ---------
Net cash provided by (used
in) investing activities ($11,572) ($265,089)
-------- ---------
</TABLE>
<PAGE>
<TABLE>
Page 7D
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Financing Activities:
Dividends paid to minority
interests
Dividends paid on common
shares (815) (13,188) (7,361) (138,995) (165) (12,883)(5,165)
Dividends paid on preferred
stock (3,114) (2,143) (2,574)
Preferred stock - retirements (20,900)
Long-term debt - issues 20,000 2,000 47,850
Long-term debt - retirements (1,000) (2,000) (57,850) (33,000) (6,960)(4,560)
Premium on reacquisition of
long-term debt
Capital contribution from
parent
Subordinated notes payable
to parent (net) 771
Changes in short-term debt 1,925 (11,675) (3,650)(31,550) (1,000) 1,000
Gain on redemption of
preferred stock 1,368
Return of capital to minority
interests and related
premium (3,296)
Repurchase of common shares
------- --------- -------- ------------------- ---------------- ---------
Net cash provided by (used
in) financing activities $110 ($7,977) ($13,154) ($202,651) ($32,229) ($165)($20,843) ($12,021)
------- --------- -------- ------------------- ---------------- ---------
Net increase (decrease) in
cash and cash equivalents ($3) $516 ($272) $440 ($934) $7,564 $3,909 $1,319
Cash and cash equivalents at
beginning of year 98 1,840 1,999 2,607 1,133 459 974 237
------- --------- -------- ------------------- ---------------- ---------
Cash and cash equivalents at
end of year $95 $2,356 $1,727 $3,047 $199 $8,023 $4,883 $1,556
======= ========= ======== =================== ================ =========
<PAGE>
Page 7E
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
NERC NEERI NANTUCKET GS EN NEES EN PARENT
---- ----- --------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Financing Activities:
Dividends paid to minority
interests
Dividends paid on common
shares (2,000) (153,915)
Dividends paid on preferred
stock
Preferred stock - retirements
Long-term debt - issues 28,000
Long-term debt - retirements (1,441)
Premium on reacquisition of
long-term debt
Capital contribution from
parent 85 5,050 355 4,505
Subordinated notes payable
to parent (net)
Changes in short-term debt (562)
Gain on edemption of
preferred stock
Return of capital to minority
interests and related
premium
Repurchase of common shares
-------- --------- ---------- ------ ------- -------
Net cash provided by (used
in) financing activities ($3,356) $5,050 $27,438 $355 $4,505 ($153,915)
-------- --------- ---------- ------- ------- -------
Net increase (decrease) in
cash and cash equivalents $405 $111 ($277) $23 $291 $2,162
Cash and cash equivalents at
beginning of year 411 70 909 3,801
-------- --------- ---------- ------- ------- -------
Cash and cash equivalents at
end of year $816 $181 $632 $23 $291 $5,963
======== ========= ========== ======= ======= =======
<PAGE>
Page 7F
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS NEES
& ELIMINATIONS CONSOLIDATED
-------------- ------------
<S> <C> <C>
Financing Activities:
Dividends paid to minority
interests 8,878 (8,878)
Dividends paid on common
shares (180,728) (153,759)
Dividends paid on preferred
stock (7,831)
Preferred stock - retirements (20,900)
Long-term debt - issues 97,850
Long-term debt - retirements (106,811)
Premium on reacquisition of
long-term debt
Capital contribution from
parent 9,995
Subordinated notes payable
to parent (net) 771
Changes in short-term debt 14,350 (59,862)
Gain on redemption of
Preferred stock 1,368
Return of capital to minority
interests and related
premium (1,663) (1,633)
Repurchase of common shares 2,075 (2,075)
---------- ----------
Net cash provided by (used
in) financing activities ($152,785) ($256,068)
---------- ----------
Net increase (decrease) in
cash and cash equivalents $13,841 $1,413
Cash and cash equivalents at
beginning of year 7,474 $7,064
---------- ----------
Cash and cash equivalents at
end of year $21,315 $8,477
========== ==========
</TABLE>
<PAGE>
<TABLE>
Page 8A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS - ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Activities:
Net income (loss) $1,704 $37,926 $22,954 $152,483 ($1,405) $1,839 $8,932 $5,447
Undistributed earnings
of subsidiaries
Depreciation and amortization (2,902)
Minority interests (4,427) (2,700)
Deferred income taxes and
investment tax credits-net 156 63 (1,188) 2,598 (2,463) (141) 1,059
Decrease (increase) in other
current assets 99 (2,363) 213 4,461 25,196 3,216 649 (22)
Increase (decrease) in
payables and other current
liabilities (520) (5,428) 1,943 (25,407) (45) (2,037) 56 31
Other, net 66 1,484 592 3,005 37
------- --------- -------- ---------- -------- -------- -------- --------
Net cash provided by (used
in) operating activities $1,505 $31,682 $24,514 $137,140 $18,381 $3,018 $5,069 $3,852
------- --------- -------- ---------- -------- -------- -------- --------
Investing Activities:
Plant expenditures,
excluding allowance for
funds used during
construction
Oil and gas exploration
and development 48
Decrease (increase) in
other investments (57) (170) (149) (115) (1,491)
------- --------- -------- ---------- -------- -------- -------- --------
Net cash provided by (used
in) investing activities ($57) ($170) ($149) ($115) $48 ($1,491) $0 $0
------- --------- -------- ---------- -------- -------- -------- --------
<PAGE>
Page 8B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS - ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
NERC NEERI NANTUCKET GS EN NEES EN PARENT
---- ----- --------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Operating Activities:
Net income (loss) $2,835 ($3,608) $356 ($156) ($1,509)
Undistributed earnings
of subsidiaries (40,299)
Depreciation and
amortization
Minority interests
Deferred income taxes and
investment tax credits-net (1,383)
Allowance for funds used
During construction (115)
Decrease (increase) in other
current assets (156) (379) (1,765) (2) (2,086)
Increase (decrease) in
payables and other current
liabilities 198 830 268 80 12 (733)
Other, net (94) 587
------- --------- --------- ------- ------ -------
Net cash provided by (used
in) operating activities $2,877 ($3,157) ($2,733) ($76) ($912)($43,118)
------- --------- --------- ------- ------- -------
Investing Activities:
Plant expenditures,
excluding allowance for
funds used during
construction 550 (6)
Oil and gas exploration
and development
Decrease (increase) in
other investments (55) (10,127)
------- --------- --------- ------- ------- -------
Net cash provided by (used
in) investing activities $0 $0 $495 $0 $0($10,133)
------- --------- --------- ------- ------- -------
<PAGE>
Page 8C
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS - ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS
& ELIMINATIONS
--------------
<S> <C>
Operating Activities:
Net income (loss) $227,954
Undistributed earnings
of subsidiaries (40,299)
Depreciation and
amortization (2,902)
Minority interests (7,127)
Deferred income taxes and
investment tax credits-net (1,299)
Allowance for funds used
during construction (115)
Decrease (increase) in other
current assets 27,061
Increase (decrease) in
payables and other current
liabilities (30,752)
Other, net 5,677
---------
Net cash provided by (used
in) operating activities $178,198
---------
Investing Activities:
Plant expenditures,
excluding allowance for
funds used during
construction 544
Oil and gas exploration
and development 48
Decrease (increase) in
other investments (12,164)
-------
Net cash provided by (used
in) investing activities ($11,572)
-------
</TABLE>
<PAGE>
<TABLE>
Page 8D
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS - ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Financing Activities:
Dividends paid to
minority interest 6,326 2,552
Dividends paid on common
shares (815) (13,188) (7,361) (138,995) (165)(12,883) (5,165)
Dividends paid on preferred
stock (3,114) (2,143) (2,574)
Capital contribution from
parent
Subordinated notes payable
to parent (net) 771
Changes in short-term debt 1,925 4,275 4,300 4,250
Gain on redemption of
preferred stock 1,368
Return of capital to
minority interests and
related premium
Repurchase of common shares 57 170 149 115 1,491
------- --------- -------- ------------------ ---------------- --------
Net cash provided by (used
in) financing activities $1,167 ($11,857) ($5,055) ($135,836) $771 $1,326($6,557) ($2,613)
------- --------- -------- ------------------ ---------------- --------
Net increase (decrease) in
cash and cash equivalents $2,615 $19,655 $19,310 $1,189 $19,200 $2,853($1,488) $1,239
------- --------- -------- ------------------ ---------------- --------
Cash and cash equivalents
at beginning of year 1,100 375 945 145
Cash and cash equivalents
at end of year $ 175 $7,975 $4,845 $1,445
======= ========= ======== ================== ================ ========
<PAGE>
Page 8E
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS - ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
NERC NEERI NANTUCKET GS EN NEES EN PARENT
---- ----- --------- ----- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Financing Activities:
Dividends paid to
minority interest
Dividends paid on common
shares (2,000) (156)
Dividends paid on preferred
stock
Capital contribution from
parent 85 5,050 355 4,505
Subordinated notes payable
to parent (net)
Changes in short-term debt (400)
Gain on redemption of
preferred stock
Return of capital to
minority interests and
related premium (1,663)
Repurchase of common shares 93
------------------ --------- ------- ------- -------
Net cash provided by (used
in) financing activities ($1,915) $5,050 ($400) $355 $4,505 ($1,726)
------------------ --------- ------- ------- -------
Net increase (decrease) in
cash and cash equivalents $962 $1,893 ($2,638) $279 $3,593 ($54,977)
------------------ --------- ------- ------- -------
Cash and cash equivalents
at beginning of year 400 4,509
Cash and cash equivalents
at end of year $ 800 $ 150 $ 5,925
================== ========= ======= ======= =======
<PAGE>
Page 8F
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS - ADJUSTMENTS AND ELIMINATIONS
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
(Continued)
TOTAL
ADJUSTMENTS
& ELIMINATIONS
--------------
<S> <C>
Financing Activities:
Dividends paid to
minority interest 8,878
Dividends paid on common
shares (180,728)
Dividends paid on preferred
stock (7,831)
Capital contribution from
parent 9,995
Subordinated notes payable
to parent (net) 771
Changes in short-term debt 14,350
Gain on redemption of preferred
stock 1,368
Return of capital to
minority interests and
related premium (1,663)
Repurchase of common shares 2,075
----------
Net cash provided by (used
in) financing activities ($152,785)
----------
Net increase (decrease) in
cash and cash equivalents $13,841
----------
Cash and cash equivalents
at beginning of year 7,474
Cash and cash equivalents
at end of year $ 21,315
=========
</TABLE>
<PAGE>
Exhibit B.4.b
As Amended March 15, 1995
BY-LAWS
OF
MASSACHUSETTS ELECTRIC COMPANY
<PAGE>
ARTICLE I.
PLACE OF STOCKHOLDERS' MEETINGS.
All meetings of the stockholders shall be held in Massachusetts either
at the principal office of the corporation or at such other place as is stated
in the call.
ARTICLE II.
ANNUAL MEETING.
The annual meeting of the stockholders shall be held at the principal
office of the corporation or such other place in Massachusetts as is stated in
the call of the meeting on the third Wednesday of March in each year, if it be
not a legal holiday, and if it be a legal holiday, then on the next succeeding
day not a legal holiday. Purposes for which the annual meeting is to be held
additional to those prescribed by law, by the agreement of association and by
these by-laws may be specified by the board of directors or by writing signed
by the president or by a majority of the directors or by stockholders who hold
at least one-tenth of the aggregate par value of the capital stock generally
entitled to vote. If such annual meeting is omitted on the day herein
provided therefor, a special meeting may be held in place thereof, and any
business transacted or elections held at such meeting shall have the same
effect as if transacted or held at the annual meeting.
ARTICLE III.
SPECIAL MEETINGS OF STOCKHOLDERS.
Except as otherwise provided in Section 4 of Article XVIII, special
meetings of the stockholders may be called by the president or by a majority
of the directors, and shall be called by the clerk, or in the case of the
death, absence, incapacity or refusal of the clerk by any other officer of the
corporation, upon written application of stockholders who hold at least one-
tenth of the aggregate par value of the capital stock entitled to vote at the
meeting, stating the time, place and purpose of the meeting.
ARTICLE IV.
NOTICE OF STOCKHOLDERS' MEETINGS.
Except as otherwise provided in Section 4 of Article XVIII, a written or
printed notice of each meeting of stockholders, stating the place, day and
hour thereof and the purpose for which the meeting is called, shall be given
by the clerk, at least seven days before such meeting, to each stockholder
entitled to vote thereat, by leaving such notice with him or at his residence
or usual place of business, or by mailing it, postage prepaid and addressed to
such stockholder at his address as it appears upon the books of the
corporation. In the absence or disability of the clerk, such notice may be
given by a person designated either by the clerk or by the person or persons
calling the meeting or by the board of directors. No notice of the time,
place or purpose of any regular or special meeting of the stockholders shall
be required if every stockholder entitled to notice thereof is present in
person or is represented at the meeting by proxy or if every such stockholder,
or his attorney thereunto authorized, by a writing which is filed with the
records of the meeting, waives such notice.
<PAGE>
ARTICLE V.
QUORUM OF STOCKHOLDERS.
Except as otherwise provided in Section 4 of Article XVIII, at any
meeting of the stockholders, a majority in interest of all stock issued and
outstanding and entitled to vote upon a question to be considered at the
meeting shall constitute a quorum for the consideration of such question, but
a less interest may adjourn any meeting from time to time, and the meeting may
be held as adjourned without further notice. When a quorum is present at any
meeting, a majority of the stock represented thereat and entitled to vote
shall, except where a larger vote is required by law, by the agreement of
association or by these by-laws, decide any question brought before such
meeting.
ARTICLE VI.
PROXIES AND VOTING.
Stockholders who are entitled to vote shall have one vote for each share
of stock owned by them. Stockholders may vote either in person or by proxy in
writing dated not more than six (6) months before the meeting named therein,
which shall be filed with the clerk of the meeting before being voted. Such
proxies shall entitle the holders thereof to vote at any adjournment of such
meeting but shall not be valid after the final adjournment of such meeting.
ARTICLE VII.
BOARD OF DIRECTORS.
A board of not less than three directors shall be chosen by ballot at
the annual meeting of the stockholders or at the special meeting held in place
thereof, or as provided in Section 4 of Article XVIII. The number of
directors for each corporate year shall be fixed by vote at the meeting at
which they are elected but the stockholders may, at any special meeting held
for the purpose during any such year, increase or decrease (within the limit
above specified) the number of directors as thus fixed, and elect new
directors to complete the number so fixed, or remove directors to reduce the
number of directors to the number so fixed; provided, however, that while
there are four (4) full quarterly dividends in default on the Preferred Stock
and the Preferred Stock-Cumulative the number of such directors shall be fixed
in accordance with Section 4 of Article XVIII. No director need be a
stockholder.
Subject to law, to the agreement of association, to the terms of the
Preferred Stock and the Preferred Stock-Cumulative and to the other provisions
of these by-laws, each director shall hold office until the next annual
meeting of the stockholders and until his successor is chosen and qualified.
ARTICLE VIII.
POWERS OF DIRECTORS.
The board of directors shall have, and may exercise, all the powers of
the corporation, except such as are conferred upon the stockholders by law, by
the agreement of association and by these by-laws.
ARTICLE IX.
MEETINGS OF THE BOARD OF DIRECTORS.
Regular meetings of the board of directors may be held at such places
and at such times as the board may by vote from time to time determine, and if
so determined, no notice thereof need be given. A regular meeting of the
board of directors may be held without notice immediately after, and at the
<PAGE>
same place as the annual meeting of the stockholders, or the special meeting
of the stockholders held in place of such annual meeting.
Special meetings of the board of directors may be held at any time and
at any place when called by the president, treasurer, or two or more
directors, reasonable notice thereof being given to each director, or at any
time without call or formal notice, provided all the directors are present or
waive notice thereof by a writing which is filed with the records of the
meeting. In any case it shall be deemed sufficient notice to a director to
send notice by mail or telegram at least forty-eight hours before the meeting
addressed to him at his usual or last known business or residence address.
ARTICLE X.
QUORUM OF THE BOARD OF DIRECTORS.
A majority of the board of directors shall constitute a quorum for the
transaction of business, but a less number may adjourn any meeting from time
to time, and the meeting may be held as adjourned without further notice.
Except as otherwise provided, when a quorum is present at any meeting, a
majority of the members in attendance thereat shall decide any question
brought before such meeting.
ARTICLE XI.
VACANCIES IN BOARD OF DIRECTORS.
If the office of any director, one or more, elected by the stockholders
generally entitled to vote, becomes vacant by reason of death, resignation,
removal, disqualification or otherwise, the remaining directors so elected,
though less than a quorum, may, unless such vacancy shall have been filled by
the stockholders generally entitled to vote, choose by a majority vote of
their entire number, a successor or successors, who shall hold office for the
unexpired term. Any vacancy in the office of a director elected by holders of
the Preferred Stock and the Preferred Stock-Cumulative shall be filled as
provided in Section 4 of Article XVIII.
ARTICLE XII.
OFFICERS AND AGENTS.
The officers shall be a president, a clerk, a treasurer and such other
officers and agents as the board of directors may in their discretion appoint.
The treasurer and the clerk shall be chosen by ballot at the annual meeting of
the stockholders. The president shall be elected annually by the board of
directors after its election by the stockholders. The president shall be a
director. The clerk shall be a resident of Massachusetts. So far as is
permitted by law, any two or more offices may be filled by the same person.
Subject to law, to the agreement of association and to the other provisions of
these by-laws, the treasurer and clerk shall each hold office until the next
annual meeting of stockholders and until his successor is chosen and
qualified, the president shall hold office until the first meeting of
directors after the next annual meeting of stockholders and until his
successor is chosen and qualified and the other officers and agents shall hold
office during the pleasure of the board of directors or for such term as the
board of directors shall prescribe. Each officer shall, subject to these by-
laws, have in addition to the duties and powers herein set forth such duties
and powers as are commonly incident to his office, and such duties and powers
as the board of directors shall from time to time designate.
ARTICLE XIII.
PRESIDENT AND VICE PRESIDENTS.
Except as otherwise determined by the board of directors the president
shall be the chief executive officer of the corporation and shall preside at
all meetings of the stockholders and of the board of directors at which he is
present. The president shall have custody of the treasurer's bond.
<PAGE>
Any vice president shall have such powers as the board of directors
shall from time to time designate.
ARTICLE XIV.
CLERK.
The clerk shall keep an accurate record of the proceedings of all
meetings of the stockholders in books provided for the purpose, which books
shall be kept at the principal office of the corporation and shall be open at
all reasonable times to the inspection of any stockholder. In the absence of
the clerk or an assistant clerk at any such meeting a temporary clerk shall be
chosen, who shall record the proceedings of such meeting in the aforesaid
books. The clerk, any assistant clerk and such temporary clerk shall be
sworn.
The clerk or an assistant clerk shall also keep accurate minutes of all
meetings of the board of directors and in their absence from any such meeting
a temporary clerk shall be chosen, who shall be sworn and shall record the
proceedings of such meeting.
ARTICLE XV.
TREASURER.
The treasurer shall, subject to the direction and under the supervision
of the board of directors, have general charge of the financial concerns of
the corporation and the care and custody of the funds and valuable papers of
the corporation, except his own bond, and he shall have power to endorse for
deposit or collection all notes, checks, drafts, etc., payable to the
corporation or its order, and to accept drafts on behalf of the corporation.
He shall keep, or cause to be kept, accurate books of account which shall be
the property of the corporation. If required by the board of directors he
shall give bond for the faithful performance of his duty in such form, in such
sum, and with such sureties as the board of directors shall require.
Any assistant treasurer shall have such powers as the board of directors
shall from time to time designate.
ARTICLE XVI.
REMOVALS.
The stockholders generally entitled to vote may, at any special meeting
called for the purpose, by vote of a majority of the capital stock issued and
outstanding and generally entitled to vote, remove from office the treasurer,
clerk or any director elected by the stockholders generally entitled to vote,
and elect his successor. The board of directors may likewise, by vote of a
majority of their entire number, remove from office any officer or agent of
the corporation; provided, however, that the board of directors may remove the
treasurer or clerk for cause only.
ARTICLE XVII.
VACANCIES.
If the office of any officer or agent, one or more, becomes vacant by
reason of death, resignation, removal, disqualification or otherwise, the
directors may, unless such vacancy, if in the office of the treasurer or
clerk, shall have been filled by the stockholders generally entitled to vote,
choose by a majority vote of their entire number, a successor or successors,
who shall hold office for the unexpired term, subject to the provisions of
Article XVI.
<PAGE>
ARTICLE XVIII.
CLASSES OF STOCK.
The capital stock of the corporation shall consist of Common Stock of
the par value of $25 a share and two classes of preferred stock, Preferred
Stock of the par value of $100 a share and Preferred Stock - Cumulative of the
par value of $25 a share, each having respectively preferences, voting rights,
restrictions and qualifications as follows:
SECTION 1. Common Stock.
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Each share of the Common Stock shall be equal to every other share
thereof in every respect. Except as required by law and except as hereafter
specifically provided in Section 2 of this Article XVIII, the holders of
Common Stock shall have the exclusive right to vote.
SECTION 2. Preferred Stock.
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A. The shares of Preferred Stock may be issued, as the board of
directors may determine, in one or more series each bearing such designation
as to distinguish the shares thereof from the shares of all other series and
classes of capital stock of the corporation. All shares of Preferred Stock,
irrespective of series, shall constitute one and the same class of stock and
shall be of equal rank as to dividends and assets with each other and with the
Preferred Stock - Cumulative. Subject to any applicable provisions of law,
the shares of Preferred Stock of different series may vary, as determined by
the board of directors and, if required by law, by the stockholders, as to the
following rights and preferences:
(1) The annual dividend rate, or method of calculation thereof,
and the date from which the dividends on shares issued prior to the
record date for the first dividend shall be cumulative and the date for
the first dividend;
(2) The redemption price or prices, or method of calculation
thereof, and any restriction on the exercise by the corporation of its
right to redeem such series;
(3) The amount or amounts payable upon any liquidation or
dissolution or winding up;
(4) The terms and amount of any sinking fund provided for the
purchase or redemption of shares; and
(5) The conversion, participation or other special rights.
B. Before any dividends on, or any distribution of assets (by
purchase of shares or otherwise) to holders of, the Common Stock or any other
stock ranking junior to the Preferred Stock as to dividends (both hereinafter
in this subsection B called "junior stock") shall be paid or set apart for
payment or otherwise provided for, the holders of the Preferred Stock shall be
entitled to receive, but only when and as declared by the board of directors,
out of any funds legally available for the declaration of dividends,
cumulative dividends at the annual dividend rate per share fixed for the
particular series payable quarterly on the first days of February, May, August
and November in each year commencing on a date specified for the first
dividend date as herein provided to stockholders of record on the respective
dates, not exceeding thirty (30) days preceding such dividend payment dates,
fixed in advance for the purpose by the board of directors prior to the
payment of each particular dividend. No dividends shall be declared on any
series of the Preferred Stock or on any other class of preferred stock ranking
on a parity therewith, as to dividends, in respect of any quarter-yearly
dividend period, unless there shall likewise be declared on all shares of all
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series of the Preferred Stock and of any other class of such parity preferred
stock at the time outstanding, like proportionate dividends, ratably, in
proportion to the respective annual dividend rates fixed therefor, in respect
of the same quarter-yearly dividend period, to the extent that such shares are
entitled to receive dividends for such quarter-yearly dividend period. The
dividends on shares of all series of the Preferred Stock shall be cumulative.
In the case of all shares of each particular series, the dividends on shares
of such series shall be cumulative:
(1) On shares issued prior to the record date for the first
dividend on the shares of such series, from the date for the particular
series fixed therefor;
(2) On shares issued after a record date for a dividend, but
prior to the dividend payment date for such dividend, from said dividend
payment; and
(3) Otherwise from the quarter-yearly dividend payment date next
preceding the date of issue of such shares;
so that dividends accrued on all outstanding shares of Preferred Stock to the
last preceding quarterly dividend payment shall have been paid in full or
declared and set apart for payment before there shall be any dividend or
distribution on, or purchase of, junior stock. The holders of the Preferred
Stock shall not be entitled to receive any dividends thereon other than the
dividends referred to in this subsection B and other than distributions
provided for in subsection D below. Whenever dividends accrued on all
outstanding shares of Preferred Stock to the last preceding quarterly dividend
payment date shall have been paid in full or declared and set apart for
payment, and subject to the limitations set forth in subsection H below and,
when applicable, in subsection E(2)(i) of Section 4 of this Article XVIII, the
board of directors may, without waiting for the expiration of the current
dividend period for the Preferred Stock, declare and pay dividends on any
junior stock out of funds legally available therefor.
As used in this Section 2, the expression "dividends accrued" shall mean
the sum of amounts with respect to all shares of Preferred Stock then
outstanding, which as to each share shall be an amount computed at the rate
per annum of the par value thereof fixed for the particular series from the
date from which dividends on such share become cumulative to the date with
reference to which the expression is used, irrespective of whether such amount
shall have been declared as dividends or there shall have existed any funds
legally available for the payment thereof, less the aggregate of all dividends
paid or declared payable on or before said last mentioned date and set aside
for such payment on such share.
C. The corporation, pursuant to action of its board of directors or
as provided in subsection A(11) of Section 4 of this Article XVIII, may redeem
the whole or any part of any series of the Preferred Stock at the time
outstanding, at any time or from time to time, by paying in cash as herein
provided the redemption price of the shares of the particular series fixed
therefor, together with dividends accrued to the date fixed for such
redemption, and by mailing, postage prepaid, at least thirty (30) days and not
more than ninety (90) days prior to the date fixed for said redemption a
notice specifying said redemption date to the holders of record of the
Preferred Stock to be redeemed, at their respective addresses as the same
shall appear on the books of the corporation; provided, however, that the
exercise by the corporation of its right to redeem shares of any particular
series may be subject to such restrictions as are determined for said series.
In case of the redemption of a part only of any series of the Preferred Stock
at the time outstanding, the corporation shall select by lot in such manner as
the board of directors determines, the shares so to be redeemed. If such
notice of redemption shall have been so mailed, and if on or before the
redemption date specified in such notice all funds necessary for such
redemption shall have been set aside by the corporation, so as to be and
continue to be available therefor, then, on and after said redemption date,
notwithstanding that any certificate for the shares of the Preferred Stock so
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called for redemption shall not have been surrendered for cancellation, the
shares represented thereby shall no longer be deemed outstanding, the right to
receive dividends thereon shall cease to accrue, and all rights of the holders
thereof shall forthwith cease and terminate, except only the right of the
holders thereof to receive the amount payable upon redemption thereof, but
without interest; provided, however, that if, after mailing said notice as
aforesaid and prior to the date of redemption specified in such notice, said
funds shall be set aside by deposit in trust, for the account of the holders
of the Preferred Stock to be redeemed, with a bank or trust company in good
standing, organized under the laws of the United States of America or The
Commonwealth of Massachusetts, having a capital, undivided profits and surplus
aggregating at least $5,000,000, thereupon all shares of the Preferred Stock
with respect to which such deposit shall have been made shall no longer be
deemed to be outstanding, and all rights with respect to such shares of
Preferred Stock shall forthwith upon such deposit in trust cease and
terminate, except only the right of the holders thereof to receive from such
deposit the amount payable upon the redemption but without interest. In case
the holders of the Preferred Stock which shall have been redeemed shall not
within four years of the date of redemption thereof claim any amount so
deposited in trust for the redemption of such shares, such bank or trust
company shall, upon demand, pay over to the corporation any such unclaimed
amount so deposited with it and shall thereupon be relieved of all
responsibility in respect thereof, and the corporation shall not be required
to hold the amount so paid over to it separate and apart from its other funds,
and thereafter the holders of such shares of Preferred Stock shall look only
to the corporation for payment of the redemption price thereof, but without
interest. If there are any dividends accrued to the last preceding quarterly
dividend payment date or dates on the outstanding Preferred Stock or any other
class of preferred stock ranking on a parity therewith as to assets, no
Preferred Stock or such parity stock shall be redeemed, purchased or otherwise
acquired by the corporation unless all series of Preferred Stock and such
parity stock which are redeemable shall be redeemed and unless an offer is
made to (a) purchase all Preferred Stock and such parity stock of any series
which is not redeemable at the time under limited restrictions then applicable
thereto at a price equal to the then redemption price for such series if such
restrictions were not applicable and (b) to purchase all Preferred Stock and
such parity stock of any series which is not redeemable at the time at a price
equal to the highest then redemption price on any outstanding shares of
Preferred Stock and such parity stock, after giving effect to the differences
in par value among classes of preferred stock, or unless a partial redemption
or any purchase or other acquisition shall have been ordered, approved or
permitted under the Public Utility Holding Company Act of 1935. All stock
redeemed or purchased under the provisions of this subsection C shall be
retired.
D. In the event of any liquidation, dissolution or winding up
(whether voluntarily or involuntarily) of the affairs of the corporation or
any distribution of its capital, then before any distribution shall be made to
the holders of Common Stock or any other stock ranking junior to the Preferred
Stock as to assets, the holders of each series of the Preferred Stock at the
time outstanding shall be entitled to be paid in cash the amount for the
particular series fixed therefor, together in each case with dividends accrued
thereon to the date fixed for payment of such distributive amounts, and no
more. No payments on account of such distributive amounts shall be made to
the holders of any series of the Preferred Stock or any other class of
preferred stock ranking on a parity therewith, as to assets, unless there
shall likewise be paid at the same time to the holders of each other series of
the Preferred Stock or such parity stock like proportionate distributive
amounts, ratably, in proportion to the full distributive amounts to which they
are respectively entitled. After such payment to the holders of Preferred
Stock or such parity stock, the remaining assets and funds of the corporation
shall be divided and distributed among the holders of Common Stock or any
other stock ranking junior to the Preferred Stock as to assets then
outstanding according to their respective rights. Neither the consolidation
nor the merger of the corporation with or into any other corporation shall be
deemed to be a liquidation, dissolution or winding up of the corporation.
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E. Except as required by law and except as hereafter specifically
provided in this Section 4 of this Article XVIII, the holders of Preferred
Stock shall have no right to vote.
F. Except as otherwise expressly provided by law, no holder of
Preferred Stock shall be entitled as such as a matter of right to subscribe
for or purchase any part of any new or additional issue of stock or warrant
carrying rights to stock, or securities convertible into stock, of any class
whatever, whether now or hereafter authorized, and whether issued for cash,
property, services or otherwise. If it is expressly required by law that such
new or additional issue be offered proportionately to the stockholders, then,
unless otherwise provided by law, the holders of all classes of preferred
stock only shall be entitled to subscribe for new or additional preferred
stock of any class and the holders of common stock only shall be entitled to
subscribe for new or additional common stock; and notice of such increase as
required by law need be given and the new shares need be offered
proportionately only to the stockholders who are so entitled to subscribe.
G. Subject to the limitations, if any, contained in Sections 4 and 5
of this Article XVIII, the corporation may from time to time issue additional
capital stock divided into classes with such preferences as to dividends,
voting power and other incidents as may be determined in accordance with
applicable provisions of law and terms of outstanding capital stock. Without
limiting the generality of the foregoing, any such additional capital stock
may be an additional series of Preferred Stock or additional shares of the
initial or any other series of Preferred Stock.
H. So long as any shares of the Preferred Stock of any series are
outstanding, the payment of dividends on Common Stock or on any other stock of
the corporation ranking junior to the Preferred Stock as to dividends or
assets (other than (i) dividends payable in stock ranking junior to the
Preferred Stock as to dividends and assets or (ii) dividends paid in cash if
immediately thereafter there shall be paid to the corporation in cash an
amount equal to such dividends for shares of or as a capital contribution with
respect to stock ranking junior to the Preferred Stock as to dividends or
assets) and the making of any distribution of assets to holders of stock
ranking junior to the Preferred Stock as to dividends or assets by purchase of
shares or otherwise (each of such actions being herein embraced within the
term "payment of junior stock dividends") shall be subject to the following
limitations:
(1) If and so long as the junior stock equity is, or as a result
of the proposed payment would become, less than twenty per cent (20%) of
total capitalization the payment of junior stock dividends, including
the proposed payment, during the twelve months ending with the last day
of the month in which the proposed payment is to be made shall not
exceed fifty per cent (50%) of the net income of the corporation
available for the payment of dividends on the stock ranking junior to
the Preferred Stock as to dividends and assets for the twelve full
calendar months immediately preceding the calendar month in which such
dividend is declared; and
(2) If and so long as the junior stock equity is, or as a result
of the proposed payment would become, less than twenty-five per cent
(25%) but is twenty per cent (20%) or more of total capitalization the
payment of junior stock dividends, including the proposed payment,
during the twelve months ending with the last day of the month in which
the proposed payment is to be made shall not exceed seventy-five per
cent (75%) of the net income of the corporation available for the
payment of dividends on the stock ranking junior to the Preferred Stock
as to dividends and assets for the twelve full calendar months
immediately preceding the calendar month in which such dividend is
declared.
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For the purposes of this subsection H "net income" shall be determined
in accordance with generally accepted accounting principles, provided,
however, that the amount deducted for depreciation shall be an amount computed
in accordance with clause (c) of Section 4.E. hereof.
The term "junior stock equity" is defined in subsection E(2)(i) of
Section 4 of this Article XVIII. The term "total capitalization" as used in
this subsection H means the aggregate of (x) the junior stock equity, (y) the
par value of, or stated capital represented by, the outstanding shares of
Preferred Stock and any other stock ranking prior thereto or on a parity
therewith as to dividends or assets, and (z) the principal amount of all
outstanding indebtedness of the corporation represented by bonds, notes and
other evidences of indebtedness maturing by their terms more than one year
from the date of issue thereof.
I. No stockholder, director, officer or agent of the corporation
shall be held individually responsible for any action taken in good faith
though subsequently adjudged to be in violation of this Section 2.
J. The shares of Preferred Stock from time to time duly authorized
may be issued for such consideration as may be fixed from time to time either
by the board of directors or as otherwise provided by law. Any and all shares
of Preferred Stock upon receipt by the corporation of the consideration so
fixed shall be deemed fully paid stock and shall not be liable to any further
call or assessment thereon.
K. Every holder of Preferred Stock of the corporation by becoming
such shall be held to have consented to all of these provisions and to have
agreed to be bound thereby and to have waived to the full extent permitted by
law any right such holder may have either now or at any time in the future
contrary to these provisions.
SECTION 3. Preferred Stock - Cumulative.
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A. The shares of Preferred Stock - Cumulative may be issued, as the
board of directors may determine, in one or more series each bearing such
designation as to distinguish the shares thereof from the shares of all other
series and classes of capital stock of the corporation. All shares of
Preferred Stock - Cumulative, irrespective of series, shall constitute one and
the same class of stock and shall be of equal rank as to dividends and assets
with each other and with the Preferred Stock. Subject to any applicable
provisions of law, the shares of Preferred Stock - Cumulative of different
series may vary, as determined by the board of directors and, if required by
law, by the stockholders, as to the following rights and preferences:
(1) The annual dividend rate, or method of calculation thereof,
and the date from which the dividends on shares issued prior to the
record date for the first dividend shall be cumulative and the date for
the first dividend;
(2) The redemption price or prices, or method of calculation
thereof, and any restriction on the exercise by the corporation of its
right to redeem such series;
(3) The amount or amounts payable upon any liquidation or
dissolution or winding up;
(4) The terms and amount of any sinking fund provided for the
purchase or redemption of shares; and
(5) The conversion, participation or other special rights.
B. Before any dividends on, or any distribution of assets (by
purchase of shares or otherwise) to holders of, the Common Stock or any other
stock ranking junior to the Preferred Stock - Cumulative as to dividends (both
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hereinafter in this subsection B called "junior stock") shall be paid or set
apart for payment or otherwise provided for, the holders of the Preferred
Stock - Cumulative shall be entitled to receive, but only when and as declared
by the board of directors, out of any funds legally available for the
declaration of dividends, cumulative dividends at the annual dividend rate per
share fixed for the particular series payable quarterly on the first days of
February, May, August and November in each year commencing on a date specified
for the first dividend date as herein provided to stockholders of record on
the respective dates, not exceeding thirty (30) days preceding such dividend
payment dates, fixed in advance for the purpose by the board of directors
prior to the payment of each particular dividend. No dividends shall be
declared on any series of the Preferred Stock - Cumulative or on any other
class of preferred stock ranking on a parity therewith, as to dividends, in
respect of any quarter-yearly dividend period, unless there shall likewise be
declared on all shares of all series of the Preferred Stock - Cumulative and
of any other class of such parity preferred stock at the time outstanding,
like proportionate dividends, ratably, in proportion to the respective annual
dividend rates fixed therefor, in respect of the same quarter-yearly dividend
period, to the extent that such shares are entitled to receive dividends for
such quarter-yearly dividend period. The dividends on shares of all series of
the Preferred Stock - Cumulative shall be cumulative. In the case of all
shares of each particular series, the dividends on shares of such series shall
be cumulative:
(1) On shares issued prior to the record date for the first
dividend on the shares of such series, from the date for the particular
series fixed therefor;
(2) On shares issued after a record date for a dividend, but
prior to the dividend payment date for such dividend, from said dividend
payment; and
(3) Otherwise from the quarter-yearly dividend payment date next
preceding the date of issue of such shares;
so that dividends accrued on all outstanding shares of Preferred Stock -
Cumulative to the last preceding quarterly dividend payment shall have been
paid in full or declared and set apart for payment before there shall be any
dividend or distribution on, or purchase of, junior stock. The holders of the
Preferred Stock - Cumulative shall not be entitled to receive any dividends
thereon other than the dividends referred to in this subsection B and other
than distributions provided for in subsection D below. Whenever dividends
accrued on all outstanding shares of Preferred Stock - Cumulative to the last
preceding quarterly dividend payment date shall have been paid in full or
declared and set apart for payment, and subject to the limitations set forth
in subsection H below and, when applicable, in subsection E(2)(i) of Section 4
of this Article XVIII, the board of directors may, without waiting for the
expiration of the current dividend period for the Preferred Stock -
Cumulative, declare and pay dividends on any junior stock out of funds legally
available therefor.
As used in this Section 3, the expression "dividends accrued" shall mean
the sum of amounts with respect to all shares of Preferred Stock - Cumulative
then outstanding, which as to each share shall be an amount computed at the
rate per annum of the par value thereof fixed for the particular series from
the date from which dividends on such share become cumulative to the date with
reference to which the expression is used, irrespective of whether such amount
shall have been declared as dividends or there shall have existed any funds
legally available for the payment thereof, less the aggregate of all dividends
paid or declared payable on or before said last mentioned date and set aside
for such payment on such share.
C. The corporation, pursuant to action of its board of directors or
as provided in subsection A(11) of Section 4 of this Article XVIII, may redeem
the whole or any part of any series of the Preferred Stock - Cumulative at the
time outstanding, at any time or from time to time, by paying in cash as
herein provided the redemption price of the shares of the particular series
<PAGE>
fixed therefor, together with dividends accrued to the date fixed for such
redemption, and by mailing, postage prepaid, at least thirty (30) days and not
more than ninety (90) days prior to the date fixed for said redemption a
notice specifying said redemption date to the holders of record of the
Preferred Stock - Cumulative to be redeemed, at their respective addresses as
the same shall appear on the books of the corporation; provided, however, that
the exercise by the corporation of its right to redeem shares of any
particular series may be subject to such restrictions as are determined for
said series. In case of the redemption of a part only of any series of the
Preferred Stock - Cumulative at the time outstanding, the corporation shall
select by lot in such manner as the board of directors determines, the shares
so to be redeemed. If such notice of redemption shall have been so mailed,
and if on or before the redemption date specified in such notice all funds
necessary for such redemption shall have been set aside by the corporation, so
as to be and continue to be available therefor, then, on and after said
redemption date, notwithstanding that any certificate for the shares of the
Preferred Stock - Cumulative so called for redemption shall not have been
surrendered for cancellation, the shares represented thereby shall no longer
be deemed outstanding, the right to receive dividends thereon shall cease to
accrue, and all rights of the holders thereof shall forthwith cease and
terminate, except only the right of the holders thereof to receive the amount
payable upon redemption thereof, but without interest; provided, however, that
if, after mailing said notice as aforesaid and prior to the date of redemption
specified in such notice, said funds shall be set aside by deposit in trust,
for the account of the holders of the Preferred Stock - Cumulative to be
redeemed, with a bank or trust company in good standing, organized under the
laws of the United States of America or The Commonwealth of Massachusetts,
having a capital, undivided profits and surplus aggregating at least
$5,000,000, thereupon all shares of the Preferred Stock - Cumulative with
respect to which such deposit shall have been made shall no longer be deemed
to be outstanding, and all rights with respect to such shares of Preferred
Stock - Cumulative shall forthwith upon such deposit in trust cease and
terminate, except only the right of the holders thereof to receive from such
deposit the amount payable upon the redemption but without interest. In case
the holders of the Preferred Stock - Cumulative which shall have been redeemed
shall not within four years of the date of redemption thereof claim any amount
so deposited in trust for the redemption of such shares, such bank or trust
company shall, upon demand, pay over to the corporation any such unclaimed
amount so deposited with it and shall thereupon be relieved of all
responsibility in respect thereof, and the corporation shall not be required
to hold the amount so paid over to it separate and apart from its other funds,
and thereafter the holders of such shares of Preferred Stock - Cumulative
shall look only to the corporation for payment of the redemption price
thereof, but without interest. If there are any dividends accrued to the last
preceding quarterly dividend payment date or dates on the outstanding
Preferred Stock - Cumulative or any other class of preferred stock ranking on
a parity therewith as to assets, no Preferred Stock - Cumulative or such
parity stock shall be redeemed, purchased or otherwise acquired by the
corporation unless all series of Preferred Stock - Cumulative and such parity
stock which are redeemable shall be redeemed and unless an offer is made to
(a) purchase all Preferred Stock - Cumulative and such parity stock of any
series which is not redeemable at the time under limited restrictions then
applicable thereto at a price equal to the then redemption price for such
series if such restrictions were not applicable and (b) to purchase all
Preferred Stock - Cumulative and such parity stock of any series which is not
redeemable at the time at a price equal to the highest then redemption price
on any outstanding shares of Preferred Stock - Cumulative and such parity
stock, after giving effect to the differences in par value among classes of
preferred stock, or unless a partial redemption or any purchase or other
acquisition shall have been ordered, approved or permitted under the Public
Utility Holding Company Act of 1935. All stock redeemed or purchased under
the provisions of this subsection C shall be retired.
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D. In the event of any liquidation, dissolution or winding up
(whether voluntarily or involuntarily) of the affairs of the corporation or
any distribution of its capital, then before any distribution shall be made to
the holders of Common Stock or any other stock ranking junior to the Preferred
Stock - Cumulative as to assets, the holders of each series of the Preferred
Stock - Cumulative at the time outstanding shall be entitled to be paid in
cash the amount for the particular series fixed therefor, together in each
case with dividends accrued thereon to the date fixed for payment of such
distributive amounts, and no more. No payments on account of such
distributive amounts shall be made to the holders of any series of the
Preferred Stock - Cumulative or any other class of preferred stock ranking on
a parity therewith, as to assets, unless there shall likewise be paid at the
same time to the holders of each other series of the Preferred Stock -
Cumulative or such parity stock like proportionate distributive amounts,
ratably, in proportion to the full distributive amounts to which they are
respectively entitled. After such payment to the holders of Preferred Stock -
Cumulative or such parity stock, the remaining assets and funds of the
corporation shall be divided and distributed among the holders of Common Stock
or any other stock ranking junior to the Preferred Stock - Cumulative as to
assets then outstanding according to their respective rights. Neither the
consolidation nor the merger of the corporation with or into any other
corporation shall be deemed to be a liquidation, dissolution or winding up of
the corporation.
E. Except as required by law and except as hereafter specifically
provided in this Section 4 of this Article XVIII, the holders of Preferred
Stock - Cumulative shall have no right to vote.
F. Except as otherwise expressly provided by law, no holder of
Preferred Stock - Cumulative shall be entitled as such as a matter of right to
subscribe for or purchase any part of any new or additional issue of stock or
warrant carrying rights to stock, or securities convertible into stock, of any
class whatever, whether now or hereafter authorized, and whether issued for
cash, property, services or otherwise. If it is expressly required by law
that such new or additional issue be offered proportionately to the
stockholders, then, unless otherwise provided by law, the holders of all
classes of preferred stock only shall be entitled to subscribe for new or
additional preferred stock of any class and the holders of common stock only
shall be entitled to subscribe for new or additional common stock; and notice
of such increase as required by law need be given and the new shares need be
offered proportionately only to the stockholders who are so entitled to
subscribe.
G. Subject to the limitations, if any, contained in Sections 4 and 5
of this Article XVIII, the corporation may from time to time issue additional
capital stock divided into classes with such preferences as to dividends,
voting power and other incidents as may be determined in accordance with
applicable provisions of law and terms of outstanding capital stock. Without
limiting the generality of the foregoing, any such additional capital stock
may be an additional series of Preferred Stock - Cumulative or additional
shares of the initial or any other series of Preferred Stock - Cumulative.
H. So long as any shares of the Preferred Stock - Cumulative of any
series are outstanding, the payment of dividends on Common Stock or on any
other stock of the corporation ranking junior to the Preferred Stock -
Cumulative as to dividends or assets (other than (i) dividends payable in
stock ranking junior to the Preferred Stock - Cumulative as to dividends and
assets or (ii) dividends paid in cash if immediately thereafter there shall be
paid to the corporation in cash an amount equal to such dividends for shares
of or as a capital contribution with respect to stock ranking junior to the
Preferred Stock - Cumulative as to dividends or assets) and the making of any
distribution of assets to holders of stock ranking junior to the Preferred
Stock - Cumulative as to dividends or assets by purchase of shares or
otherwise (each of such actions being herein embraced within the term "payment
of junior stock dividends") shall be subject to the following limitations:
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(1) If and so long as the junior stock equity is, or as a result
of the proposed payment would become, less than twenty per cent (20%) of
total capitalization the payment of junior stock dividends, including
the proposed payment, during the twelve months ending with the last day
of the month in which the proposed payment is to be made shall not
exceed fifty per cent (50%) of the net income of the corporation
available for the payment of dividends on the stock ranking junior to
the Preferred Stock - Cumulative as to dividends and assets for the
twelve full calendar months immediately preceding the calendar month in
which such dividend is declared; and
(2) If and so long as the junior stock equity is, or as a result
of the proposed payment would become, less than twenty-five per cent
(25%) but is twenty per cent (20%) or more of total capitalization the
payment of junior stock dividends, including the proposed payment,
during the twelve months ending with the last day of the month in which
the proposed payment is to be made shall not exceed seventy-five per
cent (75%) of the net income of the corporation available for the
payment of dividends on the stock ranking junior to the Preferred Stock
- Cumulative as to dividends and assets for the twelve full calendar
months immediately preceding the calendar month in which such dividend
is declared.
For the purposes of this subsection H "net income" shall be determined
in accordance with generally accepted accounting principles, provided,
however, that the amount deducted for depreciation shall be an amount computed
in accordance with clause (c) of subsection I(2) hereof.
The term "junior stock equity" is defined in subsection E(2)(i) of
Section 4 of this Article XVIII.
The term "total capitalization" as used in this subsection H means the
aggregate of (x) the junior stock equity, (y) the par value of, or stated
capital represented by, the outstanding shares of Preferred Stock - Cumulative
and any other stock ranking prior thereto or on a parity therewith as to
dividends or assets, and (z) the principal amount of all outstanding
indebtedness of the corporation represented by bonds, notes and other
evidences of indebtedness maturing by their terms more than one year from the
date of issue thereof.
I. No stockholder, director, officer or agent of the corporation
shall be held individually responsible for any action taken in good faith
though subsequently adjudged to be in violation of this Section 3.
J. The shares of Preferred Stock - Cumulative from time to time duly
authorized may be issued for such consideration as may be fixed from time to
time either by the board of directors or as otherwise provided by law. Any
and all shares of Preferred Stock - Cumulative upon receipt by the corporation
of the consideration so fixed shall be deemed fully paid stock and shall not
be liable to any further call or assessment thereon.
K. Every holder of Preferred Stock - Cumulative of the corporation by
becoming such shall be held to have consented to all of these provisions and
to have agreed to be bound thereby and to have waived to the full extent
permitted by law any right such holder may have either now or at any time in
the future contrary to these provisions.
SECTION 4. Certain Rights of Preferred Stock and Preferred
Stock - Cumulative.
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A. (1) "Equal Preference Stock" as used in this subsection A shall
mean the Preferred Stock, the Preferred Stock - Cumulative, and any other
class of preferred stock ranking on a parity therewith as to dividends.
<PAGE>
If dividends accrued to the last preceding quarterly dividend payment
date or dates on the outstanding Equal Preference Stock shall at any time and
from time to time equal or exceed an amount equivalent to four (4) full
quarterly dividends on any shares of any series of the Equal Preference Stock
at the time outstanding, then until all dividends in default on the Equal
Preference Stock shall have been paid, the holders of Equal Preference Stock,
voting separately as one class, shall have the right to elect the smallest
number of directors necessary to constitute a majority of the full board of
directors, and the holders of the stock generally entitled to vote, voting
separately as one class, shall have the right to elect the remaining members
of the board of directors. If and when all dividends in default on the Equal
Preference Stock shall be paid (and, except when prevented from so doing by
any applicable restriction of law or contained in any agreement relating to
indebtedness of the corporation, such dividends shall be declared and paid out
of any funds legally available therefor as soon as reasonably practicable
unless, by a majority vote of the directors elected by the holders of stock
generally entitled to vote, such directors determine such payment not to be in
the best interests of the corporation), the Equal Preference Stock shall
thereupon be divested of such special right to elect any member of the board
of directors, but subject always to the same provisions for the vesting of
such special right in the Equal Preference Stock in case of further like
default or defaults.
(2) Upon accrual of the right of the holders of the Equal Preference
Stock to elect a majority of the board of directors as above provided in this
subsection A, the president, a vice president or the clerk of the corporation
shall call a special meeting of the stockholders of the corporation for the
purpose of electing a new board of directors to be held not less than forty-
five (45) nor more than sixty (60) days after the accrual of such right;
provided, however, that no such special meeting shall be called if the date of
such accrual of such right shall be less than one hundred twenty (120) days
but not less than forty-five (45) days prior to the date otherwise fixed by
the by-laws of the corporation for the next annual meeting of the
stockholders, in which event said annual meeting shall be held on the date
specified in the by-laws or a special meeting in lieu thereof called to be
held within three (3) days thereafter. If said officers fail to call such
meeting, or fail to hold such annual meeting or special meeting in lieu
thereof within three (3) days of the date provided therefor in the by-laws,
any holder or holders of Equal Preference Stock holding in the aggregate one
thousand (1,000) shares may call a special meeting for such purpose.
(3) The notice of any such special meeting, any annual meeting of the
corporation or any special meeting in lieu thereof, at which the holders of
the Equal Preference Stock shall have the right to elect directors, shall be
mailed by the corporation not less than thirty (30) days prior to the meeting
and state (x) that by reason of the fact that dividends payable on the Equal
Preference Stock are or have been in default in an amount equal to or in
excess of four (4) full quarterly dividends, the holders of the Equal
Preference Stock, voting together as a class, are entitled to elect the
smallest number of directors necessary to constitute a majority of the full
board of directors, (y) that any holder of the Equal Preference Stock has the
right at any reasonable time to inspect and make copies of the list or lists
of the holders of Equal Preference Stock maintained at the principal office of
the corporation or at the office of any transfer agent for the Equal
Preference Stock, and (z) the substance of the next succeeding paragraph with
respect to the number of shares of Equal Preference Stock required to be
represented at any meeting or adjournment thereof for the election of
directors of the corporation at which such holders have the right to elect
directors.
(4) At any such special or annual meeting at which the holders of the
Equal Preference Stock shall have the right to elect directors, the presence
in person or by proxy of the holders of a majority of the outstanding stock
generally entitled to vote shall be required to constitute a quorum of such
class for the election of directors and the presence in person or by proxy of
<PAGE>
the holders of a majority of the outstanding Equal Preference Stock shall be
required to constitute a quorum of such class for the election of directors;
provided, however, that in the absence of such a quorum of the holders of the
Equal Preference Stock, no election of directors shall be held but a majority
of the holders of the Equal Preference Stock who are present in person or by
proxy shall have the power to adjourn the meeting for election of directors to
a date not less than twenty-five (25) nor more than sixty (60) days for the
date of such original meeting. At such adjourned meeting the presence in
person or by proxy of the holders of thirty-five per cent (35%) of the
outstanding Equal Preference Stock shall constitute a quorum of such class for
the election of directors.
In the calculation of any quorum, majority, or percentage, of the Equal
Preference Stock, each share of stock bearing $100 par value shall be counted
as one and each share of stock bearing $25 par value shall be counted as one-
quarter. The Equal Preference Stock, when voting as such, shall vote as a
single class.
(5) In the event any such special or annual meeting of stockholders
shall be adjourned as aforesaid, the president, any vice president or the
clerk of the corporation shall, within ten (10) days after the date of the
original meeting, cause notice of the adjourned meeting to be given to all
stockholders of the corporation entitled to vote thereat. Such notice shall
contain substantially the statements hereinabove required with respect to the
original meeting, and shall further state that the required quorum of the
holders of the Equal Preference Stock was not present at such original meeting
and that the holders of thirty-five per cent (35%) of the outstanding Equal
Preference Stock will constitute a quorum of such class for the election of
directors at such adjourned meeting.
(6) If the requisite quorum of holders of the Equal Preference Stock
shall not be present at such adjourned meeting, then, in case the original
meeting was a special meeting called as aforesaid, the directors of the
corporation then in office shall remain in office until the next annual
meeting of the stockholders of the corporation and until their successors have
been elected and shall qualify; or if such original meeting was an annual
meeting of the stockholders or special meeting in lieu thereof, all members of
the board of directors to be elected at such meeting shall be elected by a
vote of the holders of a majority of the shares of the stock generally
entitled to vote present in person or represented by proxy at such adjourned
meeting.
(7) Upon reversion, pursuant to subsection A(1), of the voting powers
to their status prior to default, a special or annual meeting of stockholders
generally entitled to vote shall be held for the purpose of electing
directors. Notice thereof shall be given promptly by the corporation and in
any case within fifteen (15) days after such reversion, such notice to be
mailed by the corporation not less than seven (7) nor more than ten (10) days
prior to such meeting to all stockholders generally entitled to vote at their
respective addresses appearing upon the books of the corporation, unless such
notice shall have been waived either before or after the holding of such
meeting by all such stockholders. If the corporation fails to call such
meeting or fails to hold such annual meeting within three (3) days of the date
provided therefor in the by-laws, any holder or holders of stock generally
entitled to vote holding in the aggregate one thousand (1,000) shares may call
a special meeting for such purpose.
(8) Forthwith upon the election of a majority of the board of
directors of the corporation by the holders of Equal Preference Stock pursuant
to subsection A(1) hereof, the terms of office of all persons who may be
directors of the corporation at the time shall terminate, whether or not the
holders of stock generally entitled to vote shall then have elected the
remaining members of the board of directors, and, if the holders of stock
generally entitled to vote shall not have elected the remaining members of the
board of directors, then the directors of the corporation in office just prior
to the election of the majority of the board of directors by the holders of
Equal Preference Stock shall appoint the remaining directors of the
<PAGE>
corporation pending such election by the holders of stock generally entitled
to vote. Any director elected by holders of Equal Preference Stock shall hold
office until the next annual meeting of the holders of Equal Preference Stock
and until his successor is chosen and qualified, except that upon the
reversion, pursuant to subsection A(1), of the voting powers to their status
prior to default, then forthwith upon the election of new directors by the
holders of stock generally entitled to vote, the terms of office of the
directors elected by the holders of Equal Preference Stock shall terminate.
(9) During any period in which the holders of Equal Preference Stock
have the right to elect a majority of the board of directors, pursuant to
subsection A(1), the number of directors constituting the full board of
directors shall be the number constituting the full board of directors
immediately prior to said period unless it be changed at an annual meeting of
stockholders by a two-thirds vote of the holders of Equal Preference Stock and
by a two-thirds vote of the holders of stock generally entitled to vote to
such number as shall have been stated in the notice of said annual meeting.
(10) In case of any vacancy in the office of a director elected by the
holders of Equal Preference Stock pursuant to the foregoing provisions of this
subsection A, the remaining directors elected by the holders of Equal
Preference Stock by affirmative vote of a majority thereof, or the remaining
director so elected if there be but one, may elect a successor or successors
to hold office for the unexpired term of the director or directors whose place
or places shall be vacant. The holders of the Equal Preference Stock, at a
special meeting called for the purpose by the holders of an aggregate of not
less than one thousand (1,000) shares of the Equal Preference Stock, upon
notice mailed not less than thirty (30) days prior to such meeting to all
stockholders entitled to vote thereat, by a vote of a majority of the Equal
Preference Stock issued and outstanding, may remove from office a director
elected by the holders of Equal Preference Stock and may elect a successor for
the remainder of his term.
(11) Under all circumstances, however, the directors elected by the
holders of stock generally entitled to vote shall have the right, and neither
the holders of Equal Preference Stock nor any directors elected under these
provisions by the holders of Equal Preference Stock shall have any right, to
vote upon the question of calling for redemption, or of purchasing, all of the
Equal Preference Stock at the time outstanding.
(12) Except when some mandatory provision of law shall be controlling
or as otherwise provided in this Section 4 and, with respect to any special
rights of (i) the Preferred Stock as a class, or (ii) the Preferred Stock -
Cumulative as a class, or (iii) any series of either such class as a series,
in the provisions of the by-laws or articles of organization controlling said
class or in the votes creating said series, neither the Preferred Stock nor
the Preferred Stock - Cumulative shall be entitled to vote as a separate
class, and no outstanding series of either such class shall be entitled to
vote as a separate series, on any matter and all shares of the Preferred Stock
of all series and all shares of the Preferred Stock - Cumulative of all series
shall be deemed to constitute but one class for any purpose for which a vote
of the stockholders of the corporation by classes may now or hereafter be
required.
B. So long as any shares of the Preferred Stock of any series are
outstanding, the corporation shall not, without the vote at a meeting called
for that purpose of the holders of at least two-thirds of the total number of
shares of the Preferred Stock of all series then outstanding make any change
in the provisions relative to the Preferred Stock, or of any series thereof,
which would change the express terms and provisions of such stock (other than
the express terms and provisions thereof set forth in subsections A, D, and E
of this Section 4) in any manner prejudicial to the holders thereof except
that if such change is prejudicial to the holders of one or more, but not all
of such series, only to the vote of the holders of two-thirds of the total
number of shares of all series so affected and then outstanding shall be
required.
<PAGE>
C. So long as any shares of the Preferred Stock - Cumulative of any
series are outstanding, the corporation shall not, without the vote at a
meeting called for that purpose of the holders of at least two-thirds of the
total number of shares of the Preferred Stock - Cumulative of all series then
outstanding make any change in the provisions relative to the Preferred Stock
- - Cumulative, or of any series thereof, which would change the express terms
and provisions of such stock (other than the express terms and provisions
thereof set forth in subsections A, D, and E of this Section 4) in any manner
prejudicial to the holders thereof except that if such change is prejudicial
to the holders of one or more, but not all, of such series, only the vote of
the holders of two-third of the total number of shares of all series so
affected and then outstanding shall be required.
D. So long as any shares of the Preferred Stock or the Preferred
Stock - Cumulative of any series are outstanding, the corporation shall not,
without the vote at a meeting called for that purpose of the holders of at
least two-thirds of the total number of shares of the Preferred Stock and the
Preferred Stock - Cumulative of all series then outstanding:
(1) Make any change in the provisions of this Section 4, which
would change the express terms and provisions of subsections A, D, or E,
or such stock in any manner prejudicial to the holders of the Preferred
Stock and the Preferred Stock - Cumulative, except that if such change
is prejudicial to the holders of one class, but not both, only the vote
of the holders of two-thirds of the total number of shares of the class
so affected and then outstanding shall be required; or
(2) Create or authorize any class of stock which shall be
preferred as to dividends or assets over the Preferred Stock, the
Preferred Stock - Cumulative or any security convertible into either
class.
No preferred stock so preferred as to dividends or assets over the Preferred
Stock or the Preferred Stock - Cumulative (other than either of such preferred
stocks issued upon conversion of another security) shall be issued more than
six months after the above referred to vote creating or authorizing such class
of stock unless within six months prior to such issue approval thereof has
been obtained, at a meeting called for the purpose, by vote of at least two-
thirds of the total number of shares of Preferred Stock and Preferred Stock -
Cumulative of all series outstanding.
E. So long as any shares of the Preferred Stock or the Preferred
Stock - Cumulative of any series are outstanding, the corporation shall not,
without the vote at a meeting called for that purpose of the holders of at
least a majority of the total number of shares of the Preferred Stock and
Preferred Stock - Cumulative of all series then outstanding:
(1) Issue shares of Preferred Stock or the Preferred Stock -
Cumulative of any series if after such issue the aggregate combined
outstanding par value of all series thereof would exceed $120 million.
(2) Issue additional shares of any series of Preferred Stock or
the Preferred Stock - Cumulative or of any other stock ranking prior
thereto or on a parity therewith as to dividends or assets, except for
refunding an equal par or stated value of Preferred Stock or Preferred
Stock - Cumulative, or other such prior or parity preferred stock, of
the corporation theretofore outstanding:
(i) Unless the junior stock equity to be outstanding
immediately after such issue shall be at least equal to the
aggregate amount payable on involuntary liquidation, dissolution
or winding up of the affairs of the corporation upon all Preferred
Stock and Preferred Stock - Cumulative of all series and of any
other such prior or parity stock to be outstanding immediately
after such issue; provided, however, that if for the purpose of
meeting this requirement it shall have been necessary to take into
<PAGE>
consideration any portion of the earned surplus of the
corporation, the corporation shall not (until such junior stock
equity exclusive of such portion of earned surplus shall equal
such aggregate) pay any dividends or make any distribution on
shares of its stock ranking junior to the Preferred Stock and
Preferred Stock - Cumulative as to dividends or assets which would
result in reducing such junior stock equity to an amount less than
such aggregate amount payable on involuntary liquidation,
dissolution or winding up of the affairs of the corporation; and
(ii) Unless the gross income of the corporation after taxes
available for interest on its indebtedness and for dividends on
the Preferred Stock, the Preferred Stock - Cumulative and any
other such prior or parity stock, determined in accordance with
generally accepted accounting principles, for a prior of twelve
(12) consecutive calendar months within the fifteen (15) calendar
months immediately preceding the calendar month in which such
additional stock is issued, or in which a contract for the
issuance and sale thereof is made, is at least one and one-half
(1-1/2) times the aggregate of the annual interest charges and
dividend requirements on all interest bearing indebtedness and all
series of Preferred Stock, Preferred Stock - Cumulative and such
prior or parity stock to be outstanding immediately after the
proposed issue. In said computations under this subsection (ii):
(a) Interest on indebtedness and dividends on stock in each case
to be retired with the proceeds of the proposed issue and similar
charges on indebtedness and stock retired or to be retired prior to the
proposed issue from the proceeds of any junior stock issued by the
corporation are to be excluded;
(b) Such gross income, similarly determined for said twelve (12)
months period, from any property acquired by purchase, merger or
otherwise during or after said period or to be acquired in connection
with the proposed issue, may be included; and
(c) The amount deducted for depreciation shall be the amount
charged by the corporation on its books for depreciation during such
period but not less than the greater of (x) two and one-tenth per cent
(2.1%) of the arithmetical average of the gross plant investment in
depreciable property on the books of the corporation on the first and
last days of such period or (y) the largest minimum depreciation
requirement for such period of any mortgage indenture to which the
corporation is a party during such period.
"Junior stock equity" as used in this subsection E and in subsections H of
Sections 2 and 3 of this Article XVIII means the aggregate of the par value
of, or stated capital represented by, the outstanding shares of stock ranking
junior to the Preferred Stock as to dividends and assets, of the premium on
capital stock and of the surplus (including earned surplus, capital surplus
and surplus invested in plant) of the corporation less the excess, if any, of
the aggregate amount payable on involuntary liquidation, dissolution or
winding up of the affairs of the corporation upon all outstanding preferred
stock of the corporation over the aggregate par or stated value thereof and
less, unless the amounts or items are being amortized or are being provided
for by reserves, (a) any amounts recorded on the books of the corporation in
adjustment accounts for utility plant and other plant in excess of the
original cost thereof, (b) unamortized debt discount and expense and capital
stock discount and expense, and (c) the excess, if any, during the period from
January 1, 1954 to the end of a month within ninety (90) days preceding the
date as of which junior stock equity is determined, over the amount charged by
the corporation on its books during such period for depreciation of an amount
determined as follows:
(x) For the calendar year 1954 and for each full calendar year
thereafter, an amount equal to two and one-tenth per cent (2.1%)
of the arithmetical average of the gross plant investment in
<PAGE>
depreciable property on the books of the corporation on January 1
and December 31 of such calendar year; and
(y) For any other period, an amount equal to one-twelfth (1/12) of two
and one-tenth per cent (2.1%) of the gross plant investment in
depreciable property on the books of the corporation on the first
day of the calendar year in such period multiplied by the number
of full calendar months in such period.
(3) 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, 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 under the provisions
of the Public Utility Holding Company Act of 1935 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; or
(4) 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.
The voting rights set forth in subsections B, C, and D shall not be
effective if, in connection with any matter specified therein, provision is
made for the purchase, redemption or retirement of all the Preferred Stock and
Preferred Stock - Cumulative at the time outstanding, or it is provided that
the proposed action shall not be effective unless such provision is made.
<PAGE>
In the calculations in subsections D and E of "at least two-thirds of
the total number of shares of Preferred Stock and the Preferred Stock -
Cumulative" or of "at least a majority of the total number" of such shares,
each share of Preferred Stock bearing $100 par value shall be counted as one
and each share of Preferred Stock - Cumulative bearing $25 par value shall be
counted as one-quarter.
F. No stockholder, directors, officer or agent of the corporation
shall be held individually responsible for any action taken in good faith
though subsequently adjudged to be in violation of this Section 4.
SECTION 5. Maximum Issues of Preferred Stock and Preferred
Stock - Cumulative.
- -----------------------------------------------------------
The corporation shall not, without the vote at a meeting called for the
purpose of at least a majority of the shares of stock generally entitled to
vote, issue shares of any series of Preferred Stock or Preferred Stock -
Cumulative if after such issue the aggregate outstanding par value of all such
series would exceed $120 million.
SECTION 6. Terms Applicable to Specific Series of the
Preferred Stock.
- ------------------------------------------------------
A. The first series of the Preferred Stock of the corporation shall
be designated "Cumulative Preferred Stock, 4.44% Series"; the annual dividend
rate per share shall be four and forty-four hundredths per cent (4.44%) of the
par value thereof (such dividends on shares of the initial issue of said first
series to be cumulative from November 18, 1953, and the first dividend date to
be February 1, 1954); the redemption prices therefor shall be as follows:
If the redemption date is: Redemption Price
On or prior to December 31, 1958 $106.568
January 1, 1959 through December 31, 1961 106.068
January 1, 1962 through December 31, 1964 105.568
January 1, 1965 through December 31, 1967 105.068
January 1, 1968 through December 31, 1970 104.568
After December 31, 1970 104.068
together in each case with accrued dividends; and the amounts payable upon any
liquidation, dissolution or winding up, if voluntary, shall be equal to said
redemption prices plus accrued dividends and, if involuntary, shall be $100.00
per share plus accrued dividends.
B. The second series of the Preferred Stock of the corporation shall
be designated "Cumulative Preferred Stock, 4.76% Series"; the annual dividend
rate per share shall be four and seventy-six hundredths per cent (4.76%) of
the par value thereof (such dividends on shares of the initial issue of said
second series to be cumulative from August 27, 1962, and the first dividend
date to be November 1, 1962); the redemption prices therefor shall be as
follows:
If the redemption date is: Redemption Price
On or prior to October 31, 1967 $106.58
November 1, 1967 through October 31, 1972 105.63
November 1, 1972 through October 31, 1977 104.68
After October 31, 1977 103.73
together in each case with accrued dividends; and the amounts payable upon any
liquidation, dissolution or winding up, if voluntary, shall be equal to said
redemption prices plus accrued dividends and, if involuntary, shall be $100.00
per share plus accrued dividends.
C. The third series of the Preferred Stock of the corporation shall
be designated "Cumulative Preferred Stock, 9.44% Series"; the annual dividend
<PAGE>
rate per share shall be nine and forty-four hundredths per cent (9.44%) of the
par value thereof (such dividends on shares of the initial issue of said third
series to be cumulative from October 19, 1970, and the first dividend date to
be February 1, 1971); the redemption prices therefor shall be as follows:
If the redemption date is: Redemption Price
On or prior to January 31, 1976 $110.95
February 1, 1976 through January 31, 1981 108.59
February 1, 1981 through January 31, 1986 106.23
After January 31, 1986 103.87
together in each case with accrued dividends, provided, however, that none of
the Cumulative Preferred Stock, 9.44% Series, shall be so redeemed prior to
October 1, 1975, if such redemption is for the purpose or in anticipation of
refunding such Preferred Stock through the use directly or indirectly of funds
obtained by the issuance of debt securities at an effective interest cost to
the corporation or other preferred stocks at an effective dividend cost to the
corporation (both as computed in accordance with generally accepted financial
practice) of less than 9.44% per annum; and the amounts payable upon any
liquidation, dissolution or winding up, if voluntary, shall be equal to said
redemption prices plus accrued dividends and, if involuntary, shall be $100.00
per share plus accrued dividends.
D. The fourth series of the Preferred Stock of the corporation shall
be designated "Cumulative Preferred Stock, 7.80% Series"; the annual dividend
rate per share shall be seven and eighty hundredths per cent (7.80%) of the
par value thereof (such dividends on shares of the initial issue of said
fourth series to be cumulative from December 14, 1971, and the first dividend
date to be February 1, 1972); the redemption prices therefor shall be as
follows:
If the redemption date is: Redemption Price
On or prior to January 31, 1977 $109.10
February 1, 1977 through January 31, 1982 107.15
February 1, 1982 through January 31, 1987 105.20
After January 31, 1987 103.25
together in each case with accrued dividends, provided, however, that none of
the Cumulative Preferred Stock, 7.80% Series, shall be so redeemed prior to
December 1, 1976, if such redemption is for the purpose or in anticipation of
refunding such Preferred Stock through the use directly or indirectly of funds
obtained by the issuance of debt securities at an effective interest cost to
the corporation or other preferred stocks at an effective dividend cost to the
corporation (both as computed in accordance with generally accepted financial
practice) of less than 7.80% per annum; and the amounts payable upon any
liquidation, dissolution or winding up, if voluntary, shall be equal to said
redemption prices plus accrued dividends and, if involuntary, shall be $100.00
per share plus accrued dividends.
E. The fifth series of the Preferred Stock of the corporation shall
be designated "Cumulative Preferred Stock, 7.84% Series"; the annual dividend
rate per share shall be seven and eighty-four hundredths per cent (7.84%) of
the par value thereof (such dividends on shares of the initial issue of said
fifth series to be cumulative from October 31, 1973, and the first dividend
date to be February 1, 1974); the redemption prices therefor shall be as
follows:
If the redemption date is: Redemption Price
On or prior to October 31, 1978 $109.00
November 1, 1978 through October 31, 1983 107.04
November 1, 1983 through October 31, 1988 105.08
November 1, 1988 through October 31, 1993 103.12
After October 31, 1993 101.95
together in each case with accrued dividends, provided, however, that none of
the Cumulative Preferred Stock, 7.84% Series, shall be so redeemed prior to
October 1, 1978, if such redemption is for the purpose or in anticipation of
<PAGE>
refunding such Preferred Stock through the use, directly or indirectly, of
funds obtained by the issuance of debt securities at an effective interest
cost to the corporation or other preferred stocks at an effective dividend
cost to the corporation (both as computed in accordance with generally
accepted financial practice) of less than 7.83% per annum; and the amounts
payable upon any liquidation, dissolution, or winding up, if voluntary, shall
be equal to said redemption prices plus accrued dividends and, if involuntary,
shall be $100.00 per share plus accrued dividends.
F. The sixth series of Preferred Stock of the Company be designated
"Cumulative Preferred Stock, 6.99% Series"; the annual dividend rate per share
be six and ninety-nine hundredths percent (6.99%) of the par value thereof
(such dividends on shares of the initial issue of said sixth series to be
cumulative from August 12, 1993, and the first dividend date to be November 1,
1993); that none of said sixth series will be redeemable until after August 1,
2003; that redemption prices per share if redeemed during the twelve-month
periods beginning August 1 in each of the years indicated in the table below
be as follows:
Year Redemption Price
---- ----------------
2003 103.50
2004 103.15
2005 102.80
2006 102.45
2007 102.10
2008 101.75
2009 101.40
2010 101.05
2011 100.70
2012 100.35
2013 and thereafter $100.00
together in each case with accrued dividends; and that the amounts payable
upon liquidation, dissolution or winding up, if voluntary, shall be equal to
said redemption prices plus accrued dividends, and, if involuntary, shall be
$100.00 per share plus accrued dividends.
SECTION 7. Terms Applicable to Specific Series of the
Preferred Stock-Cumulative
- ----------------------------------------------------------
The first series of Preferred Stock-Cumulative of the Company be
designated "Preferred Stock-Cumulative, 6.84% Series"; the annual dividend
rate per share be six and eighty-four hundredths percent (6.84%) of the par
value thereof (such dividends on shares of the initial issue of said first
series to be cumulative from the date of such initial issue, and the first
dividend date to be November 1, 1993); that none of said first series will be
redeemable until after October 1, 1998; that the redemption price per share be
$25.80 plus accrued dividends; and that the amount payable upon liquidation,
dissolution or winding up, if voluntary, shall be equal to said redemption
price plus accrued dividends, and, if involuntary, shall be $25.00 per share
plus accrued dividends.
ARTICLE XIX.
CERTIFICATES OF STOCK.
Each stockholder shall be entitled to a certificate of capital stock of
the corporation owned by him in such form as shall, in conformity to law, be
prescribed from time to time by the board of directors. Such certificate
shall be signed by the president or a vice president and by the treasurer or
an assistant treasurer, and shall bear the seal of the corporation; provided,
however, that the signature of the president or a vice president or of the
treasurer or an assistant treasurer of the corporation, or both such
signatures, or the seal of the corporation, or either or both of such
<PAGE>
signatures and such seal, upon such certificate may be facsimile, and such
certificate shall be as valid and effectual for all purposes as if signed by
such officer or officers, or sealed with the seal of the corporation, as the
case may be. The fact that a person signing has ceased to be an officer shall
not invalidate any such certificate.
ARTICLE XX.
TRANSFER OF SHARES OF STOCK.
Subject to the restrictions, if any, imposed by the agreement of
association, title to a certificate of stock and to the shares represented
thereby shall be transferred only by delivery of the certificate properly
endorsed, or by delivery of the certificate accompanied by a written
assignment of the same, or a written power of attorney to sell, assign, or
transfer the same or the shares represented thereby, properly executed; but
the person registered on the books of the corporation as the owner of shares
shall have the exclusive right to receive dividends thereon and to vote
thereon as such owner, and except only as may be required by law, may in all
respects be treated by the corporation as the exclusive owner thereof.
It shall be the duty of each stockholder to notify the corporation of
his post office address.
ARTICLE XXI.
TRANSFER BOOKS.
The treasurer or such agent or agents as may be employed by the
treasurer with the approval of the board of directors shall keep the stock and
transfer books of the corporation and a record of all certificates of stock
issued and of all transfers of stock and a register of all the stockholders,
their addresses and the number of shares held by each. For the purpose of
determining stockholders who are entitled to receive payment of any dividend,
to vote or act at a meeting and any adjournment thereof or to receive any
offering of additional stock, or for any other purpose permitted by law, the
board of directors may from time to time close the transfer books for such
period, not exceeding thirty days, as the board may determine or, without
closing said books, may fix a record date, not more than thirty days in
advance of such payment, meeting, offering or other action, as of which
stockholders entitled to such dividend, vote, offering or other right shall be
determined.
ARTICLE XXII.
LOSS OF CERTIFICATES.
In case of the alleged loss or destruction, or the mutilation of a
certificate of stock, a duplicate certificate may be issued in place thereof,
upon such reasonable terms as the board of directors may prescribe.
ARTICLE XXIII.
SEAL.
The seal of the corporation shall, subject to alteration by the board of
directors, consist of a flat-faced circular die with the words "MASSACHUSETTS
ELECTRIC COMPANY -- CORPORATE SEAL" cut or engraved thereon.
ARTICLE XXIV.
EXECUTION OF PAPERS.
Except as the board of directors may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts and other obligations made,
accepted or endorsed by the corporation, shall be signed by the president, any
vice president, the treasurer or any assistant treasurer.
<PAGE>
ARTICLE XXV.
FISCAL YEAR.
Except as from time to time otherwise provided by the board of
directors, the fiscal year of the corporation shall be the calendar year.
ARTICLE XXVI.
AMENDMENTS.
Subject to the provisions of law and of the Preferred Stock and the
Preferred Stock-Cumulative, these by-laws may be amended, altered or repealed
by a vote of a majority of the outstanding capital stock generally entitled to
vote at any meeting of such stockholders, provided notice of the proposed
amendment, alteration or repeal is given in the notice of said meeting.
ARTICLE XXVII.
LIABILITY AND INDEMNIFICATION.
No director of the corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director notwithstanding any provision of law imposing such
liability, except with respect to any matter as to which such liability shall
have been imposed (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under section sixty-one or sixty-two of chapter one hundred and fifty-six B of
the General Laws of Massachusetts, or (iv) for any transaction from which the
director derived an improper personal benefit.
The corporation shall indemnify each of its directors and officers
against any loss, liability or expense, including amounts paid in satisfaction
of judgments, in compromise or as fines and penalties, and counsel fees,
imposed upon or reasonably incurred by him in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or
criminal, including but not limited to derivative suits (to the extent
permitted by law), in which he may be involved or with which he may be
threatened, while in office or thereafter, by reason of his being or having
been a director or officer, except with respect to any matter as to which he
shall have been adjudicated in such action, suit or proceeding not to have
acted in good faith in the reasonable belief that his action was in the best
interests of the corporation, or, to the extent that such matter relates to
service with respect to any employee benefit plan, as in the best interests of
the participants or beneficiaries of such plan. As to any matter disposed of
by a compromise payment by a director or officer, pursuant to a consent decree
or otherwise, no indemnification either for said payment or for any other
expenses shall be provided unless such compromise shall be approved as in the
best interests of the corporation, after notice that it involves such
indemnification, if no change in control has occurred (a) by a disinterested
majority of the directors then in office, (b) by a majority of the
disinterested directors then in office, provided that there has been obtained
an opinion in writing of independent legal counsel to the effect that such
director or officer appears to have acted in good faith in the reasonable
belief that his action was in the best interests of the corporation, or (c) by
the vote, at a meeting duly called and held, of the holders of a majority of
the shares outstanding and entitled to vote thereon, exclusive of any shares
owned by any interested director or officer or, if a change in control shall
have occurred, by an opinion in writing of independent legal counsel to the
effect that such director or officer appears to have acted in good faith in
the reasonable belief that his action was in the best interests of the
corporation.
Expenses incurred with respect to the defense or disposition of any
action, suit or proceeding heretofore referred to in this Article shall be
advanced by the corporation prior to the final disposition of such action,
<PAGE>
suit or proceeding, upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined that he is not
entitled to indemnification, which undertaking shall be accepted without
reference to the financial ability of the recipient to make such repayment.
If in an action, suit or proceeding brought by or in right of the corporation,
a director is held not liable, whether because relieved of liability under the
first paragraph of this Article or otherwise, he shall be deemed to have been
entitled to indemnification for expenses incurred in defense of said action,
suit or proceeding.
As used in this Article:
(i) The term "officer" includes (a) persons who serve at the
request of the corporation as directors, officers, or trustees of
another organization and (b) employees of the corporation and its
affiliates who serve in any capacity with respect to benefit plans for
the corporation's employees.
(ii) An "interested" director or officer is one against whom in such
capacity the proceeding in question or another proceeding on the same or
similar grounds is then pending.
(iii)A "change in control" occurs when: (a) any individual,
corporation, association, partnership, joint venture, trust or other
entity or association thereof acting in concert (excluding any employee
benefit plan, dividend reinvestment plan or similar plan of the
corporation, or any trustee thereof acting in such capacity) acquires
more than 20% of the corporation's outstanding stock having general
voting rights or more than 20% of the common shares of any entity owning
more than 50% of the corporation's outstanding stock having general
voting rights, whether in whole or in part, by means of an offer made
publicly to the holders of all or substantially all of such outstanding
stock or shares to acquire stock or shares for cash, other property, or
a combination thereof or by any other means, unless the transaction is
consented to by vote of a majority of the continuing directors; or (b)
continuing directors cease to constitute a majority of the board.
(iv) The term "continuing director" shall mean any director of the
corporation who (a) was a member of the board of directors of the
corporation on the later of January 1, 1987, or the date the director or
officer seeking indemnification first became such, or (b) was
recommended for his initial term of office by a majority of continuing
directors in office at the time of such recommendation.
Nothing contained in this Article shall (i) limit the power of the
corporation to indemnify employees and agents of the corporation or its
subsidiaries other than directors and officers on any terms it deems
appropriate not prohibited by law, (ii) limit the power of the corporation to
indemnify directors and officers for expenses incurred in suits, actions, or
other proceedings initiated by such director or officer or (iii) affect any
rights to indemnification to which corporation personnel other than directors
and officers may be entitled by contract or otherwise. The rights provided in
this Article shall not be exclusive of or affect any other right to which any
director or officer may be entitled and such rights shall inure to the benefit
of its or his successors, heirs, executors, administrators and other legal
representatives. Such other rights shall include all powers, immunities and
rights of reimbursement allowable under the laws of The Commonwealth of
Massachusetts.
The provisions of this Article shall not apply with respect to any act
or omission occurring prior to June 25, 1987. No amendment to or repeal of
this Article shall apply to or have any effect upon the liability, exoneration
or indemnification of any director or officer for or with respect to any acts
or omissions of the director or officer occurring prior to such amendment or
repeal.
<PAGE>
Exhibit B.8.a
THE COMPANIES LAW (1995 REVISION)
COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
NEERI INTERNATIONAL
1. In these Articles Table A in the Schedule to the Statute does not apply
and unless there be something in the subject or context inconsistent
therewith,
"Articles" means these Articles as originally framed or as from
time to time altered by Special Resolution.
"Auditors" means the persons for the time being performing the
duties of auditors of the Company.
"Company" means the above-named Company.
"debenture" means debenture stock, mortgages, bonds and any other
such securities of the Company whether constituting a
charge on the assets of the Company or not.
"Directors" means the directors for the time being of the Company.
"dividend" includes bonus.
"Member" shall bear the meaning as ascribed to it in the
Statute.
"month" means calendar month.
"paid-up" means paid-up and/or credited as paid-up.
"registered means the registered office for the time
office" being of the Company.
"Seal" means the common seal of the Company and includes
every duplicate seal.
"Secretary" includes an Assistant Secretary and any person
appointed to perform the duties of Secretary of the
Company.
"share " includes a fraction of a share.
"Special has the same meaning as in the Statute and
Resolution" includes a resolution approved in writing as
described therein.
"Statute " means the Companies Law of the Cayman Islands as
amended and every statutory modification or re-
enactment thereof for the time being in force.
"written" include all modes of representing or
and reproducing words in visible form.
"in writing"
Words importing the singular number only include the plural number and
vice-versa.
Words importing the masculine gender only include the feminine gender.
Words importing persons only include corporations.
<PAGE>
2. The business of the Company may be commenced as soon after incorporation
as the Directors shall see fit, notwithstanding that part only of the shares
may have been allotted.
3. The Directors may pay, out of the capital or any other monies of the
Company, all expenses incurred in or about the formation and establishment of
the Company including the expenses of registration.
CERTIFICATES FOR SHARES
-----------------------
4. Certificates representing shares of the Company shall be in such form as
shall be determined by the Directors. Such certificates may be under Seal. All
certificates for shares shall be consecutively numbered or otherwise
identified and shall specify the shares to which they relate. The name and
address of the person to whom the shares represented thereby are issued, with
the number of shares and date of issue, shall be entered in the register of
Members of the Company. All certificates surrendered to the Company for
transfer shall be cancelled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
cancelled. The Directors may authorize certificates to be issued with the seal
and authorised signature(s) affixed by some method or system of mechanical
process.
5. Notwithstanding Article 4 of these Articles, if a share certificate be
defaced, lost or destroyed, it may be renewed on payment of a fee of one
dollar (US$1.00) or such less sum and on such terms (if any) as to evidence
and indemnity and the payment of the expenses incurred by the Company in
investigating evidence, as the Directors may prescribe.
ISSUE OF SHARES
----------------
6. Subject to the provisions, if any, in that behalf in the Memorandum of
Association and to any direction that may be given by the Company in general
meeting and without prejudice to any special rights previously conferred on
the holders of existing shares, the Directors may allot, issue, grant options
over or otherwise dispose of shares of the Company (including fractions of a
share) with or without preferred, deferred or other special rights or
restrictions, whether in regard to dividend, voting, return of capital or
otherwise and to such persons, at such times and on such other terms as they
think proper.
7. The Company shall maintain a register of its Members and every person
whose name is entered as a Member in the register of Members shall be entitled
without payment to receive within two months after allotment or lodgement of
transfer (or within such other period as the conditions of issue shall
provide) one certificate for all his shares or several certificates each for
one or more of his shares upon payment of fifty cents (US$0.50) for every
certificate after the first or such less sum as the Directors shall from time
to time determine provided that in respect of a share or shares held jointly
by several persons the Company shall not be bound to issue more than one
certificate and delivery of a certificate for a share to one of the several
joint holders shall be sufficient delivery to all such holders.
TRANSFER OF SHARES
------------------
8. The instrument of transfer of any share shall be in writing and shall be
executed by or on behalf of the transferor and the transferor shall be deemed
to remain the holder of a share until the name of the transferee is entered in
the register in respect thereof.
9. The Directors may in their absolute discretion decline to register any
transfer of shares without assigning any reason therefor. If the Directors
refuse to register a transfer they shall notify the transferee within two
months of such refusal.
<PAGE>
10. The registration of transfers may be suspended at such time and for such
periods as the Directors may from time to time determine, provided always that
such registration shall not be suspended for more than forty-five days in any
year.
REDEEMABLE SHARES
-----------------
11.
(a) Subject to the provisions of the Statute and the Memorandum of
Association, shares may be issued on the terms that they are, or at the option
of the Company or the holder are, to be redeemed on such terms and in such
manner as the Company, before the issue of the shares, may by Special
Resolution determine.
(b) Subject to the provisions of the Statute and the Memorandum of
Association, the Company may purchase its own shares (including fractions of a
share), including any redeemable shares, provided that the manner of purchase
has first been authorised by the Company in general meeting and may make
payment therefor in any manner authorised by the Statute, including out of
capital.
VARIATION OF RIGHTS OF SHARES
-----------------------------
12. If at any time the share capital of the Company is divided into
different classes of shares, the rights attached to any class (unless
otherwise provided by the terms of issue of the shares of that class) may,
whether or not the Company is being wound-up, be varied with the consent in
writing of the holders of three-fourths of the issued shares of that class, or
with the sanction of a Special Resolution passed at a general meeting of the
holders of the shares of that class.
The provisions of these Articles relating to general meetings shall
apply to every such general meeting of the holders of one class of shares
except that the necessary quorum shall be one person holding or representing
by proxy at least one-third of the issued shares of the class and that any
holder of shares of the class present in person or by proxy may demand a poll.
13. The rights conferred upon the holders of the shares of any class issued
with preferred or other rights shall not, unless otherwise expressly provided
by the terms of issue of the shares of that class, be deemed to be varied by
the creation or issue of further shares ranking pari passu therewith.
COMMISSION ON SALE OF SHARES
----------------------------
14. The Company may in so far as the Statute from time to time permits pay a
commission to any person in consideration of his subscribing or agreeing to
subscribe whether absolutely or conditionally for any shares of the Company.
Such commissions may be satisfied by the payment of cash or the lodgement of
fully or partly paid-up shares or partly in one way and partly in the other.
The Company may also on any issue of shares pay such brokerage as may be
lawful.
NON-RECOGNITION OF TRUSTS
-------------------------
15. No person shall be recognised by the Company as holding any share upon
any trust and the Company shall not be bound by or be compelled in any way to
recognize (even when having notice thereof) any equitable, contingent, future,
or partial interest in any share, or any interest in any factional part of a
share, or (except only as is otherwise provided by these Articles or the
Statute) any other rights in respect of any share except an absolute right to
the entirety thereof in the registered holder.
<PAGE>
LIEN ON SHARES
--------------
16. The Company shall have a first and paramount lien and charge on all
shares (whether fully paid-up or not) registered in the name of a Member
(whether solely or jointly with others) for all debts, liabilities or
engagements to or with the Company (whether presently payable or not) by such
Member or his estate, either alone or jointly with any other person, whether a
Member or not, but the Directors may at any time declare any share to be
wholly or in part exempt from the provisions of this Article. The registration
of a transfer of any such share shall operate as a waiver of the Company's
lien (if any) thereon. The Company's lien (if any) on a share shall extend to
all dividends or other monies payable in respect thereof.
17. The Company may sell, in such manner as the Directors think fit, any
shares on which the Company has a lien, but no sale shall be made unless a sum
in respect of which the lien exists is presently payable, nor until the
expiration of fourteen days after a notice in writing stating and demanding
payment of such part of the amount in respect of which the lien exists as is
presently payable, has been given to the registered holder or holders for the
time being of the share, or the person, of which the Company has notice,
entitled thereto by reason of his death or bankruptcy.
18. To give effect to any such sale the Directors may authorize some person
to transfer the shares sold to the purchaser thereof. The purchaser shall be
registered as the holder of the shares comprised in any such transfer, and he
shall not be bound to see to the application of the purchase money, nor shall
his title to the shares be affected by any irregularity or invalidity in the
proceedings in reference to the sale.
19. The proceeds of such sale shall be received by the Company and applied
in payment of such part of the amount in respect of which the lien exists as
is presently payable and the residue, if any, shall (subject to a like lien
for sums not presently payable as existed upon the shares before the sale) be
paid to the person entitled to the shares at the date of the sale.
CALL ON SHARES
---------------
20.(a) The Directors may from time to time make calls upon the Members in
respect of any monies unpaid on their shares (whether on account of the
nominal value of the shares or by way of premium or otherwise) and not by the
conditions of allotment thereof made payable at fixed terms, provided that no
call shall be payable at less than one month from the date fixed for the
payment of the last preceding call, and each Member shall (subject to
receiving at least fourteen days notice specifying the time or times of
payment) pay to the Company at the time or times so specified the amount
called on the shares. A call may be revoked or postponed as the Directors may
determine. A call may be made payable by instalments.
(b) A call shall be deemed to have been made at the time when the resolution
of the Directors authorizing such call was passed.
(c) The joint holders of a share shall be jointly and severally liable to pay
all calls in respect thereof.
21. If a sum called in respect of a share is not paid before or on a day
appointed for payment thereof, the persons from whom the sum is due shall pay
interest on the sum from the day appointed for payment thereof to the time of
actual payment at such rate not exceeding ten per cent per annum as the
Directors may determine, but the Directors shall be at liberty to waive
payment of such interest either wholly or in part.
22. Any sum which by the terms of issue of a share becomes payable on
allotment or at any fixed date, whether on account of the nominal value of the
share or by way of premium or otherwise, shall for the purposes of these
Articles be deemed to be a call duly made, notified and payable on the date on
which by the terms of issue the same becomes payable, and in the case of non-
payment all the relevant provisions of these Articles as to payment of
<PAGE>
interest forfeiture or otherwise shall apply as if such sum had become payable
by virtue of a call duly made and notified.
23. The Directors may, on the issue of shares, differentiate between the
holders as to the amount of calls or interest to be paid and the times of
payment.
24. (a) The Directors may, if they think fit, receive from any Member
willing to advance the same, all or any part of the monies uncalled and unpaid
upon any shares held by him, and upon all or any of the monies so advanced may
(until the same would but for such advances, become payable) pay interest at
such rate not exceeding (unless the Company in general meeting shall otherwise
direct) seven per cent per annum, as may be agreed upon between the Directors
and the Member paying such sum in advance.
(b) No such sum paid in advance of calls shall entitle the Member paying
such sum to any portion of a dividend declared in respect of any period prior
to the date upon which such sum would, but for such payment, become presently
payable.
FORFEITURE OF SHARES
--------------------
25. (a) If a Member fails to pay any call or instalment of a call or to make
any payment required by the terms of issue on the day appointed for payment
thereof, the Directors may, at any time thereafter during such time as any
part of the call, instalment or payment remains unpaid, give notice requiring
payment of so much of the call, instalment or payment as is unpaid, together
with any interest which may have accrued and all expenses that have been
incurred by the Company by reason of such non-payment. Such notice shall name
a day (not earlier than the expiration of fourteen days from the date of
giving of the notice) on or before which the payment required by the notice is
to be made, and shall state that, in the event of non-payment at or before the
time appointed the shares in respect of which such notice was given will be
liable to be forfeited.
(b) If the requirements of any such notice as aforesaid are not complied
with, any share in respect of which the notice has been given may at any time
thereafter, before the payment required by the notice has been made, be
forfeited by a resolution of the Directors to that effect. Such forfeiture
shall include all dividends declared in respect of the forfeited share and not
actually paid before the forfeiture.
(c) A forfeited share may be sold or otherwise disposed of on such terms and
in such manner as the Directors think fit and at any time before a sale or
disposition the forfeiture may be cancelled on such terms as the Directors
think fit.
26. A person whose shares have been forfeited shall cease to be a Member in
respect of the forfeited shares, but shall, notwithstanding, remain liable to
pay to the Company all monies which, at the date of forfeiture were payable by
him to the Company in respect of the shares together with interest thereon,
but his liability shall cease if and when the Company shall have received
payment in full of all monies whenever payable in respect of the shares.
27. A certificate in writing under the hand of one Director or the Secretary
of the Company that a share in the Company has been duly forfeited on a date
stated in the declaration shall be conclusive evidence of the fact therein
stated as against all persons claiming to be entitled to the share. The
Company may receive the consideration given for the share on any sale or
disposition thereof and may execute a transfer of the share in favour of the
person to whom the share is sold or disposed of and he shall thereupon be
registered as the holder of the share and shall not be bound to see to the
application of the purchase money, if any, nor shall his title to the share be
affected by any irregularity or invalidity in the proceedings in reference to
the forfeiture, sale or disposal of the share.
28. The provisions of these Articles as to forfeiture shall apply in the
case of non-payment of any sum which, by the terms of issue of a share,
becomes payable at a fixed time, whether on account of the nominal value of
the share or by way of premium as if the same had been payable by virtue of a
call duly made and notified.
<PAGE>
REGISTRATION OF EMPOWERING INSTRUMENTS
---------------------------------------
29. The Company shall be entitled to charge a fee not exceeding one dollar
(US$1.00) on the registration of every probate, letters of administration,
certificate of death or marriage, power of attorney, notice in lieu of
distringas, or other instrument.
TRANSMISSION OF SHARES
----------------------
30. In case of the death of a Member, the survivor or survivors where the
deceased was a joint holder, and the legal personal representatives of the
deceased where he was a sole holder, shall be the only persons recognised by
the Company as having any title to his interest in the shares, but nothing
herein contained shall release the estate of any such deceased holder from any
liability in respect of any shares which had been held by him solely or
jointly with other persons.
31. (a) Any person becoming entitled to a share in consequence of the
death or bankruptcy or liquidation or dissolution of a Member (or in any other
way than by transfer) may, upon such evidence being produced as may from time
to time be required by the Directors and subject as hereinafter provided,
elect either to be registered himself as holder of the share or to make such
transfer of the share to such other person nominated by him as the deceased or
bankrupt person could have made and to have such person registered as the
transferee thereof, but the Directors shall, in either case, have the same
right to decline or suspend registration as they would have had in the case of
a transfer of the share by that Member before his death or bankruptcy as the
case may be.
(b) If the person so becoming entitled shall elect to be registered himself
as holder he shall deliver or send to the Company a notice in writing signed
by him stating that he so elects.
32. A person becoming entitled to a share by reason of the death or
bankruptcy or liquidation or dissolution of the holder (or in any other case
than by transfer) shall be entitled to the same dividends and other advantages
to which he would be entitled if he were the registered holder of the share,
except that he shall not, before being registered as a Member in respect of
the share, be entitled in respect of it to exercise any right conferred by
membership in relation to meetings of the Company PROVIDED HOWEVER that the
Directors may at any time give notice requiring any such person to elect
either to be registered himself or to transfer the share and if the notice is
not complied with within ninety days the Directors may thereafter withhold
payment of all dividends, bonuses or other monies payable in respect of the
share until the requirements of the notice have been complied with.
AMENDMENT OF MEMORANDUM OF ASSOCIATION, CHANGE OF LOCATION OF
REGISTERED OFFICE & ALTERATION OF CAPITAL
- --------------------------------------------------------------
33. (a) Subject to and in so far as permitted by the provisions of the
Statute, the Company may from time to time by ordinary resolution alter or
amend its Memorandum of Association otherwise than with respect to its name
and objects and may, without restricting the generality of the foregoing:
(i) increase the share capital by such sum to be divided into shares
of such amount or without nominal or par value as the resolution
shall prescribe and with such rights, priorities and privileges
annexed thereto, as the Company in general meeting may
determine.
(ii) consolidate and divide all or any of its share capital into
shares of larger amount than its existing shares;
(iii) by subdivision of its existing shares or any of them divide the
whole or any part of its share capital into shares of smaller
amount than is fixed by the Memorandum of Association or into
shares without nominal or par value;
<PAGE>
(iv) cancel any shares which at the date of the passing of the
resolution have not been taken or agreed to be taken by any
person.
(b) All new shares created hereunder shall be subject to the same
provisions with reference to the payment of calls, liens, transfer,
transmission, forfeiture and otherwise as the shares in the original share
capital.
(c) Subject to the provisions of the Statute, the Company may by
Special Resolution change its name or alter its objects.
(d) Without prejudice to Article 11 hereof and subject to the
provisions of the Statute, the Company may by Special Resolution reduce its
share capital and any capital redemption reserve fund.
(e) Subject to the provisions of the Statute, the Company may by
resolution of the Directors change the location of its registered office.
CLOSING REGISTER OF MEMBERS OR FIXING RECORD DATE
-------------------------------------------------
34. For the purpose of determining Members entitled to notice of or to vote
at any meeting of Members or any adjournment thereof, or Members entitled to
receive payment of any dividend, or in order to make a determination of
Members for any other proper purpose, the Directors of the Company may provide
that the register of Members shall be closed for transfers for a stated period
but not to exceed in any case forty days. If the register of Members shall be
so closed for the purpose of determining Members entitled to notice of or to
vote at a meeting of Members such register shall be so closed for at least ten
days immediately preceding such meeting and the record date for such
determination shall be the date of the closure of the register of Members.
35. In lieu of or apart from closing the register of Members, the Directors
may fix in advance a date as the record date for any such determination of
Members entitled to notice of or to vote at a meeting of the Members and for
the purpose of determining the Members entitled to receive payment of any
dividend the Directors may, at or within 90 days prior to the date of
declaration of such dividend fix a subsequent date as the record date for such
determination.
36. If the register of Members is not so closed and no record date is fixed
for the determination of Members entitled to notice of or to vote at a meeting
of Members or Members entitled to receive payment of a dividend, the date on
which notice of the meeting is mailed or the date on which the resolution of
the Directors declaring such dividend is adopted, as the case may be, shall be
the record date for such determination of Members. When a determination of
Members entitled to vote at any meeting of Members has been made as provided
in this section, such determination shall apply to any adjournment thereof.
GENERAL MEETING
---------------
37. (a) Subject to paragraph (c) hereof, the Company shall within one
year of its incorporation and in each year of its existence thereafter hold a
general meeting as its annual general meeting and shall specify the meeting as
such in the notices calling it. The annual general meeting shall be held at
such time and place as the Directors shall appoint and if no other time and
place is prescribed by them, it shall be held at the registered office on the
second Wednesday in December of each year at ten o'clock in the morning.
(b) At these meetings the report of the Directors (if any) shall be
presented.
(c) If the Company is exempted as defined in the Statute it may but
shall not be obliged to hold an annual general meeting.
38. (a) The Directors may whenever they think fit, and they shall on the
requisition of Members of the Company holding at the date of the deposit of
<PAGE>
the requisition not less than one-tenth of such of the paid-up capital of the
Company as at the date of the deposit carries the right of voting at general
meetings of the Company, proceed to convene a general meeting of the Company.
(b) The requisition must state the objects of the meeting and must
be signed by the requisitionists and deposited at the registered office of the
Company and may consist of several documents in like form each signed by one
or more requisitionists.
(c) If the Directors do not within twenty-one days from the date of
the deposit of the requisition duly proceed to convene a general meeting, the
requisitionists, or any of them representing more than one-half of the total
voting rights of all of them, may themselves convene a general meeting, but
any meeting so convened shall not be held after the expiration of three months
after the expiration of the said twenty-one days.
(d) A general meeting convened as aforesaid by requisitionists shall
be convened in the same manner as nearly as possible as that in which general
meetings are to be convened by
Directors.
NOTICE OF GENERAL MEETINGS
---------------------------
39. At least five days' notice shall be given of an annual general meeting
or any other general meeting. Every notice shall be exclusive of the day on
which it is given or deemed to be given and of the day for which it is given
and shall specify the place, the day and the hour of the meeting and the
general nature of the business and shall be given in manner hereinafter
mentioned or in such other manner if any as may be prescribed by the Company
PROVIDED that a general meeting of the Company shall, whether or not the
notice specified in this regulation has been given and whether or not the
provisions of Article 38 have been complied with, be deemed to have been duly
convened if it is so agreed:
(a) in the case of a general meeting called as an annual general
meeting by all the Members entitled to attend and vote thereat
or their proxies; and
(b) in the case of any other general meeting by a majority in number
of the Members having a right to attend and vote at the meeting,
being a majority together holding not less than seventy-five
percent in nominal value or in the case of shares without
nominal or par value seventy-five per cent of the shares in
issue, or their proxies.
40. The accidental omission to give notice of a general meeting to, or the
non-receipt of notice of a meeting by any person entitled to receive notice
shall not invalidate the proceedings of that meeting.
PROCEEDINGS AT GENERAL MEETINGS
-------------------------------
41. No business shall be transacted at any general meeting unless a quorum
of Members is present at the time when the meeting proceeds to business; two
Members present in person or by proxy shall be a quorum provided always that
if the Company has one Member of record the quorum shall be that one Member
present in person or by proxy.
42. A resolution (including a Special Resolution) in writing (in one or more
counterparts) signed by all Members for the time being entitled to receive
notice of and to attend and vote at general meetings (or being corporations by
their duly authorised representatives) shall be as valid and effective as if
the same had been passed at a general meeting of the Company duly convened and
held.
43. If within half an hour from the time appointed for the meeting a quorum
is not present, the meeting, if convened upon the requisition of Members,
shall be dissolved and in any other case it shall stand adjourned to the same
day in the next week at the same time and place or to such other time or such
<PAGE>
other place as the Directors may determine and if at the adjourned meeting a
quorum is not present within half an hour from the time appointed for the
meeting the Members present shall be a quorum.
44. The Chairman, if any, of the Board of Directors shall preside as
Chairman at every general meeting of the Company, or if there is no such
Chairman, or if he shall not be present within fifteen minutes after the time
appointed for the holding of the meeting, or is unwilling to act, the
Directors present shall elect one of their number to be Chairman of the
meeting.
45. If at any general meeting no Director is willing to act as Chairman or
if no Director is present within fifteen minutes after the time appointed for
holding the meeting, the Members present shall choose one of their number to
be Chairman of the meeting.
46. The Chairman may, with the consent of any general meeting duly
constituted hereunder, and shall if so directed by the meeting, adjourn the
meeting from time to time and from place to place, but no business shall be
transacted at any adjourned meeting other than the business left unfinished at
the meeting from which the adjournment took place. When a general meeting is
adjourned for thirty days or more, notice of the adjourned meeting shall be
given as in the case of an original meeting; save as aforesaid it shall not be
necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned general meeting.
47. At any general meeting a resolution put to the vote of the meeting shall
be decided on a show of hands unless a poll is, before or on the declaration
of the result of the show of hands, demanded by the Chairman or any other
Member present in person or by proxy.
48. Unless a poll be so demanded a declaration by the Chairman that a
resolution has on a show of hands been carried, or carried unanimously, or by
a particular majority, or lost, and an entry to that effect in the Company's
Minute Book containing the Minutes of the proceedings of the meeting shall be
conclusive evidence of that fact without proof of the number or proportion of
the votes recorded in favour of or against such resolution.
49. The demand for a poll may be withdrawn.
50. Except as provided in Article 52, if a poll is duly demanded it shall be
taken in such manner as the Chairman directs and the result of the poll shall
be deemed to be the resolution of the general meeting at which the poll was
demanded.
51. In the case of an equality of votes, whether on a show of hands or on a
poll, the Chairman of the general meeting at which the show of hands takes
place or at which the poll is demanded, shall be entitled to a second or
casting vote.
52. A poll demanded on the election of a Chairman or on a question of
adjournment shall be taken forthwith. A poll demanded on any other question
shall be taken at such time as the Chairman of the general meeting directs and
any business other than that upon which a poll has been demanded or is
contingent thereon may be proceeded with pending the taking of the poll.
VOTES OF MEMBERS
-----------------
53. Subject to any rights or restrictions for the time being attached to any
class or classes of shares, on a show of hands every Member of record present
in person or by proxy at a general meeting shall have one vote and on a poll
every Member of record present in person or by proxy shall have one vote for
each share registered in his name in the register of Members.
54. In the case of joint holders of record the vote of the senior who
tenders a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders, and for this purpose
seniority shall be determined by the order in which the names stand in the
register of Members.
<PAGE>
55. A Member of unsound mind, or in respect of whom an order has been made
by any court, having jurisdiction in lunacy, may vote, whether on a show of
hands or on a poll, by his committee, receiver, curator bonds, or other person
in the nature of a committee, receiver or curator bonds appointed by that
court, and any such committee, receiver, curator bonds or other persons may
vote by proxy.
56. No Member shall be entitled to vote at any general meeting unless he is
registered as a shareholder of the Company on the record date for such meeting
nor unless all calls or other sums presently payable by him in respect of
shares in the Company have been paid.
57. No objection shall be raised to the qualification of any voter except at
the general meeting or adjourned general meeting at which the vote objected to
is given or tendered and every vote not disallowed at such general meeting
shall be valid for all purposes. Any such objection made in due time shall be
referred to the Chairman of the general meeting whose decision shall be final
and conclusive.
58. On a poll or on a show of hands votes may be given either personally or
by proxy.
PROXIES
-------
59. The instrument appointing a proxy shall be in writing and shall be
executed under the hand of the appointor or of his attorney duly authorised in
writing, or, if the appointor is a corporation under the hand of an officer or
attorney duly authorised in that behalf. A proxy need not be a Member of the
Company.
60. The instrument appointing a proxy shall be deposited at the registered
office of the Company or at such other place as is specified for that purpose
in the notice convening the meeting no later than the time for holding the
meeting, or adjourned meeting provided that the Chairman of the Meeting may at
his discretion direct that an instrument of proxy shall be deemed to have been
duly deposited upon receipt of telex, cable or telecopy confirmation from the
appointor that the instrument of proxy duly signed is in the course of
transmission to the Company.
61. The instrument appointing a proxy may be in any usual or common form and
may be expressed to be for a particular meeting or any adjournment thereof or
generally until revoked. An instrument appointing a proxy shall be deemed to
include the power to demand or join or concur in demanding a poll.
62. A vote given in accordance with the terms of an instrument of proxy
shall be valid notwithstanding the previous death or insanity of the principal
or revocation of the proxy or of the authority under which the proxy was
executed, or the transfer of the share in respect of which the proxy is given
provided that no intimation in writing of such death, insanity, revocation or
transfer as aforesaid shall have been received by the Company at the
registered office before the commencement of the general meeting, or adjourned
meeting at which it is sought to use the proxy.
63. Any corporation which is a Member of record of the Company may in
accordance with its Articles or in the absence of such provision by resolution
of its Directors or other governing body authorize such person as it thinks
fit to act as its representative at any meeting of the Company or of any class
of Members of the Company, and the person so authorised shall be entitled to
exercise the same powers on behalf of the corporation which he represents as
the corporation could exercise if it were an individual Member of record of
the Company.
64. Shares of its own capital belonging to the Company or held by it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting
and shall not be counted in determining the total number of outstanding shares
at any given time.
<PAGE>
DIRECTORS
---------
65. There shall be a Board of Directors consisting of not less than one or
more than ten persons (exclusive of alternate Directors) PROVIDED HOWEVER that
the Company may from time to time by ordinary resolution increase or reduce
the limits in the number of Directors. The first Directors of the Company
shall be determined in writing by, or appointed by a resolution of, the
subscribers of the Memorandum of Association or a majority of them.
66. The remuneration to be paid to the Directors shall be such remuneration
as the Directors shall determine. Such remuneration shall be deemed to accrue
from day to day. The Directors shall also be entitled to be paid their
travelling, hotel and other expenses properly incurred by them in going to,
attending and returning from meetings of the Directors, or any committee of
the Directors, or general meetings of the Company, or otherwise in connection
with the business of the Company, or to receive a fixed allowance in respect
thereof as may be determined by the Directors from time to time, or a
combination partly of one such method and partly the other.
67. The Directors may by resolution award special remuneration to any
Director of the Company undertaking any special work or services for, or
undertaking any special mission on behalf of, the Company other than his
ordinary routine work as a Director. Any fees paid to a Director who is also
counsel or solicitor to the Company, or otherwise serves it in a professional
capacity shall be in addition to his remuneration as a Director.
68. A Director or alternate Director may hold any other office or place of
profit under the Company (other than the office of Auditor) in conjunction
with his office of Director for such period and on such terms as to
remuneration and otherwise as the Directors may determine.
69. A Director or alternate Director may act by himself or his firm in a
professional capacity for the Company and he or his firm shall be entitled to
remuneration for professional services as if he were not a Director or
alternate Director.
70. A shareholding qualification for Directors may be fixed by the Company
in general meeting, but unless and until so fixed no qualification shall be
required.
71. A Director or alternate Director of the Company may be or become a
director or other officer of or otherwise interested in any company promoted
by the Company or in which the Company may be interested as shareholder or
otherwise and no such Director or alternate Director shall be accountable to
the Company for any remuneration or other benefits received by him as a
director or officer of, or from his interest in, such other company.
72. No person shall be disqualified from the office of Director or alternate
Director or prevented by such office from contracting with the Company, either
as vendor, purchaser or otherwise, nor shall any such contract or any contract
or transaction entered into by or on behalf of the Company in which any
Director or alternate Director shall be in any way interested be or be liable
to be avoided, nor shall any Director or alternate Director so contracting or
being so interested be liable to account to the Company for any profit
realised by any such contract or transaction by reason of such Director
holding office or of the fiduciary relation thereby established. A Director
(or his alternate Director in his absence) shall be at liberty to vote in
respect of any contract or transaction in which he is so interested as
aforesaid PROVIDED HOWEVER that the nature of the interest of any Director or
alternate Director in any such contract or transaction shall be disclosed by
him or the alternate Director appointed by him at or prior to its
consideration and any vote thereon.
73. A general notice that a Director or alternate Director is a shareholder
of any specified firm or company and is to be regarded as interested in any
transaction with such firm or company shall be sufficient disclosure under
Article 72 and after such general notice it shall not be necessary to give
special notice relating to any particular transaction.
<PAGE>
ALTERNATE DIRECTORS
-------------------
74. Subject to the exception contained in Article 82, a Director who expects
to be unable to attend Directors' Meetings because of absence, illness or
otherwise may appoint any person to be an alternate Director to act in his
stead and such appointee whilst he holds office as an alternate Director
shall, in the event of absence therefrom of his appointor, be entitled to
attend meetings of the Directors and to vote thereat and to do, in the place
and stead of his appointor, any other act or thing which his appointor is
permitted or required to do by virtue of his being a Director as if the
alternate Director were the appointor, other than appointment of an alternate
to himself, and he shall ipso facto vacate office if and when his appointor
ceases to be a Director or removes the appointee from office. Any appointment
or removal under this Article shall be effected by notice in writing under the
hand of the Director making the same.
POWERS AND DUTIES OF DIRECTORS
------------------------------
75. The business of the Company shall be managed by the Directors (or a sole
Director if only one is appointed) who may pay all expenses incurred in
promoting, registering and setting up the Company, and may exercise all such
powers of the Company as are not, from time to time by the Statute, or by
these Articles, or such regulations, being not inconsistent with the
aforesaid, as may be prescribed by the Company in general meeting required to
be exercised by the Company in general meeting PROVIDED HOWEVER that no
regulations made by the Company in general meeting shall invalidate any prior
act of the Directors which would have been valid if that regulation had not
been made.
76. The Directors may from time to time and at any time by powers of
attorney appoint any company, firm, person or body of persons, whether
nominated directly or indirectly by the Directors, to be the attorney or
attorneys of the Company for such purpose and with such powers, authorities
and discretions (not exceeding those vested in or exercisable by the Directors
under these Articles) and for such period and subject to such conditions as
they may think fit, and any such powers of attorney may contain such
provisions for the protection and convenience of persons dealing with any such
attorneys as the Directors may think fit and may also authorize any such
attorney to delegate all or any of the powers, authorities and discretions
vested in him.
77. All cheques, promissory notes, drafts, bills of exchange and other
negotiable instruments and all receipts for monies paid to the Company shall
be signed, drawn, accepted, endorsed or otherwise executed as the case may be
in such manner as the Directors shall from time to time by resolution
determine.
78. The Directors shall cause minutes to be made in books provided for the
purpose:
(a) of all appointments of officers made by the Directors;
(b) of the names of the Directors (including those represented thereat by an
alternate or by proxy) present at each meeting of the Directors and of
any committee of the Directors;
(c) of all resolutions and proceedings at all meetings of the Company and of
the Directors and of committees of Directors.
79. The Directors on behalf of the Company may pay a gratuity or pension or
allowance on retirement to any Director who has held any other salaried office
or place of profit with the Company or to his widow or dependents and may make
contributions to any fund and pay premiums for the purchase or provision of
any such gratuity, pension or allowance.
80. The Directors may exercise all the powers of the Company to borrow money
and to mortgage or charge its undertaking, property and uncalled capital or
<PAGE>
any part thereof and to issue debentures, debenture stock and other securities
whether outright or as security for any debt, liability or obligation of the
Company or of any third party.
MANAGEMENT
-----------
81. (a) The Directors may from time to time provide for the management
of the affairs of the Company in such manner as they shall think fit and the
provisions contained in the three next following paragraphs shall be without
prejudice to the general powers conferred by this paragraph.
(b) The Directors from time to time and at any time may establish
any committees, local boards or agencies for managing any of the affairs of
the Company and may appoint any persons to be members of such committees or
local boards or any managers or agents and may fix their remuneration.
(c) The Directors from time to time and at any time may delegate to
any such committee, local board, manager or agent any of the powers,
authorities and discretions for the time being vested in the Directors and may
authorize the members for the time being of any such local board, or any of
them to fill up any vacancies therein and to act notwithstanding vacancies and
any such appointment or delegation may be made on such terms and subject to
such conditions as the Directors may think fit and the Directors may at any
time remove any person so appointed and may annul or vary any such delegation,
but no person dealing in good faith and without notice of any such annulment
or variation shall be affected thereby.
(d) Any such delegates as aforesaid may be authorised by the
Directors to subdelegate all or any of the powers, authorities, and
discretions for the time being vested in them.
MANAGING DIRECTORS
-------------------
82. The Directors may, from time to time, appoint one or more of their body
(but not an alternate Director) to the office of Managing Director for such
term and at such remuneration (whether by way of salary, or commission, or
participation in profits, or partly in one way and partly in another) as they
may think fit but his appointment shall be subject to determination ipso facto
if he ceases from any cause to be a Director and no alternate Director
appointed by him can act in his stead as a Director or Managing Director.
83. The Directors may entrust to and confer upon a Managing Director any of
the powers exercisable by them upon such terms and conditions and with such
restrictions as they may think fit and either collaterally with or to the
exclusion of their own powers and may from time to time revoke, withdraw,
alter or vary all or any of such powers.
PROCEEDINGS OF DIRECTORS
------------------------
84. Except as otherwise provided by these Articles, the Directors shall meet
together for the despatch of business, convening, adjourning and otherwise
regulating their meetings as they think fit. Questions arising at any meeting
shall be decided by a majority of votes of the Directors and alternate
Directors present at a meeting at which there is a quorum, the vote of an
alternate Director not being counted if his appointor be present at such
meeting. In case of an equality of votes, the Chairman shall have a second or
casting vote.
85. A Director or alternate Director may, and the Secretary on the
requisition of a Director or alternate Director shall, at any time summon a
meeting of the Directors by at least two days' notice in writing to every
Director and alternate Director which notice shall set forth the general
nature of the business to be considered unless notice is waived by all the
Directors (or their alternates) either at, before or after the meeting is held
and PROVIDED FURTHER if notice is given in person, by cable, telex or telecopy
the same shall be deemed to have been given on the day it is delivered to the
Directors or transmitting organisation as the case may be. The provisions of
Article 40 shall apply mutatis mutandis with respect to notices of meetings of
Directors.
<PAGE>
86. The quorum necessary for the transaction of the business of the
Directors may be fixed by the Directors and unless so fixed shall be two, a
Director and his appointed alternate Director being considered only one person
for this purpose, PROVIDED ALWAYS that if there shall at any time be only a
sole Director the quorum shall be one. For the purposes of this Article an
alternate Director or proxy appointed by a Director shall be counted in a
quorum at a meeting at which the Director appointing him is not present.
87. The continuing Directors may act notwithstanding any vacancy in their
body, but if and so long as their number is reduced below the number fixed by
or pursuant to these Articles as the necessary quorum of Directors the
continuing Directors or Director may act for the purpose of increasing the
number of Directors to that number, or of summoning a general meeting of the
Company, but for no other purpose.
88. The Directors may elect a Chairman of their Board and determine the
period for which he is to hold office; but if no such Chairman is elected, or
if at any meeting the Chairman is not present within five minutes after the
time appointed for holding the same, the Directors present may choose one of
their number to be Chairman of the meeting.
89. The Directors may delegate any of their powers to committees consisting
of such member or members of the Board of Directors (including Alternate
Directors in the absence of their appointors) as they think fit; any committee
so formed shall in the exercise of the powers so delegated conform to any
regulations that may be imposed on it by the Directors.
90. A committee may meet and adjourn as it thinks proper. Questions arising
at any meeting shall be determined by a majority of votes of the members
present, and in the case of an equality of votes the Chairman shall have a
second or casting vote.
91. All acts done by any meeting of the Directors or of a committee of
Directors (including any person acting as an alternate Director) shall,
notwithstanding that it be afterwards discovered that there was some defect in
the appointment of any Director or alternate Director, or that they or any of
them were disqualified, be as valid as if every such person had been duly
appointed and qualified to be a Director or alternate Director as the case may
be.
92. Members of the Board of Directors or of any committee thereof may
participate in a meeting of the Board or of such committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other and participation in
a meeting pursuant to this provision shall constitute presence in person at
such meeting. A resolution in writing (in one or more counterparts), signed by
all the Directors for the time being or all the members of a committee of
Directors (an alternate Director being entitled to sign such resolution on
behalf of his appointor) shall be as valid and effectual as if it had been
passed at a meeting of the Directors or committee as the case may be duly
convened and held.
93. (a) A Director may be represented at any meetings of the Board of
Directors by a proxy appointed by him in which event the presence or vote of
the proxy shall for all purposes be deemed to be that of the Director.
(b) The provisions of Articles 59-62 shall mutatis mutandis apply to
the appointment of proxies by Directors.
VACATION OF OFFICE OF DIRECTOR
-------------------------------
94. The office of a Director shall be vacated:
(a) if he gives notice in writing to the Company that he resigns the
office of Director;
(b) if he absents himself (without being represented by proxy or an
alternate Director appointed by him) from three consecutive
<PAGE>
meetings of the Board of Directors without special leave of
absence from the Directors, and they pass a resolution that he
has by reason of such absence vacated office;
(c) if he dies, becomes bankrupt or makes any arrangement or
composition with his creditors generally;
(d) if he is found a lunatic or becomes of unsound mind.
APPOINTMENT AND REMOVAL OF DIRECTORS
-------------------------------------
95. The Company may by ordinary resolution appoint any person to be a
Director and may in like manner remove any Director and may in like manner
appoint another person in his stead.
96. The Directors shall have power at any time and from time to time to
appoint any person to be a Director, either to fill a casual vacancy or as an
addition to the existing Directors but so that the total amount of Directors
(exclusive of alternate Directors) shall not at any time exceed the number
fixed in accordance with these Articles.
PRESUMPTION OF ASSENT
---------------------
97. A Director of the Company who is present at a meeting of the Board of
Directors at which action on any Company matter is taken shall be presumed to
have assented to the action taken unless his dissent shall be entered in the
Minutes of the meeting or unless he shall file his written dissent from such
action with the person acting as the Secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered mail to such
person immediately after the adjournment of the meeting. Such right to dissent
shall not apply to a Director who voted in favour of such action.
SEAL
-----
98. (a) The Company may, if the Directors so determine, have a Seal
which shall, subject to paragraph (c) hereof, only be used by the authority of
the Directors or of a committee of the Directors authorised by the Directors
in that behalf and every instrument to which the Seal has been affixed shall
be signed by one person who shall be either a Director or the Secretary or
Secretary-Treasurer or some person appointed by the Directors for the purpose.
(b) The Company may have for use in any place or places outside the
Cayman Islands a duplicate Seal or Seals each of which shall be a facsimile of
the Common Seal of the Company and, if the Directors so determine, with the
addition on its face of the name of every place where it is to be used.
(c) A Director, Secretary or other officer or representative or
attorney may without further authority of the Directors affix the Seal of the
Company over his signature alone to any document of the Company required to be
authenticated by him under Seal or to be filed with the Registrar of Companies
in the Cayman Islands or elsewhere wheresoever.
OFFICERS
---------
99. The Company may have a President, a Secretary or Secretary-Treasurer
appointed by the Directors who may also from time to time appoint such other
officers as they consider necessary, all for such terms, at such remuneration
and to perform such duties, and subject to such provisions as to
disqualification and removal as the Directors from time to time prescribe.
DIVIDENDS, DISTRIBUTIONS AND RESERVE
-------------------------------------
100. Subject to the Statute, the Directors may from time to time declare
dividends (including interim dividends) and distributions on shares of the
<PAGE>
Company outstanding and authorize payment of the same out of the funds of the
Company lawfully available therefor.
101. The Directors may, before declaring any dividends or distributions, set
aside such sums as they think proper as a reserve or reserves which shall at
the discretion of the Directors, be applicable for any purpose of the Company
and pending such application may, at the like discretion, be employed in the
business of the Company.
102. No dividend or distribution shall be payable except out of the profits
of the Company, realised or unrealised, or out of the share premium account or
as otherwise permitted by the Statute.
103. Subject to the rights of persons, if any, entitled to shares with
special rights as to dividends or distributions, if dividends or distributions
are to be declared on a class of shares they shall be declared and paid
according to the amounts paid or credited as paid on the shares of such class
outstanding on the record date for such dividend or distribution as determined
in accordance with these Articles but no amount paid or credited as paid on a
share in advance of calls shall be treated for the purpose of this Article as
paid on the share.
104. The Directors may deduct from any dividend or distribution payable to
any Member all sums of money (if any) presently payable by him to the Company
on account of calls or otherwise.
105. The Directors may declare that any dividend or distribution be paid
wholly or partly by the distribution of specific assets and in particular of
paid up shares, debentures, or debenture stock of any other company or in any
one or more of such ways and where any difficulty arises in regard to such
distribution, the Directors may settle the same as they think expedient and in
particular may issue fractional certificates and fix the value for
distribution of such specific assets or any part thereof and may determine
that cash payments shall be made to any Members upon the footing of the value
so fixed in order to adjust the rights of all Members and may vest any such
specific assets in trustees as may seem expedient to the Directors.
106. Any dividend, distribution, interest or other monies payable in cash in
respect of shares may be paid by cheque or warrant sent through the post
directed to the registered address of the holder or, in the case of joint
holders, to the holder who is first named on the register of Members or to
such person and to such address as such holder or joint holders may in writing
direct. Every such cheque or warrant shall be made payable to the order of the
person to whom it is sent. Any one of two or more joint holders may give
effectual receipts for any dividends, bonuses, or other monies payable in
respect of the share held by them as joint holders.
107. No dividend or distribution shall bear interest against the Company.
CAPITALISATION
---------------
108. The Company may upon the recommendation of the Directors by ordinary
resolution authorize the Directors to capitalise any sum standing to the
credit of any of the Company's reserve accounts (including share premium
account and capital redemption reserve fund) or any sum standing to the credit
of profit and loss account or otherwise available for distribution and to
appropriate such sum to Members in the proportions in which such sum would
have been divisible amongst them had the same been a distribution of profits
by way of dividend and to apply such sum on their behalf in paying up in full
unissued shares for allotment and distribution credited as fully paid up to
and amongst them in the proportion aforesaid. In such event the Directors
shall do all acts and things required to give effect to such capitalisation,
with full power to the Directors to make such provisions as they think fit for
the case of shares becoming distributable in fractions (including provisions
whereby the benefit of fractional entitlements accrue to the Company rather
than to the Members concerned). The Directors may authorise any person to
enter on behalf of all of the Members interested into an agreement with the
Company providing for such capitalisation and matters incidental thereto and
any agreement made under such authority shall be effective and binding on all
concerned.
<PAGE>
BOOKS OF ACCOUNT
-----------------
109. The Directors shall cause proper books of account to be kept
with respect to:
(a) all sums of money received and expended by the Company and the
matters in respect of which the receipt or expenditure takes place;
(b) all sales and purchases of goods by the Company;
(c) the assets and liabilities of the Company.
Proper books shall not be deemed to be kept if there are not kept such books
of account as are necessary to give a true and fair view of the state of the
Company's affairs and to explain its transactions.
110. The Directors shall from time to time determine whether and to what
extent and at what times and places and under what conditions or regulations
the accounts and books of the Company or any of them shall be open to the
inspection of Members not being Directors and no Member (not being a Director)
shall have any right of inspecting any account or book or document of the
Company except as conferred by Statute or authorised by the Directors or by
the Company in general meeting.
111. The Directors may from time to time cause to be prepared and to be laid
before the Company in general meeting profit and loss accounts, balance
sheets, group accounts (if any) and such other reports and accounts as may be
required by law.
AUDIT
-----
112. The Company may at any annual general meeting appoint an Auditor or
Auditors of the Company who shall hold office until the next annual general
meeting and may fix his or their remuneration.
113. The Directors may before the first annual general meeting appoint an
Auditor or Auditors of the Company who shall hold office until the first
annual general meeting unless previously removed by an ordinary resolution of
the Members in general meeting in which case the Members at that meeting may
appoint Auditors. The Directors may fill any casual vacancy in the office of
Auditor but while any such vacancy continues the surviving or continuing
Auditor or Auditors, if any, may act. The remuneration of any Auditor
appointed by the Directors under this Article may be fixed by the Directors.
114. Every Auditor of the Company shall have a right of access at all times
to the books and accounts and vouchers of the Company and shall be entitled to
require from the Directors and Officers of the Company such information and
explanation as may be necessary for the performance of the duties of the
auditors.
115. Auditors shall at the next annual general meeting following their
appointment and at any other time during their term of office, upon request of
the Directors or any general meeting of the Members, make a report on the
accounts of the Company in general meeting during their tenure of office.
NOTICES
-------
116. Notices shall be in writing and may be given by the Company to any
Member either personally or by sending it by post, cable, telex or telecopy to
him or to his address as shown in the register of Members, such notice, if
mailed, to be forwarded airmail if the address be outside the Cayman Islands.
117. (a) Where a notice is sent by post, service of the notice shall be
deemed to be effected by properly addressing, pre-paying and posting a letter
containing the notice, and to have been effected at the expiration of sixty
hours after the letter containing the same is posted as aforesaid.
<PAGE>
(b) Where a notice is sent by cable, telex, or telecopy, service of
the notice shall be deemed to be effected by properly addressing, and sending
such notice through a transmitting organisation and to have been effected on
the day the same is sent as aforesaid.
118. A notice may be given by the Company to the joint holders of record of a
share by giving the notice to the joint holder first named on the register of
Members in respect of the share.
119. A notice may be given by the Company to the person or persons which the
Company has been advised are entitled to a share or shares in consequence of
the death or bankruptcy of a Member by sending it through the post as
aforesaid in a pre-paid letter addressed to them by name, or by the title of
representatives of the deceased, or trustee of the bankrupt, or by any like
description at the address supplied for that purpose by the persons claiming
to be so entitled, or at the option of the Company by giving the notice in any
manner in which the same might have been given if the death or bankruptcy had
not occurred.
120. Notice of every general meeting shall be given in any manner hereinbefore
authorised to:
(a) every person shown as a Member in the register of Members as of
the record date for such meeting except that in the case of
joint holders the notice shall be sufficient if given to the
joint holder first named in the register of Members.
(b) every person upon whom the ownership of a share devolves by
reason of his being a legal personal representative or a trustee
in bankruptcy of a Member of record where the Member of record
but for his death or bankruptcy would be entitled to receive
notice of the meeting; and
No other person shall be entitled to receive notices of general meetings.
WINDING UP
-----------
121. If the Company shall be wound up the liquidator may, with the sanction
of a Special Resolution of the Company and any other sanction required by the
Statute, divide amongst the Members in specie or kind the whole or any part of
the assets of the Company (whether they shall consist of property of the same
kind or not) and may for such purpose set such value as he deems fair upon any
property to be divided as aforesaid and may determine how such division shall
be carried out as between the Members or different classes of Members. The
liquidator may with the like sanction, vest the whole or any part of such
assets in trustees upon such trusts for the benefit of the contributories as
the liquidator, with the like sanction, shall think fit, but so that no Member
shall be compelled to accept any shares or other securities whereon there is
any liability.
122. If the Company shall be wound up, and the assets available for
distribution amongst the Members as such shall be insufficient to repay the
whole of the paid-up capital, such assets shall be distributed so that, as
nearly as may be, the losses shall be borne by the Members in proportion to
the capital paid up, or which ought to have been paid up, at the commencement
of the winding up on the shares held by them respectively. And if in a winding
up the assets available for distribution amongst the Members shall be more
than sufficient to repay the whole of the capital paid up at the commencement
of the winding up, the excess shall be distributed amongst the Members in
proportion to the capital paid up at the commencement of the winding up on the
shares held by them respectively. This Article is to be without prejudice to
the rights of the holders of shares issued upon special terms and conditions.
INDEMNITY
---------
123. The Directors and officers for the time being of the Company and any
trustee for the time being acting in relation to any of the affairs of the
<PAGE>
Company and their heirs, executors, administrators and personal
representatives respectively shall be indemnified out of the assets of the
Company from and against all actions, proceedings, costs, charges, losses,
damages and expenses which they or any of them shall or may incur or sustain
by reason of any act done or omitted in or about the execution of their duty
in their respective offices or trusts, except such (if any) as they shall
incur or sustain by or through their own wilful neglect or default
respectively and no such Director, officer or trustee shall be answerable for
the acts, receipts, neglects or defaults of any other Director, officer or
trustee or for joining in any receipt for the sake of conformity or for the
solvency or honesty of any banker or other persons with whom any monies or
effects belonging to the Company may be lodged or deposited for safe custody
or for any insufficiency of any security upon which any monies of the Company
may be invested or for any other loss or damage due to any such cause as
aforesaid or which may happen in or about the execution of his office or trust
unless the same shall happen through the wilful neglect or default of such
Director, Officer or trustee.
FINANCIAL YEAR
---------------
124. Unless the Directors otherwise prescribe, the financial year of the
Company shall end on 31st December in each year and, following the year of
incorporation, shall begin on 1st January in each year.
AMENDMENTS OF ARTICLES
-----------------------
125. Subject to the Statute, the Company may at any time and from time to
time by Special Resolution alter or amend these Articles in whole or in part.
TRANSFER BY WAY OF CONTINUATION
-------------------------------
126. If the Company is exempted as defined in the Statute, it shall, subject
to the provisions of the Statute and with the approval of a Special
Resolution, have the power to register by way of continuation as a body
corporate under the laws of any jurisdiction outside the Cayman Islands and to
be deregistered in the Cayman Islands.
DATED the 19th day of July 1996
s/Charles Jennings
_________________________________
Charles Jennings, Attorney-at-Law
PO Box 309
Grand Cayman, B.W.I.
s/Andrew Reid
__________________________________
Andrew Reid, Attorney-at-Law
PO Box 309
Grand Cayman, B.W.I.
___________________________________
Witness to the above signatures
Sharon Williams, Corporate Assistant
PO Box 309
Grand Cayman, B.W.I.
I, Cindy Y. Jefferson DEP Registrar of Companies in and for the Cayman Islands
DO HEREBY CERTIFY that this is a true and correct copy of the Articles of
Association of this Company duly incorporated on the l9th day of July, 1996
______________________________
REGISTRAR OF COMPANIES
<PAGE>
Exhibit B.8.b
THE COMPANIES LAW (1995 REVISION)
---------------------------------
COMPANY LIMITED BY SHARES
-------------------------
MEMORANDUM OF ASSOCIATION
OF
NEERI INTERNATIONAL
1. The name of the Company is NEERI International.
2. The Registered Office of the Company shall be at the offices of Maples
and Calder, Attorneys-at-Law, Ugland House, P.O. Box 309, George Town, Grand
Cayman, Cayman Islands, British West Indies or at such other place as the
Directors may from time to time decide.
3. The objects for which the Company is established are unrestricted and
shall include, but without limitation, the following:
(i) (a) To carry on the business of an investment company and to act as
promoters and entrepreneurs and to carry on business as financiers,
capitalists, concessionaires, merchants, brokers, traders, dealers, agents,
importers and exporters and to undertake and carry on and execute all kinds of
investment, financial, commercial, mercantile, trading and other operations.
(b) To carry on whether as principals, agents or otherwise howsoever the
business of realtors, developers, consultants, estate agents or managers,
builders, contractors, engineers, manufacturers, dealers in or vendors of all
types of property
including services.
(ii) To exercise and enforce all rights and powers conferred by or incidental
to the ownership of any shares, stock, obligations or other securities
including without prejudice to the generality of the foregoing all such powers
of veto or control as may be conferred by virtue of the holding by the Company
of some special proportion of the issued or nominal amount thereof, to provide
managerial and other executive, supervisory and consultant services for or in
relation to any company in which the Company is interested upon such terms as
may be thought fit.
(iii)To purchase or otherwise acquire, to sell, exchange, surrender, lease,
mortgage, charge, convert, turn to account, dispose of and deal with real and
personal property and rights of all kinds and, in particular, mortgages,
debentures, produce, concessions, options, contracts, patents, annuities,
licenses, stocks, shares, bonds, policies, book debts, business concerns,
undertakings, claims, privileges and choses in action of all kinds.
(iv) To subscribe for, conditionally or unconditionally, to underwrite, issue
on commission or otherwise, take, hold, deal in and convert stocks, shares and
securities of all kinds and to enter into partnership or into any arrangement
for sharing profits, reciprocal concessions or cooperation with any person or
company and to promote and aid in promoting, to constitute, form or organize
any company, syndicate or partnership of any kind, for the purpose of
acquiring and undertaking any property and liabilities of the Company or of
advancing, directly or indirectly, the objects of the Company or for any other
purpose which the Company may think expedient.
(v) To stand surety for or to guarantee, support or secure the performance
of all or any of the obligations of any person, firm or company whether or not
related or affiliated to the Company in any manner and whether by personal
covenant or by mortgage, charge or lien upon the whole or any part of the
undertaking, property and assets of the Company, both present and future,
including its uncalled capital or by any such method and whether or not the
Company shall receive valuable consideration therefor.
<PAGE>
(vi) To engage in or carry on any other lawful trade, business or enterprise
which may at any time appear to the Directors of the Company capable of being
conveniently carried on in conjunction with any of the aforementioned
businesses or activities or which may appear to the Directors or the Company
likely to be profitable to the Company.
In the interpretation of this Memorandum of Association in general and of this
Clause 3 in particular no object, business or power specified or mentioned
shall be limited or restricted by reference to or inference from any other
object, business or power, or the name of the Company, or by the juxtaposition
of two or more objects, businesses or powers and that, in the event of any
ambiguity in this clause or elsewhere in this Memorandum of Association' the
same shall be resolved by such interpretation and construction as will widen
and enlarge and not restrict the objects, businesses and powers of and
exercisable by the Company.
4. Except as prohibited or limited by the Companies Law (1995 Revision),
the Company shall have full power and authority to carry out any object and
shall have and be capable of from time to time and at all times exercising any
and all of the powers at any time or from time to time exercisable by a
natural person or body corporate in doing in any part of the world whether as
principal, agent, contractor or otherwise whatever may be considered by it
necessary for the attainment of its objects and whatever else may be
considered by it as incidental or conducive thereto or consequential thereon,
including, but without in any way restricting the generality of the foregoing,
the power to make any alterations or amendments to this Memorandum of
Association and the Articles of Association of the Company considered
necessary or convenient in the manner set out in the Articles of Association
of the Company, and the power to do any of the following acts or things, viz:
to pay all expenses of and incidental to the promotion, formation and
incorporation of the Company; to register the Company to do business in any
other jurisdiction; to sell, lease or dispose of any property of the Company;
to draw, make, accept, endorse, discount, execute and issue promissory notes,
debentures, bills of exchange, bills of lading, warrants and other negotiable
or transferable instruments; to lend money or other assets and to act as
guarantors; to borrow or raise money on the security of the undertaking or on
all or any of the assets of the Company including uncalled capital or without
security; to invest monies of the Company in such manner as the Directors
determine; to promote other companies; to sell the undertaking of the Company
for cash or any other consideration; to distribute assets in specie to Members
of the Company; to make charitable or benevolent donations; to pay pensions or
gratuities or provide other benefits in cash or kind to Directors, officers,
employees, past or present and their families; to purchase Directors and
officers liability insurance and to carry on any trade or business and
generally to do all acts and things which, in the opinion of the Company or
the Directors, may be conveniently or profitably or usefully acquired and
dealt with, carried on, executed or done by the Company in connection with the
business aforesaid PROVIDED THAT the Company shall only carry on the
businesses for which a license is required under the laws of the Cayman
Islands when so licensed under the terms of such laws.
5. The liability of each Member is limited to the amount from time to time
unpaid on such Member's shares.
6. The share capital of the Company is US$50,000 divided into 50,000 shares
of a nominal or par value of US$1.00 each with power for the Company insofar
as is permitted by law, to redeem or purchase any of its shares and to
increase or reduce the said capital subject to the provisions of the Companies
Law (1995 Revision) and the Articles of Association and to issue any part of
its capital, whether original, redeemed or increased with or without any
preference, priority or special privilege or subject to any postponement of
rights or to any conditions or restrictions and so that unless the conditions
of issue shall otherwise expressly declare every issue of shares whether
declared to be preference or otherwise shall be subject to the powers
hereinbefore contained.
7. If the Company is registered as exempted, its operations will be carried
on subject to the provisions of Section 192 of the Companies Law (1995
Revision) and, subject to the provisions of the Companies Law (1995 Revision)
<PAGE>
and the Articles of Association, it shall have the power to register by way of
continuation as a body corporate limited by shares under the laws of any
jurisdiction outside the Cayman Islands and to be deregistered in the Cayman
Islands.
WE the several persons whose names and addresses are subscribed are desirous
of being formed into a company in pursuance of this Memorandum of Association
and we respectively agree to take the number of shares in the capital of the
Company set opposite our respective names.
DATED the 19th day of July 1996
SIGNATURES, ADDRESSES and NUMBER OF SHARES
DESCRIPTION OF SUBSCRIBERS TAKEN BY EACH
- -------------------------- ----------------
s/Charles Jennings
_________________________________
Charles Jennings, Attorney-at-Law One
PO Box 309
Grand Cayman, B.W.I.
s/Andrew Reid
_________________________________
Andrew Reid, Attorney-at-Law One
PO Box 309
Grand Cayman, B.W.I.
____________________________________
Witness to the above signatures One
Sharon Williams, Corporate Assistant
PO Box 309
Grand Cayman, B.W.I.
<PAGE>
I, Cindy Y. Jefferson DEP. Registrar of Companies in and for the Cayman
Islands DO HEREBY CERTIFY that this is a true and correct copy of the
Memorandum of Association of this Company duly incorporated on the 19th day of
July, 1996.
s/Cindy Y. Jefferson DEP
____________________________
REGISTRAR OF COMPANIES
<PAGE>
Exhibit B.9.a
ARTICLES OF ORGANIZATION
ARTICLE I
----------
The name of the corporation is NEES Communications. Inc.
ARTICLE II
-----------
To provide telecommunications services, information services, other services
or products subject to the jurisdiction of the Federal Communications
Commission, or products or services that are related or incidental thereto.
To have as additional purposes all powers granted to corporations by the laws
of The Commonwealth of Massachusetts, provided that no such purpose shall
include any activity inconsistent with law.
ARTICLE III
-----------
The number of shares of capital stock that the corporation is authorized to
issue is 10,000 having a par value of $1.00 per share.
ARTICLE IV
-----------
Not more than one type, class or series is authorized.
ARTICLE V
----------
No restrictions are imposed by the Articles of Organization upon the transfer
of stock of any class.
ARTICLE VI
-----------
A. Meetings of the stockholders of the corporation may be held anywhere in
the United States.
B. The corporation may carry out any or all of the purposes referred to in
Article II in whole or in part through one or more subsidiaries.
C. The corporation may carry out any actions referred to in Article II to
the same extent as might an individual, whether as principal, agent,
contractor, or otherwise, and either alone or in conjunction or as a
joint venture or other arrangement with any corporation, association,
trust, firm, or individual.
D. The corporation may participate with others, as a general or limited
partner, in any business enterprise for any of the purposes which the
corporation would have the power to conduct by itself.
E. No director of the corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director notwithstanding any provision of law
imposing such liability, except with respect to any matter as to which
such liability shall have been imposed (I) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under section sixty-one
<PAGE>
or sixty-two of chapter one hundred and fifty-six B of the General Laws
of Massachusetts, or (iv) for any transaction for which the director
derived an improper personal benefit.
The corporation shall indemnify each of its directors and officers
against any loss, liability or expense, including amounts paid in
satisfaction or judgments, in compromise or as fines and penalties, and
counsel fees, imposed upon or reasonably incurred by him in connection
with the defense or disposition of any action, suite or other
proceeding, whether civil or criminal, including but not limited to
derivative suits (to the extent permitted by law), in which he may be
involved or with which he may be threatened, while in office or
thereafter, by reason of his being or having been an director or
officer, except with respect to any matter as to which he shall have
been adjudicated in such action, suit or proceeding not to have acted in
good faith in the reasonable belief that his action was in the best
interests of the corporation, or, to the extent that such matter relates
to service with respect to any employee benefit plan, as in the best
interests of the participants of beneficiaries of such plan. As to any
matter disposed of by a compromise payment by a director or officer,
pursuant to a consent decree or otherwise, no indemnification either for
said payment or for any other expenses shall be provided unless such
compromise shall be approved as in the best interests of the
corporation, after notice that it involves such indemnification, if no
change in control has occurred (a) by a disinterested majority of the
directors then in office, (b) by a majority of the disinterested
directors then in office, provided that there has been obtained an
opinion in writing of independent legal counsel to the effect that such
director or officer appears to have acted in good faith in the
reasonable belief that his action was in the best interests of the
corporation, or (c) by the vote, at a meeting duly called and held, of
the holders of a majority of the shares outstanding and entitled to vote
thereon, exclusive of any shares owned by any interested director or
officer or, if a change in control shall have occurred, by an opinion in
writing of independent legal counsel to the effect that such director or
officer appears to have acted in good faith in the reasonable belief
that his action was in the best interests of the corporation.
In discharging his duties any such director or officer, when acting in
good faith, shall be fully protected in relying upon the books of
account of the corporation or of another organization in which he serves
as contemplated by this Article, reports made to the corporation or to
such other organization by any of its officers or employees or by
counsel, accountants, appraisers or other experts or consultants
selected with reasonable care by the board of directors of the
corporation or similar governing body of such other organization, or
upon other records of the corporation or of such other organization.
No director or officer shall be liable for any act, omission, step or
conduct taken or had in good faith, which (whether by condition or
otherwise) is required, authorized or approved by any order or orders
issued pursuant to the Public Utility Holding Company Act of 1935, the
Telecommunications Act of 1996, the Communications Act of 1934, or any
other Federal statute or any state statute regulating the corporation or
a subsidiary, if any, by reason of their being subsidiaries of public
utility companies or public utility holding companies or by reason of
their activities as such, or any amendments to any thereof. In any
action, suit or proceeding based on any act, omission, step or conduct,
as in this paragraph described, the provisions hereof shall be brought
to the attention of the court. In the event that the foregoing
provisions of this paragraph are found by the court not to constitute a
valid defense on the grounds of not begin applicable to the particular
class of plaintiff, each such director and officer shall be reimbursed
for, or indemnified against, all loss, liability and expense incurred by
him or imposed on him, in connection with, or arising out of, any such
action, suite or proceeding based on any act, omission, step or conduct
taken or had in good faith as in this Article described; provided,
however, that as to any matter disposed of by a compromise payment by
such director or officer, pursuant to a consent decree or otherwise, no
indemnification either for said payment or for any other expenses shall
<PAGE>
be provided unless such compromise shall be approved as in the best
interest of the corporation as heretofore provided in this Article.
Such loss, liability and expense shall include, but shall not be limited
to, judgments, court costs and attorneys' fees.
Expenses incurred with respect to the defense or disposition of any
action, suite or proceeding heretofore referred to in this Article shall
be advanced by the corporation prior to the final disposition of such
action, suit or proceeding, upon receipt of an undertaking by or on
behalf of the recipient to repay such amount if it is ultimately
determined that he is not entitled to indemnification, which undertaking
shall be accepted without reference to the financial ability of the
recipient to make such repayment. If in an action, suit or proceeding
brought by or in right of the corporation, a director is held not
liable, whether because relieved of liability under the first paragraph
of this Article or otherwise, he shall be deemed to have been entitled
to indemnification for expenses incurred in defense of said action, suit
or proceeding.
As used in this Article:
(i) The term "officer" includes (a) persons who serve at the request
of the corporation as directors, officers, or trustees of another
organization and (b) employees of the corporation and its affiliates who
serve in any capacity with respect to benefit plans for the
corporation's employees.
(ii) An "interested" director or officer is one against who in such
capacity the proceeding in question or another proceeding on the same or
similar grounds is then pending.
(iii) A "change in control" occurs when: (a) any individual,
corporation, association, partnership, joint venture, trust or other
entity or association thereof acting in concert (excluding any employee
benefit plan, dividend reinvestment plan or similar plan of the
corporation, or any trustee thereof acting in such capacity) acquires
more than 20% of the corporation's outstanding stock having general
voting rights or more than 20% of the common shares of any entity owning
more than 50% of the corporation's outstanding stock having general
voting rights, whether in whole or in part, by means of an offer made
publicly to the holders of all or substantially all of such outstanding
stock or shares to acquire stock or shares for cash, other property, or
a combination thereof or by any other means, unless the transaction is
consented to by vote of a majority of the continuing directors; or (b)
continuing directors cease to constitute a majority of the board.
(iv) The term "continuing director" shall mean any director of the
corporation who (a) was a member of the initial board of directors of
the corporation as voted by the incorporators of the corporation, or (b)
was recommended for his initial term of office by a majority of
continuing directors in office at the time of such recommendation.
Nothing contained in this Article shall (I) limit the power of the
corporation to indemnify employees and agents of the corporation of its
subsidiaries other than directors and officers on any terms it deems
appropriate not prohibited by law, (ii) limit the power of the
corporation to indemnify directors and officers for expenses incurred in
suits, actions, or other proceedings initiated by such director or
officer or (iii) affect any rights to indemnification to which
corporation personnel other than directors and officers may be entitled
by contract or otherwise. The rights provided in this Article shall not
be exclusive of or affect any other right to which any director or
officer may be entitled and such rights shall inure to the benefit of
its or his successors, heirs, executors, administrators and other legal
representatives. Such other rights shall include all powers, immunities
and rights of reimbursement allowable under the laws of The Commonwealth
of Massachusetts.
No amendment to or repeal of this Article shall apply to or have any
effect upon the liability, exoneration or indemnification of any
director or officer for or with respect to any acts or omissions of the
director or officer occurring prior to such amendment or repeal.
<PAGE>
F. The by-laws may be amended, altered or repealed at any meeting of the
stockholders (or, prior to the issue of the initial capital stock, at
any meeting of the incorporators), provided notice of the proposed
amendment, alteration or repeal is given in the notice of said meeting.
They may also be altered, amended or repealed by vote of a majority of
the directors then in office, except that the directors shall not take
any action which provides for indemnification of directors nor any
action to amend Article IX of the by-laws, and except that the directors
shall not take any action unless permitted by law.
Any by-law so altered, amended or repealed by the directors may be
further altered or amended or reinstated by the stockholders in the
above manner.
ARTICLE VII
------------
The effective date of organization of the corporation is August 2, 1996.
ARTICLE VIII
-------------
The post office address of the corporation in Massachusetts is:
25 Research Drive, Westborough, MA 01582
Officers Name Residence
- -------- ---- ----------
President David L. Holt 6 Glen Court
Sutton, MA 01590
Treasurer John G. Cochrane 8 Captain Thomson Lane
Hingham, MA 02043
Clerk Robert J. Brill 149C Beaman Road
Princeton, MA 01541
Directors
Name Residence
- ---- ---------
Joan T. Bok 53 Pickney Street
Boston, MA 02114
John W. Rowe 929 Salem End Road
Framingham, MA 01701
Jeffrey D. Tranen 12 Whitridge Road
South Natick, MA 01760
Alfred D. Houston 19 Tanglewood Road
Wellesley, MA 02181
Cheryl A. LaFleur 2 Lilac Circle
Wellesley, MA 02181
John H. Dickson 17 Dunster Street
Needham, MA 02191
David L. Holt 6 Glen Court
Sutton, MA 01590
The fiscal year of the corporation shall end on the last day of the month of
December.
The name and business address of the Registered Agent of the corporation, if
any, is: None.
<PAGE>
ARTICLE IX
-----------
By-laws of the corporation have been duly adopted and the president,
treasurer, clerk and directors whose names are set forth above, have been duly
elected.
IN WITNESS WHEREOF and under the pains and penalties of perjury, I/WE, whose
signature(s) appear below as incorporator(s) and whose names and business or
residential address(es) ARE CLEARLY TYPED OR PRINTED beneath each signature do
hereby associate with the intention of forming this corporation under the
provisions of General Laws Chapter 156B and do hereby sign these Articles of
Organization as incorporator(s) this 1st day of August 1996.
_______________________ _________________________
Kirk L. Ramsauer Robert J. Brill
25 Research Drive 25 Research Drive
Westborough, MA 01582 Westborough, MA 01582
<PAGE>
Exhibit B.9.b
B Y - L A W S
OF
NEES COMMUNICATIONS, INC.
<PAGE>
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting.
- ---------------------------
The annual meeting of stockholders shall be held at the office of the
corporation in the Town of Westborough, Massachusetts, or at such other place
in Massachusetts as the president or a majority of the directors may
designate, on the fourth Friday of March in each year, if it be not a legal
holiday, and if it be a legal holiday, then on the next succeeding day not a
legal holiday. Purposes for which the annual meeting is to be held additional
to those prescribed by law, by the articles of organization and by these
by-laws may be specified by the board of directors or by writing signed by the
president or by a majority of the directors or by one or more stockholders who
are entitled to vote and who hold at least one-fourth part in interest of the
capital stock. If such annual meeting is omitted on the day herein provided
therefor, a special meeting may be held in place thereof, and any business
transacted or elections held at such meeting shall have the same effect as if
transacted or held at the annual meeting.
Section 2. Special Meetings.
- -------------------------------
Special meetings of the stockholders may be called to be held anywhere in
Massachusetts by the president or by a majority of the directors, and shall be
called by the clerk or, in case of the death, absence, incapacity or refusal
of the clerk, by any other officer of the corporation, upon written
application of one or more stockholders who are entitled to vote and who hold
at least one-fourth part in interest of the capital stock entitled to vote at
the meeting, stating the time, place and purpose of the meeting.
Section 3. Notice of Meetings.
- -------------------------------
A written or printed notice of each meeting of stockholders, stating the
place, day and hour thereof and the purposes for which the meeting is called,
shall be given by the clerk, at least seven days before such meeting, to each
stockholder entitled to vote thereat by leaving such notice with him or at his
residence or usual place of business, or by mailing it, postage prepaid, and
addressed to such stockholder at his address as it appears in the records of
the corporation. In the absence or disability of the clerk, such notice may
be given by a person designated either by the clerk or by the person or
persons calling the meeting or by the board of directors. No notice of the
time, place or purpose of any regular or special meeting of the stockholders
shall be required if every stockholder entitled to notice thereof is present
in person or is represented at the meeting by proxy; or if every such
stockholder, or his attorney thereunto authorized, by a writing, executed
before or after the meeting, and filed with the records of the meeting, waives
such notice.
Section 4. Quorum.
- -------------------
At any meeting of the stockholders, a majority in interest of all stock
issued and outstanding and entitled to vote upon a question to be considered
at the meeting shall constitute a quorum for the consideration of such
question, but a less interest may adjourn any meeting from time to time, and
the meeting may be held as adjourned without further notice. When a quorum is
present at any meeting, a majority of the stock represented thereat and
entitled to vote shall, except where a larger vote is required by law, by the
articles of organization or by these by-laws, decide any question brought
before such meeting.
<PAGE>
Section 5. Proxies and Voting.
- ------------------------------
Stockholders who are entitled to vote shall have one vote for each share
of stock owned by them. Stockholders may vote either in person or by proxy in
writing dated not more than six (6) months before the meeting named therein,
which shall be filed with the clerk of the meeting before being voted. Such
proxies shall entitle the holders thereof to vote at any adjournment of such
meeting but shall not be valid after the final adjournment of such meeting.
ARTICLE II
DIRECTORS
Section 1. Powers.
- -------------------
The board of directors shall have, and may exercise all the powers of the
corporation, except such as are conferred upon the stockholders by law, by the
articles of organization, and by these by-laws. In particular, and without
limiting the generality of the foregoing, the directors may at any time issue
all or from time to time any part of the unissued capital stock of the
corporation from time to time authorized under the Articles of Organization
and may determine, subject to any requirements of law, the consideration for
which stock is to be issued and the manner of allocating such consideration
between capital and surplus.
Section 2. Election.
- ---------------------
A board of not less than three directors shall be chosen by ballot at the
annual meeting of the stockholders or at the special meeting held in place
thereof. The number of directors for each corporate year shall be fixed by
vote at the meeting at which they are elected but the stockholders may, at any
special meeting held for the purpose during any such year, increase or
decrease (within the limit above specified) the number of directors as thus
fixed, and elect new directors to complete the number so fixed, or remove
directors to reduce the number of directors to the number so fixed. The
number of directors may be increased or decreased to a number no less than
three and no more than seven by the directors at any time by a vote of a
majority of the directors then in office until the next annual meeting or
special meeting in lieu of such annual meeting, provided, however, that the
directors may only eliminate vacancies existing by reason of the death,
resignation, removal or disqualification of one or more directors. No
director need be a stockholder. Subject to law, to the articles or
organization and to the other provisions of these by-laws, each director shall
hold office until the next annual meeting and until his successor is chosen
and qualified.
Section 3. Regular Meetings.
- -----------------------------
Regular meetings of the board of directors may be held at such places and
at such times as the board may by vote from time to time determine, and if so
determined, no notice thereof need be given. A regular meeting of the board
of directors may be held without notice immediately after, and at the same
place as the annual meeting of the stockholders, or the special meeting of the
stockholders held in place of such annual meeting.
Section 4. Special Meetings.
- -----------------------------
Special meetings of the board of directors may be held at any time and at
any place when called by the president, treasurer, or two or more directors,
reasonable notice thereof being given to each director, or at any time without
call or formal notice, provided all the directors are present or waive notice
thereof by a writing which is filed with the records of the meeting. In any
case it shall be deemed sufficient notice to a director to send notice by mail
or telegram at least forty-eight hours before the meeting addressed to him at
his usual or last known business or residence address.
<PAGE>
Section 5. Quorum.
- -------------------
A majority of the board of directors shall constitute a quorum for the
transaction of business, but a less number may adjourn any meeting from time
to time, and the meeting may be held as adjourned without further notice.
When a quorum is present at any meeting, a majority of the members in
attendance thereat shall decide any question brought before such meeting.
Section 6. Committees.
- ----------------------
Standing or temporary committees may be appointed from its own number by
the board of directors from time to time, with such duties and powers as may
be prescribed by vote of the board of directors.
ARTICLE III
OFFICERS AND AGENTS
Section 1. Election and Appointment.
- -------------------------------------
The officers shall be a president, a clerk, a treasurer and such other
officers and agents as the board of directors may in their discretion appoint.
The treasurer and the clerk shall be chosen by ballot at the annual meeting of
the stockholders. The president shall be elected annually by the board of
directors after its election by the stockholders. Unless the board of
directors otherwise determines, the president shall be a director. The clerk
shall be a resident of Massachusetts. So far as is permitted by law, any two
or more offices may be filled by the same person. Subject to law, and to the
other provisions of these by-laws, the treasurer and clerk shall each hold
office until the next annual meeting of stockholders and until his successor
is chosen and qualified; the president shall hold office until the first
meeting of directors after the next annual meeting of stockholders and until
his successor is chosen and qualified; and the other officers and agents shall
hold office during the pleasure of the board of directors or for such term as
the board of directors shall prescribe. Each officer shall, subject to these
by-laws, have in addition to the duties and powers herein set forth such
duties and powers as are commonly incident to his office, and such duties and
powers as the board of directors shall from time to time designate.
Section 2. President and Vice Presidents.
- ------------------------------------------
Except as otherwise determined by the board of directors, the president
shall be the chief executive officer of the corporation. Except as otherwise
determined by the board of directors, he shall preside at all meetings of the
stockholders and of the board of directors at which he is present. The
president shall have custody of the treasurer's bond.
Any vice presidents shall have such powers as the board of directors
shall from time to time designate.
Section 3. Clerk.
- ------------------
The clerk shall keep an accurate record of the proceedings of all
meetings of the stockholders in books provided for the purpose, which books
shall be kept at the principal office of the corporation and shall be open at
all reasonable times to the inspection of any stockholder. If no secretary is
appointed, the clerk shall also keep an accurate record of the proceedings of
all meetings of the board of directors. In the absence of the clerk at any
meeting of the stockholders, or of the board of directors if no secretary is
appointed, the proceedings of such meeting shall be recorded by an assistant
clerk, or if there be none or he is absent, by a temporary clerk chosen at the
meeting. The clerk and any such assistant or temporary clerk shall be sworn.
<PAGE>
Section 4. Secretary.
- ----------------------
If a secretary is appointed, he shall keep accurate minutes of all
meetings of the board of directors, and in his absence from any such meeting,
an assistant secretary, or if there be none or he is absent, a temporary
secretary, chosen at the meeting, shall record the proceedings thereof.
Section 5. Treasurer.
- ----------------------
The treasurer shall, subject to the direction and under the supervision
of the board of directors, have general charge of the financial concerns of
the corporation and the care and custody of the funds and valuable papers of
the corporation, except his own bond, and he shall have power to endorse for
deposit or collection all notes, checks, drafts and other obligations payable
to the corporation or its order, and to accept drafts on behalf of the
corporation. He shall keep, or cause to be kept accurate books of account,
which shall be the property of the corporation. If required by the board of
directors he shall give bond for the faithful performance of his duty in such
form, in such sum, and with such sureties as the board of directors shall
require.
Section 6. Removals.
- ---------------------
The stockholders may, at any special meeting called for the purpose, by
vote of a majority of the capital stock issued and outstanding and entitled to
vote, remove from office the treasurer, clerk or any director, and elect his
successor. The board of directors may likewise, by vote of a majority of
their entire number, as fixed by the stockholders, remove from office any
officer or agent of the corporation; provided, however, that the board of
directors may remove the treasurer or clerk for cause only.
Section 7. Vacancies.
- ----------------------
If the office of any director or of any officer or agent, one or more,
becomes vacant by reason of death, resignation, removal, disqualification or
otherwise, the directors or the remaining directors, though less than a
quorum, may, unless such vacancy, if in the office of the treasurer, clerk or
director, shall have been filled by the stockholders, choose by a majority
vote of their entire number, a successor or successors, who shall hold office
for the unexpired term, subject to the provisions of Section 6 of this
Article. The stockholders may at any time fill any and all vacancies arising
in the office of directors, treasurer or clerk.
ARTICLE IV
CAPITAL STOCK
Section 1. Shares Represented by Certificates and Uncertificated Shares.
- -------------------------------------------------------------------------
The board of directors may provide by resolution that some or all of any
or all classes and series of shares shall be uncertificated shares. Unless
such a resolution has been adopted, each stockholder shall be entitled to a
certificate of the capital stock of the corporation owned by him, in such form
as shall in conformity to law, be prescribed from time to time by the board of
directors. Such certificate shall be signed by the president or a vice
president and by the treasurer or an assistant treasurer, and shall bear the
seal of the corporation.
<PAGE>
Section 2. Transfer Books.
- ---------------------------
The treasurer or such agent or agents as may be employed by the treasurer
with the approval of the board of directors shall keep the stock and transfer
books of the corporation and a record of all certificates of stock issued and
of all transfers of stock, and a register of all the stockholders, their
addresses, and the number of shares held by each, in books provided for that
purpose.
The board of directors may fix in advance a time, no more than sixty days
preceding the date of any meeting of stockholders or the date for the payment
of any dividend or the making of any distribution to stockholders or the last
day on which the consent or dissent of stockholders may be effectively
expressed for any purpose, as the record date for determining the stockholders
having the right to notice of and to vote at such meeting and any adjournment
thereof or the right to receive such dividend or distribution or the right to
give such consent or dissent, and in such case only stockholders of record on
such record date shall have such right, notwithstanding any transfer of stock
on the books of the corporation after the record date; or without fixing such
record date, the board of directors may for any of such purposes close the
transfer books for all or any part of such sixty-day period.
Section 3. Transfer of Shares.
- -------------------------------
Title to a certificate of stock and to the shares represented thereby
shall be transferred only by delivery of the certificate properly endorsed, or
by delivery of the certificate accompanied by a written assignment of the
same, or a written power of attorney to sell, assign, or transfer the same or
the shares represented thereby, properly executed; but the person registered
on the books of the corporation as the owner of shares shall have the
exclusive right to receive dividends thereon and to vote thereon as such
owner, shall be held liable for such calls and assessments, if any, as may
lawfully be made thereon, and except only as may be required by law, may in
all respects be treated by the corporation as the exclusive owner thereof.
It shall be the duty of each stockholder to notify the corporation of his
post office address.
Section 4. Loss of Certificates.
- ---------------------------------
In case of the alleged loss or destruction, or the mutilation of a
certificate of stock, a duplicate certificate may be issued in place thereof,
upon such reasonable terms as the board of directors may prescribe.
ARTICLE V
INDEMNIFICATION
No director of the corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director notwithstanding any provision of law imposing such
liability, except with respect to any matter as to which such liability shall
have been imposed (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (iii)
under section sixty-one or sixty-two of chapter one hundred and fifty-six B of
the General Laws of Massachusetts, or (iv) for any transaction from which the
director derived an improper personal benefit.
The corporation shall indemnify each of its directors and officers
against any loss, liability or expense, including amounts paid in satisfaction
of judgments, in compromise or as fines and penalties, and counsel fees,
imposed upon or reasonably incurred by him in connection with the defense or
disposition of any action, suit or other proceeding, whether civil or
<PAGE>
criminal, including but not limited to derivative suits (to the extent
permitted by law), in which he may be involved or with which he may be
threatened, while in office or thereafter, by reason of his being or having
been a director or officer, except with respect to any matter as to which he
shall have been adjudicated in such action, suit or proceeding not to have
acted in good faith in the reasonable belief that his action was in the best
interests of the corporation, or, to the extent that such matter relates to
service with respect to any employee benefit plan, as in the best interests of
the participants or beneficiaries of such plan. As to any matter disposed of
by a compromise payment by a director or officer, pursuant to a consent decree
or otherwise, no indemnification either for said payment or for any other
expenses shall be provided unless such compromise shall be approved as in the
best interests of the corporation, after notice that it involves such
indemnification, if no change in control has occurred (a) by a disinterested
majority of the directors then in office, (b) by a majority of the
disinterested directors then in office, provided that there has been obtained
an opinion in writing of independent legal counsel to the effect that such
director or officer appears to have acted in good faith in the reasonable
belief that his action was in the best interests of the corporation, or (c) by
the vote, at a meeting duly called and held, of the holders of a majority of
the shares outstanding and entitled to vote thereon, exclusive of any shares
owned by any interested director or officer or, if a change in control shall
have occurred, by an opinion in writing of independent legal counsel to the
effect that such director or officer appears to have acted in good faith in
the reasonable belief that his action was in the best interests of the
corporation.
In discharging his duties any such director or officer, when acting in
good faith, shall be fully protected in relying upon the books of account of
the corporation or of another organization in which he serves as contemplated
by this Article, reports made to the corporation or to such other organization
by any of its officers or employees or by counsel, accountants, appraisers or
other experts or consultants selected with reasonable care by the board of
directors of the corporation or similar governing body of such other
organization, or upon other records of the corporation or of such other
organization.
No director or officer shall be liable for any act, omission, step or
conduct taken or had in good faith, which (whether by condition or otherwise)
is required, authorized or approved by any order or orders issued pursuant to
the Public Utility Holding Company Act of 1935 or any other Federal statute or
any state statute regulating the corporation or a subsidiary, if any, by
reason of their being subsidiaries of public utility companies or public
utility holding companies or by reason of their activities as such, or any
amendments to any thereof. In any action, suit or proceeding based on any
act, omission, step or conduct, as in this paragraph described, the provisions
hereof shall be brought to the attention of the court. In the event that the
forgoing provisions of this paragraph are found by the court not to constitute
a valid defense on the grounds of not being applicable to the particular class
of plaintiff, each such director and officer shall be reimbursed for, or
indemnified against, all loss, liability and expense incurred by him or
imposed on him, in connection with, or arising out of, any such action, suit
or proceeding based on any act, omission, step or conduct taken or had in good
faith as in this Section described; provided, however, that as to any matter
disposed of by a compromise payment by such director or officer, pursuant to a
consent decree or otherwise, no indemnification either for said payment or for
any other expenses shall be provided unless such compromise shall be approved
as in the best interest of the corporation as heretofore provided in this
Article. Such loss, liability and expense shall include, but shall not be
limited to, judgments, court costs and attorneys' fees.
Expenses incurred with respect to the defense or disposition of any
action, suit or proceeding heretofore referred to in this Article shall be
advanced by the corporation prior to the final disposition of such action,
suit or proceeding, upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined that he is not
entitled to indemnification, which undertaking shall be accepted without
reference to the financial ability of the recipient to make such repayment.
If in an action, suit or proceeding brought by or in right of the corporation,
a director is held not liable, whether because relieved of liability under the
<PAGE>
first paragraph of this Article or otherwise, he shall be deemed to have been
entitled to indemnification for expenses incurred in defense of said action,
suit or proceeding.
As used in this Article:
(i) The term "officer" includes (a) persons who serve at the written
request of the corporation as directors, officers, or trustees of another
organization and (b) employees of the corporation and its affiliates who serve
in any capacity with respect to benefit plans for the corporation's employees.
(ii) An "interested" director or officer is one against whom in such
capacity the proceeding in question or another proceeding on the same or
similar grounds is then pending.
(iii) A "change in control" occurs when: (a) any individual,
corporation, association, partnership, joint venture, trust or other entity or
association thereof acting in concert (excluding any employee benefit plan,
dividend reinvestment plan or similar plan of the corporation, or any trustee
thereof acting in such capacity) acquires more than 20% of the corporation's
outstanding stock having general voting rights or more than 20% of the common
shares of any entity owning more than 50% of the corporation's outstanding
stock having general voting rights, whether in whole or in part, by means of
an offer made publicly to the holders of all or substantially all of such
outstanding stock or shares to acquire stock or shares for cash, other
property, or a combination thereof or by any other means, unless the
transaction is consented to by vote of a majority of the continuing directors;
or (b) continuing directors cease to constitute a majority of the board.
(iv) The term "continuing director" shall mean any director of the
corporation who (a) was a member of the initial board of directors of the
corporation as voted by the incorporators of the corporation, or (b) was
recommended for his initial term of office by a majority of continuing
directors in office at the time of such recommendation.
Nothing contained in this Article shall (i) limit the power of the
corporation to indemnify employees and agents of the corporation or its
subsidiaries other than directors and officers on any terms it deems
appropriate not prohibited by law, (ii) limit the power of the corporation to
indemnify directors and officers for expenses incurred in suits, actions, or
other proceedings initiated by such director or officer or (iii) affect any
rights to indemnification to which corporation personnel other than directors
and officers may be entitled by contract or otherwise. The rights provided in
this Article shall not be exclusive of or affect any other right to which any
director or officer may be entitled and such rights shall inure to the benefit
of its or his successors, heirs, executors, administrators and other legal
representatives. Such other rights shall include all powers, immunities and
rights of reimbursement allowable under the laws of The Commonwealth of
Massachusetts.
No amendment to or repeal of this Article shall apply to or have any
effect upon the liability, exoneration or indemnification of any director or
officer for or with respect to any acts or omissions of the director or
officer occurring prior to such amendment or repeal.
ARTICLE VI
SEAL
The seal of the corporation shall, subject to alteration by the board of
directors, consist of a flat-faced circular die with the words "NEES
Communications, Inc." and "1996 - Massachusetts" cut or engraved thereon.
<PAGE>
ARTICLE VII
EXECUTION OF PAPERS
Except as the board of directors may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts and other obligations made,
accepted, endorsed or released by the corporation, shall be signed by any
officer of the corporation.
ARTICLE VIII
FISCAL YEAR
Except as from time to time otherwise provided by the board of directors,
the fiscal year of the corporation shall be the calendar year.
ARTICLE IX
AMENDMENTS
These by-laws may be amended, altered or repealed at any meeting of the
stockholders (or, prior to the issue of the initial capital stock, at any
meeting of the incorporators), provided notice of the proposed amendment,
alteration or repeal is given in the notice of said meeting. These may also
be altered, amended or repealed by vote of a majority of the directors then in
office, except that the directors shall not take any action which provides for
indemnification of directors nor any action to amend this Article IX, and
except that the directors shall not take any action unless permitted by law.
Any by-law so altered, amended or repealed by the directors may be
further altered or amended or reinstated by the stockholders in the above
manner.
<PAGE>
Exhibit C.6.c
Execution Copy
TENTH SUPPLEMENTAL LOAN AGREEMENT
Between
BUSINESS FINANCE AUTHORITY
OF THE STATE OF NEW HAMPSHIRE
and
NEW ENGLAND POWER COMPANY
Dated as of January 1, 1996
Supplementing the Loan Agreement between
The Industrial Development Authority
of the State of New Hampshire and
New England Power Company
dated as of November 15, 1983,
as Heretofore Amended by a
First Supplemental Loan Agreement
dated as of April 1, 1986, a
Second Supplemental Loan Agreement
dated as of August 1, 1988, a
Third Supplemental Loan Agreement
dated as of April 1, 1989, a
Fourth Supplemental Loan Agreement
dated as of November 1, 1990, a
Fifth Supplemental Loan Agreement
dated as of June 15, 1991, a
Sixth Supplemental Loan Agreement
dated as of January 1, 1993, a
Seventh Supplemental Loan Agreement
dated as of October 1, 1993, an
Eighth Supplemental Loan Agreement
dated as of December 1, 1993, and a
Ninth Supplemental Loan Agreement
dated as of February 1, 1995
$29,850,000 Business Finance Authority
of the State of New Hampshire
Pollution Control Revenue Bonds
(New England Power Company Project -
1990 Series B (Third Issue))
<PAGE>
TABLE OF CONTENTS
-----------------
Section 1. Definitions........................................ 1
Section 2. Authority's Representation......................... 2
Section 3. Issue of 1990 Series B Bonds (Third Issue) and
Application of Proceeds Issue of Additional
Series S G&R Bonds................................. 2
Section 4. Rights and Duties of the Authority................. 2
Section 5. Company Not to Impair Interest Exemption; Use of
Project Facilities Rebate Covenant................. 4
Section 6. Securities Laws.................................... 4
Section 7. Notices............................................ 4
Section 8. Severability....................................... 5
Section 9. Counterparts....................................... 5
Section 10. Captions........................................... 5
Section 11. Governing Law...................................... 5
Section 12. Binding Effect..................................... 5
Section 13. Obligations of the Company Under the
Indenture.......................................... 5
<PAGE>
TENTH SUPPLEMENTAL LOAN AGREEMENT
This Tenth Supplemental Loan Agreement dated as of January 1, 1996 (the "Tenth
Supplemental Loan Agreement") is between-the Business Finance Authority of the
State of New Hampshire, a body politic and corporate (previously named The
Industrial Development Authority of the State of New Hampshire) established
under Chapter 162-A:3 of the Revised Statutes of the State of New Hampshire
(the "Authority"), and New England Power Company, a corporation organized and
existing under the laws of The Commonwealth of Massachusetts (the "Company").
The Authority is authorized by Chapter 162-I of the Revised Statutes of the
State of New Hampshire (the "Act") to finance pollution control facilities
through the issue of its industrial revenue bonds. The purpose of this Tenth
Supplemental Loan Agreement is to provide for the refunding of $29,850,000 of
the Authority's 7.80% Pollution Control Revenue Bonds (New England Power
Company - 1986 Series) (the "1986 Series Bonds") issued to pay a portion of
the Company's share of the cost of pollution control facilities constructed at
Unit No. 1 at the nuclear electric generating plant in the Town of Seabrook,
Rockingham County, New Hampshire, pursuant to a Loan Agreement between the
Authority and the Company dated as of November 15, 1983 (the "Original Loan
Agreement"), to which this instrument is supplemental.
It is hereby agreed as follows:
Section 1. Definitions.
-----------------------
For purposes hereof, the following words shall have the following meanings:
"Additional Series S G&R Bonds" means the General and Refunding Mortgage
Bonds to be issued pursuant to Section 3 hereof in an amount equal to the
aggregate principal amount of the 1990 Series B Bonds (Third Issue).
"Authority's Service Charge for the 1990 Series B Bonds (Third Issue)"
means a payment to the Authority for its own use of $223,875.00 on the date of
the issue of the 1990 Series B Bonds (Third Issue).
"Code" means the Internal Revenue Code of 1986, and the proposed,
temporary, and final regulations thereunder.
"Letter of Representation" means the letter from the Company addressed
to and accepted by the Authority and the underwriter named therein (the
"Underwriter") dated January 1, 1996 relating to the 1990 Series B Bonds
(Third Issue).
"Loan Agreement" means the Original Loan Agreement as amended and
supplemented by the First Supplemental Loan Agreement dated as of April 1,
1986, the Second Supplemental Loan Agreement dated as of August 1, 1988, the
Third Supplemental Loan Agreement dated as of April 1, 1989, the Fourth
Supplemental Loan Agreement dated as of November 1, 1990, the Fifth
Supplemental Loan Agreement dated as of June 15, 1991, the Sixth Supplemental
Loan Agreement dated as of January 1, 1993, the Seventh Supplemental Loan
Agreement dated as of October 1, 1993, the Eighth Supplemental Loan Agreement
dated as of December 1, 1993, the Ninth Supplemental Loan Agreement dated as
of February 1, 1995 and this Tenth Supplemental Loan Agreement.
"Eleventh Supplemental Indenture" means the Eleventh Supplemental
Indenture between the Authority and State Street Bank and Trust Company, as
Trustee, dated as of January 1, 1996, relating to the 1990 Series B Bonds
(Third Issue), supplementing and amending the Trust Indenture between the
Authority and said Trustee (as successor to BayBank Middlesex) dated as of
November 15, 1983 (the "Original Indenture" and, as supplemented and amended
by the First Supplemental Indenture dated as of April 1, 1986, the Second
Supplemental Indenture dated as of August 1, 1988, the Third Supplemental
Indenture dated as of April 1, 1989, the Fourth Supplemental Indenture dated
as of November 1, 1990, the Fifth Supplemental Indenture dated as of June 15,
1991, the Sixth Supplemental Indenture dated as of January 1, 1993, the
Seventh Supplemental Indenture dated as of October 1, 1993, the Eighth
Supplemental Indenture dated as of December 1, 1993, the Ninth Supplemental
Indenture dated as of July 1, 1994, the Tenth Supplemental Indenture dated as
<PAGE>
of February 1, 1995 and the Eleventh Supplemental Indenture, the "Indenture").
"1990 Series B Bonds (Third Issue)" means the Authority's $29,850,000
Pollution Control Revenue Bonds (New England Power Company Project - 1990
Series B (Third Issue)) issued pursuant to Section 3 hereof and the Indenture.
"Underwriting Agreement" means the agreement between the Authority and
the Underwriter dated January 1, 1996 relating to the 1990 Series B Bonds
(Third Issue).
Capitalized terms which are not defined herein but which are defined in
the Original Loan Agreement shall have the respective meanings attributed to
them therein.
Section 2. Authority's Representation.
--------------------------------------
To induce the Company to enter into this Agreement, the Authority
represents that the Authority is a body politic and corporate established
under Chapter 162-A:3 of the Revised Statutes of the State of New Hampshire.
Section 3. Issue of 1990 Series B Bonds (Third Issue) and
Application of Proceeds. Issue of Additional
Series S G & R Bonds.
----------------------------------------------------------
Subject to, and upon the terms and conditions of, the Underwriting
Agreement, the Authority shall issue $29,850,000 aggregate principal amount of
1990 B Series Bonds (Third Issue) pursuant to the Act in the form and with the
terms provided in the Indenture.
The Authority shall loan to the Company $29,850,000 by depositing the
Proceeds of the 1990 Series B Bonds (Third Issue) in the account in the Bond
Fund for the 1986 Series Bonds established by the Indenture, to be applied by
the Trustee, with other moneys, to the redemption of $29,850,000 principal
amount of such series on April 1, 1996. The Company hereby agrees to repay the
loan of the aggregate principal amount of the 1990 B Series Bonds (Third
Issue), and to issue and deliver to the Trustee a like aggregate principal
amount of its Additional Series S G&R Bonds in substantially the form set
forth in the Fourteenth Supplemental Indenture to the General and Refunding
Mortgage Indenture. The Additional Series S Bonds shall, together with
$20,750,000 principal amount of Series S G&R Bonds heretofore issued and
delivered to the Trustee, evidence the Company's obligation to repay the loans
to it of the Proceeds of all the 1990 Series B Bonds. The Series S G&R Bonds
shall be evidenced by one single fully registered bond registered in the name
of the Trustee, which shall be nontransferable except as provided in the
Indenture.
Section 4. Rights and Duties of the Authority.
----------------------------------------------
(a) Indemnification of the Authority.
---------------------------------
The Company agrees to indemnify and hold harmless the Authority and its
directors, members, officers, employees and agents from and against any and
all damages, losses, costs, charges, expenses, judgments and liabilities
incurred by it or them arising out of any claim in connection with: the
transactions contemplated by the Loan Agreement or the Indenture; the
construction, financing, occupancy, management, maintenance, operation or use
of Unit No. 1, or any accident, injury, or damage to any person occurring
therein or thereabout; any act or omission of the Company or any of its
agents, contractors, servants, employees or licensees; or the offering,
issuance, sale or any resale of any Bond; except (i) to the extent caused by
the willful dishonesty of or intentional violation of law by the party seeking
indemnification, and (ii) to the extent based on information furnished by the
Authority in writing specifically for use in any official statement or
prospectus used in connection with the sale of Bonds. If any such claim is
asserted, the Authority or its directors, members, officers, employees or
agents, as the case may be, will give prompt notice to the Company, and the
<PAGE>
Company will assume the defense thereof, with full power to litigate and
compromise the same in its sole discretion.
(b) Remedies of the Authority.
--------------------------
Notwithstanding any contrary provision in this Tenth Supplemental Loan
Agreement, the Authority and any of its members, officers, employees or
agents, as the case may be, shall have the right to take any action or make
any decision with respect to proceedings for indemnity against liability and
for collection or reimbursement from sources other than money or property held
under the Indenture or subject to the lien thereof. The Authority may enforce
its rights under the Loan Agreement which have not- been assigned to the
Trustee, and each such member, officer, employee and agent may enforce his
rights hereunder, by legal proceedings for the specific performance of any
covenant or agreement contained herein or for the enforcement of any other
appropriate legal or equitable remedy, and may recover damages caused by any
breach by the Company of its obligations to the Authority or to such director,
member, officer, employee or agent, as the case may be, under the Loan
Agreement, including court costs, reasonable attorneys' fees and other costs
and expenses incurred in enforcing such obligations.
(c) Responsibility.
---------------
The Authority shall be entitled to the advice of counsel (who may also
be counsel for the Company or the Trustee) and shall not be liable for any
action taken or omitted to be taken in good faith in reliance on such advice.
The Authority may rely conclusively on any notice, certificate or other
document furnished to it under the Loan Agreement or the Indenture and
reasonably believed by it to be genuine. The Authority shall not be liable for
any action taken or omitted to be taken by it in good faith and reasonably
believed by it to be within the discretion or power conferred upon it or
beyond such discretion or power, as the case may be, or taken by it pursuant
to any direction or instruction by which it is governed under the Loan
Agreement or the Indenture or omitted to be taken by it by reason of the lack
of direction or instruction required under the Loan Agreement or the Indenture
for such action, or be responsible for the consequences of any error of
judgment reasonably made by it. When any consent or other action by the
Authority is called for by the Loan Agreement or the Indenture, the Authority
may defer such action pending receipt of such evidence, if any, as it may
require in support thereof. A permissive right or power to act shall not be
construed as a requirement to act; and no delay in the exercise of a right or
power shall affect the subsequent exercise of that right or power. The
Authority shall in no event be liable for the application or misapplication of
funds, or for other acts or defaults, by any person, firm or corporation
except by its own directors, members, officers, agents and employees. No
recourse shall be had by the Company, the Trustee or the holder of any Bond
for any claim based on the Loan Agreement, the Indenture or the Bonds against
any member, officer, agent or employee of the Authority unless such claim is
based upon the willful dishonesty of, or intentional violation of law by, such
person. No covenant, obligation or agreement of the Authority contained in the
Loan Agreement or the Indenture shall be deemed to be a covenant, obligation
or agreement of any present or future director, member, officer, employee or
agent of the Authority in his individual capacity, and any member, officer or
employee of the Authority executing a Bond shall not be liable personally on
the Bond or be subject to any personal liability or accountability by reason
of the issue thereof. The Authority shall be entitled to the benefits of
Section 23 of the Indenture in respect of actions taken or omitted to be taken
by it under this Seventh Supplemental Loan Agreement.
(d) Financial Obligations; Operation of Facilities.
-----------------------------------------------
Nothing contained in the Loan Agreement or the Indenture shall in any
way obligate the Authority to pay any debt or meet any financial obligation to
any person at any time hereunder or in relation to the Bonds or the Project
Facilities or Additional Facilities except from moneys (other than moneys
received for its own purposes under the Loan Agreement) received under the
<PAGE>
provisions of the Loan Agreement and the Indenture or from the exercise of the
Authority's rights under the Loan Agreement and the Indenture.
Nothing contained in the Loan Agreement or the Indenture shall be
construed to require or authorize the Authority to operate the Project
Facilities, Unit No. 1 or Additional Facilities.
(e) Expenses of the Authority.
--------------------------
Except to the extent they have been paid or reimbursed from the
Construction Fund, the Company shall pay or reimburse the Authority on demand
for all reasonable fees, charges, expenses (including reasonable attorneys'
fees) and disbursements directly related to the financing of the Project
Facilities and Additional Facilities and the issuance of Bonds including,
without limitation, the Authority's Service Charge for the 1990 Series B Bonds
(Third Issue) and reimbursement for expenses reasonably incurred or advances
reasonably made in the exercise of its rights or the performance of its
obligations under the Loan Agreement or the Indenture, with interest at the
rate specified in Section 14(g) of the Indenture.
(f) Matters to be Considered by Authority.
--------------------------------------
In approving, concurring in or consenting to action of another party, or in
exercising any discretion or in making any determination, the Authority may
consider the interests of the public, which shall include the anticipated
effect of any transaction on tax revenues and employment, as well as the
interests of the other parties and the Bondholders; however, nothing herein
shall be construed as conferring on any person other than the Company, the
Trustee and the Bondholders any right to notice, hearing or participation in
the Authority's consideration, and nothing in this subsection shall be
construed as conferring on any of them any right additional to those conferred
elsewhere herein.
Section 5. Company Not to Impair Interest Exemption; Use of
Project Facilities: Rebate Covenant.
------------------------------------------------------------
The Company will not use any of the funds loaned to it by the Authority
hereunder (or the income earned through the investment thereof) or, to the
extent of its ownership and control, operate the facilities financed under the
Indenture in any manner, and will not take any other action, which would
impair the exclusion of interest on the Bonds from gross income for Federal
income tax purposes. The Company's use of such facilities (or facilities
replacing the same), shall, to the extent of its ownership and control, be in
furtherance of the purpose of pollution control or solid waste disposal and
otherwise in compliance with the Act and the Code. The Company will comply in
all respects with the requirements of Code Section 148(f) in the event that
Gross Proceeds of the 1990 Series B Bonds (Third Issue) are invested in
Nonpurpose Investments with a Yield higher than the Yield on the 1990 Series B
Bonds (Third Issue). The terms "Nonpurpose Investments," "Gross Proceeds" and
"Yield" shall have the meanings given in Code Section 148 and the regulations
promulgated thereunder and shall be applied as provided therein.
Section 6. Securities Laws.
---------------------------
In any remarketing of any Bonds, the Company shall at all times comply
with, and shall cooperate with the Remarketing Agent to the extent necessary
to permit the Remarketing Agent to comply with, applicable federal and state
securities laws, including without limitation Rule 240.15c2-12 promulgated by
the United States Securities and Exchange Commission.
Section 7. Notices.
-------------------
All notices and directions to either party or to the Trustee shall be in
writing and shall be deemed to be sufficiently given if sent by registered or
certified mail or delivered during business hours to the Authority at Suite
<PAGE>
302, 4 Park Street, Concord, New Hampshire 03301, Attention of its Executive
Director; to the Company at 25 Research Drive, Westborough, Massachusetts
01582, Attention of its Treasurer; and to the Trustee at its Corporate Trust
Department, Two International Place, Boston, Massachusetts 02110, or to such
other address as the addressee shall have indicated by prior notice to the one
giving the notice or direction in question.
Section 8. Severability.
- ------------------------
In the event that any provision of this Tenth Supplemental Loan
Agreement shall be held to be invalid in any circumstance, such invalidity
shall not affect any other provisions or circumstances.
Section 9. Counterparts.
- ------------------------
This Tenth Supplemental Loan Agreement may be executed and delivered in
any number of counterparts, each of which shall be deemed to be an original,
but such counterparts together shall constitute one and the same instrument.
Section 10. Captions.
- ---------------------
The captions in this Tenth Supplemental Loan Agreement are for
convenience only and shall not affect the construction hereof.
Section 11. Governing Law.
- --------------------------
This instrument shall be governed by the laws of The State of New
Hampshire.
Section 12. Binding Effect.
- ---------------------------
This Tenth Supplemental Loan Agreement shall inure to the benefit of and
be binding on the Authority and the Company and their respective successors
and assigns (including, without limitation, the Trustee as grantee and
assignee under the Indenture in accordance with all the terms thereof and
hereof and for the purposes of Sections 4(a), 4(b), and 4(c) hereof the
directors, members, officers, employees and agents of the Authority and their
respective heirs, personal representatives and assigns.
Section 13. Obligations of the Company Under the Indenture.
- -----------------------------------------------------------
The Company hereby assumes and agrees to perform all of the obligations
imposed upon it under the Indenture and shall be entitled to all rights and
benefits granted to it or on its behalf thereunder.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Tenth Supplemental Loan
Agreement to be duly executed and their respective seals to be hereunto
affixed, all as of the dare first above written.
BUSINESS FINANCE AUTHORITY OF THE
STATE OF NEW HAMPSHIRE
[Seal]
s/
By: _____________________________
Executive Director
NEW ENGLAND POWER COMPANY
[Seal]
s/John G. Cochrane
By: ______________________________
Assistant Treasurer
Attest:
s/Robert King Wulff
_____________________________
Assistant Clerk
<PAGE>
Execution Copy
ELEVENTH SUPPLEMENTAL LOAN AGREEMENT
Between
BUSINESS FINANCE AUTHORITY
OF THE STATE OF NEW HAMPSHIRE
and
NEW ENGLAND POWER COMPANY
Dated as of January 15, 1996
Supplementing the Loan Agreement between
The Industrial Development Authority
of the State of New Hampshire and
New England Power Company
dated as of November 15, 1983,
as Heretofore Amended by a
First Supplemental Loan Agreement
dated as of April 1, 1986, a
Second Supplemental Loan Agreement
dated as of August 1, 1988, a
Third Supplemental Loan Agreement
dated as of April 1, 1989, a
Fourth Supplemental Loan Agreement
dated as of November 1, 1990, a
Fifth Supplemental Loan Agreement
dated as of June 15, 1991, a
Sixth Supplemental Loan Agreement
dated as of January 1, 1993, a
Seventh Supplemental Loan Agreement
dated as of October 1, 1993, an
Eighth Supplemental Loan Agreement
dated as of December 1, 1993, a
Ninth Supplemental Loan Agreement
dated as of February 1, 1995, and a
Tenth Supplemental Loan Agreement
dated as of January 1, 1996
$10,000,000 Business Finance Authority
of the State of New Hampshire
Pollution Control Revenue Bonds
(New England Power Company Project -
1990 Series A (Fifth Issue))
<PAGE>
TABLE OF CONTENTS
-----------------
Section 1. Definitions........................................ 1
Section 2. Authority's Representation ........................ 2
Section 3. Issue of 1990 Series A Bonds (Fifth Issue) and
Application Issue of Additional Series R G&R
Bonds.............................................. 2
Section 4. Rights and Duties of the Authority................. 2
Section 5. Company Not to Impair Interest Exemption; Use of
Project Facilities; Rebate Covenant................ 4
Section 6. Securities Laws.................................... 4
Section 7. Notices............................................ 5
Section 8. Severability....................................... 5
Section 9. Counterparts....................................... 5
Section 10. Captions........................................... 5
Section 11. Governing Law ..................................... 5
Section 12. Binding Effect..................................... 5
Section 13. Obligations of the Company Under the Indenture..... 5
<PAGE>
ELEVENTH SUPPLEMENTAL LOAN AGREEMENT
This Eleventh Supplemental Loan Agreement dated as of January 15, 1996 (the
"Eleventh Supplemental Loan Agreement") is between the Business Finance
Authority of the State of New Hampshire, a body politic and corporate
(previously named The Industrial Development Authority of the State of New
Hampshire) established under Chapter 162-A:3 of the Revised Statutes of the
State of New Hampshire (the "Authority"), and New England Power Company, a
corporation organized and existing under the laws of The Commonwealth of
Massachusetts (the "Company"). The Authority is authorized by Chapter 162-I of
the Revised Statutes of the State of New Hampshire (the "Act) to finance
pollution control facilities through the issue of its industrial revenue
bonds. The purpose of this Eleventh Supplemental Loan Agreement is to provide
for the refunding of $10,000,000 of the Authority's Pollution Control Revenue
Bonds (New England Power Company - 1991 Taxable Commercial Paper Series) (the
"Taxable 1991 Series Bonds") issued to pay a portion of the Company's share of
the cost of pollution control facilities constructed at Unit No. 1 at the
nuclear electric generating plant in the Town of Seabrook, Rockingham County,
New Hampshire, pursuant to a Loan Agreement between the Authority and the
Company dated as of November 15, 1983 (the "Original Loan Agreement"), to
which this instrument is supplemental.
It is hereby agreed as follows:
Section 1. Definitions.
-----------------------
For purposes hereof, the following words shall have the following
meanings:
"Additional Series R G&R Bonds" means the General and Refunding Mortgage
Bonds to be issued pursuant to Section 3 hereof in an amount equal to the
aggregate principal amount of the 1990 Series A Bonds (Fifth Issue).
"Authority's Service Charge for the 1990 Series A Bonds (Fifth Issue)"
means a payment to the Authority for its own use of $75,000.00 on the date of
the issue of the 1990 Series A Bonds (Fifth Issue).
"Code" means the Internal Revenue Code of 1986, and the proposed,
temporary, and final regulations thereunder.
"Letter of Representation" means the letter from the Company addressed
to and accepted by the Authority and the underwriter named therein (the
"Underwriter") dated January 15, 1996 relating to the 1990 Series A Bonds
(Fifth Issue).
"Loan Agreement" means the Original Loan Agreement as amended and
supplemented by the First Supplemental Loan Agreement dated as of April 1,
1986, the Second Supplemental Loan Agreement dated as of August 1, 1988, the
Third Supplemental Loan Agreement dated as of April 1, 1989, the Fourth
Supplemental Loan Agreement dated as of November 1, 1990, the Fifth
Supplemental Loan Agreement dated as of June 15, 1991, the Sixth Supplemental
Loan Agreement dated as of January 1, 1993, the Seventh Supplemental Loan
Agreement dated as of October 1, 1993, the Eighth Supplemental Loan Agreement
dated as of December 1, 1993, the Ninth Supplemental Loan Agreement dated as
of February 1, 1995, the Tenth Supplemental Loan Agreement dated as of January
1, 1996 and this Eleventh Supplemental Loan Agreement.
"Twelfth Supplemental Indenture" means the Twelfth Supplemental
Indenture between the Authority and State Street Bank and Trust Company, as
Trustee, dated as of January 15, 1996, relating toe the 1990 Series A Bonds
(Fifth Issue), supplementing and amending the Trust Indenture between the
Authority and said Trustee (as successor to BayBank Middlesex) dated as of
November 15, 1983 (the "Original Indenture" and, as supplemented and amended
by the First Supplemental Indenture dated as of April 1, 1986, the Second
Supplemental Indenture dated as of August 1, 1988, the Third Supplemental
Indenture dated as of April 1, 1989, the Fourth Supplemental Indenture dated
as of November 1, 1990, the Fifth Supplemental Indenture dated as of June 15,
1991, the Sixth Supplemental Indenture dated as of January 1, 1993, the
Seventh Supplemental Indenture dated as of October 1, 1993, the Eighth
<PAGE>
Supplemental Indenture dated as of December 1, 1993, the Ninth Supplemental
Indenture dated as of July 1, 1994, the Tenth Supplemental Indenture dated as
of February 1, 1995, the Eleventh Supplemental Indenture dated as of January
1, 1995 and the Twelfth Supplemental Indenture, the "Indenture").
"1990 Series A Bonds (Fifth Issue)" means the Authority's $10,000,000
Pollution Control Revenue Bonds (New England Power Company Project - 1990
Series A (Fifth Issue)) issued pursuant to Section 3 hereof and the Indenture.
"Underwriting Agreement" means the agreement between the Authority and
the Underwriter dated January 15, 1996 relating to the 1990 Series A Bonds
(Fifth Issue).
Capitalized terms which are not defined herein but which are defined in
the Original Loan Agreement shall have the respective meanings attributed to
them therein.
Section 2. Authority's Representation.
--------------------------------------
To induce the Company to enter into this Agreement, the Authority
represents that the Authority is a body politic and corporate established
under Chapter 162-A:3 of the Revised Statutes of the State of New Hampshire.
Section 3. Issue of 1990 Series A Bonds (Fifth Issue) and Application of
Proceeds. Issue of Additional Series R G&R Bonds.
------------------------------------------------------------------------
Subject to, and upon the terms and conditions of, the Underwriting
Agreement, the Authority shall issue $10,000,000 aggregate principal amount of
1990 A Series Bonds (Fifth Issue) pursuant to the Act in the form and with the
terms provided in the Indenture.
The Authority shall loan to the Company $10,000,000 by depositing the
Proceeds of the 1990 Series A Bonds (Fifth Issue) in the account in the Bond
Fund for the Taxable 1991 Series Bonds established by the Indenture, to be
applied by the Trustee, with other moneys, to the redemption of $10,000,000
principal amount of such series on the date of receipt by the Trustee. The
Company hereby agrees to repay the loan of the aggregate principal amount of
the 1990 A Series Bonds (Fifth Issue), and to issue and deliver to the Trustee
a like aggregate principal amount of its Additional Series R G&R Bonds in
substantially the form set forth in the Fourteenth Supplemental Indenture to
the General and Refunding Mortgage Indenture. The Additional Series R Bonds
shall, together with $117,850,000 principal amount of Series R G&R Bonds
heretofore issued and delivered to the Trustee, evidence the Company's
obligation to repay the loans to it of the Proceeds of all the 1990 Series A
Bonds. The Series R G&R Bonds shall be evidenced by one single fully
registered bond registered in the name of the Trustee, which shall be
nontransferable except as provided in the Indenture.
Section 4. Rights and Duties of the Authority.
----------------------------------------------
(a) Indemnification of the Authority.
---------------------------------
The Company agrees to indemnify and hold harmless the Authority and its
directors, members, officers, employees and agents from and against any and
all damages, losses, costs, charges, expenses, judgments and liabilities
incurred by it or them arising out of any claim in connection with: the
transactions contemplated by the Loan Agreement or the Indenture; the
construction, financing, occupancy, management, maintenance, operation or use
of Unit No. 1, or any accident, injury, or damage to any person occurring
therein or thereabout; any act or omission of the Company or any of its
agents, contractors, servants, employees or licensees; or the offering,
issuance, sale or any resale of any Bond; except (I) to the extent caused by
the willful dishonesty of or intentional violation of law by the party seeking
indemnification, and (ii) to the extent based on information furnished by the
Authority in writing specifically for use in any official statement or
prospectus used in connection with the sale of Bonds. If any such claim is
<PAGE>
asserted, the Authority or its directors, members, officers, employees or
agents, as the case may be, will give prompt notice to the Company, and the
Company will assume the defense thereof, with full power to litigate and
compromise the same in its sole discretion.
(b) Remedies of the Authority.
--------------------------
Notwithstanding any contrary provision in this Eleventh Supplemental
Loan Agreement, the Authority and any of its members, officers, employees or
agents, as the case may be, shall have the right to take any action or make
any decision with respect to proceedings for indemnity against liability and
for collection or reimbursement from sources other than money or property held
under the Indenture or subject to the lien thereof. The Authority may enforce
its rights under the Loan Agreement which have not been assigned to the
Trustee, and each such member, officer, employee and agent may enforce his
rights hereunder, by legal proceedings for the specific performance of any
covenant or agreement contained herein or for the enforcement of any other
appropriate legal or equitable remedy, and may recover damages caused by any
breach by the Company of its obligations to the Authority or to such director,
member, officer, employee or agent, as the case may be, under the Loan
Agreement, including court costs, reasonable attorneys' fees and other costs
and expenses incurred in enforcing such obligations.
(c) Responsibility.
---------------
The Authority shall be entitled to the advice of counsel (who may also
be counsel for the Company or the Trustee) and shall not be liable for any
action taken or omitted to be taken in good faith in reliance on such advice.
The Authority may rely conclusively on any notice, certificate or other
document furnished to it under the Loan Agreement or the Indenture and
reasonably believed by it to be genuine. The Authority shall not be liable for
any action taken or omitted to be taken by it in good faith and reasonably
believed by it to be within the discretion or power conferred upon it or
beyond such discretion or power, as the case may be, or taken by it pursuant
to any direction or instruction by which it is governed under the Loan
Agreement or the Indenture or omitted to be taken by it by reason of the lack
of direction or instruction required under the Loan Agreement or the Indenture
for such action, or be responsible for the consequences of any error of
judgment reasonably made by it. When any consent or other action by the
Authority is called for by the Loan Agreement or the Indenture, the Authority
may defer such action pending receipt of such evidence, if any, as it may
require in support thereof. A permissive right or power to act shall not be
construed as a requirement to act; and no delay in the exercise of a right or
power shall affect the subsequent exercise of that right or power. The
Authority shall in no event be liable for the application or misapplication of
funds, or for other acts or defaults, by any person, firm or corporation
except by its own directors, members, officers, agents and employees. No
recourse shall be had by the Company, the Trustee or the holder of any Bond
for any claim based on the Loan Agreement, the Indenture or the Bonds against
any member, officer, agent or employee of the Authority unless such claim is
based upon the willful dishonesty of, or intentional violation of law by, such
person. No covenant, obligation or agreement of the Authority contained in the
Loan Agreement or the Indenture shall be deemed to be a covenant, obligation
or agreement of any present or future director, member, officer, employee or
agent of the Authority in his individual capacity, and any member, officer or
employee of the Authority executing a Bond shall not be liable personally on
the Bond or be subject to any personal liability or accountability by reason
of the issue thereof. The Authority shall be entitled to the benefits of
Section 23 of the Indenture in respect of actions taken or omitted to be taken
by it under this Seventh Supplemental Loan Agreement.
(d) Financial Obligations; Operation of Facilities.
-----------------------------------------------
Nothing contained in the Loan Agreement or the Indenture shall in any
way obligate the Authority to pay any debt or meet any financial obligation to
any person at any time hereunder or in relation to the Bonds or the Project
Facilities or Additional Facilities except from moneys (other than moneys
<PAGE>
received for its own purposes under the Loan Agreement) received under the
provisions of the Loan Agreement and the Indenture or from the exercise of the
Authority's rights under the Loan Agreement and the Indenture.
Nothing contained in the Loan Agreement or the Indenture shall be
construed to require or authorize the Authority to operate the Project
Facilities, Unit No. 1 or Additional Facilities.
(e) Expenses of the Authority.
--------------------------
Except to the extent they have been paid or reimbursed from the
Construction Fund, the Company shall pay or reimburse the Authority on demand
for all reasonable fees, charges, expenses (including reasonable attorneys'
fees) and disbursements directly related to the financing of the Project
Facilities and Additional Facilities and the issuance of Bonds including,
without limitation, the Authority's Service Charge for the 1990 Series A Bonds
(Fifth Issue) and reimbursement for expenses reasonably incurred or advances
reasonably made in the exercise of its rights or the performance of its
obligations under the Loan Agreement or the Indenture, with interest at the
rate specified in Section 14(g) of the Indenture.
(f) Matters to be Considered by Authority.
--------------------------------------
In approving, concurring in or consenting to action of another party, or
in exercising any discretion or in making any determination, the Authority may
consider the interests of the public, which shall include the anticipated
effect of any transaction on tax revenues and employment, as well as the
interests of the other parties and the Bondholders; however, nothing herein
shall be construed as conferring on any person other than the Company, the
Trustee and the Bondholders any right to notice, hearing or participation in
the Authority's consideration, and nothing in this subsection shall be
construed as conferring on any of them any right additional to those conferred
elsewhere herein.
Section 5. Company Not to Impair Interest Exemption: Use of Project
Facilities: Rebate Covenant.
-------------------------------------------------------------------
The Company will not use any of the funds loaned to it by the Authority
hereunder (or the income earned through the investment thereof) or, to the
extent of its ownership and control, operate the facilities financed under the
Indenture in any manner, and will not take any other action, which would
impair the exclusion of interest on the Bonds from gross income for Federal
income tax purposes. The Company's use of such facilities (or facilities
replacing the same), shall, to the extent of its ownership and control, be in
furtherance of the purpose of pollution control or solid waste disposal and
otherwise in compliance with the Act and the Code. The Company will comply in
all respects with the requirements of Code Section 148(f) in the event that
Gross Proceeds of the 1990 Series A Bonds (Fifth Issue) are invested in
Nonpurpose Investments with a Yield higher than the Yield on the 1990 Series A
Bonds (Fifth Issue).
The terms "Nonpurpose Investments," gross Proceeds" and "Yield" shall
have the meanings given in Code Section 148 and the regulations promulgated
thereunder and shall be applied as provided therein.
Section 6. Securities Laws.
---------------------------
In any remarketing of any 1990 Series A Bonds, the Company shall at all
times comply with, and shall cooperate with the Remarketing Agent to the
extent necessary to permit the Remarketing Agent to comply with, applicable
federal and state securities laws, including without limitation Rule 240.15c2-
12 promulgated by the United States Securities and Exchange Commission.
<PAGE>
Section 7. Notices.
-------------------
All notices and directions to either party or to the Trustee shall be in
writing and shall be deemed to be sufficiently given if sent by registered or
certified mail or delivered during business hours to the Authority at Suite
302, 4 Park Street, Concord, New Hampshire 03301, Attention of its Executive
Director; to the Company at 25 Research Drive, Westborough, Massachusetts
01582, Attention of its Treasurer; and to the Trustee at its Corporate Trust
Department, Two International Place, Boston, Massachusetts 02110, or to such
other address as the addressee shall have indicated by prior notice to the one
giving the notice or direction in question.
Section 8. Severability.
------------------------
In the event that any provision of this Eleventh Supplemental Loan
Agreement shall be held to be invalid in any circumstance, such invalidity
shall not affect any other provisions or circumstances.
Section 9. Counterparts.
------------------------
This Eleventh Supplemental Loan Agreement may be executed and delivered
in any number of counterparts, each of which shall be deemed to be an
original, but such counterparts together shall constitute one and the same
instrument.
Section 10. Captions.
---------------------
The captions in this Eleventh Supplemental Loan Agreement are for
convenience only and shall not affect the construction hereof.
Section 11. Governing Law.
--------------------------
This instrument shall be governed by the laws of The State of New
Hampshire.
Section 12. Binding Effect.
---------------------------
This Eleventh Supplemental Loan Agreement shall inure to the benefit of
and be binding on the Authority and the Company and their respective
successors and assigns (including, without limitation, the Trustee as grantee
and assignee under the Indenture in accordance with all the terms thereof and
hereof) and for the purposes of Sections 4(a), 4(b), and 4(c) hereof the
directors, members, officers, employees and agents of the Authority and their
respective heirs, personal representatives and assigns.
Section 13. Obligations of the Company Under the Indenture.
-----------------------------------------------------------
The Company hereby assumes and agrees to perform all of the obligations
imposed upon it under the Indenture and shall be entitled to all rights and
benefits granted to it or on its behalf thereunder.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Eleventh Supplemental
Loan Agreement to be duly executed and their respective seals to be hereunto
affixed, all as of the date first above written.
BUSINESS FINANCE AUTHORITY OF THE
STATE OF NEW HAMPSHIRE
[Seal]
s/
By: ______________________________
Executive Director
NEW ENGLAND POWER COMPANY
[Seal]
s/ John G. Cochrane
By: ________________________
ASSISTANT TREASURER
Attest:
s/Kirk L. Ramsauer
______________________________
Assistant Clerk
<PAGE>
Execution Copy
TWELFTH SUPPLEMENTAL LOAN AGREEMENT
Between
BUSINESS FINANCE AUTHORITY
OF THE STATE OF NEW HAMPSHIRE
and
NEW ENGLAND POWER COMPANY
Dated as of December 1, 1996
Supplementing the Loan Agreement between
The industrial Development Authority
of the State of New Hampshire and
New England Power Company
dated as of November 15, 1983,
as Heretofore Amended by a
First Supplemental Loan Agreement
dated as of April 1, 1986, a
Second Supplemental Loan Agreement
dated as of August 1, 1988, a
Third Supplemental Loan Agreement
dated as of April 1, 1989, a
Fourth Supplemental Loan Agreement
dated as of November 1, 1990, a
Fifth Supplemental Loan Agreement
dated as of June 15, 1991, a
Sixth Supplemental Loan Agreement
dated as of January 1, 1993, a
Seventh Supplemental Loan Agreement
dated as of October 1, 1993, an
Eighth Supplemental Loan Agreement
dated as of December 1, 1993, a
Ninth Supplemental Loan Agreement
dated as of February 1, 1995, a
Tenth Supplemental Loan Agreement
dated as of January 1, 1996, and an
Eleventh Supplemental Loan Agreement
dated as of January 15, 1996
$8,000,000 Business Finance Authority
of the State of New Hampshire
Pollution Control Revenue Bonds
(New England Power Company Project -
1990 Series A (Sixth Issue))
<PAGE>
TABLE OF CONTENTS
------------------
Section 1. Definitions........................................ 1
Section 2. Authority's Representation......................... 2
Section 3. Issue of 1990 Series A Bonds (Sixth Issue) and
Application of Proceeds. Issue of Additional
Series R G&R Bonds. Payment of Bonds............... 2
Section 4. Rights and Duties of the Authority................. 2
Section 5. Company Not to Impair Interest Exemption;
Use of Project Facilities; Rebate Covenant......... 4
Section 6. Amendments to Original Loan Agreement.............. 4
Section 7. Securities Laws.................................... 5
Section 8. Notices............................................ 5
Section 9. Severability....................................... 5
Section 10. Counterparts....................................... 5
Section 11. Captions........................................... 6
Section 12. Governing Law...................................... 6
Section 13. Binding Effect..................................... 6
Section 14. Obligations of the Company Under the
Indenture.......................................... 6
<PAGE>
TWELFTH SUPPLEMENTAL LOAN AGREEMENT
This Twelfth Supplemental Loan Agreement dated as of December 1, 1996
(the "Twelfth Supplemental Loan Agreement") is between the Business Finance
Authority of the State of New Hampshire, a body politic and corporate
(previously named The Industrial Development Authority of the State of New
Hampshire) established under Chapter 162-A:3 of the Revised Statutes of the
State of New Hampshire (the "Authority"), and New England Power Company, a
corporation organized and existing under the laws of The Commonwealth of
Massachusetts (the "Company"). The Authority is authorized by Chapter 162-I of
the Revised Statutes of the State of New Hampshire (the "Act") to finance
pollution control facilities through the issue of its industrial revenue
bonds. The purpose of this Twelfth Supplemental Loan Agreement is to provide
for the refunding of $8,000,000 of the Authority's Pollution Control Revenue
Bonds (New England Power Company - 1991 Taxable Commercial Paper Series) (the
"Taxable 1991 Series Bonds) issued to pay a portion of the Company's share of
the cost of pollution control facilities constructed at Unit No. 1 at the
nuclear electric generating plant in the Town of Seabrook, Rockingham County,
New Hampshire, pursuant to a Loan Agreement between the Authority and the
Company dated as of November 15, 1983 (the "Original Loan Agreement), to which
this instrument is supplemental.
It is hereby agreed as follows:
Section 1. Definitions.
- -----------------------
For purposes hereof, the following words shall have the following
meanings:
"Additional Series R G&R Bonds" means the General and Refunding Mortgage
Bonds to be issued pursuant to Section 3 hereof in an amount equal to the
aggregate principal amount of the 1990 Series A Bonds (Sixth Issue).
"Authority's Service Charge for the 1990 Series A Bonds (Sixth Issue)"
means a payment to the Authority for its own use of $60,000.00 on the date of
the issue of the 1990 Series A Bonds (Sixth Issue).
"Code" means the Internal Revenue Code of 1986, and the proposed,
temporary, and final regulations thereunder.
"Letter of Representation" means the letter from the Company addressed
to and accepted by the Authority and the underwriter named therein (the
"Underwriter") dated December 1, 1996 relating to the 1990 Series A Bonds
(Sixth Issue).
"Loan Agreement" means the Original Loan Agreement as amended and
supplemented by the First Supplemental Loan Agreement dated as of April 1,
1986, the Second Supplemental Loan Agreement dated as of August 1, 1988, the
Third Supplemental Loan Agreement dated as of April 1, 1989, the Fourth
Supplemental Loan Agreement dated as of November 1, 1990, the Fifth
Supplemental Loan Agreement dated as of June 15, 1991, the Sixth Supplemental
Loan Agreement dated as of January 1, 1993, the Seventh Supplemental Loan
Agreement dated as of October 1, 1993, the Eighth Supplemental Loan Agreement
dated as of December 1, 1993, the Ninth Supplemental Loan Agreement dated as
of February 1, 1995, the Tenth Supplemental Loan Agreement dated as of January
1, 1996, the Eleventh Supplemental Loan Agreement dated as of January 15, 1996
and this Twelfth Supplemental Loan Agreement.
"Thirteenth Supplemental Indenture" means the Thirteenth Supplemental
Indenture between the Authority and State Street Bank and Trust Company, as
Trustee, dated as of December 1, 1996, relating to the 1990 Series A Bonds
(Sixth Issue), supplementing and amending the Trust Indenture between the
Authority and said Trustee (as successor to BayBank Middlesex) dated as of
November 15, 1983 (the "Original Indenture" and, as supplemented and amended
by the First Supplemental Indenture dated as of April 1, 1986, the Second
Supplemental Indenture dated as of August 1, 1988, the Third Supplemental
Indenture dated as of April 1, 1989, the Fourth Supplemental Indenture dated
as of November 1, 1990, the Fifth Supplemental Indenture dated as of June 15,
1991, the Sixth Supplemental Indenture dated as of January 1, 1993, the
<PAGE>
Seventh Supplemental Indenture dated as of October 1, 1993, the Eighth
Supplemental Indenture dated as of December 1, 1993, the Ninth Supplemental
Indenture dated as of July 1, 1994, the Tenth Supplemental Indenture dated as
of February 1, 1995, the Eleventh Supplemental Indenture dated as of January
1, 1995, the Twelfth Supplemental Indenture dated as of January 15, 1996 and
the Thirteenth Supplemental Indenture, the "Indenture).
"1990 Series A Bonds (Sixth Issue)" means the Authority's $8,000,000
Pollution Control Revenue Bonds (New England Power Company Project - 1990
Series A (Sixth Issue)) issued pursuant to Section 3 hereof and the Indenture.
"Underwriting Agreement" means the agreement between the Authority and
the Underwriter dated December 19, 1996 relating to the 1990 Series A Bonds
(Sixth Issue).
Capitalized terms which are not defined herein but which are defined in
the Original Loan Agreement shall have the respective meanings attributed to
them therein.
Section 2. Authority's Representation.
--------------------------------------
To induce the Company to enter into this Agreement, the Authority
represents that the Authority is a body politic and corporate established
under Chapter 162-A:3 of the Revised Statutes of the State of New Hampshire.
Section 3. Issue of 1990 Series A Bonds (Sixth Issue) and Application
of Proceeds. Issue of Additional Series R G&R Bonds.
---------------------------------------------------------------------
Payment of Bonds. Subject to, and upon the terms and conditions of, the
Underwriting Agreement, the Authority shall issue $8,000,000 aggregate
principal amount of 1990 A Series Bonds (Sixth Issue) pursuant to the Act in
the form and with the terms provided in the Indenture.
The Authority shall loan to the Company $8,000,000 by depositing the
Proceeds of the 1990 Series A Bonds (Sixth Issue) in the account in the Bond
Fund for the Taxable 1991 Series Bonds established by the Indenture, to be
applied by the Trustee, with other moneys, to the redemption of $8,000,000
principal amount of such series on the date of receipt by the Trustee. The
Company hereby agrees to repay the loan of the aggregate principal amount of
the 1990 A Series Bonds (Sixth Issue), and to issue and deliver to the Trustee
a like aggregate principal amount of its Additional Series R G&R Bonds in
substantially the form set forth in the Fourteenth Supplemental Indenture to
the General and Refunding Mortgage Indenture. The Additional Series R Bonds
shall, together with $127,850,000 principal amount of Series R G&R Bonds
heretofore issued and delivered to the Trustee, evidence the Company's
obligation to repay the loans to it of the Proceeds of all the 1990 Series A
Bonds. The Series R G&R Bonds shall be evidenced by one single fully
registered bond registered in the name of the Trustee, which shall be
nontransferable except as provided in the Indenture. If the General and
Refunding Mortgage Bonds are surrendered to the Company pursuant to Section
16A of the Indenture, the Company shall nevertheless remain obligated to make
payments to the Bond Fund in amounts and at times sufficient to pay when due
the principal of, premium, if any, and interest on the Bonds, and such
obligation shall be absolute and unconditional, binding and enforceable
against the Company in all circumstances as provided in the Act and not
subject to set-off, recoupment, or counterclaim.
Section 4. Rights and Duties of the Authority.
-----------------------------------------------
(a) Indemnification of the Authority.
---------------------------------
The Company agrees to indemnify and hold harmless the Authority and its
directors, members, officers, employees and agents from and against any and
all damages, losses, costs, charges, expenses, judgments and liabilities
incurred by it or them arising out of any claim in connection with: the
transactions contemplated by the Loan Agreement or the Indenture; the
<PAGE>
construction, financing, occupancy, management, maintenance, operation or use
of Unit No. 1, or any accident, injury, or damage to any person occurring
therein or thereabout; any act or omission of the Company or any of its
agents, contractors, servants, employees or licensees; or the offering,
issuance, sale or any resale of any Bond; except (I) to the extent caused by
the willful dishonesty of or intentional violation of law by the party seeking
indemnification, and (ii) to the extent based on information furnished by the
Authority in writing specifically for use in any official statement or
prospectus used in connection with the sale of Bonds. If any such claim is
asserted, the Authority or its directors, members, officers, employees or
agents, as the case may be, will give prompt notice to the Company, and the
Company will assume the defense thereof, with full power to litigate and
compromise the same in its sole discretion.
(b) Remedies of the Authority.
--------------------------
Notwithstanding any contrary provision in this Twelfth Supplemental Loan
Agreement, the Authority and any of its members, officers, employees or
agents, as the case may be, shall have the right to take any action or make
any decision with respect to proceedings for indemnity against liability and
for collection or reimbursement from sources other than money or property held
under the Indenture or subject to the lien thereof. The Authority may enforce
its rights under the Loan Agreement which have not been assigned to the
Trustee, and each such member, officer, employee and agent may enforce his
rights hereunder, by legal proceedings for the specific performance of any
covenant or agreement contained herein or for the enforcement of any other
appropriate legal or equitable remedy, and may recover damages caused by any
breach by the Company of its obligations to the Authority or to such director,
member, officer, employee or agent, as the case may be, under the Loan
Agreement, including court costs, reasonable attorneys' fees and other costs
and expenses incurred in enforcing such obligations.
(c) Responsibility.
---------------
The Authority shall be entitled to the advice of counsel (who may also
be counsel for the Company or the Trustee) and shall not be liable for any
action taken or omitted to be taken in good faith in reliance on such advice.
The Authority may rely conclusively on any notice, certificate or other
document furnished to it under the Loan Agreement or the Indenture and
reasonably believed by it to be genuine. The Authority shall not be liable for
any action taken or omitted to be taken by it in good faith and reasonably
believed by it to be within the discretion or power conferred upon it or
beyond such discretion or power, as the case may be, or taken by it pursuant
to any direction or instruction by which it is governed under the Loan
Agreement or the Indenture or omitted to be taken by it by reason of the lack
of direction or instruction required under the Loan Agreement or the Indenture
for such action, or be responsible for the consequences of any error of
judgment reasonably made by it. When any consent or other action by the
Authority is called for by the Loan Agreement or the Indenture, the Authority
may defer such action pending receipt of such evidence, if any, as it may
require in support thereof. A permissive right or power to act shall not be
construed as a requirement to act; and no delay in the exercise of a right or
power shall affect the subsequent exercise of that right or power. The
Authority shall in no event be liable for the application or misapplication of
funds, or for other acts or defaults, by any person, firm or corporation
except by its own directors, members, officers, agents and employees. No
recourse shall be had by the Company, the Trustee or the holder of any Bond
for any claim based on the Loan Agreement, the Indenture or the Bonds against
any member, officer, agent or employee of the Authority unless such claim is
based upon the willful dishonesty of, or intentional violation of law by, such
person. No covenant, obligation or agreement of the Authority contained in the
Loan Agreement or the Indenture shall be deemed to be a covenant, obligation
or agreement of any present or future director, member, officer, employee or
agent of the Authority in his individual capacity, and any member, officer or
employee of the Authority executing a Bond shall not be liable personally on
the Bond or be subject to any personal liability or accountability by reason
of the issue thereof. The Authority shall be entitled to the benefits of
Section 23 of the Indenture in respect of actions taken or omitted to be taken
by it under this Twelfth Supplemental Loan Agreement.
<PAGE>
(d) Financial Obligations; Operation of Facilities.
-----------------------------------------------
Nothing contained in the Loan Agreement or the Indenture shall in any
way obligate the Authority to pay any debt or meet any financial obligation to
any person at any time hereunder or in relation to the Bonds or the Project
Facilities or Additional Facilities except from moneys (other than moneys
received for its own purposes under the Loan Agreement) received under the
provisions of the Loan Agreement and the Indenture or from the exercise of the
Authority's rights under the Loan Agreement and the Indenture.
Nothing contained in the Loan Agreement or the Indenture shall be
construed to require or authorize the Authority to operate the Project
Facilities, Unit No. 1 or Additional Facilities.
(e) Expenses of the Authority.
--------------------------
Except to the extent they have been paid or reimbursed from the
Construction Fund, the Company shall pay or reimburse the Authority on demand
for all reasonable fees, charges, expenses (including reasonable attorneys'
fees) and disbursements directly related to the financing of the Project
Facilities and Additional Facilities and the issuance of Bonds including,
without limitation, the Authority's Service Charge for the 1990 Series A Bonds
(Sixth Issue) and reimbursement for expenses reasonably incurred or advances
reasonably made in the exercise of its- rights or the performance of its
obligations under the Loan Agreement or the Indenture, with interest at the
rate specified in Section 14(g) of the Indenture.
(f) Matters to be Considered by Authority.
--------------------------------------
In approving, concurring in or consenting to action of another party, or
in exercising any discretion or in making any determination, the Authority may
consider the interests of the public, which shall include the anticipated
effect of any transaction on tax revenues and employment, as well as the
interests of the other parties and the Bondholders; however, nothing herein
shall be construed as conferring on any person other than the Company, the
Trustee and the Bondholders any right to notice, hearing or participation in
the Authority's consideration, and nothing in this subsection shall be
construed as conferring on any of them any right additional to those conferred
elsewhere herein.
Section 5. Company Not to impair Interest Exemption: Use of Rebate
Covenant.
------------------------------------------------------------------
The Company will not use any of the funds loaned to it by the Authority
hereunder (or the income earned through the investment thereof) or, to the
extent of its ownership and control, operate the facilities financed under the
Indenture in any manner, and will not take any other action, which would
impair the exclusion of interest on the Bonds from gross income for Federal
income tax purposes. The Company's use of such facilities (or facilities
replacing the same), shall, to the extent of its ownership and control, be in
furtherance of the purpose of pollution control or solid waste disposal and
otherwise in compliance with the Act and the Code. The Company will comply in
all respects with the requirements of Code Section 148(f) in the event that
Gross Proceeds of the 1990 Series A Bonds (Sixth Issue) are invested in
Nonpurpose Investments with a Yield higher than the Yield on the 1990 Series A
Bonds (Sixth Issue). The terms "Nonpurpose investments "Gross Proceeds" and
"Yield" shall have the meanings given in Code Section 148 and the regulations
promulgated thereunder and shall be applied as provided therein.
Section 6. Amendments to Original Loan Agreement.
-------------------------------------------------
Upon the surrender to the Company of the General and Refunding Mortgage
Bonds held by the Trustee pursuant to Section 16A of the Original Indenture
(as added by the Thirteenth Supplemental Indenture), the Loan Agreement shall
be amended as follows:
<PAGE>
Section 6(c) of the Original Loan Agreement shall read as follows:
(c) Maintenance of Corporate Existence: Assignment of Rights and
Obligations: qualification in New Hampshire.
------------------------------------------------------------
It will maintain its corporate existence and will not dissolve, merge or
consolidate into another corporation, or permit one or more other corporations
to merge into it, unless the successor corporation assumes in writing the
Company's obligations under the Loan Agreement and the Indenture. The Company
may assign its rights and obligations under this Agreement immediately after a
mandatory tender of all of the Bonds for purchase pursuant to Section 2.09 of
the Fourth Supplemental Indenture (including the mandatory tender upon which
the General and Refunding Mortgage Bonds are surrendered by the Trustee),
provided that the assignee of such rights and obligations is a member of the
same affiliated group within the meaning of Code Section 1504 and such
assignee assumes in writing all of the Company's obligations under the Loan
Agreement and the Indenture. The Company shall not dispose of all or
substantially all of its assets, unless either (I) the transferee of such
assets assumes in writing the Company's obligations under the Loan Agreement
and the Indenture or (ii) such disposition occurs immediately after a
mandatory tender for purchase of all of the Bonds pursuant to Section 2.09 of
the Fourth Supplemental Indenture. So long as the Bonds are outstanding, the
Company (including any successor, assignee, or transferee under this Section
6(c)) shall at all times either be organized under the laws of New Hampshire
or qualified to do business therein and shall at all times be in good standing
in New Hampshire.
The second sentence of Section 10 of the Original Loan Agreement is
amended to read as follows:
This Agreement shall not be assignable, except as permitted by Section
6(c) hereof, and except that the Authority shall assign to the Trustee all of
the Authority's rights under this Agreement (except the rights to receive
payments for its own purposes under Sections 6(d) and 9 hereof).
Section 7. Securities Laws.
---------------------------
In any remarketing of any 1990 Series A Bonds, the Company shall at all
times comply with, and shall cooperate with the Remarketing Agent to the
extent necessary to permit the Remarketing Agent to comply with, applicable
federal and state securities laws, including without limitation Rule 240.15c2-
12 promulgated by the United States Securities and Exchange Commission.
Section 8. Notices.
-------------------
All notices and directions to either party or to the Trustee shall be in
writing and shall be deemed to be sufficiently given if sent by registered or
certified mail or delivered during business hours to the Authority at Suite
101, 14 Dixon Avenue, Concord, New Hampshire 03301, Attention of its Executive
Director; to the Company at 25 Research Drive, Westborough, Massachusetts
01582, Attention of its Treasurer; and to the Trustee at its Corporate Trust
Department, Two International Place, Boston, Massachusetts 02110, or to such
other address as the addressee shall have indicated by prior notice to the one
giving the notice or direction in question.
Section 9. Severability.
------------------------
In the event that any provision of this Twelfth Supplemental Loan
Agreement shall be held to be invalid in any circumstance, such invalidity
shall not affect any other provisions or circumstances.
Section 10. Counterparts.
-------------------------
This Twelfth Supplemental Loan Agreement may be executed and delivered
in any number of counterparts, each of which shall be deemed to be an
<PAGE>
original, but such counterparts together shall constitute one and the same
instrument.
Section 11. Captions.
---------------------
The captions in this Twelfth Supplemental Loan Agreement are for
convenience only and shall not affect the construction hereof.
Section 12. Governing Law. This instrument shall be governed by the laws of
The State of New Hampshire.
Section 12. Governing Law.
---------------------------
This instrument shall be governed by the laws of The State of New
Hampshire.
Section 13. Binding Effect.
---------------------------
This Twelfth Supplemental Loan Agreement shall inure to the benefit of
and be binding on the Authority and the Company and their respective
successors and assigns (including, without limitation, the Trustee as grantee
and assignee under the Indenture in accordance with all the terms thereof and
hereof) and for the purpose. of Sections 4(a), 4(b), and 4(c) hereof the
directors, members, officers, employees and agents of the Authority and their
respective heirs, personal representatives and assigns.
Section 14. Obligations of the Company Under the Indenture.
-----------------------------------------------------------
The Company hereby assumes and agrees to perform all of the obligations
imposed upon it under the Indenture and shall be entitled to all rights and
benefits granted to it or on its behalf thereunder.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Twelfth Supplemental
Loan Agreement to be duly executed and their respective seals to be hereunto
affixed, all as of the date first above written.
BUSINESS FINANCE AUTHORITY OF THE
STATE OF NEW HAMPSHIRE
[Seal]
s/
By: ______________________________
Executive Director
NEW ENGLAND POWER COMPANY
[Seal]
s/John G. Cochrane
By: _______________________________
Assistant Treasurer
Attest:
s/Kirk L. Ramsauer
______________________________
Assistant Clerk
<PAGE>
Exhibit D
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARY COMPANIES
----------------------------------------------------
Federal and State Income Tax Allocation Agreement
-------------------------------------------------
Pursuant to Rule 45(c),
-----------------------
Public Utility Holding Company Act of 1935
-------------------------------------------
This Agreement originally dated as of January 1, 1981, and revised as of
January 1, 1982, January 1, 1991, January 1, 1992, January 1, 1993, and
January 1, 1996 by and between NEW ENGLAND ELECTRIC SYSTEM, a registered
holding company, and its subsidiary or affiliated companies which participate
together in the filing of a consolidated U.S. Corporation Income Tax Return
and/or consolidated, combined or unitary state income tax returns, provides
for the allocation of consolidated federal income taxes and consolidated,
combined or unitary state income taxes for 1981 and subsequent years pursuant
to Rule 45 (c) of the Securities and Exchange Commission promulgated under the
Public Utility Holding Company Act of 1935.
It is agreed by the companies that have executed this Agreement to
allocate the consolidated, combined and unitary income tax liabilities, for
1981 and subsequent years in accordance with the following provisions.
1. Definitions
-----------
A. Corporate Tax Credit - The negative separate return tax of an
associate company for a tax year equal to the amount by which the
consolidated or combined tax is reduced by including a net
corporate tax loss or other net tax benefit in the consolidated or
combined return.
B. Separate Return Tax - The tax on the corporate taxable income of an
associate company computed as though such company were not a member
of the consolidated or combined return group.
C. Excess Tax Credits - The investment tax credit, or other credit
that would be allowable were it not for a limitation provided by
law in excess of the amount of such credits computed on a separate
return basis with regard to such limitations.
<PAGE>
D. Consolidated Alternative Minimum Tax - The tax imposed by Internal
Revenue Code Section 55(a) equal to the excess of the tentative
minimum tax for the taxable year over the regular tax for the
taxable year, computed on a consolidated basis.
E. Minimum Tax Credit Carryforward - The sum of the annual amounts of
alternative minimum tax (AMT) allocated to a company less the sum
of the minimum tax credits utilized in prior years.
F. Hydro-Quebec Phase I and II Companies - The Phase I company is New
England Electric Transmission Corporation (NEET). The Phase II
companies are New England Hydro-Transmission Corporation, New
England Hydro-Transmission Electric Co., Inc. And New England Hydro
Finance Company, Inc.
2. Allocation Procedures for Federal Income Tax Liability
------------------------------------------------------
A. General Rule - The consolidated tax on ordinary taxable income
shall be allocated among the companies participating in the
consolidated return in proportion to the corporate ordinary taxable
income, whether positive or negative, of each company. The
consolidated capital gains tax, if any, shall be allocated among
the companies in proportion to corporate capital gains or losses of
each company. Investment tax credits (net of recapture of prior
years credits), jobs credits, research and experimental credits,
motor fuels credits, and other similar credits allowable in the
computation of the consolidated tax shall be allocated to the
companies generating such credits. The consolidated AMT, if any,
shall be allocated among the companies in proportion to the excess
of each company's separate AMT over its allocated regular tax to
the combined total of such excess amounts. The consolidated
minimum tax credit shall be allocated as provided in paragraph E.
Those associate companies with a positive allocation shall pay the
amount allocated and those subsidiary companies with a negative
allocation shall receive payment of their corporate tax credits.
Any remaining funds shall be allocated among the companies in the
ratio by which the positive corporate ordinary taxable income of
each company having such income bears to the total positive
corporate ordinary taxable incomes of all companies.
<PAGE>
In no event shall the tax allocated to any subsidiary company
exceed the separate return tax of such company.
B. Special Rule - If the total of the corporate tax credits of those
companies having negative taxable incomes and/or excess tax credits
is greater than the total reduction in the consolidated tax because
of the inclusion of such losses and/or credits, then corporate tax
credits arising from inclusion of negative taxable incomes in the
consolidated return shall be recognized and paid prior to corporate
tax credits arising from excess tax credits. If the total negative
taxable income of those subsidiary companies with negative taxable
incomes is not fully applied in the consolidated return, then the
corporate tax credit of each company shall be in proportion to the
total reduction in consolidated tax liability from such negative
income as the negative taxable income of each company bears to the
total negative taxable incomes of all companies. Similarly, if the
total excess tax credits of those subsidiary companies with excess
tax credits is not fully applied in the consolidated return, the
corporate tax credit arising from excess tax credits of each
company shall be in proportion to the total reduction in
consolidated tax liability from such excess tax credits as the
excess tax credit of each company bears to the total excess tax
credits of all companies.
C. Unused Corporate Tax Credits - A subsidiary company that is
entitled to a corporate tax credit but does not receive such
payment because of the special rule in paragraph B shall retain
such right for the future as long as and to the extent that such
credit can be applied against the consolidated tax liability.
Uncompensated corporate tax credits arising from negative taxable
incomes shall have priority over excess tax credits.
D. New England Electric Transmission Corporation Rule -
Notwithstanding any other provisions herein, NEW ENGLAND ELECTRIC
TRANSMISSION CORPORATION (NEET) shall be paid, in lieu of any
payments for its corporate tax credits, the amount, if any, by
which the consolidated tax liability determined without the
inclusion of NEET in the consolidated return exceeds the actual
consolidated tax liability, all in accordance with the Phase I
<PAGE>
Terminal Facility Support Agreement, dated as of December 1, 1981,
and amended as of June 1, 1982, November 1, 1982 and January 1,
1986.
E. Minimum Tax Credit - The minimum tax credit, in a year of
consolidated credit utilization, shall be tentatively allocated
among the companies participating in the consolidated return in an
amount equal to the lesser of (1) each company's separate minimum
tax credit carryforward or (2) the excess of its allocated regular
tax over its separate AMT. If the total of such tentative minimum
tax allocations exceeds the available consolidated credit for the
taxable year, then the minimum tax credit allocation is made in
proportion to the separate company positive excess amount to the
combined total of all such amounts. If the tentative allocation is
less than the consolidated minimum tax credit utilized, the
difference between the consolidated credit utilization and the
total of the tentative allocations shall be allocated to those
companies in proportion to each company's remaining minimum tax
credit carryforward to the combined total of such carryforwards.
The total minimum tax credit utilized for a tax year will equal the
sum of the amounts allocated in the two step computation.
3. Allocation Procedures for State Income Tax Liabilities
------------------------------------------------------
A. Massachusetts Combined Returns - The combined state tax liability
shall be allocated to each company participating in the combined
return in proportion to the state taxable income, whether positive
or negative, of each such company. For this purpose, state taxable
income is determined after application of each company's separate
apportionment percentage and net operating loss deduction. Those
companies with a positive allocation shall pay the amount allocated
and those companies with a negative allocation shall receive
payment of their corporate tax credits. If the total positive tax
allocation is less than the total corporate tax credits, the
positive allocation shall be paid on a pro rata basis to those
companies with corporate tax credits. No company is to be
allocated a state tax which is greater than its state tax liability
had it filed a separate return.
<PAGE>
B. New Hampshire Unitary Business Profits Returns - The combined
unitary business profits tax liability shall be allocated to each
company included in the unitary return in accordance with the
following principles:
i. The Hydro-Quebec Phase I and II companies will be allocated a
total business profits tax liability equal to the difference
in the combined business profits taxes, before reduction for
any franchise tax credit or other tax credits, computed with
and without the inclusion of such companies as a group. The
business profits tax of the Hydro group shall be allocated
first to NEW ENGLAND ELECTRIC TRANSMISSION CORPORATION in an
amount equal to the difference in the combined unitary tax
computed with and without its inclusion, with the balance of
the Hydro group tax, if any, assigned to NEW ENGLAND HYDRO
TRANSMISSION CORPORATION.
ii. The balance of the combined unitary tax, before reduction for
any franchise tax credit or other tax credits, shall be
allocated to the remaining companies in proportion to each
company's separate company business profits tax to the
combined total of such separate company taxes. Any franchise
tax credit or other tax credits available, on a separate
company basis, to a particular company in the combined group
shall be applied to reduce the combined unitary tax allocated
to that particular company.
iii. The excess of any unitary tax credit allowed in the combined
return over the amount applied to reduce a particular
company's liability, shall be used to reduce the allocated
unitary tax liability of the other members in the combined
group on a pro rata basis. To the extent a company's
allocated unitary tax liability is reduced by application of
the franchise tax credit or other tax credits attributable to
another member of the group, the amount so reduced shall be
paid to such other member.
iv. For purposes of this paragraph 3B, the separate company
business profits tax is to be determined only for those
<PAGE>
companies with tax nexus in New Hampshire and is to be
computed by multiplying each such company's separately
apportioned state taxable income by the applicable state tax
rate. The separate company business profits tax cannot be
less than zero.
C. Other State Consolidated, Combined or Unitary Returns - The
consolidated, combined or unitary tax liability shall be allocated
to each company included in a consolidated, combined or unitary
income tax return in accordance with the procedures set forth in
paragraph 2A above (Allocation Procedures for Federal Income Tax
Liability, General Rule). Only companies with tax nexus in a
particular state shall be allocated a portion of such state's
income tax liability.
In witness whereof, this Agreement has been duly executed in the name of
and on behalf of the following companies and their corporate or common seals
have been affixed hereto.
NEW ENGLAND ELECTRIC SYSTEM
s/Michael E. Jesanis
By
M.E. Jesanis - Treasurer
GRANITE STATE ELECTRIC COMPANY
s/Howard W. McDowell
By
H.W. McDowell - Treasurer
GRANITE STATE ENERGY, INC.
s/Howard W. McDowell
By
H.W. McDowell - Treasurer
MASSACHUSETTS ELECTRIC COMPANY
s/Michael E. Jesanis
By
M.E. Jesanis - Treasurer
<PAGE>
NANTUCKET ELECTRIC COMPANY
s/John G. Cochrane
By
J.G. Cochrane - Treasurer
THE NARRAGANSETT ELECTRIC COMPANY
s/John G. Cochrane
By
J.G. Cochrane
Assistant Treasurer
NARRAGANSETT ENERGY RESOURCES COMPANY
s/John G. Cochrane
By
J.G. Cochrane - Treasurer
NEES COMMUNICATIONS, INC.
s/John G. Cochrane
By
J.G. Cochrane - Treasurer
NEES ENERGY, INC.
s/John G. Cochrane
By
J.G. Cochrane - Treasurer
NEW ENGLAND ELECTRIC RESOURCES, INC.
s/John G. Cochrane
By
J.G. Cochrane - Treasurer
NEW ENGLAND ELECTRIC TRANSMISSION CORP.
s/John G. Cochrane
By
J.G. Cochrane - Treasurer
NEW ENGLAND ENERGY INCORPORATED
s/John G. Cochrane
By
J.G. Cochrane - Treasurer
NEW ENGLAND HYDRO FINANCE COMPANY, INC.
s/John G. Cochrane
By
J.G. Cochrane - Treasurer
<PAGE>
NEW ENGLAND HYDRO-TRANSMISSION CORPORATION
s/John G. Cochrane
By
J.G. Cochrane - Treasurer
NEW ENGLAND HYDRO-TRANSMISSION
ELECTRIC COMPANY, INC.
s/John G. Cochrane
By
J.G. Cochrane - Treasurer
NEW ENGLAND POWER COMPANY
s/Michael E. Jesanis
By
M.E. Jesanis - Treasurer
NEW ENGLAND POWER SERVICE COMPANY
s/M.E. Jesanis
By
M.E. Jesanis - Treasurer
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>
Exhibit E.1.
<TABLE>
1996
Report on NEES Money Pool
($000's)
<CAPTION>
Avg. Max. Min. Investment
Company Invest. Invest. Invest. at 12/31/96
- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C>
NEES (Trust) $9,320 $26,075 $ 375 $ 5,925
Massachusetts Electric Co. -0- -0- -0- -0-
New England Power Co. -0- -0- -0- -0-
The Narragansett Electric Co. -0- -0- -0- -0-
Granite State Electric Co. -0- -0- -0- -0-
Nantucket Electric Co. 320 4,325 -0- 150
New England Power Service Co. 7,606 17,900 -0- 9,225
New England Electric Transmission 2 225 -0- -0-
Corporation
New England Energy Incorporated 3,308 9,950 175 175
New England Hydro-Transmission 3,415 7,200 150 4,850
Electric Company (NEHTEC)
New England Hydro-Transmission 1,186 4,100 150 1,450
Corporation (NEHTC)
Narragansett Energy Resources 951 2,125 300 800
Company (NERC)
</TABLE>
<PAGE>
Exhibit E.2.
Modified
FORM U-13-60
ANNUAL REPORT
For the Period
Beginning January 1, 1996 and Ending December 31, 1996
To The
U.S. SECURITIES AND EXCHANGE COMMISSION
Of
New England Electric Resources, Inc.
A Subsidiary Service Company
Date of Incorporation: January 13, 1992
State or Sovereign Power under which Incorporated or Organized:
The Commonwealth of Massachusetts
Location of Principal Executive Offices of Reporting Company:
25 Research Drive
Westborough, MA 01582
Report filed pursuant to Order dated September 4, 1992
in file number 70-7950
Name, title, and address of officer to whom correspondence concerning this
report should be addressed:
J.G. Cochrane, Treasurer
25 Research Drive
Westborough, MA 01582
Name of Principal Holding Company Under Which Reporting
Company is Organized:
New England Electric System
SEC 1926 (6-82)
<PAGE>
PAGE 2
INSTRUCTIONS FOR USE OF MODIFIED FORM U-13-60
1. Time of Filing Annual Report essentially in the form of U-13-60
shall be filed appended to Form U5S, Annual Report of the Parent and
Associate Companies Pursuant to the Public Utility Holding Company Act of
1935. Form U5S is required to be filed by May 1.
2. Number of Copies Each annual report shall be filed in duplicate.
The company should prepare and retain at least one extra copy for itself
in case correspondence with reference to the report becomes necessary.
3. Definitions - Definitions contained in Instruction 01-8 to the
Uniform System of Accounts for Mutual Service Companies and Subsidiary
Service Companies, Public Utility Holding Company Act of 1935, as amended
February 2, 1979 shall be applicable to words or terms used specifically
within this Form U-13-60.
4. Organization Chart - The company shall submit with each annual
report a copy of its current organization chart.
<PAGE>
PAGE 3
<TABLE>
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
LISTING OF SCHEDULES AND ANALYSIS OF ACCOUNTS
<CAPTION>
Schedule or Page
Description of Schedules and Accounts Account No. Number
<S> <C> <C>
COMPARATIVE BALANCE SHEET Schedule I 4-5
Company property Schedule II 6-7
Accumulated provision for depreciation
and amortization of company property Schedule III 8
Investments Schedule IV 9
Accounts receivable Schedule V 10
Miscellaneous deferred debits Schedule IX 11
Proprietary capital Schedule XI 12
Long-term debt Schedule XII 13
Current and accrued liabilities Schedule XIII 14
Notes to financial statements Schedule XIV 15
COMPARATIVE INCOME STATEMENT Schedule XV 16
Analysis of billing - nonassociate companies Account 458 17-18
Departmental analysis of salaries Account 920 19
Outside services employed Account 923 20-22
Miscellaneous general expenses Account 930.2 23
Taxes other than income taxes Account 408 24
Donations Account 426.1 25
Other deductions Account 426.5 26
Notes to statement of income Schedule XVIII 27
ORGANIZATION CHART 28
</TABLE>
<PAGE>
PAGE 4
<TABLE>
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
SCHEDULE I
COMPARATIVE BALANCE SHEET
Give balance sheet of Company as of December 31 of the current and prior
year
<CAPTION>
Account Assets and Other Debits As of December 31
Current Prior
<S> <C> <C> <C>
COMPANY PROPERTY
101 Company property (Schedule II) $ $
107 Construction work in progress (Schedule II)
------- -------
Total Property
------- -------
108 Less accumulated provision for depreciation
and amortization of company property
(Schedule III)
------- -------
Net Company Property
------- -------
INVESTMENTS
123 Investments in associate companies (Sch. IV) 1,475,000 999,999
124 Other Investments (Schedule IV)
--------- -------
Total Investments 1,475,000 999,999
--------- -------
CURRENT AND ACCRUED ASSETS
131 Cash 180,836 69,588
134 Special deposits
135 Working funds
136 Temporary cash investments (Schedule IV)
141 Notes receivable
143 Accounts receivable (Schedule V) 1,234,582 319,516
144 Accumulated provision of uncollectible accounts
146 Accounts receivable from associate companies 128,096 41
152 Fuel stock expenses undistributed
154 Materials and supplies
163 Stores expense undistributed
165 Prepayments 866,287 501,600
174 Miscellaneous current and accrued assets
--------- -------
Total Current and Accrued Assets 2,409,801 890,745
--------- -------
DEFERRED DEBITS
181 Unamortized debt expense
184 Clearing accounts
186 Miscellaneous deferred debits (Schedule IX) 125,350
188 Research, development, or demonstration
expenditures
190 Accumulated deferred income taxes
--------- -------
-0- 125,350
Total Deferred Debits --------- -------
TOTAL ASSETS AND OTHER DEBITS $3,884,801 $2,016,094
========= =======
</TABLE>
<PAGE>
PAGE 5
<TABLE>
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
SCHEDULE I
COMPARATIVE BALANCE SHEET
<CAPTION>
Account Liabilities and Proprietary Capital As of December 31
Current Prior
<S> <C> <C> <C>
PROPRIETARY CAPITAL
201 Common stock issued (Schedule XI) $ 1,000 $ 1,000
211 Miscellaneous paid-in-capital (Schedule XI) 8,448,999 3,398,999
215 Appropriated retained earnings (Schedule XI)
216 Unappropriated retained earnings (Schedule XI)(5,321,413)(1,713,513)
--------- ---------
Total Proprietary Capital 3,128,586 1,686,486
--------- ---------
LONG-TERM DEBT
223 Advances from associate companies (Schedule XII)
224 Other long-term debt (Schedule XII)
225 Unamortized premium on long-term debt
226 Unamortized discount on long-term debt - debit
--------- -------
Total Long-Term Debt
--------- -------
CURRENT AND ACCRUED LIABILITIES
231 Notes payable
232 Accounts payable 238,342 142,401
233 Notes payable to associate companies
(Schedule XIII)
234 Accounts payable to associate companies
(Schedule XIII) 465,891 11,707
236 Taxes accrued
237 Interest accrued
238 Dividends declared
241 Tax collections payable 382
242 Miscellaneous current and accrued
liabilities (Schedule XIII)
--------- -------
Total Current and Accrued Liabilities 704,615 154,108
--------- -------
DEFERRED CREDITS
253 Other deferred credits
255 Accumulated deferred investment tax credits
--------- --------
Total Deferred Credits
--------- --------
283 ACCUMULATED DEFERRED INCOME TAXES 51,600 175,500
--------- --------
TOTAL LIABILITIES AND PROPRIETARY CAPITAL $3,884,801 $2,016,094
========= =========
</TABLE>
<PAGE>
PAGE 6
<TABLE>
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
SCHEDULE II
COMPANY PROPERTY
(Not Applicable)
<CAPTION>
BALANCE AT RETIREMENTS BALANCE
BEGINNING OR OTHER (1) AT CLOSE
DESCRIPTION OF YEAR ADDITIONS SALES CHANGES OF YEAR
<S> <C> <C> <C> <C> <C>
Account
301 Organization
303 Miscellaneous
Intangible
Plant
304 Land and Land
Rights
305 Structures and
Improvements
306 Leasehold
Improvements
307 Equipment (2)
308 Office
Furniture and
Equipment
309 Automobiles,
Other Vehicles
and Related
Garage
Equipment
310 Aircraft and
Airport
Equipment
311 Other Company
Property (3)
---- ------- --- ---- ----
SUB-TOTAL None None
---- ------- --- ---- ----
107 Construction
Work in
Progress (4)
---- ------- --- ---- ----
TOTAL None None
==== ======= === ==== ====
<FN>
(1) PROVIDE AN EXPLANATION OF THOSE CHANGES CONSIDERED MATERIAL:
</FN>
</TABLE>
<PAGE>
PAGE 7
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
SCHEDULE II - CONTINUED
(Not Applicable)
<TABLE>
(2) Subaccounts are required for each class of equipment owned. The company
shall provide a listing by subaccount of equipment additions during the
year and the balance at the close of the year:
<CAPTION>
BALANCE
AT CLOSE
SUBACCOUNT DESCRIPTION ADDITIONS OF YEAR
<S> <C> <C>
---- ----
TOTAL None None
==== ====
(3) DESCRIBE OTHER COMPANY PROPERTY:
None
(4) DESCRIBE CONSTRUCTION WORK IN PROGRESS:
None
</TABLE>
<PAGE>
PAGE 8
<TABLE>
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
SCHEDULE III
ACCUMULATED PROVISION FOR DEPRECIATION AND
AMORTIZATION OF COMPANY PROPERTY
(Not Applicable)
<CAPTION>
ADDITIONS OTHER
BALANCE AT CHARGED CHANGES BALANCE
BEGINNING TO RETIRE- ADD AT CLOSE
DESCRIPTION OF YEAR ACCT 403 MENTS (DEDUCT)(1) OF YEAR
<S> <C> <C> <C> <C> <C>
Account
301 Organization
303 Miscellaneous
Intangible
Plant
304 Land and Land
Rights
305 Structures and
Improvements
306 Leasehold
Improvements
307 Equipment
308 Office
Furniture and
Equipment
309 Automobiles,
Other Vehicles
and Related
Garage
Equipment
310 Aircraft and
Airport
Equipment
311 Other Company
Property
---- --- --- --- ----
TOTAL None None
==== === === === ====
22) PROVIDE AN EXPLANATION OF THOSE CHANGES CONSIDERED MATERIAL:
None
</TABLE>
<PAGE>
PAGE 9
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
SCHEDULE IV
INVESTMENTS
<TABLE>
INSTRUCTIONS: Complete the following schedule concerning investments.
Under Account 124 "Other Investments," state each investment
separately, with description, including, the name of issuing
company, number of shares or principal amount, etc.
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING CLOSE
DESCRIPTION OF YEAR OF YEAR
<S> <C> <C>
ACCOUNT 123 - INVESTMENT IN ASSOCIATE COMPANIES
------- -------
TOTAL None None
======= =======
ACCOUNT 128 - OTHER INVESTMENTS
Separations Technologies, Inc. $999,999 $ 999,999
Monitoring Technologies, Inc. -0- 475,001
------- ---------
TOTAL (1) $999,999 $1,475,000
======= =========
ACCOUNT 136 - TEMPORARY CASH INVESTMENTS
------- ---------
TOTAL None None
======= =========
(1) See page 15 "Notes to Financial Statements" footnote (2), (3).
</TABLE>
<PAGE>
PAGE 10
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
<TABLE>
SCHEDULE V
ACCOUNTS RECEIVABLE
INSTRUCTIONS: Complete the following schedule listing accounts receivable.
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING CLOSE
OF YEAR OF YEAR
<S> <C> <C>
DESCRIPTION
ACCOUNT 143 - Nantucket Electric Company (1) 300,840 -0-
Accounts Receivable (Non-
Associated Companies) 18,676 1,234,582
------- ---------
TOTAL $319,516 $1,234,582
======= =========
<FN>
(1) In 1996, Nantucket Electric Company became an associated company and
the receivable balance due at December 31, 1996 ($125,350) is included with
Accounts Receivable from associated companies.
</FN>
</TABLE>
<PAGE>
PAGE 11
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
<TABLE>
SCHEDULE IX
MISCELLANEOUS DEFERRED DEBITS
INSTRUCTIONS: Provide detail of items in this account. Items less than
$10,000 may be grouped by class, showing the number of items
in each class.
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING CLOSE
DESCRIPTION OF YEAR OF YEAR
<S> <C> <C>
ACCOUNT 186 - DEFERRED DEBITS
NANTUCKET ELECTRIC - LONG TERM
RECEIVABLE $125,350 $0
------- -------
TOTAL $125,350 $0
======= =======
</TABLE>
<PAGE>
PAGE 12
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
<TABLE>
SCHEDULE XI
PROPRIETARY CAPITAL
<CAPTION>
OUTSTANDING
NUMBER OF PAR OR STATED CLOSE OF PERIOD
ACCOUNT SHARES VALUE NO. OF TOTAL
NUMBER CLASS OF STOCK AUTHORIZED PER SHARE SHARES AMOUNT
<S> <C> <C> <C> <C> <C>
201 COMMON STOCK ISSUED 10,000 $1 1,000 $1,000
INSTRUCTIONS: Classify amounts in each account with a brief explanation,
disclosing the general nature of transactions which give rise
to the reported amounts.
DESCRIPTION
AMOUNT
ACCOUNT 223 - MISCELLANEOUS PAID-IN CAPITAL (1) 8,448,999
ACCOUNT 215 - APPROPRIATED RETAINED EARNINGS
---------
TOTAL 8,448,999
=========
INSTRUCTIONS: Give particulars concerning net income or (loss) during the
year, distinguishing between compensation for the use of
capital owed or net loss remaining from servicing
non-associates per the General Instructions of the Uniform
Systems of Accounts. For dividends paid during the year in
cash or otherwise, provide rate percentage, amount of
dividend, date declared and date paid.
BALANCE AT NET INCOME BALANCE AT
BEGINNING OR DIVIDENDS CLOSE
DESCRIPTION OF YEAR (LOSS) PAID OF YEAR
ACCOUNT 216 -
UNAPPROPRIATED
RETAINED EARNINGS $(1,713,513) $(3,607,900) None $(5,321,413)
---------- ---------- ---- ----------
TOTAL $(1,713,513) $(3,607,900) None $(5,321,413)
======= ======= ========== ==== ==========
<FN>
(1) Amount represents contributions in the form of non-interest bearing
subordinated notes issued from New England Electric System (NEES).
As of December 31, 1996, NEES was authorized to invest up to $9.0
million dollars in the Company in the form of either subordinated
noninterest bearing notes, capital contributions or common stock.
</FN>
</TABLE>
<PAGE>
PAGE 13
<TABLE>
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
SCHEDULE XII
LONG-TERM DEBT
(Not Applicable)
INSTRUCTIONS: Advances from associate companies should be reported separately for advances on notes, and
advances on open account. Names of associate companies from which advances were received
shall be shown under the class and series of obligation column. For Account 224 - Other
long-term debt provide the name of creditor company or organization, terms of the obligation,
date of maturity, interest rate, and the amount authorized and outstanding.
<CAPTION>
TERMS OF OBLIG DATE BALANCE AT BALANCE AT
CLASS & SERIES OF INTEREST AMOUNT BEGINNING DEDUCTIONS CLOSE
NAME OF CREDITOR OF OBLIGATION MATURITY RATE AUTHORIZED OF YEAR ADDITIONS (1) OF YEAR
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ACCOUNT 223 -
ADVANCES FROM
ASSOCIATE
COMPANIES: None
ACCOUNT 224 -
OTHER LONG-TERM
DEBT: None
TOTAL None
<FN>
(1) Give an explanation of deductions:
None
</FN>
</TABLE>
<PAGE>
PAGE 14
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
<TABLE>
SCHEDULE XIII
CURRENT AND ACCRUED LIABILITIES
INSTRUCTIONS: Provide balance of notes and accounts payable to each
associate company. Give description and amount of
miscellaneous current and accrued liabilities. Items less
than $10,000 may be grouped, showing the number of items in
each group.
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING CLOSE
DESCRIPTION OF YEAR OF YEAR
<S> <C> <C>
ACCOUNT 233 - NOTES PAYABLE TO ASSOCIATE
COMPANIES
---- ----
TOTAL None None
==== ====
ACCOUNT 234 - ACCOUNTS PAYABLE TO ASSOCIATE
COMPANIES
New England Power Service Company $(2,848) $(15,980)
New England Hydro Transmission Electric Co. 39
New England Electric Transmission Corp. 59
NEES Energy, Inc. 2,024
Narragansett Electric Company 2,843
Massachusetts Electric Company 8,298
New England Power Company 14,555 468,608
------- --------
TOTAL $11,707 $465,891
======= ========
ACCOUNT 242 - MISCELLANEOUS CURRENT AND
ACCRUED LIABILITIES
---- ----
TOTAL None None
==== ====
</TABLE>
<PAGE>
PAGE 15
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
SCHEDULE XIV
NOTES TO FINANCIAL STATEMENTS
INSTRUCTIONS: The space below is provided for important notes regarding
the financial statements or any account thereof. Furnish
particulars as to any significant contingent assets or
liabilities existing at the end of the year. Notes relating
to financial statements shown elsewhere in this report may
be indicated here by reference.
(1) To assist Nantucket Electric Company (NEC) in meeting
its short-term needs for reliable energy, NEERI provided materials,
delivery, installation, interconnection and start-up testing services for a
fully automated two unit diesel driven electric generating plant at the
existing NEC Airport Generating Station. The work took place at NEC and
New England Electric facilities pursuant to a letter agreement and has been
completed. The total compensation under the agreement was recognized
during the third quarter of 1994. The agreement provides for billing over
a three year period at $25,070 per month effective the month immediately
following the notice to proceed by NEC. As of December 31, 1996, $125,350
had not yet been billed in accordance with the agreement.
(2) On May 23, 1995, NEERI invested $999,999 in Separations
Technologies, Inc. (STI). This investment is in the form of 153,846 shares
of 6% cumulative convertible preferred stock.
(3) On July 12, 1996 NEERI invested $475,001 in Monitoring
Technologies, Inc. This investment is in the form of 271,429 shares of
Series E convertible preferred stock.
(4) In July, 1996 NEERI International, a wholly-owned
subsidiary of NEERI, was formed under the laws of the Cayman Islands.
NEERI owns two shares of NEERI International, which will serve as a Project
Parent for prospective EWG/FUCO investments under File No. 70-8783. NEERI
International had no significant activity in 1996.
<PAGE>
PAGE 16
<TABLE>
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
SCHEDULE XV
STATEMENT OF INCOME
<CAPTION>
ACCOUNT DESCRIPTION CURRENT PRIOR
YEAR YEAR
<S> <C> <C> <C>
INCOME
458 Services rendered to nonassociate companies $1,379,230 $ 97,120
421 Miscellaneous income or loss
--------- --------
TOTAL INCOME $1,379,230 $ 97,120
--------- --------
EXPENSE
920 Salaries and wages
921 Office supplies and expenses 437,161 80,567
922 Administrative expense transferred - credit
923 Outside services employed 6,902,369 1,815,058
924 Property insurance
925 Injuries and damages
926 Employee pensions and benefits
930.1 General advertising expenses
930.2 Miscellaneous general expenses
931 Rents
932 Maintenance of structures and equipment
403 Depreciation and amortization expense
408 Taxes other than income taxes
409 Income taxes (2,228,500) (901,842)
410 Provision for deferred income taxes 333,600
411 Provision for deferred income taxes - credit (123,900) (158,100)
411.5 Investment tax credit
426.1 Donations
426.5 Other deductions
427 Interest on long-term debt
430 Interest on debt to associate companies
431 Other interest expense
---------- ----------
TOTAL EXPENSE $ 4,987,130$ 1,169,283
---------- ----------
NET INCOME OR (LOSS) $(3,607,900)$(1,072,163)
========== ==========
</TABLE>
<PAGE>
PAGE 17
<TABLE>
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
ANALYSIS OF BILLING
NONASSOCIATE COMPANIES
ACCOUNT 458
<CAPTION>
DIRECT INDIRECT COMPENSATION EXCESS TOTAL
COST COST FOR USE TOTAL OR AMOUNT
NAME OF NONASSOCIATE COMPANY CHARGED CHARGED OF CAPITAL COST DEFICIENCY BILLED
458-1 458-2 458-3 458-4
<S> <C> <C> <C> <C> <C> <C>
ThermoCor Kimmins (1) 600
Hydropower Technologies (2) 916
Blackstone Valley High School (3) 951
Indeck Energy Services (4) 1,080
Pittsfield Generating Co.(5) 1,200
Ken's Foods, Inc. (6) 2,400
Hanover Improvement Society (7) 3,528
MWRA-Sudbury Dam (8) 4,500
Texas Instruments (9) 5,000
Separation Technologies, Inc. (10) 13,677
Power Technologies, LTD (11) 16,819
University of Massachusetts (12) 18,895
Trans Power New Zealand (13) 20,497
Bechtel Construction (14) 69,126
Green Mountain Power (15) 85,160
MCM Enterprise (16) 88,432
National Energy Policy Office (17) 93,700
Ogden Martin Systems (18) 97,042
U.S. Dept of Agriculture (19) 135,445
Si3/Sargent (20) 150,070
Siemens (21) 173,992
U.S. Army Corps. of Engineers (22) 396,200
---------
TOTAL 1,379,230
=========
</TABLE>
<PAGE>
PAGE 18
INSTRUCTION: Provide a brief description of the services rendered to each
nonassociated company:
(1) Consulting environmental services.
(2) Consulting services for hydrogen unit alignment.
(3) Consulting services for boiler inspection.
(4) Consulting services for transmission line inspection.
(5) Construction services for transformer repair procedure.
(6) Consulting electrical services for new manufacturing plant.
(7) Consulting engineering services at earthen dam site.
(8) Consulting services for inspection of primary cable.
(9) Construction services for transformer repairs.
(10) Construction and engineering services for separator installation.
(11) Consulting engineering services for transmission feasibility study.
(12) Construction services for installation of radio tower.
(13) Consulting engineering services for upgraded data acquisition systems.
(14) Construction services at combined cycle generating plant.
(15) Construction and engineering services for transmission interconnection.
(16) Construction services for installation of rotor-mounted scanners.
(17) Consulting electrical services for study of power purchase agreements.
(18) Construction and engineering services for boiler repairs.
(19) Consulting and construction services for subwatershed dam repairs.
(20) Consulting services for retrofit and calibration of electric meters.
(21) Construction services at combined cycle generating plant.
(22) Construction services for dam gate machinery refurbishment.
<PAGE>
PAGE 19
<TABLE>
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
DEPARTMENTAL ANALYSIS OF SALARIES
ACCOUNT 920
<CAPTION>
NAME OF DEPARTMENT NUMBER
PERSONNEL
Indicate each dept. or SALARY END OF
service function EXPENSE YEAR
<S> <C> <C>
None None
---- ----
TOTAL None None
==== ====
</TABLE>
<PAGE>
PAGE 20
<TABLE>
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
OUTSIDE SERVICES EMPLOYED
ACCOUNT 923
INSTRUCTIONS: Provide a breakdown by subaccount of outside services
employed. If the aggregate amounts paid to any one payee
and included within one subaccount is less than $25,000,
only the aggregate number and amount of all such payments
included within the subaccount need be shown. Provide a
subtotal for each type of service.
<CAPTION>
RELATIONSHIP
"A"- ASSOCIATE
FROM WHOM PURCHASED ADDRESS "NA"- NON ASSOCIATE AMOUNT
<S> <C> <C> <C>
LEGAL SERVICES
Skadden, Arps, Slate 1440 New York Ave., N.W. NA $363,373
Meagher & Flom Washington, DC 20005-2111
Gadens Ridgeway Central Plaza One NA 74,933
345 Queen Street
Brisbane QLD 4000 Australia
Swidler & Berlin 3000 K Street, N.W. NA 37,569
Suite 300
Washington, DC 20007-5116
Hunton & Williams 200 Park Avenue NA 36,148
New York, NY 10166
Halloran & Sage One Goodwin Square NA 26,609
225 Asylum Street
Hartford, Ct 06103-4303
6 Vendors
(each under $25,000) 50,129
-------
SUBTOTAL $588,761
</TABLE>
<PAGE>
PAGE 21
<TABLE>
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
OUTSIDE SERVICES EMPLOYED
ACCOUNT 923
<CAPTION>
RELATIONSHIP
"A"- ASSOCIATE
FROM WHOM PURCHASED ADDRESS "NA"- NON ASSOCIATE AMOUNT
<S> <C> <C> <C>
OTHER SERVICES
New England Power 25 Research Drive A $3,659,528
Service Company Westborough, MA 01582
New England Power 25 Research Drive A 625,403
Company Westborough, MA 01582
Environmental Science 532 Atwells Avenue NA 401,221
Services Providence, RI 02909
The First National Bank 100 Federal Street NA 354,992
of Boston Boston, MA 02110
Triad Engineering Corp. 131 Middlesex Turnpike NA 310,107
Burlington, MA 01803
A. Gilberto Carvalho 5450 Glenridge Drive NA 164,841
Atlanta, GA 30338
Promon Technical Services Praia do Flamengo 154 NA 85,960
22207-900 Rio de Janeiro
RJ Brasil
George P. Sasdi Electric Power Consultancy NA 63,495
24 Hawthorne Avenue
Newton, MA 02166
Bradford Randolph 40 Central Park South NA 60,651
New York, NY 10019
U.S. Technologies, Inc. 308 Belair Drive NA $58,011
Glenview, IL 60025
B & T Consortium Bajrok 1, 11-1063 NA 50,681
Budapest, Hungary
Power Technologies, Inc. 1482 Erie Boulevard NA 43,740
Schenectady, NY 12305
General Electric P.O. Box 102827 NA 37,742
Atlanta, GA 30368
<PAGE>
PAGE 22
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
OUTSIDE SERVICES EMPLOYED
ACCOUNT 923
RELATIONSHIP
"A"- ASSOCIATE
FROM WHOM PURCHASED ADDRESS "NA"- NON ASSOCIATE AMOUNT
OTHER SERVICES (continued)
ABB Power T&D Co., Inc. 1021 Main Campus Drive NA 40,000
Raleigh, NC 27606
Maxpower International 18 Winthrop Avenue NA 36,127
Corp. Marblehead, MA 01945
Phoenix Environmental Linwood, PA NA 35,000
Services
Underwater Unlimited 3461-A S.W. Palm City Ave NA 33,248
Diving Services Palm City, FL 34990
Evaldo P. Ramos Rva Da Assemri Fia NA 31,667
58-108 Andar
RJ Brasil
Arthur Andersen P.O. Box 3917 NA 29,050
Boston, MA 02241
26 Vendors*
(each under $25,000) 192,144
---------
SUBTOTAL $6,313,608
---------
TOTAL SERVICES $6,902,369
=========
*Includes $9,460 from Massachusetts Electric Company, $3,346 from The
Narragansett Electric Company, $2,024 from NEES Energy, Inc., $20 from New
England Electric Transmission Corporation and $39 from New England Hydro-
Transmission Electric Company which are associated Companies.
</TABLE>
<PAGE>
PAGE 23
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
MISCELLANEOUS GENERAL EXPENSES
ACCOUNT 930.2
INSTRUCTIONS: Provide a listing of the amount included in Account 930.2,
"Miscellaneous General Expenses", classifying such expenses
according to their nature. Payments and expenses permitted
by Sections 321(b)(2) of the Federal Election Campaign Act,
as amended by Public Law 94-283 in 1976 (2 U.S.C. Section
441(b)(2)) shall be separately classified.
DESCRIPTION AMOUNT
None
----
TOTAL None
====
<PAGE>
PAGE 24
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
TAXES OTHER THAN INCOME TAXES
ACCOUNT 408
INSTRUCTIONS: Provide an analysis of Account 408, "Taxes Other Than Income
Taxes". Separate the analysis into two groups: (1) other
than U.S. Government taxes, and (2) U.S. Government taxes.
Specify each of the various kinds of taxes and show the
amounts thereof. Provide a subtotal for each class of tax.
KIND OF TAX AMOUNT
1) OTHER THAN U.S. GOVERNMENT TAXES
Massachusetts State Tax None
-----
SUBTOTAL None
-----
2) U.S. GOVERNMENT TAXES None
-----
SUBTOTAL None
-----
TOTAL None
=====
<PAGE>
PAGE 25
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
DONATIONS
ACCOUNT 426.1
INSTRUCTIONS: Provide a listing of the amount included in Account 426.1,
"Donations", classifying such expenses by its purpose. The
aggregate number and amount of all items of less than $3,000
may be shown in lieu of details.
NAME OF RECIPIENT PURPOSE OF DONATION NONE
----
TOTAL None
====
<PAGE>
PAGE 26
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
OTHER DEDUCTIONS
ACCOUNT 426.5
INSTRUCTIONS: Provide a listing of the amount included in Account 426.5,
"Other Deductions", classifying such expenses according to
their nature.
DESCRIPTION NAME OF PAYEE NONE
----
TOTAL None
====
<PAGE>
PAGE 27
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
SCHEDULE XVIII
NOTES TO STATEMENT OF INCOME
INSTRUCTIONS: The space below is provided for important notes regarding
the statement of income or any account thereof. Furnish
particulars as to any significant increase in services
rendered or expenses incurred during the year. Notes
relating to financial statements shown elsewhere in this
report may be indicated here by reference.
<PAGE>
PAGE 28
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
ORGANIZATION CHART
For the Year Ended December 31, 1996
Board of Directors
!
!
!
President
!
!
!
------------------------------
! !
! !
! !
Treasurer Clerk
<PAGE>
PAGE 29
ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC.
For the Year Ended December 31, 1996
SIGNATURE CLAUSE
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935 and the rules and regulations of the Securities and Exchange
Commission issued thereunder, the undersigned company has duly caused this
report to be signed on its behalf by the undersigned officer thereunto duly
authorized.
New England Electric Resources, Inc.
---------------------------------
(Name of Reporting Company)
By: s/John G. Cochrane
-------------------------------
(Signature of Signing Officer)
J.G. Cochrane Treasurer
-------------------------------------------
(Printed Name and Title of Signing Officer)
Date: April 30, 1997
---------------
<PAGE>
Exhibit E.3
ARTHUR ANDERSEN LLP
OCEAN STATE POWER
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995
TOGETHER WITH AUDITORS' REPORT
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Management Committee of
Ocean State Power:
We have audited the accompanying balance sheets of Ocean State Power (a Rhode
Island partnership) as of December 31, 1996 and 1995, and the related
statements of income, changes in partners' capital and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 2, these financial statements were prepared in accordance
with the accounting requirements of the Federal Energy Regulatory Commission
as set forth in its applicable Uniform System of Accounts and published
accounting releases, which is a comprehensive basis of accounting other than
generally accepted accounting principles.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ocean State Power as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended, in accordance with the accounting requirements
of the Federal Energy Regulatory Commission as set forth in its applicable
Uniform System of Accounts and published accounting releases.
s/Arthur Anderson LLP
Boston, Massachusetts
March 17, 1997
<PAGE>
<TABLE>
OCEAN STATE POWER
BALANCE SHEETS - DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
ASSETS
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Electric Plant, at original cost $241,139 $233,607
Less-Accumulated depreciation and amortization (Note 2) 68,636 57,175
-------- --------
172,503 176,432
CONSTRUCTION WORK-IN-PROGRESS - 6,929
-------- --------
Net electric plant 172,503 183,361
-------- --------
CURRENT ASSETS:
Cash and cash equivalents 4,532 1,461
Accounts receivable -
Affiliated companies (Notes 1, 3 and 6) 12,576 12,559
Other 4,786 4,197
Inventories -
Fuel 597 693
Materials and supplies 6,023 3,689
Prepayments 297 247
-------- --------
Total current assets 28,811 22,846
--------
DEFERRED CHARGES AND OTHER ASSETS:
Unamortized debt expense (Note 2) 1,256 1,354
Site restoration fund (Note 2) 6,018 4,624
Other 273 292
-------- --------
Total deferred charges and other assets 7,547 6,270
-------- --------
Total assets $208,861 $212,477
======== ========
Partners' Capital and Liabilities
CAPITALIZATION:
Partners' capital (see accompanying statement) $ 79,738 $82,214
Long-term debt, net of current maturities (Note 4) 84,509 90,708
-------- --------
Total capitalization 164,247 172,922
-------- --------
CURRENT LIABILITIES:
Current maturities of long-term debt 5,998 5,998
Accounts payable and accrued expenses-
Affiliated companies 927 699
Other 9,240 6,488
Accrued interest on debt 281 296
-------- --------
Total current liabilities 16,446 13,481
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 5)
RESERVES AND DEFERRED CREDITS:
Deferred federal income taxes payable
by partners (Notes 2 and 7) 10,257 9,986
Unamortized investment tax credits (Notes 2 and 7) 10,777 10,274
Site restoration reserve (Note 2) 6,018 4,624
Deferred rent revenue (Note 6) 1,116 1,191
-------- --------
Total reserves and deferred credits 28,168 26,075
-------- --------
Total partners' capital and liabilities $208,861 $212,477
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
OCEAN STATE POWER
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<CAPTION>
1996 1995
<S> <C> <C>
ELECTRIC OPERATING REVENUES (Notes 1 and 2) $100,657 $96,422
-------- -------
OPERATING EXPENSES:
Fuel costs 43,947 40,455
Operating expense 7,972 9,320
Maintenance expense 10,275 5,337
Depreciation and site restoration (Note 2) 13,145 12,860
Income taxes payable by partners (Notes 2 and 7) 5,506 6,083
Property taxes and payments in lieu of taxes (Note 5) 1,719 1,638
------- -------
82,564 75,693
------- -------
Operating income 18,093 20,729
OTHER INCOME (EXPENSE):
Allowance for other funds used during
construction (Note 2) 232 223
Interest income 211 214
Other, net (38) (350)
------- -------
405 87
------- -------
Income before interest charges 18,498 20,816
------- -------
INTEREST CHARGES:
Long-term debt (Note 4) 7,219 8,434
Allowance for borrowed funds used
during construction (Note 2) (113) (115)
------- -------
7,106 8,319
------- -------
Net income $11,392 $12,497
======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
OCEAN STATE POWER
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996 and 1995
(DOLLARS IN THOUSANDS)
<CAPTION>
EUA Narragansett
TCPL Ocean State Energy JMC Ocean
Power Ltd. Corp. Resources Co. State Corp. Total
<S> <C> <C> <C> <C> <C>
PARTNERSHIP INTEREST 40.0% 29.9% 20.0% 10.1% 100.0%
BALANCE, DECEMBER 31, 1994 $35,507 $26,543 $17,753 $8,965 $88,768
Net income 4,999 3,737 2,499 1,262 12,497
Current federal income
taxes payable by partners
(Notes 2 and 7) 1,340 1,000 671 338 3,349
Distributions (8,960) (6,698) (4,480) (2,262) (22,400)
-------- ------- ------- ------- --------
BALANCE, DECEMBER 31, 1995 32,886 24,582 16,443 8,303 82,214
Net income 4,556 3,407 2,279 1,150 11,392
Current federal income
taxes payable by partners
(Notes 2 and 7) 1,893 1,414 946 479 4,732
Distributions (7,440) (5,561) (3,720) (1,879) (18,600)
-------- ------- ------- ------- --------
BALANCE, DECEMBER 31, 1996 $31,895 $23,842 $15,948 $8,053 $79,738
======== ======= ======= ======= ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
OCEAN STATE POWER
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 and 1995
(DOLLARS IN THOUSANDS)
<CAPTION>
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $11,392 $12,497
Adjustments to reconcile net income
to net cash provided by operating
activities -
Income taxes payable by partners 5,506 6,083
Depreciation 12,023 11,738
Provision for site restoration 1,122 1,122
Site restoration interest 272 400
Amortization of debt expense 98 1,034
Amortization of rent revenue (75) (76)
Allowance for other funds used
during construction (232) (223)
Asset disposition 560 -
Salvage 626 81
Changes in assets and liabilities -
Accounts receivable (606) 1,082
Inventories (2,798) 671
Prepayments (50) (66)
Accounts payable and accrued expenses 2,980 (588)
Accrued interest (15) (35)
Other assets and liabilities 19 328
------- -------
Net cash provided by operating
activities 30,822 34,048
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,559) (7,347)
Site restoration fund (1,394) (1,522)
------- -------
Net cash used for investing activities (2,953) (8,869)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt - 3,900
Distributions to partners (18,600) (22,400)
Repayment of long-term debt -
Senior notes (5,998) (5,998)
Revolver (200) -
------- -------
Net cash used for financing activities (24,798) (24,498)
------- -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 3,071 681
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,461 780
------- -------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 4,532 $ 1,461
======= =======
CASH PAID FOR INTEREST $ 7,135 $ 7,402
======= =======
The accompanying notes are an integral part of these
financial statements.
</TABLE>
<PAGE>
OCEAN STATE POWER
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) ORGANIZATION AND BUSINESS
Organization and Management
Ocean State Power (OSP) is a Rhode Island general
partnership with four general partners (see Note 3). OSP is
managed by a committee of representatives from each of the
partners and has no employees. Plant operations and project
administration are performed under various contractual
arrangements as described below.
Business
OSP was formed to construct, own and operate a combined
cycle electric generating plant located in Burrillville,
Rhode Island, adjacent to a second generating plant that is
operated by an affiliate, Ocean State Power II (OSP II).
The plant's average net capacity is approximately 250
megawatts, and it is fired by natural gas purchased under a
firm, 20-year gas purchase contract. The plant commenced
commercial operations on December 31, 1990. The plant's
capacity and energy output are being sold under 20-year
take-or-pay unit power agreements to three investor-owned
utilities located in Massachusetts and Rhode Island. These
utilities are obligated to pay their portion of OSP's total
costs, including amounts for income taxes payable by
partners, and a return on invested capital. The price of
the energy sold is determined based on a Federal Energy
Regulatory Commission (FERC) filed cost of service contract
with an adjustment factor for unit availability. The
following utilities have agreed to purchase electricity
generated in the following proportions:
Power
Purchase
Power Purchaser Affiliate of Percentage
--------------- ------------ -----------
Boston Edison Company - 23.5%
New England Power Company Narragansett Energy
Resources Company 48.5
Montaup Electric Company EUA Ocean State Corporation 28.0
------
100.0%
======
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Regulation
OSP's rates, operations, accounting and other matters are
subject to the regulatory authority of the FERC and other
federal and state agencies. Certain gas transportation
agreements are also subject to regulation by Canadian
authorities.
<PAGE>
OCEAN STATE POWER
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Regulation (Continued)
OSP is subject to the provisions of Statement of Financial
Accounting Standards (SFAS) No. 71, Accounting for Certain
Types of Regulation, and therefore, certain of the
accounting principles followed may differ from enterprises
in general to reflect the economic effect of rate actions of
the FERC. See Note 5 for a discussion of industry
restructuring and the related uncertainties associated with
accounting for regulated businesses.
Allowance for Funds Used During Construction
OSP capitalizes an allowance for funds used during
construction (AFUDC), which represents the net cost of
borrowed funds used for construction purposes and a
reasonable rate of return on OSP's equity when used. These
costs will be recovered over the service life of the plant
in the form of revenue collected to recover depreciation
expense.
Electric Operating Revenues
OSP bills its customers monthly based on estimates in
accordance with the agreements described in Note 1, with a
subsequent true-up to reflect actual costs. Amounts due
from customers at year-end but not yet reflected in
customers' bills totaled $324,000 in 1996 and $174,000 in
1995 and are included in accounts receivable.
The unit power agreements contain incentive provisions
related to the performance of the facility. These
incentives provide for bonuses payable to OSP based on the
extent to which the electrical capability of the plant
exceeds target performance levels. Alternatively, these
incentives provide for decreases in capacity charges payable
by power purchasers based on the extent to which the
electrical capability of the plant falls below target
levels. OSP has billed and recorded revenues related to
these performance incentives of $3.9 million in 1996 and
$3.9 million in 1995.
Unamortized Debt Expense
Unamortized debt expense represents the costs incurred
related to project financing and are amortized using the
effective interest rate method over the original life of the
debt.
<PAGE>
OCEAN STATE POWER
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Depreciation and Site Restoration
Depreciation is provided to allocate the cost of OSP's
electric plant on a straight-line basis over the following
estimated useful lives:
Plant and equipment 20 years
Furniture and fixtures 5 years
Following termination of operations, OSP is obligated to
restore the site to its original preconstruction condition.
Based on a study conducted in 1991, the estimated cost, in
future dollars, for OSP and OSP II is approximately
$65 million. OSP accrues for one half of the estimated site
restoration costs over the life of the plant; OSP II is
responsible for the remaining half of the estimated costs.
The estimate of site restoration is based on a number of
assumptions. The future dollars estimate was determined by
inflating individual costs from mid-1993 to the anticipated
date of expenditure, expressed at six-month periods, at an
annual 4.5% inflation rate. The 1994 FERC Settlement
Agreement assumes an after-tax rate of return on amounts
collected for site restoration of 5.5%, with collections
beginning in November 1991 and continuing through October
2011. Changes in assumptions for such things as labor and
material costs, technology, inflation and the timing of site
restoration could cause this estimate to change in the near
term. OSP recognizes the relative uncertainties associated
with site restoration, including its changing technology and
the possibility of new requirements of law, and therefore
recognizes the need to monitor and adjust site restoration
collections through supplemental rate filings with the FERC.
Funds are deposited into a trust pending their ultimate use.
In accordance with SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, OSP and OSP II
have classified their site restoration funds as available-
for-sale securities and reflected them at fair market value
in the accompanying balance sheets. The investment income
is retained within the trust account. The cost and fair
market value of the site restoration funds at December 31,
1996 were $5,459,000 and $6,018,000, respectively, and at
December 31, 1995 were $4,337,000 and $4,624,000,
respectively.
The staff of the Securities and Exchange Commission has
questioned certain current accounting practices of the
electric utility industry regarding the recognition,
measurement and classification of decommissioning costs for
nuclear generating stations in financial statements of
electric utilities. In response to those questions, the
Financial Accounting Standards Board (FASB) has initiated a
review of the accounting for such costs. The FASB has
considered several approaches, including recording the
<PAGE>
OCEAN STATE POWER
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Depreciation and Site Restoration (Continued)
entire estimated liability for decommissioning costs
initially, rather than accruing the costs over the operating
life of the generating unit. OSP believes that such an
accounting change, if adopted by the FASB, would not
adversely affect OSP's results of operations due to its
ability to recover decommissioning costs through rates.
Cash and Cash Equivalents
OSP considers all highly liquid investments with a maturity
of three months or less to be cash equivalents.
Income Taxes
Income taxes are the responsibility of the partners and are
not normally reflected in the financial statements of
partnerships under generally accepted accounting principles.
However, the billing calculation includes an allowance for
income taxes, and the FERC requires that OSP record this
provision on its records to reflect the income taxes
calculated as if OSP were a taxable corporation. The
provisions for current and deferred income taxes payable by
partners are recorded without regard to whether each partner
could utilize its share of OSP tax deductions and investment
tax credits. Partners' capital and the net investment base
are reduced by the amount equivalent to accumulated deferred
federal income taxes payable by partners and unamortized
investment tax credit in calculating the allowed return.
Investment tax credits are deferred to the extent they would
be utilized on a separate-company basis and are amortized
over the lives of the related property. At December 31,
1996, OSP has fully utilized its investment tax credits.
OSP recognizes, in accordance with SFAS No. 109, Accounting
for Income Taxes, tax assets and liabilities for the
cumulative effect of all temporary differences between
financial statement carrying amounts and the tax bases of
assets and liabilities, including the impact of deferred
investment tax credits. The standard also requires the
adjustment of deferred tax liabilities or assets for an
enacted change in tax laws or rates, among other things.
Use of Estimates
The preparation of financial statements requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
<PAGE>
OCEAN STATE POWER
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates (Continued)
and expenses during the reporting period. Actual results
could differ from those estimates.
Reclassifications
Certain amounts in OSP's prior-year financial statements
have been reclassified to conform to the current year's
presentation.
(3) PARTNERS' CAPITAL
The general partners, along with their respective equity
interests, at December 31, 1996 are as follows:
<TABLE>
<CAPTION> Equity
Partner Affiliate of Interest
<S> <C> <C>
TCPL Power Ltd. TransCanada PipeLines Limited 40.0%
EUA Ocean State Corporation Eastern Utilities Associates 29.9
Narragansett Energy
Resources Company New England Electric System 20.0
JMC Ocean State Corporation J. Makowski Company, Inc. 10.1
-----
100.0%
=====
</TABLE>
(4) DEBT
OSP Finance Company is a finance affiliate of OSP and OSP II
(the Partnerships), and each Partnership owns 50% of its
common stock. OSP Finance Company's single purpose is to
provide long-term financing for the Partnerships. In
October 1992, OSP Finance Company issued senior notes to
various institutional investors in three tranches with fixed
interest rates and varying maturity dates. Upon receipt of
the senior note proceeds, OSP Finance Company extended loans
to OSP and OSP II, with terms the same as the senior notes.
On July 20, 1994, the Partnerships entered into a revolving
secured credit agreement (the Revolver) with a commercial
bank for $15,000,000. The Partnerships must pay an annual
commitment fee of .15% on the unused portion of the
Revolver. Principal borrowings under the Revolver are
payable in full at maturity. The Revolver expires on
July 20, 2001 and bears interest at varying rates. The
interest rate at December 31, 1996 and 1995 was 6.031% and
6.125%, respectively.
<PAGE>
OCEAN STATE POWER
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(4) DEBT (Continued)
Debt outstanding at December 31, 1996 is as follows (dollars
in thousands):
<TABLE>
<CAPTION>
OSP OSP II Total
<S> <C> <C> <C>
6.96% Series A senior notes due
June 15, 2002 $32,699 $28,028 $60,727
7.92% Series B senior notes due
February 15, 2006 22,077 18,923 41,000
8.21% Series C senior notes due
September 15, 2011 31,231 26,769 58,000
Revolving line of credit 4,500 2,000 6,500
------- ------- -------
Total long-term debt 90,507 75,720 166,227
Less Current maturities 5,998 5,141 11,139
------- ------- -------
Long-term debt,
excluding current maturities $84,509 $70,579 $155,088
======= ======= =======
</TABLE>
The Partnerships are guarantors of the senior note agreement
and the Revolver on a joint and several basis. The senior
notes and amounts outstanding under the Revolver are
collateralized by assignment of the rights and interest in
all of the Partnerships' unit power agreements and all
resulting proceeds, with the exception, however, of revenues
under the unit power agreements that are attributable to
domestic gas transportation, on which the domestic gas
transporter has a first lien.
The senior note agreement and the Revolver contain certain
covenants, including restrictions on the creation of liens,
sale of assets, amendment of agreements and the incurrence
of additional indebtedness.
OSP's share of the senior notes matures at $5,998,000 per
year over the life of the senior notes.
(5) COMMITMENTS AND CONTINGENCIES
OSP has entered into various agreements in connection with
the operation of the power plant. OSP is obligated under
the following agreements/commitments.
Gas Supply and Transportation
OSP has a firm, 20-year gas purchase contract with a
Canadian supplier for the purchase of 50,000 Mcf per day or
a minimum of 12,318,750 Mcf per year, to be delivered to the
U.S./Canadian border. OSP may also purchase additional
quantities of gas as available. The contract price is based
on an initial base price, subject to monthly adjustments
based on changes in the New England Power Pool's (NEPOOL)
Fossil Fuel Index price. This contract provides OSP with
its primary fuel supply while maintaining other gas supply
options and oil as backups.
<PAGE>
OCEAN STATE POWER
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(5) COMMITMENTS AND CONTINGENCIES (Continued)
Gas Supply and Transportation (Continued)
OSP has a firm, 20-year fuel transportation agreement with
Tennessee Gas Pipeline Company for delivery of natural gas
from the U.S./Canadian border to the plant. The agreement
may be extended beyond 20 years on a year-by-year basis.
Tax Treaty
The Partnerships entered into a tax treaty with the Town of
Burrillville, Rhode Island, providing for annual payments to
the town in lieu of any taxes that would normally be
assessed. Payments are to be made quarterly over the
20-year period through 2011 and are to be shared equally by
the Partnerships. The total payments for OSP for each of
the five years subsequent to December 31, 1996 are as
follows (dollars in thousands):
1997 1,520
1998 1,671
1999 1,774
2000 1,774
2001 1,774
Other Commitments
As part of the costs incurred to obtain the site on which
the power unit is constructed, OSP has entered into certain
agreements that provide for payments in lieu of taxes in
addition to the tax treaty above. OSP agreed to make annual
payments to the scholarship and community service
foundations in Burrillville, Rhode Island, and Uxbridge,
Massachusetts, as well as to the Harrisville, Rhode Island,
fire district in anticipation of any services to be
rendered. Payments are to be made annually over the 20-year
life and are to be shared equally by OSP and OSP II.
Deferred Revenues
OSP filed its 1995 supplement to its rate schedules with the
FERC on February 1, 1995, setting forth its proposed Return
on Equity (ROE) of 12.90% for 1995. Three parties
challenged OSP's determination of the ROE and requested a
hearing to determine the appropriate ROE for 1995. After a
hearing was set, OSP submitted an offer to settle the
proceedings at an ROE of 12.33%, which the presiding
administrative law judge certified to the FERC. The parties
are currently waiting for the FERC's decision on whether to
approve the settlement offer. At December 31, 1996, OSP has
deferred revenue recognition of $939,000 for the difference
between 12.90% and 12.33%, OSP's estimated result of the
proceedings.
<PAGE>
OCEAN STATE POWER
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(5) COMMITMENTS AND CONTINGENCIES (Continued)
Industry Restructuring
The states in which OSP's partners and power purchasers are
based have utility restructuring plans in different stages
of development or implementation. Some, such as
Massachusetts, call for an earlier initiation of retail
competition and divestiture of generation assets, as well as
providing for other arrangements for recovery of stranded
costs.
OSP believes that there are many uncertainties associated
with any major restructuring of the electric utility
industry. Among them are: the positions that will ultimately
be taken by the various New England states and their
regulatory agencies and their applicability to OSP; the role
of the FERC in any restructuring involving OSP, and the
ultimate positions it will take on relevant issues within
its jurisdiction; to what extent the United States Congress
will take legislative action and, if it does, with what
results; whether the necessary political consensus can be
reached on the significant and complex issues involved in
changing the long-standing structure of the electric utility
industry; and to what extent electric utilities will be
permitted to recover their strandable costs. OSP cannot
predict what form the restructuring of the electric utility
industry will take, or what effect any resulting
restructuring will have on OSP's business operations or
financial results.
<PAGE>
OCEAN STATE POWER
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(6) RELATED PARTIES
Ground Lease
OSP entered into an agreement to lease certain property on
which OSP II was constructed to OSP II. The original lease
term expires on December 31, 2011 and is renewable in
five-year periods through September 2088. The lease may be
terminated by OSP II with the appropriate written notice to
OSP during the initial term. OSP may terminate the lease
only upon its purchase of OSP II's power unit.
Under the provisions of the lease, OSP II paid approximately
$1.1 million of initial rent upon receipt of its
construction financing. OSP has classified amounts under
this provision as deferred rent revenue to be amortized over
the life of the lease.
OSP has an option to acquire OSP II's unit at any time at a
price equal to the greater of its fair value or any amounts
due under any mortgage on the unit.
Common Facilities Lease
OSP entered into an agreement to lease to OSP II an
undivided interest in certain common facilities. The basic
term expires on September 30, 1997 and may be extended in
five-year increments through September 2088. Rent is
payable in an amount equal to OSP II's share of the monthly
investment cost of the common facilities for the basic term
of the lease and an amount equal to a fair market rental
value of the leased property thereafter. OSP II is
obligated to share in the costs of maintaining the facility
and has an option to purchase its undivided interest in the
common facilities for its appraised fair market value. The
lease may be terminated by OSP II upon written notice and
payment of certain rents based on the fair market value
during the canceled term.
Project Administration Agent
Effective October 1, 1996, TransCanada Power (TCP), a
division of TransCanada Energy Ltd., an affiliate of one of
the general partners, was appointed project administration
agent to manage the day-to-day affairs of OSP. TCP is
compensated at agreed-upon billing rates that are adjusted
annually. TCP was paid approximately $137,000 for services
provided in 1996. The prior project administration agent,
J. Makowski Management Corp., was paid approximately
$727,000 in 1996 and $1,174,000 in 1995 for services
rendered.
<PAGE>
OCEAN STATE POWER
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(6) RELATED PARTIES (Continued)
Interconnection Facility
OSP and OSP II entered into an agreement to lease the
interconnection facility from Blackstone Valley Electric
Company (BVE), an affiliate of Eastern Utilities Associates.
Rent payments are to be paid monthly over the 20-year period
through 2011 and are to be shared equally by OSP and OSP II.
OSP paid BVE approximately $637,000 in 1996 and $649,000 in
1995 for use of the interconnection facility.
Gas Layoff Sales
During the years ended December 31, 1996 and 1995, OSP made
the following sales of available gas at market prices to the
following affiliate entities (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
US Generating Corp. (an affiliate of
JMC Ocean State Corporation) $ 78 $ -
New England Power Company 17 94
Selkirk Cogen Partners (an affiliate
of JMC Ocean State Corporation) 16 1,806
Altresco Pittsfield, L.P.(an affiliate
of JMC Ocean State Corporation) - 124
MASSPOWER (an affiliate of JMC
Ocean State Corporation) - 74
</TABLE>
(7) PROVISION FOR INCOME TAXES PAYABLE BY PARTNERS
OSP provides an amount equal to income tax expense as if it
were a separate corporation, and this amount is a component
of cost of service. The partners are exempt from state
income tax in Rhode Island. Computed federal income taxes
payable by partners are as follows (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Current $ 4,732 $ 3,349
Deferred 271 678
Investment tax credits, net 503 2,056
------- --------
$ 5,506 $ 6,083
======= ========
</TABLE>
<PAGE>
OCEAN STATE POWER
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(7) PROVISION FOR INCOME TAXES PAYABLE BY PARTNERS (Continued)
The tax effects of the temporary differences and tax
carryforwards that give rise to significant portions of the
deferred tax assets and deferred tax liabilities at December
31, 1996 and 1995 are presented below (dollars in
thousands):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Deferred tax assets
Site restoration reserve $ 2,104 $ 1,617
Deferred rent revenue 390 417
------- -------
Total deferred tax assets 2,494 2,034
------- -------
Deferred tax liabilities
Property, plant and equipment 12,618 11,935
Regulatory asset 133 85
------- -------
Total deferred tax liabilities 12,751 12,020
------- -------
Net deferred tax liability $10,257 $ 9,986
======= =======
</TABLE>
A valuation allowance has not been recorded at December 31,
1996 and 1995, as OSP expects that all deferred income tax
assets will be utilized in the future.
(8) DISCLOSURE OF FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents
approximate fair value because of the short maturity of
these investments. The fair value of the site restoration
fund is based on the quoted market prices of the investments
of the fund. The fair value of long-term debt is estimated
based on currently quoted market prices for similar types of
borrowing arrangements.
The estimated fair value of OSP's financial instruments as
of December 31, 1996 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
Carrying Value Fair Value
<S> <C> <C>
Cash and cash equivalents $ 4,532 $ 4,532
Site restoration fund 6,018 6,018
Long-term debt 90,507 96,190
</TABLE>
<PAGE>
Exhibit E.4
ARTHUR ANDERSEN LLP
OCEAN STATE POWER II
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995
TOGETHER WITH AUDITORS' REPORT
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Management Committee of
Ocean State Power II:
We have audited the accompanying balance sheets of Ocean State Power II (a
Rhode Island partnership) as of December 31, 1996 and 1995, and the related
statements of income, changes in partners' capital and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 2, these financial statements were prepared in accordance
with the accounting requirements of the Federal Energy Regulatory Commission
as set forth in its applicable Uniform System of Accounts and published
accounting releases, which is a comprehensive basis of accounting other than
generally accepted accounting principles.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ocean State Power II as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended, in accordance with the accounting requirements
of the Federal Energy Regulatory Commission as set forth in its applicable
Uniform System of Accounts and published accounting releases.
s/Arthur Andersen LLP
Boston, Massachusetts
March 17, 1997
<PAGE>
<TABLE>
OCEAN STATE POWER II
BALANCE SHEETS - DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
Assets
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Electric Plant, at original cost $176,525 $175,622
Less-Accumulated depreciation and amortization (Note 2) 45,142 36,430
-------- --------
131,383 139,192
CONSTRUCTION WORK IN PROGRESS 2,866 430
-------- --------
Net electric plant 134,249 139,622
-------- --------
CURRENT ASSETS:
Cash and cash equivalents 516 1,103
Accounts receivable -
Affiliated companies (Notes 1, 3 and 6) 12,899 13,751
Other 4,202 4,323
Inventories -
Fuel 597 693
Materials and supplies 6,031 3,683
Prepayments 297 209
-------- --------
Total current assets 24,542 23,762
-------- --------
DEFERRED CHARGES AND OTHER ASSETS:
Prepaid rent (Note 6) 1,116 1,191
Unamortized debt expense (Note 2) 1,089 1,767
Site restoration fund (Note 2) 5,383 4,043
Other 202 212
-------- --------
Total deferred charges and other assets 7,789 7,213
-------- --------
Total assets $166,580 $170,597
======== ========
Partners' Capital and Liabilities
CAPITALIZATION:
Partners' capital (see accompanying statement) $72,713 $76,502
Long-term debt, net of current maturities (Note 4) 70,579 74,421
-------- --------
Total capitalization 143,292 150,923
-------- --------
CURRENT LIABILITIES:
Current maturities of long-term debt 5,141 5,141
Accounts payable and accrued expenses-
Affiliated companies 2,552 2,164
Other 6,778 4,561
Accrued interest on debt 238 251
-------- --------
Total current liabilities 14,709 12,117
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 5)
RESERVES AND DEFERRED CREDITS:
Deferred federal income taxes payable
by partners (Notes 2 and 7) 3,196 3,514
Site restoration reserve (Note 2) 5,383 4,043
-------- --------
Total reserves and deferred credits 8,579 7,557
-------- --------
Total partners' capital and liabilities $166,580 $170,597
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
OCEAN STATE POWER II
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<CAPTION>
1996 1995
<S> <C> <C>
ELECTRIC OPERATING REVENUES (Notes 1 and 2) $101,508 $98,980
------- -------
OPERATING EXPENSES:
Fuel costs 54,051 46,252
Operating expense 11,098 12,684
Maintenance expense 2,960 4,416
Depreciation and site restoration (Note 2) 9,886 9,863
Income taxes payable by partners (Notes 2 and 7) 5,395 6,042
Property taxes and payments in lieu of taxes (Note 5) 1,711 1,646
------- -------
85,101 80,903
------- -------
Operating income 16,407 18,077
OTHER INCOME (EXPENSE):
Allowance for other funds used during
construction (Note 2) 69 32
Interest income 219 224
Other, net (35) (45)
------- -------
253 211
------- -------
Income before interest charges 16,660 18,288
------- -------
INTEREST CHARGES:
Long-term debt (Note 4) 6,596 7,078
Allowance for borrowed funds used during construction (Note 2) (34) (16)
------- -------
6,562 7,062
------- -------
Net income $10,098 $11,226
======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
OCEAN STATE POWER II
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<CAPTION>
EUA Narragansett
TCPL Ocean State Energy JMC Ocean
Power Ltd. Corp. Resources Co. State Corp. Total
<S> <C> <C> <C> <C> <C>
PARTNERSHIP INTEREST 40.0% 29.9% 20.0% 10.1% 100.0%
BALANCE, DECEMBER 31, 1994 $ 31,874 $ 23,825 $ 15,937 $ 8,048 $ 79,684
Net income 4,490 3,357 2,245 1,134 11,226
Current federal income
taxes payable by partners
(Notes 2 and 7) 2,557 1,911 1,278 646 6,392
Distributions (8,320) (6,219) (4,160) (2,101) (20,800)
-------- ------- ------- ------- --------
BALANCE, DECEMBER 31, 1995 30,601 22,874 15,300 7,727 76,502
Net income 4,039 3,019 2,020 1,020 10,098
Current federal income
taxes payable by partners
(Notes 2 and 7) 2,285 1,709 1,142 577 5,713
Distributions (7,840) (5,860) (3,920) (1,980) (19,600)
-------- ------- ------- ------- --------
BALANCE, DECEMBER 31, 1996 $29,085 $21,742 $14,542 $7,344 $72,713
======== ======= ======= ======= ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
OCEAN STATE POWER II
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<CAPTION>
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 10,098 $11,226
Adjustments to reconcile net income to net cash
provided by operating activities -
Income taxes payable by partners 5,395 6,042
Depreciation 8,764 8,741
Provision for site restoration 1,122 1,122
Site restoration interest 218 345
Amortization of debt expense 678 878
Allowance for other funds used during construction (69) (32)
Asset disposition 560 -
Salvage 108 123
Changes in assets and liabilities -
Accounts receivable 973 681
Inventories (2,813) 663
Prepayments (88) (44)
Prepaid rent 75 76
Accounts payable and accrued expenses 2,605 (1,056)
Accrued interest (13) (32)
Other assets and liabilities 80 31
-------- --------
Net cash provided by operating activities 27,693 28,764
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,499) (1,064)
Site restoration fund (1,340) (1,467)
-------- --------
Net cash used for investing activities (4,839) (2,531)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt 1,300 600
Distributions to partners (19,600) (20,800)
Repayment of long-term debt (5,141) (5,141)
-------- --------
Net cash used for financing activities (23,441 (25,341)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (587) 892
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,103 211
-------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 516 $ 1,103
======== ========
CASH PAID FOR INTEREST $ 5,930 $ 6,230
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
OCEAN STATE POWER II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) ORGANIZATION AND BUSINESS
Organization and Management
Ocean State Power II (OSP II) is a Rhode Island general
partnership with four general partners (see Note 3). OSP II
is managed by a committee of representatives from each of
the partners and has no employees. Plant operations and
project administration are performed under various
contractual arrangements, as described below.
Business
OSP II was formed to construct, own and operate a combined-
cycle electric generating plant located in Burrillville,
Rhode Island, adjacent to a second generating plant that is
operated by an affiliate, Ocean State Power (OSP). The
plant's average net capacity is approximately 250 megawatts,
and it is fired by natural gas purchased under a firm,
20-year gas purchase contract. The plant commenced
commercial operations on October 1, 1991. The plant's
capacity and energy output are being sold under 20-year
take-or-pay unit power agreements to three investor-owned
utilities located in Massachusetts and Rhode Island. These
utilities are obligated to pay their portion of OSP II's
total costs, including amounts for income taxes payable by
partners, and a return on invested capital. The price of
the energy sold is determined based on a Federal Energy
Regulatory Commission (FERC)-filed cost-of-service contract
with an adjustment factor for unit availability. The
following utilities have agreed to purchase electricity
generated in the following proportions:
Power
Purchase
Power Purchaser Affiliate of Percentage
--------------- ------------ -----------
Boston Edison Company - 23.5%
New England Power Company Narragansett Energy Resources
Company 48.5
Montaup Electric Company EUA Ocean State Corporation 28.0
-----
100.0%
======
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Regulation
OSP II's rates, operations, accounting and other matters are
subject to the regulatory authority of the FERC and other
federal and state agencies. Certain gas transportation
agreements are also subject to regulation by Canadian
authorities.
<PAGE>
OCEAN STATE POWER II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Regulation (Continued)
OSP II is subject to the provisions of Statement of
Financial Accounting Standards (SFAS) No. 71, Accounting for
Certain Types of Regulation, and therefore, certain of the
accounting principles followed may differ from enterprises
in general to reflect the economic effect of rate actions of
the FERC. See Note 5 for a discussion of industry
restructuring and the related uncertainties associated with
accounting for regulated businesses.
Allowance for Funds Used During Construction
OSP II capitalizes an allowance for funds used during
construction (AFUDC), which represents the net cost of
borrowed funds used for construction purposes and a
reasonable rate of return on OSP's II equity when used.
These costs will be recovered over the service life of the
plant in the form of revenue collected to recover
depreciation expense.
Electric Operating Revenues
OSP II bills its customers monthly based on estimates in
accordance with the agreements described in Note 1, with a
subsequent true-up to reflect actual costs. Amounts due
from customers at year-end, but not yet reflected in
customers' bills, totaled approximately $618,000 in 1996 and
$100,000 in 1995 and are included in accounts receivable.
The unit power agreements contain incentive provisions
related to the performance of the facility. These
incentives provide for bonuses payable to OSP II based on
the extent to which the electrical capability of the plant
exceeds target performance levels. Alternatively, these
incentives provide for decreases in capacity charges payable
by power purchasers based on the extent to which the
electrical capability of the plant falls below target
levels. OSP II has billed and recorded revenues related to
these performance incentives of $3.2 million in 1996 and
$3.4 million in 1995.
Unamortized Debt Expense
Unamortized debt expense represents the costs incurred
related to project financing and are amortized using the
effective interest rate method over the original life of the
debt.
<PAGE>
OCEAN STATE POWER II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Depreciation and Site Restoration
Depreciation is provided to allocate the cost of OSP II's
electric plant on a straight-line basis over the following
estimated useful lives:
Plant and equipment 20 years
Furniture and fixtures 5 years
Following a termination of operations, OSP II is obligated
to restore the site to its original preconstruction
condition. Based on a study conducted in 1991, the
estimated cost, in future dollars, for OSP and OSP II is
approximately $65 million. OSP II accrues for one half of
the estimated site restoration costs over the life of the
plant; OSP is responsible for the remaining half of the
estimated costs. The estimate of site restoration is based
on a number of assumptions. The future dollars estimate was
determined by inflating individual costs from mid-1993 to
the anticipated date of expenditure, expressed at six-month
periods, at an annual 4.5% inflation rate. The 1994 FERC
Settlement Agreement assumes an after-tax rate of return on
amounts collected for site restoration of 5.5%, with
collections beginning in November 1991 and continuing
through October 2011. Changes in assumptions for such
things as labor and material costs, technology, inflation
and the timing of site restoration could cause this estimate
to change in the near term. OSP II recognizes the relative
uncertainties associated with site restoration, including
its changing technology and the possibility of new
requirements of law, and therefore recognizes the need to
monitor and adjust site restoration collections through
supplemental rate filings with the FERC.
Funds are deposited into a trust pending their ultimate use.
In accordance with SFAS No. 115, Accounting for Certain
Investments in Debt and Equity Securities, OSP and OSP II
have classified their site restoration funds as available-
for-sale securities and reflected them at fair market value
on the accompanying balance sheets. The investment income
is retained within the trust account. The cost and fair
market value of the site restoration fund at December 31,
1996 were $4,920,000 and $5,383,000, respectively, and at
December 31, 1995 were $3,798,000 and $4,043,000,
respectively.
The staff of the Securities and Exchange Commission has
questioned certain current accounting practices of the
electric utility industry regarding the recognition,
measurement and classification of decommissioning costs for
nuclear generating stations in financial statements of
electric utilities. In response to those questions, the
Financial Accounting Standards Board (FASB) has initiated a
review of the accounting for such costs. The FASB has
considered several approaches, including recording the
entire estimated liability for decommissioning costs
<PAGE>
OCEAN STATE POWER II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Depreciation and Site Restoration (Continued)
initially, rather than accruing the costs over the operating
life of the generating unit. OSP II believes that such an
accounting change, if adopted by the FASB, would not
adversely affect OSP II's results of operations due to its
ability to recover decommissioning costs through rates.
Cash and Cash Equivalents
OSP II considers all highly liquid investments with a
maturity of three months or less to be cash equivalents.
Income Taxes
Income taxes are the responsibility of the partners and are
not reflected in the financial statements of partnerships
under generally accepted accounting principles. However,
the billing calculation includes an allowance for income
taxes, and the FERC requires that OSP II record this
provision on its records to reflect the income taxes
calculated as if OSP II were a taxable corporation. The
provisions for current and deferred income taxes payable by
partners are recorded without regard to whether each partner
could utilize its share of the OSP II tax deductions.
Partners' capital and the net investment base are reduced by
the amount equivalent to accumulated deferred federal income
taxes payable by partners in calculating the allowed return.
OSP II recognizes, in accordance with SFAS No. 109,
Accounting for Income Taxes, tax assets and liabilities for
the cumulative effect of all temporary differences between
financial statement carrying amounts and the tax bases of
assets and liabilities. The standard also requires the
adjustment of deferred tax liabilities or assets for an
enacted change in tax laws or rates, among other things.
Use of Estimates
The preparation of financial statements requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Reclassifications
Certain amounts in OSP II's prior-year financial statements
have been reclassified to conform with the current year's
presentation.
<PAGE>
OCEAN STATE POWER II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(3) PARTNERS' CAPITAL
The general partners, along with their respective equity
interests, at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Equity
Partner Affiliate of Interest
<S> <C> <C>
TCPL Power Ltd. TransCanada PipeLines Limited 40.0%
EUA Ocean State Corporation Eastern Utilities Associates 29.9
Narragansett Energy
Resources Company New England Electric System 20.0
JMC Ocean State Corporation J. Makowski Company, Inc. 10.1
-----
100.0%
=====
</TABLE>
(4) DEBT
OSP Finance Company is a finance affiliate of OSP and OSP II
(the Partnerships), and each Partnership owns 50% of its
common stock. OSP Finance Company's single purpose is to
provide long-term financing for the Partnerships. In
October 1992, OSP Finance Company issued senior notes to
various institutional investors in three tranches with fixed
interest rates and varying maturity dates. Upon receipt of
the senior note proceeds, OSP Finance Company extended loans
to Partnerships, with terms the same as the senior notes.
On July 20, 1994, the Partnerships entered into a revolving
secured credit agreement (the Revolver) with a commercial
bank for $15,000,000. The Partnerships must pay an annual
commitment fee of .15% on the unused portion of the
Revolver. Principal borrowings under the Revolver are
payable in full at maturity. The Revolver expires on
July 20, 2001 and bears interest at varying rates. The
interest rate at December 31, 1996 and 1995 was 6.031% and
6.125%, respectively.
Debt outstanding at December 31, 1996 is as follows (dollars
in thousands):
<TABLE>
<CAPTION>
OSP OSP II Total
<S> <C> <C> <C>
6.96% Series A senior notes due
June 15, 2002 $32,699 $28,028 $60,727
7.92% Series B senior notes due
February 15, 2006 22,077 18,923 41,000
8.21% Series C senior notes due
September 15, 2011 31,231 26,769 58,000
Revolving line of credit 4,500 2,000 6,500
------- ------- --------
Total long-term debt 90,507 75,720 166,227
Less Current maturities 5,998 5,141 11,139
------- ------- --------
Long-term debt,
excluding current maturities $84,509 $70,579 $155,088
====== ====== =======
</TABLE>
<PAGE>
OCEAN STATE POWER II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(4) DEBT (Continued)
The Partnerships are guarantors of the senior note agreement
and the Revolver on a joint and several basis. The senior
notes and amounts outstanding under the Revolver are
collateralized by assignment of the rights and interest in
all of the Partnerships' unit power agreements and all
resulting proceeds with the exception, however, of revenues
under the unit power agreements that are attributable to
domestic gas transportation, on which the domestic gas
transporter has a first lien.
The senior note agreement and the Revolver contain certain
covenants, including restrictions on the creation of liens,
sale of assets, amendment of agreements and the incurrence
of additional indebtedness.
OSP II's share of the senior notes matures at $5,141,000 per
year over the life of the senior notes.
(5) COMMITMENTS AND CONTINGENCIES
OSP II has entered into various agreements in connection
with the operation of the power plant. OSP II is obligated
under the following agreements/commitments.
Gas Supply and Transportation
OSP II has firm, 20-year gas purchase contracts with two
Canadian suppliers for the purchase of 25,000 Mcf from each
supplier per day or a total minimum of 12,318,750 Mcf per
year, to be delivered to the U.S./Canadian border. One of
the gas purchase contracts was entered into with an
affiliate of TCPL Power Ltd., a general partner. OSP II may
also purchase additional quantities of gas as available.
The contract prices are based on an initial base price,
subject to monthly adjustments based on changes in the New
England Power Pool's (NEPOOL) Fossil Fuel Index price.
These contracts provide OSP II with its primary fuel supply
while maintaining other gas supply options and oil as
backups.
OSP II has a firm, 20-year fuel transportation agreement
with Tennessee Gas Pipeline Company for delivery of natural
gas from the U.S./Canadian border to the plant. The
agreement may be extended beyond 20 years on a year-by-year
basis.
<PAGE>
OCEAN STATE POWER II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(5) COMMITMENTS AND CONTINGENCIES (Continued)
Tax Treaty
The Partnerships entered into a tax treaty with the Town of
Burrillville, Rhode Island, providing for annual payments to
the town in lieu of any taxes that would normally be
assessed. Payments are to be made quarterly over the
20-year period through 2011 and are to be shared equally by
the Partnerships. The total payments for OSP II for each of
the five years subsequent to December 31, 1996 are as
follows (dollars in thousands):
1997 1,520
1998 1,671
1999 1,774
2000 1,774
2001 1,774
Other Commitments
As part of the costs incurred to obtain the site on which the
power unit is constructed, OSP II has entered into certain
agreements that provide for payments in lieu of taxes in
addition to the tax treaty above. OSP II agreed to make
annual payments to the scholarship and community service
foundations in Burrillville, Rhode Island, and Uxbridge,
Massachusetts, as well as to the Harrisville, Rhode Island,
fire district in anticipation of any services to be rendered.
Payments are to be made annually over the 20-year life and are
to be shared equally by OSP and OSP II.
Deferred Revenues
OSP II filed its 1995 supplement to its rate schedules with
the FERC on February 1, 1995, setting forth its proposed
Return on Equity (ROE) of 12.90% for 1995. Three parties
challenged OSP II's determination of the ROE and requested a
hearing to determine the appropriate ROE for 1995. After a
hearing was set, OSP II submitted an offer to settle the
proceedings at an ROE of 12.33%, which the presiding
administrative law judge certified to the FERC. The parties
are currently waiting for the FERC's decision on whether to
approve the settlement offer. At December 31, 1996, OSP II
has deferred revenue recognition of $881,000 for the
difference between 12.90% and 12.33%, OSP II's estimated
result of the proceedings.
<PAGE>
OCEAN STATE POWER II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(5) COMMITMENTS AND CONTINGENCIES (Continued)
Industry Restructuring
The states in which OSP II's partners and power purchasers
are based have utility restructuring plans in different
stages of development or implementation. Some, such as
Massachusetts, call for an earlier initiation of retail
competition and divestiture of generation assets, as well as
providing for other arrangements for recovery of stranded
costs.
OSP II believes that there are many uncertainties associated
with any major restructuring of the electric utility
industry. Among them are: the positions that will ultimately
be taken by the various New England states and their
regulatory agencies and their applicability to OSP II; the
role of the FERC in any restructuring involving OSP II and
the ultimate positions it will take on relevant issues
within its jurisdiction; to what extent the United States
Congress will take legislative action and, if it does, with
what results; whether the necessary political consensus can
be reached on the significant and complex issues involved in
changing the long-standing structure of the electric utility
industry; and to what extent electric utilities will be
permitted to recover their strandable costs. OSP II cannot
predict what form the restructuring of the electric utility
industry will take, or what effect any resulting
restructuring will have on OSP II's business operations or
financial results.
<PAGE>
OCEAN STATE POWER II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(6) RELATED PARTIES
Ground Lease
OSP II entered into an agreement to lease certain property
on which OSP II was constructed from OSP. The original
lease term expires on December 31, 2011 and is renewable in
five-year periods through September 2088. The lease may be
terminated by OSP II with the appropriate written notice to
OSP during the initial term. OSP may terminate the lease
only upon its purchase of OSP II's power unit.
Under the provisions of the lease, OSP II paid approximately
$1.1 million of initial rent upon receipt of its
construction financing. OSP II has classified amounts under
this provision as prepaid rent to be amortized over the life
of the lease.
OSP has an option to acquire OSP II's power unit at any time
at a price equal to the greater of its fair value or any
amounts due under any mortgage on the unit.
Common Facilities Lease
OSP II entered into an agreement to lease from OSP an
undivided interest in certain common facilities. The basic
term expires on September 30, 1997 and may be extended in
five-year increments through September 2088. Rent is
payable in an amount equal to OSP II's share of the monthly
investment cost of the common facilities for the basic term
of the lease and an amount equal to a fair market rental
value of the leased property thereafter. OSP II is
obligated to share in the costs of maintaining the facility
and has an option to purchase its undivided interest in the
common facilities for its appraised fair market values. The
lease may be terminated by OSP II upon written notice and
payment of certain rents based on the fair market value
during the canceled term.
Project Administration Agent
Effective October 1, 1996, TransCanada Power (TCP), a
division of TransCanada Energy Ltd., an affiliate of one of
the general partners, was appointed project administration
agent to manage the day-to-day affairs of OSP II. TCP is
compensated at agreed-upon billing rates that are adjusted
annually. TCP was paid approximately $137,000 for services
provided in 1996. The prior administration agent, J.
Makowski Management Corp., was paid approximately $586,000
in 1996 and $1,076,000 in 1995 for services rendered.
<PAGE>
OCEAN STATE POWER II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(6) RELATED PARTIES (Continued)
Interconnection Facility
OSP and OSP II entered into an agreement to lease the
interconnection facility from Blackstone Valley Electric
Company (BVE), an affiliate of Eastern Utilities Associates.
Rent payments are to be paid monthly over the 20-year period
through 2011 and are to be shared equally by OSP and OSP II.
OSP II paid BVE approximately $637,000 in 1996 and $649,000
in 1995 for use of the interconnection facility.
Gas Layoff Sales
During the years ended December 31, 1996 and 1995, OSP II
made the following sales of available gas at market prices
to the following affiliated entities (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
US Generating Corp. (an affiliate of
JMC Ocean State Corporation
OSP $ 27 $ -
Selkirk Cogen Partners (an affiliate
of JMC Ocean State Corporation) - 1,354
Altresco Pittsfield, L.P.(an affiliate
of JMC Ocean State Corporation) - 124
New England Power Company - 94
MASSPOWER (An affiliate of JMC Ocean
State Corporation) - 74
</TABLE>
(7) PROVISION FOR INCOME TAXES PAYABLE BY PARTNERS
OSP II provides an amount equal to income tax expense as if
it were a separate corporation, and this amount is a
component of cost of service. The partners are exempt from
state income tax in Rhode Island. Computed federal income
taxes payable by partners are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Current $5,713 $6,392
Deferred (318) (350)
------ ------
$5,395 $6,042
====== ======
</TABLE>
<PAGE>
OCEAN STATE POWER II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(Continued)
(7) PROVISION FOR INCOME TAXES PAYABLE BY PARTNERS (Continued)
The tax effects of the temporary differences and tax
carryforwards that give rise to significant portions of the
deferred tax assets and deferred tax liabilities at December
31, 1996 and 1995 are presented below (dollars in
thousands):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Deferred tax assets
Site restoration reserve $ 1,872 $ 1,402
Other 215 189
------- -------
Total deferred tax assets 2,087 1,591
------- -------
Deferred tax liabilities
Property, plant and equipment 5,244 4,829
Regulatory asset 39 69
Debt expense - 207
------- -------
Total deferred tax liabilities 5,283 5,105
------- -------
Net deferred tax liability $ 3,196 $ 3,514
======= =======
</TABLE>
A valuation allowance has not been recorded at December 31,
1996 and 1995, as OSP II expects that all deferred income
tax assets will be utilized in the future.
(8) DISCLOSURE OF FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents
approximate fair value because of the short maturity of
these investments. The fair value of the site restoration
fund is based on the quoted market prices of the investments
of the fund. The fair value of long-term debt is estimated
based on currently quoted market prices for similar types of
borrowing arrangements.
The estimated fair value of OSP II's financial instruments
as of December 31, 1996 are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
Carrying Value Fair Value
<S> <C> <C>
Cash and cash equivalents $ 516 $ 516
Site restoration fund 5,383 5,383
Long-term debt 75,720 80,591
</TABLE>
<PAGE>
Exhibit E.5
ARTHUR ANDERSEN LLP
OSP FINANCE COMPANY
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1996 AND 1995
TOGETHER WITH AUDITORS' REPORT
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and the Board of Directors of
OSP Finance Company:
We have audited the accompanying balance sheets of OSP Finance Company (a
Delaware corporation) as of December 31, 1996 and 1995, and the related
statements of operations, stockholders' equity and cash flows for the years
then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of OSP Finance Company as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
s/Arthur Andersen LLP
Boston, Massachusetts
March 17, 1997
<PAGE>
<TABLE>
OSP FINANCE COMPANY
BALANCE SHEETS - DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
ASSETS
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
CURRENT ASSETS:
Loans receivable from stockholders-
Ocean State Power $ 5,998 $ 5,998
Ocean State Power II 5,141 5,141
Interest receivable from stockholders-
Ocean State Power 275 292
Ocean State Power II 235 250
-------- --------
Total current assets 11,649 11,681
-------- --------
LOANS RECEIVABLE FROM STOCKHOLDERS-NONCURRENT (Note 2):
Ocean State Power 80,009 86,007
Ocean State Power II 68,579 73,720
-------- --------
Total loans receivable-noncurrent 148,588 159,727
-------- --------
$160,237 $171,408
======== ========
Liabilities and Stockholders' Equity
CURRENT LIABILITIES:
Current maturities of senior notes (Note 2) $11,139 $11,139
Accrued interest 510 542
-------- --------
Total current liabilities 11,649 11,681
SENIOR NOTES, EXCLUDING CURRENT MATURITIES (Note 2) 148,588 159,727
-------- --------
Total liabilities 160,237 171,408
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value-
Authorized-1,000 shares
Issued and outstanding-20 shares - -
Additional paid-in capital 1 1
Accumulated deficit (1) (1)
-------- --------
Total stockholders' equity - -
-------- --------
$160,237 $171,408
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
OSP Finance Company
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<CAPTION>
1996 1995
<S> <C> <C>
INCOME:
Interest from Ocean State Power $ 6,797 $ 7,194
Interest from Ocean State Power II 5,826 6,166
------- -------
Total income 12,623 13,360
INTEREST EXPENSE:
Senior notes due 2002 4,614 5,374
Senior notes due 2006 3,247 3,238
Senior notes due 2011 4,762 4,748
------- -------
Total interest expense 12,623 13,360
------- -------
Net income $ - $ -
======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
OSP FINANCE COMPANY
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<CAPTION>
Additional Total
Common Paid-in Accumulated Stockholders'
Stock Capital Deficit Equity
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 $ - $ 1 $ (1) $ -
Net income - - - -
------- ------- ------- -------
BALANCE, DECEMBER 31, 1995 - 1 (1) -
Net income - - - -
------- ------- ------- -------
BALANCE, DECEMBER 31, 1996 $ - $ 1 $ (1) $ -
======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
OSP FINANCE COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<CAPTION>
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ - $ -
Adjustments to reconcile net income
to net cash provided by operating
activities -
Changes in operating assets and
liabilities-
Interest receivable 32 71
Accrued interest (32) (71)
-------- --------
Net cash provided by operating
activities - -
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Repayment of loans by stockholders 11,139 11,139
-------- --------
Net cash provided by investing
activities 11,139 11,139
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of senior notes (11,139) (11,139)
-------- --------
Net cash used for financing
activities (11,139) (11,139)
-------- --------
NET INCREASE IN CASH - -
CASH, BEGINNING OF PERIOD - -
-------- --------
CASH, END OF PERIOD $ - $ -
======== ========
CASH PAID FOR INTEREST $ 12,655 $ 13,431
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
OSP FINANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) ORGANIZATION AND BUSINESS
OSP Finance Company (the Company) was incorporated in July
1992 as a finance affiliate of Ocean State Power (OSP) and
Ocean State Power II (OSP II). OSP and OSP II (the
Partnerships) each own 50% of the Company's common stock.
The Company's single purpose is to provide long-term debt
financing for the Partnerships. Upon receipt of the senior
note proceeds, as discussed in Note 2, the Company loaned
the proceeds to the Partnerships. The costs associated with
the refinancing were paid by the Partnerships. The interest
and repayment terms of the loans receivable are the same as
the senior notes. The Company does not expect to recognize
any significant income(loss) for financial reporting or
income tax purposes.
The Partnerships were formed to construct, own and operate
two combined-cycle electric generating plants located in
Burrillville, Rhode Island. Each plant's average net
capacity is approximately 250 megawatts, and each is fired
by natural gas purchased under firm 20-year gas purchase
contracts. OSP commenced commercial operations on December
31, 1990, and OSP II commenced commercial operations on
October 1, 1991. Each plant's capacity and energy output is
being sold under 20-year take-or-pay unit power agreements
to three investor-owned utilities located in Massachusetts
and Rhode Island.
(2) SENIOR NOTES
On October 19, 1992, the Company issued senior notes in
three tranches with fixed interest rates and varying
maturity dates. The senior notes were purchased by various
institutional investors. A detail of the senior notes
outstanding at December 31, 1996 is as follows:
<TABLE>
<CAPTION>
OSP OSP II Total
<S> <C> <C> <C>
6.96% Series A notes due
June 15, 2002 $32,699 $28,028 $60,727
7.92% Series B notes due
February 15, 2006 22,077 18,923 41,000
8.21% Series C notes due
September 15, 2011 31,231 26,769 58,000
------- ------- -------
Total senior notes payable 86,007 73,720 159,727
Less Current maturities 5,998 5,141 11,139
------- ------- -------
Senior notes payable, excluding
current maturities $80,009 $68,579 $148,588
======= ======= =======
</TABLE>
<PAGE>
OSP FINANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(Continued)
(2) SENIOR NOTES (Continued)
The fair value of the Company's senior notes at December 31,
1996, estimated based on currently quoted market prices for
similar types of borrowing arrangements, is $170,281,000.
The Partnerships are guarantors of the senior note agreement
on a joint and several basis. The senior notes are
collateralized by assignment of the rights and interest in
all OSP and OSP II's unit power agreements and all resulting
proceeds, with the exception, however, of revenues under the
unit power agreements that are attributable to domestic gas
transportation, on which the domestic gas transporter has a
first lien.
The senior note agreement contains certain covenants,
including restrictions on the creation of liens, sale of
assets, amendment of agreements and the incurrence of
additional indebtedness.
The senior notes mature at $11,139,000 per year, $5,998,000
for OSP and $5,141,000 for OSP II, over the life of the
senior notes.
<TABLE> <S> <C>
<PAGE>
<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.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,896,605
<OTHER-PROPERTY-AND-INVEST> 389,146
<TOTAL-CURRENT-ASSETS> 488,880
<TOTAL-DEFERRED-CHARGES> 448,620 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 5,223,251
<COMMON> 64,970
<CAPITAL-SURPLUS-PAID-IN> 736,773
<RETAINED-EARNINGS> 887,292
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,685,417 <F3>
0
126,166 <F2>
<LONG-TERM-DEBT-NET> 1,614,578
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 145,050
<LONG-TERM-DEBT-CURRENT-PORT> 79,705
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,572,335
<TOT-CAPITALIZATION-AND-LIAB> 5,223,251
<GROSS-OPERATING-REVENUE> 2,350,698
<INCOME-TAX-EXPENSE> 139,199
<OTHER-OPERATING-EXPENSES> 1,863,381
<TOTAL-OPERATING-EXPENSES> 2,002,580
<OPERATING-INCOME-LOSS> 348,118
<OTHER-INCOME-NET> 2,168
<INCOME-BEFORE-INTEREST-EXPEN> 350,286
<TOTAL-INTEREST-EXPENSE> 127,760
<NET-INCOME> 208,936
6,463 <F2>
<EARNINGS-AVAILABLE-FOR-COMM> 208,936
<COMMON-STOCK-DIVIDENDS> 153,173
<TOTAL-INTEREST-ON-BONDS> 110,479
<CASH-FLOW-OPERATIONS> 522,570
<EPS-PRIMARY> $3.22
<EPS-DILUTED> $3.22
<FN>
<F1> Total deferred charges includes other assets.
<F2> Preferred stock reflects preferred stock of subsidiaries. Preferred
stock dividends reflect preferred stock dividends of subsidiaries and
net gain on reacquisition of preferred stock.
<F3> Total common stockholders equity is reflected net of treasury stock at
cost.
</FN>
<TABLE> <S> <C>
<PAGE>
<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.
<SUBSIDIARY>
<NAME> MASSACHUSETTS ELECTRIC COMPANY
<NUMBER> 1
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,088,430
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 235,809
<TOTAL-DEFERRED-CHARGES> 66,019 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,390,258
<COMMON> 59,953
<CAPITAL-SURPLUS-PAID-IN> 201,172
<RETAINED-EARNINGS> 165,936
<TOTAL-COMMON-STOCKHOLDERS-EQ> 427,061
0
50,000
<LONG-TERM-DEBT-NET> 343,321
<SHORT-TERM-NOTES> 5,275
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 38,500
<LONG-TERM-DEBT-CURRENT-PORT> 30,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 496,101
<TOT-CAPITALIZATION-AND-LIAB> 1,390,258
<GROSS-OPERATING-REVENUE> 1,538,537
<INCOME-TAX-EXPENSE> 25,186
<OTHER-OPERATING-EXPENSES> 1,441,390
<TOTAL-OPERATING-EXPENSES> 1,466,576
<OPERATING-INCOME-LOSS> 71,961
<OTHER-INCOME-NET> (1,213)
<INCOME-BEFORE-INTEREST-EXPEN> 70,748
<TOTAL-INTEREST-EXPENSE> 32,822
<NET-INCOME> 37,926
3,114
<EARNINGS-AVAILABLE-FOR-COMM> 34,812
<COMMON-STOCK-DIVIDENDS> 19,184
<TOTAL-INTEREST-ON-BONDS> 27,089
<CASH-FLOW-OPERATIONS> 102,919
<EPS-PRIMARY> 0 <F2>
<EPS-DILUTED> 0 <F2>
<FN>
<F1> Total deferred charges includes 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> <S> <C>
<PAGE>
<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.
<SUBSIDIARY>
<NAME> THE NARRAGANSETT ELECTRIC COMPANY
<NUMBER> 2
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 560,183
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 89,938
<TOTAL-DEFERRED-CHARGES> 56,881 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 707,002
<COMMON> 56,624
<CAPITAL-SURPLUS-PAID-IN> 80,170
<RETAINED-EARNINGS> 119,978
<TOTAL-COMMON-STOCKHOLDERS-EQ> 256,772
0
36,500
<LONG-TERM-DEBT-NET> 178,517
<SHORT-TERM-NOTES> 5,300
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 13,725
<LONG-TERM-DEBT-CURRENT-PORT> 32,500
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 183,688
<TOT-CAPITALIZATION-AND-LIAB> 707,002
<GROSS-OPERATING-REVENUE> 503,585
<INCOME-TAX-EXPENSE> 11,951
<OTHER-OPERATING-EXPENSES> 448,123
<TOTAL-OPERATING-EXPENSES> 460,074
<OPERATING-INCOME-LOSS> 43,511
<OTHER-INCOME-NET> (732)
<INCOME-BEFORE-INTEREST-EXPEN> 42,779
<TOTAL-INTEREST-EXPENSE> 19,825
<NET-INCOME> 22,954
2,143
<EARNINGS-AVAILABLE-FOR-COMM> 20,811
<COMMON-STOCK-DIVIDENDS> 9,060
<TOTAL-INTEREST-ON-BONDS> 17,205
<CASH-FLOW-OPERATIONS> 65,637
<EPS-PRIMARY> 0 <F2>
<EPS-DILUTED> 0 <F2>
<FN>
<F1> Total deferred charges includes 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> <S> <C>
<PAGE>
<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.
<SUBSIDIARY>
<NAME> NEW ENGLAND POWER COMPANY
<NUMBER> 3
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,910,293
<OTHER-PROPERTY-AND-INVEST> 78,493
<TOTAL-CURRENT-ASSETS> 333,042
<TOTAL-DEFERRED-CHARGES> 325,887 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,647,715
<COMMON> 128,998
<CAPITAL-SURPLUS-PAID-IN> 376,597
<RETAINED-EARNINGS> 400,610
<TOTAL-COMMON-STOCKHOLDERS-EQ> 906,205
0
39,666
<LONG-TERM-DEBT-NET> 733,006
<SHORT-TERM-NOTES> 5,275
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 88,325
<LONG-TERM-DEBT-CURRENT-PORT> 3,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 872,238
<TOT-CAPITALIZATION-AND-LIAB> 2,647,715
<GROSS-OPERATING-REVENUE> 1,600,309
<INCOME-TAX-EXPENSE> 91,894
<OTHER-OPERATING-EXPENSES> 1,304,654
<TOTAL-OPERATING-EXPENSES> 1,396,548
<OPERATING-INCOME-LOSS> 203,761
<OTHER-INCOME-NET> 3,308
<INCOME-BEFORE-INTEREST-EXPEN> 207,069
<TOTAL-INTEREST-EXPENSE> 54,586
<NET-INCOME> 152,483
2,574
<EARNINGS-AVAILABLE-FOR-COMM> 149,909
<COMMON-STOCK-DIVIDENDS> 134,158
<TOTAL-INTEREST-ON-BONDS> 45,111
<CASH-FLOW-OPERATIONS> 272,949
<EPS-PRIMARY> 0 <F2>
<EPS-DILUTED> 0 <F2>
<FN>
<F1> Total deferred charges includes 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> <S> <C>
<PAGE>
<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 GRANITE STATE ELECTRIC
COMPANY, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<SUBSIDIARY>
<NAME> GRANITE STATE ELECTRIC COMPANY
<NUMBER> 4
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 48,615
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 7,259
<TOTAL-DEFERRED-CHARGES> 2,107 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 57,981
<COMMON> 6,040
<CAPITAL-SURPLUS-PAID-IN> 4,000
<RETAINED-EARNINGS> 9,645
<TOTAL-COMMON-STOCKHOLDERS-EQ> 19,685
0
0
<LONG-TERM-DEBT-NET> 15,000
<SHORT-TERM-NOTES> 5,475
<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> 17,821
<TOT-CAPITALIZATION-AND-LIAB> 57,981
<GROSS-OPERATING-REVENUE> 67,906
<INCOME-TAX-EXPENSE> 1,074
<OTHER-OPERATING-EXPENSES> 63,340
<TOTAL-OPERATING-EXPENSES> 64,414
<OPERATING-INCOME-LOSS> 3,492
<OTHER-INCOME-NET> (79)
<INCOME-BEFORE-INTEREST-EXPEN> 3,413
<TOTAL-INTEREST-EXPENSE> 1,709
<NET-INCOME> 1,704
0
<EARNINGS-AVAILABLE-FOR-COMM> 1,704
<COMMON-STOCK-DIVIDENDS> 1,057
<TOTAL-INTEREST-ON-BONDS> 1,340
<CASH-FLOW-OPERATIONS> 3,539
<EPS-PRIMARY> 0 <F2>
<EPS-DILUTED> 0 <F2>
<FN>
<F1> Total deferred charges includes 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> <S> <C>
<PAGE>
<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 HYDRO-
TRANSMISSION ELECTRIC COMPANY, INC., AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<SUBSIDIARY>
<NAME> NEW ENGLAND HYDRO-TRANSMISSION ELECTRIC COMPANY, INC.
<NUMBER> 5
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 167,414
<OTHER-PROPERTY-AND-INVEST> 5
<TOTAL-CURRENT-ASSETS> 6,713
<TOTAL-DEFERRED-CHARGES> 8,296
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 182,428
<COMMON> 40,000
<CAPITAL-SURPLUS-PAID-IN> 16,384
<RETAINED-EARNINGS> 232
<TOTAL-COMMON-STOCKHOLDERS-EQ> 56,616
0
0
<LONG-TERM-DEBT-NET> 84,570
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 6,960
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 34,282
<TOT-CAPITALIZATION-AND-LIAB> 182,428
<GROSS-OPERATING-REVENUE> 40,897
<INCOME-TAX-EXPENSE> 5,671
<OTHER-OPERATING-EXPENSES> 17,639
<TOTAL-OPERATING-EXPENSES> 23,310
<OPERATING-INCOME-LOSS> 17,587
<OTHER-INCOME-NET> 110
<INCOME-BEFORE-INTEREST-EXPEN> 17,697
<TOTAL-INTEREST-EXPENSE> 8,765
<NET-INCOME> 8,932
0
<EARNINGS-AVAILABLE-FOR-COMM> 8,932
<COMMON-STOCK-DIVIDENDS> 11,600
<TOTAL-INTEREST-ON-BONDS> 8,734
<CASH-FLOW-OPERATIONS> 24,752
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<TABLE> <S> <C>
<PAGE>
<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
HYDRO-TRANSMISSION CORPORATION, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<SUBSIDIARY>
<NAME> NEW ENGLAND HYDRO-TRANSMISSION CORPORATION
<NUMBER> 6
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 140,110
<OTHER-PROPERTY-AND-INVEST> 5
<TOTAL-CURRENT-ASSETS> 2,694
<TOTAL-DEFERRED-CHARGES> 6,867
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 149,676
<COMMON> 19,700
<CAPITAL-SURPLUS-PAID-IN> 16,230
<RETAINED-EARNINGS> 849
<TOTAL-COMMON-STOCKHOLDERS-EQ> 36,779
0
0
<LONG-TERM-DEBT-NET> 51,920
<SHORT-TERM-NOTES> 3,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 4,560
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 53,417
<TOT-CAPITALIZATION-AND-LIAB> 149,676
<GROSS-OPERATING-REVENUE> 33,715
<INCOME-TAX-EXPENSE> 3,326
<OTHER-OPERATING-EXPENSES> 19,532
<TOTAL-OPERATING-EXPENSES> 22,858
<OPERATING-INCOME-LOSS> 10,857
<OTHER-INCOME-NET> 41
<INCOME-BEFORE-INTEREST-EXPEN> 10,898
<TOTAL-INTEREST-EXPENSE> 5,451
<NET-INCOME> 5,447
0
<EARNINGS-AVAILABLE-FOR-COMM> 5,447
<COMMON-STOCK-DIVIDENDS> 4,767
<TOTAL-INTEREST-ON-BONDS> 5,398
<CASH-FLOW-OPERATIONS> 13,340
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<TABLE> <S> <C>
<PAGE>
<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 TRANSMISSION CORPORATION, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<SUBSIDIARY>
<NAME> NEW ENGLAND ELECTRIC TRANSMISSION CORPORATION
<NUMBER> 7
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 43,759
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 170
<TOTAL-DEFERRED-CHARGES> 383 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 44,312
<COMMON> 120
<CAPITAL-SURPLUS-PAID-IN> 2,880
<RETAINED-EARNINGS> 244
<TOTAL-COMMON-STOCKHOLDERS-EQ> 3,244
0
0
<LONG-TERM-DEBT-NET> 20,864
<SHORT-TERM-NOTES> 1,250
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 4,624
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 14,330
<TOT-CAPITALIZATION-AND-LIAB> 44,312
<GROSS-OPERATING-REVENUE> 10,062
<INCOME-TAX-EXPENSE> 175
<OTHER-OPERATING-EXPENSES> 6,447
<TOTAL-OPERATING-EXPENSES> 6,622
<OPERATING-INCOME-LOSS> 3,440
<OTHER-INCOME-NET> (3)
<INCOME-BEFORE-INTEREST-EXPEN> 3,437
<TOTAL-INTEREST-EXPENSE> 2,545
<NET-INCOME> 892
0
<EARNINGS-AVAILABLE-FOR-COMM> 892
<COMMON-STOCK-DIVIDENDS> 867
<TOTAL-INTEREST-ON-BONDS> 2,487
<CASH-FLOW-OPERATIONS> 5,493
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> Total deferred charges includes other assets.
</FN>
<TABLE> <S> <C>
<PAGE>
<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 NANTUCKET
ELECTRIC COMPANY, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
<SUBSIDIARY>
<NAME> NANTUCKET ELECTRIC COMPANY
<NUMBER> 8
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 27,852
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 14,347
<TOTAL-DEFERRED-CHARGES> 1,374 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 43,573
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 3,810
<RETAINED-EARNINGS> 356
<TOTAL-COMMON-STOCKHOLDERS-EQ> 4,166
0
0
<LONG-TERM-DEBT-NET> 30,604
<SHORT-TERM-NOTES> 1,500
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 765
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 6,538
<TOT-CAPITALIZATION-AND-LIAB> 43,573
<GROSS-OPERATING-REVENUE> 11,864
<INCOME-TAX-EXPENSE> 152
<OTHER-OPERATING-EXPENSES> 10,999
<TOTAL-OPERATING-EXPENSES> 11,151
<OPERATING-INCOME-LOSS> 713
<OTHER-INCOME-NET> (77)
<INCOME-BEFORE-INTEREST-EXPEN> 790
<TOTAL-INTEREST-EXPENSE> 434
<NET-INCOME> 356
0
<EARNINGS-AVAILABLE-FOR-COMM> 356
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 990
<CASH-FLOW-OPERATIONS> (9,809)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> Total deferred charges includes other assets.
</FN>
