<PAGE>
File No. 30-33
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-5-S
ANNUAL REPORT
FOR THE YEAR ENDED DECEMBER 31, 1998
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, 1998 (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 $ 21,860
Granite State Energy, Inc.
(Granite State Energy) 1,000 (305)
Unsecured Debt - 445
Massachusetts Electric
Company (Mass Electric) 2,398,111 508,176
Nantucket Electric Company (Nantucket) 1 5,180
The Narragansett Electric
Company (Narragansett) 1,132,487 249,979
NEES Energy, Inc. (NEES Energy) 1,000 (22,693)
Unsecured Debt - 79,402
NEES Global Inc. (2)
(NEES Global) 1,000 (10,242)
Unsecured Debt - 31,634
New England Hydro-Transmission
Electric Company, Inc. (NEHTEC) 1,714,749 53.97 24,287
New England Hydro-Transmission
Corporation (NEHTC) 8,322 53.97 15,133
New England Electric Transmission
Corporation (NEET) 90 2,374
New England Energy
Incorporated (NEEI) (3) 2,500 (25,925)
Unsecured debt - 23,594
New England Power Service Company (NEPSCO) 3 18,189
New England Power Company (NEP) 3,749,896 99.97 520,995
NEES Communications, Inc. (NEESCom) (4) 10,000 (1,808)
Unsecured debt - 8,810
----------
$1,449,085
NEESCom ==========
NEESTelecom* (4)
New England Hydro Finance Company
(NEHFC) (5) 504 53.97 $ 5
NEES Energy
AllEnergy Marketing Company, LLC
(AllEnergy) (6) -
Texas Liquids Ltd, Inc.
AEDR Fuels, L.L.C. 50
NEP
Connecticut Yankee Atomic
Power Company 52,500 15 $ 15,671
Maine Yankee Atomic
Power Company 100,000 20 $ 16,488
Vermont Yankee Nuclear Power
Corporation 80,002 20 $ 10,588
Yankee Atomic Electric Company 46,020 30 $ 5,791
New England Wholesale Electric Company* (7)
AllEnergy Fuels Corp.* (8)
Metrowest Realty LLC* (Metrowest) (9)
NEES Global
New England Water Heater Company
(NEWH)(10)
<FN>
- --------------------
*Inactive.
</FN>
</TABLE>
<PAGE>
(1) Attached as Exhibit E.1. hereto is a schedule showing investments
during the year ended December 31, 1998 in the NEES Money Pool,
through which certain System companies lend to or borrow from
other System companies (Commission File Nos. 70-8679, 70-8901,
and 70-9089).
(2) At the board meeting held May 7, 1998, NEES Global Transmission, Inc.
was renamed NEES Global, Inc. NEES Global is a wholly-owned,
nonutility subsidiary of NEES which provides consulting and
independent project development services domestically and
internationally to nonaffiliates.
(3) Samedan/NEEI Exploration Company was a partnership engaged in
oil and gas exploration and development. NEEI owned a 50% interest
in the partnership and had invested $738,024,794 in the
partnership as of December 31, 1997. NEEI sold it's oil and gas
properties in February 1998.
(4) 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. NEES Telecommunications Corp. (formerly CO-LOCATE, Inc.) was
formed under the laws of Massachusetts on April 9, 1998, and is
wholly-owned by NEESCom.
(5) NEHFC has two shareholders, NEHTEC and NEHTC, which each have a
50% interest. The tabulation shown above reflects NEES' indirect
ownership in NEHFC.
(6) AllEnergy, a Delaware limited liability corporation formed on April
23, 1998 (AllEnergy DE), is the surviving entity from a merger with
AllEnergy Marketing Company, LLC, a Massachusetts limited liability
corporation (AllEnergy MA), which became effective January 1, 1999.
At that time, AllEnergy DE became a wholly-owned subsidiary of NEES
Energy. AEDR Fuels, L.L.C., a Maine limited liability corporation
formed on January 12, 1998, is 50% owned by AllEnergy DE and 50%
owned by Dead River Company, an unaffiliated company.
(7) Incorporated in 1972; not yet capitalized.
(8) AllEnergy Fuels Corp. was formed under the laws of Delaware on March
27, 1998 and is a wholly-owned subsidiary of NEES.
(9) Metrowest, a Delaware limited liability corporation formed on
December 18, 1998, is a wholly-owned subsidiary of NEES.
(10) NEWH is the surviving entity from a merger between NEES Acquisition,
Inc., formed under the laws of Massachusetts in 1998, and New England
Water Heater Company, Inc. The merger was effective March 31, 1998,
making the surviving entity a wholly-owned subsidiary of NEES Global.
<PAGE>
Item 2. ACQUISITION OR SALES OF UTILITY ASSETS
Merger Agreement with National Grid
- -----------------------------------
On December 11, 1998, NEES, National Grid plc, (National Grid) and NGG
Holdings LLC (Holdings), a directly and indirectly wholly-owned subsidiary of
National Grid, entered into an Agreement and Plan of Merger (Merger
Agreement). Pursuant to the Merger Agreement, Holdings will merge with and
into NEES (the Merger), with NEES becoming a wholly-owned subsidiary of
National Grid. NEES shareholders will receive $53.75 per share in cash, which
will be increased at a rate of $.003288 each day beginning six months after
shareholder approval of the Merger until the Merger is completed, up to a
maximum price of $54.35 per share.
The Merger is subject to approval by a majority vote of NEES
shareholders as well as National Grid shareholder approval. In addition, the
Merger is subject to a number of regulatory and other approvals and consents,
including approvals by the Securities and Exchange Commission (SEC) under the
Public Utility Holding Company Act of 1935 (the 1935 Act), Federal Energy
Regulatory Commission (FERC), and Nuclear Regulatory Commission (NRC), support
or approval from the states in which NEES operates, and clearance under both
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
Exon-Florio Provisions of the Omnibus Trade and Competitiveness Act of 1988.
National Grid has obtained governmental clearance in the United Kingdom for
the Merger. The Merger is expected to be completed by early 2000.
Merger Agreement with Eastern Utilities Associates
- --------------------------------------------------
On February 1, 1999, NEES, Eastern Utilities Associates (EUA), and
Research Drive, a directly and indirectly wholly-owned subsidiary of NEES,
entered into an Agreement and Plan of Merger (EUA Agreement). Pursuant to the
EUA Agreement, Research Drive will merge with and into EUA, with EUA becoming
a wholly-owned subsidiary of NEES. EUA shareholders will receive $31.00 per
share in cash, which will be increased at a rate of $.003 each day beginning
six months after EUA shareholder approval of the EUA acquisition until the
acquisition is completed or until April 30, 2000, whichever is earlier.
The acquisition of EUA is subject to approval by a two-thirds vote of
EUA shareholders. In addition, the acquisition is subject to a number of
regulatory and other approvals and consents, including approvals by the SEC
under the 1935 Act, FERC, and NRC, support or approval from the states in
which EUA subsidiaries operate, and clearance under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended. The EUA acquisition is
expected to be completed by early 2000. Following the acquisition of EUA, the
subsidiaries of NEES and EUA whose operations are similar are expected to be
consolidated.
Sale of Nonnuclear Generating Business
- ---------------------------------------
On September 1, 1998, NEES subsidiaries NEP and Narragansett
(collectively, the Sellers) completed the sale of substantially all of their
nonnuclear generating business to USGen New England, Inc. (USGen), an indirect
wholly owned subsidiary of PG&E Corporation. The assets sold include three
<PAGE>
fossil-fueled and 15 hydroelectric generating stations, totaling approximately
4,000 megawatts (MW) of capacity, as well as NEES' 100% interest in
Narragansett Energy Resources Company (NERC), a 20% general partner in the
Ocean State Power project, all of which had a book value of approximately $1.1
billion. The NEES companies received $1.59 billion for the sale. In
addition, the NEES companies were reimbursed approximately $140 million for
costs associated with early retirements and special severance programs for
employees affected by industry restructuring, and the value of inventories.
USGen assumed responsibility for environmental conditions at the Sellers'
nonnuclear generating stations. USGen also assumed the Sellers' obligations
under long-term fuel and fuel transportation contracts, and certain collective
bargaining agreements.
As part of the sale, NEP also signed a purchased power transfer
agreement through which USGen purchased NEP's entitlement to approximately
1,100 MW of power procured under long-term contracts in exchange for monthly
fixed payments by NEP averaging $9.5 million per month through January 2008
(having a net present value of $833 million) toward the above market cost of
those contracts. In some cases, these transfers involved formal assignment of
the contracts to USGen and a release of NEP from further obligations to the
power supplier, while others did not. For those that involved formal
assignment, NEP was required to make a lump sum payment equivalent to the
present value of the monthly fixed payment obligations of those contracts. On
or prior to the closing date, NEP made lump sum payments totaling
approximately $340 million and was released from further obligations relating
to two of the contracts. These lump sum payments are separate from the $833
million figure referred to above.
As part of the divestiture plan, in February 1998, NEEI, a wholly-owned
subsidiary of NEES, whose costs had been supported by the generating business,
sold its oil and gas properties for approximately $50 million. NEEI's loss on
the sale of approximately $120 million, before tax, has been reimbursed by
NEP.
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 1998
------------------
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>
NEEI
Sub. Promissory Note NEES $501,597 $501,597 (A)
Secured Note $122,000,000 $122,000,000 (A)
NEHFC
Secured Notes $11,520,000 $11,520,000 25304 & (B)
NEES ENERGY
Sub. Promissory Note NEES $52,579,500 $52,579,500 26520 & 26633
Sub. Promissory Note $6,700,000 $6,700,000
Common Stock NEES 252,753 shares $10,805,172 26849 & 26942
NEET
Common Stock 10 shares $292,283 24162
Secured Note $4,624,000 $4,624,000 24162
NEP
Bonds $328,000,000 $353,515,519 (B)
Preferred Stock NEES $38,098,800 $37,869,445 (B)
NARRAGANSETT
Bonds $12,000,000 $12,783,460 (B)
Preferred Stock NEES $5,561,550 $6,659,455 (B)
MASSACHUSETTS ELECTRIC
Bonds $40,000,000 $41,209,000 (B)
Preferred Stock NEES $5,064,025 $5,203,354 (B)
NEES GLOBAL
Sub. Promissory Note NEES $15,752,000 $15,752,000 (C)
Sub. Promissory Note $2,500,000 $2,500,000 (C)
NERC
Secured Notes $27,680,000 $29,955,128 26397 & (B)
<PAGE>
Item 4. ACQUISITION, REDEMPTION OR RETIREMENT OF SYSTEM SECURITIES (Cont.)
Calendar Year 1998
------------------
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>
NEES COMMUNICATIONS, INC.
Sub. Promissory Note NEES $7,885,000 $7,885,000 (D)
NEES
Common Stock 5,659,648 shares $233,652,741 (B)
NANTUCKET
Bonds $1,470,000 $1,470,000 (B)
<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, & 26681.
(D) NEESCom is an Exempt Telecommunications Company pursuant to Section 34 of the Act.
</FN>
</TABLE>
<PAGE>
<TABLE>
Item 5. INVESTMENTS IN SECURITIES OF NONSYSTEM COMPANIES
As of December 31, 1998.
<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.
</FN>
</TABLE>
<PAGE>
<TABLE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1998.
(Note A)
<CAPTION> Mass NEES
NEES Granite Elec Narra NEEI Global NEET NEP NEPSCO NEHTC NEHTEC NEHFC
---- ------- ---- ----- ---- ----- ---- --- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cynthia A. Arcate
9 Lowell Road, Salem, NH E-VP D s
- ---------------------------------------------------------------------------------------------------------------------------
Francis X. Beirne
95 Sawyer Road, Waltham, MA s
- ---------------------------------------------------------------------------------------------------------------------------
Joan T. Bok
22 Beacon St., Boston, MA D f
- ---------------------------------------------------------------------------------------------------------------------------
William M. Bulger
1 Beacon St., Boston, MA D f
- ---------------------------------------------------------------------------------------------------------------------------
John G. Cochrane T T T T T T T T VP s T T T
- ---------------------------------------------------------------------------------------------------------------------------
Eric P. Cody VP VP s
- ---------------------------------------------------------------------------------------------------------------------------
William R. Connallon
476 Union Ave., Middlesex, NJ
- ---------------------------------------------------------------------------------------------------------------------------
John H. Dickson
95 Sawyer Rd., Waltham, MA s
- ---------------------------------------------------------------------------------------------------------------------------
William F. Dowd VP s
- ---------------------------------------------------------------------------------------------------------------------------
Richard R. Duperey
40 Washington St., Wellesley, MA
- ---------------------------------------------------------------------------------------------------------------------------
William J. Flaherty
1101 Turnpike St., No. Andover, MA VP s
- ---------------------------------------------------------------------------------------------------------------------------
Peter G. Flynn D P
- ---------------------------------------------------------------------------------------------------------------------------
Andrea Foley-Stapleford VP s
- ---------------------------------------------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1998 (continued).
(Note A)
Granite
State Nantucket NEES NEES Texas AllEnergy
Energy Electric Comm. Energy AllEnergy Liquids Fuels NEWH Metrowest
------ --------- ---- ------ --------- ------- --------- ---- ---------
Cynthia A. Arcate
9 Lowell Road, Salem, NH
- -----------------------------------------------------------------------------------------------------------------------------
Francis X. Beirne
95 Sawyer Road, Waltham, MA VP
- -----------------------------------------------------------------------------------------------------------------------------
Joan T. Bok
22 Beacon St., Boston, MA
- -----------------------------------------------------------------------------------------------------------------------------
William M. Bulger
1 Beacon St., Boston, MA
- -----------------------------------------------------------------------------------------------------------------------------
John G. Cochrane T T T
- -----------------------------------------------------------------------------------------------------------------------------
Eric P. Cody
- -----------------------------------------------------------------------------------------------------------------------------
William R. Connallon
476 Union Ave., Middlesex, NJ VP P s
- -----------------------------------------------------------------------------------------------------------------------------
John H. Dickson
95 Sawyer Rd., Waltham, MA P D P VP
- -----------------------------------------------------------------------------------------------------------------------------
William F. Dowd
- -----------------------------------------------------------------------------------------------------------------------------
Richard R. Duperey
40 Washington St., Wellesley, MA P D
- -----------------------------------------------------------------------------------------------------------------------------
William J. Flaherty
1101 Turnpike St., No. Andover, MA
- -----------------------------------------------------------------------------------------------------------------------------
Peter G. Flynn
- -----------------------------------------------------------------------------------------------------------------------------
Andrea Foley-Stapleford
- -----------------------------------------------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1998 (continued).
(Note A)
Mass NEES
NEES Granite Elec Narra NEEI Global NEET NEP NEPSCO NEHTC NEHTEC NEHFC
---- ------- ---- ----- ---- ----- ---- --- ------ ----- ------ -----
David Fredericks
2 Fairgrounds Rd., Nant., MA
- ---------------------------------------------------------------------------------------------------------------------------
Richard W. Frost
55 Bearfoot Rd., Northboro, MA VP VP D VP VP s
- ---------------------------------------------------------------------------------------------------------------------------
Ronald T. Gerwatowski
280 Melrose St., Providence, RI S s
- ---------------------------------------------------------------------------------------------------------------------------
Peter H. Gibson
Westborough, MA
- ---------------------------------------------------------------------------------------------------------------------------
Don F. Goodwin VP s
- ---------------------------------------------------------------------------------------------------------------------------
Christopher G. Gulick
95 Sawyer Road, Waltham, MA
- ---------------------------------------------------------------------------------------------------------------------------
Gregory A. Hale s
- ---------------------------------------------------------------------------------------------------------------------------
William H. Heil
95 Sawyer Road, Waltham, MA
- ---------------------------------------------------------------------------------------------------------------------------
David L. Holt E-VP s
- ---------------------------------------------------------------------------------------------------------------------------
Alfred D. Houston D Ch D P Ch D D Ch D D Ch Ps D D D
- ---------------------------------------------------------------------------------------------------------------------------
Michael E. Jesanis Sr-VP VP VP VP s
- ---------------------------------------------------------------------------------------------------------------------------
Paul L. Joskow
7 Chilton Street, Brookline, MA D f
- ---------------------------------------------------------------------------------------------------------------------------
David C. Kennedy VP VP s
- ---------------------------------------------------------------------------------------------------------------------------
John M. Kucharski
45 William Street, Wellesley, MA D f
- ---------------------------------------------------------------------------------------------------------------------------
Edward H. Ladd
125 Claybrook Rd., Dover, MA D f
- ---------------------------------------------------------------------------------------------------------------------------
Cheryl A. LaFleur Sr-VP S D D D D D D VP D VP Ds D D D
- ---------------------------------------------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1998 (continued).
(Note A)
Granite
State Nantucket NEES NEES Texas AllEnergy
Energy Electric Comm. Energy AllEnergy Liquids Fuels NEWH Metrowest
------ --------- ---- ------ --------- ------- ------- ---- ---------
David Fredericks
2 Fairgrounds Rd., Nant., MA VP s
- -----------------------------------------------------------------------------------------------------------------------------
Richard W. Frost
55 Bearfoot Rd., Northboro, MA VP
- -----------------------------------------------------------------------------------------------------------------------------
Ronald T. Gerwatowski
280 Melrose St., Providence, RI
- -----------------------------------------------------------------------------------------------------------------------------
Peter H. Gibson
Westborough, MA VP
- -----------------------------------------------------------------------------------------------------------------------------
Don F. Goodwin
- -----------------------------------------------------------------------------------------------------------------------------
Christopher G. Gulick
95 Sawyer Road, Waltham, MA VP VP
- -----------------------------------------------------------------------------------------------------------------------------
Gregory A. Hale S C C
- -----------------------------------------------------------------------------------------------------------------------------
William H. Heil
95 Sawyer Road, Waltham, MA Ch Ch P D
- -----------------------------------------------------------------------------------------------------------------------------
David L. Holt
- -----------------------------------------------------------------------------------------------------------------------------
Alfred D. Houston D D P D D
- -----------------------------------------------------------------------------------------------------------------------------
Michael E. Jesanis
- -----------------------------------------------------------------------------------------------------------------------------
Paul L. Joskow
7 Chilton Street, Brookline, MA
- -----------------------------------------------------------------------------------------------------------------------------
David C. Kennedy P
- -----------------------------------------------------------------------------------------------------------------------------
John M. Kucharski
45 William Street, Wellesley, MA
- -----------------------------------------------------------------------------------------------------------------------------
Edward H. Ladd
125 Claybrook Rd., Dover, MA
- -----------------------------------------------------------------------------------------------------------------------------
Cheryl A. LaFleur D D D D D D
- -----------------------------------------------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1998 (continued).
(Note A)
Mass NEES
NEES Granite Elec Narra NEEI Global NEET NEP NEPSCO NEHTC NEHTEC NEHFC
---- ------- ---- ----- ---- ----- ---- --- ------ ----- ------ -----
Shannon M. Larson VP s
- ----------------------------------------------------------------------------------------------------------------------------
Ralph E. Loomis
633 Penn. Ave., NW 6th floor
Washington, DC VP s
- ----------------------------------------------------------------------------------------------------------------------------
John F. Malley VP s
- ----------------------------------------------------------------------------------------------------------------------------
Robert L. McCabe Ch D Ch D Ch D
- ----------------------------------------------------------------------------------------------------------------------------
Joshua A. McClure
P.O. Box 1119, Westerly, RI D f
- ----------------------------------------------------------------------------------------------------------------------------
Howard W. McDowell T Co Co Co Co Sr-VPCo s Co Co Co
- ----------------------------------------------------------------------------------------------------------------------------
Robert H. McLaren VP s
- ----------------------------------------------------------------------------------------------------------------------------
James P. Meehan s
- ----------------------------------------------------------------------------------------------------------------------------
Rita A. Moran
939 Southbridge St.,Worcester, MA VP
- ----------------------------------------------------------------------------------------------------------------------------
Charles H. Moser
55 Bearfoot Rd., Northboro, MA VP s
- ----------------------------------------------------------------------------------------------------------------------------
Richard Nadeau
280 Melrose St., Providence, RI VP s
- ----------------------------------------------------------------------------------------------------------------------------
James A. Neumann
476 Union Ave., Middlesex, NJ
- ----------------------------------------------------------------------------------------------------------------------------
Joseph P. Newman
55 Bearfoot Rd., Northboro, MA VP
- ----------------------------------------------------------------------------------------------------------------------------
Kwong O. Nuey VP s
55 Bearfoot Rd., Northboro, MA
- ----------------------------------------------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1998 (continued).
(Note A)
Granite
State Nantucket NEES NEES Texas AllEnergy
Energy Electric Comm. Energy AllEnergy Liquids Fuels NEWH Metrowest
------ --------- ---- ------ --------- ------- ---------- ---- ---------
Shannon M. Larson VP
- -----------------------------------------------------------------------------------------------------------------------------
Ralph E. Loomis
633 Penn. Ave., NW 6th floor
Washington, DC
- -----------------------------------------------------------------------------------------------------------------------------
John F. Malley
- -----------------------------------------------------------------------------------------------------------------------------
Robert L. McCabe Ch D
- -----------------------------------------------------------------------------------------------------------------------------
Joshua A. McClure
P.O. Box 1119, Westerly, RI
- -----------------------------------------------------------------------------------------------------------------------------
Howard W. McDowell T Co
- -----------------------------------------------------------------------------------------------------------------------------
Robert H. McLaren T T
- -----------------------------------------------------------------------------------------------------------------------------
James P. Meehan C
- -----------------------------------------------------------------------------------------------------------------------------
Rita A. Moran
939 Southbridge St.,Worcester, MA
- -----------------------------------------------------------------------------------------------------------------------------
Charles H. Moser
55 Bearfoot Rd., Northboro, MA
- -----------------------------------------------------------------------------------------------------------------------------
Richard Nadeau
280 Melrose St., Providence, RI
- -----------------------------------------------------------------------------------------------------------------------------
James A. Neumann
476 Union Ave., Middlesex, NJ VP
- -----------------------------------------------------------------------------------------------------------------------------
Joseph P. Newman
55 Bearfoot Rd., Northboro, MA
- -----------------------------------------------------------------------------------------------------------------------------
Kwong O. Nuey
- -----------------------------------------------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1998 (continued).
(Note A)
Mass NEES
NEES Granite Elec Narra NEEI Global NEET NEP NEPSCO NEHTC NEHTEC NEHFC
---- ------- ---- ----- ---- ----- ---- --- ------ ----- ------ -----
Rosemarie O'Donahue
476 Union Ave., Middlesex, NJ
- ----------------------------------------------------------------------------------------------------------------------------
Lydia M. Pastuszek
55 Bearfoot Rd., Northboro, MA Sr-VP D Sr-VP D Sr-VP s
- ----------------------------------------------------------------------------------------------------------------------------
Frank L. Peraino
95 Sawyer Road, Waltham, MA
- ----------------------------------------------------------------------------------------------------------------------------
Anthony C. Pini D P VP s
- ----------------------------------------------------------------------------------------------------------------------------
Kirk L. Ramsauer C S s S C C
- ----------------------------------------------------------------------------------------------------------------------------
Marcy L. Reed
95 Sawyer Road, Waltham, MA
- ----------------------------------------------------------------------------------------------------------------------------
Lawrence J. Reilly
55 Bearfoot Rd., Northboro, MA P D P D P D s
- ----------------------------------------------------------------------------------------------------------------------------
James S. Robinson VP
- ----------------------------------------------------------------------------------------------------------------------------
Thomas E. Rogers VP s
- ----------------------------------------------------------------------------------------------------------------------------
Christopher E. Root
55 Bearfoot Rd., Northboro, MA Sr-VP D Sr-VP D Sr-VP VP s VP VP
- ----------------------------------------------------------------------------------------------------------------------------
Masheed H. Rosenqvist VP VP s VP VP VP
- ----------------------------------------------------------------------------------------------------------------------------
Timothy R. Roughan
548 Haydenville Rd., Northampton, MA VP
- ----------------------------------------------------------------------------------------------------------------------------
Michael F. Ryan
280 Melrose St., Providence, RI D VPs
- ----------------------------------------------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1998 (continued).
(Note A)
Granite
State Nantucket NEES NEES Texas AllEnergy
Energy Electric Comm. Energy AllEnergy Liquids Fuels NEWH Metrowest
------ --------- ---- ------ --------- ------- --------- ---- ---------
Rosemarie O'Donahue
476 Union Ave., Middlesex, NJ VP
- -----------------------------------------------------------------------------------------------------------------------------
Lydia M. Pastuszek
55 Bearfoot Rd., Northboro, MA Sr-VP D
- -----------------------------------------------------------------------------------------------------------------------------
Frank L. Peraino
95 Sawyer Road, Waltham, MA Sr-VP
- -----------------------------------------------------------------------------------------------------------------------------
Anthony C. Pini P D D VP
- -----------------------------------------------------------------------------------------------------------------------------
Kirk L. Ramsauer C S S S
- -----------------------------------------------------------------------------------------------------------------------------
Marcy L. Reed
95 Sawyer Road, Waltham, MA VP T VP T T
- -----------------------------------------------------------------------------------------------------------------------------
Lawrence J. Reilly
55 Bearfoot Rd., Northboro, MA P D
- -----------------------------------------------------------------------------------------------------------------------------
James S. Robinson
- -----------------------------------------------------------------------------------------------------------------------------
Thomas E. Rogers
- -----------------------------------------------------------------------------------------------------------------------------
Christopher E. Root
55 Bearfoot Rd., Northboro, MA Sr-VP D
- -----------------------------------------------------------------------------------------------------------------------------
Masheed H. Rosenqvist
- -----------------------------------------------------------------------------------------------------------------------------
Timothy R. Roughan
548 Haydenville Rd., Northampton, MA
- -----------------------------------------------------------------------------------------------------------------------------
Michael F. Ryan
280 Melrose St., Providence, RI
- -----------------------------------------------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1998 (continued).
(Note A)
Mass NEES
NEES Granite Elec Narra NEEI Global NEET NEP NEPSCO NEHTC NEHTEC NEHFC
---- ------- ---- ----- ---- ----- ---- --- ------ ----- ------ -----
George M. Sage
P.O. Box 9527, Providence, RI D f
- ----------------------------------------------------------------------------------------------------------------------------
Nancy H. Sala
55 Bearfoot Rd., Northboro, MA Sr-VPD s
- ----------------------------------------------------------------------------------------------------------------------------
Richard P. Sergel D P D D D D D P D D D s P D P D P D
- ----------------------------------------------------------------------------------------------------------------------------
William T. Sherry
245 South Main St., Hopedale, MA VP
- ----------------------------------------------------------------------------------------------------------------------------
Charles E. Soule
15 River St #404,
Boston, MA D f
- ----------------------------------------------------------------------------------------------------------------------------
Susan Stevens VP
- ----------------------------------------------------------------------------------------------------------------------------
Ronald L. Thomas
280 Melrose St., Providence, RI D
- ----------------------------------------------------------------------------------------------------------------------------
John G. Upham II
170 Medford St., Malden, MA VP s
- ----------------------------------------------------------------------------------------------------------------------------
Jeffrey W. VanSant VP s
- ----------------------------------------------------------------------------------------------------------------------------
Anne Wexler
1317 F Street, N.W., Suite 600
Washington, DC D f
- ----------------------------------------------------------------------------------------------------------------------------
David L. Williamson
200 Church St., Palmyra, N.Y.
- ----------------------------------------------------------------------------------------------------------------------------
James Q. Wilson
32910 Camino de Buena Ventura,
Malibu, CA D f
- ----------------------------------------------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1998 (continued).
(Note A)
Granite
State Nantucket NEES NEES Texas AllEnergy
Energy Electric Comm. Energy AllEnergy Liquids Fuels NEWH Metrowest
------ --------- ---- ------ --------- ------- -------- ---- ---------
George M. Sage
P.O. Box 9527, Providence, RI
- -----------------------------------------------------------------------------------------------------------------------------
Nancy H. Sala
55 Bearfoot Rd., Northboro, MA Sr-VP D
- -----------------------------------------------------------------------------------------------------------------------------
Richard P. Sergel D D D D D
- -----------------------------------------------------------------------------------------------------------------------------
William T. Sherry
245 South Main St., Hopedale, MA
- -----------------------------------------------------------------------------------------------------------------------------
Charles E. Soule
15 River St. #404,
Boston, MA
- -----------------------------------------------------------------------------------------------------------------------------
Susan Stevens
- -----------------------------------------------------------------------------------------------------------------------------
Ronald L. Thomas
280 Melrose St., Providence, RI
- -----------------------------------------------------------------------------------------------------------------------------
John G. Upham II
170 Medford St., Malden, MA
- -----------------------------------------------------------------------------------------------------------------------------
Jeffrey W. VanSant
- -----------------------------------------------------------------------------------------------------------------------------
Anne Wexler
1317 F Street, N.W., Suite 600
Washington, DC
- -----------------------------------------------------------------------------------------------------------------------------
David L. Williamson
200 Church St., Palmyra, N.Y. VP
- -----------------------------------------------------------------------------------------------------------------------------
James Q. Wilson
32910 Camino de Buena Ventura,
Malibu, CA
- -----------------------------------------------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1998 (continued).
(Note A)
Mass NEES
NEES Granite Elec Narra NEEI Global NEET NEP NEPSCO NEHTC NEHTEC NEHFC
---- ------- ---- ----- ---- ----- ---- --- ------ ----- ------ ----
James R. Winoker
222 Richmond Street
Providence, RI D f
- ----------------------------------------------------------------------------------------------------------------------------
Robert King Wulff S C C S C s
- ----------------------------------------------------------------------------------------------------------------------------
Geraldine M. Zipser C s
- ----------------------------------------------------------------------------------------------------------------------------
Peter T. Zschokke
280 Melrose St., Providence, RI VP s
- ----------------------------------------------------------------------------------------------------------------------------
<PAGE>
Item 6. OFFICERS AND DIRECTORS
Part I. As of December 31, 1998 (continued).
(Note A)
Granite
State Nantucket NEES NEES Texas AllEnergy
Energy Electric Comm. Energy AllEnergy Liquids Fuels NEWH Metrowest
------ --------- ---- ------ --------- ------- -------- ---- ---------
James R. Winoker
222 Richmond Street
Providence, RI
- -----------------------------------------------------------------------------------------------------------------------------
Robert King Wulff S
- -----------------------------------------------------------------------------------------------------------------------------
Geraldine M. Zipser S
- -----------------------------------------------------------------------------------------------------------------------------
Peter T. Zschokke
280 Melrose St., Providence, RI
- -----------------------------------------------------------------------------------------------------------------------------
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, 1998.
<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
John M. Kucharski State Street Boston Corp., D a
Boston, MA
<FN>
- --------------------
a - Rule 70(a)
g - C-Chairman & CEO; D-Director; T-Trustee
</FN>
</TABLE>
Item 6. OFFICERS AND DIRECTORS
Part III.
Disclosures made in proxy statements and annual reports on Form 10-K,
filed in 1998, follow:
<PAGE>
NEES
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Annual Compensation (b) Compensation
-------------------------- -------------------
Other Restricted
Name and Annual & Deferred All Other
Principal Compensa- Share LTIP Compensa-
Position Year Salary Bonus tion Awards Payouts tion
(a) ($) ($)(c) ($)(d) ($)(e) ($) ($)(f)
- ---------- ---- ------- ------ --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard P. 1998 437,500 289,382 12,233 165,952 100,166 718
Sergel 1997 244,893 242,020 8,764 51,043 781
President and 1996 212,700 110,724 5,366 138,376 3,535
Chief Executive
Officer
(elected 2/6/98)
John W. Rowe 1998 127,882 6,600 5,635 0 0 1,673
Former 1997 597,600 285,692 12,599 152,206 2,544
President and 1996 537,600 287,896 9,093 370,288 4,891
Chief Executive
Officer
(resigned 2/6/98)
Alfred D. 1998 442,694 294,951 10,227 167,893 157,751 2,594
Houston 1997 345,072 314,028 9,616 88,573 1,836
Chairman 1996 335,016 167,306 6,265 182,267 4,649
Cheryl A. 1998 209,132 117,577 7,992 54,387 39,024 439
LaFleur 1997 176,388 192,437 6,827 37,768 335
Senior Vice 1996 165,624 89,477 4,059 106,020 3,251
President,
General
Counsel and
Secretary
Michael E. 1998 206,010 115,467 8,040 53,376 34,834 382
Jesanis 1997 164,736 188,213 7,399 31,866 320
Senior Vice 1996 153,995 80,070 4,007 101,376 3,218
President
and Chief
Financial
Officer
David C. 1998 186,658 96,257 12,487 40,032 35,808 621
Kennedy
Vice President
(elected 2/98)
</TABLE>
<PAGE>
(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.
In 1996 and 1997, the bonus amounts were all cash or contributions to
the Incentive Thrift Plan, including related deferred compensation plan
matches.
(d) Includes amounts reimbursed by NEES for the payment of taxes on certain
noncash benefits and NEES contributions to the Incentive Thrift Plan
that are not bonus contributions including related deferred compensation
plan match. See description under Plan Summaries.
(e) The incentive share awards for the named executives 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.
As of December 31, 1998, the following executive officers held the
amount of restricted shares and deferred share equivalents with the
value indicated:
- Mr. Sergel 9,581 shares, $461,085 value;
- Mr. Rowe 29,847 shares, $1,436,386 value;
- Mr. Houston 13,216 shares, $636,020 value;
- Ms. LaFleur 6,552 shares, $315,315 value;
- Mr. Jesanis 6,731 shares, $323,929 value;
- Mr. Kennedy 3,617 shares, $174,068 value.
The value was calculated by multiplying the closing market price on
December 31, 1998, by the number of shares.
(f) Includes NEES contributions to life insurance. See description under
Plan Summaries. The life insurance contribution is calculated based on
the value of term life insurance for the named individuals. The premium
costs for most of these policies have been or will be recovered by NEES.
Prior to 1997, this column also included NEES contributions to the
Incentive Thrift plan that are not bonus contributions. These figures
are now included in the Other Annual Compensation column.
<PAGE>
NEP
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Annual Compensation (b) Compensation
-------------------------- -------------------
Other Restricted
Name and Annual & Deferred All Other
Principal Compensa- Share LTIP Compensa-
Position Year Salary Bonus tion Awards Payouts tion
(a) ($) ($)(c) ($)(d) ($)(e) ($) ($)(f)
- ---------- ---- ------- ------ --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Lawrence E. 1998 164,340 85,287 14,155 35,369 14,469 408,571 (h)
Bailey 1997 156,516 188,214 3,316 0 0 600
Former 1996 151,956 101,667 116 0 0 3,776
President (g)
Alfred D. 1998 49,236 32,804 1,137 18,677 17,545 288
Houston
Chairman
Peter G. 1998 57,838 29,383 1,151 12,176 6,864 75
Flynn
President (i)
John F. 1998 144,492 71,636 7,292 29,328 31,472 183
Malley 1997 140,280 96,072 2,922 0 0 375
Vice 1996 133,394 104,885 116 0 0 3,141
President
Masheed H. 1998 113,697 44,654 2,285 17,618 0 366
Rosenqvist
Vice
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. In 1996 and 1997, the bonus amounts were all cash
or contributions to the incentive thrift plan, including related
deferred compensation plan matches. See descriptions under Plan
Summaries.
<PAGE>
(d) Includes amounts reimbursed by NEP for the payment of taxes on certain
noncash benefits and NEP contributions to the incentive thrift plan that
are not bonus contributions including related deferred compensation plan
match. See description under Plan Summaries.
(e) The incentive share awards for the named executives who are also NEES
executives (1996 - 1998) and the other named executives (in 1998 only)
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. The shares awarded for the other
named executives in 1996 and 1997 were not restricted and the value of
the awards is included in the bonus column.
As of December 31, 1998, the following executive officers held the
amount of restricted and deferred shares with the value indicated:
Mr. Bailey 4,031 shares, $193,991 value; Mr. Houston 13,216 shares,
$636,020 value; Mr. Flynn 2,838 shares, $136,578 value; and Mr. Malley
3,901 shares, $187,735 value. The value was calculated by multiplying
the closing market price on December 31, 1998 by the number of shares.
(f) Includes NEP contributions to life insurance. 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.
Prior to 1997, this column also included NEP contributions to the
incentive thrift plan that are not bonus contributions. These figures
are now included in the Other Annual Compensation column.
(g) Mr. Bailey retired effective December 31, 1998.
(h) Under the terms of the severance plan described on page 40, Mr. Bailey
received a lump sum payment of $408,131 upon his retirement on December
31, 1998.
(i) Mr. Flynn was elected President effective January 1, 1999.
<PAGE>
MASS. ELECTRIC
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Annual Compensation (b) Compensation
-------------------------- -------------------
Other Restricted
Name and Annual & Deferred All Other
Principal Compensa- Share LTIP Compensa-
Position Year Salary Bonus tion Awards Payouts tion
(a) ($) ($)(c) ($)(d) ($)(e) ($) ($)(f)
- ---------- ---- ------- ------ --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Lawrence J. 1998 113,414 59,341 5,413 24,421 19,632 215
Reilly 1997 160,515 168,637 6,910 0 0 448
President 1996 96,163 70,177 2,467 46,082 0 2,250
Robert L. 1998 140,682 59,448 6,753 24,226 31,075 830
McCabe
Chairman
Nancy H. 1998 128,592 53,247 1,392 21,763 15,975 195
Sala 1997 124,344 60,661 2,603 0 0 283
Senior Vice 1996 118,251 65,493 116 0 0 2,730
President
Lydia M. 1998 104,345 51,761 2,228 21,134 22,531 140
Pastuszek 1997 125,481 81,944 2,544 0 0 241
Senior Vice 1996 86,068 52,017 69 22,115 0 1,893
President
Kwong O. 1998 96,311 37,716 2,115 15,135 11,542 186
Nuey
Vice
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. In 1996 and 1997, the bonus
amounts were all cash or contributions to the incentive thrift plan,
including related deferred compensation plan matches. See descriptions
under Plan Summaries.
(d) Includes amounts reimbursed by Mass. Electric for the payment of taxes
on certain noncash benefits and Mass. Electric contributions to the
<PAGE>
incentive thrift plan that are not bonus contributions including related
deferred compensation plan match. See description under Plan Summaries.
(e) In 1998, the incentive share awards for the named executives 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. In 1996, certain named officers also received
special share awards in the form of deferred share equivalents. The
shares awarded for the named officers in 1996 and 1997 were not
restricted and the value of the awards is included in the bonus column.
As of December 31, 1998, the following executive officers held the
amount of restricted and deferred shares with the value indicated: Mr.
Reilly 6,064 shares, $291,830 value; Mr. McCabe 6,979 shares, $335,864
value; Ms. Sala 2,058 shares, $99,041 value; Ms. Pastuszek 3,117 shares,
$150,005 value; and Mr. Nuey 2,033 shares, $97,838 value. The value was
calculated by multiplying the closing market price on December 31, 1998
by the number of shares.
(f) Includes Mass. Electric contributions to life insurance. See
description under Plan Summaries. The life insurance contribution is
calculated based on the value of term life insurance for the named
individuals. The premium costs for most of these policies have been or
will be recovered by Mass. Electric. Prior to 1997, this column also
included Mass. Electric contributions to the incentive thrift plan that
are not bonus contributions. These figures are now included in the
Other Annual Compensation column.
<PAGE>
NARRAGANSETT
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Annual Compensation (b) Compensation
-------------------------- -------------------
Other Restricted
Name and Annual & Deferred All Other
Principal Compensa- Share LTIP Compensa-
Position Year Salary Bonus tion Awards Payouts tion
(a) ($) ($)(c) ($)(d) ($)(e) ($) ($)(f)
- ---------- ---- ------- ------ --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Lawrence J. 1998 52,729 27,589 2,517 11,354 9,127 99
Reilly 1997 679 452 29 0 0 1
President 1996 16,329 11,916 419 7,825 0 382
Robert L. 1998 40,283 17,022 1,933 6,937 8,898 237
McCabe 1997 179,460 148,868 9,881 0 0 1,528
Chairman 1996 127,388 88,905 4,819 50,308 0 3,424
Richard W. 1998 119,544 41,969 2,746 16,320 15,346 438
Frost 1997 113,856 52,347 2,396 0 0 596
Vice 1996 108,432 57,680 119 0 0 2,888
President
Michael F. 1998 112,368 42,237 2,393 16,856 0 108
Ryan 1997 103,983 52,060 2,197 0 0 220
Vice 1996 64,555 18,397 77 0 0 1,473
President
Richard 1998 102,912 18,655 2,681 4,433 0 160
Nadeau
Vice
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. In 1996 and 1997, the bonus
amounts were all cash or contributions to the incentive thrift plan,
including related deferred compensation plan matches. See descriptions
under Plan Summaries.
(d) Includes amounts reimbursed by Narragansett for the payment of taxes on
certain noncash benefits and Narragansett contributions to the incentive
<PAGE>
thrift plan that are not bonus contributions including related deferred
compensation plan match. See description under Plan Summaries.
(e) In 1998, the incentive share awards for the named executives 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. The shares awarded in 1996 and 1997 were not
restricted and the value of the awards is included in the bonus column.
As of December 31, 1998, the following executive officers held the
amount of restricted and deferred shares with the value indicated: Mr.
Reilly 6,064 shares, $291,830 value; Mr. McCabe 6,979 shares, $335,864
value; Mr. Frost 819 shares, $39,414 value; Mr. Ryan 11 shares, $529
value; Mr. Nadeau 65 shares, $3,128 value. The value was calculated by
multiplying the closing market price on December 31, 1998 by the number
of shares.
(f) Includes Narragansett contributions to life insurance. 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. Prior to 1997, this column also included
Narragansett contributions to the incentive thrift plan that are not
bonus contributions. These figures are now included in the Other Annual
Compensation column.
<PAGE>
Share Ownership
---------------
The following table lists the holdings of NEES common shares and
deferred shares by NEES' directors, the executive officers named in the
Summary Compensation Table, and for directors and all executive officers as a
group. The information includes all whole shares beneficially owned, directly
or indirectly, as of January 20, 1999.
<TABLE>
<CAPTION>
Shares Deferred
Beneficially Share
Name Owned (a) Equivalents (b) Total
---- ------------ --------------- ---------
<S> <C> <C> <C>
Joan T. Bok 14,016 -- 14,016
William M. Bulger 100 2,420 2,520
Alfred D. Houston 14,359 15,489 29,848
Michael E. Jesanis 4,316 7,188 11,504
Paul L. Joskow 2,829 635 3,464
David C. Kennedy 8,236 4,439 12,675
John M. Kucharski 3,100 -- 3,100
Edward H. Ladd 6,746 308 7,054
Cheryl A. LaFleur 3,595 7,147 10,742
Joshua A. McClure 2,255 693 2,948
John W. Rowe (c) 5,704 26,418 32,122
George M. Sage 4,300 -- 4,300
Richard P. Sergel 8,574 12,069 20,643
Charles E. Soule 1,310 6,515 7,825
Anne Wexler 3,048 -- 3,048
James Q. Wilson 3,655 308 3,963
James R. Winoker 2,600 -- 2,600
Lawrence E. Bailey 5,490 4,973 10,463
Peter G. Flynn 6,671 3,564 10,235
John F. Malley 3,952 3,549 7,501
Masheed H. Rosenqvist 1,802 364 2,166
Robert L. McCabe 10,691 7,944 18,635
Kwong O. Nuey 1,667 1,874 3,541
Lydia M. Pastuszek 8,242 2,712 10,954
Lawrence J. Reilly 4,010 7,161 11,171
Christopher E. Root 2,256 3,519 5,775
Nancy H. Sala 6,348 (d) 2,541 8,889
Richard W. Frost 7,035 530 7,565
Richard Nadeau 5,029 0 5,029
Michael F. Ryan 1,316 11 1,327
Ronald L. Thomas 1,614 0 1,614
All directors and
executive officers,
as a group
(42 persons) 154,866 (e) 122,371 277,237
</TABLE>
<PAGE>
(a) Number of shares beneficially owned includes:
- shares directly owned by certain relatives with whom directors or
officers share voting or investment power;
- 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;
- 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
- with respect to the executive officers of NEES, allocated shares in
the Incentive Thrift Plan described below.
(b) Deferred share equivalents are held under NEES' 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 is paid out
in the same form, cash or shares, as was deferred. The rights of the
executives to payment are those of general, unsecured creditors.
While deferred, the shares do 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) Mr. Rowe, former President and Chief Executive Officer, resigned
effective February 6, 1998.
(d) Ms. Sala disclaims a beneficial ownership interest in 283 shares held in
a custodial account.
(e) Amount is less than 1% of the total number of shares of NEES outstanding.
T. Rowe Price Trust Company, 100 East Pratt Street, Baltimore, MD 21202
is the only person or group known to NEES as of January 20, 1999 to
beneficially own 5% or more of NEES' common shares. However, T. Rowe Price
Trust Company disclaims beneficial ownership of all such shares. As of
December 31, 1998, T. Rowe Price owned 4,740,729 shares as trustee for NEES
employee benefits plans, including those discussed herein. This represented
8% of NEES common shares.
<PAGE>
Share Ownership Guidelines
--------------------------
NEES has long recognized the importance of consistent alignment of
executive interests with those of shareholders. In 1995, the Compensation
Committee of the Board 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. Sergel, the level is 40,000 shares.
- For Mr. Houston, the level is 25,000 shares.
- For the other executives listed in the Executive Compensation Summary
Table, the level is 7,000 to 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 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.
Contracts and Transactions with System Companies
------------------------------------------------
During 1998, Mr. Joskow did consulting work for NEES or subsidiaries of
NEES under a separate consulting contract for which he was paid approximately
$30,000. These consulting services were not related to his duties as a Board
member.
Mr. Winoker is Chief Executive Officer of Belvoir Properties, Inc.
(Belvoir). Belvoir leases two parcels of land in Providence, Rhode Island
from a subsidiary of NEES under a twenty-year lease with an initial annual
rent of approximately $60,000.
In 1998, Applied Resources Integrated Services, Inc. (ARIS) was awarded a
contract in a competitive process by a subsidiary of NEES. ARIS is owned by a
son and daughter of Mr. Bulger. The contract is for services related to an
energy efficiency lighting program beginning in 1999. ARIS will be paid up to
$200,000 per year under the contract. It is a two year contract with an
option to extend for an additional year.
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 general provisions of the incentive compensation
plans are described in the report of the Compensation Committee. The amounts
of compensation and benefits provided to the named executive officers under
the plans described below are presented in the Summary Compensation Table.
<PAGE>
Goals Program
- -------------
The Goals Program establishes goals annually. For 1998, these included
goals related to core operating income, costs to customers for electricity
delivery, safety, absenteeism, transmission and distribution 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 NEES' Incentive
Thrift Plan (shown under Other Annual Compensation in the Summary Compensation
Table) and, based on an incentive formula tied to core operating income, may
fully match the first 5% of base compensation contributed (the additional
amount, if any, is shown under Bonus in the Summary Compensation Table).
Under Federal law, contributions to these plans are limited. In 1998, the
contribution amount was limited to $10,000.
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 common 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 $160,000 in
calculating 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 the named executive officers 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
final annual salary for Mr. Rowe and 22.5% of 1998 annual salary plus 40% of
final annual salary for Mr. Houston. 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 has been closed to
new participants, and an alternative was established with only a life
insurance benefit.
<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 seminars conducted at various locations during each year.
Other
- -----
NEES does not have any share option plans.
Long-Term Incentive Plan - Awards in Last Fiscal Year
-----------------------------------------------------
The Long-Term Performance Share Award Plan provides awards based on
various measures of NEES performance over a three-year period. Each award
factor functions independently. The performance targets for each cycle are
set by the Compensation Committee of the NEES Board. 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 (ranging
from 15% to 50%) of base pay. At the end of the three-year cycle, the
participant receives NEES shares based upon the performance against the
various factors.
The measures of performance for the cycle commencing January 1, 1998 are
as follows: total shareholder return; maintenance or improvement of bond
ratings; redeployment of the generation sale proceeds; and System service
levels, including customer satisfaction, reliability, safety, and compliance.
The following tables show the potential awards, for those executive
officers named in the Summary Compensation Tables, under the Long-Term
Performance Share Award Plan for the performance cycle commencing January 1,
1998. The NEES System's performance will be measured over the three-year
period ending December 31, 2000. However, upon the completion of the merger
with National Grid, the executives will receive awards based upon an average
of incentive compensation target achievement for the prior three years and not
upon the measures specified below.
<PAGE>
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>
Richard P. Sergel 3,569 3 years 29 3,569
Alfred D. Houston 4,310 3 years 34 4,310
Cheryl A. LaFleur 2,293 3 years 18 2,293
Michael E. Jesanis 2,142 3 years 17 2,142
David C. Kennedy 987 3 years 8 987
</TABLE>
NEP
---
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>
Lawrence E. Bailey 977 3 years 8 977
Alfred D. Houston 4,310 3 years 34 4,310
Peter G. Flynn 853 3 years 7 853
John F. Malley 859 3 years 7 859
Masheed H. Rosenqvist (d) - - - -
</TABLE>
Mass. Electric
--------------
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>
Lawrence J. Reilly 1,036 3 years 9 1,036
Robert L. McCabe 1,119 3 years 9 1,119
Nancy H. Sala 464 3 years 4 464
Lydia M. Pastuszek 866 3 years 7 866
Kwong O. Nuey 461 3 years 4 461
</TABLE>
<PAGE>
Narragansett
------------
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>
Lawrence J. Reilly 1,036 3 years 9 1,036
Robert L. McCabe 1,119 3 years 9 1,119
Richard W. Frost 427 3 years 4 427
Michael F. Ryan 401 3 years 4 401
Richard Nadeau (d) - - - -
</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 zero.
(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.
(d) Did not participate in this plan for 1998.
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 1999.
<PAGE>
<TABLE>
<CAPTION>
PENSION PLAN TABLE
------------------
FIVE-YEAR
AVERAGE 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
COMPENSATION SERVICE SERVICE SERVICE SERVICE SERVICE SERVICE
- ------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 300,000 60,300 87,500 114,700 141,100 167,500 184,100
$ 400,000 81,000 117,500 154,000 189,600 225,100 241,600
$ 500,000 101,700 147,600 193,500 238,100 282,700 311,000
$ 600,000 122,400 177,600 232,900 286,600 340,300 374,500
$ 700,000 143,100 207,700 272,300 335,100 397,900 437,900
$ 800,000 163,800 237,700 311,700 383,600 455,500 501,400
$ 900,000 184,500 267,800 351,100 432,100 513,100 564,800
$1,000,000 205,200 297,800 390,500 480,600 570,700 628,300
$1,100,000 225,900 327,900 429,900 529,100 628,300 691,700
$1,200,000 246,600 357,900 469,300 577,600 685,900 755,200
$1,300,000 267,300 388,000 508,700 626,100 743,500 818,700
$1,400,000 288,000 418,000 548,100 674,600 801,100 882,100
</TABLE>
For purposes of the retirement plans, Mr. Sergel, Mr. Rowe, Mr. Houston,
Ms. LaFleur, Mr. Jesanis, and Mr. Kennedy currently have 20, 20, 35, 13, 16,
and 26 credited years of service, respectively. Messrs. Bailey, Flynn, and
Malley and Ms. Rosenqvist currently have 30, 17, 27, and 17 credited years of
service, respectively. Mr. Reilly, Mr. McCabe, Ms. Sala, Ms. Pastuszek, and
Mr. Nuey currently have 17, 30, 29, 18, and 8 credited years of service,
respectively. Mr. Frost, Mr. Ryan, and Mr. Nadeau currently have 36, 4, and
43 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. If the participant elected at age 65 a 100% joint and survivor
benefit with a spouse of the same age, the benefit shown would be reduced by
approximately 16%.
The pension plan table above does not include annuity payments to be
received in lieu of life insurance for Messrs. Rowe and Houston. Those
payments are described above under Plan Summaries.
In December 1997, the NEES companies announced a voluntary early
retirement program available to all nonunion employees over age 55 with ten or
more years of service. Messrs. Frost, McCabe, and Nadeau were all eligible
for, and accepted, the offer. The program offered either an annuity or a lump
sum equal to the greater of either one week's base pay times the number of
years of service or an additional five years service and five years of age
toward their pension. The offer also included certain health care and
bridging of social security benefits. The program is conditioned upon
consummation of the divestiture of the nonnuclear generating business to
<PAGE>
USGen. Mr. McCabe also has an employment agreement which provides that if he
remains in the employ of the NEES companies until December 31, 1998, or the
retirement effective date under the offer, he will receive an annuity or a
lump sum equal to an additional five years of service and five years of age
toward his pension plus $225,000, subject to an offset for any benefits under
the general offer. The value of Messrs. Frost, McCabe, and Nadeau's benefits
under the offer and the contract cannot be determined until their retirement.
NEES covers the full cost of post-retirement health benefits for the
senior executives listed in the Summary Compensation Table.
NEES Payments Upon a Change of Control
or Termination of Employment
- --------------------------------------
NEES has agreements with certain of its executives, including those
named in the Summary Compensation Table, which provide severance payments in
the event of certain terminations of employment following a Change in Control
of NEES. These are discussed at greater length below. NEES' bonus plans,
including those described in the Compensation Committee Report, provide for
payments equal to the average of the bonuses for the three prior years in the
event of a Change in Control.
The Board recognized the trend toward business combinations and
consolidation in the electric utility industry and considered it essential to
the best interests of its shareholders to foster the continuous employment of
key management personnel. In addition, the Board recognized that the
possibility of a change in control at NEES, as at other electric utilities,
existed and that such possibility, and the uncertainty and questions which it
may raise among management, could result in the departure or distraction of
management personnel to the detriment of NEES and its shareholders.
Furthermore, the Board determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of
the management of the Company and its subsidiaries to their assigned duties
without distraction in the face of potentially disturbing circumstances
arising from the possibility of a change in control. Accordingly, NEES
determined that executive officers (including those listed in the Summary
Compensation Table, but excluding Messrs. Houston and Sergel) 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.
Severance Agreements
--------------------
NEES is a party to agreements with each of Mr. Sergel, Mr. Houston, Mr.
Jesanis, Ms. LaFleur, and Mr. Kennedy (each, an "Executive" and each
agreement, a "Severance Agreement"), which Severance Agreements were entered
into in 1995 with Mr. Houston and on March 1, 1998 with the other Executives
(and amended on December 8, 1998 for Mr. Kennedy) and which remain in effect
for the three year period following (1) a "Change in Control" of NEES (as
defined in the Severance Agreements) or (2) a "Major Transaction" (as defined
in the Severance Agreements). In accordance with the terms of the Severance
Agreements, if the applicable Executive's employment is terminated within
three years following the event described in clause (1) or (2), as applicable,
NEES will pay to the Executive the severance payments and will provide to the
Executive the severance benefits described below, unless the Executive's
<PAGE>
employment is terminated (x) by NEES for Cause, (y) by the Executive without
Good Reason or (z) by reason of the Executive's death, Disability or
Retirement (each term, as defined in the Severance Agreements).
The shareholder approval of the merger agreement will constitute a Major
Transaction and the consummation of the transactions contemplated by the
merger will constitute a Change in Control. Accordingly, in the event an
Executive's employment is terminated within three years following the Major
Transaction or Change in Control, such Executive will be entitled to receive,
in lieu of any other payments due to the Executive: (1) a lump sum cash
payment equal to three times (two times, in certain cases) the sum of (a) the
higher of (i) such Executive's annual base compensation in effect at the time
of termination and (ii) such Executive's annual base compensation in effect
immediately prior to the Change in Control or Major Transaction and (b) the
higher of (i) the average of the annual bonuses awarded to such Executive
under the New England Electric Companies' Senior Incentive Compensation Plan,
New England Electric Companies' Incentive Compensation Plan I, II and III and
the Incentive Share Plan (collectively, the "Incentive Plans") for the three
performance years ended prior to the date of termination and (ii) the average
of the annual bonuses awarded to such Executive pursuant to the Incentive
Plans for the three performance years ended prior to the Change in Control or
Major Transaction; (2) a cash lump sum payment equal to the excess of (a) the
actuarial equivalent of the retirement pension which the Executive would have
accrued under the terms of each pension plan of NEES (determined as if the
Executive (i) were fully vested thereunder and had accumulated 36 additional
months (24 additional months, in certain cases) of service credit thereunder
and (ii) had been credited under each such pension plan of NEES during such 36
month period with compensation at the higher of (A) the Executive's
compensation during the 12 months prior to the date of termination and (B) the
Executive's compensation during the 12 months ending on the date of the Change
in Control or Major Transaction) over (b) the actuarial equivalent of the
retirement pension which the Executive had actually accrued pursuant to the
provisions of NEES' pension plans as of the date of his or her termination of
employment; (3) the continuation of employee welfare benefits for three years
(two years, in certain cases) following the date of termination, reduced to
the extent the Executive receives such benefits from a subsequent employer;
(4) if the Executive would have otherwise been entitled to post-retirement
health care or life insurance had he continued to be employed for three
additional years (two additional years, in certain cases), such post-
retirement health care and life insurance commencing on the later of (a) the
date that such coverage would have first become available to the Executive and
(b) the date that the benefits described in clause (3) above terminate and (5)
the reimbursement of legal fees and expenses, if any, incurred by the
Executive in disputing any issue relating to the termination of his
employment. Notwithstanding the above, payments to be made and benefits to be
provided to the Executives will be reduced to the extent necessary to avoid
imposition of the excise tax (the "Excise Tax") pursuant to Section 4999 of
the Code; in certain cases, however, such payments and benefits will be
reduced only if such reduction would yield a greater result to the Executive
than actual payment by the Executive of the Excise Tax. Notwithstanding the
foregoing, Mr. Sergel, in lieu of such reduction, is entitled to an additional
payment to hold him harmless from the Excise Tax, if any, imposed on any
payment to him. It is estimated (based upon information currently available)
that this additional payment would be $2,127,338.
<PAGE>
In accordance with the terms of the Severance Agreements, it is
presently estimated (based upon information currently available) that the
Executives would be entitled to lump sum cash severance payments upon
termination of employment in the circumstances described above approximately
in the following amounts: Mr. Sergel, $3,630,475; Mr. Houston, $2,605,476; Mr.
Jesanis, $1,282,398; Ms. LaFleur, $1,280,037; and Mr. Kennedy, $736,060.
Pursuant to the employment agreement to be entered into among NEES,
National Grid Group and Mr. Sergel on the effective date of the merger, Mr.
Sergel will waive his rights under his Severance Agreement.
NEP, Mass. Electric, and Narragansett
Payments upon a Change of Control or
Termination of Employment
- -------------------------------------
NEES is a party to agreements with each of Mr. Flynn, Mr. Houston, Mr.
McCabe, and Mr. Reilly (each, an Executive), which agreements remain in effect
for the three-year period following a change in control (as defined below) or
a major transaction (as defined in the agreements). The term of the
agreements are for three years with automatic annual extensions, unless
terminated by NEES. If, following the described event, the Executive's
employment is terminated other than for cause (as defined in the agreements)
or if the Executive terminates employment for good reason (as defined in the
agreements), NEES will pay to the Executive a lump sum cash 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 bonus amounts for the
prior three years. Payments and benefits to the Executive will be reduced to
the extent necessary to avoid imposition of any federal excise tax due under
Section 280G of the Internal Revenue Code; however, such payments and benefits
will be reduced only if such reduction would yield a greater result to the
Executive than actual payment by the Executive of the excise tax. 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 to three additional years of pension credit.
Change in Control, including potential change of control, occurs (1)
when any person becomes the beneficial owner of 20%t of the voting securities
of NEES, (2) when the prior members of the Board of NEES 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 full distribution of the participant's cash and
share accounts and the actuarial 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,
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. These payments 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 participants' account times the average target
achievement percentage for the Incentive Thrift Plan for the three prior
<PAGE>
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 the related
Incentive Share Deferral Agreements provide that, upon the occurrence of a
change in control (defined more narrowly than in other plans), any
restrictions on shares and account balances would cease.
Executive officers (including those listed in the summary compensation
table, but excluding Mr. Houston) would receive a benefit equal to one and
one-half times (one times in certain cases) 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 members of the Compensation Committee (the Committee) of the Board
of Directors have the responsibility for executive compensation, including the
administration of certain of NEES' incentive compensation plans.
NEES' 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 NEES as our industry becomes increasingly
competitive. The compensation package reflects the fact that these managers'
backgrounds are suitable to a broader industrial marketplace and are not
necessarily limited to NEES or its industry. Total compensation consists of
Base Salary, Incentive Compensation (performance based, at risk compensation),
and Benefits. The Committee periodically reviews each component of NEES'
executive compensation program to ensure that pay levels and incentive
opportunities are competitive and that incentive opportunities are linked to
NEES performance. NEES' 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 NEES' shareholders and customers; and (4) an ever
higher percentage of total compensation should be at risk and share based as
one moves upward through management. The compensation of the Chief Executive
Officer, Mr. Sergel, is based on these considerations.
Compensation Decisions
- ----------------------
The Board of Directors votes the compensation of Mr. Sergel and Mr.
Houston acting upon recommendations of the Compensation Committee. The
Committee reports its decisions to the Board of Directors. After meeting in
executive session and discussing the reports made by the Committee, the Board
of Directors has unanimously accepted each of the recommendations described
below made in 1998 and to date in 1999. However, as described in the
Supplemental Report, which follows, the Board (including the members of the
Compensation Committee) later increased Mr. Sergel's base compensation for
1999.
The Compensation Committee votes the compensation of all other NEES
executive officers listed in the Summary Compensation Table, as well as other
<PAGE>
senior employees. The Board has ratified the compensation decisions for these
executive officers. Although NEES management may be present during Committee
discussions of officers' compensation, Committee decisions with respect to the
compensation of Mr. Sergel and Mr. Houston were reached in executive session.
Under Section 162(m) of the Internal Revenue Code, tax deductions are
limited for compensation above $1 million, not including amounts deferred.
Given the mandatory deferral of their share awards by Messrs. Sergel and
Houston, the Code provisions do not currently impact NEES. Total compensation
for each of the other executive officers is also 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 March 1998 the Committee reviewed the compensation of the System
officers (other than Messrs. Sergel and Houston) in light of their additional
responsibilities. The Committee considered relevant base pay market data
including both utility and general industry surveys. The Committee then set
the 1998 compensation levels for those individuals.
At the meeting of November 23, 1998, the Committee considered data from
multiple surveys from a number of independent consultants on senior executive
compensation levels for comparable utilities and for industry in general.
They then discussed the events of the preceding year and reflected upon the
changes in the industry, the significant progress NEES had made as a leader in
the restructuring of the industry, and the successful sale of NEES' nonnuclear
generation business. In this context, the contributions of both Mr. Houston
and Mr. Sergel in assuming the leadership of NEES and in continuing its
success were evaluated. The Committee then voted to recommend to the full
Board that Mr. Houston's and Mr. Sergel's base compensation be each set at
$500,000 for 1999.
At the same November meeting the Committee reviewed NEES' compensation
philosophy, set out above, and discussed the need to adequately reward
employees when compared to the utility and broader industry averages and the
need to retain valuable contributors. The Committee then considered
comparative market compensation data, and individual performance and
responsibilities. After consultation with Messrs. Houston and Sergel, the
Committee set the compensation levels for 1999 for the other senior
executives.
<PAGE>
Performance Based Incentive Compensation
- ----------------------------------------
Performance Based Incentive Compensation (at risk compensation or bonus)
is designed to deliver rewards above base salary, if NEES and the individual
executives perform well.
Annual Target Plans
-------------------
In 1997, the Committee reevaluated the existing annual bonus plans
because: NEES' shifting from being a vertically integrated utility to being
primarily a transmission and distribution company; comparative ROE and cost
per kilowatt-hour measurements becoming less appropriate as the prime measures
of success as different utilities proceed through competitive transitions at
different times and at different rates; and NEES' strategic plan calling for
significant new business development in competitive new areas.
The incentive compensation plans were therefore revised to be reflective
of the achievement of operating income from the core business and strategic
objectives. Annual income targets and strategic objectives are established by
the Board of Directors for each year. For 1998 those objectives were:
achieving recovery of stranded investments; maximizing the return on the sale
of the generation business; running the best wires business in the Northeast;
increasing the size of the energy delivery business; and profiting from growth
in unregulated ventures. Benchmarks were established for each of these
objectives.
Mr. Sergel's and Mr. Houston's bonuses under the plan were directly
related to achievement of the above described corporate objectives.
Participants in the senior plan and other principal System officers
share all five of these objectives. Other participants may have some but not
all of these objectives depending upon their responsibilities within NEES.
For Messrs. Sergel and Houston, achievement of the operating income objective
would provide a formula bonus of 15% of base pay. Achievement of an operating
income objective above the target and achievement of all strategic objectives
in full would generate a calculated cash award of up to 50% of base pay. The
Committee retains discretion within the plan to adjust the final calculation
to reflect extraordinary events.
At the January 1999 meeting, upon considering the performance of NEES
during the previous year, the Committee increased the weighting for merger
activities in consideration of the value of the merger with the National Grid
Group which had been brought forward by Messrs. Sergel and Houston. It was
the Committee's judgment that their performance significantly exceeded the
design of the plan and the Committee's expectations when establishing the
strategic objectives for 1998. Accordingly, the Committee recommended to the
Board that the cash bonuses for Messrs. Sergel and Houston be set at 62.5% of
base compensation.
The participants in the incentive compensation plans are also awarded
common shares of NEES 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
<PAGE>
for that year from the incentive compensation plan in which she or he
participates. For Mr. Sergel and Mr. Houston, the percentage was 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 1998 were approximately 0.07% of the number of outstanding
shares.) As noted above under Share Ownership Guidelines, the share awards of
NEES officers were restricted for 1998.
Three-Year Target Plan
----------------------
In order to increase executive focus on multi-year performance, NEES
established in 1995 the Long-Term Performance Share Award Plan described
below. The first payout under this plan for the three year cycle ended
December 31, 1998 was made in February 1999.
Awards for this plan are based upon various measures of NEES 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 January 1 of the first year of the plan
measurement period. Percentages 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 were
dependent upon the relative shareholder return on equity (as shown in the
following table) as compared to a national grouping of utilities. The return
on equity was at the 73(rd) percentile, producing an 85% payment for this
goal. The total calculated award for the plan cycle 1996-1998 was 77% of the
allocated shares.
Benefits
- --------
The executive benefits are designed both to provide a competitive
package and to retain flexibility for NEES in staffing management to meet
changing conditions.
New England Electric System Compensation Committee
George M. Sage, Chairman
John M. Kucharski
Anne Wexler
<PAGE>
Supplemental Report of the Board of
Directors on Executive Compensation
- -----------------------------------
As noted in the preceding report of the Compensation Committee, the
Board of Directors had approved each of the recommendations of the
Compensation Committee. At its meeting on December 11, 1998, relating to the
proposed merger with the National Grid Group, the Board again considered Mr.
Sergel's leadership in developing the merger. In light of this and the
Board's subjective judgment as to the continued value of Mr. Sergel to NEES,
they increased his 1999 base compensation to $550,000.
New England Electric System Board of Directors
Joan T. Bok Edward H. Ladd Charles E. Soule
William M. Bulger Joshua A. McClure Anne Wexler
Alfred D. Houston George M. Sage James Q. Wilson
Paul L. Joskow Richard P. Sergel James R. Winoker
John M. Kucharski
Corporate Performance
---------------------
Total Return
- ------------
The following table shows total shareholder return for NEES (capital
appreciation plus reinvested dividends) for the years 1993 through 1998, 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, 1993.
<TABLE>
<CAPTION>
NEES S&P 500 EEI Index
---- ------- ---------
<S> <C> <C> <C>
1993 100.00 100.00 100.00
1994 87.70 101.32 88.43
1995 115.87 139.40 115.86
1996 108.82 171.40 117.25
1997 142.28 228.58 149.33
1998 169.06 294.30 170.07
</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 1994 through 1998 compared to a national grouping of approximately
80 electric utilities 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 has been a key driver of NEES' incentive compensation
program.
<PAGE>
<TABLE>
<CAPTION>
National Regional
NEES Grouping Grouping
---- -------- --------
<S> <C> <C> <C>
1994 12.73% 11.42% 11.40%
1995 12.78% 11.72% 10.43%
1996 12.58% 11.41% 11.13%
1997 12.84% 10.89% 10.60%
1998 11.37% 11.28% 10.33%
</TABLE>
Note: The earnings performance shown on the table 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 Governance Committee, and a Corporate Responsibility
Committee.
Executive Committee
- -------------------
- Mrs. Bok
- Mr. Houston
- Mr. Joskow
- Mr. Ladd
- Mr. Sage
- Mr. Sergel
- Ms. Wexler
Mr. Ladd 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.
Audit Committee
- ---------------
- Mr. Bulger
- Mr. Joskow
- Mr. Soule
- Mr. 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 Board of Directors the
independent public accountants to be engaged for the coming year.
<PAGE>
Compensation Committee
- ----------------------
- Mr. Kucharski
- Mr. Sage
- Ms. Wexler
Mr. Sage serves as the Chairman of this Committee.
The Compensation Committee is responsible for executive compensation,
including the administration of certain of NEES' incentive compensation plans.
Corporate Governance Committee
- ------------------------------
- Mr. Joskow
- Mr. Ladd
- Mr. Sage
- Ms. Wexler
Mr. Ladd serves as Chairman of this Committee.
The Corporate Governance Committee is responsible for maintaining the
quality and experience of the Board. As part of its responsibilities, the
committee also functions as a nominating committee and considers and evaluates
director candidates, determines criteria and procedures for selecting
non-management directors, and conducts periodic reviews of director
performance. This Committee also considers written recommendations from
shareholders for nominees to the Board.
Corporate Responsibility Committee
- ----------------------------------
- Mrs. Bok
- Mr. Houston
- Mr. McClure
- Mr. Sergel
- Mr. Wilson
- Mr. Winoker
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.
Director Compensation
- ---------------------
Members of the Board of Directors, except Messrs. Houston and Sergel,
receive annually a retainer of $20,000 and 300 common shares of NEES, and
receive a meeting fee of $1,000 plus expenses for each meeting attended.
The Chairman of the Executive Committee receives an annual retainer of
$12,000. Other members of the Executive Committee, except Messrs. Houston and
<PAGE>
Sergel, receive an annual retainer of $5,000. The Chairmen of the Audit,
Compensation, Corporate Governance, and Corporate Responsibility Committees
each receive an annual retainer of $6,000. Other members of the Audit,
Compensation, and Corporate Responsibility Committees, except Messrs. Houston
and Sergel, receive annual retainers of $4,000. There is no retainer for the
other members of the Corporate Governance Committee. All directors
participating in a Committee meeting, except Messrs. Houston and Sergel,
receive a meeting fee of $1,000 plus expenses.
NEES permits directors to defer all or a portion of any cash retainers,
meeting fees, and retainer shares under a deferred compensation plan. At the
end of the deferral period, the compensation is paid out in the same form,
cash or shares, as was deferred. Deferred shares do not have voting rights or
other rights associated with ownership while deferred. A special account is
maintained on NEES' books showing the amounts deferred and the interest or
dividends accrued thereon. 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 cash retainer for directors who served
on the Board for 10 or more years and 75% of the annual cash retainer for
directors who served between 5 and 10 years. There are no death benefits
under the plan.
Attendance
- ----------
The Board of Directors held 13 meetings in 1998. The Executive, Audit,
Compensation, Corporate Governance, and Corporate Responsibility Committees
held 3, 3, 7, 3, and 3 meetings, respectively, in 1998. All directors
attended at least 75% of the aggregate number of meetings of the Board of
Directors and the committees of which they were members.
NEP, Mass. Electric, and Narragansett Directors' Compensation
- -------------------------------------------------------------
Since all members of the NEP, Mass. Electric, and Narragansett Boards
are employees of NEES System companies, no fees are paid for service on the
Boards.
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.
<PAGE>
(2) Year Ended December 31, 1998.
<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
--------------
Associated Industries of Mass., Inc. 426.40 $ 30,000.00
Hale & Dorr 426.40 $ 13,454.00
Eliassen Group, Inc. (B) 426.40 $ 10,420.00
Joyce & Joyce (B) 426.40 $ 55,988.00
Yes On 4 Coalition/Keep The Electric Rate
Reduction 426.40 $2,592,830.00
Other (1) 426.40 $ 6,700.00
Edison Electric Institute 426.10 $ 121,251.00
The Alliance to Save Energy 426.10 $ 12,800.00
Other (12) 426.10 $ 20,820.00
NEP
---
Gallagher, Callahan and Gartrell (B) 426.40 $ 276,356.00
Gary A. Hale 426.40 $ 127,200.00
Sullivan & Leshane, Inc. 426.40 $ 76,320.00
Alliance for Competitive Energy 426.40 $ 56,044.00
Edison Electric Institute 426.40 $ 49,800.00
Halloran & Sage (B) 426.40 $ 37,409.00
Joyce & Joyce (B) 426.40 $ 45,788.00
Save The Bay 426.10 $ 25,025.00
Other (18) 426.10 $ 39,344.00
Narragansett
------------
John G. Coffey, Esq. (B) 426.40 $ 20,000.00
McGovern, Noel & Benik, Inc. (B) 426.40 $ 30,000.00
Winsor Association Consultants (B) 426.40 $ 22,000.00
Edison Electric Institute 426.40 $ 41,139.00
Other (10) 426.10 $ 32,885.00
<PAGE>
Granite State
-------------
Gallagher Callahan and Gartrell (B) 426.40 $ 24,937.00
Other (1) 426.40 $ 4,330.00
Campaign for Ratepayers' Rights 426.10 $ 10,300.00
Other (5) 426.10 $ 2,055.00
NEES
----
Massachusetts Business Roundtable 930.20 $ 13,300.00
Massachusetts Business Roundtable 426.40 $ 700.00
Repeal PUHCA NOW 426.40 $ 35,000.00
Nantucket Electric Company
- --------------------------
Nantucket Green Fund 426.10 $ 1,000.00
<FN>
- --------------------
(A) All such payments, unless otherwise noted, were subscriptions, dues,
and/or contributions.
(B) Payments for legislative services.
</FN>
</TABLE>
Item 8. SERVICE, SALES AND CONSTRUCTION CONTRACTS
Part I.
<TABLE>
<CAPTION>
Serving Receiving Compensation
Transaction Company Company (1998)
- ----------- ------- --------- ------------
<S> <C> <C> <C>
Fuel Purchase Contract (1) NEEI NEP $27,361,257
Phase I Terminal Facility
Support Agreement (2) NEET NEP $ 1,664,202
Phase II Massachusetts Transmission NEHTEC NEP $ 4,688,023
Facilities Support Agreement (3)
Phase II New Hampshire Transmission NEHTC NEP $ 3,876,593
Facilities Support Agreement (4)
<FN>
- --------------------
(1) Contract dated 7/26/79 as amended was in effect at 12/31/98.
(2) Agreement dated 12/1/81 as amended was in effect at 12/31/98.
(3) Agreement dated 6/1/85 as amended was in effect at 12/31/98.
(4) Agreement dated 6/1/85 as amended was in effect at 12/31/98.
</FN>
</TABLE>
<PAGE>
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 1998 Form 10-K (Supplement A-2).
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. Connecticut Yankee Atomic Power Company 1998 Annual Report to
Shareholders (Exhibit A.2.1 to Northeast Utilities' Form U-5-S, File
No. 30-246).
2. Maine Yankee Atomic Power Company 1998 Annual Report (filed
herewith).
3. Massachusetts Electric Company, Form 10-K for the year ended
December 31, 1998 (File No. 0-5464).
4. The Narragansett Electric Company, Form 10-K for the year ended
December 31, 1998 (File No. 1-7471).
5. New England Electric System, Form 10-K for the year ended
December 31, 1998 (File No. 1-3446).
6. New England Power Company, Form 10-K for the year ended December 31,
1998 (File No. 1-6564).
7. a. Vermont Yankee Nuclear Power Corporation 1998 Annual Report to
Stockholders (to be filed under cover of Form SE).
b. Vermont Yankee Nuclear Power Corporation 1998 FERC Form 1 (filed
herewith).
8. a. Yankee Atomic Electric Company 1998 Annual Report to Stockholders
(filed herewith).
b. Yankee Atomic Electric Company 1998 FERC Form 1 (to be filed under
cover of Form SE).
9. New England Electric Transmission Corporation 1998 Annual Report
(filed herewith).
B. Corporate Documents:
1. AEDR Fuels, L.L.C.:
AEDR Fuels Operating Agreement effective, December 1997 (filed
herewith).
2. AllEnergy Marketing Company, L.L.C.:
a. Agreement and Plan of Merger dated December 31, 1998 (Exhibit
10(ii) to 1998 NEES Form 10-K, File No. 1-3446).
b. Limited Liability Company Agreement (Exhibit B-1 to Amendment No.
1 to Form U-1, File No. 70-8921).
c. Amendment No. 1 to Limited Liability Company Agreement (Exhibit
10(jj) to 1997 NEES Form 10-K, File No. 1-3446).
3. Texas Liquids, L.L.C.:
Limited Liability Company Agreement (Exhibit B.2.a to NEES 1997 Form
U-5-S).
4. Granite State Electric Company:
a. Articles of Organization (Exhibit B.1.a to NEES 1983 Form U-5-S).
b. By-laws March 27, 1998 (filed herewith).
5. 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).
6. 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 (Exhibit 3(b) to 1997 Mass. Electric Form 10-K, File No.
0-5464).
<PAGE>
7. 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).
8. 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. Preference Provisions as amended dated December 15, 1997 (Exhibit
4(c) to NEES 1997 Form 10-K, File No. 1-3446).
9. NEES Communications, Inc.:
a. Articles of Organization (Exhibit B.9.a to NEES 1996 Form U-5-S).
b. By-laws (Exhibit B.9.b to NEES 1996 Form U-5-S).
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. NEES Global, 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:
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 dated March 17, 1998 (filed herewith).
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).
<PAGE>
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 dated March 17, 1998 (filed herewith).
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 dated March 17, 1998 (filed herewith).
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 1997 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).
20. New England Water Heater Co., Inc.:
a. Articles of Merger (filed herewith).
b. By-laws dated March 30, 1998 (filed herewith).
21. Metrowest Realty, L.L.C.:
Limited Liability Company Agreement dated as of December 17, 1998
(filed herewith).
C. Funded Debt:
1. Granite State Electric Company:
a. Note Agreement with Aid Association for Lutherans dated as of
October 1, 1991 (Exhibit C-1 to NEES 1991 Form U-5-S).
<PAGE>
b. Note Agreement with First Colony Life Insurance Company dated as
of November 1, 1993 (Exhibit C-1 to NEES 1993 Form U-5-S).
c. 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).
d. Note Agreement with the Paul Revere Life Insurance Company dated
as of June 15, 1998 (filed herewith).
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. 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-three 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), Exhibit 4(b) to
1997 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 Power Company:
a. 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.6.b to NEES 1993 Form U-5-S); Fifth
Supplement dated as of August 1, 1998 (filed herewith).
b. 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
<PAGE>
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 (Exhibit
6.c to NEES 1996 Form U-5-S); Thirteenth Supplement dated as of
August 1, 1998 (filed herewith).
c. Loan Agreement with the Connecticut Development Authority dated as
of October 15, 1985 (Exhibit C-8(h) to NEES 1985 Form
U-5-S).
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 1998 (filed herewith).
2. NEES Global annual report on Modified Form U-13-60 (filed herewith).
3. Financial Statements of the New England Electric System Companies
Incentive Thrift Plan (Thrift Plan) (filed herewith).
4 Financial Statements of the New England Electric System Companies
Incentive Thrift Plan II (Thrift Plan II) (filed herewith).
5. 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, 1998,
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/John G. Cochrane
By:
John G. Cochrane
Vice President and Treasurer
Date: May 3, 1999
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ----------- ----------- ----
Supplement NEES Consolidating Balance Sheet, Filed herewith
A-1 Consolidating Income and Retained Earnings
Statements and Consolidating Statement of
Changes in Financial Position for the
year ended December 31, 1998
Supplement NEES Form 10-K for the year ended Incorporated
A-2 December 31, 1998 by reference
A.1 Connecticut Yankee Atomic Power Company Incorporated
1998 Annual Report to Shareholders by reference
A.2 Maine Yankee Atomic Power Company Filed under
1998 Annual Report cover of
Form SE
A.3 Massachusetts Electric Company Incorporated
Form 10-K for the year ended December 31, 1998 by reference
A.4 The Narragansett Electric Company Incorporated
Form 10-K for the year ended December 31, 1998 by reference
A.5 New England Electric System Incorporated
Form 10-K for the year ended December 31, 1998 by reference
A.6 New England Power Company Incorporated
Form 10-K for the year ended December 31, 1998 by reference
A.7.a Vermont Yankee Nuclear Power Corporation To be filed
1998 Annual Report to Stockholders under cover
of Form SE
A.7.b Vermont Yankee Nuclear Power Corporation Filed under
1998 FERC Form 1 cover of
Form SE
A.8.a Yankee Atomic Electric Company Filed under
1998 Annual Report to Stockholders cover of
Form SE
A.8.b Yankee Atomic Electric Company To be filed
1998 FERC Form 1 under cover
of Form SE
A.9 New England Electric Transmission Filed herewith
Corporation 1998 Annual Report
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ----------- ----------- ----
B.1 AEDR Fuels, L.L.C. Operating Agreement Filed herewith
B.2.a AllEnergy Marketing Company, L.L.C. Incorporated
Agreement and Plan of Merger by reference
B.2.b AllEnergy Marketing Company, L.L.C. Incorporated
Limited Liability Company Agreement by reference
B.2.c AllEnergy Marketing Company, L.L.C. Incorporated
Amendment No. 1 to Limited Liability by reference
Company Agreement
B.3 Texas Liquids, L.L.C. Limited Liability Incorporated
Company Agreement by reference
B.4.a Granite State Electric Company Incorporated
Articles of Organization by reference
B.4.b Granite State Electric Company Filed herewith
By-laws
B.5.a Granite State Energy, Inc. Incorporated
Certificate of Incorporation by reference
B.5.b Granite State Energy, Inc. Incorporated
By-laws by reference
B.6.a Massachusetts Electric Company Incorporated
Articles of Organization and Articles by reference
of Amendment
B.6.b Massachusetts Electric Company Incorporated
By-laws by reference
B.7.a Nantucket Electric Company Incorporated
Articles of Organization by reference
B.7.b Nantucket Electric Company Incorporated
By-laws by reference
B.8.a The Narragansett Electric Company Incorporated
Charter and Amendment thereto by reference
B.8.b The Narragansett Electric Company Incorporated
By-laws by reference
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ----------- ----------- ----
B.8.c The Narragansett Electric Company Incorporated
Preference Provisions as amended by reference
B.9.a NEES Communications, Inc. Incorporated
Articles of Organization by reference
B.9.b NEES Communications, Inc. Incorporated
By-laws by reference
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 NEES Global, Inc. Incorporated
Articles of Organization by reference
B.11.b NEES Global, Inc. Incorporated
By-laws by reference
B.12 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 Filed herewith
By-laws
B.14.a New England Energy Incorporated Incorporated
Articles of Organization and Articles of by reference
Amendment
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
Articles of Incorporation and Articles of by reference
Amendment
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ----------- ----------- ----
B.16.b New England Hydro-Transmission Corporation Filed herewith
By-laws
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 Filed herewith
By-laws
B.18.a New England Power Company Incorporated
Articles of Organization and Articles of by reference
Amendment
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
B.20.a New England Water Heater Company Filed herewith
Articles of Merger
B.20.b New England Water Heater Company Filed herewith
By-Laws
B.21 Metrowest Realty LLC Filed herewith
Limited Liability Company Agreement
C.1.a Granite State Electric Company Incorporated
Note Agreement with Aid Association for by reference
Lutherans
C.1.b Granite State Electric Company Incorporated
Note Agreement with First Colony Life by reference
Insurance Company
C.1.c Granite State Electric Company Incorporated
Note Agreement with First Colony Life by reference
Insurance Company
C.1.d Granite State Electric Company Filed herewith
Note Agreement with Paul Revere Life
Insurance Company
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ----------- ----------- ----
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-three supplements thereto
C.4 New England Electric Transmission Corporation Incorporated
Note Agreement with PruCapital Management, Inc. by reference
et al. and Mortgage, Deed of Trust and
Security Agreement
C.5.a New England Power Company Incorporated
Loan Agreement with Massachusetts Industrial by reference
Finance Agency and four supplements thereto
Fifth supplement dated as of August 1, 1998 Filed herewith
C.5.b 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 twelve supplements thereto
Thirteenth supplement dated as of August 1, 1998 Filed herewith
C.5.c New England Power Company Incorporated
Loan Agreement with Connecticut Development by reference
Authority
D New England Electric System and Subsidiary Filed herewith
Companies, Federal and State Income Tax
Allocation Agreement
E.1 Money Pool investments for 1998 Filed herewith
E.2 NEES Global Annual Report on Modified Filed herewith
Form U-13-60
E.3 New England Electric System Companies Filed under
Incentive Thrift Plan Financial Statements cover of
Form SE
E.4 New England Electric System Companies Filed under
Incentive Thrift Plan II Financial Statements cover of
Form SE
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ----------- ----------- ----
E.5 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, 1998
CONSOLIDATING INCOME AND RETAINED EARNINGS STATEMENTS
FOR YEAR ENDED DECEMBER 31, 1998
CONSLIDATING STATEMENT OF CASH FLOWS
FOR YEAR ENDED DECEMBER 31, 1998
<PAGE>
<TABLE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
INDEX OF CONSOLIDATED WORKSHEETS
YEAR ENDED DECEMBER 31, 1998
<CAPTION>
Pages
-----
<S> <C>
Consolidating Balance Sheet........................................................... 1
Consolidating Statement of Income..................................................... 2
Consolidating Statement of Retained Earnings.......................................... 3
Consolidating Statement of Cash Flows................................................. 4
INDEX OF INDIVIDUAL COMPANY STATEMENTS
Balance Statement Retained Statement of
Sheet of Income Earnings Cash Flows
------- --------- -------- ------------
<S> <C> <C> <C> <C>
GRANITE STATE ELECTRIC COMPANY (GRANITE STATE) 1 2 3 4
MASSACHUSETTS ELECTRIC COMPANY (MASS. ELECTRIC) 1 2 3 4
THE NARRAGANSETT ELECTRIC COMPANY (NARRA. ELECTRIC) 1 2 3 4
NEW ENGLAND POWER COMPANY (NEP) 1 2 3 4
NEW ENGLAND ENERGY INCORPORATED (NEEI) 1 2 3 4
NEW ENGLAND POWER SERVICE COMPANY (NEPSCO) 1 2 3 4
NEW ENGLAND HYDRO-TRANSMISSION ELECTRIC COMPANY,
INC. (NEHTECI) 1 2 3 4
NEW ENGLAND HYDRO-TRANSMISSION CORPORATION (NEHTC) 1 2 3 4
NARRAGANSETT ENERGY RESOURCES COMPANY (NERC) 1 2 3 4
NEES GLOBAL, INC. (NEES GLOBAL) 1 2 3 4
NEES COMMUNICATIONS, INC. (NEESCOM) 1 2 3 4
NANTUCKET ELECTRIC COMPANY (NANT.ELECTRIC) 1 2 3 4
GRANITE STATE ENERGY (GS EN) 1 2 3 4
NEES ENERGY (NEES EN) 1 2 3 4
NEW ENGLAND ELECTRIC SYSTEM (PARENT) 1 2 3 4
</TABLE>
<PAGE>
<TABLE>
Page 1A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 1998 (IN MILLIONS, ROUNDED TO NEAREST HUNDRED THOUSAND)
<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 $72.4 $1,626.6 $732.1 $1,262.4 $1.8 $220.7 $172.0
Less accumulated
depreciation and
amortization 22.9 500.0 209.2 837.6 70.6 46.7
----- -------- ----- ------- ---- ------ ------ ------
49.5 1,126.6 522.9 424.8 1.8 150.1 125.3
Construction work in
progress 0.3 16.6 2.6 33.3
----- -------- ------ ------- ---- ------ ------ ------
Net utility plant 49.8 1,143.2 525.5 458.1 1.8 150.1 125.3
----- -------- ------ ------- ---- ------ ------ ------
Investments in
nuclear power
companies, at equity 48.5
Investments in other
subsidiaries, at
equity
Other investments
at cost 1.2 14.7 5.1 39.6 72.9
Current assets 9.4 270.2 83.0 350.7 $5.3 40.1 5.2 0.8
Deferred charges and
other assets 1.4 26.5 50.5 1,517.9 2.3 8.4 4.7 4.9
----- -------- ------ ------- ---- ------ ------ ------
$61.8 $1,454.6 $664.1 $2,414.8 $7.6 $123.2 $160.0 $131.0
===== ======== ====== ======= ==== ====== ====== ======
<PAGE>
Page 1B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 1998 (IN MILLIONS, ROUNDED NEAREST TO HUNDRED THOUSAND)
(Continued)
NEES NANT.
NERC GLOBAL NEESCOM ELECTRIC GS EN NEES EN PARENT
---- ------ -------- ---------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Utility plant,
at original cost $42.1
Less accumulated
depreciation and
amortization 7.7
-------- ------ ---------- ------ ---------- ---------- ---------
34.4
Construction work in
progress 0.2
-------- ------ ---------- ------ ---------- --------- ---------
Net utility plant 34.6
-------- ------ ---------- ------ ---------- --------- ---------
Investments in
nuclear power
companies, at equity
Investments in other
subsidiaries, at
equity $0.7 $1,449.1
Other investments
at cost 19.9 $10.3 0.2 $6.8 5.1
Current assets 2.7 1.2 5.9 $0.3 65.1 171.1
Deferred charges and
other assets 1.1 3.3 14.6 0.7
-------- ------ -------- ------- ------- --------- ----------
$23.3 $12.6 $44.0 $0.3 $86.5 $1,626.0
======== ====== ======== ======= ======= ========= ==========
<PAGE>
Page 1C
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 1998 (IN MILLIONS, ROUNDED TO NEAREST HUNDRED THOUSAND)
(Continued)
TOTAL
ADJUSTMENTS NEES
& ELMINATIONS CONSOLIDATED
------------- ------------
<S> <C> <C>
Assets
Utility plant,
at original cost $4,130.1
Less accumulated
depreciation and
amortization 1,694.7
-------- --------
2,435.4
Construction work in
progress 53.0
-------- --------
Net utility plant 2,488.4
-------- --------
Investments in
nuclear power
companies, at equity 48.5
Investments in other
subsidiaries, at
equity $1,447.4 2.4
Other investments
at cost 6.6 169.2
Current assets 287.6 723.4
Deferred charges and
other assets (2.3) 1,638.6
-------- --------
$1,739.3 $5,070.5
======== ========
</TABLE>
<PAGE>
Page 1D
<TABLE>
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 1998 (IN MILLIONS, ROUNDED TO NEAREST HUNDRED THOUSAND)
(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 $22.0 $508.2 $249.1 $520.9 ($2.3) $26.8 $48.2 $30.0
Minority interests in
consolidated
subsidiaries
Cumulative preferred
stock 10.7 7.3 1.5
Long-term debt 20.0 353.3 168.7 371.8 70.6 42.8
----- ----- ----- ----- ----- ----- ----- -----
Total capitalization 42.0 872.2 425.1 894.2 (2.3) 26.8 118.8 72.8
----- ----- ----- ----- ----- ----- ----- -----
Current liabilities
Long-term debt due
within 1 year 15.0 8.0 7.0 4.5
Short-term debt 80.7 26.7 1.5
Other current
liabilities 11.2 186.2 87.7 199.9 9.9 13.9 4.1 4.1
----- ----- ----- ----- ----- ----- ----- -----
Total current
liabilities 11.2 281.9 122.4 199.9 9.9 13.9 11.1 10.1
----- ----- ----- ----- ----- ----- ----- -----
Deferred federal and
state income taxes 3.9 201.0 81.0 165.1 (15.3) 22.2 18.2
Unamortized investment
tax credits 0.8 14.4 6.5 30.9 7.9 4.6
Other reserves and
deferred credits 3.9 85.1 29.1 1,124.7 97.8 25.3
----- ----- ----- ----- ----- ----- ----- -----
$61.8 $1,454.6 $664.1 $2,414.8 $7.6 $123.2 $160.0 $131.0
===== ===== ===== ===== ===== ===== ===== =====
<PAGE>
Page 1E
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 1998 (IN MILLIONS, ROUNDED TO NEAREST HUNDRED THOUSAND)
(Continued)
NEES NANT.
NERC GLOBAL NEESCOM ELECTRIC GS EN NEES EN PARENT
---- ------ -------- ----- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Capitalization and
liabilities
Common share equity $21.4 $7.0 $5.2 $0.1 $56.9 $1,571.7
Minority interests in
consolidated
subsidiaries 0.5
Cumulative preferred
stock
Long-term debt 27.7 0.8
----- ----- ----- ----- ----- ----- -----
Total capitalization 21.4 7.0 32.9 0.1 58.2 1,571.7
----- ----- ----- ----- ----- ----- -----
Current liabilities
Long-term debt due
within 1 year 1.5 0.3
Short-term debt 3.2
Other current
liabilities 0.8 5.4 2.7 0.2 28.0 45.0
----- ----- ----- ----- ----- ----- -----
Total current
liabilities 0.8 5.4 7.4 0.2 28.3 45.0
----- ----- ----- ----- ----- ----- -----
Deferred federal and
state income taxes 0.8 0.2 1.6 (0.8) (4.2)
Unamortized investment
tax credits 0.2
Other reserves and
deferred credits 0.3 1.9 0.8 13.5
----- ----- ----- ----- ----- ----- -----
$23.3 $12.6 $44.0 $0.3 $86.5 $1,626.0
===== ===== ===== ===== ===== ===== =====
<PAGE>
Page 1F
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 1998 (IN MILLIONS, ROUNDED TO NEAREST HUNDRED THOUSAND)
(Continued)
TOTAL
ADJUSTMENTS NEES
& ELIMINATIONS CONSOLIDATED
-------------- ------------
<S> <C> <C>
Capitalization and
liabilities
Common share equity $1,495.2 $1,570.0
Minority interests in
consolidated
subsidiaries (38.2) 38.7
Cumulative preferred
stock 19.5
Long-term debt 1,055.7
-------- -------
Total capitalization 1,457.0 2,683.9
-------- -------
Current liabilities
Long-term debt due
within 1 year 36.3
Short-term debt 112.1
Other current
liabilities 175.8 423.3
------- ------
Total current
liabilities 287.9 459.6
------- ------
Deferred federal and
state income taxes 1.6 472.1
Unamortized investment
tax credits 65.3
Other reserves and
deferred credits (7.2) 1,389.6
------- -------
$1,739.3 $5,070.5
======== ========
</TABLE>
<PAGE>
<TABLE>
Page 2A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1998 (IN MILLIONS, ROUNDED TO NEAREST HUNDRED THOUSAND)
<CAPTION>
GRANITE MASS. NARRA.
STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC
------- -------- -------- --- ---- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenue $65.7 $1,490.4 $475.7 $1,218.3 $37.0 $31.7
------- -------- ------- -------- -------- -------- ------ ------
Operating expenses:
Fuel for generation 5.9 223.8
Purchased electric energy 41.6 940.8 234.2 399.8
Other operation 11.2 292.5 95.8 155.1 4.5 9.9
Maintenance 1.4 33.5 12.0 60.3 1.1 0.1
Depreciation and amortization 2.6 61.7 22.7 99.9 8.9 5.9
Taxes, other than income
taxes 2.2 38.0 39.0 48.5 3.3 3.2
Income taxes 1.8 36.3 16.2 73.6 (0.1) 4.0 3.2
-------- -------- ------- -------- ----- -------- ------ ------
Total operating expenses 60.8 1,402.8 425.8 1,061.0 (0.1) 21.8 22.3
-------- -------- -------- -------- ----- -------- ------ ------
Operating income 4.9 87.6 49.9 157.3 0.1 15.2 9.4
Other income:
Allowance for equity funds
used during construction 0.6
Equity in income of
generating companies 5.3
Other income (expense), net 0.1 (3.5) 0.8 0.2 $1.8 0.2
------ ------- ----- ------ ----- ----- ------ ------
Operating and other income 5.0 84.1 50.7 163.4 0.1 1.8 15.4 9.4
-------- ------ ------- ----- ------ ----- ----- ------
Interest:
Interest on long-term debt 1.4 27.1 14.9 30.8 0.2 7.5 4.6
Other interest 0.4 7.3 3.6 10.7
Allowance for borrowed funds
used during construction (0.7) (0.1) (1.0)
-------- ------ ------- ----- ------ ----- ----- ------
Total interest 1.8 33.7 18.4 40.5 0.2 7.5 4.6
-------- ------ ------- ----- ------ ----- ----- ------
Income after interest 3.2 50.4 32.3 122.9 (0.1) 1.8 7.9 4.8
Preferred dividends and net
gain/loss on reacquisition
of preferred stock of
subsidiaries 1.0 1.8 1.4
Minority interests
-------- ------ ------- ----- ------ ----- ----- ------
Net income $3.2 $49.4 $30.5 $121.5 ($0.1) $1.8 $7.9 $4.8
======== ====== ======= ===== ====== ===== ===== ======
<PAGE>
Page 2B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1998 (IN MILLION, ROUNDED TO NEAREST HUNDRED THOUSAND)
(Continued)
NEES NANT.
NERC GLOBAL ELECTRIC NEESCOM GS EN NEES EN PARENT
---- ------ --------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenue $5.0 $15.1 $0.1 $0.7 $171.4 ($0.1)
------ ------- ------ ------ ------ ------- -----
Operating expenses
Fuel for generation
Purchased electric energy 5.6 0.7
Other operation 4.5 3.5 2.0 190.3 7.6
Maintenance 0.6
Depreciation and amortization 1.2 2.1 0.1 1.4 0.2
Taxes, other than income
taxes 0.4 0.1 0.1
Income taxes ($0.1) (1.2) 0.4 (0.9) (6.9) 1.1
------ ------- ------ ------ ------ ------- -------
Total operating expenses (0.1) 4.5 12.6 1.3 0.7 184.8 9.0
------ ------- ------ ------ ------ ------- -------
Operating income 0.1 0.5 2.5 (1.2) (13.4) (9.1)
Other income:
Allowance for equity funds
used during construction
Equity in income of
generating companies 4.2 (0.1) (58.2)
Other income (expense), net (1.5) 0.4 266.8
------ ------- ----- ------ ------ ------- -------
Operating and other income 4.3 (1.1) 2.5 (1.2) (13.0) 199.5
------ ------- ----- ------ ------ ------- -------
Interest:
Interest on long-term debt 1.4 1.9
Other interest 0.1 9.7
Allowance for borrowed funds
used during construction
------ ------- ----- ------ ------ ------ -------
Total interest 1.4 2.0 9.7
------ ------- ----- ------ ------ ------ -------
Income after interest 2.9 (1.1) 0.5 (1.2) (13.0) 189.8
Preferred dividends and net
gain/loss on reacquisition
of preferred stock of
subsidiaries (0.7)
Minority interests
------ ------- ------ ------ ------ ------ -------
Net income $2.9 ($1.1) $0.5 ($1.2) $0.0 ($13.0) $190.5
====== ======= ====== ====== ====== ====== =======
<PAGE>
Page 2C
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1998(IN MILLIONS, ROUNDED TO NEAREST HUNDRED THOUSAND)
(Continued)
TOTAL
ADJUSTMENTS NEES
& ELIMINATIONS CONSOLIDATED
-------------- ------------
<S> <C> <C>
Operating revenue $1,090.5 $2,420.5
---------- ----------
Operating expenses
Fuel for generation 229.7
Purchased electric energy 989.4 633.3
Other operation 101.1 675.8
Maintenance 109.0
Depreciation and amortization 206.7
Taxes, other than income
taxes 134.8
Income taxes 5.0 122.4
---------- ---------
Total operating expenses 1,095.5 2,111.7
---------- ----------
Operating income (5.0) 308.8
Other income:
Allowance for equity funds
used during construction 0.6
Equity in income of
generating companies (58.2) 9.4
Other income (expense), net 268.5 (3.2)
---------- ----------
Operating and other income 205.3 315.6
---------- ----------
Interest:
Interest on long-term debt 89.8
Other interest 4.0 27.8
Allowance for borrowed funds
used during construction (1.8)
---------- ----------
Total interest 4.0 115.8
---------- ----------
Income after interest 201.3 199.8
Preferred dividends and net
gain/loss on reacquisition
of preferred stock of
subsidiaries 3.5
Minority interests (6.3) 6.3
---------- ----------
Net income $207.6 $190.0
========== ==========
</TABLE>
<PAGE>
<TABLE>
Page 3A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1998 (IN MILLION, ROUNDED TO NEAREST HUNDRED THOUSAND)
<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 $10.8 $201.2 $129.6 $407.6 ($26.0) $1.8 $0.3 $0.9
Additions:
Net income after preferred
dividends of subsidiaries 3.2 49.4 30.5 121.5 (0.1) 1.8 7.9 4.8
Deductions:
Common dividends 2.2 42.0 73.6 130.6 1.8 8.0 5.8
Repurchase of common stock 193.9
Elimination due to dissolution
of entity
------- -------- ---------------- --------- ------ ------- -----
Retained earnings at end
of year $11.8 $208.6 $86.5 $204.6 ($26.1) $1.8 $0.2 ($0.1)
======= ======== ================ ========= ====== ======= =====
<PAGE>
Page 3B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1998 (IN MILLIONS, ROUNDED TO NEAREST HUNDRED THOUSAND)
(Continued)
NEES NANT.
NERC GLOBAL ELECTRIC NEESCOM GS EN NEES EN PARENT
---- ------ --------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Retained earnings at
beginning of year $2.5 ($9.2) $0.9 ($0.6) ($0.3) ($9.5) $956.6
Additions:
Net income after preferred
dividends of subsidiaries 2.9 (1.1) 0.5 (1.2) (13.0) 190.5
Deductions:
Common dividends 1.3 145.9
Repurchase of common stock
Elimination due to dissolution
of entity 4.1
----- ------- -------- ------- ------ ------- --------
Retained earnings at end
of year $0.0 ($10.3) $1.4 ($1.8) ($0.3) ($22.5) $1,001.2
===== ======= ======== ======= ====== ======= ========
<PAGE>
Page 3C
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1998 (IN MILLIONS, ROUNDED TO NEAREST HUNDRED THOUSAND)
(Continued)
TOTAL
ADJUSTMENTS NEES
& ELIMINATIONS CONSOLIDATED
-------------- ------------
<S> <C> <C>
Retained earnings at
beginning of year $712.1 $954.5
Additions:
Net income after preferred
dividends of subsidiaries 207.6 190.0
Deductions:
Common dividends 265.6 145.6
Repurchase of common stock 193.9
Elimination due to dissolution of entity 4.1
-------- ---------
Retained earnings at end
of year $456.1 $998.9
======== =======
</TABLE>
<PAGE>
<TABLE>
Page 4A
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998 (IN MILLIONS, ROUNDED TO NEAREST HUNDRED THOUSAND)
<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 $3.2 $50.4 $32.3 $122.9 ($0.1) $1.8 $7.9 $4.8
Adjustments to reconcile net
income to net cash provided
by (used in) operating activities:
Decrease (increase) in
undistributed earnings of
subsidiaries
Depreciation and amortization 2.6 61.7 22.8 104.3 8.8 5.9
Deferred income taxes and
investment tax credits-net (0.6) 22.3 (2.7) (226.7) (60.3) (4.9) 1.6 1.2
Allowance for funds used
during construction (0.7) (0.1) (1.6)
Reimbursement to NEEI of loss
on sale of oil and gas properties (120.9) 120.9
Buyout of purchased power contracts (326.6)
Minority interests
Decrease (increase) in other
current assets 0.6 (33.9) 6.3 111.9 7.2 (24.2) 0.8 (0.7)
Increase (decrease) in payables
and other current liabilities (1.3) (57.8) (9.0) (26.7) 3.8 (15.6) 0.6 (0.7)
Other, net 1.8 31.3 14.7 (49.6) (1.7) 39.7 0.1
---- ---- ----- ----- ----- ----- ---- ----
Net cash provided by (used
in) operating activities $6.3 $73.3 $64.3 ($413.0) $69.8 ($3.2) 19.7 10.6
-------- --------- ------------------- ------------------ -------- -----
Investing Activities:
Proceeds from sale of
generating assets 39.7 1,688.9
Plant expenditures,
excluding allowance for
funds used during
construction (3.2) (77.6) (22.2) (64.4)
Proceeds from sale of NEEI
oil and gas property 50.0
Purchase of available-for-sale
securities, net
Decrease (increase) in
other investments (3.5) (5.5) (2.8)
-------- ------- ------- -------- ------- ------- ------ ------
Net cash provided by (used
in) investing activities (3.2) (81.1) 17.5 1,619.0 50.0 (2.8)
-------- --------- ------------------- --------- ------ ------ ------
<PAGE>
Page 4B
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998 (IN MILLIONS, ROUNDED TO NEAREST HUNDRED THOUSAND)
(Continued)
NEES NANT.
NERC GLOBAL NEESCOM ELECTRIC GS EN NEES EN PARENT
---- ------ ------- --------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Activities:
Net Income $2.9 ($1.1) ($1.2) $0.5 ($13.0) $190.5
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Decrease(increase) in
undistributed earnings of
subsidiaries 256.2
Depreciation and amortization 1.2 2.2 1.3
Deferred income taxes and
investment tax credits-net (4.2) 0.5 0.3 1.0 (0.2) (0.9)
Allowance for funds used
during construction
Reimbursement to NEEI of loss
on sale of oil and gas properties
Buyout of purchased power contracts
Minority interests
Decrease (increase) in other
current assets 0.6 (1.2) (0.8) (2.1) (30.4) 33.5
Increase (decrease) in payables
and other current liabilities 0.3 5.2 (2.0) 0.1 6.0 0.4
Other, net 30.8 2.0 (1.1) 0.8 1.5 5.1
-------- --------- --------- ---------- ---------- -------- --------
Net cash provided by (used
in) operating activities 30.1 1.7 2.4 0.4 0.1 (34.8) 484.8
-------- --------- --------- ---------- ---------- -------- --------
Investing Activities:
Proceeds from sale of
generating assets
Plant expenditures,
excluding allowance for
funds used during
construction (13.4) (10.3) (2.2) (2.2)
Proceeds from sale of NEEI
oil and gas property
Purchase of available-for-sale
securities, net (55.9)
Decrease (increase) in
other investments (5.6) (17.6) 140.1
-------- --------- --------- ---------- ---------- -------- ---------
Net cash provided by (used
in) investing activities (19.0) (10.3) (2.2) (19.8) 84.2
-------- --------- --------- ---------- ---------- -------- ---------
<PAGE>
Page 4C
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998 (IN MILLIONS, ROUNDED TO NEAREST HUNDRED THOUSAND)
(Continued)
TOTAL
ADJUSTMENTS NEES
& ELIMINATIONS CONSOLIDATED
-------------- ------------
<S> <C> <C>
Operating Activities:
Net Income $211.8 $190.0
Adjustments to reconcile net
income to net cash provided
by (used in) operating activities:
Decrease(increase)in undistributed
earnings of subsidiaries 256.2
Depreciation and amortization (0.2) 211.0
Deferred income taxes and
investment tax credits-net (0.2) (273.4)
Allowance for funds used during construction (2.4)
Reimbursement to NEEI of loss
on sale of oil and gas properties
Buyout of purchased power contracts (326.6)
Minority interests (6.3) 6.3
Decrease (increase) in other current assets 128.7 (61.1)
Increase (decrease) in payables
and other current liabilities (182.2) 85.5
Other, net 61.9 13.5
---------- ----------
Net cash provided by (used
in) operating activities 469.7 (157.2)
---------- ----------
Investing Activities:
Proceeds from sale of generating assets 1,728.6
Plant expenditures, excluding allowance
for funds used during construction (13.5) (182.0)
Proceeds from sale of NEEI oil
and gas property 50.0
Purchase of available-for-sale
securities, net 2.0 (57.9)
Decrease (increase) in other investments 151.8 (46.7)
-------- ---------
Net cash provided by (used
in) investing activities 140.3 1,492.0
-------- ---------
</TABLE>
<PAGE>
<TABLE>
Page 4D
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998 (IN MILLIONS, ROUNDED TO NEAREST HUNDRED THOUSAND)
(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 NEES common
shares (1.0) (42.0) (73.0) (166.1) (1.8) (8.1) (5.5)
Dividends paid on preferred
stock (1.0) (.7) (1.2)
Preferred stock - redemptions (5.0) (5.5) (38.4)
Long-term debt - issues 5.0 50.0
Long-term debt - retirements (40.0) (12.0) (328.0) (122.0) (7.0) (4.6)
Premium on reacquisition of
long-term debt
Capital contribution from
parent 0.3 0.2 34.9
Subordinated notes payable
to parent (net) 0.5
Changes in short-term debt (4.1) 46.0 10.3 (111.3) 1.5
Premium on redemption of
preferred stock (0.2) (1.2) (0.1)
Return of capital to minority
interests and related
premium (4.2) (3.4)
Repurchase of common shares (418.0)
------- --------- -------- --------- ---------- -------------------------
Net cash provided by (used
in) financing activities (0.1) 8.1 (81.9) (1,028.2) (121.5) (1.8) (19.3) (12.0)
------- --------- -------- --------- ---------- -------------------------
Net increase (decrease) in
cash and cash equivalents 3.0 0.3 (0.1) 177.8 (1.7) (7.8) 0.4 (1.4)
Cash and cash equivalents at
beginning of year 0.3 6.7 3.1 1.6 2.8 7.1 2.8 1.4
------- --------- -------- --------- ---------- -------------------------
Cash and cash equivalents at
end of year 3.3 7.0 3.0 179.4 1.1 (0.7) 3.2 0.0
======= ========= ======== ========= ========== =========================
<PAGE>
Page 4E
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998 (IN MILLIONS, ROUNDED TO NEAREST HUNDRED THOUSAND)
(Continued)
NEES NANT.
NERC GLOBAL NEESCOM ELECTRIC GS EN NEES EN PARENT
---- ------ ------- --------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Financing Activities:
Dividends paid to minority
interests
Dividends paid on NEES common
shares (2.3) (147.7)
Dividends paid on preferred
stock
Preferred stock - redemptions
Long-term debt - issues 0.5
Long-term debt - retirements (28.6) (1.4)
Premium on reacquisition of
long-term debt
Capital contribution from
parent (0.8) 4.3 7.9 10.8
Subordinated notes payable
to parent (net) (0.1) 13.3 45.9
Changes in short-term debt 3.1 (102.0)
Premium on redemption of
preferred stock
Return of capital to minority
interests and related
premium 0.1
Repurchase of common shares (219.9)
-------- --------- ---------- ------- ------- ------- --------
Net cash provided by (used
in) financing activities (31.7) 17.6 7.9 1.7 57.2 (469.6)
-------- --------- ---------- ------- ------- ------- --------
Net increase (decrease) in
cash and cash equivalents (1.6) 0.3 0.0 (0.1) 0.1 2.6 99.4
Cash and cash equivalents at
beginning of year 1.6 0.3 0.1 0.1 1.6 1.1
-------- --------- ---------- ------- ------- ------- --------
Cash and cash equivalents at
end of year 0.0 0.6 0.0 0.0 0.2 4.2 100.5
======== ========= ========== ======= ======= ======= ========
<PAGE>
Page 4F
NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998 (IN MILLIONS, ROUNDED TO NEAREST HUNDRED THOUSAND)
(Continued)
TOTAL
ADJUSTMENTS NEES
& ELIMINATIONS CONSOLIDATED
-------------- ------------
<S> <C> <C>
Financing Activities:
Dividends paid to minority
interests 6.7 (6.7)
Dividends paid on NEES common
shares (300.1) (147.4)
Dividends paid on preferred
stock (2.9)
Preferred stock - redemptions (29.3) (19.6)
Long-term debt - issues 0.5 55.0
Long-term debt - retirements (543.6)
Premium on reacquisition of
long-term debt 22.1 (22.1)
Capital contribution from
parent 57.6
Subordinated notes payable
to parent (net) 59.6
Changes in short-term debt 95.5 (252.0)
Premium on redemption of
Preferred stock (1.5)
Return of capital to minority
interests and related
premium (3.7) (3.8)
Repurchase of common shares (416.7) (221.2)
---------- ----------
Net cash provided by (used
in) financing activities (512.2) (1,161.4)
---------- ----------
Net increase (decrease) in
cash and cash equivalents 97.8 173.4
Cash and cash equivalents at
beginning of year 16.5 14.3
---------- ----------
Cash and cash equivalents at
end of year $114.3 $187.7
========== ==========
</TABLE>
<PAGE>
EXHIBIT A.9
Annual Report 1998
New England Electric Transmission Corporation
A Subsidiary of
New England Electric System
[LOGO] New England Electric Transmission Corp.
A NEES company
<PAGE>
NEW ENGLAND ELECTRIC TRANSMISSION CORPORATION
9 Lowell Road
Salem, New Hampshire 03079
Directors
(As of January 1, 1999)
Alfred D. Houston Richard P. Sergel
Chairman of New England President and Chief Executive
Electric System Officer of New England
Electric System
Cheryl A. LaFleur
Senior Vice President, General
Counsel, and Secretary
of New England Electric System
Officers
(As of January 1, 1999)
Richard P. Sergel Kirk L. Ramsauer
President of the Company and of Secretary of the Company and
certain affiliates and President of certain affiliates and
and Chief Executive Officer of Assistant Secretary, Clerk or
New England Electric System Assistant Clerk of certain
affiliates
Christopher E. Root
Vice President of the Company Howard W. McDowell
and of certain affiliates and Controller of the Company and
Senior Vice President of of certain affiliates, Senior
certain affiliates Vice President of an
affiliate, Treasurer or
Masheed H. Rosenqvist Assistant Treasurer of
Vice President of the Company certain affiliates and
and of certain affiliates Assistant Secretary of
an affiliate
John G. Cochrane
Treasurer of the Company and
of certain affiliates, Assistant
Treasurer of an affiliate,
Vice President of an affiliate
and Treasurer of New England
Electric System
This report is not to be considered an offer to sell or buy
or solicitation of an offer to sell or buy any security.
<PAGE>
<TABLE>
<CAPTION>
NEW ENGLAND ELECTRIC TRANSMISSION CORPORATION
Statements of Income
=============================================================================
Year ended December 31 (In thousands) 1998 1997
=============================================================================
<S> <C> <C>
Operating revenue $9,611 $9,680
------ ------
Operating expenses:
Operation 1,003 1,341
Maintenance 323 196
Depreciation and amortization 4,688 4,688
Taxes, other than income taxes 418 406
Income taxes 515 (20)
------ ------
Total operating expenses 6,947 6,611
------ ------
Operating income 2,664 3,069
Other income (expense), net 4 -
------ ------
Operating and other income 2,668 3,069
------ ------
Interest:
Interest on long-term debt 1,673 2,080
Other interest 182 129
------ ------
Total interest 1,855 2,209
------ ------
Net income $ 813 $ 860
====== ======
Statements of Retained Earnings
=============================================================================
Year ended December 31 (In thousands) 1998 1997
=============================================================================
Retained earnings at beginning of year $ 310 $ 244
Net income 813 860
Dividends declared on common stock, $10,350 and
$7,000 per share, respectively (957) (735)
Repurchase of common stock (42) (59)
------ ------
Retained earnings at end of year $ 124 $ 310
====== ======
</TABLE>
Per share data is not relevant because the Company's common stock is wholly
owned by New England Electric System.
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
NEW ENGLAND ELECTRIC TRANSMISSION CORPORATION
Balance Sheets
=============================================================================
At December 31 (In thousands) 1998 1997
=============================================================================
<S> <C> <C>
Assets
Utility plant, at original cost $91,168 $91,168
Less accumulated provisions for depreciation 56,786 52,098
------- -------
Net utility plant 34,382 39,070
------- -------
Current assets:
Cash 20 13
Accounts receivable (including $13 and $3 from
affiliates) 13 66
Materials and supplies, at average cost 78 86
Other current assets 417 -
------- -------
Total current assets 528 165
------- -------
Deferred charges and other assets 301 341
------- -------
$35,211 $39,576
======= =======
Capitalization and Liabilities
Capitalization:
Common stock and related premium, par
value $5 per share,
Authorized - 300 shares
Outstanding - 90 and 100 shares $ 90 $ 100
Other paid-in capital 2,160 2,400
Retained earnings 124 310
------- -------
Total common equity 2,374 2,810
Long-term debt 11,616 16,240
------- -------
Total capitalization 13,990 19,050
------- -------
Current liabilities:
Long-term debt due within one year 4,624 4,624
Short-term debt to affiliates 3,425 2,400
Accounts payable (including $62 and $297 to
affiliates) 143 416
Accrued liabilities:
Taxes 417 13
Interest 77 82
Dividends payable 203 200
------- -------
Total current liabilities 8,889 7,735
------- -------
Deferred federal and state income taxes 8,508 8,412
Unamortized investment tax credits 2,981 3,387
Other reserves and deferred credits 843 992
------- -------
$35,211 $39,576
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
NEW ENGLAND ELECTRIC TRANSMISSION CORPORATION
Statements of Cash Flows
=============================================================================
Year ended December 31 (In thousands) 1998 1997
=============================================================================
<S> <C> <C>
Operating activities:
Net income $ 813 $ 860
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,688 4,688
Deferred income taxes and investment tax
credits, net (459) (448)
Decrease (increase) in accounts receivable 53 (66)
Decrease (increase) in materials and supplies 8 31
Increase (decrease) in accounts payable (273) 97
Increase (decrease) in other current liabilities 399 (497)
Other, net (377) 55
------- -------
Net cash provided by operating activities $ 4,852 $ 4,720
------- -------
Financing activities:
Dividends paid on common stock $ (954) $ (715)
Long-term debt - retirements (4,624) (4,624)
Changes in short-term debt 1,025 1,150
Reacquired common stock (292) (559)
------- -------
Net cash used in financing activities $(4,845) $(4,748)
------- -------
Net increase (decrease) in cash and cash equivalents $ 7 $ (28)
Cash and cash equivalents at beginning of year 13 41
------- -------
Cash and cash equivalents at end of year $ 20 $ 13
======= =======
Supplementary Information:
Interest paid less amounts capitalized $ 1,820 $ 2,179
------- -------
Income taxes paid $ 570 $ 578
------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NEW ENGLAND ELECTRIC TRANSMISSION CORPORATION
Notes to Financial Statements
Note A - Organization and Purpose
New England Electric Transmission Corporation (the Company) is a wholly owned
subsidiary of New England Electric System (NEES), formed in 1981 to build,
own, and operate a major portion of an initial international transmission
interconnection between the electric systems of Hydro-Quebec and New England
(Phase I). The Phase I interconnection arrangements with Hydro-Quebec provide
690 megawatts (MW) of transfer capability. The interconnection went into
commercial operation in October 1986. The Company's portion of the
interconnection consists of a direct current/alternating current converter
terminal, related facilities and six miles of high voltage direct current
transmission line in New Hampshire. The Company is subject to the regulatory
jurisdiction of the Federal Energy Regulatory Commission (FERC), the New
Hampshire Public Utilities Commission, and the Securities and Exchange
Commission under the Public Utility Holding Company Act of 1935 (1935 Act).
Under a support agreement between the Company and all participating electric
utilities and participating municipal electric companies in New England,
including, New England Power Company (NEP), an affiliate, participants have
certain rights in the interconnection based on their participating shares as
defined in such agreements and are required to make support payments for their
share of the costs of the project.
In the event of a failure by any participant to make support payments, the
remaining participants would assume, pro rata, their share of support payments
and will receive a like increased share of project benefits. The maximum
increase
in any participant's share of payments and benefits, without its consent, is
50 percent of such participant's original share. In the event the project
facilities are removed from commercial operation for any reason, each
participant is contractually committed to pay its pro rata share of the
Company's net investment in the project.
In November 1990, a second phase of the interconnection (Phase II) went into
service. Phase II was constructed by affiliated companies and increased the
transfer capability of the combined interconnection to 2,000 MW. Pursuant to
additional Phase II contractual arrangements with Hydro-Quebec, energy
deliveries from Quebec have significantly increased. Under Phase II
operations, the Phase I converter terminal currently operates as a back-up for
the Phase II converter terminals. The six mile transmission line owned and
operated by the Company continues to be an integral part of the expanded
interconnection.
Note B - Significant Accounting Policies
1. System of Accounts:
The accounts of the Company are maintained in accordance with the Uniform
System of Accounts prescribed by regulatory bodies having jurisdiction.
2. Basis of Financial Statement Presentation:
The support agreement described above constitutes a direct financing-type
capital lease in accordance with guidelines established by the Financial
Accounting Standards Board. However, due to the structure of the support
agreement, whether the agreement is accounted for as a capital lease or not
would have no material impact on total assets, total liabilities, or net
income. Accordingly, these financial statements have been presented consistent
with standard utility regulatory accounting practice rather than in accordance
with the rules applicable to capital leases.
<PAGE>
In preparing the financial statements, management is required to make
estimates that affect the reported amounts of assets and liabilities and
disclosures of asset recovery and contingent liabilities as of the date of the
balance sheets and revenues and expenses for the period. These estimates may
differ from actual amounts if future circumstances cause a change in the
assumptions used to calculate these estimates.
3. Utility Plant:
Pursuant to written agreements, the Company has made certain improvements to
the transmission facilities of others, principally NEP. These improvements
were necessary for the efficient operation of the interconnection. Title for
these improvements, which represent a net investment of approximately $5
million at December 31, 1998, is not held by the Company. However, pursuant to
the terms of the support agreement, the Company has effective financial
ownership of these facilities and, as a result, has included such amounts in
"Utility plant."
4. Related Party Transactions:
The Company's other facilities are located on land leased from NEP, pursuant
to leasing arrangements that are coterminous with the support agreement (see
Note A), which have been approved by regulatory authorities. Net billings from
NEP for this lease and other billings from NEP are immaterial.
New England Power Service Company, an affiliated service company operating
pursuant to the provisions of Section 13 of the 1935 Act, furnished services
to the Company at the cost of such services. These costs amounted to $879,000
and $451,000 in 1998 and 1997, respectively. None of these costs were
capitalized in 1998 or 1997.
5. Depreciation:
In accordance with the support agreement, depreciation is provided on a
straight-line basis over a 235-month period, the term of the Company's
long-term debt, beginning with the in-service date of the project of October
1, 1986. New additions to plant are depreciated over the remaining term of the
Company's long- term debt.
6. Cash:
The Company classifies short-term investments with a maturity of 90 days or
less at time of purchase as cash.
Note C - Income Taxes
The Company and other subsidiaries participate with NEES in filing
consolidated federal income tax returns. In accordance with the NEES
intercompany tax allocation agreement and the provisions of the support
agreement, the increase or reduction in the consolidated current tax liability
resulting from the inclusion of the Company in the consolidated federal income
tax return is paid by or to the Company. Federal income tax returns have been
examined and reported on by the Internal Revenue Service through 1993.
<PAGE>
<TABLE>
Total income taxes in the statements of income are as follows:
<CAPTION>
=============================================================================
Year ended December 31 (In thousands) 1998 1997
=============================================================================
<S> <C> <C>
Income taxes charged to operations $ 515 $ (20)
Income taxes charged to other income 2 -
----- -----
Total income taxes $517 $(20)
----- -----
Total income taxes consist of the following components:
=============================================================================
Year ended December 31 (In thousands) 1998 1997
=============================================================================
Current income taxes $ 976 $ 427
Deferred income taxes (53) (41)
Investment tax credits, net (406) (406)
----- -----
Total income taxes $ 517 $ (20)
----- -----
Investment tax credits have been deferred and are being amortized over the
depreciation period of the project property giving rise to the credits.
Total income taxes consist of federal and state components as follows:
=============================================================================
Year ended December 31 (In thousands) 1998 1997
=============================================================================
Federal income taxes $ (98) $ (70)
State income taxes 615 50
----- -----
Total income taxes $ 517 $ (20)
----- -----
Consistent with the support agreement and rate-making policies of the FERC, the
Company has adopted comprehensive interperiod tax allocation. Total deferred
income taxes were generated primarily from excess tax depreciation.
The following table identifies the major components of total deferred income
taxes:
=============================================================================
At December 31 (In millions) 1998 1997
=============================================================================
Deferred tax asset:
Investment tax credits $ 1 $ 1
All other 2 2
----- -----
3 3
----- -----
Deferred tax liability:
Plant related (10) (10)
All other (1) (1)
----- -----
(11) (11)
----- -----
Net deferred tax liability $ (8) $ (8)
----- -----
</TABLE>
Total income taxes in 1998 and 1997 differ from the amounts computed by
applying the statutory tax rate to income before taxes, principally due to the
amortization of investment tax credits and state income taxes, net of federal
tax benefit.
<PAGE>
Note D - Short-term Borrowing Arrangements
NEES and certain subsidiaries, including the Company, with regulatory
approval, operate a money pool to more effectively utilize cash resources and
to reduce outside short-term borrowings. Short-term borrowing needs are met
first by available funds of the money pool participants. Borrowing companies
pay interest at a rate designed to approximate the cost of outside short-term
borrowings. Companies who invest in the pool share the interest earned on a
basis proportionate to their average monthly investment in the money pool.
Funds may be withdrawn from or repaid to the pool at any time without prior
notice. The Company had $3,425,000 in short-term borrowings outstanding under
this arrangement at December 31, 1998.
The Company has lines of credit totaling $6 million with two banks. There are
no compensating balance arrangements and fees are paid in lieu of compensating
balances on the lines of credit. The Company had no borrowings against these
lines of credit at December 31, 1998. The fair value of the Company's short-
term debt equals the carrying value.
Note E - Long-term Debt
At December 31, 1998, the Company had $16,240,000 of outstanding
collateralized notes with an interest rate of 8.80 percent and a final stated
maturity on April 17, 2006. The Company has made optional prepayments which
have shortened the final maturity to August 22, 2004. Substantially all of the
properties of the Company are subject to the lien of the mortgage, pursuant to
which the notes have been issued. The note agreement requires cash sinking
fund installments of $4,624,000 for 1999, $4,032,000 for 2000, $2,112,000 for
2001 through 2003 and $1,248,000 for 2004.
At December 31, 1998, the Company's long-term debt had a carrying value of
approximately $16,200,000 and had a fair value of approximately $16,800,000.
The fair market value of the Company's long-term debt was estimated based on
the current rates offered to the Company for debt of the same remaining
maturity.
Note F - Restrictions on Payment of Dividends
Pursuant to the provisions of the note agreement relating to the 8.80 percent
notes, payment of dividends on common stock would not be permitted if, after
giving effect to such payment of dividends, common equity became less than 10
percent of total capitalization, including short-term debt. Under these
provisions, none of the Company's retained earnings at December 31, 1998 were
restricted as to common dividends.
Note G - Common Stock and Other Paid-in Capital
<TABLE>
The Company reacquired shares of its common stock at a premium in 1998 and
1997 as follows (dollar amounts expressed in thousands):
<CAPTION>
Reductions to:
=====================================
Common stock
Number of Cash and related Other paid- Retained
Year shares paid premium in capital earnings
=============================================================================
<S> <C> <C> <C> <C> <C>
1998 10 $292 $10 $240 $42
1997 20 $559 $20 $480 $59
=============================================================================
</TABLE>
<PAGE>
Report of Independent Accountants
New England Electric Transmission Corporation:
In our opinion, the accompanying balance sheets and the related
statements of income, of retained earnings, and cash flows present fairly, in
all material respects, the financial position of New England Electric
Transmission Corporation (the Company), at December 31, 1998 and 1997, and the
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
Boston, Massachusetts PricewaterhouseCoopers LLP
February 23, 1999
<PAGE>
<TABLE>
Utility Participants
<CAPTION>
Percentage
Participation
-------------
<S> <C>
The Connecticut Light & Power Company 18.48700%
New England Power Company 17.96963
Public Service Company of New Hampshire 11.84823
Boston Edison Company 11.24796
Vermont Electric Power Company* 9.48183
Central Maine Power Company 6.99346
The United Illuminating Company 5.44715
Western Massachusetts Electric Company 3.75741
Commonwealth Electric Company 3.72867
Montaup Electric Company 3.57770
Massachusetts Municipal Wholesale Electric Company** 3.45308
Bangor Hydro-Electric Company 1.50834
Connecticut Municipal Electric Energy Cooperative 0.82968
Newport Electric Corporation 0.44217
Fitchburg Gas & Electric Light Company 0.42636
Taunton Municipal Lighting Plant 0.35520
City of Chicopee Municipal Lighting Plant 0.32263
Holyoke Water Power Company 0.12350
---------
Total 100.00000%
* Representing 22 Vermont utilities
** Representing 29 Massachusetts utilities and one Rhode Island utility
</TABLE>
<PAGE>
EXHIBIT B.1
AEDR FUELS LLC
OPERATING AGREEMENT
Effective December __, 1997
<PAGE>
AEDR FUELS LLC
OPERATING AGREEMENT
ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - FORMATION OF COMPANY. . . . . . . . . . . . . . . . . . . 6
2.1 Formation. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.3 Principal Place of Business; Principal Executive Office. . . . 6
2.4 Registered Office and Registered Agent . . . . . . . . . . . . 6
2.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III - BUSINESS OF COMPANY. . . . . . . . . . . . . . . . . . . 7
ARTICLE IV - IDENTITY OF MEMBERS . . . . . . . . . . . . . . . . . . . 7
ARTICLE V - RIGHTS AND DUTIES OF THE MEMBERS . . . . . . . . . . . . . 8
5.1 Management by Members. . . . . . . . . . . . . . . . . . . . . 8
5.2 Restriction on Authority of Individual Members . . . . . . . . 9
5.3 Amendment of Articles of Organization or of Operating
Agreement; Dissolution, Merger, etc. . . . . . . . . . . . . . 10
5.4 Duties of the Members. . . . . . . . . . . . . . . . . . . . . 10
5.5 The Members Have No Exclusive Duty to Company. . . . . . . . . 10
5.6 Indemnification of the Members, Employees and Other Agents . . 12
5.7 Rights to Information. . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VI - RIGHTS AND OBLIGATIONS OF MEMBERS . . . . . . . . . . . . 14
6.1 Limitation of Liability. . . . . . . . . . . . . . . . . . . . 14
6.2 List of Members. . . . . . . . . . . . . . . . . . . . . . . . 14
6.3 Priority and Return of Capital . . . . . . . . . . . . . . . . 15
6.4 Obligations of Initial Members . . . . . . . . . . . . . . . . 15
6.5 Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.6 Right to Reimbursement . . . . . . . . . . . . . . . . . . . . 15
6.7 Sale of AllEnergy Products . . . . . . . . . . . . . . . . . . 15
6.8 AllEnergy Trademarks . . . . . . . . . . . . . . . . . . . . . 15
6.9 Dead River's Manchester District . . . . . . . . . . . . . . . 16
ARTICLE VII - MEETINGS OF MEMBERS. . . . . . . . . . . . . . . . . . . 16
7.1 Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.2 Place of Meetings. . . . . . . . . . . . . . . . . . . . . . . 16
7.3 Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . 16
7.4 Meeting of all Members . . . . . . . . . . . . . . . . . . . . 16
7.5 Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.6 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.7 Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . 17
7.8 Proxies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
7.9 Action by Members Without a Meeting. . . . . . . . . . . . . . 17
7.10 Waiver of Notice. . . . . . . . . . . . . . . . . . . . . . . 18
7.11 Telephonic Meetings . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VIII - CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS;
ANNUAL BUDGET. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.1 Members' Initial Capital Contributions . . . . . . . . . . . . 18
8.2 Additional Capital Contributions . . . . . . . . . . . . . . . 18
<PAGE>
8.3 Annual Budget. . . . . . . . . . . . . . . . . . . . . . . . . 19
8.4 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . 19
8.5 Withdrawal or Reduction of Members' Contributions to Capital . 20
ARTICLE IX - ALLOCATIONS, INCOME TAX, DISTRIBUTIONS, ELECTIONS
AND REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.1 Allocations of Profits and Losses from Operations. . . . . . . 21
9.2 Special Allocations to Capital Accounts and Certain Other
Income Tax Allocations . . . . . . . . . . . . . . . . . . . . 21
9.3 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.4 Distributions for Taxes. . . . . . . . . . . . . . . . . . . . . 23
9.5 Limitation Upon Distributions. . . . . . . . . . . . . . . . . . 23
9.6 Accounting Principles. . . . . . . . . . . . . . . . . . . . . . 23
9.7 Interest On and Return of Capital Contributions. . . . . . . . . 23
9.8 Returns and other Elections. . . . . . . . . . . . . . . . . . . 24
9.9 Taxation as Partnership. . . . . . . . . . . . . . . . . . . . . 24
9.10 Tax Representation; Elections . . . . . . . . . . . . . . . . . 24
ARTICLE X - TRANSFERABILITY. . . . . . . . . . . . . . . . . . . . . . . 24
10.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.2 Right of First Refusal. . . . . . . . . . . . . . . . . . . . . 25
10.3 Transfers by Operation of Law . . . . . . . . . . . . . . . . . 27
ARTICLE XI - ADDITIONAL MEMBERS. . . . . . . . . . . . . . . . . . . . . 28
ARTICLE XII - DISSOLUTION AND TERMINATION. . . . . . . . . . . . . . . . 29
12.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.2 Effect of Filing of Dissolving Statement. . . . . . . . . . . . 30
12.3 Winding Up, Liquidation and Distribution of Assets. . . . . . . 30
12.4 Certificate of Cancellation . . . . . . . . . . . . . . . . . . 31
12.5 Return of Capital Contribution - Nonrecourse. . . . . . . . . . 31
12.6 Breach of Operating Agreement; Remedies; Survival . . . . . . . 31
ARTICLE XIII - ARBITRATION AND INJUNCTION. . . . . . . . . . . . . . . . 32
ARTICLE XIV - MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . 32
14.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
14.2 Books of Account and Records. . . . . . . . . . . . . . . . . . 33
14.3 Application of Maine Law. . . . . . . . . . . . . . . . . . . . 33
14.4 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.5 Execution of Additional Instruments . . . . . . . . . . . . . . 33
14.6 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.7 Headings and Pronouns . . . . . . . . . . . . . . . . . . . . . 33
14.8 Waivers. . . . . . . . . . . . . . . .. . . . . . . . . . . . . 33
14.9 Rights and Remedies Cumulative. . . . . . . . . . . . . . . . . 34
14.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.11 Heirs, Successors and Assigns. . . . . . . . . . . . . . . . . 34
14.12 Creditors. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.14 Integration. . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.15 Execution of Additional Instruments. . . . . . . . . . . . . . 34
14.16 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.17 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 34
<PAGE>
OPERATING AGREEMENT
OF
AEDR FUELS LLC
THIS OPERATING AGREEMENT is made and entered into as of this ____ day of
December, 1997, by and among the Company and the Persons executing this
Operating Agreement as Members and is to take effect on the later of (a) the
date of this Operating Agreement or (b) the date on which the Company's
initial Articles of Organization is filed with the Secretary of State of the
State of Maine in substantial compliance with the requirements of the Act
("the "Effective Date").
WITNESSETH:
In consideration of the mutual covenants contained in this Operating
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 In addition to the terms defined elsewhere in this Operating
Agreement, the following terms shall have the following respective meanings:
(a) "Act" means the Maine Limited Liability Company Act, 31 M.R.S.A.
Chap. 13, and all amendments thereto.
(b) "Articles of Organization" means the Articles of Organization of
the Company as filed with the Secretary of State as the same may be amended
from time to time by the Members.
(c) "Capital Account" means, as of any given date, the Capital
Contribution to the Company by a Member as adjusted up to the date in question
pursuant to Articles VIII and IX.
(d) "Capital Contributions" means, with respect to any Member, the
total amount of cash, and the Gross Asset Value, determined by Members holding
a Majority Interest, of all tangible or intangible property, which such Member
or its predecessor in interest has contributed to the Company in respect of
such Member's Membership Interest net of liabilities secured thereby or that
the Company is considered to assume or to be subject to under Section 752 of
the Code.
(e) "Capital Units" means the dollar amount of a Member's aggregate
Capital Contributions to the Company, reduced by any return of Capital
Contributions to the Member.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Company" means the limited liability company formed pursuant to
this Operating Agreement.
(h) "Deficit Capital Account" means, with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
taxable year, after giving effect to the following adjustments:
<PAGE>
(i) credit to such Capital Account any amount which such Member
is obligated to restore under Section 1.704-1(b)(2)(ii)(c) of the
Treasury Regulations, as well as any addition thereto pursuant to the
next to last sentence of Sections 1.704-2(g)(1) and (i)(5) of the
Treasury Regulations, after taking into account thereunder any changes
during such year in limited liability company minimum gain attributable
to any nonrecourse debt (as determined under Section 1.704-2(d) of the
Treasury Regulations) or any Member nonrecourse indebtedness minimum
gain attributable to any member nonrecourse debt (as determined under
Section 1.704-2(i)(3) of the Treasury Regulations); and
(ii) debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Treasury
Regulations.
This definition of Deficit Capital Account is intended to comply with the
provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and 1.704-2,
and will be interpreted consistently with those provisions.
(i) "Depreciation" means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Fiscal
Year bears to such beginning adjusted tax basis; provided, however, that if
the adjusted basis for federal income tax purposes of an asset at the
beginning of such Fiscal Year is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method
selected by the Members.
(j) "Distributable Cash" means all cash, revenues and funds received by
the Company, less the sum of the following to the extent paid or set aside by
the Company: (i) all principal and interest payments on indebtedness of the
Company and all other sums paid to lenders; (ii) all cash expenditures
incurred incident to the normal operation of the Company's business; and (iii)
Reserves.
(k) "Entity" means any general partnership, limited partnership,
limited liability company, corporation, joint venture, trust, business trust,
cooperative or association or any foreign trust or foreign business
organization.
(l) "Fiscal Year" means the Company's fiscal year which shall be a
52/53 week year ending on the Friday closest to December 31.
(m) "Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross fair market value of such
asset, as determined by Members holding a Majority Interest.
<PAGE>
(ii) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values, as
determined by Members holding a Majority Interest as of the following
times: (a) the acquisition of an additional interest by any new or
existing Member in exchange for more than a de minimis Capital
Contribution; (b) the distribution by the Company to a Member of more
than a de minimis amount of property as consideration for a Membership
Interest; and (c) the liquidation of the Company within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); provided, however, that
adjustments pursuant to clauses (a) and (b) above shall be made only if
Members holding a Majority Interest reasonably determine that such
adjustments are necessary or appropriate to reflect the relative
economic interests of the Members in the Company;
(iii) The Gross Asset Value of any Company asset distributed to
any Member shall be adjusted to equal the gross fair market value of
such asset on the date of distribution as determined by Members holding
a Majority Interest; and
(iv) The Gross Asset Values of Company assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Section 734(b) or Code Section 743(b), but only
to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Regulation Section
1.704-1(b)(2)(iv)(m) and Section 8.4 and subparagraph (vii) under the
definition of Net Profits and Net Losses; provided, however, that Gross
Asset Values shall not be adjusted pursuant to this definition to the
extent Members holding a Majority Interest determine that an adjustment
pursuant to subparagraph (ii) of this definition is necessary or
appropriate in connection with a transaction that would otherwise result
in an adjustment pursuant to this subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant
to subparagraph (i), (ii) or (iv) of this definition, then such Gross Asset
Value shall thereafter be adjusted by the Depreciation taken into account with
respect to such asset for purposes of computing Net Profits and Net Losses.
(n) "Majority Interest" means that number of Capital Units of Members
which taken together exceed fifty percent (50%) of the aggregate of all
Capital Units.
(o) "Member" means each of the parties who executes a counterpart of
this Operating Agreement as a Member and each of the parties who may hereafter
become Members, until withdrawal.
(p) "Membership Interest" means a Member's entire interest in the
Company including such Member's economic interest and such other rights and
privileges that the Member may enjoy by being a Member.
(q) "Net Profits" and "Net Losses" mean for each taxable year of the
Company an amount equal to the Company's net taxable income or loss for such
year as determined for federal income tax purposes (including separately
stated items) in accordance with the accounting method and rules used by the
Company and in accordance with Section 703 of the Code with the following
adjustments:
<PAGE>
(i) any items of income, gain, loss and deduction allocated to
Members pursuant to Section 9.2 shall not be taken into account in
computing Net Profits or Net Losses for purposes of this Operating
Agreement;
(ii) any income of the Company that is exempt from federal income
tax and not otherwise taken into account in computing Net Profits and
Net Losses (pursuant to this definition) shall be added to such taxable
income or loss;
(iii) any expenditure of the Company described in Section
705(a)(2)(B) of the Code and not otherwise taken into account in
computing Net Profits and Net Losses (pursuant to this definition) shall
be subtracted from such taxable income or loss; and
(iv) in the event the Gross Asset Value of any Company asset is
adjusted pursuant to clause (ii) or (iii) of the definition of Gross
Asset Value, the amount of such adjustment shall be taken into account
as gain or loss from the disposition of such asset for purposes of
computing Net Profits and Net Losses;
(v) gain or loss resulting from any disposition of any Company
asset with respect to which gain or loss is recognized for federal
income tax purposes shall be computed with reference to the Gross Asset
Value of the asset disposed of, notwithstanding that the adjusted tax
basis of such asset differs from its Gross Asset Value;
(vi) in lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income
or loss, there shall be taken into account Depreciation for such Fiscal
Year; and
(vii) to the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Section 734(b) of the Code or Section 743(b)
of the Code is required pursuant to Section 1.704-1(b)(2)(iv)(m)(4) of
the Treasury Regulations to be taken into account in determining Capital
Accounts, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases the basis of the asset) from the disposition of
the asset and shall be taken into account for purposes of computing Net
Profits or Net Losses.
(r) "Operating Agreement" means this Operating Agreement as originally
executed and as amended from time to time.
(s) "Person" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors, and assigns of
such Person where the context so permits.
(t) "Reserves" shall mean, with respect to any fiscal period, funds set
aside or amounts allocated during such period to reserves which shall be
maintained in amounts deemed sufficient by Members holding a Majority
Interest, for working capital and to pay taxes, insurance, debt service or
other costs or expenses incident to the ownership or operation of the
Company's business.
<PAGE>
(u) "Secretary of State" means the Secretary of State of the State of
Maine.
(v) "Selling Member" means any Member which sells, assigns, or
otherwise transfers for consideration all or any portion of its Membership
Interest.
(w) "Statement of Authority" means a statement of limited liability
company authority with respect to the Company executed in accordance with
Section 626 of the Act.
(x) "Supermajority Interest" means that number of Capital Units of
Members which taken together equal or exceed sixty-six and two-thirds percent
(66 2/3%) of the aggregate of all Capital Units.
(y) "Termination of Membership", with respect to any Member, means the
withdrawal of the Member from the Company for any reason other than death or,
in the case of a Member which is an Entity, dissolution or other termination
of its existence as a legal entity, including without limitation: (i) the
voluntary withdrawal of the Member, which shall be effected by delivery of
written notice to other Members at least 90 days before the effective date of
such withdrawal and the consent of the other Members as required in Section
6.5 hereof, and (ii) a finding of Cause with respect to such withdrawing
Member by Members holding at least 66 2/3% of the Capital Units (excluding
Capital Units held by such withdrawing Member) with respect to such Member,
which shall immediately result in the withdrawal of such Member. For purposes
of this Section 1.1(z), "Cause" shall mean acts, actions or omissions of a
Member that are adverse to the Company's interests, including, without
limitation, the following:
(i) Bankruptcy of a Member; or
(ii) The failure of a Member to observe or perform one or more
material duties and obligations as a Member, including without
limitation the breach of any provision of this Operating Agreement, and
the continued failure of such Member to observe or perform the same or
to cure said breach for a period of seven (7) business days from the day
of his receipt of written notice from the Company specifying the
aforesaid failure or breach.
(z) "Treasury Regulations" shall include proposed, temporary and final
regulations promulgated under the Code in effect as of the date of filing the
Articles of Organization and the corresponding sections of any regulations
subsequently issued that amend or supersede such regulations.
ARTICLE II
FORMATION OF COMPANY
2.1 Formation. The Company shall be formed at the time of the filing of
the initial Articles of Organization with the Secretary of State in
substantial compliance with the Act, and, until such time, no Person shall be
authorized to take any action pursuant to this Operating Agreement except for
the purpose of effecting such formation.
2.2 Name. The name of the Company is AEDR Fuels LLC.
<PAGE>
2.3 Principal Place of Business; Principal Executive Office. The
Company's principal place of business and principal executive office shall be
95 Sawyer Road, Waltham, Massachusetts. The Company may relocate its
principal place of business or its principal executive office from time to
time as the Members deem advisable.
2.4 Registered Office and Registered Agent. The address of the
Company's initial registered office shall be One Monument Square, Portland,
Maine 04101. The name and address of the Company's initial registered agent
shall be Bruce A. Coggeshall, Pierce Atwood, One Monument Square, Portland,
Maine 04101. The registered office and registered agent may be changed from
time to time as Members holding a Majority Interest deem advisable by filing
notice of such changes with the Secretary of State in accordance with Section
607 of the Act.
2.5 Term. The term of the Company shall be 5 years from the filing of
the Articles of Organization with the Secretary of State; provided, however,
that the term of the Company shall automatically be renewed for up to ten (10)
successive additional 3 year periods, unless, at least 1 year prior to the end
of the then-current 5 or 3 year period (as applicable), any Member or Members
holding in the aggregate at least 50% of the Capital Units in the Company have
given written notice to all other Members of said Member(s) desire to dissolve
the Company.
ARTICLE III
BUSINESS OF COMPANY
The Company exists solely for the purpose of engaging in the business of
acquiring and operating businesses selling fuel oil, propane and other energy
sources (including natural gas and electricity) and other energy related
products and services on a retail basis in the states of Massachusetts,
Connecticut, Rhode Island and New Hampshire (the "Target Territory"), and
engaging in activities and owning assets related thereto, and may not conduct
any other business without the written consent of Members owning a Majority
Interest.
The provisions of this Article III shall be applied in any
interpretation of the duties of Members under Section 652 of the Act or this
Operating Agreement, and the rights and duties of the Members as provided in
Articles V and VI hereof. The authority granted to the Members under this
Operating Agreement or the Act to bind the Company shall be limited to actions
necessary or convenient to this business purpose, and shall be further limited
as provided in Articles V and VI hereof, in the Articles of Organization and
in any Statement of Authority.
ARTICLE IV
IDENTITY OF MEMBERS
The names and addresses of the Members, their respective Capital Units
and their initial Capital Contributions are to be set forth on a schedule
maintained by the Members at the Company's principal office. The initial
version of such schedule is attached hereto as Exhibit A. Such schedule shall
be modified from time to time to reflect changes thereto made in accordance
with this Operating Agreement and the Act and shall be made available to any
Member upon request.
<PAGE>
ARTICLE V
RIGHTS AND DUTIES OF THE MEMBERS
5.1 (a) Management by Members. The Company and its business shall be
managed by its Members. Each Member may designate by written notice to the
Company and to the other Members, one or more representatives of such Member
(each, a "Representative") who shall be authorized to speak on behalf of and
take actions on behalf of such Member and, if such authorization is subject to
any limits, conditions or qualifications, shall specify the precise nature of
such limits, conditions or qualifications. A Member's designation may be
changed at any time by notice to the Company and the other Members. In the
absence of a designated Representative, the chief executive officer of such
Member shall be such Member's Representative. The Members expressly intend
that the Company will not have "managers," as that term is used in the Act or
in Rev. Proc. 95-10, 1995-3 I.R.B. 20, it being understood that the
Representatives do not constitute "managers," but that each Representative
acts solely as the agent of the Member that appointed it. The Members shall
cause the Company to hire such management personnel as they deem appropriate
and by resolutions adopted by the Members, establish, subject to any
limitations contained herein, the authority of such management personnel to
act on behalf of the Company.
(b) Officers; Authority. The Members may designate one or more persons
to be officers of the Company and may remove any such person as an officer of
the Company. Any officers so designated shall have such titles and, subject
to the other provisions of this Operating Agreement, have such authority and
perform such duties as the Members may delegate to them, including the power
to execute documents, and shall serve at the pleasure of the Members. Unless
the authority of the person designated as the officer in question is limited
or expanded in the document appointing such officer or is otherwise specified
by the Members, any officer so appointed shall have the same authority to act
for the Company as a corresponding officer of a Maine corporation would have
to act for a Maine corporation in the absence of a specific delegation of
authority; provided, however, that unless such power is specifically delegated
to the officer in question either for a specific transaction or generally, no
such officer shall have the power to act in a manner that is not consistent
with the business plan and annual budget of the Company then in effect, or
contrary to the provisions of Article V hereof. The Members, in their
discretion, may by written instrument signed by such Members ratify any act
previously taken by an officer acting on behalf of the Company.
(c) Limitations on Members' Authority. Notwithstanding anything to the
contrary contained in this Article V or in the Act, neither the Members nor
any officer of the Company shall have authority to take any of the following
actions on behalf of the Company without first obtaining the affirmative vote
of Members holding a Supermajority Interest unless a lesser voting requirement
is expressly set forth in this Operating Agreement.
(i) incur any indebtedness for borrowed money on behalf of the
Company in excess of $250,000 or refinance any such indebtedness of the
Company in excess of $250,000;
(ii) confess a judgment against the Company in an amount in excess
of $250,000, or release, settle or compromise any claim or right in
favor of the Company having a value in excess of $250,000;
<PAGE>
(iii) cause the Company to incur any liabilities in any single
transaction or series of related transactions in excess of $250,000;
(iv) (A) make capital expenditures in any single transaction or
series of related transactions in excess of $250,000, or make any
capital expenditures which are outside of the approved operating budget
of the Company (as approved by the Members holding a Majority Interest)
or (B) acquire all or part of the assets or securities of, or other
interest in, any other Entity involving the expenditure of more than
$250,000;
(v) admit new Members to the Company;
(vi) knowingly do any act in contravention of this Operating
Agreement;
(vii) knowingly do any act which would make it impossible to carry
on the ordinary business of the Company, except as otherwise provided in
this Operating Agreement;
(viii) cause the Company to voluntarily take any action that would
cause a bankruptcy of the Company;
(ix) sell or otherwise transfer all or substantially all of the
assets of the Company, act to dissolve the Company and wind up its
affairs, or cause the Company to merge or consolidate with or into any
Entity; or
(x) cause a significant change in the nature of the Company's
business.
5.2 Restriction on Authority of Individual Members. Except to the
extent provided by the Act or by any other express terms of this Operating
Agreement, no Member shall have the power to act for or on behalf of, or to
bind, the Company without first obtaining the written consent of a Member or
Members holding a Majority Interest at the time of such consent to the
proposed action. Such written consent may be specific as to a proposed
action, or may be continuing until revoked by a Member or Members holding a
majority of the Capital Units at the time of revocation, and such specific or
continuing written consent shall be effective according to its terms.
5.3 Amendment of Articles of Organization or of Operating Agreement;
Dissolution, Merger, etc. No revision, restatement or amendment of the
Certificate of Organization of the Company or of this Operating Agreement,
dissolution of the Company or sale of substantially all of the Company's
assets, or consummation of any merger or consolidation of the Company with or
into any other entity, shall be effective unless first approved by a Member or
Members holding a Supermajority Interest at the time of the proposed action;
provided, however, that any provision of the Articles of Organization or of
this Operating Agreement containing a requirement of the vote of a greater
number of Members or percentage of Capital Units may be amended only by such
vote.
5.4 Duties of the Members.
<PAGE>
(a) Each Member shall exercise its powers and discharge its duties in
good faith with a view to the interests of the Company and its Members with
that degree of diligence, care and skill that ordinarily prudent persons would
exercise under similar circumstances in like positions.
(b) Every Member must account to the Company and hold as trustee for it
any profit or benefit derived by that Person from any transaction connected
with the conduct of the Company's business or winding up of the Company, or
any use by such Member of the Company's property, including, but not limited
to, confidential or proprietary information of the Company entrusted to the
Person as a result of that Person's status as a Member, unless that Person has
obtained the consent of more than one half by number of the disinterested
Members.
5.5 The Members Have No Exclusive Duty to Company.
(a) Notwithstanding the provisions of Section 5.4 hereof, but subject
to the limitations contained in Section 5.5(b), any Member may have other
business interests and may engage in other activities in addition to those
relating to the Company. Subject to the provisions of Section 5.5(b), neither
the Company nor any Member shall have any right, by virtue of this Operating
Agreement, to share or participate in such other permitted investments or
activities of any Member or to the income or proceeds derived therefrom. No
Member shall incur any liability to the Company or to any of the Members as a
result of engaging in any such other permitted business or venture.
(b) Subject to the provisions of Section 8.2(c), each Member shall be
required to present to the Company for consideration, as soon as reasonably
practical upon gaining knowledge or awareness of the same by said Member (the
"Presenting Member"), any opportunity for acquisition of the assets, voting or
membership interest of any fuel oil or propane company (a "Target Company")
which has a material portion of its operations in the Target Territory. Said
notification shall include all relevant information which the Presenting
Member has regarding the Target Company and its business operations. Unless
approved by the Members holding a Majority Interest, no Member shall execute
any agreement which prohibits it from disclosing such information to the
Company or any other Member. No Member shall enter into discussions or
negotiations regarding acquisition of a Target Company on that Member's own
behalf unless and until the Members holding a Majority Interest have
determined that the Company shall not pursue acquisition of the Target
Company. If a Member proposes that the Company acquire a Target Company it
shall notify the other Members and the Members shall, within 15 days
thereafter, decide whether or not to pursue such acquisition.
(c) Pursuit of Acquisition. If the Members decide not to pursue such
acquisition or fail to reach a decision to pursue the acquisition within the
allotted time, and any Member ("Purchasing Member") thereafter determines to
pursue such Target Company for its own account, it shall give the other
Members notice of such intent, together with the anticipated price and
approximate terms, and the other Members holding a majority of the Capital
Units (excluding the Capital Units held by the Purchasing Member) shall have
an additional period of 15 days to decide that the Company should pursue the
acquisition. If the decision is made to pursue the acquisition, then only the
Company and none of the individual Members shall be entitled to pursue the
acquisition of that Target Company for its own account for a period of two
years, unless the Company decides not to acquire the Target Company pursuant
<PAGE>
to Section 5.5(e). If the Company decides not to pursue acquisition of the
Target Company, then the Purchasing Member and other Members voting in favor
of pursuing such acquisition shall be entitled to pursue acquisition of the
Target Company at the price and on the approximate terms set forth in the
proposal to the Company, but any Member not voting in favor of pursuing the
acquisition of the Target Company shall be prohibited from pursuing the
acquisition of the Target Company for its own account for a period of two
years without first offering the opportunity to the Company.
(d) If the Members decide to pursue such acquisition, they shall,
within 30 days thereafter, or within such longer period as the Members holding
a Majority Interest may determine, decide whether to make the acquisition.
(e) Decision to Acquire. If the Members decide not to acquire or fail
to reach a decision to acquire within the allotted time, and a Purchasing
Member thereafter determines to acquire such Target Company for its own
account, it shall give the other Members notice of such intent, together with
the anticipated price and approximate terms, and the other Members holding a
majority of the Capital Units (excluding the Capital Units held by the
Purchasing Member) shall have an additional period of 15 days to decide that
the Company should acquire the Target Company. If the decision is made to
acquire, then only the Company and none of the individual Members shall be
entitled to acquire that Target Company for its own account for a period of
two years. If the Company decides not to acquire the Target Company, then the
Purchasing Member and other Members voting in favor of such acquisition shall
be entitled to acquire the Target Company at the price and on the approximate
terms set forth in the proposal to the Company, but any Member not voting in
favor of acquiring the Target Company shall be prohibited from acquiring the
Target Company for its own account for a period of two years without first
offering the opportunity to the Company.
(f) Notwithstanding any provision to the contrary contained herein,
each Member shall be free to directly serve customers both inside and outside
of the Target Territory and pursue acquisitions of fuel oil and propane
companies serving customers located primarily outside of the Target Territory.
Within the Target Territory, each Member agrees to not pursue commercial
arrangements similar to the arrangements reflected in this Agreement, with
third parties which offer products and services similar to and competitive
with those offered by other Members within the Target Territory.
5.6 Indemnification of the Members, Employees and Other Agents.
(a) General. The Company shall in all cases indemnify any person who
is or was a Member, or who as an employee or agent of a Member is or was
serving as an agent or employee of the Company, and may indemnify any other
person, who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a Member, employee or agent of the Company, or is or was serving at the
request of the Company as a member, principal, director, officer, trustee,
partner, fiduciary, employee or agent of another Entity, pension or other
employee benefit plan or other enterprise, against expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement to the extent
actually and reasonably incurred by that person in connection with such
action, suit or proceeding; provided that no indemnification may be provided
for any person with respect to any matter as to which that person shall have
been finally adjudicated:
<PAGE>
(i) Not to have acted honestly or in the reasonable belief that
that person's action was in or not opposed to the best interests of the
Company or its Members or, in the case of a person serving as a
fiduciary of an employee benefit plan or trust, in or not opposed to the
best interests of that plan or trust, or its participants or
beneficiaries;
(ii) With respect to any criminal action or proceeding, to have
had reasonable cause to believe that that person's conduct was unlawful;
or
(iii) To have acted without authorization under or in violation
of this Operating Agreement.
The termination of any action, suit or proceeding by judgment, order or
conviction adverse to that Person, or by settlement or plea of nolo contendere
or its equivalent, shall not of itself create a presumption that (i) that
person did not act honestly or in the reasonable belief that that person's
action was in or not opposed to the best interests of the Company or its
Members or, in the case of a person serving as a fiduciary of an employee
benefit plan or trust, in or not opposed to the best interests of that plan or
trust or its participants or beneficiaries, (ii) with respect to any criminal
action or proceeding, had reasonable cause to believe that that person's
conduct was unlawful, or (iii) that person acted without authorization under
or in violation of this Operating Agreement.
(b) Derivative Actions. Notwithstanding any provision of Section
5.6(a) or (d), the Company shall not indemnify any person with respect to any
claim, issue or matter asserted by or in the right of the Company as to which
that person is finally adjudicated to be liable to the Company unless the
court in which the action, suit or proceeding was brought shall determine
that, in view of all the circumstances of the case, that person is fairly and
reasonably entitled to indemnity for such amounts as the court shall deem
reasonable.
(c) Advancement of Expenses. Expenses (including, without limitation,
reasonable attorneys fees) incurred in defending a civil, criminal,
administrative or investigative action, suit or proceeding with respect to
which indemnification exists under Section 5.6(a) of this Agreement, shall be
authorized and paid by the Company in advance of the final disposition of that
action, suit or proceeding, to the extent permitted by Section 654(5) of the
Act and upon receipt of the undertaking and affirmation described in Section
654(5)(A) and (B) of the Act from the Person or Persons on whose behalf or for
whose benefit the expenses are to be advanced.
(d) Indemnification Rights Under Operating Agreement Not Exclusive;
Enforceable by Separate Action. The indemnification and entitlement to
advances of expenses provided by this Section 5.6 shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any agreement, vote of Members or otherwise, both as to action in that
person's official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a Member,
employee, agent, trustee, partner or fiduciary and shall inure to the benefit
of the heirs, executors and administrators of such a person. A right to
indemnification required by this Section 5.6 may be enforced by a separate
<PAGE>
action against the Company, if an order for indemnification has not been
entered by a court in any action, suit or proceeding in respect to which
indemnification is sought.
(e) Insurance. The Company shall have power to purchase and maintain
insurance on behalf of any person who is or was a Member against any liability
asserted against that person and incurred by that person in any such capacity,
or arising out of that person's status as such, whether or not the Company
would have the power to indemnify that person against such liability under
this Section 5.6.
(f) Amendment. Any amendment, modification or repeal of this Section
5.6 shall not deny, diminish or otherwise limit the rights of any person to
indemnification or advance hereunder with respect to any action, suit or
proceeding arising out of any conduct, act or omission occurring or allegedly
occurring at any time prior to the date of such amendment, modification or
repeal.
(g) Indemnification by Members. A Member who takes any unauthorized
action on or purportedly on behalf of the Company shall indemnify and hold the
Company and the other Members harmless from any costs (including without
limitation reasonable attorneys' fees) or damages incurred by any such
indemnified parties as a result thereof. The Company and any Member entitled
to indemnification under this Section 5.6(g) shall be entitled to set off
against, withhold, proceed against or collect or receive from the Company, as
applicable, all or any part of the indemnifying Member's Membership Interest,
any amounts distributable with respect thereto or, following the withdrawal of
such Member or the dissolution of the Company, any amounts payable to the
indemnifying Member pursuant to this Operating Agreement, under an employment
agreement or otherwise, in order to enforce its, his or her rights hereunder.
The obligations of the Members hereunder shall survive the withdrawal of any
Member as such and the dissolution or termination of the Company.
5.7 Rights to Information. Members shall have the right to receive
from the Company upon request a copy of the Articles of Organization and of
this Agreement, as amended from time to time, and such other information
regarding the Company as is required by the Act, subject to reasonable
conditions and standards established by the Members, as permitted by the Act,
which may include, without limitation, withholding or restrictions on the use
of confidential information. Within 90 days after the end of each fiscal year
the Company shall furnish to all Members such information as may be needed to
permit Members to file their federal income tax returns and any required state
and local income tax returns.
ARTICLE VI
RIGHTS AND OBLIGATIONS OF MEMBERS
6.1 Limitation of Liability. Except as otherwise provided in the Act,
no Member of the Company shall be obligated personally for any debt,
obligation or liability of the Company or of any other Member, whether arising
in contract, tort or otherwise, solely by reason of being a Member of the
Company. No Member shall be personally liable to the Company or to its
Members for breach of any fiduciary or other duty with respect to the business
and affairs of the Company that does not involve (i) a breach of the duty of
loyalty to the Company or its Members, (ii) acts or omissions not in good
<PAGE>
faith or which involve intentional misconduct or a knowing violation of the
law; or (iii) a transaction from which the Member derived an improper personal
benefit. No Member shall have any responsibility to restore any negative
balance in its Capital Account or to contribute to or in respect of the
liabilities or obligations of the Company or return distributions made by the
Company except as required by the Act or other applicable law; provided,
however, that Members are responsible for their failure to make required
Capital Contributions under Sections 8.1 and 8.2. The failure of the Company
to observe any formalities or requirements relating to the exercise of its
powers or the management of its business or affairs under this Operating
Agreement or the Act shall not be grounds for making its Members responsible
for the liabilities of the Company.
6.2 List of Members. Upon written request of any Member, the Company
shall provide a list showing the names, addresses and Membership Interests of
all Members.
6.3 Priority and Return of Capital. Except as may be expressly
provided in Article IX hereof, no Member shall have priority over any other
Member, either as to the return of Capital Contributions or as to Net Profits,
Net Losses or distributions; provided that this Section shall not apply to
loans (as distinguished from Capital Contributions) which a Member has made to
the Company.
6.4 Obligations of Initial Members. In addition to its remaining
obligations as a Member hereunder, AllEnergy Marketing Company, LLC
("AllEnergy") is expected to provide to the Company, through AllEnergy
personnel, expertise in marketing, sales and energy management. In addition
to its remaining obligations as a Member hereunder, Dead River Company ("Dead
River") is expected to provide to the Company, through Dead River personnel,
expertise in operations and customer service, sales and installation of energy
consuming products, and acquisition and operation of retail operating
companies. Each of Dead River and AllEnergy shall assist the Company in the
procurement of fuel oil and other products to be sold by the Company. The
Members are expected to limit the provision of the required services to those
approved in the annual operating budget. Notwithstanding the foregoing, the
costs incurred by Members so providing these services shall be reimbursed by
the Company pursuant to Section 6.6.
6.5 Withdrawal. Except as provided in Article X, no Member may
withdraw or resign from the Company without the consent of the other Members
holding a majority of the Capital Units, not including the Capital Units of
the withdrawing or resigning Member.
6.6 Right to Reimbursement. Each of the Members shall be entitled to
be reimbursed for the cost of services provided to the Company within 30 days
of submission of proof of such costs to the Company for the actual cost
(including an overhead allocation) in accordance with the Public Utility
Holding Company Act of 1935 ("PUHCA"), to the extent applicable for services
provided to the Company by the employees of the Member. All costs for
services rendered to the Company by any Member must have been approved in the
annual operating budget of the Company.
6.7 Sale of AllEnergy Products. AllEnergy shall make available to the
Company and its subsidiaries, through commission sales arrangements or
otherwise, on terms to be agreed, AllEnergy products for sale by the Company
<PAGE>
and its subsidiaries to their customers. Unless otherwise agreed, the Company
and its subsidiaries will be paid commissions on the sale of AllEnergy
products on a basis not less favorable than that afforded to independent
commissioned sales agents under similar circumstances, but subject to any
applicable limitations imposed by PUHCA. The Company shall actively promote
AllEnergy products and services and will not sell or offer for sale any
products or services competing with the AllEnergy products and services
available for sale by it.
6.8 AllEnergy Trademarks. Upon execution of this Agreement, AllEnergy
shall enter into the form of Trademark Licensing Agreement ("TLA") with the
Company, attached hereto as Exhibit B. Pursuant to the terms of the TLA, the
Company shall be permitted to market all of its goods and services for retail
sale using the trademarks and trade names used by AllEnergy to market products
of a similar nature. AllEnergy will cooperate with the Company to coordinate
branding and marketing of the Company's products and services with the
products and services offered by AllEnergy.
6.9 Dead River's Manchester District. Dead River shall, within 60 days
of the Effective Date, propose to the Company that the Company acquire the
assets of Dead River's Manchester, New Hampshire District as its initial
acquisition of a fuel oil and propane business, with the intention that the
Company will be presented the opportunity to purchase that business at its
fair market value. The parties will in good faith attempt to agree on the
fair market value of such business. All costs of due diligence in connection
with the proposed acquisition shall be paid by the Company.
ARTICLE VII
MEETINGS OF MEMBERS
7.1 Meetings. Meetings of the Members for any purpose may be called by
any Member or Members holding at least thirty percent (30%) of the Capital
Units.
7.2 Place of Meetings. The Person or Persons calling a meeting
pursuant to Section 7.1 hereof may designate any place within the New England
states as the place of meeting for any meeting of the Members. If no
designation is made, the place of meeting shall be the principal executive
office of the Company.
7.3 Notice of Meetings. Written notice stating the place, day and hour
of the meeting and the purpose or purposes for which the meeting is called
shall be delivered not less than twenty (20) nor more than sixty (60) days
before the date of the meeting, either personally or by mail, by or at the
direction of the Members or Person(s) calling the meeting, to each Member
entitled to vote at such meeting. If mailed, such notice shall be deemed to
be delivered three (3) business days after being deposited in the United
States mail, addressed to the Member at its address as it appears on the books
of the Company, with postage thereon prepaid.
7.4 Meeting of all Members. If all of the Members shall meet at any
time and place and consent to the holding of a meeting at such time and place,
such meeting shall be valid without call or notice, and at such meeting lawful
action may be taken.
<PAGE>
7.5 Record Date. 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 distribution, the date on which
notice of the meeting is mailed or the date on which the resolution declaring
such distribution 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.
7.6 Quorum. Members holding at least a majority of the Capital Units
of all Members, represented in person or by proxy, shall constitute a quorum
at any meeting of Members. In the absence of a quorum at any such meeting, a
majority of the Capital Units so represented may adjourn the meeting from time
to time for a period not to exceed 60 days without further notice. However,
if the adjournment is for more than 60 days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each Member of record entitled to vote at the
meeting. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. The Members present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding
the withdrawal during such meeting of that number of Capital Units whose
absence would cause there to be present less than a quorum.
7.7 Manner of Acting. If a quorum is present, the affirmative vote of
Members holding a majority of the Capital Units represented in person or by
proxy shall be the act of the Members, unless the vote of a greater or lesser
proportion or number is otherwise required by the Act, by the Articles of
Organization, or by this Operating Agreement. Unless otherwise expressly
provided herein or required under applicable law, Members who have an interest
(economic or otherwise) in the outcome of any particular matter upon which the
Members vote or consent may vote or consent upon any such matter and their
Capital Unit, vote or consent, as the case may be, shall be counted in the
determination of whether the requisite matter was approved by the Members.
7.8 Proxies. At all meetings of Members a Member may vote in person or
by proxy executed in writing by the Member or by a duly authorized
attorney-in-fact. Such proxy shall be filed with the Members before or at the
time of the meeting. No proxy shall be valid after eleven months from the date
of its execution, unless otherwise provided in the proxy.
7.9 Action by Members Without a Meeting. Action required or permitted
to be taken at a meeting of Members may be taken without a meeting if the
action is evidenced by one or more written consents describing the action
taken, signed by a sufficient number of Members or Members holding the
requisite Capital Units, as applicable, whose vote is necessary for the taking
of the action described therein and delivered to the Members for inclusion in
the minutes or for filing with the Company records. Action taken under this
Section is effective when Members in the requisite number or holding the
requisite Capital Units, as applicable, have signed the consent, unless the
consent specifies a different effective date. The record date for determining
Members entitled to take action without a meeting shall be the date the first
Member signs a written consent. Notice of all actions so taken will be given
as soon as practicable to all Members.
<PAGE>
7.10 Waiver of Notice. When any notice is required to be given to any
Member, a waiver thereof in writing signed by the person entitled to such
notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice.
7.11 Telephonic Meetings. Any Member may participate in a meeting of
the Members by means of conference telephone or similar communications
equipment which permits all persons participating in the meeting to hear each
other, and participation in the meeting by means of such equipment shall
constitute presence in person at such meeting.
ARTICLE VIII
CONTRIBUTIONS TO THE COMPANY AND CAPITAL
ACCOUNTS; ANNUAL BUDGETS
8.1 Members' Initial Capital Contributions. Each Member shall
contribute, on or prior to December 31, 1997 the amount of cash and, if
applicable, other property set forth and identified as the Initial Capital
Contribution on Exhibit A hereto as its initial Capital Contribution.
8.2 Additional Capital Contributions.
(a) Except as provided in Section 8.2(b):
No Member shall be required to make any Capital Contribution in
addition to those contemplated by Section 8.1;
(i) No Member shall be permitted to make any Capital
Contributions in addition to those contemplated by Section 8.1
hereof unless Members holding a Supermajority Interest vote to
permit such additional Capital Contributions; and
(ii)In the event that Members holding a Supermajority
Interest vote to permit additional Capital Contributions as
provided herein (other than those required by Section 8.2(b)
hereof), the Members shall have the opportunity (but not the
obligation) to participate in such additional Capital
Contributions on a pro rata basis in accordance with their Capital
Units. No additional Capital Contributions (including those made
pursuant to Section 8.2(b)) may be made other than in cash without
the approval of Members holding a Supermajority Interest.
(b) Each Member shall contribute from time to time, as an additional
Capital Contribution, (i) such Member's pro-rata portion of the amount
necessary to fund the annual operating budget of the Company after accounting
for revenues of the Company (as said budget is approved by the Members holding
a Majority Interest, and in the event that no annual operating budget is
approved the annual operating budget shall be equal to the Base Annual
Operating Budget plus 5%) up to a maximum amount of $500,000.00 per Member for
each annual operating budget; and (ii) such Member's pro-rata portion of
amounts as are necessary to fund any acquisition of fuel oil or propane
businesses located within the Target Territory which are approved by the
Members, in either case subject to an aggregate limit equal to that Member's
Aggregate Required Additional Capital Contribution as shown on Exhibit A.
Each such additional Capital Contribution shall be made in a timely fashion so
<PAGE>
that the Company will have funds when needed for the purpose for which the
contribution is to be made. Notwithstanding the foregoing, in the case of
additional Capital Contributions to fund business acquisitions, each Member's
additional Capital Contribution shall be limited to the pro-rata portion
(based upon that Member's Capital Units) of the equity contribution necessary
to consummate the acquisition of said business, absent contrary approval by
Members holding a Supermajority Interest. For purposes of this subsection,
the term "Base Annual Operating Budget" shall mean the most recent annual
operating budget of the Company.
(c) Once the Members have made their Aggregate Required Additional
Capital Contribution and the Members holding a majority interest agree that
further Capital Contributions are needed in excess of the Aggregate Required
Additional Capital Contribution to make any additional acquisition, the
obligation under Section 5.5 hereof to present acquisition opportunities to
the Company shall be suspended unless and until the Members agree to increase
their capital contributions in an amount sufficient to enable the Company,
together with any other available resources, to make such acquisitions.
(d) For as long as AllEnergy is a Member of the Company, all Capital
Contributions required to be made pursuant to this Operating Agreement will be
made in compliance with the requirements of PUHCA, to the extent applicable.
8.3 Annual Budget. The budget for the first Fiscal Year of the
Company, shall be agreed upon by the Members no later than 15 days after the
Effective Date. The Members shall, at least 60 days before the beginning of
each subsequent Fiscal Year, determine a budget for the Company for the next
Fiscal Year (the budget for the Company's first Fiscal Year and each
subsequent budget, each an "Annual Budget"). Each Annual Budget shall include
a projected profit and loss statement, cash flow statement and balance sheet
for the next Fiscal Year, and shall specify and quantify capital expenditures.
8.4 Capital Accounts.
(a) A separate Capital Account shall be maintained for each Member in
accordance with the capital accounting rules of Section 704(b) of the Code.
The beginning balance in each Member's Capital Account shall be the amount of
such Member's initial Capital Contribution made pursuant to Section 8.1 above
(as set forth on Exhibit A hereto). Thereafter, a Member's Capital Account
shall be credited with (i) the amount of any subsequent Capital Contribution
to the Company by such Member; (ii) such Member's distributive share of
Company Net Profits; (iii) all items of income and gain allocated to such
Member pursuant to Section 9.2 (other than paragraph (f) thereof); and (iv)
such other amounts as may be required for the Capital Account to be determined
and maintained in accordance with the rules of Section 1.704-1(b)(2)(iv) of
the Treasury Regulations (including Section 1.704-1(b)(2)(iv)(g) thereof). A
Member's Capital Account shall be debited with (i) such Member's distributive
share of items of Company Net Losses; (ii) all items of loss and deduction
allocated to such Member pursuant to Section 9.2 (other than paragraph (f)
thereof); (iii) the amount of cash or the fair market value of any property
distributed from the Company to such Member (reduced by the amount of debt, if
any, assumed by such Member in connection with the distribution); and (iv)
such other amounts as may be required for the Capital Account to be determined
and maintained in accordance with the rules of Section 1.704-1(b)(2)(iv) of
the Treasury Regulations (including Section 1.704-1(b)(2)(iv)(g) thereof). It
is the parties' specific intent that Capital Accounts shall be maintained in
accordance with the capital account maintenance rules contained in section
<PAGE>
704(b) of the Code, including the regulations thereunder, and this Section
8.4(a) shall be construed and applied to achieve such result.
(b) Upon liquidation of the Company (or any Member's Membership
Interest), liquidating distributions will be made in accordance with the
positive Capital Account balances of the Members, as determined after taking
into account all Capital Account adjustments for the Company's taxable year
during which the liquidation occurs. Liquidation proceeds will be paid in
accordance with Section 12.3. The Company may offset damages for breach of
this Operating Agreement by a Member whose interest is liquidated (either upon
the withdrawal of the Member or the liquidation of the Company) against the
amount otherwise distributable to such Member.
(c) Except as otherwise required in the Act (and subject to Sections
8.1, 8.2 and 9.2), no Member shall have any liability to restore all or any
portion of a deficit balance in such Member's Capital Account.
8.5 Withdrawal or Reduction of Members' Contributions to Capital.
(a) A Member shall not receive out of the Company's property any part of
its Capital Contribution until all liabilities of the Company, except
liabilities to Members on account of their Capital Contributions, have been
paid or there remains property of the Company sufficient to pay them.
(b) A Member, irrespective of the nature of its Capital Contribution,
has only the right to demand and receive cash in return for its Capital
Contribution.
ARTICLE IX
ALLOCATIONS, INCOME TAX, DISTRIBUTIONS,
ELECTIONS AND REPORTS
9.1 Allocations of Profits and Losses from Operations. The Net Profits
and Net Losses of the Company for each Fiscal Year will be allocated among the
Members in proportion to the Capital Units of the Members.
9.2 Special Allocations to Capital Accounts and Certain Other Income
Tax Allocations. Notwithstanding Section 9.1 hereof:
(a) In the event any Member unexpectedly receives any adjustments,
allocations, or distributions described in Sections 1.704-1(b)(2)(ii)(d)(4),
(5), or (6) of the Treasury Regulations, which create or increase a Deficit
Capital Account of such Member, then items of Company income and gain
(consisting of a pro rata portion of each item of Company income, including
gross income, and gain for such year and, if necessary, for subsequent years)
shall be specially allocated to such Member in an amount and manner sufficient
to eliminate, to the extent required by the Treasury Regulations, the Deficit
Capital Account so created as quickly as possible. It is the parties' intent
that this Section 9.2(a) be interpreted to comply with the alternate test for
economic effect set forth in Section 1.704-1(b)(2)(ii)(d) of the Treasury
Regulations.
(b) In the event any Member would have a Deficit Capital Account at the
end of any Company taxable year, the Capital Account of such Member shall be
specially credited with items of Membership income (including gross income)
and gain in the amount of such excess as quickly as possible.
<PAGE>
(c) With respect to any Member, notwithstanding the provisions of
Section 9.1, the amount of Net Losses for any taxable year that would
otherwise be allocated to such Member pursuant to Section 9.1 shall not cause
such Member to have a, or increase such Member's, Deficit Capital Account
balance. Any Net Losses in excess of the limitation set forth in this Section
9.2(c) shall be allocated among the other Members pro rata, to the extent that
each, respectively, is liable or exposed with respect to any debts or other
obligations of the Company.
(d) Notwithstanding any other provision of this Section 9.2, if there
is a net decrease in the Company's minimum gain as defined in Treasury
Regulation Section 1.704-2(d) during a taxable year of the Company, then the
Capital Accounts of each Member shall be allocated items of income (including
gross income) and gain for such year (and if necessary for subsequent years)
equal to that member's share of the net decrease in Company minimum gain. This
Section 9.2(c) is intended to comply with the minimum gain charge-back
requirement of Section 1.704-2 of the Treasury Regulations and shall be
interpreted consistently therewith. If in any taxable year that the Company
has a net decrease in the Company's minimum gain, if the minimum gain
charge-back requirement would cause a distortion in the economic arrangement
among the Members and it is not expected that the Company will have sufficient
other income to correct that distortion, the Members may in their discretion
(and shall, if requested to do so by a Member) seek to have the Internal
Revenue Service waive the minimum gain charge-back requirement in accordance
with Treasury Regulation Section 1.704-2(f)(4).
(e) Notwithstanding any other provision of this Section 9.2, if there
is a net decrease in partner (Member) nonrecourse debt minimum gain, as
defined in Treasury Regulation Section 1.704-2(i), during a taxable year of
the Company, then the Capital Account of each Member shall be allocated items
of income (including gross income) and gain for such year (and if necessary
for subsequent years) in proportion to and to the extent of each such Member's
share if any, of such net decrease in partner (Member) nonrecourse debt
minimum gain, except to the extent that such allocation would not be required
by Treasury Regulation Section 1.704-2(i)(4). This Section 9.2(e) is intended
to comply with the partner (Member) nonrecourse debt minimum gain charge-back
requirement of Section 1.704-2(i) of the Treasury Regulations and shall be
interpreted consistently therewith.
(f) Items of Company loss, deduction and expenditures described in
Section 705(a)(2)(B) which are attributable to any nonrecourse debt of the
Company and are characterized as partner (Member) nonrecourse deductions under
Section 1.704-2(i) of the Treasury Regulations shall be allocated to the
Members' Capital Accounts in accordance with said Section 1.704-2(i) of the
Treasury Regulations.
(g) Beginning in the first taxable year in which there are allocations
of "nonrecourse deductions" (as described in Section 1.704-2(b) of the
Treasury Regulations) such deductions shall be allocated to the Members in the
same manner as Net Profit or Net Loss is allocated for such period.
(h) In accordance with Section 704(c)(1)(A) of the Code and Section
1.704(b)(2)(iv)(g) of the Treasury Regulations, if a Member contributes
property or is deemed to contribute property pursuant to Treasury Regulation
Section 1.704-1(b)(2)(iv)(g) with a Gross Asset Value that differs from its
adjusted basis at the time of contribution (or deemed contribution), income,
<PAGE>
gain, loss and deductions with respect to the property shall, solely for
federal income tax purposes (and not for Capital Account purposes), be
allocated among the Members so as to take account of any variation between the
adjusted basis of such property to the Company and its Gross Asset Value as of
the beginning of the relevant taxable year (or portion thereof).
(i) Any credit or charge to the Capital Accounts of the Members
pursuant to Sections 9.2 (a), (b), (c), (d), (e), (f) and/or (g) hereof shall
be taken into account in computing subsequent allocations of Net Profits and
Net Losses pursuant to Section 9.1, so that the net amount of any items
charged or credited to Capital Accounts pursuant to Sections 9.1 and 9.2 (a),
(b), (c), (d), (e), (f) and/or (g) and shall to the extent possible, be equal
to the net amount that would have been allocated to the Capital Account of
each Member pursuant to the provisions of this Article IX if the special
allocations required by Sections 9.2 (a), (b), (c), (d), (e), (f) and/or (g)
hereof had not occurred.
9.3 Distributions. All distributions of Distributable Cash shall be
made to the Members pro rata in proportion to the respective interests of the
Members in Net Profits and Net Losses as set forth in Section 9.1 on the
record date of such distribution. Except as provided in Section 9.5, all
distributions of Distributable Cash and property shall be made at such time as
determined by a majority of the Members. All amounts withheld pursuant to the
Code or any provisions of state or local tax law with respect to any payment
or distribution to the Members from the Company shall be treated as amounts
distributed to the relevant Member or Members pursuant to this Section 9.3.
9.4 Distributions for Taxes. Subject to the provisions of Section 9.5,
the Company shall annually distribute to each Member an amount of cash
sufficient in amount to pay any state and federal income taxes on income
earned by the Company and allocated to such Member, based upon the assumption
that each Member pays federal and state income taxes at the marginal rate then
applicable to the Member whose marginal combined federal and state income tax
rate (taking into account the deductibility of state income taxes for federal
income tax purposes) is the highest of any Member.
9.5 Limitation Upon Distributions. No distribution shall be declared
and paid if, in the determination of a majority of the Members, after giving
effect to the distribution:
(a) the Company would not able to pay its debts as they become due in
the usual course of business; or
(b) all liabilities of the Company, other than liabilities to Members on
account of their Membership Interests and liabilities for which the recourse
of creditors is limited to specified property of the Company, would exceed the
fair value of the Company's assets, except that the fair value of property
that is subject to a liability for which the recourse of creditors is limited
shall be included in the Company's assets only to the extent the fair value of
that property exceeds that liability.
9.6 Accounting Principles. For financial accounting purposes (but not
for federal income tax or Capital Account maintenance purposes) the profits
and losses of the Company shall be determined in accordance with generally
accepted accounting principles applied on a consistent basis.
<PAGE>
9.7 Interest On and Return of Capital Contributions. No Member shall be
entitled to interest on its Capital Contribution or to return of its Capital
Contribution, except as otherwise specifically provided for herein, and any
return of the Capital Contributions of any Member shall be made solely from
the assets of the Company and only in accordance with the terms of this
Agreement.
9.8 Returns and other Elections. The Company shall prepare and timely
file all tax returns required to be filed by the Company pursuant to the Code
and all other tax returns and other reports deemed necessary and required in
each jurisdiction in which the Company does business, including without
limitation, all sales and use tax filings and annual reports with the
Secretary of State. Copies of such returns and other reports, or pertinent
information therefrom, shall be furnished to the Members within 90 days after
the end of the Company's Fiscal Year, and in any event, as soon as they are
available.
9.9 Taxation as Partnership. Notwithstanding section 9.8 of this
Operating Agreement, Members shall make any elections and take any and all
other actions necessary to cause the Company to be taxed as a partnership
under the Code. In the event that the Company's counsel or accountants advise
that, as a result of any change in applicable laws or regulations, or
administrative or judicial interpretations thereof, or otherwise, it is
necessary or desirable to amend the terms of this Operating Agreement or of
the Articles of Organization in order to preserve or protect the Company's
treatment as a partnership for tax purposes, then
(i) the Members shall make such amendments to this Operating
Agreement or the Articles of Organization, as the case may be, that
preserve and protect such partnership status, and which secondarily
preserve the economic arrangement among the parties to the greatest
extent possible, and which tertiarily preserve the management structure
of the Company to the greatest extent possible; and
(ii) all Members agree to vote for and approve any such
amendments.
9.10 Tax Representation, Elections. The Members may designate one of
the Members to prepare and file (or have prepared and filed) all required
returns for federal, state and local tax purposes, and to serve as the "Tax
Matters Partner" of the Company for purposes of Section 6231(a)(7) of the
Code, with power to manage and represent the Company in any administrative
proceeding of the Internal Revenue Service. Any elections which may or are
required to be made by the Company for tax purposes, whether on a federal,
state or local return, or otherwise, shall be determined by Members holding a
Majority Interest.
ARTICLE X
TRANSFERABILITY
10.1 General. Except as otherwise specifically provided herein,
without the affirmative vote of Members holding a majority of the Capital
Units of all Members (excluding the Capital Units of the Transferring Member)
a Member (the "Transferring Member") shall not have the right to:
<PAGE>
(a) sell, assign, transfer, exchange, mortgage, pledge or hypothecate,
or otherwise transfer for consideration (collectively, "sell" or "sale"); or
(b) gift, bequeath or otherwise transfer for no consideration whether or
not by operation of law, except in connection with bankruptcy, insolvency and
similar proceedings (collectively "gift"), all or any part of its Membership
Interest.
Notwithstanding the foregoing, a Member may transfer all of its
Membership Interest to any person or entity directly or indirectly
controlling, controlled by, or under common control with such Member, provided
that such transferee consents to becoming a Member of the Company and to be
bound by the terms of this Operating Agreement and provided further, that in
the reasonable judgment of the other Members, such transfer will not have a
material adverse effect on the Company, its financial condition, or its
operations.
Each Member hereby acknowledges the reasonableness of the restrictions
on sale and gift of Membership Interests imposed by this Operating Agreement
in view of the Company's purposes and the relationship of the Members.
Accordingly, the restrictions on sale and gift contained herein shall be
specifically enforceable. Any transfer or attempted transfer of Membership
Interests other than in strict accordance with the terms hereof shall be void
and of no effect. In the event that any Member pledges or otherwise encumbers
any of its Membership Interest as security for repayment of a liability, any
such pledge or hypothecation shall be made pursuant to a pledge or
hypothecation agreement that requires the pledgee or secured party to be bound
by all the terms and conditions of this Article X.
10.2 Right of First Refusal.
(a) A Member (the "Selling Member") which desires to sell all or any
portion of its Membership Interest in the Company shall so notify the other
Members (the "Offeree Members") and if requested by one or more of the Offeree
Members, engage in good faith negotiations with the Offeree Members to sell
its interest to the Offeree Members. If after 30 days following the giving of
such notice, the Selling Member and the Offeree Members are unable to agree
upon the sale of the interest of the Selling Member to one or more Offeree
Members, then the Selling Member shall be free to seek other purchasers for
its Membership Interest. Prior to selling such Membership Interest, however,
the Selling Member shall give written notice to the Offeree Members by
certified mail or personal delivery of the terms and conditions under which
the Selling Member is offering to sell such interest, and a list of
prospective purchasers of such interest (the "Prospective Purchasers"). The
Offeree Members shall have the right to purchase all (but not less than all)
of the interest proposed to be sold by the Selling Member upon the same terms
and conditions as stated in the aforesaid written notice by giving written
notification to the Selling Member, by certified mail or personal delivery, of
its or their intention to do so within thirty (30) days after receipt of
written notice from the Selling Member. The interest proposed to be sold
shall be subject to purchase by the Offeree Members, in whole but not in part,
pro rata in accordance with the then relative percentage interests of the
Members electing to purchase such Membership Interest. If the Offeree Members
fail to so notify the Selling Member of its or their desire to exercise this
right of first refusal within said period, the right of first refusal shall
terminate and the Selling Member shall, for a period of 180 days following
<PAGE>
expiration of the 30 day notice period be entitled to sell its Membership
Interest to any one or more of the Prospective Purchasers on terms
substantially the same as those set forth in the notice given to the Offeree
Members, unless a majority of interest of the Offeree Members, within said 30
day period, notify the Selling Member of its or their election to dissolve the
Company, in which event the Company shall be dissolved in accordance with
Article 12 hereof.
(b) In the event one or more Offeree Members give written notice to the
Selling Member of its or their desire to exercise this right of first refusal
and to purchase all of the Selling Member's interest in the Company which the
Selling Member desires to sell upon the same terms and conditions as are
stated in the Selling Member's written notice, such Offeree Members shall have
the right to designate the time, date and place of closing, provided that the
date of closing shall be within ninety (90) days after receipt by the Offeree
Members of written notification from the Selling Member its desire to sell.
(c) In the event of the purchase of the Selling Member's interest in
the Company by a third party purchaser, and as a condition to recognizing the
effectiveness and binding nature of any such sale and substitution of a new
Member as against the Company or otherwise, the Company may require the
Selling Member and the proposed purchaser to execute, acknowledge and deliver
to the Company such instruments of transfer, assignment and assumption and
such other certificates, representations and documents, and to perform all
such other acts, which the Company may deem necessary or desirable to:
(i) constitute such purchaser as a Member or successor-in-
interest;
(ii) confirm that the person desiring to be admitted as a Member,
has accepted, assumed and agreed to be subject and bound by all of the
terms, obligations and conditions of the Operating Agreement, as the
same may have been further amended, including any payment obligations
the Selling Member may have to the Company at the time of transfer;
(iii) preserve the status of the Company as a foreign or domestic
limited liability company after the completion of such sale, transfer,
assignment, or substitution under the laws of each jurisdiction in which
the Company is qualified, organized or does business;
(iv) maintain the status of the Company as a partnership for
federal tax purposes; and
(v) assure compliance with any applicable state and federal laws
including without limitation securities laws and regulations.
(d) Any sale or gift of a Membership Interest or admission of a Member
in compliance with this Article X shall be deemed effective as of the last day
of the calendar month in which the remaining Members' consent thereto was
given, or, if no such consent was required, then on such date that the donee
or successor in interest complies with Section 10.2(c). The Transferring
Member agrees, upon request of the Company, to execute such certificates or
other documents and perform such other acts as may be reasonably requested by
the Company from time to time in connection with such sale, transfer,
assignment, or substitution. The Transferring Member hereby indemnifies the
Company and the remaining Members against any and all loss, damage, or expense
<PAGE>
(including, without limitation, tax liabilities or loss of tax benefits)
arising directly or indirectly as a result of any transfer or purported
transfer in violation of this Article X.
(e) The foregoing right of first refusal may be waived, and consent to
transfer of a Membership Interest may be given by vote of Members holding a
Majority Interest (computed by excluding the Membership Interest of the
Transferring Member).
(f) A Member which is subject to a transfer of its Membership Interest
by operation of law or pursuant to a judicial decree or settlement of judicial
proceedings, other than a judicial decree or proceeding described in Section
10.3, shall be deemed to be a selling Member and be subject to the provisions
of Section 10.2.
10.3 Transfers by Operation of Law. (a) In the event that a Member (i)
files a voluntary petition under any bankruptcy or insolvency law, or a
petition for the appointment of a receiver, or makes an assignment for the
benefit of creditors, or (ii) is subjected involuntarily to such a petition or
assignment, or to an attachment or other legal or equitable interest with
respect to its Membership in the Company, and such involuntary petition, or
assignment, attachment or other interest is not discharged within thirty (30)
days after its date, said Member shall be deemed to have offered all of his or
her Membership Interest to the Company as provided in this Section 10.3. Such
offer shall be irrevocable for a period of ninety (90) days and within said
time period the Company may, by delivering a written notice of acceptance to
such Member, accept the offer in respect of all, but not less than all, of
said Membership Interest. If the Company does not elect to purchase all of
the Membership Interest of such Member, such Membership Interest shall be
deemed to have been offered to the remaining Members, individually, for an
additional ninety (90) days following the ninety (90) day period during which
the Company could purchase the Membership Interest. The Membership Interest
shall be subject to purchase by the remaining Members pro rata in accordance
with their then relative Percentage Interests. If the Company or the
remaining Members do not notify said selling Member of its or their decision
in respect of the Membership Interest within the applicable ninety (90) day
offering period, said offer to sell shall be deemed not to have been accepted
by the Company or the remaining Members, as the case may be.
(b) Purchase Price. The purchase price at which the Company or a
remaining Member, as the case may be, may elect to purchase all or a portion
of a Membership Interest hereunder shall be a ratable portion of the lesser of
(i) the selling Member's Capital Account balance adjusted through the date of
purchase and further adjusted by adjusting the Gross Asset Values of all
Company assets to equal their fair market value as of such date, or (ii) the
selling Member's Capital Contributions, in either case reduced by any unpaid
Capital Contributions the Selling Member is required to pay pursuant to this
Operating Agreement.
(c) Payment of Purchase Price. If the Company or any remaining Members
elect to purchase a Membership Interest in accordance with the provisions of
this Section 10.3, transfer of said Membership Interest shall be made at the
office of the Company on a mutually satisfactory business day within thirty
(30) days of acceptance of the offer to sell by the Company, or the remaining
Members, as the case may be. Delivery of instruments evidencing such transfer
to the Company or the remaining Members, as the case may be, shall be made
<PAGE>
upon receipt by the selling Member of cash representing the aggregate purchase
price for the Membership Interest.
(d) Withdrawal of Members if No Purchase. In the event that all or any
portion of the Membership Interest subject to purchase pursuant to this
Section 10.3 is not so repurchased, the Member owning such Membership Interest
shall be deemed to have withdrawn as a Member in compliance with Section 6.5
hereof and shall receive a distribution from the Company equal to the amount
specified in Section 10.3(b), unless the Company is dissolved within 60 days
of such withdrawal, in which case such Member will receive the amount
determined under Article XII.
ARTICLE XI
ADDITIONAL MEMBERS
From the date of the formation of the Company, any Person or Entity may
become a Member in the Company upon execution of all necessary documentation
to bind such person or entity to the terms of this Operating Agreement either
(i) upon approval by Members holding a Supermajority Interest by the issuance
by the Company of Membership Interests for such consideration as Members
holding a Supermajority Interest shall determine, or (ii) as a transferee of a
Member's Membership Interest or any portion thereof, upon approval of holder
of a majority of the Capital Units other than those held by the Transferring
Member, subject to the terms and conditions of this Operating Agreement. No
new Members shall be entitled to any retroactive allocation of losses, income
or expense deductions incurred by the Company. The Members may, at their
option, at the time a Member is admitted, close the Company books (as though
the Company's tax year had ended) or make pro rata allocations of loss, income
and expense deductions to a new Member for that portion of the Company's tax
year in which a Member was admitted in accordance with the provisions of
Section 706(d) of the Code and the Treasury Regulations promulgated
thereunder.
ARTICLE XII
DISSOLUTION AND TERMINATION
12.1 Dissolution.
(a) The Company shall be dissolved upon the occurrence of any of the
following events:
(i) the expiration of the Term as set forth in Section 2.5.
(ii) the election of a majority of interest of Offeree Members
under Section 10.2(a).
(iii) the written agreement of Members holding a Supermajority
Interest;
(iv) the sale or other disposition of all or substantially all of
the assets of the Company or the permanent cessation of the Company's
business operations; or
<PAGE>
(v) any other cause resulting in dissolution under the Act
provided however, that except as provided above, the Company shall have
perpetual existence so long as it has the minimum number of Members
required by the Act, and it shall not be dissolved and its affairs shall
not be wound up as a result of the death, insanity, retirement,
resignation, expulsion bankruptcy or dissolution of a Member, or the
occurrence of any other event which terminates the membership of a
Member in the Company, and in any such event the existence of the
Company shall continue without further consent of the Members, unless
the Members otherwise determine. If any action or occurrence leaves the
Company with less than the minimum number of Members required by the
Act, the existence of the Company shall nevertheless be continued if the
last remaining Member shall agree in writing to continue the existence
of the Company and to the admission of any other person as a Member of
the Company.
(b) As soon as possible following the occurrence of any of the events
specified in this Section 12.1 effecting the dissolution of the Company, the
appropriate representative of the Company shall execute a statement of intent
to dissolve in such form as shall be prescribed by the Act and file same with
the office of the Secretary of State.
(c) If a Member who is an individual dies or a court of competent
jurisdiction adjudges him to be incompetent to manage his person or his
property, the Member's executor, administrator, guardian, conservator, or
other legal representative ("Successor") may exercise all of the Member's
rights for the purpose of settling his estate or administering his property,
provided, however, that for purposes of Section 10.2, 10.3, Article XI and
Section 12.1(a)(iii), the Successor shall not be considered a Member and shall
have no right to vote, approve or consent to any matter pursuant to such
provisions and for purposes of determining voting requirements any Capital
Units held by the successor shall be deemed to be not outstanding.
12.2 Effect of Filing of Dissolving Statement. Upon the filing of a
statement of intent to dissolve with the Secretary of State, the Company shall
cease to carry on its business, except insofar as may be necessary for the
winding up of its business, but its separate existence shall continue until a
certificate of cancellation has been issued by the Secretary of State or until
a decree dissolving the Company has been entered by a court of competent
jurisdiction.
12.3 Winding Up, Liquidation and Distribution of Assets.
(a) Upon dissolution, the Members shall immediately proceed to wind up
the affairs of the Company in accordance with the requirements of the Act and
other applicable law. In furtherance of the winding up of the Company, the
Members shall:
(i) sell or otherwise liquidate all of the Company's assets as
promptly as practicable (except to the extent the Members may determine
to distribute any assets to the Members in kind);
(ii) discharge or make reasonable provision for all liabilities of
the Company, including liabilities to Members who are also creditors
(other than liabilities to Members for distributions and the return of
capital) and establish such Reserves as may be reasonably necessary to
<PAGE>
provide for contingent liabilities of the Company (for purposes of
determining the Capital Accounts of the Members, the amounts of such
Reserves shall be deemed to be an expense of the Company);
(iii) distribute the remaining assets of the Company in the
following order of priority:
(1) To each Member, with respect to the cumulative amount of
all accrued but unpaid pre-dissolution distributions for which the
Company is liable to such Member, the amount of such liability;
(2) To each Member, with respect to his unreturned capital
contribution, an amount equal to the positive balance (if any) in
his Capital Account (as determined after taking into account all
Capital Account adjustments for the Company's taxable year during
which the liquidation occurs), or, if the assets available to be
distributed hereunder are insufficient to cover the aggregate of
the Members' positive balances, a proportionate amount based upon
the relative positive balances of the Members; and
(3) To each Member with respect to his Membership Interest,
a proportionate share of the remaining assets equal to its
proportionate share of Capital Units.
(b) The Members shall cause an accounting to be made by the Company's
independent accountants of the accounts of the Company and of the Company's
assets, liabilities and operations, from the date of the last previous
accounting until the date of dissolution.
(c) If any assets of the Company are distributed in kind, the net fair
market value of such assets as of the date of dissolution shall be determined
by independent appraisal or by agreement of the Members. Such assets shall be
deemed to have been sold to the Members in proportion to their Capital Units
as of the date of dissolution for their fair market value, and the Capital
Accounts of the Members shall be adjusted to reflect such deemed sale.
(d) Notwithstanding anything to the contrary in this Agreement, upon a
liquidation, if any Member has a Deficit Capital Account (after giving effect
to all contributions, distributions, allocations and other Capital Account
adjustments for all taxable years, including the year during which such
liquidation occurs), such Member shall have no obligation to make any Capital
Contribution, and the negative balance of such Member's Capital Account shall
not be considered a debt owed by such Member to the Company or to any other
person for any purpose whatsoever.
12.4 Certificate of Cancellation. Upon completion of the winding up,
liquidation and distribution of the assets, the Company shall be deemed
terminated and the Members shall forthwith file with the Secretary of State a
certificate of cancellation. Thereafter, the Members, as liquidating trustees,
shall have authority to distribute any Company property discovered after
termination, convey real estate and take such other action as may be necessary
on behalf of and in the name of the Company.
12.5 Return of Capital Contribution - Nonrecourse. Except as provided
by law or as expressly provided in this Agreement, upon dissolution, each
Member shall look solely to the assets of the Company for the return of his
<PAGE>
Capital Contribution. If the Company property remaining after the payment or
discharge of the debts and liabilities of the Company is insufficient to
return the Capital Contribution of a Member, such Member shall have no
recourse against any other Member.
12.6 Breach of Operating Agreement; Remedies; Survival. The parties
agree and acknowledge that, in addition to any other remedies specifically set
forth herein, in the event of a breach of any provision of this Operating
Agreement by a Member, the Company and the non-breaching Members shall be
entitled to receive from the breaching Member any and all damages suffered by
them as a result of such breach, together with all expenses incurred in
connection with the enforcement of this Operating Agreement and the collection
of such damages, including reasonable attorneys' fees. Without limitation of
any other means of recourse, in order to collect any amounts owing hereunder,
the Company and such non-breaching Members shall be entitled to set off
against, withhold, proceed against or collect or receive directly from the
Company, as applicable, all or any part of the breaching Member's Membership
Interest, any distributions with respect thereto and, following the withdrawal
of such Member or the dissolution of the Company, any amounts payable to the
breaching Member pursuant to this Operating Agreement. The obligations of the
Members hereunder shall survive the withdrawal of any Member and the
dissolution or termination of the Company.
ARTICLE XIII
ARBITRATION AND INJUNCTION
Any and all disputes arising out of, under, in connection with, or
relating to this Operating Agreement, the breach or any alleged breach
thereof, including disputes regarding the Capital Accounts or any Termination
of Membership for Cause, which cannot be settled through good faith
negotiations or other agreed upon procedures, shall be settled by arbitration
conducted in accordance with the rules and regulations of the American
Arbitration Association. Because of the unique relationship of the Members in
the Company and the unique value of their interests therein, this provision
for arbitration shall not prevent any party from applying for and obtaining
injunctive relief (i) as provided in Section 10.1, or (ii) in instances where,
in the absence thereof, the rights of such party cannot be adequately
protected by an arbitrator's award. Unless the parties otherwise agree, the
arbitration proceedings shall be conducted before a three-person arbitration
panel. Each party shall select an arbitrator within 20 business days of the
first written demand for arbitration. If a party fails to designate an
arbitrator within such time, the other party may designate two arbitrators.
The arbitrators shall then promptly designate a third arbitrator, who shall be
a neutral arbitrator and chairman of the panel. All arbitrators appointed
shall be individuals knowledgeable about public accountancy. No member of the
arbitration panel may be an attorney representing any party to such
proceeding. The arbitration shall be held in Boston, Massachusetts, unless
otherwise agreed. Each party shall share equally the costs and fees of such
arbitration, including compensation to the arbitrators for their time spent in
arriving at their determination. The award rendered by the arbitrators shall
be final and binding, and judgment may be entered upon the award in accordance
with applicable law in any court of competent jurisdiction.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
<PAGE>
14.1 Notices. Any notice, demand, or communication required or
permitted to be given by any provision of this Operating Agreement shall be
deemed to have been sufficiently given or served for all purposes if delivered
personally to the party or to an executive officer of the party to whom the
same is directed or, if sent by registered or certified mail, postage and
charges prepaid, addressed to the Member's and/or Company's address, as
appropriate, which is set forth in this Operating Agreement. Except as
otherwise provided herein, any such notice shall be deemed to be given three
business days after the date on which the same was deposited in a regularly
maintained receptacle for the deposit of United States mail, addressed and
sent as aforesaid.
14.2 Books of Account and Records. The Company shall maintain all
records and documents required by and in accordance with the Act. Proper and
complete records and books of account shall be kept or shall be caused to be
kept by the Members or officers of the Company in which shall be entered fully
and accurately all transactions and other matters relating to the Company's
business in such detail and completeness as is customary and usual for
businesses of the type engaged in by the Company, and in accordance with
generally accepted accounting principles. The books and records shall be at
all times be maintained at the principal executive office of the Company and
shall be open to the reasonable inspection and examination of the Members, or
their duly authorized representatives, during reasonable business hours. The
Company shall be audited annually by independent auditors chosen by Members
and the audited financial statements of the Company shall be made available to
the Members within 90 days of the end of each fiscal year or as soon
thereafter as such statements are available to the Company.
14.3 Application of Maine Law. This Operating Agreement, and the
application and interpretation hereof, shall be governed exclusively by its
terms and by the laws of the State of Maine.
14.4 Amendments. Other than as expressly provided herein, this
Operating Agreement may not be amended except by the written consent of
Members holding at least a Supermajority Interest; provided, however, that no
such amendment may be effected that would require any additional Capital
Contributions without the written consent of each Member, and further provided
that Section 14.15 shall not be amended without the consent of AllEnergy, so
long as it is a Member.
14.5 Execution of Additional Instruments. Each Member hereby agrees to
execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply
with any laws, rules or regulations.
14.6 Construction. Whenever the singular number is used in this
Operating Agreement and when required by the context the same shall include
the plural and vice versa, and the masculine gender shall include the feminine
and neuter genders and vice versa.
14.7 Headings and Pronouns. The headings in this Operating Agreement
are inserted for convenience and are in no way intended to describe,
interpret, define, or limit the scope, extent or intent of this Operating
Agreement or any provision hereof. All pronouns and only variations thereof
shall be deemed to refer to masculine, feminine, or neuter, singular or plural
as the identity of the Person or Persons may require.
<PAGE>
14.8 Waivers. The failure of any party to seek redress for violation of
or to insist upon the strict performance of any covenant or condition of this
Operating Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of an original
violation.
14.9 Rights and Remedies Cumulative. The rights and remedies provided
by this Operating Agreement are cumulative and the use of any one right or
remedy by any party shall not preclude or waive the right to use any or all
other remedies. Said rights and remedies are given in addition to any other
rights the parties may have by law, statute, ordinance or otherwise.
14.10 Severability. If any provision of this Operating Agreement or the
application thereof to any person or circumstance shall be invalid, illegal or
unenforceable to any extent, the remainder of this Operating Agreement and the
application there of shall not be affected and shall be enforceable to the
fullest extent permitted by law.
14.11 Heirs, Successors and Assigns. Each and all of the covenants,
terms, provisions and agreements herein contained shall be binding upon and
inure to the benefit of the parties hereto and, to the extent permitted by
this Operating Agreement, their respective heirs, legal representatives,
successors and assigns.
14.12 Creditors. None of the provisions of this Operating Agreement
shall be for the benefit of or enforceable by any creditors of the Company
except as required by the Act.
14.13 Counterparts. This Operating Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
14.14 Integration. This Operating Agreement constitutes the parties'
entire agreement with respect to the subject matter hereof and thereof, and
supersedes any and all prior oral or written agreements or understandings with
respect thereto.
14.15 The Members acknowledge that AllEnergy and the Company are
subject to regulation by the U.S. Securities and Exchange Commission (the
"SEC") under PUHCA and that AllEnergy is acquiring an interest in the Company
as an "energy related company" pursuant to the exemption of Rule 58
promulgated under PUHCA. The Members agree that the Company shall not
undertake or pursue any business activity (including, without limitation, the
acquisition of Target Companies) unless such business activity is one that may
be undertaken by an "energy related company" as such term is defined under
such Rule 58; provided, however, that, notwithstanding the foregoing, the
Company may undertake a business activity if (i) such business activity is
specifically authorized by an order of the SEC issued under PUHCA, or (ii) in
the opinion of counsel to AllEnergy, PUHCA is no longer applicable to the
Membership Interest of AllEnergy.
14.16 Publicity. No Member shall make any press release or other
public statements concerning the Company or its business without the consent
of the other Members.
<PAGE>
14.17 Confidentiality. Each Member recognizes that the confidential
and proprietary information of each other Member constitutes a valuable asset
and agrees that a Member's confidential and proprietary information shall
remain the exclusive property of such Member. No Member shall use or disclose
to any third party any confidential information of another Member without that
Member's express written consent. For purposes hereof, confidential
information shall mean all financial and business information, marketing
plans, trade secrets, customer lists and other information concerning a Member
which is not known to the public generally. This Section 14.17 shall survive
termination of this Operating Agreement and may not be amended or modified
without the consent of all Members.
IN WITNESS WHEREOF, the Members have signed and sealed this Operating
Agreement as of the date first written above.
MEMBERS
WITNESS DEAD RIVER COMPANY
By:
Its
ALLENERGY MARKETING COMPANY, LLC
By:
Its
<PAGE>
EXHIBIT A
TO
AEDR FUELS LLC
OPERATING AGREEMENT
List of Members
Name Address Initial Cash Aggregate Percentage
Capital Required Interest
Contribution Additional (%)
Capital
AllEnergy 95 Sawyer Road $0 $10,000,000 50%
Marketing Waltham, MA 02154
Company, LLC
Dead River One Dana Street $0 $10,000,000 50%
Company P.O. Box 17577
Portland, ME 04112-8755
As in effect from and after December __, 1997
<PAGE>
EXHIBIT B
TO
AEDR FUELS LLC
OPERATING AGREEMENT
[FORM OF TRADEMARK LICENSING AGREEMENT]
<PAGE>
EXHIBIT B.4.b
Amended 3/27/98
B Y - L A W S
OF
GRANITE STATE ELECTRIC COMPANY
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of stockholders shall be
held at such place within or without New Hampshire as the president or a
majority of the directors may designate, 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 articles
of incorporation 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-tenth 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 within or without New Hampshire by the
president, the treasurer, or by a majority of the directors, and shall be
called by the secretary, or in case of the death, absence, incapacity or
refusal of the secretary, 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-tenth part in interest of the capital stock entitled to
vote at the meeting, stating the time, place and purpose of the meeting. No
business shall be transacted at a special meeting except as is included within
the notice of said meeting.
Section 3. Action Without a Meeting. Any action required or permitted
to be taken at any meeting of the stockholders may be taken without a meeting
if all the stockholders consent to the action in writing and the written
consents are filed with the records of the meetings of stockholders. Such
consents shall be treated for all purposes as a vote at a meeting.
Section 4. 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 secretary, not
less than ten nor more than fifty 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 secretary, such notice may
be given by a person designated either by the secretary or by the person or
persons calling the meeting or by the board of directors. Meetings may be
held without notice provided all stockholders entitled to vote thereat shall
sign, either before or after the time stated in the notice, a written waiver
of notice.
<PAGE>
Section 5. 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. If less than a majority of the outstanding
shares entitled to vote are represented at a meeting, a majority of the shares
so represented may adjourn any meeting from time to time, and the meeting may
be held as adjourned without further notice. At such adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally noticed. The
stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. 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
incorporation or by these by-laws, decide any question brought before such
meeting.
Section 6. 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 months
before the meeting named therein, which shall be filed with the secretary
before being voted. Such proxies shall entitle the holders thereof to vote at
any adjournment of such meeting. No proxy shall be valid after eleven months
from the date of its execution, unless otherwise provided in the proxy, nor in
any event 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 incorporation, and by these by-laws.
Section 2. Election. A board of not less than one nor more than eleven
directors shall be chosen at the annual meeting of 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 or the board of directors 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 to the number so fixed. No
director need be a stockholder. Subject to law, to the articles of
incorporation, 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.
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
<PAGE>
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.
Section 5. Telephonic or Similar Directors' Meetings. Any action
required or permitted to be taken at any meeting of the board of directors may
be taken without a meeting if all the directors consent to the action in
writing and the written consents are filed with the records of the meetings of
directors. Such consents shall be treated for all purposes as a vote at a
meeting.
Section 6. 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 7. 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.
Section 8. Removals. The stockholders may at any special meeting
called for the purpose, by vote of a majority of the capital stock issued,
remove from office any director, with or without cause, and elect his
successor.
Section 9. Vacancies. If the office of any director is vacant for any
reason, including an increase in the number of directors, the remaining
directors, though less than a quorum, may elect a successor or successors who
shall hold office for the unexpired term. If, for any reason, the remaining
directors do not elect such successor or successors, the stockholders may
elect such successor or successors.
ARTICLE III
OFFICERS AND AGENTS
Section 1. Election and Appointment. The officers shall be a
president, a secretary, a treasurer, and such other officers and agents as the
board of directors may in their discretion appoint. The president and each
other officer shall be elected annually by the board of directors after its
election by the stockholders. So far as is permitted by law, any two or more
offices may be filled by the same person. Subject to law, to the articles of
incorporation, and to the other provisions of these by-laws, the president and
each other officer shall hold office until the first meeting of directors
after the next annual meeting of stockholders and until his successor is
chosen and qualified unless sooner removed by vote of the board of directors.
Each officer shall, subject to these by-laws, have in addition to the duties
and powers herein set forth such duties and powers as the board of directors
shall from time to time designate.
<PAGE>
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 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.
Any vice presidents shall have such powers as the board of directors
shall from time to time designate.
Section 3. Secretary. The secretary shall keep an accurate record of
the proceedings of all meetings of the stockholders and of the board of
directors 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 secretary at any
meeting of the stockholders or the board of directors, the proceedings of such
meeting shall be recorded by an assistant secretary, or if there be none or he
is absent, by a temporary secretary chosen at the meeting. The secretary and
any such assistant or temporary secretary shall be sworn.
Section 4. Treasurer and Assistant 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 may require.
Any assistant treasurer shall have such powers as the board of directors
shall from time to time designate.
Section 5. Removals. The board of directors may, by vote of a majority
of their entire number as fixed by the stockholders, remove from office any
officer or agent of the corporation with or without cause.
Section 6. 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 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 5 of this Article III.
ARTICLE IV
CAPITAL STOCK
Section 1. Certificates. 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 secretary or an assistant secretary, and shall bear the
seal of the corporation.
<PAGE>
Section 2. Transfer Books; Record Date. 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, not more than thirty
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 thirty-day
period.
The treasurer or agent having charge of the stock transfer books for
shares of the corporation shall make a complete record of the stockholders
entitled to vote at each meeting of stockholders or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each. Such record shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any stockholder
during the whole time of the meeting.
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
Section 1. General. The corporation shall indemnify each of its
directors and officers, as defined in the last section of this Article,
against any loss, liability, or expense, including amounts paid in
<PAGE>
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, 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 such 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; 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 interests of the corporation, after notice that it involves
such indemnification, (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 stock outstanding and entitled to
vote thereon, exclusive of any stock owned by any interested director or
office.
Section 2. Books and Reports. 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.
Section 3. Regulatory Orders. No director or officer, as defined in
the last Section of this Article, 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 Federal Power
Act, or any other Federal statute or any state statute regulating the
corporation or a subsidiary, if any, by reason of their being 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 Section described,
the provisions hereof shall be brought to the attention of the court. In the
event that the foregoing provisions of this Section 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 provide 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 not be limited to, judgments, court costs, and attorney's fees.
<PAGE>
Section 4. Advance of Expenses. Expenses incurred with respect to any
action, suit, or proceeding heretofore referred to in this Article may 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 unless it is ultimately determined that he is
entitled to indemnification.
Section 5. Rights not Exclusive. The rights of indemnification hereby
provided 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.
Section 6. Definitions. As used in this Article, the terms "director"
and "officer" are the directors and officers elected and appointed by the
stockholders and directors and include persons who serve at the request of the
corporation as directors, officers, or trustees of another organization in
which the corporation has any direct or indirect interest as a shareholder,
creditor or otherwise. 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. Nothing contained in this Article
shall affect any rights to indemnification to which the corporation personnel
other than directors and officers may be entitled by contract or otherwise
under law.
ARTICLE VI
SEAL
The seal of the corporation shall be circular in form and shall have
engraved in its margin such words and figures as the directors may determine.
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
<PAGE>
These by-laws may be amended, altered, or repealed at any annual meeting
of the stockholders without previous notice or at any special meeting of the
stockholders, provided notice of the proposed amendment, alteration, or repeal
is given in the notice of said meeting.
<PAGE>
EXHIBIT B.13.b
Amended 3/17/98
B Y - L A W S
OF
NEW ENGLAND ELECTRIC TRANSMISSION CORPORATION
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of stockholders shall
be held at the office of the corporation in Concord, New Hampshire, or at such
other place within or without New Hampshire 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
incorporation, 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-tenth 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 within or without New Hampshire by the
president, by the treasurer, or by a majority of the directors, and shall be
called by the secretary, or in case of the death, absence, incapacity, or
refusal of the secretary, 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-tenth part in interest of the capital stock entitled to
vote at the meeting, stating the time, place, and purpose of the meeting.
Section 3. Action Without a Meeting. Any action required or
permitted to be taken at any meeting of the stockholders may be taken without
a meeting if all the stockholders consent to the action in writing and the
written consents are filed with the records of the meetings of stockholders.
Such consents shall be treated for all purposes as a vote at a meeting.
Section 4. 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 secretary, not
less than ten nor more than fifty 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 secretary, such notice may
be given by a person designated either by the secretary or by the person or
persons calling the meeting or by the board of directors. Meetings may be
held without notice provided all stockholders entitled to vote thereat shall
sign, either before or after the time stated in the notice, a written waiver
of notice.
<PAGE>
Section 5. 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. If less than a majority of the outstanding
shares entitled to vote are represented at a meeting, a majority of the shares
so represented may adjourn any meeting from time to time, and the meeting may
be held as adjourned without further notice. At such adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally noticed. The
stockholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. 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
incorporation, or by these by-laws, decide any question brought before such
meeting.
Section 6. 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
months before the meeting named therein, which shall be filed with the
secretary before being voted. Such proxies shall entitle the holders thereof
to vote at any adjournment of such meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy, nor in any event 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 incorporation, and by these
by-laws.
Section 2. Election. A board of not less than one director shall be
chosen at the annual meeting of 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 to the
number so fixed. No director need be a stockholder. Subject to law, to the
articles of incorporation, 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
<PAGE>
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.
Section 5. Telephonic or Similar Directors' Meetings. Any action
required or permitted to be taken at any meeting of the board of directors may
be taken without a meeting if all the directors consent to the action in
writing and the written consents are filed with the records of the meetings of
directors. Such consents shall be treated for all purposes as a vote at a
meeting.
Members of the board of directors may participate in any regular or
special meeting of the board of directors or any committee thereof by means of
a conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other at the same time,
and participation in a meeting in such a manner shall constitute presence in
person at such a meeting.
Section 6. 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 7. 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.
Section 8. Removals. The stockholders may at any special meeting
called for the purpose, by vote of a majority of the capital stock issued,
remove from office any director, with our without cause, and elect his
successor.
Section 9. Vacancies. If the office of any director is vacant for
any reason, including an increase in the number of directors, the remaining
directors, though less than a quorum, may elect a successor or successors who
shall hold office for the unexpired term. If, for any reason, the remaining
directors do not elect such successor or successors, the stockholders may
elect such successor or successors.
ARTICLE III
OFFICERS AND AGENTS
Section 1. Election and Appointment. The officers shall be a
president, a secretary, a treasurer, and such other officers and agents as the
board of directors may in their discretion appoint. The president and each
other officer shall be elected annually by the board of directors after its
election by the stockholders. The president shall be a director. So far as
is permitted by law, any two or more offices may be filled by the same person.
Subject to law, to the articles of incorporation, and to the other provisions
of these by-laws, the president and each other officer shall hold office until
the first meeting of directors after the next annual meeting of stockholders
and until his successor is chosen and qualified unless sooner removed by vote
of the board of directors. Each officer shall, subject to these by-laws, have
<PAGE>
in addition to the duties and powers herein set forth 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 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.
Any vice presidents shall have such powers as the board of directors
shall from time to time designate.
Section 3. Secretary. The secretary shall keep an accurate record
of the proceedings of all meetings of the stockholders and of the board of
directors 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 secretary at any
meeting of the stockholders or the board of directors, the proceedings of such
meeting shall be recorded by an assistant secretary, or if there be none or he
is absent, by a temporary secretary chosen at the meeting. The secretary and
any such assistant or temporary secretary shall be sworn.
Section 4. Treasurer and Assistant 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 may require.
Any assistant treasurer shall have such powers as the board of
directors shall from time to time designate.
Section 5. Removals. The board of directors may, by vote of a
majority of their entire number as fixed by the stockholders, remove from
office any officer or agent of the corporation with or without cause.
Section 6. 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 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 5 of this Article III.
ARTICLE IV
CAPITAL STOCK
Section 1. Certificates. 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 secretary or an assistant secretary, 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, not more than
thirty 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 thirty-day
period.
The treasurer or agent having charge of the stock transfer books for
shares of the corporation shall make a complete record of the stockholders
entitled to vote at each meeting of stockholders or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each. Such record shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any stockholder
during the whole time of the meeting.
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
Section 1. General. The corporation shall indemnify each of its
directors and officers, as defined in the last section of this Article,
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
<PAGE>
the defense or disposition of any action, suit, or other proceeding, whether
civil or criminal, 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 such 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; 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 interests of the corporation, after notice that it involved
such indemnification, (a) by a disinterested majority of the directors then in
office, or (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 stock outstanding and entitled to
vote thereon, exclusive of any stock owned by any interested director or
officer.
Section 2. Books and Reports. 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.
Section 3. Regulatory Orders. No director or officer, as defined in
the last section of this Article, 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 Federal Power
Act, or any other Federal statute or any state statute regulating the
corporation or a subsidiary, if any, by reason of their being 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 Section described,
the provisions hereof shall be brought to the attention of the court. In the
event that the foregoing provisions of this Section 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.
<PAGE>
Section 4. Advance of Expenses. Expenses incurred with respect to
any action, suit, or proceeding heretofore referred to in this Article may 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 unless it is ultimately determined that he is
entitled to indemnification.
Section 5. Rights not Exclusive. The rights of indemnification
hereby provided 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.
Section 6. Definitions. As used in this Article, the terms
"director" and "officer" are the directors and officers elected and appointed
by the stockholders and directors and include persons who serve at the request
of the corporation as directors, officers, or trustees of another organization
in which the corporation has any direct or indirect interest as a shareholder,
creditor, or otherwise. 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. Nothing contained in this Article
shall affect any rights to indemnification to which the corporation personnel
other than directors and officers may be entitled by contract or otherwise
under law.
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 "New England
Electric Transmission Corporation" and "1981 - New Hampshire" cut or engraved
thereon.
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.
<PAGE>
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 the meeting.
<PAGE>
EXHIBIT B.16.b
Amended 3/17/98
B Y - L A W S
OF
NEW ENGLAND HYDRO-TRANSMISSION CORPORATION
ARTICLE I
STOCKHOLDERS
Section 1. Classes. The common stock of the corporation contains two
classes of stock: Class A Common Stock and Class B Common Stock. Holders of
the Class A Common Stock shall have general voting power. Holders of the
Class B Common Stock shall not be entitled to vote for any purposes, except in
matters specifically provided under Section 60 of Chapter 293-A of the New
Hampshire Revised Statutes or corresponding provisions of any subsequent New
Hampshire law.
Section 2. Annual Meeting. The annual meeting of stockholders shall be
held at the office of the corporation in Concord, New Hampshire, or at such
other place 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 business 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 incorporation, 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 three or more stockholders
who are entitled to vote and who hold at least one-tenth 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 3. Special Meetings. Special meetings of the stockholders may
be called to be held anywhere within or without New Hampshire by the
president, by the treasurer, or by a majority of the directors, and shall be
called by the secretary, or in case of the death, absence, incapacity, or
refusal of the secretary, 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-tenth part in interest of the capital stock entitled to
vote at the meeting, stating the time, place, and purpose of the meeting.
Section 4. Action Without a Meeting. Any action required or permitted
to be taken at any meeting of the stockholders may be taken without a meeting
if all the stockholders consent to the action in writing and the written
consents are filed with the records of the meetings of stockholders. Such
consents shall be treated for all purposes as a vote at a meeting.
<PAGE>
Section 5. 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 secretary, not
less than ten nor more than fifty 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 secretary, such notice may
be given by a person designated either by the secretary or by the person or
persons calling the meeting or by the board of directors. Meetings may be
held without notice provided all stockholders entitled to vote thereat shall
sign, either before or after the time stated in the notice, a written waiver
of notice.
Section 6. Quorum. At any meeting of the stockholders, a majority of
the shares of stock of the corporation 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. If less than a majority of the
outstanding shares entitled to vote are represented at a meeting, a majority
of the shares so represented may adjourn any meeting from time to time, and
the meeting may be held as adjourned without further notice. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally noticed. The stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum. 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 incorporation, or by these by-laws, decide any question brought
before such meeting.
Section 7. Proxies and Voting. Stockholders who are entitled to vote
shall have one vote for each share, and a proportionate vote for a fractional
share, of stock owned by them. Stockholders may vote either in person or by
proxy in writing dated not more than six months before the meeting named
therein, which shall be filed with the secretary before being voted. Such
proxies shall entitle the holders thereof to vote at any adjournment of such
meeting. No proxy shall be valid after eleven months from the day of its
execution, unless otherwise provided in the proxy, nor in any event 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 incorporation, and by these
by-laws.
Section 2. Election. A board of not less than one director 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
<PAGE>
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 one 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 of
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 sign, either before or after the
time stated in the notice, a written waiver of notice 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.
Section 5. Consent in Lieu of Director's Meetings. Any action required
or permitted to be taken at any meeting of the board of directors may be taken
without a meeting if all the directors consent to the action in writing and
the written consents are filed with the records of the meetings of directors.
Such consents shall be treated for all purposes as a vote at a meeting.
Section 6. Telephonic or Similar Director's Meetings. Members of the
board of directors may participate in any regular or special meeting of the
board of directors or any committee thereof by means of a conference telephone
or similar communications equipment by means of which all persons
participating in the meetinng can hear each other at the same time, and
participation in a meeting in such a manner shall constitute presence in
person at such a meeting.
Section 7. Quorum. A majority of the board of directors shall
constitute a quorum for the transaction of business, but a lesser 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.
<PAGE>
Section 8. 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.
Section 9. Removals. The stockholders may at any special meeting
called for the purpose, by vote of a majority of the shares of stock of the
corporation issued and outstanding, remove from office any director, with our
without cause, and elect his successor.
Section 10. Vacancies. If the office of any director is vacant for any
reason, including an increase in the number of directors, the remaining
directors, though less than a quorum, may elect a successor or successors who
shall hold office for the unexpired term. If, for any reason, the remaining
directors do not elect such successor or successors, the stockholders may
elect such successor or successors.
ARTICLE III
OFFICERS AND AGENTS
Section 1. Election and Appointment. The officers shall be a
president, a secretary, a treasurer, and such other officers and agents as the
board of directors may in their discretion elect or appoint. The president
and each other officer shall be elected annually by the board of directors
after its election by the stockholders. The president shall be a director.
So far as is permitted by law, any two or more offices may be filled by the
same person. Subject to law, to the articles of incorporation, and to the
other provisions of these by-laws, the president and each other officer shall
hold office until the first meeting of directors after the next annual meeting
of stockholders and until his successor is chosen and qualified unless sooner
removed by vote of the board of directors. Each officer shall, subject to
these by-laws, have in addition to the duties and powers herein set forth 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 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.
Any vice presidents shall have such powers as the board of directors
shall from time to time designate.
Section 3. Secretary. The secretary shall keep an accurate record of
the proceedings of all meetings of the stockholders and of the board of
directors in books provided for the purpose, which books shall be kept at the
registered office of the corporation and shall be open at all reasonable times
to the inspection of any stockholder. In the absence of the secretary at any
meeting of the stockholders or the board of directors, the proceedings of such
meeting shall be recorded by an assistant secretary, or if there be none or he
is absent, by a temporary secretary chosen at the meeting. The secretary and
any such assistant or temporary secretary shall be sworn.
<PAGE>
Section 4. Treasurer and Assistant 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 may require.
Any assistant treasurer shall have such powers as the board of directors
shall from time to time designate.
Section 5. Removals. The board of directors may, by vote of a majority
of their entire number as fixed by the stockholders, remove from office any
officer or agent of the corporation with or without cause.
Section 6. 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 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 5 of this Article III.
ARTICLE IV
TRANSACTIONS OF INTERESTED
OFFICERS OR DIRECTORS
No director or officer of this corporation shall be disqualified by his
office from dealing or contracting with this corporation as a vendor,
purchaser, or otherwise, and no transaction or contract of this corporation
shall be void or voidable by reason of the fact that any director or officer
of this corporation or any firm of which any such director or officer is a
member or employee or any corporation of which any such director or officer is
a shareholder, officer, director, or employee, is in any way interested in
such transaction or contract, provided that, after such interest shall have
been disclosed, such transaction or contract is or shall be authorized,
ratified, or approved either (1) by vote of a majority of the Board of
Directors, exclusive of any director or officer so interested in such
transaction or contract, any director or officer who is a member or employee
of a firm so interested in such transaction or contract, and any director or
officer who is a shareholder, officer, director, or employee of a corporation
so interested in such transaction or contract; or (2) by the written consent,
or by a vote at a stockholders' meeting, of the holders of record of a
majority of all the outstanding shares of stock of this corporation entitled
to vote. No director or officer or this corporation shall be liable to
account to this corporation for any profits realized by or from or through any
such transaction or contract of this corporation authorized, ratified, or
approved as aforesaid by reason of the fact that he, or any firm of which he
is a member or employee or any corporation of which he is a shareholder,
officer, director, or employee was interested in such transaction or contract.
Nothing herein contained shall create liability in the events above described
or prevent the authorization, ratification or approval of such contracts or
transactions in any other manner provided by law.
<PAGE>
ARTICLE V
INDEMNIFICATION
Section 1. General. The corporation shall indemnify each of its
directors and officers, as defined in Section 6 of this Article V, 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, 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 such 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; 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 interests of the corporation, after notice that it involved such
indemnification, (a) by a disinterested majority of the directors then in
office, or (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 stock outstanding and entitled to
vote thereon, exclusive of any stock owned by any interested director or
officer.
Section 2. Books and Reports. 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.
Section 3. Regulatory Orders. No director or officer, as defined in
Section 6 of this Article V, 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 Federal Power Act, or any
other Federal statute or any state statute regulating the corporation or a
subsidiary, if any, by reason of their being 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 Section described, the provisions
hereof shall be brought to the attention of the court. In the event that the
foregoing provisions of this Section 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
<PAGE>
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.
Section 4. Advance of Expenses. Expenses incurred with respect to any
action, suit, or proceeding referred to in this Article may 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 unless it is ultimately determined that he is entitled to
indemnification.
Section 5. Rights not Exclusive. The rights of indemnification hereby
provided 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.
Section 6. Definitions. As used in this Article, the terms "director"
and "officer" are the directors and officers elected and appointed by the
stockholders and directors and include persons who serve at the request of the
corporation as directors, officers, or trustees of another organization in
which the corporation has any direct or indirect interest as a shareholder,
creditor, or otherwise. 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. Nothing contained in this Article
shall affect any rights to indemnification to which the corporation personnel
other than directors and officers may be entitled by contract or otherwise
under law.
ARTICLE VI
CAPITAL STOCK
Section 1. Certificates. 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 secretary or an assistant secretary, and shall bear the
seal of the corporation.
Section 2. Transfer Books; Record Date. 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.
<PAGE>
The board of directors may fix in advance a time, not more than thirty
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. For
the purpose of determining the shareholders entitled to notice of or to vote
at a meeting of shareholders, the record date shall be set not less than ten
days preceding the date of the meeting. In lieu of 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 thirty-day period.
The treasurer or agent having charge of the stock transfer books for
shares of the corporation shall make a complete record of the stockholders
entitled to vote at each meeting of stockholders or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each. Such record shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any stockholder
during the whole time of the meeting.
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 VII
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 "New England
Hydro-Transmission Corporation " and "1984 - New Hampshire" cut or engraved
thereon.
<PAGE>
ARTICLE VIII
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 IX
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 X
CORPORATE BOOKS
The minutes of the proceedings of the Shareholders and Board of
Directors of the corporation shall be kept in the City of Concord in the State
of New Hampshire.
ARTICLE XI
AMENDMENTS
These by-laws may be amended, altered, or repealed or new by-laws may be
adopted at any meeting of the stockholders (or, prior to the issue of the
initial capital stock, at any meeting of the Board of Directors), provided
notice of the proposed amendment, alteration, repeal, or adoption is given in
the notice of the meeting.
<PAGE>
EXHIBIT B.17.b
Amended 3/17/98
BY-LAWS
OF
NEW ENGLAND HYDRO-TRANSMISSION ELECTRIC COMPANY, INC.
ARTICLE I
STOCKHOLDERS
Section 1. Classes. The common stock of the corporation contains two
classes of stock: Class A Common Stock and Class B Common Stock. Holders of
the Class A Common Stock shall have general voting power. Holders of the
Class B Common Stock shall not be entitled to vote for any purposes, except in
matters specifically provided under Section 8A(b) of Chapter 164 of the
Massachusetts General Laws or corresponding provisions of any subsequent
Massachusetts law.
Section 2. 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 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
three or more stockholders who are entitled to vote and who hold at least
one-tenth 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 3. 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 the 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-tenth part in interest of the
capital stock entitled to vote at the meeting, stating the time, place and
purpose of the meeting.
Section 4. 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
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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 5. 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 agreement of association or by these by-laws, decide
any question brought before such meeting.
Section 6. Proxies and Voting. Stockholders who are entitled to vote
shall have one vote for each share of common stock owned by them of the class
entitled to vote on the questions. Stockholders may vote either in person or
by proxy in writing dated not more than six 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 agreement of association and by these by-laws.
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 of
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
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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.
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 IIA
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
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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,
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
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.
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(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 April 1, 1988, 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 April 1, 1988. 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 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. 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. 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.
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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.
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 directors, 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 III. The stockholders may at any time
fill any and all vacancies arising in the office of directors, treasurer or
clerk.
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ARTICLE IV
CAPITAL STOCK
Section 1. Certificates. 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.
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, not more than thirty
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 diseent, 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 thirty-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
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Section 1. General. The corporation shall indemnify each if its
directors and officers, as defined in the last section of this Article,
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, 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 such 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; 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 interests of the corporation, after notice that it involved such
indemnification, (a) by a disinterested majority of the directors then in
office, or (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 stock outstanding and entitled to
vote thereon, exclusive of any stock owned by any interested director or
officer.
Section 2. Books and Reports. 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.
Section 3. Regulatory Orders. No director or officer, as defined in
the last Section of this Article, 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 Federal Power
Act, or any other Federal statute or any state statute regulating the
corporation or a subsidiary, if any, by reason of their being 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 Section described, the provisions hereof shall be brought
to the attention of the court. In the event that the foregoing provisions of
this Section 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
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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.
Section 4. Advance of Expenses. Expenses incurred with respect to any
action, suit or proceeding heretofore referred to in this Article may 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 unless it is ultimately determined that he is
entitled to indemnification.
Section 5. Rights not Exclusive. The rights of indemnification hereby
provided 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.
Section 6. Definitions. As used in this Article, the terms "director"
and "officer" are the directors and officers elected and appointed by the
stockholders and directors and include persons who serve at the request of the
corporation as directors, officers, or trustees of another organization in
which the corporation has any direct or indirect interest as a shareholder,
creditor or otherwise. 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. Nothing contained in this Article
shall affect any rights to indemnification to which the corporation personnel
other than directors and officers may be entitled by contract or otherwise
under law.
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 "New England
Hydro-Transmission Electric Company, Inc." and "1984 - Massachusetts" cut or
engraved thereon.
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.
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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.
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EXHIBIT B.20.a
THE COMMONWEALTH OF MASSACHUSETTS
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF MERGER
(General Laws, Chapter 156B, Section 78)
Merger of NEES Acquisition, Inc.
and
New England Water Heater Co., Inc.
the constituent corporations, into
New England Water Heater Co., Inc.
one of the constituent corporations
The undersigned officers of each of the constituent corporations certify under
the penalties of perjury as follows:
An agreement of merger has duly been adopted in compliance with the
requirements of General Laws, Chapter 156B, Section 78, and will be kept
as provided by Subsection (d) thereof. The surviving corporation will
furnish a copy of said agreement to any of its stockholders, or to any
person who was a stockholder of any constituent corporation, upon
written request without charge.
2. The effective date of the merger determined pursuant to the agreement of
merger shall be the date approved and filed by the Secretary of the
commonwealth. If a later effective date is desired, please specify such
date which shall not be more than thirty days after the date of filing:
3. The following amendments to the Articles of Organization of the
surviving corporation have been effected pursuant to the agreement of
merger:
Articles II, III, V and VI are being amended. See Attachment 1
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ATTACHMENT 1
The following amendments to the Articles of Organization of the
surviving corporation have been effected pursuant to the agreement of merger:
Article II - The purpose of the corporation is to engage in the following
business activities:
The principal purpose for which the Corporation is organized
is to rent water heaters and provide a range of energy-
related services.
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 the law.
Article III - The type and classes of stock and the total number of shares
and par value, if any, of each type and class of stock which
the corporation is authorized to issue is as follows:
Without Par Value Stocks With Par Value Stocks
TYPE Number of Shares TYPE Number of Shares Par Value
COMMON: ---- COMMON: 1,000 $.01
PREFERRED: ---- PREFERRED: ----- ----
Article V - The restrictions, if any, imposed by the Articles of
Organization upon the transfer of stock of any class are as
follows:
None
Article VI - Other Provisions
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.
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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 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 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
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.
<PAGE>
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 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 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 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 being applicable to the particular
class of plaintiff, each such director and officer shall
be reimburse 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
thecorporation 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
<PAGE>
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
<PAGE>
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 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 occurring prior to such amendment or
repeal.
4. The information contained in Item 4 is not a permanent part of the
Articles of Organization of the "surviving" corporation.
(a) The street address of the "surviving" corporation in
Massachusetts is:
40 Washington Street
Wellesley, MA 02181
(b) The name, residential address, and post office address of each
director and officer of the "surviving" corporation is:
<TABLE>
<CAPTION>
Name Residential Address Post Office Address
<C> <S> <S> <S>
President: Richard R. Duperey 80 Middle Street 40 Washington Street
Lexington, MA 02173 Wellesley, MA 02181
Treasurer: Robert H. McLaren 6 Liberty Tree Lane 25 Research Drive
Shrewsbury, MA 01545 Westborough, MA 01582
Clerk: Gregory A. Hale 39 Old Village Road 25 Research Drive
Sturbridge, MA 01566 Westborough, MA 01582
Directors: Richard R. Duperey 80 Middle Street 40 Washington Street
Lexington, MA 02173 Wellesley, MA 02181
Alfred D. Houston 19 Tanglewood Road 25 Research Drive
Wellesley, MA 02181 Westborough, MA 01582
Cheryl A. LaFleur 2 Lilac Circle 25 Research Drive
Wellesley, MA 02181 Westborough, MA 01582
Richard P. Sergel 34 Brook Street 25 Research Drive
Wellesley, MA 02181 Westborough, MA 01582
</TABLE>
<PAGE>
(c) The fiscal year (i.e. tax year) of the "surviving" corporation
shall end on the last day of the month of:
December
(d) The name and business address of the resident agent, if any, of
the "surviving" corporation is:
Richard R. Duperey 40 Washington Street Wellesley, MA 02181
The undersigned officers of the several constituent corporations listed
above further state under the penalties of perjury as to their respective
corporations that the agreement of merger has been duly executed on behalf of
said corporation and duly approved by the stockholders of such corporation in
the manner required by General laws, Chapter 156B, Section 78.
Anthony C. Pini ____________________________ Vice President
Gregory A. Hale ____________________________ Clerk
of NEES Acquisition, Inc.
Richard R. Duperey ____________________________ President
Richard R. Duperey ____________________________ Clerk
of New England Water Heater Co., Inc.
<PAGE>
EXHIBIT B.20.b
B Y - L A W S
OF
NEW ENGLAND WATER HEATER CO., INC.
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting. The annual meeting of the stockholders shall
be held at the principal office of the corporation or at such other place in
Massachusetts as the president or a majority of the directors may designate,
on the fourth Friday in 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 of Stockholders. 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. No business shall be transacted at a
special meeting except as is included within the notice of said meeting.
Section 3. Action Without a Meeting. Any action required or permitted
to be taken at any meeting of the stockholders may be taken without a meeting
if all the stockholders consent to the action in writing and the written
consents are filed with the records of the meetings of stockholders. Such
consents shall be treated for all purposes as a vote at a meeting.
Section 4. Notice of Meetings of Stockholders. 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 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
<PAGE>
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.
Section 5. Quorum of Stockholders. 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.
Section 6. 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
BOARD OF DIRECTORS
Section 1. 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 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 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 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. 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 death,
resignation, removal or disqualification of one or more directors. No
director need be a stockholder. Subject to law, to the articles of
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.
<PAGE>
Section 3. Regular 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 same place as the annual
meeting of stockholders, or the special meeting of stockholders held in place
of such annual meeting.
Section 4. Special Meetings of the Board of Directors. 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.
Section 5. Consent in Lieu of Director's Meetings. Any action required
or permitted to be taken at any meeting of the board of directors may be taken
without a meeting if all of the directors consent to the action in writing and
the written consents are filed with the records of the meetings of directors.
Such consents shall be treated for all purposes as a vote at a meeting.
Section 6. Telephonic or Similar Director's Meetings. Members of the
board of directors may participate in any regular or special meeting of the
board of directors or any committee thereof by means of a conference telephone
or similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same time, and
participation in a meeting in such a manner shall constitute presence in
person at such a meeting.
Section 7. 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. 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 8. 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.
Section 9. Vacancies in Board of Directors. If the office of any
director is vacant for any reason, including an increase in the number of
directors, the remaining directors, though less than a quorum, may elect a
successor or successors who shall hold office for the unexpired term. If, for
any reason, the remaining directors do not elect such successor or successors,
the stockholders may elect such successor or successors.
ARTICLE III
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
<PAGE>
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.
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
<PAGE>
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
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 board of directors of the corporation
on the later of March 1, 1988, or the date the director or officer seeking
<PAGE>
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.
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 IV
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, to the articles of organization,
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 President. 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.
<PAGE>
Section 3. Clerk. The clerk shall keep an accurate record of the
proceedings of all meetings of the stockholders and of the board of directors
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 at any such
meeting the proceedings of such meeting shall be recorded by an assistant
clerk, or if there be none, or if he is absent, by a temporary clerk chosen of
the meeting in the aforesaid books. The clerk and any assistant clerk shall
be sworn.
Section 4. Treasurer and Assistant 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 or executive committee shall require.
Any assistant treasurer shall have such powers as the board of directors
or executive committee shall from time to time designate.
Section 5. Removals of Directors, Officers, and Agents. 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 6. 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, 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 IV.
ARTICLE V
CAPITAL STOCK
Section 1. Certificates. 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 or executive committee. 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.
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 or
executive committee 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
<PAGE>
and a register of all the stockholders, their addresses and the number of
shares held by each in books provided and approved by the board of directors
or executive committee for that purpose. The transfer books of the capital
stock of the corporation may be closed for such period from time to time in
anticipation of stockholders' meetings or the declaration or payment of
dividends, as the board of directors or executive committee may determine.
Section 3. Transfer of Shares. Subject to the restrictions, if any,
imposed by the articles of incorporation, 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 VI
SEAL
The seal of the corporation shall, subject to alteration by the board of
directors or executive committee, consist of a flat-faced circular die with
the words "NEES ACQUISITION, INC. INCORPORATED MASSACHUSETTS 1998" cut or
engraved thereon.
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.
<PAGE>
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 X, 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 B.21
LIMITED LIABILITY COMPANY AGREEMENT
OF
METROWEST REALTY, L.L.C.
THIS LIMITED LIABILITY COMPANY AGREEMENT of Metrowest Realty, L.L.C.
(the "LLC"), dated as of December 17, 1998, is made by New England Electric
System as the sole member of the LLC. Additional members of the LLC may be
admitted as provided herein. New England Electric System, together with any
such additional members, is hereinafter referred to as a "Member" or
"Members."
New England Electric System, intending to form a limited liability
company pursuant to the Delaware Limited Liability Company Act (the "Act"),
hereby agrees as follows:
1. Name of LLC. The name of the LLC is Metrowest Realty, L.L.C.
2. Business of LLC; Purposes and Powers.
(a) The general character of the business of the LLC is to (i)
directly or indirectly hold interests in real estate and to acquire, finance,
operate and dispose of such interests and (ii) engage in any lawful act or
activity for which limited liability companies may be organized under the Act,
directly or indirectly through joint ventures, partnerships or other entities;
and to engage in any activities directly or indirectly related, necessary,
desirable or incidental thereto.
(b) The LLC shall be member-managed. All decisions respecting
any matter set forth herein or otherwise affecting or arising out of the
conduct of the business of the LLC shall be made by the Members, by action of
a majority in number thereof, unless pursuant to this Agreement, the Act or
other applicable law, a greater number or percentage of Members is required.
The Members shall have the exclusive right and full authority to manage,
conduct and operate the LLC business. Specifically, but not by way of
limitation, the Members shall be authorized, for and on behalf of the LLC:
(i) to purchase and sell interests in real estate on
behalf of the LLC;
(ii) to borrow money, to enter into, execute and deliver
indemnities, to issue evidences of indebtedness and to guarantee the debts of
others for whatever purposes they may specify, whether or not related to the
LLC or the LLC's assets, and, as security therefor, to mortgage, pledge or
otherwise encumber the assets of the LLC;
(iii) to cause to be paid on or before the due date
thereof all amounts due and payable by the LLC to any person or entity;
(iv) to employ such agents, employees, managers,
accountants, attorneys, consultants and other persons necessary or appropriate
to carry out the business and affairs of the LLC, whether or not any such
persons so employed are Members or are affiliated or related to any Member,
and to pay such fees, expenses, salaries, wages and other compensation to such
persons as the Members shall in their sole discretion determine;
<PAGE>
(v) to pay, extend, renew, modify, adjust, submit to
arbitration, prosecute, defend or compromise, upon such terms as they may
determine and upon such evidence as they may deem sufficient, any obligation,
suit, liability, cause of action or claim, including taxes, either in favor of
or against the LLC;
(vi) to pay any and all fees and to make any and all
expenditures which the Members, in their discretion, deem necessary or
appropriate in connection with the organization of the LLC, and the carrying
out of its obligations and responsibilities under this or any other Agreement;
(vii) to cause the LLC's property to be maintained and
operated in a manner which satisfies in all respects the obligations imposed
with respect to such maintenance and operation by law, by any mortgages
encumbering such property from time to time and by any lease, agreement or
rental arrangement pertaining to such property;
(viii) to cause necessary and proper repairs to be made and
supplies necessary for the proper operation, maintenance and repair of the
LLC's property to be obtained;
(ix) to lease, sell, finance or refinance all or any
portion of the LLC's property; and
(x) to exercise all powers and authority granted by the
Act to members, except as otherwise specifically provided in this Agreement.
(c) Any Member of the LLC is authorized to execute on behalf of
the LLC any documents to be filed with the Secretary of State of the State of
Delaware. Any Member is authorized to execute, acknowledge, deliver and
record on behalf of the LLC any recordable instrument purporting to affect an
interest in real property of the LLC.
(d) The signature of any one Member on any agreement, contract,
instrument or other document shall be sufficient to bind the LLC in respect
thereof and conclusively evidence the authority of such Member and the LLC
with respect thereto, and no third party need look to any other evidence or
require the joinder or consent of any other party.
3. Office of the Limited Liability Company. The LLC's registered
office in Delaware is c/o Corporation Trust Company, Corporation Trust Center,
1209 Orange Street, Wilmington, New Castle County, DE 19801. The address of
the principal place of business of the LLC is 25 Research Drive, Westborough,
Massachusetts 01582-0001.
4. Agent for Service of Process. The name and address of the agent
for service of process of the LLC in Delaware is c/o Corporation Trust
Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, DE 19801.
5. Members' Names and Business Addresses. The name and business
address of each Member is set forth on Schedule A attached hereto.
6. Term of the LLC. The term of the LLC shall commence upon the
filing of a Certificate of Formation in the Office of the Secretary of State
of the State of Delaware. The term shall continue in perpetuity until the LLC
is terminated by agreement of the Members, unless earlier dissolved upon the
occurrence of an event of dissolution under Section 18-801 of the Act
<PAGE>
(provided that, following the occurrence of such event, the LLC may be
continued pursuant to Section 12 of this Agreement or pursuant to the Act).
7. Capital Contributions; Capital Accounts; and Liability of Members.
(a) Each Member has contributed the cash or property to the
capital of the LLC set forth opposite such Member's name on Schedule A
attached hereto. Additional capital contributions may be made by any Member
if agreed to by all Members.
Except as otherwise provided in this Section 7, no Member shall be
obligated or permitted to contribute any additional capital to the LLC. No
interest shall accrue on any contributions to the capital of the LLC, and no
Member shall have the right to withdraw or to be repaid any capital
contributed by him, her or it or to receive any other payment in respect of
its interest in the LLC, including without limitation as a result of the
withdrawal or resignation of such Member from the LLC, except as specifically
provided in this Agreement.
(b) A "Capital Account" shall be maintained for each Member and
adjusted in accordance with Regulations under Section 704 of the Internal
Revenue Code of 1986, as amended (the "Code"). To the extent consistent with
such Regulations, the adjustments to such Capital Accounts shall include the
following: there shall be credited to each Member's Capital Account the
amount of any cash or the net fair market value of any property actually
contributed by such Member to the capital of the LLC and such Member's share
of the net profits of the LLC and of any items in the nature of income or gain
separately allocated to the Members; and there shall be charged against each
Member's Capital Account the amount of any cash and the net fair market value
of any property distributed to such Member and such Member's share of the net
losses of the LLC and of any items in the nature of losses or deductions
separately allocated to the Members.
(c) The liability of the Members for the losses, debts and
obligations of the LLC shall be limited to their capital contributions;
provided, however, that under applicable law, the Members may under certain
circumstances be liable to the LLC to the extent of previous distributions
made to them in the event that the LLC does not have sufficient assets to
discharge its liabilities. Without limiting the foregoing, (i) no Member, in
his, her or its capacity as a Member shall have any liability to restore any
negative balance in his, her or its Capital Account, and (ii) the failure of
the LLC to observe any formalities or requirements relating to exercise of its
powers or management of its business or affairs under this Agreement or the
Act shall not be grounds for imposing personal liability on the Members or
managers for liabilities of the LLC.
8. Return of Contributions. The contribution of each Member is to be
returned to such Member only upon the termination and liquidation of the LLC,
but contributions may be returned prior to such time if agreed upon by all
Members.
9. Share of Net Profits, Net Losses and Cash Distributions.
(a) During the term of the LLC, the net cash flow, net proceeds
of any sale or refinancing of any property of the LLC, and any other
distributions of cash or other property of the LLC, shall be allocated among
the Members in proportion to their respective capital contributions. Subject
<PAGE>
to the foregoing, distributions to the Members shall be made at such times and
in such amounts as the Members shall determine.
Distributions of net proceeds of liquidation of the LLC (whether of cash
or other assets) shall be distributed to all Members with positive Capital
Account balances (after such balances have been adjusted to reflect the
allocation of net profits or net losses and items thereof through the date of
liquidation pursuant to Section 9(b)), in proportion to and to the extent of
such positive balances.
A Member, regardless of the nature of his, her or its contribution to
the LLC, shall have no right to demand or receive any distribution from the
LLC in any form other than cash. The LLC may, at any time and from time to
time, make distributions in kind to the Members. If any assets of the LLC are
distributed in kind, such assets shall be distributed on the basis of their
fair market value as determined by the Members.
(b) Net profits and net losses shall, for both accounting and
tax purposes, be net profits and net losses as determined for purposes of
adjusting Capital Account balances as provided in Treasury Regulation Section
1.704-1(b)(2)(iv)(b). Net profits and net losses of the LLC shall be
allocated among the members in proportion to their respective capital
contributions. For tax purposes, all items of depreciation, gain, loss,
deduction or credit shall be determined in accordance with the Treasury
Regulations under Section 704(b) of the Code and, except to the extent
otherwise required by the Code, allocated to and among the Members in the same
percentages in which the Members share in net profits and net losses.
(c) New England Electric System shall be the "tax matters
partner" of the LLC for purposes of the Code.
(d) No Member shall have any right to distributions respecting
his, her or its membership interest (upon withdrawal or resignation from the
LLC or otherwise) except as expressly set forth in this Agreement.
10. Substitution and Assignment of a Member's Interest; Resignation.
No Member may sell, assign, give, pledge, hypothecate, encumber or otherwise
transfer, including, without limitation, any assignment or transfer by
operation of law or by order of court, such Member's interest in the LLC or
any part thereof, or in all or any part of the assets of the LLC, or resign
from the LLC, in each case without the unanimous written consent of all of the
other Members, and any purported assignment or resignation without such
consent shall be null and void and of no effect whatsoever.
11. Admission of Additional Members. Additional Members may be
admitted to the LLC if agreed to by all Members.
12. Continuation of the LLC. To the extent permitted by applicable
law, the Members may continue the business of the LLC upon the occurrence of
any event which constitutes an event of dissolution of an LLC under the Act by
electing to do so within 90 days after the occurrence of any of such event.
Any such election shall be made by Members whose capital contributions to the
LLC represent at least a majority of the capital contributions made by all
Members.
13. Termination of Membership; Return of Capital. No Member may
resign from or terminate his or her or its membership in the LLC or have any
right to distributions respecting his, her or its membership interest (upon
<PAGE>
withdrawal or resignation from the LLC or otherwise) except as expressly set
forth herein. No Member shall have the right to demand or receive property
other than cash in return for such Member's contribution.
14. Miscellaneous.
(a) The Members shall cause the LLC to keep just and true books
of account with respect to the operations of the LLC. Such books shall be
maintained at the principal place of business of the LLC, or at such other
place as the Members shall determine, and all Members, and their duly
authorized representatives, shall at all reasonable times have access to such
books.
(b) Such books shall be kept on the accrual method of
accounting, or on such other method of accounting as the Members may from time
to time determine, and shall be closed and balanced as of December 31 in each
year. The same method of accounting shall be used for both LLC accounting and
tax purposes. The fiscal year of the LLC shall be the calendar year.
(c) The Members shall cause the LLC to maintain one or more
accounts in a bank (or banks) which is a member of the F.D.I.C., which
accounts shall be used for the payment of the expenditures incurred by the
Members in connection with the business of the LLC, and in which shall be
deposited any and all cash receipts. All such amounts shall be and remain the
property of the LLC, and shall be received, held and disbursed by the Members
for the purposes specified in this Agreement.
(d) Subject to the restrictions on transfers set forth herein,
this Agreement, and each and every provision hereof, shall be binding upon and
shall inure to the benefit of the Members, their respective successors,
successors-in-title, heirs and assigns, and each and every successor-in-
interest to any Member, whether such successor acquires such interest by way
of gift, purchase, foreclosure or any other method, shall hold such interest
subject to all of the terms and provisions of this Agreement.
(e) No change, modification or amendment of this Agreement shall
be valid or binding unless such change, modification or amendment shall be in
writing and duly executed by all of the Members.
(f) This Agreement and the rights and obligations of the parties
hereunder shall be governed by and interpreted, construed and enforced in
accordance with the laws of the State of Delaware.
(g) This Agreement may be executed in a number of counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all the Members notwithstanding that all Members have not signed the same
counterpart.
(h) None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditor of any Member, or any creditor of
the LLC other than a Member who is such a creditor of the LLC.
(i) The Members hereby agree that no Member nor any successor-
in-interest to any Member, shall have the right while this Agreement remains
in effect to have the property of the LLC partitioned, or to file a complaint
or institute any proceeding at law or in equity to have the property of the
LLC partitioned, and each Member, on behalf of himself, his successors,
representatives, heirs and assigns, hereby waives any such right. It is the
<PAGE>
intention of the Members that during the term of this Agreement, the rights of
the Members and their successors-in-interest, as among themselves, shall be
governed by the terms of this Agreement, and that the right of any Member or
successor-in-interest to assign, transfer, sell or otherwise dispose of his
interest in the LLC shall be subject to the limitations and restrictions of
this Agreement.
(j) This Agreement constitutes the full and complete agreement
of the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Member has signed and sworn to this Agreement
under penalties of perjury as of the date first above written.
MEMBER:
New England Electric System
By:_____________________________________
David C. Kennedy
Vice President
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>
SCHEDULE A
TO
LIMITED LIABILITY COMPANY AGREEMENT
OF
METROWEST REALTY, L.L.C.
MEMBER
NAME AND ADDRESS OF MEMBER CAPITAL CONTRIBUTION
New England Electric System $10
25 Research Drive
Westborough, MA 01582-0001
<PAGE>
EXHIBIT C.1.d
==============================================================================
GRANITE STATE ELECTRIC COMPANY
$5,000,000 7.30% Notes due June 15, 2028
NOTE AGREEMENT
Dated as of June 15, 1998
==============================================================================
<PAGE>
TABLE OF CONTENTS
SECTION HEADING PAGE
SECTION 1. AUTHORIZATION OF NOTES 1
SECTION 2. SALE AND PURCHASE OF NOTES 1
SECTION 3. CLOSING 2
SECTION 4. CONDITIONS TO CLOSING 2
Section 4.1. Representations and Warranties 2
Section 4.2. Performance; No Default 2
Section 4.3. Closing Certificate 2
Section 4.4. Regulatory Approvals; Filings 2
Section 4.5. No Material Adverse Change 3
Section 4.6. Opinion of Company Counsel 3
Section 4.7. Legal Investment 3
Section 4.8. Proceedings and Documents 3
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 4
Section 5.1. Organization, Standing, Etc 4
Section 5.2. Subsidiaries 4
Section 5.3. Qualification 4
Section 5.4. Investments 4
Section 5.5. Franchises, Etc 4
Section 5.6. Financial Statements, Etc 5
Section 5.7. Changes, Etc 5
Section 5.8. Indebtedness 5
Section 5.9. Tax Returns and Payments 6
Section 5.10. Title to Properties; Liens 6
Section 5.11. Litigation, Etc 6
Section 5.12. Compliance with Other Instruments, Law; No Defaults 6
Section 5.13. Employee Retirement Income Security Act of 1974 7
Section 5.14. Regulatory Approvals 7
Section 5.15. Patents, Trademarks, Etc 8
Section 5.16. Offer of Notes 8
Section 5.17. Investment Company Act Status 8
Section 5.18. Federal Reserve Regulations 8
Section 5.19. Brokers, Etc 8
Section 5.20. Compliance with Environmental Laws 8
Section 5.21. Affiliate Contracts 9
Section 5.22. Disclosure 9
Section 5.23. Solvency 10
SECTION 6. USE OF PROCEEDS 10
SECTION 7. REPRESENTATIONS OF THE PURCHASER 10
SECTION 8. REGISTRATION, TRANSFER AND SUBSTITUTION OF NOTES 10
Section 8.1. Note Register; Ownership of Notes 10
Section 8.2. Transfer and Exchange of Notes 10
Section 8.3. Replacement of Notes 11
<PAGE>
SECTION 9. PAYMENTS ON NOTES 11
SECTION 10. PREPAYMENT OF NOTES 12
Section 10.1. No Required Prepayments 12
Section 10.2. Optional Prepayments 12
Section 10.3. Notice of Optional Prepayments 12
Section 10.4. Application of Prepayments 12
Section 10.5. Maturity; Surrender, Etc 12
Section 10.6. Repurchase of Notes 12
SECTION 11. BUSINESS COVENANTS 13
Section 11.1. Payment of Notes 13
Section 11.2. Corporate Existence, Etc 13
Section 11.3. Payment of Taxes and Claims 13
Section 11.4. Maintenance of Properties; Insurance 13
Section 11.5. Funded Debt 14
Section 11.6. Short-Term Debt 14
Section 11.7. Liens 14
Section 11.8. Restrictions on Dividends and Other Distributions 15
Section 11.9. Restrictions on Investments and Acquisitions
of Property 16
Section 11.10. Consolidation, Merger and Disposition of Assets 17
Section 11.11. Transactions with Affiliates 17
Section 11.12. Issuance of Stock 18
Section 11.13. Maintenance of Certain Contracts 18
Section 11.14. Compliance with Laws, Etc 18
SECTION 12. INFORMATION AS TO THE COMPANY 18
Section 12.1. Accounting; Financial Statements and Other
Information 18
Section 12.2. Inspection 21
SECTION 13. DEFAULTS 21
Section 13.1. Events of Default; Acceleration 21
Section 13.2. Acceleration of Maturities 23
Section 13.3. Rescission of Acceleration 23
Section 13.4. Remedies on Default, Etc 24
SECTION 14. INTERPRETATION OF AGREEMENT; DEFINITIONS 24
Section 14.1. Definitions 24
Section 14.2. Accounting Principles 29
Section 14.3. Directly or Indirectly 29
SECTION 15. EXPENSES, ETC 29
SECTION 16. PRIVATE PLACEMENT NUMBER 30
SECTION 17. SURVIVAL OF COVENANTS AND AGREEMENTS, ETC 30
SECTION 18. AMENDMENTS, WAIVERS AND CONSENTS 30
SECTION 19. NOTICES 31
<PAGE>
SECTION 20. FURTHER ASSURANCES 31
SECTION 21. MISCELLANEOUS 31
Section 21.1. Successors and Assigns 31
Section 21.2. Powers and Rights not Waived; Remedies Cumulative 32
Section 21.3. Severability 32
Section 21.4. Governing Law 32
Section 21.5. Captions 32
Section 21.6. Counterparts 32
Signature 33
ATTACHMENTS TO THE NOTE AGREEMENT:
Schedule I -- Payment and other Instructions
Schedule II -- Regulatory Approvals
Schedule III -- Environmental Disclosure
Schedule III(A) -- Description of Changes and Proceedings
Schedule IV -- Affiliate Contracts
Schedule V -- Indebtedness of the Company
Exhibit A -- Form of Note
Exhibit B -- Form of Opinion of Counsel to Company
<PAGE>
GRANITE STATE ELECTRIC COMPANY
9 Lowell Road
Salem, New Hampshire 03079
Dated as of June 15, 1998
The Paul Revere Life Insurance Company
c/o Provident Investment Management, LLC
One Fountain Square
Chattanooga, Tennessee 37402
Ladies and Gentlemen:
Granite State Electric Company, a New Hampshire corporation (herein,
together with its successors and assigns, called the "Company"), agrees with
you (the "Purchaser") as follows:
SECTION 1. AUTHORIZATION OF NOTES.
The Company will duly authorize the issue and sale of $5,000,000 in
aggregate principal amount of its 7.30% Notes due June 15, 2028 (the "Notes,"
such term to include any such note or notes issued in substitution therefor or
replacement thereof pursuant to Section 8), to be substantially in the form of
Exhibit A hereto, with such changes therefrom, if any, as may be approved by
the Purchaser and the Company. Certain other capitalized terms used herein are
defined in Section 14. Each Note is to (a) bear interest from the date of
issue on the unpaid principal amount thereof at the rate of 7.30% per annum
(computed on the basis of a 360-day year of twelve 30-day months) payable
semiannually on June 15 and December 15 of each year (commencing December 15,
1998), and with interest (so computed) on any overdue principal balance
(including any overdue prepayment of principal) and premium (if any) and (to
the extent permitted by applicable law) on any overdue installment of
interest, at the rate of 9.30% per annum after the due date, whether by
acceleration or otherwise, until paid, payable semiannually as aforesaid or,
at the option of the registered holder thereof, on demand, and (b) mature and
be due and payable as to the entire remaining unpaid principal amount thereof
on June 15, 2028.
SECTION 2. SALE AND PURCHASE OF NOTES.
At the Closing referred to in Section 3, the Company will issue and sell
to the Purchaser and, subject to the terms and conditions hereof and in
reliance upon the representations and warranties of the Company contained
herein or otherwise made in writing by or on behalf of the Company in
connection with the transactions contemplated hereby, the Purchaser will
purchase from the Company, Notes in the aggregate principal amount of Five
Million Dollars ($5,000,000) at 100% of the principal amount thereof.
SECTION 3. CLOSING.
The closing for the sale and purchase of the Notes (the "Closing") shall
take place at the offices of New England Power Service Company, 25 Research
Drive, Westborough, MA 01582 at 10:00 a.m., Boston, Massachusetts time on
June 15, 1998 (the "Closing Date"). At the Closing the Company will deliver to
<PAGE>
the Purchaser the Notes against delivery by the Purchaser to the Company or
its order of immediately available funds in Account No. 50967513 at The First
National Bank of Boston (A.B.A. No. 011000390) in the amount of the purchase
price therefor. If the Closing shall not occur on or prior to June 30, 1998,
or if at the Closing the Company shall not deliver to the Purchaser the Notes
or if any of the conditions specified in Section 4 shall not have been
fulfilled to the Purchaser's satisfaction, the Purchaser shall, at its
election, be relieved of all further obligations under this Agreement, without
thereby waiving any other rights it may have by reason of such failure or non-
fulfillment.
SECTION 4. CONDITIONS TO CLOSING.
The obligations of the Purchaser to purchase and pay for the Notes to be
sold to it at the Closing is subject to the fulfillment to the Purchaser's
satisfaction, prior to or at the Closing, of the following conditions:
Section 4.1. Representations and Warranties. The representations and
warranties of the Company in Section 5 and otherwise made in writing by or on
behalf of the Company in connection with the transactions contemplated hereby
shall be complete and correct when made and at the time of the Closing, except
as affected by the consummation of the transactions contemplated hereby.
Section 4.2. Performance; No Default. The Company shall have
performed and complied with all agreements and conditions contained herein
required to be performed or complied with by it prior to or at the Closing,
and at the time of the Closing (and after effect has been given to the sale of
the Notes and application of the proceeds of such sale) no condition or event
shall exist which constitutes or which, after notice or lapse of time or both,
would constitute an Event of Default.
Section 4.3. Closing Certificate. The Company shall have delivered to
the Purchaser an Officers' Certificate, dated the Closing Date, certifying
that the conditions specified in Sections 4.1, 4.2 and 4.5 have been fulfilled
and that, after giving effect to the issue and sale of the Notes and the
application of the proceeds thereof, the Company will be in compliance with
Sections 11.5 and 11.6.
Section 4.4. Regulatory Approvals; Filings. (a) The issue and the sale
of the Notes shall have been duly authorized or approved by an appropriate
order of the New Hampshire Public Utilities Commission (the "NHPUC"). Such
order shall be final and in full force and effect and not subject to any
appeal, hearing or rehearing or any contest. All conditions contained in any
such order which are to be fulfilled on or prior to the issuance of the Notes
shall have been fulfilled. The Company shall have delivered to the Purchaser
and its special counsel a certified copy of such order and the application
therefor.
(b) The Company shall have prepared a detailed statement, sworn to by
its Treasurer or an Assistant Treasurer, demonstrating that the proceeds of
the Notes will be applied to the payment of Short-Term Debt of the Company
incurred for, to the cost of, or to the reimbursement of the treasury for, the
retirement of outstanding notes, capitalizable additions and improvements to
the plant and property of the Company, or other capital expenditures. Such
statement shall be filed with the NHPUC immediately following the Closing.
<PAGE>
Section 4.5. No Material Adverse Change. There shall not have occurred
any material adverse change in the assets, liabilities, condition (financial
or otherwise), business, properties, operations or prospects of the Company
from that reflected in the most recent audited financial statements of the
Company referred to in Section 5.6, true and complete copies of which shall
have been delivered to the Purchaser.
Section 4.6. Opinion of Company Counsel. The Purchaser shall have
received from Kirk L. Ramsauer, Associate General Counsel of the Company, and
Carlos A. Gavilondo, Senior Attorney of the Company, a favorable opinion,
dated the Closing Date, substantially in the form of Exhibit B hereto and
covering such other matters as the Purchaser may reasonably request.
Section 4.7. Legal Investment. At the time of the Closing, the
purchase of the Notes by the Purchaser shall be permitted by all laws and
regulations to which it is subject, without resort to any basket provision of
said laws or regulations, and, if requested in writing by the Purchaser, the
Company shall have delivered to the Purchaser a certificate or certificates,
dated the Closing Date, signed by the Company's Treasurer or Assistant
Treasurer, certifying as to the financial and other data necessary to enable
the Purchaser to determine that the purchase of the Notes is so permitted.
Section 4.8. Proceedings and Documents. All corporate and other
proceedings and documents and instruments incident to the transactions
contemplated hereby shall be satisfactory in substance and form to the
Purchaser, and the Purchaser shall have received all such counterpart
originals or certified or other copies of such documents and instruments as it
may reasonably request.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants that:
Section 5.1. Organization, Standing, Etc. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New Hampshire and has all requisite power, authority and legal right
to own, lease and operate its properties, to carry on its business as now
conducted and as presently proposed to be conducted, to enter into this
Agreement, to issue and sell the Notes and to carry out the terms hereof and
thereof. The only class of capital stock of the Company is its common stock,
par value $100 per share, of which 60,400 shares are authorized, have been
validly issued, are outstanding and are owned by New England Electric System,
a Massachusetts voluntary association (the "Parent"). The execution and
delivery of this Agreement and the issuance of the Notes and the consummation
of the transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action on the part of the Company, and no approval
of the stockholders of the Company or any holders of any Indebtedness (or any
trustee for such holders) of the Company is required in connection therewith,
and the Agreement and the Notes, when executed and delivered by the Company,
will constitute the legal, valid and binding obligations, contracts and
agreements of the Company enforceable in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance or
similar laws affecting creditors' rights generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
<PAGE>
Section 5.2. Subsidiaries. The Company has no Subsidiaries and does
not own any shares of capital stock or shares of beneficial interest of any
corporation or other entity other than shares of capital stock of certain
entities carried on the books of the Company not in excess of $10,000 in the
aggregate for all such entities.
Section 5.3. Qualification. The Company is not qualified or licensed
as a foreign corporation in any jurisdiction, and neither the character of the
properties owned, leased or operated by it nor the nature of the activities
conducted or presently proposed to be conducted by it make such qualification
or licensing in any jurisdiction necessary.
Section 5.4. Investments. The Company owns no Investments other than
the capital stock referred to in Section 5.2 and Investments permitted by
Section 11.9.
Section 5.5. Franchises, Etc. The Company owns, possesses or has the
right to use all franchises, certificates of convenience and necessity,
operating rights, licenses, permits, consents, approvals, authorizations and
orders of governmental and administrative bodies, political subdivisions and
regulatory authorities as are necessary for the ownership or leasing or
operation of the properties now owned, leased or operated by it, the
maintenance of the properties now owned, leased or operated by it and the
conduct of the business now conducted and presently proposed to be conducted
by it. Each such franchise, certificate of convenience and necessity,
operating right, license, permit, consent, approval, authorization or order of
governmental bodies, political subdivisions and regulatory authorities is
valid and subsisting and contains no unduly burdensome term, condition,
provision or limitation.
Section 5.6. Financial Statements, Etc. The Company has furnished to
the Purchaser a true and complete copy of the Private Placement Memorandum,
dated April, 1998, prepared by the Company (the "Memorandum"). The Memorandum
correctly describes, as of its date, the business then conducted and proposed
to be conducted by the Company. The Memorandum contains the 1997 Annual Report
to Stockholders of the Company in which are contained audited balance sheets
of the Company as at December 31 in each of the fiscal years 1996 and 1997 and
statements of income and cash flows for the fiscal years ended December 31,
1996 and 1997, inclusive, accompanied by the report thereon of Coopers &
Lybrand L.L.P. In addition, the Company has furnished to the Purchaser true
and correct copies of an unaudited balance sheet of the Company and the
related statements of income and retained earnings for the three-month period
ended March 31, 1998. All financial statements and the related notes and
schedules contained in the foregoing materials are complete and correct
(subject, in the case of any unaudited financial statements, to year-end audit
adjustments) and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis through the periods
covered thereby (except for changes specifically noted therein in which the
independent certified public accountants auditing any such financial statement
have concurred) and fairly present the financial conditions and results of
operations of the entity or entities to which they relate as at the respective
dates and for the respective periods specified. Except as specifically
described in such financial statements or in the Memorandum, the Company does
not have any material obligations or liabilities, contingent or otherwise.
<PAGE>
Section 5.7. Changes, Etc. Since December 31, 1997: (a) except for the
matters set forth in Schedule III(A), there has been no change in the assets,
liabilities, business, operations or condition (financial or otherwise) of the
Company from that reflected in the balance sheet of the Company as at such
date, other than changes in the ordinary course of business which have not
been, either in any case or in the aggregate, materially adverse; (b) except
for the matters set forth in Schedule III(A), neither the business, operations
or affairs of the Company nor any of its properties or assets have been
materially adversely affected by any occurrence or development (whether or not
insured against); and (c) other than the cash dividend payment made on its
outstanding shares of common stock to its Parent on April 1, 1998, in the
aggregate amount of $120,800, the Company has not, directly or indirectly,
declared, paid or made any dividend or distribution on or on account of any
shares of capital stock of the Company or any redemption, retirement, purchase
or other acquisition of any shares of capital stock of the Company or entered
into any agreement to do so.
Section 5.8. Indebtedness. Schedule V to this Agreement correctly
describes all Short-Term Debt and Funded Debt of the Company outstanding on
March 31, 1998. Since March 31, 1998, the Company has not incurred any
substantial amounts of additional Short-Term Debt or Funded Debt.
Section 5.9. Tax Returns and Payments. The Company and other
Affiliates of the Company participate with the Parent in filing consolidated
federal income tax returns, and all federal income tax returns required to be
filed by such consolidated group have been filed and all taxes shown to be due
on such returns have been paid. The consolidated federal income tax liability
of such consolidated group has been finally determined and satisfied through
the fiscal year ended December 31, 1993. The Company has filed all other tax
returns required by law to be filed by it, has paid all taxes shown to be due
on such returns and has paid all taxes, assessments and other governmental
charges levied upon any of its properties, assets, income or franchises, other
than those not yet delinquent. The charges, accruals and reserves on the books
of the Company in respect of federal and state income taxes for all fiscal
periods are adequate in the opinion of the Company, and the Company knows of
no unpaid assessment for additional federal, state, local or foreign income
taxes for any fiscal period or of any basis therefor.
Section 5.10. Title to Properties; Liens. Certain substations owned by
the Company and necessary for its business are located on land owned by Power
pursuant to one or more agreements which permit such location on such land and
which are adequate for the conduct of the Company's business. Other portions
of the Company's distribution system are located on public ways or private
property pursuant to agreements, easements, licenses, permits or other rights
described in Section 5.5 which permit such location on such land and which are
adequate for the conduct of the Company's business. The Company owns all
right, title and interest in and to all its assets and properties (including
assets and properties reflected in the balance sheet of the Company as at
March 31, 1998 referred to in Section 5.6) and has good and marketable title
to its substations, whether located on its land or on land owned by Power, in
each case, free from all Liens except Liens permitted by Section 11.7, subject
only to immaterial exceptions, minor encumbrances and defects in title which
do not, either individually or in the aggregate, impair the use of such
properties in the conduct of the Company's business. There are no leases
which, alone or in the aggregate, are material to the Company's business. The
<PAGE>
Company enjoys peaceful and undisturbed possession under all leases under
which it operates. The Company does not hold any property as conditional
vendee under any conditional sale or other title retention agreement.
Section 5.11. Litigation, Etc. There is no action, proceeding or
investigation pending or, to the Company's knowledge, threatened (or any basis
therefor known to the Company) which questions the validity of this Agreement
or the Notes or any action taken or to be taken pursuant hereto or thereto.
Except for the matters set forth in Schedules III and III(A), and subject to
the representations contained in Section 5.20 with respect to such matters set
forth in Schedule III, there is no action, proceeding or investigation pending
or, to the Company's knowledge, threatened (or any basis therefor known to the
Company) which might result, either in any case or in the aggregate, in any
material adverse change in the business, operations, affairs or condition
(financial or otherwise) of the Company or its properties and assets taken as
a whole or in any material liability on the part of the Company.
Section 5.12. Compliance with Other Instruments, Law; No Defaults. The
Company is not in violation of any term of its charter or by-laws, or any term
of any franchise, license, permit, agreement, indenture, mortgage or
instrument to which it is a party or by which it or any of its property is
bound or in violation of any judgment, decree, order, law, statute,
governmental or administrative rule or in violation of regulation applicable
to it (including, without limitation, any such governmental rule or regulation
relating to occupational health and safety standards and controls, consumer
protection or equal employment practice requirements), so as to materially and
adversely affect, either individually or in the aggregate, its business,
operations, affairs or condition (financial or otherwise); and the execution,
delivery and performance of this Agreement and the Notes will not result in
any such violation or be in conflict with or constitute a default under any
term of any of the foregoing, or under any term of this Agreement, and will
not result in the creation of any Lien upon any of the properties or assets of
the Company pursuant to any such term; and there is no such term which
materially adversely affects or in the future may (so far as the Company can
now foresee) materially adversely affect the business, operations, affairs or
condition (financial or otherwise) of the Company or any of its properties or
assets.
Section 5.13. Employee Retirement Income Security Act of 1974. Without
in any way limiting the scope of Section 5.12, no "employee pension benefit
plan" (as defined in Section 3 of the Employee Retirement Income Security Act
of 1974 ("ERISA")) maintained by the Company or by any member of a "controlled
group of corporations" (as defined in ER1SA sec. 210(a)) or group of "trades
or businesses under common control" (as defined in ERISA sec. 210(d)) of which
the Company is a member has (a) engaged in any "prohibited transaction" (as
defined in Section 406 of ERISA and Section 4975 of the Internal Revenue Code
of 1986, as amended), (b) incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), (c) terminated in a manner which could
result in the imposition of a Lien on the assets of the Company pursuant to
Section 4068 of ERISA, or (d) engaged in any action which would constitute a
"complete withdrawal" or "partial withdrawal" by the Company or by a "member
of an affiliated group" from a "multi-employer plan" (as defined in ERISA
Sections 4203, 4205 and 4001, respectively). No liability to the Pension
Benefit Guaranty Corporation (other than required insurance premiums, all of
which, to the extent due and payable, have been paid) has been incurred with
<PAGE>
respect to any such "employee pension benefit plan" and there has not been any
reportable event within the meaning of ERISA, or any other event or condition,
which presents a material risk of termination of any such plan by the Pension
Benefit Guaranty Corporation.
Section 5.14. Regulatory Approvals. The Company is a "subsidiary
company" of a "registered holding company", as such terms are defined in the
Public Utility Holding Company Act of 1935, as amended (the "1935 Act").
Schedule II contains a complete list of all orders and approvals which are
required to be obtained by or from any governmental or administrative body,
authority, commission or agency for the valid offer, issue, sale and delivery
of the Notes by the Company and the consummation of the transactions
contemplated hereby. All such orders and approvals listed in such Schedule II
have been duly issued or obtained, and are in full force and effect and not
subject to any appeal, hearing or rehearing or any contest, and all conditions
contained in such approvals which are to be fulfilled on or prior to the
issuance of the Notes have been fulfilled. Other than the approvals listed on
Schedule II hereto, no order, consent, approval, or authorization of, or
registration, declaration or filing with, or the taking of any other action in
respect of, any governmental or administrative body, authority, commission or
agency is required as a condition precedent to the valid offer, issue, sale
and delivery of the Notes by the Company and the consummation of the
transactions contemplated hereby.
Section 5.15. Patents, Trademarks, Etc. The Company owns or possesses
all of the patents, trademarks, service marks, trade names and copyrights and
all rights of use with respect to the foregoing, necessary for the conduct of
its business as now conducted or as presently proposed to be conducted,
without any known conflict with the rights of others.
Section 5.16. Offer of Notes. Neither the Company nor anyone acting on
its behalf has directly or indirectly offered the Notes or any part thereof or
any similar securities for issue or sale to, or solicited any offer to buy any
of the same from anyone other than the Purchaser and not more than 20 other
institutional investors. Neither the Company nor anyone acting on its behalf
has taken or will take any action which will subject the issuance and sale of
the Notes to the provisions of Section 5 of the Securities Act of 1933, as
amended, or the applicable provisions of any state "Blue Sky" laws.
Section 5.17. Investment Company Act Status. The Company is not an
"investment company" or a company "controlled" by an "investment company", as
such terms are defined in the Investment Company Act of 1940, as amended.
Section 5.18. Federal Reserve Regulations. The Company does not own and
has no present intention of acquiring, any "margin security" within the
meaning of Regulation G (12 C.F.R. Part 207) of the Board of Governors of the
Federal Reserve System (herein called a "margin security"). The proceeds of
the sale of the Notes will be applied as provided in Section 6. None of such
proceeds will be used, directly or indirectly, for the purpose of purchasing
or carrying any margin security or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry a margin
security or for any other purpose which might constitute the transactions
contemplated hereby a "purpose credit" within the meaning of said Regulation
G, or cause this Agreement to violate Regulation G, Regulation T, Regulation
X, or any other regulation of the Board of Governors of the Federal Reserve
System, or the Securities Exchange Act of 1934, each as now in effect.
<PAGE>
Section 5.19. Brokers, Etc. The Company has dealt with no broker,
finder, commission agent or other Person in connection with the sale of the
Notes and the transactions contemplated by this Agreement. Neither the Company
nor the Purchaser is under any obligation to pay any broker's fee, finder's
fee, or commission in connection with such transactions.
Section 5.20. Compliance with Environmental Laws. To the best of the
Company's knowledge, after due inquiry by a responsible officer of the
Company, the Company is not in violation of any applicable Federal, state, or
local laws, statutes, rules, regulations or ordinances relating to public
health, safety or the environment, including, without limitation, relating to
releases, discharges, emissions or disposals to air, water, land or ground
water, to the withdrawal or use of ground water, to the use, handling or
disposal of polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde,
to the treatment, storage, disposal or management of hazardous substances
(including, without limitation, petroleum, crude oil or any fraction thereof,
or other hydrocarbons), pollutants or contaminants, to exposure to toxic,
hazardous or other controlled, prohibited or regulated substances which
violation could have a material adverse effect on the business, prospects,
profits, properties or condition (financial or otherwise) of the Company.
Except for the matters set forth in Schedule III hereto, the Company does not
know of any liability or class of liability of the Company under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended (42 U.S.C. Section 9601 et seq.), or the Resource Conservation and
Recovery Act of 1976, as amended (42 U.S.C. Section 6901 et seq.). None of the
matters set forth in Schedule III, either individually or in the aggregate,
involve the reasonable possibility of materially and adversely (defined for
purposes of this Section 5.20 as an amount equal to 10% or more of Common
Equity) affecting the business, prospects, properties or condition (financial
or otherwise) of the Company.
Section 5.21. Affiliate Contracts. Except for the contracts listed in
Schedule IV, the Company has no arrangements with any one or more of its
Affiliates, formal or informal, written or oral, for the sale, leasing or
other provision to the Company of any property, property rights, goods or
services which are necessary in any material respect for the conduct by the
Company of its business, as now conducted and as presently proposed to be
conducted (any such arrangement with one or more of its Affiliates being
herein referred to as an "Affiliate Contract"). Schedule IV sets forth with
respect to each Affiliate Contract in effect on the date hereof the property,
property rights, goods or services provided to the Company thereunder, the
Affiliate or Affiliates of the Company party thereto and the expiration date
thereof. Each such Affiliate Contract (i) constitutes a valid and binding
obligation of the parties thereto and (ii) is in full force and effect and in
compliance with all applicable requirements of each governmental regulatory
body or authority having jurisdiction thereof.
Section 5.22. Disclosure. Neither this Agreement, the financial
statements described in Section 5.6, the Memorandum nor any other document,
certificate or statement furnished to the Purchaser by or on behalf of the
Company in connection with the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein and therein not
misleading. There is no fact known to the Company which materially adversely
affects or in the future may (so far as the Company can now reasonably
<PAGE>
foresee) materially adversely affect the business, operations, affairs or
condition (financial or otherwise) of the Company or any of its properties or
assets which has not been set forth in this Agreement (including the Schedules
attached hereto), the financial statements described in Section 5.6, the
Memorandum or in the other documents, certificates and written statements
furnished to the Purchaser by or on behalf of the Company prior to the date of
this Agreement in connection with the transactions contemplated hereby.
Section 5.23. Solvency. The Company is, and upon giving effect to the
issuance of the Notes will be, solvent and not in default with respect to the
payment of the principal of or interest on any of its obligations.
SECTION 6. USE OF PROCEEDS.
The proceeds of the sale of the Notes will be applied by the Company to
the payment of short-term indebtedness of the Company incurred for the purpose
of financing expenditures for the retirement of outstanding notes, extensions,
additions and improvements to the Company's plant and property, to pay for
such retired notes, extensions, additions and improvements or to reimburse the
Company for such retired notes, extensions, additions and improvements.
SECTION 7. REPRESENTATIONS OF THE PURCHASER.
The Purchaser represents that it is purchasing the Notes for its own
account for investment and not with a view to the distribution thereof,
provided, however, that the disposition of the Purchaser's property shall at
all times be and remain within its control. The Purchaser also represents that
no part of the purchase price of the Notes will be paid, directly or
indirectly, out of the assets of any separate account maintained by the
Purchaser in which any employee benefit plan has any interest. As used in this
Section 7, the terms "separate account" and "employee benefit plan" shall have
the respective meanings assigned to them in ERISA.
SECTION 8. REGISTRATION, TRANSFER AND SUBSTITUTION OF NOTES.
Section 8.1. Note Register; Ownership of Notes. The Company will keep at
its agency located at the office of New England Power Service Company at 25
Research Drive, Westborough, Massachusetts 01582, or such other office or
agency as the Company may designate in writing to the holders of the Notes, a
register in which the Company will provide for the registration of Notes and
the registration of transfers of Notes. The Company may treat the Person in
whose name any Note is registered on such register as the owner thereof for
the purpose of receiving payment of the principal of and the premium, if any,
and interest on such Note and for all other purposes, whether or not such Note
shall be overdue, and the Company shall not be affected by any notice to the
contrary. All references in this Agreement to a "holder" of any Note shall
mean the Person in whose name such Note is at the time registered on such
register.
Section 8.2. Transfer and Exchange of Notes. Upon surrender of any Note
for registration of transfer or for exchange at the agency specified in
Section 8.1, the Company at its expense will execute and deliver in exchange
therefor a new Note or Notes in denominations of not less than $100,000
(except one Note may be issued in a lesser principal amount if the unpaid
principal amount of the surrendered Note is not evenly divisible by, or is
less than, $100,000), as requested by the holder or transferee, which
<PAGE>
aggregate the unpaid principal amount of such surrendered Note. Each such new
Note shall be registered in the name of such Person or its nominee as such
holder or transferee may request, dated as of the date to which interest has
been paid on the Note so surrendered or, if such surrender is prior to the
payment of any interest thereon, then dated as of the date of issue, and
otherwise of the same form and tenor as the Notes so surrendered for exchange.
The installments of principal, premium, if any, and interest payable on each
such new Note shall be due on the same dates as the corresponding installments
of principal, premium, if any, and interest remaining unpaid on such
surrendered Note.
Section 8.3. Replacement of Notes. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
any Note and, in the case of any such loss, theft or destruction of any Note
held by a Person other than the Purchaser or an institutional holder, upon
delivery of indemnity reasonably satisfactory to the Company, or, in the case
of any such mutilation, upon the surrender of such Note for cancellation at
the principal office of the Company, the Company at its expense will execute
and deliver, in lieu thereof, a new Note of like tenor, dated so that there
will be no loss of interest on such lost, stolen, destroyed or mutilated Note.
If the Purchaser or any subsequent institutional holder is the owner of any
such lost, stolen or destroyed Note, then the affidavit of an authorized
officer of such owner, setting forth the fact of loss, theft or destruction
and of its ownership of such Note at the time of such loss, theft or
destruction shall be accepted as satisfactory evidence thereof and no further
indemnity shall be required as a condition to the execution and delivery of a
new Note other than the written agreement of such owner to indemnify the
Company. Any Note in lieu of which any such new Note has been so executed and
delivered by the Company shall be deemed to be no longer outstanding for any
purpose of this Agreement.
SECTION 9. PAYMENTS ON NOTES.
So long as the Purchaser or its nominee shall be the holder of any Note,
and notwithstanding anything contained in this Agreement or in such Note to
the contrary, the Company will punctually pay all sums becoming due on such
Note for principal, premium, if any, and interest in the manner and at the
address specified for such purpose in Schedule I, or in such other manner and
at such other address as the Purchaser shall have from time to time specified
in writing for such purpose to the Company, without the presentation or
surrender of such Note, except that any Note so paid or prepaid in full shall,
following such payment or prepayment, upon receipt of written request
therefor, be surrendered to the Company at its principal office or at the
place of payment maintained by the Company pursuant to Section 8.1 for
cancellation. Prior to any sale or other disposition of any Note held by the
Purchaser or its nominee the Purchaser will, at its election, either endorse
thereon the amount of principal paid thereon or make such Note available to
the Company at its principal office or at the office or agency maintained by
the Company pursuant to Section 8.1 for the purpose of making such endorsement
thereon. The Company agrees to afford the benefits of this Section 9 to any
institutional investor which is the direct or indirect transferee of any Note
issued by it and purchased by the Purchaser under this Agreement and which has
made the same agreement relating thereto as the Purchaser has made in this
Section 9.
<PAGE>
SECTION 10. PREPAYMENT OF NOTES.
Section 10.1. No Required Prepayments. No prepayments are required to
be made with respect to the Notes prior to the expressed maturity date thereof
other than prepayments made in connection with an acceleration of the Notes
pursuant to the provisions of Section 13.1 hereof.
Section 10.2. Optional Prepayments. Upon compliance with Section 10.3,
the Company shall have the privilege, on any date, of prepaying the
outstanding Notes, either in whole or in part (but if in part then in a
minimum principal amount of $100,000) by payment of the principal amount of
the Notes, or portion thereof to be prepaid, and accrued interest thereon to
the date of such prepayment and a premium equal to the Make-Whole Amount,
determined as of five business days prior to the date of such prepayment
pursuant to this Section 10.2.
Section 10.3. Notice of Optional Prepayments. The Company will give
notice of any prepayment of the Notes pursuant to Section 10.2 to each holder
thereof not less than 30 days nor more than 60 days before the date fixed for
such optional prepayment specifying (i) such date, (ii) the principal amount
of the holder's Notes to be prepaid on such date, (iii) that a premium may be
payable, (iv) that date when such premium will be calculated, (v) the
estimated premium and (vi) the accrued interest applicable to the prepayment.
Such notice of prepayment shall also certify all facts, if any, which are
conditions precedent to any such prepayment. Notice of prepayment having been
so given, the aggregate principal amount of the Notes specified in such
notice, together with accrued interest thereon and the premium, if any,
payable with respect thereto shall become due and payable on the prepayment
date specified in said notice. Not later than two business days prior to the
prepayment date specified in such notice, the Company shall provide each
holder of a Note written notice of the premium, if any, payable in connection
with such prepayment and, whether or not any premium is payable, a reasonably
detailed computation of the Make-Whole Amount.
Section 10.4. Application of Prepayments. All partial prepayments shall
be applied on all outstanding Notes ratably in accordance with the unpaid
principal amounts thereof.
Section 10.5. Maturity; Surrender, Etc. In the case of each prepayment,
the principal amount of each Note to be prepaid shall mature and become due
and payable on the date fixed for such prepayment, together with interest on
such principal amount accrued to such date. From and after such date, unless
the Company shall fail to pay such principal amount when so due and payable,
together with interest, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall, upon the request of
the Company, be surrendered to the Company and cancelled and shall not be
reissued, and no Note shall be issued in lieu of any prepaid principal amount
of any Note.
Section 10.6. Repurchase of Notes. The Company will not, nor will it
permit any Affiliate to, directly or indirectly, repurchase or make any offer
to repurchase any Notes unless the Company or such Affiliate has offered to
repurchase Notes, pro rata, from all holders of the Notes at the time
outstanding and upon the same terms. In case the Company or any such Affiliate
repurchases any Notes pursuant to this Section 10.6, such Notes shall
thereafter be cancelled and no Notes shall be issued in substitution therefor.
<PAGE>
SECTION 11. BUSINESS COVENANTS.
The Company covenants that, from and after the date of this Agreement
and thereafter as long as any of the Notes shall be outstanding:
Section 11.1. Payment of Notes. The Company will punctually pay or
cause to be paid all amounts in respect of the principal of, premium (if any),
and interest on the Notes in accordance with the terms of this Agreement and
the Notes.
Section 11.2. Corporate Existence, Etc. (a) The Company will not
voluntarily liquidate or dissolve and will at all times preserve and keep in
full force and effect its corporate existence, licenses, rights and franchises
(except as otherwise permitted or contemplated by Section 11.10), provided,
however, that the Company may abandon any license, right or franchise if, in
each such case, (i) in the good faith judgment of the Company as determined by
its Board of Directors such abandonment is in the best interest of the Company
and is not disadvantageous to the holders of the Notes and (ii) notice of any
such abandonment is given to each holder of the Notes as provided in Section
19.
(b) The Company will not create or acquire, or in any other manner cause
to exist, any Subsidiary.
Section 11.3. Payment of Taxes and Claims. The Company will pay and
discharge all taxes, assessments and other governmental charges or levies
validly imposed upon the Company or any of its properties or assets or in
respect of any of its franchises, business, income or profits before any
penalty or interest accrues thereon, and all claims (including, without
limitation, all trade accounts payable in accordance with usual and customary
business terms and all claims for labor, services, materials and supplies) for
sums which have become due and payable and which by law have or might become a
Lien upon any property or asset of the Company provided, however, that (unless
any material item of property would be lost, forfeited or materially damaged
as a result thereof) failure to pay such charges or sums shall not constitute
default hereunder if payment of such charges or sums is being contested in
good faith by appropriate proceedings promptly initiated and diligently
conducted and if such reserve or other appropriate provision, if any, as shall
be required by generally accepted accounting principles shall have been made
therefor.
Section 11.4. Maintenance of Properties; Insurance. The Company will
maintain or cause to be maintained in good repair, working order and condition
all properties used or useful in the business of the Company and from time to
time will make or cause to be made all appropriate repairs, renewals and
replacements thereof. The Company will maintain or cause to be maintained,
with financially sound and reputable insurers, insurance with respect to its
properties and business against loss or damage of the kinds customarily
insured against by corporations of established reputation engaged in the same
or similar business and similarly situated, and of a comparable size and
capitalization, of such types and in such amounts as are customarily carried
under similar circumstances by such other corporations.
<PAGE>
Section 11.5. Funded Debt. The Company will not directly or indirectly
create, incur, assume, guarantee or otherwise become liable with respect to
any Funded Debt (other than the Notes) unless, immediately after giving effect
thereto,
(i) Net Income Available for Interest Charges of the Company for a
period of any 12 consecutive calendar months within the 15 calendar months
immediately preceding the calendar month of the proposed issuance of
additional Funded Debt shall have equaled at least 200% of Pro Forma Annual
Interest Charges as of the date of such proposed issuance;
(ii) the aggregate unpaid principal amount of all Funded Debt of the
Company shall not exceed 65% of Capitalization of the Company; and
(iii) the aggregate unpaid principal amount of all Funded Debt of the
Company plus the aggregate unpaid principal amount of all Short-Term Debt of
the Company shall not exceed 70% of the sum of Capitalization plus the
aggregate unpaid principal amount of all Short-Term Debt of the Company.
Section 11.6. Short-Term Debt. The Company will not directly or
indirectly create, incur, assume, guarantee or otherwise become liable with
respect to any Short-Term Debt unless, immediately after giving effect
thereto, the aggregate unpaid principal amount of all Funded Debt of the
Company plus the aggregate unpaid principal amount of all Short-Term Debt of
the Company shall not exceed 70% of the sum of Capitalization of the Company
plus the aggregate unpaid principal amount of all Short-Term Debt of the
Company.
Section 11.7. Liens. The Company will not directly or indirectly create,
incur, assume or permit to exist any Lien on any property or asset (including
any document or instrument in respect of goods and accounts receivable) now
owned or hereafter acquired by the Company or any income or profits therefrom,
except that the restrictions in this Section 11.7 shall not prohibit any of
the foregoing consisting of:
(a) Liens for taxes, assessments or governmental charges or claims
the payment of which is not at the time required by Section 11.3;
(b) Liens of carriers, warehousemen, mechanics and materialmen and
statutory landlords' Liens incurred in the ordinary course of business for
sums not yet due or being contested in good faith by appropriate proceedings
promptly initiated and diligently conducted, if such reserve or other
appropriate provision, if any, as shall be required by generally accepted
accounting principles shall have been made therefor;
(c) Liens incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment insurance and
other types of social security (exclusive of Liens imposed under ERISA), or to
secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed money);
(d) any attachment or judgment Lien, unless the judgment it secures
shall not, within 60 days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall not have been discharged
within 60 days after the expiration of any such stay;
<PAGE>
(e) leases or subleases granted to others in the ordinary course of
business and not interfering with the ordinary conduct of the business of the
Company; and
(f) other Liens incidental to the conduct of the business of the
Company or the ownership of its property and assets (including easements,
rights of way, restrictions and other similar charges or encumbrances incurred
in the ordinary course of business), which were not incurred in connection
with its borrowing of money or obtaining of advances or credit, and which do
not in the aggregate materially detract from the value of its property or
assets or materially impair the use thereof in the operation of its business.
Section 11.8 Restrictions on Dividends and Other Distributions. The
Company will not directly or indirectly at any time:
(a) declare or pay any dividend in cash or in other assets or
property (other than dividends payable solely in common stock of the Company)
on or in respect of any class of its capital stock, or
(b) purchase, redeem, retire or otherwise acquire any shares of its
capital stock or any warrants or rights to purchase any shares of its capital
stock, or
(c) make any distribution in respect of its capital stock,
(any such dividend, payment, purchase, redemption, retirement, acquisition or
distribution is referred to in this Section 11.8 as a "Restricted Payment")
if, immediately after giving effect to any such proposed action, (i) any
condition or event shall exist which constitutes or which, after notice or
lapse of time or both would constitute, an Event of Default or (ii) the sum of
the aggregate unpaid principal amount of all Funded Debt of the Company plus
the aggregate unpaid principal amount of all Short-Term Debt of the Company
shall exceed 70% of the sum of Capitalization of the Company plus the
aggregate unpaid principal amount of all Short-Term Debt of the Company.
The Company will not declare any dividend which constitutes a Restricted
Payment payable more than 60 days after the date of declaration thereof.
The amount of any Restricted Payment in property other than cash shall
be deemed to be the greater of the fair market value thereof (determined in
good faith by the Company's Board of Directors at the time such Restricted
Payment is declared, made or paid) and the net book value thereof on the books
of the Company (determined in accordance with generally accepted accounting
principles on the date such Restricted Payment is declared, made or paid).
Section 11.9. Restrictions on Investments and Acquisitions of Property.
The Company will not directly or indirectly (i) purchase or otherwise acquire
any shares of capital stock or shares of beneficial interest in any
corporation or other entity except to the extent permitted by this Section or
by Section 11.10 and (ii) will not make any other Investments except:
(a) the following, all of which shall have a maturity within
one year from the date of acquisition thereof:
<PAGE>
(1) Investments in the Money Pool in accordance with
the terms thereof, as amended from time to time with the
approval of the Securities and Exchange Commission;
(2) direct or indirect obligations of the United
States of America, or of any agency thereof, or obligations
guaranteed by the United States of America;
(3) repurchase agreements with respect to securities
of the type referred to in the immediately preceding clause
(2), provided that each such repurchase agreement (x) is
transacted with a securities dealer designated as a "primary
dealer" by the Federal Reserve Bank, (y) obligates the seller
thereunder to repurchase the securities which are the subject
thereof no later than 30 days after the purchase thereof, and
(z) requires that the securities which are the subject thereof
are to be delivered to and held by the Company or a custodian
bank which is an Eligible Bank (as hereinafter defined);
(4) Investments in commercial paper (issued by banks
or corporations organized under the laws of the United States
or any state thereof) which at the date of investment are
accorded at least two of the following ratings: A-1, or better,
by Standard & Poor's Corporation, Prime-l, or better, by
Moody's Investors Service, Inc. and F-1, or better, by Fitch
Investors Services, Inc.;
(5) Investments in prime bankers acceptances of Eligible
Banks which are deemed eligible for rediscount at Federal
Reserve Banks;
(6) Investments in certificates of deposit issued by
Eligible Banks; and
(7) Investments in obligations issued by governmental
subdivisions and bearing interest exempt from federal income
taxes which are accorded a rating of A+, SP-1, A-1, or better,
by Standard & Poor's Corporation or A1, P-1, VMIG-1, MIG-1, or
better, by Moody's Investors Service, Inc.
The term "Eligible Bank" as used herein shall mean a bank or trust
company organized under the laws of the United States or any state
thereof having capital, surplus and undivided profits aggregating at
least $100,000,000 and which is accorded either (x) a bank deposit
rating of P-1, or better, by Moody's Investors Service, Inc. or (y) a
commercial paper rating of A-1, or better, by Standard & Poor's
Corporation; and
(b) Investments consisting of the cash surrender value of life
insurance policies for Company executives and Investments held in a rabbi
trust to fund executive deferred compensation liabilities; and
(c) Investments other than the Investments permitted in
subdivisions (a) and (b)of this Section 11.9 not used or useful in the conduct
of the public utility business; provided that the aggregate outstanding
<PAGE>
principal amount of any such Investments at any one time outstanding shall not
exceed 5% of Common Equity.
Section 11.10. Consolidation, Merger and Disposition of Assets. The
Company will not directly or indirectly become a party to any merger,
consolidation or sale or lease of all or substantially all of its assets
unless immediately after giving effect to such transaction,
(a) no condition or event shall exist which constitutes, or which,
after notice or lapse of time or both, would constitute an Event of Default,
(b) the surviving party, the resulting corporation or the purchaser
or lessee of such assets, as the case may be, would be entitled to create and
incur $1.00 of additional Funded Debt pursuant to the provisions of Section
11.5, and
(c) either (i) the Company is the surviving or resulting corporation or
(ii) the surviving party, the resulting corporation or the purchaser or lessee
of such assets shall have expressly assumed, in a manner approved in writing
by the holders of not less than 66-2/3% in aggregate principal amount of the
Notes then outstanding, the Company's obligations in respect of this Agreement
and any of the Notes which shall then be outstanding, and shall have furnished
to the holders of the Notes an Officers' Certificate and opinion of counsel,
which counsel shall be reasonably satisfactory to the holders of a majority in
principal amount of the Notes then outstanding, stating that the transaction
and the instrument or instruments of assumption have been duly authorized, and
such instrument or instruments have been duly executed and delivered, are in
full force and effect and constitute the legal, valid and binding obligation
of the parties thereto enforceable in accordance with the terms of such
instrument or instruments.
Section 11.11. Transactions with Affiliates. The Company will not
directly or indirectly enter into any material transaction with an Affiliate
(including, without limitation, the purchase, sale or exchange of property,
the rendering of any service and the payment of management or other service
fees, or the repayment of any indebtedness owed to an Affiliate) except in the
ordinary course of business and pursuant to the reasonable requirements of the
Company's business and upon terms which are fair and reasonable to the Company
and which are no less favorable to the Company than would obtain in a
comparable transaction with a Person not an Affiliate (in each case regarding
the Company as a business independent of any Affiliate); provided however, the
restrictions contained in the foregoing provisions of this sentence shall not
be applicable so long as the Company shall be a "subsidiary company" of a
"registered holding company" as such terms are defined in the 1935 Act.
Notwithstanding the foregoing, it is understood that the Company is a party to
the Affiliate Contracts pursuant to which the Company purchases its electric
energy requirements from Power, purchases other services from New England
Power Service Company, and participates in the Money Pool with several
Affiliates, and that the Company may maintain the Affiliate Contracts in full
force and effect and may renew the Affiliate Contracts and enter into other
agreements with its Affiliates providing for the provision of goods or
services to the Company at cost, and perform its obligations under each
thereof. It is further understood that pursuant to a proposed settlement
agreement filed with the New Hampshire Public Utilities Commission and pending
approval, the power contract with Power would be amended to allow for
termination of the all-requirements provision of the power contract and allow
<PAGE>
Power to recover its above-market generation commitments through a contract
termination charge, which the Company would collect from its customers.
Section 11.12. Issuance of Stock. The Company will not (either directly
or indirectly by the issuance of rights or options for, or securities
convertible into, such shares) issue, sell or otherwise dispose of any shares
of any class of its capital stock (other than directors' qualifying shares, if
required by applicable law) except to the Parent.
Section 11.13. Maintenance of Certain Contract. The Company will at all
times maintain in full force and effect the Affiliate Contract listed as item
1 on Schedule IV, or, a renewal or replacement contract providing for the
provision to the Company of the same or comparable property rights, goods or
services on terms which are on the whole not less favorable to the Company
than the terms of the Affiliate Contract renewed or replaced thereby.
Section 11.14. Compliance with Laws, Etc. The Company will comply with
all statutes, laws and governmental rules, regulations and orders applicable
to its business, properties and assets, including, without limitation, ERISA
and the Occupational Safety and Health Act of 1970 and applicable statutes or
governmental rules, regulations and orders relating to environmental standards
or controls in all applicable jurisdictions, consumer protection and equal
employment practices; provided that, the Company shall not be deemed in
violation of this Section 11.14 as a result of a failure to comply with the
provisions of any particular statute, law, or governmental rule, regulation or
order if (i) such provisions are being contested by the Company in good faith
and by appropriate proceedings which effectively stay any enforcement of
compliance and imposition of any penalty for noncompliance therewith, or (ii)
such failure to comply with such provisions would not (x) result in any fines,
penalties, injunctive relief, the imposition of any Lien not permitted by
Section 11.7 or other civil liabilities which, in the aggregate, would
materially and adversely affect the business, properties, operations or
condition (financial or otherwise) of the Company, or in any criminal
liability, or (y) be disadvantageous to the holders of the Notes.
SECTION 12. INFORMATION AS TO THE COMPANY.
Section 12.1. Accounting; Financial Statements and Other Information.
The Company will maintain a system of accounting established and administered
in accordance with generally accepted accounting principles, and will set
aside on its books all such proper reserves as shall be required by generally
accepted accounting principles. The Company will deliver to the Purchaser, so
long as it is the holder of any Note, and to each holder of at least 5% in
principal amount of the Notes at the time outstanding:
(a) as soon as available but in any event within 45 days after the
end of each of the first three quarterly fiscal periods in each year of the
Company, (i) a balance sheet of the Company at the end of such period, (ii) a
statement of income and retained earnings of the Company for such year-to-date
period and for the twelve months then ended and (iii) a statement of cash
flows of the Company for the year-to-date period then ended, in each case,
setting forth in comparative form figures for the corresponding period of the
previous year, all in reasonable detail and certified, subject to changes
resulting from year-end audit adjustments, as presenting fairly such financial
condition, results of operations and cash flows, by any one of the following:
<PAGE>
the President, a Vice President, the Treasurer, an Assistant Treasurer or the
Controller of the Company;
(b) as soon as available but in any event within 90 days after the
end of each fiscal year of the Company, a balance sheet of the Company as at
the end of such year, and a statement of income and of retained earnings and
cash flows of the Company for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and accompanied by the opinion thereon of Coopers & Lybrand L.L.P. or
of other independent public accountants of recognized national standing
selected by the Company, which opinion shall state that such financial
statements have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent with the prior fiscal years (except
for such changes, if any, as may be specified in such opinion) and fairly
present the financial position of the Company as at the end of such year and
the results of its operations and cash flows for such year, which opinion
shall not be qualified by reason of any limitation on such accountants imposed
by the Company; and that the audit by such accountants in connection with such
financial statements has been made in accordance with generally accepted
auditing standards;
(c) together with each delivery of financial statements pursuant to
subdivision (a) or (b) above, an Officers' Certificate (i) stating that the
signers have reviewed the terms of this Agreement and of the Notes and have
made, or caused to be made under their supervision, a review of the operations
and condition of the Company during the accounting period covered by such
financial statements and that such review has not disclosed the existence
during or at the end of such accounting period, and that the signers do not
have knowledge of the existence as at the date of such Officers' Certificate,
of any condition or event which constitutes or which, after notice or lapse of
time or both, would constitute an Event of Default, or, if any such condition
or event existed or exists, specifying the nature and period of existence
thereof and what action the Company has taken or is taking or proposes to take
with respect thereto, and (ii) demonstrating in reasonable detail compliance
during and at the end of such accounting period with the restrictions
contained in Sections 11.5 through 11.10, inclusive, hereof;
(d) together with each delivery of financial statements pursuant to
subdivision (b) above, a certificate by the independent public accountants
giving the opinion thereon stating (i) that their examination has included a
review of the terms of this Agreement and of the Notes as they relate to
accounting matters and that such review is sufficient to enable them to give
such certificate, (ii) whether or not their examination has disclosed the
existence during the fiscal year covered by such financial statements (and
stating whether or not they have knowledge of the existence as at the date of
such accountants' certificate) of any condition or event which constitutes or
which, after notice or lapse of time or both, would constitute an Event of
Default, and, if their examination has disclosed (or if they have knowledge
of) such a condition or event, specifying the nature and period of existence
thereof and (iii) that they have examined the Officers' Certificate delivered
therewith pursuant to subdivision (c) above, confirming the matters set forth
in such Officers' Certificate pursuant to clause (ii) of such subdivision (c)
and confirming that the calculations set forth in such Officers' Certificate
demonstrating compliance with the restrictions referred to in clause (ii) of
such subdivision (c) have been made in accordance with the provisions of this
Agreement (it being understood that, to the extent such calculations are based
<PAGE>
on financial information as of a date other than the end of such fiscal year,
such calculations will be based on amounts set forth in the Company's
unaudited interim financial statements);
(e) promptly upon receipt thereof, copies of all audit reports
submitted to the Company by independent public accountants in connection with
each annual or interim audit of the books of the Company made by such
accountants;
(f) promptly upon the sending, making available or filing of the
same, copies of all financial statements, including annual and quarterly
reports, reports, notices and proxy statements sent by the Company or the
Parent to their respective shareholders, and of all regular and periodic
reports and any registration statement or prospectus filed by the Company, the
Parent and by any other corporation or other entity which owns, directly or
indirectly, a majority of the voting stock of the Company, with any securities
exchange or with the Securities and Exchange Commission (or any Federal
governmental body or agency succeeding to any of its functions);
(g) forthwith upon any officer of the Company obtaining knowledge
of any condition or event which to such officer's knowledge constitutes or
which, after notice or lapse of time or both, would constitute an Event of
Default, or becoming aware that any holder of a Note or any other Person has
given any notice to the Company or taken any action with respect to a claimed
default or event or condition referred to in Sections 13.1(f), 13.1(g),
13.1(h), 13.1(i) or 13.1(j), an Officers' Certificate specifying the nature
and period of existence thereof and what action the Company has taken or is
taking or proposes to take with respect thereto; and
(h) with reasonable promptness, such other information and data
with respect to the Company as from time to time may be reasonably requested
by the Purchaser, so long as it or its nominee is the holder of any Note, or
by any other holder of at least 5% in aggregate principal amount of the Notes
then outstanding.
Section 12.2. Inspection. The Company will permit any authorized
representatives designated by the Purchaser or its nominee, so long as either
is the holder of any Note or Notes, or by any other holder of at least 5% in
aggregate principal amount of the Notes at the time outstanding, at the
Company's expense (excluding salary and other overhead expenses of the
Purchaser or any such other holder and the travel and related expenses of such
authorized representative, which shall be paid by the Purchaser or such other
holder), to visit and inspect any of the properties of the Company including
its books of account, and to make copies and take extracts therefrom, and to
discuss its affairs, finances and accounts with its officers and independent
public accountants (and by this provision the Company authorizes such
accountants to discuss with the Purchaser or any such other holder the
finances and affairs of the Company), all at such reasonable times and as
often as may reasonably be requested.
SECTION 13. DEFAULTS.
Section 13.1. Events of Default; Acceleration. If any of the following
conditions or events ("Events of Default") shall occur for any reason
whatsoever (and whether such occurrence shall be voluntary or involuntary or
come about or be effected by operation of law, governmental or administrative
<PAGE>
rule or regulation or judicial or governmental or administrative decision or
action or otherwise):
(a) if the Company shall default in the payment of any principal of
or premium (if any) on, any Note when the same becomes due and payable whether
at maturity or a date fixed for prepayment or by declaration or otherwise; or
(b) if the Company shall fail to pay any interest on any Note for a
period of 10 Business Days after the same becomes due and payable; or
(c) if the Company shall default in the performance of or
compliance with any term contained in Section 11.2 or Section 11.5 through
11.13 inclusive, or Section 12.1(g); or
(d) if the Company shall default in the performance of or
compliance with any term contained herein other than those referred to in
clause (c) of this Section 13.1 and such default shall not have been remedied
within thirty days after the Company shall have (by reason of notice or
otherwise) actual knowledge of such default; or
(e) if any representation or warranty made in writing by or on
behalf of the Company herein or pursuant hereto shall prove to have been false
or incorrect in any material respect on the date as of which made; or
(f) if the Company shall default (as principal or guarantor or
other surety) in the payment of any principal of, or premium, if any, or
interest on any Indebtedness for borrowed money (other than the Notes)
aggregating in excess of $1,000,000 or in the performance of or compliance
with any term of any evidence of such Indebtedness or of any mortgage,
indenture or other agreement relating thereto or in the payment of any rental
obligation under any lease and such default shall have resulted in the
acceleration of the maturity of such Indebtedness; or
(g) if the Company pursuant to or within the meaning of Title 11,
U.S. Code, as amended from time to time, or any similar Federal, or State law
for the relief of debtors (collectively, the "Bankruptcy Law"):
(i) commences a voluntary bankruptcy, reorganization,
arrangement or insolvency proceeding, or other proceedings for relief under
any Bankruptcy Law;
(ii) consents by answer (or failure to contest) or otherwise
to the filing against it of a petition for, or the entry of an order for,
relief from claims against it in an involuntary bankruptcy, reorganization,
arrangement or insolvency proceeding, or other proceedings for relief under
any Bankruptcy Law;
(iii) consents to the appointment of any receiver, trustee,
assignee, liquidator, custodian or similar official under any Bankruptcy Law
(any such official being referred to as a "Custodian") of it or for all or
substantially all of its property; or
(iv) makes a general assignment for the benefit of its
creditors; or
<PAGE>
(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief from claims against the Company in an
involuntary bankruptcy, reorganization, arrangement or insolvency proceeding,
or other proceedings for relief under any Bankruptcy Law;
(ii) appoints a Custodian of the Company or for all or
substantially all of its property; or
(iii) adjudicates the Company as being insolvent or orders the
winding up, dissolution or liquidation of the Company; and the order or decree
remains unstayed and in effect for 90 days; or
(i) if the Company shall be generally not paying, or shall admit in
writing its inability to pay, its debts as they become due; or
(j) if a final judgment which, with other outstanding final
judgments against the Company, exceeds an aggregate of $1,000,000 shall be
rendered against the Company and if, within 90 days after entry thereof, such
judgment shall not have been discharged or execution thereof stayed pending
appeal, or if, within 90 days after the expiration of any such stay, such
judgment shall not have been discharged;
then, upon the occurrence of an Event of Default described in the foregoing
subdivisions (a) through (j), inclusive, or if the holder of any Note or of
any other evidence of Indebtedness of the Company gives any notice or takes
any other action with respect to a claimed default, the Company agrees to give
notice as required by Section 12.1(g) to all holders of the Notes then
outstanding.
Section 13.2. Acceleration of Maturities. When any Event of Default
described in subdivision (a) or (b) of Section 13.1 has happened and is
continuing, any holder of any Note may, and when any Event of Default
described in subdivision (c) through (f), inclusive, or subdivision (j) of
said Section 13.1 has happened and is continuing, the holder or holders of
66-2/3% or more of the principal amount of Notes at the time outstanding may,
by notice to the Company, declare the entire principal and all interest
accrued on all Notes to be, and all Notes shall thereupon become, forthwith
due and payable, without any presentment, demand, protest or other notice of
any kind, all of which are hereby expressly waived. When any Event of Default
described in subdivision (g), (h) or (i) of Section 13.1 has occurred, then
all outstanding Notes shall immediately become due and payable without
presentment, demand or notice of any kind. Upon the Notes becoming due and
payable as a result of any Event of Default as aforesaid, the Company will
forthwith pay to the holders of the Notes the entire principal and interest
accrued on the Notes and, to the extent not prohibited by applicable law, an
amount as liquidated damages for the loss of the bargain evidenced hereby (and
not as a penalty) equal to the Make-Whole Amount, determined as of the date on
which the Notes shall so become due and payable. No course of dealing on the
part of the holder or holders of any Notes nor any delay or failure on the
part of any holder of Notes to exercise any right shall operate as a waiver of
such right or otherwise prejudice such holder's rights, powers and remedies.
The Company further agrees, to the extent permitted by law, to pay to the
holder or holders of the Notes all costs and expenses incurred by them in the
<PAGE>
collection of any Notes upon any default hereunder or thereon, including
reasonable compensation to such holder's or holders' attorneys for all
services rendered in connection therewith.
Section 13.3. Rescission of Acceleration. The provisions of Section 13.2
are subject to the condition that if the principal of and accrued interest on
all or any outstanding Notes have been declared immediately due and payable by
reason of the occurrence of any Event of Default described in subdivisions (a)
through (f), inclusive, or subdivision (j) of Section 13.1, the holders of 66-
2/3% in aggregate principal amount of the Notes then outstanding may, by
written instrument filed with the Company, rescind and annul such declaration
and the consequences thereof, provided that at the time such declaration is
annulled and rescinded:
(a) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes or this Agreement;
(b) all arrears of interest upon all the Notes and all other sums
payable under the Notes and under this Agreement (except any principal,
interest or premium on the Notes which has become due and payable solely by
reason of such declaration under Section 13.2) shall have been duly paid; and
(c) each and every other Event of Default shall have been made
good, cured or waived pursuant to Section 18;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Event of Default or impair any right consequent thereto.
Section 13.4. Remedies on Default, Etc. In case any one or more Events
of Default shall occur and be continuing, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in such Note, or for
an injunction against a violation of any of the terms hereof or thereof, or in
aid of the exercise of any power granted hereby or thereby or by law. In case
of a default in the payment of any principal of, premium (if any) or interest
on any Note, the Company will pay to the holder thereof such further amount as
shall be sufficient to cover the cost and expenses of collection, including,
without limitation, reasonable attorneys fees, expenses and disbursements. No
course of dealing and no delay on the part of any holder of any Note in
exercising any right shall operate as a waiver thereof or otherwise prejudice
such holder's rights, powers or remedies. No right, power or remedy conferred
by this Agreement or by any Note upon any holder thereof shall be exclusive of
any other right, power or remedy referred to herein or therein or now or
hereafter available at law, in equity, by statute or otherwise.
SECTION 14. INTERPRETATION OF AGREEMENT; DEFINITIONS.
Section 14.1. Definitions. As used herein the following terms have the
following respective meanings (such meanings applying to the singular and
plural forms of the terms so defined):
"Affiliate" with reference to any Person, any director, officer or
employee of such Person, any corporation, association, firm or other entity of
which such Person is a member, director, officer or employee; any other Person
which beneficially owns or holds 5% or more of the shares of any class of the
<PAGE>
voting stock of such Person; any other Person 5% or more of the shares of
voting stock of which are beneficially owned or held by such Person; and any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such Person. The term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of any Person, whether through the
ownership of voting securities, by contract or otherwise.
"Affiliate Contracts" the meaning specified in Section 5.21.
"Business Day" any day other than a Saturday, Sunday or any other day on
which commercial banks are authorized to be closed in Boston, Massachusetts or
New York, New York.
"Capitalization" the aggregate of Funded Debt and all amounts which
should, in accordance with generally accepted accounting principles, be
classified on a balance sheet in respect of the capital stock, premium on
capital stock, paid-in capital and retained earnings accounts, less the amount
at which any treasury shares are carried as an asset.
"Capitalized Lease" shall mean any lease the obligation for rentals with
respect to which is required to be capitalized on a balance sheet of the
lessee in accordance with generally accepted accounting principles.
"Capitalized Rentals" of any Person shall mean as of the date of any
determination thereof the amount at which the aggregate rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a balance sheet of such Person.
"Closing" the meaning specified in Section 3.
"Closing Date" the meaning specified in Section 3.
"Common Equity" shall mean the sum of the par value of the outstanding
common stock of the Company, other paid-in capital of the Company and retained
earnings of the Company.
"Eligible Banks" the meaning specified in Section 11.9.
"ERISA" the meaning specified in Section 5.13.
"Events of Default" the meaning specified in Section 13.1.
"Funded Debt" with reference to any Person, shall mean (a) all
Indebtedness of such Person for borrowed money maturing more than one year
from the date of the creation thereof or which by its terms or by the terms of
any instrument or agreement relating thereto is directly or indirectly
renewable or extendable at the option of the debtor to a date more than one
year from the date of the creation thereof, and all Indebtedness for borrowed
money outstanding under a revolving credit or similar agreement obligating the
lender or lenders to extend credit over a period of more than one year, and
including all payments of the aforesaid Indebtedness which, although maturing
one year or less from the date of determination thereof, constitutes a
mandatory installment, serial maturity, sinking fund or other similar payment
in respect of Indebtedness having a final maturity of more than one year after
<PAGE>
the date of the creation thereof, (b) all Capitalized Rentals of such Person,
and (c) all Guarantees by such Person of Funded Debt of others.
"Guarantees" by any person shall mean (a) all guarantees, sales with
recourse endorsements (other than for collection or deposit in the ordinary
course of business) and other obligations (contingent or otherwise) to pay,
purchase, repurchase or otherwise acquire or become liable upon or in respect
of any Indebtedness of any other Person, and (b) without limiting the
generality of the foregoing, all obligations (contingent or otherwise), to
purchase products, supplies or other property or services from any other
Person under agreements requiring payment therefor regardless of the non-
delivery or non-furnishing thereof, or to make Investments in any other
Person, or to maintain the capital, working capital, solvency or general
financial condition of any other Person, or to indemnify any other Person
against and hold such other Person harmless from damages, losses and
liabilities, all under circumstances intended to enable such other Person or
Persons to discharge any Indebtedness or to comply with agreements relating to
such Indebtedness or otherwise to assure or protect creditors against loss in
respect of such Indebtedness. The amount of any Guarantee shall be deemed to
be the amount of the Indebtedness of, or damages, losses or liabilities of,
the other Person or Persons in connection with which the Guarantee is made or
to which it relates unless the obligations under the Guarantee are limited to
a determinable amount, in which case the amount of such Guarantee shall be
deemed to be such determinable amount. For purposes of this definition, sales
with recourse shall mean either the assumption of any financial responsibility
by way of endorsement, agreement to repurchase, guarantee, "hold-back",
agreement to indemnify against loss or the like in respect of a sale of
receivables or other obligations, but customary warranties as to validity,
absence of default and the like shall not constitute recourse.
"Indebtedness" with reference to any Person shall mean (a) all items
(except items of capital stock, premium on capital stock, or paid-in capital
or retained earnings or contingency reserves or reserves for deferred income
taxes or of minority interests) and obligations (whether fixed or contingent)
which in accordance with generally accepted accounting principles would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person as of the date on which Indebtedness is to be
determined, including all Capitalized Lease obligations, (b) all Indebtedness
secured by any mortgage, pledge, lien, security interest or conditional sale
or other title retention agreement existing on any property or asset owned or
held by such Person, whether or not the Indebtedness secured thereby shall
have been assumed, and (c) all Guarantees by such Person.
"Investment" as applied to any Person, any direct or indirect purchase
or other acquisition by such Person of stock or other securities of any other
Person, or any direct or indirect loan, advance or capital contribution by
such Person, including all Indebtedness and accounts receivable from any other
Person which are not current assets or did not arise from sales to such other
Person in the ordinary course of business.
"Lien" any interest in property securing an obligation owed to, or a
claim by, a Person other than the owner of the property, whether such interest
is based on the common law, statute or contract, and including but not limited
to the security interest or lien arising from a mortgage, encumbrance, pledge,
conditional sale or trust receipt or a lease, consignment or encroachments,
easements, rights of way, covenants, conditions, restrictions, leases and
<PAGE>
other title exceptions and encumbrances affecting property. For the purposes
of this Agreement, the Company shall be deemed to be the owner of any property
which it has acquired or holds subject to a conditional sale agreement or
other arrangement pursuant to which title to the property has been retained by
or vested in some other Person for security purposes.
"Make-Whole Amount" in connection with any prepayment or acceleration of
the Notes, the excess, if any, of (i) the aggregate present value as of the
date of such prepayment of each dollar of principal being prepaid and the
amount of interest (exclusive of interest accrued to the date of prepayment)
that would have been payable in respect of such dollar if such prepayment had
not been made, determined by discounting such amounts at the Reinvestment Rate
from the respective dates on which they would have been payable, over (ii)
100% of the principal amount of the outstanding Notes being prepaid. If the
Reinvestment Rate is equal to or higher than 7.30%, the Make-Whole Amount with
respect to the Notes shall be zero. For purposes of any determination of the
Make-Whole Amount:
"Reinvestment Rate" shall mean 0.50%, plus the arithmetic mean of the
yields for the two columns under the heading "Week Ending" published in
the Statistical Release under the caption "Treasury Constant Maturities"
for the maturity (rounded to the nearest month) corresponding to the
Life to Maturity of the Notes being prepaid. If no maturity exactly
corresponds to such Life to Maturity, yields for the two published
maturities most closely corresponding to such Life to Maturity shall be
calculated pursuant to the immediately preceding sentence and the
Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to
the nearest month. For the purposes of calculating the Reinvestment
Rate, the most recent Statistical Release published prior to the date of
determination of the Make-Whole Amount shall be used.
"Statistical Release" shall mean the then most recently published
statistical release designated "H.15(519)" or any successor publication
which is published weekly by the Federal Reserve System and which
establishes yields on actively traded U.S. Government Securities
adjusted to constant maturities or, if such statistical release is not
published at the time of any determination hereunder, then such other
reasonably comparable index which shall be designated by the holders of
66-2/3% in aggregate principal amount of the outstanding Notes.
"Life to Maturity" of the principal amount of the Notes being prepaid
shall mean, as of the time of any determination thereof, the number of
years (calculated to the nearest one-twelfth) which will elapse between
the date of determination and the final maturity of the Notes being
prepaid.
"Memorandum" the meaning specified in Section 5.6.
"Money Pool" the New England Electric System Money Pool.
"Net Income" the net income (or deficit) of the Company for the period
in question (taken as a cumulative whole) shall be the amount of net income
earned during such period and subsequently transferred to the retained
earnings account on the books of the Company, as determined in accordance with
generally accepted accounting principles.
<PAGE>
"Net Income Available for Interest Charges" for any period shall mean,
Net Income for such period plus all amounts deducted in determining such Net
Income for (a) interest charges accrued during such period on Indebtedness and
amortization of Indebtedness discount and expense, and (b) taxes imposed on or
measured by income or excess profits for such period.
"1935 Act" the meaning specified in Section 5.14.
"Officers' Certificate" a certificate executed on behalf of the Company
by any two of the following officers of the Company: its President, any of its
Vice Presidents, its Treasurer or any of its Assistant Treasurers, provided
that, at least one of the officers executing any certificate delivered
pursuant to Section 12.1 shall be the Treasurer or an Assistant Treasurer of
the Company.
"Parent" the meaning specified in Section 5.1.
"Person" a corporation, an association, a partnership, an organization,
a business, an individual, a government or political subdivision thereof or a
governmental agency.
"Power" New England Power Company, a Massachusetts corporation. Holders
of Power's common stock and 6% Cumulative Preferred Stock have general voting
rights. Parent owns all of the common stock of Power and 74.82% of the 6%
Cumulative Preferred Stock. Such shares represent 99.71% of the voting power.
"Pro Forma Annual Interest Charges" as at any date of determination, the
total amount payable during the twelve-month period commencing on such date in
respect of interest charges on (including amortization of debt discount or
expenses incurred in connection with) Funded Debt of the Company outstanding
on such date of determination, after giving effect to any Funded Debt proposed
to be created on such date, but not including interest on any Funded Debt if
and to the extent that such Funded Debt is being discharged from proceeds of
the Funded Debt proposed to be incurred, determined in accordance with
generally accepted accounting principles. If the interest rate on any Funded
Debt (whether outstanding or proposed to be incurred on such date of
determination) is determined by reference to a floating rate, the interest
payable on such Funded Debt during such twelve-month period shall be
calculated by using the rate in effect on the date of determination.
"Short-Term Debt" with reference to any Person, shall mean all
Indebtedness of such Person for borrowed money maturing on demand or one year
or less from the date of the creation thereof and not by its terms or by the
terms of any instrument or agreement relating thereto directly or indirectly
renewable or extendable at the option of the debtor to a date more than one
year from the date of the creation thereof, provided, however, that
Indebtedness for borrowed money outstanding under a revolving credit or
similar agreement which obligates the lender or lenders to extend credit over
a period of more than one year shall constitute Funded Debt and not Short-Term
Debt even though the same matures on demand or one year or less from the date
of the creation thereof, and provided, further, that payments on the aforesaid
Indebtedness which, although maturing one year or less from the date of
determination thereof, constitutes a mandatory installment, serial maturity,
sinking fund or other similar payment in respect of Indebtedness having a
final maturity of more than one year after the date of the creation thereof
<PAGE>
shall constitute Funded Debt and not Short-Term Debt and all Guarantees by
such Person of Short Term Debt of others.
"Subsidiary" any corporation of which the Company owns or controls
directly or indirectly all of the stock of each class except directors'
qualifying shares.
Section 14.2. Accounting Principles. Where the character or amount of
any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, the same shall be done in
accordance with generally accepted accounting principles, to the extent
applicable, except where such principles are inconsistent with the
requirements of this Agreement.
Section 14.3. Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action
in question is taken directly or indirectly by such Person.
SECTION 15. EXPENSES, ETC.
Whether or not the transactions contemplated hereby shall be
consummated, the Company will pay all expenses in connection with such
transactions and in connection with any amendments, waivers or consents
resulting from any work-out, renegotiation or restructuring relating to the
performance by the Company (whether or not the same become effective) under or
in respect of this Agreement or the Notes, including, without limitation: (a)
the cost and expenses of producing and reproducing this Agreement, of the
producing and reproducing and issue of the Notes, of furnishing all opinions
by counsel for the Company and all certificates on behalf of the Company, and
of the Company's performance of and compliance with all agreements and
conditions contained herein on its part to be performed or complied with; (b)
the cost of delivering to the principal office of the Purchaser and any
institutional investor which is the direct or indirect transferee of the
Purchaser, insured to its satisfaction, any Notes delivered to it upon any
substitution of Notes pursuant to Section 8 and of the Purchaser's or any such
institutional investor's delivering any Notes, insured to its satisfaction,
upon any such substitution; (c) the reasonable expenses and disbursements of
counsel for the Purchaser in connection with such transactions and any such
amendments, waivers or consents; and (d) the reasonable out-of-pocket expenses
incurred by the Purchaser in connection with such transactions and any such
amendments, waivers or consents. The Company also will pay, and will save the
Purchaser and each holder of any Note or Notes harmless from, any and all
liabilities with respect to (a) any taxes (including interest and penalties)
which may be payable in respect of the execution and delivery of this
Agreement, the issue of the Notes and any amendment, waiver or consents under
or in respect of this Agreement or the Notes and (b) any claim for any
broker's fee, finder's fee or commission claimed or asserted to be payable in
connection with the sale of the Notes or the transactions contemplated by this
Agreement.
SECTION 16. PRIVATE PLACEMENT NUMBER.
In conjunction with the issuance of the Notes, Purchaser will make the
appropriate filings with Standard and Poor's CUSIP Service Bureau, agent of
<PAGE>
the National Association of Insurance Commissioners, in order to obtain a
private placement number ("PPN") for the transaction contemplated hereby. The
Company agrees to pay all fees and expenses in connection with the preparation
and processing of the PPN request.
SECTION 17. SURVIVAL OF COVENANTS AND AGREEMENTS, ETC.
All covenants and agreements contained herein and all representations
and warranties made in writing by or on behalf of the Company herein or
pursuant hereto shall survive the execution and delivery of this Agreement,
any investigation at any time made by the Purchaser or on its behalf, the
purchase of the Notes by the Purchaser hereunder, and any disposition or
payment of the Notes. All statements contained in any certificate or other
instrument delivered by or on behalf of the Company pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed
representations and warranties made by the Company hereunder.
SECTION 18. AMENDMENTS, WAIVERS AND CONSENTS.
Any term, covenant, agreement or condition of this Agreement or of the
Notes may be amended and the observance of any term, covenant, agreement or
condition hereof or thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the Company and the holders of at least 66-2/3% in principal amount
of the Notes at the time outstanding, provided, however, that, without the
prior written consent of the holders of all the Notes at the time outstanding,
no such amendment or waiver shall (a) extend the fixed maturity or reduce the
principal amount of or premium (if any), or reduce the rate or extend the time
of payment of interest on, or reduce the amount or extend the time of payment
of any principal or premium (if any) payable on any prepayment of, any Note,
(b) reduce the aforesaid percentage of the principal amount of the Notes the
holders of which are required to consent to any such amendment or waiver, or
(c) change the provisions of Section 13 giving each holder of any Note the
right, without joining any other holders of the Notes, to declare the Notes
held by such holder due and payable as provided in Section 13 or (d) change
the specified percentages of 66-2/3% of the principal amount of the Notes the
holders of which are required in Section 13.2 to declare the Notes due and
payable in certain circumstances or required under Section 13.3 to rescind an
acceleration of the Notes. Any amendment or waiver effected in accordance with
this Section 18 shall be binding upon each holder of any Note at the time
outstanding, each future holder of any Note and the Company. Notes directly or
indirectly held by the Company, or any Affiliate of the Company shall not be
deemed outstanding for purposes of determining whether any amendment or waiver
has been effected in accordance with this Section 18.
SECTION 19. NOTICES.
Except as otherwise provided in this Agreement, notices and other
communications under this Agreement shall be in writing and shall be mailed
prepaid by registered or certified mail, return receipt requested, or by
overnight air courier or facsimile communication, in each case addressed (a)
if to the Purchaser, at the address set forth in Schedule I attached to this
Agreement, or at such other address as the Purchaser shall have furnished to
the Company in writing, except as otherwise provided in Section 9 with respect
to payments on Notes held by the Purchaser, or (b) if to any other holder of
<PAGE>
any Note, at such address as such other holder shall have furnished to the
Company in writing, or, until any such other holder so furnishes an address to
the Company, then to and at the address of the last holder of such Note who
has so furnished an address to the Company, or (c) if to the Company, at its
address set forth at the beginning of this Agreement, to the attention of the
Treasurer, with a copy to the address of its agency set forth in Section 8.1,
or at such other address, or to the attention of such other officer, as the
Company shall have furnished to the Purchaser and each such other holder in
writing. A notice to the Purchaser by overnight air courier shall only be
effective if delivered to the Purchaser at a street address designated for
such purpose in Schedule I, and a notice to the Purchaser by facsimile
communication shall only be effective if made by confirmed transmission to the
Purchaser at a telephone number designated for such purpose in Schedule I, or,
in either case, as the Purchaser or a subsequent holder of any Note initially
issued to the Purchaser may designate to the Company in writing.
SECTION 20. FURTHER ASSURANCES.
The Company will execute and deliver all such instruments and take all
such action as the Purchaser from time to time may reasonably request in order
to further effectuate the purposes and carry out the terms of this Agreement
and the Notes.
SECTION 21. MISCELLANEOUS.
Section 21.1. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto, whether so expressed or not,
and, in particular, shall inure to the benefit of and be enforceable by any
holder or holders at the time of the Notes or any part thereof. Except as
stated in Section 17, this Agreement embodies the entire agreement and
understanding between the Purchaser and the Company and supersedes all prior
agreements and understandings relating to the subject matter hereof.
Section 21.2. Powers and Rights not Waived; Remedies Cumulative. No
delay or failure on the part of the holder of any Note in the exercise of any
power or right shall operate as a waiver thereof; nor shall any single or
partial exercise of the same preclude any other or further exercise thereof,
or the exercise of any other power or right, and the rights and remedies of
the holder of any Note are cumulative to, and are not exclusive of, any rights
or remedies any such holder would otherwise have.
Section 21.3. Severability. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect
the validity or enforceability of any remaining portion, which remaining
portion shall remain in force and effect as if this Agreement had been
executed with the invalid or unenforceable portion thereof eliminated and it
is hereby declared the intention of the parties hereto that they would have
executed the remaining portion of this Agreement without including therein any
such part, parts or portion which may, for any reason, be hereafter declared
invalid or unenforceable.
Section 21.4. Governing Law. This Agreement and the Notes shall be
construed and enforced in accordance with and governed by the laws of the
State of New Hampshire.
<PAGE>
Section 21.5. Captions. The headings in this Agreement and the table of
contents hereto are for purposes of reference only and shall not limit or
otherwise affect the meaning hereof.
Section 21.6. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
If you are in agreement with the foregoing, please sign the form of
agreement on the accompanying counterparts of this letter and return one of
the same to the Company, whereupon this letter shall become a binding
agreement between the Purchaser and the Company.
Very truly yours,
GRANITE STATE ELECTRIC COMPANY
s/ H.W. McDowell
By _____________________________
Title: Treasurer
The foregoing Agreement is
hereby agreed to as of the
date thereof.
THE PAUL REVERE LIFE INSURANCE COMPANY
By: Provident Investment Management, L.L.C.
Its agent
s/
By________________________________________
Title: Vice President
<PAGE>
PRINCIPAL AMOUNT
NAME AND ADDRESS OF NOTES TO BE
OF PURCHASER PURCHASED
THE PAUL REVERE LIFE INSURANCE COMPANY $5,000,000
(Notes to be registered in the name of
"CUDD & CO. (the nominee of
The Paul Revere Life Insurance Company)")
(1) Address all notices regarding payments
and all other communications to:
Provident Investment Management, LLC
Private Placements
One Fountain Square
Chattanooga, Tennessee 37402
Telephone: (423) 755 - 1365
Fax: (423) 755 - 3351
(2) All payments on account of the
Notes shall be made by wire
transfer of immediately available
funds to:
CUDD & CO.
C/o The Chase Manhattan Bank, N.A.
New York, NY
ABA No. 021 000 021
SSG Private Income Processing
A/C #900-9-000200
Custodial Account No. G06992
Please reference: Issuer
PPN
Coupon
Maturity
Principal = $ ________________
Interest = $ ________________
Tax Identification Number: 13-6022143 (CUDD & CO.)
SCHEDULE I
(To Note Agreement)
<PAGE>
REGULATORY APPROVAL
The following is a description of the regulatory approval which has been
obtained by the Company as required by Section 5.14 of the Note Agreement:
Order of New Hampshire Public Utilities Commission, numbered
22,761 and dated October 21, 1997 and the letter from the Commission dated
April 20, 1998, confirming compliance with the requirements of Order 22,761.
SCHEDULE II
(to Note Agreement)
<PAGE>
ENVIRONMENTAL DISCLOSURES
PURSUANT TO SECTION 5.20 OF THE
NOTE AGREEMENT
1. Missouri Electric Works Superfund Site- Cape Girardeau, Missouri
The Missouri Electric Works was a motor and electrical transformer
repair and sales business located in Cape Girardeau, MO. In 1979, the Company
(and an affiliated company) sold used transformers to a company called
National Electric Service in St. Louis, MO. Unknown to the Company, National
Electric shipped the transformers to Missouri Electric Works where they were
to be serviced and then sold. Some of the Company's (and its affiliated
company's) equipment was resold while other equipment never left the site.
In the mid-1980's the U.S. Environmental Protection Agency determined
that the Missouri Electric Works site was contaminated by PCBs and declared it
a federal Superfund site.
In 1988, the EPA sent a notice of potential responsibility to NEPSCO (an
affiliate company and the entity representing the Company in the transformer
sale to National Electric Service). NEPSCO is part of the group of
potentially responsible parties (PRPs) that is addressing cleanup of the site.
The EPA has selected a remedy to clean up soils at the site. The
estimated cost for this cleanup is $15-$18 million. The PRP group will study
whether groundwater cleanup is necessary. Rough cost estimates for groundwater
cleanup range from $20-$28 million.
Originally, there were about 700 PRPs at the site. NEPSCO was assessed
0.06% of the responsibility for cleanup. On October 1, 1991, NEPSCO learned
that a large number of PRPs had been removed from the group, and that it is
now assessed 0.961% of the responsibility.
Based on these rough cost figures, and assuming that NEPSCO would be
assessed a 0.961% share of cleanup costs, it is estimated at this time that
the Company's share of these costs may be $44,000-$200,000 in total. However,
these figures are not firm, and final costs could be more or less than
estimated at this time. The Company has recorded a reserve on its books of
$84,000 (before tax) against this liability.
SCHEDULE III
(To Note Agreement)
<PAGE>
2. Chandonnet c.21E Site - Lowell, Massachusetts.
The Chandonnet property was used for a scrap metal and salvage yard. The
Company (together with some of its affiliated companies), other electrical
utilities, and other commercial-industrial businesses sold unusable
transformers and other electrical equipment to a scrap dealer that arranged
for disposal of the materials at the Chandonnet site.
The site became contaminated with PCBs. The Massachusetts Department of
Environmental Protection deemed the Company a "generator" of hazardous waste
(i.e., PCBs) and identified the Company as a potentially responsible party
("PRP"). There were about 20 other PRPs named at the site.
Complete cleanup costs at the Chandonnet site are estimated between
$500,000 to $600,000. In addition to payments made to date, the Company has
recorded a reserve on its books of $3,000 which represents an estimate of its
share of additional costs to be incurred. However, these figures are not firm,
and the Company's final costs could be more or less than estimated at this
time.
III-2
<PAGE>
DESCRIPTION OF CHANGES AND PROCEEDINGS
Since December 31, 1997, there have been several developments related to
the electric utility industry restructuring proceedings before the New
Hampshire Public Utilities Commission (NHPUC) and the Company's settlement
agreement pending before the NHPUC. These developments were reported in pages
1 - 4 of the 1997 Annual Report of the Company and are incorporated herein by
reference.
On April 28, 1998, the Federal Energy Regulatory Commission approved the
comprehensive settlement agreement reached between the Company, Power, the
Governor's Office of the State of New Hampshire, and a number of other
parties. The settlement provides for choice of power supplier to Company
customers by no later than July 1, 1998. The settlement agreement still
requires NHPUC approval. On May 1, 1998, the Company submitted a filing to
the NHPUC in compliance with the March 20, 1998 Order of Rehearing which would
provide for retail access to begin July 1, 1998 even if the Company's
previously filed settlement were not accepted.
Pursuant to a case filed by Public Service Company of New Hampshire
(PSNH)(an entity unaffiliated with the Company) to prevent implementation of
the NHPUC's electricity deregulation plan (which called for less than full
stranded cost recovery in some instances), a U.S. District Judge in June 1998
issued an injunction of all NHPUC actions on deregulating the electric utility
industry until the case could be decided on the merits. Trial is tentatively
scheduled for November 1998. All New Hampshire electric utilities are covered
by the order unless they voluntarily waive the injunction. The case is PSNH
v. Patch, et. al., Civil Action Numbers 97-121 (D. RI) and 97-97 (D. NH).
SCHEDULE III (A)
(To Note Agreement)
<PAGE>
<TABLE>
AFFILIATE CONTRACTS OF THE COMPANY
<CAPTION>
SERVICE, PROPERTY, EXPIRATION
AFFILIATE(S) CONTRACT ETC. PROVIDED DATE
THEREBY
<S> <C> <C> <C> <C>
1. New England Service Contract Various corporate, 12/31/98
Power Service dated administrative and support
Company December 31, services including
1997 accounting, construction,
engineering, legal and data
processing services
2. New England Primary Service Electricity for resale at See 1997
Power Company for Resale retail level Annual Report
for Granite
State Electric
Company
3. New England NEES Money Pool Money Pool arrangement Current
Electric System for borrowing and authorization
and certain investing of excess cash. expires
subsidiaries October 31,
2001; any
member may
terminate at
any time
4. Various Deferred Compensation Agreements with outside directors of the Company
which terminate upon payment of deferred amounts.
5. Various Benefit Contracts with employees or officers of the Company.
6. New England Property Sharing Mutual Consent to the No specified
Power Company Agreement dated location of facilities, term
November 3, equipment and materials on
1993 property owned by the
other
</TABLE>
SCHEDULE IV
(to Note Agreement)
<PAGE>
<TABLE>
<CAPTION>
SERVICE, PROPERTY EXPIRATION
AFFILIATE(S) CONTRACT ETC. PROVIDED DATE
THEREBY
<S> <C> <C> <C> <C>
7. New England Memorandum of Concurrent filing of Any party may
Power Company, Understanding resource plans with terminate on
Massachusetts dated July 21, commissions and two-years
Electric Company, 1993 procedures for entering notice
and The into new supply side
Narragansett commitments
Electric Company
8. Six affiliates of Mutual Assistance Incidental assistance and December 31,
New England Agreement services provided among 1998
Electric System companies upon request,
if granted, at cost
</TABLE>
IV-4
<PAGE>
INDEBTEDNESS OF THE COMPANY
AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
Short-Term Debt:
<S> <C> <C> <C>
Short-Term Debt to Affiliates
through NEES Moneypool $2.475.000
Total $2,475,000
Funded Debt:
7.94% Notes 5,000,000
9.44% Notes 5,000,000
7.37% Notes 5,000,000
Total $15,000,000
Sum of Short-Term Debt and Funded Debt $17,475,000
</TABLE>
SCHEDULE V
(to Note Agreement)
<PAGE>
GRANITE STATE ELECTRIC COMPANY
7.30% Note
Due June 15, 2028
No. R
$ _______________ [Date]
GRANITE STATE ELECTRIC COMPANY (the "Company"), a New Hampshire
corporation, for value received, hereby promises to pay to ____________, or
registered assigns, the principal amount of ____________ Dollars
($____________), on June 15, 2028, and to pay interest (computed on the basis
of a 360 day year of twelve 30-day months) on the principal amount from time
to time remaining unpaid hereon at the rate of 7.30% per annum from the date
hereof until maturity, payable semiannually on each June 15 and December 15 of
each year commencing after the date hereof, until such unpaid balance shall
become due and payable (whether at maturity or at a date fixed for prepayment
or by declaration or otherwise). The Company agrees to pay interest (payable
as aforesaid or, at the option of the registered holder hereof, on demand) on
any overdue principal (including any overdue prepayment of principal), premium
(if any) and (to the extent permitted by applicable law) on any overdue
installment of interest, at the rate of 9.30% per annum after the due date,
whether by acceleration or otherwise, until paid. Payments of principal,
premium (if any) and interest on this Note shall be made in lawful money of
the United States of America at the address of the registered holder hereof
for such purpose specified in or pursuant to the Note Agreement referred to
below.
This Note is one of the 7.30% Notes due June 15, 2028 (the "Notes") of
the Company in the aggregate principal amount of $5,000,000 issued or to be
issued under and pursuant to the terms and provisions of the Note Agreement
dated as of June 15, 1998 (the "Note Agreement"), entered into by the Company
with the original Purchaser therein referred to and this Note and the holder
hereof are entitled equally and ratably with the holders of all other Notes
outstanding under the Note Agreement to all the benefits provided for thereby
or referred to therein. Reference is hereby made to the Note Agreement for a
statement of such rights and benefits.
This Note and the other Notes outstanding under the Note Agreement may be
declared due prior to their expressed maturity dates, all in the events, on
the terms and in the manner and amounts as provided in the Note Agreement.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Agreement.
EXHIBIT A
(to Note Agreement)
<PAGE>
This Note is registered on the books of the Company and is transferable only
by surrender thereof at the principal office of the Company duly endorsed or
accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
GRANITE STATE ELECTRIC COMPANY
By
Its
A-2
<PAGE>
[Letterhead of Company Counsel]
[Closing Date]
The Paul Revere Life Insurance Company
One Fountain Square
Chattanooga, Tennessee 37402
Granite State Electric Company
7.30% Notes due June 15, 2028
Ladies and Gentlemen:
We, the undersigned, are Associate General Counsel and Senior Attorney,
respectively, of Granite State Electric Company, a New Hampshire corporation
(the "Company"), and in such respective capacities we have represented the
Company in connection with (i) the issuance and sale today by the Company of
$5,000,000 in aggregate principal amount of its 7.30% Notes due June 15, 2028
(the "Notes"), pursuant to the Note Agreement, dated as of June 15, 1998 (the
"Note Agreement"), between the Company and you, and (ii) the purchase by you
today of $5,000,000 in aggregate principal amount of the Notes. Capitalized
terms used herein without definition have the respective meanings attributed
thereto in the Note Agreement.
In so acting, we have participated in the preparation of the Note
Agreement and the Notes being purchased by and delivered to you today. We have
also examined and relied upon the representations and warranties as to factual
matters contained in and made pursuant to the Note Agreement and have examined
and relied upon the originals, or copies certified or otherwise identified to
our satisfaction, of such records, documents, certificates and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below.
Based on the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of New Hampshire and has all
requisite power, authority and legal right to own, lease and operate its
properties, to carry on its business as now conducted and as presently
proposed to be conducted, to enter into the Note Agreement, to issue and sell
the Notes and to carry out the terms of the Note Agreement and the Notes. The
only class of capital stock of the Company is its common stock, par value $100
per share, of which 60,400 shares are authorized, have been validly issued,
are outstanding and are owned by New England Electric System.
2. The Company has no Subsidiaries and does not own any shares of
capital stock of any corporation or other entity other than shares of capital
stock of certain entities carried on the books of the Company not in excess of
$10,000 in the aggregate for all such entities.
3. The Company is not qualified or licensed as a foreign corporation
in any jurisdiction and neither the character of the properties owned nor the
nature of the activities conducted by it makes such qualification or licensing
necessary in any jurisdiction.
<PAGE>
4. The execution, delivery and performance by the Company of the Note
Agreement and the Notes and the consummation of the transactions contemplated
thereby have been duly authorized by all necessary corporate action on the
part of the Company and no approval of the stockholders of the Company or of
any holders of any Indebtedness (or any trustee for any such holders) is
required in connection therewith. The Note Agreement and the Notes purchased
by and delivered to you today have been duly executed and delivered by duly
authorized officers of the Company.
5. The Note Agreement and the Notes purchased by you today constitute
the legal valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws from time to
time in effect affecting enforcement of creditors' rights generally.
6. There is no action, proceeding or investigation pending or, to the
best of our knowledge, threatened (or any basis therefor) which questions the
validity or enforceability of the Note Agreement or the Notes or any action
taken or to be taken pursuant thereto. Except for the matters set forth in
Schedules III and III(A) to the Note Agreement, there is no action, proceeding
or investigation pending or, to our knowledge threatened (or any basis
therefore) which might result, either in any case or in the aggregate, in any
material adverse change in the business, operations, affairs or condition
(financial or otherwise) of the Company or in any of its properties or assets
or in any material liability on the part of the Company. In our opinion, none
of the matters set forth in Schedule III of the Note Agreement, either
individually or in the aggregate, involve the reasonable possibility of
materially and adversely (defined for purposes of this paragraph 6 only as an
amount equal to 10% or more of the common equity of the Company) affecting the
business, operations, properties or condition (financial or otherwise) of the
Company.
7. The Company is not in violation of any term of its charter or by-
laws, or any term of any franchise, license, permit, agreement, indenture,
mortgage or instrument to which it is a party or by which it or any of its
property is bound or any judgment, decree, order, law, statute, governmental
or administrative rule or regulation applicable to it (including, without
limitation, any such governmental rule or regulation relating to occupational
health and safety standards and controls, consumer protection or equal
employment practice requirements), so as to materially and adversely affect,
either individually or in the aggregate, its business, operations, affairs or
condition (financial or otherwise); and the execution, delivery and
performance of the Note Agreement and the Notes will not result in any such
violation or be in conflict with or constitute a default under any term of any
of the foregoing and will not result in the creation of any Lien upon any of
the properties or assets of the Company pursuant to any such term; and there
is no such term which materially adversely affects the business, operations,
affairs or condition (financial or otherwise) of the Company or any of its
properties or assets.
8. The Company is a "subsidiary company" of a "registered holding
company", as such terms are defined in the Public Utility Holding Company Act
of 1935, as amended. The New Hampshire Public Utilities Commission, by its
order numbered 22,761 dated October 21, 1997, and its letter dated April 20,
1998 (collectively, the "NHPUC Order") , has authorized the Company to issue
and sell the Notes on the terms provided for in the Note Agreement. The NHPUC
<PAGE>
Order has been duly obtained, has become final and non-appealable without
revocation, amendment or other modification, is unstayed and still in effect.
Except for the NHPUC Order, no order, consent, approval or authorization of,
or declaration or filing with, or the taking of any other action in respect
of, any governmental body, authority, commission or agency is required for the
valid execution and delivery of the Note Agreement or the valid offer, issue,
sale and delivery of the Notes pursuant thereto and the consummation of the
transactions contemplated thereby.
9. The Company has all such franchises, certificates of convenience
and necessity, operating rights, licenses, permits, consents, approvals,
authorizations and orders of governmental bodies, political subdivisions and
regulatory authorities, free from burdensome restrictions, as are necessary
for the ownership of the properties now owned and operated by it, the
maintenance and operation of the properties now operated by it and the conduct
of the business now conducted by it.
10. Certain substations owned by the Company and necessary for its
business are located on land owned by New England Power Company, an Affiliate
of the Company, pursuant to one or more agreements which permit such location
on such land and which are adequate for the conduct of the Company's business.
Other portions of the Company's distribution system are located on public ways
or private property pursuant to agreements, easements, licenses, permits or
other rights described in Section 5.5 of the Note Agreement which permit such
location on such land and which are adequate for the conduct of the Company's
business. The Company owns all right, title and interest in and to all its
assets and properties (including assets and properties reflected in the
balance sheet of the Company as at March 31, 1998 referred to in Section 5.6
of the Note Agreement) and has good and marketable title to its substations,
whether located on its land or on land owned by New England Power Company, in
each case, free from all Liens except Liens permitted by Section 11.7 of the
Note Agreement, subject only to immaterial exceptions, minor encumbrances and
defects in title which do not, either individually or in the aggregate, impair
the use of such properties in the conduct of the Company's business.
11. The offer, issue, sale and delivery to you by the Company of the
Notes pursuant to the terms and conditions of the Note Agreement constitute
exempt transactions under the registration provisions of the Securities Act of
1933, as amended, and neither the registration of such Notes thereunder nor
the qualification of an indenture under the Trust Indenture Act of 1939, as
amended, is required in connection with such offer, issue, sale and delivery
of the Notes.
12. The Company is not an "investment company", or a person directly
or indirectly "controlled" by or acting on behalf of an "investment company",
as such terms are defined in the Investment Company Act of 1940, as amended.
13. The issuance and sale of the Notes pursuant to the terms and
conditions of the Note Agreement does not contravene Regulation G, Regulation
T, Regulation X or any other regulation of the Board of Governors of the
Federal Reserve System or Section 7 of the Exchange Act, each as now in
effect.
The above opinion, insofar as it relates to titles, is based in part
upon opinions of local counsel and of counsel associated with us and in part
upon examination of titles of the Company to its principal properties by title
examiners under our direction, the direction of counsel associated with us, or
<PAGE>
the direction of local counsel, or by local counsel and reviewed by us or
counsel associated with us, such title examiners and counsel being, in our
opinion, of good standing and experienced in the examination of titles. In the
case of easements over lands of others, the title of the grantors of the
easements were not in all cases examined to the same extent as in the case of
fee ownership and in some instances such easements depend upon long user.
Kirk L. Ramsauer is a member of the bar of The Commonwealth of
Massachusetts and does not express any opinion as to the matters governed by
any laws other than those of The Commonwealth of Massachusetts and the Federal
law of the United States of America and Carlos A. Gavilondo is a member of the
bar of the State of New Hampshire and does not express any opinion as to
matters governed by any laws other than those of the State of New Hampshire.
Very truly yours,
______________________________________
Kirk L. Ramsauer,
Associate General Counsel
______________________________________
Carlos A. Gavilondo, Senior Attorney
EXHIBIT B
(to Note Agreement)
<PAGE>
EXHIBIT C.5.a
FIFTH SUPPLEMENTAL LOAN AGREEMENT
Between
MASSACHUSETTS INDUSTRIAL FINANCE AGENCY
and
NEW ENGLAND POWER COMPANY
Dated as of August 1, 1998
Supplementing the Loan Agreement between
Massachusetts Industrial Finance Agency and
New England Power Company
dated as of March 15, 1980,
as Heretofore Amended by
a First Supplemental Loan Agreement
dated as of January 15, 1983,
a Second Supplemental Loan Agreement
dated as of September 15, 1983,
a Third Supplemental Loan Agreement
dated as of October 1, 1992, and
a Fourth Supplemental Loan Agreement
dated as of September 1, 1993
<PAGE>
TABLE OF CONTENTS
Section 1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Amendments to Original Loan Agreement. . . . . . . . . . . 1
Section 3. Severability . . . . . . . . . . . . . . . . . . . . . . . 3
Section 4. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 3
Section 5. Captions . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 6. Governing Law. . . . . . . . . . . . . . . . . . . . . . . 3
Section 7. Binding Effect . . . . . . . . . . . . . . . . . . . . . . 4
Section 8. Obligations of the Company Under the Indenture . . . . . . 4
<PAGE>
FIFTH SUPPLEMENTAL LOAN AGREEMENT
This Fifth Supplemental Loan Agreement dated as of August 1, 1998 (the
"Fifth Supplemental Loan Agreement") is between Massachusetts Industrial
Finance Agency, a body politic and corporate and a public instrumentality of
The Commonwealth of Massachusetts established under Chapter 23A of the General
Laws of Massachusetts (the "Agency"), and New England Power Company, a
corporation organized and existing under the laws of The Commonwealth of
Massachusetts (the "Company"). The Agency is authorized by Massachusetts
General Laws, Chapter 23A, sec. 29-38C and, to the extent made applicable by
sec. 35(a) thereof, Chapter 40D (the "Act") to finance pollution control
facilities through the issue of its industrial revenue bonds. The purpose of
this Fifth Supplemental Loan Agreement is to amend a Loan Agreement between
the Agency and the Company dated as of March 15, 1980 (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:
"Loan Agreement" means the Original Loan Agreement as amended and
supplemented by the First Supplemental Loan Agreement dated as of January 15,
1983, the Second Supplemental Loan Agreement dated as of September 15, 1983,
the Third Supplemental Loan Agreement dated as of October 1, 1992, the Fourth
Supplemental Loan Agreement dated as of September 1, 1993 and this Fifth
Supplemental Loan Agreement.
"Sixth Supplemental Indenture" means the Sixth Supplemental Indenture
between the Agency and State Street Bank and Trust Company, as Trustee, dated
as of August 1, 1998, supplementing and amending the Trust Indenture between
the Agency and said Trustee (as successor to Boston Safe Deposit and Trust
Company) dated as of March 15, 1980 (the "Original Indenture" and, as
supplemented and amended by the First Supplemental Indenture dated as of
January 15, 1983, the Second Supplemental Indenture dated as of September 15,
1983, the Third Supplemental Indenture dated as of October 1, 1992, the Fourth
Supplemental Indenture dated as of September 1, 1993, the Fifth Supplemental
Indenture dated as of July 1, 1994 and the Sixth Supplemental Indenture, the
"Indenture").
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. 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 Sixth
Supplemental Indenture), the Loan Agreement shall be amended as follows:
A. Section 6(c) of the Original Loan Agreement shall read as
follows:
(c) Maintenance of Corporate Existence;
Assignment of Rights and Obligations; Qualification in
Massachusetts. It will maintain its corporate existence
and will not dissolve, merge or
<PAGE>
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 with respect to all or any series or subseries of the Bonds on
or after the date of a mandatory tender of all of the affected 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 or assignees of such rights and obligations is a member or are
members of the same affiliated group within the meaning of Code sec.
1504 and such assignee or assignees assumes or assume in writing all of
the Company's obligations under the Loan Agreement and the Indenture
with respect to the affected Bonds. The Company shall not dispose of
all or substantially all of its assets, unless either (i) the transferee
or transferees of such assets assumes or assume in writing the Company's
obligations under the Loan Agreement and the Indenture or (ii) such
disposition occurs on or after the date of a mandatory tender for
purchase of all of the affected Bonds pursuant to Section 2.09 of the
Fourth Supplemental Indenture. Any such assignment of rights and
obligations under this Agreement or disposition of assets occurring
after the date of mandatory tender referenced in the two preceding
sentences may only occur if the Bondholders purchasing the affected
Bonds on or after such mandatory tender date were informed on or before
the applicable date of purchase, either through a remarketing circular,
official statement or other disclosure document or information, of the
proposed assignment or disposition. Compliance with the preceding
sentence shall be conclusively evidenced by a certificate of the Company
delivered to the Agency and the Trustee no later than the effective date
of the proposed assignment or disposition to the effect that the Company
has complied with the applicable requirements of such preceding
sentences. 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 Massachusetts or
qualified to do business therein and shall at all times be in good
standing in Massachusetts.
B. Section 6 of the Original Loan Agreement is amended by adding at
the end thereof the following new subsection:
(e) Liens. The Company will not incur, issue, assume, create or
suffer to exist any lien on or with respect to any of its properties or
assets, whether now owned or hereafter acquired, or assign any right to
receive income, other than Permitted Liens, as hereinafter defined,
unless such lien is extended to also secure the Company's obligations
with respect to the Bonds on a parity basis. For purposes of this
subsection, "Permitted Liens" shall mean such of the following as to
which no enforcement, collection, execution, levy or foreclosure
proceeding shall have been commenced: (a) liens for taxes, assessments
and governmental charges or levies to the extent not required to be paid
or to the extent any such tax, assessment, charge or claim is being
contested in good faith and by proper proceedings and as to which
appropriate reserves are being maintained, unless and until any lien
resulting therefrom attaches to its property and becomes enforceable
against its other creditors.; (b) liens imposed by law, such as
materialmen's , mechanics', carriers', workmen's and repairmen's liens
<PAGE>
and other similar liens arising in the ordinary course of business; (c)
pledges or deposits to secure obligations under workers' compensation
laws or similar legislation or to secure public or statutory
obligations; (d) easements, rights of way and other encumbrances on
title to real property that do not render title to the property
encumbered thereby unmarketable or materially adversely effect the use
of such property for its present purposes; (e) liens created by or
resulting from any litigation or other proceeding which is being
contested in good faith by appropriate proceedings; and (f) purchase
money liens upon or in any real property or equipment acquired or held
by the Company in the ordinary course of business to secure the purchase
price of such property or equipment or to secure debt incurred solely
for the purpose of financing the acquisition of such property or
equipment, or liens existing on such property or equipment at the time
of its acquisition (other than any such liens created in contemplation
of such acquisition that were not incurred to finance the acquisition of
such property) or extensions, renewals or replacements of any of the
foregoing for the same or a lesser amount, provided, however, that no
such lien shall extend to or cover any properties of any character other
than the real property or equipment being acquired, and no such
extension, renewal or replacement shall extend to or cover any
properties not theretofore subject to the lien being extended, renewed
or replaced.
C. 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
Agency shall assign to the Trustee all of the Agency's
rights under this Agreement (except the rights to receive
payments for its own purposes under Sections 6(d) and 9
hereof).
Section 3. Severability. In the event that any provision of this Fifth
Supplemental Loan Agreement shall be held to be invalid in any circumstance,
such invalidity shall not affect any other provisions or circumstances.
Section 4. Counterparts. This Fifth 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 5. Captions. The captions in this Fifth Supplemental Loan
Agreement are for convenience only and shall not affect the construction
hereof.
Section 6. Governing Law. This instrument shall be governed by the
laws of The Commonwealth of Massachusetts.
Section 7. Binding Effect. This Fifth Supplemental Loan Agreement
shall inure to the benefit of and be binding on the Agency 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).
<PAGE>
Section 8. 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.
IN WITNESS WHEREOF, the parties have caused this Fifth Supplemental Loan
Agreement to be duly executed and their respective seals to be hereunto
affixed, all as of the date first above written.
MASSACHUSETTS INDUSTRIAL FINANCE AGENCY
[Seal]
By:______________________________
Title:
NEW ENGLAND POWER COMPANY
[Seal]
s/ John G. Cochrane
By:______________________________
Treasurer
Attest:
s/ Kirk L. Ramsauer
_____________________________
Assistant Clerk
<PAGE>
EXHIBIT C.5.b
THIRTEENTH SUPPLEMENTAL LOAN AGREEMENT
Between
BUSINESS FINANCE AUTHORITY
OF THE STATE OF NEW HAMPSHIRE
and
NEW ENGLAND POWER COMPANY
Dated as of August 1, 1998
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, an
Eleventh Supplemental Loan Agreement
dated as of January 15, 1996 and a
Twelfth Supplemental Loan Agreement
dated as of December 1, 1996
<PAGE>
TABLE OF CONTENTS
Section 1. Definitions. . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Amendments to Original Loan Agreement. . . . . . . . . . 2
Section 3. Severability . . . . . . . . . . . . . . . . . . . . . . 3
Section 4. Counterparts . . . . . . . . . . . . . . . . . . . . . . 3
Section 5. Captions . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 6. Governing Law. . . . . . . . . . . . . . . . . . . . . . 3
Section 7. Binding Effect . . . . . . . . . . . . . . . . . . . . . 4
Section 8. Obligations of the Company Under the Indenture . . . . . 4
<PAGE>
THIRTEENTH SUPPLEMENTAL LOAN AGREEMENT
This Thirteenth Supplemental Loan Agreement dated as of August 1, 1998
(the "Thirteenth 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 Thirteenth Supplemental Loan Agreement is to amend
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:
"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, the Twelfth Supplemental Loan Agreement dated as of December 1, 1996 and
this Thirteenth Supplemental Loan Agreement.
"Fourteenth Supplemental Indenture" means the Fourteenth Supplemental
Indenture between the Authority and State Street Bank and Trust Company, as
Trustee, dated as of August 1, 1998, 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 of February 1, 1995, the Eleventh Supplemental Indenture
dated as of January 1, 1995, the Twelfth Supplemental Indenture dated as of
January 15, 1996, the Thirteenth Supplemental Indenture dated as of December
1, 1996, and the Fourteenth Supplemental Indenture, the "Indenture").
<PAGE>
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. 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 and amended by the Fourteenth Supplemental Indenture),
the Loan Agreement shall be amended as follows:
A. 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 with respect
to all or any series or subseries of the Bonds on or
after the date of a mandatory tender of all of the
affected 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 sec. 1504 and such assignee assumes in writing all
of the Company's obligations under the Loan Agreement and
the Indenture with respect to the affected Bonds. 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 on or after the date of a mandatory
tender for purchase of all of the affected Bonds pursuant
to Section 2.09 of the Fourth Supplemental Indenture. Any
such assignment of rights and obligations under this
Agreement or disposition of assets occurring after the
date of mandatory tender referenced in the two preceding
sentences may only occur if the Bondholders purchasing
the affected Bonds on or after such mandatory tender date
were informed on or before the applicable date of
purchase, either through a remarketing circular, official
statement or other disclosure document or information, of
the proposed assignment or disposition. Compliance with
the preceding sentence shall be conclusively evidenced by
a certificate of the Company delivered to the Authority
and the Trustee no later than the effective date of the
proposed assignment or disposition to the effect that the
Company has complied with the applicable requirements of
such preceding sentences. So long as the Bonds are
outstanding, the Company (including any successor,
<PAGE>
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.
B. Section 6 of the Original Loan Agreement is amended by adding at
the end thereof the following new subsection:
(e) Liens. The Company will not incur, issue, assume, create or
suffer to exist any lien on or with respect to any of its properties or
assets, whether now owned or hereafter acquired, or assign any right to
receive income, other than Permitted Liens, as hereinafter defined,
unless such lien is extended to also secure the Company's obligations
with respect to the Bonds on a parity basis. For purposes of this
subsection, "Permitted Liens" shall mean such of the following as to
which no enforcement, collection, execution, levy or foreclosure
proceeding shall have been commenced: (a) liens for taxes, assessments
and governmental charges or levies to the extent not required to be paid
or to the extent any such tax, assessment, charge or claim is being
contested in good faith and by proper proceedings and as to which
appropriate reserves are being maintained, unless and until any lien
resulting therefrom attaches to its property and becomes enforceable
against its other creditors.; (b) liens imposed by law, such as
materialmen's , mechanics', carriers', workmen's and repairmen's liens
and other similar liens arising in the ordinary course of business; (c)
pledges or deposits to secure obligations under workers' compensation
laws or similar legislation or to secure public or statutory
obligations; (d) easements, rights of way and other encumbrances on
title to real property that do not render title to the property
encumbered thereby unmarketable or materially adversely effect the use
of such property for its present purposes; (e) liens created by or
resulting from any litigation or other proceeding which is being
contested in good faith by appropriate proceedings; and (f) purchase
money liens upon or in any real property or equipment acquired or held
by the Company in the ordinary course of business to secure the purchase
price of such property or equipment or to secure debt incurred solely
for the purpose of financing the acquisition of such property or
equipment, or liens existing on such property or equipment at the time
of its acquisition (other than any such liens created in contemplation
of such acquisition that were not incurred to finance the acquisition of
such property) or extensions, renewals or replacements of any of the
foregoing for the same or a lesser amount, provided, however, that no
such lien shall extend to or cover any properties of any character other
than the real property or equipment being acquired, and no such
extension, renewal or replacement shall extend to or cover any
properties not theretofore subject to the lien being extended, renewed
or replaced.
Section 3. Severability. In the event that any provision of this
Thirteenth Supplemental Loan Agreement shall be held to be invalid in any
circumstance, such invalidity shall not affect any other provisions or
circumstances.
Section 4. Counterparts. This Thirteenth 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.
<PAGE>
Section 5. Captions. The captions in this Thirteenth Supplemental Loan
Agreement are for convenience only and shall not affect the construction
hereof.
Section 6. Governing Law. This instrument shall be governed by the
laws of The State of New Hampshire.
Section 7. Binding Effect. This Thirteenth 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).
Section 8. 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.
IN WITNESS WHEREOF, the parties have caused this Thirteenth 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]
By:______________________________
Executive Director
NEW ENGLAND POWER COMPANY
[Seal]
s/ John G. Cochrane
By:______________________________
Treasurer
Attest:
s/ Kirk L. Ramsauer
_____________________________
Assistant Clerk
<PAGE>
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 and January 1, 1998 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.
<PAGE>
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.
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
<PAGE>
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. New England Electric System
shall not receive a payment for its corporate tax credits, if any.
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. 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
<PAGE>
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 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
<PAGE>
tax credit Carry forward 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 Carry
forward 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 shall 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
<PAGE>
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 section 3B, the separate company
business profits tax is to be determined only for those
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. Vermont Consolidated Income Tax Returns - The consolidated
corporate income tax liability shall be allocated to each
company included in the consolidated return in proportion to
the Vermont net taxable income before apportionment, whether
positive or negative, of each such company. 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 shall
be allocated a state tax which is greater than its state tax
liability had it filed a separate return.
<PAGE>
D. Connecticut Combined Business Tax Returns - The tax on combined
net income shall be allocated to each company participating in
the combined return in proportion to the Connecticut net income
after apportionment, whether positive or negative, of each such
company. The tax on combined minimum tax base shall be
allocated to each company in proportion to such company's
separate minimum tax base. The tax on the number of companies
included in the combined return and the combined return
preference tax shall be allocated equally among the companies
participating in the return. 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. No company shall be allocated a state
tax which is greater than its state tax liability had it filed
a separate return.
E. 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.
<PAGE>
NEW ENGLAND ELECTRIC SYSTEM
s/J.G. Cochrane
By
J.G. Cochrane - Treasurer
ALLENERGY FUELS CORPORATION
s/Marcy L. Reed
By
Marcy L. Reed - Treasurer
GRANITE STATE ELECTRIC COMPANY
s/H.W. McDowell
By
H.W. McDowell - Treasurer
GRANITE STATE ENERGY, INC.
s/H.W. McDowell
By
H.W. McDowell - Treasurer
MASSACHUSETTS ELECTRIC COMPANY
s/J.G. Cochrane
By
J.G. Cochrane - Treasurer
NANTUCKET ELECTRIC COMPANY
s/J.G. Cochrane
By
J.G. Cochrane - Treasurer
THE NARRAGANSETT ELECTRIC COMPANY
s/J.G. Cochrane
By
J.G. Cochrane - Treasurer
<PAGE>
NEES COMMUNICATIONS, INC.
s/R.H. McLaren
By
R.H. McLaren - Treasurer
NEES ENERGY, INC.
s/J.G. Cochrane
By
J.G. Cochrane - Treasurer
NEES GLOBAL, INC.
s/J.G. Cochrane
By
J.G. Cochrane - Treasurer
NEES TELECOMMUNICATIONS CORP.
s/R.H. McLaren
By
R.H. McLaren - Treasurer
NEW ENGLAND ELECTRIC TRANSMISSION CORP.
s/J.G. Cochrane
By
J.G. Cochrane - Treasurer
NEW ENGLAND ENERGY INCORPORATED
s/J.G. Cochrane
By
J.G. Cochrane - Treasurer
NEW ENGLAND HYDRO FINANCE COMPANY, INC.
s/J.G. Cochrane
By
J.G. Cochrane - Treasurer
<PAGE>
NEW ENGLAND HYDRO-TRANSMISSION CORPORATION
s/J.G. Cochrane
By
J.G. Cochrane - Treasurer
NEW ENGLAND HYDRO-TRANSMISSION
ELECTRIC COMPANY, INC.
s/J.G. Cochrane
By
J.G. Cochrane - Treasurer
NEW ENGLAND POWER COMPANY
s/J.G. Cochrane
By
J.G. Cochrane - Treasurer
NEW ENGLAND POWER SERVICE COMPANY
s/J.G. Cochrane
By
J.G. Cochrane - Treasurer
NEW ENGLAND WATER HEATER COMPANY, INC.
s/R.H. McLaren
By
R.H. McLaren - 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>
1998
Report on NEES Money Pool
($000's)
<CAPTION>
Avg. Max. Min. Investment
Company Invest. Invest. Invest. at 12/31/98
- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C>
NEES (Trust) $44,331 $194,725 $ -0- $ -0-
Massachusetts Electric Co -0- -0- -0- -0-
New England Power Co. 88,673 555,200 -0- 177,125
The Narragansett Electric Co. 155 7,100 -0- -0-
Granite State Electric Co. 2,620 6,375 -0- 2,900
Nantucket Electric Co. 565 3,300 -0- -0-
New England Power Service Co. 4,687 22,975 -0- 2,675
New England Electric Transmission -0- -0- -0- -0-
Corporation
New England Energy Incorporated 4,513 15,200 275 625
New England Hydro-Transmission 3,824 7,050 700 2,775
Electric Company (NEHTEC)
New England Hydro-Transmission 1,888 6,550 -0- -0-
Corporation (NEHTC)
Narragansett Energy Resources 282 1,925 -0- -0-
Company (NERC)
</TABLE>
<PAGE>
Exhibit E.2
Modified
FORM U-13-60
ANNUAL REPORT
For the Period
Beginning January 1, 1998 and Ending December 31, 1998
To The
U.S. SECURITIES AND EXCHANGE COMMISSION
Of
NEES Global, 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 NEES Global, 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 20-21
Miscellaneous general expenses Account 930.2 22
Taxes other than income taxes Account 408 23
Donations Account 426.1 24
Other deductions Account 426.5 25
Notes to statement of income Schedule XVIII 26
ORGANIZATION CHART 27
</TABLE>
<PAGE>
PAGE 4
<TABLE>
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
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) $ 20,867 $
107 Construction work in progress (Schedule II)
--------- ---------
Total Property 20,867
--------- ---------
108 Less accumulated provision for depreciation
and amortization of company property
(Schedule III) (4,175)
--------- ---------
Net Company Property 16,692
--------- ---------
INVESTMENTS
123 Investments in associate companies (Sch. IV) 676 163
124 Other Investments (Schedule IV) 3,150 3,897
--------- ---------
Total Investments 3,826 4,060
--------- ---------
CURRENT AND ACCRUED ASSETS
131 Cash 595 298
134 Special deposits 12
135 Working funds
136 Temporary cash investments (Schedule IV)
141 Notes receivable
143 Accounts receivable (Schedule V) 1,109 743
144 Accumulated provision of uncollectible accounts (170)
146 Accounts receivable from associate companies 0 56
152 Fuel stock expenses undistributed
154 Materials and supplies
163 Stores expense undistributed
165 Prepayments 1,202
174 Miscellaneous current and accrued assets 6
--------- ---------
Total Current and Accrued Assets 2,754 1,097
--------- ---------
DEFERRED DEBITS
181 Unamortized debt expense
184 Clearing accounts
186 Miscellaneous deferred debits (Schedule IX)
188 Research, development, or demonstration
expenditures
190 Accumulated deferred income taxes
--------- ----------
Total Deferred Debits --------- ----------
TOTAL ASSETS AND OTHER DEBITS $ 23,272 $5,157
========= ==========
</TABLE>
<PAGE>
PAGE 5
<TABLE>
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
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 $ 1
211 Miscellaneous paid-in-capital (Schedule XI) 31,679 14,074
215 Appropriated retained earnings (Schedule XI)
216 Unappropriated retained earnings (Schedule XI) (10,288) (9,160)
------- -------
Total Proprietary Capital 21,392 4,915
------- -------
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 165 145
233 Notes payable to associate companies
(Schedule XIII)
234 Accounts payable to associate companies
(Schedule XIII) 53 19
236 Taxes accrued 217 76
237 Interest accrued
238 Dividends declared
241 Tax collections payable 58 2
242 Miscellaneous current and accrued
liabilities (Schedule XIII) 237
------- -------
Total Current and Accrued Liabilities 730 242
------- -------
DEFERRED CREDITS
253 Other deferred credits 314
255 Accumulated deferred investment tax credits
------- -------
Total Deferred Credits 314
------- -------
283 ACCUMULATED DEFERRED INCOME TAXES 836
------- -------
TOTAL LIABILITIES AND PROPRIETARY CAPITAL $23,272 $5,157
======= =======
</TABLE>
<PAGE>
PAGE 6
<TABLE>
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
SCHEDULE II
COMPANY PROPERTY
<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) 0 21,001 (681) 20,320
308 Office
Furniture and
Equipment 0 547 547
309 Automobiles,
Other Vehicles
and Related
Garage
Equipment
310 Aircraft and
Airport
Equipment
311 Other Company
Property (3)
---- ------- ---- ---- ------
SUB-TOTAL None 21,548 (681) 20,867
---- ------- ---- ---- ------
107 Construction
Work in
Progress (4)
---- ------- ---- ---- ------
TOTAL None 21,548 (681) 20,867
==== ======= ==== ==== ======
<FN>
(1) PROVIDE AN EXPLANATION OF THOSE CHANGES CONSIDERED MATERIAL:
</FN>
</TABLE>
<PAGE>
PAGE 7
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
SCHEDULE II - CONTINUED
<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>
Rental water heaters 21,548 (A) 20,320
------ ------
TOTAL 21,548 20,320
====== ======
(3) DESCRIBE OTHER COMPANY PROPERTY:
None
(4) DESCRIBE CONSTRUCTION WORK IN PROGRESS:
None
</TABLE>
(A) Includes water heaters on New England Water Heater Company's books
on the date of acquisition, plus water heaters purchased during the year since
the acquisition.
<PAGE>
PAGE 8
<TABLE>
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
SCHEDULE III
ACCUMULATED PROVISION FOR DEPRECIATION AND
AMORTIZATION OF COMPANY PROPERTY
<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 0 (3,774) 28 (3,746)
308 Office
Furniture and
Equipment 0 (429) (429)
309 Automobiles,
Other Vehicles
and Related
Garage
Equipment
310 Aircraft and
Airport
Equipment
311 Other Company
Property
---- ------ --- --- ------
TOTAL 0 (4,203) 28 (4,175)
==== ====== === === ======
22) PROVIDE AN EXPLANATION OF THOSE CHANGES CONSIDERED MATERIAL:
None
</TABLE>
<PAGE>
PAGE 9
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
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 163 676
------- -------
TOTAL 163 676
======= =======
ACCOUNT 124 - OTHER INVESTMENTS
Separation Technologies, Inc. $1,000 $1,000
Monitoring Technologies, Inc. 475 0
Underwater Unlimited Diving
Services, Inc. 1,000 0
Nexus Energy Software, Inc. 1,400 2,150
HydroServ Group, LLC 22 0
---------- ---------
TOTAL (1) $3,897 $3,150
========== =========
ACCOUNT 136 - TEMPORARY CASH INVESTMENTS
------- ---------
TOTAL None None
======= =========
(1) See page 15 "Notes to Financial Statements" footnote
(1),(2),(3),(5),(8)
</TABLE>
<PAGE>
PAGE 10
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
<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 - Accounts Receivable (Non-
Associated Companies) 743 1,109
---------- --------
TOTAL $743 $1,109
========== ========
</TABLE>
<PAGE>
PAGE 11
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
<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
---- ----
TOTAL None None
==== ====
</TABLE>
<PAGE>
PAGE 12
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars, except per share data)
<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
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) 31,679
ACCOUNT 215 - APPROPRIATED RETAINED EARNINGS
-------
TOTAL 31,679
=======
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 $(9,160) $(1,128) None $(10,288)
------- ------- ---- --------
TOTAL $(9,160) $(1,128) None $(10,288)
======= ======= ==== ========
<FN>
(1) Amount represents contributions in the form of non-interest bearing
subordinated notes issued ($27,326,000) from New England Electric
System (NEES). Also includes $4,353,000 relating to the acquisition
of New England Water Heater Co. As of November 24, 1998, NEES
Global, Inc. shares a line of authority of up to $125,000,000 with
NEES Energy, Inc. a NEES subsidiary.
</FN>
</TABLE>
<PAGE>
PAGE 13
<TABLE>
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
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:
ACCOUNT 224 -
OTHER LONG-TERM
DEBT:
-----
TOTAL None
=====
<FN>
(1) Give an explanation of deductions:
None
</FN>
</TABLE>
<PAGE>
PAGE 14
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
<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 $45
Narragansett Electric Company 3
Massachusetts Electric Company 10 1
New England Power Company 8 4
Nantucket Electric Company 1
------- -------
TOTAL $19 $53
======= =======
ACCOUNT 242 - MISCELLANEOUS CURRENT AND
ACCRUED LIABILITIES
Accrued Payroll 0 147
Other 0 90
---- ----
TOTAL 0 $237
==== ====
</TABLE>
<PAGE>
PAGE 15
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
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) In May 1995, NEES Global, Inc.(NG) invested $1,000,000
in Separation Technologies, Inc. (STI). This investment is in the form of
153,846 shares of 6% cumulative convertible preferred stock.
(2) In July 1996, NG invested $475,000 in Monitoring
Technologies, Inc. This investment is in the form of 271,429 shares of
Series E convertible preferred stock. As a result of a business decision,
NG recorded a charge to expense of $475,000 in the fourth quarter of 1998
representing its investment in Monitoring Technologies, Inc.
(3) In July 1997, NG invested $1,000,000 in Underwater
Unlimited Diving Services, Inc. (UUDSI) in the form of 200,000 shares of
Convertible Nonvoting Preferred Stock. In September 1998, NG decided to
terminate its interest in UUDSI and recorded a charge to expense of
$1,000,000, representing its investment in UUDSI
(4) In September 1998, NG decided to terminate its 50
percent interest in HydroServ Group LLC (HG). As a result of its decision
to terminate its interest in the HG joint venture, NG recorded a charge to
expense of $9,000 in the third quarter of 1998 representing its net equity
investment in HG.
(5) In July, 1997 NGT entered into an agreement with ABB
Power Systems, a Swedish corporation, which provides for reimbursement of
50% of project development costs. Such reimbursements were recorded as a
lump sum reduction in expenses, shown in account 923 "Outside services
employed." The agreement was terminated in the second quarter of 1998.
(6) In August, 1997, NG invested $1,400,000 in Nexus Energy
Software, Inc. in the form of 1,000,000 shares of Series A Preferred Stock.
An additional investment of $750,000 was made in October 1998 in the form
of 300,000 shares of Series B Preferred Stock.
(7) Effective May 1, 1998, NGT changed its name to NEES
Global, Inc. (NG). NG is a Massachusetts corporation which was formed in
January 1992. NG was not capitalized until October 13, 1992, when one
thousand shares of NG common stock were issued to New England Electric
System (NEES).
(8) On June 25, 1998, New England Water Heater Co, Inc.
(NEWH), an energy-related company, became a wholly-owned subsidiary of NG
in accordance with Rule 58 of the Act. The company's financial statements
are consolidated with NG. In the third quarter of 1998, NEWH purchased at
net book value all rental water heaters from its affiliates, Massachusetts
Electric Company and The Narragansett Electric Company.
(9) In 1998, NG invested $514,000 to maintain a one percent
interest in AllEnergy Marketing Co., LLC., an affiliated "energy-related
company" within the meaning of Rule 58 of the Act.
<PAGE>
PAGE 16
<TABLE>
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
SCHEDULE XV
COMPARATIVE INCOME STATEMENT
<CAPTION>
ACCOUNT DESCRIPTION CURRENT PRIOR
YEAR YEAR
<S> <C> <C> <C>
INCOME
458 Services rendered to nonassociate companies $ 791 $ 575
421 Miscellaneous income or loss (143) (108)
451 Rental water heater revenue 4,201 0
------- -------
TOTAL INCOME $ 4,849 $ 467
------- -------
EXPENSE
587 Cost of Sales - New England Water Heater Co. 715 0
920 Salaries and wages - New England Water Heater Co. 412
921 Office supplies and expenses 1,207 362
922 Administrative expense transferred - credit
923 Outside services employed 2,138 5,524
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 1,180 0
408 Taxes other than income taxes
409 Income taxes (1,625) (1,528)
410 Provision for deferred income taxes 504
411 Provision for deferred income taxes - credit (38) (52)
411.5 Investment tax credit
426.1 Donations
426.5 Other deductions 1,484 0
427 Interest on long-term debt
430 Interest on debt to associate companies
431 Other interest expense
------- -------
TOTAL EXPENSE $ 5,977 $ 4,306
------- -------
NET INCOME OR (LOSS) $(1,128) $(3,839)
======= =======
</TABLE>
<PAGE>
PAGE 17
<TABLE>
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
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>
Confidential information provided on EXHIBIT A
</TABLE>
<PAGE>
PAGE 18
INSTRUCTION: Provide a brief description of the services rendered to
each nonassociated company:
Confidential information provided on EXHIBIT A
<PAGE>
PAGE 19
<TABLE>
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
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>
New England Water Heater Co.:
Officers $ 41 1
Customer Service 231 8
Service 34 2
Office 46 3
Credit/Collection 60 3
---- ---
TOTAL $412 17
==== ===
</TABLE>
<PAGE>
PAGE 20
<TABLE>
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
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 $100,000,
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 TYPE OF SERVICE "NA"- NON ASSOCIATE AMOUNT
<S> <C> <C> <C>
LEGAL SERVICES
9 Vendors
(each under $100,000) 53
----
SUBTOTAL $53
</TABLE>
<PAGE>
PAGE 21
<TABLE>
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
OUTSIDE SERVICES EMPLOYED
ACCOUNT 923
<CAPTION>
RELATIONSHIP
"A"- ASSOCIATE
FROM WHOM PURCHASED TYPE OF SERVICE "NA"- NON ASSOCIATE AMOUNT
<S> <C> <C> <C>
OTHER SERVICES
New England Power Construction, Engineering, A $1,893
Service Company & Administrative Svcs.
ABB Power Systems(A) Reimbursement Agreement NA ($244)
24 Vendors(B) 436
(each under $100,000) ------
SUBTOTAL $2,085
------
TOTAL SERVICES $2,138
======
(A) Represents the reimbursement of expenses under a cost sharing agreement
(B) Includes $81,000 from associated companies
</TABLE>
<PAGE>
PAGE 22
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
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
----
TOTAL None
====
<PAGE>
PAGE 23
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
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
-----
SUBTOTAL
-----
2) U.S. GOVERNMENT TAXES
-----
SUBTOTAL
-----
TOTAL None
=====
<PAGE>
PAGE 24
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
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
----
TOTAL None
====
<PAGE>
PAGE 25
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
(In Thousands of Dollars)
OTHER DEDUCTIONS
ACCOUNT 426.5
<TABLE>
INSTRUCTIONS: Provide a listing of the amount included in Account 426.5,
"Other Deductions", classifying such expenses according to
their nature.
<CAPTION>
DESCRIPTION NAME OF PAYEE
<S> <C> <C>
Write off of investment Underwater Unlimited Diving Services $1,000
Write off of investment Monitoring Technologies, Inc. 475
Write off of investment HydroServ Group, LLC 9
-------
TOTAL $1,484
=======
</TABLE>
<PAGE>
PAGE 26
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
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 27
ANNUAL REPORT OF NEES Global, Inc.
ORGANIZATION CHART
For the Year Ended December 31, 1998
Board of Directors
!
!
!
President
!
!
!
------------------------------
! !
! !
! !
Treasurer Clerk
<PAGE>
PAGE 28
ANNUAL REPORT OF NEES Global, Inc.
For the Year Ended December 31, 1998
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.
NEES Global, 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, 1999
---------------
<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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,488,426
<OTHER-PROPERTY-AND-INVEST> 220,108
<TOTAL-CURRENT-ASSETS> 723,418
<TOTAL-DEFERRED-CHARGES> 1,638,583 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 5,070,535
<COMMON> 64,970
<CAPITAL-SURPLUS-PAID-IN> 736,744
<RETAINED-EARNINGS> 998,912
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,570,003 <F3>
0
19,480 <F2>
<LONG-TERM-DEBT-NET> 1,055,740
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 36,307
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,389,005
<TOT-CAPITALIZATION-AND-LIAB> 5,070,535
<GROSS-OPERATING-REVENUE> 2,420,533
<INCOME-TAX-EXPENSE> 122,354
<OTHER-OPERATING-EXPENSES> 1,989,340
<TOTAL-OPERATING-EXPENSES> 2,111,694
<OPERATING-INCOME-LOSS> 308,839
<OTHER-INCOME-NET> 6,808
<INCOME-BEFORE-INTEREST-EXPEN> 315,647
<TOTAL-INTEREST-EXPENSE> 115,873
<NET-INCOME> 190,042
1,915 <F2>
<EARNINGS-AVAILABLE-FOR-COMM> 190,042
<COMMON-STOCK-DIVIDENDS> 145,648
<TOTAL-INTEREST-ON-BONDS> 89,805
<CASH-FLOW-OPERATIONS> (157,197)
<EPS-PRIMARY> $3.05
<EPS-DILUTED> $3.04
<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.
<F3> Total common stockholders equity includes treasury stock at cost and
unrealized gain on securities.
</FN>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 1
<CIK> 0000063073
<NAME> MASSACHUSETTS ELECTRIC COMPANY
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,143,169
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 270,158
<TOTAL-DEFERRED-CHARGES> 41,235 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,454,562
<COMMON> 59,953
<CAPITAL-SURPLUS-PAID-IN> 239,440
<RETAINED-EARNINGS> 208,537
<TOTAL-COMMON-STOCKHOLDERS-EQ> 508,203 <F3>
0
10,674
<LONG-TERM-DEBT-NET> 353,329
<SHORT-TERM-NOTES> 80,725
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 15,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 486,631
<TOT-CAPITALIZATION-AND-LIAB> 1,454,562
<GROSS-OPERATING-REVENUE> 1,490,417
<INCOME-TAX-EXPENSE> 36,319
<OTHER-OPERATING-EXPENSES> 1,366,454
<TOTAL-OPERATING-EXPENSES> 1,402,773
<OPERATING-INCOME-LOSS> 87,644
<OTHER-INCOME-NET> (3,510)
<INCOME-BEFORE-INTEREST-EXPEN> 84,134
<TOTAL-INTEREST-EXPENSE> 33,748
<NET-INCOME> 50,386
873
<EARNINGS-AVAILABLE-FOR-COMM> 49,513
<COMMON-STOCK-DIVIDENDS> 41,967
<TOTAL-INTEREST-ON-BONDS> 27,073
<CASH-FLOW-OPERATIONS> 73,251
<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.
<F3> Total common stockholders equity includes the unrealized gain on
securities.
</FN>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 2
<CIK> 0000069659
<NAME> THE NARRAGANSETT ELECTRIC COMPANY
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 525,488
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 83,004
<TOTAL-DEFERRED-CHARGES> 55,628 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 664,120
<COMMON> 56,624
<CAPITAL-SURPLUS-PAID-IN> 105,794
<RETAINED-EARNINGS> 86,465
<TOTAL-COMMON-STOCKHOLDERS-EQ> 249,120 <F3>
0
7,238
<LONG-TERM-DEBT-NET> 168,702
<SHORT-TERM-NOTES> 26,675
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 8,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 204,385
<TOT-CAPITALIZATION-AND-LIAB> 664,120
<GROSS-OPERATING-REVENUE> 475,654
<INCOME-TAX-EXPENSE> 16,177
<OTHER-OPERATING-EXPENSES> 409,570
<TOTAL-OPERATING-EXPENSES> 425,747
<OPERATING-INCOME-LOSS> 49,907
<OTHER-INCOME-NET> 801
<INCOME-BEFORE-INTEREST-EXPEN> 50,708
<TOTAL-INTEREST-EXPENSE> 18,455
<NET-INCOME> 32,253
567
<EARNINGS-AVAILABLE-FOR-COMM> 31,686
<COMMON-STOCK-DIVIDENDS> 73,612
<TOTAL-INTEREST-ON-BONDS> 14,925
<CASH-FLOW-OPERATIONS> 64,203
<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.
<F3> Total common stockholders equity includes the unrealized gain on
securities.
</FN>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 3
<CIK> 0000071337
<NAME> NEW ENGLAND POWER COMPANY
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 458,113
<OTHER-PROPERTY-AND-INVEST> 88,121
<TOTAL-CURRENT-ASSETS> 350,653
<TOTAL-DEFERRED-CHARGES> 1,517,901 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,414,788
<COMMON> 74,998
<CAPITAL-SURPLUS-PAID-IN> 241,223
<RETAINED-EARNINGS> 204,603
<TOTAL-COMMON-STOCKHOLDERS-EQ> 520,896 <F3>
0
1,567
<LONG-TERM-DEBT-NET> 371,765
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,520,560
<TOT-CAPITALIZATION-AND-LIAB> 2,414,788
<GROSS-OPERATING-REVENUE> 1,218,340
<INCOME-TAX-EXPENSE> 73,594
<OTHER-OPERATING-EXPENSES> 987,384
<TOTAL-OPERATING-EXPENSES> 1,060,978
<OPERATING-INCOME-LOSS> 157,362
<OTHER-INCOME-NET> 6,035
<INCOME-BEFORE-INTEREST-EXPEN> 163,397
<TOTAL-INTEREST-EXPENSE> 40,502
<NET-INCOME> 122,895
1,230
<EARNINGS-AVAILABLE-FOR-COMM> 121,665
<COMMON-STOCK-DIVIDENDS> 130,610
<TOTAL-INTEREST-ON-BONDS> 30,775
<CASH-FLOW-OPERATIONS> (413,049)
<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.
<F3> Total common stockholders equity includes the unrealized gain on
securities.
</FN>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 4
<CIK> 0000043080
<NAME> GRANITE STATE ELECTRIC COMPANY
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 49,833
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 9,392
<TOTAL-DEFERRED-CHARGES> 2,576 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 61,801
<COMMON> 6,040
<CAPITAL-SURPLUS-PAID-IN> 4,000
<RETAINED-EARNINGS> 11,820
<TOTAL-COMMON-STOCKHOLDERS-EQ> 22,006 <F2>
0
0
<LONG-TERM-DEBT-NET> 20,000
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 19,795
<TOT-CAPITALIZATION-AND-LIAB> 61,801
<GROSS-OPERATING-REVENUE> 65,743
<INCOME-TAX-EXPENSE> 1,761
<OTHER-OPERATING-EXPENSES> 59,043
<TOTAL-OPERATING-EXPENSES> 60,804
<OPERATING-INCOME-LOSS> 4,939
<OTHER-INCOME-NET> 42
<INCOME-BEFORE-INTEREST-EXPEN> 4,981
<TOTAL-INTEREST-EXPENSE> 1,814
<NET-INCOME> 3,167
0
<EARNINGS-AVAILABLE-FOR-COMM> 3,167
<COMMON-STOCK-DIVIDENDS> 2,174
<TOTAL-INTEREST-ON-BONDS> 1,457
<CASH-FLOW-OPERATIONS> 6,276
<EPS-PRIMARY> 0 <F3>
<EPS-DILUTED> 0 <F3>
<FN>
<F1> Total deferred charges includes other assets and other property and
investments.
<F2> Total common stockholders equity includes net unrealized gains on
securities.
<F3> Per share data is not relevant because the Company's common stock is
wholly owned by New England Electric System.
</FN>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 5
<CIK> 0000771839
<NAME> NEW ENGLAND HYDRO-TRANSMISSION ELECTRIC COMPANY, INC.
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 150,074
<OTHER-PROPERTY-AND-INVEST> 5
<TOTAL-CURRENT-ASSETS> 5,207
<TOTAL-DEFERRED-CHARGES> 4,744 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 160,030
<COMMON> 34,000
<CAPITAL-SURPLUS-PAID-IN> 13,928
<RETAINED-EARNINGS> 229
<TOTAL-COMMON-STOCKHOLDERS-EQ> 48,157
0
0
<LONG-TERM-DEBT-NET> 70,650
<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> 34,263
<TOT-CAPITALIZATION-AND-LIAB> 160,030
<GROSS-OPERATING-REVENUE> 36,987
<INCOME-TAX-EXPENSE> 3,984
<OTHER-OPERATING-EXPENSES> 17,800
<TOTAL-OPERATING-EXPENSES> 21,784
<OPERATING-INCOME-LOSS> 15,203
<OTHER-INCOME-NET> 151
<INCOME-BEFORE-INTEREST-EXPEN> 15,354
<TOTAL-INTEREST-EXPENSE> 7,519
<NET-INCOME> 7,835
0
<EARNINGS-AVAILABLE-FOR-COMM> 7,835
<COMMON-STOCK-DIVIDENDS> 7,975
<TOTAL-INTEREST-ON-BONDS> 7,508
<CASH-FLOW-OPERATIONS> 19,700
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> Total deferred charges includes other assets.
</FN>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 6
<CIK> 0000771838
<NAME> NEW ENGLAND HYDRO-TRANSMISSION CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 125,298
<OTHER-PROPERTY-AND-INVEST> 5
<TOTAL-CURRENT-ASSETS> 853
<TOTAL-DEFERRED-CHARGES> 4,871 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 131,027
<COMMON> 16,500
<CAPITAL-SURPLUS-PAID-IN> 13,594
<RETAINED-EARNINGS> (89)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 30,005
0
0
<LONG-TERM-DEBT-NET> 42,800
<SHORT-TERM-NOTES> 1,500
<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> 52,162
<TOT-CAPITALIZATION-AND-LIAB> 131,027
<GROSS-OPERATING-REVENUE> 31,660
<INCOME-TAX-EXPENSE> 3,210
<OTHER-OPERATING-EXPENSES> 19,072
<TOTAL-OPERATING-EXPENSES> 22,282
<OPERATING-INCOME-LOSS> 9,378
<OTHER-INCOME-NET> 72
<INCOME-BEFORE-INTEREST-EXPEN> 9,450
<TOTAL-INTEREST-EXPENSE> 4,619
<NET-INCOME> 4,831
0
<EARNINGS-AVAILABLE-FOR-COMM> 4,831
<COMMON-STOCK-DIVIDENDS> 5,769
<TOTAL-INTEREST-ON-BONDS> 4,609
<CASH-FLOW-OPERATIONS> 10,602
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1> Total deferred charges includes other assets.
</FN>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 7
<CIK> 0000718444
<NAME> NEW ENGLAND ELECTRIC TRANSMISSION CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 34,382
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 528
<TOTAL-DEFERRED-CHARGES> 301 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 35,211
<COMMON> 90
<CAPITAL-SURPLUS-PAID-IN> 2,160
<RETAINED-EARNINGS> 124
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,374
0
0
<LONG-TERM-DEBT-NET> 11,616
<SHORT-TERM-NOTES> 3,425
<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> 13,172
<TOT-CAPITALIZATION-AND-LIAB> 35,211
<GROSS-OPERATING-REVENUE> 9,611
<INCOME-TAX-EXPENSE> 515
<OTHER-OPERATING-EXPENSES> 6,432
<TOTAL-OPERATING-EXPENSES> 6,947
<OPERATING-INCOME-LOSS> 2,664
<OTHER-INCOME-NET> 4
<INCOME-BEFORE-INTEREST-EXPEN> 2,668
<TOTAL-INTEREST-EXPENSE> 1,855
<NET-INCOME> 813
0
<EARNINGS-AVAILABLE-FOR-COMM> 813
<COMMON-STOCK-DIVIDENDS> 957
<TOTAL-INTEREST-ON-BONDS> 1,673
<CASH-FLOW-OPERATIONS> 4,852
<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 NANTUCKET ELECTRIC COMPANY,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<SUBSIDIARY>
<NUMBER> 8
<NAME> NANTUCKET ELECTRIC COMPANY
<MULTIPLIER> 1,000
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<PERIOD-TYPE> 12-MOS
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 34,621
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 5,897
<TOTAL-DEFERRED-CHARGES> 3,448 <F1>
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 43,966
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> 3,810
<RETAINED-EARNINGS> 1,426
<TOTAL-COMMON-STOCKHOLDERS-EQ> 5,236
0
0
<LONG-TERM-DEBT-NET> 27,667
<SHORT-TERM-NOTES> 3,150
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,480
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 6,433
<TOT-CAPITALIZATION-AND-LIAB> 43,966
<GROSS-OPERATING-REVENUE> 15,109
<INCOME-TAX-EXPENSE> 387
<OTHER-OPERATING-EXPENSES> 12,245
<TOTAL-OPERATING-EXPENSES> 12,632
<OPERATING-INCOME-LOSS> 2,477
<OTHER-INCOME-NET> 62
<INCOME-BEFORE-INTEREST-EXPEN> 2,539
<TOTAL-INTEREST-EXPENSE> 1,972
<NET-INCOME> 567
0
<EARNINGS-AVAILABLE-FOR-COMM> 567
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 1,861
<CASH-FLOW-OPERATIONS> 504
<EPS-PRIMARY> 0 <F2>
<EPS-DILUTED> 0 <F2>
<FN>
<F1> Total deferred charges includes other assets and other property and
investments.
<F2> Per share data is not relevant because the Company's common stock is
wholly owned by New England Electric System.
</FN>
