PRELIMINARY COPY--SUBJECT TO COMPLETION, DATED OCTOBER 16, 1997
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN CONSENT STATEMENT
SCHEDULE 14A INFORMATION
CONSENT STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary Consent Statement [_] Confidential, for Use of the
[_] Definitive Consent Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
NIAGARA MOHAWK POWER CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING CONSENT STATEMENT,
IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
<PAGE>
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, NY 13202
___________, 1997
Dear Shareholder:
Please find enclosed important information pertaining to the consent
that Niagara Mohawk Power Corporation (the "Corporation") is seeking from
holders of its preferred stock to increase the amount of unsecured indebtedness
the Corporation may issue. Under the Corporation's Certificate of Incorporation,
it cannot, without the consent of a majority of the total number of votes which
may be cast by the holders of the Corporation's preferred stock, issue debt
securities representing unsecured indebtedness if such unsecured indebtedness
would exceed (i) 10% of the sum of the Corporation's secured indebtedness, the
capital of the Corporation and the consolidated surplus of the Corporation plus
(ii) $50,000,000. At present, this would entitle the Corporation to have
outstanding approximately $700 million in unsecured indebtedness. The
Corporation is seeking the consent of the holders of the preferred stock to
issue up to $5 billion in unsecured indebtedness in excess of the present
limitation. In particular, the Corporation anticipates that over half of this
amount could be used in connection with the Master Restructuring Agreement
described in the attached consent solicitation. In addition, the ability to use
unsecured indebtedness will increase the Corporation's flexibility in planning
and financing its business activities. We would greatly appreciate your giving
prompt attention to the enclosed material which you are urged to read in its
entirety.
If the necessary number of shares of preferred stock grant consents,
all holders of preferred stock will receive a special cash payment in the amount
of $___ per share (or $0.__ per share for $25 par preferred stocks). Information
pertaining to the special cash payment is included with the enclosed material.
It is important that all preferred shareholders, regardless of the
number of shares owned, grant a consent. WE URGE YOU TO GRANT YOUR CONSENT BY
MARKING, SIGNING AND DATING THE ENCLOSED CONSENT CARD, WHICH IS INCLUDED WITHIN,
AND RETURN IT AS SOON AS POSSIBLE. Shareholders are requested to return their
consent by December 3, 1997 (the "Return Date").
The board of directors of the Corporation has not set a record date
with respect to this consent solicitation. Accordingly, under New York law, the
record date
<PAGE>
for determining shareholders entitled to grant a consent with respect to this
solicitation is October 23, 1997, the date of the board resolution authorizing
the seeking of consents.
If you have any questions regarding the proposed consent, please call
Merrill Lynch & Co., the Solicitation Agent, at (888) 654-8637 (toll free), D.F.
King & Co., Inc., the Information Agent, at (800) 290-6432, Richard C. Lathrop
of the Corporation at (315) 428-5247 or your Broker-Dealer.
Sincerely,
Kapua A. Rice
Secretary
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<PAGE>
NIAGARA MOHAWK POWER CORPORATION
CONSENT STATEMENT
WITH RESPECT TO ITS PREFERRED STOCK
Introduction
This Consent Statement is first being mailed on or about ___________,
1997 to the preferred shareholders of Niagara Mohawk Power Corporation, a New
York corporation (the "Corporation"), in connection with the solicitation of
consents by the Board of Directors (the "Board") of the Corporation to the
Proposal described below. Under the Corporation's Certificate of Incorporation,
it cannot, without the consent, granted in writing or by a vote at a special
meeting, of a majority of the total number of votes which may be cast by the
holders of the Corporation's preferred stock, issue debt securities representing
unsecured indebtedness if such unsecured indebtedness would exceed (i) 10% of
the sum of the Corporation's secured indebtedness, the capital of the
Corporation and the consolidated surplus of the Corporation (which amount is the
limitation set forth in the Certificate of Incorporation (the "Charter
Limitation")) plus (ii) $50,000,000 (which additional amount was approved by the
preferred shareholders in 1956 and together with the Charter Limitation is
referred to as the "Present Limitation"). At present, this would entitle the
Corporation to have outstanding approximately $700 million in unsecured
indebtedness, approximately $195 million of which is presently outstanding. The
Corporation is seeking the consent of the holders of the Preferred Stock to
issue up to $5 billion in unsecured indebtedness in excess of the Present
Limitation (the "Proposal"). The ability to use unsecured indebtedness will
increase the Corporation's flexibility in planning and financing its business
activities. In particular, the Corporation anticipates that over half this
amount could be used in connection with the Master Restructuring Agreement
described herein.
If the Proposal is approved, the Corporation will make a special cash
payment in the amount of $___ per share (or $0.__ per share for $25 par
preferred stocks) to all holders of record on the record date (the "Cash
Payment"). Shareholders are requested to return their consents by the Return
Date of December 3, 1997.
YOUR CONSENT AND PROMPT ACTION ARE IMPORTANT. YOU ARE URGED TO GRANT
YOUR CONSENT BY MARKING, SIGNING, DATING AND RETURNING THE ENCLOSED WHITE
CONSENT CARD AS SOON AS POSSIBLE.
<PAGE>
CONSENT PROCEDURES
Record Date, Voting Securities, Required Vote
The Board of Directors of the Corporation has not set a record date
with respect to this consent solicitation. Accordingly, under New York law, the
record date for determining shareholders entitled to grant a consent with
respect to this solicitation is October 23, 1997 (the "Record Date"), the date
of the board resolution authorizing the seeking of consents. Only holders of
record of the Corporation's preferred stock at the close of business on the
Record Date will be entitled to grant consents. The Corporation has fifteen
series of preferred stock and the record holders of all shares of all series of
stock vote together as one class with respect to the Proposal. The shares of
preferred stock outstanding on the Record Date, and the vote to which each share
is entitled in consideration of the Proposal, are as follows:
<TABLE>
<CAPTION>
Shares Votes Aggregate Cash Payment
Series Outstanding Per Share Votes Per Share
<S> <C> <C> <C>
Cumulative Preferred $100 Par
3.40% Series [200,000] 1 [200,000]
3.60% Series [350,000] 1 [350,000]
3.90% Series [240,000] 1 [240,000]
4.10% Series [210,000] 1 [210,000]
4.85% Series [250,000] 1 [250,000]
5.25% Series [200,000] 1 [200,000]
6.10% Series [250,000] 1 [250,000]
7.45% Series [222,000] 1 [222,000]
7.72% Series [400,000] 1 [400,000]
Cumulative Preferred $25 Par
7.85% Series [731,204 ] 1/4 [182,801]
8.375% Series [100,000] 1/4 [ 25,000]
9.50% Series [6,000,000] 1/4 [1,500,000]
Adjustable Rate Preferred $25 Par
Series A [1,200,000] 1/4 [300,000]
Series B [1,750,000] 1/4 [437,500]
Series C [2,000,000] 1/4 [500,000]
---------
Total Votes Entitled to be Cast [5,267,301]
</TABLE>
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<PAGE>
The consent of a majority of the votes entitled to be cast by the
preferred stock, voting together as one class, is required to consent to the
Proposal. The Corporation's Common Stock is not required to consent to the
Proposal.
Consent Procedures Generally; Effectiveness of Consents
The Corporation is a New York corporation and is, therefore, subject to
the New York Business Corporation Law (the "BCL"). The BCL permits action by
less than unanimous written consent of stockholders where any provision in a
certificate of incorporation not inconsistent with the BCL so provides. The
Certificate of Incorporation of the Corporation specifically provides that a
majority of the total number of votes which may be cast by the holders of all
series of preferred stock may consent in writing to the Corporation's issuance
of unsecured debt in excess of the Charter Limitation.
The Proposal will become effective when properly completed, unrevoked
and effective consent cards (or other forms of consent) indicating consent to
the Proposal, signed by the holders of record on the Record Date of a majority
of the votes entitled to be cast by the preferred stock, are delivered to the
Corporation.
Because the Proposal will become effective only if executed consents
are returned by holders of record on the Record Date of a majority of the votes
entitled to be cast by the Preferred Stock, the following actions will have the
same effect as withholding consent to the Proposal: (a) failing to execute, date
and return a consent card or (b) executing, dating and returning a consent
marked "WITHHOLDS CONSENT" or "ABSTAINS" as to the Proposal. If returned consent
cards are executed and dated but not marked with respect to the Proposal, the
shareholder will be deemed to have consented to the Proposal.
Procedural Instructions
If a shareholder is a record holder of shares of Preferred Stock as of
the close of business on the Record Date, such shareholder may consent to,
withhold consent to or abstain with respect to the Proposal by marking the
"CONSENTS", "WITHHOLDS CONSENT" or "ABSTAINS" box, as applicable, on the
accompanying consent card and signing, dating and returning it promptly in the
enclosed postage-paid envelope. Any beneficial owner of shares who is not the
registered holder of such shares as of the Record Date (as would be the case for
any beneficial owner whose shares are registered in the name of such owner's
broker, dealer, commercial bank, trust company or other nominee) must arrange
with the record holder to execute and deliver a consent form on such beneficial
owner's behalf.
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<PAGE>
UNDER THE BCL, ONLY SHAREHOLDERS OF RECORD ON THE RECORD DATE ARE
ELIGIBLE TO GIVE THEIR CONSENT TO THE PROPOSALS. THEREFORE, EACH SHAREHOLDER IS
URGED, EVEN IF SUCH SHAREHOLDER HAS SOLD ITS SHARES SUBSEQUENT TO THE RECORD
DATE, TO GRANT ITS CONSENT PURSUANT TO THE ENCLOSED CONSENT CARD WITH RESPECT TO
ALL SHARES HELD AS OF THE RECORD DATE. IF THE CASH PAYMENT IS MADE, IT WILL BE
MADE TO THE HOLDERS OF RECORD ON THE RECORD DATE. IN ADDITION, ANY SHAREHOLDER
OWNING SHARES BENEFICIALLY (BUT NOT OF RECORD), SUCH AS A PERSON WHOSE OWNERSHIP
OF SHARES IS THROUGH A BROKER, BANK OR OTHER FINANCIAL INSTITUTION, SHOULD
CONTACT THAT BROKER, BANK OR OTHER FINANCIAL INSTITUTION WITH INSTRUCTIONS TO
EXECUTE THE CONSENT CARD ON SUCH SHAREHOLDER'S BEHALF OR TO HAVE THE BROKER,
BANK OR FINANCIAL INSTITUTION'S NOMINEE EXECUTE THE CONSENT. EACH SHAREHOLDER IS
URGED TO ENSURE THAT THE RECORD HOLDER OF SUCH SHAREHOLDER'S SHARES MARKS,
SIGNS, DATES AND RETURNS THE ENCLOSED CONSENT CARD AS SOON AS POSSIBLE.
Revocation of Consents
Executed consents may be revoked at any time, provided that a written,
dated revocation which clearly identifies the consent being revoked is executed
and delivered to the principal executive offices of the Corporation at 300 Erie
Boulevard West, Syracuse, New York 13202, prior to the time that the Proposal
becomes effective. A revocation may be in any written form validly signed by the
record holder as of the Record Date as long as it clearly states that the
consent previously given is no longer effective.
Appraisal Rights
No appraisal rights are or will be available under the BCL in
connection with the Proposal.
OWNERSHIP OF PREFERRED STOCK
The preferred stock is the only class of securities entitled to vote on
the Proposal. There were approximately 5,000 holders of record of shares of
preferred stock as of September 30, 1997.
To the knowledge of the Corporation, as of the Record Date, there are
no beneficial owners of more than 5% of the outstanding shares of preferred
stock and none of the Corporation's directors or executive officers own any
shares of preferred stock.
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<PAGE>
Cash Payments
Subject to the terms and conditions set forth in this Consent
Statement, if (but only if) the Proposal is approved, the Corporation will make
the applicable Cash Payment, to each preferred shareholder on the Record Date
regardless of whether such shareholder grants a consent. If the Proposal is
approved, Cash Payments will be paid out of the Corporation's general funds,
promptly after the Proposal is approved. However, no accrued interest will be
paid on the Cash Payments regardless of any delay in making payments.
Only preferred shareholders on the Record Date (or their legal
representatives or attorneys-in-fact) are entitled to receive Cash Payments. Any
beneficial owner of shares who is not the registered holder of such shares as of
the Record Date must arrange with the record holder to receive his proportionate
interest in the Cash Payments made to such record holder. The Corporation will
have no responsibility or liability for any aspect of the records relating to or
payments made on account of any beneficial owners's interest in the Cash Payment
made to a record holder of preferred stock.
REASONS FOR THE PROPOSAL
The Proposal would permit the Corporation to issue $5 billion in
unsecured debt securities in excess of the Present Limitation. At present, the
Corporation has outstanding approximately $3.4 billion in long-term debt, of
which approximately $195 million is unsecured.
As a result of state and federal policy, the Corporation has 157
contracts to buy power at above market cost from independent power producers
("IPPs"), even when the power is not needed. The Corporation's payments to IPPs
increased from less than $200 million in 1990 to $1.1 billion in 1996, and if no
action were taken would continue to grow. On July 9, 1997, following months of
negotiations, the Corporation entered into a Master Restructuring Agreement with
sixteen IPPs, pursuant to which in exchange for terminating or restructuring
their contracts, those IPPs would receive $3.6 billion in cash and 46 million in
shares of common stock of the Corporation. In addition, the Corporation and
certain of such IPPs would enter into restructured financial and physical
contracts on terms more favorable to the Corporation than the existing
contracts. The contracts covered by the Master Restructuring Agreement represent
more than 80% of the Corporation's above-market IPP costs.
Consummation of the Master Restructuring Agreement is subject to a
number of conditions that require the approval of a large number of third
parties, including regulatory approvals, amendment or termination of the IPPs'
existing third-
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<PAGE>
party arrangements, creation of new IPP third-party arrangements, approval of
the Corporation's common shareholders and the Corporation's successful
completion of the financing required to accomplish the transaction. The
Corporation hopes to close the Master Restructuring Agreement in the first half
of 1998.
At present, the Corporation plans to finance approximately 90% of the
cash payment to the IPPs by incurring indebtedness and to use cash on hand for
the remainder. Under the terms of the Master Restructuring Agreement, if such
amount is raised through an underwritten public offering registered with the
Securities and Exchange Commission (an "Offering"), such debt securities would,
unless applicable securitization legislation is enacted in New York, have to be
general unsecured obligations of the Corporation. Thus, to raise the necessary
cash in an Offering, it is necessary to raise the Present Limitation. If the
Proposal is not approved, the Corporation intends to raise the funds necessary
for the Master Restructuring Agreement by obtaining the waiver of the IPPs to
this restriction (which the Company belives it could obtain by offering
comparable security for the Corporation's contractual obligations to the IPPs)
or by raising debt other than in an Offering. In either case, funds could be
raised through a combination of an unsecured Offering to the extent of the
Present Limitation (as it would be increased by further secured borrowings) and
further secured borrowings (which could be secured by a second mortgage
interest). Such borrowings would probably require the Corporation to amend or
refinance its senior debt facility and pay additional mortgage recording taxes.
At present, the Corporation has not finalized the structure of the
financing necessary to fund the Master Restructuring Agreement, although it is
presently considering a combination of bank financing and an Offering. In
addition, given the status of the regulatory proceedings and the timing
contemplated by the Master Restructuring Agreement (in which the IPPs have three
months following receipt of regulatory approval to conclude their third party
arrangements and determine, on an individual basis, if they will go forward), it
is impossible for the Corporation to know if the transaction will close and the
ultimate terms thereof and the impact on the Corporation. Nonetheless, given the
present interest rate environment, the Corporation might prefund some of this
obligation, with indebtedness that could be prepaid should the transaction not
occur, and in any event would like to have the flexibility to pursue all
financing opportunities at an early stage. Accordingly, the Corporation is
seeking approval of the Proposal now to provide it maximum financing
flexibility.
In addition to the requirements of the Master Restructuring Agreement,
and regardless of whether that transaction closes, approval of the Proposal will
provide the Corporation with greater financing flexibility in the future. The
Corporation would then have the flexibility to issue unsecured debt to meet both
capital requirements and to fund first mortgage bond maturities of approximately
$2 billion which will occur through
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<PAGE>
2006, to the extent that interim cash flow or other sources of funds are not
adequate or, in the latter case, are more costly.
As competition intensifies in the electric utility industry, as a
result of regulatory, legislative and market developments, flexibility and cost
structure will be even more crucial to success in the future. Given that the
electric industry is extremely capital intensive, controlling and minimizing
financing costs are essential ingredients to operating effectively in the new
competitive environment.
The Corporation believes that adoption of the Proposal is key to
meeting the objectives of flexibility and cost structure. Historically, the
Corporation's debt financing generally has been accomplished through the
issuance of long-term first mortgage bonds. First mortgage bonds represent
secured indebtedness because they place a first priority lien on substantially
all of the Corporation's assets. The Corporation's indenture with respect to its
first mortgage bonds contains certain restrictive covenants with respect to,
among other things, the disposition of assets and the ability to issue
additional first mortgage bonds. In addition, the issuance of mortgage bonds has
the added expense of a New York recording tax of approximately 1%. The Proposal
will not only allow the Corporation to issue a greater amount of unsecured debt,
it may also allow the Corporation to issue a greater amount of total debt. The
Corporation anticipates changing the mix of debt securities toward more
issuances on an unsecured basis to cover the Corporation's capital needs and to
fund future maturities as needed.
FOR THE ABOVE REASONS, THE CORPORATION'S
BOARD BELIEVES THE BEST LONG-TERM INTERESTS
OF SHAREHOLDERS ARE SERVED BY, AND
ENCOURAGES SHAREHOLDERS TO GRANT CONSENTS
FOR, THE ADOPTION OF THE PROPOSAL
Certain Effects Of The Proposal
At present, the Corporation cannot incur more than approximately $700
million of unsecured indebtedness without the consent of the preferred
shareholders but can incur secured indebtedness without the consent of the
preferred shareholders. While the Corporation's debt instruments contain
restrictions as to the amount of indebtedness, both secured and unsecured, that
may be incurred, such restrictions could be waived. Both secured and unsecured
indebtedness rank prior to the position of the preferred stock. Accordingly, to
the extent the Proposal allows the Corporation to incur a greater amount of
total inebtedness, and such indebtedness increases the credit risks of the
Corporation, the market price and credit rating of the preferred stock could
decline.
Rating Agencies
Moody's Investors Service and Standard & Poor's (the "Rating Agencies")
have been advised of the Proposal. The Rating Agencies have advised the
Corporation that the adoption of the Proposal, in and of itself, will not result
in a reduction of the preferred stock's current ratings.
Ratings are not recommendations to purchase, hold or sell shares of the
preferred stock inasmuch as the ratings do not comment as to market price or
suitability for a particular investor. The ratings are based on current
information furnished to the Rating Agencies by the Corporation and obtained
from other sources. The ratings may be changed, suspended or withdrawn as a
result of changes in, or the unavailability of, such information.
Financial and Other Information Relating to the Corporation
The financial statements of the Corporation and related information
included in its Annual Report on Form 10-K for the year ended December 31, 1996
and its Quarterly Report on Form 10-Q for the six month period ended June 30,
1997, as filed with the SEC, are hereby incorporated by reference. The
Corporation will provide without charge, upon the written or oral request of any
person (including any beneficial owner) to whom this Consent Statement is
delivered, a copy of such information (excluding certain exhibits). Such
requests for information should be directed to Investor Relations Department,
Niagara Mohawk Power Corporation, 300 Erie Boulevard West, Syracuse, NY 13202,
telephone (315) 428-6012.
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<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Preferred shareholders should consult their own tax advisors in light
of their particular circumstances as to the application of United States federal
income tax laws, as well as the effect of any state, local, or foreign tax laws.
As used herein, the term "United States Holder" means a preferred
shareholder that is for United States federal income tax purposes, (i) a citizen
or resident of the United States, (ii) a corporation or partnership organized in
or under the laws of the United States or any state thereof or the District of
Columbia, or (iii) an estate or trust specified as being a "United States
Person" in the Code.
Cash Payments
Though not entirely free from doubt, it is believed that the Cash
Payments will be treated as ordinary dividend income to recipient United States
Holders, and the Corporation will treat such payments accordingly.
Backup Withholding and Information Reporting
The amount of the Cash Payment paid to a United States Holder will be
reported to such holder and to the Internal Revenue Service in the same way all
cash dividends are reported. Backup withholding at a rate of 31% will apply to
any such payments made to non-exempt United States Holders for whom backup
withholding applies with regards to the payment of regular cash dividends.
SOLICITATION OF CONSENTS
Consents will be solicited by mail, telephone, telegraph, telex,
telecopier and in person. Solicitation may be made by directors, officers,
investor relations personnel and other regular employees of the Corporation. No
such employees will receive additional compensation for such solicitation.
Banks, brokerage houses and other custodians, nominees and fiduciaries
will be requested to forward the solicitation materials to the beneficial owners
of preferred stock for which they hold of record and the Corporation will
reimburse them for their reasonable out-of-pocket expenses. In addition, the
Corporation will pay to each designated Soliciting Dealer a solicitation fee of
$___ per share ($0.____per share for $25 par preferred stocks) for each share of
preferred stock as to which a consent is granted by a beneficial owner holding
2,500 (or 10,000 with respect to $25 par preferred stocks) or fewer shares. A
designated Soliciting Dealer is an entity obtaining the consent as set forth on
the consent or the Notice of Solicited Consents and it is (a) any broker or
dealer in securities, including the Solicitation Agent in its capacity as a
dealer or broker, which is a member of any national securities exchange or of
the NASD, (b) any foreign broker or dealer not eligible for membership in the
NASD which agrees to conform to the NASD's Rules of Fair Practice in making
solicitions, or (c) any bank or trust company.
No solicitation fee (other than solicitation fees payable to the
Solicitation Agent as provided below) shall be payable to a Solicitating Dealer
with respect to the granting of a consent with respect to shares by a holder
except as set forth on the consent or a Notice of Solicited Consents. No
solicitation fee shall be payable to a Soliciting Dealer in respect of shares
registered in the name of such Soliciting Dealer unless such shares are held by
such Soliciting Dealer as nominee and a consent is being granted with respect to
such shares by one or more beneficial owners identified on the Notice of
Solicited Consents. No solicitation fee shall be payable to a Soliciting Dealer
if such Soliciting Dealer is required for any reason to transfer the amount of
such fee to a consenting holder. No solicitation fee shall be paid to a
Soliciting Dealer with respect to shares held for its own account or shares
beneficially owned by such Soliciting Dealer. No broker, dealer, bank, trust
company or fiduciary shall be deemed to be the agent of the Corporation, the
Solicitation Agent or D.F. King for purposes of this solicitation.
Soliciting Dealers will include any of the organizations described in
clauses (a), (b) and (c) above even when the activities of such organizations in
connection with the solicitation consist solely of forwarding to clients
materials related to the solicitation, and granting consents as directed by
beneficial owners thereof. No Soliciting Dealer is required to make any
recommendation to holders of shares as to whether to grant a consent. No
assumption is made, in making payment to any Soliciting Dealer, that its
activities in connection with the solicitation included any activities other
than those described above, and for all purposes noted in all materials relating
to the solicitation, the term "solicit" shall be deemed to mean no more than
"processing consents" or "forwarding to customers materials regarding the
solicitation."
The Corporation has retained D.F. King & Co., Inc. ("D.F. King") to
assist in connection with this consent solicitation for which D.F. King will be
paid a fee estimated to be $20,000 and will be reimbursed for reasonable
out-of-pocket expenses. The Corporation will indemnify D.F. King against certain
liabilities and expenses in
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<PAGE>
connection with the consent solicitation, including liabilities under the
federal securities laws.
Merrill Lynch & Co. ("Merrill Lynch") has been retained as Solicitation
Agent. The Corporation has agreed to pay __________ to Merrill Lynch for such
engagement. The Corporation has also agreed to reimburse Merrill Lynch for its
reasonable out-of-pocket expenses, including the fees and expenses of its legal
counsel, incurred in furtherance of such services, and has agreed to indemnify
Merrill Lynch and certain related persons and entities against certain
liabilities and expenses in connection with its engagement, including certain
liabilities under the federal securities laws.
The expenses related directly to the consent solicitation will be borne
by the Corporation.
YOUR CONSENT AND PROMPT ACTION ARE IMPORTANT. YOU ARE URGED TO GRANT
YOUR CONSENT BY MARKING, SIGNING, DATING AND RETURNING THE ENCLOSED WHITE
CONSENT CARD AS SOON AS POSSIBLE.
DELIVERY OF CONSENTS
Properly executed consents should be received by mail as soon as
possible. The Return Date is December 3, 1997. Such consents should be mailed or
delivered to D.F. King at one of the addresses set forth below. If you have any
questions concerning this consent solicitation or the procedures to be followed
to execute and deliver a consent or need additional copies of documents, please
contact D.F. King & Co. at the address or phone numbers specified below.
Proposals of shareholders intended to be presented at the 1998 Annual Meeting
must be received by the Corporation on or before December 2, 1997, to be
considered for inclusion in the Corporation's Proxy Statement and Form of Proxy
relating to that meeting.
By Order of the Board of Directors
Secretary
Dated: __________
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<PAGE>
NIAGARA MOHAWK POWER CORPORATION
CONSENT SOLICITED BY NIAGARA MOHAWK POWER CORPORATION
TO ACTION OF PREFERRED SHAREHOLDERS WITHOUT A MEETING
The undersigned, a holder of record of shares of preferred
stock of Niagara Mohawk Power Corporation (the "Corporation") on the record
date, _______, for this consent solicitation, hereby acknowledges receipt of the
Consent Statement dated ________, 1997 (the "Consent Statement"), and consents
pursuant to the Corporation's Certificate of Incorporation, with respect to all
of the shares of preferred stock held by the undersigned, to the adoption of the
following proposal (the "Proposal") without a meeting of the shareholders of the
Corporation (except as otherwise specified below).
THE CORPORATION URGES YOU TO CONSENT TO THE PROPOSAL.
<TABLE>
<CAPTION>
Withholds
Consents Consent Abstains
------- ---------- --------
<S> <C> <C> <C> <C>
--------- --------- --------
Proposal: Consent to the incurrence of $5 billion in unsecured : : : : : :
debt in excess of the Present Limitation applicable : : : : : :
to the Corporation as set forth in the Consent : : : : : :
Statement. --------- --------- --------
</TABLE>
PLEASE VOTE PROMPTLY !
IF RETURNED CARDS ARE EXECUTED AND DATED BUT NOT MARKED WITH RESPECT TO THE
PROPOSAL THE UNDERSIGNED WILL BE DEEMED TO HAVE CONSENTED TO THE PROPOSAL.
Consents can only be given by the shareholder of record on
the Record Date. Please sign your name below exactly as it
appears on your stock certificate or on the label affixed
hereto. If shares are held jointly, each shareholder should
sign. When signing as officer, director, shareholder,
trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by
president or authorized officer. If a partnership, please
sign in partnership name by authorized person.
DATE
--------------------------------------
SIGNATURES
--------------------------------------
TITLE OR AUTHORITY
--------------------------------------
SIGNATURE
--------------------------------------
(IF HELD JOINTLY)
PLEASE MARK, SIGN, DATE AND RETURN YOUR CONSENT PROMPTLY.
<PAGE>
[Reverse of Consent]
NIAGARA MOHAWK POWER CORPORATION
SOLICITED FEES
Pursuant to the terms of the Consent Statement dated October __, 1997, Niagara
Mohawk Power Corporation will pay to designated brokers and dealers a
solicitation fee of $___ ($.__ for $25 par preferred stocks) per share for any
retail or registered Shares as to which consents are granted in favor of the
Proposal by beneficial owners of 2,500 (10,000 with respect to $25 par preferred
stocks) or fewer shares. No such fee shall be payable to a broker or dealer with
respect to the vote of shares by a holder unless the consent designates such
broker or dealer. However, soliciting brokers and dealers will not be entitled
to a solicitation fee for shares beneficially owned by such broker or dealer.
The above signed represents that the Soliciting Dealer (as defined in the
Consent Statement) who solicited and obtained this vote in favor of the proposed
amendment is:
Name of Firm:
-------------------------------------------------------------------
Please Print
Name of Individual Broker
or Financial Consultant:
--------------------------------------------------------
Telephone Number of Broker
or Financial Consultant:
--------------------------------------------------------
Identification Number (if known):
-----------------------------------------------
Address:
-----------------------------------------------------------------------
Include Zip Code
The acceptance of compensation by such broker or dealer will constitute a
representation by it that: (a) it has complied with the applicable requirements
of the Securities Exchange Act of 1934, as amended and the applicable rules and
regulations thereunder, in connection with such solicitation; (b) it is entitled
to such compensation for such solicitation under the terms and conditions of the
Consent Statement; (c) in soliciting votes of shares it has used no solicitation
materials other than those furnished by Niagara Mohawk Power Corporation; and
(d) if it is a foreign broker or dealer not eligible for membership in the
National Association of Securities Dealers, Inc. (the "NASD"), it has agreed to
conform to the NASD's Rules of Fair Practice in making solicitations.
The payment of compensation to any broker or dealer is dependent on such broker
or dealer returning a Notice of Solicited Consents to D.F. King & Co., Inc.
<PAGE>
MERRILL LYNCH & CO.
NIAGARA MOHAWK POWER CORPORATION
CONSENT SOLICITATION
WITH RESPECT TO ITS PREFERRED STOCK
---------------------------
SHAREHOLDERS ARE REQUESTED TO RETURN CONSENTS BY THE RETURN DATE OF
DECEMBER 3, 1997.
---------------------------
October __, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Niagara Mohawk Power Corporation, a New York
corporation ( "the Company") to act as Solicitation Agent and in connection
therewith are enclosing the letter to preferred stockholders, consent statement
and consent. If the Proposal described in the consent statement is approved by
the Company's preferred shareholders, the Company will make a special cash
payment in the amount of $___ per share ($0.__ for $25 par preferred stocks) to
each holder of preferred stock.
We are asking you to contact your clients for whom you hold shares
registered in your name (or in the name of your nominee) or who hold shares
registered in their own names. Please bring the solicitation to their attention
as promptly as possible.
The Company will pay to each designated Soliciting Dealer a solicitation
fee of $___ per share ($0.__ per share for $25 par preferred stocks) for each
share of preferred stock as to which a consent is granted by a beneficial owner
holding 2,500 (or 10,000 with respect to $25 par preferred stocks) or fewer
shares. A designated Soliciting Dealer is an entity obtaining the consent as set
forth on the consent or the Notice of Solicited Consents and it is (i) any
broker or dealer in securities, including the Dealer Managers in their capacity
as a broker or dealer, which is a member of any national securities exchange or
of the National Association of Securities Dealers, Inc. (the "NASD"), (ii) any
foreign broker or dealer not eligible for membership in the NASD which agrees to
conform to the NASD's Rules of Fair Practice in making solicitations, or (iii)
any bank or trust company. No solicitation fee (other than solicitation fees
payable to the Dealer Managers) shall be payable to a Soliciting Dealer with
respect to the consent by a holder unless the consent designates such Soliciting
Dealer or a Notice of Solicited Consents is provided. No solicitation fee shall
be payable to a Soliciting Dealer in respect of shares registered in the name of
such Soliciting Dealer unless such shares are held by such Soliciting Dealer as
nominee and a consent is being granted with respect to such shares by one or
more beneficial owners identified on the Notice of Solicited Tenders on the
reverse hereof. No solicitation fee shall be payable to a Soliciting Dealer if
such Soliciting Dealer is required for any reason to transfer the amount of such
fee to a consenting holder. No solicitation fee shall be payable to a Soliciting
Dealer with respect to shares held in such Soliciting Dealer's own account or
shares beneficially owned by such Soliciting Dealer. No broker, dealer, bank,
trust company or fiduciary shall be deemed to be the agent of the Company, the
Solicitation Agent or D.F. King & Co., Inc.
Merrill Lynch & Co.
<PAGE>
NOTICE OF SOLICITED CONSENTS
List below the number of shares as to which consents were granted by
each beneficial owner whose consent you have solicited. All shares in a series
of preferred stock beneficially owned by a beneficial owner, whether in one
account or several, and in however many capacities, must be aggregated for
purposes of completing the tables below. Any questions as to what constitutes
beneficial ownership should be directed to D.F. King & Co., Inc. ("D.F. King").
If the space below is inadequate, list the shares on a separate signed schedule
and affix the list to this Notice of Solicited Consents.
ALL NOTICES OF SOLICITED CONSENTS SHOULD BE RETURNED TO D.F. KING AT
THE ADDRESS SET FORTH IN THE SOLICITATION STATEMENT WITHIN THREE NEW YORK STOCK
EXCHANGE TRADING DAYS AFTER THE COMPANY ANNOUNCES IT HAS RECEIVED SUFFICIENT
CONSENTS TO APPROVE THE PROPOSAL. NOTICES MAY BE FAXED TO D.F. KING AT (212)
269-6061 (CONFIRMATION TELEPHONE NUMBER (212) 269-5550 (ext. 6831)). ALL
QUESTIONS CONCERNING THE NOTICES OF SOLICITED CONSENTS SHOULD BE DIRECTED TO
D.F. KING AT THE TELEPHONE NUMBER SET FORTH IN THE SOLICITATION STATEMENT.
<TABLE>
<CAPTION>
Beneficial Owners of Less than 2,500 Shares (or 10,000 shares of $25 par preferred stocks)
To be Completed by the Soliciting Dealer
--------------------------------------------------------------------------------
Number of Shares Consented Series of Preferred
------------------------------------ ------------------------------
<S> <C> <C>
Beneficial Owner No. 1 _______________ _______________
Beneficial Owner No. 2 _______________ _______________
Beneficial Owner No. 3 _______________ _______________
Beneficial Owner No. 4 _______________ _______________
Beneficial Owner No. 5 _______________ _______________
Total =============== ===============
</TABLE>
The undersigned hereby confirms that: (i) it has complied with the
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the applicable rules and regulations thereunder, in connection with such
solicitations; (ii) it is entitled to such compensation for such solicitation
under the terms and conditions of the Consent Statement, (iii) in soliciting
consents, it has used no soliciting materials other than those furnished by the
Company; and (iv) if it is a foreign broker or dealer not eligible for
membership in the NASD, it has agreed to conform to the NASD's Rules of Fair
Practices in making solicitations.
- ---------------------------------- ----------------------------------
Firm Name Address (Including Zip Code)
- ---------------------------------- ----------------------------------
By: Area Code and Telephone Number
Title:
