SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-2987
NIAGARA MOHAWK POWER CORPORATION
(Exact name of registrant as specified in its charter)
STATE OF NEW YORK 15-0265555
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 ERIE BOULEVARD WEST
SYRACUSE, NEW YORK 13202
(Address of principal executive offices) (Zip Code)
(315) 474-1511
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES [ X ] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
COMMON STOCK, $1 PAR VALUE, OUTSTANDING AT APRIL 30, 1998 -
144,419,351
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
FORM 10-Q - For the Quarter Ended March 31, 1998
INDEX
PART I. FINANCIAL INFORMATION
- ----------------------------------
Glossary of Terms
Item 1. Financial Statements.
a) Consolidated Statements of Income - Three Months
Ended March 31, 1998 and 1997
b) Consolidated Balance Sheets - March 31, 1998 and
December 31, 1997
c) Consolidated Statements of Cash Flows - Three Months
Ended March 31, 1998 and 1997
d) Notes to Consolidated Financial Statements
e) Review by Independent Accountants
f) Independent Accountants' Report on the Limited Review of
the Interim Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
PART II. OTHER INFORMATION
- -------------------------------
Item 1. Legal Proceedings.
Item 6. Exhibits and Reports on Form 8-K.
Signature
Exhibit Index
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
- ---------------------------------------------------------
GLOSSARY OF TERMS
- -----------------
TERM DEFINITION
- ---- ----------
Dth Dekatherm: one thousand cubic feet of gas with a heat
content of 1,000 British Thermal Units per cubic foot
EBITDA Earnings before interest charges, interest income, income
taxes,depreciation and amortization, amortization of nuclear
fuel,allowance for funds used during construction, the
POWERCHOICE charge,non-cash regulatory deferrals and other
amortizations, and extraordinary items.
FAC Fuel Adjustment Clause: a clause in a rate schedule that
provides for an adjustment to the customer's bill if the
cost of fuel varies from a specified unit cost
GAAP Generally Accepted Accounting Principles
GWh Gigawatt-hours: one gigawatt equals one billion watt-hours
IPP Independent Power Producer: any person that owns or
operates, in whole or part, one or more Independent Power
Facilities
IPP Party Independent Power Producers that are a party to the
MRA
KWh Kilowatt-hour: a unit of electrical energy equal to one
kilowatt of power supplied or taken from and electric
circuit steadily for one hour
MRA Master Restructuring Agreement - an agreement to terminate,
restate or amend IPP Party power purchase agreements, including
amendments thereto
MRA Reg- Recoverable costs to terminate, restate or amend IPP Party
ulatory contracts, which will be deferred and amortized
Asset under POWERCHOICE
POWERCHOICE Company's five-year electric rate agreement, which
agreement incorporates the MRA, approved by the PSC in an
order dated March 20, 1998
PPA Power Purchase Agreement: long-term contracts under which a
utility is obligated to purchase electricity from an IPP at
specified rates
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
- ---------------------------------------------------------
GLOSSARY OF TERMS
- -----------------
TERM DEFINITION
- ---- ----------
PRP Potentially Responsible Party
PSC New York State Public Service Commission
SFAS Statement of Financial Accounting Standards No. 71
No. 71 "Accounting for the Effects of Certain Types of Regulation"
SFAS Statement of Financial Accounting Standards No. 121
No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of"
Unit 1 Nine Mile Point Nuclear Station Unit No. 1
Unit 2 Nine Mile Point Nuclear Station Unit No. 2
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended March 31,
1998 1997
---- ----
(In thousands of dollars)
<S> <C> <C>
OPERATING REVENUES:
Electric $ 863,169 $ 877,369
Gas 235,235 286,463
---------- ----------
1,098,404 1,163,832
---------- ----------
OPERATING EXPENSES:
Fuel for electric generation 47,198 37,465
Electricity purchased 324,350 328,803
Gas purchased 115,452 148,631
Other operation and
maintenance expenses 262,362 206,665
Depreciation and amortization 87,950 84,222
Other taxes 126,795 126,109
---------- ----------
964,107 931,895
---------- ----------
OPERATING INCOME 134,297 231,937
Other income 4,225 7,100
---------- ----------
INCOME BEFORE INTEREST CHARGES 138,522 239,037
Interest charges 65,590 67,538
---------- ----------
INCOME BEFORE FEDERAL AND
FOREIGN INCOME TAXES 72,932 171,499
Federal and foreign income taxes 52,569 68,477
---------- ----------
NET INCOME (Note 1) 20,363 103,022
Dividends on preferred stock 9,223 9,399
---------- ----------
<PAGE>
BALANCE AVAILABLE FOR COMMON
STOCK $ 11,140 $ 93,623
========== ==========
Average number of shares of
common stock outstanding
(in thousands) 144,419 144,389
BASIC AND DILUTED EARNINGS
PER AVERAGE SHARE OF
COMMON STOCK $ 0.08 $ 0.65
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
<TABLE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
ASSETS MARCH 31,
- ------ 1998 December 31,
(UNAUDITED) 1997
----------- -----------
(In thousands of dollars)
<S> <C> <C>
UTILITY PLANT:
Electric plant $ 8,751,846 $ 8,752,865
Nuclear fuel 583,639 577,409
Gas plant 1,131,482 1,131,541
Common plant 319,146 319,409
Construction work in progress 420,299 294,650
----------- -----------
Total utility plant 11,206,412 11,075,874
Less - Accumulated depreciation
and amortization 4,308,748 4,207,830
----------- -----------
Net utility plant 6,897,664 6,868,044
---------- -----------
OTHER PROPERTY AND INVESTMENTS 296,976 371,709
----------- -----------
CURRENT ASSETS:
Cash, including temporary cash
investments of $379,920 and
$315,708, respectively 436,256 378,232
Accounts Receivable (less
allowance for doubtful accounts
of $64,500 and $62,500
respectively) 578,488 492,244
Materials and supplies, at
average cost:
Coal and oil for production
of electricity 22,440 27,642
Gas storage 14,367 39,447
Other 124,923 118,308
Prepaid taxes 78,921 15,518
Other 10,733 20,309
----------- -----------
1,266,128 1,091,700
----------- -----------
<PAGE>
REGULATORY ASSETS (NOTE 3):
Regulatory tax asset 405,624 399,119
Deferred finance charges 239,880 239,880
Deferred environmental
restoration costs (Note 2) 220,000 220,000
Unamortized debt expense 55,314 57,312
Postretirement benefits other
than pensions 55,524 56,464
Other 198,228 204,049
----------- -----------
1,174,570 1,176,824
----------- -----------
OTHER ASSETS 72,245 75,864
----------- -----------
$ 9,707,583 $ 9,584,141
=========== ===========
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
<TABLE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
MARCH 31,
1998 December 31,
(UNAUDITED) 1997
----------- -----------
(In thousands of dollars)
<S> <C> <C>
CAPITALIZATION:
COMMON STOCKHOLDERS' EQUITY:
Common stock - $1 par
value; authorized
185,000,000 shares;
issued 144,419,351 $ 144,419 $ 144,419
Capital stock premium
and expense 1,780,978 1,779,688
Retained earnings 691,060 679,920
---------- ----------
2,616,457 2,604,027
---------- ----------
CUMULATIVE PREFERRED STOCK,
AUTHORIZED 3,400,000 SHARES,
$100 PAR VALUE:
Non-redeemable (optionally
redeemable), issued
2,100,000 shares 210,000 210,000
Redeemable (mandatorily
redeemable), issued
222,000 shares 20,400 20,400
CUMULATIVE PREFERRED STOCK,
AUTHORIZED 19,600,000 SHARES,
$25 PAR VALUE:
Non-redeemable (optionally
redeemable), issued
9,200,000 shares 230,000 230,000
Redeemable (mandatorily
redeemable), issued
2,581,204 shares 56,210 56,210
-------- ----------
516,610 516,610
Long-term debt 3,418,299 3,417,381
---------- ----------
TOTAL CAPITALIZATION 6,551,366 6,538,018
---------- ----------
<PAGE>
CURRENT LIABILITIES:
Long-term debt due within
one year 67,065 67,095
Sinking fund requirements
on redeemable perferred stock 10,120 10,120
Accounts payable 227,564 263,095
Payable on outstanding bank
checks 17,380 23,720
Customers' deposits 18,689 18,372
Accrued taxes 39,055 9,005
Accrued interest 76,573 62,643
Accrued vacation pay 37,081 36,532
Other 119,997 64,756
---------- ----------
613,524 555,338
---------- ----------
REGULATORY LIABILITIES (NOTE 3):
Deferred finance charges 239,880 239,880
---------- ----------
OTHER LIABILITIES:
Accumulated deferred income
taxes 1,381,900 1,320,532
Employee pension and other
benefits 240,526 240,211
Deferred pension settlement gain 10,142 12,438
Unbilled revenues 28,881 43,281
Other 421,364 414,443
---------- ----------
2,082,813 2,030,905
---------- ----------
COMMITMENTS AND CONTINGENCIES (NOTES 2 AND 3):
Liability for environmental
restoration 220,000 220,000
---------- ----------
$9,707,583 $9,584,141
========== ==========
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
<TABLE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1998 1997
---- ----
(In thousands of dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 20,363 $103,022
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 87,950 84,222
Amortization of nuclear fuel 8,461 7,526
Provision for deferred income taxes 54,863 21,288
Net accounts receivable (100,644) (30,895)
Materials and supplies 26,313 37,626
Accounts payable and accrued
expenses (31,949) (58,066)
Accrued interest and taxes 43,980 86,568
Changes in other assets and
liabilities 17,886 (20,173)
---------- ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 127,223 231,118
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction additions (123,518) (49,668)
Nuclear fuel (6,230) (2,445)
---------- ---------
Acquisition of utility plant (129,748) (52,113)
Materials and supplies related
to construction (2,646) 68
Accounts payable and accrued
expenses related to construction (7,987) (14,517)
Other investments 75,124 (6,258)
Other 6,070 (3,290)
---------- ---------
NET CASH USED IN INVESTING
ACTIVITIES (59,187) (76,110)
---------- ---------
<PAGE>
CASH FLOWS FROM FINANCING ACTIVITIES:
Reductions in long-term debt - (3,300)
Dividends paid (9,223) (9,399)
Other (789) (203)
---------- ---------
NET CASH USED IN FINANCING
ACTIVITIES (10,012) (12,902)
---------- ---------
NET INCREASE IN CASH 58,024 142,106
Cash at beginning of period 378,232 325,398
---------- ---------
CASH AT END OF PERIOD $ 436,256 $467,504
========== =========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Interest paid $ 54,774 $ 59,074
Income taxes paid $ 304 $ 11,470
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS.
Niagara Mohawk Power Corporation and subsidiary companies (the
"Company"), in the opinion of management, has included all
adjustments (which include normal recurring adjustments) necessary
for a fair statement of the results of operations for the interim
periods presented. The consolidated financial statements for 1998
are subject to adjustment at the end of the year when they will be
audited by independent accountants. The consolidated financial
statements and notes thereto should be read in conjunction with the
financial statements and notes for the years ended December 31, 1997,
1996 and 1995 included in the Company's 1997 Annual Report on Form
10-K.
The Company's electric sales tend to be substantially higher in
summer and winter months as related to weather patterns in its
service territory; gas sales tend to peak in the winter.
Notwithstanding other factors, the Company's quarterly net income
will generally fluctuate accordingly. Therefore, the earnings for
the three-month period ended March 31, 1998, should not be taken as
an indication of earnings for all or any part of the balance of the
year. It is expected that the closing of the MRA and implementation of
POWERCHOICE will result in substantially depressed earnings during its
five-year term, but will substantially improve operating cash flows.
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income", which
establishes standards for reporting comprehensive income.
Comprehensive income is the change in the equity of a company, not
including those changes that result from shareholder transactions.
The Company's components of other comprehensive income relate to
foreign currency translation adjustments and unrealized gains and
losses associated with certain investments held as available for
sale. Total comprehensive income for the three months ended March 31, 1998
and 1997 was $21.4 million and $100.5 million, respectively.
Certain amounts have been reclassified on the accompanying
Consolidated Financial Statements to conform with the 1998
presentation.
NOTE 2. CONTINGENCIES
ENVIRONMENTAL ISSUES: The public utility industry typically utilizes
and/or generates in its operations a broad range of hazardous and
potentially hazardous wastes and by-products. The Company believes
it is handling identified wastes and by-products in a manner
consistent with federal, state and local requirements and has
implemented an environmental audit program to identify any potential
areas of concern and aid in compliance with such requirements. The
Company is also currently conducting a program to investigate and
restore, as necessary to meet current environmental standards,
certain properties associated with its former gas manufacturing
process and other properties which the Company has learned may be
contaminated with industrial waste, as well as investigating
identified industrial waste sites as to which it may be determined
that the Company contributed. The Company has also been advised that
various federal, state or local agencies believe certain properties
require investigation and has prioritized the sites based on
available information in order to enhance the management of
investigation and remediation, if necessary.
The Company is currently aware of 126 sites with which it has been or
may be associated, including 78 which are Company-owned. The number
of owned sites increased as the Company has established a program to
identify and actively manage potential areas of concern at its
electric substations. This effort resulted in identifying an
additional 32 sites. With respect to non-owned sites, the Company
may be required to contribute some proportionate share of remedial
costs. Although one party can, as a matter of law, be held liable
for all of the remedial costs at a site, regardless of fault, in
practice costs are usually allocated among PRPs.
Investigations at each of the Company-owned sites are designed to (1)
determine if environmental contamination problems exist, (2) if
necessary, determine the appropriate remedial actions and (3) where
appropriate, identify other parties who should bear some or all of
the cost of remediation. Legal action against such other parties
will be initiated where appropriate. After site investigations are
completed, the Company expects to determine site-specific remedial
actions and to estimate the attendant costs for restoration.
However, since investigations are ongoing for most sites, the
estimated cost of remedial action is subject to change.
Estimates of the cost of remediation and post-remedial monitoring are
based upon a variety of factors, including identified or potential
contaminants; location, size and use of the site; proximity to
sensitive resources; status of regulatory investigation and knowledge
of activities at similarly situated sites. Additionally, the
Company's estimating process includes an initiative where these
factors are developed and reviewed using direct input and support
obtained from the New York State Department of Environmental
Conservation ("DEC"). Actual Company expenditures are dependent upon
the total cost of investigation and remediation and the ultimate
determination of the Company's share of responsibility for such
costs, as well as the financial viability of other identified
responsible parties since clean-up obligations are joint and several.
The Company has denied any responsibility at certain of these PRP
sites and is contesting liability accordingly.
As a consequence of site characterizations and assessments completed
to date and negotiations with PRPs, the Company has accrued a
liability in the amount of $220 million, which is reflected in the
Company's Consolidated Balance Sheets at March 31, 1998 and December
31, 1997. The potential high end of the range is presently estimated
at approximately $650 million, including approximately $285 million
in the unlikely event the Company is required to assume 100%
responsibility at non-owned sites. The amount accrued at March 31,
1998 and December 31, 1997 incorporates the additional electric
substations, previously mentioned, and a change in the method used to
estimate the liability for 27 of the Company's largest sites to rely
upon a decision analysis approach. This method includes developing
several remediation approaches for each of the 27 sites, using the
factors previously described, and then assigning a probability to
each approach. The probability represents the Company's best
estimate of the likelihood of the approach occurring using input
received directly from the DEC. The probable costs for each approach
are then calculated to arrive at an expected value. While this
approach calculates a range of outcomes for each site, the Company
has accrued the sum of the expected values for these sites. The
amount accrued for the Company's remaining sites is determined
through feasibility studies or engineering estimates, the Company's
estimated share of a PRP allocation or where no better estimate is
available, the low end of a range of possible outcomes. In addition,
the Company has recorded a regulatory asset representing the
remediation obligations to be recovered from ratepayers. POWERCHOICE
provides for the continued application of deferral accounting for
cost differences resulting from this effort.
In October 1997, the Company submitted a draft feasibility study to
the DEC, which included the Company's Harbor Point site and five
surrounding non-owned sites. The study indicates a range of viable
remedial approaches, however, a final determination has not been made
concerning the remedial approach to be taken. This range consists of
a low end of $22 million and a high end of $230 million, with an
expected value calculation of $51 million, which is included in the
amounts accrued at March 31, 1998 and December 31, 1997. The range
represents the total costs to remediate the properties and does not
consider contributions from other PRPs. The Company anticipates
receiving comments from the DEC on the draft feasibility study by the
summer of 1999. At this time, the Company cannot definitively
predict the nature of the DEC proposed remedial action plan or the
range of remediation costs it will require. While the Company does
not expect to be responsible for the entire cost to remediate these
properties, it is not possible at this time to determine its share of
the cost of remediation. In May 1995, the Company filed a complaint,
pursuant to applicable Federal and New York State law, in the U.S.
District Court for the Northern District of New York against several
defendants seeking recovery of past and future costs associated with
the investigation and remediation of the Harbor Point and surrounding
sites. The New York State Attorney General moved to dismiss the
Company's claims against the State of New York, the New York State
Department of Transportation and the Thruway Authority and Canal
Corporation under the Comprehensive Environmental Response,
Compensation and Liability Act. The Company opposed this motion. On
April 3, 1998, the Court denied the New York State Attorney General's
motion as it pertains to the Thruway Authority and Canal Corporation,
and granted the motion relative to the State of New York and the Department
of Transportation. The case management order presently calls for the
close of discovery on December 31, 1998. As a result, the Company
cannot predict the outcome of the pending litigation against other
PRPs or the allocation of the Company's share of the costs to
remediate the Harbor Point and surrounding sites.
Where appropriate, the Company has provided notices of insurance
claims to carriers with respect to the investigation and remediation
costs for manufactured gas plant, industrial waste sites and sites
for which the Company has been identified as a PRP. To date, the
Company has reached settlements with a number of insurance carriers,
resulting in payments to the Company of approximately $36 million,
net of costs incurred in pursuing recoveries. Under POWERCHOICE the
electric portion or approximately $32 million will be amortized over
10 years. The remaining portion relates to the gas business and is
being amortized over the three year settlement period.
TAX ASSESSMENTS: The Internal Revenue Service ("IRS") has conducted
an examination of the Company's federal income tax returns for the
years 1989 and 1990 and issued a Revenue Agents' Report. The IRS has
raised an issue concerning the deductibility of payments made to IPPs
in accordance with certain contracts that include a provision for a
tracking account. A tracking account represents amounts that these
mandated contracts required the Company to pay IPPs in excess of the
Company's avoided costs, including a carrying charge. The IRS
proposes to disallow a current deduction for amounts paid in excess
of the avoided costs of the Company. Although the Company believes
that any such disallowances for the years 1989 and 1990 will not have
a material impact on its financial position or results of operations,
it believes that a disallowance for these above-market payments for
the years subsequent to 1990 could have a material adverse affect on
its cash flows. To the extent that contracts involving tracking
accounts are terminated or restated or amended under the MRA with IPP
Parties as described in Note 3, the effects of any proposed
disallowance would be mitigated with respect to the IPP Parties
covered under the MRA. The Company is vigorously defending its
position on this issue. The IRS is currently conducting its
examination of the Company's federal income tax returns for the years
1991 through 1993.
NOTE 3. RATE AND REGULATORY ISSUES AND CONTINGENCIES
The Company's financial statements conform to GAAP, including the
accounting principles for rate-regulated entities with respect to its
regulated operations. As discussed below, the Company discontinued
application of regulatory accounting principles to the Company's
fossil and hydro generation business. Substantively, SFAS No. 71
permits a public utility, regulated on a cost-of-service basis, to
defer certain costs which would otherwise be charged to expense, when
authorized to do so by the regulator. These deferred costs are known
as regulatory assets, which in the case of the Company are
approximately $935 million, net of approximately $240 million of
regulatory liabilities at March 31, 1998. These regulatory assets
are probable of recovery. The portion of the $935 million which has
been allocated to the nuclear generation and electric transmission
and distribution business is approximately $811 million, which is net
of approximately $240 million of regulatory liabilities. Regulatory
assets allocated to the rate-regulated gas distribution business are
$124 million. Generally, regulatory assets and liabilities were
allocated to the portion of the business that incurred the underlying
transaction that resulted in the recognition of the regulatory asset
or liability. The allocation methods used between electric and gas
are consistent with those used in prior regulatory proceedings.
The Company concluded as of December 31, 1996, that the termination,
restatement or amendment of IPP contracts and implementation of
POWERCHOICE was the probable outcome of negotiations that had taken
place since the POWERCHOICE announcement. Under POWERCHOICE, the
separated non-nuclear generation business would no longer be
rate-regulated on a cost-of-service basis and, accordingly,
regulatory assets related to the non-nuclear power generation
business, amounting to approximately $103.6 million ($67.4 million
after tax or 47 cents per share) were charged against 1996 income as
an extraordinary non-cash charge.
The PSC, in its written order issued March 20, 1998 approving
POWERCHOICE, determined to limit the estimated value of the MRA
Regulatory Asset that can be recovered from customers to
approximately $4 billion. The ultimate amount of the MRA Regulatory
Asset to be established may vary based on certain events related to
the closing of the MRA. The estimated value of the MRA Regulatory
Asset includes the issuance of 42.9 million shares of common stock,
which the PSC, in determining the recoverable amount of such asset,
valued at $8 per share. Because the value of the consideration to be
paid to the IPP Parties can only be determined at the MRA closing,
the value of the limitation on the recoverability of the MRA
Regulatory Asset was estimated at $190 million (85 cents per share)
which was charged to 1997 earnings. The charge to expense was
determined as the difference between $8 per share and the Company's
closing common stock price on March 26, 1998 of $12 7/16 per share,
multiplied by 42.9 million shares. Any variance from the estimate
used in determining the charge to expense in 1997, including changes
to the common stock price at closing, will be reflected in results of
operations in 1998.
As a result of amendments to the MRA dated April 22 and May 7, 1998,
the amount of cash compensation to be paid to the IPP Parties was
increased a net amount of approximately $15 million to $3.631 billion.
The net increase in cash compensation was partly in exchange for net
reductions in future payment obligations. The Company proposes, subject to
PSC approval, to adjust the MRA Regulatory Asset as a consequence of the
amendments. The amortization periods related to components of changes to
the cash compensation will generally correspond to the changes in cash
flow resulting from the amendments. The Company expects the net
amount of annual MRA Regulatory Asset amortization to be slightly higher
in the period beyond POWERCHOICE.
Under POWERCHOICE, the Company's remaining electric business (nuclear
generation and electric transmission and distribution business) will
continue to be rate-regulated on a cost-of-service basis and,
accordingly, the Company continues to apply SFAS No. 71 to these
businesses. Also, the Company's IPP contracts, including those
restructured under the MRA, will continue to be the obligations of
the regulated business.
SFAS No. 71 does not require the Company to earn a return on the
regulatory assets in assessing its applicability. The Company
believes that the prices it will charge for electric service over the
next 10 years, including the Competitive Transition Charge ("CTC")
assuming no reduction in demand or bypass of the CTC or exit fees,
will be sufficient to recover the MRA Regulatory Asset and to provide
recovery of and a return on the remainder of its assets, as
appropriate. In the event the Company could no longer apply SFAS No.
71 in the future, it would be required to record an after-tax
non-cash charge against income for any remaining unamortized
regulatory assets and liabilities. Depending on when SFAS No. 71 was
required to be discontinued, such charge would likely be material to
the Company's reported financial condition and results of operations
and adversely affect the Company's ability to pay dividends. It is
expected that the POWERCHOICE agreement, while having the effect of
substantially depressing earnings during its five-year term, will
substantially improve operating cash flows.
With the implementation of POWERCHOICE, specifically the separation
of non-nuclear generation as an entity that would no longer be
cost-of-service regulated, the Company is required to assess the
carrying amounts of its long-lived assets in accordance with SFAS No.
121. SFAS No. 121 requires long-lived assets and certain
identifiable intangibles held and used by an entity to be reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable or when
assets are to be disposed of. In performing the review for
recoverability, the Company is required to estimate future
undiscounted cash flows expected to result from the use of the asset
and/or its disposition. The Company has determined that there is no
impairment of its fossil and hydro generating assets. To the extent
the proceeds resulting from the sale of the fossil and hydro assets
are not sufficient to avoid a loss, the Company would be able to
recover such loss through the CTC. The POWERCHOICE agreement
provides for deferral and future recovery of losses, if any,
resulting from the sale of the non-nuclear generating assets. The
Company's fossil and hydro generation plant assets had a net book
value of approximately $1.1 billion at March 31, 1998.
As described in Form 10-K for fiscal year ended December 31, 1997,
Part II, Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - "Master Restructuring Agreement
and the POWERCHOICE Agreement," the conclusion of the termination,
restatement or amendment of IPP contracts, and closing of the
financing necessary to implement such termination, restatement or
amendment, as well as implementation of POWERCHOICE, is subject to a
number of contingencies. In the event the Company is unable to
successfully bring these events to conclusion, it is likely that
application of SFAS No. 71 would be discontinued. The resulting
non-cash after-tax charges against income, based on regulatory assets
and liabilities associated with the nuclear generation and electric
transmission and distribution businesses as of March 31, 1998, would
be approximately $527 million or $3.65 per share. Various
requirements under applicable law and regulations and under corporate
instruments, including those with respect to issuance of debt and
equity securities, payment of common and preferred dividends and
certain types of transfers of assets could be adversely impacted by
any such write-downs.
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
REVIEW BY INDEPENDENT ACCOUNTANTS
The Company's independent accountants, Price Waterhouse LLP, have
made limited reviews (based on procedures adopted by the American
Institute of Certified Public Accountants) of the unaudited
Consolidated Balance Sheet of Niagara Mohawk Power Corporation and
Subsidiary Companies as of March 31, 1998 and the unaudited
Consolidated Statements of Income and Cash Flows for the three-month
periods ended March 31, 1998 and 1997. The accountants' report
regarding their limited reviews of the Form 10-Q of Niagara Mohawk
Power Corporation and its subsidiaries appears on the next page.
That report does not express an opinion on the interim unaudited
consolidated financial information. Price Waterhouse LLP has not
carried out any significant or additional audit tests beyond those
which would have been necessary if their report had not been
included. Accordingly, such report is not a "report" or "part of the
Registration Statement" within the meaning of Sections 7 and 11 of
the Securities Act of 1933 and the liability provisions of Section 11
of such Act do not apply.
<PAGE>
PRICE WATERHOUSE LLP
ONE MONY PLAZA
SYRACUSE NY 13202
TELEPHONE 315-474-6571
REPORT OF INDEPENDENT ACCOUNTANTS
May 14, 1998
To the Stockholders and Board of Directors of
Niagara Mohawk Power Corporation
300 Erie Boulevard West
Syracuse, NY 13202
We have reviewed the condensed consolidated balance sheet of Niagara
Mohawk Power Corporation and its subsidiaries as of March 31, 1998
and the related condensed consolidated statements of income and of
cash flows for the three-month periods ended March 31, 1998 and 1997.
These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of
persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the condensed consolidated financial
statements referred to above for them to be in conformity with
generally accepted accounting principles.
We previously audited in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1997,
and the related consolidated statements of income, of retained
earnings and of cash flows for the year then ended (not presented
herein), and in our report dated March 26, 1998, we expressed an
unqualified opinion (containing explanatory paragraphs with respect
to the Company's application of Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation" [SFAS No. 71] for its nuclear generation, electric
transmission and distribution and gas businesses and discontinuation
of SFAS No. 71 for its non-nuclear generation business in 1996). In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1997, is fairly stated,
in all material respects, in relation to the consolidated balance
sheet from which it has been derived.
As discussed in Note 3, the Company believes that it continues to
meet the requirements for application of SFAS No. 71 for its nuclear
generation, electric transmission and distribution and gas
businesses. In the event that the Company is unable to complete the
termination, restatement or amendment of independent power producer
contracts, this conclusion could change in 1998 and beyond, resulting
in material adverse effects on the Company's financial condition and
results of operations.
/s/ Price Waterhouse LLP
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Certain statements included in this Quarterly Report on Form 10-Q are
forward-looking statements as defined in Section 21E of the
Securities Exchange Act of 1934, including the improvement in the
Company's financial condition expected as a result of the MRA and the
implementation of POWERCHOICE. The Company's actual results and
developments may differ materially from the results discussed in or
implied by such forward-looking statements, due to risks and
uncertainties that exist in the Company's operations and business
environment, including, but not limited to, matters described in the
context of such forward-looking statements, as well as such other
factors as set forth in the Notes to Consolidated Financial
Statements contained herein.
MASTER RESTRUCTURING AGREEMENT AND POWERCHOICE AGREEMENT
(See Form 10-K for fiscal year ended December 31, 1997, Part II, Item
7. Management's Discussion and Analysis of Financial Condition and
Results of Operations - "Master Restructuring Agreement and the
POWERCHOICE Agreement.")
MASTER RESTRUCTURING AGREEMENT. The MRA was amended to decrease the cash
payable to the IPP Parties by approximately $157 million in exchange
for agreed-upon price increases in certain restated IPP contracts. Only
one IPP, NorCon Power Partners, L.P. ("NorCon"), has withdrawn
from the MRA. The withdrawal of NorCon will reduce the cash payable
by the Company at closing by approximately $158 million. The Company
is currently assessing its possible actions with respect to Norcon's
contract. The Company has also determined to replace the fixed price swap
contracts originally contemplated by the MRA with an additional $297
million of cash compensation to the IPP Parties.
The MRA currently provides for the termination, restatement or
amendment of 27 PPAs with 14 IPPs, which represent approximately three
quarters of the Company's over-market purchased power obligations, in
exchange for an aggregate of approximately $3.631 billion in cash and
42.9 million shares of the Company's common stock. The closing of the
MRA is subject to certain conditions, including the successful financing
of the MRA and Company shareholder approval of the issuance of common stock
to the IPP Parties.
Norcen Energy Resources, Ltd. ("Norcen"), a gas supplier, sued three
IPPs that are party to the MRA and the Company, as to which litigation
a settlement agreement has been reached. (see Part II, Item 1. Legal
Proceedings - "Norcen Litigation").
POWERCHOICE AGREEMENT. In April 1998, the cities of Oswego, Fulton,
Cohoes and the New York Conference of Mayors and Municipal Officials
sought a temporary restraining order and preliminary injunction in
New York State Supreme Court against the PSC to enjoin the
implementation of the POWERCHOICE settlement, the MRA and the
Company's contemplated auction of its fossil and hydro generation
assets on the grounds that the PSC failed to comply with the
provisions of the State Environmental Quality Review Act. They were
joined in their petition by the chairman of the Buffalo City Council
Energy Committee (see Part II, Item 1. Legal Proceedings - "City of
Oswego Litigation"). In addition, the City of Oswego and others
petitioned the PSC for rehearing of the March 20, 1998 Order
approving POWERCHOICE. The Company is unable to predict the outcome
or timing of this matter.
In its written order dated May 6, 1998, the PSC approved the
Company's plan to divest its fossil and hydroelectric generating
plants, which is a key component in the Company's POWERCHOICE plan to
lower average electricity prices and provide customer choice. The
Company has begun distributing information about the plants to
interested bidders and is reviewing potential buyers for appropriate
financial qualifications. The Company expects to begin receiving
non-binding bids in June 1998. Final bids are expected in September
1998 and definitive agreements will be completed shortly thereafter.
Transaction closings are anticipated to occur in mid-1999.
JANUARY 1998 ICE STORM
In early January 1998, a major ice storm and flooding caused
extensive damage in a large area of northern New York. The Company's
electric transmission and distribution facilities in an area of
approximately 7,000 square miles were damaged, interrupting service
to approximately 120,000 of the Company's customers, or approximately
300,000 people. The Company had to rebuild much of its transmission
and distribution system to restore power in this area. By the end of
January 1998, service to all customers was restored.
The total estimated cost of the restoration and rebuild efforts is
approximately $131 million. As of March 1998, the Company recorded
$70.2 million in expense associated with the January 1998 ice storm (of
which $62.9 million was considered incremental) and $61.2 million was
capitalized. The Company is continuing to inspect and survey the work
completed and these efforts may impact the allocation of costs between
capital and expense.
The Company continues to pursue federal disaster relief assistance
and is working with its insurance carriers to assess what portion of
the rebuild costs are covered by insurance policies. The Company is
also analyzing potential available options for state financial aid.
The Company is unable to determine what recoveries, if any, it may
receive from these sources. While these efforts are continuing, the
fact that the Company has not recovered any amounts to date required
a charge to first-quarter earnings.
NUCLEAR MATTERS
UNIT 1 OUTAGE. On April 28, 1998, Unit 1 was taken out of service to fix
design deficiencies related to the control room emergency ventilation
system. Unit 1 is expected to return to service by early June 1998.
UNIT 2 OUTAGE. On May 2, 1998, Unit 2 was taken out of service for a
planned refueling and maintenance outage. Based on progress to date,
Unit 2 is scheduled to return to service, mid-June 1998.
DISPOSAL OF NUCLEAR FUEL. (See Form 10-K for fiscal year ended
December 31, 1997, Part II, Item 8. Financial Statements and
Supplementary Data - "Note 3. Nuclear Operations - Nuclear Fuel
Disposal Cost.") In April 1998, the U.S. Senate passed legislation
to reform the federal government's spent nuclear fuel disposal
policy. Such legislation requires the Department of Energy to accept
spent nuclear fuel from nuclear power plants beginning no later than
June 30, 2003, if all necessary approvals are obtained. In addition,
it requires the payment of one-time fees by electric utilities for
the disposal of nuclear fuel irradiated prior to 1983 to be paid to
the Nuclear Waste Fund no later than September 30, 2001. As of March
31, 1998, the Company has recorded a liability of $115.9 million for
the disposal of nuclear fuel irradiated prior to 1983. The Company is
unable to predict whether this bill will be enacted into law.
PSC STAFF'S TENTATIVE CONCLUSIONS ON THE FUTURE OF NUCLEAR
GENERATION. (See Form 10-K for fiscal year ended December 31, 1997,
Part II, Item 8. Financial Statements and Supplementary Data - "Note
3. Nuclear Operations - PSC Staff's Tentative Conclusions on the
Future of Nuclear Generation.") In late March 1998, the PSC issued
an Opinion and Order Instituting Further Inquiry. The order
concluded that a more extensive examination is required to address
all issues regarding the future treatment of nuclear generation
brought forth by the PSC staff and other parties.
GENERIC GAS RESTRUCTURING PROCEEDING
As a result of the generic restructuring proceeding, in which the PSC
ordered all New York utilities to implement a service unbundling
beginning in May 1996, nearly 3,200 customers have chosen to buy
natural gas from other sources, with the Company continuing to
provide transportation service for a separate fee. These changes have
not had a material impact on the Company's margins since the margin
is traditionally derived from the delivery service and not from the
commodity sale. The margin for delivery for residential and
commercial aggregation services approximately equals the margin on
the traditional sales service classes. To date the PSC has allowed
the utilities to assign the pipeline capacity to the customers
converting from sales to transportation. This assignment is allowed
during a three-year period ending March 1999, by which time the PSC
will decide on methods for dealing with the remaining unassigned or
excess capacity. In a clarifying order in the generic restructuring
proceeding, issued September 4, 1997, the PSC indicated that it is
unlikely that utilities will be allowed to continue to assign
pipeline capacity to departing customers after March, 1999.
As a part of the generic restructuring proceeding, all utilities were
required to file a report with the PSC in April 1998, describing
actions that have been taken to mitigate potential stranded costs as
customers migrate to transportation service. The Company filed a report
on March 31, 1998 that noted that it has taken numerous actions to
reduce its capacity obligations and its potential stranded costs to
the maximum extent possible. The Company's actions include the
following:
1) The Company has not entered into any new upstream capacity
contracts;
2) The Company has provided notice of termination with respect to
firm upstream capacity contracts that have reached their
notification date (the total capacity under such contracts is
96,101 Dth per day);
3) All opportunities to reduce capacity contracts continue to be
exercised by the Company;
4) Active participation in programs to remarket or release its
existing capacity, where those programs do not provide full
reimbursement of the Company's costs;
5) Active participation in open seasons offered by the interstate
pipelines to return capacity prior to the termination date of
the contract; and
6) Expansion of the Company's service territory by obtaining new
franchises to serve areas not previously served.
The Company is unable to determine the timing or outcome of this
proceeding.
FINANCING PLANS AND FINANCIAL POSITION
The Company's EBITDA for the twelve months ended March 31, 1998, was
approximately $859.7 million, and upon implementation of the MRA and
POWERCHOICE is expected to increase to approximately $1.2 billion
to $1.3 billion per year. EBITDA represents earnings before
interest charges, interest income, income taxes, depreciation and
amortization, amortization of nuclear fuel, allowance for funds used
during construction, the POWERCHOICE charge, non-cash regulatory
deferrals and other amortizations, and extraordinary items. EBITDA
is a non-GAAP measure of cash flows and is presented to provide
additional information about the Company's ability to meet its future
requirements for debt service which would increase significantly upon
consummation of the MRA. EBITDA should not be considered an
alternative to net income as an indicator of operating performance or
as an alternative to cash flows, as presented on the Consolidated
Statement of Cash Flows, as a measure of liquidity.
LIQUIDITY AND CAPITAL RESOURCES
Under the MRA, the Company will pay an aggregate of $3.631 billion in
cash. The Company now expects to obtain $3.272 billion of this amount
through a public market offering of senior unsecured debt and the remainder
from cash on hand. The Company will not be able to issue incremental
first mortgage bonds under the terms of the public debt offering. The
Company plans to amend its existing $804 million bank facility to, among
other things, extend the term from June 30, 1999 to June 1, 2000 and
accommodate the holding company restructuring and permit the auction of
fossil/hydro generating assets.
NET CASH PROVIDED BY OPERATING ACTIVITIES decreased $103.9 million in
the first quarter of 1998 primarily due to a decrease of $98.7
million in the amount of accounts receivable sold under the accounts
receivable sales program (which the Company has budgeted to restore
in 1998).
NET CASH USED IN INVESTING ACTIVITIES decreased $16.5 million in the
first quarter of 1998 primarily as a result of a decrease in other
investments of $81.4 million offset by an increase in the acquisition
of utility plant of $77.6 million, primarily due to the January 1998
ice storm.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 versus Three Months Ended March 31,
1997
- ---------------------------------------------------------------------
The following discussion presents the material changes in results of
operations for the first quarter of 1998 in comparison to the same
period in 1997. The Company's quarterly results of operations
reflect the seasonal nature of its business, with peak electric loads
in summer and winter periods. Gas sales peak principally in the
winter. The earnings for the three month period should not be taken
as an indication of earnings for all or any part of the balance of
the year. In addition, this discussion and analysis is not likely to
be indicative of future operations or earnings, particularly in view
of the probable termination, restatement or amendment of IPP
contracts and implementation of POWERCHOICE. It should also be read
in conjunction with other financial and statistical information
appearing elsewhere in this report.
Earnings for the first quarter were $11.1 million or 8 cents per
share, as compared with $93.6 million or 65 cents per share for the
first quarter of 1997. Earnings for the first quarter 1998 reflect
the write-off of $62.9 million, or 28 cents per share, to reflect the
Company's estimate of incremental, non-capitalized costs to restore
power and rebuild its electric system in northern New York as a
result of the January 1998 ice storm (see "January 1998 Ice
Storm"). First quarter 1998 earnings were also lower by
approximately 14 cents per share due to a higher allocation of
federal income taxes in this period reflecting the expected lower
level of earnings over the remainder of the year. In addition, first
quarter 1998 earnings were also lower due to warmer weather, higher
capacity payments to IPPs and higher industrial customer discounts.
ELECTRIC REVENUES
Electric revenues decreased $14.2 million or 1.6% from 1997 primarily
as a result of a decrease in volume and mix of sales to ultimate
customers of $25.5 million, offset by an increase in sales to other
electric systems and miscellaneous electric revenues of $11.3
million.
ELECTRIC SALES
Electric sales to ultimate consumers were approximately 8.7 billion
KWh in the first quarter of 1998, a 1.1% decrease from 1997 primarily
as a result of warmer weather and the power outages during the
January 1998 ice storm (see "January 1998 Ice Storm"). Residential
and commercial sales declined 4.9% and 1.1%, respectively. After
adjusting for the effects of weather and the farm and food processor
retail access pilot program, sales to ultimate consumers would have
been expected to increase 0.9%. Sales for resale increased 204
million Kwh (17.2%), reflecting sales to energy service companies
participating in the Company's farm and food processor retail access
pilot program. This resulted in a net increase in total electric
sales of 106 million KWh (1.1%).
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
Electric Revenue (Thousands) Sales (GWh)
----------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
% %
1998 1997 Change 1998 1997 Change
--------- --------- ------- ------ ----- -------
Residential $ 336,434 $ 352,919 (4.7) 2,737 2,877 (4.9)
Commercial 310,038 314,291 (1.4) 2,956 2,988 (1.1)
Industrial 123,470 129,943 (5.0) 1,743 1,738 0.3
Industrial - Special 15,977 14,922 7.1 1,162 1,099 5.7
Other 14,576 13,888 5.0 70 64 9.4
--------- --------- ------- ------ ----- -------
Total to
Ultimate Consumers 800,495 825,963 (3.1) 8,668 8,766 (1.1)
Other Electric Systems 32,923 23,949 37.5 1,387 1,183 17.2
Miscellaneous 29,751 27,457 8.4 - - -
--------- --------- ------- ------ ----- -------
Total $ 863,169 $ 877,369 (1.6) 10,055 9,949 1.1
========= ========= ======= ====== ===== =======
</TABLE>
<PAGE>
Electric fuel and purchased power costs increased $5.3 million or
1.4%. This increase is the result of an $8.7 million increase in
actual fuel costs, a $0.1 million increase in payments to IPPs and a
$2.7 million increase in costs deferred and recovered through the
operation of the FAC, partially offset by a decrease in other
purchased power costs of $6.2 million. Internal generation increased
in 1998, reflecting the full operation of the Company's nuclear power
plants in the first quarter of 1998 as compared to 1997. On March 3,
1997, Unit 1 was taken out of service for a planned refueling and
maintenance outage and was returned to service on May 8, 1997.
GAS REVENUES
Gas revenues decreased $51.2 million or 17.9% in 1998 from the
comparable period in 1997, primarily as a result of lower purchased
gas adjustment clause revenues of $26.9 million and a decrease in
sales to ultimate consumers of $24.3 million.
GAS SALES
Due primarily to warmer weather during the first quarter of 1998, gas
sales to ultimate consumers decreased 4.0 million Dth or 10.8% from
the first quarter of 1997. After adjusting for the effects of
weather, sales to ultimate consumers decreased 6.5% primarily due to
the migration of certain large commercial sales customers to the
transportation class and lower customer usage. Spot market sales
(sales for resale), which are generally from the higher priced gas
available to the Company and therefore yield margins that are
substantially lower than traditional sales to ultimate consumers,
also decreased as the warm weather depressed spot sales
opportunities. In addition, changes in purchased gas adjustment
clause revenues are generally margin-neutral.
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
Gas Revenue (Thousands) Sales (Thousands of Dth)
----------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
% %
1998 1997 Change 1998 1997 Change
--------- --------- ------- ------ ------ -------
Residential $ 160,664 $ 188,687 (14.9) 23,820 25,764 (7.5)
Commercial 55,053 72,500 (24.1) 8,862 10,540 (15.9)
Industrial 1,546 3,412 (54.7) 306 678 (54.9)
--------- --------- ------- ------ ------ -------
Total to
Ultimate Consumers 217,263 264,599 (17.9) 32,988 36,982 (10.8)
Transportation of
Customer-Owned Gas 16,685 15,313 9.0 42,297 41,702 1.4
Spot Market Sales 38 3,082 (98.8) 15 1,088 (98.6)
Miscellaneous 1,249 3,469 (64.0) - -
--------- --------- ------- ------ ------ ------
Total to System
Core Customers $ 235,235 $ 286,463 (17.9) 75,300 79,772 (5.6)
========= ========= ======= ====== ====== =======
</TABLE>
<PAGE>
The total cost of gas included in expense decreased 22.3% in 1998.
This was the result of a 5.8 million decrease in Dth purchased and
withdrawn from storage for ultimate consumer sales ($20.1 million), a
$3.0 million decrease in Dth purchased for spot market sales, a $0.7
million decrease in purchased gas costs and certain other items
recognized and recovered through the purchased gas adjustment clause
and an 8.3% decrease in the average cost per Dth purchased ($9.4
million). The Company's net cost per Dth sold, as charged to expense
and excluding spot market purchases, decreased to $3.56 in 1998 from
$3.82 in 1997.
OTHER OPERATION AND MAINTENANCE EXPENSES increased by $55.7 million
primarily as a result of the write-off of the costs associated with
the January 1998 ice storm (see "January 1998 Ice Storm"). BAD DEBT
EXPENSE for the first quarter of 1998 was $16.0 million as compared
with $21.3 million in 1997.
The decrease in FEDERAL AND FOREIGN INCOME TAXES of approximately
$15.9 million was primarily due to a decrease in pre-tax income,
partially offset by a higher percentage allocation of federal income
taxes to the first quarter of 1998, reflecting the expected lower
level of earnings over the remainder of the year. The effective tax
rate for the first quarter of 1998 was 72% as compared to 40% for the
first quarter of 1997. This increase is caused by the allocation of
certain flow through tax adjustments.
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1. LEGAL PROCEEDINGS.
Norcen Litigation
- -----------------
In April 1998, Norcen sued three IPPs that are parties to the MRA and
the Company. The claim against the Company relates to certain rights
of Norcen to sue if the Company breached its PPAs with the three
projects and alleges tortious interference by the Company with
Norcen's gas purchase agreements. In May 1998, such projects announced
that they had entered into a settlement agreement with Norcen in
which Norcen agreed to release the Company from litigation upon the
closing of the MRA.
City of Oswego Litigation
- -------------------------
In April 1998, the cities of Oswego, Fulton,Cohoes and the New York
Conference of Mayors and Municipal Officials sought a temporary
restraining order and preliminary injunction in New York State
Supreme Court against the PSC to enjoin the implementation of the
POWERCHOICE settlement, the MRA and the Company's contemplated
auction of its fossil and hydro generation assets on the grounds that
the PSC failed to comply with the provisions of the State
Environmental Quality Review Act. The application of the City of
Oswego and the other petitioners for the temporary restraining order
was denied at a Supreme Court hearing held in Albany on April 21,
1998. On May 8, 1998, there were oral arguments heard in the Supreme
Court in Albany and the court did not grant the cities' request for
preliminary injunction but rather reserved ruling on all of the
cities' requests. The Company is unable to predict the outcome of
this matter.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
Exhibit 3(i) - By-laws of the Company, as amended April 23, 1998.
Exhibit 10 - Employment Agreement between the Company and John H.
Mueller, dated January 19, 1998, incorporated herein by reference to
the Company's Annual Report on Form 10-K for fiscal year ended
December 31, 1997.
Exhibit 10(b) - PSC Opinion and Order regarding approval of the
POWERCHOICE settlement agreement with the PSC, issued and effective
March 20, 1998, incorporated herein by reference to the Company's
Annual Report on Form 10-K for fiscal year ended December 31, 1997.
Exhibit 10(c) - Amendments to the Master Restructuring Agreement.
Exhibit 11 - Computation of the Average Number of Shares of Common
Stock Outstanding for the Three Months Ended March 31, 1998 and 1997.
Exhibit 12 - Statement Showing Computations of Ratio of Earnings to
Fixed Charges, Ratio of Earnings to Fixed Charges without Allowance
for Funds Used During Construction ("AFC") and Ratio of Earnings to
Fixed Charges and Preferred Stock Dividends for the Twelve Months
Ended March 31, 1998.
Exhibit 15 - Accountants' Acknowledgement Letter.
Exhibit 27 - Financial Data Schedule.
In accordance with Paragraph 4(iii) of Item 601(b) of Regulation S-K,
the Company agrees to furnish to the Securities and Exchange
Commission, upon request, a copy of the agreements comprising the
$804 million senior debt facility that the Company completed with a
bank group during March 1996. The total amount of long-term debt
authorized under such agreement does not exceed 10 percent of the
total consolidated assets of the Company and its subsidiaries.
(b) Report on Form 8-K:
Form 8-K Reporting Date - February 11, 1998
Item reported - Item 5. Other Events.
Registrant filed information concerning the January 1998 ice
storm.
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
NIAGARA MOHAWK POWER CORPORATION
(Registrant)
Date: May 14, 1998 By /s/ Steven W. Tasker
--------------------
Steven W. Tasker
Vice President-Controller and
Principal Accounting Officer
<PAGE>
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
3(i) By-laws of NMPC, as amended April 23, 1998.
10 Employment Agreement between the Company and John
H. Mueller, dated January 19, 1998, incorporated herein by
reference to the Company's Annual Report on Form 10-K
for fiscal year ended December 31, 1997.
10(b) PSC Opinion and Order regarding approval of the
POWERCHOICE settlement agreement with the PSC, issued
and effective March 20, 1998, incorporated herein by
reference to the Company's Annual Report on Form 10-K
for fiscal year ended December 31, 1997.
10(c) Amendments to the Master Restructuring Agreement.
11 Computation of the Average Number of Shares
of Common Stock Outstanding for the Three
Months Ended March 31, 1998 and 1997.
12 Statement Showing Computations of Ratio of
Earnings to Fixed Charges, Ratio of Earnings
to Fixed Charges without AFC and Ratio of
Earnings to Fixed Charges and Preferred Stock
Dividends for the Twelve Months Ended
March 31, 1998.
15 Accountants' Acknowledgement Letter.
27 Financial Data Schedule.
<PAGE>
<PAGE>1 Exhibit 3(i)
BY-LAWS
NIAGARA MOHAWK POWER CORPORATION
ADOPTED JANUARY 5, 1950
(As Amended April 23, 1998)<PAGE>
<PAGE>2
BY-LAWS
NIAGARA MOHAWK POWER CORPORATION
ADOPTED JANUARY 5, 1950
(As Amended April 23, 1998)
<TABLE><CAPTION>
Index*
Page Page
<S> <C> <C> <C>
Additional Officers 14 Officers 11
Adjournments 4 Place of Meeting 3
Amendments 20 President 12
Annual Meeting 2 Procedure 4,9,11,20
Assistant Officers 13,14 Proxies 6
Audit Committee 10 Quorum 4,9
Bonds 15 Record Date 18
Certificate of Stock 17 Registrar 17
Chairman of the Board 12 Resignation 7
Committees 9 Scrip 19
Compensation 8,15 Secretary 13
Controller 13 Special Meetings 3
Corporate Charter 1 Stock 17
Corporate Seal 20 Stockholders' Meetings 2
Directors 6 Term of Office 6,12
Directors' Meetings 8 Transfer Agent 17
Election 2,6,12,20 Transfers of Shares 18
Executive Committee 10 Treasurer 14
Finance Committee 10 Unanimous Written Consent 11
Finances 19 Vacancies 7
Fiscal Year 20 Vice Presidents 13
General Provisions 19 Voting 5
Indemnification; Insurance 15,17
Inspectors of Election 5
Lost Stock Certificates 19
Notices of Meetings 3,8,11
/TABLE
<PAGE>
*This Index does not constitute part of the By-Laws or have any
bearing upon the interpretation of their terms and provisions.
<PAGE>3
BY-LAWS OF NIAGARA MOHAWK POWER CORPORATION
ARTICLE I
BY-LAWS SUPPLEMENT CORPORATE CHARTER
Section 1. Corporate Charter: The provisions of these by-laws
supplement the corporate charter. The provisions of the latter
shall govern over the provisions of these by-laws in the event of
any conflict. Elections of directors and meetings of stockholders
in addition to those provided by these by-laws may be held in
accordance with the provisions of the corporate charter. The term
"corporate charter" as used in these by-laws includes the
Certificate of Consolidation of Antwerp Light and Power Company,
Baldwinsville Light and Heat Company of Baldwinsville, N.Y., Fulton
Fuel and Light Company, Fulton Light, Heat and Power Company,
Malone Light and Power Company, Northern New York Utilities, Inc.,
The Norwood Electric Light and Power Company, Peoples Gas and
Electric Company of Oswego, St. Lawrence County Utilities, Inc.,
St. Lawrence Valley Power Corporation, The Syracuse Lighting
Company, Inc., and Utica Gas and Electric Company forming Niagara
Hudson Public Service Corporation, filed in the Department of State
of the State of New York on July 31, 1937, all certificates
supplemental thereto or amendatory thereof or in restatement
thereof filed in the Department of State of the State of New York
(including specifically but without limitation among all such
supplemental or amendatory certificates heretofore filed or
hereafter to be filed, the Certificate of Change of Name of Niagara
Hudson Public Service Corporation to Central New York Power
Corporation, filed in the Department of State of the State of New
York on September 15, 1937, the Certificate of Consolidation of New
York Power and Light Corporation and Buffalo Niagara Electric
Corporation and Central New York Power Corporation which is to
survive the consolidation and be named Niagara Mohawk Power
Corporation Pursuant to Sections 26-a and 86 of the Stock
Corporation Law and to Subdivision 4 of Section 11 of the
Transportation Corporations Law, filed in the Department of State
of the State of New York on January 5, 1950, and the Certificate of
Amendment of Certificate of Incorporation of Niagara Mohawk Power
Corporation Pursuant to Sections 26-a and 36 of the Stock<PAGE>
<PAGE>4
Corporation Law, filed in the Department of State of the State of New York
on January 5, 1950), and includes also all resolutions of the board of
directors fixing the designations, preferences, privileges and voting powers
of any series of stock of the corporation, and all other instruments which
are binding upon, and define or set forth the rights of, the stockholders
of the corporation.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meeting: The annual meeting of the stockholders
of the corporation for the election of directors and the
transaction of such other business as may properly come before it
shall be held at such date and time as may be designated by the Board of
Directors.
Business properly brought before any such annual meeting shall
include matters specifically set forth in the corporation's proxy
statement with respect to such meeting, matters which the Chairman
of the Board of Directors in his sole discretion causes to be
placed on the agenda of any such annual meeting and (i) any
proposal of a stockholder of this corporation and (ii) any
nomination by a stockholder of a person or persons for election as
director or directors, if such stockholder has made a written
request to this corporation to have such proposal or nomination
considered at such annual meeting, as provided herein, and further
provided that such proposal or nomination is otherwise proper for
consideration under applicable law and the certificate of
incorporation and by-laws of the corporation.
Notice of any proposal to be presented by any stockholder or of the
name of any person to be nominated by any stockholder for election
as a director of the corporation must be received by the secretary
of the corporation at its principal executive office not less than
60 nor more than 90 days prior to the date of the annual meeting;
provided, however, that if the date of the annual meeting is first
publicly announced or disclosed (in a public filing or otherwise)
less than 70 days prior to the date of the meeting, such notice
shall be given not more than ten days after such date is first so
announced or disclosed. Public notice shall be deemed to have been<PAGE>
<PAGE>5
given more than 70 days in advance of the annual meeting if the
corporation shall have previously disclosed, in these by-laws or
otherwise, that the annual meeting in each year is to be held on a
determinable date, unless and until the Board of Directors determines to
hold the meeting on a different date.
Any stockholder who gives notice of any such proposal shall deliver
therewith the text of the proposal to be presented and a brief
written statement of the reasons why such stockholder favors the
proposal and setting forth such stockholder's name and address, the
number and class of all shares of each class of stock of the
corporation beneficially owned by such stockholder and any material
interest of such stockholder in the proposal (other than as a
stockholder).
Any stockholder desiring to nominate any person for election as a
director of the corporation shall deliver with such notice a
statement in writing setting forth the name of the person to be
nominated, the number and class of all shares of each class of
stock of the corporation beneficially owned by such person, the
information regarding such person required by paragraphs (a), (e)
and (f) of Item 401 of Regulation S-K adopted by the Securities and
Exchange Commission (or the corresponding provisions of any
regulation subsequently adopted by the Securities and Exchange
Commission applicable to the corporation), such person's signed
consent to serve as a director of the corporation if elected, such
stockholder's name and address and the number and class of all
shares of each class of stock of the corporation beneficially owned
by such stockholder. As used herein, shares "beneficially owned"
shall mean all shares as to which such person, together with such
person's affiliates and associates (as defined in Rule 12b-2 under
the Securities Exchange Act of 1934), may be deemed to beneficially
own pursuant to Rules 13d-3 and 13d-5 under the Securities Exchange
Act of 1934, as well as all shares as to which such person,
together with such person's affiliates and associates, has the
right to become the beneficial owner pursuant to any agreement or
understanding, or upon the exercise of warrants, option or rights
to convert or exchange (whether such rights are exercisable
immediately or only after the passage of time or the occurrence of
conditions).
The person presiding at the meeting, in addition to making any
other determinations that may be appropriate to the conduct of the
meeting, shall determine whether such notice has been duly given<PAGE>
<PAGE>6
and shall direct that proposals and nominees not be considered if
such notice has not been so given.
Section 2. Special Meetings: Special meetings of the stockholders
of the corporation may be called at any time by a majority of the
entire board of directors or by the Chairman of the Board or the
President. Such request shall state the purpose or purposes of the
proposed meeting.
Special meetings of stockholders for the election of directors in
accordance with the provisions of the corporate charter providing
for a special election of directors in the event of default in the
payment of dividends on the preferred stock or preference stock for
a specified period and on the termination of such default may be
called as provided in the corporate charter.
Section 3. Place and Notice of Stockholders' Meetings: Meetings of
Stockholders shall be held at the principal office of the
corporation in the City of Syracuse, New York, or at such other
place or places in the State of New York as may be determined from
time to time by the board of directors. For meetings other than annual
meetings, the notice shall also state by and at whose direction and for
what purpose or purposes the meeting is called. If the manner of giving
notice of the meeting is not specified by law or the corporate
charter, notice shall be given by mailing, postage prepaid, not
less than ten (10) nor more than sixty (60) days before such
meeting, a copy of the notice of such meeting, stating the purpose
or purposes for which the meeting is called and the time when and
the place where it is to be held, to each stockholder of record on the
record date established pursuant to Article VII, Section 4 entitled to
vote at the meeting at his address as it appears on the stock book
of the corporation, unless he shall have filed with the Secretary
of the corporation a written request that notices intended for him
be mailed to some other address, in which case it shall be mailed
to the address designated in such request. If, at any meeting,
action is proposed to be taken which would, if taken, entitle shareholders
fulfilling the requirements of Section 623 of the New York Business
Corporation Law to receive payment for their shares, the notice of
such meeting shall also include a statement to that effect.<PAGE>
<PAGE>7
Section 4. Business at Stockholders' Meetings: Business transacted
at all meetings of stockholders shall be confined to the objects
stated in the notice of the meeting and matters germane thereto.
In the absence of fraud, the determination of the holders of a
majority of the stock present in person or by proxy and entitled to
vote at the meeting shall be conclusive as to whether any proposed
action or proceeding at such meeting is within the scope of the notice of
such meeting.
Section 5. Procedure: The order of business and all other matters
of procedure at every meeting of stockholders may be determined by
the presiding officer.
Section 6. Quorum: Except as otherwise provided by law or in the
corporate charter, the presence of a majority of the holders of
shares, in person or by proxy, entitled to vote thereat shall
constitute a quorum at any shareholders' meeting.
Section 7. Adjournments: Except as otherwise provided by the
corporate charter, the stockholders entitled to vote who are
present in person or by proxy at any meeting of stockholders,
whether or not a quorum shall be present or represented at the
meeting, shall have power by a majority vote to adjourn the meeting
from time to time without further notice other than announcement at
the meeting, unless the board of directors shall fix a new record
date in respect of such adjourned meeting, in which case the
provisions of Section 3 of this Article shall apply. At any
adjourned meeting at which the requisite amount of voting stock shall be
present in person or by proxy any business may be transacted which might
have been transacted at the meeting as originally called, and the
stockholders entitled to vote at the meeting as originally called, and no
others, unless the board of directors shall have fixed a new record date
in respect thereof, shall be entitled to vote at such adjourned meeting.
Section 8. Voting: Whenever an action shall require the vote of
stockholders, the tabulations that identify the particular vote of
a stockholder on all proxies, consents, authorizations and ballots
shall be kept confidential, except as disclosure may be required<PAGE>
<PAGE>8
(i) by applicable law, (ii) in pursuit or defense of legal
proceedings, (iii) to resolve a bona fide dispute as to the
authenticity of one or more proxies, consents, authorizations or
ballots or as to the accuracy of any tabulation of such proxies,
consents, authorizations or ballots, (iv) if an individual
stockholder requests that his or her vote and identity be forwarded
to the corporation, or (v) in the event of a proxy or consent
solicitation in opposition to the solicitation of the Board of
Directors of the corporation; and the receipt and tabulation of such votes
will be by an independent third party not affiliated with the corporation.
Comments written on proxies, consents, authorizations and ballots, will be
transcribed and provided to the secretary of the corporation
without reference to the vote of the stockholder, except where such
stockholder has requested that the nature of their vote be forwarded to
the corporation.
Stockholders shall have such voting rights as may be granted by law
and the provisions of the corporate charter. All questions
presented to stockholders for decision shall be decided by a vote
of shares. Voting may be viva voce unless a stockholder present in
person or by proxy and entitled to vote at the meeting shall demand
a vote by ballot in which event a vote by ballot shall be taken.
Except where otherwise provided by law, the corporate charter or
these by-laws, elections shall be determined by a plurality vote
and all other questions that shall be submitted to stockholders for
decision shall be decided by a majority of the votes cast.
Section 9. Inspectors of Election: Two inspectors of election who
are not employees or directors of the corporation, shall be
appointed by the directors to serve at each meeting of
stockholders, or of a class of stockholders, such inspectors to
serve at such meeting and any adjournments thereof; and such
inspectors shall have authority to count and report upon the votes
cast at such meeting upon the election of directors and such other
questions as may be voted upon by ballot. In the event that any
such inspector of election shall not have been appointed by the
directors to serve at such meeting, or, having been appointed,
shall be absent from such meeting or adjournment or unable to serve
thereat, such inspector shall be appointed by the presiding officer
at such meeting or adjournment.
The inspectors appointed to act at any meeting of stockholders,
before entering upon the discharge of their duties, shall be sworn<PAGE>
<PAGE>9
faithfully to execute the duties of inspectors at such meeting with
strict impartiality and according to the best of their ability, and
the oath so taken shall be subscribed by them and shall be filed in
the records of such meeting.
The inspectors shall be responsible for determining the number of
shares outstanding, the voting power of each, the shares
represented at the meeting, the existence of a quorum, and the
validity and effect of any proxies. They shall also receive and
tabulate all votes, ballots or consents and determine the result of
any election, hear and determine all challenges and questions arising in
connection with any election and do such acts to conduct the election
according to the applicable provisions of law of the State of New York.
Section 10. Proxies: Each stockholder entitled to vote at any
meeting of stockholders may be represented and vote at such meeting
by his proxy, authorized and acting in manner as provided by the
applicable laws of the State of New York. No proxy shall be valid
after the expiration of eleven (11) months from the date of its execution
unless otherwise provided in the proxy in accordance with law.
ARTICLE III
DIRECTORS
Section 1. Number and Qualifications: Except as otherwise required
by the provisions of the corporate charter relating to the rights
of the holders of any class or series of preferred or preference
stock having a preference over the common stock as to dividends or
to elect directors under specified circumstances, the board of directors
shall consist of not less than nine (9) nor more than twenty-one
(21) persons, the exact number initially to be fifteen (15)
persons, subject to change from time to time to any number not less
than nine (9) nor more than twenty-one (21) persons by the board of
directors pursuant to a resolution adopted by a majority of the
total number of authorized directors (whether or not there exist<PAGE>
<PAGE>10
any vacancies in previously authorized directorships at the time
any such resolution is presented to the board for adoption). Directors
need not be stockholders. No person, other than those serving on
November 11, 1976, who has reached age 70 prior to May 1 in the year such
director would otherwise stand for election, shall stand for election as a
director.
Section 2. Election and Tenure of Office: Except as otherwise
provided by law, the corporate charter or these by-laws, the
directors of the corporation shall be elected at the annual meeting
of the stockholders or at any meeting of the stockholders held in
lieu of such annual meeting, which meeting, for the purposes of
these by-laws, shall be deemed the annual meeting. The directors
shall be classified, with respect to the time for which they
severally hold office into three classes, as nearly equal in number
as possible, one class to hold office initially for a term expiring at
the annual meeting of stockholders to be held in 1989, another class to
hold office initially for a term expiring at the annual meeting of
stockholders to be held in 1990, and another class to hold office
initially for a term expiring at the annual meeting of stockholders
to be held in 1991, with the members of each class to hold office
until their successors are elected and qualified. At each annual
meeting of the stockholders of the corporation, the successors to
the class of directors whose terms expire at that meeting shall be
elected, to hold office until the annual meeting of stockholders
held in the third year following the year of their election.
Except as otherwise provided in the corporate charter, the directors
shall hold office until the annual meeting at which their respective
terms expire and until their successors are elected and have
qualified. The election of directors shall be conducted by two
inspectors of election appointed as hereinbefore provided. The
election need not be by ballot and shall be decided by a plurality
vote.
Section 3. Resignation; Removal: Any director of the corporation
may resign at any time by giving his resignation to the chief
executive officer of the corporation, or to the Secretary. Such
resignation shall take effect at the time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation<PAGE>
<PAGE>11
shall not be necessary to make it effective. Subject to the rights
of the holders of any class or series of preferred or preference
stock having preference over the holders of common stock as to
dividends or to elect directors under specified circumstances, any
director, or the entire board of directors, may be removed from office
at any time, but only for cause.
Section 4. Vacancies: Except as otherwise provided by the corporate
charter, if the office of any director becomes vacant for any
reason, a majority of the directors then in office, whether or not
such majority shall constitute a quorum, may choose a successor
who, to the extent required by New York law, shall hold office until
the next annual meeting of stockholders at which the election of directors
is in the regular order of business and until his successor has been
elected and qualified; provided that if New York law does not so require,
such director shall hold office for the full unexpired term of the
director whose seat he is filling, or any such vacancy in the board of
directors may be filled by the stockholders entitled to vote at any
meeting of stockholders, notice of which shall have referred to the
proposed election.
Except as otherwise provided by the corporate charter, in the event
of an increase in the number of directors pursuant to Section 1 of
this Article III, a majority of the directors then in office,
whether or not such majority shall constitute a quorum, may elect
the additional director or directors who to the extent required by
New York law, shall hold office until the next annual meeting of
stockholders at which the election of directors is in the regular
order of business and until his successor has been elected and
qualified; provided that if New York law does not so require, such
director or directors shall hold office for the full unexpired term
of the class of directors to which such director or directors is
elected, or any such director or directors may be elected by the<PAGE>
<PAGE>12
stockholders entitled to vote at any meeting of stockholders,
notice of which shall have referred to the proposed election. No
decrease in the number of authorized directors constituting the
entire board of directors shall shorten the term of any incumbent
director.
Section 5. Compensation: Members of the board of directors shall be
entitled to compensation for service and the board of directors may
assign duties to any member or members of the board and may fix the
amount of compensation therefor, which shall be a charge to be paid
by the corporation. The board of directors may elect or appoint
members of the board as officers, members of committees, or agents
of the corporation, may assign duties to be performed and may fix
the amount of the respective salaries, fees or other compensation
therefor, and the amount so fixed shall be a charge to be paid by
the corporation. In addition to any other compensation provided
pursuant to these by-laws, each director shall be entitled to
receive a fee, in amount as fixed from time to time by resolution
of the board of directors, for attendance at any meeting of the
board, or of any committee of the board, together with his expenses of
attendance, if any.
Section 6. Meetings of Directors: Regular meetings of the board of
directors shall be held at such times and at such places as may be
determined by the board of directors, or by the Chairman of the Board or
by the President. Special meetings of the board may be called from time
to time by any three directors, or by the Chairman of the Board or by the
President.
Any action required or permitted to be taken by the board or any
committee thereof may be taken without a meeting if all board or
committee members file one or more written consents to a resolution
authorizing the action with the respective minutes of the board or
committee as the case may be.
Any one or more members of the board or of any of its committees
may participate in a meeting of the board or committee by
conference telephone or similar communications equipment allowing<PAGE>
<PAGE>13
all participants in the meeting to hear each other at the same time.
Participation by such means shall constitute presence at a meeting.
Section 7. Notice of Meetings of Board of Directors: Notice of each
meeting of the board of directors, stating the time and place
thereof, shall be given to each member of the board by the Secretary, or an
Assistant Secretary, by mailing the same, postage prepaid, addressed to
each member of the board at his residence to usual place of business not
less than three (3) days before the meeting, or by delivering the same to
each member of the board personally or to his residence or usual place of
business, or by sending the same by telegraph or facsimile transmission
to his residence or usual place of business, not less than one (1) day
before the meeting. Meetings of the board of directors may also be held
at any time and place without notice provided all the members are present at
such meeting without protest or, at any time before or after the meeting,
shall sign a written waiver of notice. The notice of any meeting of the
board of directors need not specify the purpose or purposes for which the
meeting is called, except as otherwise expressly provided in these
by-laws.
Section 8. Quorum: At all meetings of the board of directors, except
where otherwise provided by law, the corporate charter, or these by-laws, a
quorum shall be required for the transaction of business and shall consist
of not less than one-third of the entire board, if the number of members
be more than nine (9), but not less than a majority, if the number of
directors be less than nine (9); and the vote of a majority of the
directors present shall decide any questions that may come before the
meeting. A majority of the directors present at any meeting, although
less than a quorum, may adjourn the same from time to time, without
notice other than announcement at the meeting, until a quorum is present.
Section 9. Procedure: The order of business and all other matters
of procedure at every meeting of directors may be determined by the
presiding member.<PAGE>
<PAGE>14
ARTICLE IV
COMMITTEES OF DIRECTORS
Section 1. Designation: The board of directors, by resolution or
resolutions adopted by a majority of the entire board, shall
designate an Executive Committee, an Audit Committee and a Finance
Committee, and may designate one or more other committees, each
committee to consist of three (3) or more directors of the
corporation. In the interim between meetings of the board, the
Executive Committee shall have and may exercise the powers of the
board of directors granted by the corporate charter and these
by-laws and by resolution of the board, and such other committees
shall have only such powers as shall be granted by these by-laws
and by resolution of the board; provided, however, that no committee shall
have authority as to the following matters:
(a) The submission to shareholders of any action that needs
shareholders' approval by law;
(b) The filling of vacancies in the board of directors or in any
committee;
(c) The fixing of compensation of the directors for serving on the
board or on any committee;
(d) The amendment or repeal of the by-laws, or the adoption of new
by-laws; or
(e) The amendment or repeal of any resolution of the board which,
by its terms, shall not be so amendable or repealable.
Each committee shall serve at the pleasure of the board of
directors and shall have such name or names as may be determined
from time to time by the by-laws or by resolution or resolutions
adopted by the board of directors. Except as otherwise required by
law, the existence of any such committee may be terminated, or its
powers and authority modified, at any time by resolution of the
board of directors.<PAGE>
<PAGE>15
Section 2. Executive Committee: When the board of directors is not
in session, the Executive Committee shall have all of the authority
of the board of directors, except it shall have no authority as to
the matters specified in Section 1 of this Article IV. The
Chairman of the Board shall be Chairman of the Executive Committee. The
members of the Executive Committee shall serve at the pleasure of
the board of directors.
Section 3. Audit Committee: The Audit Committee shall recommend to
the board of directors the accounting firm to be selected by the
board or to be recommended by it for shareholder approval, as
independent auditor of the corporation and its subsidiaries; act on
behalf of the board in meeting and reviewing with the independent
auditors, the chief internal auditor and the appropriate corporate
officers matters relating to corporate financial reporting and
accounting procedures and policies, adequacy of internal controls
and the scope of the respective audits of the independent auditors
and the internal auditor; review the results of such audits with
the respective auditing agency and reporting thereon to the board;
review and make recommendations to the board concerning the
independent auditor's fees and services; review interim and annual
financial reports and disclosures and submit to the board any
recommendations it may have from time to time with respect to
financial reporting and accounting practices and policies; be
consulted, and its consent obtained, prior to the selection or
termination of the chief internal auditor; oversee matters
involving compliance with Corporate business ethics policies
including the work of the Business Ethics Council; review
management's assessment of financial risks; authorize special
investigations and studies, as appropriate, in fulfillment of its
function as specified herein or by resolution of the board of
directors; and perform any other duties or functions deemed
appropriate by the board of directors. The Committee will conduct
a self-assessment at least every three years of its performance in
relation to its powers and responsibilities. The membership of
such committee shall consist only of directors of the corporation who
are not, and have not been, officers of the company.
Section 4. Finance Committee: The Finance Committee shall exercise
such powers of the board of directors as shall be provided in one<PAGE>
<PAGE>16
or more resolutions of the board of directors with respect to the
issuance by the corporation of securities and evidences of
indebtedness and the participation by the corporation in other
financing transactions and with respect to the authorization of the
making, modification, alteration, termination or abrogation of
notes, bills, mortgages, sales, deeds, financing leases, liens and
contracts of the corporation and shall further be empowered to take
any action in connection with the determination of the terms of any
securities, evidences of indebtedness or other financing transactions of
the corporation the issuance of which by the corporation or the
participation in which by the corporation shall have theretofore been
approved by the board of directors, and shall further perform any other
duties or functions deemed appropriate by the board of directors.
Section 5. Records and Procedure: Said committees shall keep
regular minutes of their proceedings and report the same to the
board when required. Unless otherwise determined by the board of
directors each committee may appoint a chairman and a secretary and
such other officers of the committee as it may deem advisable, may
determine the time and place of holding each meeting of the
committee, the notice of meetings to be given to members, and all
other procedural questions which may arise in connection with the
work of the committee.
Section 6. Unanimous Written Consent: Any action authorized in writing,
by all of the members of a committee, and filed with the minutes of the
corporation shall be the act of that committee with the same force and
effect as if the same had been passed by unanimous vote at a duly called
meeting of such committee.
Section 7. Notice: Unless otherwise provided by resolution of the board
of directors or by a vote of a majority of the members of the relevant
committee, notice of committee meetings shall be given in the same manner
as notice of special meetings of the board of directors is to be given
under Article III, Section 7 of the By-Laws.
ARTICLE V
OFFICERS
Section 1. Officers: The officers of the corporation shall consist
of a Chairman of the Board, a President, one or more Vice-Presidents, a
Secretary, a Controller, a Treasurer, and such Assistant Secretaries,
Assistant Controllers and Assistant Treasurers and other officers as
shall be elected or appointed by the board of directors. The board
of directors may elect or appoint a General Counsel upon such terms
and with such powers and duties as it may prescribe and may also
designate the General Counsel an officer of the corporation.
Section 2. Election: The officers of the corporation shall be<PAGE>
<PAGE>17
elected or appointed by the board of directors at the meeting of
the board held after each annual meeting of the stockholders. The
Chairman of the Board and the President shall be elected or
appointed by the board of directors from among their number. Any
number of Vice-Presidents, the Secretary, the Controller, the Treasurer
and other officers established pursuant to resolution of the board of
directors shall also be elected or appointed by the board of directors.
Section 3. Term of Office: The officers of the corporation shall
hold office until the meeting of the board of directors held after
the next annual meeting of the stockholders and until their
successors are elected and have qualified, unless a shorter term is
fixed or unless removed, subject to the provisions of law, by the
board of directors. The Chairman of the Board, the President, any
Vice President, the Secretary, the Controller or the Treasurer may
be removed at any time, with or without cause, by the board of
directors provided that notice of the meeting at which such action
shall have been taken shall set forth such action as one of the
purposes of such meeting. Any other officer of the corporation may
be removed at any time, with or without cause, by the board of
directors. If the office of any officer becomes vacant for any
reason, the vacancy may be filled by the board of directors at any
time to serve the remaining current term of that office.
Section 4. Chairman of the Board: There shall be a chairman of the
Board of Directors, with the official title "Chairman of the
Board", who shall be the chief executive officer of the
corporation. The Chairman of the Board shall preside at meetings
of the stockholders, the board of directors and the Executive Committee.
He shall recommend to the board policies to be followed by the corporation,
and, subject to the board, shall have general charge of the
policies and business of the corporation and general supervision of
the details thereof, and shall supervise the operation, maintenance
and preservation of the properties of the corporation. He shall
keep the board of directors informed respecting thebusiness of the
corporation. He shall have authority to sign on behalf of the
corporation all contracts and other documents or instruments to be
signed or executed by the corporation, and, in all cases where the<PAGE>
<PAGE>18
duties and powers of subordinate officers and agents of the
corporation are not specifically prescribed by the by-laws or by
resolutions of the board of directors, the Chairman of the Board
may prescribe such duties and powers. He shall perform such other
duties as may from time to time be assigned to him by the board of
directors.
Section 5. The President: The President shall have the direction of
and responsibility for the operations of the corporation and such
other powers and duties as the board of directors or the Chairman
of the Board shall designate from time to time and, in the absence
or inability to act of the Chairman of the Board, shall have the
powers and duties of the Chairman of the Board. The President,
unless some other person is thereunto specifically authorized by
vote of the board of directors, shall have authority to sign all
contracts and other documents and instruments of the corporation.
Section 6. The Vice-Presidents: The Vice-Presidents may be
designated by such title or titles and in such order of seniority
as the board of directors may determine. The Vice-Presidents shall
perform such of the duties and exercise such of the powers of the
President on behalf of the corporation as may be assigned to them
respectively from time to time by the board of directors or by the
Chairman of the Board or the President, and, subject to the control
of the board, shall have authority to sign on behalf of the
corporation all contracts and other documents or instruments
necessary for the conduct of the business of the corporation. The
Vice-Presidents shall perform such other duties as may from time to
time be assigned to them respectively by the board of directors or the
Chairman of the Board or the President.
Section 7. The Secretary and Assistant Secretaries: The Secretary
shall cause notices of all meetings of stockholders and directors
to be given as required by law, the corporate charter, and these
by-laws. He shall attend all meetings of stockholders and of the
board of directors and keep the minutes thereof. He shall affix
the corporate seal to and sign such instruments as require the seal
and his signature and shall perform such other duties as usually
pertain to his office or as are required of him by the board of directors
or the Chairman of the Board or the President.<PAGE>
<PAGE>19
Any Assistant Secretary may, in the absence or disability of the
Secretary, or at his request, perform the duties and exercise the
powers of the Secretary, and shall perform such other duties as the
board of directors, the Chairman of the Board, the President or the
Secretary shall prescribe.
The Secretary or any Assistant Secretary may certify under the
corporate seal as to the corporate charter or these by-laws or any
provision thereof, the acts of the board of directors or any
committee thereof, the tenure, signatures, identity and acts of
officers of the corporation or other corporate facts, and any such
certificate may be relied upon by any person or corporation to whom
the same shall be given until receipt of written notice to the
contrary.
In the absence of the Secretary and of an Assistant Secretary, the
stockholders or the board of directors may appoint a secretary pro
tem to record the proceedings of their respective meetings and to
perform such other acts pertaining to said office as they may
direct.
Section 8. The Controller and Assistant Controllers: The Controller
shall be the chief accounting officer of the corporation. He shall
have general supervision of the accounting and financial reporting
policies of the corporation, and shall recommend policies and
procedures and shall render current and periodic reports of
financial status to the Chairman of the Board, the President and
the board of directors. He shall perform such other duties as
usually pertain to his office or as are required of him by the
board of directors or the Chairman of the Board or the President.
Any Assistant Controller may, in the absence or disability of the
Controller, or at his request, perform the duties and exercise the
powers of the Controller and shall perform such other duties as the
board of directors, the Chairman of the Board, the President or the
Controller shall prescribe.
Section 9. The Treasurer and Assistant Treasurers: The Treasurer is
authorized and empowered to receive and collect all moneys due the
corporation and to receipt for the same. He shall be empowered to
execute on behalf of the corporation all instruments, agreements<PAGE>
<PAGE>20
and certificates necessary or appropriate to effect the issuance by
the corporation of securities or evidences of indebtedness or to permit
the corporation to enter into and perform any other financing
transactions to the extent the foregoing are within the ordinary
course of business of the corporation or have been authorized by
the board of directors or a committee thereof. He shall cause to
be entered in books of the corporation to be kept for that purpose
full and accurate accounts of all moneys received by and paid on
account of the corporation. He shall make and sign such reports,
statements, and instruments as may be required of him by the board
of directors or by laws of the United States or the State of New
York, or by commission, bureau, department or agency created under
any such laws, and shall perform such other duties as usually
pertain to his office or as are required of him by the board of
directors or the Chairman of the Board or the President.
Any Assistant Treasurer may, in the absence or disability of the
Treasurer, or at his request, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as the
board of directors, the Chairman of the Board, or the President,
or the Treasurer shall prescribe.
Section 10. Additional Officers: In addition to the officers
provided for by these by-laws, the board of directors may, from
time to time, designate and appoint such other officers as may be
necessary or convenient for the transaction of the business and
affairs of the corporation. Such other officers shall have such powers
and duties as may be assigned to them by resolution of the board of
directors.
Section 11. Officers Holding Two or More Offices: Any two or more
of the above-mentioned offices may be held by the same person,
except that the President shall not also be the Secretary, but no officer
shall execute or verify any instrument in more than one capacity if
such instrument be required by law or otherwise to be executed or
verified by any two or more officers.
Section 12. Duties of Officers May be Delegated: In case of the
absence of any officer of the corporation, or for any other reason<PAGE>
<PAGE>21
that the board of directors may deem sufficient, the board of
directors may delegate, for the time and to the extent specified,
the powers or duties of any officer to any other officer, or to any
director.
Section 13. Compensation: The compensation of all officers with an
assigned salary level above the scale of Salary Level 20 as
prescribed in the Salary Administration Program, as adopted by the
board of directors, shall be fixed by the board of directors. The
compensation of all other officers and employees shall be fixed by
the Chairman of the Board or by the President in accordance with
the Salary Administration Program.
Section 14. Bonds: The board of directors may require any officer,
agent or employee of the corporation to give a bond to the
corporation, conditional upon the faithful performance of his
duties, with one or more sureties and in such amount as may be
satisfactory to the board of directors. The premium payable to any
surety company for such bond shall be paid by the corporation.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS; INSURANCE
Section 1. Indemnification: The corporation shall fully indemnify,
to the extent not expressly prohibited by law, each person involved
in, or made or threatened to be made a party to, any action, claim
or proceeding, whether civil or criminal, including any
investigative, administrative, legislative, or other proceeding,
and including an action by or in the right of the corporation or
any other corporation, or any partnership, joint venture, trust,
employee benefit plan, or other enterprise, and including appeals
therein (any such action or proceeding being hereinafter referred to as
a "Matter"), by reason of the fact that such person, such person's
testator or intestate (i) is or was a director or officer of the
corporation, or (ii) is or was serving, at the request of the
corporation, as a director, officer, or in any other capacity, any
other corporation, or any partnership, joint venture, trust,
employee benefit plan, or other enterprise, against any and all<PAGE>
<PAGE>22
judgments, fines, penalties, amounts paid in settlement, and expenses,
including attorneys' fees, actually and reasonably incurred as a
result of or in connection with any Matter, except as provided in
the next paragraph.
No indemnification shall be made to or on behalf of any such person
if a judgment or other final adjudication adverse to such person
establishes that such person's acts were committed in bad faith or
were the result of active and deliberate dishonesty and were
material to the cause of action so adjudicated, or that such person
personally gained in fact a financial profit or other advantage to
which such person was not legally entitled. In addition, no
indemnification shall be made with respect to any Matter initiated
by any such person against the corporation, or a director or officer of
the corporation, other than to enforce the terms of this article,
unless such Matter was authorized by the board of directors.
Further, no indemnification shall be made with respect to any
settlement or compromise of any Matter unless and until the corporation has
consented to such settlement or compromise.
In making any determination regarding any person's entitlement to
indemnification hereunder, it shall be presumed that such person is
entitled to indemnification, and the corporation shall have the
burden of proving the contrary.
Written notice of any Matter for which indemnity may be sought by
any person shall be given to the corporation as soon as practicable
and the corporation shall be permitted to participate therein.
Such person shall cooperate in good faith with any request that
common counsel be utilized by the parties to any Matter who are
similarly situated, unless to do so would be inappropriate due to
actual or potential differing interests between or among such
parties.
Section 2. Advancement of Expenses: Except in the case of a Matter
against a director, officer, or other person specifically approved
by the board of directors, the corporation shall, subject to
Section 1 above, pay expenses actually and reasonably incurred by
<PAGE>23
or on behalf of such a person in connection with any Matter in advance
of the final disposition of such Matter. Such payments shall be made
promptly upon receipt by the corporation, from time to time, of a
written demand of such person for such advancement, together with
an undertaking by or on behalf of such person to repay any expenses
so advanced to the extent that the person receiving the advancement
is ultimately found not to be entitled to indemnification for part
or all of such expenses.
Section 3. Rights Not Exclusive: The rights to indemnification and
advancement of expenses granted by or pursuant to this article (i)
shall not limit or exclude, but shall be in addition to, any other
rights which may be granted by or pursuant to any statute,
corporate charter, by-law, resolution, or agreement, (ii) shall be deemed
to constitute contractual obligations of the corporation to any
director, officer, or other person who serves in a capacity
referred to herein at any time while this article is in effect,
(iii) are intended to be retroactive and shall be available with respect
to events occurring prior to the adoption of this article, and (iv)
shall continue to exist after the repeal or modification hereof
with respect to events occurring prior thereto. It is the intent
of this article to require the corporation to indemnify the persons
referred to herein for the aforementioned judgments, fines,
penalties, amounts paid in settlement, and expenses, including
attorneys' fees, in each and every circumstance in which such
indemnification could lawfully be permitted by express provisions
of by-laws, and the indemnification required by this article shall
not be limited by the absence of an express recital of such
circumstances.
Section 4. Authorization of Contracts: The corporation may, with
the approval of the board of directors, enter into an agreement
with any person who is, or is about to become, a director or
officer of the corporation, or who is serving, or is about to
serve, at the request of the corporation, as a director, officer, or
in any other capacity, any other corporation, or any partnership, joint
venture, trust, employee benefit plan, or other enterprise, which agreement
may provide for indemnification of such person and advancement of<PAGE>
<PAGE>24
expenses to such person upon terms, and to the extent, not
prohibited by law. The failure to enter into any such agreement
shall not affect or limit the rights of any such person under this
article.
Section 5. Insurance: The corporation may purchase and maintain
insurance to indemnify the corporation and the directors and
officers within the limits permitted by law.
Section 6. Severability: If any provision of this article is
determined at any time to be unenforceable in any respect, the
other provisions shall not in any way be affected or impaired
thereby.
ARTICLE VII
STOCK
Section 1. Transfer Agent and Registrar: The board of directors may
appoint one or more individuals, banks, firms of bankers, or trust
companies the agent or agents of the corporation for the transfer
of shares of its stock, and may also appoint one or more
individuals, bank, firms of bankers, or trust companies registrar
or registrars for the registering of shares of its stock.
Section 2. Certificate of Stock: The certificates of stock of the
corporation shall be numbered and shall be recorded in the books of
the corporation as they are issued. They shall contain the
holder's name and number of shares and shall be signed by the
Chairman of the Board, the President or a Vice-President and the
Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and shall be sealed with the corporate seal,<PAGE>
<PAGE>25
which may be a facsimile. Where any such certificate is signed by
a registrar, the signatures of any such Chairman of the Board,
President, Vice-President, Secretary, Assistant Secretary,
Treasurer or Assistant Treasurer upon such certificate may be
facsimiles. In case any such officer who has signed or whose
facsimile signature has been placed upon such certificate shall
have ceased to be such before such certificate is issued, it may be
issued by the corporation with the same effect as if such officer
had not ceased to be such at the date of its issue. No certificate
of stock shall be valid until countersigned by a transfer agent if
the corporation have a transfer agent for the class or series of
stock represented by such certificate whose signature may be a
facsimile and until registered by a registrar if the corporation
have a registrar for such class or series.
Section 3. Transfers of Shares: Subject to applicable law, shares
of stock shall be transferable on the books of the corporation by
the holder thereof, in person or by duly authorized attorney, upon
the surrender to the corporation or any transfer agent of the
corporation of the certificate representing the shares to be
transferred, duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer. The corporation
shall be entitled to treat the holder of record of any share or
shares of stock as the owner thereof and accordingly shall not be
bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person whether or not it shall
have express or other notice thereof, save as expressly provided by the
laws of the State of New York. The board of directors, to the extent
permitted by law, shall have power and authority to make all such rules and
regulations as it may deem expedient concerning the issue, transfer, and
registration of certificates of stock.
Section 4. Fixing of Record Date or Closing Transfer Books: The
board of directors may fix a day and hour, not more than sixty (60)
days prior to the day on which any meeting of stockholders is to be
held, as the time as of which stockholders entitled to notice of or
to vote at such meeting and at all adjournments thereof shall be
determined; and in the event such record date is fixed by the board
of directors no one other than the holders of record on such date
of stock entitled to notice of or to vote at such meeting shall be
entitled to notice of or to vote at such meeting, or unless a new<PAGE>
<PAGE>26
record date be fixed as provided in Article II, Section 7 of these by-laws,
any adjournment thereof. The board of directors may at its option, in
lieu of fixing a record date as aforesaid, prescribe a period, not
exceeding sixty (60) days prior to any meeting of stockholders,
during which no transfer of shares on the books of the corporation
may be made.
The board of directors may fix a day and hour, not exceeding sixty
(60) days preceding the date fixed for the payment of a dividend or
the making of any distribution, or for the delivery of evidences or
rights or evidences of interests arising out of any change,
conversion or exchange of stock, as a record time for the
determination of the stockholders, or stockholders of any class or
series, entitled to receive any such dividend, distribution,
rights, or interests, and in such case only stockholders of record
at the time so fixed shall be entitled to receive such dividend,
distribution, rights, or interests, or the board of directors may
at its option prescribe a period, not exceeding sixty (60) days prior
to the date for such payment, distribution or delivery, during
which no transfer of stock on the books of the corporation may be
made.
Section 5. Lost Stock Certificates: The holder of any certificate
representing shares of stock of the corporation shall immediately
notify the corporation of any mutilation, loss, or destruction
thereof, and the board of directors or an officer or officers duly
authorized thereunto by the board of directors may in its or his
discretion authorize one or more new certificates for the same
number of shares in the aggregate to be issued to such holder upon
the surrender of the mutilated certificate, or, in case of loss or
destruction of the certificate, upon satisfactory proof of such
loss or destruction and the deposit of indemnity by way of bond or
otherwise in such form and amount and with such surety or sureties
or security as the board of directors or such officer or officers may
require to protect the corporation against loss or liability by
reason of the issuance of such new certificates; but the board of
directors may in its discretion refuse to issue new certificates
save upon the order of the court having jurisdiction in such
matters.<PAGE>
<PAGE>27
Section 6. Scrip: The board of directors may from time to time
authorize the issuance by the corporation of scrip certificates
representing interests in fractions of a full share of any class or
series of stock of the corporation, and, subject to the provisions
of the corporate charter and applicable provisions of law, shall
have power to prescribe the rights, and the conditions and
limitations thereof, to which the holders of such scrip
certificates shall be entitled in respect of such scrip certificates and
of the interests in shares of stock of the corporation represented thereby,
which rights and the conditions and limitations thereon shall be set
forth therein to the extent required by law. Such scrip
certificates may be issued in registered or bearer form, as the
board of directors may determine.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Finances: The funds of the corporation shall be
deposited in its name with such bank or banks, firm or firms of
bankers, trust company or trust companies as the board of directors
may from time to time designate. All checks, notes, drafts and
other negotiable instruments of the corporation shall be signed by such
officer or officers, agent or agents, employee or employees or such
other person or persons as may be designated by the board of directors
from time to time by resolution, or by the Chairman of the Board or
the President or the Treasurer in the exercise of authority conferred
by resolution of the board of directors. No officers, agents,
employees of the corporation, or other person, alone or with
others, shall have power to make any checks, notes, drafts or other
negotiable instruments in the name of the corporation or to bind
the corporation thereby, except as in this article provided.
Section 2. Fiscal Year: The fiscal year of the corporation shall be
the calendar year unless otherwise provided by the board of directors.<PAGE>
<PAGE>28
ARTICLE IX
CORPORATE SEAL
Section 1. Form of Seal: The seal of the corporation shall bear the
name of the corporation, the year of its incorporation, and such
appropriate design as the board of directors may approve. The seal
on stock certificates or on any corporate obligation for the
payment of money may be facsimile.
ARTICLE X
AMENDMENTS
Section 1. Procedure: These by-laws may be added to, amended,
altered, or repealed at any meeting of stockholders, notice of
which shall have referred to the proposed action, by the vote of
the holders of record of a majority of the outstanding shares of
the corporation entitled to vote, or, to the extent permitted by
law, at any meeting of the board of directors, notice of which
shall have referred to the proposed action, by the affirmative vote
of a majority of the board of directors.
Section 2. Amendment of By-Law Regulating Election of Directors: If
any by-law regulating an impending election of directors is adopted
or amended or repealed by the board of directors, there shall be
set forth in the notice of the next meeting of stockholders for the
election of directors the by-law so adopted or amended or repealed,
together with a concise statement of the changes made.
<PAGE>
EXHIBIT 10(c)
FIRST AMENDMENT OF MASTER RESTRUCTURING AGREEMENT
AMENDMENT, entered into on March 31, 1998 (the "Amendment")
by and between NIAGARA MOHAWK POWER CORPORATION, a New York
corporation ("NMPC" or the "Company") and the several independent
power producers identified as such on the signature pages hereto
(each, an "IPP" and collectively, the "IPPs").
RECITALS
The Company and the IPPs are parties to that certain Master
Restructuring Agreement entered into on July 9, 1997 (the "MRA"),
and such parties desire to amend the MRA as set forth herein.
NOW, THEREFORE, the parties hereby agree as follows:
1. DEFINED TERMS. All capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to them
in the MRA.
2. AMENDMENT. The definition of the term "Expiration
Date" in Section 1 of the MRA is hereby amended by deleting said
definition and substituting the following therefor:
"Expiration Date" shall mean July 15, 1998,
except as otherwise provided in Sections
2.7(b) and 12.3(b).
3. NO OTHER AMENDMENT. Except as expressly set forth in
this Amendment, none of the rights, obligations, terms, covenants
or conditions of the Parties pursuant to the MRA shall be
amended, modified, waived, terminated or otherwise affected in
any manner whatsoever.
4. COUNTERPARTS; FACSIMILE. This Amendment may be
executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument. This Amendment may be delivered
with only a facsimile signature, with the same force and effect
as if an original signature had been delivered.
5. ENTIRE AGREEMENT. This Amendment constitutes the
entire agreement among the Parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and
understandings, written or oral, among the Parties hereto with
respect thereto.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Agreement, effective as of the day and year first above written.
Niagara Mohawk Power Corporation
By: /s/ William F. Edwards
----------------------
Name: William F. Edwards
Title: Senior Vice President
American Ref-Fuel Company of Niagara, L.P.
By: /s/ Richard Oliver
------------------
Name: Richard Oliver
Title: Vice President - Development
Onondaga Cogeneration Limited Partnership
By: Geddes Cogeneration Corporation,
Its General Partner
By: /s/ Luis Tellez
----------------
Name: Luis Tellez
Title: Vice President
Project Orange Associates, L.P.
By: NCP Syracuse, Inc.,
Its General Partner
By: NCP Energy, Inc.,
Its Attorney-in-Fact
By: /s/ Luis Tellez
---------------
Name: Luis Tellez
Title: Vice President
<PAGE>
Fulton Cogeneration Associates, a
New York limited partnership
By: ANR Venture Fulton Company,
Its Managing General Partner
By: /s/ Mark P. Barry
-----------------
Name: Mark P. Barry
Title: Vice President
Cogen Energy Technology L.P.
By: Cogen Energy Technology, Inc.,
Its General Partner
By: /s/ John E. Guinness
--------------------
Name: John E. Guinness
Title: President
Lyonsdale Energy Limited Partnership, a
Delaware Limited Partnership
By: Harbinger Lyonsdale L.L.C.
Its Managing General Partner
By: /s/ Patrick E. Molony
---------------------
Name: Patrick E. Molony
Title: Vice President
Encogen Four Partners, L.P.
By: EDC Four Inc.,
Its General Partner
By: /s/ Melvin E. Wentz
-------------------
Name: Melvin E. Wentz
Title: President
<PAGE>
NorCon Power Partners, L.P.
By: Northern Consolidated Power, Inc.,
Its General Partner
By: /s/ J. Douglas Divine
---------------------
Name: J. Douglas Divine
Title: Vice President - Strategic Planning
Indeck-Ilion Limited Partnership
By: Indeck Energy Services of Ilion, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
---------------------
Name: Thomas M. Campone
Title: President
Indeck-Yerkes Limited Partnership
By: Indeck-Yerkes Energy Services, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
---------------------
Name: Thomas M. Campone
Title: President
Indeck-Olean Limited Partnership
By: Indeck Energy Services of Olean, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
---------------------
Name: Thomas M. Campone
Title: President
<PAGE>
Indeck-Oswego Limited Partnership
By: Indeck Energy Services of Oswego, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
---------------------
Name: Thomas M. Campone
Title: President
Black River Limited Partnership
By: Jones Black River Services, Inc.,
Its Managing General Partner
By: /s/ William A. Garnett
----------------------
Name: William A. Garnett
Title: President
LG&E Westmoreland Rensselaer, a
California general partnership
By: LG&E Power 15 Incorporated,
A General Partner
By:
Name:
Title:
By: Westmoreland-Rensselaer, L.P.,
A General Partner
By: WEI-Rensselaer, Inc.
A General Partner
By:
Name:
Title:
<PAGE>
Salt City Energy Venture, L.P.
By: Salt City Energy, LLC,
Its General Partner
By: /s/ Edward Barno
----------------
Name: Edward Barno
Title: Member
AG-Energy, L.P.
By: AG-Energy, Inc.,
Its General Partner
By:
Name:
Title:
Seneca Power Partners, L.P.
By: Seneca Power Corporation,
Its General Partner
By:
Name:
Title:
Sterling Power Partners, L.P.
By: Sterling Power, Ltd.,
Its General Partner
By:
Name:
Title:
<PAGE>
Power City Partners, L.P.
By: Power City Generating, Inc.,
Its General Partner
By:
Name:
Title:
P&N Partners, L.P.
By: P&N Energy Systems, Inc.,
Its General Partner
By:
Name:
Title:
Selkirk Cogen Partners, L.P.
By: JMC Selkirk, Inc.,
Managing General Partner
By: /s/ George J. Grunbeck
----------------------
Name: George J. Grunbeck
Title: Vice President
East Syracuse Generating Company, L.P.
By: /s/ George J. Grunbeck
----------------------
Name: George J. Grunbeck
Title: Vice President
<PAGE>
Kamine/Besicorp Carthage L.P.
By: Kamine Carthage Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
--------------------
Name: Harold N. Kamine
Title: President
By: Beta Carthage, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
Kamine/Besicorp South Glens Falls L.P.
By: Kamine South Glens Falls Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
--------------------
Name: Harold N. Kamine
Title: President
By: Beta South Glens Falls, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
<PAGE>
Kamine/Besicorp Natural Dam L.P.
By: Kamine Natural Dam Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
--------------------
Name: Harold N. Kamine
Title: President
By: Beta Natural Dam, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
Kamine/Besicorp Syracuse, L.P.
By: Kamine Syracuse Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
--------------------
Name: Harold N. Kamine
Title: President
By: Beta Syracuse, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
<PAGE>
Kamine/Besicorp Beaver Falls, L.P.
By: Kamine Beaver Falls Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
--------------------
Name: Harold N. Kamine
Title: President
By: Beta Beaver Falls, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
United Development Group - Niagara, L.P.
By: United Development Group - Niagara, Inc.,
Its General Partner
By: /s/ W. John Fair
----------------
Name: W. John Fair
Title: President
SECOND AMENDMENT OF MASTER RESTRUCTURING AGREEMENT
AMENDMENT entered into on April 21, 1998 (the "Amendment")
by and between NIAGARA MOHAWK POWER CORPORATION, a New York
corporation ("NMPC" or the "Company") and the several independent
power producers identified as such on the signature pages hereto
(each, an "IPP" and collectively, the "IPPs").
RECITALS
(A) The Company and the IPPs are parties to that
certain Master Restructuring Agreement entered into on July 9,
1997, as amended by the First Amendment of Master Restructuring
Agreement entered into on March 31, 1998 (as so amended, the
"MRA").
(B) The MRA has been terminated with respect to Oxbow
Power Corporation of North Tonawanda, New York, Inc. ("Oxbow")
pursuant to Section 2.6 of the MRA.
(C) Pursuant to an agreement dated September 26, 1997
(the "NorCon Agreement"), the Company and NorCon have agreed that
NorCon's Existing PPA shall be a Terminating PPA and to amend
NorCon's share of the Allocation.
(D) Pursuant to an agreement dated February 25, 1998
(the "Encogen Amendment"), the Company and Encogen Four Partners,
L.P. ("Encogen") have agreed to amend Encogen's share of the
Allocation.
(E) The Parties desire to amend the MRA to reflect
certain modifications to the terms and conditions of the MRA as
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises
and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
6. DEFINED TERMS. All capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to them
in the MRA.
7. AMENDMENTS.
(A) DEFINITIONS. Sections 1 and 2.9 of the MRA are
hereby amended by deleting the definitions of the following terms
set forth therein, and substituting and/or adding the following
definitions:
"Conditions Determination Date" shall mean May 7, 1998,
except as otherwise provided in Section 2.7(b).
"Scheduled Date" shall mean June 30, 1998.
"Contract Adjustment" shall mean the annual aggregate
Contract Adjustment set forth on Attachment A-3 to Exhibit A
to the MRA, as adjusted by Sections 2.5 and 2.6 and as the
same may be further adjusted pursuant to Sections 2.7 or
12.4(b) of the MRA. For purposes hereof, the Contract
Adjustment shall be determined after giving effect to all
adjustments required to be made hereunder through the
Consummation Date.
"Contract Price Discounts" shall mean the annual
aggregate Contract Price Discounts set forth on Exhibit B
annexed to this Amendment, which includes adjustments to
reflect the termination of the MRA with respect to Oxbow and
the NorCon Agreement, which amount shall be further adjusted
in the event the MRA is terminated with respect to any IPP
whose Existing PPA is set forth on Schedule 2.3, by reducing
the annual aggregate Contract Price Discounts set forth on
Exhibit B annexed to this Amendment by the product of (x)
the number of megawatt hours in the respective Contract Year
set forth in the Restated Contract allocated to any such IPP
with respect to which the MRA is terminated and (y)
$5.00/MWh in the third through ninth Contract Years and
$2.50/MWh in the tenth Contract Year. For purposes hereof,
the Contract Price Discounts shall be determined after
giving effect to all adjustments required to be made
hereunder through the Consummation Date.
(B) CONTRACT ADJUSTMENT; CONTRACT PRICE DISCOUNTS. A
new Section 2.10 is hereby added to the MRA, which reads in its
entirety as follows:
2.10 CONTRACT ADJUSTMENT; CONTRACT PRICE DISCOUNTS.
(a) On the Consummation Date, the Cash Payment to
be paid by the Company shall be reduced by an amount equal
to the sum of (i) the present value of the Contract
Adjustment for the first through tenth Contract Years under
the Restated Contracts, which present value shall be
determined as of the Consummation Date using a discount rate
of ten percent (10%) per annum, mid-year convention, plus
(ii) the present value of the Contract Price Discounts for
the third through tenth Contract Years under the Restated
Contracts, which present value shall be determined as of the
Consummation Date using a discount rate of seven and one-
half percent (7.5%) per annum, mid-year convention.
(b) The Company and the IPPs shall, not later
than five (5) Business Days after the Conditions
Determination Date, calculate and agree on the amount of the
reduction of the Cash Payment pursuant to subsection (a)
above. For purposes of illustration only, if no IPP is
hereafter terminated from the MRA, then the reduction of the
Cash Payment pursuant to subsection (a)(i) will be
$54,659,857 and pursuant to subsection (a)(ii) will be
$102,420,244. The calculated and agreed to amounts shall be
further adjusted in the event that following such
calculation any IPP is terminated from the MRA. As soon as
practicable following such calculation (or further
adjustment thereto), the Company and the IPPs shall give an
appropriate notice or notices to the Depositary to effect
the reduction of the Cash Payment pursuant to the provisions
of this Section 2.10. The IPPs shall cause WP&Co. to give
an appropriate notice to the Depositary to effect such
reduction among the individual IPPs.
(c) The Parties acknowledge and agree that the
Contract Adjustment required to be realized by the Company
pursuant to Section 2.9 of the MRA will be realized by the
Company upon reduction of the Cash Payment pursuant to
subsection (a) above.
(d) The Parties acknowledge and agree that the
contract prices under each of the Restated Contracts will be
increased by $5.00/MWh in the third through ninth Contract
Years and by $2.50/MWh in the tenth Contract Year under the
Restated Contracts and that the Restated Contracts to be
entered into pursuant to Section 2.3 of the MRA shall be
adjusted accordingly.
(C) NEGOTIATIONS.
(1) Section 2.7 is hereby modified as follows:
(i) The words "not later than the date which is ten
(10) Business Days prior to the Conditions Determination
Date" in the first sentence of Section 2.7(b) of the MRA are
changed to "not later than April 30, 1998".
(ii) For purposes of Section 2.7(b), the term
"Contract(s)" also shall include the Fixed Price Swap
Contracts.
(2) The following new sub-sections (c) and (d) are
hereby added to Section 2.7 of the MRA, which read in their
entirety as follows:
(c) The Company agrees to use its Reasonable Best
Efforts (i) to negotiate with the IPPs and Constellation
Power Source, Inc. ("CPS") to agree, not later than April
30, 1998, on a final form of the Fixed Price Swap Contracts.
The IPPs agree to use their Reasonable Best Efforts to
negotiate with CPS and enter into, not later than April 30,
1998, a definitive agreement with respect to the purchase by
CPS or its designee of the Fixed Price Swap Contracts on the
Consummation Date (the "CPS Purchase Agreement"). The CPS
Purchase Agreement (other than the consideration to be paid
by CPS, which shall be redacted) shall be made available to
the Company as soon as practicable, in order to provide the
Company a reasonable opportunity to review same in
connection with the approvals and determinations to be made
by the Company pursuant to this Section 2.7(c). If the CPS
Purchase Agreement shall contain any conditions to the
obligations of CPS and/or the IPPs to consummate the
purchase of the Fixed Price Swap Contracts that differ
materially from the conditions to the obligations of each
IPP to consummate the Restructuring under the MRA on the
Consummation Date, then such conditions shall be subject to
the Company's approval, which approval shall be given (or
not given) by the Company not later than April 30, 1998.
The Company also shall notify the IPPs, not later than April
30, 1998, if the Company determines that the purchaser of
the Fixed Price Swap Contracts under the CPS Purchase
Agreement is not a permitted counterparty in accordance with
Section 2.4 of the MRA, failing which such counterparty
shall be deemed an "Approved Assignee" in accordance with
Section 2.4(iii).
(d) If requested by such IPP, the Company and
each IPP with a Terminating PPA shall use their Reasonable
Best Efforts (i) to negotiate and agree on new or amended
gas transportation agreements between the Company and each
IPP with a Terminating PPA that has an existing gas
transportation agreement with the Company and (ii) to
negotiate and agree on amended interconnection agreements or
interconnection arrangements between the Company and each
IPP with a Terminating PPA, in each case in order to
complete same not later than April 30, 1998.
(D) ALLOCABLE CONSIDERATION. In order to reflect the
adjustments to the amount of the Cash Payment and the number of
Company Shares resulting from the termination of the MRA with
respect to Oxbow, the NorCon Agreement and the Encogen Amendment
(but not to reflect any reduction of the Cash Payment pursuant to
Section 2.10), Section 3.1 of the MRA is hereby amended by
deleting same in its entirety and substituting the following
therefor:
3.1 ALLOCABLE CONSIDERATION. The Company shall, not
later than 10:00 a.m. on the Consummation Date, pay and/or
deliver to the Depositary on behalf of the IPPs or their
respective designees, the following (referred to herein as
the "Allocable Consideration"):
(a) Three billion five hundred fifty-two million
eight hundred four thousand dollars ($3,552,804,000) (the
"Cash Payment");
(b) Forty-two million nine hundred forty-five
thousand five hundred twelve (42,945,512) newly-issued,
fully-paid and nonassessable shares ("Company Shares") of
Common Stock of the Company, which number of Company Shares
shall be subject to adjustment in accordance with Section
3.5 hereof; and
(c) The cash amount to be paid by the Company to
Encogen pursuant to the Encogen Amendment in lieu of Company
Shares allocated to Encogen in the original Allocation.
(E) SHORT-TERM NOTES; ADDITIONAL CASH PAYMENT.
Pursuant to Section 3.2 of the MRA, the Company hereby gives
notice of its election to deliver the Additional Cash Payment in
lieu of the Short-Term Notes. The Company shall, not later than
10:00 a.m. on the Consummation Date, pay the Depositary the
Additional Cash Payment in accordance with Section 3.2 of the
MRA.
(F) ACQUISITION OF COMPANY SHARES. The existing
Section 3.3 of the MRA is hereby re-designated as "sub-section
(a)" of Section 3.3, and the following new sub-section (b) is
hereby added to Section 3.3 of the MRA:
(b) Any IPP that pursuant to the Allocation will
acquire Company Shares shall have the right to name as the
designee of such Company Shares (in accordance with Section
3.3(a) above) WP&Co. (or its broker-dealer affiliate) or
another person acting as a broker-dealer for distribution,
and not for investment purposes, with respect to the Company
Shares, for purposes of effecting one or more block trades
of such Company Shares or an underwritten offering of such
Company Shares (in each case pursuant to the Shelf
Registration Statement) at or immediately following the
Consummation Date to a person or persons that, to the
Knowledge (as said term is defined in the Shareholder's
Agreement annexed as Exhibit 3.7 hereto) of the selling IPP,
is an Eligible Purchaser (referred to herein as the "Initial
Resale"). For purposes of this Section 3.3, an "Eligible
Purchaser" shall be any person who (regardless of the number
of Company Shares acquired by such person), were it to
acquire direct or indirect beneficial ownership of more than
five percent of the total outstanding shares of Common Stock
of the Company, would be eligible by virtue of the
provisions of Rule 13d-1(b) or (c) under the Exchange Act to
file a Statement on Schedule 13G in respect of such
beneficial ownership in lieu of a Statement on Schedule 13D.
In connection with any such issuance or sale of Company
Shares, (i) if the Company Shares are issued to a broker-
dealer, the Company Shares so issued shall not bear the
legend required by Section 3.6, (ii) neither the broker-
dealer nor any purchaser of the Company Shares shall be
required to execute a Shareholders' Agreement in accordance
with Section 3.7 (unless such purchaser is a permitted
designee pursuant to Section 3.3(a) who, had it acquired
Company Shares pursuant to Section 3.3(a), would have been
required to execute a Shareholder's Agreement) and (iii) the
broker-dealer shall not be required to provide to the
Company the representation letters required by Sections 3.7
and 5.6, but any purchaser of the Company Shares shall
provide to the Company the representation letter required by
Section 3.7. Nothing contained in this Section 3.3(b) shall
prohibit any sale of Company Shares by an IPP that is
otherwise not prohibited by this Agreement or, if
applicable, the Shareholder's Agreement.
(G) INITIAL RESALE. The following new sub-section (c)
is hereby added to Section 3.6 of the MRA:
(c) In order to facilitate the disposition of the
Company Shares, the Company agrees to reasonably cooperate
with WP&Co. (or its broker-dealer affiliate) or other
broker-dealer in connection with the Initial Resale as
described in Section 3.3(b) and, without limiting the
generality of the foregoing, to permit WP&Co. (or its
broker-dealer affiliate) or such other broker-dealer to
participate with the Company in all material presentations
to rating agencies and investors in connection with the
Public Offering and to invite potential investors to such
presentations. The Parties agree that DLJ shall participate
in any Initial Resale that is organized by WP&Co. (or its
broker-dealer affiliate). The Company also agrees, at the
request of the IPPs, to cooperate with CPS in connection
with CPS's proposed sale of bonds in connection with the
purchase of the Fixed Price Swap Contracts.
(H) CONDITIONS TO EACH IPP'S OBLIGATIONS ON THE
CONSUMMATION DATE. New Sections 8.14 and 8.15 are hereby added
to the MRA, which read in their entirety as follows:
8.14 SALE OF FIXED PRICE SWAP CONTRACTS. If the CPS
Purchase Agreement has been entered into as contemplated by
Section 2.7(c) and the IPPs shall give a notice designating
CPS or its designee as the counterparty pursuant to Section
2.4, the Fixed Price Swap Contracts shall have been issued
by the Company to CPS or its designee in accordance with the
terms of the CPS Purchase Agreement.
8.15 SELKIRK INDENTURE APPROVAL. The obligations of
Selkirk Cogen Partners, L.P. ("Selkirk") (and only of
Selkirk) to consummate the Restructuring are subject to, at
Selkirk's option, either (a) receipt of the approval of its
bondholders to the Restructuring as its affects Selkirk or
(b) a conclusive determination by Selkirk made in a written
notice to the Company that Selkirk will undertake the
Restructuring as it affects Selkirk without a vote of its
bondholders (the applicable event in the preceding clauses
(a) and (b) being referred to herein as the "Indenture
Approval"). If, on or before the Consummation Date, the
Indenture Approval has not been obtained and Selkirk
nevertheless elects to proceed with the Restructuring, the
transactions contemplated by this Agreement with respect to
Selkirk shall be consummated on the Consummation Date in
escrow by delivering Selkirk's share of the Allocation,
including any related documentation, to the Escrow Agent
pending receipt of the Indenture Approval. In such event,
the Company and Selkirk shall enter into an escrow agreement
with the Escrow Agent (in substantially the same form, with
such changes as may be appropriate, as the Escrow Agreement)
setting forth the rights and obligations of the Company and
Selkirk prior to receipt of the Indenture Approval and in
the event that the Indenture Approval is not obtained. Upon
the later to occur of the Consummation Date or receipt of
the Indenture Approval (and provided that this Agreement
shall not otherwise have been terminated with respect to
Selkirk as provided herein), the Company and Selkirk shall
promptly enter into the Restated Contract, and the Company
and Selkirk shall simultaneously reconcile between them in
cash any payments made pursuant to Selkirk's Existing PPA
which are in excess of or less than payments that would have
been made pursuant to Selkirk's Restated Contract had such
Restated Contract been in effect from the Consummation Date
based on a methodology to be mutually agreed to by the
Company and Selkirk, and the term of the Restated Contract
between the Company and Selkirk shall be determined as if
such Restated Contract had commenced as of the Consummation
Date. If (i) the Indenture Approval has not been received
on or before August 31, 1998 in form and substance
reasonably acceptable to Selkirk or (ii) prior to August 31,
1998, Selkirk has concluded in a written notice to the
Company that the Indenture Approval cannot be expected to be
received on or before August 31, 1998 in form and substance
acceptable to Selkirk, then the Agreement shall be deemed
for all purposes under this Agreement (except as otherwise
provided in Section 12.4(d)) to have terminated with respect
to Selkirk prior to the Consummation Date in accordance with
Section 12.2(c). In the event of such termination with
respect to Selkirk, the Contract Price Discounts and the
reduction of the Cash Payment pursuant to Section
2.10(a)(ii) each shall be re-calculated as if this Agreement
was terminated with respect to Selkirk prior to the
Consummation Date and the amount by which such reduction is
decreased as a result of such re-calculation shall promptly
be paid by the Company to the Depositary on behalf of the
IPPs or as the IPPs may otherwise direct. Failure of
Selkirk to obtain the Indenture Approval prior to the
Conditions Determination Date shall not be deemed a waiver
of any condition in accordance with Section 10.1(c). The
provisions of this Section 8.15 shall survive the
Consummation Date until fully performed.
(I) SCHEDULES. In order to reflect that NorCon's
Existing PPA shall be a Terminating PPA, NorCon's Existing PPA
shall be deleted from Schedule 2.3 annexed to the MRA and shall
be added to Schedule 2.1 annexed to the MRA.
(J) SELKIRK TERMINATION. The following new sub-
section (d) is hereby added to Section 12.4 of the MRA:
(d) Notwithstanding anything to the contrary
contained in Section 12.4(b), in the event this Agreement
shall terminate with respect to Selkirk for any reason,
including but not limited to pursuant to Section 8.15, then
(x) the aggregate contract quantity of energy and aggregate
contract quantity of installed capacity under the Restated
Contracts shall be reduced by the contract quantity of
energy and contract quantity of installed capacity allocated
to Selkirk in the Contracts Allocation and Selkirk shall not
enter into a Restated Contract and (y) with respect to the
negative Cash Payment of $2,211,000 allocated to Selkirk in
the initial Allocation, the Company shall pay such sum as
follows: (A) if this Agreement shall terminate with respect
to Selkirk on or before the Consummation Date, the Company
shall add the sum of $2,211,000 to the Cash Payment and pay
such additional sum to the Depositary on the Consummation
Date in the same manner as provided in Section 3.3 or (B) if
this Agreement shall terminate with respect to Selkirk after
the Consummation Date in accordance with Section 8.15
hereof, the Company shall pay the sum of $2,211,000 to
Selkirk within two Business Days of such termination (by
wire transfer of federal funds to the account designated by
Selkirk). The provisions of this Section 12.4(d) shall
survive the Consummation Date until fully performed.
8.16 NO OTHER AMENDMENT. Except as expressly set forth in
this Amendment, the NorCon Agreement (with respect to the Company
and NorCon only) and the Encogen Amendment (with respect to the
Company and Encogen only), none of the rights or obligations of
the parties hereto pursuant to the MRA shall be amended,
modified, waived, terminated or otherwise affected in any manner
whatsoever. Without limiting the generality of the foregoing,
the parties hereto agree that except as expressly set forth in
the NorCon Agreement (with respect to NorCon only), the Encogen
Amendment (with respect to Encogen only) and herein, the
Allocation with respect to each IPP shall remain unchanged, and
nothing contained herein shall increase or reduce the Allocable
Consideration payable to any IPP, nor in any way affect the
Additional Cash Payment, or the terms of any Termination
Agreements, Amended PPAs, Restated Contracts or Fixed Price Swap
Contracts. The Company, on the one hand, and NorCon and Encogen,
respectively, on the other, represent that they have given (or
covenant that promptly after the execution hereof they will give)
an appropriate notice to WP&Co. and the Depositary pursuant to
Section 3.4(a) of the MRA to reflect the changes in NorCon's and
Encogen's shares of the Allocation resulting from the NorCon
Agreement and Encogen Amendment, respectively.
9. RATIFICATION. Each party hereto agrees that (i) the
MRA is in full force and effect and (ii) to the best knowledge of
such party, there is no current breach or default on the part of
any other party or any other event or condition which, upon
notice, the passage of time, or both, would constitute such a
breach or default.
10. COUNTERPARTS; FACSIMILE. This Amendment may be
executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument. This Amendment may be delivered
with only a facsimile signature, with the same force and effect
as if an original signature had been delivered.
11. ENTIRE AGREEMENT. This Amendment constitutes the
entire agreement between the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and
understandings, written or oral, between the parties hereto with
respect thereto.
IN WITNESS WHEREOF, the parties have duly executed this
Second Amendment of Master Restructuring Agreement, effective as
of the day and year first above written.
Niagara Mohawk Power Corporation
By: /s/ William F. Edwards
--------------------------
Name: William F. Edwards
Title: Senior Vice President
American Ref-Fuel Company of Niagara, L.P.
By /s/ Richard Oliver
------------------
Name: Richard Oliver
Title: Vice President - Development
<PAGE>
Onondaga Cogeneration Limited Partnership
By: Geddes Cogeneration Corporation,
Its General Partner
By: /s/ Luis Tellez
---------------
Name: Luis Tellez
Title: Vice President
Project Orange Associates, L.P.
By: NCP Syracuse, Inc.,
Its General Partner
By: NCP Energy, Inc.,
Its Attorney-in-Fact
By: /s/ Luis Tellez
---------------
Name: Luis Tellez
Title: Vice President
Fulton Cogeneration Associates, a
New York limited partnership
By: ANR Venture Fulton Company,
Its Managing General Partner
By:
Name:
Title:
Cogen Energy Technology L.P.
By: Cogen Energy Technology, Inc.,
Its General Partner
By: /s/ John E. Guinness
--------------------
Name: John E. Guinness
Title: President
<PAGE>
Lyonsdale Energy Limited Partnership, a
Delaware Limited Partnership
By: Harbinger Lyonsdale L.L.C.
Its Managing General Partner
By: /s/ Patrick E. Molony
---------------------
Name: Patrick E. Molony
Title: Vice President
Encogen Four Partners, L.P.
By: EDC Four Inc.,
Its General Partner
By: /s/ Melvin E. Wentz
-------------------
Name: Melvin E. Wentz
Title: President
NorCon Power Partners, L.P.
By: Northern Consolidated Power, Inc.,
Its General Partner
By: /s/ J. Douglas Divine
---------------------
Name: J. Douglas Divine
Title: Vice President - Strategic Planning
Indeck-Ilion Limited Partnership
By: Indeck Energy Services of Ilion, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
---------------------
Name: Thomas M. Campone
Title: President
<PAGE>
Indeck-Yerkes Limited Partnership
By: Indeck-Yerkes Energy Services, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
---------------------
Name: Thomas M. Campone
Title: President
Indeck-Olean Limited Partnership
By: Indeck Energy Services of Olean, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
---------------------
Name: Thomas M. Campone
Title: President
Indeck-Oswego Limited Partnership
By: Indeck Energy Services of Oswego, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
---------------------
Name: Thomas M. Campone
Title: President
Black River Limited Partnership
By: Jones Black River Services, Inc.,
Its Managing General Partner
By: /s/ William a. Garnett
----------------------
Name: William A. Garnett
Title: President
<PAGE>
LG&E Westmoreland Rensselaer, a
California general partnership
By: LG&E Power 15 Incorporated,
A General Partner
By:
Name:
Title:
By: Westmoreland-Rensselaer, L.P.,
A General Partner
By: WEI-Rensselaer, Inc.
A General Partner
By:
Name:
Title:
Salt City Energy Venture, L.P.
By: Salt City Energy, LLC,
Its General Partner
By: /s/ Edward Barno
----------------
Name: Edward Barno
Title: Member
AG-Energy, L.P.
By: AG-Energy, Inc.,
Its General Partner
By:
Name:
Title:
<PAGE>
Seneca Power Partners, L.P.
By: Seneca Power Corporation,
Its General Partner
By:
Name:
Title:
Sterling Power Partners, L.P.
By: Sterling Power, Ltd.,
Its General Partner
By:
Name:
Title:
Power City Partners, L.P.
By: Power City Generating, Inc.,
Its General Partner
By:
Name:
Title:
P&N Partners, L.P.
By: P&N Energy Systems, Inc.,
Its General Partner
By:
Name:
Title:
<PAGE>
Selkirk Cogen Partners, L.P.
By: JMC Selkirk, Inc.,
Managing General Partner
By: /s/ George J. Grunbeck
----------------------
Name: George J. Grunbeck
Title: Vice President
East Syracuse Generating Company, L.P.
By: /s/ George J. Grunbeck
----------------------
Name: George J. Grunbeck
Title: Vice President
Kamine/Besicorp Carthage L.P.
By: Kamine Carthage Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
--------------------
Name: Harold N. Kamine
Title: President
By: Beta Carthage, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
Kamine/Besicorp South Glens Falls L.P.
By: Kamine South Glens Falls Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
--------------------
Name: Harold N. Kamine
Title: President
<PAGE>
By: Beta South Glens Falls, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
Kamine/Besicorp Natural Dam L.P.
By: Kamine Natural Dam Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
--------------------
Name: Harold N. Kamine
Title: President
By: Beta Natural Dam, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
Kamine/Besicorp Syracuse, L.P.
By: Kamine Syracuse Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
--------------------
Name: Harold N. Kamine
Title: President
<PAGE>
By: Beta Syracuse, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
Kamine/Besicorp Beaver Falls, L.P.
By: Kamine Beaver Falls Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
--------------------
Name: Harold N. Kamine
Title: President
By: Beta Beaver Falls, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
United Development Group - Niagara, L.P.
By: United Development Group - Niagara, Inc.,
Its General Partner
By: /s/ W. John Fair
----------------
Name: W. John Fair
Title: President
EXHIBIT B
TO
SECOND AMENDMENT
OF
MASTER RESTRUCTURING AGREEMENT
CONTRACT PRICE DISCOUNTS
AGGREGATE ANNUAL AGGREGATE
CONTRACT MEGAWATT CONTRACT PRICE CONTRACT PRICE
YEAR HOURS* DISCOUNT/MWh DISCOUNTS
3 4,036,541 $5.00 $20,182,705
4 4,077,076 $5.00 $20,385,380
5 4,082,893 $5.00 $20,414,465
6 4,101,576 $5.00 $20,507,880
7 4,112,341 $5.00 $20,561,705
8 4,124,871 $5.00 $20,624,355
9 4,132,976 $5.00 $20,664,880
10 4,144,776 $2.50 $10,361,940
* Includes megawatt hours under Restated Contracts to be
entered into by all IPPs that are parties to Existing PPAs listed
on Schedule 2.3 of the MRA, other than Oxbow and NorCon.
THIRD AMENDMENT OF MASTER RESTRUCTURING AGREEMENT
AMENDMENT entered into on April 30, 1998 (the "Amendment")
by and between NIAGARA MOHAWK POWER CORPORATION, a New York
corporation ("NMPC" or the "Company") and the several independent
power producers identified as such on the signature pages hereto
(each, an "IPP" and collectively, the "IPPs").
RECITALS
(A) The Company and the IPPs are parties to that
certain Master Restructuring Agreement entered into on July 9,
1997, as amended by the First Amendment of Master Restructuring
Agreement entered into on March 31, 1998 and the Second Amendment
of Master Restructuring Agreement entered into on April 21, 1998
(as so amended, the "MRA").
(B) Pursuant to Section 2.7(b) of the MRA, not later
than April 30, 1998, the Company shall deliver a notice of any
Contracts which have not been agreed upon in their final form.
(C) The parties believe that all Contracts, as well as
the gas transportation agreements and interconnection agreements
or arrangements referred to in Section 2.7(d) of the MRA, will be
agreed upon by May 5, 1998, but desire extra time to finalize
such agreements without commencing the steps required by Section
2.7(b).
(D) Section 10.1(b)(ii) of the MRA requires the
Company's condition as to Third Party Releases to be satisfied or
waived as of the Conditions Determination Date, yet many of such
releases cannot be obtained until the Consummation.
(E) The Parties desire to amend the MRA to reflect
certain modifications to the terms and conditions of the MRA as
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises
and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
12. DEFINED TERMS. All capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to them
in the MRA.
13. AMENDMENTS.
(A) NEGOTIATIONS.
(1) Sections 2.7(b), (c) and (d) are hereby modified
to replace "April 30, 1998" in all places with "noon on May 5,
1998".
(2) Section 2.7(b)(ii) is hereby amended to replace
the words "within five (5) Business Days following the receipt of
such notice" and the words "on or before ten (10) Business Days
after receipt of the Company's subclause (y) notice" with, in
each case, "no later than 6:00 p.m. (New York time) on May 6,
1998".
(3) The following new sub-section (e) is hereby added
to Section 2.7 of the MRA, which reads in its entirety as
follows:
(e) The Company agrees that neither an IPP's
delivery of a Termination Agreement initialed by such
IPP (having a Terminating PPA pursuant to Schedule
2.1), regardless of the terms thereof with respect to
gas transportation agreements and interconnection
agreements and interconnection arrangements ("ancillary
agreements"), nor the Company's failure to issue a
Company Notice pursuant to Section 2.7(b) with respect
to such IPP, shall be construed to preclude such IPP
from terminating the MRA with respect to itself
pursuant to Section 12.2(c) on or before the Conditions
Determination Date in the event such IPP has not
concluded negotiations of the ancillary agreements with
the Company in a manner satisfactory to such IPP. In
the event such IPP has not concluded negotiations of
the ancillary agreements with the Company in a manner
satisfactory to such IPP (whether before or after the
Conditions Determination Date), then such IPP, at its
option, may add to the list of agreements to be
terminated pursuant to the Termination Agreement any or
all of such IPP's existing ancillary agreements and may
elect to retain its existing interconnection agreement
or existing interconnection arrangements. The Company
agrees to continue the negotiations referenced in
Section 2.7(d) with respect to such ancillary
agreements through the Conditions Determination Date
and thereafter.
(B) REPRESENTATION LETTERS. A new Section 10.6 is
hereby added to read as follows:
10.6. REPRESENTATION LETTERS. Notwithstanding
Sections 8.3(a) and 9.3(a), or Exhibits 8.3A and 9.3A,
respectively, in the event that an IPP shall elect (a)
pursuant to Section 10.1(c)(ii)(x) to waive any of the
conditions set forth in Section 8.10 or 8.11 with
respect to a third party or (b) pursuant to Section 9.7
to provide the Company with an indemnity in lieu of a
NMPC/Third Party Release with respect to a third party
or in the event the Company shall elect pursuant to
Section 10.1(b)(ii)(x) (as modified by this Amendment
with respect to Third Party Releases) to waive any of
the conditions set forth in Section 9.7, then in any
such case such party shall not be required to provide
the representation and warranty set forth in paragraph
4(b)(i) of its respective representation letter annexed
as Exhibit 8.3A or 9.3A with respect to the applicable
mortgage, indenture, agreement, instrument or contract
with such third party.
(C) SATISFACTION OF CONDITIONS; CONSUMMATION.
(1) Subsections 10.1(b) and (c) are hereby amended to
delete the words "or within three (3) Business Days before".
(2) In the event the MRA is terminated with respect to
any IPP(s) on or before the Conditions Determination Date and the
Company desires to terminate the MRA pursuant to Section 12.1(d)
as a result of such termination with respect to any IPP(s), the
Company shall give notice thereof to all IPPs not later than ten
(10) days after the Conditions Determination Date.
(D) NMPC/THIRD PARTY RELEASES. Notwithstanding any
provision of the MRA to the contrary, the Company's condition set
forth in Section 9.7(b) shall remain in effect until the
Consummation Date. The only NMPC/Third Party Releases that will
be required to be furnished to the Company pursuant to Section
9.7(b) are those set forth on the schedule provided to the IPPs'
Special Counsel on or before April 30, 1998.
14. NO OTHER AMENDMENT. Except as expressly set forth in
this Amendment, none of the rights or obligations of the parties
hereto pursuant to the MRA shall be amended, modified, waived,
terminated or otherwise affected in any manner whatsoever.
Without limiting the generality of the foregoing, the parties
hereto agree that except as expressly set forth in the NorCon
Agreement (with respect to NorCon only), the Encogen Amendment
(with respect to Encogen only) or any prior amendment of the MRA,
the Allocation with respect to each IPP shall remain unchanged,
and nothing contained herein shall increase or reduce the
Allocable Consideration payable to any IPP, nor in any way affect
the Additional Cash Payment, or, except as expressly set forth
herein, the terms of any Termination Agreements, Amended PPAs,
Restated Contracts or Fixed Price Swap Contracts.
15. RATIFICATION. Each party hereto agrees that (i) the
MRA is in full force and effect and (ii) to the best knowledge of
such party, there is no current breach or default on the part of
any other party or any other event or condition which, upon
notice, the passage of time, or both, would constitute such a
breach or default.
16. COUNTERPARTS; FACSIMILE. This Amendment may be
executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument. This Amendment may be delivered
with only a facsimile signature, with the same force and effect
as if an original signature had been delivered.
17. ENTIRE AGREEMENT. This Amendment constitutes the
entire agreement between the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and
understandings, written or oral, between the parties hereto with
respect thereto.
IN WITNESS WHEREOF, the parties have duly executed this
Third Amendment of Master Restructuring Agreement, effective as
of the day and year first above written.
Niagara Mohawk Power Corporation
By: /s/ William F. Edwards
-------------------------
Name: William F. Edwards
Title: Senior Vice President
American Ref-Fuel Company of Niagara, L.P.
By: /s/ Richard Oliver
------------------
Name: Richard Oliver
Title: Vice President - Development
Onondaga Cogeneration Limited Partnership
By: Geddes Cogeneration Corporation,
Its General Partner
By: /s/ Luis Tellez
---------------
Name: Luis Tellez
Title: Vice President
<PAGE>
Project Orange Associates, L.P.
By: NCP Syracuse, Inc.,
Its General Partner
By: NCP Energy, Inc.,
Its Attorney-in-Fact
By: /s/ Luis Tellez
---------------
Name: Luis Tellez
Title: Vice President
Fulton Cogeneration Associates, a
New York limited partnership
By: ANR Venture Fulton Company,
Its Managing General Partner
By:
Name:
Title:
Cogen Energy Technology L.P.
By: Cogen Energy Technology, Inc.,
Its General Partner
By: /s/ John E. Guinness
--------------------
Name: John E. Guinness
Title: President
Lyonsdale Energy Limited Partnership, a
Delaware Limited Partnership
By: Harbinger Lyonsdale L.L.C.
Its Managing General Partner
By: /s/ Patrick E. Molony
---------------------
Name: Patrick E. Molony
Title: Vice President
<PAGE>
Encogen Four Partners, L.P.
By: EDC Four Inc.,
Its General Partner
By: /s/ Melvin E. Wentz
-------------------
Name: Melvin E. Wentz
Title: President
NorCon Power Partners, L.P.
By: Northern Consolidated Power, Inc.,
Its General Partner
By: /s/ J. Douglas Divine
---------------------
Name: J. Douglas Divine
Title: Vice President - Strategic Planning
Indeck-Ilion Limited Partnership
By: Indeck Energy Services of Ilion, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
---------------------
Name: Thomas M. Campone
Title: President
Indeck-Yerkes Limited Partnership
By: Indeck-Yerkes Energy Services, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
---------------------
Name: Thomas M. Campone
Title: President
<PAGE>
Indeck-Olean Limited Partnership
By: Indeck Energy Services of Olean, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
---------------------
Name: Thomas M. Campone
Title: President
Indeck-Oswego Limited Partnership
By: Indeck Energy Services of Oswego, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
---------------------
Name: Thomas M. Campone
Title: President
Black River Limited Partnership
By: Jones Black River Services, Inc.,
Its Managing General Partner
By: /s/ William a. Garnett
----------------------
Name: William A. Garnett
Title: President
LG&E Westmoreland Rensselaer, a
California general partnership
By: LG&E Power 15 Incorporated,
A General Partner
By:
Name:
Title:
<PAGE>
By: Westmoreland-Rensselaer, L.P.,
A General Partner
By: WEI-Rensselaer, Inc.
A General Partner
By:
Name:
Title:
Salt City Energy Venture, L.P.
By: Salt City Energy, LLC,
Its General Partner
By: /s/ Edward Barno
----------------
Name: Edward Barno
Title: Member
AG-Energy, L.P.
By: AG-Energy, Inc.,
Its General Partner
By:
Name:
Title:
Seneca Power Partners, L.P.
By: Seneca Power Corporation,
Its General Partner
By:
Name:
Title:
<PAGE>
Sterling Power Partners, L.P.
By: Sterling Power, Ltd.,
Its General Partner
By:
Name:
Title:
Power City Partners, L.P.
By: Power City Generating, Inc.,
Its General Partner
By:
Name:
Title:
P&N Partners, L.P.
By: P&N Energy Systems, Inc.,
Its General Partner
By:
Name:
Title:
Selkirk Cogen Partners, L.P.
By: JMC Selkirk, Inc.,
Managing General Partner
By: /s/ George J. Grunbeck
----------------------
Name: George J. Grunbeck
Title: Vice President
<PAGE>
East Syracuse Generating Company, L.P.
By: /s/ George J. Grunbeck
----------------------
Name: George J. Grunbeck
Title: Vice President
Kamine/Besicorp Carthage L.P.
By: Kamine Carthage Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
--------------------
Name: Harold N. Kamine
Title: President
By: Beta Carthage, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
Kamine/Besicorp South Glens Falls L.P.
By: Kamine South Glens Falls Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
--------------------
Name: Harold N. Kamine
Title: President
By: Beta South Glens Falls, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
<PAGE>
Kamine/Besicorp Natural Dam L.P.
By: Kamine Natural Dam Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
--------------------
Name: Harold N. Kamine
Title: President
By: Beta Natural Dam, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
Kamine/Besicorp Syracuse, L.P.
By: Kamine Syracuse Cogen Co., Inc.,
Its General Partner
By: /s/ Haraold N. Kamine
---------------------
Name: Harold N. Kamine
Title: President
By: Beta Syracuse, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
<PAGE>
Kamine/Besicorp Beaver Falls, L.P.
By: Kamine Beaver Falls Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
--------------------
Name: Harold N. Kamine
Title: President
By: Beta Beaver Falls, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
United Development Group - Niagara, L.P.
By: United Development Group - Niagara, Inc.,
Its General Partner
By: /s/ W. John Fair
----------------
Name: W. John Fair
Title: President
FOURTH AMENDMENT OF MASTER RESTRUCTURING AGREEMENT
AMENDMENT entered into on May 7, 1998 (the "Amendment") by
and between NIAGARA MOHAWK POWER CORPORATION, a New York
corporation ("NMPC" or the "Company") and the several independent
power producers identified as such on the signature pages hereto
(each, an "IPP" and collectively, the "IPPs").
RECITALS
(A) The Company and the IPPs are parties to that
certain Master Restructuring Agreement entered into on July 9,
1997, as amended by the First Amendment of Master Restructuring
Agreement entered into on March 31, 1998, and the Second
Amendment of Master Restructuring Agreement entered into on April
21, 1998, and the Third Amendment of Master Restructuring
Agreement entered into on April 30, 1998 (as so amended, the
"MRA").
(B) The Parties desire to amend the MRA to reflect
certain modifications to the terms and conditions of the MRA as
hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing premises
and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
18. DEFINED TERMS. All capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to them
in the MRA.
19. AMENDMENT. Section 8.14 of the MRA is hereby deleted
in its entirety, and the following new Section 8.14 is hereby
substituted therefor, which reads in its entirety as follows:
8.14 SALE OF FIXED PRICE SWAP CONTRACTS.
(a) Either (i) NMPC and the IPPs shall have
entered into definitive agreements with respect to the
purchase by Constellation Power Source, Inc. ("CPS") or its
designee of the Fixed Price Swap Contracts on the
Consummation Date, including the form of the Fixed Price
Swap Contracts (such agreements, collectively, the "CPS
Purchase Agreement"), on terms reasonably satisfactory to
NMPC and the IPPs, with a purchase price of $330,000,000 and
the Fixed Price Swap Contracts shall have been issued by the
Company to CPS or its designee in accordance with the terms
of the CPS Purchase Agreement and the purchase price
therefor shall have been paid to the IPPs on the
Consummation Date or (ii) the Company shall have increased
the Cash Payment by $330,000,000 (subject to clause (b)
below), in which case no Fixed Price Swap Contracts shall be
delivered by the Company to the Escrow Agent and all
references to the Fixed Price Swap Contracts in this
Agreement and in Exhibit A hereto shall be deleted and the
section entitled "Fixed Price Swap Contracts" on page 6 of
Exhibit A and Attachments A-10 and A-11 to Exhibit A shall
be deleted in their entirety.
(b) Notwithstanding clause (a)(ii) above, the
amount by which the Cash Payment shall be increased pursuant
to clause (ii) above shall be reduced by the amount
certified by WP&Co. to the Company as being the net amount
of the value of the Fixed Price Swap Contracts deemed
allocated to any IPP with respect to which the MRA is
terminated in accordance with Section 12.2 hereof on or
after the Conditions Determination Date.
(c) If, at any time on or before the second
anniversary of the Consummation Date, NMPC shall consummate
any agreement to terminate, materially amend, restate or
otherwise restructure (other than as a result of a final
judgment in litigation) the Existing PPA of any IPP with
respect to which the MRA is terminated pursuant to Section
12.2 and the aggregate fair market value to the terminated
IPP at such time of the amended, restated or restructured
contract (if any) plus all other consideration paid to such
terminated IPP plus the out of pocket expenses incurred by
NMPC in connection therewith (as determined in a good faith
reasonable manner by NMPC) (the "Aggregate New Value" for
such terminated IPP) is less than the Aggregate Allocation
Amount (as defined below) for such terminated IPP, NMPC
shall thereupon pay WP&Co. on behalf of the remaining IPPs,
an amount equal to (a) the reduction in the Cash Payment
made pursuant to Section 8.14(b) (the "Section 8.14(b)
Reduction") with respect to such terminated IPP times (b)
the greater of (i) zero and (ii) one minus (x) the Aggregate
New Value for such terminated IPP divided by the Aggregate
Allocation Amount for such terminated IPP. As used herein,
"Aggregate Allocation Amount" for any terminated IPP means
(i) the Section 8.14(b) Reduction for such terminated IPP
plus (ii) the fair market value of such terminated IPP's
share of the original Allocation (which value shall be
determined, in the case of the Company Shares, based on the
average closing price of the Company's Common Stock on the
New York Stock Exchange on the 20 consecutive trading days
ending on (and including) the trading day immediately
preceding the Consummation Date).
20. CONTRACTS.
(A) In the event that all references to the Fixed
Price Swap Contracts are deleted in accordance with clause (ii)
of Section 8.14(a) of the MRA, then prior to the Consummation
Date and the effectiveness of the Contracts between the Company
and any IPP, the Company and each such IPP shall (i) modify the
terms of each Contract to delete all references to the Fixed
Price Swap Contracts, (ii) jointly deliver executed counterparts
of such modified Contracts to the Escrow Agent, and (iii) execute
and deliver instructions to the Escrow Agent directing the Escrow
Agent to replace the relevant Contracts then held by the Escrow
Agent with such modified Contracts.
(B) Notwithstanding anything to the contrary contained
in Section 2.8 of the MRA, prior the Consummation Date and the
effectiveness of the Restated Contracts, NMPC shall, upon the
request of any of Cogen Energy Technology L.P., Fulton
Cogeneration Associates, Indeck-Oswego Limited Partnership,
Indeck-Yerkes Limited Partnership, LG&E Westmoreland Rensselaer,
Onondaga Cogeneration Limited Partnership, Project Orange
Associates, L.P. or Selkirk Cogen Partners, L.P. (each, a
"Continuing IPP"), (i) modify the terms of any of such Continuing
IPP's Restated Contracts for the mutual benefit of NMPC and such
Continuing IPP to include therein or modify a demonstrated
maximum net capacity provision as detailed in Attachment A hereto
or such other demonstrated maximum net capacity provision as
shall be mutually agreed upon by NMPC and such Continuing IPP,
(ii) modify the terms of any of such Continuing IPP's Restated
Contracts to include or exclude any other provisions mutually
agreed between NMPC and such Continuing IPP, (iii) jointly with
such Continuing IPP, deliver executed counterparts of such
modified Restated Contracts to the Escrow Agent, and (iv) execute
and deliver instructions to the Escrow Agent, jointly with such
Continuing IPP, directing the Escrow Agent to replace the
relevant Restated Contracts then held by the Escrow Agent with
such modified Restated Contracts.
21. NO OTHER AMENDMENT. Except as expressly set forth in
this Amendment, none of the rights or obligations of the parties
hereto pursuant to the MRA shall be amended, modified, waived,
terminated or otherwise affected by this Amendment in any manner
whatsoever. Without limiting the generality of the foregoing,
the parties hereto agree that except as expressly set forth in
the NorCon Agreement (with respect to NorCon only), the Encogen
Amendment (with respect to Encogen only), any prior amendment of
the MRA, or herein, the Allocation with respect to each IPP shall
remain unchanged, and nothing contained herein shall increase or
reduce the Allocable Consideration payable to any IPP, nor in any
way affect the Additional Cash Payment or, except as expressly
set forth herein, the terms of any Termination Agreements,
Amended PPAs, Restated Contracts (including any amendments
thereto or agreements to amend such Restated Contracts executed
prior to the date hereof) or Fixed Price Swap Contracts.
22. RATIFICATION. Each party hereto agrees that (i) the
MRA is in full force and effect and (ii) to the best knowledge of
such party, there is no current breach or default on the part of
any other party or any other event or condition which, upon
notice, the passage of time, or both, would constitute such a
breach or default.
23. COUNTERPARTS; FACSIMILE. This Amendment may be
executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute
one and the same instrument. This Amendment may be delivered
with only a facsimile signature, with the same force and effect
as if an original signature had been delivered.
24. ENTIRE AGREEMENT. This Amendment constitutes the
entire agreement between the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and
understandings, written or oral, between the parties hereto with
respect thereto.
IN WITNESS WHEREOF, the parties have duly executed this
Fourth Amendment of Master Restructuring Agreement, effective as
of the day and year first above written.
Niagara Mohawk Power Corporation
By: /s/ William F. Edwards
-------------------------
Name: William F. Edwards
Title: Senior Vice President
American Ref-Fuel Company of Niagara, L.P.
By: /s/ Richard Oliver
------------------
Name: Richard Oliver
Title: Vice President - Development
Onondaga Cogeneration Limited Partnership
By: Geddes Cogeneration Corporation,
Its General Partner
By: /s/ Luis Tellez
---------------
Name: Luis Tellez
Title: Vice President
Project Orange Associates, L.P.
By: NCP Syracuse, Inc.,
Its General Partner
By: NCP Energy, Inc.,
Its Attorney-in-Fact
By: /s/ Luis Tellez
---------------
Name: Luis Tellez
Title: Vice President
<PAGE>
Fulton Cogeneration Associates, a
New York limited partnership
By: ANR Venture Fulton Company,
Its Managing General Partner
By:
Name:
Title:
Cogen Energy Technology L.P.
By: Cogen Energy Technology, Inc.,
Its General Partner
By: /s/ John E. Guinness
--------------------
Name: John E. Guinness
Title: President
Lyonsdale Energy Limited Partnership, a
Delaware Limited Partnership
By: Harbinger Lyonsdale L.L.C.
Its Managing General Partner
By: /s/ Patrick E. Molony
---------------------
Name: Patrick E. Molony
Title: Vice President
Encogen Four Partners, L.P.
By: EDC Four Inc.,
Its General Partner
By: /s/ Melvin E. Wentz
-------------------
Name: Melvin E. Wentz
Title: President
<PAGE>
NorCon Power Partners, L.P.
By: Northern Consolidated Power, Inc.,
Its General Partner
By:
Name: J. Douglas Divine
Title: Vice President - Strategic Planning
Indeck-Ilion Limited Partnership
By: Indeck Energy Services of Ilion, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
---------------------
Name: Thomas M. Campone
Title: President
Indeck-Yerkes Limited Partnership
By: Indeck-Yerkes Energy Services, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
---------------------
Name: Thomas M. Campone
Title: President
Indeck-Olean Limited Partnership
By: Indeck Energy Services of Olean, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
---------------------
Name: Thomas M. Campone
Title: President
<PAGE>
Indeck-Oswego Limited Partnership
By: Indeck Energy Services of Oswego, Inc.,
Its General Partner
By: /s/ Thomas M. Campone
---------------------
Name: Thomas M. Campone
Title: President
Black River Limited Partnership
By: Jones Black River Services, Inc.,
Its Managing General Partner
By: /s/ William A. Garnett
----------------------
Name: William A. Garnett
Title: President
LG&E Westmoreland Rensselaer, a
California general partnership
By: LG&E Power 15 Incorporated,
A General Partner
By:
Name:
Title:
By: Westmoreland-Rensselaer, L.P.,
A General Partner
By: WEI-Rensselaer, Inc.
A General Partner
By:
Name:
Title:
<PAGE>
Salt City Energy Venture, L.P.
By: Salt City Energy, LLC,
Its General Partner
By: /s/ Edward Barno
----------------
Name: Edward Barno
Title: Member
AG-Energy, L.P.
By: AG-Energy, Inc.,
Its General Partner
By:
Name:
Title:
Seneca Power Partners, L.P.
By: Seneca Power Corporation,
Its General Partner
By:
Name:
Title:
Sterling Power Partners, L.P.
By: Sterling Power, Ltd.,
Its General Partner
By:
Name:
Title:
<PAGE>
Power City Partners, L.P.
By: Power City Generating, Inc.,
Its General Partner
By:
Name:
Title:
P&N Partners, L.P.
By: P&N Energy Systems, Inc.,
Its General Partner
By:
Name:
Title:
Selkirk Cogen Partners, L.P.
By: JMC Selkirk, Inc.,
Managing General Partner
By: /s/ George J. Grunbeck
----------------------
Name: George J. Grunbeck
Title: Vice President
East Syracuse Generating Company, L.P.
By: /s/ George J. Grunbeck
----------------------
Name: George J. Grunbeck
Title: Vice President
<PAGE>
Kamine/Besicorp Carthage L.P.
By: Kamine Carthage Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
--------------------
Name: Harold N. Kamine
Title: President
By: Beta Carthage, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
Kamine/Besicorp South Glens Falls L.P.
By: Kamine South Glens Falls Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
---------------------
Name: Harold N. Kamine
Title: President
By: Beta South Glens Falls, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
<PAGE>
Kamine/Besicorp Natural Dam L.P.
By: Kamine Natural Dam Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
---------------------
Name: Harold N. Kamine
Title: President
By: Beta Natural Dam, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
Kamine/Besicorp Syracuse, L.P.
By: Kamine Syracuse Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
--------------------
Name: Harold N. Kamine
Title: President
By: Beta Syracuse, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
<PAGE>
Kamine/Besicorp Beaver Falls, L.P.
By: Kamine Beaver Falls Cogen Co., Inc.,
Its General Partner
By: /s/ Harold N. Kamine
--------------------
Name: Harold N. Kamine
Title: President
By: Beta Beaver Falls, Inc.,
Its General Partner
By: /s/ Michael J. Daley
--------------------
Name: Michael J. Daley
Title: President
United Development Group - Niagara, L.P.
By: United Development Group - Niagara, Inc.,
Its General Partner
By: /s/ W. John Fair
----------------
Name: W. John Fair
Title: President
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
Computation of the Average Number of Shares of Common Stock Outstanding For the Three Months Ended
March 31, 1998 and 1997
(4)
Average Number of
Shares Outstanding
As Shown on the
(1) (2) (3) Consolidated
Shares of Number of Share Statement of Income
Common Days Days (3 divided by number
Stock Outstanding (2 x 1) of Days in Period)
----------- -------------- -------------- ------------------
Three Month's Ended March 31:
<S> <C> <C> <C> <C>
January 1 - March 31, 1998 144,419,351 90 12,997,741,590 144,419,351
=========== ============== ===========
January 1 - March 31, 1997 144,365,214 90 12,992,869,260
Shares issued -
Acqusition - Syracuse
Suburban Gas Company, Inc -
January 6 25,405 85 2,159,425
----------- --------------
144,390,619 12,995,028,685 144,389,208
=========== ============== ============
Note: Earnings per share calculated on both a primary and fully diluted
basis are the same due to the effects of rounding.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
NIAGARA MOHAWK POWER CORPORATION AND SUBSIDIARY COMPANIES
Statement Showing Computation of Ratio of Earnings to Fixed Charges,
Ratio of Earnings to Fixed Charges without AFC and Ratio of Earnings
to Fixed Charges and Preferred Stock Dividends for the Twelve Months
Ended March 31, 1998
(in thousands of dollars)
<S> <C>
A. Net Income $ (22,824)
B. Taxes Based on Income or Profits 44,187
-----------
C. Earnings, Before Income Taxes 21,363
D. Fixed Charges (a) 304,670
-----------
E. Earnings Before Income Taxes and Fixed Charges 326,033
F. Allowance for Funds Used During Construction (AFC) 12,844
-----------
G. Earnings Before Income Taxes and Fixed Charges
without AFC $ 313,189
===========
<PAGE>
Preferred Dividend Factor:
H. Preferred Dividend Requirements $ 37,221
I. Ratio of Pre-tax Income to Net Income (C / A) (NEGATIVE)
-----------
J. Preferred Dividend Factor (H x I) $ 37,221
K. Fixed Charges as Above (D) 304,670
-----------
L. Fixed Charges and Preferred Dividends Combined $ 341,891
===========
M. Ratio of Earnings to Fixed Charges (E / D) 1.07
===========
N. Ratio of Earnings to Fixed Charges
without AFC (G / D) 1.03
===========
O. Ratio of Earnings to Fixed Charges and
Preferred Dividends Combined (E / L) 0.95
===========
(a) Includes a portion of rentals deemed representative of the
interest factor ($26,345).
</TABLE>
<PAGE>
EXHIBIT 15
May 14, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Dear Sirs:
We are aware that Niagara Mohawk Power Corporation has included our
report dated May 14, 1998 (issued pursuant to the provisions of
Statement on Auditing Standards No. 71) in the Registration
Statements on Form S-8 (Nos. 33-36189, 33-42771 and 333-13781) in the
Prospectus constituting part of the Registration Statements on Form
S-3 (Nos. 33-50703, 33-51073, 33-54827, 33-55546 and 333-49541) and in
the Prospectus/Proxy Statement constituting part of the Registration
Statement on Form S-4 (No. 333-49769). We are also aware of our
responsibilities under the Securities Act of 1933.
Yours very truly,
/s/ Price Waterhouse LLP
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET, CONSOLIDATED STATEMENT OF INCOME AND CONSOLIDATED
STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
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