-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A2WRJhMnv3y0K6dZHUC4MFxo9KPHt/6g3zWqyHaE3a9CLTpMP0dEuyO9qTAmCyzX J1dpBA/YCZVD4chTqM74fA== 0000071297-97-000029.txt : 19970502 0000071297-97-000029.hdr.sgml : 19970502 ACCESSION NUMBER: 0000071297-97-000029 CONFORMED SUBMISSION TYPE: U5S PUBLIC DOCUMENT COUNT: 24 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970501 SROS: BSE SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW ENGLAND ELECTRIC SYSTEM CENTRAL INDEX KEY: 0000071297 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 041663060 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U5S SEC ACT: 1935 Act SEC FILE NUMBER: 001-03446 FILM NUMBER: 97592962 BUSINESS ADDRESS: STREET 1: 25 RESEARCH DR CITY: WESTBOROUGH STATE: MA ZIP: 01581 BUSINESS PHONE: 5083669011 U5S 1 File No. 30-33 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. FORM U-5-S ANNUAL REPORT FOR THE YEAR ENDED DECEMBER 31, 1996 Filed pursuant to the Public Utility Holding Company Act of 1935 by LOGO NEW ENGLAND ELECTRIC SYSTEM 25 Research Drive, Westborough, Massachusetts 01582 Item 1. SYSTEM COMPANIES AND INVESTMENT THEREIN AS OF DECEMBER 31, 1996 (1)
Value Per Books of Percent of Issuer and Number of Voting Power Carrying Name of Company Common Shares (100% unless Value (and abbreviation used herein) Owned Specified) to Owner - ------------------------------ ------------- ------------ --------- (000's) New England Electric System (Voluntary Association) (NEES) None Granite State Electric Company (Granite) 60,400 $ 19,685 Granite State Energy, Inc. (Granite State Energy) (2) 1,000 (155) Unsecured Debt - 355 Massachusetts Electric Company (Mass Electric) 2,398,111 427,165 Nantucket Electric Company (Nantucket) (3) 1 4,166 The Narragansett Electric Company (Narragansett) 1,132,487 256,602 Narragansett Energy Resources Company (NERC) 25 988 Unsecured Debt - 750 NEES Energy, Inc. (NEES Energy) (4) 1,000 (1,508) Unsecured Debt - 4,505 New England Electric Resources, Inc. (NEERI) 1,000 (5,320) Unsecured Debt - 8,449 New England Hydro-Transmission Electric Company, Inc. (NEHTEC) 2,017,352 53.97 28,554 New England Hydro-Transmission Corporation (NEHTC) 9,935 53.97 18,549 New England Electric Transmission Corporation (NEET) 120 3,244 New England Energy Incorporated (NEEI) (5) 2,500 (24,457) Unsecured debt - 20,997 New England Power Service Company (NEPSCO) 3 18,189 New England Power Company (NEP) 6,449,896 98.85 906,064 ---------- $1,686,822 ========== New England Hydro Finance Company (NEHFC) (6) 504 53.97 $ 5 NERC Ocean State Power (7) - 35.69 $ 19,777 Ocean State Power II (7) - 35.69 $ 15,386 NEES Energy AllEnergy Marketing Company, LLC (AllEnergy) (8) - 50 $ 1,716 NEERI NEERI International (9) 2 $ 0 NEP Connecticut Yankee Atomic Power Company 52,500 15 $ 15,914 Maine Yankee Atomic Power Company 100,000 20 $ 14,460 Vermont Yankee Nuclear Power Corporation 80,002 20 $ 10,627 Yankee Atomic Electric Company 46,020 30 $ 6,901 NEES Communications, Inc. (NEESCom) (10) New England Wholesale Electric Company (11)* - -------------------- *Inactive.
(1) Attached as Exhibit E.1. hereto is a schedule showing investments during the year ended December 31, 1996 in the NEES Money Pool, through which certain System companies lend to or borrow from other System companies (Commission File Nos. 70-8261, 70-8453, 70-8679, and 70-8901). (2) Granite State Energy, a New Hampshire Corporation, was formed on April 22, 1996 as a wholly-owned nonutility subsidiary of NEES which provides a range of energy and related services, including but not limited to sales of electric energy, audits, power quality, fuel supply, repair, maintenance, construction, design, engineering, and consulting. (3) Nantucket was incorporated on April 12, 1905 under the laws of Massachusetts, and was acquired by NEES on March 26, 1996. Nantucket provides electric service at retail to approximately 8,300 customers. Its service territory is limited to the Island and Town of Nantucket. (4) NEES Energy, a Massachusetts Corporation, was formed on June 14, 1996 as a wholly-owned nonutility marketing subsidiary of NEES. (5) Samedan/NEEI Exploration Company is a partnership engaged in oil and gas exploration and development. NEEI owns a 50% interest in the partnership and had invested $730,221,570 in the partnership as of December 31, 1996. (6) NEHFC has two shareholders, NEHTEC and NEHTC, which each have a 50% interest. The tabulation shown above reflects NEES' indirect ownership in NEHFC. (7) Both Ocean State Power and Ocean State Power II are general partnerships; NERC owns a 20% equity interest in each. (8) AllEnergy, a Massachusetts Limited Liability Corporation, was formed on September 18, 1996. NEES Energy owns a 50% interest in ALLEnergy, an energy marketing joint venture between NEES Energy and a wholly-owned subsidiary of Eastern Enterprises, a regional gas holding company. (9) NEERI International was formed on July 19, 1996 under the laws of the Cayman Islands as a wholly-owned nonutility subsidiary of NEERI which will serve as a holding company for NEERI's capitalized international projects. (10) NEESCom is a wholly-owned, nonutility subsidiary of NEES which provides telecommunications and information-related products and services, and was formed under the laws of Massachusetts on August 2, 1996. NEESCom was not yet capitalized as of December 31, 1996. (11) Incorporated in 1972; not yet capitalized. Item 2. ACQUISITION OR SALES OF UTILITY ASSETS (None to be reported.) Item 3. ISSUE, SALE, PLEDGE, GUARANTEE OR ASSUMPTION OF SYSTEM SECURITIES (None to be reported.) Item 4. ACQUISITION, REDEMPTION OR RETIREMENT OF SYSTEM SECURITIES
Calendar Year 1996 ------------------ Name of Company Acquiring, Redeeming Number of Shares or Retiring or Principal Amount Commission Securities ------------------------ Authorization (Issuer unless Redeemed or (Release No. Name of Issuer otherwise noted) Acquired Retired (1) Consideration or Other) -------------- ---------------- -------- ------------- ------------- -------------- GRANITE Unsecured Note $1,000,000 $1,000,000 23595, 24272 & (B) GRANITE STATE ENERGY Sub. Promissory Note NEES $355,000 $355,000 26520 NEHFC Secured Notes $11,520,000 $11,520,000 25304 & (B) NEEI Sub. Promissory Note NEES $4,771,136 $4,771,136 (A) Sub. Promissory Note $4,000,000 $4,000,000 (A) NEES ENERGY Sub. Promissory Note NEES $4,505,000 $4,505,000 26520 & 26633 NEET Common Stock 20 shares $548,934 24162 Secured Note $4,624,000 $4,624,000 24162 NEP Bonds $57,850,000 $58,447,000 (B) Preferred Stock $20,850,000 $19,531,770 (B) NARRAGANSETT Bonds $2,000,000 $2,260,000 (B) NEERI Sub. Promissory Note NEES $5,050,000 $ 5,050,000 (C) NERC Sub. Promissory Note NEES $1,085,000 $1,085,000 (D) Sub. Promissory Note $1,000,000 $1,000,000 (D) - -------------------- (1) Securities were extinguished. (A) SEC Release No. 24847 and Rule 45(b)(3). (B) Rule 42. (C) SEC Release No. 25261, 26017, 26057, 26235, 26277, & 26291 (D) SEC Release No. 24960, 24727, 25313, & 26397
Item 5. INVESTMENTS IN SECURITIES OF NONSYSTEM COMPANIES As of December 31, 1996.
Number of Shares or General Principal Percent Nature Carrying Amount Voting of Issuer's Value Name of Owner Name of Issuer Security Owned Owned Power Business to Owner - ------------- -------------- -------------- --------- ------- ----------- ----------- (in thous.) NEES UNITIL Corporation Capital Stock 34,400 shs. 0.8 Public $303 no par value Utility Three Two business Stocks $ 74 Subsidiaries development (A) corporations - -------------------- (A) Mass. Electric, Narragansett, and NEP.
Item 6. OFFICERS AND DIRECTORS Part I. As of December 31, 1996. (Note A)
Mass NEES Granite Elec Narra NEEI NEERI NEET NEP NEPSCO NEHTC NEHTEC NERC NEHFC ---- ------- ---- ----- ---- ----- ---- --- ------ ----- ------ ---- ----- Andrew H. Aitken VP VP s - --------------------------------------------------------------------------------------------------------------------------------- John Amoroso 245 S. Main Street, Hopedale, MA VP s - --------------------------------------------------------------------------------------------------------------------------------- Cynthia A. Arcate 9 Lowell Road, Salem, NH VP s - --------------------------------------------------------------------------------------------------------------------------------- Lawrence E. Bailey VP VP s - --------------------------------------------------------------------------------------------------------------------------------- Thomas J. Bascetta P.O. Box 5426, W. Lebanon, NH D f - --------------------------------------------------------------------------------------------------------------------------------- Urville J. Beaumont 8 Samoset Dr., Salem, NH D f - --------------------------------------------------------------------------------------------------------------------------------- Joan T. Bok One International Pl., Suite 2115 Boston, MA D ChB D D D D D D D D f D D D D - --------------------------------------------------------------------------------------------------------------------------------- Robert J. Brill s - --------------------------------------------------------------------------------------------------------------------------------- William M. Bulger 18 Tremont St., Boston, MA D f - --------------------------------------------------------------------------------------------------------------------------------- Marilyn R. Campbell 79 Brady Avenue, Salem, NH D f - --------------------------------------------------------------------------------------------------------------------------------- Stephen A. Cardi 400 Lincoln Ave., Warwick, RI D f - --------------------------------------------------------------------------------------------------------------------------------- John G. Cochrane T T T VP s T T T T - --------------------------------------------------------------------------------------------------------------------------------- Eric P. Cody VP s - --------------------------------------------------------------------------------------------------------------------------------- Item 6. OFFICERS AND DIRECTORS Part I. As of December 31, 1996. (Note A) Granite State Nantucket NEERI NEES NEES Energy Electric International Comm. Energy ------ --------- ------------- ---- ------ Andrew H. Aitken - ----------------------------------------------------------------------------------------- John Amoroso 245 S. Main Street, Hopedale, MA VP - ----------------------------------------------------------------------------------------- Cynthia A. Arcate 9 Lowell Road, Salem, NH - ----------------------------------------------------------------------------------------- Lawrence E. Bailey - ----------------------------------------------------------------------------------------- Thomas J. Bascetta P.O. Box 5426, W. Lebanon, NH - ----------------------------------------------------------------------------------------- Urville J. Beaumont 8 Samoset Dr., Salem, NH - ----------------------------------------------------------------------------------------- Joan T. Bok One International Pl., Suite 2115 Boston, MA D D D D - ----------------------------------------------------------------------------------------- Robert J. Brill C - ----------------------------------------------------------------------------------------- William M. Bulger 18 Tremont St., Boston, MA - ----------------------------------------------------------------------------------------- Marilyn R. Campbell 79 Brady Avenue, Salem, NH - ----------------------------------------------------------------------------------------- Stephen A. Cardi 400 Lincoln Ave., Warwick, RI - ----------------------------------------------------------------------------------------- John G. Cochrane T T T T - ----------------------------------------------------------------------------------------- Eric P. Cody - ----------------------------------------------------------------------------------------- Item 6. OFFICERS AND DIRECTORS Part I. As of December 31, 1996 (continued). (Note A) Mass NEES Granite Elec Narra NEEI NEERI NEET NEP NEPSCO NEHTC NEHTEC NERC NEHFC ---- ------- ---- ----- ---- ----- ---- --- ------ ----- ------ ---- ----- Sally L. Collins 23 Ridgewood Terrace, Northampton, MA D f - --------------------------------------------------------------------------------------------------------------------------------- Dan C. Delurey VP s - --------------------------------------------------------------------------------------------------------------------------------- John H. Dickson 95 Sawyer Rd., Waltham, MA - --------------------------------------------------------------------------------------------------------------------------------- Jeffrey A. Donahue P D VP VP s VP VP - --------------------------------------------------------------------------------------------------------------------------------- Peter G. Flynn VP s - --------------------------------------------------------------------------------------------------------------------------------- David Fredericks 2 Fairgrounds Rd., Nant., MA - --------------------------------------------------------------------------------------------------------------------------------- Richard W. Frost 280 Melrose St., Providence, RI VP s - --------------------------------------------------------------------------------------------------------------------------------- Frances H. Gammell 200 Providence Street, P.O. Box 1007 W. Warwick, RI D f - --------------------------------------------------------------------------------------------------------------------------------- Dr. Kalyan K. Ghosh 486 Chandler St., Worcester, MA D f - --------------------------------------------------------------------------------------------------------------------------------- Don F. Goodwin VP s - --------------------------------------------------------------------------------------------------------------------------------- Gregory A. Hale s - --------------------------------------------------------------------------------------------------------------------------------- George W. Harris Ledge Road, Pelham, NH D f - --------------------------------------------------------------------------------------------------------------------------------- Nicholas D. N. Harvey, Jr. 41 S. Park Street, Hanover, NH D f - --------------------------------------------------------------------------------------------------------------------------------- David L. Holt E-VP s - --------------------------------------------------------------------------------------------------------------------------------- Charles B. Housen 120 E. Main Street, Erving, MA D f - --------------------------------------------------------------------------------------------------------------------------------- Item 6. OFFICERS AND DIRECTORS Part I. As of December 31, 1996 (continued). (Note A) Granite State Nantucket NEERI NEES NEES Energy Electric International Comm. Energy ------ --------- ------------- ---- ------ Sally L. Collins 23 Ridgewood Terrace, Northampton, MA - ----------------------------------------------------------------------------------------- Dan C. Delurey - ----------------------------------------------------------------------------------------- John H. Dickson 95 Sawyer Rd., Waltham, MA P D - ----------------------------------------------------------------------------------------- Jeffrey A. Donahue VP - ----------------------------------------------------------------------------------------- Peter G. Flynn - ----------------------------------------------------------------------------------------- David Fredericks 2 Fairgrounds Rd., Nant., MA VP s - ----------------------------------------------------------------------------------------- Richard W. Frost 280 Melrose St., Providence, RI - ----------------------------------------------------------------------------------------- Frances H. Gammell 200 Providence Street, P.O. Box 1007 W. Warwick, RI - ----------------------------------------------------------------------------------------- Dr. Kalyan K. Ghosh 486 Chandler St., Worcester, MA - ----------------------------------------------------------------------------------------- Don F. Goodwin - ----------------------------------------------------------------------------------------- Gregory A. Hale S C - ----------------------------------------------------------------------------------------- George W. Harris Ledge Road, Pelham, NH - ----------------------------------------------------------------------------------------- Nicholas D. N. Harvey, Jr. 41 S. Park Street, Hanover, NH - ----------------------------------------------------------------------------------------- David L. Holt P D - ----------------------------------------------------------------------------------------- Charles B. Housen 120 E. Main Street, Erving, MA - ----------------------------------------------------------------------------------------- Item 6. OFFICERS AND DIRECTORS Part I. As of December 31, 1996 (continued). (Note A) Mass NEES Granite Elec Narra NEEI NEERI NEET NEP NEPSCO NEHTC NEHTEC NERC NEHFC ---- ------- ---- ----- ---- ----- ---- --- ------ ----- ------ ---- ----- Alfred D. Houston E-VP VP T D P D D D D P s D D D D - --------------------------------------------------------------------------------------------------------------------------------- Michael E. Jesanis T T T T s - --------------------------------------------------------------------------------------------------------------------------------- Paul L. Joskow 7 Chilton Street, Brookline, MA D f - --------------------------------------------------------------------------------------------------------------------------------- James Joynt 2 Fairgrounds Rd., Nant., MA - --------------------------------------------------------------------------------------------------------------------------------- David C. Kennedy VP s - --------------------------------------------------------------------------------------------------------------------------------- Joseph J. Kirby 23 Broad Street, Westerly, RI D f - --------------------------------------------------------------------------------------------------------------------------------- John M. Kucharski 45 William Street, Wellesley, MA D f - --------------------------------------------------------------------------------------------------------------------------------- Edward H. Ladd 125 Claybrook Rd., Dover, MA D f - --------------------------------------------------------------------------------------------------------------------------------- Cheryl A. LaFleur VP S D D D VP D VP Ds D D D D - --------------------------------------------------------------------------------------------------------------------------------- Shannon M. Larson 280 Melrose St., Providence, RI VP s - --------------------------------------------------------------------------------------------------------------------------------- John L. Levett VP s - --------------------------------------------------------------------------------------------------------------------------------- John F. Malley VP s P D - --------------------------------------------------------------------------------------------------------------------------------- Paul R. Marshall 1101 Turnpike St., No. Andover, MA S s S S - --------------------------------------------------------------------------------------------------------------------------------- Robert L. McCabe 280 Melrose St., Providence, RI D P s - --------------------------------------------------------------------------------------------------------------------------------- Joshua A. McClure P.O. Box 1119, Westerly, RI D f - --------------------------------------------------------------------------------------------------------------------------------- Item 6. OFFICERS AND DIRECTORS Part I. As of December 31, 1996 (continued). (Note A) Granite State Nantucket NEERI NEES NEES Energy Electric International Comm. Energy ------ --------- ------------- ---- ------ Alfred D. Houston D D D D VP D - ----------------------------------------------------------------------------------------- Michael E. Jesanis - ----------------------------------------------------------------------------------------- Paul L. Joskow 7 Chilton Street, Brookline, MA - ----------------------------------------------------------------------------------------- James Joynt 2 Fairgrounds Rd., Nant., MA VP s - ----------------------------------------------------------------------------------------- David C. Kennedy D - ----------------------------------------------------------------------------------------- Joseph J. Kirby 23 Broad Street, Westerly, RI - ----------------------------------------------------------------------------------------- John M. Kucharski 45 William Street, Wellesley, MA - ----------------------------------------------------------------------------------------- Edward H. Ladd 125 Claybrook Rd., Dover, MA - ----------------------------------------------------------------------------------------- Cheryl A. LaFleur D D D - ----------------------------------------------------------------------------------------- Shannon M. Larson 280 Melrose St., Providence, RI - ----------------------------------------------------------------------------------------- John L. Levett P - ----------------------------------------------------------------------------------------- John F. Malley - ----------------------------------------------------------------------------------------- Paul R. Marshall 1101 Turnpike St., No. Andover, MA - ----------------------------------------------------------------------------------------- Robert L. McCabe 280 Melrose St., Providence, RI - ----------------------------------------------------------------------------------------- Joshua A. McClure P.O. Box 1119, Westerly, RI - ----------------------------------------------------------------------------------------- Item 6. OFFICERS AND DIRECTORS Part I. As of December 31, 1996 (continued). (Note A) Mass NEES Granite Elec Narra NEEI NEERI NEET NEP NEPSCO NEHTC NEHTEC NERC NEHFC ---- ------- ---- ----- ---- ----- ---- --- ------ ----- ------ ---- ----- Howard W. McDowell D T Co Co Co Co Co s Co Co Co Co - --------------------------------------------------------------------------------------------------------------------------------- Patricia McGovern 400 Atlantic Avenue, Boston, MA D f - --------------------------------------------------------------------------------------------------------------------------------- Robert H. McLaren VP s - --------------------------------------------------------------------------------------------------------------------------------- Howard R. Mortenson P.O. Box 885, Charlestown, NH D f - --------------------------------------------------------------------------------------------------------------------------------- Charles H. Moser VP s - --------------------------------------------------------------------------------------------------------------------------------- Richard Nadeau 280 Melrose St., Providence, RI VP s - --------------------------------------------------------------------------------------------------------------------------------- Chester O. Paradise VP s - --------------------------------------------------------------------------------------------------------------------------------- Lydia M. Pastuszek 1101 Turnpike St., No. Andover, MA P D s VP - --------------------------------------------------------------------------------------------------------------------------------- Anthony C. Pini VP s - --------------------------------------------------------------------------------------------------------------------------------- Kirk L. Ramsauer C s C C - --------------------------------------------------------------------------------------------------------------------------------- John F. Reilly 1 Merrimack Plaza, Lowell, MA D f - --------------------------------------------------------------------------------------------------------------------------------- Lawrence J. Reilly P D s - --------------------------------------------------------------------------------------------------------------------------------- Thomas G. Robinson S s - --------------------------------------------------------------------------------------------------------------------------------- Thomas E. Rogers VP s - --------------------------------------------------------------------------------------------------------------------------------- Christopher E. Root VP s - --------------------------------------------------------------------------------------------------------------------------------- John W. Rowe P D D D Ch D D D Ch D Ch D s D D D D - --------------------------------------------------------------------------------------------------------------------------------- Michael F. Ryan 280 Melrose St., Providence, RI VP s - --------------------------------------------------------------------------------------------------------------------------------- Item 6. OFFICERS AND DIRECTORS Part I. As of December 31, 1996 (continued). (Note A) Granite State Nantucket NEERI NEES NEES Energy Electric International Comm. Energy ------ --------- ------------- ---- ------ Howard W. McDowell T - ----------------------------------------------------------------------------------------- Patricia McGovern 400 Atlantic Avenue, Boston, MA - ----------------------------------------------------------------------------------------- Robert H. McLaren - ----------------------------------------------------------------------------------------- Howard R. Mortenson P.O. Box 885, Charlestown, NH - ----------------------------------------------------------------------------------------- Charles H. Moser - ----------------------------------------------------------------------------------------- Richard Nadeau 280 Melrose St., Providence, RI - ----------------------------------------------------------------------------------------- Chester O. Paradise - ----------------------------------------------------------------------------------------- Lydia M. Pastuszek 1101 Turnpike St., No. Andover, MA - ----------------------------------------------------------------------------------------- Anthony C. Pini - ----------------------------------------------------------------------------------------- Kirk L. Ramsauer C - ----------------------------------------------------------------------------------------- John F. Reilly 1 Merrimack Plaza, Lowell, MA - ----------------------------------------------------------------------------------------- Lawrence J. Reilly P D - ----------------------------------------------------------------------------------------- Thomas G. Robinson - ----------------------------------------------------------------------------------------- Thomas E. Rogers VP - ----------------------------------------------------------------------------------------- Christopher E. Root - ----------------------------------------------------------------------------------------- John W. Rowe D D P D - ----------------------------------------------------------------------------------------- Michael F. Ryan 280 Melrose St., Providence, RI - ----------------------------------------------------------------------------------------- Item 6. OFFICERS AND DIRECTORS Part I. As of December 31, 1996 (continued). (Note A) Mass NEES Granite Elec Narra NEEI NEERI NEET NEP NEPSCO NEHTC NEHTEC NERC NEHFC ---- ------- ---- ----- ---- ----- ---- --- ------ ----- ------ ---- ----- George M. Sage P.O. Box 9527, Providence, RI D f - --------------------------------------------------------------------------------------------------------------------------------- Nancy H. Sala 939 Southbridge St., Worcester, MA VP s - --------------------------------------------------------------------------------------------------------------------------------- Richard P. Sergel Sr-VP Ch D Ch D Ch D D D s - --------------------------------------------------------------------------------------------------------------------------------- Dennis E. Snay 170 Medford St., Malden, MA VP s - --------------------------------------------------------------------------------------------------------------------------------- Charles E. Soule 50 O'Neill Drive, Westboro, MA D f - --------------------------------------------------------------------------------------------------------------------------------- Jeffrey D. Tranen Sr-VP VP D D P D P D D s P D P D D P D - --------------------------------------------------------------------------------------------------------------------------------- William E. Trueheart 1 Waterhouse St., Apt.1, Cambridge, MA D f - --------------------------------------------------------------------------------------------------------------------------------- Arnold H. Turner VP VP s VP VP VP - --------------------------------------------------------------------------------------------------------------------------------- Jeffrey W. VanSant VP VP s - --------------------------------------------------------------------------------------------------------------------------------- William Watkins, Jr. 280 Melrose Street, Providence, RI E-VP s - --------------------------------------------------------------------------------------------------------------------------------- Roslyn M. Watson 25 Braddock Park, Boston, MA D f - --------------------------------------------------------------------------------------------------------------------------------- Wendy Watts 2 Fairgrounds Rd., Nant., MA - --------------------------------------------------------------------------------------------------------------------------------- Item 6. OFFICERS AND DIRECTORS Part I. As of December 31, 1996 (continued). (Note A) Granite State Nantucket NEERI NEES NEES Energy Electric International Comm. Energy ------ --------- ------------- ---- ------ George M. Sage P.O. Box 9527, Providence, RI - ----------------------------------------------------------------------------------------- Nancy H. Sala 939 Southbridge St., Worcester, MA - ----------------------------------------------------------------------------------------- Richard P. Sergel - ----------------------------------------------------------------------------------------- Dennis E. Snay 170 Medford St., Malden, MA - ----------------------------------------------------------------------------------------- Charles E. Soule 50 O'Neill Drive, Westboro, MA - ----------------------------------------------------------------------------------------- Jeffrey D. Tranen D D - ----------------------------------------------------------------------------------------- William E. Trueheart 1 Waterhouse St., Apt.1, Cambridge, MA - ----------------------------------------------------------------------------------------- Arnold H. Turner - ----------------------------------------------------------------------------------------- Jeffrey W. VanSant - ----------------------------------------------------------------------------------------- William Watkins, Jr. 280 Melrose Street, Providence, RI - ----------------------------------------------------------------------------------------- Roslyn M. Watson 25 Braddock Park, Boston, MA - ----------------------------------------------------------------------------------------- Wendy Watts 2 Fairgrounds Rd., Nant., MA S s - ----------------------------------------------------------------------------------------- Item 6. OFFICERS AND DIRECTORS Part I. As of December 31, 1996 (continued). (Note A) Mass NEES Granite Elec Narra NEEI NEERI NEET NEP NEPSCO NEHTC NEHTEC NERC NEHFC ---- ------- ---- ----- ---- ----- ---- --- ------ ----- ------ ---- ----- Anne Wexler 1317 F Street, N.W., Suite 600 Washington, DC D f - --------------------------------------------------------------------------------------------------------------------------------- John A. Wilson, Jr. 49 Madison Ave., No. Kingston, RI D f - --------------------------------------------------------------------------------------------------------------------------------- James Q. Wilson 32910 Camino de Buena Ventura, Malibu, CA D f - --------------------------------------------------------------------------------------------------------------------------------- James R. Winoker 222 Richmond Street Providence, RI D f - --------------------------------------------------------------------------------------------------------------------------------- Robert King Wulff C C S C s S - --------------------------------------------------------------------------------------------------------------------------------- Geraldine M. Zipser C s - --------------------------------------------------------------------------------------------------------------------------------- Item 6. OFFICERS AND DIRECTORS Part I. As of December 31, 1996 (continued). (Note A) Granite State Nantucket NEERI NEES NEES Energy Electric International Comm. Energy ------ --------- ------------- ---- ------ Anne Wexler 1317 F Street, N.W., Suite 600 Washington, DC - ----------------------------------------------------------------------------------------- John A. Wilson, Jr. 49 Madison Ave., No. Kingston, RI - ----------------------------------------------------------------------------------------- James Q. Wilson 32910 Camino de Buena Ventura, Malibu, CA - ----------------------------------------------------------------------------------------- James R. Winoker 222 Richmond Street Providence, RI - ----------------------------------------------------------------------------------------- Robert King Wulff - ----------------------------------------------------------------------------------------- Geraldine M. Zipser S - ----------------------------------------------------------------------------------------- Key: Ch-Chairman; ChB-Chairman of the Board; VCh-Vice Chairman; D-Director; P-President; E-VP-Executive Vice President; Sr-VP-Senior Vice President; VP-F-Vice President--Finance; VP-Vice President; T-Treasurer; Co-Controller; C-Clerk; S-Secretary; s-Salary; f-Fee. Note A: Address is 25 Research Drive, Westborough, Massachusetts 01582 unless otherwise indicated.
Item 6. OFFICERS AND DIRECTORS Part II. Financial Connections as of December 31, 1996.
Position Name and Held in Name of Location of Financial Applicable Officer or Financial Institution Exemption Director Institution (g) Rule ---------- ----------- ----------- ---------- William M. Bulger Citizens Bank of Massachusetts D a Boston, MA Joseph J. Kirby The Washington Trust Co., C c Westerly, RI The Washington Trust Bancorp, Inc., Westerly, RI C c John M. Kucharski State Street Boston Corp., D a Boston, MA Robert L. McCabe Citizen Savings Bank, D c,f Providence, RI John F. Reilly Family Bank, D c Haverhill, MA John W. Rowe First National Bank of Boston, D a,c,d,e,f Boston, MA Bank of Boston Corporation, D a,c,d,e,f Boston, MA Charles E. Soule Westboro Savings Bank T a Westboro, MA William Watkins, Jr. Rhode Island Hospital Trust D f National Bank, Providence, RI Roslyn M. Watson The Dreyfus Laurel Funds, T d New York, NY American Express Centurion D d Bank, Wilmington, DE - -------------------- a - Rule 70(a) b - Rule 70(b) c - Rule 70(c) d - Rule 70(d) e - Rule 70(e) f - Rule 70(f) g - C-Chairman & CEO; D-Director; T-Trustee
Item 6. OFFICERS AND DIRECTORS Part III. Disclosures made in proxy statements and annual reports on Form 10-K, filed in 1997, follow: NEES SUMMARY COMPENSATION TABLE
Long Term Compen- Annual Compensation (b) sation ----------------------- --------- Other Restricted Name and Annual Share All Other Principal Salary Bonus Compensa- Awards Compensa- Position (a) Year ($) ($)(c) tion ($)(d) ($)(e) tion ($)(f) - ------------ ---- ------ ------ ----------- --------- ---------- John W. Rowe, 1996 537,600 287,896 9,093 370,288 4,891 (g) President 1995 537,600 427,213 9,568 0 4,750 and Chief 1994 501,156 284,540 9,517 160,974 4,526 Executive Officer Alfred D. 1996 335,016 167,306 6,265 182,267 4,649 (h) Houston, 1995 262,800 177,663 5,753 0 4,180 Executive 1994 244,860 132,370 5,501 62,040 4,027 Vice President Jeffrey D. 1996 220,116 110,284 5,486 138,020 3,684 (i) Tranen, 1995 200,100 143,254 5,268 0 3,578 Senior Vice 1994 187,356 98,357 5,049 45,804 3,466 President Richard P. 1996 212,700 110,724 5,366 138,376 3,535 (j) Sergel, 1995 184,956 139,373 4,877 0 3,424 Senior Vice 1994 168,600 94,801 4,934 44,352 3,324 President Cheryl A. 1996 165,624 89,477 4,059 106,020 3,251 (k) LaFleur, 1995 125,616 107,617 116 0 2,721 Vice 1994 113,344 71,117 116 25,609 2,633 President and Secretary
(a) Officers of NEES also hold various positions with subsidiary companies. Compensation for these positions is included in this table. (b) Includes deferred compensation in category and year earned. (c) The bonus figures represent: cash bonuses under an incentive compensation plan; the all-employee Goals Program; the variable match of the Incentive Thrift Plan including related deferred compensation plan matches; special cash bonuses; and unrestricted shares under the Incentive Share Plan. See descriptions under Plan Summaries. For 1996 and 1994 the bonus amounts were all cash or contributions to the Incentive Thrift Plan, including related deferred compensation plan matches. In 1995 Mr. Rowe's bonus was $276,728 cash and contributions, and $150,485 in shares; Mr. Houston's bonus was $123,160 cash and contributions and $54,503 in shares; Mr. Tranen's bonus was $99,403 cash and contributions and $43,851 in shares; Mr. Sergel's bonus was $96,649 in cash and contributions and $42,724 in shares; and Ms. LaFleur's bonus was $84,370 in cash and contributions and $23,247 in shares. (d) Includes amounts reimbursed by NEES for the payment of taxes on certain noncash benefits. (e) As more fully described in the Compensation Committee Report on Executive Compensation, special share bonus awards were made in 1996. Under the terms of those awards, the share values were mandatorily deferred until the executive's termination of employment. No awards vested during 1996 under the Company's Long-Term Performance Share Award Plan. See Long Term Incentive Plan - Awards in Last Fiscal Year. The incentive share awards for the named executives made for 1994 and 1996 were in the form of restricted shares (with a five-year restriction) or deferred share equivalents, deferred for receipt for at least five years, at the executive's option. As cash dividends are declared, the number of deferred share equivalents will be increased as if the dividends were reinvested in shares. See also Payments Upon a Change in Control below. The shares awarded for 1995 were not restricted and the value of the awards is included in the bonus column. As of December 31, 1996, the following executive officers held the amount of restricted and deferred share equivalents with the value indicated: Mr. Rowe 27,022 shares, $942,392 value; Mr. Houston 10,014 shares, $349,238 value; Mr. Tranen 7,719 shares, $269,200 value; and Mr. Sergel 7,471 shares, $260,551 value; and Ms. LaFleur 4,774 shares, $166,493 value. The value was calculated by multiplying the closing market price on December 31, 1996, by the number of shares. (f) Includes Company contributions to life insurance and the Incentive Thrift Plan that are not bonus contributions including related deferred compensation plan match. See description under Plan Summaries. The life insurance contribution is calculated based on the value of term life insurance for the named individuals. The premium costs for most of these policies have been or will be recovered by the Company. (g) For Mr. Rowe, the type and amount of compensation in 1996 is as follows: $ 3,000 for contributions to the thrift plan and $1,891 for life insurance. (h) For Mr. Houston, the type and amount of compensation in 1996 is as follows: $3,000 for contributions to the thrift plan and $1,649 for life insurance. (i) For Mr. Tranen, the type and amount of compensation in 1996 is as follows: $3,000 for contributions to the thrift plan and $684 for life insurance. (j) For Mr. Sergel, the type and amount of compensation in 1996 is as follows: $3,000 for contributions to the thrift plan and $535 for life insurance. (k) For Ms. LaFleur, the type and amount of compensation in 1996 is as follows: $3,000 for contributions to the thrift plan and $251 for life insurance. NEP SUMMARY COMPENSATION TABLE
Long-Term Compensa- Annual Compensation (b) tion -------------------------- --------- Other Restricted Name and Annual & Deferred All Other Principal Compensa- Share Compensa- Position Year Salary Bonus tion Awards tion (a) ($) ($)(c) ($)(d) ($)(e) ($)(f) - ---------- ---- ------- ------ --------- ---------- --------- John W. 1996 180,096 96,445 3,046 124,047 1,638(g) Rowe 1995 157,070 124,818 2,795 0 1,387 Chairman 1994 211,598 119,716 4,018 67,966 1,911 Jeffrey D. 1996 200,684 100,548 5,002 125,836 3,358(h) Tranen 1995 188,884 135,224 4,972 0 3,377 President 1994 187,356 98,357 5,049 45,804 3,466 Lawrence E. 1996 151,956 101,667 116 0 3,776(i) Bailey 1995 144,720 92,328 116 0 3,598 Vice 1994 140,471 66,510 116 27,484 3,952 President John F. 1996 133,394 104,885 116 0 3,141(j) Malley 1995 127,236 96,261 116 0 2,907 Vice 1994 117,169 65,474 116 27,469 2,996 President Arnold H. 1996 128,172 89,185 116 0 2,849(k) Turner 1995 128,172 65,439 116 0 2,276 Vice 1994 124,428 52,888 116 21,747 2,849 President
(a) Certain officers of NEP are also officers of NEES and various other System companies. (b) Includes deferred compensation in category and year earned. (c) The bonus figure represents: cash bonuses under an incentive compensation plan, the all-employee goals program, the variable match of the incentive thrift plan, including related deferred compensation plan matches, special cash bonuses, and unrestricted shares under the incentive share plan. See descriptions under Plan Summaries. (d) Includes amounts reimbursed by NEP for the payment of taxes. (e) Special share bonuses were made to a limited number of executives in 1996. Under the terms of those awards, the share values were mandatorily deferred until the executives' termination of employment. No awards vested during 1996 under the Long-Term Performance Share Award Plan. The incentive share awards for the named executives made for 1994 were in the form of restricted shares (with a five-year restriction) or deferred share equivalents, deferred for receipt for at least five years, at the executive's option. In 1996 awards for NEES officers were similarly restricted. As cash dividends are declared, the number of deferred share equivalents will be increased as if the dividends were reinvested in shares. None of the shares awarded for 1995 were restricted. As of December 31, 1996, the following executive officers held the amount of restricted and deferred shares with the value indicated: Mr. Rowe 27,022 shares, $942,392 value; Mr. Tranen 7,719 shares, $269,200 value; Mr. Bailey 3,220 shares, $112,298 value; Mr. Malley 2,834 shares, $98,836 value; and Mr. Turner 2,774 shares, $96,743 value. The value was calculated by multiplying the closing market price on December 31, 1996 by the number of shares. (f) Includes NEP contributions to life insurance and the incentive thrift plan that are not bonus contributions, including any related deferred compensation plan match. See description under Plan Summaries. The life insurance contribution is calculated based on the value of term life insurance for the named individuals. The premium costs for most of these policies have been or will be recovered by NEP. (g) For Mr. Rowe, the amount and type of compensation in 1996 is as follows: $1,005 for contributions to the thrift plan and $633 for life insurance. (h) For Mr. Tranen, the amount and type of compensation in 1996 is as follows: $2,735 for contributions to the thrift plan and $623 for life insurance. (i) For Mr. Bailey, the amount and type of compensation in 1996 is as follows: $3,000 for contributions to the thrift plan and $776 for life insurance. (j) For Mr. Malley, the amount and type of compensation in 1996 is as follows: $2,668 for contributions to the thrift plan, and $474 for life insurance. (k) For Mr. Turner, the amount and type of compensation in 1996 is as follows: $2,051 for contributions to the thrift plan and $798 for life insurance. MASS. ELECTRIC SUMMARY COMPENSATION TABLE
Long-Term Compensa- Annual Compensation (b) tion -------------------------- --------- Other Restricted Name and Annual & Deferred All Other Principal Compensa- Share Compensa- Position Year Salary Bonus tion Awards tion (a) ($) ($)(c) ($)(d) ($)(e) ($)(f) - ---------- ---- ------- ------ --------- ---------- --------- Richard P. 1996 135,213 70,388 3,411 87,965 2,247(g) Sergel 1995 123,480 93,047 3,256 0 2,285 Chairman 1994 113,021 63,550 3,307 29,731 2,228 Lawrence J. 1996 96,163 70,177 2,467 46,082 2,250(h) Reilly 1995 38,561 34,985 37 0 986 President 1994 25,576 16,917 26 6,136 563 Eric P. 1996 124,186 79,124 116 0 2,876(i) Cody 1995 67,714 40,590 70 0 1,548 Vice 1994 74,318 37,144 74 15,371 1,726 President Nancy H. 1996 118,251 65,493 116 0 2,730(j) Sala 1995 115,524 59,932 116 0 2,498 Vice 1994 107,621 39,318 116 16,129 2,493 President Anthony C. 1996 114,058 66,117 113 17,258 2,580(k) Pini 1995 111,300 59,993 116 0 2,403 Vice 1994 105,884 43,465 116 17,688 2,454 President
(a) Certain officers of Mass. Electric are also officers of NEES and various other System companies. (b) Includes deferred compensation in category and year earned. (c) The bonus figure represents: cash bonuses under an incentive compensation plan, the all-employee goals program, the variable match of the incentive thrift plan, and unrestricted shares under the incentive share plan or special share bonuses. See descriptions under Plan Summaries. (d) Includes amounts reimbursed by Mass. Electric for the payment of taxes. (e) Special share bonuses were made to a limited number of executives in 1996. Under the terms of those awards, the share values were mandatorily deferred until the executives' termination of employment. No awards vested during 1996 under the Long-Term Performance Share Award Plan. The incentive share awards for the named executives made for 1994 were in the form of restricted shares (with a five-year restriction) or deferred share equivalents, deferred for receipt for at least five years, at the executive's option. In 1996 awards for NEES officers were similarly restricted. As cash dividends are declared, the number of deferred share equivalents will be increased as if the dividends were reinvested in shares. None of the shares awarded for 1995 were restricted. As of December 31, 1996, the following executive officers held the amount of restricted and deferred shares with the value indicated: Mr. Sergel 7,471 shares, $260,551 value; Mr. Reilly 4,677 shares, $163,110 value; Mr. Cody 2,714 shares, $94,651 value; Ms. Sala 1,639 shares, $57,160 value; and Mr. Pini 1,640 shares, $57,195 value. The value was calculated by multiplying the closing market price on December 31, 1996 by the number of shares. (f) Includes Mass. Electric contributions to life insurance and the incentive thrift plan that are not bonus contributions, including any related deferred compensation plan match. See description under Plan Summaries. The life insurance contribution is calculated based on the value of term life insurance for the named individuals. The premium costs for most of these policies have been or will be recovered by Mass. Electric. (g) For Mr. Sergel, the type and amount of compensation in 1996 is as follows: $1,907 for contributions to the thrift plan and $340 for life insurance. (h) For Mr. Reilly, the type and amount of compensation in 1996 is as follows: $1,923 for contributions to the thrift plan and $327 for life insurance. (i) For Mr. Cody, the type and amount of compensation in 1996 is as follows: $2,484 for contributions to the thrift plan and $392 for life insurance. (j) For Ms. Sala, the type and amount of compensation in 1996 is as follows: $2,365 for contributions to the thrift plan and $365 for life insurance. (k) For Mr. Pini, the type and amount of compensation in 1996 is as follows: $2,281 for contributions to the thrift plan and $299 for life insurance. NARRAGANSETT SUMMARY COMPENSATION TABLE
Long-Term Compensa- Annual Compensation (b) tion -------------------------- --------- Other Restricted Name and Annual & Deferred All Other Principal Compensa- Share Compensa- Position Year Salary Bonus tion Awards tion (a) ($) ($)(c) ($)(d) ($)(e) ($)(f) - ---------- ---- ------- ------ --------- ---------- --------- Richard P. 1996 70,998 36,959 1,791 46,188 1,180(g) Sergel 1995 54,821 41,310 1,446 0 1,015 Chairman 1994 50,319 26,293 1,472 13,237 992 Robert L. 1996 127,388 88,905 4,819 50,308 3,424(h) McCabe 1995 152,407 111,785 4,206 0 4,851 President 1994 140,785 68,784 4,457 28,576 4,256 William 1996 132,012 84,081 119 0 4,509(i) Watkins, 1995 128,172 77,967 119 0 4,054 Jr. 1994 124,428 62,799 115 26,136 6,186 Executive Vice President Richard W. 1996 108,432 57,680 119 0 2,888(j) Frost 1995 103,272 48,972 119 0 2,787 Vice 1994 99,300 34,269 115 13,629 2,706 President Richard 1996 100,884 24,830 119 0 3,004(k) Nadeau 1995 95,838 15,500 119 0 2,902 Vice 1994 91,572 11,272 115 3,267 3,037 President
(a) Certain officers of Narragansett are also officers of NEES and various other System companies. (b) Includes deferred compensation in category and year earned. (c) The bonus figure represents: cash bonuses under an incentive compensation plan, the all-employee goals program, the variable match of the incentive thrift plan, and unrestricted shares under the incentive share plan or special share bonuses. See descriptions under Plan Summaries. (d) Includes amounts reimbursed by Narragansett for the payment of taxes. (e) Special share bonuses were made to a limited number of executives in 1996. Under the terms of those awards, the share values were mandatorily deferred until the executives' termination of employment. No awards vested during 1996 under the Long-Term Performance Share Award Plan. The incentive share awards for the named executives made for 1994 were in the form of restricted shares (with a five-year restriction) or deferred share equivalents, deferred for receipt for at least five years, at the executive's option. In 1996 awards for NEES officers were similarly restricted. As cash dividends are declared, the number of deferred share equivalents will be increased as if the dividends were reinvested in shares. None of the shares awarded for 1995 were restricted. As of December 31, 1996, the following executive officers held the amount of restricted and deferred shares with the value indicated: Mr. Sergel 7,471 shares, $260,551 value; Mr. McCabe 6,027 shares, $210,192 value; Mr. Watkins 2,490 shares, $86,839 value; Mr. Frost 895 shares, $31,213 value; and Mr. Nadeau 201 shares, $7,010 value. The value was calculated by multiplying the closing market price on December 31, 1996 by the number of shares. (f) Includes Narragansett contributions to life insurance and the incentive thrift plan that are not bonus contributions, including any related deferred compensation plan match. See description under Plan Summaries. The life insurance contribution is calculated based on the value of term life insurance for the named individuals. The premium costs for most of these policies have been or will be recovered by Narragansett. (g) For Mr. Sergel, the type and amount of compensation in 1996 is as follows: $1,001 for contributions to the thrift plan and $179 for life insurance. (h) For Mr. McCabe, the type and amount of compensation in 1996 is as follows: $2,165 for contributions to the thrift plan and $1,259 for life insurance. (i) For Mr. Watkins, the type and amount of compensation in 1996 is as follows: $2,640 for contributions to the thrift plan and $1,869 for life insurance. (j) For Mr. Frost, the type and amount of compensation in 1996 is as follows: $2,169 for contributions to the thrift plan and $719 for life insurance. (k) For Mr. Nadeau, the type and amount of compensation in 1996 is as follows: $2,018 for contributions to the thrift plan and $986 for life insurance. Security Ownership ------------------ The following table lists the holdings of NEES common shares as of March 1, 1997 by NEES, NEP, Mass. Electric, and Narragansett directors, the executive officers named in the Summary Compensation Tables, and all directors and executive officers, as a group. Shares Deferred Beneficially Share Name Owned (a) Equivalents(b) - ---- ----------- -------------- Joan T. Bok 17,111 William M. Bulger 100 129 Alfred D. Houston 13,235 8,892 Paul L. Joskow 2,719 John M. Kucharski 2,500 Edward H. Ladd 5,789 Cheryl A. LaFleur 2,543 4,603 Joshua A. McClure 2,010 251 John W. Rowe 22,677 20,419 George M. Sage 3,300 Richard P. Sergel 8,413 6,692 Charles E. Soule 1,196 2,875 Jeffrey D. Tranen 8,141 6,764 Anne Wexler 2,176 James Q. Wilson 3,002 James R. Winoker 1,500 Urville J. Beaumont 293 Eric P. Cody 2,435 2,044 Sally L. Collins 295 Kalyan K. Ghosh 51 242 Charles B. Housen 18 Patricia McGovern 161 Anthony C. Pini 8,413 1,113 John F. Reilly 296 Lawrence J. Reilly 2,738 4,469 Nancy H. Sala 7,749 (c) 1,538 Roslyn M. Watson 296 181 Stephen A. Cardi 294 Richard W. Frost 6,805 472 Frances H. Gammell 296 292 Joseph J. Kirby 295 Robert L. McCabe 9,532 5,022 Richard Nadeau 4,115 William E. Trueheart 296 702 Willliam Watkins, Jr. 5,512 2,185 John A. Wilson, Jr. 658 Lawrence E. Bailey 5,200 2,485 John F. Malley 4,988 2,566 Arnold H. Turner 4,048 1,985 All directors and executive officers, as a group (51 persons) 211,480 (d) 88,981 (d) (a) Number of shares beneficially owned includes: (i) shares directly owned by certain relatives with whom directors or officers share voting or investment power; (ii) shares held of record individually by a director or officer or jointly with others or held in the name of a bank, broker, or nominee for such individual's account; (iii) shares in which certain directors or officers maintain exclusive or shared investment or voting power whether or not the securities are held for their benefit; and (iv) with respect to the executive officers, allocated shares in the Incentive Thrift Plan described below. (b) Deferred share equivalents are held under the Deferred Compensation Plan or pursuant to individual deferral agreements. Under the Plan or deferral agreements, executives may elect to defer cash compensation and share awards. There are various deferral periods available under the plans. At the end of the deferral period, the compensation may be paid out in NEES common shares, cash, or a combination thereof. The rights of the executives to payment are those of general, unsecured creditors. While deferred, the shares do not have voting rights or other rights associated with ownership. As cash dividends are declared, the number of deferred share equivalents will be increased as if the dividends were reinvested in NEES common shares. Deferred share equivalents for directors are held under the Directors Deferred Compensation Plan. See Board Structure and Compensation for a description of that plan. Potential share awards under the Long-Term Performance Share Award Plan are not included in this table. (c) Ms. Sala disclaims a beneficial ownership interest in 260 shares held under the Uniform Gift to Minors Act. (d) Amount is less than 1% of the total number of shares of the Company outstanding. Listed below are the only persons or groups known to the System as of March 10, 1997 to beneficially own 5% or more of NEES common shares. However, T. Rowe Price Trust Company disclaims beneficial ownership of all such shares. The quantity of shares listed below is as of December 31, 1996. Amount and Nature Name and Address of of Beneficial Percent of Beneficial Owner Ownership Common Shares ------------------- ----------------- -------------- T. Rowe Price Trust Company 5,268,184 shares as 8.1% 100 East Pratt Street trustee for Baltimore, MD 21202 System employee benefits plans, including those discussed herein. Franklin Resources, Inc. 4,592,700 shares 7.1% 777 Mariners Island Blvd. San Mateo, CA 94403-7777 Contracts and Transactions with System Companies ------------------------------------------------ During 1996, Mr. Joskow did consulting work for NEES or subsidiaries of NEES under a separate consulting contract for which he was paid approximately $41,000. These consulting services were not related to his duties as a Board member. NEES and its subsidiaries retain from time to time National Economic Research Associates, Inc. (NERA). During 1996, NERA invoiced subsidiaries of NEES for approximately $245,000.00 to prepare testimony and reports on regulatory matters. Mr. Joskow is a special consultant to NERA. Mrs. Bok serves as a consultant to NEES. Under the terms of her contract, she receives an annual retainer of $100,000. Mrs. Bok also serves as a director for each of NEES' direct subsidiaries. She has agreed to waive the normal fees and annual retainers otherwise payable for services by nonemployees on these boards and receives in lieu thereof a single annual stipend of $60,000. The construction company of Mr. Stephen A. Cardi, a director of Narragansett, was paid approximately $138,000 in 1996 pursuant to a contract to provide gravel to Narragansett and approximately $2 million by NEP in 1996 pursuant to a contract to construct Collier Point Park at Manchester Street Station. Compensation Committee Interlocks and Insider Participation ----------------------------------------------------------- Mr. Winoker served as a member of NEES' Compensation Committee during 1996. A subsidiary of NEES entered into a three-year lease for office space in 1996 with Belvoir Properties, Inc. (Belvoir) with an annual rent of $36,000. Belvoir also entered into a twenty-year lease with a subsidiary of NEES for a parcel of land in Providence, Rhode Island with an initial annual rent of $30,000. Plan Summaries -------------- A brief description of the various plans through which compensation and benefits are provided to the named executive officers is presented below to better enable shareholders to understand the information presented in the tables shown earlier. The amounts of compensation and benefits provided to the named executive officers under the plans described below (and charged to the System Companies listed in the above tables) are presented in the Summary Compensation Tables. Goals Program - ------------- The Goals Program covers all employees who have completed one year of service with any NEES subsidiary. Goals are established annually. For 1996, these goals related to earnings per share, customer costs, safety, absenteeism, demand-side management results, generating station availability, transmission reliability, environmental and OSHA compliance, and customer satisfaction. Some goals apply to all employees, while others apply to particular functional groups. Depending upon the number of goals met, and provided the minimum earnings goal is met, employees may earn a cash bonus of 1% to 4-1/2% of their compensation. Incentive Thrift Plan - --------------------- The Incentive Thrift Plan (a 401(k) program) provides for a match of 40% of up to the first 5% of base compensation contributed to the System's Incentive Thrift Plan (shown under All Other Compensation in the Summary Compensation Tables) and, based on an incentive formula tied to earnings per share, may fully match the first 5% of base compensation contributed (the additional amount, if any, is shown under Bonus in the Summary Compensation Tables). Under Federal law, contributions to these plans are limited. In 1996, the contribution amount was limited to $9,500. Deferred Compensation Plan - -------------------------- The Deferred Compensation Plan offers executives the opportunity to defer base pay and bonuses. The plan offers the option of investing at the prime rate or in NEES Shares; however, share bonuses may only be deferred in a share account. Under Federal law, the Incentive Thrift Plan, described above, is required to limit participant base compensation to $150,000 in calculating the NEES match. Under the Deferred Compensation Plan, NEES will make a contribution to an executive's share account equivalent to the resultant reduction in his match under the Incentive Thrift Plan. Life Insurance - -------------- NEES has established for certain senior executives life insurance plans funded by individual policies. The combined death benefit under these insurance plans is three times the participant's annual salary. These plans are structured so that, over time, NEES should recover the cost of the insurance premiums. After termination of employment, Messrs. Rowe and Houston may elect, commencing at age 55 or later, to receive an annuity income equal to 40% of annual salary. In that event, the life insurance is reduced over fifteen years to an amount equal to the participant's final annual salary. Due to changes in the tax law, this plan was closed to new participants, and an alternative was established with only a life insurance benefit. The individuals listed in the NEES summary compensation table and Messrs. McCabe and Reilly are in one or the other of these plans. Financial Counseling - -------------------- NEES pays for personal financial counseling for senior executives. As required by the IRS, a portion of the amount paid is reported as taxable income for the executive. Financial counseling is also offered to other employees through a limited number of seminars conducted at various locations each year. Other - ----- NEES does not have any share option plans. Long Term Incentive Plan - Awards in Last Fiscal Year ----------------------------------------------------- The following tables show the potential awards, for those executive officers named in the Summary Compensation Tables who participate in the plan, under the Long-Term Performance Share Award Plan (more fully described in the Compensation Committee Report on page 36) for the performance cycle commencing January 1, 1996. The System's performance will be measured over the three- year period ending December 31, 1998. NEES ---- Estimated Future Payouts under Non-Stock Price-Based Plans -----------------------------------------------------------
Number of Common Share Performance Name Equivalents(a) Period Threshold(b) Target(c) - ---- ----------- --------- --------- ------ John W. Rowe 6,747 3 years 169 6,747 Alfred D. Houston 4,204 3 years 105 4,204 Jeffrey D. Tranen 2,763 3 years 69 2,763 Richard P. Sergel 2,670 3 years 67 2,670 Cheryl A. LaFleur 1,040 3 years 26 1,040 NEP --- Estimated Future Payouts under Non-stock Price-based Plans ------------------------------------------------ Number of Common Share Performance Name Equivalents(a) Period Threshold(b) Target(c) ---- -------------- ----------- ------------ --------- John W. Rowe 6,747 3 years 169 6,747 Jeffrey D. Tranen 2,763 3 years 69 2,763 Lawrence E. Bailey 954 3 years 24 954 John F. Malley 839 3 years 21 839 Arnold H. Turner 805 3 years 21 805 Mass Electric --------------- Estimated Future Payouts under Non-stock Price-based Plans ------------------------------------------------ Number of Common Share Performance Name Equivalents(a) Period Threshold(b) Target(c) ---- -------------- ----------- ------------ --------- Richard P. Sergel 2,670 3 years 67 2,670 Lawrence J. Reilly 804 3 years 21 804 Eric P. Cody 782 3 years 20 782 Nancy H. Sala 448 3 years 12 448 Anthony C. Pini 442 3 years 11 442 Narragansett ------------ Estimated Future Payouts under Non-stock Price-based Plans ------------------------------------------------ Number of Common Share Performance Name Equivalents(a) Period Threshold(b) Target(c) ---- -------------- ----------- ------------ --------- Richard P. Sergel 2,670 3 years 67 2,670 Robert L. McCabe 1,108 3 years 28 1,108 William Watkins, Jr. 829 3 years 21 829 Richard W. Frost 409 3 years 11 409
(a) Amounts are denominated in common share units. No dividends are attributable to share units. At the end of the cycle, awards are paid either in shares or in cash (valued at the five-day average price prior to the January 15 following the close of the performance cycle). (b) The awards in this column represent the threshold number of shares that could be earned if the minimum attainment level is reached for one factor. The minimum payout upon failure to achieve any of the goals would be 0. (c) The awards in this column represent the target (and maximum) number of shares that could be earned if the maximum performance is achieved for all factors. The Long-Term Performance Share Award Plan provides awards based on various measures of System performance over a three-year period. Each award factor functions independently. The performance targets for each cycle are set by the Compensation Committee. The measures of performance for this cycle are: return on equity compared to the national group (60th- 75th percentile); kilowatt-hour cost compared to regional group (67th-90th percentile); total shareholder return compared to the regional group (60th- 75th percentile); maintenance or improvement of bond ratings; and system service levels, measured by customer satisfaction, system reliability, system availability, and regulatory compliance. The national grouping is the utility group formerly tracked by Duff & Phelps. The regional grouping is composed of New England/New York regional utilities. Retirement Plans - ---------------- The following chart shows estimated annual benefits payable to executive officers under the qualified pension plan and the supplemental retirement plan, assuming retirement at age 65 in 1997. PENSION PLAN TABLE ------------------
FIVE-YEAR 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS AVERAGE SERVICE SERVICE SERVICE SERVICE SERVICE SERVICE COMPENSATION - ------------ ------- ------- ------- ------- ------- ------- $ 300,000 60,400 87,600 114,900 141,300 167,800 184,500 $ 400,000 81,100 117,700 154,300 189,800 225,400 248,000 $ 500,000 101,800 147,700 193,700 238,300 283,000 311,400 $ 600,000 122,500 177,800 233,100 286,800 340,600 374,900 $ 700,000 143,200 207,800 272,500 335,300 398,200 438,300 $ 800,000 163,900 237,900 311,900 383,800 455,800 501,800 $ 900,000 184,600 267,900 351,300 432,300 513,400 565,200 $1,000,000 205,300 298,000 390,700 480,800 571,000 628,700 $1,100,000 226,000 328,000 430,000 529,300 628,600 692,100 $1,200,000 246,700 358,100 469,500 577,800 686,200 755,600 $1,300,000 267,400 388,100 509,000 626,300 743,800 819,000 $1,400,000 288,100 418,200 548,300 674,800 801,400 882,500
For purposes of the retirement plans, Messrs. Rowe, Houston, Tranen, and Sergel and Ms. LaFleur currently have 19, 34, 27, 18 and 11 credited years of service, respectively. Messrs. Bailey, Malley, and Turner currently have 28, 25, and 31 credited years of service, respectively. Mr. Reilly, Mr. Cody, Ms. Sala, and Mr. Pini currently have 15, 13, 27, and 18 credited years of service, respectively. Messrs. McCabe, Watkins, Frost, and Nadeau currently have 28, 24, 34, and 41 credited years of service, respectively. Benefits under the pension plans are computed using formulae based on percentages of highest average compensation computed over five consecutive years. The compensation covered by the pension plan includes salary, bonus, and incentive share awards. Long-Term Performance Share Awards will not be included. The benefits listed in the pension table are not subject to deduction for Social Security and are shown without any joint and survivor benefits. The pension plan table above does not include annuity payments to be received in lieu of life insurance for Messrs. Rowe and Houston. The policies are described above under Plan Summaries. Under the Retirement Supplement Plan, participants receive an annual adjustment to their pension benefits. The amount of the adjustment is equal to the rate of interest on AAA bonds for the prior year less two percent (but in no case more than the increase in the cost of living). Mr. Rowe is the only active employee now participating in this plan. The System covers the full cost of post-retirement health benefits for the senior executives listed in the Summary Compensation Table. Payments Upon a Change of Control - --------------------------------- NEES has agreements with certain of its executives, including those named in the Summary Compensation Table, which provide severance benefits in the event of certain terminations of employment following a Change in Control of NEES (as defined below). (Mr. Tranen's contracts also provides severance benefits in the event of a divestiture of all or a substantial portion of the System's fossil fuel generating assets.) The terms of the agreements are for three years with automatic annual extensions, unless terminated by the System. If, following a Change of Control, the executive's employment is terminated other than for cause (as defined) or if the executive terminates employment for good reason (as defined), NEES will pay to the executive a lump sum cash payment equal to three times (two times for some executives) the sum of the executive's most recent annual base compensation and the average of his or her bonus amounts for the prior three years. If Mr. Rowe receives payments under his severance agreement that would subject him to any federal excise tax due under section 280G of the Internal Revenue Code, he will receive a cash "gross-up" payment so he would be in the same net after-tax position he would have been in had such excise tax not been applied. In addition, NEES will provide disability and health benefits to the executive for two to three years, provide such post-retirement health and welfare benefits as the executive would have earned within such two to three years, and grant two or three additional years of pension credit. Mr. Rowe would become eligible for benefits under the Retirement Supplement Plan described below prior to the five-year vesting term. Change in Control, including potential change of control, occurs (1) when any person becomes the beneficial owner of 20% of the voting securities of NEES, (2) when the prior members of the Board no longer constitute a 2/3 majority of the Board, or (3) NEES enters into an agreement that could result in a Change in Control. Upon a change in control a participant in the deferred compensation plan has the option of receiving a lump sum payment equal to the value of cash and share accounts and the actuarial value of maximum value of future benefits from the insurance related benefits under a prior plan, all less 10%. The System's bonus plans, including the incentive compensation plans described in the Compensation Committee report, the Incentive Thrift Plan, and the Goals Program, provide for payments equal to the average of the bonuses for the three prior years in the event of a Change of Control. This payment would be made in lieu of the regular bonuses for the year in which the Change in Control occurs. The Long-Term Performance Share Award Plan provides for a cash payment equal to the value of the performance shares in the participant's account times the average target achievement percentage for the Incentive Thrift Plan for the three prior years. The System's Retirees Health and Life Insurance Plan has provisions preventing changes in benefits adverse to the participants for three years following a Change in Control. The Incentive Share Plan and related Incentive Share Deferral Agreements provide that, upon the occurrence of a change in control (defined more narrowly than in the other plans), any restrictions on shares and account balances would cease. In light of the changes in the utility industry, NEES determined that executive officers, including those listed in the Summary Compensation Tables, but excluding Mr. Rowe, would receive a benefit equal to either 1 or 1-1/2 times annual compensation, for a severance other than one for cause or following a change in control. New England Electric System Compensation Committee Report on Executive Compensation - ------------------------------------------ The System's total compensation package is designed to attract, retain, and reward superior managers who are committed to solid financial performance and who can also successfully lead the System as our industry becomes increasingly competitive. The compensation package reflects the fact that these managers' backgrounds are not necessarily limited to our System or industry. Total compensation consists of Base Salary, Incentive Compensation (performance based, at risk compensation), and Benefits. The Committee periodically reviews each component of the System's executive compensation program to ensure that pay levels and incentive opportunities are competitive and that incentive opportunities are linked to System performance. The System's general compensation philosophy is that (1) the Base Salary ranges should be competitive, with individual salaries reflecting performance and experience; (2) a significant portion of management compensation should be tied to achievement of corporate goals in order to maintain a sharp focus on corporate performance; (3) substantial portions of incentive compensation should be in shares so as to consistently align the interest of management and the System's shareholders and customers; and (4) an ever higher percentage of total compensation should be at risk and share based as one moves upward through management. The compensation of Mr. Rowe, the Chief Executive Officer, is based on these considerations. Share Ownership Guidelines - -------------------------- The System has long recognized the importance of consistent alignment of executive interests with those of shareholders. In 1995, the Committee voted that it is expected that executives will own shares or share equivalents to certain minimum levels within five years of being subject to the requirement. For Mr. Rowe, the level is 40,000 shares. In February 1997, the Committee voted that Mr. Houston's level be raised to 25,000 shares. For the other executives listed in the NEES Compensation Summary Table, the level is 15,000 shares. Other executives are expected to hold from 2,000 to 7,000 shares depending on their compensation levels and bonus plans. In 1996, the NEES Board of Directors voted that members of the Board were expected to own 2,500 shares within five years of being subject to that requirement. To further reinforce the importance of executive share ownership, the Committee has amended the Incentive Share Plan and the Long-Term Performance Share Award Plan to provide that all shares awarded to System officers are restricted for five years, unless deferred, at the officer's option, until termination of service or ten years. Compensation Decisions - ---------------------- The NEES Board of Directors votes the compensation of Mr. Rowe, acting upon recommendations of the Compensation Committee, which is described on page 38. The Committee reports its decisions to the NEES Board of Directors. After meeting in executive session without Mr. Rowe, and discussing the reports made by the Committee, the NEES Board of Directors has unanimously accepted each of the recommendations described below made in 1996 and to date in 1997. The Compensation Committee votes the compensation of all other System executive officers listed in the Summary Compensation Table, as well as other senior employees. The Board has ratified the compensation decisions for these executive officers. Although System management may be present during Committee discussions of officers' compensation, Committee decisions with respect to the compensation of Mr. Rowe are reached in executive session. No decision on the compensation of any executive officer is made in his or her presence. Under Section 162(m) of the Internal Revenue Code, tax deductions are limited for compensation above $1 million. Mr. Rowe's total compensation of $832,700 in cash and $377,068 in shares for 1996 exceeds $1 million; however, the limitation of the Code does not apply to amounts deferred. Given the mandatory deferral of his special and plan share bonuses, the Internal Revenue Code provisions do not currently impact the System. Compensation for each of the other executive officers is well below the $1 million threshold. The Committee has not, therefore, had to address issues related to Section 162(m) and does not expect to in the near future, but will continue to monitor these issues. Base Salary - ----------- Base Salary levels are established after consideration of the appropriate market to determine the salary range for a position. Extensive salary survey analyses are compiled annually and presented to the Committee for review. Salary ranges are then defined on the basis of those market surveys. These surveys may include some of the same companies included in incentive compensation plan comparisons or in the corporate performance chart. In October 1996, after consideration of multiple surveys prepared by various consulting organizations and industry groups, and taking into account Mr. Rowe's experience, success, and record as a utility CEO, the Committee recommended the base salary for Mr. Rowe be set at $597,600 for 1997. (Mr. Rowe's base salary was last changed effective January 1995.) The Board adopted this recommendation. In November 1996, the Committee reviewed the performance of each individual in the compensation group below Mr. Rowe and the relative position of these individuals compared to the market surveys discussed above, and, after the Committee's subjective analysis of the performance of those individuals, the Committee adopted salaries for this group. Performance Based Incentive Compensation - ---------------------------------------- Performance Based Incentive Compensation (at risk compensation or bonus) is designed to deliver rewards above base salary, if the System and the individual executives perform well. Annual Target Plans - ------------------- The incentive components of the annual target compensation plans are based on formulae with difficult threshold targets. Under the formulae, in order for any plan bonuses to be awarded, the System must achieve a return on equity that places the System in the top 50% of the approximately 90 electric utilities listed in the utility group formerly tracked by Duff & Phelps (the National Grouping) or in the top 50% of the New England/New York regional utilities (the Regional Grouping). See the Return on Equity graph, below. The NEES Board of Directors, in response to extraordinary events, may enhance or curtail the actual return on equity used to determine whether the System met the targets. They did not do so for 1996. On February 24, 1997, the Committee voted the bonuses under these plans. For the maximum incentive to be awarded, the System must achieve a return on equity in the top 25% of both the National and Regional Groupings and the System's cost per kilowatt-hour must be the lowest or next lowest of a selected group of New England electric utilities. In 1996, if only one of the return on equity targets had been met, Mr. Rowe would have received a formula bonus of 12% of base pay in cash and 7.2% in shares. The maximum would have been 50% of base pay in cash and 30% in shares. Based on the performance described below, his formula bonus (cash and shares) was 49.34% of base pay in cash and 29.58% in shares. For purposes of determining the bonus amount for 1996, the System placed in the 72nd and the 88th percentiles in return on shareholder equity of the National and Regional Groupings, respectively. The System placed second in the Regional Grouping with respect to customer cost per kilowatt-hour in 1996. No bonus awards would be made under the plans if earnings are not sufficient to cover dividends, even if the return on equity targets had been met. Mr. Rowe's bonus under the plan is directly related to achievement of the above described corporate targets. For 1996, the incentive compensation plan bonuses of the other executives were additionally dependent upon the achievement of individual goals. The participants in the incentive compensation plans are awarded NEES common shares under the Incentive Share Plan, approved by the shareholders in 1990. No discretion is exercised by the Committee in the awarding of shares generated by the formulae. An individual's award of shares under the Incentive Share Plan is a fixed percentage of her or his cash award for that year from the incentive compensation plan in which she or he participates. For Mr. Rowe, the percentage is 60%. If no cash award is made, no shares are distributed under the formulae. Further, total plan awards of shares in any calendar year cannot exceed one-half of one percent (0.5%) of the number of outstanding shares at the end of the previous calendar year. (The incentive plan shares awarded, including those restricted or deferred, for 1996 were approximately 0.08% of the number of outstanding shares.) As noted above, the Committee has restricted the share awards of System officers. The Committee voted to approve the bonuses upon which the share awards are based on February 24, 1997. Special Share Award - ------------------- The Committee believes that during 1996 certain officers of the System accomplished significant results in leading industry restructuring in New England in a way which protects the System's shareholders at a time when utility investments are exposed to increased risk. In recognition of these efforts, the Committee recommended to the Board a special share award of 6,000 shares for Mr. Rowe. This share award was conditioned on being deferred until Mr. Rowe's termination of service with the System. The other officers listed in the NEES summary table were also awarded shares that were also mandatorily deferred. Three-Year Target Plan - ---------------------- In order to increase executive focus on multi-year performance, in 1995 the System established the Long-Term Performance Share Award Plan described below. No payout was made in 1996 nor will be made under this plan until the Spring of 1999. Under this plan, awards are based upon various measures of System performance over a three-year period. Each award factor or measurement functions independently. The factors change from year to year and include financial and operating performance. The factors may be related to those in the incentive plans. The factors are established by the Committee at the beginning of each cycle. All participants share the same factors and factor weights. Performance is rated on rolling three-year periods, with a new cycle beginning each year. An individual's potential award under the plan is a fixed percentage of her or his base pay on the January 1 of the first year of the plan measurement period. For Mr. Rowe, that percentage was 50%. Percentages for other executives range from 15% to 50%. No dividends accrue on the allocated shares until awarded. At the end of the three-year cycle, the participant receives actual shares based upon the performance against the various factors. For example, for the first cycle, 20% of the shares are dependent upon total shareholder return compared to other regional utilities. See Estimated Future Payouts under Non-Stock Price-Based Plans, below. Benefits - -------- The executive benefits are designed both to provide a competitive package and to retain System flexibility in staffing management to meet changing conditions. Severance - --------- In November 1996 the Committee reviewed management severance benefits in light of the changes in the utility industry. The Committee determined that, executive officers (including those listed in the Summary Compensation Tables, but excluding Messrs. Rowe and Houston) would receive a benefit equal to one and one-half times annual compensation, for a severance other than one for cause or following a change in control. New England Electric System Compensation Committee John M. Kucharski George M. Sage James R. Winoker Corporate Performance --------------------- Total Return - ------------ The following table shows total shareholder return for NEES (capital appreciation plus reinvested dividends) for the years 1991 through 1996, as compared to the Standard & Poor's 500 Index and the Edison Electric Institute (EEI) Index of 100 investor-owned electric companies, assuming the investment of $100 on December 31, 1991.
NEES S & P 500 EEI Index ---- --------- --------- 1991 100.00 100.00 100.00 1992 127.84 137.11 107.50 1993 137.11 118.46 119.58 1994 120.25 120.03 105.74 1995 158.87 165.13 138.55 1996 149.20 203.05 140.22
Note: The share price performance shown on the table above is not necessarily indicative of future price performance. Return on Equity - ---------------- The following table shows the return on equity of NEES common shares for the years 1992 through 1996 compared to a national grouping of approximately 90 electric utilities (those utilities listed in the utility group formerly tracked by Duff & Phelps) and a regional grouping of utilities in the New York and New England area. As discussed in the report of the Compensation Committee, return on equity is a key driver of the System's incentive compensation program.
NEES National Regional Grouping Grouping ---- -------- -------- 1992 12.58% 11.32% 11.84% 1993 12.64% 11.90% 11.41% 1994 12.73% 11.42% 11.40% 1995 12.78% 11.72% 10.43% 1996 12.58% 11.41% 11.13%
Note: The return on equity shown for each grouping is the median at the date of incentive compensation determination. The earnings performance shown on the graph above is not necessarily indicative of future performance. NEES Board Structure and Compensation ------------------------------------- NEES has an Executive Committee, an Audit Committee, a Compensation Committee, a Corporate Responsibility Committee, and a Nominating Committee. The committee memberships listed below are as of January 1, 1997. The members of the Executive Committee are Mrs. Bok, Mr. Ladd, Mr. Rowe, Mr. Sage, and Ms. Wexler. Mrs. Bok serves as the Chairman of this Committee. During the intervals between meetings of the Board of Directors, the Executive Committee has all the powers of the Board that may be delegated. The members of the Audit Committee are Messrs. Bulger, Joskow, Soule, and Winoker. Mr. Joskow serves as the Chairman of this Committee. The Audit Committee reviews with the independent public accountants the scope of their audit and management's financial stewardship for the current and prior years. This Committee also recommends to the NEES Board of Directors and to the boards of the subsidiaries of NEES the independent public accountants to be engaged for the coming year. The members of the Compensation Committee are Messrs. Kucharski, Sage, and Winoker. Mr. Sage serves as the Chairman of this Committee. The Compensation Committee is responsible for executive compensation, including the administration of certain of the System's incentive compensation plans. The members of the Corporate Responsibility Committee are Mrs. Bok, Mr. McClure, Mr. Rowe, Ms. Wexler, and Mr. Wilson. Mr. Wilson serves as the Chairman of this Committee. The Corporate Responsibility Committee reviews compliance with laws and regulations, offers guidance in considering public policy issues, and helps to assure ethical conduct. The members of the Nominating Committee are Mr. Ladd, Mr. Sage, and Ms. Wexler. Mr. Ladd serves as Chairman of this Committee. The Nominating Committee considers and evaluates director candidates, determines criteria and procedures for selecting nonmanagement directors, and conducts periodic reviews of director performance. This Committee also considers written recommendations from shareholders for nominees to the Board. The Chairman of the Executive Committee receives an annual retainer of $7,000. Other members of the Executive Committee, except Mr. Rowe, receive an annual retainer of $5,000. The Chairmen of the Audit, Compensation, and Corporate Responsibility Committees each receive an annual retainer of $6,000. Other members of these Committees, except Mr. Rowe, receive annual retainers of $4,000. The Chairman of the Nominating Committee receives an annual retainer of $2,000. There is no retainer for the other members of the Nominating Committee. All directors participating in a Committee meeting, except Mr. Rowe, receive a meeting fee of $850 plus expenses. Members of the Board of Directors, except Mr. Rowe, receive annually a retainer of $14,000 and 300 NEES common shares, and receive a meeting fee of $850 plus expenses for each meeting attended. NEES permits directors to defer all or a portion of any cash retainers, meeting fees, and retainer shares under a deferred compensation plan. A director may elect to defer to a Company Share Account or a Prime Rate Account. While deferred, the shares do not have voting rights or other rights associated with ownership. At the time of electing to defer compensation, the director also elects whether to receive payment after ten years or upon retirement, and, if upon retirement, whether in ten payments or a lump sum. A special account is maintained on NEES' books showing the amounts deferred and the interest accrued thereon. This plan also provides certain death and disability benefits. Group life insurance of $80,000 is provided to each member of the Board of Directors. Director contributions to qualified charities are matched by NEES under a matching gift program, which has a maximum limit of $3,500. Pursuant to a director retirement plan, nonemployee directors who have served on the Board of NEES for 5 years or more will receive a retirement benefit upon the later of the director's retirement from the Board or age 60. The benefit level is 100% of the annual retainer for directors who served on the Board for 10 or more years and 75% of the annual retainer for directors who served between 5 and 10 years. There are no death benefits under the plan. The Board of Directors held 10 meetings in 1996. The Executive, Audit, Compensation, Corporate Responsibility, and Nominating Committees held 2, 3, 3, 3, and 2 meetings, respectively, in 1996. Mass. Electric, Narragansett, and NEP Directors' Compensation - ------------------------------------------------------------- Members of the Mass. Electric and Narragansett Boards of Directors, except employees of NEES System companies, i.e., Messrs. McCabe, L. J. Reilly, Rowe, and Sergel, receive a quarterly retainer of $1,500, a meeting fee of $600 plus expenses, and 50 NEES common shares each year. Since all members of the NEP Board are employees of NEES System companies, no fees are paid for service on the Board except as previously noted for Mrs. Bok. Mass. Electric and Narragansett permit directors to defer all or a portion of any cash retainers, meeting fees, and retainer shares under a deferred compensation plan. A director may elect to defer to a NEES Share Account or a Prime Rate Account. While deferred, the shares do not have voting rights or other rights associated with ownership. At the time of electing to defer compensation, the director also elects whether to receive payment after ten years or upon retirement, and, if upon retirement, whether in ten payments or a lump sum. Special accounts are maintained on Mass. Electric's and Narragansett's books showing the amounts deferred and the interest or dividends accrued thereon. Director contributions to qualified charities are matched by the System under a matching gift program, which has a maximum limit of $3,500. Item 7. CONTRIBUTIONS AND PUBLIC RELATIONS (1) None. Payments are made to certain employees and other persons, who may act in the capacities enumerated in Item 7 for services rendered or materials purchased, but such payments are not contributions. (2) Year Ended December 31, 1996.
Accounts Charged, if any, per Books Purpose of Disbursing Name of Recipient or Beneficiary (A) Company Amount - ------------------------------- ------- ----------------- ------ Name of Company --------------- Mass. Electric -------------- Nashua River Watershed Council 930.20 $ 250.00 Connecticut River Watershed Council 930.20 $ 200.00 Massachusetts Electric & Gas Association 426.40 $ 90,383.00 Joyce & Joyce (B) 426.40 $ 80,000.00 Edison Electric Institute 426.40 $ 77,468.00 The Lowell Plan 426.10 $ 8,900.00 Massachusetts Taxpayers Foundation 426.10 $ 8,682.00 Business for Social Responsibility 426.10 $ 5,500.00 The Urban Institute 426.10 $ 5,000.00 The Alliance to Save Energy 426.10 $ 4,400.00 National Conference of Christians & Jews 426.10 $ 3,750.00 Pioneer Institute for Public Policy 426.10 $ 2,500.00 Merrimack River Watershed Council 426.10 $ 1,750.00 Council of State Governors 426.10 $ 1,500.00 The Northeast Corridor Initiative Inc. 426.10 $ 1,000.00 Financial Accounting Foundation 426.10 $ 790.00 EDP Economic Development 426.10 $ 500.00 Merrimack Valley Branch NAACP 426.10 $ 50.00 NEP --- Gallagher Callahan and Gartrell (B) 426.40 $225,815.00 Alliance for Competitive Energy (B) 426.40 $ 92,482.00 Sullivan & Leshane, Inc. (B) 426.40 $ 77,223.00 NEP (Cont.) ----------- Edison Electric Institute 426.40 $ 33,804.00 Swidler & Berlin Chartered (B) 426.40 $ 18,261.00 Halloran & Sage (B) 426.40 $ 3,462.00 Save the Bay 426.10 $ 29,011.00 American Enterprise Institute 426.10 $ 20,000.00 Taunton River Watershed Alliance, Inc. 426.10 $ 10,000.00 Mass Taxpayers Foundation 426.10 $ 8,682.00 The Nature Conservancy 426.10 $ 6,000.00 The Alliance to Save Energy 426.10 $ 5,125.00 Resources for the Future 426.10 $ 5,000.00 Audubon Society of NH 426.10 $ 3,825.00 Business for Social Responsibility 426.10 $ 2,500.00 C.R.W.C. - River Fest 426.10 $ 2,500.00 The Northeast Corridor Initiative Inc. 426.10 $ 2,000.00 Vermont Archeological Society 426.10 $ 2,000.00 Business & Industry Association of NH 426.10 $ 1,875.00 Council on Economic Priorities 426.10 $ 1,000.00 Society for the Protection of NH Forest 426.10 $ 530.00 Deerfield River Watershed Association 426.10 $ 500.00 Nashua River Watershed Association 426.10 $ 500.00 Salem Conservation Commission 426.10 $ 500.00 Dunbarton Conservation Commission 426.10 $ 250.00 Windham Regional Commission 426.10 $ 250.00 The Alhambra Organization Lugo #13 426.10 $ 200.00 Mass. Forestry Association 426.10 $ 150.00 NH Timberland Owners Association 426.10 $ 100.00 National Resources Defense Council Inc. 426.10 $ 55.00 Southern Povert Law Center 426.10 $ 25.00 Union of Concerned Scientists 426.10 $ 25.00 Narragansett ------------ John G. Coffey, Esq. (B) 426.40 $ 40,000.00 McGovern, Noel & Benik, Inc. (B) 426.40 $ 30,000.00 M&P Strategic Communications (B) 426.40 $ 28,056.00 McMahon-Preston Communications (B) 426.40 $ 27,338.00 Edison Electric Institute 426.40 $ 26,762.00 Winsor Association Co. (B) 426.40 $ 26,000.00 R.I. Public Expenditure Council 426.10 $ 10,893.00 Providence Foundation 426.10 $ 7,000.00 Rhode Island Urban Project 426.10 $ 7,000.00 National Conference of Christians & Jews 426.10 $ 3,000.00 Urban Institute 426.10 $ 2,500.00 The Alliance to Save Energy 426.10 $ 2,000.00 Urban League of Rhode Island 426.10 $ 1,750.00 Keep Providence Beautiful 426.10 $ 1,500.00 Northeast Corridor Initiative 426.10 $ 1,440.00 Nature Conservancy 426.10 $ 1,000.00 Save the Bay 426.10 $ 525.00 Council of State Governments 426.10 $ 500.00 Financial Accounting Foundations 426.10 $ 360.00 Rhode Island Coalition for Affirmative Action 426.10 $ 150.00 U.S. Lighthouse Society 426.10 $ 70.00 Ocean Adoption Research Exchange 426.10 $ 25.00 Granite State ------------- Gallagher Callahan and Gartrell (B) 426.40 $ 25,513.00 Edison Electric Institute 426.40 $ 2,817.00 Business and Industry Association of NH 426.10 $ 625.00 Urban Institute 426.10 $ 500.00 Business for Social Responsibility 426.10 $ 250.00 National Awareness Foundation 426.10 $ 250.00 The Alliance to Save Energy 426.10 $ 160.00 Financial Accounting Foundation 426.10 $ 30.00 NEES ---- Massachusetts Business Roundtable 426.40 $ 700.00 Nantucket Electric Company -------------------------- Nantucket Green Fund 426.1 $ 1,000.00 - -------------------- (A) All such payments, unless otherwise noted, were subscriptions, dues, and/or contributions. (B) Payments for legislative services.
Item 8. SERVICE, SALES AND CONSTRUCTION CONTRACTS Part I.
Serving Receiving Compensation Transaction Company Company (1996) - ----------- ------- --------- ------------ Fuel Purchase Contract (1) NEEI NEP $64,549,407 Phase I Terminal Facility Support Agreement (2) NEET NEP $ 1,828,362 Phase II Massachusetts Transmission NEHTEC NEP $ 7,579,978 Facilities Support Agreement (3) Phase II New Hampshire Transmission NEHTC NEP $ 6,247,683 Facilities Support Agreement (4) - -------------------- (1) Contract dated 7/26/79 as amended was in effect at 12/31/96. (2) Agreement dated 12/1/81 as amended was in effect at 12/31/96. (3) Agreement dated 6/1/85 as amended was in effect at 12/31/96. (4) Agreement dated 6/1/85 as amended was in effect at 12/31/96.
Part II. See Item 6, Part III. Part III. None. Item 9. WHOLESALE GENERATORS AND FOREIGN UTILITY COMPANIES None. Item 10. FINANCIAL STATEMENTS AND EXHIBITS Financial Statements - -------------------- NEES Consolidating Financial Statements (Supplement A-1) and Financial Statements and Supporting Schedules of NEES and NEES subsidiaries consolidated contained in the NEES 1996 Form 10-K (Supplement A-2). Exhibits - -------- Unless otherwise indicated, the exhibits listed below are incorporated by reference to the appropriate exhibit numbers and the commission file numbers indicated in parenthesis. A. Annual Reports: 1. a. Connecticut Yankee Atomic Power Company 1996 Annual Report to Shareholders (Exhibit A.2.1 to Northeast Utilities' Form U-5-S, File No. 30-246). b. Connecticut Yankee Atomic Power Company 1996 FERC Form 1 (Exhibit A.2.2 to Northeast Utilities' Form U-5-S, File No. 30-246). 2. a. Maine Yankee Atomic Power Company 1996 Annual Report (filed herewith). b. Maine Yankee Atomic Power Company 1996 FERC Form 1 (filed herewith). 3. Massachusetts Electric Company, Form 10-K for the year ended December 31, 1996 (File No. 0-5464). 4. The Narragansett Electric Company, Form 10-K for the year ended December 31, 1996 (File No. 0-898). 5. New England Electric System, Form 10-K for the year ended December 31, 1996 (File No. 1-3446). 6. New England Power Company, Form 10-K for the year ended December 31, 1996 (File No. 0-1229). 7. a. Vermont Yankee Nuclear Power Corporation 1996 Annual Report to Stockholders (filed herewith). b. Vermont Yankee Nuclear Power Corporation 1996 FERC Form 1 (filed herewith). 8. a. Yankee Atomic Electric Company 1996 Annual Report to Stockholders (filed herewith). b. Yankee Atomic Electric Company 1996 FERC Form 1 (filed herewith). 9. New England Electric Transmission Corporation 1996 Annual Report (filed herewith). B. Corporate Documents: 1. AllEnergy Marketing Company, L.L.C.: a. Limited Liability Company Agreement (Exhibit B-1 to Amendment No. 1 to Form U-1, File No. 70-8921). 2. Granite State Electric Company: a. Articles of Organization (Exhibit B.1.a to NEES 1983 Form U-5-S). b. By-laws (Exhibit B.1.b to NEES 1983 Form U-5-S). 3. Granite State Energy, Inc.: a. Certificate of Incorporation (Exhibit No. 3(i) to Certificate of Notification, File No. 70-8803). b. By-laws (Exhibit No. 3(ii) to Certificate of Notification, File No. 70-8803). 4. Massachusetts Electric Company: a. Articles of Organization (Exhibit B.2.a to NEES 1983 Form U-5- S); Articles of Amendment dated March 5, 1993, August 11, 1993, September 20, 1993, and November 1, 1993 (Exhibit 3(a) to 1993 Form 10-K, File No. 0-5464). b. By-laws (Filed herewith). 5. Nantucket Electric Company: a. Articles of Organization (Exhibit A-6 filed under cover of Form SE, File No. 70-8675). b. By-laws (Exhibit A-7 filed under cover of Form SE, File No. 70- 8675). 6. The Narragansett Electric Company: a. Charter (Exhibit B.3.a to NEES 1983 Form U-5-S); Amendment to Charter dated June 9, 1988 (Exhibit B.3.a to NEES 1988 Form U-5-S). b. By-laws (Exhibit 3 to 1980 Form 10-K, File No. 0-898). c. Stockholders Votes re Preference Provisions as amended dated March 23, 1993 (Exhibit 4(c) to NEES 1993 Form 10-K, File No. 1-3446). 7. Narragansett Energy Resources Company: a. Articles of Incorporation (Exhibit B.4.a to NEES 1987 Form U-5-S). b. By-laws (Exhibit B.4.b to NEES 1995 Form U-5-S). 8. NEERI International: a. Articles of Association (filed herewith). b. Memorandum of Association (filed herewith). 9. NEES Communications, Inc.: a. Articles of Organization (filed herewith). b. By-laws (filed herewith). 10. NEES Energy, Inc.: a. Certificate of Incorporation (Exhibit 3(i) to Certificate of Notification, File No. 70-8803). b. By-laws (Exhibit 3(ii) to Certificate of Notification, File No. 70-8803). 11. New England Electric Resources, Inc.: a. Articles of Organization (Exhibit B.5.a to NEES 1993 Form U-5- S). b. By-Laws (Exhibit B.5.b to NEES 1993 Form U-5-S). 12. New England Electric System: a. Agreement and Declaration of Trust (Exhibit 3 to NEES 1994 Form 10-K, File No. 1-3446). 13. New England Electric Transmission Corporation: a. Restated Articles of Incorporation (Exhibit B.6.a to NEES 1983 Form U-5-S). b. By-laws (Exhibit B.6.b to NEES 1983 Form U-5-S). 14. New England Energy Incorporated: a. Articles of Organization (Exhibit B.7.a to NEES 1983 Form U-5- S); Articles of Amendment dated April 8, 1988 (Exhibit B.8.a to NEES 1988 Form U-5-S). b. By-laws (Exhibit B.8.b to NEES 1995 Form U-5-S). 15. New England Hydro Finance Company, Inc. a. Articles of Organization (Exhibit B.9.a to NEES 1988 Form U-5-S). b. By-laws (Exhibit B.9.b to NEES 1995 Form U-5-S). 16. New England Hydro-Transmission Corporation a. Articles of Incorporation (Exhibit B.8.a to NEES 1986 Form U-5-S); Articles of Amendment dated January 18, 1989 (Exhibit B.10.a to NEES 1988 Form U-5-S). b. By-laws (Exhibit B.10.b to NEES 1988 Form U-5-S). 17. New England Hydro-Transmission Electric Company a. Restated Articles of Organization dated January 13, 1989 (Exhibit B.11.a to NEES 1988 Form U-5-S). b. By-laws (Exhibit B.11.b to NEES 1988 Form U-5-S). 18. New England Power Company: a. Articles of Organization (Exhibit B.8.a to NEES 1983 Form U-5- S); Articles of Amendment dated June 25, 1987 (Exhibit B.12.a to NEES 1988 Form U-5-S). b. By-laws (Exhibit 3(b) to 1995 Form 10-K, File No. 0-1229). 19. New England Power Service Company: a. Articles of Organization (Exhibit B.9.a to NEES 1983 Form U-5- S). b. By-laws (Exhibit B.13.b to NEES 1988 Form 10-K, File No. 0-1229). C. Funded Debt: 1. Granite State Electric Company: Note Agreement with John Hancock dated March 15, 1985 (Exhibit A to Granite Certificate of Notification, File No. 70-6998). Note Agreement with Teachers Insurance dated as of February 1, 1987 (Exhibit A to Granite Certificate of Notification, File No. 70-7288). Note Agreement with Aid Association for Lutherans dated as of October 1, 1991 (Exhibit C-1 to NEES 1991 Form U-5-S). Note Agreement with First Colony Life Insurance Company dated as of November 1, 1993 (Exhibit C-1 to NEES 1993 Form U-5-S). Note Agreement with First Colony Life Insurance Company dated as of July 1, 1995 (Exhibit A to Granite Certificate of Notification, File No. 70-8625). 2. Massachusetts Electric Company: First Mortgage Indenture and Deed of Trust, dated as of July 1, 1949, and twenty-one supplements thereto (Exhibit 7-A, File No. 1-8019; Exhibit 7-B, File No. 2-8836; Exhibit 4-C, File No. 2-9593; Exhibit 4 to 1980 Form 10-K, File No. 2-8019; Exhibit 4 to 1982 Form 10-K, File No. 0-5464; Exhibit 4 to 1986 Form 10-K, File No. 0-5464; Exhibit 4(a) to 1988 Form 10-K, File No. 1-3446; Exhibit 4(a) to 1989 Form 10-K, File No. 1-3446; Exhibit 4(a) to 1992 Form 10-K, File No. 1-3446; Exhibit 4(a) to 1993 Form 10-K, File No. 1-3446; Exhibit 4(a) to 1995 NEES Form 10-K, File No. 1-3446). 3. The Narragansett Electric Company: First Mortgage Indenture and Deed of Trust, dated as of September 1, 1944, and twenty-two supplements thereto (Exhibit 7-1, File No. 2-7042; Exhibit 7-B, File No. 2-7490; Exhibit 4-C, File No. 2-9423; Exhibit 4-D, File No. 2-10056; Exhibit 4 to 1980 Form 10-K, File No. 0-898; Exhibit 4 to 1982 Form 10-K, File No. 0-898; Exhibit 4 to 1983 Form 10-K, File No. 0-898; Exhibit 4 to 1985 Form 10-K, File No. 0-898; Exhibit 4 to 1986 Form 10-K, File No. 0-898; Exhibit 4 to 1987 Form 10-K, File No. 0-898; Exhibit C-3 to NEES 1991 Form U-5-S; Exhibit 4(b) to 1992 Form 10-K, File No. 1-3446; Exhibit 4(b) to 1993 Form 10-K, File No. 1-3446; Exhibit 4(b) to 1995 NEES Form 10-K, File No. 1- 3446). 4. New England Electric Transmission Corporation: Note Agreement with PruCapital Management, Inc. et al. dated as of September 1, 1986; Mortgage, Deed of Trust and Security Agreement dated as of September 1, 1986 (Exhibit 10(g) to 1986 Form 10-K, File No. 1-3446). 5. New England Energy Incorporated: Credit Agreement dated as of April 13, 1995 (Exhibit 10(e)(v) to 1995 NEES Form 10-K, File No. 1-3446). 6. New England Power Company: a. General and Refunding Mortgage Indenture and Deed of Trust dated as of January 1, 1977 and twenty supplements thereto (Exhibit 4(b) to 1980 Form 10-K, File No. 0-1229; Exhibit 4(b) to 1982 Form 10-K, File No. 0-1229; Exhibit 4(b) to 1983 Form 10-K, File No. 0-1229; Exhibit 4(b) to 1985 Form 10-K, File No. 0-1229; Exhibit 4(b) to 1986 Form 10-K, File No. 0-1229; Exhibit 4(b) to 1988 Form 10-K, File No. 0-1229; Exhibit 4(c)(ii) to 1989 Form 10-K, File No. 1-3446; Exhibit 4(c)(ii) to 1990 Form 10-K, File No. 1-3446; Exhibit C.6.b to NEES 1991 Form U-5-S; Exhibit 4(c)(ii) to NEES 1992 Form 10-K, File No. 1- 3446; Exhibit 4(d) to NEES 1993 Form 10-K, File No. 1-3446; Exhibit 4(d) to 1995 NEES Form 10-K, File No. 1-3446). b. Loan Agreement with Massachusetts Industrial Finance Agency dated as of March 15, 1980 and two supplements thereto (Exhibit C.8.c to NEES 1983 Form U-5-S); Supplements dated as of October 1, 1992 and September 1, 1993 (Exhibit C-6b to NEES 1993 Form U-5-S). c. Loan Agreement with Business Finance Authority of the State of New Hampshire (formerly the Industrial Development Authority of the State of New Hampshire) dated as of November 15, 1983 (Exhibit C.8.d to NEES 1983 Form U-5-S); First Supplement dated as of April 1, 1986 (Exhibit C.7.d to NEES 1986 Form U-5-S); Second Supplement dated as of August 1, 1988 (Exhibit C.7.d to NEES 1988 Form U-5-S); Third Supplement dated as of February 1, 1989; Fourth Supplement dated as of November 1, 1990 (Exhibit C.6.d to NEES 1990 Form U-5-S); Fifth Supplement dated as of June 15, 1991 (Exhibit C.6.d to NEES 1991 Form U-5-S); Sixth Supplement dated as of January 1, 1993 (Exhibit C.6.d to NEES 1992 Form U-5-S); Seventh Supplement dated as of October 1, 1993 and Eighth Supplement dated as of December 1, 1993 (Exhibit C.6.c to NEES 1993 Form U-5-S); Ninth Supplement dated as of February 1, 1995 (Exhibit 6.c to NEES 1995 Form U-5-S), Tenth Supplement dated as of January 15, 1996, Eleventh Supplement dated as of January 15, 1996, and Twelfth Supplement dated as of December 1, 1996 (filed herewith). d. Loan Agreement with the Connecticut Development Authority dated as of October 15, 1985 (Exhibit C-8(h) to NEES 1985 Form U-5-S). 7. Narragansett Energy Resources Company: Note Agreements with Connecticut General Life Insurance Company, CIGNA Property and Casualty Insurance Company, Insurance Company of North America, and Life Insurance Company of North America, dated November 30, 1995 (Exhibit A to NERC Certificate of Notification, File No. 70-8671). D. New England Electric System and Subsidiary Companies, Federal and State Income Tax Allocation Agreement (Filed herewith). E. 1. Schedule showing Money Pool investments for 1995 (filed herewith). 2. NEERI annual report on Modified Form U-13-60 (filed herewith). 3. Ocean State Power Financial Statements as of December 31, 1995 (filed herewith). 4. Ocean State Power II Financial Statements as of December 31, 1995 (filed herewith). 5. OSP Finance Company Financial Statements as of December 31, 1995 (filed herewith). 6. Financial Statements of the New England Electric System Companies Incentive Thrift Plan (Thrift Plan) (filed herewith). 7. Financial Statements of the New England Electric System Companies Incentive Thrift Plan II (Thrift Plan II) (filed herewith). 8. Financial Statements of the Yankee Atomic Electric Company Thrift Plan (filed herewith). F. Schedules (filed herewith). G. Financial Data Schedules (filed herewith). H. None. I. None. The name "New England Electric System" means the Trustee or Trustees for the time being (as trustee or trustees but not personally) under an Agreement and Declaration of Trust dated January 2, 1926, as amended, which is hereby referred to and a copy of which, as amended, has been filed with the Secretary of The Commonwealth of Massachusetts. Any agreement, obligation or liability made, entered into or incurred by or on behalf of New England Electric System binds only its trust estate, and no shareholder, director, trustee, officer or agent thereof assumes or shall be held to any liability therefor. SIGNATURE New England Electric System, a registered holding company, has duly caused this Annual Report, Form U-5-S, for the year ended December 31, 1996, Commission's File No. 30-33 to be signed on its behalf, by the undersigned thereunto duly authorized, pursuant to the requirements of the Public Utility Holding Company Act of 1935. NEW ENGLAND ELECTRIC SYSTEM s/Michael E. Jesanis By: Michael E. Jesanis, Treasurer Date: May 1, 1997 EX-99 2 EXHIBIT INDEX EXHIBIT INDEX ------------- Exhibit No. Description Page - ----------- ----------- ---- Supplement NEES Consolidating Balance Sheet, Filed A-1 Consolidating Income and Retained Earnings herewith Statements and Consolidating Statement of Changes in Financial Position for the year ended December 31, 1996 Supplement NEES Form 10-K for the year ended Filed under A-2 December 31, 1996 cover of Form SE A.1.a Connecticut Yankee Atomic Power Company Incorporated 1996 Annual Report to Shareholders by reference A.1.b Connecticut Yankee Atomic Power Company Incorporated 1996 FERC Form 1 by reference A.2.a Maine Yankee Atomic Power Company Filed under 1996 Annual Report cover of Form SE A.2.b Maine Yankee Atomic Power Company Filed under 1996 FERC Form 1 cover of Form SE A.3 Massachusetts Electric Company Incorporated Form 10-K for the year ended December 31, 1996 by reference A.4 The Narragansett Electric Company Incorporated Form 10-K for the year ended December 31, 1996 by reference A.5 New England Electric System Incorporated Form 10-K for the year ended December 31, 1996 by reference A.6 New England Power Company Incorporated Form 10-K for the year ended December 31, 1996 by reference A.7.a Vermont Yankee Nuclear Power Corporation Filed under 1996 Annual Report to Stockholders cover of Form SE A.7.b Vermont Yankee Nuclear Power Corporation Filed under 1996 FERC Form 1 cover of Form SE A.8.a Yankee Atomic Electric Company Filed under 1996 Annual Report to Stockholders cover of Form SE A.8.b Yankee Atomic Electric Company Filed under 1996 FERC Form 1 cover of Form SE A.9 New England Electric Transmission Filed under Corporation 1996 Annual Report cover of Form SE B.1.a AllEnergy Marketing Company, L.L.C. Incorporated Limited Liability Company Agreement by reference B.2.a Granite State Electric Company Incorporated Articles of Organization by reference B.2.b Granite State Electric Company Incorporated By-laws by reference B.3.a Granite State Energy, Inc. Incorporated Certificate of Incorporation by reference EXHIBIT INDEX ------------- Exhibit No. Description Page - ----------- ----------- ---- B.3.b Granite State Energy, Inc. Incorporated By-laws by reference B.4.a Massachusetts Electric Company Incorporated Amendment to Articles of Organization by reference B.4.b Massachusetts Electric Company Filed By-laws herewith B.5.a Nantucket Electric Company Incorporated Articles of Organization by reference B.5.b Nantucket Electric Company Incorporated By-laws by reference B.6.a The Narragansett Electric Company Incorporated Amendment to Charter by reference B.6.b The Narragansett Electric Company Incorporated By-laws by reference B.6.c The Narragansett Electric Company Incorporated Stockholders Votes re Preference Provisions by reference B.7.a Narragansett Energy Resources Company Incorporated Articles of Incorporation by reference B.7.b Narragansett Energy Resources Company Incorporated By-laws by reference B.8.a NEERI International Filed Articles of Association herewith B.8.b NEERI International Filed Memorandum of Association herewith B.9.a NEES Communications, Inc. Filed Articles of Organization herewith B.9.b NEES Communications, Inc. Filed By-laws herewith B.10.a NEES Energy, Inc. Incorporated Certificate of Incorporation by reference B.10.b NEES Energy, Inc. Incorporated By-laws by reference B.11.a New England Electric Resources, Inc. Incorporated Articles of Organization by reference B.11.b New England Electric Resources, Inc. Incorporated By-laws by reference B.12.a New England Electric System Incorporated Agreement and Declaration of Trust by reference B.13.a New England Electric Transmission Corporation Incorporated Restated Articles of Incorporation by reference B.13.b New England Electric Transmission Corporation Incorporated By-laws by reference B.14.a New England Energy Incorporated Incorporated Amendment to Articles of Organization by reference EXHIBIT INDEX ------------- Exhibit No. Description Page - ----------- ----------- ---- B.14.b New England Energy Incorporated Incorporated By-laws by reference B.15.a New England Hydro Finance Company, Inc. Incorporated Articles of Organization by reference B.15.b New England Hydro Finance Company, Inc. Incorporated By-Laws by reference B.16.a New England Hydro-Transmission Corporation Incorporated Amendment to Articles of Incorporation by reference B.16.b New England Hydro-Transmission Corporation Incorporated By-laws by reference B.17.a New England Hydro-Transmission Electric Company Incorporated Restated Articles of Organization by reference B.17.b New England Hydro-Transmission Electric Company Incorporated By-laws by reference B.18.a New England Power Company Incorporated Amendment to Articles of Organization by reference B.18.b New England Power Company Incorporated By-laws by reference B.19.a New England Power Service Company Incorporated Articles of Organization by reference B.19.b New England Power Service Company Incorporated By-laws by reference C.1 Granite State Electric Company Incorporated Note Agreement with John Hancock by reference Granite State Electric Company Incorporated Note Agreement with Teachers Insurance by reference Granite State Electric Company Incorporated Note Agreement with Aid Association for by reference Lutherans Granite State Electric Company Incorporated Note Agreement with First Colony Life by reference Insurance Company Granite State Electric Company Incorporated Note Agreement with First Colony Life by reference Insurance Company C.2 Massachusetts Electric Company Incorporated First Mortgage Indenture and Deed of Trust by reference and twenty-one supplements thereto C.3 The Narragansett Electric Company Incorporated First Mortgage Indenture and Deed of Trust by reference and twenty-two supplements thereto C.4 New England Electric Transmission Corporation Incorporated Note Agreement with PruCapital Management, Inc. by reference et al. C.5 New England Energy Incorporated Incorporated Credit Agreement dated as of April 13, 1995 by reference C.6.a New England Power Company General and Incorporated Refunding Mortgage Indenture and Deed of Trust by reference and twenty supplements thereto EXHIBIT INDEX ------------- Exhibit No. Description Page - ----------- ----------- ---- C.6.b New England Power Company Incorporated Loan Agreement with Massachusetts Industrial by reference Finance Agency and four supplements thereto C.6.c New England Power Company Incorporated Loan Agreement with Business Finance Authority by reference of the State of New Hampshire (formerly the Industrial Development Authority of the State of New Hampshire) and nine supplements thereto Tenth supplement dated as of January 1, 1996, Filed Eleventh supplement dated as of January 15, herewith 1996, and Twelfth supplement dated as of December 1, 1996 C.6.d Loan Agreement with Connecticut Development Incorporated Authority by reference C.7 Narragansett Energy Resources Company Incorporated Note Agreements by reference D New England Electric System and Subsidiary Filed Companies, Federal and State Income Tax herewith Allocation Agreement E.1 Money Pool investments for 1996 Filed herewith E.2 NEERI annual report on Modified Form U-13-60 Filed herewith E.3 Ocean State Power Financial Statements as of Filed December 31, 1996 herewith E.4 Ocean State Power II Financial Statements Filed as of December 31, 1996 herewith E.5 OSP Finance Company Financial Statements Filed as of December 31, 1996 herewith E.6 New England Electric System Companies Filed under Incentive Thrift Plan Financial Statements cover of Form SE E.7 New England Electric System Companies Filed under Incentive Thrift Plan II Financial Statements cover of Form SE E.8 Yankee Atomic Electric Company Filed under Thrift Plan Financial Statements cover of Form SE F Schedules Filed under cover of Form SE G Financial Data Schedules Filed herewith EX-99 3 SUPPLEMENT A-1 SUPPLEMENT A-1 NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATING BALANCE SHEET AT DECEMBER 31, 1996 CONSOLIDATING INCOME AND RETAINED EARNINGS STATEMENTS FOR YEAR ENDED DECEMBER 31, 1996 CONSLIDATING STATEMENT OF CASH FLOWS FOR YEAR ENDED DECEMBER 31, 1996 NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED INDEX OF CONSOLIDATED WORKSHEETS YEAR ENDED DECEMBER 31, 1996
Pages ----- Consolidating Balance Sheet, Adjustments and Eliminations............................. 1 - 2 Consolidating Statement of Income, Adjustments and Eliminations....................... 3 - 4 Consolidating Statement of Retained Earnings, Adjustments and Eliminations............ 5 - 6 Consolidating Statement of Cash Flows, Adjustments and Eliminations................... 7 - 8 INDEX OF INDIVIDUAL COMPANY STATEMENTS Balance Statement Retained Statement of Sheet of Income Earnings Cash Flows ------- --------- -------- ------------ NEW ENGLAND ELECTRIC SYSTEM (NEES) 1 3 5 7 GRANITE STATE ELECTRIC COMPANY (GRANITE STATE) 1 3 5 7 MASSACHUSETTS ELECTRIC COMPANY (MASS. ELECTRIC) 1 3 5 7 THE NARRAGANSETT ELECTRIC COMPANY (NARRA. ELECTRIC) 1 3 5 7 NEW ENGLAND POWER COMPANY (NEP) 1 3 5 7 NEW ENGLAND ENERGY INCORPORATED (NEEI) 1 3 5 7 NEW ENGLAND POWER SERVICE COMPANY (NEPSCO) 1 3 5 7 NEW ENGLAND HYDRO-TRANSMISSION ELECTRIC COMPANY, INC. (NEHTECI) 1 3 5 7 NEW ENGLAND HYDRO-TRANSMISSION CORPORATION (NEHTC) 1 3 5 7 NARRAGANSETT ENERGY RESOURCES COMPANY (NERC) 1 3 5 7 NEW ENGLAND ENERGY RESOURCES, INC. (NEERI) 1 3 5 7 NANTUCKET ELECTRIC COMPANY (NANTUCK) 1 3 5 7 GRANITE STATE ENERGY (GS EN) 1 3 5 7 NEES ENERGY (NEES EN) 1 3 5 7 NEW ENGLAND ELECTRIC SYSTEM - TRUST (PARENT) 1 3 5 7
Page 1A NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET DECEMBER 31, 1996 (IN THOUSANDS)
GRANITE MASS. NARRA. STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC ------- -------- -------- --- ---- ------ ------- ----- Assets Utility plant, at original cost $66,460$1,509,896 $742,481 $2,991,797 $11,019 $220,197 $175,056 Less accumulated depreciation and amortization 18,925 430,585 187,690 1,118,341 52,783 34,946 ------------------ -------- ---------- ---------- ------- -------- -------- 47,535 1,079,311 554,791 1,873,456 11,019 167,414 140,110 Construction work in progress 1,080 9,119 5,392 36,836 ------------------ -------- ---------- ---------- ------- -------- -------- Net utility plant 48,615 1,088,430 560,183 1,910,292 11,019 167,414 140,110 ------------------ -------- ---------- ---------- ------- -------- -------- Oil and gas properties $1,286,613 Less accumulated amortization 1,079,038 Work in progress ---------- Net oil and gas properties 207,575 ---------- Investments in nuclear power companies, at equity 47,902 Investments in other subsidiaries, at equity Other investments at cost 865 9,213 4,049 30,591 49,887 5 5 Current assets 7,259 235,809 89,938 333,043 19,026 24,405 6,713 2,694 Deferred charges and other assets 1,242 56,806 52,832 325,887 342 819 8,296 6,867 ------------------ -------- ---------- ---------- ------- -------- -------- $57,981$1,390,258 $707,002 $2,647,715 $226,943 $86,130 $182,428 $149,676 ================== ======== ========== ========== ======= ======== ======== Page 1B NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET DECEMBER 31, 1996 (IN THOUSANDS) (Continued) NERC NEERI NANTUCKET GS EN NEES EN PARENT ---- ----- --------- ----- ------- ------ Assets Utility plant, at original cost $37,489 Less accumulated depreciation and amortization 9,733 -------- ------ -------------------- ---------- ---------- 27,756 Construction work in progress 96 -------- ------ -------------------- ---------- --------- Net utility plant 27,852 -------- ------ -------------------- ---------- --------- Oil and gas properties Less accumulated amortization Work in progress -------- -------- -------------------- ---------- --------- Net oil and gas properties ---------- --------- Investments in nuclear power companies, at equity Investments in other subsidiaries, at equity 35,163 1,716 1,686,822 Other investments at cost 1,475 108 3,828 Current assets 1,107 2,422 14,347 194 294 45,324 Deferred charges and other assets (379) 1,266 -------- ------ -------------------- ---------- ----------- $35,891 $3,897 $43,573 $194 $2,010 $1,735,974 ======== ====== ==================== ========== =========== Page 1C NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET DECEMBER 31, 1996 (IN THOUSANDS) (Continued) TOTAL ADJUSTMENTS NEES & ELMINATIONS CONSOLIDATED ------------- ------------ Assets Utility plant, at original cost $61,439 $5,692,956 Less accumulated depreciation and amortization 1,853,003 --------- --------- 61,439 3,839,953 Construction work in progress (4,129) 56,652 ------ ---------- Net utility plant 57,310 3,896,605 ------ ---------- Oil and gas properties (48) 1,286,661 Less accumulated amortization (2,902) 1,081,940 Work in progress ------- --------- Net oil and gas properties 2,854 204,721 ------- --------- Investments in nuclear power companies, at equity 47,902 Investments in other subsidiaries, at equity 1,683,577 40,124 Other investments at cost 3,627 96,399 Current assets 293,695 488,880 Deferred charges and other assets 5,358 448,620 ---------- ---------- $2,046,421 $5,223,251 ========== ==========
Page 1D NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET DECEMBER 31, 1996 (IN THOUSANDS) (Continued)
GRANITE MASS. NARRA. STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC ------- -------- --------- --- ---- ------ ------- ----- Capitalization and liabilities Common share equity $19,685 $427,061$256,772 $906,205 ($3,460) $18,189 $56,616 $36,779 Minority interests in consolidated subsidiaries Cumulative preferred stock 50,000 36,500 39,666 Long-term debt 15,000 343,321 178,517 733,006 149,000 84,570 51,920 ------------------------------------ ---------- ------- -------- -------- Total capitalization 34,685 820,382 471,789 1,678,877 145,540 18,189 141,186 88,699 ------------------------------------ ---------- ------- -------- -------- Current liabilities Long-term debt due within 1 year 30,000 32,500 3,000 6,960 4,560 Short-term debt 5,475 43,775 19,025 93,600 3,000 Other current liabilities 10,870 255,973 75,163 189,041 6,429 25,020 5,313 3,440 ------------------------------------ ---------- ------- -------- -------- Total current liabilities 16,345 329,748 126,688 285,641 6,429 25,020 12,273 11,000 ------------------------------------ ---------- ------- -------- -------- Deferred federal and state income taxes 4,515 177,778 81,880 382,164 72,255 (10,160) 22,809 18,859 Unamortized investment tax credits 961 16,566 7,517 55,486 6,160 3,237 Other reserves and deferred credits 1,475 45,784 19,128 245,547 2,719 53,081 27,881 ------------------------------------ ---------- ------- -------- -------- $57,981$1,390,258$707,002$2,647,715 $226,943 $86,130 $182,428 $149,676 ==================================== ========== ======= ======== ======== Page 1E NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET DECEMBER 31, 1995 (IN THOUSANDS) (Continued) NERC NEERI NANTUCKET GS EN NEES EN PARENT ---- ----- --------- ----- ------- ------ Capitalization and liabilities Common share equity $1,738 $3,129 $4,166 $200 $2,997 $1,688,829 Minority interests in consolidated subsidiaries Cumulative preferred stock Long-term debt 28,640 30,604 -------- ------- -------------------- --------------------- Total capitalization 30,378 3,129 34,770 200 2,997 1,688,829 -------- ------- -------------------- --------------------- Current liabilities Long-term debt due within 1 year 1,920 765 Short-term debt 1,500 Other current liabilities 6 716 4,514 (6) (987) 42,653 -------- ------- -------------------- --------------------- Total current liabilities 1,926 716 6,779 (6) (987) 42,653 -------- ------- -------------------- --------------------- Deferred federal and state income taxes 1,766 52 468 (2,897) Unamortized investment tax credits 1,821 188 Other reserves and deferred credits 1,368 7,389 -------- ------- -------------------- ---------- ---------- $35,891 $3,897 $43,573 $194 $2,010 $1,735,974 ======== ======= ==================== ========== ========== Page 1F NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET DECEMBER 31, 1996 (IN THOUSANDS) (Continued) TOTAL ADJUSTMENTS NEES & ELIMINATIONS CONSOLIDATED -------------- ------------ Capitalization and liabilities Common share equity $1,733,489 $1,685,417 Minority interests in consolidated subsidiaries (46,293) 46,293 Cumulative preferred stock 126,166 Long-term debt 1,614,578 ---------- ---------- Total capitalization 1,687,196 3,472,454 ---------- ---------- Current liabilities Long-term debt due within 1 year 79,705 Short-term debt 21,325 145,050 Other current liabilities 280,290 337,855 ---------- ---------- Total current liabilities 301,615 562,610 ---------- ---------- Deferred federal and state income taxes (1,440) 750,929 Unamortized investment tax credits 91,936 Other reserves and deferred credits 59,050 345,322 ---------- ---------- $2,046,421 $5,223,251 ========== ==========
Page 2A NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET ADJUSTMENTS AND ELIMINATIONS DECEMBER 31, 1996 (IN THOUSANDS)
GRANITE MASS. NARRA. STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC ------- -------- -------- --- ---- ------ ------- ----- Debit Common share equity 19,685 427,061 256,772 906,205 (3,650) 18,189 56,616 36,779 Short-term debt 5,475 5,275 5,300 5,275 Other current liabilities 7,803 167,337 42,781 55,775 321 453 2,323 817 Other reserves and deferred credits 4,691 53,963 2,719 Construction work in progress 4,129 Oil and Gas properties 48 ------- -------- -------- ---------- -------- ------- ------- ------- Total $32,963 $599,673 $309,544 $1,025,395 ($420) $18,642 $58,939 $37,596 ======= ======== ======== ========== ======== ======= ======= ======= Credit Minority interests in consolidated subsidiaries 27,776 18,517 Deferred charges and other assets 4,691 2,990 Utility plant, at original cost 61,439 Investments in other subsidiaries, at equity Other investments at cost 98 315 283 189 2,639 5 5 Deferred Federal and State income taxes 1,440 Current assets 725 4,139 1,250 199,804 18,796 12,697 4,947 2,311 Accumulated amortization Oil and gas properties 2,902 ------- -------- -------- ---------- -------- ------- ------- ------- Total $823 $4,454 $6,224 $261,432 $32,657 $15,336 $32,728 $20,833 ======= ======== ======== ========== ======== ======= ======= ======= Page 2B NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET ADJUSTMENTS AND ELIMINATIONS DECEMBER 31, 1996 (IN THOUSANDS) (Continued) NERC NEERI NANTUCKET GS EN NEES EN PARENT ---- ----- --------- ----- ------- ------ Debit Common share equity 1,738 3,129 4,166 200 2,997 3,602 Short-term debt Other current liabilities 278 1,344 846 80 11 121 Other reserves and deferred credits 590 (2,913) Construction work in progress Oil and gas properties ------ ------ ---------- -------- -------- -------- Total $1,816 $4,473 $5,602 $280 $3,008 $6,446 ====== ====== ========== ======== ======== ======== Credit Minority interests in consolidated subsidiaries Deferred charges and other assets 590 (2,913) Utility plant, at original cost Investments in other subsidiaries, at equity 1,683,577 Other investments at cost 93 Deferred Federal and State income taxes Current assets 1,084 881 1,874 2 45,185 Accumulated amortization Oil and gas properties ------ ------ ---------- -------- -------- ---------- Total $1,084 $881 $2,464 $0 $2 $1,732,172 ====== ====== ========== ======== ======== ========== Page 2C NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET ADJUSTMENTS AND ELIMINATIONS DECEMBER 31, 1996 (IN THOUSANDS) (Continued) TOTAL ADJUSTMENTS & ELIMINATIONS -------------- Debit Common share equity $1,733,489 Short-term debt 21,325 Other current liabilities 280,290 Oil and gas properties 48 Other reserves and deferred credits 59,050 Construction work in progress 4,129 ---------- Total $2,104,157 ========== Credit Minority interests in consolidated subsidiaries $46,293 Deferred charges and other assets 5,358 Utility plant, at original cost 61,439 Investments in other subsidiaries, at equity 1,683,577 Other investments at cost 3,627 Deferred Federal and State income taxes 1,440 Current assets 293,695 Accumulated amortization Oil and gas properties 2,902 ---------- Total $2,104,157 ========== /TABLE Page 3A NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
GRANITE MASS. NARRA. STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC ------- -------- -------- --- ---- ------ ------- ----- Operating revenue $67,906 $1,538,537 $503,585 $1,600,309 $52,171 $40,897 $33,715 -------- ---------- -------- ------------------ ---------------- -------- Operating expenses Fuel for generation 342,545 Purchased electric energy 47,163 1,120,709 297,060 508,910 Other operation 9,772 211,663 71,625 203,456 4,443 4,822 10,344 Maintenance 2,260 31,102 13,009 79,118 1,074 119 Depreciation and amortization 2,309 47,357 27,899 104,209 46,261 8,884 5,880 Taxes, other than income taxes 1,836 30,559 38,530 66,416 2,859 3,189 Income taxes 1,074 25,186 11,951 91,894 (637) 5,671 3,326 -------- ---------- -------- ------------------ ---------------- -------- Total operating expenses 64,414 1,466,576 460,074 1,396,548 50,067 23,310 22,858 -------- ---------- -------- ------------------ ---------------- -------- Operating income 3,492 71,961 43,511 203,761 2,104 17,587 10,857 Other income: Allowance for equity funds used during construction Equity in income of generating companies 5,159 Other income (expense), net (79) (1,213) (732) (1,851) (1,219) 1,839 110 41 -------- ---------- -------- ------------------ ---------------- -------- Operating and other income 3,413 70,748 42,779 207,069 885 1,839 17,697 10,898 -------- ---------- -------- ------------------ ---------------- -------- Interest: Interest on long-term debt 1,340 27,089 17,205 45,111 2,290 8,734 5,398 Other interest 396 6,473 2,883 10,066 31 53 Allowance for borrowed funds used during construction (27) (740) (263) (591) -------- ---------- -------- ------------------ ---------------- -------- Total interest 1,709 32,822 19,825 54,586 2,290 8,765 5,451 -------- ---------- -------- ------------------ ---------------- -------- Income after interest 1,704 37,926 22,954 152,483 (1,405) 1,839 8,932 5,447 Preferred dividends of subsidiaries 3,114 2,143 2,574 Minority interests -------- ---------- -------- ------------------ ---------------- -------- Net income $1,704 $34,812 $20,811 $149,909($1,405) $1,839 $8,932 $5,447 ======== ========== ======== ================== ================ ======== Page 3B NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT YEAR ENDED DECEMBER 31, 1996(IN THOUSANDS) (Continued) NERC NEERI NANTUCKET GS EN NEES EN PARENT ---- ----- --------- ----- ------- ------ Operating revenue $11,864 $299 ------------------ -------- ------- -------- -------- Operating expenses Fuel for generation 4,048 Purchased electric energy 299 Other operation 93 4,893 236 937 4,122 Maintenance 1,095 8 Depreciation and amortization 677 Taxes, other than income taxes 286 3 (188) 35 Income taxes 152 (84) (808) (169) ------------------ -------- ------- -------- -------- Total operating expenses 93 11,151 454 (51) 3,988 ------------------ -------- ------- -------- -------- Operating income (93) 713 (155) 51 (3,988) Other income: Allowance for equity funds used during construction 114 Equity in income of generating companies 5,174 (1,533) 40,354 Other income (expense), net 74 (3,608) (37) 173,042 ------------------ -------- ------- -------- -------- Operating and other income 5,155 (3,608) 790 (155) (1,482) 209,408 ------------------ -------- ------- -------- -------- Interest: Interest on long-term debt 2,320 990 Other interest 70 25 316 Allowance for borrowed funds used during construction (626) ------------------ -------- ------- -------- -------- Total interest 2,320 434 25 316 ------------------ -------- ------- -------- -------- Income after interest 2,835 (3,608) 356 (155) (1,507) 209,092 Preferred dividends of subsidiaries Minority interests ------------------ -------- ------- -------- -------- Net income $2,835 ($3,608) $356 ($155) ($1,507) $209,092 ================== ======== ======= ======== ======== Page 3C NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT YEAR ENDED DECEMBER 31, 1996(IN THOUSANDS) (Continued) TOTAL ADJUSTMENTS NEES & ELIMINATIONS CONSOLIDATED -------------- ------------ Operating revenue $1,498,585 $2,350,698 ---------- ---------- Operating expenses Fuel for generation 11,599 334,994 Purchased electric energy 1,464,741 509,400 Other operation 25,316 501,090 Maintenance 127,785 Depreciation and amortization (2,903) 246,379 Taxes, other than income taxes (208) 143,733 Income taxes (1,643) 139,199 ---------- --------- Total operating expenses 1,496,902 2,002,580 ---------- ---------- Operating income 1,683 348,118 Other income: Allowance for equity funds used during construction 114 Equity in income of generating companies 38,820 10,334 Other income (expense), net 174,533 (8,166) ---------- ---------- Operating and other income 215,150 350,286 ---------- ---------- Interest: Interest on long-term debt (2) 110,479 Other interest 786 19,527 Allowance for borrowed funds used during construction (1) (2,246) ---------- ---------- Total interest 783 127,760 ---------- ---------- Income after interest 214,367 222,526 Preferred dividends of subsidiaries 1,368 6,463 Minority interests (7,127) 7,127 ---------- ---------- Net income $220,126 $208,936 ========== ==========
Page 4A NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT ADJUSTMENTS AND ELIMINATIONS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
GRANITE MASS. NARRA. STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC ------- -------- -------- --- ---- ------ ------- ----- Income: Operating revenue $141 $4,980 $1,160 $1,458,714 $19,003 $7,580 $6,248 Allowance for equity funds used during construction Equity in income of generating companies Other income/(expense), net 4 15 14 10 (1,058) 176 112 61 Minority interests 4,427 2,700 ------- ---------- -------- ---------- ------- ------ ------- ------ Expenses: Fuel for generation (10,074) 21,648 Purchased electric energy 47,136 1,120,461 296,845 Other operation 24 1,365 38 20,630 (1,009) 659 3,427 Depreciation and amotization (2,903) Taxes, other than income (208) Income taxes (1,021) Interest on long-term debt 1 (3) Other interest 108 225 222 221 3 Allowance for borrowed funds used during construction (1) Preferred dividends of subsidiaries 1,368 ------- ---------- -------- ---------- ------- ------ ------- ------ Total ($47,123) ($1,117,056) ($285,857) $1,414,858 $23,086 $11,524 $112 $5,581 ======= ========== ======== ========== ======= ====== ======= ====== Page 4B NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT ADJUSTMENTS AND ELIMINATIONS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) (Continued) NERC NEERI NANTUCKET GS EN NEES EN PARENT ---- ----- --------- ----- ------- ------ Income: Operating revenue $758 Allowance for equity funds used during construction 114 Equity in income of generating companies (1,534) 40,354 Other income/(expense), net 49 (97) 912 174,336 Minority interests ---------- -------- ---------- ------- ------ ------- Expenses: Fuel for generation 25 Purchased electric energy 300 Other operation 181 1 Depreciation and amortization Taxes, other than income Income taxes (622) Interest on long-term debt Other interest 6 Allowance for borrowed funds used during construction Preferred dividends of subsidiaries ---------- -------- ---------- ------- ------ -------- Total $49 $0 $563 ($301) $0 $214,690 ========== ======== ========== ======= ====== ======= Page 4C NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENT ADJUSTMENTS AND ELIMINATIONS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) (Continued) TOTAL ADJUSTMENTS & ELIMINATIONS -------------- Income: Operating revenue 1,498,585 Allowance for equity funds used during construction 114 Equity in income of generating companies 38,820 Other income/(expense), net 174,533 Minority interests 7,127 ---------- Expenses: Fuel for generation 11,599 Purchased electric energy 1,464,741 Other operation 25,316 Depreciation and amortization (2,903) Taxes, other than income (208) Income taxes (1,643) Interest on long-term debt (2) Other interest 786 Allowance for borrowed funds used during construction (1) Preferred dividends of subsidiaries 1,368 ---------- Total $220,126 ==========
Page 5A NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED STATEMENT OF RETAINED EARNINGS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
GRANITE MASS. NARRA. STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC ------- -------- -------- --- ---- ------ ------- ----- Retained earnings at beginning of year $8,998 $150,308 $108,227 $385,309($23,302) $165 $2,900 $181 Additions: Net income after preferred dividends of subsidiaries 1,704 34,812 20,811 149,909 (1,405) 1,839 8,932 5,447 Deductions: Common dividends 1,057 19,184 9,060 134,158 165 11,600 4,767 Premium on redemption of common stock 450 13 ------- -------- -------- ----------------- ------ ------- ------- Retained earnings at end of year $9,645 $165,936 $119,978 $400,610($24,707) $1,839 $232 $848 ======= ======== ======== ================= ====== ======= ======= Page 5B NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED STATEMENT OF RETAINED EARNINGS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) (Continued) NERC NEERI NANTUCKET GS EN NEES EN PARENT ---- ----- --------- ----- ------- ------ Retained earnings at beginning of year $102 ($1,713) $833,576 Additions: Net income after preferred dividends of subsidiaries 2,835 (3,608) 356 (155) (1,507) 209,092 Deductions: Common dividends 2,000 153,328 Premium on redemption of common stock ------- -------- ----------------- -------- -------- Retained earnings at end of year $937 ($5,321) $356 ($155) ($1,507) $889,340 ======= ======== ================= ======== ======== Page 5C NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED STATEMENT OF RETAINED EARNINGS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) (Continued) TOTAL ADJUSTMENTS NEES & ELIMINATIONS CONSOLIDATED -------------- ------------ Retained earnings at beginning of year $633,222 $831,529 Additions: Net income after preferred dividends of subsidiaries 220,126 208,936 Deductions: Common dividends 182,146 153,173 Premium on redemption of common stock 463 -------- --------- Retained earnings at end of year $670,739 $887,292 ========= ========
Page 6A NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED STATEMENT OF RETAINED EARNINGS - ADJUSTMENTS AND ELIMINATIONS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
GRANITE MASS. NARRA. STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC ------- -------- -------- --- ---- ------ ------- ----- Retained earnings at beginning of year $8,998 $151,124 $108,588 $386,179($23,302) $165 $2,900 $181 Additions: Net income after preferred dividends of subsidiaries 1,704 34,812 20,811 149,909 (1,405) 1,839 8,932 5,447 Deductions: Common dividends 1,057 19,184 9,060 134,158 165 11,600 4,767 Premium on redemption of common stock 450 13 ------- -------- -------- ----------------- ------ ------- ------- Retained earnings at end of year $9,645 $166,752 $120,339 $401,480($24,707) $1,839 $232 $848 ======= ======== ======== ================= ====== ======= ======= Page 6B NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED STATEMENT OF RETAINED EARNINGS - ADJUSTMENTS AND ELIMINATIONS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) (Continued) NERC NEERI NANTUCKET GS EN NEES EN PARENT ---- ----- --------- ----- ------- ------ Retained earnings at beginning of year $102 ($1,713) Additions: Net income after preferred dividends of subsidiaries 2,835 (3,608) 356 (155) (1,507) 156 Deductions: Common dividends 1,999 156 Premium on redemption of common stock ------- -------- -------- ------ -------- -------- Retained earnings at end of year $938 ($5,321) $356 ($155) ($1,507) $0 ======= ======== ======== ====== ======== ======== Page 6C NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED STATEMENT OF RETAINED EARNINGS - ADJUSTMENTS AND ELIMINATIONS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) (Continued) TOTAL ADJUSTMENTS & ELIMINATIONS -------------- Retained earnings at beginning of year $633,222 Additions: Net income after preferred dividends of subsidiaries 220,126 Deductions: Common dividends 182,146 Premium on redemption of common stock 463 -------- Retained earnings at end of year $670,739 ========
Page 7A NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
GRANITE MASS. NARRA. STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC ------- -------- -------- --- ---- ------ ------- ----- Operating Activities: Net Income $1,704 $37,926 $22,954 $152,483 ($1,405) $1,839 $8,932 $5,447 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Undistributed earnings of subsidiaries Depreciation and amortization 2,309 47,357 27,899 108,339 46,261 8,884 5,880 Deferred income taxes and investment tax credits-net 334 (7,850) 4,177 (7,458) (20,435) (4,663) 2,746 1,492 Allowance for funds used during construction (27) (740) (263) (591) Minority interests Decrease (increase) in other current assets 4 1,241 13,995 18,520 24,966 3,521 3,516 118 Increase (decrease) in payables and other current liabilities (423) 27,415 (11,361) (26,925) 2,231 (970) 673 385 Other, net (362) (2,430) 8,236 28,582 10,723 1 18 -------- --------- ------------------- ------------------ ---------------- Net cash provided by (used in) operating activities $3,539 $102,919 $65,637 $272,950 $51,618 $10,450 $24,752 $13,340 -------- --------- ------------------- ------------------ ---------------- Investing Activities: Plant expenditures, excluding allowance for funds used during construction (3,576) (93,828) (52,574) (65,981) Oil and gas exploration and development (20,323) Decrease (increase) in other investments (76) (598) (181) (3,878) (2,721) -------- --------- ------------------- ------------------ ---------------- Net cash provided by (used in) investing activities ($3,652) ($94,426) ($52,755) ($69,859) ($20,323) ($2,721) -------- --------- ------------------- ------------------ ---------------- Page 7B NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) (Continued) NERC NEERI NANTUCKET GS EN NEES EN PARENT ---- ----- --------- ----- ------- ------ Operating Activities: Net Income $2,835 ($3,608) $356 ($156) ($1,509) $209,092 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Undistributed earnings of subsidiaries (40,299) Depreciation and amortization 677 Deferred income taxes and investment tax credits-net 90 (124) (60) 124 Allowance for funds used during construction (740) Minority interests Decrease (increase) in other current assets (159) (1,420) (11,354) (171) (2) (2,027) Increase (decrease) in payables and other current liabilities (298) 563 1,825 (5) (987) 1,556 Other, net (35) 125 (513) 1,534 253 -------- --------- ------------------- ---------- -------- Net cash provided by (used in) operating activities $2,433 ($4,464) ($9,809) ($332) ($964) $168,699 -------- --------- ------------------- ---------- -------- Investing Activities: Plant expenditures, excluding allowance for funds used during construction (17,906) Oil and gas exploration and development Decrease (increase) in other investments 1,328 (475) (3,250) (12,622) -------- --------- ------------------- ---------- -------- Net cash provided by (used in) investing activities $1,328 ($475) ($17,906) $0 ($3,250) ($12,622) -------- --------- ------------------- ---------- -------- Page 7C NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) (Continued) TOTAL ADJUSTMENTS NEES & ELIMINATIONS CONSOLIDATED -------------- ------------ Operating Activities: Net Income $227,954 $208,936 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Undistributed earnings of subsidiaries (40,299) Depreciation and amortization (2,902) 250,508 Deferred income taxes and investment tax credits-net (1,299) (30,328) Allowance for funds used during construction (115) (2,246) Minority interests (7,127) 7,127 Decrease (increase) in other current assets 27,061 23,687 Increase (decrease) in payables and other current liabilities (30,752) 24,431 Other, net 5,677 40,455 ---------- ---------- Net cash provided by (used in) operating activities $178,198 $522,570 ---------- ---------- Investing Activities: Plant expenditures, excluding allowance for funds used during construction 544 ($234,409) Oil and gas exploration and development 48 ($20,371) Decrease (increase) in other investments (12,164) ($10,309) -------- --------- Net cash provided by (used in) investing activities ($11,572) ($265,089) -------- ---------
Page 7D NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) (Continued)
GRANITE MASS. NARRA. STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC ------- -------- -------- --- ---- ------ ------- ----- Financing Activities: Dividends paid to minority interests Dividends paid on common shares (815) (13,188) (7,361) (138,995) (165) (12,883)(5,165) Dividends paid on preferred stock (3,114) (2,143) (2,574) Preferred stock - retirements (20,900) Long-term debt - issues 20,000 2,000 47,850 Long-term debt - retirements (1,000) (2,000) (57,850) (33,000) (6,960)(4,560) Premium on reacquisition of long-term debt Capital contribution from parent Subordinated notes payable to parent (net) 771 Changes in short-term debt 1,925 (11,675) (3,650)(31,550) (1,000) 1,000 Gain on redemption of preferred stock 1,368 Return of capital to minority interests and related premium (3,296) Repurchase of common shares ------- --------- -------- ------------------- ---------------- --------- Net cash provided by (used in) financing activities $110 ($7,977) ($13,154) ($202,651) ($32,229) ($165)($20,843) ($12,021) ------- --------- -------- ------------------- ---------------- --------- Net increase (decrease) in cash and cash equivalents ($3) $516 ($272) $440 ($934) $7,564 $3,909 $1,319 Cash and cash equivalents at beginning of year 98 1,840 1,999 2,607 1,133 459 974 237 ------- --------- -------- ------------------- ---------------- --------- Cash and cash equivalents at end of year $95 $2,356 $1,727 $3,047 $199 $8,023 $4,883 $1,556 ======= ========= ======== =================== ================ ========= Page 7E NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) (Continued) NERC NEERI NANTUCKET GS EN NEES EN PARENT ---- ----- --------- ----- ------- ------ Financing Activities: Dividends paid to minority interests Dividends paid on common shares (2,000) (153,915) Dividends paid on preferred stock Preferred stock - retirements Long-term debt - issues 28,000 Long-term debt - retirements (1,441) Premium on reacquisition of long-term debt Capital contribution from parent 85 5,050 355 4,505 Subordinated notes payable to parent (net) Changes in short-term debt (562) Gain on edemption of preferred stock Return of capital to minority interests and related premium Repurchase of common shares -------- --------- ---------- ------ ------- ------- Net cash provided by (used in) financing activities ($3,356) $5,050 $27,438 $355 $4,505 ($153,915) -------- --------- ---------- ------- ------- ------- Net increase (decrease) in cash and cash equivalents $405 $111 ($277) $23 $291 $2,162 Cash and cash equivalents at beginning of year 411 70 909 3,801 -------- --------- ---------- ------- ------- ------- Cash and cash equivalents at end of year $816 $181 $632 $23 $291 $5,963 ======== ========= ========== ======= ======= ======= Page 7F NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) (Continued) TOTAL ADJUSTMENTS NEES & ELIMINATIONS CONSOLIDATED -------------- ------------ Financing Activities: Dividends paid to minority interests 8,878 (8,878) Dividends paid on common shares (180,728) (153,759) Dividends paid on preferred stock (7,831) Preferred stock - retirements (20,900) Long-term debt - issues 97,850 Long-term debt - retirements (106,811) Premium on reacquisition of long-term debt Capital contribution from parent 9,995 Subordinated notes payable to parent (net) 771 Changes in short-term debt 14,350 (59,862) Gain on redemption of Preferred stock 1,368 Return of capital to minority interests and related premium (1,663) (1,633) Repurchase of common shares 2,075 (2,075) ---------- ---------- Net cash provided by (used in) financing activities ($152,785) ($256,068) ---------- ---------- Net increase (decrease) in cash and cash equivalents $13,841 $1,413 Cash and cash equivalents at beginning of year 7,474 $7,064 ---------- ---------- Cash and cash equivalents at end of year $21,315 $8,477 ========== ==========
Page 8A NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS - ADJUSTMENTS AND ELIMINATIONS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
GRANITE MASS. NARRA. STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC ------- -------- -------- --- ---- ------ ------- ----- Operating Activities: Net income (loss) $1,704 $37,926 $22,954 $152,483 ($1,405) $1,839 $8,932 $5,447 Undistributed earnings of subsidiaries Depreciation and amortization (2,902) Minority interests (4,427) (2,700) Deferred income taxes and investment tax credits-net 156 63 (1,188) 2,598 (2,463) (141) 1,059 Decrease (increase) in other current assets 99 (2,363) 213 4,461 25,196 3,216 649 (22) Increase (decrease) in payables and other current liabilities (520) (5,428) 1,943 (25,407) (45) (2,037) 56 31 Other, net 66 1,484 592 3,005 37 ------- --------- -------- ---------- -------- -------- -------- -------- Net cash provided by (used in) operating activities $1,505 $31,682 $24,514 $137,140 $18,381 $3,018 $5,069 $3,852 ------- --------- -------- ---------- -------- -------- -------- -------- Investing Activities: Plant expenditures, excluding allowance for funds used during construction Oil and gas exploration and development 48 Decrease (increase) in other investments (57) (170) (149) (115) (1,491) ------- --------- -------- ---------- -------- -------- -------- -------- Net cash provided by (used in) investing activities ($57) ($170) ($149) ($115) $48 ($1,491) $0 $0 ------- --------- -------- ---------- -------- -------- -------- -------- Page 8B NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS - ADJUSTMENTS AND ELIMINATIONS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) (Continued) NERC NEERI NANTUCKET GS EN NEES EN PARENT ---- ----- --------- ----- ------- ------ Operating Activities: Net income (loss) $2,835 ($3,608) $356 ($156) ($1,509) Undistributed earnings of subsidiaries (40,299) Depreciation and amortization Minority interests Deferred income taxes and investment tax credits-net (1,383) Allowance for funds used During construction (115) Decrease (increase) in other current assets (156) (379) (1,765) (2) (2,086) Increase (decrease) in payables and other current liabilities 198 830 268 80 12 (733) Other, net (94) 587 ------- --------- --------- ------- ------ ------- Net cash provided by (used in) operating activities $2,877 ($3,157) ($2,733) ($76) ($912)($43,118) ------- --------- --------- ------- ------- ------- Investing Activities: Plant expenditures, excluding allowance for funds used during construction 550 (6) Oil and gas exploration and development Decrease (increase) in other investments (55) (10,127) ------- --------- --------- ------- ------- ------- Net cash provided by (used in) investing activities $0 $0 $495 $0 $0($10,133) ------- --------- --------- ------- ------- ------- Page 8C NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS - ADJUSTMENTS AND ELIMINATIONS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) (Continued) TOTAL ADJUSTMENTS & ELIMINATIONS -------------- Operating Activities: Net income (loss) $227,954 Undistributed earnings of subsidiaries (40,299) Depreciation and amortization (2,902) Minority interests (7,127) Deferred income taxes and investment tax credits-net (1,299) Allowance for funds used during construction (115) Decrease (increase) in other current assets 27,061 Increase (decrease) in payables and other current liabilities (30,752) Other, net 5,677 --------- Net cash provided by (used in) operating activities $178,198 --------- Investing Activities: Plant expenditures, excluding allowance for funds used during construction 544 Oil and gas exploration and development 48 Decrease (increase) in other investments (12,164) ------- Net cash provided by (used in) investing activities ($11,572) -------
Page 8D NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS - ADJUSTMENTS AND ELIMINATIONS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) (Continued)
GRANITE MASS. NARRA. STATE ELECTRIC ELECTRIC NEP NEEI NEPSCO NEHTECI NEHTC ------- -------- -------- --- ---- ------ ------- ----- Financing Activities: Dividends paid to minority interest 6,326 2,552 Dividends paid on common shares (815) (13,188) (7,361) (138,995) (165)(12,883) (5,165) Dividends paid on preferred stock (3,114) (2,143) (2,574) Capital contribution from parent Subordinated notes payable to parent (net) 771 Changes in short-term debt 1,925 4,275 4,300 4,250 Gain on redemption of preferred stock 1,368 Return of capital to minority interests and related premium Repurchase of common shares 57 170 149 115 1,491 ------- --------- -------- ------------------ ---------------- -------- Net cash provided by (used in) financing activities $1,167 ($11,857) ($5,055) ($135,836) $771 $1,326($6,557) ($2,613) ------- --------- -------- ------------------ ---------------- -------- Net increase (decrease) in cash and cash equivalents $2,615 $19,655 $19,310 $1,189 $19,200 $2,853($1,488) $1,239 ------- --------- -------- ------------------ ---------------- -------- Cash and cash equivalents at beginning of year 1,100 375 945 145 Cash and cash equivalents at end of year $ 175 $7,975 $4,845 $1,445 ======= ========= ======== ================== ================ ======== Page 8E NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS - ADJUSTMENTS AND ELIMINATIONS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) (Continued) NERC NEERI NANTUCKET GS EN NEES EN PARENT ---- ----- --------- ----- ------- ------ Financing Activities: Dividends paid to minority interest Dividends paid on common shares (2,000) (156) Dividends paid on preferred stock Capital contribution from parent 85 5,050 355 4,505 Subordinated notes payable to parent (net) Changes in short-term debt (400) Gain on redemption of preferred stock Return of capital to minority interests and related premium (1,663) Repurchase of common shares 93 ------------------ --------- ------- ------- ------- Net cash provided by (used in) financing activities ($1,915) $5,050 ($400) $355 $4,505 ($1,726) ------------------ --------- ------- ------- ------- Net increase (decrease) in cash and cash equivalents $962 $1,893 ($2,638) $279 $3,593 ($54,977) ------------------ --------- ------- ------- ------- Cash and cash equivalents at beginning of year 400 4,509 Cash and cash equivalents at end of year $ 800 $ 150 $ 5,925 ================== ========= ======= ======= ======= Page 8F NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS - ADJUSTMENTS AND ELIMINATIONS YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS) (Continued) TOTAL ADJUSTMENTS & ELIMINATIONS -------------- Financing Activities: Dividends paid to minority interest 8,878 Dividends paid on common shares (180,728) Dividends paid on preferred stock (7,831) Capital contribution from parent 9,995 Subordinated notes payable to parent (net) 771 Changes in short-term debt 14,350 Gain on redemption of preferred stock 1,368 Return of capital to minority interests and related premium (1,663) Repurchase of common shares 2,075 ---------- Net cash provided by (used in) financing activities ($152,785) ---------- Net increase (decrease) in cash and cash equivalents $13,841 ---------- Cash and cash equivalents at beginning of year 7,474 Cash and cash equivalents at end of year $ 21,315 =========
EX-3.(II) 4 EXHIBIT B.4.B Exhibit B.4.b As Amended March 15, 1995 BY-LAWS OF MASSACHUSETTS ELECTRIC COMPANY ARTICLE I. PLACE OF STOCKHOLDERS' MEETINGS. All meetings of the stockholders shall be held in Massachusetts either at the principal office of the corporation or at such other place as is stated in the call. ARTICLE II. ANNUAL MEETING. The annual meeting of the stockholders shall be held at the principal office of the corporation or such other place in Massachusetts as is stated in the call of the meeting on the third Wednesday of March in each year, if it be not a legal holiday, and if it be a legal holiday, then on the next succeeding day not a legal holiday. Purposes for which the annual meeting is to be held additional to those prescribed by law, by the agreement of association and by these by-laws may be specified by the board of directors or by writing signed by the president or by a majority of the directors or by stockholders who hold at least one-tenth of the aggregate par value of the capital stock generally entitled to vote. If such annual meeting is omitted on the day herein provided therefor, a special meeting may be held in place thereof, and any business transacted or elections held at such meeting shall have the same effect as if transacted or held at the annual meeting. ARTICLE III. SPECIAL MEETINGS OF STOCKHOLDERS. Except as otherwise provided in Section 4 of Article XVIII, special meetings of the stockholders may be called by the president or by a majority of the directors, and shall be called by the clerk, or in the case of the death, absence, incapacity or refusal of the clerk by any other officer of the corporation, upon written application of stockholders who hold at least one- tenth of the aggregate par value of the capital stock entitled to vote at the meeting, stating the time, place and purpose of the meeting. ARTICLE IV. NOTICE OF STOCKHOLDERS' MEETINGS. Except as otherwise provided in Section 4 of Article XVIII, a written or printed notice of each meeting of stockholders, stating the place, day and hour thereof and the purpose for which the meeting is called, shall be given by the clerk, at least seven days before such meeting, to each stockholder entitled to vote thereat, by leaving such notice with him or at his residence or usual place of business, or by mailing it, postage prepaid and addressed to such stockholder at his address as it appears upon the books of the corporation. In the absence or disability of the clerk, such notice may be given by a person designated either by the clerk or by the person or persons calling the meeting or by the board of directors. No notice of the time, place or purpose of any regular or special meeting of the stockholders shall be required if every stockholder entitled to notice thereof is present in person or is represented at the meeting by proxy or if every such stockholder, or his attorney thereunto authorized, by a writing which is filed with the records of the meeting, waives such notice. ARTICLE V. QUORUM OF STOCKHOLDERS. Except as otherwise provided in Section 4 of Article XVIII, at any meeting of the stockholders, a majority in interest of all stock issued and outstanding and entitled to vote upon a question to be considered at the meeting shall constitute a quorum for the consideration of such question, but a less interest may adjourn any meeting from time to time, and the meeting may be held as adjourned without further notice. When a quorum is present at any meeting, a majority of the stock represented thereat and entitled to vote shall, except where a larger vote is required by law, by the agreement of association or by these by-laws, decide any question brought before such meeting. ARTICLE VI. PROXIES AND VOTING. Stockholders who are entitled to vote shall have one vote for each share of stock owned by them. Stockholders may vote either in person or by proxy in writing dated not more than six (6) months before the meeting named therein, which shall be filed with the clerk of the meeting before being voted. Such proxies shall entitle the holders thereof to vote at any adjournment of such meeting but shall not be valid after the final adjournment of such meeting. ARTICLE VII. BOARD OF DIRECTORS. A board of not less than three directors shall be chosen by ballot at the annual meeting of the stockholders or at the special meeting held in place thereof, or as provided in Section 4 of Article XVIII. The number of directors for each corporate year shall be fixed by vote at the meeting at which they are elected but the stockholders may, at any special meeting held for the purpose during any such year, increase or decrease (within the limit above specified) the number of directors as thus fixed, and elect new directors to complete the number so fixed, or remove directors to reduce the number of directors to the number so fixed; provided, however, that while there are four (4) full quarterly dividends in default on the Preferred Stock and the Preferred Stock-Cumulative the number of such directors shall be fixed in accordance with Section 4 of Article XVIII. No director need be a stockholder. Subject to law, to the agreement of association, to the terms of the Preferred Stock and the Preferred Stock-Cumulative and to the other provisions of these by-laws, each director shall hold office until the next annual meeting of the stockholders and until his successor is chosen and qualified. ARTICLE VIII. POWERS OF DIRECTORS. The board of directors shall have, and may exercise, all the powers of the corporation, except such as are conferred upon the stockholders by law, by the agreement of association and by these by-laws. ARTICLE IX. MEETINGS OF THE BOARD OF DIRECTORS. Regular meetings of the board of directors may be held at such places and at such times as the board may by vote from time to time determine, and if so determined, no notice thereof need be given. A regular meeting of the board of directors may be held without notice immediately after, and at the same place as the annual meeting of the stockholders, or the special meeting of the stockholders held in place of such annual meeting. Special meetings of the board of directors may be held at any time and at any place when called by the president, treasurer, or two or more directors, reasonable notice thereof being given to each director, or at any time without call or formal notice, provided all the directors are present or waive notice thereof by a writing which is filed with the records of the meeting. In any case it shall be deemed sufficient notice to a director to send notice by mail or telegram at least forty-eight hours before the meeting addressed to him at his usual or last known business or residence address. ARTICLE X. QUORUM OF THE BOARD OF DIRECTORS. A majority of the board of directors shall constitute a quorum for the transaction of business, but a less number may adjourn any meeting from time to time, and the meeting may be held as adjourned without further notice. Except as otherwise provided, when a quorum is present at any meeting, a majority of the members in attendance thereat shall decide any question brought before such meeting. ARTICLE XI. VACANCIES IN BOARD OF DIRECTORS. If the office of any director, one or more, elected by the stockholders generally entitled to vote, becomes vacant by reason of death, resignation, removal, disqualification or otherwise, the remaining directors so elected, though less than a quorum, may, unless such vacancy shall have been filled by the stockholders generally entitled to vote, choose by a majority vote of their entire number, a successor or successors, who shall hold office for the unexpired term. Any vacancy in the office of a director elected by holders of the Preferred Stock and the Preferred Stock-Cumulative shall be filled as provided in Section 4 of Article XVIII. ARTICLE XII. OFFICERS AND AGENTS. The officers shall be a president, a clerk, a treasurer and such other officers and agents as the board of directors may in their discretion appoint. The treasurer and the clerk shall be chosen by ballot at the annual meeting of the stockholders. The president shall be elected annually by the board of directors after its election by the stockholders. The president shall be a director. The clerk shall be a resident of Massachusetts. So far as is permitted by law, any two or more offices may be filled by the same person. Subject to law, to the agreement of association and to the other provisions of these by-laws, the treasurer and clerk shall each hold office until the next annual meeting of stockholders and until his successor is chosen and qualified, the president shall hold office until the first meeting of directors after the next annual meeting of stockholders and until his successor is chosen and qualified and the other officers and agents shall hold office during the pleasure of the board of directors or for such term as the board of directors shall prescribe. Each officer shall, subject to these by- laws, have in addition to the duties and powers herein set forth such duties and powers as are commonly incident to his office, and such duties and powers as the board of directors shall from time to time designate. ARTICLE XIII. PRESIDENT AND VICE PRESIDENTS. Except as otherwise determined by the board of directors the president shall be the chief executive officer of the corporation and shall preside at all meetings of the stockholders and of the board of directors at which he is present. The president shall have custody of the treasurer's bond. Any vice president shall have such powers as the board of directors shall from time to time designate. ARTICLE XIV. CLERK. The clerk shall keep an accurate record of the proceedings of all meetings of the stockholders in books provided for the purpose, which books shall be kept at the principal office of the corporation and shall be open at all reasonable times to the inspection of any stockholder. In the absence of the clerk or an assistant clerk at any such meeting a temporary clerk shall be chosen, who shall record the proceedings of such meeting in the aforesaid books. The clerk, any assistant clerk and such temporary clerk shall be sworn. The clerk or an assistant clerk shall also keep accurate minutes of all meetings of the board of directors and in their absence from any such meeting a temporary clerk shall be chosen, who shall be sworn and shall record the proceedings of such meeting. ARTICLE XV. TREASURER. The treasurer shall, subject to the direction and under the supervision of the board of directors, have general charge of the financial concerns of the corporation and the care and custody of the funds and valuable papers of the corporation, except his own bond, and he shall have power to endorse for deposit or collection all notes, checks, drafts, etc., payable to the corporation or its order, and to accept drafts on behalf of the corporation. He shall keep, or cause to be kept, accurate books of account which shall be the property of the corporation. If required by the board of directors he shall give bond for the faithful performance of his duty in such form, in such sum, and with such sureties as the board of directors shall require. Any assistant treasurer shall have such powers as the board of directors shall from time to time designate. ARTICLE XVI. REMOVALS. The stockholders generally entitled to vote may, at any special meeting called for the purpose, by vote of a majority of the capital stock issued and outstanding and generally entitled to vote, remove from office the treasurer, clerk or any director elected by the stockholders generally entitled to vote, and elect his successor. The board of directors may likewise, by vote of a majority of their entire number, remove from office any officer or agent of the corporation; provided, however, that the board of directors may remove the treasurer or clerk for cause only. ARTICLE XVII. VACANCIES. If the office of any officer or agent, one or more, becomes vacant by reason of death, resignation, removal, disqualification or otherwise, the directors may, unless such vacancy, if in the office of the treasurer or clerk, shall have been filled by the stockholders generally entitled to vote, choose by a majority vote of their entire number, a successor or successors, who shall hold office for the unexpired term, subject to the provisions of Article XVI. ARTICLE XVIII. CLASSES OF STOCK. The capital stock of the corporation shall consist of Common Stock of the par value of $25 a share and two classes of preferred stock, Preferred Stock of the par value of $100 a share and Preferred Stock - Cumulative of the par value of $25 a share, each having respectively preferences, voting rights, restrictions and qualifications as follows: SECTION 1. Common Stock. - ------------------------- Each share of the Common Stock shall be equal to every other share thereof in every respect. Except as required by law and except as hereafter specifically provided in Section 2 of this Article XVIII, the holders of Common Stock shall have the exclusive right to vote. SECTION 2. Preferred Stock. - ---------------------------- A. The shares of Preferred Stock may be issued, as the board of directors may determine, in one or more series each bearing such designation as to distinguish the shares thereof from the shares of all other series and classes of capital stock of the corporation. All shares of Preferred Stock, irrespective of series, shall constitute one and the same class of stock and shall be of equal rank as to dividends and assets with each other and with the Preferred Stock - Cumulative. Subject to any applicable provisions of law, the shares of Preferred Stock of different series may vary, as determined by the board of directors and, if required by law, by the stockholders, as to the following rights and preferences: (1) The annual dividend rate, or method of calculation thereof, and the date from which the dividends on shares issued prior to the record date for the first dividend shall be cumulative and the date for the first dividend; (2) The redemption price or prices, or method of calculation thereof, and any restriction on the exercise by the corporation of its right to redeem such series; (3) The amount or amounts payable upon any liquidation or dissolution or winding up; (4) The terms and amount of any sinking fund provided for the purchase or redemption of shares; and (5) The conversion, participation or other special rights. B. Before any dividends on, or any distribution of assets (by purchase of shares or otherwise) to holders of, the Common Stock or any other stock ranking junior to the Preferred Stock as to dividends (both hereinafter in this subsection B called "junior stock") shall be paid or set apart for payment or otherwise provided for, the holders of the Preferred Stock shall be entitled to receive, but only when and as declared by the board of directors, out of any funds legally available for the declaration of dividends, cumulative dividends at the annual dividend rate per share fixed for the particular series payable quarterly on the first days of February, May, August and November in each year commencing on a date specified for the first dividend date as herein provided to stockholders of record on the respective dates, not exceeding thirty (30) days preceding such dividend payment dates, fixed in advance for the purpose by the board of directors prior to the payment of each particular dividend. No dividends shall be declared on any series of the Preferred Stock or on any other class of preferred stock ranking on a parity therewith, as to dividends, in respect of any quarter-yearly dividend period, unless there shall likewise be declared on all shares of all series of the Preferred Stock and of any other class of such parity preferred stock at the time outstanding, like proportionate dividends, ratably, in proportion to the respective annual dividend rates fixed therefor, in respect of the same quarter-yearly dividend period, to the extent that such shares are entitled to receive dividends for such quarter-yearly dividend period. The dividends on shares of all series of the Preferred Stock shall be cumulative. In the case of all shares of each particular series, the dividends on shares of such series shall be cumulative: (1) On shares issued prior to the record date for the first dividend on the shares of such series, from the date for the particular series fixed therefor; (2) On shares issued after a record date for a dividend, but prior to the dividend payment date for such dividend, from said dividend payment; and (3) Otherwise from the quarter-yearly dividend payment date next preceding the date of issue of such shares; so that dividends accrued on all outstanding shares of Preferred Stock to the last preceding quarterly dividend payment shall have been paid in full or declared and set apart for payment before there shall be any dividend or distribution on, or purchase of, junior stock. The holders of the Preferred Stock shall not be entitled to receive any dividends thereon other than the dividends referred to in this subsection B and other than distributions provided for in subsection D below. Whenever dividends accrued on all outstanding shares of Preferred Stock to the last preceding quarterly dividend payment date shall have been paid in full or declared and set apart for payment, and subject to the limitations set forth in subsection H below and, when applicable, in subsection E(2)(i) of Section 4 of this Article XVIII, the board of directors may, without waiting for the expiration of the current dividend period for the Preferred Stock, declare and pay dividends on any junior stock out of funds legally available therefor. As used in this Section 2, the expression "dividends accrued" shall mean the sum of amounts with respect to all shares of Preferred Stock then outstanding, which as to each share shall be an amount computed at the rate per annum of the par value thereof fixed for the particular series from the date from which dividends on such share become cumulative to the date with reference to which the expression is used, irrespective of whether such amount shall have been declared as dividends or there shall have existed any funds legally available for the payment thereof, less the aggregate of all dividends paid or declared payable on or before said last mentioned date and set aside for such payment on such share. C. The corporation, pursuant to action of its board of directors or as provided in subsection A(11) of Section 4 of this Article XVIII, may redeem the whole or any part of any series of the Preferred Stock at the time outstanding, at any time or from time to time, by paying in cash as herein provided the redemption price of the shares of the particular series fixed therefor, together with dividends accrued to the date fixed for such redemption, and by mailing, postage prepaid, at least thirty (30) days and not more than ninety (90) days prior to the date fixed for said redemption a notice specifying said redemption date to the holders of record of the Preferred Stock to be redeemed, at their respective addresses as the same shall appear on the books of the corporation; provided, however, that the exercise by the corporation of its right to redeem shares of any particular series may be subject to such restrictions as are determined for said series. In case of the redemption of a part only of any series of the Preferred Stock at the time outstanding, the corporation shall select by lot in such manner as the board of directors determines, the shares so to be redeemed. If such notice of redemption shall have been so mailed, and if on or before the redemption date specified in such notice all funds necessary for such redemption shall have been set aside by the corporation, so as to be and continue to be available therefor, then, on and after said redemption date, notwithstanding that any certificate for the shares of the Preferred Stock so called for redemption shall not have been surrendered for cancellation, the shares represented thereby shall no longer be deemed outstanding, the right to receive dividends thereon shall cease to accrue, and all rights of the holders thereof shall forthwith cease and terminate, except only the right of the holders thereof to receive the amount payable upon redemption thereof, but without interest; provided, however, that if, after mailing said notice as aforesaid and prior to the date of redemption specified in such notice, said funds shall be set aside by deposit in trust, for the account of the holders of the Preferred Stock to be redeemed, with a bank or trust company in good standing, organized under the laws of the United States of America or The Commonwealth of Massachusetts, having a capital, undivided profits and surplus aggregating at least $5,000,000, thereupon all shares of the Preferred Stock with respect to which such deposit shall have been made shall no longer be deemed to be outstanding, and all rights with respect to such shares of Preferred Stock shall forthwith upon such deposit in trust cease and terminate, except only the right of the holders thereof to receive from such deposit the amount payable upon the redemption but without interest. In case the holders of the Preferred Stock which shall have been redeemed shall not within four years of the date of redemption thereof claim any amount so deposited in trust for the redemption of such shares, such bank or trust company shall, upon demand, pay over to the corporation any such unclaimed amount so deposited with it and shall thereupon be relieved of all responsibility in respect thereof, and the corporation shall not be required to hold the amount so paid over to it separate and apart from its other funds, and thereafter the holders of such shares of Preferred Stock shall look only to the corporation for payment of the redemption price thereof, but without interest. If there are any dividends accrued to the last preceding quarterly dividend payment date or dates on the outstanding Preferred Stock or any other class of preferred stock ranking on a parity therewith as to assets, no Preferred Stock or such parity stock shall be redeemed, purchased or otherwise acquired by the corporation unless all series of Preferred Stock and such parity stock which are redeemable shall be redeemed and unless an offer is made to (a) purchase all Preferred Stock and such parity stock of any series which is not redeemable at the time under limited restrictions then applicable thereto at a price equal to the then redemption price for such series if such restrictions were not applicable and (b) to purchase all Preferred Stock and such parity stock of any series which is not redeemable at the time at a price equal to the highest then redemption price on any outstanding shares of Preferred Stock and such parity stock, after giving effect to the differences in par value among classes of preferred stock, or unless a partial redemption or any purchase or other acquisition shall have been ordered, approved or permitted under the Public Utility Holding Company Act of 1935. All stock redeemed or purchased under the provisions of this subsection C shall be retired. D. In the event of any liquidation, dissolution or winding up (whether voluntarily or involuntarily) of the affairs of the corporation or any distribution of its capital, then before any distribution shall be made to the holders of Common Stock or any other stock ranking junior to the Preferred Stock as to assets, the holders of each series of the Preferred Stock at the time outstanding shall be entitled to be paid in cash the amount for the particular series fixed therefor, together in each case with dividends accrued thereon to the date fixed for payment of such distributive amounts, and no more. No payments on account of such distributive amounts shall be made to the holders of any series of the Preferred Stock or any other class of preferred stock ranking on a parity therewith, as to assets, unless there shall likewise be paid at the same time to the holders of each other series of the Preferred Stock or such parity stock like proportionate distributive amounts, ratably, in proportion to the full distributive amounts to which they are respectively entitled. After such payment to the holders of Preferred Stock or such parity stock, the remaining assets and funds of the corporation shall be divided and distributed among the holders of Common Stock or any other stock ranking junior to the Preferred Stock as to assets then outstanding according to their respective rights. Neither the consolidation nor the merger of the corporation with or into any other corporation shall be deemed to be a liquidation, dissolution or winding up of the corporation. E. Except as required by law and except as hereafter specifically provided in this Section 4 of this Article XVIII, the holders of Preferred Stock shall have no right to vote. F. Except as otherwise expressly provided by law, no holder of Preferred Stock shall be entitled as such as a matter of right to subscribe for or purchase any part of any new or additional issue of stock or warrant carrying rights to stock, or securities convertible into stock, of any class whatever, whether now or hereafter authorized, and whether issued for cash, property, services or otherwise. If it is expressly required by law that such new or additional issue be offered proportionately to the stockholders, then, unless otherwise provided by law, the holders of all classes of preferred stock only shall be entitled to subscribe for new or additional preferred stock of any class and the holders of common stock only shall be entitled to subscribe for new or additional common stock; and notice of such increase as required by law need be given and the new shares need be offered proportionately only to the stockholders who are so entitled to subscribe. G. Subject to the limitations, if any, contained in Sections 4 and 5 of this Article XVIII, the corporation may from time to time issue additional capital stock divided into classes with such preferences as to dividends, voting power and other incidents as may be determined in accordance with applicable provisions of law and terms of outstanding capital stock. Without limiting the generality of the foregoing, any such additional capital stock may be an additional series of Preferred Stock or additional shares of the initial or any other series of Preferred Stock. H. So long as any shares of the Preferred Stock of any series are outstanding, the payment of dividends on Common Stock or on any other stock of the corporation ranking junior to the Preferred Stock as to dividends or assets (other than (i) dividends payable in stock ranking junior to the Preferred Stock as to dividends and assets or (ii) dividends paid in cash if immediately thereafter there shall be paid to the corporation in cash an amount equal to such dividends for shares of or as a capital contribution with respect to stock ranking junior to the Preferred Stock as to dividends or assets) and the making of any distribution of assets to holders of stock ranking junior to the Preferred Stock as to dividends or assets by purchase of shares or otherwise (each of such actions being herein embraced within the term "payment of junior stock dividends") shall be subject to the following limitations: (1) If and so long as the junior stock equity is, or as a result of the proposed payment would become, less than twenty per cent (20%) of total capitalization the payment of junior stock dividends, including the proposed payment, during the twelve months ending with the last day of the month in which the proposed payment is to be made shall not exceed fifty per cent (50%) of the net income of the corporation available for the payment of dividends on the stock ranking junior to the Preferred Stock as to dividends and assets for the twelve full calendar months immediately preceding the calendar month in which such dividend is declared; and (2) If and so long as the junior stock equity is, or as a result of the proposed payment would become, less than twenty-five per cent (25%) but is twenty per cent (20%) or more of total capitalization the payment of junior stock dividends, including the proposed payment, during the twelve months ending with the last day of the month in which the proposed payment is to be made shall not exceed seventy-five per cent (75%) of the net income of the corporation available for the payment of dividends on the stock ranking junior to the Preferred Stock as to dividends and assets for the twelve full calendar months immediately preceding the calendar month in which such dividend is declared. For the purposes of this subsection H "net income" shall be determined in accordance with generally accepted accounting principles, provided, however, that the amount deducted for depreciation shall be an amount computed in accordance with clause (c) of Section 4.E. hereof. The term "junior stock equity" is defined in subsection E(2)(i) of Section 4 of this Article XVIII. The term "total capitalization" as used in this subsection H means the aggregate of (x) the junior stock equity, (y) the par value of, or stated capital represented by, the outstanding shares of Preferred Stock and any other stock ranking prior thereto or on a parity therewith as to dividends or assets, and (z) the principal amount of all outstanding indebtedness of the corporation represented by bonds, notes and other evidences of indebtedness maturing by their terms more than one year from the date of issue thereof. I. No stockholder, director, officer or agent of the corporation shall be held individually responsible for any action taken in good faith though subsequently adjudged to be in violation of this Section 2. J. The shares of Preferred Stock from time to time duly authorized may be issued for such consideration as may be fixed from time to time either by the board of directors or as otherwise provided by law. Any and all shares of Preferred Stock upon receipt by the corporation of the consideration so fixed shall be deemed fully paid stock and shall not be liable to any further call or assessment thereon. K. Every holder of Preferred Stock of the corporation by becoming such shall be held to have consented to all of these provisions and to have agreed to be bound thereby and to have waived to the full extent permitted by law any right such holder may have either now or at any time in the future contrary to these provisions. SECTION 3. Preferred Stock - Cumulative. - ----------------------------------------- A. The shares of Preferred Stock - Cumulative may be issued, as the board of directors may determine, in one or more series each bearing such designation as to distinguish the shares thereof from the shares of all other series and classes of capital stock of the corporation. All shares of Preferred Stock - Cumulative, irrespective of series, shall constitute one and the same class of stock and shall be of equal rank as to dividends and assets with each other and with the Preferred Stock. Subject to any applicable provisions of law, the shares of Preferred Stock - Cumulative of different series may vary, as determined by the board of directors and, if required by law, by the stockholders, as to the following rights and preferences: (1) The annual dividend rate, or method of calculation thereof, and the date from which the dividends on shares issued prior to the record date for the first dividend shall be cumulative and the date for the first dividend; (2) The redemption price or prices, or method of calculation thereof, and any restriction on the exercise by the corporation of its right to redeem such series; (3) The amount or amounts payable upon any liquidation or dissolution or winding up; (4) The terms and amount of any sinking fund provided for the purchase or redemption of shares; and (5) The conversion, participation or other special rights. B. Before any dividends on, or any distribution of assets (by purchase of shares or otherwise) to holders of, the Common Stock or any other stock ranking junior to the Preferred Stock - Cumulative as to dividends (both hereinafter in this subsection B called "junior stock") shall be paid or set apart for payment or otherwise provided for, the holders of the Preferred Stock - Cumulative shall be entitled to receive, but only when and as declared by the board of directors, out of any funds legally available for the declaration of dividends, cumulative dividends at the annual dividend rate per share fixed for the particular series payable quarterly on the first days of February, May, August and November in each year commencing on a date specified for the first dividend date as herein provided to stockholders of record on the respective dates, not exceeding thirty (30) days preceding such dividend payment dates, fixed in advance for the purpose by the board of directors prior to the payment of each particular dividend. No dividends shall be declared on any series of the Preferred Stock - Cumulative or on any other class of preferred stock ranking on a parity therewith, as to dividends, in respect of any quarter-yearly dividend period, unless there shall likewise be declared on all shares of all series of the Preferred Stock - Cumulative and of any other class of such parity preferred stock at the time outstanding, like proportionate dividends, ratably, in proportion to the respective annual dividend rates fixed therefor, in respect of the same quarter-yearly dividend period, to the extent that such shares are entitled to receive dividends for such quarter-yearly dividend period. The dividends on shares of all series of the Preferred Stock - Cumulative shall be cumulative. In the case of all shares of each particular series, the dividends on shares of such series shall be cumulative: (1) On shares issued prior to the record date for the first dividend on the shares of such series, from the date for the particular series fixed therefor; (2) On shares issued after a record date for a dividend, but prior to the dividend payment date for such dividend, from said dividend payment; and (3) Otherwise from the quarter-yearly dividend payment date next preceding the date of issue of such shares; so that dividends accrued on all outstanding shares of Preferred Stock - Cumulative to the last preceding quarterly dividend payment shall have been paid in full or declared and set apart for payment before there shall be any dividend or distribution on, or purchase of, junior stock. The holders of the Preferred Stock - Cumulative shall not be entitled to receive any dividends thereon other than the dividends referred to in this subsection B and other than distributions provided for in subsection D below. Whenever dividends accrued on all outstanding shares of Preferred Stock - Cumulative to the last preceding quarterly dividend payment date shall have been paid in full or declared and set apart for payment, and subject to the limitations set forth in subsection H below and, when applicable, in subsection E(2)(i) of Section 4 of this Article XVIII, the board of directors may, without waiting for the expiration of the current dividend period for the Preferred Stock - Cumulative, declare and pay dividends on any junior stock out of funds legally available therefor. As used in this Section 3, the expression "dividends accrued" shall mean the sum of amounts with respect to all shares of Preferred Stock - Cumulative then outstanding, which as to each share shall be an amount computed at the rate per annum of the par value thereof fixed for the particular series from the date from which dividends on such share become cumulative to the date with reference to which the expression is used, irrespective of whether such amount shall have been declared as dividends or there shall have existed any funds legally available for the payment thereof, less the aggregate of all dividends paid or declared payable on or before said last mentioned date and set aside for such payment on such share. C. The corporation, pursuant to action of its board of directors or as provided in subsection A(11) of Section 4 of this Article XVIII, may redeem the whole or any part of any series of the Preferred Stock - Cumulative at the time outstanding, at any time or from time to time, by paying in cash as herein provided the redemption price of the shares of the particular series fixed therefor, together with dividends accrued to the date fixed for such redemption, and by mailing, postage prepaid, at least thirty (30) days and not more than ninety (90) days prior to the date fixed for said redemption a notice specifying said redemption date to the holders of record of the Preferred Stock - Cumulative to be redeemed, at their respective addresses as the same shall appear on the books of the corporation; provided, however, that the exercise by the corporation of its right to redeem shares of any particular series may be subject to such restrictions as are determined for said series. In case of the redemption of a part only of any series of the Preferred Stock - Cumulative at the time outstanding, the corporation shall select by lot in such manner as the board of directors determines, the shares so to be redeemed. If such notice of redemption shall have been so mailed, and if on or before the redemption date specified in such notice all funds necessary for such redemption shall have been set aside by the corporation, so as to be and continue to be available therefor, then, on and after said redemption date, notwithstanding that any certificate for the shares of the Preferred Stock - Cumulative so called for redemption shall not have been surrendered for cancellation, the shares represented thereby shall no longer be deemed outstanding, the right to receive dividends thereon shall cease to accrue, and all rights of the holders thereof shall forthwith cease and terminate, except only the right of the holders thereof to receive the amount payable upon redemption thereof, but without interest; provided, however, that if, after mailing said notice as aforesaid and prior to the date of redemption specified in such notice, said funds shall be set aside by deposit in trust, for the account of the holders of the Preferred Stock - Cumulative to be redeemed, with a bank or trust company in good standing, organized under the laws of the United States of America or The Commonwealth of Massachusetts, having a capital, undivided profits and surplus aggregating at least $5,000,000, thereupon all shares of the Preferred Stock - Cumulative with respect to which such deposit shall have been made shall no longer be deemed to be outstanding, and all rights with respect to such shares of Preferred Stock - Cumulative shall forthwith upon such deposit in trust cease and terminate, except only the right of the holders thereof to receive from such deposit the amount payable upon the redemption but without interest. In case the holders of the Preferred Stock - Cumulative which shall have been redeemed shall not within four years of the date of redemption thereof claim any amount so deposited in trust for the redemption of such shares, such bank or trust company shall, upon demand, pay over to the corporation any such unclaimed amount so deposited with it and shall thereupon be relieved of all responsibility in respect thereof, and the corporation shall not be required to hold the amount so paid over to it separate and apart from its other funds, and thereafter the holders of such shares of Preferred Stock - Cumulative shall look only to the corporation for payment of the redemption price thereof, but without interest. If there are any dividends accrued to the last preceding quarterly dividend payment date or dates on the outstanding Preferred Stock - Cumulative or any other class of preferred stock ranking on a parity therewith as to assets, no Preferred Stock - Cumulative or such parity stock shall be redeemed, purchased or otherwise acquired by the corporation unless all series of Preferred Stock - Cumulative and such parity stock which are redeemable shall be redeemed and unless an offer is made to (a) purchase all Preferred Stock - Cumulative and such parity stock of any series which is not redeemable at the time under limited restrictions then applicable thereto at a price equal to the then redemption price for such series if such restrictions were not applicable and (b) to purchase all Preferred Stock - Cumulative and such parity stock of any series which is not redeemable at the time at a price equal to the highest then redemption price on any outstanding shares of Preferred Stock - Cumulative and such parity stock, after giving effect to the differences in par value among classes of preferred stock, or unless a partial redemption or any purchase or other acquisition shall have been ordered, approved or permitted under the Public Utility Holding Company Act of 1935. All stock redeemed or purchased under the provisions of this subsection C shall be retired. D. In the event of any liquidation, dissolution or winding up (whether voluntarily or involuntarily) of the affairs of the corporation or any distribution of its capital, then before any distribution shall be made to the holders of Common Stock or any other stock ranking junior to the Preferred Stock - Cumulative as to assets, the holders of each series of the Preferred Stock - Cumulative at the time outstanding shall be entitled to be paid in cash the amount for the particular series fixed therefor, together in each case with dividends accrued thereon to the date fixed for payment of such distributive amounts, and no more. No payments on account of such distributive amounts shall be made to the holders of any series of the Preferred Stock - Cumulative or any other class of preferred stock ranking on a parity therewith, as to assets, unless there shall likewise be paid at the same time to the holders of each other series of the Preferred Stock - Cumulative or such parity stock like proportionate distributive amounts, ratably, in proportion to the full distributive amounts to which they are respectively entitled. After such payment to the holders of Preferred Stock - Cumulative or such parity stock, the remaining assets and funds of the corporation shall be divided and distributed among the holders of Common Stock or any other stock ranking junior to the Preferred Stock - Cumulative as to assets then outstanding according to their respective rights. Neither the consolidation nor the merger of the corporation with or into any other corporation shall be deemed to be a liquidation, dissolution or winding up of the corporation. E. Except as required by law and except as hereafter specifically provided in this Section 4 of this Article XVIII, the holders of Preferred Stock - Cumulative shall have no right to vote. F. Except as otherwise expressly provided by law, no holder of Preferred Stock - Cumulative shall be entitled as such as a matter of right to subscribe for or purchase any part of any new or additional issue of stock or warrant carrying rights to stock, or securities convertible into stock, of any class whatever, whether now or hereafter authorized, and whether issued for cash, property, services or otherwise. If it is expressly required by law that such new or additional issue be offered proportionately to the stockholders, then, unless otherwise provided by law, the holders of all classes of preferred stock only shall be entitled to subscribe for new or additional preferred stock of any class and the holders of common stock only shall be entitled to subscribe for new or additional common stock; and notice of such increase as required by law need be given and the new shares need be offered proportionately only to the stockholders who are so entitled to subscribe. G. Subject to the limitations, if any, contained in Sections 4 and 5 of this Article XVIII, the corporation may from time to time issue additional capital stock divided into classes with such preferences as to dividends, voting power and other incidents as may be determined in accordance with applicable provisions of law and terms of outstanding capital stock. Without limiting the generality of the foregoing, any such additional capital stock may be an additional series of Preferred Stock - Cumulative or additional shares of the initial or any other series of Preferred Stock - Cumulative. H. So long as any shares of the Preferred Stock - Cumulative of any series are outstanding, the payment of dividends on Common Stock or on any other stock of the corporation ranking junior to the Preferred Stock - Cumulative as to dividends or assets (other than (i) dividends payable in stock ranking junior to the Preferred Stock - Cumulative as to dividends and assets or (ii) dividends paid in cash if immediately thereafter there shall be paid to the corporation in cash an amount equal to such dividends for shares of or as a capital contribution with respect to stock ranking junior to the Preferred Stock - Cumulative as to dividends or assets) and the making of any distribution of assets to holders of stock ranking junior to the Preferred Stock - Cumulative as to dividends or assets by purchase of shares or otherwise (each of such actions being herein embraced within the term "payment of junior stock dividends") shall be subject to the following limitations: (1) If and so long as the junior stock equity is, or as a result of the proposed payment would become, less than twenty per cent (20%) of total capitalization the payment of junior stock dividends, including the proposed payment, during the twelve months ending with the last day of the month in which the proposed payment is to be made shall not exceed fifty per cent (50%) of the net income of the corporation available for the payment of dividends on the stock ranking junior to the Preferred Stock - Cumulative as to dividends and assets for the twelve full calendar months immediately preceding the calendar month in which such dividend is declared; and (2) If and so long as the junior stock equity is, or as a result of the proposed payment would become, less than twenty-five per cent (25%) but is twenty per cent (20%) or more of total capitalization the payment of junior stock dividends, including the proposed payment, during the twelve months ending with the last day of the month in which the proposed payment is to be made shall not exceed seventy-five per cent (75%) of the net income of the corporation available for the payment of dividends on the stock ranking junior to the Preferred Stock - Cumulative as to dividends and assets for the twelve full calendar months immediately preceding the calendar month in which such dividend is declared. For the purposes of this subsection H "net income" shall be determined in accordance with generally accepted accounting principles, provided, however, that the amount deducted for depreciation shall be an amount computed in accordance with clause (c) of subsection I(2) hereof. The term "junior stock equity" is defined in subsection E(2)(i) of Section 4 of this Article XVIII. The term "total capitalization" as used in this subsection H means the aggregate of (x) the junior stock equity, (y) the par value of, or stated capital represented by, the outstanding shares of Preferred Stock - Cumulative and any other stock ranking prior thereto or on a parity therewith as to dividends or assets, and (z) the principal amount of all outstanding indebtedness of the corporation represented by bonds, notes and other evidences of indebtedness maturing by their terms more than one year from the date of issue thereof. I. No stockholder, director, officer or agent of the corporation shall be held individually responsible for any action taken in good faith though subsequently adjudged to be in violation of this Section 3. J. The shares of Preferred Stock - Cumulative from time to time duly authorized may be issued for such consideration as may be fixed from time to time either by the board of directors or as otherwise provided by law. Any and all shares of Preferred Stock - Cumulative upon receipt by the corporation of the consideration so fixed shall be deemed fully paid stock and shall not be liable to any further call or assessment thereon. K. Every holder of Preferred Stock - Cumulative of the corporation by becoming such shall be held to have consented to all of these provisions and to have agreed to be bound thereby and to have waived to the full extent permitted by law any right such holder may have either now or at any time in the future contrary to these provisions. SECTION 4. Certain Rights of Preferred Stock and Preferred Stock - Cumulative. - --------------------------------------------------------------- A. (1) "Equal Preference Stock" as used in this subsection A shall mean the Preferred Stock, the Preferred Stock - Cumulative, and any other class of preferred stock ranking on a parity therewith as to dividends. If dividends accrued to the last preceding quarterly dividend payment date or dates on the outstanding Equal Preference Stock shall at any time and from time to time equal or exceed an amount equivalent to four (4) full quarterly dividends on any shares of any series of the Equal Preference Stock at the time outstanding, then until all dividends in default on the Equal Preference Stock shall have been paid, the holders of Equal Preference Stock, voting separately as one class, shall have the right to elect the smallest number of directors necessary to constitute a majority of the full board of directors, and the holders of the stock generally entitled to vote, voting separately as one class, shall have the right to elect the remaining members of the board of directors. If and when all dividends in default on the Equal Preference Stock shall be paid (and, except when prevented from so doing by any applicable restriction of law or contained in any agreement relating to indebtedness of the corporation, such dividends shall be declared and paid out of any funds legally available therefor as soon as reasonably practicable unless, by a majority vote of the directors elected by the holders of stock generally entitled to vote, such directors determine such payment not to be in the best interests of the corporation), the Equal Preference Stock shall thereupon be divested of such special right to elect any member of the board of directors, but subject always to the same provisions for the vesting of such special right in the Equal Preference Stock in case of further like default or defaults. (2) Upon accrual of the right of the holders of the Equal Preference Stock to elect a majority of the board of directors as above provided in this subsection A, the president, a vice president or the clerk of the corporation shall call a special meeting of the stockholders of the corporation for the purpose of electing a new board of directors to be held not less than forty- five (45) nor more than sixty (60) days after the accrual of such right; provided, however, that no such special meeting shall be called if the date of such accrual of such right shall be less than one hundred twenty (120) days but not less than forty-five (45) days prior to the date otherwise fixed by the by-laws of the corporation for the next annual meeting of the stockholders, in which event said annual meeting shall be held on the date specified in the by-laws or a special meeting in lieu thereof called to be held within three (3) days thereafter. If said officers fail to call such meeting, or fail to hold such annual meeting or special meeting in lieu thereof within three (3) days of the date provided therefor in the by-laws, any holder or holders of Equal Preference Stock holding in the aggregate one thousand (1,000) shares may call a special meeting for such purpose. (3) The notice of any such special meeting, any annual meeting of the corporation or any special meeting in lieu thereof, at which the holders of the Equal Preference Stock shall have the right to elect directors, shall be mailed by the corporation not less than thirty (30) days prior to the meeting and state (x) that by reason of the fact that dividends payable on the Equal Preference Stock are or have been in default in an amount equal to or in excess of four (4) full quarterly dividends, the holders of the Equal Preference Stock, voting together as a class, are entitled to elect the smallest number of directors necessary to constitute a majority of the full board of directors, (y) that any holder of the Equal Preference Stock has the right at any reasonable time to inspect and make copies of the list or lists of the holders of Equal Preference Stock maintained at the principal office of the corporation or at the office of any transfer agent for the Equal Preference Stock, and (z) the substance of the next succeeding paragraph with respect to the number of shares of Equal Preference Stock required to be represented at any meeting or adjournment thereof for the election of directors of the corporation at which such holders have the right to elect directors. (4) At any such special or annual meeting at which the holders of the Equal Preference Stock shall have the right to elect directors, the presence in person or by proxy of the holders of a majority of the outstanding stock generally entitled to vote shall be required to constitute a quorum of such class for the election of directors and the presence in person or by proxy of the holders of a majority of the outstanding Equal Preference Stock shall be required to constitute a quorum of such class for the election of directors; provided, however, that in the absence of such a quorum of the holders of the Equal Preference Stock, no election of directors shall be held but a majority of the holders of the Equal Preference Stock who are present in person or by proxy shall have the power to adjourn the meeting for election of directors to a date not less than twenty-five (25) nor more than sixty (60) days for the date of such original meeting. At such adjourned meeting the presence in person or by proxy of the holders of thirty-five per cent (35%) of the outstanding Equal Preference Stock shall constitute a quorum of such class for the election of directors. In the calculation of any quorum, majority, or percentage, of the Equal Preference Stock, each share of stock bearing $100 par value shall be counted as one and each share of stock bearing $25 par value shall be counted as one- quarter. The Equal Preference Stock, when voting as such, shall vote as a single class. (5) In the event any such special or annual meeting of stockholders shall be adjourned as aforesaid, the president, any vice president or the clerk of the corporation shall, within ten (10) days after the date of the original meeting, cause notice of the adjourned meeting to be given to all stockholders of the corporation entitled to vote thereat. Such notice shall contain substantially the statements hereinabove required with respect to the original meeting, and shall further state that the required quorum of the holders of the Equal Preference Stock was not present at such original meeting and that the holders of thirty-five per cent (35%) of the outstanding Equal Preference Stock will constitute a quorum of such class for the election of directors at such adjourned meeting. (6) If the requisite quorum of holders of the Equal Preference Stock shall not be present at such adjourned meeting, then, in case the original meeting was a special meeting called as aforesaid, the directors of the corporation then in office shall remain in office until the next annual meeting of the stockholders of the corporation and until their successors have been elected and shall qualify; or if such original meeting was an annual meeting of the stockholders or special meeting in lieu thereof, all members of the board of directors to be elected at such meeting shall be elected by a vote of the holders of a majority of the shares of the stock generally entitled to vote present in person or represented by proxy at such adjourned meeting. (7) Upon reversion, pursuant to subsection A(1), of the voting powers to their status prior to default, a special or annual meeting of stockholders generally entitled to vote shall be held for the purpose of electing directors. Notice thereof shall be given promptly by the corporation and in any case within fifteen (15) days after such reversion, such notice to be mailed by the corporation not less than seven (7) nor more than ten (10) days prior to such meeting to all stockholders generally entitled to vote at their respective addresses appearing upon the books of the corporation, unless such notice shall have been waived either before or after the holding of such meeting by all such stockholders. If the corporation fails to call such meeting or fails to hold such annual meeting within three (3) days of the date provided therefor in the by-laws, any holder or holders of stock generally entitled to vote holding in the aggregate one thousand (1,000) shares may call a special meeting for such purpose. (8) Forthwith upon the election of a majority of the board of directors of the corporation by the holders of Equal Preference Stock pursuant to subsection A(1) hereof, the terms of office of all persons who may be directors of the corporation at the time shall terminate, whether or not the holders of stock generally entitled to vote shall then have elected the remaining members of the board of directors, and, if the holders of stock generally entitled to vote shall not have elected the remaining members of the board of directors, then the directors of the corporation in office just prior to the election of the majority of the board of directors by the holders of Equal Preference Stock shall appoint the remaining directors of the corporation pending such election by the holders of stock generally entitled to vote. Any director elected by holders of Equal Preference Stock shall hold office until the next annual meeting of the holders of Equal Preference Stock and until his successor is chosen and qualified, except that upon the reversion, pursuant to subsection A(1), of the voting powers to their status prior to default, then forthwith upon the election of new directors by the holders of stock generally entitled to vote, the terms of office of the directors elected by the holders of Equal Preference Stock shall terminate. (9) During any period in which the holders of Equal Preference Stock have the right to elect a majority of the board of directors, pursuant to subsection A(1), the number of directors constituting the full board of directors shall be the number constituting the full board of directors immediately prior to said period unless it be changed at an annual meeting of stockholders by a two-thirds vote of the holders of Equal Preference Stock and by a two-thirds vote of the holders of stock generally entitled to vote to such number as shall have been stated in the notice of said annual meeting. (10) In case of any vacancy in the office of a director elected by the holders of Equal Preference Stock pursuant to the foregoing provisions of this subsection A, the remaining directors elected by the holders of Equal Preference Stock by affirmative vote of a majority thereof, or the remaining director so elected if there be but one, may elect a successor or successors to hold office for the unexpired term of the director or directors whose place or places shall be vacant. The holders of the Equal Preference Stock, at a special meeting called for the purpose by the holders of an aggregate of not less than one thousand (1,000) shares of the Equal Preference Stock, upon notice mailed not less than thirty (30) days prior to such meeting to all stockholders entitled to vote thereat, by a vote of a majority of the Equal Preference Stock issued and outstanding, may remove from office a director elected by the holders of Equal Preference Stock and may elect a successor for the remainder of his term. (11) Under all circumstances, however, the directors elected by the holders of stock generally entitled to vote shall have the right, and neither the holders of Equal Preference Stock nor any directors elected under these provisions by the holders of Equal Preference Stock shall have any right, to vote upon the question of calling for redemption, or of purchasing, all of the Equal Preference Stock at the time outstanding. (12) Except when some mandatory provision of law shall be controlling or as otherwise provided in this Section 4 and, with respect to any special rights of (i) the Preferred Stock as a class, or (ii) the Preferred Stock - Cumulative as a class, or (iii) any series of either such class as a series, in the provisions of the by-laws or articles of organization controlling said class or in the votes creating said series, neither the Preferred Stock nor the Preferred Stock - Cumulative shall be entitled to vote as a separate class, and no outstanding series of either such class shall be entitled to vote as a separate series, on any matter and all shares of the Preferred Stock of all series and all shares of the Preferred Stock - Cumulative of all series shall be deemed to constitute but one class for any purpose for which a vote of the stockholders of the corporation by classes may now or hereafter be required. B. So long as any shares of the Preferred Stock of any series are outstanding, the corporation shall not, without the vote at a meeting called for that purpose of the holders of at least two-thirds of the total number of shares of the Preferred Stock of all series then outstanding make any change in the provisions relative to the Preferred Stock, or of any series thereof, which would change the express terms and provisions of such stock (other than the express terms and provisions thereof set forth in subsections A, D, and E of this Section 4) in any manner prejudicial to the holders thereof except that if such change is prejudicial to the holders of one or more, but not all of such series, only to the vote of the holders of two-thirds of the total number of shares of all series so affected and then outstanding shall be required. C. So long as any shares of the Preferred Stock - Cumulative of any series are outstanding, the corporation shall not, without the vote at a meeting called for that purpose of the holders of at least two-thirds of the total number of shares of the Preferred Stock - Cumulative of all series then outstanding make any change in the provisions relative to the Preferred Stock - - Cumulative, or of any series thereof, which would change the express terms and provisions of such stock (other than the express terms and provisions thereof set forth in subsections A, D, and E of this Section 4) in any manner prejudicial to the holders thereof except that if such change is prejudicial to the holders of one or more, but not all, of such series, only the vote of the holders of two-third of the total number of shares of all series so affected and then outstanding shall be required. D. So long as any shares of the Preferred Stock or the Preferred Stock - Cumulative of any series are outstanding, the corporation shall not, without the vote at a meeting called for that purpose of the holders of at least two-thirds of the total number of shares of the Preferred Stock and the Preferred Stock - Cumulative of all series then outstanding: (1) Make any change in the provisions of this Section 4, which would change the express terms and provisions of subsections A, D, or E, or such stock in any manner prejudicial to the holders of the Preferred Stock and the Preferred Stock - Cumulative, except that if such change is prejudicial to the holders of one class, but not both, only the vote of the holders of two-thirds of the total number of shares of the class so affected and then outstanding shall be required; or (2) Create or authorize any class of stock which shall be preferred as to dividends or assets over the Preferred Stock, the Preferred Stock - Cumulative or any security convertible into either class. No preferred stock so preferred as to dividends or assets over the Preferred Stock or the Preferred Stock - Cumulative (other than either of such preferred stocks issued upon conversion of another security) shall be issued more than six months after the above referred to vote creating or authorizing such class of stock unless within six months prior to such issue approval thereof has been obtained, at a meeting called for the purpose, by vote of at least two- thirds of the total number of shares of Preferred Stock and Preferred Stock - Cumulative of all series outstanding. E. So long as any shares of the Preferred Stock or the Preferred Stock - Cumulative of any series are outstanding, the corporation shall not, without the vote at a meeting called for that purpose of the holders of at least a majority of the total number of shares of the Preferred Stock and Preferred Stock - Cumulative of all series then outstanding: (1) Issue shares of Preferred Stock or the Preferred Stock - Cumulative of any series if after such issue the aggregate combined outstanding par value of all series thereof would exceed $120 million. (2) Issue additional shares of any series of Preferred Stock or the Preferred Stock - Cumulative or of any other stock ranking prior thereto or on a parity therewith as to dividends or assets, except for refunding an equal par or stated value of Preferred Stock or Preferred Stock - Cumulative, or other such prior or parity preferred stock, of the corporation theretofore outstanding: (i) Unless the junior stock equity to be outstanding immediately after such issue shall be at least equal to the aggregate amount payable on involuntary liquidation, dissolution or winding up of the affairs of the corporation upon all Preferred Stock and Preferred Stock - Cumulative of all series and of any other such prior or parity stock to be outstanding immediately after such issue; provided, however, that if for the purpose of meeting this requirement it shall have been necessary to take into consideration any portion of the earned surplus of the corporation, the corporation shall not (until such junior stock equity exclusive of such portion of earned surplus shall equal such aggregate) pay any dividends or make any distribution on shares of its stock ranking junior to the Preferred Stock and Preferred Stock - Cumulative as to dividends or assets which would result in reducing such junior stock equity to an amount less than such aggregate amount payable on involuntary liquidation, dissolution or winding up of the affairs of the corporation; and (ii) Unless the gross income of the corporation after taxes available for interest on its indebtedness and for dividends on the Preferred Stock, the Preferred Stock - Cumulative and any other such prior or parity stock, determined in accordance with generally accepted accounting principles, for a prior of twelve (12) consecutive calendar months within the fifteen (15) calendar months immediately preceding the calendar month in which such additional stock is issued, or in which a contract for the issuance and sale thereof is made, is at least one and one-half (1-1/2) times the aggregate of the annual interest charges and dividend requirements on all interest bearing indebtedness and all series of Preferred Stock, Preferred Stock - Cumulative and such prior or parity stock to be outstanding immediately after the proposed issue. In said computations under this subsection (ii): (a) Interest on indebtedness and dividends on stock in each case to be retired with the proceeds of the proposed issue and similar charges on indebtedness and stock retired or to be retired prior to the proposed issue from the proceeds of any junior stock issued by the corporation are to be excluded; (b) Such gross income, similarly determined for said twelve (12) months period, from any property acquired by purchase, merger or otherwise during or after said period or to be acquired in connection with the proposed issue, may be included; and (c) The amount deducted for depreciation shall be the amount charged by the corporation on its books for depreciation during such period but not less than the greater of (x) two and one-tenth per cent (2.1%) of the arithmetical average of the gross plant investment in depreciable property on the books of the corporation on the first and last days of such period or (y) the largest minimum depreciation requirement for such period of any mortgage indenture to which the corporation is a party during such period. "Junior stock equity" as used in this subsection E and in subsections H of Sections 2 and 3 of this Article XVIII means the aggregate of the par value of, or stated capital represented by, the outstanding shares of stock ranking junior to the Preferred Stock as to dividends and assets, of the premium on capital stock and of the surplus (including earned surplus, capital surplus and surplus invested in plant) of the corporation less the excess, if any, of the aggregate amount payable on involuntary liquidation, dissolution or winding up of the affairs of the corporation upon all outstanding preferred stock of the corporation over the aggregate par or stated value thereof and less, unless the amounts or items are being amortized or are being provided for by reserves, (a) any amounts recorded on the books of the corporation in adjustment accounts for utility plant and other plant in excess of the original cost thereof, (b) unamortized debt discount and expense and capital stock discount and expense, and (c) the excess, if any, during the period from January 1, 1954 to the end of a month within ninety (90) days preceding the date as of which junior stock equity is determined, over the amount charged by the corporation on its books during such period for depreciation of an amount determined as follows: (x) For the calendar year 1954 and for each full calendar year thereafter, an amount equal to two and one-tenth per cent (2.1%) of the arithmetical average of the gross plant investment in depreciable property on the books of the corporation on January 1 and December 31 of such calendar year; and (y) For any other period, an amount equal to one-twelfth (1/12) of two and one-tenth per cent (2.1%) of the gross plant investment in depreciable property on the books of the corporation on the first day of the calendar year in such period multiplied by the number of full calendar months in such period. (3) Merge or consolidate with or into any other corporation or corporations or sell, lease or dispose of all or substantially all its assets, unless such merger, consolidation, sale, lease or disposition, or the issuance and assumption of all securities to be issued or assumed in connection therewith, shall have been ordered, approved or permitted under the provisions of the Public Utility Holding Company Act of 1935 or by any successor commission or regulatory authority of the United States of America having jurisdiction in the premises under said Act or by any court of the United States having such jurisdiction; or (4) Issue or assume any unsecured notes, debentures or other securities representing unsecured indebtedness for purposes other than (x) the refunding of outstanding unsecured indebtedness theretofore issued or assumed by the corporation resulting in maturities later than the maturity of the indebtedness being refunded or (y) the reacquisition, redemption or other retirement of any indebtedness which reacquisition, redemption or other retirement has been authorized under the provisions of the Public Utility Holding Company Act of 1935, if, immediately after such issue or assumption, the total principal amount of all unsecured notes, debentures or other securities representing both long and short-term unsecured indebtedness issued or assumed by the corporation and then to be outstanding (but excluding unsecured indebtedness theretofore so voted for by holders of Preferred Stock and Preferred Stock - Cumulative) would exceed twenty per cent (20%) of total capitalization, or if, immediately after such issue or assumption, such short- term unsecured indebtedness issued or assumed by the corporation after September 30, 1998 and then to be outstanding (but excluding short-term unsecured indebtedness theretofore so voted for by holders of Preferred Stock and Preferred Stock - Cumulative) would exceed ten per cent (10%) of total capitalization; provided, however, that in the event such short-term unsecured indebtedness (but excluding short-term unsecured indebtedness theretofore so voted for by holders of Preferred Stock and Preferred Stock - Cumulative) exceeds such latter limit, no unsecured securities representing unsecured indebtedness shall be issued or assumed (except for the purposes specified in clauses (x) and (y) above) unless such ratio of short-term unsecured indebtedness immediately after such issue or assumption is not in excess of such limit. "Short-term unsecured indebtedness" as used in this subsection E(4) means unsecured indebtedness of an original maturity of less than ten years and "long-term unsecured indebtedness" means unsecured indebtedness of an original maturity of ten years or more. For the purposes hereof, when any long-term unsecured indebtedness becomes due within five years, or when any long-term unsecured indebtedness is to be retired within five years through a sinking fund or otherwise, such long-term unsecured indebtedness, in each case, shall be considered short-term unsecured indebtedness. "Total capitalization" as used in this subsection E(4) means the aggregate of (i) the total principal amount of all bonds and other securities representing secured indebtedness issued or assumed by the corporation and then outstanding and (ii) the capital, premium and surplus of the corporation as then stated on the books of account of the corporation. The voting rights set forth in subsections B, C, and D shall not be effective if, in connection with any matter specified therein, provision is made for the purchase, redemption or retirement of all the Preferred Stock and Preferred Stock - Cumulative at the time outstanding, or it is provided that the proposed action shall not be effective unless such provision is made. In the calculations in subsections D and E of "at least two-thirds of the total number of shares of Preferred Stock and the Preferred Stock - Cumulative" or of "at least a majority of the total number" of such shares, each share of Preferred Stock bearing $100 par value shall be counted as one and each share of Preferred Stock - Cumulative bearing $25 par value shall be counted as one-quarter. F. No stockholder, directors, officer or agent of the corporation shall be held individually responsible for any action taken in good faith though subsequently adjudged to be in violation of this Section 4. SECTION 5. Maximum Issues of Preferred Stock and Preferred Stock - Cumulative. - ----------------------------------------------------------- The corporation shall not, without the vote at a meeting called for the purpose of at least a majority of the shares of stock generally entitled to vote, issue shares of any series of Preferred Stock or Preferred Stock - Cumulative if after such issue the aggregate outstanding par value of all such series would exceed $120 million. SECTION 6. Terms Applicable to Specific Series of the Preferred Stock. - ------------------------------------------------------ A. The first series of the Preferred Stock of the corporation shall be designated "Cumulative Preferred Stock, 4.44% Series"; the annual dividend rate per share shall be four and forty-four hundredths per cent (4.44%) of the par value thereof (such dividends on shares of the initial issue of said first series to be cumulative from November 18, 1953, and the first dividend date to be February 1, 1954); the redemption prices therefor shall be as follows: If the redemption date is: Redemption Price On or prior to December 31, 1958 $106.568 January 1, 1959 through December 31, 1961 106.068 January 1, 1962 through December 31, 1964 105.568 January 1, 1965 through December 31, 1967 105.068 January 1, 1968 through December 31, 1970 104.568 After December 31, 1970 104.068 together in each case with accrued dividends; and the amounts payable upon any liquidation, dissolution or winding up, if voluntary, shall be equal to said redemption prices plus accrued dividends and, if involuntary, shall be $100.00 per share plus accrued dividends. B. The second series of the Preferred Stock of the corporation shall be designated "Cumulative Preferred Stock, 4.76% Series"; the annual dividend rate per share shall be four and seventy-six hundredths per cent (4.76%) of the par value thereof (such dividends on shares of the initial issue of said second series to be cumulative from August 27, 1962, and the first dividend date to be November 1, 1962); the redemption prices therefor shall be as follows: If the redemption date is: Redemption Price On or prior to October 31, 1967 $106.58 November 1, 1967 through October 31, 1972 105.63 November 1, 1972 through October 31, 1977 104.68 After October 31, 1977 103.73 together in each case with accrued dividends; and the amounts payable upon any liquidation, dissolution or winding up, if voluntary, shall be equal to said redemption prices plus accrued dividends and, if involuntary, shall be $100.00 per share plus accrued dividends. C. The third series of the Preferred Stock of the corporation shall be designated "Cumulative Preferred Stock, 9.44% Series"; the annual dividend rate per share shall be nine and forty-four hundredths per cent (9.44%) of the par value thereof (such dividends on shares of the initial issue of said third series to be cumulative from October 19, 1970, and the first dividend date to be February 1, 1971); the redemption prices therefor shall be as follows: If the redemption date is: Redemption Price On or prior to January 31, 1976 $110.95 February 1, 1976 through January 31, 1981 108.59 February 1, 1981 through January 31, 1986 106.23 After January 31, 1986 103.87 together in each case with accrued dividends, provided, however, that none of the Cumulative Preferred Stock, 9.44% Series, shall be so redeemed prior to October 1, 1975, if such redemption is for the purpose or in anticipation of refunding such Preferred Stock through the use directly or indirectly of funds obtained by the issuance of debt securities at an effective interest cost to the corporation or other preferred stocks at an effective dividend cost to the corporation (both as computed in accordance with generally accepted financial practice) of less than 9.44% per annum; and the amounts payable upon any liquidation, dissolution or winding up, if voluntary, shall be equal to said redemption prices plus accrued dividends and, if involuntary, shall be $100.00 per share plus accrued dividends. D. The fourth series of the Preferred Stock of the corporation shall be designated "Cumulative Preferred Stock, 7.80% Series"; the annual dividend rate per share shall be seven and eighty hundredths per cent (7.80%) of the par value thereof (such dividends on shares of the initial issue of said fourth series to be cumulative from December 14, 1971, and the first dividend date to be February 1, 1972); the redemption prices therefor shall be as follows: If the redemption date is: Redemption Price On or prior to January 31, 1977 $109.10 February 1, 1977 through January 31, 1982 107.15 February 1, 1982 through January 31, 1987 105.20 After January 31, 1987 103.25 together in each case with accrued dividends, provided, however, that none of the Cumulative Preferred Stock, 7.80% Series, shall be so redeemed prior to December 1, 1976, if such redemption is for the purpose or in anticipation of refunding such Preferred Stock through the use directly or indirectly of funds obtained by the issuance of debt securities at an effective interest cost to the corporation or other preferred stocks at an effective dividend cost to the corporation (both as computed in accordance with generally accepted financial practice) of less than 7.80% per annum; and the amounts payable upon any liquidation, dissolution or winding up, if voluntary, shall be equal to said redemption prices plus accrued dividends and, if involuntary, shall be $100.00 per share plus accrued dividends. E. The fifth series of the Preferred Stock of the corporation shall be designated "Cumulative Preferred Stock, 7.84% Series"; the annual dividend rate per share shall be seven and eighty-four hundredths per cent (7.84%) of the par value thereof (such dividends on shares of the initial issue of said fifth series to be cumulative from October 31, 1973, and the first dividend date to be February 1, 1974); the redemption prices therefor shall be as follows: If the redemption date is: Redemption Price On or prior to October 31, 1978 $109.00 November 1, 1978 through October 31, 1983 107.04 November 1, 1983 through October 31, 1988 105.08 November 1, 1988 through October 31, 1993 103.12 After October 31, 1993 101.95 together in each case with accrued dividends, provided, however, that none of the Cumulative Preferred Stock, 7.84% Series, shall be so redeemed prior to October 1, 1978, if such redemption is for the purpose or in anticipation of refunding such Preferred Stock through the use, directly or indirectly, of funds obtained by the issuance of debt securities at an effective interest cost to the corporation or other preferred stocks at an effective dividend cost to the corporation (both as computed in accordance with generally accepted financial practice) of less than 7.83% per annum; and the amounts payable upon any liquidation, dissolution, or winding up, if voluntary, shall be equal to said redemption prices plus accrued dividends and, if involuntary, shall be $100.00 per share plus accrued dividends. F. The sixth series of Preferred Stock of the Company be designated "Cumulative Preferred Stock, 6.99% Series"; the annual dividend rate per share be six and ninety-nine hundredths percent (6.99%) of the par value thereof (such dividends on shares of the initial issue of said sixth series to be cumulative from August 12, 1993, and the first dividend date to be November 1, 1993); that none of said sixth series will be redeemable until after August 1, 2003; that redemption prices per share if redeemed during the twelve-month periods beginning August 1 in each of the years indicated in the table below be as follows: Year Redemption Price ---- ---------------- 2003 103.50 2004 103.15 2005 102.80 2006 102.45 2007 102.10 2008 101.75 2009 101.40 2010 101.05 2011 100.70 2012 100.35 2013 and thereafter $100.00 together in each case with accrued dividends; and that the amounts payable upon liquidation, dissolution or winding up, if voluntary, shall be equal to said redemption prices plus accrued dividends, and, if involuntary, shall be $100.00 per share plus accrued dividends. SECTION 7. Terms Applicable to Specific Series of the Preferred Stock-Cumulative - ---------------------------------------------------------- The first series of Preferred Stock-Cumulative of the Company be designated "Preferred Stock-Cumulative, 6.84% Series"; the annual dividend rate per share be six and eighty-four hundredths percent (6.84%) of the par value thereof (such dividends on shares of the initial issue of said first series to be cumulative from the date of such initial issue, and the first dividend date to be November 1, 1993); that none of said first series will be redeemable until after October 1, 1998; that the redemption price per share be $25.80 plus accrued dividends; and that the amount payable upon liquidation, dissolution or winding up, if voluntary, shall be equal to said redemption price plus accrued dividends, and, if involuntary, shall be $25.00 per share plus accrued dividends. ARTICLE XIX. CERTIFICATES OF STOCK. Each stockholder shall be entitled to a certificate of capital stock of the corporation owned by him in such form as shall, in conformity to law, be prescribed from time to time by the board of directors. Such certificate shall be signed by the president or a vice president and by the treasurer or an assistant treasurer, and shall bear the seal of the corporation; provided, however, that the signature of the president or a vice president or of the treasurer or an assistant treasurer of the corporation, or both such signatures, or the seal of the corporation, or either or both of such signatures and such seal, upon such certificate may be facsimile, and such certificate shall be as valid and effectual for all purposes as if signed by such officer or officers, or sealed with the seal of the corporation, as the case may be. The fact that a person signing has ceased to be an officer shall not invalidate any such certificate. ARTICLE XX. TRANSFER OF SHARES OF STOCK. Subject to the restrictions, if any, imposed by the agreement of association, title to a certificate of stock and to the shares represented thereby shall be transferred only by delivery of the certificate properly endorsed, or by delivery of the certificate accompanied by a written assignment of the same, or a written power of attorney to sell, assign, or transfer the same or the shares represented thereby, properly executed; but the person registered on the books of the corporation as the owner of shares shall have the exclusive right to receive dividends thereon and to vote thereon as such owner, and except only as may be required by law, may in all respects be treated by the corporation as the exclusive owner thereof. It shall be the duty of each stockholder to notify the corporation of his post office address. ARTICLE XXI. TRANSFER BOOKS. The treasurer or such agent or agents as may be employed by the treasurer with the approval of the board of directors shall keep the stock and transfer books of the corporation and a record of all certificates of stock issued and of all transfers of stock and a register of all the stockholders, their addresses and the number of shares held by each. For the purpose of determining stockholders who are entitled to receive payment of any dividend, to vote or act at a meeting and any adjournment thereof or to receive any offering of additional stock, or for any other purpose permitted by law, the board of directors may from time to time close the transfer books for such period, not exceeding thirty days, as the board may determine or, without closing said books, may fix a record date, not more than thirty days in advance of such payment, meeting, offering or other action, as of which stockholders entitled to such dividend, vote, offering or other right shall be determined. ARTICLE XXII. LOSS OF CERTIFICATES. In case of the alleged loss or destruction, or the mutilation of a certificate of stock, a duplicate certificate may be issued in place thereof, upon such reasonable terms as the board of directors may prescribe. ARTICLE XXIII. SEAL. The seal of the corporation shall, subject to alteration by the board of directors, consist of a flat-faced circular die with the words "MASSACHUSETTS ELECTRIC COMPANY -- CORPORATE SEAL" cut or engraved thereon. ARTICLE XXIV. EXECUTION OF PAPERS. Except as the board of directors may generally or in particular cases authorize the execution thereof in some other manner, all deeds, leases, transfers, contracts, bonds, notes, checks, drafts and other obligations made, accepted or endorsed by the corporation, shall be signed by the president, any vice president, the treasurer or any assistant treasurer. ARTICLE XXV. FISCAL YEAR. Except as from time to time otherwise provided by the board of directors, the fiscal year of the corporation shall be the calendar year. ARTICLE XXVI. AMENDMENTS. Subject to the provisions of law and of the Preferred Stock and the Preferred Stock-Cumulative, these by-laws may be amended, altered or repealed by a vote of a majority of the outstanding capital stock generally entitled to vote at any meeting of such stockholders, provided notice of the proposed amendment, alteration or repeal is given in the notice of said meeting. ARTICLE XXVII. LIABILITY AND INDEMNIFICATION. No director of the corporation shall be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director notwithstanding any provision of law imposing such liability, except with respect to any matter as to which such liability shall have been imposed (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under section sixty-one or sixty-two of chapter one hundred and fifty-six B of the General Laws of Massachusetts, or (iv) for any transaction from which the director derived an improper personal benefit. The corporation shall indemnify each of its directors and officers against any loss, liability or expense, including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees, imposed upon or reasonably incurred by him in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, including but not limited to derivative suits (to the extent permitted by law), in which he may be involved or with which he may be threatened, while in office or thereafter, by reason of his being or having been a director or officer, except with respect to any matter as to which he shall have been adjudicated in such action, suit or proceeding not to have acted in good faith in the reasonable belief that his action was in the best interests of the corporation, or, to the extent that such matter relates to service with respect to any employee benefit plan, as in the best interests of the participants or beneficiaries of such plan. As to any matter disposed of by a compromise payment by a director or officer, pursuant to a consent decree or otherwise, no indemnification either for said payment or for any other expenses shall be provided unless such compromise shall be approved as in the best interests of the corporation, after notice that it involves such indemnification, if no change in control has occurred (a) by a disinterested majority of the directors then in office, (b) by a majority of the disinterested directors then in office, provided that there has been obtained an opinion in writing of independent legal counsel to the effect that such director or officer appears to have acted in good faith in the reasonable belief that his action was in the best interests of the corporation, or (c) by the vote, at a meeting duly called and held, of the holders of a majority of the shares outstanding and entitled to vote thereon, exclusive of any shares owned by any interested director or officer or, if a change in control shall have occurred, by an opinion in writing of independent legal counsel to the effect that such director or officer appears to have acted in good faith in the reasonable belief that his action was in the best interests of the corporation. Expenses incurred with respect to the defense or disposition of any action, suit or proceeding heretofore referred to in this Article shall be advanced by the corporation prior to the final disposition of such action, suit or proceeding, upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined that he is not entitled to indemnification, which undertaking shall be accepted without reference to the financial ability of the recipient to make such repayment. If in an action, suit or proceeding brought by or in right of the corporation, a director is held not liable, whether because relieved of liability under the first paragraph of this Article or otherwise, he shall be deemed to have been entitled to indemnification for expenses incurred in defense of said action, suit or proceeding. As used in this Article: (i) The term "officer" includes (a) persons who serve at the request of the corporation as directors, officers, or trustees of another organization and (b) employees of the corporation and its affiliates who serve in any capacity with respect to benefit plans for the corporation's employees. (ii) An "interested" director or officer is one against whom in such capacity the proceeding in question or another proceeding on the same or similar grounds is then pending. (iii)A "change in control" occurs when: (a) any individual, corporation, association, partnership, joint venture, trust or other entity or association thereof acting in concert (excluding any employee benefit plan, dividend reinvestment plan or similar plan of the corporation, or any trustee thereof acting in such capacity) acquires more than 20% of the corporation's outstanding stock having general voting rights or more than 20% of the common shares of any entity owning more than 50% of the corporation's outstanding stock having general voting rights, whether in whole or in part, by means of an offer made publicly to the holders of all or substantially all of such outstanding stock or shares to acquire stock or shares for cash, other property, or a combination thereof or by any other means, unless the transaction is consented to by vote of a majority of the continuing directors; or (b) continuing directors cease to constitute a majority of the board. (iv) The term "continuing director" shall mean any director of the corporation who (a) was a member of the board of directors of the corporation on the later of January 1, 1987, or the date the director or officer seeking indemnification first became such, or (b) was recommended for his initial term of office by a majority of continuing directors in office at the time of such recommendation. Nothing contained in this Article shall (i) limit the power of the corporation to indemnify employees and agents of the corporation or its subsidiaries other than directors and officers on any terms it deems appropriate not prohibited by law, (ii) limit the power of the corporation to indemnify directors and officers for expenses incurred in suits, actions, or other proceedings initiated by such director or officer or (iii) affect any rights to indemnification to which corporation personnel other than directors and officers may be entitled by contract or otherwise. The rights provided in this Article shall not be exclusive of or affect any other right to which any director or officer may be entitled and such rights shall inure to the benefit of its or his successors, heirs, executors, administrators and other legal representatives. Such other rights shall include all powers, immunities and rights of reimbursement allowable under the laws of The Commonwealth of Massachusetts. The provisions of this Article shall not apply with respect to any act or omission occurring prior to June 25, 1987. No amendment to or repeal of this Article shall apply to or have any effect upon the liability, exoneration or indemnification of any director or officer for or with respect to any acts or omissions of the director or officer occurring prior to such amendment or repeal. EX-3.(I) 5 EXHIBIT B.8.A Exhibit B.8.a THE COMPANIES LAW (1995 REVISION) COMPANY LIMITED BY SHARES ARTICLES OF ASSOCIATION OF NEERI INTERNATIONAL 1. In these Articles Table A in the Schedule to the Statute does not apply and unless there be something in the subject or context inconsistent therewith, "Articles" means these Articles as originally framed or as from time to time altered by Special Resolution. "Auditors" means the persons for the time being performing the duties of auditors of the Company. "Company" means the above-named Company. "debenture" means debenture stock, mortgages, bonds and any other such securities of the Company whether constituting a charge on the assets of the Company or not. "Directors" means the directors for the time being of the Company. "dividend" includes bonus. "Member" shall bear the meaning as ascribed to it in the Statute. "month" means calendar month. "paid-up" means paid-up and/or credited as paid-up. "registered means the registered office for the time office" being of the Company. "Seal" means the common seal of the Company and includes every duplicate seal. "Secretary" includes an Assistant Secretary and any person appointed to perform the duties of Secretary of the Company. "share " includes a fraction of a share. "Special has the same meaning as in the Statute and Resolution" includes a resolution approved in writing as described therein. "Statute " means the Companies Law of the Cayman Islands as amended and every statutory modification or re- enactment thereof for the time being in force. "written" include all modes of representing or and reproducing words in visible form. "in writing" Words importing the singular number only include the plural number and vice-versa. Words importing the masculine gender only include the feminine gender. Words importing persons only include corporations. 2. The business of the Company may be commenced as soon after incorporation as the Directors shall see fit, notwithstanding that part only of the shares may have been allotted. 3. The Directors may pay, out of the capital or any other monies of the Company, all expenses incurred in or about the formation and establishment of the Company including the expenses of registration. CERTIFICATES FOR SHARES ----------------------- 4. Certificates representing shares of the Company shall be in such form as shall be determined by the Directors. Such certificates may be under Seal. All certificates for shares shall be consecutively numbered or otherwise identified and shall specify the shares to which they relate. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered in the register of Members of the Company. All certificates surrendered to the Company for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled. The Directors may authorize certificates to be issued with the seal and authorised signature(s) affixed by some method or system of mechanical process. 5. Notwithstanding Article 4 of these Articles, if a share certificate be defaced, lost or destroyed, it may be renewed on payment of a fee of one dollar (US$1.00) or such less sum and on such terms (if any) as to evidence and indemnity and the payment of the expenses incurred by the Company in investigating evidence, as the Directors may prescribe. ISSUE OF SHARES ---------------- 6. Subject to the provisions, if any, in that behalf in the Memorandum of Association and to any direction that may be given by the Company in general meeting and without prejudice to any special rights previously conferred on the holders of existing shares, the Directors may allot, issue, grant options over or otherwise dispose of shares of the Company (including fractions of a share) with or without preferred, deferred or other special rights or restrictions, whether in regard to dividend, voting, return of capital or otherwise and to such persons, at such times and on such other terms as they think proper. 7. The Company shall maintain a register of its Members and every person whose name is entered as a Member in the register of Members shall be entitled without payment to receive within two months after allotment or lodgement of transfer (or within such other period as the conditions of issue shall provide) one certificate for all his shares or several certificates each for one or more of his shares upon payment of fifty cents (US$0.50) for every certificate after the first or such less sum as the Directors shall from time to time determine provided that in respect of a share or shares held jointly by several persons the Company shall not be bound to issue more than one certificate and delivery of a certificate for a share to one of the several joint holders shall be sufficient delivery to all such holders. TRANSFER OF SHARES ------------------ 8. The instrument of transfer of any share shall be in writing and shall be executed by or on behalf of the transferor and the transferor shall be deemed to remain the holder of a share until the name of the transferee is entered in the register in respect thereof. 9. The Directors may in their absolute discretion decline to register any transfer of shares without assigning any reason therefor. If the Directors refuse to register a transfer they shall notify the transferee within two months of such refusal. 10. The registration of transfers may be suspended at such time and for such periods as the Directors may from time to time determine, provided always that such registration shall not be suspended for more than forty-five days in any year. REDEEMABLE SHARES ----------------- 11. (a) Subject to the provisions of the Statute and the Memorandum of Association, shares may be issued on the terms that they are, or at the option of the Company or the holder are, to be redeemed on such terms and in such manner as the Company, before the issue of the shares, may by Special Resolution determine. (b) Subject to the provisions of the Statute and the Memorandum of Association, the Company may purchase its own shares (including fractions of a share), including any redeemable shares, provided that the manner of purchase has first been authorised by the Company in general meeting and may make payment therefor in any manner authorised by the Statute, including out of capital. VARIATION OF RIGHTS OF SHARES ----------------------------- 12. If at any time the share capital of the Company is divided into different classes of shares, the rights attached to any class (unless otherwise provided by the terms of issue of the shares of that class) may, whether or not the Company is being wound-up, be varied with the consent in writing of the holders of three-fourths of the issued shares of that class, or with the sanction of a Special Resolution passed at a general meeting of the holders of the shares of that class. The provisions of these Articles relating to general meetings shall apply to every such general meeting of the holders of one class of shares except that the necessary quorum shall be one person holding or representing by proxy at least one-third of the issued shares of the class and that any holder of shares of the class present in person or by proxy may demand a poll. 13. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith. COMMISSION ON SALE OF SHARES ---------------------------- 14. The Company may in so far as the Statute from time to time permits pay a commission to any person in consideration of his subscribing or agreeing to subscribe whether absolutely or conditionally for any shares of the Company. Such commissions may be satisfied by the payment of cash or the lodgement of fully or partly paid-up shares or partly in one way and partly in the other. The Company may also on any issue of shares pay such brokerage as may be lawful. NON-RECOGNITION OF TRUSTS ------------------------- 15. No person shall be recognised by the Company as holding any share upon any trust and the Company shall not be bound by or be compelled in any way to recognize (even when having notice thereof) any equitable, contingent, future, or partial interest in any share, or any interest in any factional part of a share, or (except only as is otherwise provided by these Articles or the Statute) any other rights in respect of any share except an absolute right to the entirety thereof in the registered holder. LIEN ON SHARES -------------- 16. The Company shall have a first and paramount lien and charge on all shares (whether fully paid-up or not) registered in the name of a Member (whether solely or jointly with others) for all debts, liabilities or engagements to or with the Company (whether presently payable or not) by such Member or his estate, either alone or jointly with any other person, whether a Member or not, but the Directors may at any time declare any share to be wholly or in part exempt from the provisions of this Article. The registration of a transfer of any such share shall operate as a waiver of the Company's lien (if any) thereon. The Company's lien (if any) on a share shall extend to all dividends or other monies payable in respect thereof. 17. The Company may sell, in such manner as the Directors think fit, any shares on which the Company has a lien, but no sale shall be made unless a sum in respect of which the lien exists is presently payable, nor until the expiration of fourteen days after a notice in writing stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable, has been given to the registered holder or holders for the time being of the share, or the person, of which the Company has notice, entitled thereto by reason of his death or bankruptcy. 18. To give effect to any such sale the Directors may authorize some person to transfer the shares sold to the purchaser thereof. The purchaser shall be registered as the holder of the shares comprised in any such transfer, and he shall not be bound to see to the application of the purchase money, nor shall his title to the shares be affected by any irregularity or invalidity in the proceedings in reference to the sale. 19. The proceeds of such sale shall be received by the Company and applied in payment of such part of the amount in respect of which the lien exists as is presently payable and the residue, if any, shall (subject to a like lien for sums not presently payable as existed upon the shares before the sale) be paid to the person entitled to the shares at the date of the sale. CALL ON SHARES --------------- 20.(a) The Directors may from time to time make calls upon the Members in respect of any monies unpaid on their shares (whether on account of the nominal value of the shares or by way of premium or otherwise) and not by the conditions of allotment thereof made payable at fixed terms, provided that no call shall be payable at less than one month from the date fixed for the payment of the last preceding call, and each Member shall (subject to receiving at least fourteen days notice specifying the time or times of payment) pay to the Company at the time or times so specified the amount called on the shares. A call may be revoked or postponed as the Directors may determine. A call may be made payable by instalments. (b) A call shall be deemed to have been made at the time when the resolution of the Directors authorizing such call was passed. (c) The joint holders of a share shall be jointly and severally liable to pay all calls in respect thereof. 21. If a sum called in respect of a share is not paid before or on a day appointed for payment thereof, the persons from whom the sum is due shall pay interest on the sum from the day appointed for payment thereof to the time of actual payment at such rate not exceeding ten per cent per annum as the Directors may determine, but the Directors shall be at liberty to waive payment of such interest either wholly or in part. 22. Any sum which by the terms of issue of a share becomes payable on allotment or at any fixed date, whether on account of the nominal value of the share or by way of premium or otherwise, shall for the purposes of these Articles be deemed to be a call duly made, notified and payable on the date on which by the terms of issue the same becomes payable, and in the case of non- payment all the relevant provisions of these Articles as to payment of interest forfeiture or otherwise shall apply as if such sum had become payable by virtue of a call duly made and notified. 23. The Directors may, on the issue of shares, differentiate between the holders as to the amount of calls or interest to be paid and the times of payment. 24. (a) The Directors may, if they think fit, receive from any Member willing to advance the same, all or any part of the monies uncalled and unpaid upon any shares held by him, and upon all or any of the monies so advanced may (until the same would but for such advances, become payable) pay interest at such rate not exceeding (unless the Company in general meeting shall otherwise direct) seven per cent per annum, as may be agreed upon between the Directors and the Member paying such sum in advance. (b) No such sum paid in advance of calls shall entitle the Member paying such sum to any portion of a dividend declared in respect of any period prior to the date upon which such sum would, but for such payment, become presently payable. FORFEITURE OF SHARES -------------------- 25. (a) If a Member fails to pay any call or instalment of a call or to make any payment required by the terms of issue on the day appointed for payment thereof, the Directors may, at any time thereafter during such time as any part of the call, instalment or payment remains unpaid, give notice requiring payment of so much of the call, instalment or payment as is unpaid, together with any interest which may have accrued and all expenses that have been incurred by the Company by reason of such non-payment. Such notice shall name a day (not earlier than the expiration of fourteen days from the date of giving of the notice) on or before which the payment required by the notice is to be made, and shall state that, in the event of non-payment at or before the time appointed the shares in respect of which such notice was given will be liable to be forfeited. (b) If the requirements of any such notice as aforesaid are not complied with, any share in respect of which the notice has been given may at any time thereafter, before the payment required by the notice has been made, be forfeited by a resolution of the Directors to that effect. Such forfeiture shall include all dividends declared in respect of the forfeited share and not actually paid before the forfeiture. (c) A forfeited share may be sold or otherwise disposed of on such terms and in such manner as the Directors think fit and at any time before a sale or disposition the forfeiture may be cancelled on such terms as the Directors think fit. 26. A person whose shares have been forfeited shall cease to be a Member in respect of the forfeited shares, but shall, notwithstanding, remain liable to pay to the Company all monies which, at the date of forfeiture were payable by him to the Company in respect of the shares together with interest thereon, but his liability shall cease if and when the Company shall have received payment in full of all monies whenever payable in respect of the shares. 27. A certificate in writing under the hand of one Director or the Secretary of the Company that a share in the Company has been duly forfeited on a date stated in the declaration shall be conclusive evidence of the fact therein stated as against all persons claiming to be entitled to the share. The Company may receive the consideration given for the share on any sale or disposition thereof and may execute a transfer of the share in favour of the person to whom the share is sold or disposed of and he shall thereupon be registered as the holder of the share and shall not be bound to see to the application of the purchase money, if any, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the forfeiture, sale or disposal of the share. 28. The provisions of these Articles as to forfeiture shall apply in the case of non-payment of any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the nominal value of the share or by way of premium as if the same had been payable by virtue of a call duly made and notified. REGISTRATION OF EMPOWERING INSTRUMENTS --------------------------------------- 29. The Company shall be entitled to charge a fee not exceeding one dollar (US$1.00) on the registration of every probate, letters of administration, certificate of death or marriage, power of attorney, notice in lieu of distringas, or other instrument. TRANSMISSION OF SHARES ---------------------- 30. In case of the death of a Member, the survivor or survivors where the deceased was a joint holder, and the legal personal representatives of the deceased where he was a sole holder, shall be the only persons recognised by the Company as having any title to his interest in the shares, but nothing herein contained shall release the estate of any such deceased holder from any liability in respect of any shares which had been held by him solely or jointly with other persons. 31. (a) Any person becoming entitled to a share in consequence of the death or bankruptcy or liquidation or dissolution of a Member (or in any other way than by transfer) may, upon such evidence being produced as may from time to time be required by the Directors and subject as hereinafter provided, elect either to be registered himself as holder of the share or to make such transfer of the share to such other person nominated by him as the deceased or bankrupt person could have made and to have such person registered as the transferee thereof, but the Directors shall, in either case, have the same right to decline or suspend registration as they would have had in the case of a transfer of the share by that Member before his death or bankruptcy as the case may be. (b) If the person so becoming entitled shall elect to be registered himself as holder he shall deliver or send to the Company a notice in writing signed by him stating that he so elects. 32. A person becoming entitled to a share by reason of the death or bankruptcy or liquidation or dissolution of the holder (or in any other case than by transfer) shall be entitled to the same dividends and other advantages to which he would be entitled if he were the registered holder of the share, except that he shall not, before being registered as a Member in respect of the share, be entitled in respect of it to exercise any right conferred by membership in relation to meetings of the Company PROVIDED HOWEVER that the Directors may at any time give notice requiring any such person to elect either to be registered himself or to transfer the share and if the notice is not complied with within ninety days the Directors may thereafter withhold payment of all dividends, bonuses or other monies payable in respect of the share until the requirements of the notice have been complied with. AMENDMENT OF MEMORANDUM OF ASSOCIATION, CHANGE OF LOCATION OF REGISTERED OFFICE & ALTERATION OF CAPITAL - -------------------------------------------------------------- 33. (a) Subject to and in so far as permitted by the provisions of the Statute, the Company may from time to time by ordinary resolution alter or amend its Memorandum of Association otherwise than with respect to its name and objects and may, without restricting the generality of the foregoing: (i) increase the share capital by such sum to be divided into shares of such amount or without nominal or par value as the resolution shall prescribe and with such rights, priorities and privileges annexed thereto, as the Company in general meeting may determine. (ii) consolidate and divide all or any of its share capital into shares of larger amount than its existing shares; (iii) by subdivision of its existing shares or any of them divide the whole or any part of its share capital into shares of smaller amount than is fixed by the Memorandum of Association or into shares without nominal or par value; (iv) cancel any shares which at the date of the passing of the resolution have not been taken or agreed to be taken by any person. (b) All new shares created hereunder shall be subject to the same provisions with reference to the payment of calls, liens, transfer, transmission, forfeiture and otherwise as the shares in the original share capital. (c) Subject to the provisions of the Statute, the Company may by Special Resolution change its name or alter its objects. (d) Without prejudice to Article 11 hereof and subject to the provisions of the Statute, the Company may by Special Resolution reduce its share capital and any capital redemption reserve fund. (e) Subject to the provisions of the Statute, the Company may by resolution of the Directors change the location of its registered office. CLOSING REGISTER OF MEMBERS OR FIXING RECORD DATE ------------------------------------------------- 34. For the purpose of determining Members entitled to notice of or to vote at any meeting of Members or any adjournment thereof, or Members entitled to receive payment of any dividend, or in order to make a determination of Members for any other proper purpose, the Directors of the Company may provide that the register of Members shall be closed for transfers for a stated period but not to exceed in any case forty days. If the register of Members shall be so closed for the purpose of determining Members entitled to notice of or to vote at a meeting of Members such register shall be so closed for at least ten days immediately preceding such meeting and the record date for such determination shall be the date of the closure of the register of Members. 35. In lieu of or apart from closing the register of Members, the Directors may fix in advance a date as the record date for any such determination of Members entitled to notice of or to vote at a meeting of the Members and for the purpose of determining the Members entitled to receive payment of any dividend the Directors may, at or within 90 days prior to the date of declaration of such dividend fix a subsequent date as the record date for such determination. 36. If the register of Members is not so closed and no record date is fixed for the determination of Members entitled to notice of or to vote at a meeting of Members or Members entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of Members. When a determination of Members entitled to vote at any meeting of Members has been made as provided in this section, such determination shall apply to any adjournment thereof. GENERAL MEETING --------------- 37. (a) Subject to paragraph (c) hereof, the Company shall within one year of its incorporation and in each year of its existence thereafter hold a general meeting as its annual general meeting and shall specify the meeting as such in the notices calling it. The annual general meeting shall be held at such time and place as the Directors shall appoint and if no other time and place is prescribed by them, it shall be held at the registered office on the second Wednesday in December of each year at ten o'clock in the morning. (b) At these meetings the report of the Directors (if any) shall be presented. (c) If the Company is exempted as defined in the Statute it may but shall not be obliged to hold an annual general meeting. 38. (a) The Directors may whenever they think fit, and they shall on the requisition of Members of the Company holding at the date of the deposit of the requisition not less than one-tenth of such of the paid-up capital of the Company as at the date of the deposit carries the right of voting at general meetings of the Company, proceed to convene a general meeting of the Company. (b) The requisition must state the objects of the meeting and must be signed by the requisitionists and deposited at the registered office of the Company and may consist of several documents in like form each signed by one or more requisitionists. (c) If the Directors do not within twenty-one days from the date of the deposit of the requisition duly proceed to convene a general meeting, the requisitionists, or any of them representing more than one-half of the total voting rights of all of them, may themselves convene a general meeting, but any meeting so convened shall not be held after the expiration of three months after the expiration of the said twenty-one days. (d) A general meeting convened as aforesaid by requisitionists shall be convened in the same manner as nearly as possible as that in which general meetings are to be convened by Directors. NOTICE OF GENERAL MEETINGS --------------------------- 39. At least five days' notice shall be given of an annual general meeting or any other general meeting. Every notice shall be exclusive of the day on which it is given or deemed to be given and of the day for which it is given and shall specify the place, the day and the hour of the meeting and the general nature of the business and shall be given in manner hereinafter mentioned or in such other manner if any as may be prescribed by the Company PROVIDED that a general meeting of the Company shall, whether or not the notice specified in this regulation has been given and whether or not the provisions of Article 38 have been complied with, be deemed to have been duly convened if it is so agreed: (a) in the case of a general meeting called as an annual general meeting by all the Members entitled to attend and vote thereat or their proxies; and (b) in the case of any other general meeting by a majority in number of the Members having a right to attend and vote at the meeting, being a majority together holding not less than seventy-five percent in nominal value or in the case of shares without nominal or par value seventy-five per cent of the shares in issue, or their proxies. 40. The accidental omission to give notice of a general meeting to, or the non-receipt of notice of a meeting by any person entitled to receive notice shall not invalidate the proceedings of that meeting. PROCEEDINGS AT GENERAL MEETINGS ------------------------------- 41. No business shall be transacted at any general meeting unless a quorum of Members is present at the time when the meeting proceeds to business; two Members present in person or by proxy shall be a quorum provided always that if the Company has one Member of record the quorum shall be that one Member present in person or by proxy. 42. A resolution (including a Special Resolution) in writing (in one or more counterparts) signed by all Members for the time being entitled to receive notice of and to attend and vote at general meetings (or being corporations by their duly authorised representatives) shall be as valid and effective as if the same had been passed at a general meeting of the Company duly convened and held. 43. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of Members, shall be dissolved and in any other case it shall stand adjourned to the same day in the next week at the same time and place or to such other time or such other place as the Directors may determine and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting the Members present shall be a quorum. 44. The Chairman, if any, of the Board of Directors shall preside as Chairman at every general meeting of the Company, or if there is no such Chairman, or if he shall not be present within fifteen minutes after the time appointed for the holding of the meeting, or is unwilling to act, the Directors present shall elect one of their number to be Chairman of the meeting. 45. If at any general meeting no Director is willing to act as Chairman or if no Director is present within fifteen minutes after the time appointed for holding the meeting, the Members present shall choose one of their number to be Chairman of the meeting. 46. The Chairman may, with the consent of any general meeting duly constituted hereunder, and shall if so directed by the meeting, adjourn the meeting from time to time and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. When a general meeting is adjourned for thirty days or more, notice of the adjourned meeting shall be given as in the case of an original meeting; save as aforesaid it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned general meeting. 47. At any general meeting a resolution put to the vote of the meeting shall be decided on a show of hands unless a poll is, before or on the declaration of the result of the show of hands, demanded by the Chairman or any other Member present in person or by proxy. 48. Unless a poll be so demanded a declaration by the Chairman that a resolution has on a show of hands been carried, or carried unanimously, or by a particular majority, or lost, and an entry to that effect in the Company's Minute Book containing the Minutes of the proceedings of the meeting shall be conclusive evidence of that fact without proof of the number or proportion of the votes recorded in favour of or against such resolution. 49. The demand for a poll may be withdrawn. 50. Except as provided in Article 52, if a poll is duly demanded it shall be taken in such manner as the Chairman directs and the result of the poll shall be deemed to be the resolution of the general meeting at which the poll was demanded. 51. In the case of an equality of votes, whether on a show of hands or on a poll, the Chairman of the general meeting at which the show of hands takes place or at which the poll is demanded, shall be entitled to a second or casting vote. 52. A poll demanded on the election of a Chairman or on a question of adjournment shall be taken forthwith. A poll demanded on any other question shall be taken at such time as the Chairman of the general meeting directs and any business other than that upon which a poll has been demanded or is contingent thereon may be proceeded with pending the taking of the poll. VOTES OF MEMBERS ----------------- 53. Subject to any rights or restrictions for the time being attached to any class or classes of shares, on a show of hands every Member of record present in person or by proxy at a general meeting shall have one vote and on a poll every Member of record present in person or by proxy shall have one vote for each share registered in his name in the register of Members. 54. In the case of joint holders of record the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of Members. 55. A Member of unsound mind, or in respect of whom an order has been made by any court, having jurisdiction in lunacy, may vote, whether on a show of hands or on a poll, by his committee, receiver, curator bonds, or other person in the nature of a committee, receiver or curator bonds appointed by that court, and any such committee, receiver, curator bonds or other persons may vote by proxy. 56. No Member shall be entitled to vote at any general meeting unless he is registered as a shareholder of the Company on the record date for such meeting nor unless all calls or other sums presently payable by him in respect of shares in the Company have been paid. 57. No objection shall be raised to the qualification of any voter except at the general meeting or adjourned general meeting at which the vote objected to is given or tendered and every vote not disallowed at such general meeting shall be valid for all purposes. Any such objection made in due time shall be referred to the Chairman of the general meeting whose decision shall be final and conclusive. 58. On a poll or on a show of hands votes may be given either personally or by proxy. PROXIES ------- 59. The instrument appointing a proxy shall be in writing and shall be executed under the hand of the appointor or of his attorney duly authorised in writing, or, if the appointor is a corporation under the hand of an officer or attorney duly authorised in that behalf. A proxy need not be a Member of the Company. 60. The instrument appointing a proxy shall be deposited at the registered office of the Company or at such other place as is specified for that purpose in the notice convening the meeting no later than the time for holding the meeting, or adjourned meeting provided that the Chairman of the Meeting may at his discretion direct that an instrument of proxy shall be deemed to have been duly deposited upon receipt of telex, cable or telecopy confirmation from the appointor that the instrument of proxy duly signed is in the course of transmission to the Company. 61. The instrument appointing a proxy may be in any usual or common form and may be expressed to be for a particular meeting or any adjournment thereof or generally until revoked. An instrument appointing a proxy shall be deemed to include the power to demand or join or concur in demanding a poll. 62. A vote given in accordance with the terms of an instrument of proxy shall be valid notwithstanding the previous death or insanity of the principal or revocation of the proxy or of the authority under which the proxy was executed, or the transfer of the share in respect of which the proxy is given provided that no intimation in writing of such death, insanity, revocation or transfer as aforesaid shall have been received by the Company at the registered office before the commencement of the general meeting, or adjourned meeting at which it is sought to use the proxy. 63. Any corporation which is a Member of record of the Company may in accordance with its Articles or in the absence of such provision by resolution of its Directors or other governing body authorize such person as it thinks fit to act as its representative at any meeting of the Company or of any class of Members of the Company, and the person so authorised shall be entitled to exercise the same powers on behalf of the corporation which he represents as the corporation could exercise if it were an individual Member of record of the Company. 64. Shares of its own capital belonging to the Company or held by it in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any given time. DIRECTORS --------- 65. There shall be a Board of Directors consisting of not less than one or more than ten persons (exclusive of alternate Directors) PROVIDED HOWEVER that the Company may from time to time by ordinary resolution increase or reduce the limits in the number of Directors. The first Directors of the Company shall be determined in writing by, or appointed by a resolution of, the subscribers of the Memorandum of Association or a majority of them. 66. The remuneration to be paid to the Directors shall be such remuneration as the Directors shall determine. Such remuneration shall be deemed to accrue from day to day. The Directors shall also be entitled to be paid their travelling, hotel and other expenses properly incurred by them in going to, attending and returning from meetings of the Directors, or any committee of the Directors, or general meetings of the Company, or otherwise in connection with the business of the Company, or to receive a fixed allowance in respect thereof as may be determined by the Directors from time to time, or a combination partly of one such method and partly the other. 67. The Directors may by resolution award special remuneration to any Director of the Company undertaking any special work or services for, or undertaking any special mission on behalf of, the Company other than his ordinary routine work as a Director. Any fees paid to a Director who is also counsel or solicitor to the Company, or otherwise serves it in a professional capacity shall be in addition to his remuneration as a Director. 68. A Director or alternate Director may hold any other office or place of profit under the Company (other than the office of Auditor) in conjunction with his office of Director for such period and on such terms as to remuneration and otherwise as the Directors may determine. 69. A Director or alternate Director may act by himself or his firm in a professional capacity for the Company and he or his firm shall be entitled to remuneration for professional services as if he were not a Director or alternate Director. 70. A shareholding qualification for Directors may be fixed by the Company in general meeting, but unless and until so fixed no qualification shall be required. 71. A Director or alternate Director of the Company may be or become a director or other officer of or otherwise interested in any company promoted by the Company or in which the Company may be interested as shareholder or otherwise and no such Director or alternate Director shall be accountable to the Company for any remuneration or other benefits received by him as a director or officer of, or from his interest in, such other company. 72. No person shall be disqualified from the office of Director or alternate Director or prevented by such office from contracting with the Company, either as vendor, purchaser or otherwise, nor shall any such contract or any contract or transaction entered into by or on behalf of the Company in which any Director or alternate Director shall be in any way interested be or be liable to be avoided, nor shall any Director or alternate Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or transaction by reason of such Director holding office or of the fiduciary relation thereby established. A Director (or his alternate Director in his absence) shall be at liberty to vote in respect of any contract or transaction in which he is so interested as aforesaid PROVIDED HOWEVER that the nature of the interest of any Director or alternate Director in any such contract or transaction shall be disclosed by him or the alternate Director appointed by him at or prior to its consideration and any vote thereon. 73. A general notice that a Director or alternate Director is a shareholder of any specified firm or company and is to be regarded as interested in any transaction with such firm or company shall be sufficient disclosure under Article 72 and after such general notice it shall not be necessary to give special notice relating to any particular transaction. ALTERNATE DIRECTORS ------------------- 74. Subject to the exception contained in Article 82, a Director who expects to be unable to attend Directors' Meetings because of absence, illness or otherwise may appoint any person to be an alternate Director to act in his stead and such appointee whilst he holds office as an alternate Director shall, in the event of absence therefrom of his appointor, be entitled to attend meetings of the Directors and to vote thereat and to do, in the place and stead of his appointor, any other act or thing which his appointor is permitted or required to do by virtue of his being a Director as if the alternate Director were the appointor, other than appointment of an alternate to himself, and he shall ipso facto vacate office if and when his appointor ceases to be a Director or removes the appointee from office. Any appointment or removal under this Article shall be effected by notice in writing under the hand of the Director making the same. POWERS AND DUTIES OF DIRECTORS ------------------------------ 75. The business of the Company shall be managed by the Directors (or a sole Director if only one is appointed) who may pay all expenses incurred in promoting, registering and setting up the Company, and may exercise all such powers of the Company as are not, from time to time by the Statute, or by these Articles, or such regulations, being not inconsistent with the aforesaid, as may be prescribed by the Company in general meeting required to be exercised by the Company in general meeting PROVIDED HOWEVER that no regulations made by the Company in general meeting shall invalidate any prior act of the Directors which would have been valid if that regulation had not been made. 76. The Directors may from time to time and at any time by powers of attorney appoint any company, firm, person or body of persons, whether nominated directly or indirectly by the Directors, to be the attorney or attorneys of the Company for such purpose and with such powers, authorities and discretions (not exceeding those vested in or exercisable by the Directors under these Articles) and for such period and subject to such conditions as they may think fit, and any such powers of attorney may contain such provisions for the protection and convenience of persons dealing with any such attorneys as the Directors may think fit and may also authorize any such attorney to delegate all or any of the powers, authorities and discretions vested in him. 77. All cheques, promissory notes, drafts, bills of exchange and other negotiable instruments and all receipts for monies paid to the Company shall be signed, drawn, accepted, endorsed or otherwise executed as the case may be in such manner as the Directors shall from time to time by resolution determine. 78. The Directors shall cause minutes to be made in books provided for the purpose: (a) of all appointments of officers made by the Directors; (b) of the names of the Directors (including those represented thereat by an alternate or by proxy) present at each meeting of the Directors and of any committee of the Directors; (c) of all resolutions and proceedings at all meetings of the Company and of the Directors and of committees of Directors. 79. The Directors on behalf of the Company may pay a gratuity or pension or allowance on retirement to any Director who has held any other salaried office or place of profit with the Company or to his widow or dependents and may make contributions to any fund and pay premiums for the purchase or provision of any such gratuity, pension or allowance. 80. The Directors may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and uncalled capital or any part thereof and to issue debentures, debenture stock and other securities whether outright or as security for any debt, liability or obligation of the Company or of any third party. MANAGEMENT ----------- 81. (a) The Directors may from time to time provide for the management of the affairs of the Company in such manner as they shall think fit and the provisions contained in the three next following paragraphs shall be without prejudice to the general powers conferred by this paragraph. (b) The Directors from time to time and at any time may establish any committees, local boards or agencies for managing any of the affairs of the Company and may appoint any persons to be members of such committees or local boards or any managers or agents and may fix their remuneration. (c) The Directors from time to time and at any time may delegate to any such committee, local board, manager or agent any of the powers, authorities and discretions for the time being vested in the Directors and may authorize the members for the time being of any such local board, or any of them to fill up any vacancies therein and to act notwithstanding vacancies and any such appointment or delegation may be made on such terms and subject to such conditions as the Directors may think fit and the Directors may at any time remove any person so appointed and may annul or vary any such delegation, but no person dealing in good faith and without notice of any such annulment or variation shall be affected thereby. (d) Any such delegates as aforesaid may be authorised by the Directors to subdelegate all or any of the powers, authorities, and discretions for the time being vested in them. MANAGING DIRECTORS ------------------- 82. The Directors may, from time to time, appoint one or more of their body (but not an alternate Director) to the office of Managing Director for such term and at such remuneration (whether by way of salary, or commission, or participation in profits, or partly in one way and partly in another) as they may think fit but his appointment shall be subject to determination ipso facto if he ceases from any cause to be a Director and no alternate Director appointed by him can act in his stead as a Director or Managing Director. 83. The Directors may entrust to and confer upon a Managing Director any of the powers exercisable by them upon such terms and conditions and with such restrictions as they may think fit and either collaterally with or to the exclusion of their own powers and may from time to time revoke, withdraw, alter or vary all or any of such powers. PROCEEDINGS OF DIRECTORS ------------------------ 84. Except as otherwise provided by these Articles, the Directors shall meet together for the despatch of business, convening, adjourning and otherwise regulating their meetings as they think fit. Questions arising at any meeting shall be decided by a majority of votes of the Directors and alternate Directors present at a meeting at which there is a quorum, the vote of an alternate Director not being counted if his appointor be present at such meeting. In case of an equality of votes, the Chairman shall have a second or casting vote. 85. A Director or alternate Director may, and the Secretary on the requisition of a Director or alternate Director shall, at any time summon a meeting of the Directors by at least two days' notice in writing to every Director and alternate Director which notice shall set forth the general nature of the business to be considered unless notice is waived by all the Directors (or their alternates) either at, before or after the meeting is held and PROVIDED FURTHER if notice is given in person, by cable, telex or telecopy the same shall be deemed to have been given on the day it is delivered to the Directors or transmitting organisation as the case may be. The provisions of Article 40 shall apply mutatis mutandis with respect to notices of meetings of Directors. 86. The quorum necessary for the transaction of the business of the Directors may be fixed by the Directors and unless so fixed shall be two, a Director and his appointed alternate Director being considered only one person for this purpose, PROVIDED ALWAYS that if there shall at any time be only a sole Director the quorum shall be one. For the purposes of this Article an alternate Director or proxy appointed by a Director shall be counted in a quorum at a meeting at which the Director appointing him is not present. 87. The continuing Directors may act notwithstanding any vacancy in their body, but if and so long as their number is reduced below the number fixed by or pursuant to these Articles as the necessary quorum of Directors the continuing Directors or Director may act for the purpose of increasing the number of Directors to that number, or of summoning a general meeting of the Company, but for no other purpose. 88. The Directors may elect a Chairman of their Board and determine the period for which he is to hold office; but if no such Chairman is elected, or if at any meeting the Chairman is not present within five minutes after the time appointed for holding the same, the Directors present may choose one of their number to be Chairman of the meeting. 89. The Directors may delegate any of their powers to committees consisting of such member or members of the Board of Directors (including Alternate Directors in the absence of their appointors) as they think fit; any committee so formed shall in the exercise of the powers so delegated conform to any regulations that may be imposed on it by the Directors. 90. A committee may meet and adjourn as it thinks proper. Questions arising at any meeting shall be determined by a majority of votes of the members present, and in the case of an equality of votes the Chairman shall have a second or casting vote. 91. All acts done by any meeting of the Directors or of a committee of Directors (including any person acting as an alternate Director) shall, notwithstanding that it be afterwards discovered that there was some defect in the appointment of any Director or alternate Director, or that they or any of them were disqualified, be as valid as if every such person had been duly appointed and qualified to be a Director or alternate Director as the case may be. 92. Members of the Board of Directors or of any committee thereof may participate in a meeting of the Board or of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting. A resolution in writing (in one or more counterparts), signed by all the Directors for the time being or all the members of a committee of Directors (an alternate Director being entitled to sign such resolution on behalf of his appointor) shall be as valid and effectual as if it had been passed at a meeting of the Directors or committee as the case may be duly convened and held. 93. (a) A Director may be represented at any meetings of the Board of Directors by a proxy appointed by him in which event the presence or vote of the proxy shall for all purposes be deemed to be that of the Director. (b) The provisions of Articles 59-62 shall mutatis mutandis apply to the appointment of proxies by Directors. VACATION OF OFFICE OF DIRECTOR ------------------------------- 94. The office of a Director shall be vacated: (a) if he gives notice in writing to the Company that he resigns the office of Director; (b) if he absents himself (without being represented by proxy or an alternate Director appointed by him) from three consecutive meetings of the Board of Directors without special leave of absence from the Directors, and they pass a resolution that he has by reason of such absence vacated office; (c) if he dies, becomes bankrupt or makes any arrangement or composition with his creditors generally; (d) if he is found a lunatic or becomes of unsound mind. APPOINTMENT AND REMOVAL OF DIRECTORS ------------------------------------- 95. The Company may by ordinary resolution appoint any person to be a Director and may in like manner remove any Director and may in like manner appoint another person in his stead. 96. The Directors shall have power at any time and from time to time to appoint any person to be a Director, either to fill a casual vacancy or as an addition to the existing Directors but so that the total amount of Directors (exclusive of alternate Directors) shall not at any time exceed the number fixed in accordance with these Articles. PRESUMPTION OF ASSENT --------------------- 97. A Director of the Company who is present at a meeting of the Board of Directors at which action on any Company matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the Minutes of the meeting or unless he shall file his written dissent from such action with the person acting as the Secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to such person immediately after the adjournment of the meeting. Such right to dissent shall not apply to a Director who voted in favour of such action. SEAL ----- 98. (a) The Company may, if the Directors so determine, have a Seal which shall, subject to paragraph (c) hereof, only be used by the authority of the Directors or of a committee of the Directors authorised by the Directors in that behalf and every instrument to which the Seal has been affixed shall be signed by one person who shall be either a Director or the Secretary or Secretary-Treasurer or some person appointed by the Directors for the purpose. (b) The Company may have for use in any place or places outside the Cayman Islands a duplicate Seal or Seals each of which shall be a facsimile of the Common Seal of the Company and, if the Directors so determine, with the addition on its face of the name of every place where it is to be used. (c) A Director, Secretary or other officer or representative or attorney may without further authority of the Directors affix the Seal of the Company over his signature alone to any document of the Company required to be authenticated by him under Seal or to be filed with the Registrar of Companies in the Cayman Islands or elsewhere wheresoever. OFFICERS --------- 99. The Company may have a President, a Secretary or Secretary-Treasurer appointed by the Directors who may also from time to time appoint such other officers as they consider necessary, all for such terms, at such remuneration and to perform such duties, and subject to such provisions as to disqualification and removal as the Directors from time to time prescribe. DIVIDENDS, DISTRIBUTIONS AND RESERVE ------------------------------------- 100. Subject to the Statute, the Directors may from time to time declare dividends (including interim dividends) and distributions on shares of the Company outstanding and authorize payment of the same out of the funds of the Company lawfully available therefor. 101. The Directors may, before declaring any dividends or distributions, set aside such sums as they think proper as a reserve or reserves which shall at the discretion of the Directors, be applicable for any purpose of the Company and pending such application may, at the like discretion, be employed in the business of the Company. 102. No dividend or distribution shall be payable except out of the profits of the Company, realised or unrealised, or out of the share premium account or as otherwise permitted by the Statute. 103. Subject to the rights of persons, if any, entitled to shares with special rights as to dividends or distributions, if dividends or distributions are to be declared on a class of shares they shall be declared and paid according to the amounts paid or credited as paid on the shares of such class outstanding on the record date for such dividend or distribution as determined in accordance with these Articles but no amount paid or credited as paid on a share in advance of calls shall be treated for the purpose of this Article as paid on the share. 104. The Directors may deduct from any dividend or distribution payable to any Member all sums of money (if any) presently payable by him to the Company on account of calls or otherwise. 105. The Directors may declare that any dividend or distribution be paid wholly or partly by the distribution of specific assets and in particular of paid up shares, debentures, or debenture stock of any other company or in any one or more of such ways and where any difficulty arises in regard to such distribution, the Directors may settle the same as they think expedient and in particular may issue fractional certificates and fix the value for distribution of such specific assets or any part thereof and may determine that cash payments shall be made to any Members upon the footing of the value so fixed in order to adjust the rights of all Members and may vest any such specific assets in trustees as may seem expedient to the Directors. 106. Any dividend, distribution, interest or other monies payable in cash in respect of shares may be paid by cheque or warrant sent through the post directed to the registered address of the holder or, in the case of joint holders, to the holder who is first named on the register of Members or to such person and to such address as such holder or joint holders may in writing direct. Every such cheque or warrant shall be made payable to the order of the person to whom it is sent. Any one of two or more joint holders may give effectual receipts for any dividends, bonuses, or other monies payable in respect of the share held by them as joint holders. 107. No dividend or distribution shall bear interest against the Company. CAPITALISATION --------------- 108. The Company may upon the recommendation of the Directors by ordinary resolution authorize the Directors to capitalise any sum standing to the credit of any of the Company's reserve accounts (including share premium account and capital redemption reserve fund) or any sum standing to the credit of profit and loss account or otherwise available for distribution and to appropriate such sum to Members in the proportions in which such sum would have been divisible amongst them had the same been a distribution of profits by way of dividend and to apply such sum on their behalf in paying up in full unissued shares for allotment and distribution credited as fully paid up to and amongst them in the proportion aforesaid. In such event the Directors shall do all acts and things required to give effect to such capitalisation, with full power to the Directors to make such provisions as they think fit for the case of shares becoming distributable in fractions (including provisions whereby the benefit of fractional entitlements accrue to the Company rather than to the Members concerned). The Directors may authorise any person to enter on behalf of all of the Members interested into an agreement with the Company providing for such capitalisation and matters incidental thereto and any agreement made under such authority shall be effective and binding on all concerned. BOOKS OF ACCOUNT ----------------- 109. The Directors shall cause proper books of account to be kept with respect to: (a) all sums of money received and expended by the Company and the matters in respect of which the receipt or expenditure takes place; (b) all sales and purchases of goods by the Company; (c) the assets and liabilities of the Company. Proper books shall not be deemed to be kept if there are not kept such books of account as are necessary to give a true and fair view of the state of the Company's affairs and to explain its transactions. 110. The Directors shall from time to time determine whether and to what extent and at what times and places and under what conditions or regulations the accounts and books of the Company or any of them shall be open to the inspection of Members not being Directors and no Member (not being a Director) shall have any right of inspecting any account or book or document of the Company except as conferred by Statute or authorised by the Directors or by the Company in general meeting. 111. The Directors may from time to time cause to be prepared and to be laid before the Company in general meeting profit and loss accounts, balance sheets, group accounts (if any) and such other reports and accounts as may be required by law. AUDIT ----- 112. The Company may at any annual general meeting appoint an Auditor or Auditors of the Company who shall hold office until the next annual general meeting and may fix his or their remuneration. 113. The Directors may before the first annual general meeting appoint an Auditor or Auditors of the Company who shall hold office until the first annual general meeting unless previously removed by an ordinary resolution of the Members in general meeting in which case the Members at that meeting may appoint Auditors. The Directors may fill any casual vacancy in the office of Auditor but while any such vacancy continues the surviving or continuing Auditor or Auditors, if any, may act. The remuneration of any Auditor appointed by the Directors under this Article may be fixed by the Directors. 114. Every Auditor of the Company shall have a right of access at all times to the books and accounts and vouchers of the Company and shall be entitled to require from the Directors and Officers of the Company such information and explanation as may be necessary for the performance of the duties of the auditors. 115. Auditors shall at the next annual general meeting following their appointment and at any other time during their term of office, upon request of the Directors or any general meeting of the Members, make a report on the accounts of the Company in general meeting during their tenure of office. NOTICES ------- 116. Notices shall be in writing and may be given by the Company to any Member either personally or by sending it by post, cable, telex or telecopy to him or to his address as shown in the register of Members, such notice, if mailed, to be forwarded airmail if the address be outside the Cayman Islands. 117. (a) Where a notice is sent by post, service of the notice shall be deemed to be effected by properly addressing, pre-paying and posting a letter containing the notice, and to have been effected at the expiration of sixty hours after the letter containing the same is posted as aforesaid. (b) Where a notice is sent by cable, telex, or telecopy, service of the notice shall be deemed to be effected by properly addressing, and sending such notice through a transmitting organisation and to have been effected on the day the same is sent as aforesaid. 118. A notice may be given by the Company to the joint holders of record of a share by giving the notice to the joint holder first named on the register of Members in respect of the share. 119. A notice may be given by the Company to the person or persons which the Company has been advised are entitled to a share or shares in consequence of the death or bankruptcy of a Member by sending it through the post as aforesaid in a pre-paid letter addressed to them by name, or by the title of representatives of the deceased, or trustee of the bankrupt, or by any like description at the address supplied for that purpose by the persons claiming to be so entitled, or at the option of the Company by giving the notice in any manner in which the same might have been given if the death or bankruptcy had not occurred. 120. Notice of every general meeting shall be given in any manner hereinbefore authorised to: (a) every person shown as a Member in the register of Members as of the record date for such meeting except that in the case of joint holders the notice shall be sufficient if given to the joint holder first named in the register of Members. (b) every person upon whom the ownership of a share devolves by reason of his being a legal personal representative or a trustee in bankruptcy of a Member of record where the Member of record but for his death or bankruptcy would be entitled to receive notice of the meeting; and No other person shall be entitled to receive notices of general meetings. WINDING UP ----------- 121. If the Company shall be wound up the liquidator may, with the sanction of a Special Resolution of the Company and any other sanction required by the Statute, divide amongst the Members in specie or kind the whole or any part of the assets of the Company (whether they shall consist of property of the same kind or not) and may for such purpose set such value as he deems fair upon any property to be divided as aforesaid and may determine how such division shall be carried out as between the Members or different classes of Members. The liquidator may with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the contributories as the liquidator, with the like sanction, shall think fit, but so that no Member shall be compelled to accept any shares or other securities whereon there is any liability. 122. If the Company shall be wound up, and the assets available for distribution amongst the Members as such shall be insufficient to repay the whole of the paid-up capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by the Members in proportion to the capital paid up, or which ought to have been paid up, at the commencement of the winding up on the shares held by them respectively. And if in a winding up the assets available for distribution amongst the Members shall be more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess shall be distributed amongst the Members in proportion to the capital paid up at the commencement of the winding up on the shares held by them respectively. This Article is to be without prejudice to the rights of the holders of shares issued upon special terms and conditions. INDEMNITY --------- 123. The Directors and officers for the time being of the Company and any trustee for the time being acting in relation to any of the affairs of the Company and their heirs, executors, administrators and personal representatives respectively shall be indemnified out of the assets of the Company from and against all actions, proceedings, costs, charges, losses, damages and expenses which they or any of them shall or may incur or sustain by reason of any act done or omitted in or about the execution of their duty in their respective offices or trusts, except such (if any) as they shall incur or sustain by or through their own wilful neglect or default respectively and no such Director, officer or trustee shall be answerable for the acts, receipts, neglects or defaults of any other Director, officer or trustee or for joining in any receipt for the sake of conformity or for the solvency or honesty of any banker or other persons with whom any monies or effects belonging to the Company may be lodged or deposited for safe custody or for any insufficiency of any security upon which any monies of the Company may be invested or for any other loss or damage due to any such cause as aforesaid or which may happen in or about the execution of his office or trust unless the same shall happen through the wilful neglect or default of such Director, Officer or trustee. FINANCIAL YEAR --------------- 124. Unless the Directors otherwise prescribe, the financial year of the Company shall end on 31st December in each year and, following the year of incorporation, shall begin on 1st January in each year. AMENDMENTS OF ARTICLES ----------------------- 125. Subject to the Statute, the Company may at any time and from time to time by Special Resolution alter or amend these Articles in whole or in part. TRANSFER BY WAY OF CONTINUATION ------------------------------- 126. If the Company is exempted as defined in the Statute, it shall, subject to the provisions of the Statute and with the approval of a Special Resolution, have the power to register by way of continuation as a body corporate under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands. DATED the 19th day of July 1996 s/Charles Jennings _________________________________ Charles Jennings, Attorney-at-Law PO Box 309 Grand Cayman, B.W.I. s/Andrew Reid __________________________________ Andrew Reid, Attorney-at-Law PO Box 309 Grand Cayman, B.W.I. ___________________________________ Witness to the above signatures Sharon Williams, Corporate Assistant PO Box 309 Grand Cayman, B.W.I. I, Cindy Y. Jefferson DEP Registrar of Companies in and for the Cayman Islands DO HEREBY CERTIFY that this is a true and correct copy of the Articles of Association of this Company duly incorporated on the l9th day of July, 1996 ______________________________ REGISTRAR OF COMPANIES EX-99 6 EXHIBIT B.8.B Exhibit B.8.b THE COMPANIES LAW (1995 REVISION) --------------------------------- COMPANY LIMITED BY SHARES ------------------------- MEMORANDUM OF ASSOCIATION OF NEERI INTERNATIONAL 1. The name of the Company is NEERI International. 2. The Registered Office of the Company shall be at the offices of Maples and Calder, Attorneys-at-Law, Ugland House, P.O. Box 309, George Town, Grand Cayman, Cayman Islands, British West Indies or at such other place as the Directors may from time to time decide. 3. The objects for which the Company is established are unrestricted and shall include, but without limitation, the following: (i) (a) To carry on the business of an investment company and to act as promoters and entrepreneurs and to carry on business as financiers, capitalists, concessionaires, merchants, brokers, traders, dealers, agents, importers and exporters and to undertake and carry on and execute all kinds of investment, financial, commercial, mercantile, trading and other operations. (b) To carry on whether as principals, agents or otherwise howsoever the business of realtors, developers, consultants, estate agents or managers, builders, contractors, engineers, manufacturers, dealers in or vendors of all types of property including services. (ii) To exercise and enforce all rights and powers conferred by or incidental to the ownership of any shares, stock, obligations or other securities including without prejudice to the generality of the foregoing all such powers of veto or control as may be conferred by virtue of the holding by the Company of some special proportion of the issued or nominal amount thereof, to provide managerial and other executive, supervisory and consultant services for or in relation to any company in which the Company is interested upon such terms as may be thought fit. (iii)To purchase or otherwise acquire, to sell, exchange, surrender, lease, mortgage, charge, convert, turn to account, dispose of and deal with real and personal property and rights of all kinds and, in particular, mortgages, debentures, produce, concessions, options, contracts, patents, annuities, licenses, stocks, shares, bonds, policies, book debts, business concerns, undertakings, claims, privileges and choses in action of all kinds. (iv) To subscribe for, conditionally or unconditionally, to underwrite, issue on commission or otherwise, take, hold, deal in and convert stocks, shares and securities of all kinds and to enter into partnership or into any arrangement for sharing profits, reciprocal concessions or cooperation with any person or company and to promote and aid in promoting, to constitute, form or organize any company, syndicate or partnership of any kind, for the purpose of acquiring and undertaking any property and liabilities of the Company or of advancing, directly or indirectly, the objects of the Company or for any other purpose which the Company may think expedient. (v) To stand surety for or to guarantee, support or secure the performance of all or any of the obligations of any person, firm or company whether or not related or affiliated to the Company in any manner and whether by personal covenant or by mortgage, charge or lien upon the whole or any part of the undertaking, property and assets of the Company, both present and future, including its uncalled capital or by any such method and whether or not the Company shall receive valuable consideration therefor. (vi) To engage in or carry on any other lawful trade, business or enterprise which may at any time appear to the Directors of the Company capable of being conveniently carried on in conjunction with any of the aforementioned businesses or activities or which may appear to the Directors or the Company likely to be profitable to the Company. In the interpretation of this Memorandum of Association in general and of this Clause 3 in particular no object, business or power specified or mentioned shall be limited or restricted by reference to or inference from any other object, business or power, or the name of the Company, or by the juxtaposition of two or more objects, businesses or powers and that, in the event of any ambiguity in this clause or elsewhere in this Memorandum of Association' the same shall be resolved by such interpretation and construction as will widen and enlarge and not restrict the objects, businesses and powers of and exercisable by the Company. 4. Except as prohibited or limited by the Companies Law (1995 Revision), the Company shall have full power and authority to carry out any object and shall have and be capable of from time to time and at all times exercising any and all of the powers at any time or from time to time exercisable by a natural person or body corporate in doing in any part of the world whether as principal, agent, contractor or otherwise whatever may be considered by it necessary for the attainment of its objects and whatever else may be considered by it as incidental or conducive thereto or consequential thereon, including, but without in any way restricting the generality of the foregoing, the power to make any alterations or amendments to this Memorandum of Association and the Articles of Association of the Company considered necessary or convenient in the manner set out in the Articles of Association of the Company, and the power to do any of the following acts or things, viz: to pay all expenses of and incidental to the promotion, formation and incorporation of the Company; to register the Company to do business in any other jurisdiction; to sell, lease or dispose of any property of the Company; to draw, make, accept, endorse, discount, execute and issue promissory notes, debentures, bills of exchange, bills of lading, warrants and other negotiable or transferable instruments; to lend money or other assets and to act as guarantors; to borrow or raise money on the security of the undertaking or on all or any of the assets of the Company including uncalled capital or without security; to invest monies of the Company in such manner as the Directors determine; to promote other companies; to sell the undertaking of the Company for cash or any other consideration; to distribute assets in specie to Members of the Company; to make charitable or benevolent donations; to pay pensions or gratuities or provide other benefits in cash or kind to Directors, officers, employees, past or present and their families; to purchase Directors and officers liability insurance and to carry on any trade or business and generally to do all acts and things which, in the opinion of the Company or the Directors, may be conveniently or profitably or usefully acquired and dealt with, carried on, executed or done by the Company in connection with the business aforesaid PROVIDED THAT the Company shall only carry on the businesses for which a license is required under the laws of the Cayman Islands when so licensed under the terms of such laws. 5. The liability of each Member is limited to the amount from time to time unpaid on such Member's shares. 6. The share capital of the Company is US$50,000 divided into 50,000 shares of a nominal or par value of US$1.00 each with power for the Company insofar as is permitted by law, to redeem or purchase any of its shares and to increase or reduce the said capital subject to the provisions of the Companies Law (1995 Revision) and the Articles of Association and to issue any part of its capital, whether original, redeemed or increased with or without any preference, priority or special privilege or subject to any postponement of rights or to any conditions or restrictions and so that unless the conditions of issue shall otherwise expressly declare every issue of shares whether declared to be preference or otherwise shall be subject to the powers hereinbefore contained. 7. If the Company is registered as exempted, its operations will be carried on subject to the provisions of Section 192 of the Companies Law (1995 Revision) and, subject to the provisions of the Companies Law (1995 Revision) and the Articles of Association, it shall have the power to register by way of continuation as a body corporate limited by shares under the laws of any jurisdiction outside the Cayman Islands and to be deregistered in the Cayman Islands. WE the several persons whose names and addresses are subscribed are desirous of being formed into a company in pursuance of this Memorandum of Association and we respectively agree to take the number of shares in the capital of the Company set opposite our respective names. DATED the 19th day of July 1996 SIGNATURES, ADDRESSES and NUMBER OF SHARES DESCRIPTION OF SUBSCRIBERS TAKEN BY EACH - -------------------------- ---------------- s/Charles Jennings _________________________________ Charles Jennings, Attorney-at-Law One PO Box 309 Grand Cayman, B.W.I. s/Andrew Reid _________________________________ Andrew Reid, Attorney-at-Law One PO Box 309 Grand Cayman, B.W.I. ____________________________________ Witness to the above signatures One Sharon Williams, Corporate Assistant PO Box 309 Grand Cayman, B.W.I. I, Cindy Y. Jefferson DEP. Registrar of Companies in and for the Cayman Islands DO HEREBY CERTIFY that this is a true and correct copy of the Memorandum of Association of this Company duly incorporated on the 19th day of July, 1996. s/Cindy Y. Jefferson DEP ____________________________ REGISTRAR OF COMPANIES EX-3.(I) 7 EXHIBIT B.9.A Exhibit B.9.a ARTICLES OF ORGANIZATION ARTICLE I ---------- The name of the corporation is NEES Communications. Inc. ARTICLE II ----------- To provide telecommunications services, information services, other services or products subject to the jurisdiction of the Federal Communications Commission, or products or services that are related or incidental thereto. To have as additional purposes all powers granted to corporations by the laws of The Commonwealth of Massachusetts, provided that no such purpose shall include any activity inconsistent with law. ARTICLE III ----------- The number of shares of capital stock that the corporation is authorized to issue is 10,000 having a par value of $1.00 per share. ARTICLE IV ----------- Not more than one type, class or series is authorized. ARTICLE V ---------- No restrictions are imposed by the Articles of Organization upon the transfer of stock of any class. ARTICLE VI ----------- A. Meetings of the stockholders of the corporation may be held anywhere in the United States. B. The corporation may carry out any or all of the purposes referred to in Article II in whole or in part through one or more subsidiaries. C. The corporation may carry out any actions referred to in Article II to the same extent as might an individual, whether as principal, agent, contractor, or otherwise, and either alone or in conjunction or as a joint venture or other arrangement with any corporation, association, trust, firm, or individual. D. The corporation may participate with others, as a general or limited partner, in any business enterprise for any of the purposes which the corporation would have the power to conduct by itself. E. No director of the corporation shall be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director notwithstanding any provision of law imposing such liability, except with respect to any matter as to which such liability shall have been imposed (I) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under section sixty-one or sixty-two of chapter one hundred and fifty-six B of the General Laws of Massachusetts, or (iv) for any transaction for which the director derived an improper personal benefit. The corporation shall indemnify each of its directors and officers against any loss, liability or expense, including amounts paid in satisfaction or judgments, in compromise or as fines and penalties, and counsel fees, imposed upon or reasonably incurred by him in connection with the defense or disposition of any action, suite or other proceeding, whether civil or criminal, including but not limited to derivative suits (to the extent permitted by law), in which he may be involved or with which he may be threatened, while in office or thereafter, by reason of his being or having been an director or officer, except with respect to any matter as to which he shall have been adjudicated in such action, suit or proceeding not to have acted in good faith in the reasonable belief that his action was in the best interests of the corporation, or, to the extent that such matter relates to service with respect to any employee benefit plan, as in the best interests of the participants of beneficiaries of such plan. As to any matter disposed of by a compromise payment by a director or officer, pursuant to a consent decree or otherwise, no indemnification either for said payment or for any other expenses shall be provided unless such compromise shall be approved as in the best interests of the corporation, after notice that it involves such indemnification, if no change in control has occurred (a) by a disinterested majority of the directors then in office, (b) by a majority of the disinterested directors then in office, provided that there has been obtained an opinion in writing of independent legal counsel to the effect that such director or officer appears to have acted in good faith in the reasonable belief that his action was in the best interests of the corporation, or (c) by the vote, at a meeting duly called and held, of the holders of a majority of the shares outstanding and entitled to vote thereon, exclusive of any shares owned by any interested director or officer or, if a change in control shall have occurred, by an opinion in writing of independent legal counsel to the effect that such director or officer appears to have acted in good faith in the reasonable belief that his action was in the best interests of the corporation. In discharging his duties any such director or officer, when acting in good faith, shall be fully protected in relying upon the books of account of the corporation or of another organization in which he serves as contemplated by this Article, reports made to the corporation or to such other organization by any of its officers or employees or by counsel, accountants, appraisers or other experts or consultants selected with reasonable care by the board of directors of the corporation or similar governing body of such other organization, or upon other records of the corporation or of such other organization. No director or officer shall be liable for any act, omission, step or conduct taken or had in good faith, which (whether by condition or otherwise) is required, authorized or approved by any order or orders issued pursuant to the Public Utility Holding Company Act of 1935, the Telecommunications Act of 1996, the Communications Act of 1934, or any other Federal statute or any state statute regulating the corporation or a subsidiary, if any, by reason of their being subsidiaries of public utility companies or public utility holding companies or by reason of their activities as such, or any amendments to any thereof. In any action, suit or proceeding based on any act, omission, step or conduct, as in this paragraph described, the provisions hereof shall be brought to the attention of the court. In the event that the foregoing provisions of this paragraph are found by the court not to constitute a valid defense on the grounds of not begin applicable to the particular class of plaintiff, each such director and officer shall be reimbursed for, or indemnified against, all loss, liability and expense incurred by him or imposed on him, in connection with, or arising out of, any such action, suite or proceeding based on any act, omission, step or conduct taken or had in good faith as in this Article described; provided, however, that as to any matter disposed of by a compromise payment by such director or officer, pursuant to a consent decree or otherwise, no indemnification either for said payment or for any other expenses shall be provided unless such compromise shall be approved as in the best interest of the corporation as heretofore provided in this Article. Such loss, liability and expense shall include, but shall not be limited to, judgments, court costs and attorneys' fees. Expenses incurred with respect to the defense or disposition of any action, suite or proceeding heretofore referred to in this Article shall be advanced by the corporation prior to the final disposition of such action, suit or proceeding, upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined that he is not entitled to indemnification, which undertaking shall be accepted without reference to the financial ability of the recipient to make such repayment. If in an action, suit or proceeding brought by or in right of the corporation, a director is held not liable, whether because relieved of liability under the first paragraph of this Article or otherwise, he shall be deemed to have been entitled to indemnification for expenses incurred in defense of said action, suit or proceeding. As used in this Article: (i) The term "officer" includes (a) persons who serve at the request of the corporation as directors, officers, or trustees of another organization and (b) employees of the corporation and its affiliates who serve in any capacity with respect to benefit plans for the corporation's employees. (ii) An "interested" director or officer is one against who in such capacity the proceeding in question or another proceeding on the same or similar grounds is then pending. (iii) A "change in control" occurs when: (a) any individual, corporation, association, partnership, joint venture, trust or other entity or association thereof acting in concert (excluding any employee benefit plan, dividend reinvestment plan or similar plan of the corporation, or any trustee thereof acting in such capacity) acquires more than 20% of the corporation's outstanding stock having general voting rights or more than 20% of the common shares of any entity owning more than 50% of the corporation's outstanding stock having general voting rights, whether in whole or in part, by means of an offer made publicly to the holders of all or substantially all of such outstanding stock or shares to acquire stock or shares for cash, other property, or a combination thereof or by any other means, unless the transaction is consented to by vote of a majority of the continuing directors; or (b) continuing directors cease to constitute a majority of the board. (iv) The term "continuing director" shall mean any director of the corporation who (a) was a member of the initial board of directors of the corporation as voted by the incorporators of the corporation, or (b) was recommended for his initial term of office by a majority of continuing directors in office at the time of such recommendation. Nothing contained in this Article shall (I) limit the power of the corporation to indemnify employees and agents of the corporation of its subsidiaries other than directors and officers on any terms it deems appropriate not prohibited by law, (ii) limit the power of the corporation to indemnify directors and officers for expenses incurred in suits, actions, or other proceedings initiated by such director or officer or (iii) affect any rights to indemnification to which corporation personnel other than directors and officers may be entitled by contract or otherwise. The rights provided in this Article shall not be exclusive of or affect any other right to which any director or officer may be entitled and such rights shall inure to the benefit of its or his successors, heirs, executors, administrators and other legal representatives. Such other rights shall include all powers, immunities and rights of reimbursement allowable under the laws of The Commonwealth of Massachusetts. No amendment to or repeal of this Article shall apply to or have any effect upon the liability, exoneration or indemnification of any director or officer for or with respect to any acts or omissions of the director or officer occurring prior to such amendment or repeal. F. The by-laws may be amended, altered or repealed at any meeting of the stockholders (or, prior to the issue of the initial capital stock, at any meeting of the incorporators), provided notice of the proposed amendment, alteration or repeal is given in the notice of said meeting. They may also be altered, amended or repealed by vote of a majority of the directors then in office, except that the directors shall not take any action which provides for indemnification of directors nor any action to amend Article IX of the by-laws, and except that the directors shall not take any action unless permitted by law. Any by-law so altered, amended or repealed by the directors may be further altered or amended or reinstated by the stockholders in the above manner. ARTICLE VII ------------ The effective date of organization of the corporation is August 2, 1996. ARTICLE VIII ------------- The post office address of the corporation in Massachusetts is: 25 Research Drive, Westborough, MA 01582 Officers Name Residence - -------- ---- ---------- President David L. Holt 6 Glen Court Sutton, MA 01590 Treasurer John G. Cochrane 8 Captain Thomson Lane Hingham, MA 02043 Clerk Robert J. Brill 149C Beaman Road Princeton, MA 01541 Directors Name Residence - ---- --------- Joan T. Bok 53 Pickney Street Boston, MA 02114 John W. Rowe 929 Salem End Road Framingham, MA 01701 Jeffrey D. Tranen 12 Whitridge Road South Natick, MA 01760 Alfred D. Houston 19 Tanglewood Road Wellesley, MA 02181 Cheryl A. LaFleur 2 Lilac Circle Wellesley, MA 02181 John H. Dickson 17 Dunster Street Needham, MA 02191 David L. Holt 6 Glen Court Sutton, MA 01590 The fiscal year of the corporation shall end on the last day of the month of December. The name and business address of the Registered Agent of the corporation, if any, is: None. ARTICLE IX ----------- By-laws of the corporation have been duly adopted and the president, treasurer, clerk and directors whose names are set forth above, have been duly elected. IN WITNESS WHEREOF and under the pains and penalties of perjury, I/WE, whose signature(s) appear below as incorporator(s) and whose names and business or residential address(es) ARE CLEARLY TYPED OR PRINTED beneath each signature do hereby associate with the intention of forming this corporation under the provisions of General Laws Chapter 156B and do hereby sign these Articles of Organization as incorporator(s) this 1st day of August 1996. _______________________ _________________________ Kirk L. Ramsauer Robert J. Brill 25 Research Drive 25 Research Drive Westborough, MA 01582 Westborough, MA 01582 EX-3.(II) 8 EXHIBIT B.9.B Exhibit B.9.b B Y - L A W S OF NEES COMMUNICATIONS, INC. ARTICLE I STOCKHOLDERS Section 1. Annual Meeting. - --------------------------- The annual meeting of stockholders shall be held at the office of the corporation in the Town of Westborough, Massachusetts, or at such other place in Massachusetts as the president or a majority of the directors may designate, on the fourth Friday of March in each year, if it be not a legal holiday, and if it be a legal holiday, then on the next succeeding day not a legal holiday. Purposes for which the annual meeting is to be held additional to those prescribed by law, by the articles of organization and by these by-laws may be specified by the board of directors or by writing signed by the president or by a majority of the directors or by one or more stockholders who are entitled to vote and who hold at least one-fourth part in interest of the capital stock. If such annual meeting is omitted on the day herein provided therefor, a special meeting may be held in place thereof, and any business transacted or elections held at such meeting shall have the same effect as if transacted or held at the annual meeting. Section 2. Special Meetings. - ------------------------------- Special meetings of the stockholders may be called to be held anywhere in Massachusetts by the president or by a majority of the directors, and shall be called by the clerk or, in case of the death, absence, incapacity or refusal of the clerk, by any other officer of the corporation, upon written application of one or more stockholders who are entitled to vote and who hold at least one-fourth part in interest of the capital stock entitled to vote at the meeting, stating the time, place and purpose of the meeting. Section 3. Notice of Meetings. - ------------------------------- A written or printed notice of each meeting of stockholders, stating the place, day and hour thereof and the purposes for which the meeting is called, shall be given by the clerk, at least seven days before such meeting, to each stockholder entitled to vote thereat by leaving such notice with him or at his residence or usual place of business, or by mailing it, postage prepaid, and addressed to such stockholder at his address as it appears in the records of the corporation. In the absence or disability of the clerk, such notice may be given by a person designated either by the clerk or by the person or persons calling the meeting or by the board of directors. No notice of the time, place or purpose of any regular or special meeting of the stockholders shall be required if every stockholder entitled to notice thereof is present in person or is represented at the meeting by proxy; or if every such stockholder, or his attorney thereunto authorized, by a writing, executed before or after the meeting, and filed with the records of the meeting, waives such notice. Section 4. Quorum. - ------------------- At any meeting of the stockholders, a majority in interest of all stock issued and outstanding and entitled to vote upon a question to be considered at the meeting shall constitute a quorum for the consideration of such question, but a less interest may adjourn any meeting from time to time, and the meeting may be held as adjourned without further notice. When a quorum is present at any meeting, a majority of the stock represented thereat and entitled to vote shall, except where a larger vote is required by law, by the articles of organization or by these by-laws, decide any question brought before such meeting. Section 5. Proxies and Voting. - ------------------------------ Stockholders who are entitled to vote shall have one vote for each share of stock owned by them. Stockholders may vote either in person or by proxy in writing dated not more than six (6) months before the meeting named therein, which shall be filed with the clerk of the meeting before being voted. Such proxies shall entitle the holders thereof to vote at any adjournment of such meeting but shall not be valid after the final adjournment of such meeting. ARTICLE II DIRECTORS Section 1. Powers. - ------------------- The board of directors shall have, and may exercise all the powers of the corporation, except such as are conferred upon the stockholders by law, by the articles of organization, and by these by-laws. In particular, and without limiting the generality of the foregoing, the directors may at any time issue all or from time to time any part of the unissued capital stock of the corporation from time to time authorized under the Articles of Organization and may determine, subject to any requirements of law, the consideration for which stock is to be issued and the manner of allocating such consideration between capital and surplus. Section 2. Election. - --------------------- A board of not less than three directors shall be chosen by ballot at the annual meeting of the stockholders or at the special meeting held in place thereof. The number of directors for each corporate year shall be fixed by vote at the meeting at which they are elected but the stockholders may, at any special meeting held for the purpose during any such year, increase or decrease (within the limit above specified) the number of directors as thus fixed, and elect new directors to complete the number so fixed, or remove directors to reduce the number of directors to the number so fixed. The number of directors may be increased or decreased to a number no less than three and no more than seven by the directors at any time by a vote of a majority of the directors then in office until the next annual meeting or special meeting in lieu of such annual meeting, provided, however, that the directors may only eliminate vacancies existing by reason of the death, resignation, removal or disqualification of one or more directors. No director need be a stockholder. Subject to law, to the articles or organization and to the other provisions of these by-laws, each director shall hold office until the next annual meeting and until his successor is chosen and qualified. Section 3. Regular Meetings. - ----------------------------- Regular meetings of the board of directors may be held at such places and at such times as the board may by vote from time to time determine, and if so determined, no notice thereof need be given. A regular meeting of the board of directors may be held without notice immediately after, and at the same place as the annual meeting of the stockholders, or the special meeting of the stockholders held in place of such annual meeting. Section 4. Special Meetings. - ----------------------------- Special meetings of the board of directors may be held at any time and at any place when called by the president, treasurer, or two or more directors, reasonable notice thereof being given to each director, or at any time without call or formal notice, provided all the directors are present or waive notice thereof by a writing which is filed with the records of the meeting. In any case it shall be deemed sufficient notice to a director to send notice by mail or telegram at least forty-eight hours before the meeting addressed to him at his usual or last known business or residence address. Section 5. Quorum. - ------------------- A majority of the board of directors shall constitute a quorum for the transaction of business, but a less number may adjourn any meeting from time to time, and the meeting may be held as adjourned without further notice. When a quorum is present at any meeting, a majority of the members in attendance thereat shall decide any question brought before such meeting. Section 6. Committees. - ---------------------- Standing or temporary committees may be appointed from its own number by the board of directors from time to time, with such duties and powers as may be prescribed by vote of the board of directors. ARTICLE III OFFICERS AND AGENTS Section 1. Election and Appointment. - ------------------------------------- The officers shall be a president, a clerk, a treasurer and such other officers and agents as the board of directors may in their discretion appoint. The treasurer and the clerk shall be chosen by ballot at the annual meeting of the stockholders. The president shall be elected annually by the board of directors after its election by the stockholders. Unless the board of directors otherwise determines, the president shall be a director. The clerk shall be a resident of Massachusetts. So far as is permitted by law, any two or more offices may be filled by the same person. Subject to law, and to the other provisions of these by-laws, the treasurer and clerk shall each hold office until the next annual meeting of stockholders and until his successor is chosen and qualified; the president shall hold office until the first meeting of directors after the next annual meeting of stockholders and until his successor is chosen and qualified; and the other officers and agents shall hold office during the pleasure of the board of directors or for such term as the board of directors shall prescribe. Each officer shall, subject to these by-laws, have in addition to the duties and powers herein set forth such duties and powers as are commonly incident to his office, and such duties and powers as the board of directors shall from time to time designate. Section 2. President and Vice Presidents. - ------------------------------------------ Except as otherwise determined by the board of directors, the president shall be the chief executive officer of the corporation. Except as otherwise determined by the board of directors, he shall preside at all meetings of the stockholders and of the board of directors at which he is present. The president shall have custody of the treasurer's bond. Any vice presidents shall have such powers as the board of directors shall from time to time designate. Section 3. Clerk. - ------------------ The clerk shall keep an accurate record of the proceedings of all meetings of the stockholders in books provided for the purpose, which books shall be kept at the principal office of the corporation and shall be open at all reasonable times to the inspection of any stockholder. If no secretary is appointed, the clerk shall also keep an accurate record of the proceedings of all meetings of the board of directors. In the absence of the clerk at any meeting of the stockholders, or of the board of directors if no secretary is appointed, the proceedings of such meeting shall be recorded by an assistant clerk, or if there be none or he is absent, by a temporary clerk chosen at the meeting. The clerk and any such assistant or temporary clerk shall be sworn. Section 4. Secretary. - ---------------------- If a secretary is appointed, he shall keep accurate minutes of all meetings of the board of directors, and in his absence from any such meeting, an assistant secretary, or if there be none or he is absent, a temporary secretary, chosen at the meeting, shall record the proceedings thereof. Section 5. Treasurer. - ---------------------- The treasurer shall, subject to the direction and under the supervision of the board of directors, have general charge of the financial concerns of the corporation and the care and custody of the funds and valuable papers of the corporation, except his own bond, and he shall have power to endorse for deposit or collection all notes, checks, drafts and other obligations payable to the corporation or its order, and to accept drafts on behalf of the corporation. He shall keep, or cause to be kept accurate books of account, which shall be the property of the corporation. If required by the board of directors he shall give bond for the faithful performance of his duty in such form, in such sum, and with such sureties as the board of directors shall require. Section 6. Removals. - --------------------- The stockholders may, at any special meeting called for the purpose, by vote of a majority of the capital stock issued and outstanding and entitled to vote, remove from office the treasurer, clerk or any director, and elect his successor. The board of directors may likewise, by vote of a majority of their entire number, as fixed by the stockholders, remove from office any officer or agent of the corporation; provided, however, that the board of directors may remove the treasurer or clerk for cause only. Section 7. Vacancies. - ---------------------- If the office of any director or of any officer or agent, one or more, becomes vacant by reason of death, resignation, removal, disqualification or otherwise, the directors or the remaining directors, though less than a quorum, may, unless such vacancy, if in the office of the treasurer, clerk or director, shall have been filled by the stockholders, choose by a majority vote of their entire number, a successor or successors, who shall hold office for the unexpired term, subject to the provisions of Section 6 of this Article. The stockholders may at any time fill any and all vacancies arising in the office of directors, treasurer or clerk. ARTICLE IV CAPITAL STOCK Section 1. Shares Represented by Certificates and Uncertificated Shares. - ------------------------------------------------------------------------- The board of directors may provide by resolution that some or all of any or all classes and series of shares shall be uncertificated shares. Unless such a resolution has been adopted, each stockholder shall be entitled to a certificate of the capital stock of the corporation owned by him, in such form as shall in conformity to law, be prescribed from time to time by the board of directors. Such certificate shall be signed by the president or a vice president and by the treasurer or an assistant treasurer, and shall bear the seal of the corporation. Section 2. Transfer Books. - --------------------------- The treasurer or such agent or agents as may be employed by the treasurer with the approval of the board of directors shall keep the stock and transfer books of the corporation and a record of all certificates of stock issued and of all transfers of stock, and a register of all the stockholders, their addresses, and the number of shares held by each, in books provided for that purpose. The board of directors may fix in advance a time, no more than sixty days preceding the date of any meeting of stockholders or the date for the payment of any dividend or the making of any distribution to stockholders or the last day on which the consent or dissent of stockholders may be effectively expressed for any purpose, as the record date for determining the stockholders having the right to notice of and to vote at such meeting and any adjournment thereof or the right to receive such dividend or distribution or the right to give such consent or dissent, and in such case only stockholders of record on such record date shall have such right, notwithstanding any transfer of stock on the books of the corporation after the record date; or without fixing such record date, the board of directors may for any of such purposes close the transfer books for all or any part of such sixty-day period. Section 3. Transfer of Shares. - ------------------------------- Title to a certificate of stock and to the shares represented thereby shall be transferred only by delivery of the certificate properly endorsed, or by delivery of the certificate accompanied by a written assignment of the same, or a written power of attorney to sell, assign, or transfer the same or the shares represented thereby, properly executed; but the person registered on the books of the corporation as the owner of shares shall have the exclusive right to receive dividends thereon and to vote thereon as such owner, shall be held liable for such calls and assessments, if any, as may lawfully be made thereon, and except only as may be required by law, may in all respects be treated by the corporation as the exclusive owner thereof. It shall be the duty of each stockholder to notify the corporation of his post office address. Section 4. Loss of Certificates. - --------------------------------- In case of the alleged loss or destruction, or the mutilation of a certificate of stock, a duplicate certificate may be issued in place thereof, upon such reasonable terms as the board of directors may prescribe. ARTICLE V INDEMNIFICATION No director of the corporation shall be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director notwithstanding any provision of law imposing such liability, except with respect to any matter as to which such liability shall have been imposed (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under section sixty-one or sixty-two of chapter one hundred and fifty-six B of the General Laws of Massachusetts, or (iv) for any transaction from which the director derived an improper personal benefit. The corporation shall indemnify each of its directors and officers against any loss, liability or expense, including amounts paid in satisfaction of judgments, in compromise or as fines and penalties, and counsel fees, imposed upon or reasonably incurred by him in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, including but not limited to derivative suits (to the extent permitted by law), in which he may be involved or with which he may be threatened, while in office or thereafter, by reason of his being or having been a director or officer, except with respect to any matter as to which he shall have been adjudicated in such action, suit or proceeding not to have acted in good faith in the reasonable belief that his action was in the best interests of the corporation, or, to the extent that such matter relates to service with respect to any employee benefit plan, as in the best interests of the participants or beneficiaries of such plan. As to any matter disposed of by a compromise payment by a director or officer, pursuant to a consent decree or otherwise, no indemnification either for said payment or for any other expenses shall be provided unless such compromise shall be approved as in the best interests of the corporation, after notice that it involves such indemnification, if no change in control has occurred (a) by a disinterested majority of the directors then in office, (b) by a majority of the disinterested directors then in office, provided that there has been obtained an opinion in writing of independent legal counsel to the effect that such director or officer appears to have acted in good faith in the reasonable belief that his action was in the best interests of the corporation, or (c) by the vote, at a meeting duly called and held, of the holders of a majority of the shares outstanding and entitled to vote thereon, exclusive of any shares owned by any interested director or officer or, if a change in control shall have occurred, by an opinion in writing of independent legal counsel to the effect that such director or officer appears to have acted in good faith in the reasonable belief that his action was in the best interests of the corporation. In discharging his duties any such director or officer, when acting in good faith, shall be fully protected in relying upon the books of account of the corporation or of another organization in which he serves as contemplated by this Article, reports made to the corporation or to such other organization by any of its officers or employees or by counsel, accountants, appraisers or other experts or consultants selected with reasonable care by the board of directors of the corporation or similar governing body of such other organization, or upon other records of the corporation or of such other organization. No director or officer shall be liable for any act, omission, step or conduct taken or had in good faith, which (whether by condition or otherwise) is required, authorized or approved by any order or orders issued pursuant to the Public Utility Holding Company Act of 1935 or any other Federal statute or any state statute regulating the corporation or a subsidiary, if any, by reason of their being subsidiaries of public utility companies or public utility holding companies or by reason of their activities as such, or any amendments to any thereof. In any action, suit or proceeding based on any act, omission, step or conduct, as in this paragraph described, the provisions hereof shall be brought to the attention of the court. In the event that the forgoing provisions of this paragraph are found by the court not to constitute a valid defense on the grounds of not being applicable to the particular class of plaintiff, each such director and officer shall be reimbursed for, or indemnified against, all loss, liability and expense incurred by him or imposed on him, in connection with, or arising out of, any such action, suit or proceeding based on any act, omission, step or conduct taken or had in good faith as in this Section described; provided, however, that as to any matter disposed of by a compromise payment by such director or officer, pursuant to a consent decree or otherwise, no indemnification either for said payment or for any other expenses shall be provided unless such compromise shall be approved as in the best interest of the corporation as heretofore provided in this Article. Such loss, liability and expense shall include, but shall not be limited to, judgments, court costs and attorneys' fees. Expenses incurred with respect to the defense or disposition of any action, suit or proceeding heretofore referred to in this Article shall be advanced by the corporation prior to the final disposition of such action, suit or proceeding, upon receipt of an undertaking by or on behalf of the recipient to repay such amount if it is ultimately determined that he is not entitled to indemnification, which undertaking shall be accepted without reference to the financial ability of the recipient to make such repayment. If in an action, suit or proceeding brought by or in right of the corporation, a director is held not liable, whether because relieved of liability under the first paragraph of this Article or otherwise, he shall be deemed to have been entitled to indemnification for expenses incurred in defense of said action, suit or proceeding. As used in this Article: (i) The term "officer" includes (a) persons who serve at the written request of the corporation as directors, officers, or trustees of another organization and (b) employees of the corporation and its affiliates who serve in any capacity with respect to benefit plans for the corporation's employees. (ii) An "interested" director or officer is one against whom in such capacity the proceeding in question or another proceeding on the same or similar grounds is then pending. (iii) A "change in control" occurs when: (a) any individual, corporation, association, partnership, joint venture, trust or other entity or association thereof acting in concert (excluding any employee benefit plan, dividend reinvestment plan or similar plan of the corporation, or any trustee thereof acting in such capacity) acquires more than 20% of the corporation's outstanding stock having general voting rights or more than 20% of the common shares of any entity owning more than 50% of the corporation's outstanding stock having general voting rights, whether in whole or in part, by means of an offer made publicly to the holders of all or substantially all of such outstanding stock or shares to acquire stock or shares for cash, other property, or a combination thereof or by any other means, unless the transaction is consented to by vote of a majority of the continuing directors; or (b) continuing directors cease to constitute a majority of the board. (iv) The term "continuing director" shall mean any director of the corporation who (a) was a member of the initial board of directors of the corporation as voted by the incorporators of the corporation, or (b) was recommended for his initial term of office by a majority of continuing directors in office at the time of such recommendation. Nothing contained in this Article shall (i) limit the power of the corporation to indemnify employees and agents of the corporation or its subsidiaries other than directors and officers on any terms it deems appropriate not prohibited by law, (ii) limit the power of the corporation to indemnify directors and officers for expenses incurred in suits, actions, or other proceedings initiated by such director or officer or (iii) affect any rights to indemnification to which corporation personnel other than directors and officers may be entitled by contract or otherwise. The rights provided in this Article shall not be exclusive of or affect any other right to which any director or officer may be entitled and such rights shall inure to the benefit of its or his successors, heirs, executors, administrators and other legal representatives. Such other rights shall include all powers, immunities and rights of reimbursement allowable under the laws of The Commonwealth of Massachusetts. No amendment to or repeal of this Article shall apply to or have any effect upon the liability, exoneration or indemnification of any director or officer for or with respect to any acts or omissions of the director or officer occurring prior to such amendment or repeal. ARTICLE VI SEAL The seal of the corporation shall, subject to alteration by the board of directors, consist of a flat-faced circular die with the words "NEES Communications, Inc." and "1996 - Massachusetts" cut or engraved thereon. ARTICLE VII EXECUTION OF PAPERS Except as the board of directors may generally or in particular cases authorize the execution thereof in some other manner, all deeds, leases, transfers, contracts, bonds, notes, checks, drafts and other obligations made, accepted, endorsed or released by the corporation, shall be signed by any officer of the corporation. ARTICLE VIII FISCAL YEAR Except as from time to time otherwise provided by the board of directors, the fiscal year of the corporation shall be the calendar year. ARTICLE IX AMENDMENTS These by-laws may be amended, altered or repealed at any meeting of the stockholders (or, prior to the issue of the initial capital stock, at any meeting of the incorporators), provided notice of the proposed amendment, alteration or repeal is given in the notice of said meeting. These may also be altered, amended or repealed by vote of a majority of the directors then in office, except that the directors shall not take any action which provides for indemnification of directors nor any action to amend this Article IX, and except that the directors shall not take any action unless permitted by law. Any by-law so altered, amended or repealed by the directors may be further altered or amended or reinstated by the stockholders in the above manner. EX-4 9 EXHIBIT C.6.C Exhibit C.6.c Execution Copy TENTH SUPPLEMENTAL LOAN AGREEMENT Between BUSINESS FINANCE AUTHORITY OF THE STATE OF NEW HAMPSHIRE and NEW ENGLAND POWER COMPANY Dated as of January 1, 1996 Supplementing the Loan Agreement between The Industrial Development Authority of the State of New Hampshire and New England Power Company dated as of November 15, 1983, as Heretofore Amended by a First Supplemental Loan Agreement dated as of April 1, 1986, a Second Supplemental Loan Agreement dated as of August 1, 1988, a Third Supplemental Loan Agreement dated as of April 1, 1989, a Fourth Supplemental Loan Agreement dated as of November 1, 1990, a Fifth Supplemental Loan Agreement dated as of June 15, 1991, a Sixth Supplemental Loan Agreement dated as of January 1, 1993, a Seventh Supplemental Loan Agreement dated as of October 1, 1993, an Eighth Supplemental Loan Agreement dated as of December 1, 1993, and a Ninth Supplemental Loan Agreement dated as of February 1, 1995 $29,850,000 Business Finance Authority of the State of New Hampshire Pollution Control Revenue Bonds (New England Power Company Project - 1990 Series B (Third Issue)) TABLE OF CONTENTS ----------------- Section 1. Definitions........................................ 1 Section 2. Authority's Representation......................... 2 Section 3. Issue of 1990 Series B Bonds (Third Issue) and Application of Proceeds Issue of Additional Series S G&R Bonds................................. 2 Section 4. Rights and Duties of the Authority................. 2 Section 5. Company Not to Impair Interest Exemption; Use of Project Facilities Rebate Covenant................. 4 Section 6. Securities Laws.................................... 4 Section 7. Notices............................................ 4 Section 8. Severability....................................... 5 Section 9. Counterparts....................................... 5 Section 10. Captions........................................... 5 Section 11. Governing Law...................................... 5 Section 12. Binding Effect..................................... 5 Section 13. Obligations of the Company Under the Indenture.......................................... 5 TENTH SUPPLEMENTAL LOAN AGREEMENT This Tenth Supplemental Loan Agreement dated as of January 1, 1996 (the "Tenth Supplemental Loan Agreement") is between-the Business Finance Authority of the State of New Hampshire, a body politic and corporate (previously named The Industrial Development Authority of the State of New Hampshire) established under Chapter 162-A:3 of the Revised Statutes of the State of New Hampshire (the "Authority"), and New England Power Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts (the "Company"). The Authority is authorized by Chapter 162-I of the Revised Statutes of the State of New Hampshire (the "Act") to finance pollution control facilities through the issue of its industrial revenue bonds. The purpose of this Tenth Supplemental Loan Agreement is to provide for the refunding of $29,850,000 of the Authority's 7.80% Pollution Control Revenue Bonds (New England Power Company - 1986 Series) (the "1986 Series Bonds") issued to pay a portion of the Company's share of the cost of pollution control facilities constructed at Unit No. 1 at the nuclear electric generating plant in the Town of Seabrook, Rockingham County, New Hampshire, pursuant to a Loan Agreement between the Authority and the Company dated as of November 15, 1983 (the "Original Loan Agreement"), to which this instrument is supplemental. It is hereby agreed as follows: Section 1. Definitions. ----------------------- For purposes hereof, the following words shall have the following meanings: "Additional Series S G&R Bonds" means the General and Refunding Mortgage Bonds to be issued pursuant to Section 3 hereof in an amount equal to the aggregate principal amount of the 1990 Series B Bonds (Third Issue). "Authority's Service Charge for the 1990 Series B Bonds (Third Issue)" means a payment to the Authority for its own use of $223,875.00 on the date of the issue of the 1990 Series B Bonds (Third Issue). "Code" means the Internal Revenue Code of 1986, and the proposed, temporary, and final regulations thereunder. "Letter of Representation" means the letter from the Company addressed to and accepted by the Authority and the underwriter named therein (the "Underwriter") dated January 1, 1996 relating to the 1990 Series B Bonds (Third Issue). "Loan Agreement" means the Original Loan Agreement as amended and supplemented by the First Supplemental Loan Agreement dated as of April 1, 1986, the Second Supplemental Loan Agreement dated as of August 1, 1988, the Third Supplemental Loan Agreement dated as of April 1, 1989, the Fourth Supplemental Loan Agreement dated as of November 1, 1990, the Fifth Supplemental Loan Agreement dated as of June 15, 1991, the Sixth Supplemental Loan Agreement dated as of January 1, 1993, the Seventh Supplemental Loan Agreement dated as of October 1, 1993, the Eighth Supplemental Loan Agreement dated as of December 1, 1993, the Ninth Supplemental Loan Agreement dated as of February 1, 1995 and this Tenth Supplemental Loan Agreement. "Eleventh Supplemental Indenture" means the Eleventh Supplemental Indenture between the Authority and State Street Bank and Trust Company, as Trustee, dated as of January 1, 1996, relating to the 1990 Series B Bonds (Third Issue), supplementing and amending the Trust Indenture between the Authority and said Trustee (as successor to BayBank Middlesex) dated as of November 15, 1983 (the "Original Indenture" and, as supplemented and amended by the First Supplemental Indenture dated as of April 1, 1986, the Second Supplemental Indenture dated as of August 1, 1988, the Third Supplemental Indenture dated as of April 1, 1989, the Fourth Supplemental Indenture dated as of November 1, 1990, the Fifth Supplemental Indenture dated as of June 15, 1991, the Sixth Supplemental Indenture dated as of January 1, 1993, the Seventh Supplemental Indenture dated as of October 1, 1993, the Eighth Supplemental Indenture dated as of December 1, 1993, the Ninth Supplemental Indenture dated as of July 1, 1994, the Tenth Supplemental Indenture dated as of February 1, 1995 and the Eleventh Supplemental Indenture, the "Indenture"). "1990 Series B Bonds (Third Issue)" means the Authority's $29,850,000 Pollution Control Revenue Bonds (New England Power Company Project - 1990 Series B (Third Issue)) issued pursuant to Section 3 hereof and the Indenture. "Underwriting Agreement" means the agreement between the Authority and the Underwriter dated January 1, 1996 relating to the 1990 Series B Bonds (Third Issue). Capitalized terms which are not defined herein but which are defined in the Original Loan Agreement shall have the respective meanings attributed to them therein. Section 2. Authority's Representation. -------------------------------------- To induce the Company to enter into this Agreement, the Authority represents that the Authority is a body politic and corporate established under Chapter 162-A:3 of the Revised Statutes of the State of New Hampshire. Section 3. Issue of 1990 Series B Bonds (Third Issue) and Application of Proceeds. Issue of Additional Series S G & R Bonds. ---------------------------------------------------------- Subject to, and upon the terms and conditions of, the Underwriting Agreement, the Authority shall issue $29,850,000 aggregate principal amount of 1990 B Series Bonds (Third Issue) pursuant to the Act in the form and with the terms provided in the Indenture. The Authority shall loan to the Company $29,850,000 by depositing the Proceeds of the 1990 Series B Bonds (Third Issue) in the account in the Bond Fund for the 1986 Series Bonds established by the Indenture, to be applied by the Trustee, with other moneys, to the redemption of $29,850,000 principal amount of such series on April 1, 1996. The Company hereby agrees to repay the loan of the aggregate principal amount of the 1990 B Series Bonds (Third Issue), and to issue and deliver to the Trustee a like aggregate principal amount of its Additional Series S G&R Bonds in substantially the form set forth in the Fourteenth Supplemental Indenture to the General and Refunding Mortgage Indenture. The Additional Series S Bonds shall, together with $20,750,000 principal amount of Series S G&R Bonds heretofore issued and delivered to the Trustee, evidence the Company's obligation to repay the loans to it of the Proceeds of all the 1990 Series B Bonds. The Series S G&R Bonds shall be evidenced by one single fully registered bond registered in the name of the Trustee, which shall be nontransferable except as provided in the Indenture. Section 4. Rights and Duties of the Authority. ---------------------------------------------- (a) Indemnification of the Authority. --------------------------------- The Company agrees to indemnify and hold harmless the Authority and its directors, members, officers, employees and agents from and against any and all damages, losses, costs, charges, expenses, judgments and liabilities incurred by it or them arising out of any claim in connection with: the transactions contemplated by the Loan Agreement or the Indenture; the construction, financing, occupancy, management, maintenance, operation or use of Unit No. 1, or any accident, injury, or damage to any person occurring therein or thereabout; any act or omission of the Company or any of its agents, contractors, servants, employees or licensees; or the offering, issuance, sale or any resale of any Bond; except (i) to the extent caused by the willful dishonesty of or intentional violation of law by the party seeking indemnification, and (ii) to the extent based on information furnished by the Authority in writing specifically for use in any official statement or prospectus used in connection with the sale of Bonds. If any such claim is asserted, the Authority or its directors, members, officers, employees or agents, as the case may be, will give prompt notice to the Company, and the Company will assume the defense thereof, with full power to litigate and compromise the same in its sole discretion. (b) Remedies of the Authority. -------------------------- Notwithstanding any contrary provision in this Tenth Supplemental Loan Agreement, the Authority and any of its members, officers, employees or agents, as the case may be, shall have the right to take any action or make any decision with respect to proceedings for indemnity against liability and for collection or reimbursement from sources other than money or property held under the Indenture or subject to the lien thereof. The Authority may enforce its rights under the Loan Agreement which have not- been assigned to the Trustee, and each such member, officer, employee and agent may enforce his rights hereunder, by legal proceedings for the specific performance of any covenant or agreement contained herein or for the enforcement of any other appropriate legal or equitable remedy, and may recover damages caused by any breach by the Company of its obligations to the Authority or to such director, member, officer, employee or agent, as the case may be, under the Loan Agreement, including court costs, reasonable attorneys' fees and other costs and expenses incurred in enforcing such obligations. (c) Responsibility. --------------- The Authority shall be entitled to the advice of counsel (who may also be counsel for the Company or the Trustee) and shall not be liable for any action taken or omitted to be taken in good faith in reliance on such advice. The Authority may rely conclusively on any notice, certificate or other document furnished to it under the Loan Agreement or the Indenture and reasonably believed by it to be genuine. The Authority shall not be liable for any action taken or omitted to be taken by it in good faith and reasonably believed by it to be within the discretion or power conferred upon it or beyond such discretion or power, as the case may be, or taken by it pursuant to any direction or instruction by which it is governed under the Loan Agreement or the Indenture or omitted to be taken by it by reason of the lack of direction or instruction required under the Loan Agreement or the Indenture for such action, or be responsible for the consequences of any error of judgment reasonably made by it. When any consent or other action by the Authority is called for by the Loan Agreement or the Indenture, the Authority may defer such action pending receipt of such evidence, if any, as it may require in support thereof. A permissive right or power to act shall not be construed as a requirement to act; and no delay in the exercise of a right or power shall affect the subsequent exercise of that right or power. The Authority shall in no event be liable for the application or misapplication of funds, or for other acts or defaults, by any person, firm or corporation except by its own directors, members, officers, agents and employees. No recourse shall be had by the Company, the Trustee or the holder of any Bond for any claim based on the Loan Agreement, the Indenture or the Bonds against any member, officer, agent or employee of the Authority unless such claim is based upon the willful dishonesty of, or intentional violation of law by, such person. No covenant, obligation or agreement of the Authority contained in the Loan Agreement or the Indenture shall be deemed to be a covenant, obligation or agreement of any present or future director, member, officer, employee or agent of the Authority in his individual capacity, and any member, officer or employee of the Authority executing a Bond shall not be liable personally on the Bond or be subject to any personal liability or accountability by reason of the issue thereof. The Authority shall be entitled to the benefits of Section 23 of the Indenture in respect of actions taken or omitted to be taken by it under this Seventh Supplemental Loan Agreement. (d) Financial Obligations; Operation of Facilities. ----------------------------------------------- Nothing contained in the Loan Agreement or the Indenture shall in any way obligate the Authority to pay any debt or meet any financial obligation to any person at any time hereunder or in relation to the Bonds or the Project Facilities or Additional Facilities except from moneys (other than moneys received for its own purposes under the Loan Agreement) received under the provisions of the Loan Agreement and the Indenture or from the exercise of the Authority's rights under the Loan Agreement and the Indenture. Nothing contained in the Loan Agreement or the Indenture shall be construed to require or authorize the Authority to operate the Project Facilities, Unit No. 1 or Additional Facilities. (e) Expenses of the Authority. -------------------------- Except to the extent they have been paid or reimbursed from the Construction Fund, the Company shall pay or reimburse the Authority on demand for all reasonable fees, charges, expenses (including reasonable attorneys' fees) and disbursements directly related to the financing of the Project Facilities and Additional Facilities and the issuance of Bonds including, without limitation, the Authority's Service Charge for the 1990 Series B Bonds (Third Issue) and reimbursement for expenses reasonably incurred or advances reasonably made in the exercise of its rights or the performance of its obligations under the Loan Agreement or the Indenture, with interest at the rate specified in Section 14(g) of the Indenture. (f) Matters to be Considered by Authority. -------------------------------------- In approving, concurring in or consenting to action of another party, or in exercising any discretion or in making any determination, the Authority may consider the interests of the public, which shall include the anticipated effect of any transaction on tax revenues and employment, as well as the interests of the other parties and the Bondholders; however, nothing herein shall be construed as conferring on any person other than the Company, the Trustee and the Bondholders any right to notice, hearing or participation in the Authority's consideration, and nothing in this subsection shall be construed as conferring on any of them any right additional to those conferred elsewhere herein. Section 5. Company Not to Impair Interest Exemption; Use of Project Facilities: Rebate Covenant. ------------------------------------------------------------ The Company will not use any of the funds loaned to it by the Authority hereunder (or the income earned through the investment thereof) or, to the extent of its ownership and control, operate the facilities financed under the Indenture in any manner, and will not take any other action, which would impair the exclusion of interest on the Bonds from gross income for Federal income tax purposes. The Company's use of such facilities (or facilities replacing the same), shall, to the extent of its ownership and control, be in furtherance of the purpose of pollution control or solid waste disposal and otherwise in compliance with the Act and the Code. The Company will comply in all respects with the requirements of Code Section 148(f) in the event that Gross Proceeds of the 1990 Series B Bonds (Third Issue) are invested in Nonpurpose Investments with a Yield higher than the Yield on the 1990 Series B Bonds (Third Issue). The terms "Nonpurpose Investments," "Gross Proceeds" and "Yield" shall have the meanings given in Code Section 148 and the regulations promulgated thereunder and shall be applied as provided therein. Section 6. Securities Laws. --------------------------- In any remarketing of any Bonds, the Company shall at all times comply with, and shall cooperate with the Remarketing Agent to the extent necessary to permit the Remarketing Agent to comply with, applicable federal and state securities laws, including without limitation Rule 240.15c2-12 promulgated by the United States Securities and Exchange Commission. Section 7. Notices. ------------------- All notices and directions to either party or to the Trustee shall be in writing and shall be deemed to be sufficiently given if sent by registered or certified mail or delivered during business hours to the Authority at Suite 302, 4 Park Street, Concord, New Hampshire 03301, Attention of its Executive Director; to the Company at 25 Research Drive, Westborough, Massachusetts 01582, Attention of its Treasurer; and to the Trustee at its Corporate Trust Department, Two International Place, Boston, Massachusetts 02110, or to such other address as the addressee shall have indicated by prior notice to the one giving the notice or direction in question. Section 8. Severability. - ------------------------ In the event that any provision of this Tenth Supplemental Loan Agreement shall be held to be invalid in any circumstance, such invalidity shall not affect any other provisions or circumstances. Section 9. Counterparts. - ------------------------ This Tenth Supplemental Loan Agreement may be executed and delivered in any number of counterparts, each of which shall be deemed to be an original, but such counterparts together shall constitute one and the same instrument. Section 10. Captions. - --------------------- The captions in this Tenth Supplemental Loan Agreement are for convenience only and shall not affect the construction hereof. Section 11. Governing Law. - -------------------------- This instrument shall be governed by the laws of The State of New Hampshire. Section 12. Binding Effect. - --------------------------- This Tenth Supplemental Loan Agreement shall inure to the benefit of and be binding on the Authority and the Company and their respective successors and assigns (including, without limitation, the Trustee as grantee and assignee under the Indenture in accordance with all the terms thereof and hereof and for the purposes of Sections 4(a), 4(b), and 4(c) hereof the directors, members, officers, employees and agents of the Authority and their respective heirs, personal representatives and assigns. Section 13. Obligations of the Company Under the Indenture. - ----------------------------------------------------------- The Company hereby assumes and agrees to perform all of the obligations imposed upon it under the Indenture and shall be entitled to all rights and benefits granted to it or on its behalf thereunder. IN WITNESS WHEREOF, the parties have caused this Tenth Supplemental Loan Agreement to be duly executed and their respective seals to be hereunto affixed, all as of the dare first above written. BUSINESS FINANCE AUTHORITY OF THE STATE OF NEW HAMPSHIRE [Seal] s/ By: _____________________________ Executive Director NEW ENGLAND POWER COMPANY [Seal] s/John G. Cochrane By: ______________________________ Assistant Treasurer Attest: s/Robert King Wulff _____________________________ Assistant Clerk Execution Copy ELEVENTH SUPPLEMENTAL LOAN AGREEMENT Between BUSINESS FINANCE AUTHORITY OF THE STATE OF NEW HAMPSHIRE and NEW ENGLAND POWER COMPANY Dated as of January 15, 1996 Supplementing the Loan Agreement between The Industrial Development Authority of the State of New Hampshire and New England Power Company dated as of November 15, 1983, as Heretofore Amended by a First Supplemental Loan Agreement dated as of April 1, 1986, a Second Supplemental Loan Agreement dated as of August 1, 1988, a Third Supplemental Loan Agreement dated as of April 1, 1989, a Fourth Supplemental Loan Agreement dated as of November 1, 1990, a Fifth Supplemental Loan Agreement dated as of June 15, 1991, a Sixth Supplemental Loan Agreement dated as of January 1, 1993, a Seventh Supplemental Loan Agreement dated as of October 1, 1993, an Eighth Supplemental Loan Agreement dated as of December 1, 1993, a Ninth Supplemental Loan Agreement dated as of February 1, 1995, and a Tenth Supplemental Loan Agreement dated as of January 1, 1996 $10,000,000 Business Finance Authority of the State of New Hampshire Pollution Control Revenue Bonds (New England Power Company Project - 1990 Series A (Fifth Issue)) TABLE OF CONTENTS ----------------- Section 1. Definitions........................................ 1 Section 2. Authority's Representation ........................ 2 Section 3. Issue of 1990 Series A Bonds (Fifth Issue) and Application Issue of Additional Series R G&R Bonds.............................................. 2 Section 4. Rights and Duties of the Authority................. 2 Section 5. Company Not to Impair Interest Exemption; Use of Project Facilities; Rebate Covenant................ 4 Section 6. Securities Laws.................................... 4 Section 7. Notices............................................ 5 Section 8. Severability....................................... 5 Section 9. Counterparts....................................... 5 Section 10. Captions........................................... 5 Section 11. Governing Law ..................................... 5 Section 12. Binding Effect..................................... 5 Section 13. Obligations of the Company Under the Indenture..... 5 ELEVENTH SUPPLEMENTAL LOAN AGREEMENT This Eleventh Supplemental Loan Agreement dated as of January 15, 1996 (the "Eleventh Supplemental Loan Agreement") is between the Business Finance Authority of the State of New Hampshire, a body politic and corporate (previously named The Industrial Development Authority of the State of New Hampshire) established under Chapter 162-A:3 of the Revised Statutes of the State of New Hampshire (the "Authority"), and New England Power Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts (the "Company"). The Authority is authorized by Chapter 162-I of the Revised Statutes of the State of New Hampshire (the "Act) to finance pollution control facilities through the issue of its industrial revenue bonds. The purpose of this Eleventh Supplemental Loan Agreement is to provide for the refunding of $10,000,000 of the Authority's Pollution Control Revenue Bonds (New England Power Company - 1991 Taxable Commercial Paper Series) (the "Taxable 1991 Series Bonds") issued to pay a portion of the Company's share of the cost of pollution control facilities constructed at Unit No. 1 at the nuclear electric generating plant in the Town of Seabrook, Rockingham County, New Hampshire, pursuant to a Loan Agreement between the Authority and the Company dated as of November 15, 1983 (the "Original Loan Agreement"), to which this instrument is supplemental. It is hereby agreed as follows: Section 1. Definitions. ----------------------- For purposes hereof, the following words shall have the following meanings: "Additional Series R G&R Bonds" means the General and Refunding Mortgage Bonds to be issued pursuant to Section 3 hereof in an amount equal to the aggregate principal amount of the 1990 Series A Bonds (Fifth Issue). "Authority's Service Charge for the 1990 Series A Bonds (Fifth Issue)" means a payment to the Authority for its own use of $75,000.00 on the date of the issue of the 1990 Series A Bonds (Fifth Issue). "Code" means the Internal Revenue Code of 1986, and the proposed, temporary, and final regulations thereunder. "Letter of Representation" means the letter from the Company addressed to and accepted by the Authority and the underwriter named therein (the "Underwriter") dated January 15, 1996 relating to the 1990 Series A Bonds (Fifth Issue). "Loan Agreement" means the Original Loan Agreement as amended and supplemented by the First Supplemental Loan Agreement dated as of April 1, 1986, the Second Supplemental Loan Agreement dated as of August 1, 1988, the Third Supplemental Loan Agreement dated as of April 1, 1989, the Fourth Supplemental Loan Agreement dated as of November 1, 1990, the Fifth Supplemental Loan Agreement dated as of June 15, 1991, the Sixth Supplemental Loan Agreement dated as of January 1, 1993, the Seventh Supplemental Loan Agreement dated as of October 1, 1993, the Eighth Supplemental Loan Agreement dated as of December 1, 1993, the Ninth Supplemental Loan Agreement dated as of February 1, 1995, the Tenth Supplemental Loan Agreement dated as of January 1, 1996 and this Eleventh Supplemental Loan Agreement. "Twelfth Supplemental Indenture" means the Twelfth Supplemental Indenture between the Authority and State Street Bank and Trust Company, as Trustee, dated as of January 15, 1996, relating toe the 1990 Series A Bonds (Fifth Issue), supplementing and amending the Trust Indenture between the Authority and said Trustee (as successor to BayBank Middlesex) dated as of November 15, 1983 (the "Original Indenture" and, as supplemented and amended by the First Supplemental Indenture dated as of April 1, 1986, the Second Supplemental Indenture dated as of August 1, 1988, the Third Supplemental Indenture dated as of April 1, 1989, the Fourth Supplemental Indenture dated as of November 1, 1990, the Fifth Supplemental Indenture dated as of June 15, 1991, the Sixth Supplemental Indenture dated as of January 1, 1993, the Seventh Supplemental Indenture dated as of October 1, 1993, the Eighth Supplemental Indenture dated as of December 1, 1993, the Ninth Supplemental Indenture dated as of July 1, 1994, the Tenth Supplemental Indenture dated as of February 1, 1995, the Eleventh Supplemental Indenture dated as of January 1, 1995 and the Twelfth Supplemental Indenture, the "Indenture"). "1990 Series A Bonds (Fifth Issue)" means the Authority's $10,000,000 Pollution Control Revenue Bonds (New England Power Company Project - 1990 Series A (Fifth Issue)) issued pursuant to Section 3 hereof and the Indenture. "Underwriting Agreement" means the agreement between the Authority and the Underwriter dated January 15, 1996 relating to the 1990 Series A Bonds (Fifth Issue). Capitalized terms which are not defined herein but which are defined in the Original Loan Agreement shall have the respective meanings attributed to them therein. Section 2. Authority's Representation. -------------------------------------- To induce the Company to enter into this Agreement, the Authority represents that the Authority is a body politic and corporate established under Chapter 162-A:3 of the Revised Statutes of the State of New Hampshire. Section 3. Issue of 1990 Series A Bonds (Fifth Issue) and Application of Proceeds. Issue of Additional Series R G&R Bonds. ------------------------------------------------------------------------ Subject to, and upon the terms and conditions of, the Underwriting Agreement, the Authority shall issue $10,000,000 aggregate principal amount of 1990 A Series Bonds (Fifth Issue) pursuant to the Act in the form and with the terms provided in the Indenture. The Authority shall loan to the Company $10,000,000 by depositing the Proceeds of the 1990 Series A Bonds (Fifth Issue) in the account in the Bond Fund for the Taxable 1991 Series Bonds established by the Indenture, to be applied by the Trustee, with other moneys, to the redemption of $10,000,000 principal amount of such series on the date of receipt by the Trustee. The Company hereby agrees to repay the loan of the aggregate principal amount of the 1990 A Series Bonds (Fifth Issue), and to issue and deliver to the Trustee a like aggregate principal amount of its Additional Series R G&R Bonds in substantially the form set forth in the Fourteenth Supplemental Indenture to the General and Refunding Mortgage Indenture. The Additional Series R Bonds shall, together with $117,850,000 principal amount of Series R G&R Bonds heretofore issued and delivered to the Trustee, evidence the Company's obligation to repay the loans to it of the Proceeds of all the 1990 Series A Bonds. The Series R G&R Bonds shall be evidenced by one single fully registered bond registered in the name of the Trustee, which shall be nontransferable except as provided in the Indenture. Section 4. Rights and Duties of the Authority. ---------------------------------------------- (a) Indemnification of the Authority. --------------------------------- The Company agrees to indemnify and hold harmless the Authority and its directors, members, officers, employees and agents from and against any and all damages, losses, costs, charges, expenses, judgments and liabilities incurred by it or them arising out of any claim in connection with: the transactions contemplated by the Loan Agreement or the Indenture; the construction, financing, occupancy, management, maintenance, operation or use of Unit No. 1, or any accident, injury, or damage to any person occurring therein or thereabout; any act or omission of the Company or any of its agents, contractors, servants, employees or licensees; or the offering, issuance, sale or any resale of any Bond; except (I) to the extent caused by the willful dishonesty of or intentional violation of law by the party seeking indemnification, and (ii) to the extent based on information furnished by the Authority in writing specifically for use in any official statement or prospectus used in connection with the sale of Bonds. If any such claim is asserted, the Authority or its directors, members, officers, employees or agents, as the case may be, will give prompt notice to the Company, and the Company will assume the defense thereof, with full power to litigate and compromise the same in its sole discretion. (b) Remedies of the Authority. -------------------------- Notwithstanding any contrary provision in this Eleventh Supplemental Loan Agreement, the Authority and any of its members, officers, employees or agents, as the case may be, shall have the right to take any action or make any decision with respect to proceedings for indemnity against liability and for collection or reimbursement from sources other than money or property held under the Indenture or subject to the lien thereof. The Authority may enforce its rights under the Loan Agreement which have not been assigned to the Trustee, and each such member, officer, employee and agent may enforce his rights hereunder, by legal proceedings for the specific performance of any covenant or agreement contained herein or for the enforcement of any other appropriate legal or equitable remedy, and may recover damages caused by any breach by the Company of its obligations to the Authority or to such director, member, officer, employee or agent, as the case may be, under the Loan Agreement, including court costs, reasonable attorneys' fees and other costs and expenses incurred in enforcing such obligations. (c) Responsibility. --------------- The Authority shall be entitled to the advice of counsel (who may also be counsel for the Company or the Trustee) and shall not be liable for any action taken or omitted to be taken in good faith in reliance on such advice. The Authority may rely conclusively on any notice, certificate or other document furnished to it under the Loan Agreement or the Indenture and reasonably believed by it to be genuine. The Authority shall not be liable for any action taken or omitted to be taken by it in good faith and reasonably believed by it to be within the discretion or power conferred upon it or beyond such discretion or power, as the case may be, or taken by it pursuant to any direction or instruction by which it is governed under the Loan Agreement or the Indenture or omitted to be taken by it by reason of the lack of direction or instruction required under the Loan Agreement or the Indenture for such action, or be responsible for the consequences of any error of judgment reasonably made by it. When any consent or other action by the Authority is called for by the Loan Agreement or the Indenture, the Authority may defer such action pending receipt of such evidence, if any, as it may require in support thereof. A permissive right or power to act shall not be construed as a requirement to act; and no delay in the exercise of a right or power shall affect the subsequent exercise of that right or power. The Authority shall in no event be liable for the application or misapplication of funds, or for other acts or defaults, by any person, firm or corporation except by its own directors, members, officers, agents and employees. No recourse shall be had by the Company, the Trustee or the holder of any Bond for any claim based on the Loan Agreement, the Indenture or the Bonds against any member, officer, agent or employee of the Authority unless such claim is based upon the willful dishonesty of, or intentional violation of law by, such person. No covenant, obligation or agreement of the Authority contained in the Loan Agreement or the Indenture shall be deemed to be a covenant, obligation or agreement of any present or future director, member, officer, employee or agent of the Authority in his individual capacity, and any member, officer or employee of the Authority executing a Bond shall not be liable personally on the Bond or be subject to any personal liability or accountability by reason of the issue thereof. The Authority shall be entitled to the benefits of Section 23 of the Indenture in respect of actions taken or omitted to be taken by it under this Seventh Supplemental Loan Agreement. (d) Financial Obligations; Operation of Facilities. ----------------------------------------------- Nothing contained in the Loan Agreement or the Indenture shall in any way obligate the Authority to pay any debt or meet any financial obligation to any person at any time hereunder or in relation to the Bonds or the Project Facilities or Additional Facilities except from moneys (other than moneys received for its own purposes under the Loan Agreement) received under the provisions of the Loan Agreement and the Indenture or from the exercise of the Authority's rights under the Loan Agreement and the Indenture. Nothing contained in the Loan Agreement or the Indenture shall be construed to require or authorize the Authority to operate the Project Facilities, Unit No. 1 or Additional Facilities. (e) Expenses of the Authority. -------------------------- Except to the extent they have been paid or reimbursed from the Construction Fund, the Company shall pay or reimburse the Authority on demand for all reasonable fees, charges, expenses (including reasonable attorneys' fees) and disbursements directly related to the financing of the Project Facilities and Additional Facilities and the issuance of Bonds including, without limitation, the Authority's Service Charge for the 1990 Series A Bonds (Fifth Issue) and reimbursement for expenses reasonably incurred or advances reasonably made in the exercise of its rights or the performance of its obligations under the Loan Agreement or the Indenture, with interest at the rate specified in Section 14(g) of the Indenture. (f) Matters to be Considered by Authority. -------------------------------------- In approving, concurring in or consenting to action of another party, or in exercising any discretion or in making any determination, the Authority may consider the interests of the public, which shall include the anticipated effect of any transaction on tax revenues and employment, as well as the interests of the other parties and the Bondholders; however, nothing herein shall be construed as conferring on any person other than the Company, the Trustee and the Bondholders any right to notice, hearing or participation in the Authority's consideration, and nothing in this subsection shall be construed as conferring on any of them any right additional to those conferred elsewhere herein. Section 5. Company Not to Impair Interest Exemption: Use of Project Facilities: Rebate Covenant. ------------------------------------------------------------------- The Company will not use any of the funds loaned to it by the Authority hereunder (or the income earned through the investment thereof) or, to the extent of its ownership and control, operate the facilities financed under the Indenture in any manner, and will not take any other action, which would impair the exclusion of interest on the Bonds from gross income for Federal income tax purposes. The Company's use of such facilities (or facilities replacing the same), shall, to the extent of its ownership and control, be in furtherance of the purpose of pollution control or solid waste disposal and otherwise in compliance with the Act and the Code. The Company will comply in all respects with the requirements of Code Section 148(f) in the event that Gross Proceeds of the 1990 Series A Bonds (Fifth Issue) are invested in Nonpurpose Investments with a Yield higher than the Yield on the 1990 Series A Bonds (Fifth Issue). The terms "Nonpurpose Investments," gross Proceeds" and "Yield" shall have the meanings given in Code Section 148 and the regulations promulgated thereunder and shall be applied as provided therein. Section 6. Securities Laws. --------------------------- In any remarketing of any 1990 Series A Bonds, the Company shall at all times comply with, and shall cooperate with the Remarketing Agent to the extent necessary to permit the Remarketing Agent to comply with, applicable federal and state securities laws, including without limitation Rule 240.15c2- 12 promulgated by the United States Securities and Exchange Commission. Section 7. Notices. ------------------- All notices and directions to either party or to the Trustee shall be in writing and shall be deemed to be sufficiently given if sent by registered or certified mail or delivered during business hours to the Authority at Suite 302, 4 Park Street, Concord, New Hampshire 03301, Attention of its Executive Director; to the Company at 25 Research Drive, Westborough, Massachusetts 01582, Attention of its Treasurer; and to the Trustee at its Corporate Trust Department, Two International Place, Boston, Massachusetts 02110, or to such other address as the addressee shall have indicated by prior notice to the one giving the notice or direction in question. Section 8. Severability. ------------------------ In the event that any provision of this Eleventh Supplemental Loan Agreement shall be held to be invalid in any circumstance, such invalidity shall not affect any other provisions or circumstances. Section 9. Counterparts. ------------------------ This Eleventh Supplemental Loan Agreement may be executed and delivered in any number of counterparts, each of which shall be deemed to be an original, but such counterparts together shall constitute one and the same instrument. Section 10. Captions. --------------------- The captions in this Eleventh Supplemental Loan Agreement are for convenience only and shall not affect the construction hereof. Section 11. Governing Law. -------------------------- This instrument shall be governed by the laws of The State of New Hampshire. Section 12. Binding Effect. --------------------------- This Eleventh Supplemental Loan Agreement shall inure to the benefit of and be binding on the Authority and the Company and their respective successors and assigns (including, without limitation, the Trustee as grantee and assignee under the Indenture in accordance with all the terms thereof and hereof) and for the purposes of Sections 4(a), 4(b), and 4(c) hereof the directors, members, officers, employees and agents of the Authority and their respective heirs, personal representatives and assigns. Section 13. Obligations of the Company Under the Indenture. ----------------------------------------------------------- The Company hereby assumes and agrees to perform all of the obligations imposed upon it under the Indenture and shall be entitled to all rights and benefits granted to it or on its behalf thereunder. IN WITNESS WHEREOF, the parties have caused this Eleventh Supplemental Loan Agreement to be duly executed and their respective seals to be hereunto affixed, all as of the date first above written. BUSINESS FINANCE AUTHORITY OF THE STATE OF NEW HAMPSHIRE [Seal] s/ By: ______________________________ Executive Director NEW ENGLAND POWER COMPANY [Seal] s/ John G. Cochrane By: ________________________ ASSISTANT TREASURER Attest: s/Kirk L. Ramsauer ______________________________ Assistant Clerk Execution Copy TWELFTH SUPPLEMENTAL LOAN AGREEMENT Between BUSINESS FINANCE AUTHORITY OF THE STATE OF NEW HAMPSHIRE and NEW ENGLAND POWER COMPANY Dated as of December 1, 1996 Supplementing the Loan Agreement between The industrial Development Authority of the State of New Hampshire and New England Power Company dated as of November 15, 1983, as Heretofore Amended by a First Supplemental Loan Agreement dated as of April 1, 1986, a Second Supplemental Loan Agreement dated as of August 1, 1988, a Third Supplemental Loan Agreement dated as of April 1, 1989, a Fourth Supplemental Loan Agreement dated as of November 1, 1990, a Fifth Supplemental Loan Agreement dated as of June 15, 1991, a Sixth Supplemental Loan Agreement dated as of January 1, 1993, a Seventh Supplemental Loan Agreement dated as of October 1, 1993, an Eighth Supplemental Loan Agreement dated as of December 1, 1993, a Ninth Supplemental Loan Agreement dated as of February 1, 1995, a Tenth Supplemental Loan Agreement dated as of January 1, 1996, and an Eleventh Supplemental Loan Agreement dated as of January 15, 1996 $8,000,000 Business Finance Authority of the State of New Hampshire Pollution Control Revenue Bonds (New England Power Company Project - 1990 Series A (Sixth Issue)) TABLE OF CONTENTS ------------------ Section 1. Definitions........................................ 1 Section 2. Authority's Representation......................... 2 Section 3. Issue of 1990 Series A Bonds (Sixth Issue) and Application of Proceeds. Issue of Additional Series R G&R Bonds. Payment of Bonds............... 2 Section 4. Rights and Duties of the Authority................. 2 Section 5. Company Not to Impair Interest Exemption; Use of Project Facilities; Rebate Covenant......... 4 Section 6. Amendments to Original Loan Agreement.............. 4 Section 7. Securities Laws.................................... 5 Section 8. Notices............................................ 5 Section 9. Severability....................................... 5 Section 10. Counterparts....................................... 5 Section 11. Captions........................................... 6 Section 12. Governing Law...................................... 6 Section 13. Binding Effect..................................... 6 Section 14. Obligations of the Company Under the Indenture.......................................... 6 TWELFTH SUPPLEMENTAL LOAN AGREEMENT This Twelfth Supplemental Loan Agreement dated as of December 1, 1996 (the "Twelfth Supplemental Loan Agreement") is between the Business Finance Authority of the State of New Hampshire, a body politic and corporate (previously named The Industrial Development Authority of the State of New Hampshire) established under Chapter 162-A:3 of the Revised Statutes of the State of New Hampshire (the "Authority"), and New England Power Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts (the "Company"). The Authority is authorized by Chapter 162-I of the Revised Statutes of the State of New Hampshire (the "Act") to finance pollution control facilities through the issue of its industrial revenue bonds. The purpose of this Twelfth Supplemental Loan Agreement is to provide for the refunding of $8,000,000 of the Authority's Pollution Control Revenue Bonds (New England Power Company - 1991 Taxable Commercial Paper Series) (the "Taxable 1991 Series Bonds) issued to pay a portion of the Company's share of the cost of pollution control facilities constructed at Unit No. 1 at the nuclear electric generating plant in the Town of Seabrook, Rockingham County, New Hampshire, pursuant to a Loan Agreement between the Authority and the Company dated as of November 15, 1983 (the "Original Loan Agreement), to which this instrument is supplemental. It is hereby agreed as follows: Section 1. Definitions. - ----------------------- For purposes hereof, the following words shall have the following meanings: "Additional Series R G&R Bonds" means the General and Refunding Mortgage Bonds to be issued pursuant to Section 3 hereof in an amount equal to the aggregate principal amount of the 1990 Series A Bonds (Sixth Issue). "Authority's Service Charge for the 1990 Series A Bonds (Sixth Issue)" means a payment to the Authority for its own use of $60,000.00 on the date of the issue of the 1990 Series A Bonds (Sixth Issue). "Code" means the Internal Revenue Code of 1986, and the proposed, temporary, and final regulations thereunder. "Letter of Representation" means the letter from the Company addressed to and accepted by the Authority and the underwriter named therein (the "Underwriter") dated December 1, 1996 relating to the 1990 Series A Bonds (Sixth Issue). "Loan Agreement" means the Original Loan Agreement as amended and supplemented by the First Supplemental Loan Agreement dated as of April 1, 1986, the Second Supplemental Loan Agreement dated as of August 1, 1988, the Third Supplemental Loan Agreement dated as of April 1, 1989, the Fourth Supplemental Loan Agreement dated as of November 1, 1990, the Fifth Supplemental Loan Agreement dated as of June 15, 1991, the Sixth Supplemental Loan Agreement dated as of January 1, 1993, the Seventh Supplemental Loan Agreement dated as of October 1, 1993, the Eighth Supplemental Loan Agreement dated as of December 1, 1993, the Ninth Supplemental Loan Agreement dated as of February 1, 1995, the Tenth Supplemental Loan Agreement dated as of January 1, 1996, the Eleventh Supplemental Loan Agreement dated as of January 15, 1996 and this Twelfth Supplemental Loan Agreement. "Thirteenth Supplemental Indenture" means the Thirteenth Supplemental Indenture between the Authority and State Street Bank and Trust Company, as Trustee, dated as of December 1, 1996, relating to the 1990 Series A Bonds (Sixth Issue), supplementing and amending the Trust Indenture between the Authority and said Trustee (as successor to BayBank Middlesex) dated as of November 15, 1983 (the "Original Indenture" and, as supplemented and amended by the First Supplemental Indenture dated as of April 1, 1986, the Second Supplemental Indenture dated as of August 1, 1988, the Third Supplemental Indenture dated as of April 1, 1989, the Fourth Supplemental Indenture dated as of November 1, 1990, the Fifth Supplemental Indenture dated as of June 15, 1991, the Sixth Supplemental Indenture dated as of January 1, 1993, the Seventh Supplemental Indenture dated as of October 1, 1993, the Eighth Supplemental Indenture dated as of December 1, 1993, the Ninth Supplemental Indenture dated as of July 1, 1994, the Tenth Supplemental Indenture dated as of February 1, 1995, the Eleventh Supplemental Indenture dated as of January 1, 1995, the Twelfth Supplemental Indenture dated as of January 15, 1996 and the Thirteenth Supplemental Indenture, the "Indenture). "1990 Series A Bonds (Sixth Issue)" means the Authority's $8,000,000 Pollution Control Revenue Bonds (New England Power Company Project - 1990 Series A (Sixth Issue)) issued pursuant to Section 3 hereof and the Indenture. "Underwriting Agreement" means the agreement between the Authority and the Underwriter dated December 19, 1996 relating to the 1990 Series A Bonds (Sixth Issue). Capitalized terms which are not defined herein but which are defined in the Original Loan Agreement shall have the respective meanings attributed to them therein. Section 2. Authority's Representation. -------------------------------------- To induce the Company to enter into this Agreement, the Authority represents that the Authority is a body politic and corporate established under Chapter 162-A:3 of the Revised Statutes of the State of New Hampshire. Section 3. Issue of 1990 Series A Bonds (Sixth Issue) and Application of Proceeds. Issue of Additional Series R G&R Bonds. --------------------------------------------------------------------- Payment of Bonds. Subject to, and upon the terms and conditions of, the Underwriting Agreement, the Authority shall issue $8,000,000 aggregate principal amount of 1990 A Series Bonds (Sixth Issue) pursuant to the Act in the form and with the terms provided in the Indenture. The Authority shall loan to the Company $8,000,000 by depositing the Proceeds of the 1990 Series A Bonds (Sixth Issue) in the account in the Bond Fund for the Taxable 1991 Series Bonds established by the Indenture, to be applied by the Trustee, with other moneys, to the redemption of $8,000,000 principal amount of such series on the date of receipt by the Trustee. The Company hereby agrees to repay the loan of the aggregate principal amount of the 1990 A Series Bonds (Sixth Issue), and to issue and deliver to the Trustee a like aggregate principal amount of its Additional Series R G&R Bonds in substantially the form set forth in the Fourteenth Supplemental Indenture to the General and Refunding Mortgage Indenture. The Additional Series R Bonds shall, together with $127,850,000 principal amount of Series R G&R Bonds heretofore issued and delivered to the Trustee, evidence the Company's obligation to repay the loans to it of the Proceeds of all the 1990 Series A Bonds. The Series R G&R Bonds shall be evidenced by one single fully registered bond registered in the name of the Trustee, which shall be nontransferable except as provided in the Indenture. If the General and Refunding Mortgage Bonds are surrendered to the Company pursuant to Section 16A of the Indenture, the Company shall nevertheless remain obligated to make payments to the Bond Fund in amounts and at times sufficient to pay when due the principal of, premium, if any, and interest on the Bonds, and such obligation shall be absolute and unconditional, binding and enforceable against the Company in all circumstances as provided in the Act and not subject to set-off, recoupment, or counterclaim. Section 4. Rights and Duties of the Authority. ----------------------------------------------- (a) Indemnification of the Authority. --------------------------------- The Company agrees to indemnify and hold harmless the Authority and its directors, members, officers, employees and agents from and against any and all damages, losses, costs, charges, expenses, judgments and liabilities incurred by it or them arising out of any claim in connection with: the transactions contemplated by the Loan Agreement or the Indenture; the construction, financing, occupancy, management, maintenance, operation or use of Unit No. 1, or any accident, injury, or damage to any person occurring therein or thereabout; any act or omission of the Company or any of its agents, contractors, servants, employees or licensees; or the offering, issuance, sale or any resale of any Bond; except (I) to the extent caused by the willful dishonesty of or intentional violation of law by the party seeking indemnification, and (ii) to the extent based on information furnished by the Authority in writing specifically for use in any official statement or prospectus used in connection with the sale of Bonds. If any such claim is asserted, the Authority or its directors, members, officers, employees or agents, as the case may be, will give prompt notice to the Company, and the Company will assume the defense thereof, with full power to litigate and compromise the same in its sole discretion. (b) Remedies of the Authority. -------------------------- Notwithstanding any contrary provision in this Twelfth Supplemental Loan Agreement, the Authority and any of its members, officers, employees or agents, as the case may be, shall have the right to take any action or make any decision with respect to proceedings for indemnity against liability and for collection or reimbursement from sources other than money or property held under the Indenture or subject to the lien thereof. The Authority may enforce its rights under the Loan Agreement which have not been assigned to the Trustee, and each such member, officer, employee and agent may enforce his rights hereunder, by legal proceedings for the specific performance of any covenant or agreement contained herein or for the enforcement of any other appropriate legal or equitable remedy, and may recover damages caused by any breach by the Company of its obligations to the Authority or to such director, member, officer, employee or agent, as the case may be, under the Loan Agreement, including court costs, reasonable attorneys' fees and other costs and expenses incurred in enforcing such obligations. (c) Responsibility. --------------- The Authority shall be entitled to the advice of counsel (who may also be counsel for the Company or the Trustee) and shall not be liable for any action taken or omitted to be taken in good faith in reliance on such advice. The Authority may rely conclusively on any notice, certificate or other document furnished to it under the Loan Agreement or the Indenture and reasonably believed by it to be genuine. The Authority shall not be liable for any action taken or omitted to be taken by it in good faith and reasonably believed by it to be within the discretion or power conferred upon it or beyond such discretion or power, as the case may be, or taken by it pursuant to any direction or instruction by which it is governed under the Loan Agreement or the Indenture or omitted to be taken by it by reason of the lack of direction or instruction required under the Loan Agreement or the Indenture for such action, or be responsible for the consequences of any error of judgment reasonably made by it. When any consent or other action by the Authority is called for by the Loan Agreement or the Indenture, the Authority may defer such action pending receipt of such evidence, if any, as it may require in support thereof. A permissive right or power to act shall not be construed as a requirement to act; and no delay in the exercise of a right or power shall affect the subsequent exercise of that right or power. The Authority shall in no event be liable for the application or misapplication of funds, or for other acts or defaults, by any person, firm or corporation except by its own directors, members, officers, agents and employees. No recourse shall be had by the Company, the Trustee or the holder of any Bond for any claim based on the Loan Agreement, the Indenture or the Bonds against any member, officer, agent or employee of the Authority unless such claim is based upon the willful dishonesty of, or intentional violation of law by, such person. No covenant, obligation or agreement of the Authority contained in the Loan Agreement or the Indenture shall be deemed to be a covenant, obligation or agreement of any present or future director, member, officer, employee or agent of the Authority in his individual capacity, and any member, officer or employee of the Authority executing a Bond shall not be liable personally on the Bond or be subject to any personal liability or accountability by reason of the issue thereof. The Authority shall be entitled to the benefits of Section 23 of the Indenture in respect of actions taken or omitted to be taken by it under this Twelfth Supplemental Loan Agreement. (d) Financial Obligations; Operation of Facilities. ----------------------------------------------- Nothing contained in the Loan Agreement or the Indenture shall in any way obligate the Authority to pay any debt or meet any financial obligation to any person at any time hereunder or in relation to the Bonds or the Project Facilities or Additional Facilities except from moneys (other than moneys received for its own purposes under the Loan Agreement) received under the provisions of the Loan Agreement and the Indenture or from the exercise of the Authority's rights under the Loan Agreement and the Indenture. Nothing contained in the Loan Agreement or the Indenture shall be construed to require or authorize the Authority to operate the Project Facilities, Unit No. 1 or Additional Facilities. (e) Expenses of the Authority. -------------------------- Except to the extent they have been paid or reimbursed from the Construction Fund, the Company shall pay or reimburse the Authority on demand for all reasonable fees, charges, expenses (including reasonable attorneys' fees) and disbursements directly related to the financing of the Project Facilities and Additional Facilities and the issuance of Bonds including, without limitation, the Authority's Service Charge for the 1990 Series A Bonds (Sixth Issue) and reimbursement for expenses reasonably incurred or advances reasonably made in the exercise of its- rights or the performance of its obligations under the Loan Agreement or the Indenture, with interest at the rate specified in Section 14(g) of the Indenture. (f) Matters to be Considered by Authority. -------------------------------------- In approving, concurring in or consenting to action of another party, or in exercising any discretion or in making any determination, the Authority may consider the interests of the public, which shall include the anticipated effect of any transaction on tax revenues and employment, as well as the interests of the other parties and the Bondholders; however, nothing herein shall be construed as conferring on any person other than the Company, the Trustee and the Bondholders any right to notice, hearing or participation in the Authority's consideration, and nothing in this subsection shall be construed as conferring on any of them any right additional to those conferred elsewhere herein. Section 5. Company Not to impair Interest Exemption: Use of Rebate Covenant. ------------------------------------------------------------------ The Company will not use any of the funds loaned to it by the Authority hereunder (or the income earned through the investment thereof) or, to the extent of its ownership and control, operate the facilities financed under the Indenture in any manner, and will not take any other action, which would impair the exclusion of interest on the Bonds from gross income for Federal income tax purposes. The Company's use of such facilities (or facilities replacing the same), shall, to the extent of its ownership and control, be in furtherance of the purpose of pollution control or solid waste disposal and otherwise in compliance with the Act and the Code. The Company will comply in all respects with the requirements of Code Section 148(f) in the event that Gross Proceeds of the 1990 Series A Bonds (Sixth Issue) are invested in Nonpurpose Investments with a Yield higher than the Yield on the 1990 Series A Bonds (Sixth Issue). The terms "Nonpurpose investments "Gross Proceeds" and "Yield" shall have the meanings given in Code Section 148 and the regulations promulgated thereunder and shall be applied as provided therein. Section 6. Amendments to Original Loan Agreement. ------------------------------------------------- Upon the surrender to the Company of the General and Refunding Mortgage Bonds held by the Trustee pursuant to Section 16A of the Original Indenture (as added by the Thirteenth Supplemental Indenture), the Loan Agreement shall be amended as follows: Section 6(c) of the Original Loan Agreement shall read as follows: (c) Maintenance of Corporate Existence: Assignment of Rights and Obligations: qualification in New Hampshire. ------------------------------------------------------------ It will maintain its corporate existence and will not dissolve, merge or consolidate into another corporation, or permit one or more other corporations to merge into it, unless the successor corporation assumes in writing the Company's obligations under the Loan Agreement and the Indenture. The Company may assign its rights and obligations under this Agreement immediately after a mandatory tender of all of the Bonds for purchase pursuant to Section 2.09 of the Fourth Supplemental Indenture (including the mandatory tender upon which the General and Refunding Mortgage Bonds are surrendered by the Trustee), provided that the assignee of such rights and obligations is a member of the same affiliated group within the meaning of Code Section 1504 and such assignee assumes in writing all of the Company's obligations under the Loan Agreement and the Indenture. The Company shall not dispose of all or substantially all of its assets, unless either (I) the transferee of such assets assumes in writing the Company's obligations under the Loan Agreement and the Indenture or (ii) such disposition occurs immediately after a mandatory tender for purchase of all of the Bonds pursuant to Section 2.09 of the Fourth Supplemental Indenture. So long as the Bonds are outstanding, the Company (including any successor, assignee, or transferee under this Section 6(c)) shall at all times either be organized under the laws of New Hampshire or qualified to do business therein and shall at all times be in good standing in New Hampshire. The second sentence of Section 10 of the Original Loan Agreement is amended to read as follows: This Agreement shall not be assignable, except as permitted by Section 6(c) hereof, and except that the Authority shall assign to the Trustee all of the Authority's rights under this Agreement (except the rights to receive payments for its own purposes under Sections 6(d) and 9 hereof). Section 7. Securities Laws. --------------------------- In any remarketing of any 1990 Series A Bonds, the Company shall at all times comply with, and shall cooperate with the Remarketing Agent to the extent necessary to permit the Remarketing Agent to comply with, applicable federal and state securities laws, including without limitation Rule 240.15c2- 12 promulgated by the United States Securities and Exchange Commission. Section 8. Notices. ------------------- All notices and directions to either party or to the Trustee shall be in writing and shall be deemed to be sufficiently given if sent by registered or certified mail or delivered during business hours to the Authority at Suite 101, 14 Dixon Avenue, Concord, New Hampshire 03301, Attention of its Executive Director; to the Company at 25 Research Drive, Westborough, Massachusetts 01582, Attention of its Treasurer; and to the Trustee at its Corporate Trust Department, Two International Place, Boston, Massachusetts 02110, or to such other address as the addressee shall have indicated by prior notice to the one giving the notice or direction in question. Section 9. Severability. ------------------------ In the event that any provision of this Twelfth Supplemental Loan Agreement shall be held to be invalid in any circumstance, such invalidity shall not affect any other provisions or circumstances. Section 10. Counterparts. ------------------------- This Twelfth Supplemental Loan Agreement may be executed and delivered in any number of counterparts, each of which shall be deemed to be an original, but such counterparts together shall constitute one and the same instrument. Section 11. Captions. --------------------- The captions in this Twelfth Supplemental Loan Agreement are for convenience only and shall not affect the construction hereof. Section 12. Governing Law. This instrument shall be governed by the laws of The State of New Hampshire. Section 12. Governing Law. --------------------------- This instrument shall be governed by the laws of The State of New Hampshire. Section 13. Binding Effect. --------------------------- This Twelfth Supplemental Loan Agreement shall inure to the benefit of and be binding on the Authority and the Company and their respective successors and assigns (including, without limitation, the Trustee as grantee and assignee under the Indenture in accordance with all the terms thereof and hereof) and for the purpose. of Sections 4(a), 4(b), and 4(c) hereof the directors, members, officers, employees and agents of the Authority and their respective heirs, personal representatives and assigns. Section 14. Obligations of the Company Under the Indenture. ----------------------------------------------------------- The Company hereby assumes and agrees to perform all of the obligations imposed upon it under the Indenture and shall be entitled to all rights and benefits granted to it or on its behalf thereunder. IN WITNESS WHEREOF, the parties have caused this Twelfth Supplemental Loan Agreement to be duly executed and their respective seals to be hereunto affixed, all as of the date first above written. BUSINESS FINANCE AUTHORITY OF THE STATE OF NEW HAMPSHIRE [Seal] s/ By: ______________________________ Executive Director NEW ENGLAND POWER COMPANY [Seal] s/John G. Cochrane By: _______________________________ Assistant Treasurer Attest: s/Kirk L. Ramsauer ______________________________ Assistant Clerk EX-99 10 EXHIBIT D Exhibit D NEW ENGLAND ELECTRIC SYSTEM AND SUBSIDIARY COMPANIES ---------------------------------------------------- Federal and State Income Tax Allocation Agreement ------------------------------------------------- Pursuant to Rule 45(c), ----------------------- Public Utility Holding Company Act of 1935 ------------------------------------------- This Agreement originally dated as of January 1, 1981, and revised as of January 1, 1982, January 1, 1991, January 1, 1992, January 1, 1993, and January 1, 1996 by and between NEW ENGLAND ELECTRIC SYSTEM, a registered holding company, and its subsidiary or affiliated companies which participate together in the filing of a consolidated U.S. Corporation Income Tax Return and/or consolidated, combined or unitary state income tax returns, provides for the allocation of consolidated federal income taxes and consolidated, combined or unitary state income taxes for 1981 and subsequent years pursuant to Rule 45 (c) of the Securities and Exchange Commission promulgated under the Public Utility Holding Company Act of 1935. It is agreed by the companies that have executed this Agreement to allocate the consolidated, combined and unitary income tax liabilities, for 1981 and subsequent years in accordance with the following provisions. 1. Definitions ----------- A. Corporate Tax Credit - The negative separate return tax of an associate company for a tax year equal to the amount by which the consolidated or combined tax is reduced by including a net corporate tax loss or other net tax benefit in the consolidated or combined return. B. Separate Return Tax - The tax on the corporate taxable income of an associate company computed as though such company were not a member of the consolidated or combined return group. C. Excess Tax Credits - The investment tax credit, or other credit that would be allowable were it not for a limitation provided by law in excess of the amount of such credits computed on a separate return basis with regard to such limitations. D. Consolidated Alternative Minimum Tax - The tax imposed by Internal Revenue Code Section 55(a) equal to the excess of the tentative minimum tax for the taxable year over the regular tax for the taxable year, computed on a consolidated basis. E. Minimum Tax Credit Carryforward - The sum of the annual amounts of alternative minimum tax (AMT) allocated to a company less the sum of the minimum tax credits utilized in prior years. F. Hydro-Quebec Phase I and II Companies - The Phase I company is New England Electric Transmission Corporation (NEET). The Phase II companies are New England Hydro-Transmission Corporation, New England Hydro-Transmission Electric Co., Inc. And New England Hydro Finance Company, Inc. 2. Allocation Procedures for Federal Income Tax Liability ------------------------------------------------------ A. General Rule - The consolidated tax on ordinary taxable income shall be allocated among the companies participating in the consolidated return in proportion to the corporate ordinary taxable income, whether positive or negative, of each company. The consolidated capital gains tax, if any, shall be allocated among the companies in proportion to corporate capital gains or losses of each company. Investment tax credits (net of recapture of prior years credits), jobs credits, research and experimental credits, motor fuels credits, and other similar credits allowable in the computation of the consolidated tax shall be allocated to the companies generating such credits. The consolidated AMT, if any, shall be allocated among the companies in proportion to the excess of each company's separate AMT over its allocated regular tax to the combined total of such excess amounts. The consolidated minimum tax credit shall be allocated as provided in paragraph E. Those associate companies with a positive allocation shall pay the amount allocated and those subsidiary companies with a negative allocation shall receive payment of their corporate tax credits. Any remaining funds shall be allocated among the companies in the ratio by which the positive corporate ordinary taxable income of each company having such income bears to the total positive corporate ordinary taxable incomes of all companies. In no event shall the tax allocated to any subsidiary company exceed the separate return tax of such company. B. Special Rule - If the total of the corporate tax credits of those companies having negative taxable incomes and/or excess tax credits is greater than the total reduction in the consolidated tax because of the inclusion of such losses and/or credits, then corporate tax credits arising from inclusion of negative taxable incomes in the consolidated return shall be recognized and paid prior to corporate tax credits arising from excess tax credits. If the total negative taxable income of those subsidiary companies with negative taxable incomes is not fully applied in the consolidated return, then the corporate tax credit of each company shall be in proportion to the total reduction in consolidated tax liability from such negative income as the negative taxable income of each company bears to the total negative taxable incomes of all companies. Similarly, if the total excess tax credits of those subsidiary companies with excess tax credits is not fully applied in the consolidated return, the corporate tax credit arising from excess tax credits of each company shall be in proportion to the total reduction in consolidated tax liability from such excess tax credits as the excess tax credit of each company bears to the total excess tax credits of all companies. C. Unused Corporate Tax Credits - A subsidiary company that is entitled to a corporate tax credit but does not receive such payment because of the special rule in paragraph B shall retain such right for the future as long as and to the extent that such credit can be applied against the consolidated tax liability. Uncompensated corporate tax credits arising from negative taxable incomes shall have priority over excess tax credits. D. New England Electric Transmission Corporation Rule - Notwithstanding any other provisions herein, NEW ENGLAND ELECTRIC TRANSMISSION CORPORATION (NEET) shall be paid, in lieu of any payments for its corporate tax credits, the amount, if any, by which the consolidated tax liability determined without the inclusion of NEET in the consolidated return exceeds the actual consolidated tax liability, all in accordance with the Phase I Terminal Facility Support Agreement, dated as of December 1, 1981, and amended as of June 1, 1982, November 1, 1982 and January 1, 1986. E. Minimum Tax Credit - The minimum tax credit, in a year of consolidated credit utilization, shall be tentatively allocated among the companies participating in the consolidated return in an amount equal to the lesser of (1) each company's separate minimum tax credit carryforward or (2) the excess of its allocated regular tax over its separate AMT. If the total of such tentative minimum tax allocations exceeds the available consolidated credit for the taxable year, then the minimum tax credit allocation is made in proportion to the separate company positive excess amount to the combined total of all such amounts. If the tentative allocation is less than the consolidated minimum tax credit utilized, the difference between the consolidated credit utilization and the total of the tentative allocations shall be allocated to those companies in proportion to each company's remaining minimum tax credit carryforward to the combined total of such carryforwards. The total minimum tax credit utilized for a tax year will equal the sum of the amounts allocated in the two step computation. 3. Allocation Procedures for State Income Tax Liabilities ------------------------------------------------------ A. Massachusetts Combined Returns - The combined state tax liability shall be allocated to each company participating in the combined return in proportion to the state taxable income, whether positive or negative, of each such company. For this purpose, state taxable income is determined after application of each company's separate apportionment percentage and net operating loss deduction. Those companies with a positive allocation shall pay the amount allocated and those companies with a negative allocation shall receive payment of their corporate tax credits. If the total positive tax allocation is less than the total corporate tax credits, the positive allocation shall be paid on a pro rata basis to those companies with corporate tax credits. No company is to be allocated a state tax which is greater than its state tax liability had it filed a separate return. B. New Hampshire Unitary Business Profits Returns - The combined unitary business profits tax liability shall be allocated to each company included in the unitary return in accordance with the following principles: i. The Hydro-Quebec Phase I and II companies will be allocated a total business profits tax liability equal to the difference in the combined business profits taxes, before reduction for any franchise tax credit or other tax credits, computed with and without the inclusion of such companies as a group. The business profits tax of the Hydro group shall be allocated first to NEW ENGLAND ELECTRIC TRANSMISSION CORPORATION in an amount equal to the difference in the combined unitary tax computed with and without its inclusion, with the balance of the Hydro group tax, if any, assigned to NEW ENGLAND HYDRO TRANSMISSION CORPORATION. ii. The balance of the combined unitary tax, before reduction for any franchise tax credit or other tax credits, shall be allocated to the remaining companies in proportion to each company's separate company business profits tax to the combined total of such separate company taxes. Any franchise tax credit or other tax credits available, on a separate company basis, to a particular company in the combined group shall be applied to reduce the combined unitary tax allocated to that particular company. iii. The excess of any unitary tax credit allowed in the combined return over the amount applied to reduce a particular company's liability, shall be used to reduce the allocated unitary tax liability of the other members in the combined group on a pro rata basis. To the extent a company's allocated unitary tax liability is reduced by application of the franchise tax credit or other tax credits attributable to another member of the group, the amount so reduced shall be paid to such other member. iv. For purposes of this paragraph 3B, the separate company business profits tax is to be determined only for those companies with tax nexus in New Hampshire and is to be computed by multiplying each such company's separately apportioned state taxable income by the applicable state tax rate. The separate company business profits tax cannot be less than zero. C. Other State Consolidated, Combined or Unitary Returns - The consolidated, combined or unitary tax liability shall be allocated to each company included in a consolidated, combined or unitary income tax return in accordance with the procedures set forth in paragraph 2A above (Allocation Procedures for Federal Income Tax Liability, General Rule). Only companies with tax nexus in a particular state shall be allocated a portion of such state's income tax liability. In witness whereof, this Agreement has been duly executed in the name of and on behalf of the following companies and their corporate or common seals have been affixed hereto. NEW ENGLAND ELECTRIC SYSTEM s/Michael E. Jesanis By M.E. Jesanis - Treasurer GRANITE STATE ELECTRIC COMPANY s/Howard W. McDowell By H.W. McDowell - Treasurer GRANITE STATE ENERGY, INC. s/Howard W. McDowell By H.W. McDowell - Treasurer MASSACHUSETTS ELECTRIC COMPANY s/Michael E. Jesanis By M.E. Jesanis - Treasurer NANTUCKET ELECTRIC COMPANY s/John G. Cochrane By J.G. Cochrane - Treasurer THE NARRAGANSETT ELECTRIC COMPANY s/John G. Cochrane By J.G. Cochrane Assistant Treasurer NARRAGANSETT ENERGY RESOURCES COMPANY s/John G. Cochrane By J.G. Cochrane - Treasurer NEES COMMUNICATIONS, INC. s/John G. Cochrane By J.G. Cochrane - Treasurer NEES ENERGY, INC. s/John G. Cochrane By J.G. Cochrane - Treasurer NEW ENGLAND ELECTRIC RESOURCES, INC. s/John G. Cochrane By J.G. Cochrane - Treasurer NEW ENGLAND ELECTRIC TRANSMISSION CORP. s/John G. Cochrane By J.G. Cochrane - Treasurer NEW ENGLAND ENERGY INCORPORATED s/John G. Cochrane By J.G. Cochrane - Treasurer NEW ENGLAND HYDRO FINANCE COMPANY, INC. s/John G. Cochrane By J.G. Cochrane - Treasurer NEW ENGLAND HYDRO-TRANSMISSION CORPORATION s/John G. Cochrane By J.G. Cochrane - Treasurer NEW ENGLAND HYDRO-TRANSMISSION ELECTRIC COMPANY, INC. s/John G. Cochrane By J.G. Cochrane - Treasurer NEW ENGLAND POWER COMPANY s/Michael E. Jesanis By M.E. Jesanis - Treasurer NEW ENGLAND POWER SERVICE COMPANY s/M.E. Jesanis By M.E. Jesanis - Treasurer The name "NEW ENGLAND ELECTRIC SYSTEM" means the trustee or trustees for the time being (as trustee or trustees but not personally) under an agreement and declaration of trust dated January 2, 1926, as amended, which is hereby referred to, and a copy of which as amended has been filed with the Secretary of The Commonwealth of Massachusetts. Any agreement, obligation or liability made, entered into or incurred by or on behalf of New England Electric System binds only its trust estate, and no shareholder, director, trustee officer, or agent thereof assumes or shall be held to any liability therefor. EX-99 11 EXHIBIT E.1 Exhibit E.1. 1996 Report on NEES Money Pool ($000's)
Avg. Max. Min. Investment Company Invest. Invest. Invest. at 12/31/96 - ------- ------- ------- ------- ----------- NEES (Trust) $9,320 $26,075 $ 375 $ 5,925 Massachusetts Electric Co. -0- -0- -0- -0- New England Power Co. -0- -0- -0- -0- The Narragansett Electric Co. -0- -0- -0- -0- Granite State Electric Co. -0- -0- -0- -0- Nantucket Electric Co. 320 4,325 -0- 150 New England Power Service Co. 7,606 17,900 -0- 9,225 New England Electric Transmission 2 225 -0- -0- Corporation New England Energy Incorporated 3,308 9,950 175 175 New England Hydro-Transmission 3,415 7,200 150 4,850 Electric Company (NEHTEC) New England Hydro-Transmission 1,186 4,100 150 1,450 Corporation (NEHTC) Narragansett Energy Resources 951 2,125 300 800 Company (NERC)
EX-99 12 EXHIBIT E.2 Exhibit E.2. Modified FORM U-13-60 ANNUAL REPORT For the Period Beginning January 1, 1996 and Ending December 31, 1996 To The U.S. SECURITIES AND EXCHANGE COMMISSION Of New England Electric Resources, Inc. A Subsidiary Service Company Date of Incorporation: January 13, 1992 State or Sovereign Power under which Incorporated or Organized: The Commonwealth of Massachusetts Location of Principal Executive Offices of Reporting Company: 25 Research Drive Westborough, MA 01582 Report filed pursuant to Order dated September 4, 1992 in file number 70-7950 Name, title, and address of officer to whom correspondence concerning this report should be addressed: J.G. Cochrane, Treasurer 25 Research Drive Westborough, MA 01582 Name of Principal Holding Company Under Which Reporting Company is Organized: New England Electric System SEC 1926 (6-82) PAGE 2 INSTRUCTIONS FOR USE OF MODIFIED FORM U-13-60 1. Time of Filing Annual Report essentially in the form of U-13-60 shall be filed appended to Form U5S, Annual Report of the Parent and Associate Companies Pursuant to the Public Utility Holding Company Act of 1935. Form U5S is required to be filed by May 1. 2. Number of Copies Each annual report shall be filed in duplicate. The company should prepare and retain at least one extra copy for itself in case correspondence with reference to the report becomes necessary. 3. Definitions - Definitions contained in Instruction 01-8 to the Uniform System of Accounts for Mutual Service Companies and Subsidiary Service Companies, Public Utility Holding Company Act of 1935, as amended February 2, 1979 shall be applicable to words or terms used specifically within this Form U-13-60. 4. Organization Chart - The company shall submit with each annual report a copy of its current organization chart. PAGE 3 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. LISTING OF SCHEDULES AND ANALYSIS OF ACCOUNTS
Schedule or Page Description of Schedules and Accounts Account No. Number COMPARATIVE BALANCE SHEET Schedule I 4-5 Company property Schedule II 6-7 Accumulated provision for depreciation and amortization of company property Schedule III 8 Investments Schedule IV 9 Accounts receivable Schedule V 10 Miscellaneous deferred debits Schedule IX 11 Proprietary capital Schedule XI 12 Long-term debt Schedule XII 13 Current and accrued liabilities Schedule XIII 14 Notes to financial statements Schedule XIV 15 COMPARATIVE INCOME STATEMENT Schedule XV 16 Analysis of billing - nonassociate companies Account 458 17-18 Departmental analysis of salaries Account 920 19 Outside services employed Account 923 20-22 Miscellaneous general expenses Account 930.2 23 Taxes other than income taxes Account 408 24 Donations Account 426.1 25 Other deductions Account 426.5 26 Notes to statement of income Schedule XVIII 27 ORGANIZATION CHART 28
PAGE 4 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 SCHEDULE I COMPARATIVE BALANCE SHEET Give balance sheet of Company as of December 31 of the current and prior year
Account Assets and Other Debits As of December 31 Current Prior COMPANY PROPERTY 101 Company property (Schedule II) $ $ 107 Construction work in progress (Schedule II) ------- ------- Total Property ------- ------- 108 Less accumulated provision for depreciation and amortization of company property (Schedule III) ------- ------- Net Company Property ------- ------- INVESTMENTS 123 Investments in associate companies (Sch. IV) 1,475,000 999,999 124 Other Investments (Schedule IV) --------- ------- Total Investments 1,475,000 999,999 --------- ------- CURRENT AND ACCRUED ASSETS 131 Cash 180,836 69,588 134 Special deposits 135 Working funds 136 Temporary cash investments (Schedule IV) 141 Notes receivable 143 Accounts receivable (Schedule V) 1,234,582 319,516 144 Accumulated provision of uncollectible accounts 146 Accounts receivable from associate companies 128,096 41 152 Fuel stock expenses undistributed 154 Materials and supplies 163 Stores expense undistributed 165 Prepayments 866,287 501,600 174 Miscellaneous current and accrued assets --------- ------- Total Current and Accrued Assets 2,409,801 890,745 --------- ------- DEFERRED DEBITS 181 Unamortized debt expense 184 Clearing accounts 186 Miscellaneous deferred debits (Schedule IX) 125,350 188 Research, development, or demonstration expenditures 190 Accumulated deferred income taxes --------- ------- -0- 125,350 Total Deferred Debits --------- ------- TOTAL ASSETS AND OTHER DEBITS $3,884,801 $2,016,094 ========= =======
PAGE 5 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 SCHEDULE I COMPARATIVE BALANCE SHEET
Account Liabilities and Proprietary Capital As of December 31 Current Prior PROPRIETARY CAPITAL 201 Common stock issued (Schedule XI) $ 1,000 $ 1,000 211 Miscellaneous paid-in-capital (Schedule XI) 8,448,999 3,398,999 215 Appropriated retained earnings (Schedule XI) 216 Unappropriated retained earnings (Schedule XI)(5,321,413)(1,713,513) --------- --------- Total Proprietary Capital 3,128,586 1,686,486 --------- --------- LONG-TERM DEBT 223 Advances from associate companies (Schedule XII) 224 Other long-term debt (Schedule XII) 225 Unamortized premium on long-term debt 226 Unamortized discount on long-term debt - debit --------- ------- Total Long-Term Debt --------- ------- CURRENT AND ACCRUED LIABILITIES 231 Notes payable 232 Accounts payable 238,342 142,401 233 Notes payable to associate companies (Schedule XIII) 234 Accounts payable to associate companies (Schedule XIII) 465,891 11,707 236 Taxes accrued 237 Interest accrued 238 Dividends declared 241 Tax collections payable 382 242 Miscellaneous current and accrued liabilities (Schedule XIII) --------- ------- Total Current and Accrued Liabilities 704,615 154,108 --------- ------- DEFERRED CREDITS 253 Other deferred credits 255 Accumulated deferred investment tax credits --------- -------- Total Deferred Credits --------- -------- 283 ACCUMULATED DEFERRED INCOME TAXES 51,600 175,500 --------- -------- TOTAL LIABILITIES AND PROPRIETARY CAPITAL $3,884,801 $2,016,094 ========= =========
PAGE 6 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 SCHEDULE II COMPANY PROPERTY (Not Applicable)
BALANCE AT RETIREMENTS BALANCE BEGINNING OR OTHER (1) AT CLOSE DESCRIPTION OF YEAR ADDITIONS SALES CHANGES OF YEAR Account 301 Organization 303 Miscellaneous Intangible Plant 304 Land and Land Rights 305 Structures and Improvements 306 Leasehold Improvements 307 Equipment (2) 308 Office Furniture and Equipment 309 Automobiles, Other Vehicles and Related Garage Equipment 310 Aircraft and Airport Equipment 311 Other Company Property (3) ---- ------- --- ---- ---- SUB-TOTAL None None ---- ------- --- ---- ---- 107 Construction Work in Progress (4) ---- ------- --- ---- ---- TOTAL None None ==== ======= === ==== ==== (1) PROVIDE AN EXPLANATION OF THOSE CHANGES CONSIDERED MATERIAL:
PAGE 7 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 SCHEDULE II - CONTINUED (Not Applicable) (2) Subaccounts are required for each class of equipment owned. The company shall provide a listing by subaccount of equipment additions during the year and the balance at the close of the year:
BALANCE AT CLOSE SUBACCOUNT DESCRIPTION ADDITIONS OF YEAR ---- ---- TOTAL None None ==== ==== (3) DESCRIBE OTHER COMPANY PROPERTY: None (4) DESCRIBE CONSTRUCTION WORK IN PROGRESS: None
PAGE 8 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 SCHEDULE III ACCUMULATED PROVISION FOR DEPRECIATION AND AMORTIZATION OF COMPANY PROPERTY (Not Applicable)
ADDITIONS OTHER BALANCE AT CHARGED CHANGES BALANCE BEGINNING TO RETIRE- ADD AT CLOSE DESCRIPTION OF YEAR ACCT 403 MENTS (DEDUCT)(1) OF YEAR Account 301 Organization 303 Miscellaneous Intangible Plant 304 Land and Land Rights 305 Structures and Improvements 306 Leasehold Improvements 307 Equipment 308 Office Furniture and Equipment 309 Automobiles, Other Vehicles and Related Garage Equipment 310 Aircraft and Airport Equipment 311 Other Company Property ---- --- --- --- ---- TOTAL None None ==== === === === ==== 22) PROVIDE AN EXPLANATION OF THOSE CHANGES CONSIDERED MATERIAL: None
PAGE 9 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 SCHEDULE IV INVESTMENTS INSTRUCTIONS: Complete the following schedule concerning investments. Under Account 124 "Other Investments," state each investment separately, with description, including, the name of issuing company, number of shares or principal amount, etc.
BALANCE AT BALANCE AT BEGINNING CLOSE DESCRIPTION OF YEAR OF YEAR ACCOUNT 123 - INVESTMENT IN ASSOCIATE COMPANIES ------- ------- TOTAL None None ======= ======= ACCOUNT 128 - OTHER INVESTMENTS Separations Technologies, Inc. $999,999 $ 999,999 Monitoring Technologies, Inc. -0- 475,001 ------- --------- TOTAL (1) $999,999 $1,475,000 ======= ========= ACCOUNT 136 - TEMPORARY CASH INVESTMENTS ------- --------- TOTAL None None ======= ========= (1) See page 15 "Notes to Financial Statements" footnote (2), (3).
PAGE 10 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 SCHEDULE V ACCOUNTS RECEIVABLE INSTRUCTIONS: Complete the following schedule listing accounts receivable.
BALANCE AT BALANCE AT BEGINNING CLOSE OF YEAR OF YEAR DESCRIPTION ACCOUNT 143 - Nantucket Electric Company (1) 300,840 -0- Accounts Receivable (Non- Associated Companies) 18,676 1,234,582 ------- --------- TOTAL $319,516 $1,234,582 ======= ========= (1) In 1996, Nantucket Electric Company became an associated company and the receivable balance due at December 31, 1996 ($125,350) is included with Accounts Receivable from associated companies.
PAGE 11 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 SCHEDULE IX MISCELLANEOUS DEFERRED DEBITS INSTRUCTIONS: Provide detail of items in this account. Items less than $10,000 may be grouped by class, showing the number of items in each class.
BALANCE AT BALANCE AT BEGINNING CLOSE DESCRIPTION OF YEAR OF YEAR ACCOUNT 186 - DEFERRED DEBITS NANTUCKET ELECTRIC - LONG TERM RECEIVABLE $125,350 $0 ------- ------- TOTAL $125,350 $0 ======= =======
PAGE 12 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 SCHEDULE XI PROPRIETARY CAPITAL
OUTSTANDING NUMBER OF PAR OR STATED CLOSE OF PERIOD ACCOUNT SHARES VALUE NO. OF TOTAL NUMBER CLASS OF STOCK AUTHORIZED PER SHARE SHARES AMOUNT 201 COMMON STOCK ISSUED 10,000 $1 1,000 $1,000 INSTRUCTIONS: Classify amounts in each account with a brief explanation, disclosing the general nature of transactions which give rise to the reported amounts. DESCRIPTION AMOUNT ACCOUNT 223 - MISCELLANEOUS PAID-IN CAPITAL (1) 8,448,999 ACCOUNT 215 - APPROPRIATED RETAINED EARNINGS --------- TOTAL 8,448,999 ========= INSTRUCTIONS: Give particulars concerning net income or (loss) during the year, distinguishing between compensation for the use of capital owed or net loss remaining from servicing non-associates per the General Instructions of the Uniform Systems of Accounts. For dividends paid during the year in cash or otherwise, provide rate percentage, amount of dividend, date declared and date paid. BALANCE AT NET INCOME BALANCE AT BEGINNING OR DIVIDENDS CLOSE DESCRIPTION OF YEAR (LOSS) PAID OF YEAR ACCOUNT 216 - UNAPPROPRIATED RETAINED EARNINGS $(1,713,513) $(3,607,900) None $(5,321,413) ---------- ---------- ---- ---------- TOTAL $(1,713,513) $(3,607,900) None $(5,321,413) ======= ======= ========== ==== ========== (1) Amount represents contributions in the form of non-interest bearing subordinated notes issued from New England Electric System (NEES). As of December 31, 1996, NEES was authorized to invest up to $9.0 million dollars in the Company in the form of either subordinated noninterest bearing notes, capital contributions or common stock.
PAGE 13 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 SCHEDULE XII LONG-TERM DEBT (Not Applicable) INSTRUCTIONS: Advances from associate companies should be reported separately for advances on notes, and advances on open account. Names of associate companies from which advances were received shall be shown under the class and series of obligation column. For Account 224 - Other long-term debt provide the name of creditor company or organization, terms of the obligation, date of maturity, interest rate, and the amount authorized and outstanding.
TERMS OF OBLIG DATE BALANCE AT BALANCE AT CLASS & SERIES OF INTEREST AMOUNT BEGINNING DEDUCTIONS CLOSE NAME OF CREDITOR OF OBLIGATION MATURITY RATE AUTHORIZED OF YEAR ADDITIONS (1) OF YEAR ACCOUNT 223 - ADVANCES FROM ASSOCIATE COMPANIES: None ACCOUNT 224 - OTHER LONG-TERM DEBT: None TOTAL None (1) Give an explanation of deductions: None
PAGE 14 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 SCHEDULE XIII CURRENT AND ACCRUED LIABILITIES INSTRUCTIONS: Provide balance of notes and accounts payable to each associate company. Give description and amount of miscellaneous current and accrued liabilities. Items less than $10,000 may be grouped, showing the number of items in each group.
BALANCE AT BALANCE AT BEGINNING CLOSE DESCRIPTION OF YEAR OF YEAR ACCOUNT 233 - NOTES PAYABLE TO ASSOCIATE COMPANIES ---- ---- TOTAL None None ==== ==== ACCOUNT 234 - ACCOUNTS PAYABLE TO ASSOCIATE COMPANIES New England Power Service Company $(2,848) $(15,980) New England Hydro Transmission Electric Co. 39 New England Electric Transmission Corp. 59 NEES Energy, Inc. 2,024 Narragansett Electric Company 2,843 Massachusetts Electric Company 8,298 New England Power Company 14,555 468,608 ------- -------- TOTAL $11,707 $465,891 ======= ======== ACCOUNT 242 - MISCELLANEOUS CURRENT AND ACCRUED LIABILITIES ---- ---- TOTAL None None ==== ====
PAGE 15 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 SCHEDULE XIV NOTES TO FINANCIAL STATEMENTS INSTRUCTIONS: The space below is provided for important notes regarding the financial statements or any account thereof. Furnish particulars as to any significant contingent assets or liabilities existing at the end of the year. Notes relating to financial statements shown elsewhere in this report may be indicated here by reference. (1) To assist Nantucket Electric Company (NEC) in meeting its short-term needs for reliable energy, NEERI provided materials, delivery, installation, interconnection and start-up testing services for a fully automated two unit diesel driven electric generating plant at the existing NEC Airport Generating Station. The work took place at NEC and New England Electric facilities pursuant to a letter agreement and has been completed. The total compensation under the agreement was recognized during the third quarter of 1994. The agreement provides for billing over a three year period at $25,070 per month effective the month immediately following the notice to proceed by NEC. As of December 31, 1996, $125,350 had not yet been billed in accordance with the agreement. (2) On May 23, 1995, NEERI invested $999,999 in Separations Technologies, Inc. (STI). This investment is in the form of 153,846 shares of 6% cumulative convertible preferred stock. (3) On July 12, 1996 NEERI invested $475,001 in Monitoring Technologies, Inc. This investment is in the form of 271,429 shares of Series E convertible preferred stock. (4) In July, 1996 NEERI International, a wholly-owned subsidiary of NEERI, was formed under the laws of the Cayman Islands. NEERI owns two shares of NEERI International, which will serve as a Project Parent for prospective EWG/FUCO investments under File No. 70-8783. NEERI International had no significant activity in 1996. PAGE 16 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 SCHEDULE XV STATEMENT OF INCOME
ACCOUNT DESCRIPTION CURRENT PRIOR YEAR YEAR INCOME 458 Services rendered to nonassociate companies $1,379,230 $ 97,120 421 Miscellaneous income or loss --------- -------- TOTAL INCOME $1,379,230 $ 97,120 --------- -------- EXPENSE 920 Salaries and wages 921 Office supplies and expenses 437,161 80,567 922 Administrative expense transferred - credit 923 Outside services employed 6,902,369 1,815,058 924 Property insurance 925 Injuries and damages 926 Employee pensions and benefits 930.1 General advertising expenses 930.2 Miscellaneous general expenses 931 Rents 932 Maintenance of structures and equipment 403 Depreciation and amortization expense 408 Taxes other than income taxes 409 Income taxes (2,228,500) (901,842) 410 Provision for deferred income taxes 333,600 411 Provision for deferred income taxes - credit (123,900) (158,100) 411.5 Investment tax credit 426.1 Donations 426.5 Other deductions 427 Interest on long-term debt 430 Interest on debt to associate companies 431 Other interest expense ---------- ---------- TOTAL EXPENSE $ 4,987,130$ 1,169,283 ---------- ---------- NET INCOME OR (LOSS) $(3,607,900)$(1,072,163) ========== ==========
PAGE 17 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 ANALYSIS OF BILLING NONASSOCIATE COMPANIES ACCOUNT 458
DIRECT INDIRECT COMPENSATION EXCESS TOTAL COST COST FOR USE TOTAL OR AMOUNT NAME OF NONASSOCIATE COMPANY CHARGED CHARGED OF CAPITAL COST DEFICIENCY BILLED 458-1 458-2 458-3 458-4 ThermoCor Kimmins (1) 600 Hydropower Technologies (2) 916 Blackstone Valley High School (3) 951 Indeck Energy Services (4) 1,080 Pittsfield Generating Co.(5) 1,200 Ken's Foods, Inc. (6) 2,400 Hanover Improvement Society (7) 3,528 MWRA-Sudbury Dam (8) 4,500 Texas Instruments (9) 5,000 Separation Technologies, Inc. (10) 13,677 Power Technologies, LTD (11) 16,819 University of Massachusetts (12) 18,895 Trans Power New Zealand (13) 20,497 Bechtel Construction (14) 69,126 Green Mountain Power (15) 85,160 MCM Enterprise (16) 88,432 National Energy Policy Office (17) 93,700 Ogden Martin Systems (18) 97,042 U.S. Dept of Agriculture (19) 135,445 Si3/Sargent (20) 150,070 Siemens (21) 173,992 U.S. Army Corps. of Engineers (22) 396,200 --------- TOTAL 1,379,230 =========
PAGE 18 INSTRUCTION: Provide a brief description of the services rendered to each nonassociated company: (1) Consulting environmental services. (2) Consulting services for hydrogen unit alignment. (3) Consulting services for boiler inspection. (4) Consulting services for transmission line inspection. (5) Construction services for transformer repair procedure. (6) Consulting electrical services for new manufacturing plant. (7) Consulting engineering services at earthen dam site. (8) Consulting services for inspection of primary cable. (9) Construction services for transformer repairs. (10) Construction and engineering services for separator installation. (11) Consulting engineering services for transmission feasibility study. (12) Construction services for installation of radio tower. (13) Consulting engineering services for upgraded data acquisition systems. (14) Construction services at combined cycle generating plant. (15) Construction and engineering services for transmission interconnection. (16) Construction services for installation of rotor-mounted scanners. (17) Consulting electrical services for study of power purchase agreements. (18) Construction and engineering services for boiler repairs. (19) Consulting and construction services for subwatershed dam repairs. (20) Consulting services for retrofit and calibration of electric meters. (21) Construction services at combined cycle generating plant. (22) Construction services for dam gate machinery refurbishment. PAGE 19 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 DEPARTMENTAL ANALYSIS OF SALARIES ACCOUNT 920
NAME OF DEPARTMENT NUMBER PERSONNEL Indicate each dept. or SALARY END OF service function EXPENSE YEAR None None ---- ---- TOTAL None None ==== ====
PAGE 20 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 OUTSIDE SERVICES EMPLOYED ACCOUNT 923 INSTRUCTIONS: Provide a breakdown by subaccount of outside services employed. If the aggregate amounts paid to any one payee and included within one subaccount is less than $25,000, only the aggregate number and amount of all such payments included within the subaccount need be shown. Provide a subtotal for each type of service.
RELATIONSHIP "A"- ASSOCIATE FROM WHOM PURCHASED ADDRESS "NA"- NON ASSOCIATE AMOUNT LEGAL SERVICES Skadden, Arps, Slate 1440 New York Ave., N.W. NA $363,373 Meagher & Flom Washington, DC 20005-2111 Gadens Ridgeway Central Plaza One NA 74,933 345 Queen Street Brisbane QLD 4000 Australia Swidler & Berlin 3000 K Street, N.W. NA 37,569 Suite 300 Washington, DC 20007-5116 Hunton & Williams 200 Park Avenue NA 36,148 New York, NY 10166 Halloran & Sage One Goodwin Square NA 26,609 225 Asylum Street Hartford, Ct 06103-4303 6 Vendors (each under $25,000) 50,129 ------- SUBTOTAL $588,761
PAGE 21 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 OUTSIDE SERVICES EMPLOYED ACCOUNT 923
RELATIONSHIP "A"- ASSOCIATE FROM WHOM PURCHASED ADDRESS "NA"- NON ASSOCIATE AMOUNT OTHER SERVICES New England Power 25 Research Drive A $3,659,528 Service Company Westborough, MA 01582 New England Power 25 Research Drive A 625,403 Company Westborough, MA 01582 Environmental Science 532 Atwells Avenue NA 401,221 Services Providence, RI 02909 The First National Bank 100 Federal Street NA 354,992 of Boston Boston, MA 02110 Triad Engineering Corp. 131 Middlesex Turnpike NA 310,107 Burlington, MA 01803 A. Gilberto Carvalho 5450 Glenridge Drive NA 164,841 Atlanta, GA 30338 Promon Technical Services Praia do Flamengo 154 NA 85,960 22207-900 Rio de Janeiro RJ Brasil George P. Sasdi Electric Power Consultancy NA 63,495 24 Hawthorne Avenue Newton, MA 02166 Bradford Randolph 40 Central Park South NA 60,651 New York, NY 10019 U.S. Technologies, Inc. 308 Belair Drive NA $58,011 Glenview, IL 60025 B & T Consortium Bajrok 1, 11-1063 NA 50,681 Budapest, Hungary Power Technologies, Inc. 1482 Erie Boulevard NA 43,740 Schenectady, NY 12305 General Electric P.O. Box 102827 NA 37,742 Atlanta, GA 30368 PAGE 22 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 OUTSIDE SERVICES EMPLOYED ACCOUNT 923 RELATIONSHIP "A"- ASSOCIATE FROM WHOM PURCHASED ADDRESS "NA"- NON ASSOCIATE AMOUNT OTHER SERVICES (continued) ABB Power T&D Co., Inc. 1021 Main Campus Drive NA 40,000 Raleigh, NC 27606 Maxpower International 18 Winthrop Avenue NA 36,127 Corp. Marblehead, MA 01945 Phoenix Environmental Linwood, PA NA 35,000 Services Underwater Unlimited 3461-A S.W. Palm City Ave NA 33,248 Diving Services Palm City, FL 34990 Evaldo P. Ramos Rva Da Assemri Fia NA 31,667 58-108 Andar RJ Brasil Arthur Andersen P.O. Box 3917 NA 29,050 Boston, MA 02241 26 Vendors* (each under $25,000) 192,144 --------- SUBTOTAL $6,313,608 --------- TOTAL SERVICES $6,902,369 ========= *Includes $9,460 from Massachusetts Electric Company, $3,346 from The Narragansett Electric Company, $2,024 from NEES Energy, Inc., $20 from New England Electric Transmission Corporation and $39 from New England Hydro- Transmission Electric Company which are associated Companies.
PAGE 23 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 MISCELLANEOUS GENERAL EXPENSES ACCOUNT 930.2 INSTRUCTIONS: Provide a listing of the amount included in Account 930.2, "Miscellaneous General Expenses", classifying such expenses according to their nature. Payments and expenses permitted by Sections 321(b)(2) of the Federal Election Campaign Act, as amended by Public Law 94-283 in 1976 (2 U.S.C. Section 441(b)(2)) shall be separately classified. DESCRIPTION AMOUNT None ---- TOTAL None ==== PAGE 24 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 TAXES OTHER THAN INCOME TAXES ACCOUNT 408 INSTRUCTIONS: Provide an analysis of Account 408, "Taxes Other Than Income Taxes". Separate the analysis into two groups: (1) other than U.S. Government taxes, and (2) U.S. Government taxes. Specify each of the various kinds of taxes and show the amounts thereof. Provide a subtotal for each class of tax. KIND OF TAX AMOUNT 1) OTHER THAN U.S. GOVERNMENT TAXES Massachusetts State Tax None ----- SUBTOTAL None ----- 2) U.S. GOVERNMENT TAXES None ----- SUBTOTAL None ----- TOTAL None ===== PAGE 25 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 DONATIONS ACCOUNT 426.1 INSTRUCTIONS: Provide a listing of the amount included in Account 426.1, "Donations", classifying such expenses by its purpose. The aggregate number and amount of all items of less than $3,000 may be shown in lieu of details. NAME OF RECIPIENT PURPOSE OF DONATION NONE ---- TOTAL None ==== PAGE 26 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 OTHER DEDUCTIONS ACCOUNT 426.5 INSTRUCTIONS: Provide a listing of the amount included in Account 426.5, "Other Deductions", classifying such expenses according to their nature. DESCRIPTION NAME OF PAYEE NONE ---- TOTAL None ==== PAGE 27 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 SCHEDULE XVIII NOTES TO STATEMENT OF INCOME INSTRUCTIONS: The space below is provided for important notes regarding the statement of income or any account thereof. Furnish particulars as to any significant increase in services rendered or expenses incurred during the year. Notes relating to financial statements shown elsewhere in this report may be indicated here by reference. PAGE 28 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. ORGANIZATION CHART For the Year Ended December 31, 1996 Board of Directors ! ! ! President ! ! ! ------------------------------ ! ! ! ! ! ! Treasurer Clerk PAGE 29 ANNUAL REPORT OF NEW ENGLAND ELECTRIC RESOURCES, INC. For the Year Ended December 31, 1996 SIGNATURE CLAUSE Pursuant to the requirements of the Public Utility Holding Company Act of 1935 and the rules and regulations of the Securities and Exchange Commission issued thereunder, the undersigned company has duly caused this report to be signed on its behalf by the undersigned officer thereunto duly authorized. New England Electric Resources, Inc. --------------------------------- (Name of Reporting Company) By: s/John G. Cochrane ------------------------------- (Signature of Signing Officer) J.G. Cochrane Treasurer ------------------------------------------- (Printed Name and Title of Signing Officer) Date: April 30, 1997 --------------- EX-99 13 EXHIBIT E.3 Exhibit E.3 ARTHUR ANDERSEN LLP OCEAN STATE POWER FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996 AND 1995 TOGETHER WITH AUDITORS' REPORT ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Management Committee of Ocean State Power: We have audited the accompanying balance sheets of Ocean State Power (a Rhode Island partnership) as of December 31, 1996 and 1995, and the related statements of income, changes in partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note 2, these financial statements were prepared in accordance with the accounting requirements of the Federal Energy Regulatory Commission as set forth in its applicable Uniform System of Accounts and published accounting releases, which is a comprehensive basis of accounting other than generally accepted accounting principles. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ocean State Power as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in accordance with the accounting requirements of the Federal Energy Regulatory Commission as set forth in its applicable Uniform System of Accounts and published accounting releases. s/Arthur Anderson LLP Boston, Massachusetts March 17, 1997 OCEAN STATE POWER BALANCE SHEETS - DECEMBER 31, 1996 AND 1995 (DOLLARS IN THOUSANDS) ASSETS
1996 1995 ---- ---- Electric Plant, at original cost $241,139 $233,607 Less-Accumulated depreciation and amortization (Note 2) 68,636 57,175 -------- -------- 172,503 176,432 CONSTRUCTION WORK-IN-PROGRESS - 6,929 -------- -------- Net electric plant 172,503 183,361 -------- -------- CURRENT ASSETS: Cash and cash equivalents 4,532 1,461 Accounts receivable - Affiliated companies (Notes 1, 3 and 6) 12,576 12,559 Other 4,786 4,197 Inventories - Fuel 597 693 Materials and supplies 6,023 3,689 Prepayments 297 247 -------- -------- Total current assets 28,811 22,846 -------- DEFERRED CHARGES AND OTHER ASSETS: Unamortized debt expense (Note 2) 1,256 1,354 Site restoration fund (Note 2) 6,018 4,624 Other 273 292 -------- -------- Total deferred charges and other assets 7,547 6,270 -------- -------- Total assets $208,861 $212,477 ======== ======== Partners' Capital and Liabilities CAPITALIZATION: Partners' capital (see accompanying statement) $ 79,738 $82,214 Long-term debt, net of current maturities (Note 4) 84,509 90,708 -------- -------- Total capitalization 164,247 172,922 -------- -------- CURRENT LIABILITIES: Current maturities of long-term debt 5,998 5,998 Accounts payable and accrued expenses- Affiliated companies 927 699 Other 9,240 6,488 Accrued interest on debt 281 296 -------- -------- Total current liabilities 16,446 13,481 -------- -------- COMMITMENTS AND CONTINGENCIES (Note 5) RESERVES AND DEFERRED CREDITS: Deferred federal income taxes payable by partners (Notes 2 and 7) 10,257 9,986 Unamortized investment tax credits (Notes 2 and 7) 10,777 10,274 Site restoration reserve (Note 2) 6,018 4,624 Deferred rent revenue (Note 6) 1,116 1,191 -------- -------- Total reserves and deferred credits 28,168 26,075 -------- -------- Total partners' capital and liabilities $208,861 $212,477 ======== ======== The accompanying notes are an integral part of these financial statements.
OCEAN STATE POWER STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 (DOLLARS IN THOUSANDS)
1996 1995 ELECTRIC OPERATING REVENUES (Notes 1 and 2) $100,657 $96,422 -------- ------- OPERATING EXPENSES: Fuel costs 43,947 40,455 Operating expense 7,972 9,320 Maintenance expense 10,275 5,337 Depreciation and site restoration (Note 2) 13,145 12,860 Income taxes payable by partners (Notes 2 and 7) 5,506 6,083 Property taxes and payments in lieu of taxes (Note 5) 1,719 1,638 ------- ------- 82,564 75,693 ------- ------- Operating income 18,093 20,729 OTHER INCOME (EXPENSE): Allowance for other funds used during construction (Note 2) 232 223 Interest income 211 214 Other, net (38) (350) ------- ------- 405 87 ------- ------- Income before interest charges 18,498 20,816 ------- ------- INTEREST CHARGES: Long-term debt (Note 4) 7,219 8,434 Allowance for borrowed funds used during construction (Note 2) (113) (115) ------- ------- 7,106 8,319 ------- ------- Net income $11,392 $12,497 ======= ======= The accompanying notes are an integral part of these financial statements.
OCEAN STATE POWER STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 1996 and 1995 (DOLLARS IN THOUSANDS)
EUA Narragansett TCPL Ocean State Energy JMC Ocean Power Ltd. Corp. Resources Co. State Corp. Total PARTNERSHIP INTEREST 40.0% 29.9% 20.0% 10.1% 100.0% BALANCE, DECEMBER 31, 1994 $35,507 $26,543 $17,753 $8,965 $88,768 Net income 4,999 3,737 2,499 1,262 12,497 Current federal income taxes payable by partners (Notes 2 and 7) 1,340 1,000 671 338 3,349 Distributions (8,960) (6,698) (4,480) (2,262) (22,400) -------- ------- ------- ------- -------- BALANCE, DECEMBER 31, 1995 32,886 24,582 16,443 8,303 82,214 Net income 4,556 3,407 2,279 1,150 11,392 Current federal income taxes payable by partners (Notes 2 and 7) 1,893 1,414 946 479 4,732 Distributions (7,440) (5,561) (3,720) (1,879) (18,600) -------- ------- ------- ------- -------- BALANCE, DECEMBER 31, 1996 $31,895 $23,842 $15,948 $8,053 $79,738 ======== ======= ======= ======= ======== The accompanying notes are an integral part of these financial statements.
OCEAN STATE POWER STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996 and 1995 (DOLLARS IN THOUSANDS)
1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $11,392 $12,497 Adjustments to reconcile net income to net cash provided by operating activities - Income taxes payable by partners 5,506 6,083 Depreciation 12,023 11,738 Provision for site restoration 1,122 1,122 Site restoration interest 272 400 Amortization of debt expense 98 1,034 Amortization of rent revenue (75) (76) Allowance for other funds used during construction (232) (223) Asset disposition 560 - Salvage 626 81 Changes in assets and liabilities - Accounts receivable (606) 1,082 Inventories (2,798) 671 Prepayments (50) (66) Accounts payable and accrued expenses 2,980 (588) Accrued interest (15) (35) Other assets and liabilities 19 328 ------- ------- Net cash provided by operating activities 30,822 34,048 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (1,559) (7,347) Site restoration fund (1,394) (1,522) ------- ------- Net cash used for investing activities (2,953) (8,869) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt - 3,900 Distributions to partners (18,600) (22,400) Repayment of long-term debt - Senior notes (5,998) (5,998) Revolver (200) - ------- ------- Net cash used for financing activities (24,798) (24,498) ------- ------- NET INCREASE IN CASH AND CASH EQUIVALENTS 3,071 681 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,461 780 ------- ------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 4,532 $ 1,461 ======= ======= CASH PAID FOR INTEREST $ 7,135 $ 7,402 ======= ======= The accompanying notes are an integral part of these financial statements.
OCEAN STATE POWER NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (1) ORGANIZATION AND BUSINESS Organization and Management Ocean State Power (OSP) is a Rhode Island general partnership with four general partners (see Note 3). OSP is managed by a committee of representatives from each of the partners and has no employees. Plant operations and project administration are performed under various contractual arrangements as described below. Business OSP was formed to construct, own and operate a combined cycle electric generating plant located in Burrillville, Rhode Island, adjacent to a second generating plant that is operated by an affiliate, Ocean State Power II (OSP II). The plant's average net capacity is approximately 250 megawatts, and it is fired by natural gas purchased under a firm, 20-year gas purchase contract. The plant commenced commercial operations on December 31, 1990. The plant's capacity and energy output are being sold under 20-year take-or-pay unit power agreements to three investor-owned utilities located in Massachusetts and Rhode Island. These utilities are obligated to pay their portion of OSP's total costs, including amounts for income taxes payable by partners, and a return on invested capital. The price of the energy sold is determined based on a Federal Energy Regulatory Commission (FERC) filed cost of service contract with an adjustment factor for unit availability. The following utilities have agreed to purchase electricity generated in the following proportions: Power Purchase Power Purchaser Affiliate of Percentage --------------- ------------ ----------- Boston Edison Company - 23.5% New England Power Company Narragansett Energy Resources Company 48.5 Montaup Electric Company EUA Ocean State Corporation 28.0 ------ 100.0% ====== (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Regulation OSP's rates, operations, accounting and other matters are subject to the regulatory authority of the FERC and other federal and state agencies. Certain gas transportation agreements are also subject to regulation by Canadian authorities. OCEAN STATE POWER NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Regulation (Continued) OSP is subject to the provisions of Statement of Financial Accounting Standards (SFAS) No. 71, Accounting for Certain Types of Regulation, and therefore, certain of the accounting principles followed may differ from enterprises in general to reflect the economic effect of rate actions of the FERC. See Note 5 for a discussion of industry restructuring and the related uncertainties associated with accounting for regulated businesses. Allowance for Funds Used During Construction OSP capitalizes an allowance for funds used during construction (AFUDC), which represents the net cost of borrowed funds used for construction purposes and a reasonable rate of return on OSP's equity when used. These costs will be recovered over the service life of the plant in the form of revenue collected to recover depreciation expense. Electric Operating Revenues OSP bills its customers monthly based on estimates in accordance with the agreements described in Note 1, with a subsequent true-up to reflect actual costs. Amounts due from customers at year-end but not yet reflected in customers' bills totaled $324,000 in 1996 and $174,000 in 1995 and are included in accounts receivable. The unit power agreements contain incentive provisions related to the performance of the facility. These incentives provide for bonuses payable to OSP based on the extent to which the electrical capability of the plant exceeds target performance levels. Alternatively, these incentives provide for decreases in capacity charges payable by power purchasers based on the extent to which the electrical capability of the plant falls below target levels. OSP has billed and recorded revenues related to these performance incentives of $3.9 million in 1996 and $3.9 million in 1995. Unamortized Debt Expense Unamortized debt expense represents the costs incurred related to project financing and are amortized using the effective interest rate method over the original life of the debt. OCEAN STATE POWER NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Depreciation and Site Restoration Depreciation is provided to allocate the cost of OSP's electric plant on a straight-line basis over the following estimated useful lives: Plant and equipment 20 years Furniture and fixtures 5 years Following termination of operations, OSP is obligated to restore the site to its original preconstruction condition. Based on a study conducted in 1991, the estimated cost, in future dollars, for OSP and OSP II is approximately $65 million. OSP accrues for one half of the estimated site restoration costs over the life of the plant; OSP II is responsible for the remaining half of the estimated costs. The estimate of site restoration is based on a number of assumptions. The future dollars estimate was determined by inflating individual costs from mid-1993 to the anticipated date of expenditure, expressed at six-month periods, at an annual 4.5% inflation rate. The 1994 FERC Settlement Agreement assumes an after-tax rate of return on amounts collected for site restoration of 5.5%, with collections beginning in November 1991 and continuing through October 2011. Changes in assumptions for such things as labor and material costs, technology, inflation and the timing of site restoration could cause this estimate to change in the near term. OSP recognizes the relative uncertainties associated with site restoration, including its changing technology and the possibility of new requirements of law, and therefore recognizes the need to monitor and adjust site restoration collections through supplemental rate filings with the FERC. Funds are deposited into a trust pending their ultimate use. In accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, OSP and OSP II have classified their site restoration funds as available- for-sale securities and reflected them at fair market value in the accompanying balance sheets. The investment income is retained within the trust account. The cost and fair market value of the site restoration funds at December 31, 1996 were $5,459,000 and $6,018,000, respectively, and at December 31, 1995 were $4,337,000 and $4,624,000, respectively. The staff of the Securities and Exchange Commission has questioned certain current accounting practices of the electric utility industry regarding the recognition, measurement and classification of decommissioning costs for nuclear generating stations in financial statements of electric utilities. In response to those questions, the Financial Accounting Standards Board (FASB) has initiated a review of the accounting for such costs. The FASB has considered several approaches, including recording the OCEAN STATE POWER NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Depreciation and Site Restoration (Continued) entire estimated liability for decommissioning costs initially, rather than accruing the costs over the operating life of the generating unit. OSP believes that such an accounting change, if adopted by the FASB, would not adversely affect OSP's results of operations due to its ability to recover decommissioning costs through rates. Cash and Cash Equivalents OSP considers all highly liquid investments with a maturity of three months or less to be cash equivalents. Income Taxes Income taxes are the responsibility of the partners and are not normally reflected in the financial statements of partnerships under generally accepted accounting principles. However, the billing calculation includes an allowance for income taxes, and the FERC requires that OSP record this provision on its records to reflect the income taxes calculated as if OSP were a taxable corporation. The provisions for current and deferred income taxes payable by partners are recorded without regard to whether each partner could utilize its share of OSP tax deductions and investment tax credits. Partners' capital and the net investment base are reduced by the amount equivalent to accumulated deferred federal income taxes payable by partners and unamortized investment tax credit in calculating the allowed return. Investment tax credits are deferred to the extent they would be utilized on a separate-company basis and are amortized over the lives of the related property. At December 31, 1996, OSP has fully utilized its investment tax credits. OSP recognizes, in accordance with SFAS No. 109, Accounting for Income Taxes, tax assets and liabilities for the cumulative effect of all temporary differences between financial statement carrying amounts and the tax bases of assets and liabilities, including the impact of deferred investment tax credits. The standard also requires the adjustment of deferred tax liabilities or assets for an enacted change in tax laws or rates, among other things. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues OCEAN STATE POWER NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Use of Estimates (Continued) and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Certain amounts in OSP's prior-year financial statements have been reclassified to conform to the current year's presentation. (3) PARTNERS' CAPITAL The general partners, along with their respective equity interests, at December 31, 1996 are as follows:
Equity Partner Affiliate of Interest TCPL Power Ltd. TransCanada PipeLines Limited 40.0% EUA Ocean State Corporation Eastern Utilities Associates 29.9 Narragansett Energy Resources Company New England Electric System 20.0 JMC Ocean State Corporation J. Makowski Company, Inc. 10.1 ----- 100.0% =====
(4) DEBT OSP Finance Company is a finance affiliate of OSP and OSP II (the Partnerships), and each Partnership owns 50% of its common stock. OSP Finance Company's single purpose is to provide long-term financing for the Partnerships. In October 1992, OSP Finance Company issued senior notes to various institutional investors in three tranches with fixed interest rates and varying maturity dates. Upon receipt of the senior note proceeds, OSP Finance Company extended loans to OSP and OSP II, with terms the same as the senior notes. On July 20, 1994, the Partnerships entered into a revolving secured credit agreement (the Revolver) with a commercial bank for $15,000,000. The Partnerships must pay an annual commitment fee of .15% on the unused portion of the Revolver. Principal borrowings under the Revolver are payable in full at maturity. The Revolver expires on July 20, 2001 and bears interest at varying rates. The interest rate at December 31, 1996 and 1995 was 6.031% and 6.125%, respectively. OCEAN STATE POWER NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (4) DEBT (Continued) Debt outstanding at December 31, 1996 is as follows (dollars in thousands):
OSP OSP II Total 6.96% Series A senior notes due June 15, 2002 $32,699 $28,028 $60,727 7.92% Series B senior notes due February 15, 2006 22,077 18,923 41,000 8.21% Series C senior notes due September 15, 2011 31,231 26,769 58,000 Revolving line of credit 4,500 2,000 6,500 ------- ------- ------- Total long-term debt 90,507 75,720 166,227 Less Current maturities 5,998 5,141 11,139 ------- ------- ------- Long-term debt, excluding current maturities $84,509 $70,579 $155,088 ======= ======= =======
The Partnerships are guarantors of the senior note agreement and the Revolver on a joint and several basis. The senior notes and amounts outstanding under the Revolver are collateralized by assignment of the rights and interest in all of the Partnerships' unit power agreements and all resulting proceeds, with the exception, however, of revenues under the unit power agreements that are attributable to domestic gas transportation, on which the domestic gas transporter has a first lien. The senior note agreement and the Revolver contain certain covenants, including restrictions on the creation of liens, sale of assets, amendment of agreements and the incurrence of additional indebtedness. OSP's share of the senior notes matures at $5,998,000 per year over the life of the senior notes. (5) COMMITMENTS AND CONTINGENCIES OSP has entered into various agreements in connection with the operation of the power plant. OSP is obligated under the following agreements/commitments. Gas Supply and Transportation OSP has a firm, 20-year gas purchase contract with a Canadian supplier for the purchase of 50,000 Mcf per day or a minimum of 12,318,750 Mcf per year, to be delivered to the U.S./Canadian border. OSP may also purchase additional quantities of gas as available. The contract price is based on an initial base price, subject to monthly adjustments based on changes in the New England Power Pool's (NEPOOL) Fossil Fuel Index price. This contract provides OSP with its primary fuel supply while maintaining other gas supply options and oil as backups. OCEAN STATE POWER NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (5) COMMITMENTS AND CONTINGENCIES (Continued) Gas Supply and Transportation (Continued) OSP has a firm, 20-year fuel transportation agreement with Tennessee Gas Pipeline Company for delivery of natural gas from the U.S./Canadian border to the plant. The agreement may be extended beyond 20 years on a year-by-year basis. Tax Treaty The Partnerships entered into a tax treaty with the Town of Burrillville, Rhode Island, providing for annual payments to the town in lieu of any taxes that would normally be assessed. Payments are to be made quarterly over the 20-year period through 2011 and are to be shared equally by the Partnerships. The total payments for OSP for each of the five years subsequent to December 31, 1996 are as follows (dollars in thousands): 1997 1,520 1998 1,671 1999 1,774 2000 1,774 2001 1,774 Other Commitments As part of the costs incurred to obtain the site on which the power unit is constructed, OSP has entered into certain agreements that provide for payments in lieu of taxes in addition to the tax treaty above. OSP agreed to make annual payments to the scholarship and community service foundations in Burrillville, Rhode Island, and Uxbridge, Massachusetts, as well as to the Harrisville, Rhode Island, fire district in anticipation of any services to be rendered. Payments are to be made annually over the 20-year life and are to be shared equally by OSP and OSP II. Deferred Revenues OSP filed its 1995 supplement to its rate schedules with the FERC on February 1, 1995, setting forth its proposed Return on Equity (ROE) of 12.90% for 1995. Three parties challenged OSP's determination of the ROE and requested a hearing to determine the appropriate ROE for 1995. After a hearing was set, OSP submitted an offer to settle the proceedings at an ROE of 12.33%, which the presiding administrative law judge certified to the FERC. The parties are currently waiting for the FERC's decision on whether to approve the settlement offer. At December 31, 1996, OSP has deferred revenue recognition of $939,000 for the difference between 12.90% and 12.33%, OSP's estimated result of the proceedings. OCEAN STATE POWER NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (5) COMMITMENTS AND CONTINGENCIES (Continued) Industry Restructuring The states in which OSP's partners and power purchasers are based have utility restructuring plans in different stages of development or implementation. Some, such as Massachusetts, call for an earlier initiation of retail competition and divestiture of generation assets, as well as providing for other arrangements for recovery of stranded costs. OSP believes that there are many uncertainties associated with any major restructuring of the electric utility industry. Among them are: the positions that will ultimately be taken by the various New England states and their regulatory agencies and their applicability to OSP; the role of the FERC in any restructuring involving OSP, and the ultimate positions it will take on relevant issues within its jurisdiction; to what extent the United States Congress will take legislative action and, if it does, with what results; whether the necessary political consensus can be reached on the significant and complex issues involved in changing the long-standing structure of the electric utility industry; and to what extent electric utilities will be permitted to recover their strandable costs. OSP cannot predict what form the restructuring of the electric utility industry will take, or what effect any resulting restructuring will have on OSP's business operations or financial results. OCEAN STATE POWER NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (6) RELATED PARTIES Ground Lease OSP entered into an agreement to lease certain property on which OSP II was constructed to OSP II. The original lease term expires on December 31, 2011 and is renewable in five-year periods through September 2088. The lease may be terminated by OSP II with the appropriate written notice to OSP during the initial term. OSP may terminate the lease only upon its purchase of OSP II's power unit. Under the provisions of the lease, OSP II paid approximately $1.1 million of initial rent upon receipt of its construction financing. OSP has classified amounts under this provision as deferred rent revenue to be amortized over the life of the lease. OSP has an option to acquire OSP II's unit at any time at a price equal to the greater of its fair value or any amounts due under any mortgage on the unit. Common Facilities Lease OSP entered into an agreement to lease to OSP II an undivided interest in certain common facilities. The basic term expires on September 30, 1997 and may be extended in five-year increments through September 2088. Rent is payable in an amount equal to OSP II's share of the monthly investment cost of the common facilities for the basic term of the lease and an amount equal to a fair market rental value of the leased property thereafter. OSP II is obligated to share in the costs of maintaining the facility and has an option to purchase its undivided interest in the common facilities for its appraised fair market value. The lease may be terminated by OSP II upon written notice and payment of certain rents based on the fair market value during the canceled term. Project Administration Agent Effective October 1, 1996, TransCanada Power (TCP), a division of TransCanada Energy Ltd., an affiliate of one of the general partners, was appointed project administration agent to manage the day-to-day affairs of OSP. TCP is compensated at agreed-upon billing rates that are adjusted annually. TCP was paid approximately $137,000 for services provided in 1996. The prior project administration agent, J. Makowski Management Corp., was paid approximately $727,000 in 1996 and $1,174,000 in 1995 for services rendered. OCEAN STATE POWER NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (6) RELATED PARTIES (Continued) Interconnection Facility OSP and OSP II entered into an agreement to lease the interconnection facility from Blackstone Valley Electric Company (BVE), an affiliate of Eastern Utilities Associates. Rent payments are to be paid monthly over the 20-year period through 2011 and are to be shared equally by OSP and OSP II. OSP paid BVE approximately $637,000 in 1996 and $649,000 in 1995 for use of the interconnection facility. Gas Layoff Sales During the years ended December 31, 1996 and 1995, OSP made the following sales of available gas at market prices to the following affiliate entities (dollars in thousands):
1996 1995 US Generating Corp. (an affiliate of JMC Ocean State Corporation) $ 78 $ - New England Power Company 17 94 Selkirk Cogen Partners (an affiliate of JMC Ocean State Corporation) 16 1,806 Altresco Pittsfield, L.P.(an affiliate of JMC Ocean State Corporation) - 124 MASSPOWER (an affiliate of JMC Ocean State Corporation) - 74
(7) PROVISION FOR INCOME TAXES PAYABLE BY PARTNERS OSP provides an amount equal to income tax expense as if it were a separate corporation, and this amount is a component of cost of service. The partners are exempt from state income tax in Rhode Island. Computed federal income taxes payable by partners are as follows (dollars in thousands):
1996 1995 Current $ 4,732 $ 3,349 Deferred 271 678 Investment tax credits, net 503 2,056 ------- -------- $ 5,506 $ 6,083 ======= ========
OCEAN STATE POWER NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (7) PROVISION FOR INCOME TAXES PAYABLE BY PARTNERS (Continued) The tax effects of the temporary differences and tax carryforwards that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1996 and 1995 are presented below (dollars in thousands):
1996 1995 Deferred tax assets Site restoration reserve $ 2,104 $ 1,617 Deferred rent revenue 390 417 ------- ------- Total deferred tax assets 2,494 2,034 ------- ------- Deferred tax liabilities Property, plant and equipment 12,618 11,935 Regulatory asset 133 85 ------- ------- Total deferred tax liabilities 12,751 12,020 ------- ------- Net deferred tax liability $10,257 $ 9,986 ======= =======
A valuation allowance has not been recorded at December 31, 1996 and 1995, as OSP expects that all deferred income tax assets will be utilized in the future. (8) DISCLOSURE OF FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of cash and cash equivalents approximate fair value because of the short maturity of these investments. The fair value of the site restoration fund is based on the quoted market prices of the investments of the fund. The fair value of long-term debt is estimated based on currently quoted market prices for similar types of borrowing arrangements. The estimated fair value of OSP's financial instruments as of December 31, 1996 are as follows (dollars in thousands):
Carrying Value Fair Value Cash and cash equivalents $ 4,532 $ 4,532 Site restoration fund 6,018 6,018 Long-term debt 90,507 96,190
EX-99 14 EXHIBIT E.4 Exhibit E.4 ARTHUR ANDERSEN LLP OCEAN STATE POWER II FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996 AND 1995 TOGETHER WITH AUDITORS' REPORT ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Management Committee of Ocean State Power II: We have audited the accompanying balance sheets of Ocean State Power II (a Rhode Island partnership) as of December 31, 1996 and 1995, and the related statements of income, changes in partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As described in Note 2, these financial statements were prepared in accordance with the accounting requirements of the Federal Energy Regulatory Commission as set forth in its applicable Uniform System of Accounts and published accounting releases, which is a comprehensive basis of accounting other than generally accepted accounting principles. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ocean State Power II as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in accordance with the accounting requirements of the Federal Energy Regulatory Commission as set forth in its applicable Uniform System of Accounts and published accounting releases. s/Arthur Andersen LLP Boston, Massachusetts March 17, 1997 OCEAN STATE POWER II BALANCE SHEETS - DECEMBER 31, 1996 AND 1995 (DOLLARS IN THOUSANDS) Assets
1996 1995 ---- ---- Electric Plant, at original cost $176,525 $175,622 Less-Accumulated depreciation and amortization (Note 2) 45,142 36,430 -------- -------- 131,383 139,192 CONSTRUCTION WORK IN PROGRESS 2,866 430 -------- -------- Net electric plant 134,249 139,622 -------- -------- CURRENT ASSETS: Cash and cash equivalents 516 1,103 Accounts receivable - Affiliated companies (Notes 1, 3 and 6) 12,899 13,751 Other 4,202 4,323 Inventories - Fuel 597 693 Materials and supplies 6,031 3,683 Prepayments 297 209 -------- -------- Total current assets 24,542 23,762 -------- -------- DEFERRED CHARGES AND OTHER ASSETS: Prepaid rent (Note 6) 1,116 1,191 Unamortized debt expense (Note 2) 1,089 1,767 Site restoration fund (Note 2) 5,383 4,043 Other 202 212 -------- -------- Total deferred charges and other assets 7,789 7,213 -------- -------- Total assets $166,580 $170,597 ======== ======== Partners' Capital and Liabilities CAPITALIZATION: Partners' capital (see accompanying statement) $72,713 $76,502 Long-term debt, net of current maturities (Note 4) 70,579 74,421 -------- -------- Total capitalization 143,292 150,923 -------- -------- CURRENT LIABILITIES: Current maturities of long-term debt 5,141 5,141 Accounts payable and accrued expenses- Affiliated companies 2,552 2,164 Other 6,778 4,561 Accrued interest on debt 238 251 -------- -------- Total current liabilities 14,709 12,117 -------- -------- COMMITMENTS AND CONTINGENCIES (Note 5) RESERVES AND DEFERRED CREDITS: Deferred federal income taxes payable by partners (Notes 2 and 7) 3,196 3,514 Site restoration reserve (Note 2) 5,383 4,043 -------- -------- Total reserves and deferred credits 8,579 7,557 -------- -------- Total partners' capital and liabilities $166,580 $170,597 The accompanying notes are an integral part of these financial statements.
OCEAN STATE POWER II STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 (DOLLARS IN THOUSANDS)
1996 1995 ELECTRIC OPERATING REVENUES (Notes 1 and 2) $101,508 $98,980 ------- ------- OPERATING EXPENSES: Fuel costs 54,051 46,252 Operating expense 11,098 12,684 Maintenance expense 2,960 4,416 Depreciation and site restoration (Note 2) 9,886 9,863 Income taxes payable by partners (Notes 2 and 7) 5,395 6,042 Property taxes and payments in lieu of taxes (Note 5) 1,711 1,646 ------- ------- 85,101 80,903 ------- ------- Operating income 16,407 18,077 OTHER INCOME (EXPENSE): Allowance for other funds used during construction (Note 2) 69 32 Interest income 219 224 Other, net (35) (45) ------- ------- 253 211 ------- ------- Income before interest charges 16,660 18,288 ------- ------- INTEREST CHARGES: Long-term debt (Note 4) 6,596 7,078 Allowance for borrowed funds used during construction (Note 2) (34) (16) ------- ------- 6,562 7,062 ------- ------- Net income $10,098 $11,226 ======= ======= The accompanying notes are an integral part of these financial statements.
OCEAN STATE POWER II STATEMENTS OF CHANGES IN PARTNERS' CAPITAL FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 (DOLLARS IN THOUSANDS)
EUA Narragansett TCPL Ocean State Energy JMC Ocean Power Ltd. Corp. Resources Co. State Corp. Total PARTNERSHIP INTEREST 40.0% 29.9% 20.0% 10.1% 100.0% BALANCE, DECEMBER 31, 1994 $ 31,874 $ 23,825 $ 15,937 $ 8,048 $ 79,684 Net income 4,490 3,357 2,245 1,134 11,226 Current federal income taxes payable by partners (Notes 2 and 7) 2,557 1,911 1,278 646 6,392 Distributions (8,320) (6,219) (4,160) (2,101) (20,800) -------- ------- ------- ------- -------- BALANCE, DECEMBER 31, 1995 30,601 22,874 15,300 7,727 76,502 Net income 4,039 3,019 2,020 1,020 10,098 Current federal income taxes payable by partners (Notes 2 and 7) 2,285 1,709 1,142 577 5,713 Distributions (7,840) (5,860) (3,920) (1,980) (19,600) -------- ------- ------- ------- -------- BALANCE, DECEMBER 31, 1996 $29,085 $21,742 $14,542 $7,344 $72,713 ======== ======= ======= ======= ======== The accompanying notes are an integral part of these financial statements.
OCEAN STATE POWER II STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 (DOLLARS IN THOUSANDS)
1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net income 10,098 $11,226 Adjustments to reconcile net income to net cash provided by operating activities - Income taxes payable by partners 5,395 6,042 Depreciation 8,764 8,741 Provision for site restoration 1,122 1,122 Site restoration interest 218 345 Amortization of debt expense 678 878 Allowance for other funds used during construction (69) (32) Asset disposition 560 - Salvage 108 123 Changes in assets and liabilities - Accounts receivable 973 681 Inventories (2,813) 663 Prepayments (88) (44) Prepaid rent 75 76 Accounts payable and accrued expenses 2,605 (1,056) Accrued interest (13) (32) Other assets and liabilities 80 31 -------- -------- Net cash provided by operating activities 27,693 28,764 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (3,499) (1,064) Site restoration fund (1,340) (1,467) -------- -------- Net cash used for investing activities (4,839) (2,531) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 1,300 600 Distributions to partners (19,600) (20,800) Repayment of long-term debt (5,141) (5,141) -------- -------- Net cash used for financing activities (23,441 (25,341) -------- -------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (587) 892 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,103 211 -------- -------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 516 $ 1,103 ======== ======== CASH PAID FOR INTEREST $ 5,930 $ 6,230 ======== ======== The accompanying notes are an integral part of these financial statements.
OCEAN STATE POWER II NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (1) ORGANIZATION AND BUSINESS Organization and Management Ocean State Power II (OSP II) is a Rhode Island general partnership with four general partners (see Note 3). OSP II is managed by a committee of representatives from each of the partners and has no employees. Plant operations and project administration are performed under various contractual arrangements, as described below. Business OSP II was formed to construct, own and operate a combined- cycle electric generating plant located in Burrillville, Rhode Island, adjacent to a second generating plant that is operated by an affiliate, Ocean State Power (OSP). The plant's average net capacity is approximately 250 megawatts, and it is fired by natural gas purchased under a firm, 20-year gas purchase contract. The plant commenced commercial operations on October 1, 1991. The plant's capacity and energy output are being sold under 20-year take-or-pay unit power agreements to three investor-owned utilities located in Massachusetts and Rhode Island. These utilities are obligated to pay their portion of OSP II's total costs, including amounts for income taxes payable by partners, and a return on invested capital. The price of the energy sold is determined based on a Federal Energy Regulatory Commission (FERC)-filed cost-of-service contract with an adjustment factor for unit availability. The following utilities have agreed to purchase electricity generated in the following proportions: Power Purchase Power Purchaser Affiliate of Percentage --------------- ------------ ----------- Boston Edison Company - 23.5% New England Power Company Narragansett Energy Resources Company 48.5 Montaup Electric Company EUA Ocean State Corporation 28.0 ----- 100.0% ====== (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Regulation OSP II's rates, operations, accounting and other matters are subject to the regulatory authority of the FERC and other federal and state agencies. Certain gas transportation agreements are also subject to regulation by Canadian authorities. OCEAN STATE POWER II NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Regulation (Continued) OSP II is subject to the provisions of Statement of Financial Accounting Standards (SFAS) No. 71, Accounting for Certain Types of Regulation, and therefore, certain of the accounting principles followed may differ from enterprises in general to reflect the economic effect of rate actions of the FERC. See Note 5 for a discussion of industry restructuring and the related uncertainties associated with accounting for regulated businesses. Allowance for Funds Used During Construction OSP II capitalizes an allowance for funds used during construction (AFUDC), which represents the net cost of borrowed funds used for construction purposes and a reasonable rate of return on OSP's II equity when used. These costs will be recovered over the service life of the plant in the form of revenue collected to recover depreciation expense. Electric Operating Revenues OSP II bills its customers monthly based on estimates in accordance with the agreements described in Note 1, with a subsequent true-up to reflect actual costs. Amounts due from customers at year-end, but not yet reflected in customers' bills, totaled approximately $618,000 in 1996 and $100,000 in 1995 and are included in accounts receivable. The unit power agreements contain incentive provisions related to the performance of the facility. These incentives provide for bonuses payable to OSP II based on the extent to which the electrical capability of the plant exceeds target performance levels. Alternatively, these incentives provide for decreases in capacity charges payable by power purchasers based on the extent to which the electrical capability of the plant falls below target levels. OSP II has billed and recorded revenues related to these performance incentives of $3.2 million in 1996 and $3.4 million in 1995. Unamortized Debt Expense Unamortized debt expense represents the costs incurred related to project financing and are amortized using the effective interest rate method over the original life of the debt. OCEAN STATE POWER II NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Depreciation and Site Restoration Depreciation is provided to allocate the cost of OSP II's electric plant on a straight-line basis over the following estimated useful lives: Plant and equipment 20 years Furniture and fixtures 5 years Following a termination of operations, OSP II is obligated to restore the site to its original preconstruction condition. Based on a study conducted in 1991, the estimated cost, in future dollars, for OSP and OSP II is approximately $65 million. OSP II accrues for one half of the estimated site restoration costs over the life of the plant; OSP is responsible for the remaining half of the estimated costs. The estimate of site restoration is based on a number of assumptions. The future dollars estimate was determined by inflating individual costs from mid-1993 to the anticipated date of expenditure, expressed at six-month periods, at an annual 4.5% inflation rate. The 1994 FERC Settlement Agreement assumes an after-tax rate of return on amounts collected for site restoration of 5.5%, with collections beginning in November 1991 and continuing through October 2011. Changes in assumptions for such things as labor and material costs, technology, inflation and the timing of site restoration could cause this estimate to change in the near term. OSP II recognizes the relative uncertainties associated with site restoration, including its changing technology and the possibility of new requirements of law, and therefore recognizes the need to monitor and adjust site restoration collections through supplemental rate filings with the FERC. Funds are deposited into a trust pending their ultimate use. In accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, OSP and OSP II have classified their site restoration funds as available- for-sale securities and reflected them at fair market value on the accompanying balance sheets. The investment income is retained within the trust account. The cost and fair market value of the site restoration fund at December 31, 1996 were $4,920,000 and $5,383,000, respectively, and at December 31, 1995 were $3,798,000 and $4,043,000, respectively. The staff of the Securities and Exchange Commission has questioned certain current accounting practices of the electric utility industry regarding the recognition, measurement and classification of decommissioning costs for nuclear generating stations in financial statements of electric utilities. In response to those questions, the Financial Accounting Standards Board (FASB) has initiated a review of the accounting for such costs. The FASB has considered several approaches, including recording the entire estimated liability for decommissioning costs OCEAN STATE POWER II NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Depreciation and Site Restoration (Continued) initially, rather than accruing the costs over the operating life of the generating unit. OSP II believes that such an accounting change, if adopted by the FASB, would not adversely affect OSP II's results of operations due to its ability to recover decommissioning costs through rates. Cash and Cash Equivalents OSP II considers all highly liquid investments with a maturity of three months or less to be cash equivalents. Income Taxes Income taxes are the responsibility of the partners and are not reflected in the financial statements of partnerships under generally accepted accounting principles. However, the billing calculation includes an allowance for income taxes, and the FERC requires that OSP II record this provision on its records to reflect the income taxes calculated as if OSP II were a taxable corporation. The provisions for current and deferred income taxes payable by partners are recorded without regard to whether each partner could utilize its share of the OSP II tax deductions. Partners' capital and the net investment base are reduced by the amount equivalent to accumulated deferred federal income taxes payable by partners in calculating the allowed return. OSP II recognizes, in accordance with SFAS No. 109, Accounting for Income Taxes, tax assets and liabilities for the cumulative effect of all temporary differences between financial statement carrying amounts and the tax bases of assets and liabilities. The standard also requires the adjustment of deferred tax liabilities or assets for an enacted change in tax laws or rates, among other things. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Certain amounts in OSP II's prior-year financial statements have been reclassified to conform with the current year's presentation. OCEAN STATE POWER II NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (3) PARTNERS' CAPITAL The general partners, along with their respective equity interests, at December 31, 1996 are as follows:
Equity Partner Affiliate of Interest TCPL Power Ltd. TransCanada PipeLines Limited 40.0% EUA Ocean State Corporation Eastern Utilities Associates 29.9 Narragansett Energy Resources Company New England Electric System 20.0 JMC Ocean State Corporation J. Makowski Company, Inc. 10.1 ----- 100.0% =====
(4) DEBT OSP Finance Company is a finance affiliate of OSP and OSP II (the Partnerships), and each Partnership owns 50% of its common stock. OSP Finance Company's single purpose is to provide long-term financing for the Partnerships. In October 1992, OSP Finance Company issued senior notes to various institutional investors in three tranches with fixed interest rates and varying maturity dates. Upon receipt of the senior note proceeds, OSP Finance Company extended loans to Partnerships, with terms the same as the senior notes. On July 20, 1994, the Partnerships entered into a revolving secured credit agreement (the Revolver) with a commercial bank for $15,000,000. The Partnerships must pay an annual commitment fee of .15% on the unused portion of the Revolver. Principal borrowings under the Revolver are payable in full at maturity. The Revolver expires on July 20, 2001 and bears interest at varying rates. The interest rate at December 31, 1996 and 1995 was 6.031% and 6.125%, respectively. Debt outstanding at December 31, 1996 is as follows (dollars in thousands):
OSP OSP II Total 6.96% Series A senior notes due June 15, 2002 $32,699 $28,028 $60,727 7.92% Series B senior notes due February 15, 2006 22,077 18,923 41,000 8.21% Series C senior notes due September 15, 2011 31,231 26,769 58,000 Revolving line of credit 4,500 2,000 6,500 ------- ------- -------- Total long-term debt 90,507 75,720 166,227 Less Current maturities 5,998 5,141 11,139 ------- ------- -------- Long-term debt, excluding current maturities $84,509 $70,579 $155,088 ====== ====== =======
OCEAN STATE POWER II NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (4) DEBT (Continued) The Partnerships are guarantors of the senior note agreement and the Revolver on a joint and several basis. The senior notes and amounts outstanding under the Revolver are collateralized by assignment of the rights and interest in all of the Partnerships' unit power agreements and all resulting proceeds with the exception, however, of revenues under the unit power agreements that are attributable to domestic gas transportation, on which the domestic gas transporter has a first lien. The senior note agreement and the Revolver contain certain covenants, including restrictions on the creation of liens, sale of assets, amendment of agreements and the incurrence of additional indebtedness. OSP II's share of the senior notes matures at $5,141,000 per year over the life of the senior notes. (5) COMMITMENTS AND CONTINGENCIES OSP II has entered into various agreements in connection with the operation of the power plant. OSP II is obligated under the following agreements/commitments. Gas Supply and Transportation OSP II has firm, 20-year gas purchase contracts with two Canadian suppliers for the purchase of 25,000 Mcf from each supplier per day or a total minimum of 12,318,750 Mcf per year, to be delivered to the U.S./Canadian border. One of the gas purchase contracts was entered into with an affiliate of TCPL Power Ltd., a general partner. OSP II may also purchase additional quantities of gas as available. The contract prices are based on an initial base price, subject to monthly adjustments based on changes in the New England Power Pool's (NEPOOL) Fossil Fuel Index price. These contracts provide OSP II with its primary fuel supply while maintaining other gas supply options and oil as backups. OSP II has a firm, 20-year fuel transportation agreement with Tennessee Gas Pipeline Company for delivery of natural gas from the U.S./Canadian border to the plant. The agreement may be extended beyond 20 years on a year-by-year basis. OCEAN STATE POWER II NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (5) COMMITMENTS AND CONTINGENCIES (Continued) Tax Treaty The Partnerships entered into a tax treaty with the Town of Burrillville, Rhode Island, providing for annual payments to the town in lieu of any taxes that would normally be assessed. Payments are to be made quarterly over the 20-year period through 2011 and are to be shared equally by the Partnerships. The total payments for OSP II for each of the five years subsequent to December 31, 1996 are as follows (dollars in thousands): 1997 1,520 1998 1,671 1999 1,774 2000 1,774 2001 1,774 Other Commitments As part of the costs incurred to obtain the site on which the power unit is constructed, OSP II has entered into certain agreements that provide for payments in lieu of taxes in addition to the tax treaty above. OSP II agreed to make annual payments to the scholarship and community service foundations in Burrillville, Rhode Island, and Uxbridge, Massachusetts, as well as to the Harrisville, Rhode Island, fire district in anticipation of any services to be rendered. Payments are to be made annually over the 20-year life and are to be shared equally by OSP and OSP II. Deferred Revenues OSP II filed its 1995 supplement to its rate schedules with the FERC on February 1, 1995, setting forth its proposed Return on Equity (ROE) of 12.90% for 1995. Three parties challenged OSP II's determination of the ROE and requested a hearing to determine the appropriate ROE for 1995. After a hearing was set, OSP II submitted an offer to settle the proceedings at an ROE of 12.33%, which the presiding administrative law judge certified to the FERC. The parties are currently waiting for the FERC's decision on whether to approve the settlement offer. At December 31, 1996, OSP II has deferred revenue recognition of $881,000 for the difference between 12.90% and 12.33%, OSP II's estimated result of the proceedings. OCEAN STATE POWER II NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (5) COMMITMENTS AND CONTINGENCIES (Continued) Industry Restructuring The states in which OSP II's partners and power purchasers are based have utility restructuring plans in different stages of development or implementation. Some, such as Massachusetts, call for an earlier initiation of retail competition and divestiture of generation assets, as well as providing for other arrangements for recovery of stranded costs. OSP II believes that there are many uncertainties associated with any major restructuring of the electric utility industry. Among them are: the positions that will ultimately be taken by the various New England states and their regulatory agencies and their applicability to OSP II; the role of the FERC in any restructuring involving OSP II and the ultimate positions it will take on relevant issues within its jurisdiction; to what extent the United States Congress will take legislative action and, if it does, with what results; whether the necessary political consensus can be reached on the significant and complex issues involved in changing the long-standing structure of the electric utility industry; and to what extent electric utilities will be permitted to recover their strandable costs. OSP II cannot predict what form the restructuring of the electric utility industry will take, or what effect any resulting restructuring will have on OSP II's business operations or financial results. OCEAN STATE POWER II NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (6) RELATED PARTIES Ground Lease OSP II entered into an agreement to lease certain property on which OSP II was constructed from OSP. The original lease term expires on December 31, 2011 and is renewable in five-year periods through September 2088. The lease may be terminated by OSP II with the appropriate written notice to OSP during the initial term. OSP may terminate the lease only upon its purchase of OSP II's power unit. Under the provisions of the lease, OSP II paid approximately $1.1 million of initial rent upon receipt of its construction financing. OSP II has classified amounts under this provision as prepaid rent to be amortized over the life of the lease. OSP has an option to acquire OSP II's power unit at any time at a price equal to the greater of its fair value or any amounts due under any mortgage on the unit. Common Facilities Lease OSP II entered into an agreement to lease from OSP an undivided interest in certain common facilities. The basic term expires on September 30, 1997 and may be extended in five-year increments through September 2088. Rent is payable in an amount equal to OSP II's share of the monthly investment cost of the common facilities for the basic term of the lease and an amount equal to a fair market rental value of the leased property thereafter. OSP II is obligated to share in the costs of maintaining the facility and has an option to purchase its undivided interest in the common facilities for its appraised fair market values. The lease may be terminated by OSP II upon written notice and payment of certain rents based on the fair market value during the canceled term. Project Administration Agent Effective October 1, 1996, TransCanada Power (TCP), a division of TransCanada Energy Ltd., an affiliate of one of the general partners, was appointed project administration agent to manage the day-to-day affairs of OSP II. TCP is compensated at agreed-upon billing rates that are adjusted annually. TCP was paid approximately $137,000 for services provided in 1996. The prior administration agent, J. Makowski Management Corp., was paid approximately $586,000 in 1996 and $1,076,000 in 1995 for services rendered. OCEAN STATE POWER II NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (6) RELATED PARTIES (Continued) Interconnection Facility OSP and OSP II entered into an agreement to lease the interconnection facility from Blackstone Valley Electric Company (BVE), an affiliate of Eastern Utilities Associates. Rent payments are to be paid monthly over the 20-year period through 2011 and are to be shared equally by OSP and OSP II. OSP II paid BVE approximately $637,000 in 1996 and $649,000 in 1995 for use of the interconnection facility. Gas Layoff Sales During the years ended December 31, 1996 and 1995, OSP II made the following sales of available gas at market prices to the following affiliated entities (dollars in thousands):
1996 1995 US Generating Corp. (an affiliate of JMC Ocean State Corporation OSP $ 27 $ - Selkirk Cogen Partners (an affiliate of JMC Ocean State Corporation) - 1,354 Altresco Pittsfield, L.P.(an affiliate of JMC Ocean State Corporation) - 124 New England Power Company - 94 MASSPOWER (An affiliate of JMC Ocean State Corporation) - 74
(7) PROVISION FOR INCOME TAXES PAYABLE BY PARTNERS OSP II provides an amount equal to income tax expense as if it were a separate corporation, and this amount is a component of cost of service. The partners are exempt from state income tax in Rhode Island. Computed federal income taxes payable by partners are as follows (dollars in thousands):
1996 1995 Current $5,713 $6,392 Deferred (318) (350) ------ ------ $5,395 $6,042 ====== ======
OCEAN STATE POWER II NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995 (Continued) (7) PROVISION FOR INCOME TAXES PAYABLE BY PARTNERS (Continued) The tax effects of the temporary differences and tax carryforwards that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1996 and 1995 are presented below (dollars in thousands):
1996 1995 Deferred tax assets Site restoration reserve $ 1,872 $ 1,402 Other 215 189 ------- ------- Total deferred tax assets 2,087 1,591 ------- ------- Deferred tax liabilities Property, plant and equipment 5,244 4,829 Regulatory asset 39 69 Debt expense - 207 ------- ------- Total deferred tax liabilities 5,283 5,105 ------- ------- Net deferred tax liability $ 3,196 $ 3,514 ======= =======
A valuation allowance has not been recorded at December 31, 1996 and 1995, as OSP II expects that all deferred income tax assets will be utilized in the future. (8) DISCLOSURE OF FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of cash and cash equivalents approximate fair value because of the short maturity of these investments. The fair value of the site restoration fund is based on the quoted market prices of the investments of the fund. The fair value of long-term debt is estimated based on currently quoted market prices for similar types of borrowing arrangements. The estimated fair value of OSP II's financial instruments as of December 31, 1996 are as follows (dollars in thousands):
Carrying Value Fair Value Cash and cash equivalents $ 516 $ 516 Site restoration fund 5,383 5,383 Long-term debt 75,720 80,591
EX-99 15 EXHIBIT E.5 Exhibit E.5 ARTHUR ANDERSEN LLP OSP FINANCE COMPANY FINANCIAL STATEMENTS AS OF DECEMBER 31, 1996 AND 1995 TOGETHER WITH AUDITORS' REPORT ARTHUR ANDERSEN LLP REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders and the Board of Directors of OSP Finance Company: We have audited the accompanying balance sheets of OSP Finance Company (a Delaware corporation) as of December 31, 1996 and 1995, and the related statements of operations, stockholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of OSP Finance Company as of December 31, 1996 and 1995, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. s/Arthur Andersen LLP Boston, Massachusetts March 17, 1997 OSP FINANCE COMPANY BALANCE SHEETS - DECEMBER 31, 1996 AND 1995 (DOLLARS IN THOUSANDS) ASSETS
1996 1995 ---- ---- CURRENT ASSETS: Loans receivable from stockholders- Ocean State Power $ 5,998 $ 5,998 Ocean State Power II 5,141 5,141 Interest receivable from stockholders- Ocean State Power 275 292 Ocean State Power II 235 250 -------- -------- Total current assets 11,649 11,681 -------- -------- LOANS RECEIVABLE FROM STOCKHOLDERS-NONCURRENT (Note 2): Ocean State Power 80,009 86,007 Ocean State Power II 68,579 73,720 -------- -------- Total loans receivable-noncurrent 148,588 159,727 -------- -------- $160,237 $171,408 ======== ======== Liabilities and Stockholders' Equity CURRENT LIABILITIES: Current maturities of senior notes (Note 2) $11,139 $11,139 Accrued interest 510 542 -------- -------- Total current liabilities 11,649 11,681 SENIOR NOTES, EXCLUDING CURRENT MATURITIES (Note 2) 148,588 159,727 -------- -------- Total liabilities 160,237 171,408 -------- -------- STOCKHOLDERS' EQUITY: Common stock, $1.00 par value- Authorized-1,000 shares Issued and outstanding-20 shares - - Additional paid-in capital 1 1 Accumulated deficit (1) (1) -------- -------- Total stockholders' equity - - -------- -------- $160,237 $171,408 ======== ======== The accompanying notes are an integral part of these financial statements.
OSP Finance Company STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 (DOLLARS IN THOUSANDS)
1996 1995 INCOME: Interest from Ocean State Power $ 6,797 $ 7,194 Interest from Ocean State Power II 5,826 6,166 ------- ------- Total income 12,623 13,360 INTEREST EXPENSE: Senior notes due 2002 4,614 5,374 Senior notes due 2006 3,247 3,238 Senior notes due 2011 4,762 4,748 ------- ------- Total interest expense 12,623 13,360 ------- ------- Net income $ - $ - ======= ======= The accompanying notes are an integral part of these financial statements.
OSP FINANCE COMPANY STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 (DOLLARS IN THOUSANDS)
Additional Total Common Paid-in Accumulated Stockholders' Stock Capital Deficit Equity BALANCE, DECEMBER 31, 1994 $ - $ 1 $ (1) $ - Net income - - - - ------- ------- ------- ------- BALANCE, DECEMBER 31, 1995 - 1 (1) - Net income - - - - ------- ------- ------- ------- BALANCE, DECEMBER 31, 1996 $ - $ 1 $ (1) $ - ======= ======= ======= ======= The accompanying notes are an integral part of these financial statements.
OSP FINANCE COMPANY STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 (DOLLARS IN THOUSANDS)
1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ - $ - Adjustments to reconcile net income to net cash provided by operating activities - Changes in operating assets and liabilities- Interest receivable 32 71 Accrued interest (32) (71) -------- -------- Net cash provided by operating activities - - -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Repayment of loans by stockholders 11,139 11,139 -------- -------- Net cash provided by investing activities 11,139 11,139 -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of senior notes (11,139) (11,139) -------- -------- Net cash used for financing activities (11,139) (11,139) -------- -------- NET INCREASE IN CASH - - CASH, BEGINNING OF PERIOD - - -------- -------- CASH, END OF PERIOD $ - $ - ======== ======== CASH PAID FOR INTEREST $ 12,655 $ 13,431 ======== ======== The accompanying notes are an integral part of these financial statements.
OSP FINANCE COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (1) ORGANIZATION AND BUSINESS OSP Finance Company (the Company) was incorporated in July 1992 as a finance affiliate of Ocean State Power (OSP) and Ocean State Power II (OSP II). OSP and OSP II (the Partnerships) each own 50% of the Company's common stock. The Company's single purpose is to provide long-term debt financing for the Partnerships. Upon receipt of the senior note proceeds, as discussed in Note 2, the Company loaned the proceeds to the Partnerships. The costs associated with the refinancing were paid by the Partnerships. The interest and repayment terms of the loans receivable are the same as the senior notes. The Company does not expect to recognize any significant income(loss) for financial reporting or income tax purposes. The Partnerships were formed to construct, own and operate two combined-cycle electric generating plants located in Burrillville, Rhode Island. Each plant's average net capacity is approximately 250 megawatts, and each is fired by natural gas purchased under firm 20-year gas purchase contracts. OSP commenced commercial operations on December 31, 1990, and OSP II commenced commercial operations on October 1, 1991. Each plant's capacity and energy output is being sold under 20-year take-or-pay unit power agreements to three investor-owned utilities located in Massachusetts and Rhode Island. (2) SENIOR NOTES On October 19, 1992, the Company issued senior notes in three tranches with fixed interest rates and varying maturity dates. The senior notes were purchased by various institutional investors. A detail of the senior notes outstanding at December 31, 1996 is as follows:
OSP OSP II Total 6.96% Series A notes due June 15, 2002 $32,699 $28,028 $60,727 7.92% Series B notes due February 15, 2006 22,077 18,923 41,000 8.21% Series C notes due September 15, 2011 31,231 26,769 58,000 ------- ------- ------- Total senior notes payable 86,007 73,720 159,727 Less Current maturities 5,998 5,141 11,139 ------- ------- ------- Senior notes payable, excluding current maturities $80,009 $68,579 $148,588 ======= ======= =======
OSP FINANCE COMPANY NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996 (Continued) (2) SENIOR NOTES (Continued) The fair value of the Company's senior notes at December 31, 1996, estimated based on currently quoted market prices for similar types of borrowing arrangements, is $170,281,000. The Partnerships are guarantors of the senior note agreement on a joint and several basis. The senior notes are collateralized by assignment of the rights and interest in all OSP and OSP II's unit power agreements and all resulting proceeds, with the exception, however, of revenues under the unit power agreements that are attributable to domestic gas transportation, on which the domestic gas transporter has a first lien. The senior note agreement contains certain covenants, including restrictions on the creation of liens, sale of assets, amendment of agreements and the incurrence of additional indebtedness. The senior notes mature at $11,139,000 per year, $5,998,000 for OSP and $5,141,000 for OSP II, over the life of the senior notes. EX-27 16 EXHIBIT G FINANCIAL DATA SCHEDULE
OPUR1 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND RELATED CONSOLIDATED STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS OF NEW ENGLAND ELECTRIC SYSTEM, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 DEC-31-1996 DEC-31-1996 12-MOS PER-BOOK 3,896,605 389,146 488,880 448,620 0 5,223,251 64,970 736,773 887,292 1,685,417 0 126,166 1,614,578 0 0 145,050 79,705 0 0 0 1,572,335 5,223,251 2,350,698 139,199 1,863,381 2,002,580 348,118 2,168 350,286 127,760 208,936 6,463 208,936 153,173 110,479 522,570 $3.22 $3.22 Total deferred charges includes other assets. Preferred stock reflects preferred stock of subsidiaries. Preferred stock dividends reflect preferred stock dividends of subsidiaries and net gain on reacquisition of preferred stock. Total common stockholders equity is reflected net of treasury stock at cost. EX-27 17 EXHIBIT G FINANCIAL DATA SCHEDULE
OPUR1 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND RELATED STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS OF MASSACHUSETTS ELECTRIC COMPANY, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. MASSACHUSETTS ELECTRIC COMPANY 1 1,000 DEC-31-1996 DEC-31-1996 12-MOS PER-BOOK 1,088,430 0 235,809 66,019 0 1,390,258 59,953 201,172 165,936 427,061 0 50,000 343,321 5,275 0 38,500 30,000 0 0 0 496,101 1,390,258 1,538,537 25,186 1,441,390 1,466,576 71,961 (1,213) 70,748 32,822 37,926 3,114 34,812 19,184 27,089 102,919 0 0 Total deferred charges includes other assets. Per share data is not relevant because the Company's common stock is wholly-owned by New England Electric System. EX-27 18 EXHIBIT G FINANCIAL DATA SCHEDULE
OPUR1 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND RELATED STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS OF THE NARRAGANSETT ELECTRIC COMPANY, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. THE NARRAGANSETT ELECTRIC COMPANY 2 1,000 DEC-31-1996 DEC-31-1996 12-MOS PER-BOOK 560,183 0 89,938 56,881 0 707,002 56,624 80,170 119,978 256,772 0 36,500 178,517 5,300 0 13,725 32,500 0 0 0 183,688 707,002 503,585 11,951 448,123 460,074 43,511 (732) 42,779 19,825 22,954 2,143 20,811 9,060 17,205 65,637 0 0 Total deferred charges includes other assets. Per share data is not relevant because the Company's common stock is wholly-owned by New England Electric System. EX-27 19 EXHIBIT G FINANCIAL DATA SCHEDULE
OPUR1 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND RELATED STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS OF NEW ENGLAND POWER COMPANY, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. NEW ENGLAND POWER COMPANY 3 1,000 DEC-31-1996 DEC-31-1996 12-MOS PER-BOOK 1,910,293 78,493 333,042 325,887 0 2,647,715 128,998 376,597 400,610 906,205 0 39,666 733,006 5,275 0 88,325 3,000 0 0 0 872,238 2,647,715 1,600,309 91,894 1,304,654 1,396,548 203,761 3,308 207,069 54,586 152,483 2,574 149,909 134,158 45,111 272,949 0 0 Total deferred charges includes other assets. Per share data is not relevant because the Company's common stock is wholly-owned by New England Electric System. EX-27 20 EXHIBIT G FINANCIAL DATA SCHEDULE
OPUR1 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND RELATED STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS OF GRANITE STATE ELECTRIC COMPANY, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. GRANITE STATE ELECTRIC COMPANY 4 1,000 DEC-31-1996 DEC-31-1996 12-MOS PER-BOOK 48,615 0 7,259 2,107 0 57,981 6,040 4,000 9,645 19,685 0 0 15,000 5,475 0 0 0 0 0 0 17,821 57,981 67,906 1,074 63,340 64,414 3,492 (79) 3,413 1,709 1,704 0 1,704 1,057 1,340 3,539 0 0 Total deferred charges includes other assets. Per share data is not relevant because the Company's common stock is wholly-owned by New England Electric System. EX-27 21 EXHIBIT G FINANCIAL DATA SCHEDULE
OPUR1 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND RELATED STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS OF NEW ENGLAND HYDRO- TRANSMISSION ELECTRIC COMPANY, INC., AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. NEW ENGLAND HYDRO-TRANSMISSION ELECTRIC COMPANY, INC. 5 1,000 DEC-31-1996 DEC-31-1996 12-MOS PER-BOOK 167,414 5 6,713 8,296 0 182,428 40,000 16,384 232 56,616 0 0 84,570 0 0 0 6,960 0 0 0 34,282 182,428 40,897 5,671 17,639 23,310 17,587 110 17,697 8,765 8,932 0 8,932 11,600 8,734 24,752 0 0 EX-27 22 EXHIBIT G FINANCIAL DATA SCHEDULE
OPUR1 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND RELATED STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS OF NEW ENGLAND HYDRO-TRANSMISSION CORPORATION, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. NEW ENGLAND HYDRO-TRANSMISSION CORPORATION 6 1,000 DEC-31-1996 DEC-31-1996 12-MOS PER-BOOK 140,110 5 2,694 6,867 0 149,676 19,700 16,230 849 36,779 0 0 51,920 3,000 0 0 4,560 0 0 0 53,417 149,676 33,715 3,326 19,532 22,858 10,857 41 10,898 5,451 5,447 0 5,447 4,767 5,398 13,340 0 0 EX-27 23 EXHIBIT G FINANCIAL DATA SCHEDULE
OPUR1 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND RELATED STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS OF NEW ENGLAND ELECTRIC TRANSMISSION CORPORATION, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. NEW ENGLAND ELECTRIC TRANSMISSION CORPORATION 7 1,000 DEC-31-1996 DEC-31-1996 12-MOS PER-BOOK 43,759 0 170 383 0 44,312 120 2,880 244 3,244 0 0 20,864 1,250 0 0 4,624 0 0 0 14,330 44,312 10,062 175 6,447 6,622 3,440 (3) 3,437 2,545 892 0 892 867 2,487 5,493 0 0 Total deferred charges includes other assets. EX-27 24 EXHIBIT G FINANCIAL DATA SCHEDULE
OPUR1 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND RELATED STATEMENTS OF INCOME, RETAINED EARNINGS AND CASH FLOWS OF NANTUCKET ELECTRIC COMPANY, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. NANTUCKET ELECTRIC COMPANY 8 1,000 DEC-31-1996 DEC-31-1996 12-MOS PER-BOOK 27,852 0 14,347 1,374 0 43,573 0 3,810 356 4,166 0 0 30,604 1,500 0 0 765 0 0 0 6,538 43,573 11,864 152 10,999 11,151 713 (77) 790 434 356 0 356 0 990 (9,809) 0 0 Total deferred charges includes other assets. -----END PRIVACY-ENHANCED MESSAGE-----