<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1996
REGISTRATION NO. 333-3362
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BAYCORP HOLDINGS, LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 4911 02-0488443
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
COCHECO FALLS MILLWORKS, 100 MAIN STREET, DOVER, NEW HAMPSHIRE 03820
(603) 742-3388
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOHN A. TILLINGHAST, PRESIDENT
BAYCORP HOLDINGS, LTD.
COCHECO FALLS MILLWORKS
100 MAIN STREET
DOVER, NEW HAMPSHIRE 03820
(603) 742-3388
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
DAVID E. REDLICK, ESQ
HALE AND DORR
60 STATE STREET
BOSTON, MA 02109
(617) 526-6000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement
and the satisfaction or waiver of certain other conditions under the Agreement
and Plan of Merger described herein.
If any of the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT WILL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT WILL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
BAYCORP HOLDINGS, LTD.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER LOCATIONS IN PROXY STATEMENT/PROSPECTUS
- ----------- ---------------------------------------
<S> <C> <C>
INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus................. Cover Page of Registration Statement;
Cross Reference Sheet; Outside Front
Cover Page of Proxy
Statement/Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus..................................... Inside Front Cover Page of Proxy
Statement/Prospectus; Available
Information; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.................. Summary; Selected Financial Data; Risk
Factors
4. Terms of the Transaction....................... Summary; The Merger; Comparison of
Stockholder Rights
5. Pro Formal Financial Information............... Selected Financial Data; Financial
Statements
6. Material Contracts with the Company Being
Acquired....................................... The Merger
7. Additional Information Required for Reoffering
By Persons and Parties Deemed to be
Underwriters................................... *
8. Interests of Named Experts and Counsel......... *
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................... *
INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants.... *
11. Incorporation of Certain Information By
Reference...................................... *
12. Information with Respect to S-2 or S-3
Registrants.................................... *
13. Incorporation of Certain Information by
Reference...................................... *
14. Information with Respect to Registrants Other
than S-3 or S-2 Registrations.................. Description of Holding Company
INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies...... *
16. Information with Respect to S-2 or S-3
Companies...................................... *
17. Information with Respect to Companies Other
Than S-3 or S-2 Companies...................... Available Information; Summary;
Selected Financial Data
VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or
Authorizations are to be Solicited............. Outside Front Cover Page of Joint Proxy
Statement/Prospectus; Available
Information; Summary; The Special
Meeting; The Merger; Comparison of
Stockholder Rights
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or in an
Exchange Offer................................. *
<FN>
- ---------------
* Inapplicable
</TABLE>
<PAGE> 3
GREAT BAY POWER CORPORATION
COCHECO FALLS MILLWORKS
100 MAIN STREET
DOVER, NEW HAMPSHIRE 03820
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 1996
To the Shareholders of Great Bay Power Corporation:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders (the "Special
Meeting") of Great Bay Power Corporation, a New Hampshire corporation ("Great
Bay"), will be held on , , 1996 at the offices of Hale and
Dorr, 60 State Street, Boston, Massachusetts, beginning at 10:00 a.m., local
time, for the following purposes:
1. To consider and vote upon a proposal to approve an Agreement and Plan
of Merger dated as of May 28, 1996 (the "Merger Agreement") by and
among Great Bay, BayCorp Holdings, Ltd. ("Holding Company"), a newly-
formed Delaware corporation that is currently a wholly-owned subsidiary
of Great Bay, and GB Transitory Subsidiary, Inc., a wholly-owned
subsidiary of Holding Company (the "Transitory Subsidiary"), pursuant
to which, among other things, (a) Transitory Subsidiary will be merged
with and into Great Bay (the "Merger"), (b) except for shares of Great
Bay Common Stock, $.01 par value per share ("Great Bay Common Stock")
which are held by Great Bay shareholders who properly exercise their
dissenters' rights under New Hampshire law, each outstanding share of
Great Bay Common Stock will be converted into the right to receive one
share of common stock, $.01 par value per share, of Holding Company
("Holding Company Common Stock"), (c) Great Bay will become a
wholly-owned subsidiary of Holding Company, and (d) each holder of
options to purchase shares of Great Bay Common Stock issued by Great
Bay pursuant to Great Bay's 1995 Stock Option Plan (the "Great Bay
Stock Option Plan") whether vested or unvested ("Great Bay Options"),
will be granted substitute options to purchase an equal number of
shares of Holding Company Common Stock pursuant to Holding Company's
1996 Stock Option Plan (the "Holding Company Stock Option Plan") on the
same terms and conditions and at the same exercise price per share as
presently provided for by the Great Bay Options. THE MERGER IS MORE
COMPLETELY DESCRIBED IN THE MERGER AGREEMENT, THE FORM OF WHICH IS
ATTACHED AS ANNEX I TO THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS.
2. To approve Holding Company's 1996 Stock Option Plan, a copy of which is
attached as Annex III to the accompanying Proxy Statement/Prospectus.
3. To transact such other business as may properly come before the Special
Meeting or any adjournments or postponements thereof.
Only holders of record of shares of Great Bay Common Stock at the close of
business on May 3, 1996, the record date for the Special Meeting (the "Record
Date"), are entitled to notice of, and to vote at, the Special Meeting and any
adjournments or postponements thereof.
The affirmative vote of the holders of a majority of the outstanding shares
of Great Bay Common Stock is necessary to approve the Merger Agreement. The
affirmative vote of the holders of a majority of the shares of Great Bay Common
Stock present or represented at the Special Meeting is required for the approval
of Holding Company's 1996 Stock Option Plan.
<PAGE> 4
Holders of Great Bay Common Stock are entitled to assert dissenters'
rights under Sections 293-A:13.01-13.31 of the New Hampshire Business
Corporation Act with respect to the proposed Merger and, subject to the
consummation of the Merger, to receive the "fair value" of their shares in cash
by complying with the procedures set forth in Sections 293-A:13.20-13.28 of the
New Hampshire Business Corporation Act. Unless waived by Great Bay, it is a
condition to the Merger that the number of shares of Great Bay Common Stock
held by shareholders of Great Bay who properly exercise their dissenters'
rights shall not exceed 20,000 shares as of the effective date of the Merger. A
description of dissenters' rights under New Hampshire law is included in the
accompanying Proxy Statement/Prospectus and a copy of the relevant text of the
New Hampshire Business Corporation Act is attached as Annex II to the
accompanying Proxy Statement/Prospectus.
By Order of the Board of Directors
FRANK W. GETMAN JR.
Secretary
, 1996
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
DATE AND SIGN YOUR PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE-
PREPAID ENVELOPE. DO NOT SEND ANY STOCK CERTIFICATES WITH THE ENCLOSED PROXY
CARD. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE EITHER IN PERSON OR BY
YOUR PROXY.
PLEASE DO NOT SEND STOCK CERTIFICATES AT THIS TIME.
<PAGE> 5
PRELIMINARY COPY
SUBJECT TO COMPLETION, DATED MAY , 1996
PROXY STATEMENT/PROSPECTUS
---------------------------
PROSPECTUS
FOR SHARES OF COMMON STOCK OF
BAYCORP HOLDINGS, LTD.
---------------------------
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS
GREAT BAY POWER CORPORATION
TO BE HELD ON , 1996
This Proxy Statement/Prospectus relates to the proposed merger (the
"Merger") of GB Transitory Subsidiary, Inc., a New Hampshire corporation
("Transitory Subsidiary"), which is a wholly-owned subsidiary of BayCorp
Holdings, Ltd., a Delaware corporation ("Holding Company"), with and into Great
Bay Power Corporation, a New Hampshire corporation ("Great Bay"), pursuant to an
Agreement and Plan of Merger dated as of May 28, 1996 (the "Merger Agreement"),
the form of which is attached as Annex I hereto. As a result of the Merger, (i)
Transitory Subsidiary will be merged with and into Great Bay, (ii) except for
shares of Great Bay's common stock, $.01 par value per share ("Great Bay Common
Stock"), which are held by Great Bay shareholders who properly exercise their
dissenters' rights under New Hampshire law ("Dissenting Shares"), each
outstanding share of Great Bay Common Stock will be converted into the right to
receive one share of common stock, $.01 par value per share, of Holding Company
("Holding Company Common Stock"), (iii) Great Bay will become a wholly-owned
subsidiary of Holding Company, and (iv) each holder of options to purchase
shares of Great Bay Common Stock issued by Great Bay pursuant to its 1995 Stock
Option Plan (the "Great Bay Stock Option Plan"), whether vested or unvested
("Great Bay Options"), will be granted substitute options to purchase an equal
number of shares of Holding Company Common Stock pursuant to Holding Company's
1996 Stock Option Plan (the "Holding Company Stock Option Plan") on the same
terms and conditions and at the same exercise price per share as presently
provided for by the Great Bay Options. The Holding Company Stock Option Plan is
identical to the Great Bay Stock Option Plan, and the Great Bay Stock Option
Plan will be terminated if the Merger is consummated.
This Proxy Statement/Prospectus serves as a Prospectus of Holding Company
with respect to up to 8,439,948 shares of Holding Company Common Stock to be
issued in the proposed Merger. Each person who controls or who is under common
control with Great Bay at the time the Merger is submitted for a vote of the
Great Bay shareholders may, in connection with any distribution of the Holding
Company Common Stock received in the Merger, be deemed to be "affiliates" of
Great Bay and thus "underwriters" within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), unless such stock is sold pursuant to
paragraph (d) of Rule 145 promulgated under the Securities Act, pursuant to an
effective registration statement filed under the Securities Act with respect to
such sales or pursuant to another applicable exemption therefrom. This Proxy
Statement/Prospectus does not cover any resales of the Holding Company Common
Stock received by such Great Bay shareholders upon consummation of the Merger,
and no person is authorized to make any use of this Proxy Statement/Prospectus
in connection with any such resale. See "The Merger -- Restrictions on Resale of
Holding Company Common Stock Received in the Merger; Affiliates."
This Proxy Statement/Prospectus also serves as the proxy statement in
connection with the solicitation of proxies by the Board of Directors of Great
Bay (the "Great Bay Board") for use at the special meeting of Great Bay
shareholders (the "Special Meeting") to be held for the purpose of approving the
proposed Merger and the Holding Company Stock Option Plan.
All information contained in this Proxy Statement/Prospectus relating to
Great Bay, Holding Company and Transitory Subsidiary has been supplied by Great
Bay.
<PAGE> 6
Great Bay Common Stock is quoted on the Nasdaq National Market under the
symbol "GBPW." On May 23, 1996, the last reported sale price for a share of
Great Bay Common Stock on the Nasdaq National Market was $7.875. Great Bay
currently is the sole shareholder of Holding Company, and Holding Company Common
Stock is not currently, and has never previously been, traded on any established
public market. Subject to the consummation of the Merger, the Holding Company
Common Stock has been approved for quotation on the Nasdaq National Market under
the symbol "GBPW."
---------------------------
ANY INVESTMENT IN THE SHARES OF HOLDING COMPANY COMMON STOCK OFFERED HEREBY
INVOLVES A HIGH DEGREE OF RISK. FOR A DISCUSSION OF CERTAIN RISKS OF AN
INVESTMENT IN THE SHARES OF HOLDING COMPANY COMMON STOCK OFFERED HEREBY, SEE
"RISK FACTORS" ON PAGES 9 TO 12.
---------------------------
THE SECURITIES TO BE ISSUED IN THE MERGER HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROXY
STATEMENT/PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE HOLDING COMPANY
COMMON STOCK MAY BE REQUIRED TO DELIVER A PROSPECTUS.
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to shareholders of Great Bay on or about , 1996.
The date of this Proxy Statement/Prospectus is , 1996.
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................................................. 1
SUMMARY............................................................................... 2
The Companies....................................................................... 2
Recommendation of the Great Bay Board............................................... 2
The Special Meeting................................................................. 3
The Merger.......................................................................... 3
The Holding Company Stock Option Plan............................................... 6
SELECTED FINANCIAL DATA OF GREAT BAY.................................................. 7
GREAT BAY COMMON STOCK MARKET PRICE INFORMATION....................................... 8
RISK FACTORS.......................................................................... 9
THE SPECIAL MEETING................................................................... 13
General............................................................................. 13
Matters to be Considered at the Special Meeting; Recommendation of the Great Bay
Board............................................................................ 13
Record Date; Shares Entitled to Vote................................................ 13
Quorum; Required Vote............................................................... 13
Voting and Revocation of Proxies.................................................... 14
Solicitation of Proxies............................................................. 14
- -- PROPOSAL ONE --
THE MERGER............................................................................ 15
Reasons for the Merger; Recommendation of Great Bay Board........................... 15
Effective Date of the Merger........................................................ 15
Structure and Terms of the Merger................................................... 15
Employment Agreements to be Assumed by Holding Company.............................. 16
Substitution of Great Bay Stock Options............................................. 16
Assumption of the PECO Warrant...................................................... 16
Assumption of Facility Lease........................................................ 16
Procedure for Exchange of Certificates.............................................. 16
Management and Operation After the Merger........................................... 16
Conditions to Consummation of the Merger; Amendment or Termination of the Merger
Agreement........................................................................ 17
Regulatory Approvals................................................................ 17
Accounting Treatment................................................................ 17
Certain Federal Income Tax Consequences............................................. 17
Restrictions on Resale of Holding Company Common Stock Received in the Merger;
Affiliates....................................................................... 18
RIGHTS OF DISSENTING SHAREHOLDERS..................................................... 19
INFORMATION CONCERNING GREAT BAY...................................................... 21
Business............................................................................ 21
Properties.......................................................................... 29
Employees........................................................................... 29
Legal Proceedings................................................................... 29
Certain Transactions................................................................ 29
Management's Discussion and Analysis of Financial Condition and Results of
Operations....................................................................... 30
Management.......................................................................... 34
Security Ownership of Certain Beneficial Owners and Management of Great Bay......... 38
Relationship Between Holding Company and Great Bay.................................. 40
DESCRIPTION OF HOLDING COMPANY........................................................ 41
DESCRIPTION OF HOLDING COMPANY CAPITAL STOCK.......................................... 41
General............................................................................. 41
Holding Company Common Stock........................................................ 41
Transfer Agent and Registrar........................................................ 42
Holding Company Preferred Stock..................................................... 42
Registration Rights................................................................. 42
</TABLE>
i
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
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<S> <C>
COMPARISON OF STOCKHOLDER RIGHTS...................................................... 43
Authorized Capital Stock............................................................ 43
Preemptive Rights................................................................... 44
Voting Rights....................................................................... 44
Actions by Stockholders Without a Meeting........................................... 44
Dividends or Other Distributions.................................................... 44
Number and Qualification of Directors; Size of Board................................ 45
Cumulative Voting................................................................... 45
Removal of Directors................................................................ 45
Special Meeting of Stockholders..................................................... 45
Amendment of Certificate of Incorporation and By-Laws............................... 46
Director's Liability and Indemnification............................................ 47
Anti-Takeover Statutes.............................................................. 47
Sale of Assets...................................................................... 48
Appraisal Rights.................................................................... 48
- -- PROPOSAL TWO --
THE HOLDING COMPANY STOCK OPTION PLAN................................................. 49
STOCKHOLDER PROPOSALS................................................................. 54
LEGAL MATTERS......................................................................... 54
EXPERTS............................................................................... 54
GLOSSARY OF CERTAIN DEFINED TERMS..................................................... 55
INDEX TO GREAT BAY FINANCIAL STATEMENTS............................................... F-1
ANNEX I AGREEMENT AND PLAN OF MERGER............................................... A-1
ANNEX II SECTIONS 293-A:13.01-13.31 OF THE NEW HAMPSHIRE BUSINESS CORPORATION ACT... B-1
ANNEX III HOLDING COMPANY 1996 STOCK OPTION PLAN..................................... C-1
</TABLE>
ii
<PAGE> 9
AVAILABLE INFORMATION
Great Bay is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by Great Bay with the Commission may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the regional offices of the Commission located at Seven World Trade Center,
13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material also may be obtained from the
Public Reference Section of the Commission, Washington, D.C. 20549 at prescribed
rates.
Holding Company has filed with the Commission a Registration Statement
(which terms will include all amendments, exhibits and schedules thereto) on
Form S-4 (the "Registration Statement") under the Securities Act with respect to
up to 8,439,948 shares of Holding Company Common Stock to be issued upon the
consummation of the Merger. This Proxy Statement/Prospectus, which constitutes a
part of the Registration Statement, omits certain information contained in the
Registration Statement. Such additional information may be obtained from the
Commission's principal office in Washington, D.C. Statements made in this Proxy
Statement/Prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete, and in each instance that
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or such other document, and each such
statement is qualified in its entirety by such reference.
---------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS,
IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES
MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY GREAT BAY, HOLDING COMPANY OR ANY
OTHER PERSON. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION
OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL
TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER WILL UNDER ANY CIRCUMSTANCES CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF GREAT BAY,
TRANSITORY SUBSIDIARY OR HOLDING COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
---------------------------
NOTICE TO NEW HAMPSHIRE RESIDENTS: Neither the fact that a registration
statement or an application for a license has been filed with the State of New
Hampshire nor the fact that a security is effectively registered or a person is
licensed in the State of New Hampshire constitutes a finding by the Secretary of
State that any documents filed under RSA 421-B of the New Hampshire Uniform
Securities Act is true, complete and not misleading. Neither any such fact nor
the fact that an exemption or exception is available for a security or a
transaction means that the Secretary of State has passed in any way upon the
merits or qualifications of, or recommended or given approval to, any person,
security or transaction. It is unlawful to make, or cause to be made, to any
prospective purchaser, customer or client any representation inconsistent with
the provisions of this paragraph.
1
<PAGE> 10
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. The information contained in this summary is
qualified in its entirety by, and should be read in conjunction with, the
detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Proxy Statement/Prospectus and the documents
incorporated herein by reference. A glossary of certain defined terms used in
this Proxy Statement/Prospectus appears under the heading "Glossary of Certain
Defined Terms." Shareholders are urged to read this Proxy Statement/Prospectus
and the Annexes attached hereto in their entirety. See "Risk Factors."
THE COMPANIES
Great Bay Power Corporation. Great Bay is a public utility whose principal
asset is a 12.1% joint ownership interest in Seabrook Nuclear Power Project in
Seabrook, New Hampshire (the "Seabrook Project"). Great Bay was incorporated in
New Hampshire in 1986 and was formerly known as EUA Power Corporation. Great Bay
sells its share of the electricity output of the Seabrook Project in the
wholesale electricity market, primarily in the Northeast United States. Great
Bay does not have operational responsibility for the Seabrook Project. Great
Bay's share of the Seabrook Project capacity is approximately 140 megawatts
("MW"). Great Bay currently sells all but 10 MW of its share of the Seabrook
Project capacity in the Short-Term Market (as defined in the "Glossary of
Certain Defined Terms," below). See "Information Concerning Great Bay --
Business -- Power Purchase Agreements."
Great Bay filed a voluntary petition for reorganization under Chapter 11 of
the United States Bankruptcy Code in the United States Bankruptcy Court for the
District of New Hampshire on February 28, 1991. It conducted its business as a
Debtor in Possession until November 23, 1994, at which time it emerged from
Chapter 11.
BayCorp Holdings, Ltd. Holding Company is a newly formed Delaware
corporation and currently is a wholly-owned subsidiary of Great Bay and thus is
controlled by Great Bay. Holding Company currently is engaged in no business
activities other than in connection with the proposed Merger described herein.
If the Merger is consummated, Holding Company will be the sole shareholder of
Great Bay.
GB Transitory Subsidiary, Inc. Transitory Subsidiary is a newly formed New
Hampshire corporation and a wholly-owned subsidiary of Holding Company.
Transitory Subsidiary was formed specifically for the purpose of effecting the
transactions contemplated by the Merger Agreement. Transitory Subsidiary
currently is engaged in no business activities other than in connection with the
proposed Merger described herein. Subject to the consummation of the Merger,
Transitory Subsidiary will be merged with and into Great Bay. Upon completion of
the Merger, Transitory Subsidiary will cease to exist and Great Bay will be the
surviving corporation.
The principal executive offices of Great Bay, Holding Company and
Transitory Subsidiary are located at Cocheco Falls Millworks, 100 Main Street,
Dover, New Hampshire 03820 and the telephone number is (603) 433-8822.
The Holding Company Stock Option Plan. Pursuant to the Merger Agreement,
Holding Company will adopt the Holding Company Stock Option Plan. The Holding
Company Stock Option Plan is identical to the Great Bay Stock Option Plan, and
the Great Bay Stock Option Plan will be terminated if the Merger is consummated.
RECOMMENDATIONS OF THE GREAT BAY BOARD
The Great Bay Board has determined that the Merger is in the best interests
of Great Bay and its shareholders because the Great Bay Board believes that
attractive opportunities may exist to enter new businesses or acquire existing
businesses, both in energy related fields and in unrelated fields, certain of
which Great Bay may be prohibited from entering because of its status as an
exempt wholesale generator ("EWG"). Accordingly, the Great Bay Board has
unanimously adopted, subject to shareholder approval, the Merger Agreement and
recommends that the shareholders vote FOR approval of the Merger Agreement. In
addition, in connection with the Merger, the Great Bay Board and the Holding
Company Board of Directors (the "Holding Company Board") unanimously adopted,
subject to shareholder approval, the Holding Company Stock Option Plan and
recommends that the shareholders vote FOR approval of the Holding Company Stock
2
<PAGE> 11
- -------------------------------------------------------------------------------
Option Plan. For a description of the reasons for the Merger, see "The Merger --
Reasons for the Merger; Recommendation of Great Bay Board."
THE SPECIAL MEETING
Date, Time and Place of the Special Meeting. The Special Meeting of
shareholders of Great Bay will be held on day, [ ], 1996 at
the offices of Hale and Dorr, 60 State Street, Boston, Massachusetts, beginning
at 10:00 a.m., local time.
Matters to be Considered at the Special Meeting. At the Special Meeting,
the shareholders of Great Bay will be asked to approve the Merger Agreement and
the Holding Company Stock Option Plan.
Record Date; Shares Entitled to Vote. Only holders of record of shares of
Great Bay Common Stock at the close of business on May 3, 1996, the record date
for the Special Meeting (the "Record Date"), are entitled to notice of, and to
vote at, the Special Meeting with respect to the approval of the Merger
Agreement.
Quorum; Required Vote. The presence, in person or by proxy, of the holders
of a majority of the outstanding shares of Great Bay Common Stock entitled to
vote at the Special Meeting will be necessary to constitute a quorum for the
transaction of business. Approval of the Merger Agreement requires the
affirmative vote of the holders of a majority of the outstanding shares of Great
Bay Common Stock. Approval of the Holding Company Stock Option Plan requires the
affirmative vote of the holders of a majority of the shares of Great Bay Common
Stock present or represented at the Special Meeting.
Ownership of Securities. As of the Record Date, there were outstanding and
entitled to vote 7,999,948 shares of Great Bay Common Stock. Accordingly, the
Merger will be approved if the holders of 3,999,975 shares of Great Bay Common
Stock approve the Merger Agreement. As of the Record Date, Great Bay's
directors, executive officers, certain entities affiliated with Great Bay's
directors and executive officers and the Elliott Group (as defined in "Security
Ownership of Certain Beneficial Owners and Management of Great Bay" below) in
the aggregate held, directly or indirectly, 4,453,030 shares of Great Bay Common
Stock, or approximately 55.7% of the shares of Great Bay Common Stock
outstanding as of such date. Each of the directors and executive officers of
Great Bay and the members of the Elliott Group have indicated that they and
their affiliates intend to vote their shares of Great Bay Common Stock for
approval of the Merger Agreement, ensuring the approval of the Merger Agreement
by the Great Bay shareholders without regard to the votes of any other Great Bay
shareholders.
In addition, as of the Record Date, (i) options to purchase 375,000 shares
of Great Bay Common Stock and (ii) a warrant to purchase 420,000 shares of Great
Bay Common Stock (the "PECO Warrant") were outstanding. As of the Record Date,
200,000 of such options were exercisable and the PECO Warrant was exercisable in
full.
Rights of Dissenting Shareholders. Holders of Great Bay Common Stock are
entitled to assert dissenters' rights under Sections 293-A:13.01-13.31 of the
New Hampshire Revised Business Corporation Act (the "New Hampshire Law") with
respect to the proposed Merger and, subject to the consummation of the Merger,
to receive the "fair value" of their shares in cash by complying with the
procedures set forth in Sections 293-A:13.20-13.28 of the New Hampshire Law.
Unless waived by Great Bay, it is a condition to the Merger that the number of
shares of Great Bay Common Stock held by shareholders of Great Bay who properly
exercise their dissenters' rights shall not exceed 20,000 shares as of the
effective date of the Merger. See "Rights of Dissenting Shareholders" and the
text of Sections 293-A:13.01-13.31 of the New Hampshire Law, a copy of which is
attached as Annex II hereto.
THE MERGER
Effective Date. The Merger will become effective upon the date of filing
(the "Effective Date") of Articles of Merger with respect to the Merger of
Transitory Subsidiary with and into Great Bay (the "Articles of Merger"), as
described in the Merger Agreement, with the Secretary of State of the State of
New Hampshire pursuant to Section 293-A:11.05 of the New Hampshire Law. Subject
to the satisfaction of other conditions set forth in the Merger Agreement and
the receipt of all Merger Regulatory Approvals (as defined below), it is
anticipated that the Articles of Merger will be filed as promptly as practicable
following the
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3
<PAGE> 12
- -------------------------------------------------------------------------------
approval of the Merger Agreement by holders of the requisite number of shares of
Great Bay Common Stock. See "The Merger -- Effective Date of the Merger."
General Terms of the Merger. Pursuant to the Merger Agreement, at the
Effective Date (i) Transitory Subsidiary will be merged with and into Great Bay,
(ii) except for Dissenting Shares, each share of Great Bay Common Stock
outstanding immediately prior to the effectiveness of the Merger will be
converted into the right to receive one share of Holding Company Common Stock,
(iii) Great Bay will become a wholly-owned subsidiary of Holding Company, and
(iv) each holder of Great Bay Options will be granted substitute options to
purchase shares of Holding Company Common Stock pursuant to the Holding Company
Stock Option Plan on the same terms and conditions and at the same exercise
price per share as presently provided for by the Great Bay Options. The Holding
Company Stock Option Plan is identical to the Great Bay Stock Option Plan and
the Great Bay Stock Option Plan will be terminated if the Merger is consummated.
See "Rights of Dissenting Shareholders," "The Merger -- Structure and Terms of
the Merger" and "The Holding Company Stock Option Plan."
Conversion of Shares. If the Merger is consummated, at the Effective Date,
each outstanding share of Great Bay Common Stock, except for Dissenting Shares,
will be converted into the right to receive one share of Holding Company Common
Stock. See "Description of Holding Company Capital Stock."
Comparative Rights of Shareholders of Great Bay and Holding Company. If
the Merger is consummated, at the Effective Date, holders of Great Bay Common
Stock, except for holders of Dissenting Shares, will become holders of Holding
Company Common Stock. As a result, the rights of such shareholders, which are
presently governed by the New Hampshire Law, the Restated Articles of
Incorporation of Great Bay (the "Great Bay Articles") and the Amended and
Restated By-Laws of Great Bay (the "Great Bay By-Laws") will be governed by the
Delaware General Corporation Law (the "Delaware Law"), the Certificate of
Incorporation of Holding Company (the "Holding Company Certificate") and the
By-Laws of Holding Company (the "Holding Company By-Laws"). Certain differences
in the rights of such shareholders will arise as a result of this change in
governing law as well as from distinctions between the Articles of Incorporation
and By-Laws of Great Bay and the Certificate of Incorporation and By-Laws of
Holding Company. See "The Merger -- Reasons for the Merger; Recommendation of
Great Bay Board" and "Comparison of Stockholder Rights."
Reasons for the Merger. The Great Bay Board believes that attractive
opportunities may exist to enter new businesses or acquire existing businesses,
both in energy related fields and in unrelated fields. Great Bay currently has
no understandings, agreements or commitments for any acquisition. The Great Bay
Board believes that it is advisable to restructure Great Bay as a subsidiary of
Holding Company because Holding Company would be able to engage in business
activities, through subsidiaries other than Great Bay, which Great Bay is
currently prohibited from engaging in because of Great Bay's status as an Exempt
Wholesale Generator ("EWG") under the Public Utility Holding Company Act of
1935, as amended (the "PUHCA").
As an EWG, Great Bay is limited to the generation and sale of electricity
from the Seabrook Project in the wholesale electricity market and activities
incidental thereto. Holding Company will be able to engage in other business
activities which may be related or unrelated to those of Great Bay. Great Bay is
also subject to regulation by the New Hampshire Public Utilities Commission (the
"NHPUC") as a New Hampshire public utility. Any financing transaction, except
the issuance of short term debt for up to 10% of the value of Great Bay's net
fixed assets, or issuance of securities by Great Bay, among other transactions,
is subject to approval by the NHPUC. Following the consummation of the Merger,
New Hampshire public utilities laws would not directly regulate the activities
of Holding Company.
The Great Bay Board also anticipates that the establishment of a holding
company structure may help insulate Holding Company and each of its subsidiaries
from the liabilities of the others. In addition, Holding Company is governed by
Delaware corporate law, which is better developed (in terms of judicial
interpretation and precedents) and is more widely known and understood by
potential investors and other parties likely to have business dealings with
Holding Company than New Hampshire corporate law which governs Great Bay. See
"The Merger -- Reasons for the Merger; Recommendation of Great Bay Board."
Management and Operation After the Merger. The persons who are officers
and directors of Great Bay immediately prior to the Effective Date will, after
the Effective Date, be the officers and directors of Holding
- -------------------------------------------------------------------------------
4
<PAGE> 13
- -------------------------------------------------------------------------------
Company and of Great Bay, without change, until their successors have been duly
elected or appointed and qualified.
Required Regulatory and Other Approvals. The consummation of the Merger is
subject to approval by the NHPUC and the Federal Energy Regulatory Commission
("FERC") and to consent by the Nuclear Regulatory Commission (the "NRC")
(collectively the "Merger Regulatory Approvals"). Great Bay and Holding Company
have filed applications with the NHPUC, the FERC and the NRC seeking such
approval of and consent to the Merger. See "The Merger -- Regulatory Approvals."
Services Agreement. On the Effective Date, Holding Company and Great Bay
will enter into a Management and Administrative Services Agreement (the
"Services Agreement") pursuant to which the Holding Company will provide to
Great Bay a full range of management services, including general management and
administration, accounting and bookkeeping, budgeting and regulatory compliance.
Great Bay will pay Holding Company a monthly fee of $120,000 in consideration of
such services. The Services Agreement will have a one-year term and will provide
for automatic one-year renewals. The monthly fee for subsequent renewal terms
will be determined by agreement of Great Bay and Holding Company. See
"Information Concerning Great Bay -- Relationship Between Holding Company and
Great Bay."
Conditions to Consummation of the Merger. The consummation of the Merger
is conditioned upon, among other things, obtaining requisite shareholder and
regulatory approvals, approval for quotation on the Nasdaq National Market of
the Holding Company Common Stock to be issued pursuant to the Merger, the
absence of any injunction prohibiting consummation of the Merger, the
effectiveness of the Registration Statement and the receipt of certain legal
opinions with respect to tax matters. In addition, unless waived by Great Bay,
the number of Dissenting Shares will not exceed 20,000 shares of Great Bay
Common Stock as of the Effective Date. See "The Merger -- Certain Federal Income
Tax Consequences" and "The Merger -- Conditions to the Consummation of the
Merger; Amendment or Termination of the Merger Agreement."
Termination of the Merger Agreement. At any time before the Effective
Date, notwithstanding approval by the shareholders of Great Bay, the Merger
Agreement may be terminated by action of the Board of Directors of Great Bay.
See "The Merger -- Conditions to the Consummation of the Merger; Amendment or
Termination of the Merger Agreement."
Restrictions on Resale of Holding Company Common Stock Received in the
Merger; Affiliates. The Registration Statement and this Proxy
Statement/Prospectus do not relate to or cover the resale after the Effective
Date of shares of Holding Company Common Stock issued to shareholders of Great
Bay in the Merger who may be deemed to be "affiliates" of Great Bay and thus
"underwriters" within the meaning of Rule 145 under the Securities Act, and no
person is authorized to make any use of this Proxy Statement/Prospectus in
connection with any such resale. Such securities may not be publicly reoffered
or resold by such persons except pursuant to an effective registration statement
under the Securities Act or pursuant to an applicable exemption therefrom. See
"The Merger -- Restrictions on Resale of Holding Company Common Stock Received
in the Merger; Affiliates."
Accounting Treatment. The Merger will be accounted for as a "pooling of
interests of entities under common control" for accounting and financial
reporting purposes. See "The Merger -- Accounting Treatment."
Certain Federal Income Tax Consequences. The Merger is intended to
constitute a tax-free reorganization under the Internal Revenue Code of 1986, as
amended (the "Code") with respect to Great Bay shareholders who receive shares
of Holding Company Common Stock pursuant to the Merger Agreement. Neither Great
Bay nor Holding Company intends to request a ruling from the Internal Revenue
Service with respect to the Merger. Hale and Dorr, counsel to Great Bay, will
render an opinion to the effect that, under present United States federal income
tax law: (i) no gain or loss will be recognized by shareholders of Great Bay
upon the conversion of their shares of Great Bay Common Stock solely into shares
of Holding Company Common Stock pursuant to the terms of the Merger; (ii) the
tax basis of the shares of Holding Company Common Stock into which shares of
Great Bay Common Stock are converted pursuant to the Merger will be the same as
the basis of such shares of Great Bay Common Stock; and (iii) the holding period
for shares of Holding Company Common Stock into which shares of Great Bay Common
Stock are converted pursuant to the Merger will include the period that such
shares of Great Bay Common Stock were held by the holder,
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5
<PAGE> 14
- -------------------------------------------------------------------------------
provided that such shares were held as capital assets on the Effective Date of
the Merger. See "The Merger -- Certain Federal Income Tax Consequences." Holders
of Great Bay Common Stock are urged to consult with their tax advisors to
determine the particular tax consequences of the Merger to them.
Substitution of Great Bay Stock Options. If the Merger is consummated, at
the Effective Date, each holder of a Great Bay Option under the Great Bay Stock
Option Plan will be granted substitute options by Holding Company under Holding
Company's 1996 Stock Option Plan (the "Holding Company Stock Option Plan") to
purchase an equal number of shares of Holding Company Common Stock on the same
terms and conditions and at the same exercise price per share. The Holding
Company Stock Option Plan is identical to the Great Bay Stock Option Plan and
the Great Bay Stock Option Plan will be terminated if the Merger is consummated.
See "The Holding Company Stock Option Plan" and "The Merger -- Substitution of
Great Bay Stock Options."
Assumption of the PECO Warrant. If the Merger is consummated, at the
Effective Date, the PECO Warrant will be assumed by Holding Company and will
automatically become a warrant representing the right to acquire an equal number
of shares of Holding Company Common Stock on the same terms and conditions and
price per share. See "The Merger -- Assumption of the PECO Warrant."
Procedure for Exchange of Certificates. Subject to the consummation of the
Merger, Holding Company will mail a letter of transmittal with instructions to
all holders of record of Great Bay Common Stock immediately prior to the Merger,
for use in surrendering their stock certificates in exchange for certificates
representing shares of Holding Company Common Stock. Certificates should not be
surrendered until the letter of transmittal is received. See "The Merger --
Procedure for Exchange of Certificates."
THE HOLDING COMPANY STOCK OPTION PLAN
Terms of the Holding Company Stock Option Plan. The Holding Company Board
unanimously adopted, subject to stockholder approval, the Holding Company Stock
Option Plan at its meeting on April 16, 1996. Under the terms of the Holding
Company Stock Option Plan, Holding Company is authorized to grant options
("Holding Company Options") to purchase up to 600,000 shares of Common Stock to
employees, officers or directors of, and consultants and advisors to, the
Company and its subsidiaries. Holding Company may grant options that are
intended to qualify as incentive stock options within the meaning of Section 422
of the Internal Revenue Code of 1986 (the "Code") or nonstatutory options not
intended to qualify as incentive stock options. The purpose of the Holding
Company Stock Option Plan is to ensure that Holding Company may continue to
attract and retain key employees, officers, directors, consultants and advisors
who are expected to contribute to Holding Company's growth and success. The text
of the Holding Company Stock Option Plan is attached as Annex III to this Proxy
Statement/Prospectus. The Holding Company Stock Option Plan is identical to the
Great Bay Stock Option Plan and will replace the Great Bay Stock Option Plan at
the Effective Date and it is intended that the Great Bay Options will be
replaced by Holding Company Options.
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6
<PAGE> 15
SELECTED FINANCIAL DATA OF GREAT BAY
<TABLE>
The following table sets forth selected financial data and other operating
information of Great Bay. The selected financial data presented below for
periods subsequent to November 23, 1994 give effect to the consummation of Great
Bay's Fifth Amended Plan of Reorganization dated February 11, 1994, as amended
by a First Amendment dated September 9, 1994 (the "Amended Bankruptcy Plan") of
the predecessor of Great Bay and to the adoption of fresh start reporting by
Great Bay as of that date in accordance with the American Institute of Certified
Public Accountants' Statement of Position 90-7 Financial Reporting by Entities
in Reorganization under the Bankruptcy Code." Accordingly, periods prior to
November 23, 1994 have been designated "Predecessor Company" or the
"Predecessor" and periods subsequent to November 23, 1994 have been designated
"Reorganized Company" or the "Company". Selected balance sheet and statement of
income (loss) data of the Predecessor Company periods are not comparable to
those of the Reorganized Company periods and a line has been drawn in the tables
to separate the Predecessor financial data from the Company financial data.
The following data presents (i) selected financial data of the Reorganized
Company as of and for the three month periods ended March 31, 1996 and March 31,
1995, for the year ended December 31, 1995, as of December 31, 1994 and for the
period from November 24, 1994 to December 31, 1994 and (ii) selected financial
data of the Predecessor Company for the period from January 1, 1994 to November
23, 1994, as of December 31, 1991, December 31, 1992 and December 31, 1993 and
for each of the three years in the period ended December 31, 1993. Operating
results for the three months ended March 31, 1996 are not necessarily indicative
of the results that may be expected for the entire year ended December 31, 1996.
The information below should be read in conjunction with the "Information
Concerning Great Bay -- Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Great Bay financial statements,
including the notes thereto, contained elsewhere in this Proxy
Statement/Prospectus.
SELECTED FINANCIAL DATA OF GREAT BAY
(DOLLARS IN THOUSANDS)
<CAPTION>
REORGANIZED COMPANY PREDECESSOR COMPANY
-------------------------------------------------- ------------------------------------------------
FOR THE THREE MONTHS FOR THE YEAR NOVEMBER 24 JANUARY 1
ENDED MARCH 31, ENDED TO TO FOR THE YEARS ENDED DECEMBER 31,
-------------------- DECEMBER 31, DECEMBER 31, NOVEMBER 23, ---------------------------------
1996 1995 1995 1994 1994 1993 1992 1991
--------- -------- ------------ ------------ ------------ --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating Revenues........ $ 6,891 $ 7,781 $ 24,524 $ 3,129 $ 13,989 $ 24,620 $ 23,027 $ 20,919
Fuel, Operation and
Maintenance............. 5,775 6,205 24,899 2,409 21,762 22,991 26,823 27,896
Net (Loss) Income......... (1,017 ) 560 (6,059) 182 131,385 (9,433) (47,468)(2) (19,792)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -----------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991
------------------ ------------ ------------ --------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash & Cash Equivalents.... 16,743 16,469 22,217 138 4,817 133
Working Capital(1)......... 22,557 20,516 27,169 (289,585) (284,819) (160,756)
Total Assets............... 140,103 138,771 145,666 324,590 333,758 359,058
Decommissioning
Liability................ 50,789 50,899 48,530 -- -- --
Capitalization:
Long-Term Debt (excluding
current
maturities)(1)......... -- 0 0 0 0 180,000
Common Equity............ 82,216 82,223 88,292 (139,783) (130,350) (82,882)
Cumulative Convertible
Preferred Stock........ -- 63,090 63,090 63,090
Total Capitalization....... 82,216 82,233 88,292 (76,693) (67,260) 160,208
<FN>
- ---------------
(1) As a result of Predecessor's bankruptcy filing, the Predecessor was in
default under the indenture pursuant to which the secured notes were issued.
Long-Term Debt of the Predecessor was thereafter classified as a current
liability subject to compromise.
(2) In 1992, the Predecessor Company reversed all accumulated tax benefits
related to carryforwards of net operating losses and alternative minimum tax
credits to reflect the anticipated imposition of certain tax law limitations
and the impact of certain settlement agreements between the Predecessor
Company and Eastern Utilities Associates ("EUA").
</TABLE>
7
<PAGE> 16
GREAT BAY COMMON STOCK
MARKET PRICE INFORMATION
From January 27, 1995 to April 17, 1995, Great Bay Common Stock traded on
the Nasdaq over-the-counter market and was quoted on the Nasdaq OTC Bulletin
Board. Transfers occurred infrequently and at a low volume level. During this
period, the low and high prices at which transactions in Great Bay Common Stock
occurred on the Nasdaq OTC Bulletin Board were $7.12 and $9.00 per share,
respectively. These prices may have reflected inter-dealer prices, without
retail mark-ups, mark-downs or commissions, and may not have necessarily
represented actual transactions.
<TABLE>
Great Bay Common Stock commenced trading on the Nasdaq National Market
("NNM") on April 18, 1995 under the symbol "GBPW." Following are the reported
high and low sales prices of Great Bay Common Stock on the NNM as reported daily
in the Wall Street Journal for each quarter since the Great Bay Common Stock
commenced trading on the NNM:
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1995
----
Second quarter (beginning April 18, 1995).............. 9 3/4 7
Third quarter.......................................... 9 7 3/4
Fourth quarter......................................... 9 1/4 6 3/4
1996
----
First quarter.......................................... 8 3/4 6 3/4
Second quarter (through May 23, 1996).................. 8 3/4 7 1/2
</TABLE>
As of May 3, 1996, Great Bay had 24 holders of record of Great Bay Common
Stock.
Great Bay has never paid cash dividends on the Great Bay Common Stock.
Holding Company currently expects that it will retain all of its future earnings
and does not anticipate paying a dividend in the foreseeable future.
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<PAGE> 17
RISK FACTORS
An investment in the shares of Holding Company Common Stock offered hereby
involves a high degree of risk. The following factors, in addition to the other
information contained in this Proxy Statement/Prospectus, should be carefully
considered by shareholders of Great Bay in evaluating whether to approve the
Merger Agreement and become holders of Holding Company Common Stock. The
following risk factors apply to Great Bay and its business and operations. If
the Merger is consummated, these risk factors will apply equally to Holding
Company in that following the Merger Holding Company's primary asset will be its
ownership of the equity of Great Bay.
RISKS RELATING TO GREAT BAY
Ownership of Single Asset. Great Bay owns a single principal asset, its
12.1% joint interest in the Seabrook Nuclear Power Project in Seabrook, New
Hampshire. Accordingly, Great Bay's results of operations are completely
dependent upon the successful and continued operation of the Seabrook Project.
In particular, if the Seabrook Project experiences unscheduled outages of
significant duration, Great Bay's results of operations will be materially
adversely affected.
History of Losses; Implementation of Business Strategy. Great Bay has
never reported an operating profit since its incorporation. Great Bay's business
strategy is to seek purchasers for its share of the Seabrook Project electricity
output at prices, either in the short-term market or pursuant to medium or
long-term contracts, significantly in excess of the prices currently available
in the short-term wholesale electricity market since sales at current short-term
rates do not result in sufficient revenue to enable Great Bay to meet its cash
requirements for operations, maintenance and capital related costs. Great Bay's
ability to obtain such higher prices will depend on regional, national and
worldwide energy supply and demand factors which are beyond the control of Great
Bay. There can be no assurance that Great Bay ever will be able to sell power at
prices that will enable it to meet its cash requirements.
Liquidity Needs. As of December 31, 1995, Great Bay had approximately
$16.5 million in cash, cash equivalents and short-term investments. Great Bay
believes that such cash, together with the anticipated proceeds from the sale of
electricity by Great Bay, will be sufficient to enable Great Bay to meet its
cash requirements until the prices at which Great Bay can sell its electricity
increase sufficiently to enable Great Bay to cover its annual cash requirements.
However, if the Seabrook Project operates at a capacity factor below historical
levels, or if expenses associated with the ownership or operation of the
Seabrook Project, including without limitation decommissioning costs, are
materially higher than anticipated, or if the prices at which Great Bay is able
to sell its share of the Seabrook Project electricity do not increase at the
rates and within the time expected by Great Bay, Great Bay would be required to
raise additional capital, either through a debt financing or an equity
financing, to meet its ongoing cash requirements. There is no assurance that
Great Bay would be able to raise such capital or that the terms on which any
additional capital is available would be acceptable. If additional funds are
raised by the issuance of equity securities, dilution to then existing
shareholders could result.
Changes in Power Sale Contract Terms Available in Wholesale Power
Market. In the past, wholesale sellers of electric power, which typically were
regulated electric utilities, frequently entered into medium or long-term power
sale contracts providing for prices in excess of the prices available in the
short-term market. Recently, increased competition in the wholesale electric
power market, reduced growth in the demand for electricity and low prices in the
short-term market have reduced the willingness of wholesale power purchasers to
enter into medium or long-term contracts and have reduced the prices obtainable
from such contracts.
Risks in Connection with Joint Ownership of Seabrook Project. Great Bay is
required under the Agreement for Joint Ownership, Construction and Operation of
New Hampshire Nuclear Units dated May 1, 1973, as amended, by and among Great
Bay and the other 10 utility companies who are owners of the Seabrook Project
(the "JOA"), to pay its share of Seabrook Unit 1 and Seabrook Unit 2 expenses,
including without limitation operations and maintenance expenses, construction
and nuclear fuel expenditures and decommissioning costs, regardless of the level
of Seabrook Unit 1's operations. Under certain circumstances, a failure by Great
Bay to make its monthly payments under the JOA entitles certain other joint
owners of the Seabrook Project to purchase Great Bay's interest in the Seabrook
Project for 75% of the then fair market value thereof.
9
<PAGE> 18
In addition, the failure to make monthly payments under the JOA by owners
of the Seabrook Project other than Great Bay may have a material adverse effect
on Great Bay by causing Great Bay to pay a greater proportion of the Seabrook
Unit 1 and Seabrook Unit 2 expenses in order to preserve the value of its share
of the Seabrook Project.
The Seabrook Project is owned by Great Bay and the other owners thereof as
tenants in common, with the various owners holding varying ownership shares.
This means that Great Bay, which owns only a 12.1% interest, does not have
control of the management of the'Seabrook Project. As a result, decisions may be
made affecting the Seabrook Project, notwithstanding Great Bay's opposition.
Certain costs and expenses of operating the Seabrook Project or owning an
interest therein, such as certain insurance and decommissioning costs, are
subject to increase or retroactive adjustment based on factors beyond Great
Bay's control. The cost of disposing of Unit 2 of the Seabrook Project is not
known at this time. These various costs and expenses may adversely affect Great
Bay, possibly materially.
Extensive Government Regulation. The Seabrook Project is subject to
extensive regulation by federal and state agencies. In particular, the Seabrook
Project and Great Bay, as part owner of a licensed nuclear facility, are subject
to the broad jurisdiction of the NRC, which is empowered to authorize the
siting, construction and operation of nuclear reactors after consideration of
public health and safety, environmental and antitrust matters. Great Bay is also
subject to the jurisdiction of the FERC and, as a result, is required to file
with FERC all contracts for the sale of electricity. FERC has the authority to
suspend the rates at which Great Bay proposes to sell power, to allow such rates
to go into effect subject to refund and to modify a proposed or existing rate if
FERC determines that such rate is not "just and reasonable." FERC's jurisdiction
also includes, among other things, the sale, lease, merger, consolidation or
other disposition of facilities, interconnection of certain facilities,
accounts, service and property records. Compliance with the various requirements
of the NRC and FERC is expensive. Noncompliance with NRC requirements may
result, among other things, in a shutdown of the Seabrook Project.
The NRC has promulgated a broad range of regulations affecting all aspects
of the design, construction and operation of a nuclear facility, such as the
Seabrook Project, including performance of nuclear safety systems, fire
protection, emergency response planning and notification systems, insurance and
quality assurance. The NRC retains authority to modify, suspend or withdraw
operating licenses, such as that pursuant to which the Seabrook Project
operates, at any time that conditions warrant. The NRC might order Seabrook Unit
1 to shut down, if, among other reasons, (i) flaws were discovered in the
construction or design of Seabrook Unit 1, (ii) operations of Seabrook Unit 1
failed to comply with applicable safety and operating requirements, (iii)
problems developed with respect to other nuclear generating plants of a design
and construction similar to Unit 1, or (iv) accidents at other nuclear
facilities suggested that nuclear generating plants generally were less safe
than previously believed.
Great Bay is also subject to the New Hampshire public utility law and
regulations of the NHPUC which affect, among other things, the issuance of
securities, transfer of utility property and contracts with affiliates as well
as the sale, lease, merger, consolidation or other disposition of facilities.
The NHPUC does not regulate wholesale electricity rates.
Risk of Nuclear Accident. Nuclear reactors have been used to generate
electric power for more than 30 years and there are currently more than 100
nuclear reactors used for electric power generation in the United States.
Although the safety record of such nuclear reactors in the United States
generally has been very good, accidents and other unforeseen problems have
occurred both in the United States and elsewhere, including the well-publicized
incidents at Three Mile Island in Pennsylvania and Chernobyl in the former
Soviet Union. The consequences of such an accident can be severe, including loss
of life and property damage, and the available insurance coverage may not be
sufficient to pay all the damages incurred.
Public Controversy Concerning Nuclear Power Plants. Substantial
controversy has existed for some time concerning nuclear generating plants and
over the years such opposition has led to construction delays, cost overruns,
licensing delays, demonstrations and other difficulties. The Seabrook Project
was the subject of significant public controversy during its construction and
licensing and remains controversial. An increase in public concerns regarding
the Seabrook Project or nuclear power in general could adversely affect the
10
<PAGE> 19
operating license of Seabrook Unit 1. While Great Bay cannot predict the
ultimate effect of such controversy, it is possible that it could result in a
premature shutdown of the unit.
Waste Disposal; Decommissioning Cost. There has been considerable public
concern and regulatory attention focused upon the disposal of low- and
high-level nuclear wastes produced at nuclear facilities and the ultimate
decommissioning of such facilities. As to waste disposal concerns, both the
federal government and the State of New Hampshire are currently delinquent in
the performance of their statutory obligations. This has necessitated on-site
storage of low-level wastes at the Seabrook Project. Although low-level wastes
("LLW") storage facilities in Utah and South Carolina became available in 1995,
certain LLW continue to be stored on-site at the Seabrook Project. The Seabrook
Project anticipates increasing its on-site storage capacity for low-level wastes
in 1996. The increased capacity is expected to be sufficient through 2006. In
addition, the Managing Agent of the Seabrook Project has advised Great Bay that
the Seabrook Project has adequate on-site storage capacity for high-level wastes
until approximately 2010.
As to decommissioning, the NRC regulations require that upon permanent
shutdown of a nuclear facility, appropriate arrangements for full
decontamination and decommissioning of the facility be made. These regulations
include a requirement to set aside during operation sufficient funds to defray
decommissioning costs. While the owners of the Seabrook Project are accumulating
a trust fund to defray decommissioning costs, these costs could substantially
exceed the value of the trust fund, and the owners (including Great Bay) would
remain liable for the excess. Moreover, the amount that is required to be
deposited in the trust fund is subject to periodic review and adjustment by an
independent commission of the State of New Hampshire, which could result in
material increases in such amounts. Such a review is currently in process.
Intense Competition. Great Bay sells its share of Seabrook Project
electricity primarily into the Northeast United States wholesale electricity
market. There are a large number of suppliers to this market and competition is
intense. A primary source of competition comes from traditional utilities, many
of which presently have excess capacity. In addition, non-utility wholesale
generators of electricity, such as Independent Power Producers ("IPPs"),
Qualifying Facilities ("QFs") and EWGs, as well as power marketers and brokers,
actively sell electricity in this market. Great Bay may face increased
competition, primarily based on price, from all such sources in the future.
Volume of Sales of Stock; Possible Volatility of Share Price; Lack of
Dividends. Since trading began in Great Bay Common Stock on the NNM in April
1995, the trading volume has been low, averaging 19,300 shares per week through
April 30, 1996. Market prices for securities of companies such as Holding
Company are highly volatile. Factors such as fluctuations in energy prices,
unscheduled outages at the Seabrook Project, events at the Seabrook Project or
other nuclear reactors, the terms of power sales contracts entered into by Great
Bay and market conditions for utility stocks in general could have a significant
impact on the future market price of the Holding Company Common Stock. No
dividends have been paid on the Great Bay Common Stock and, subject to the
consummation of the Merger, Holding Company does not anticipate paying dividends
on the Holding Company Common Stock in the foreseeable future.
Antitakeover Provisions. The Holding Company Certificate of Incorporation
requires that any action required or permitted to be taken by the stockholders
of Holding Company must be effected at a duly called annual or special meeting
of stockholders and may not be effected by any consent in writing. Special
meetings of the stockholders of Holding Company may be called only by the
Chairman of the Board of Directors, the Chief Executive Officer (or if there is
no Chief Executive Officer, the President) or the Board of Directors. The
affirmative vote of the holders of 75% of the shares of capital stock of Holding
Company issued and outstanding and entitled to vote is required to amend or
repeal these provisions. In addition, the Board of Directors of Holding Company
has the authority, without further action by the stockholders, to fix the rights
and preferences of, and issue shares of, Preferred Stock. These provisions, as
well as other provisions of the Certificate of Incorporation and the By-Laws of
Holding Company may have the effect of deterring hostile takeovers or delaying
or preventing changes in control or management of Holding Company, including
transactions in which stockholders might otherwise receive a premium for their
shares over then current market prices. In addition, these provisions may limit
the ability of stockholders to approve transactions that they may deem to be in
their best interests. See "Comparison of Stockholder Rights."
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RISKS RELATED TO HOLDING COMPANY.
In contrast with Great Bay, the activities of Holding Company will not be
subject to the extensive government regulation related to public utilities and
licensed nuclear facilities. Thus, Holding Company will not receive the benefit
of the scrutiny by federal and state agencies that Great Bay receives. In
addition, Holding Company may pursue activities with a greater business risk
that those associated with a regulated entity such as Great Bay. Depending on
the success of any new activities that Holding Company determines to pursue, it
is possible that Holding Company's earnings per share and dividends, if any,
might be lower than if Holding Company did not pursue such activities.
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THE SPECIAL MEETING
GENERAL
The Special Meeting of shareholders of Great Bay will be held on
[ , ,] 1996 at the offices of Hale and Dorr, 60 State Street,
Boston, Massachusetts, beginning at 10:00 a.m., local time, and at any
adjournments or postponements thereof.
This Proxy Statement/Prospectus serves as a Prospectus of Holding Company
with respect to the shares of Holding Company Common Stock to be issued pursuant
to the proposed Merger, which Prospectus is part of a Registration Statement on
Form S-4 filed by Holding Company with the Commission under the Securities Act.
This Proxy Statement/Prospectus also serves as the proxy statement in
connection with the solicitation of proxies by the Great Bay Board for use at
the Special Meeting. This Proxy Statement/Prospectus is accompanied by a form of
proxy for use at the Special Meeting.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING; RECOMMENDATION OF THE GREAT BAY
BOARD
At the Special Meeting, the shareholders of Great Bay will be asked to
approve the Merger Agreement and the Holding Company Stock Option Plan and to
transact such other business as may properly come before the Special Meeting and
any adjournments or postponements thereof. The Great Bay Board is not presently
aware of any such other business.
The Great Bay Board has unanimously approved the Merger Agreement and the
Holding Company Stock Option Plan, subject to shareholder approval, and believes
the Merger contemplated by the Merger Agreement and the adoption of the Holding
Company Stock Option Plan are in the best interests of Great Bay and its
shareholders. THE BOARD OF DIRECTORS OF GREAT BAY RECOMMENDS THAT GREAT BAY
SHAREHOLDERS VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT AND OF THE HOLDING
COMPANY STOCK OPTION PLAN.
RECORD DATE; SHARES ENTITLED TO VOTE
Only holders of record of shares of Great Bay Common Stock as of the close
of business on May 3, 1996 are entitled to receive notice of, and to vote at,
the Special Meeting and any adjournments or postponements thereof with respect
to the approval of the Merger Agreement. At the close of business on the Record
Date, there were 7,999,948 shares of Great Bay Common Stock outstanding, each of
which will be entitled to one vote on each matter properly submitted at the
Special Meeting.
QUORUM; REQUIRED VOTE
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Great Bay Common Stock entitled to vote at the Special
Meeting will be necessary to constitute a quorum for the transaction of
business. Under New Hampshire Law and the Great Bay By-Laws, the approval of the
Merger Agreement requires the affirmative vote of the holders of a majority of
the outstanding shares of Great Bay Common Stock.
Abstentions will be counted as present for the purposes of determining
whether a quorum is present but will not be counted as votes cast in favor of or
against the Merger Agreement. Because the vote on the Merger Agreement requires
the approval of a majority of the votes entitled to be cast by the holders of
the outstanding shares of Great Bay Common Stock, abstentions will have the same
effect as a negative vote on this proposal.
As of the Record Date, there were outstanding and entitled to vote
7,999,948 shares of Great Bay Common Stock. Accordingly, the Merger will be
approved if the holders of 3,999,975 shares of Great Bay Common Stock approve
the Merger Agreement. As of the Record Date, Great Bay's directors, executive
officers, certain entities affiliated with Great Bay's directors and executive
officers and the Elliott Group (as defined in "Security Ownership of Certain
Beneficial Owners and Management of Great Bay" below) in the aggregate held,
directly or indirectly, 4,453,030 shares of Great Bay Common Stock, or
approximately 55.7% of the shares of Great Bay Common Stock outstanding as of
such date. Each of the directors and executive officers of Great Bay and the
members of the Elliott Group have indicated that they and their affiliates
intend to vote their shares of Great Bay Common Stock in favor of the proposals
to approve the Merger Agreement and the Holding Company Stock Option Plan,
ensuring the approval of the Merger Agreement and the
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Holding Company Stock Option Plan by the Great Bay shareholders without regard
to the votes of any other Great Bay shareholders.
VOTING AND REVOCATION OF PROXIES
Shares of Great Bay Common Stock that are entitled to vote and are
represented at the Special Meeting by properly executed proxies received prior
to or at the Special Meeting and not revoked will be voted at the Special
Meeting in accordance with the instructions indicated on such proxies. If a
proxy is signed and returned without indicating any voting instructions, shares
of Great Bay Common Stock represented by such proxy will be voted FOR the
proposal to approve the Merger Agreement.
The Board of Directors of Great Bay is not currently aware of any business
to be acted upon at the Special Meeting other than as described herein. If,
however, other matters are properly brought before the Special Meeting or any
adjournments or postponements thereof, the persons appointed as proxies will
have discretion to vote on such matters in accordance with their best judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before the shares represented by such proxy are voted at
the Special Meeting by (i) filing with the Secretary of Great Bay a written
notice of such revocation bearing a later date than the proxy, (ii) duly
executing a proxy relating to the same shares bearing a later date and
delivering it to the Secretary of Great Bay before the taking of the vote at the
Special Meeting, or (iii) voting in person at the Special Meeting. Attendance at
the Special Meeting will not in and of itself constitute a revocation of a
proxy. All written notices of revocation and other communications with respect
to revocation of proxies should be addressed as follows: Great Bay Holdings
Corp., Cocheco Falls Millworks, 100 Main Street, Dover, New Hampshire 03820,
Attention: Frank W. Getman Jr., Secretary, and must be received before the
taking of the vote at the Special Meeting.
SOLICITATION OF PROXIES
Great Bay will bear all expenses of this solicitation, including the cost
of preparing and mailing this Proxy Statement/Prospectus. In addition to
solicitation by mail, directors, officers and employees of Great Bay, who will
not be specifically compensated for such services but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation, may
solicit proxies from Great Bay shareholders personally or by telephone,
telecopy, telegram or other means of communication. Great Bay will also arrange
with custodians, nominees and fiduciaries for the forwarding of solicitation of
proxy materials to the beneficial owners of shares held of record by such
persons. Great Bay may reimburse such custodians, nominees and fiduciaries
reasonable out-of-pocket expenses incurred in connection therewith.
SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
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-- PROPOSAL ONE --
------------------
THE MERGER
The following discussion is not intended to be a complete summary of the
terms and provisions of the Merger Agreement and is qualified in its entirety by
reference to the full text of the Merger Agreement, a form of which is attached
as Annex I hereto and is incorporated herein by reference.
REASONS FOR THE MERGER; RECOMMENDATION OF GREAT BAY BOARD
The Great Bay Board unanimously approved the Merger Agreement, subject to
shareholder approval, at its meeting held on April 16, 1996. The Great Bay Board
believes that the consummation of the Merger is in the best interests of Great
Bay and its shareholders. The purpose of the Merger is to create a holding
company structure for the future conduct of business of Holding Company and
Great Bay. In this structure, Holding Company will be the parent public company
in which Great Bay shareholders will own equity and Great Bay will be a
wholly-owned subsidiary.
The Great Bay Board believes that attractive opportunities may exist to
enter new businesses or acquire existing businesses, both in energy related
fields and in unrelated fields. Great Bay currently has no understandings,
agreements or commitments for any acquisition. The Great Bay Board believes it
is advisable to restructure Great Bay as a subsidiary of Holding Company because
Holding Company would be able to engage in business activities, through
subsidiaries other than Great Bay, which Great Bay is currently prohibited from
engaging in because of Great Bay's status as an EWG under the PUHCA.
As an EWG, Great Bay is limited to the generation and sale of electricity
from the Seabrook Project in the wholesale electricity market and activities
incidental thereto. Holding Company will be able to engage in other business
activities which may be related or unrelated to those of Great Bay. Great Bay is
also subject to regulation by the NHPUC as a New Hampshire public utility. Any
financing transaction, except the issuance of short term debt for up to 10% of
the value of Great Bay's net fixed assets, or issuance of securities by Great
Bay, among other transactions, is subject to approval by the NHPUC. Following
the consummation of the Merger, New Hampshire public utilities laws would not
directly regulate the activities of Holding Company.
The Great Bay Board also anticipates that the establishment of a holding
company structure may help insulate Holding Company and each of its subsidiaries
from the liabilities of the others. In addition, Holding Company is governed by
Delaware corporate law, which is better developed (in terms of judicial
interpretation and precedents) and is more widely known and understood by
potential investors and other parties likely to have business dealings with
Holding Company than New Hampshire corporate law which governs Great Bay.
EFFECTIVE DATE OF THE MERGER
Pursuant to the Merger Agreement and in accordance with the New Hampshire
Law, Transitory Subsidiary will be merged with and into Great Bay on the
Effective Date. The Merger will become effective immediately upon the filing, in
accordance with the relevant provisions of the New Hampshire Law, of the
Articles of Merger with the Secretary of State of New Hampshire.
The number of shares of Holding Company Common Stock to be issued on the
Effective Date will equal the number of shares of Great Bay Common Stock
outstanding immediately prior thereto, less the number of Dissenting Shares.
The Articles of Merger will be filed on the date of the closing, which is
expected to occur as soon as practicable following the Special Meeting and the
satisfaction or waiver of the other conditions in the Merger Agreement.
STRUCTURE AND TERMS OF THE MERGER
Pursuant to the Merger Agreement, on the Effective Date, the Transitory
Subsidiary, a wholly-owned subsidiary of Holding Company, will merge with and
into Great Bay. The separate existence of Transitory Subsidiary will cease on
the Effective Date. Great Bay will survive the Merger as a wholly-owned
subsidiary of Holding Company and will continue to be governed by the laws of
the State of New Hampshire.
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Upon the consummation of the Merger, each outstanding share of Great Bay
Common Stock as of the Record Date (other than any shares held in the treasury
of Great Bay and Dissenting Shares), will cease to exist and will be converted
into the right to receive one fully-paid and non-assessable share of Holding
Company Common Stock. Shares of Holding Company Common Stock issued and
outstanding immediately prior to the Effective Date which are held by Great Bay
will cease to exist and will be cancelled, with the result being that the
shareholders of Great Bay immediately prior to the Merger will become the
stockholders of Holding Company.
EMPLOYMENT AGREEMENTS TO BE ASSUMED BY HOLDING COMPANY
Great Bay is party to employment agreements with its two executive
officers. Upon consummation of the Merger, Great Bay will assign these
employment agreements to Holding Company and Holding Company will assume these
employment agreements. See "Information Concerning Great Bay -- Employees."
SUBSTITUTION OF GREAT BAY STOCK OPTIONS
If the Merger is consummated, at the Effective Date, each holder of Great
Bay Options under the Great Bay Stock Option Plan will be granted substitute
options by Holding Company under the Holding Company Stock Option Plan to
purchase an equal number of shares of Holding Company Common Stock on the same
terms and conditions and at the same exercise price per share. The Holding
Company Stock Option Plan is identical to the Great Bay Stock Option Plan. The
term, exercisability, vesting schedule, status as an "incentive stock option"
under the Code, if applicable, and all other terms of the substitute option will
be identical to those of the Great Bay Options. The substitution of Great Bay
Options will not give the Optionholders additional benefits which they did not
have immediately prior to the Effective Date, result in any acceleration of any
vesting schedule for any Great Bay Option or relieve the Optionholders of any
obligations or restrictions applicable to their options or the shares obtainable
upon exercise of the options. As of the Record Date, 375,000 shares of Great Bay
Common Stock were subject to outstanding Great Bay Options. If the Merger is
consummated, the Great Bay Option Plan will be terminated. See "The Holding
Company Stock Option Plan" for a summary of the Holding Company Stock Option
Plan.
ASSUMPTION OF THE PECO WARRANT
Pursuant to the Merger Agreement and the provisions of the PECO Warrant, at
the Effective Date, the PECO Warrant will be assumed by Holding Company and will
automatically become a warrant representing the right to acquire an equal number
of shares of Holding Company Common Stock on the same terms and conditions and
at the same exercise price per share.
ASSUMPTION OF FACILITY LEASE
Great Bay leases approximately 3,000 square feet of office space in Dover,
New Hampshire under a lease expiring in April 1999. Upon the consummation of the
Merger, Great Bay will assign this lease to Holding Company, and Holding Company
will assume this lease.
PROCEDURE FOR EXCHANGE OF CERTIFICATES
Pursuant to the Merger Agreement, promptly after the Effective Date Holding
Company will mail a form of letter of transmittal to holders of Great Bay Common
Stock, except for holders of Dissenting Shares, together with instructions for
the exchange of such holder's certificates representing Great Bay Common Stock
for certificates representing shares of Holding Company Common Stock. All
shareholders of Great Bay are urged to exchange their stock certificates at the
earliest possible date after receiving the letter of transmittal. Shareholders
of Great Bay should not submit their stock certificates for exchange until they
receive such letter of transmittal and instructions.
MANAGEMENT AND OPERATION AFTER THE MERGER
After the Effective Date, Great Bay will be a wholly-owned subsidiary of
Holding Company and will continue its business from its existing office
location. After the Effective Date, the persons who are officers and directors
of Great Bay immediately prior to the Effective Date will be the officers and
directors of Holding Company and of Great Bay, without change, until their
successors have been duly elected or appointed and qualified.
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CONDITIONS TO CONSUMMATION OF THE MERGER; AMENDMENT OR TERMINATION OF THE MERGER
AGREEMENT
The respective obligations of Holding Company and Great Bay to effect the
Merger are subject to the following conditions, among others: (a) the Merger
Agreement will have been approved by the shareholders of Great Bay; (b) all
Merger Regulatory Approvals will have been obtained; (c) the Registration
Statement will have become effective and will not be the subject of a stop order
or proceedings seeking a stop order; (d) no temporary restraining order,
preliminary or permanent injunction or other order will be in effect nor will
there be any proceeding seeking any of the foregoing that prevents, or seeks to
prevent, the consummation of the Merger; (e) no action will be taken, nor any
statute, rule, regulation, or order enacted, entered, enforced or deemed
applicable to the Merger which makes the consummation of the Merger illegal; and
(f) the shares of Holding Company Common Stock to be issued in the Merger will
have been approved for quotation on the Nasdaq National Market. Unless waived by
Great Bay, it is a condition to the Merger that the number of shares of Great
Bay Common Stock held by shareholders of Great Bay who properly exercise their
dissenters' rights shall not exceed 20,000 shares as of the Effective Date.
At any time before the Effective Date, notwithstanding approval of the
Merger Agreement by the shareholders of Great Bay, the Merger Agreement may be
amended, modified, supplemented or terminated and the Merger may be abandoned by
action of the Great Bay Board; provided, however, that no such amendment,
modification or supplement will affect the rights of the shareholders of Great
Bay in a manner which is materially adverse to such shareholders in the judgment
of the Great Bay Board. The Great Bay Board will notify the Great Bay
shareholders in writing of any amendment, modification or supplement to the
Merger Agreement prior to the Effective Date which is materially adverse to the
shareholders of Great Bay and allow such shareholders an opportunity to change
their vote by providing the shareholders with an appropriate form of proxy to
use to indicate such a change.
REGULATORY APPROVALS
If the Merger is approved by Great Bay's shareholders at the Special
Meeting, the Merger is expected to become effective as soon thereafter as all
Merger Regulatory Approvals have been obtained and the required Articles of
Merger are filed. Great Bay has filed petitions with each of the NHPUC, FERC and
the NRC requesting the Merger Regulatory Approvals. Great Bay's petitions are
presently pending before these agencies and Great Bay expects that it will
receive decisions from each of the agencies by July 9, 1996. There is no
assurance that the Merger Regulatory Approvals will be obtained. All expenses in
connection with the Merger will be paid by Great Bay whether or not the Merger
is consummated.
ACCOUNTING TREATMENT
The Merger will be accounted for as a "pooling of interests of entities
under common control" and will result in the combination of the recorded book
values of the assets, liabilities and shareholders' equity of Great Bay, Holding
Company and the Transitory Subsidiary. The Merger will not result in a material
change to any of Great Bay's previously reported results.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary addresses the material United States federal income
tax consequences of the Merger to Great Bay shareholders. Nevertheless, this
summary does not address all aspects of United States federal income taxation
that may be relevant to Great Bay shareholders in light of their particular
circumstances or to Great Bay shareholders that are subject to special treatment
under the federal income tax laws (such as dealers in securities, tax-exempt
organizations, life insurance companies, financial institutions, partnerships
and other pass-through entities, regulated investment companies, and foreign
taxpayers). Additionally, this summary does not address the United States
federal income tax considerations that may be relevant to holders of Great Bay
options or warrants or to Great Bay shareholders that acquired their stock
pursuant to the exercise of employee stock options or otherwise received their
stock as compensation. Finally, this summary does not address any state, local,
or foreign income tax considerations, or any federal, state, local, or foreign
estate or gift tax considerations that may be relevant to Great Bay
shareholders.
The following summary is based upon the opinion of Hale and Dorr, counsel
to Great Bay, of the Code, the applicable Treasury Regulations, judicial
authority, and administrative rulings and practice, as in effect on
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the date hereof. Nevertheless, the Internal Revenue Service is not precluded
from adopting a contrary position. Moreover, there can be no assurance that
future legislative, judicial, or administrative changes or interpretations will
not adversely affect the accuracy of the statements and conclusions set forth
herein. Any such changes or interpretations could be applied retroactively and
could alter or affect the tax consequences of the Merger to Great Bay and the
Great Bay shareholders.
It is intended that the Merger will constitute a tax-free reorganization
with respect to Great Bay shareholders who receive shares of Holding Company
Common Stock pursuant to the Merger Agreement. Hale and Dorr, counsel to Great
Bay, will render an opinion to the effect that, under present United States
federal income tax law: (i) no gain or loss will be recognized by shareholders
of Great Bay upon the conversion of their shares of Great Bay Common Stock
solely into shares of Holding Company Common Stock pursuant to the terms of the
Merger; (ii) the tax basis of the shares of Holding Company Common Stock into
which shares of Great Bay Common Stock are converted pursuant to the Merger will
be the same as the basis of such shares of Great Bay Common Stock; and (iii) the
holding period for shares of Holding Company Common Stock into which shares of
Great Bay Common Stock are converted pursuant to the Merger will include the
period that such shares of Great Bay Common Stock were held by the holder,
provided that such shares were held as capital assets on the Effective Date of
the Merger.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY.
ACCORDINGLY, GREAT BAY SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE
APPLICABLE FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES TO THEM OF THE
PROPOSED MERGER.
RESTRICTIONS ON RESALE OF HOLDING COMPANY COMMON STOCK RECEIVED IN THE MERGER;
AFFILIATES
The shares of Holding Company Common Stock to be issued in the Merger to
the holders of Great Bay Common Stock pursuant to the Merger Agreement have been
registered under the Securities Act, thereby allowing such shares to be freely
traded without restriction by persons who are not deemed to be "affiliates" of
Holding Company or of Great Bay. For this purpose, the term "affiliate" means
any person who, directly or indirectly, through one or more intermediaries,
possesses the power to direct or cause the direction of management and policies
of Great Bay or Holding Company, whether through the ownership of Great Bay or
Holding Company Common Stock, by contract, or otherwise. Certain officers,
directors and principal shareholders of Great Bay may be deemed to be affiliates
of Great Bay and thus "underwriters" within the meaning of Rule 145 under the
Securities Act. Such persons will not be able to resell the Holding Company
Common Stock received by them in the Merger except pursuant to an effective
registration statement under the Securities Act or pursuant to an applicable
exemption therefrom. All persons who may be deemed to be affiliates should
carefully consider the limitations imposed by Rules 144 and 145 under the
Securities Act prior to effecting resales of shares of Holding Company Common
Stock.
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RIGHTS OF DISSENTING SHAREHOLDERS
Under Sections 293-A:13.01-293-A:13.31 of the New Hampshire Law ("Chapter
293-A"), holders of Great Bay Common Stock are entitled to dissenters' rights
with respect to the proposed Merger. Unless waived by Great Bay, it is a
condition to the Merger that the number of shares of Great Bay Common Stock held
by shareholders of Great Bay who properly exercise their dissenters' rights
shall not exceed 20,000 shares as of the effective date of the Merger.
Subject to the consummation of the Merger, holders of Great Bay Common
Stock who hold such shares of record on the date of making a written demand for
appraisal as described below, continuously hold such shares through the
Effective Date and otherwise comply fully with the procedures set forth in
Chapter 293-A will be entitled to receive from Great Bay payment of the "fair
value" of their shares in cash, in lieu of obtaining shares of Holding Company
Common Stock.
SHAREHOLDERS ELECTING TO EXERCISE DISSENTERS' RIGHTS MUST COMPLY STRICTLY
WITH THE PROCEDURES SET FORTH IN CHAPTER 293-A. FAILURE TO FOLLOW ANY SUCH
PROCEDURE MAY RESULT IN A TERMINATION OR WAIVER OF DISSENTERS' RIGHTS UNDER
CHAPTER 293-A.
The following discussion of the provisions of Chapter 293-A is not intended
to be a complete statement of its provisions and is qualified in its entirety by
reference to the full text of those sections, a copy of which is attached as
Annex II hereto.
Under Chapter 293-A, not less than ten days prior to the Special Meeting,
Great Bay is required to notify shareholders that they are or may be entitled to
assert dissenters' rights. This Proxy Statement/Prospectus constitutes notice to
holders of Great Bay Common Stock that dissenters' rights are available to them.
Under Chapter 293-A, a shareholder electing to exercise his or her
dissenters' rights must deliver to Great Bay, before the vote on the Merger
Agreement is taken, written notice of his or her intent to demand payment for
his or her shares if the Merger is consummated. A WRITTEN NOTICE OF INTENT TO
DEMAND PAYMENT SHOULD BE DELIVERED EITHER IN PERSON OR BY MAIL (CERTIFIED MAIL,
RETURN RECEIPT REQUESTED, BEING THE RECOMMENDED FORM OF TRANSMITTAL) ON OR
BEFORE 9:00 A.M. ON [DATE OF SPECIAL MEETING], 1996 TO GREAT BAY POWER
CORPORATION, COCHECO FALLS MILLWORKS, 100 MAIN STREET, DOVER, NEW HAMPSHIRE
03820, ATTENTION: FRANK W. GETMAN JR., SECRETARY.
SHAREHOLDERS WHO WISH TO ASSERT DISSENTERS' RIGHTS AND MAKE A DEMAND FOR
PAYMENT MUST NOT VOTE THEIR SHARES IN FAVOR OF THE MERGER AGREEMENT.
SHAREHOLDERS WHO VOTE THEIR SHARES IN FAVOR OF THE MERGER AGREEMENT IRREVOCABLY
WAIVE THEIR DISSENTERS' RIGHTS. SHAREHOLDERS WHO WISH TO ASSERT DISSENTERS'
RIGHTS ARE NOT REQUIRED TO VOTE AGAINST THE MERGER AGREEMENT TO PRESERVE
DISSENTERS' RIGHTS.
If the Merger is consummated, then no later than ten days after the
consummation of the Merger, Great Bay will send a written dissenters' notice
(the "Notice") to all shareholders who delivered a written notice of intent to
demand payment to Great Bay before the vote was taken and did not vote in favor
of the Merger Agreement. The Notice will: (i) state where the payment demand
will be sent and where and when certificates for shares will be deposited, (ii)
supply a form for demanding payment that includes the date of the first
announcement to the news media or to shareholders of the terms of the proposed
Merger (the "Announcement Date") and requires that the person asserting
dissenters' rights certify whether or not he or she acquired beneficial
ownership of the shares before the Announcement Date, (iii) set a date by which
Great Bay will receive the payment demand (which date will not be less than 30
days nor more than 60 days after the date the Notice is delivered), and (iv)
contain a copy of Chapter 293-A.
Any holder of Great Bay Common Stock electing to exercise dissenters'
rights must, after receiving the Notice, demand payment, certify whether he or
she acquired beneficial ownership of the shares before the Announcement Date,
and deposit his or her certificates in accordance with the terms of the Notice.
A SHAREHOLDER WHO DOES NOT DEMAND PAYMENT OR DEPOSIT HIS OR HER SHARE
CERTIFICATES WHERE REQUIRED, EACH BY THE DATE SET FORTH IN THE NOTICE, IS NOT
ENTITLED TO RECEIVE PAYMENT FOR HIS OR HER SHARES UNDER CHAPTER 293-A.
Except as described below, the notice of intent to demand payment and the
written demand for payment must be made by or for the shareholder of record of
the shares for which dissenters' rights are being asserted. Accordingly, such
notice and demand should be executed by or for such shareholder of record, fully
and
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correctly, as such shareholder's name appears on the certificate(s) formerly
representing the shares. If shares are owned of record in a fiduciary capacity,
such as by a trustee, guardian or custodian, execution of the notice of intent
to demand payment and the demand for payment should be made in such capacity. If
shares are owned of record by more than one person, as in a joint tenancy or
tenancy in common, the notice of intent to demand payment and the demand for
payment should be executed by or for all joint owners.
An authorized agent, including one of two or more joint owners, may execute
the notice of intent to demand payment and the demand for payment for a
shareholder of record. However, the agent must identify the record owner or
owners and must expressly disclose that, in executing the notice and the demand,
the agent is acting as agent for the record owner(s). A beneficial shareholder
may assert dissenters' rights as to shares held on his or her behalf only if (i)
he or she submits to Great Bay the record owner's written consent to the dissent
not later than the time the beneficial shareholder asserts dissenters' rights,
and (ii) he or she does so with respect to all shares of which he or she is the
beneficial shareholder or over which he or she has power to direct the vote.
Following the consummation of the Merger, or upon receipt of a payment
demand, Great Bay will pay each dissenter who complied with the provisions of
Section 293-A:13.23 the amount Great Bay estimates to be the fair value of his
or her shares, plus accrued interest. The payment will be accompanied by certain
financial information of Great Bay, a statement of Great Bay's estimate of the
fair value of the shares, an explanation of how interest was calculated, a
statement of the dissenter's right to demand payment if the shareholder is
dissatisfied with payment and a copy of Chapter 293-A.
Under Section 293-A:13.28, a dissenter may notify Great Bay in writing of
his or her own estimate of the fair value of his or her shares and amount of
interest due and demand payment of his or her estimate, less any payment already
made by Great Bay, if: (i) the dissenter believes the amount paid by Great Bay
was less than the fair value of his or her shares or that the interest due was
incorrectly calculated, (ii) Great Bay fails to make payment for the shares
within 60 days after the date set for demanding payment, or (iii) Great Bay,
having failed to consummate the Merger, does not return the deposited
certificates within 60 days after the date set for demanding payment. A
DISSENTER WAIVES HIS OR HER RIGHT TO DEMAND PAYMENT UNDER CHAPTER 293-A:13.28
UNLESS HE OR SHE NOTIFIES GREAT BAY OF HIS OR HER DEMAND IN WRITING WITHIN 30
DAYS AFTER GREAT BAY MADE OR OFFERED PAYMENT FOR HIS OR HER SHARES.
If a demand for payment under Section 293-A:13.28 remains unsettled, Great
Bay will commence a proceeding within 60 days after receiving the payment demand
and petition the appropriate court to determine fair value of the shares and
accrued interest. If Great Bay does not commence the proceeding within 60 days,
it will pay each dissenter whose demand remains unsettled the amount demanded by
him or her, including interest.
Great Bay will make all dissenters whose demands remain unsettled parties
to the proceeding and all parties will be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication as
provided by law. Each dissenter made a party to the proceeding is entitled to
judgment for the amount, if any, by which the court finds the fair value of his
or her shares, plus interest, exceeds the amount previously paid by Great Bay.
The costs of the proceeding will be determined by the court, including
reasonable compensation and expenses of appraisers appointed by the court. The
court will assess the costs against Great Bay, except that the court may assess
costs against all or some dissenters who are parties, in the amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Section
293-A:13.28. The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable. If the
court finds that the services of counsel for any dissenter were of substantial
benefit to other dissenters similarly situated, and that the fees for the
services should not be assessed against Great Bay, the court may award to these
counsel reasonable fees to be paid out of the amounts awarded to dissenters who
were benefitted.
SHAREHOLDERS OF GREAT BAY WHO EXERCISE DISSENTERS' RIGHTS WILL NOT BECOME
STOCKHOLDERS OF HOLDING COMPANY.
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INFORMATION CONCERNING GREAT BAY
BUSINESS
Great Bay is a public utility whose principal asset is a 12.1% joint
ownership interest in the Seabrook Project in Seabrook, New Hampshire. Great Bay
was incorporated in New Hampshire in 1986 and was formerly known as EUA Power
Corporation. Great Bay sells its share of the electricity output of the Seabrook
Project in the wholesale electricity market, primarily in the Northeast United
States. Great Bay does not have operational responsibility for the Seabrook
Project. Great Bay's share of the Seabrook Project capacity is approximately 140
MW. Great Bay currently sells all but 10 MW of its share of the Seabrook Project
capacity in the Short-Term Market. If the Merger is consummated, Great Bay will
continue its business and operations as a wholly-owned subsidiary of Holding
Company. See "The Merger -- Structure and Terms of the Merger."
The Seabrook Project
The Seabrook Project is located on an 896-acre site in Seabrook, New
Hampshire. It is owned by Great Bay and ten other utility companies, consisting
of North Atlantic Energy Company, Connecticut Light and Power, the United
Illuminating Company, Canal Electric Company, Massachusetts Municipal Wholesale
Electric Company, Montaup Electric Company, New England Power Company, New
Hampshire Electric Cooperative, Inc., Taunton Municipal Lighting Plant and
Hudson Light & Power Department (together with Great Bay, the "Participants").
Seabrook Unit 1 is a 1,150-MW nuclear-fueled steam electricity generating
station. It employs a four loop, pressurized water reactor and support auxiliary
systems designed by the Westinghouse Electric Company. The reactor is housed in
a steel-lined reinforced concrete containment structure and a concrete
containment enclosure structure. Reactor cooling water is obtained from the
Atlantic Ocean through a 17,000-foot-long intake tunnel and returned through a
16,500-foot-long discharge tunnel. The station has a remaining expected service
life of 30 years. Seabrook Unit 1 transmits its generated power to the New
England 345 kilovolt transmission grid, a major network of interconnecting lines
covering New England, through three separate transmission lines emanating from
the station. On March 15, 1990, the Participants received from the NRC a full
power operating license which authorizes operation of Seabrook Unit 1 until
October 2026. Commercial operation of Seabrook Unit 1 commenced on August 19,
1990. Management believes that Seabrook Unit 1 is in good condition.
Since the Seabrook Project was originally designed to consist of two
generating units, Great Bay also owns a 12.1% joint ownership interest in
Seabrook Unit 2, to which it has assigned no value. On November 6, 1986, the
joint owners of the Seabrook Project, recognizing that Seabrook Unit 2 had been
canceled in 1984, voted to dispose of Unit 2. Certain assets of Seabrook Unit 2
have been and are being sold from time to time to third parties. The
Participants are currently considering plans regarding disposition of Seabrook
Unit 2, but such plans have not yet been finalized and approved. Great Bay is
unable to estimate the costs for which it will be responsible in connection with
the disposition of Seabrook Unit 2. Because Seabrook Unit 2 was never completed
or operated, costs associated with its disposition will not include any amounts
for decommissioning. Great Bay currently pays its share of monthly expenses
required to preserve and protect the value of the Seabrook Unit 2 components. On
May 23, 1996, Great Bay and the joint owners of the Seabrook Project announced a
proposed transaction for the sale of two steam generators from Seabrook Unit 2.
If this sale is completed, Great Bay will receive approximately $7,000,000 in
cash. Great Bay had previously written off its investment in Unit 2 and will
recognize a gain from this sale.
Joint Ownership of Seabrook
Great Bay and the other Participants are parties to the JOA which
establishes the respective ownership interests of the Participants in the
Seabrook Project and defines their responsibilities with respect to the ongoing
operation, maintenance and decommissioning of the Seabrook Project. In general,
all ongoing costs of the Seabrook Project other than taxes are divided
proportionately among the Participants in accordance with their ownership
interests in the Seabrook Project. Each Participant is only liable for its share
of the Seabrook Project's costs and not liable for any other Participant's
share. Great Bay's joint ownership interest of 12.1% is the third largest
interest among the Participants, exceeded only by the approximately 40% interest
held by Northeast Utilities and its affiliates and the 17.5% interest held by
The United Illuminating Company.
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A Participant may sell any portion of its ownership interest to any entity
that is engaged in the electric utility business in New England. Before such
sale, however, such selling Participant must give certain other Participants the
right of first refusal to purchase the interest on the same terms. Any
Participant may transfer, free from the foregoing right of first refusal, any
portion of its interest (a) to a wholly-owned subsidiary, (b) to another company
in the same holding company system or a construction trust for the benefit of
the transferor or another company in the same holding company system, or (c) in
connection with a merger, consolidation or acquisition of the assets of such
Participant.
The JOA provides for a Managing Agent to carry out the daily operational
and management responsibilities of the Seabrook Project. The current Managing
Agent (the "Managing Agent"), appointed by certain of the Participants on June
29, 1992, is North Atlantic Energy Service Corporation ("NAESCO"), a
wholly-owned subsidiary of Northeast Utilities. Northeast Utilities, in
conjunction with certain of its affiliates, holds the largest joint ownership
interest, as described above. Certain material decisions regarding the Seabrook
Project are made by an Executive Committee consisting of the chief executive
officers of certain of the Participants or their designees. There are currently
five members of the Executive Committee. The Executive Committee acts by
majority vote of its members, although any action of the Executive Committee may
be modified by vote of 51% of the ownership interests. Great Bay does not have a
representative on the Executive Committee. Under the JOA, the appointment of the
managing agent of the Seabrook Project may only be made by a majority in
interest of the Participants.
Bankruptcy Proceeding and Reorganization
Great Bay filed a voluntary petition for reorganization under Chapter 11 of
the United States Bankruptcy Code (the "Bankruptcy Code") in the United States
Bankruptcy Court for the District of New Hampshire (the "Bankruptcy Court") on
February 28, 1991. It conducted its business as a Debtor in Possession until
November 23, 1994, at which time Great Bay's Amended Bankruptcy Plan became
effective and Great Bay emerged from Chapter 11. Financing for the Amended
Bankruptcy Plan was provided by affiliates of Omega Advisors, Inc. and by
Elliott Associates, L.P. (collectively, the "Investors"). At the time Great Bay
emerged from Chapter 11, the Investors purchased 4,800,000 shares of Great Bay's
Common Stock for $35,000,000.
Current Business
The business of Great Bay consists of the management of its joint ownership
interest in the Seabrook Project and the sale in the wholesale power market of
its share of electricity produced by the Seabrook Project. Great Bay does not
have operational responsibility for the Seabrook Project. To date, Great Bay has
entered into one long-term power contract for approximately 10 MW of Great Bay's
share of the Seabrook Project capacity. Great Bay's business strategy is to seek
purchasers, either in the short-term market or pursuant to medium or long-term
contracts, for its share of the Seabrook Project electricity output at prices in
excess of the prices currently available in the short-term market since sales at
current short-term prices result in revenues which are less than Great Bay's
cash requirements for operations, maintenance and capital expenditures.
Marketing
Great Bay and PECO Energy Company ("PECO") entered into a Services
Agreement dated as of November 3, 1995 (the "PECO Services Agreement"), pursuant
to which PECO was appointed as Great Bay's exclusive agent to market and sell
Great Bay's uncommitted portion of electricity generated by the Seabrook
Project. Proceeds from the sale of Great Bay's electricity together with
reservation fees payable by PECO to Great Bay will be shared between Great Bay
and PECO in accordance with formulas set forth in the PECO Services Agreement.
The PECO Services Agreement became effective on December 31, 1995, and has
an initial term of two years. The term will be automatically extended for one
additional year (to December 31, 1998) if PECO exercises the PECO Warrant to
purchase the shares of Great Bay Common Stock, described below. At any time
prior to the Warrant Expiration Date (as defined below), Great Bay is entitled
to terminate the PECO Services Agreement; however, if the PECO Services
Agreement is so terminated, Great Bay will be required to refund to PECO the
$1,000,000 purchase price for the Warrant plus interest.
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At the time that Great Bay entered into the PECO Services Agreement, Great
Bay and PECO entered into a Warrant Purchase Agreement, dated November 3, 1995
(the "PECO Warrant Purchase Agreement"), pursuant to which on February 15, 1996,
PECO purchased the PECO Warrant from Great Bay for $1,000,000. The PECO Warrant
entitles PECO to purchase 420,000 shares of Great Bay's Common Stock at an
exercise price of the higher of (1) $9.75 per share, or (2) the highest trading
price per share of Great Bay's Common Stock prior to the Warrant Expiration
Date. The $1,000,000 purchase price for the PECO Warrant will be credited toward
the aggregate exercise price of the PECO Warrant upon exercise. If PECO does not
exercise the PECO Warrant, the purchase price for the PECO Warrant is wholly or
partially refundable only if Great Bay terminates the PECO Services Agreement
for convenience prior to the Warrant Expiration Date or if PECO exercises
certain of its rights to terminate the PECO Services Agreement. The PECO Warrant
expires on September 30, 1996 (the "Warrant Expiration Date") unless extended
because the Seabrook Project fails to maintain a 60% capacity factor for the
first 9 months of 1996, in which case the Warrant Expiration Date will be
extended until the earlier of such time as the Seabrook Project's rolling
12-month capacity factor equals or exceeds 60% or December 31, 1997. The
Seabrook Project's rolling nine-month capacity factor for the period from August
1, 1995 through April 30, 1996 was 79%. The Seabrook Project's capacity factor
for the four-month period from January 1, 1996 through April 30, 1996 was 89.6%.
From November 23, 1994 to December 31, 1995, UNITIL Resources, Inc.
("URI"), a wholly owned subsidiary of UNITIL Company ("UNITIL") marketed Great
Bay's energy. Great Bay paid URI commissions for sales of power plus
reimbursement for URI's time. The amount of the commission varied based on the
length of the power sale contracts and prices obtained. For the year ended
December 31, 1995, Great Bay paid $333,138 for services rendered pursuant to
this marketing agreement with URI. The marketing agreement with URI terminated
as of December 31, 1995.
Great Bay currently sells most of its power to utility companies located in
the Northeast United States in the short-term wholesale power market. Great Bay
is currently not dependent on any single customer because many utilities and
marketers are willing to buy Great Bay's share of electricity from the Seabrook
Project at substantially the same price. Prices in the short-term market are
typically higher during the summer and winter because the demand for electrical
power is higher during these periods in the Northeast United States. Sales of
power to UNITIL Power Corporation ("UNITIL Power"), a wholly owned subsidiary of
UNITIL, accounted for more than 10% of Great Bay's revenues during 1995. See
"Power Purchase Agreements."
Power Purchase Agreements
Great Bay is a party to a power agreement, dated as of April 1, 1993 (the
"UNITIL Power Purchase Agreement"), with UNITIL Power which provides for Great
Bay to sell to UNITIL Power approximately 10 MW of power. The UNITIL Power
Purchase Agreement commenced on May 1, 1993 and runs through October 31, 2010.
During the first year of this term, the price of power under the UNITIL Power
Purchase Agreement was 5.0 cents per kilowatt-hour ("kWh"). Thereafter, the
price is subject to increase in accordance with a formula which provides for
adjustments at less than the actual rate of inflation. UNITIL Power has an
option to extend the UNITIL Power Purchase Agreement for an additional 12 years
until 2022.
The UNITIL Power Purchase Agreement is front-end loaded whereby UNITIL
Power pays higher prices, on an inflation adjusted basis, in the early years of
the Agreement and lower prices in later years. The amount of the excess paid by
UNITIL Power in the early years of the UNITIL Power Purchase Agreement is
quantified in a "Balance Account" which increases annually to $4.1 million in
1998, then decreases annually, reaching zero in 2001. If the UNITIL Power
Purchase Agreement terminates prior to its scheduled termination and if at that
time there is a positive amount in the Balance Account, Great Bay is obligated
to refund that amount to UNITIL Power.
To secure the obligations of Great Bay under the UNITIL Power Purchase
Agreement, including the obligation to repay to UNITIL Power the amount of the
Balance Account, the UNITIL Power Purchase Agreement grants UNITIL Power a
mortgage on Great Bay's interest in the Seabrook Project. This mortgage may be
subordinated to first mortgage financing of up to a maximum amount of
$80,000,000. The UNITIL Power Purchase Agreement further provides that UNITIL
Power's mortgage will rank pari passu with other mortgages that may hereafter be
granted by Great Bay to other purchasers of power from Great Bay to secure
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similar obligations, provided that (i) the maximum amount of indebtedness
secured by the first mortgage on the Seabrook Interest may not exceed
$80,000,000 and (ii) the combined total of all second mortgages on the Seabrook
Interest may not exceed the sum of (a) $80,000,000 less the total amount of
Great Bay's debt then outstanding which is secured by a first mortgage plus (b)
$57,000,000.
In addition to the UNITIL Power Purchase Agreement, Great Bay also has
entered into an option agreement with UNITIL Power (the "Power Purchase Option
Agreement") under which Great Bay has granted UNITIL Power the option to
purchase, during the period from November 1, 1998 through October 31, 2018,
approximately 15 MW of electricity at a price equal to 6.5 cents per kWh,
subject to adjustment in accordance with a formula. UNITIL Power is required to
exercise its option under the Power Purchase Option Agreement on or before the
earlier of (i) October 31, 1996, or (ii) 30 days after the first date on which
Great Bay is prepared to commit to sell, for a minimum of 10 years, all or any
part of the last remaining 15 MW of Great Bay's share of power generated by the
Seabrook Project. Based on the current market conditions, Great Bay believes
that it is unlikely that UNITIL Power will exercise this option under the Power
Purchase Option Agreement.
Great Bay has also entered into a Purchased Power Agreement, dated as of
March 2, 1995 (the "Freedom Purchased Power Agreement"), with Freedom Energy
Company ("Freedom Energy") pursuant to which Great Bay agreed to sell to Freedom
Energy, subject to the satisfaction of certain material conditions precedent, up
to 20 MW of power at an initial price of approximately 4.5 cents per kWh. The
Freedom Purchased Power Agreement is subject to the receipt by Freedom Energy of
all necessary regulatory approvals, including approval from the NHPUC to operate
as a utility and to sell electricity directly to end-users and approval by the
FERC of the rates specified in the agreement. In addition, the agreement is
subject to the entry by Freedom Energy into an agreement with Public Service
Company of New Hampshire ("PSNH") for transmission services. Great Bay has the
right, which it has not exercised, to terminate the Freedom Purchased Power
Agreement since these conditions were not satisfied by February 28, 1996.
Freedom Energy has petitioned the NHPUC for permission to sell electric power
directly to end-users located in the franchise service area of PSNH, but it is
not currently authorized to operate an electric utility. Great Bay is unable to
predict whether Freedom Energy will obtain the necessary approvals or customers
to purchase 20 MW of electricity.
Great Bay is also a party to a Purchased Power Agreement, dated November 9,
1995 (the "Bangor Purchased Power Agreement"), with Bangor Hydro-Electric
Company ("Bangor Hydro") pursuant to which Bangor Hydro agreed to purchase from
Great Bay, subject to increase or reduction under certain circumstances, 10 MW
of electricity during the months of January through March 1996 and for the
months of November 1996 through March 1997 and November 1997 through March 1998.
Pursuant to the Bangor Purchased Power Agreement, Great Bay also granted to
Bangor Hydro an option to purchase from Great Bay, subject to increase or
reduction under certain circumstances, up to 10 MW of electricity for the months
of November 1998 through March 1999 and November 1999 through March 2000.
During the year ended December 31, 1995, sales to Northeast Utilities, New
England Power Company, UNITIL and Bangor Hydro accounted for 27%, 21%, 15% and
12%, respectively, of total operating revenues. See Note J of Notes to the
Financial Statements.
Competition
Great Bay sells its share of Seabrook electricity into the wholesale
electricity market in the Northeast United States. There are a large number of
suppliers to this market and a surplus of capacity, resulting in intense
competition. A primary source of competition comes from traditional utilities,
many of which presently have excess capacity. In addition, non-utility wholesale
generators of electricity, such as IPPs, QFs and EWGs, as well as power
marketers and brokers, actively sell electricity in this market.
Great Bay may face increased competition, primarily based on price, from
all the foregoing sources in the future. Great Bay believes that it will be able
to compete effectively in the wholesale electricity market because of the
current low cost of electricity generated by the Seabrook Project in comparison
with existing alternative sources and the reduction of Great Bay's capital costs
resulting from the implementation of the Chapter 11 reorganization plan. In
addition, Great Bay believes that the commitment by PECO to provide back-up
power under the PECO Services Agreement, as well as PECO's marketing
capabilities, will favorably affect Great Bay's competitive position.
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NEPOOL
Great Bay is a party to the New England Power Pool ("NEPOOL") Agreement
(the "NEPOOL Agreement") and is a member of NEPOOL. NEPOOL is open to all
investor-owned, municipal and cooperative electric utilities in New England that
are connected to the New England power grid. Effective November 13, 1995, the
NEPOOL Agreement was amended to permit broader membership and participation in
NEPOOL by power marketers and other non-utilities that transact business in the
bulk power market in New England. The NEPOOL Agreement provides for coordinated
planning of future facilities as well as the operation of nearly 100% of
existing generating capacity in New England and of related transmission
facilities as if they were one system. The NEPOOL Agreement imposes on its
participants obligations concerning generating capacity reserves and the right
to use major transmission lines. On occasions when one or more transmission
lines are out of service, the quantity of power being produced by then operating
generation plants may exceed the quantity of power that can be carried safely by
the transmission system. In such instances, one or more generation plants may be
taken off-line by NEPOOL. To date, the Seabrook Project has not been taken
off-line in these instances. Great Bay believes that it is unlikely that the
Seabrook Project would be taken off-line in such instances because NEPOOL
prefers to take off-line non-nuclear plants which are less complex and less
difficult to schedule than nuclear units.
The NEPOOL agreement also provides for central dispatch of the generating
capacity of NEPOOL members with the objective of achieving economical use of the
region's facilities. Pursuant to the NEPOOL Agreement, interchange sales
(purchases from or sales to the pool by a NEPOOL member) are made at prices
approximately equal to the fuel cost for generation without contribution to the
support of fixed charges, if NEPOOL has the right to schedule delivery of the
power. On rare occasions, unscheduled power is delivered, or "dumped," to the
pool, for which no payment is made by NEPOOL. Great Bay does not expect to
"dump" power to NEPOOL. NEPOOL members also jointly schedule generation plant
maintenance to avoid capacity shortages in the NEPOOL area. The number of
generation plants undergoing maintenance at any time affects the cost of
replacement power in the market. Thus, Great Bay's operating revenues and costs
are affected to some extent by the operations of plants of other members.
Nuclear Power, Energy and Utility Regulation
The Seabrook Project and Great Bay, as part owner of a licensed nuclear
facility, are subject to the broad jurisdiction of the NRC, which is empowered
to authorize the siting, construction and operation of nuclear reactors after
consideration of public health and safety, environmental and antitrust matters.
Great Bay has been, and will be, affected to the extent of its proportionate
share by the cost of any such requirements made applicable to Seabrook Unit 1.
Great Bay is also subject to the jurisdiction of the FERC under Parts II
and III of the Federal Power Act and, as a result, is required to file with FERC
all contracts for the sale of electricity. FERC has the authority to suspend the
rates at which Great Bay proposes to sell power, to allow such rates to go into
effect subject to refund and to modify a proposed or existing rate if FERC
determines that such rate is not "just and reasonable." FERC's jurisdiction also
includes, among other things, the sale, lease, merger, consolidation or other
disposition of facilities, interconnection of certain facilities, accounts,
service and property records.
Because it is an EWG, Great Bay is not subject to the jurisdiction of the
NHPUC under PUHCA. In order to maintain its EWG status, Great Bay must continue
to engage exclusively in the business of owning and/or operating all or part of
one or more "eligible facilities" and to sell electricity only at wholesale
(i.e., not to end users) and activities incidental thereto. An "eligible
facility" is a facility used for the generation of electric energy exclusively
at wholesale or used for the generation of electric energy and leased to one or
more public utility companies. The term "facility" may include a portion of a
facility. In the case of Great Bay, its 12.1% joint ownership interest in the
Seabrook Project comprises an "eligible facility."
Great Bay is subject to regulation by the NHPUC in many respects including
the issuance of securities, the issuance of debt, contracts with affiliates,
forms of accounts, transfers of utility properties, mortgaging of utility
property and other matters. The NHPUC does not regulate rates charged for sales
of electricity at wholesale.
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The NHPUC and the regulatory authorities with jurisdiction over utilities
in New Hampshire and state legislatures of several other states in which Great
Bay sells electricity are considering a range of proposals relating to the
deregulation of the utility industry. It is not possible to predict what steps
will be taken by these authorities and legislatures or their impact on Great
Bay.
Nuclear Power Issues
Nuclear units in the United States have been subject to widespread
criticism and opposition, which has led to construction delays, cost overruns,
licensing delays and other difficulties. Various groups have sought to prohibit
the completion and operation of nuclear units and the disposal of nuclear waste
by litigation, legislation and participation in administrative proceedings. The
Seabrook Project was the subject of significant public controversy during its
construction and licensing and remains controversial. An increase in public
concerns regarding the Seabrook Project or nuclear power in general could
adversely affect the operating license of Seabrook Unit 1. While Great Bay
cannot predict the ultimate effect of such controversy, it is possible that it
could result in a premature shutdown of the unit.
In the event of a permanent shutdown of any unit, NRC regulations require
that it be completely decontaminated of any residual radioactivity. While the
owners of the Seabrook Project are accumulating a trust fund to pay
decommissioning costs, if these costs exceed the amount of the trust fund, the
owners (including Great Bay) will be liable for the excess.
Nuclear Related Insurance
In accordance with the Price Anderson Act, the limit of liability for a
nuclear-related accident is approximately $8.9 billion, effective November 18,
1994. The primary layer of insurance for this liability is $200 million of
coverage provided by the commercial insurance market. The secondary coverage is
approximately $8.7 billion, based on the 110 currently licensed reactors in the
United States. The secondary layer is based on a retrospective premium
assessment of $79.3 million per nuclear accident per licensed reactor, payable
at a rate not exceeding $10 million per year per accident and a maximum of $20
million per year. In addition, the retrospective premium is subject to inflation
based indexing at five-year intervals and, if the sum of all public liability
claims and legal costs arising from any nuclear accident exceeds the maximum
amount of financial protection available, then each licensee can be assessed an
additional 5% ($3.965 million) of the maximum retrospective assessment. With
respect to the Seabrook Project, Great Bay would be obligated to pay its
ownership share of any assessment resulting from a nuclear incident at any
United States nuclear generating facility. Great Bay estimates its maximum
liability per incident currently would be an aggregate amount of approximately
$9.59 million per accident, with a maximum annual assessment of about $1.21
million per incident, per year.
In addition to the insurance required by the Price Anderson Act, the NRC
regulations require licensees, including the Seabrook Project, to carry all risk
nuclear property damage insurance in the amount of at least $1.06 billion, which
amount must be dedicated, in the event of an accident at the reactor, to the
stabilization and decontamination of the reactor to prevent significant risk to
the public health and safety.
During 1995, Great Bay purchased business interruption insurance from
Nuclear Electric Insurance Limited ("NEIL"). This policy is in effect from
December 22, 1995 until September 15, 1996 and provides for the payment of a
fixed weekly loss amount of $520,000 in the event of an outage at the Seabrook
Project of more than 21 weeks resulting from property damage occurring from a
"sudden fortuitous event, which happens by chance, is unexpected and
unforeseeable." The maximum amount payable to Great Bay is $70.3 million. Under
the terms of the policy, Great Bay is subject to a potential retrospective
premium adjustment of up to approximately $650,000 should NEIL's board of
directors deem that additional funds are necessary to preserve the financial
integrity of NEIL. Since NEIL was founded in 1980, there has been no
retrospective premium adjustment; however, there can be no assurance that NEIL
will not make retrospective adjustments in the future. The liability for this
retrospective premium adjustment ceases six years after the end of the policy
unless prior demand has been made.
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Nuclear Fuel
The Seabrook Project's joint owners have made, or expect to make, various
arrangements for the acquisition of uranium concentrate, the conversion,
enrichment, fabrication and utilization of nuclear fuel and the disposition of
that fuel after use. Many of these arrangements are pursuant to multi-year
contracts with concentrate and services providers. Based on the Seabrook
Project's existing contractual arrangements, Great Bay believes that the
Seabrook Project has available or under supply contracts sufficient nuclear fuel
for operations through approximately 2001. The next refueling, based on NAESCO's
expectation for fuel consumption, is currently scheduled for June 1997. Uranium
concentrate and conversion, enrichment and fabrication services currently are
available from a variety of sources. The cost of such concentrate and such
services varies based upon market factors.
Nuclear Waste Disposal
Costs associated with nuclear plant operations include amounts for disposal
of nuclear wastes, including spent fuel, as well as for the ultimate
decommissioning of the plants. Under the Nuclear Waste Policy Act of 1982 (the
"NWPA"), the United States Department of Energy (the "DOE") is required (subject
to various contingencies) to design, license, construct and operate a permanent
repository for high level radioactive wastes and spent nuclear fuel and
establish prescribed fees for the disposal of such waste and fuel. The NWPA
specifies that the DOE provide for the disposal of such waste and spent nuclear
fuel starting in 1998.
The owners of the Seabrook Project have entered into contracts with the DOE
for disposal of spent nuclear fuel in accordance with the NWPA. In return for
payment of the prescribed fees, the federal government is to take title to and
dispose of the Seabrook Project's high level wastes and spent nuclear fuel
beginning no later than 1998. However, the DOE has announced that its first high
level waste repository will not be in operation earlier than 2010,
notwithstanding the DOE's statutory and contractual responsibility to begin
disposal of high-level radioactive waste and spent fuel, beginning not later
than January 31, 1998.
Until the federal government begins receiving such materials in accordance
with the NWPA, operating nuclear generating units such as the Seabrook Project
will need to retain high level wastes and spent fuel on-site or make other
provisions for their storage. Great Bay has been advised by the Managing Agent
that on-site storage facilities for the Seabrook Project are expected to be
adequate until at least 2010.
Disposal costs for LLWs that result from normal operation of nuclear
generating units have increased significantly in recent years and are expected
to continue to rise. The cost increases are functions of increased packaging and
transportation costs and higher fees and surcharges charged by the disposal
facilities. Pursuant to the Low-Level Radioactive Waste Policy Act of 1980, each
state was responsible for providing disposal facilities for LLW generated within
the state and was authorized to join with other states into regional compacts to
jointly fulfill their responsibilities. However, pursuant to the Low-Level
Radioactive Waste Policy Amendments Act of 1985, each state in which a currently
operating disposal facility is located (South Carolina, Nevada and Washington)
is allowed to impose volume limits and a surcharge on shipments of LLW from
states that are not members of the compact in the region in which the facility
is located. On June 19, 1992, the United States Supreme Court issued a decision
upholding certain parts of the Low-Level Radioactive Waste Policy Amendments Act
of 1985, but invalidating a key provision of that law requiring each state to
take title to LLW generated within that state if the state fails to meet
federally mandated deadlines for siting LLW disposal facilities. The decision
has resulted in uncertainty about states' continuing roles in siting LLW
disposal facilities and may result in increased LLW disposal costs and the need
for longer interim LLW storage before a permanent solution is developed. Based
on information provided by NAESCO, management believes that the on-site storage
capacity for LLW generated by the Seabrook Project is adequate.
In April 1995, a privately owned facility in Utah was approved as a
disposal facility for certain types of LLW. Additionally, the Barnwell, South
Carolina disposal facility was reopened in July 1995 to all states except North
Carolina as a result of legislation passed by the South Carolina legislature.
The Seabrook Project began shipping certain LLW to the Utah facility in December
1995. All LLW generated by the Seabrook Project which exceeds the maximum
radioactivity level of LLW accepted by the Utah facility and LLW resulting from
the Seabrook Project's operation prior to that date is stored on-site.
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Decommissioning
NRC licensing requirements and restrictions are also applicable to the
decommissioning of nuclear generating units at the end of their service lives,
and the NRC has adopted comprehensive regulations concerning decommissioning
planning, timing, funding and environmental review. Any changes in NRC
requirements or technology can increase estimated decommissioning costs.
Along with the other Participants, Great Bay is responsible for its pro
rata share of the decommissioning and cancellation costs for Seabrook. The
decommissioning funding schedule is determined by the New Hampshire Nuclear
Decommissioning Financing Committee (the "NDFC"). The NDFC reviews the
decommissioning funding schedule for the Seabrook Project at least annually and,
for good cause, may increase or decrease the amount of the funds or alter the
funding schedule. Great Bay pays its share of decommissioning costs on a monthly
basis.
The estimated cost to decommission the Seabrook Project, based on a study
performed in 1994 for the lead owner of the Plant, is approximately $414 million
in 1995 dollars and $2.1 billion in 2026 dollars, assuming a 36-year life for
the facility and a future escalation rate of 4.25%. Based on this estimate, the
current value of Great Bay's share of this liability in 1995 dollars is
approximately $50.2 million.
The Seabrook Project's decommissioning estimate and funding schedule is
subject to review each year by the NDFC. The review of the 1996 estimate and
funding schedule by the NDFC is currently scheduled to commence in May 1996.
Although the owners of the Seabrook Project are accumulating funds in an
external trust to defray decommissioning costs, these costs could substantially
exceed the value of the trust fund, and the owners, including Great Bay, would
remain liable for the excess.
On November 15, 1992, Great Bay's former parent, EUA, and certain other
parties entered into a settlement agreement. Under the settlement agreement EUA,
guaranteed an amount not to exceed $10 million of Great Bay's future
decommissioning costs of Seabrook Unit 1 in the event that Great Bay is unable
to pay its share of such decommissioning costs.
Environmental Regulation
The Seabrook Project, like other electric generating stations, is subject
to standards administered by federal, state and local authorities with respect
to the siting of facilities and associated environmental factors. The United
States Environmental Protection Agency (the "EPA"), and certain state and local
authorities, have jurisdiction over releases of pollutants, contaminants and
hazardous substances into the environment and have broad authority in connection
therewith, including the ability to require installation of pollution control
devices and remedial actions. The NRC has promulgated a variety of standards to
protect the public from radiological pollution caused by the normal operation of
nuclear generating facilities.
The EPA issued a National Pollutant Discharge Elimination System permit,
valid for a period of five years, to NAESCO on October 30, 1993 authorizing
discharges from Seabrook Station into the Atlantic Ocean and the Browns River in
accordance with limitations, monitoring requirements and conditions specified in
the permit. On August 31, 1994, the New Hampshire Department of Environmental
Services issued to NAESCO permits to operate two auxiliary boilers and two
emergency diesel generators in accordance with New Hampshire Revised Statutes
Annotated Chapter 125-C. These permits, which are effective until August 31,
1997, prescribe limits for the emission of air pollutants into the ambient air
as well as record keeping and other reporting criteria. Because the liabilities
of the Participants under the JOA are several and not joint, in the event that
NAESCO violates the emissions limits contained in its permits, if at all, Great
Bay is liable for its pro rata share of any costs and liabilities assessed for
the emissions violations.
In some environmental areas, the NRC and the EPA have overlapping
jurisdiction. Thus, NRC regulations are subject to all conditions imposed by the
EPA and a variety of federal environmental statutes, including obtaining permits
for the discharge of pollutants (including heat, which is discharged by the
Seabrook Project) into the nation's navigable waters. In addition, the EPA has
established standards, and is in the process of reviewing existing standards,
for certain toxic air pollutants, including radionuclides, under the United
States Clean Air Act which apply to NRC-licensed facilities. The effective date
for the new EPA radionuclide standards has been stayed as applied to nuclear
generating units. Environmental regulation of the Seabrook Project may result in
material increases in capital and operating costs, delays or cancellation of
construction of planned improvements, or modification or termination of
operation of existing facilities.
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<PAGE> 37
Management believes that Great Bay is in compliance in all material respects
with applicable EPA, NRC and other regulations relating to pollution caused by
nuclear generating facilities.
Energy Policy Act
The Energy Act addresses many aspects of national energy policy and
includes important changes for electric utilities and registered holding
companies. For example, the Energy Act grants FERC new authority to mandate
transmission access for QFs, EWGs and traditional utilities. It is not possible
to predict the impact which the Energy Act and the rules and regulations which
will be promulgated by various regulatory agencies pursuant to the Energy Act
will have on Great Bay. It is also not possible to predict the timing or content
of future energy policy legislation and the significance of such legislation to
Great Bay. Various issues not addressed by the Energy Act, including regional
planning and transmission arrangements, could be addressed in future
legislation.
PROPERTIES
Great Bay's principal asset is its 12.1% joint ownership interest in the
Seabrook Project. The Seabrook Project is a nuclear-fueled, steam electricity,
generating plant located in Seabrook, New Hampshire, which was planned to have
two Westinghouse pressurized water reactors, Seabrook Unit 1 and Seabrook Unit 2
(each with a rated capacity of 1,150 megawatts), utilizing ocean water for
condenser cooling purposes. Seabrook Unit 1 entered commercial service on August
19, 1990. Seabrook Unit 2 has been canceled.
EMPLOYEES
Great Bay currently has five employees. If the Merger is consummated, all
of these employees will become Holding Company employees. See "Certain
Transactions" and "Management -- Employment Agreements."
LEGAL PROCEEDINGS
Great Bay filed applications for abatement of its 1994 and 1995 property
taxes with the Towns of Seabrook, Hampton and Hampton Falls, New Hampshire (the
"New Hampshire Towns"). Each of the New Hampshire Towns denied Great Bay's
abatement requests. On December 22, 1994 with respect to Hampton and Hampton
Falls and February 18, 1995 with respect to Seabrook, Great Bay filed appeals
with the Board of Land and Tax Appeals (the "1994 Tax Appeals"). Approximately
$2,200,000 of property taxes is at issue in the 1994 Tax Appeals. Although Great
Bay believes that the New Hampshire Towns significantly overvalued Great Bay's
interest in the Seabrook Project, the 1994 Tax Appeals are presently pending and
Great Bay is unable to express an opinion as to the likely outcome of this
matter. Great Bay believes that a decision by the New Hampshire Towns against
Great Bay would not have material adverse effect on Great Bay's results of
operations because Great Bay paid its 1994 and 1995 property taxes to the New
Hampshire Towns.
In December 1995, the Town of Seabrook, New Hampshire (the "Town of
Seabrook") issued a bill for property taxes for the second half of 1995 to North
Atlantic Energy Corp., et al. The Town of Seabrook informed Great Bay that it
believed Great Bay's share of this bill was equal to $1,293,000. Great Bay
initially refused to pay the bill because Great Bay believes that the Town of
Seabrook's assessment of Great Bay's interest in the Seabrook Project is
overstated and because the bill fails to recognize Great Bay as an independent
taxpayer with a separately assessed and valued parcel of real estate. On April
30, 1996, Great Bay paid the December 1995 property tax bill to avoid the Town
of Seabrook placing a lien on the Seabrook Project. Great Bay has filed a
petition with the Town of Seabrook seeking tax abatement of Great Bay's 1995
property taxes. Great Bay is unable to express an opinion as to the likely
outcome of this matter.
CERTAIN TRANSACTIONS
Mr. Tillinghast serves as the President and sole stockholder of Tillinghast
Technology Interests, Inc. ("TILTEC"), a private consulting firm that provides
services to various corporations relative to cogeneration, alternative energy
projects, third party power generation and general restructuring of the U.S.
utility industry. From January 1 through April 24, 1995, TILTEC and Great Bay
were parties to an Agreement, dated as of November 23, 1994, under which TILTEC
provided Great Bay with approximately 1,000 square feet of furnished office
space located within close proximity to the Seabrook Project at 20 Ladd Street
in Portsmouth, New Hampshire, and administrative support services for a total
fee of $3,500 per month.
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<PAGE> 38
TILTEC and Great Bay entered into a new Expense Sharing Agreement, dated as
of April 24, 1995 (the "New Expense Sharing Agreement"), superseding in its
entirety the November 23, 1994 expense sharing agreement. Under the New Expense
Sharing Agreement, TILTEC agreed to continue to provide to Great Bay
approximately 1,000 square feet of furnished office space in Portsmouth, New
Hampshire and administrative support services for a total fee of $7,400 per
month. The New Expense Sharing Agreement terminated effective as of May 1, 1996.
Because of its need for additional space, Great Bay relocated to a new facility
in Dover, New Hampshire on May 1, 1996.
Effective August 1, 1995 (the "Getman Commencement Date"), Frank W. Getman
Jr. commenced employment with Great Bay and entered into an Employment Agreement
(the "Getman Employment Agreement") pursuant to which he agreed to serve as Vice
President, General Counsel and Secretary through August 1, 1998. Pursuant to the
Getman Employment, Great Bay loaned Mr. Getman $75,000 at the time he commenced
employment. The principal amount of the loan will be forgiven in equal
installments of $25,000 on each of the first, second and third anniversaries of
the Getman Commencement Date, so long as Mr. Getman remains employed by Great
Bay on such dates. In the event that Mr. Getman's employment is terminated for
cause (as defined in the Getman Employment Agreement) or by Mr. Getman, he has
agreed to repay to Great Bay the outstanding principal amount of such loan at
such time, less any amounts forgiven by Great Bay, plus interest accrued on such
adjusted principal amount from the Getman Commencement Date at an interest rate
of 6% per year. See "Management -- Employment Agreements."
MANAGEMENT'S DISCUSSION OF ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF GREAT BAY
Emergence from Chapter 11
On February 28, 1991, Great Bay filed a voluntary petition for
reorganization under Chapter 11 of the Bankruptcy Code. On November 23, 1994
(the "Confirmation Date"), a formal confirmation order by the Bankruptcy Court
with respect to Great Bay's Amended Bankruptcy Plan became effective. At that
time, Great Bay emerged from bankruptcy. As a result of the Chapter 11
proceeding and in accordance with the provisions of the Amended Bankruptcy Plan,
the capital structure of Great Bay was completely changed. In particular, as
part of its Chapter 11 proceeding, Great Bay discharged all of its pre-petition
debt, which consisted primarily of the approximately $280 million principal
amount of outstanding Notes and unpaid accrued interest on the Notes of
approximately $14 million, and raised gross proceeds of $35 million in the
Amended Bankruptcy Plan. See "Business -- Bankruptcy Proceeding and
Reorganization." Thus, as a result, Great Bay's net worth increased
significantly and Great Bay was relieved of the obligation to make principal and
interest payments on the Notes.
The following discussion focuses solely on operating revenues and operating
expenses which are presented in a substantially consistent manner for all of the
periods presented. As a result of the Chapter 11 proceeding and subsequent
effectiveness of the Amended Bankruptcy Plan on November 23, 1994, the 1994
Statement of Income represents separately the results of operations of the
predecessor company prior to November 23, 1994 from the results of operations of
Great Bay after that date.
On the Confirmation Date, Great Bay adopted a "Fresh Start" Balance Sheet.
This Balance Sheet reflects the assets and liabilities of Great Bay at their
estimated fair values as of the Confirmation Date, including the net proceeds of
the equity financing for the Amended Bankruptcy Plan, and eliminating
liabilities discharged under the Amended Bankruptcy Plan.
Overview
Great Bay reported an operating loss in the three-month period ended March
31, 1996 and in each of the year ended December 31, 1995, the combined
twelve-month period ended December 31, 1994 and the year ended December 31,
1993. These losses were primarily due to sales of Great Bay's share of
electricity from the Seabrook Project in the short-term market at prices
resulting in revenues substantially below actual expenses.
The Seabrook Project from time to time experiences both scheduled and
unscheduled outages. Great Bay incurs losses during outage periods due to the
loss of all operating revenues and additional costs associated with the outages
as well as continuing operating and maintenance expenses and depreciation.
Unscheduled outages or operation of the unit at reduced capacity can occur due
to the automatic operation of safety systems following the detection of a
malfunction. In addition, it is possible for the unit to be shut down or
operated at reduced capacity based on the results of scheduled and unscheduled
inspections and routine surveillance by
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<PAGE> 39
Seabrook Project personnel. It is not possible for Great Bay to predict the
frequency or duration of any future unscheduled outages; however, it is likely
that such unscheduled outages will occur. The Managing Agent of the Seabrook
Project has scheduled the next refueling outage for June 1997. Refueling outages
are scheduled generally every 18-24 months depending upon the Seabrook Project
capacity factor and the rate at which the nuclear fuel is consumed.
This Proxy Statement/Prospectus contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," 'excepts,"
"intends," and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause Great Bay's
and Holding Company's actual results to differ materially from those indicated
by such forward-looking statements. These factors include, without limitation,
those set forth under the caption "Risk Factors" at pages 9 through 12.
Results of Operations
OPERATING REVENUES
Three Month Periods Ended March 31, 1996 and 1995
Great Bay's operating revenues decreased by approximately $890,000, or
11.4%, to $6,891,000 in the first quarter of 1996 as compared with $7,781,000 in
the first quarter of 1995. This decrease was primarily due to lower availability
and production at the Seabrook Project resulting from unscheduled outages during
the first quarter of 1996 compared with no scheduled or unscheduled outages
occurring during the same period in 1995. During the first quarter of 1996, the
average capacity factor at the Seabrook Project was 86.1% of the rated capacity
versus an average capacity factor of 100.6% for the same period in 1995. Sales
of electricity decreased by approximately 12.9% to 264,134,400 kilowatt hours in
1996 as compared with 303,169,000 kilowatt hours in 1995. This decrease in kWh
sales during the first quarter of 1996 was partially offset by an increase in
the sales price per kWh received by Great Bay during the first quarter of 1996,
as compared to the same period in 1995. During the first quarter of 1996 the
sales price per kWh (determined by dividing total sales revenue by the total
number of kWh hours sold in the applicable period) increased 2% to $2.61 cents
per kWh as compared with $2.56 cents per kWh in the 1995 period. Great Bay's
cost of power (determined by dividing total operating expenses by Great Bay's
12.1% share of the power produced by the Seabrook Project during the applicable
period) increased by 15.9% to 2.91 cents per kWh in the first three months of
1996 as compared to 2.51 cents per kWh in the first three months of 1995. This
increase is primarily the result of the unscheduled outages during January and
February of 1996. Scheduled and unscheduled outage time increases Great Bay's
cost of power because Seabrook Project costs are spread over fewer kWhs.
Years Ended December 31, 1995, 1994 and 1993
Great Bay's operating revenues for 1995 increased by approximately $7.4
million, or 43%, as compared with the combined twelve months ended 1994. The
increase was due to reduced scheduled and unscheduled outage time during 1995,
with an average capacity factor of 83.2% in 1995 as compared with 61.6% in the
combined twelve months ended 1994. Operating revenues were also favorably
affected in 1995 by reduced outage time and an increase in the sales price per
kWh to 2.41 cents per kWh as compared with 2.27 cents per kWh in the combined
twelve months ended 1994. Great Bay's cost of power decreased by 34.7% to 3.18
cents per kWh in 1995 as compared with 4.88 cents per kWh in the combined twelve
months ended 1994, primarily as a result of reduced depreciation and
amortization expenses in 1995 resulting from the write down to fair value of all
of Great Bay's assets following its emergence from bankruptcy in November 1994.
Great Bay's operating revenues for the combined twelve months ended 1994
decreased by approximately $7.5 million, or 30.5%, in comparison with 1993. The
decrease was primarily due to greater scheduled and unscheduled outages at the
Seabrook Project during 1994 than in 1993, with an average capacity factor of
61.6% in 1994 in comparison with 89.9% in 1993. The sales price per
kilowatt-hour power was substantially unchanged, increasing to 2.27 cents in the
combined twelve-month period in 1994 from 2.24 cents in 1993. Great Bay's cost
of power for the same periods increased by 68.3% to 4.88 cents per kWh in the
combined twelve-month period in 1994 as compared with 2.90 cents per kWh in
1993, primarily as a result of the outages in the combined twelve months ended
1994.
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EXPENSES
Three Month Periods Ended March 31, 1996 and 1995
Great Bay's production expenses for the first quarter of 1996 decreased by
$618,000 or 14.7%, compared with the first quarter of 1995. This decrease was
primarily the result of reduced operating costs at the Seabrook Project
reflecting lower staffing levels and a reduction in the level of outside
services, lower nuclear fuel amortization because the Seabrook Project added
less expensive nuclear fuel at the last refueling outage and lower outage
accruals as the result of the use of a 20-month assumed scheduled operating
cycle in the first quarter of 1996 and an 18-month cycle in the first quarter of
1995. The change in the operating cycle reflects a change by the Managing Agent
of the Seabrook Project as to the assumed burn rate of the nuclear fuel.
Great Bay's administrative and general expenses increased by $512,000
during the first quarter of 1996, an increase of 36.5% over the comparable
period in 1995. This increase was primarily due to the costs associated with the
growth and management of Great Bay, including transition and start-up costs
associated with Great Bay directly performing its own administrative functions
following the termination of its Marketing and Management and Administrative
Services Agreements with UNITIL Resources, Inc., marketing fees paid to PECO and
costs associated with Great Bay's proposed corporate restructuring into a
holding company structure. The marketing fees paid to PECO are calculated based
upon a revenue sharing formula. The formula is materially dependent upon the
capacity factor achieved at the Seabrook Project and is subject to a biannual
true-up in July and January based on the actual capacity factor for the prior
six-month period. If the Seabrook Project annual capacity factor exceeds 85%,
Great Bay is entitled to retain a greater percentage of current year revenues
and PECO is required to make a true-up payment to Great Bay.
Great Bay's depreciation and amortization expenses increased 18.7% to
$874,000 in the first quarter of 1996 as compared to $736,000 during the first
quarter of 1995. This increase was primarily attributable to Great Bay's utility
plant being depreciated over a shorter remaining license life and amortization
of the cost of the materials and supplies inventory that is expected to be on
hand at the expiration of the Seabrook Project's NRC operating license.
Other deductions increased 157%, or $606,000, reflecting $219,000 in other
deductions during the first quarter of 1996 as compared to other income of
$387,000 recorded during the first quarter of 1995. This increase was primarily
due to Great Bay's recognition of its share of the Seabrook Project's
decommissioning liability. During the first quarter of 1996, Great Bay Power
began to accrete its share of the Seabrook Project's decommissioning liability
in 1996 dollars rather than 1995 dollars. In 1995 there was no expense for Great
Bay's share of Seabrook Project's decommissioning liability because the entire
amount of Great Bay's share of Seabrook Project's decommissioning liability was
reflected as a liability on Great Bay's balance sheet under fresh start
accounting principles. This accretion is a non-cash charge and recognizes Great
Bay's liability related to the closure and decommissioning of its nuclear plant
in current year dollars over the licensing period of the plant.
Years Ended December 31, 1995, 1994 and 1993
Great Bay's total operating expenses (excluding depreciation and all taxes)
for 1995 increased $0.7 million, or 3.0%, in comparison with the combined twelve
months ended 1994, primarily as a result of increased administrative and general
expenses. This increase was partially offset by lower maintenance costs during
the Seabrook Project's 1995 scheduled outage. Depreciation and amortization
expenses decreased by 59.6% to $3.3 million during 1995 as compared with $8.3
million in the combined twelve months ended 1994. The decrease was the result of
a reduction in the depreciable value of Great Bay's investment in the Seabrook
Project due to the write down to fair value of all of Great Bay's assets
following its emergence from bankruptcy in November 1994. In the combined twelve
months ended 1994, as part of its emergence from bankruptcy, Great Bay wrote off
$137.9 million of assets and liabilities. Interest income increased in 1995 to
$1.5 million as a result of Great Bay's significantly higher cash and investment
balances in 1995.
Great Bay's total operating expenses (excluding depreciation and all taxes)
for the combined twelve-month period in 1994 increased $1.2 million, or 5.1%, in
comparison with 1993, primarily as a result of increased maintenance costs
during the Seabrook Project's 1994 outages. Taxes other than income increased
for the combined twelve-month period in 1994 by approximately $0.4 million, or
10.4%, over 1993, reflecting
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changes in the manner in which Great Bay accrued for this liability as a result
of the uncertainty regarding the timing and magnitude of the net operating loss
carryforwards described below.
NET OPERATING LOSSES
For federal income tax purposes, as of December 31, 1995, Great Bay had net
operating loss carry forwards ("NOLs") of approximately $167 million, which are
scheduled to expire between 2005 and 2010. Because Great Bay has experienced one
or more ownership changes, within the meaning of Section 382 of the Internal
Revenue Code of 1986, as amended, an annual limitation is imposed on the ability
of Great Bay to use $136 million of these carryforwards. Great Bay's best
estimate at this time is that the annual limitation on the use of $136 million
of Great Bay's NOLs is approximately $5.5 million per year. Great Bay's other
$31 million of NOLs are not currently subject to such limitations.
Liquidity and Capital Resources
Great Bay is required under the JOA to pay its share of Seabrook Unit 1 and
Seabrook Unit 2 expenses, including, without limitation, operation and
maintenance expenses, construction and nuclear fuel expenditures and
decommissioning costs, regardless of the level of Seabrook Unit 1's operations.
Great Bay currently is selling most of its power in the Northeast United States
short-term wholesale power market. The cash generated from electricity sales by
Great Bay is and has been less than Great Bay's ongoing cash requirements. Great
Bay expects that it will continue to incur cash deficits until the prices at
which it is able to sell its share of the Seabrook Project electricity increase,
which may be a number of years, if ever. Great Bay intends to cover such
deficits with its cash and short-term investments which totaled approximately
$16.7 million at March 31, 1996. However, if the Seabrook Project operates at a
capacity factor below historical levels, or if expenses associated with the
ownership or operation of the Seabrook Project, including without limitation
decommissioning costs, are materially higher than anticipated, or if the prices
at which Great Bay is able to sell its share of the Seabrook Project electricity
do not increase at the rates and within the time expected by Great Bay, Great
Bay would be required to raise additional capital, either through a debt
financing or an equity financing, to meet its ongoing cash requirements.
Great Bay's principal asset available to serve as collateral for borrowings
is its 12.1% joint interest in the Seabrook Project. Pursuant to a power
purchase agreement, dated as of April 1, 1993, between Great Bay and UNITIL
Power Corp., Great Bay's interest in the Seabrook Project is encumbered by a
mortgage. This mortgage may be subordinated to up to $80 million of senior
secured financing.
Great Bay's cash and short-term investments increased approximately
$274,000 during the first quarter of 1996. Principal factors affecting liquidity
during the three months ended March 31, 1996 included the operating loss
discussed above, decommissioning trust fund payments of $181,000, an increase in
accounts receivable of $1,008,000 due to the resumption of power sales in the
first quarter of 1996 following reduced sales in December 1995 as a result of
the scheduled outage during that month and an increase in Prepayments and other
assets of $1,391,000, primarily related to cash funding of Great Bay's share of
the Seabrook Project's operating costs. Offsetting these items were non-cash
charges to income of $1,801,000 for depreciation and amortization,
decommissioning trust fund accretion of $565,000 and local property and state
nuclear tax accruals of $917,000. Great Bay also received $1,000,000 as a result
of the PECO warrant purchase.
In December 1995, the Town of Seabrook, New Hampshire (the "Town of
Seabrook") issued a bill for property taxes for the second half of 1995 to
"North Atlantic Energy Corp., et al." The Town of Seabrook informed Great Bay
that it believed Great Bay's share of this bill was $1,293,000. Great Bay
initially refused to pay the bill because Great Bay believes that the Town of
Seabrook's assessment of Great Bay's interest in the Seabrook Project is
overstated and because the bill fails to recognize Great Bay as an independent
taxpayer with a separately assessed and valued parcel of real estate. As of
March 31, 1996, the non-payment of these property taxes was reflected in Great
Bay's financial statements as taxes accrued. On April 30, 1996, Great Bay paid
the December 1995 property tax bill to avoid the Town of Seabrook placing a lien
on the Seabrook Project. Great Bay has filed a petition with the Town of
Seabrook seeking a tax abatement of Great Bay's 1995 property taxes. Management
of Great Bay is unable to express an opinion as to the likely outcome of this
matter.
Great Bay's cash and short-term investments decreased approximately $5.7
million during 1995, primarily as a result of the operating loss discussed above
plus $7.5 million of capital expenditures for plant and nuclear fuel, payments
of $1.0 million to the decommissioning trust fund and payments of $2.7 million
for
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bankruptcy-related reorganization expenses. Partially offsetting the items
listed above were non-cash charges to income of $7.9 million for depreciation
and amortization.
Great Bay's fiscal 1995 decommissioning expenses totaled approximately $1.0
million. The decommissioning funding schedule is determined by the NDFC, which
reviews such schedule for the Seabrook Project at least annually. Great Bay's
decommissioning expenses for fiscal 1996 and fiscal 1997 will depend upon the
outcome of pending proceedings before the NDFC. Great Bay expects to use
revenues from the sale of power to pay these decommissioning expenses.
Great Bay anticipates that its share of the Seabrook Project's capital
expenditures for the 1996 fiscal year will total approximately $2.7 million,
primarily for nuclear fuel and various capital projects.
On May 23, 1996, Great Bay and the joint owners of the Seabrook Project
announced a proposed transaction for the sale of two steam generators from
Seabrook Unit 2. If this sale is completed, Great Bay will receive approximately
$7,000,000 in cash. Great Bay had previously written off its investment in Unit
2 and will recognize a gain from this sale.
MANAGEMENT
After the Effective Date, Great Bay will be a wholly-owned subsidiary of
Holding Company. The persons who are officers and directors of Great Bay
immediately prior to the Effective Date will be the officers and directors of
Holding Company and of Great Bay immediately after the Effective Date, without
change, until their successors have been duly elected or appointed and
qualified.
Executive Officer and Directors
<TABLE>
The executive officer and directors of Great Bay are as follows:
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
John A. Tillinghast....................... 69 Chief Executive Officer, President, Treasurer
and Chairman of the Board of Directors
Frank W. Getman Jr........................ 32 Vice President, Secretary and General Counsel
Kenneth A. Buckfire....................... 37 Director
Andrew J. Kurtz........................... 29 Director
Charles A. Leeds, Jr...................... 44 Director
</TABLE>
Great Bay has only two officers, its President, John A. Tillinghast, and
its Vice President and General Counsel, Frank W. Getman Jr. A Management and
Administrative Services Agreement was in effect during 1995 between Great Bay
and URI which provided for URI to provide a full range of services to Great Bay
including management, accounting and bookkeeping, budgeting and regulatory
compliance. Under the Management and Administrative Services Agreement with URI,
Great Bay paid URI $225,000 per year for senior executive management services
and reimbursed day-to-day operational services at URI's cost plus 25%. Great Bay
terminated this agreement effective January 2, 1996. As of May 1, 1996, Great
Bay had five employees and had assumed responsibility for virtually all of its
administrative functions other than its power marketing functions, which
continue to be provided by a third party pursuant to a contractual agreement.
Set forth below is information concerning the executive officers and
directors of Great Bay:
John A. Tillinghast has served as President, Treasurer and the Chairman of
the Board of Directors of Great Bay since November 1994 and Chief Executive
Officer since April 1995. Since 1987, Mr. Tillinghast has served as President
and the sole stockholder of Tillinghast Technology Interests, Inc., a private
consulting firm. From 1986 to 1993, Mr. Tillinghast served as Chairman of the
Energy Engineering Board of the National Academy of Sciences. He holds an M.S.
in Mechanical Engineering from Columbia University.
Frank W. Getman Jr. has served as Vice President, Secretary and General
Counsel since August 1. 1995. From September 1991 to August 1995, Mr. Getman was
an attorney with the law firm of Hale and Dorr, Boston, Massachusetts. Mr.
Getman holds J.D. and M.B.A. degrees from Boston College and a B.A. in Political
Science from Tufts University.
Kenneth A. Buckfire has served as a director of Great Bay since November
1994. Mr. Buckfire has been a Director at Wasserstein Perella & Co., Inc. since
January 1996. Mr. Buckfire served with Lehman Brothers,
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<PAGE> 43
Inc. from September 1994 to January 1996 as a Senior Vice President of High
Yield Banking and from March 1991 to August 1994 as a Vice President of High
Yield Banking. Mr. Buckfire is a director of Pike Advertising Services, Inc.,
Caddis International, Inc. and Marketarts Webtrack L.L.C. Mr. Buckfire holds a
B.A. from the University of Michigan and an M.B.A. from Columbia University.
Andrew J. Kurtz has served as a director of Great Bay since May 1995. Mr.
Kurtz has been an analyst and portfolio manager for Elliott Associates, L.P.
since July 1994. From August 1992 to July 1994, Mr. Kurtz was an attorney at
Weil, Gotshal and Manges in New York. Mr. Kurtz was employed by Chemical Realty
Corporation, a division of Chemical Bank, from 1988 to 1989. Mr. Kurtz has a
B.S. in Economics from the Wharton School of Business at the University of
Pennsylvania and a J.D. from the University of Pennsylvania.
Charles A. Leeds, Jr. has served as a director of Great Bay since November
1995. Mr. Leeds has served as the Portfolio Manager for Omega Advisors, Inc.
since 1991. Mr. Leeds holds a B.A. in Economics from the University of
Pennsylvania and an M.B.A. from Columbia University.
Compensation for Directors
Employee directors of Great Bay do not receive any compensation for serving
on the Board. Non-employee directors receive $2,500 per quarter, plus reasonable
expenses. Non-employee directors are also eligible to receive stock option
grants in accordance with a formula specified in the Great Bay Stock Option
Plan. At the Effective Date, each Great Bay director holding outstanding Great
Bay Options will be granted substitute options to purchase shares of Holding
Company Common Stock. See "The Merger -- Substitution of Great Bay Stock
Options." Mr. Leeds, a non-employee director of Great Bay, has waived his rights
to all compensation available to non-employee directors, including his right to
receive stock options pursuant to the Great Bay Stock Option Plan.
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<PAGE> 44
Executive Compensation
<TABLE>
SUMMARY COMPENSATION TABLE. The following table sets forth certain
information concerning the compensation of (i) Great Bay's Chief Executive
Officer (the "CEO") and (ii) the only other officer as of December 31, 1995
whose salary and bonuses earned during the fiscal year ended December 31, 1995
at the annual rate of $100,000 or more (the CEO and such other executive officer
are hereinafter referred to as the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------- -------------------
SALARY BONUS OPTIONS/SARS
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(1) (#)(2)
--------------------------- ---- ------- ----- -------------------
<S> <C> <C> <C> <C>
John A. Tillinghast(3).......................... 1995 $95,000 0 200,000
President and Chief Executive Officer 1994 9,896 0
Frank W. Getman Jr.(4).......................... 1995 41,667 0 75,000
Vice President, General Counsel and Secretary
<FN>
- ---------------
(1) Amounts shown represent cash compensation earned by the Named Executive
Officers for the fiscal years presented.
(2) The option exercise price is equal to the fair market value of the Great Bay
Common Stock on the date of grant.
(3) Mr. Tillinghast's employment with Great Bay commenced on November 23, 1994.
(4) Mr. Getman's employment with Great Bay commenced on August 1, 1995.
</TABLE>
<TABLE>
OPTION/SAR GRANT TABLE. The following table sets forth certain information
regarding options and SARs granted during the fiscal year ended December 31,
1995 by Great Bay to the Named Executive Officers:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL REALIZABLE
SECURITIES OPTIONS/ VALUE AT ASSUMED RATES
UNDERLYING SARS OF STOCK PRICE
OPTIONS/ GRANTED TO APPRECIATION FOR
SARS EMPLOYEES EXERCISE OR OPTION TERM(2)
GRANTED IN FISCAL BASE PRICE EXPIRATION ----------------------
NAME (#) YEAR ($/SH)(1) DATE 5%($) 10%($)
- ------------------------- ---------- ---------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
John A. Tillinghast...... 200,000(3)(4) 72.7% $8.00 4/24/02 $652,000 $1,518,000
Frank W. Getman Jr....... 75,000(4)(5) 27.3% 8.50 8/01/02 259,500 642,000
<FN>
- ---------------
(1) The exercise price is equal to the fair market value of Great Bay Common
Stock on the date of grant (based upon the most recent per share closing
price on the Nasdaq National Market).
(2) The amounts shown on this table represent hypothetical gains that could be
achieved for the respective options if exercised at the end of the option
term. These gains are based on assumed rates of stock appreciation of 5% and
10%, compounded annually from the dates the respective options were granted
to their expiration dates. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses associated
with the exercise. Actual gains, if any, on stock option exercises will
depend on the future performance of Great Bay Common Stock, the
optionholder's continued employment through the option period, and the date
on which the options are exercised.
(3) This option vested with respect to 100,000 shares on April 16, 1996 and will
vest with respect to the remaining 100,000 shares on April 24, 1997.
(4) The exercisability of these options is accelerated upon the occurrence of a
change in control (as defined in the Great Bay Stock Option Plan). These
options are intended to qualify as incentive stock options.
(5) This option may be exercised with respect to 35,000 shares on or after
August 1, 1996 and with respect to an additional 20,000 shares on or after
each of August 1, 1997 and August 1, 1998.
</TABLE>
36
<PAGE> 45
<TABLE>
OPTION EXERCISES AND YEAR-END VALUES. The following table sets forth
certain information concerning each exercise of stock options during the fiscal
year ended December 31, 1995 by each of the Named Executive Officers and the
number and value of unexercised options held by each of the Named Executive
Officers on December 31, 1995:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL YEAR-END AT FISCAL YEAR-END
SHARES (#)(1) ($)(2)
ACQUIRED VALUE ------------------ ------------------
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ------------------ ------------------
<S> <C> <C> <C> <C>
John A. Tillinghast............... 0 0 0/200,000 0/0
Frank W. Getman Jr................ 0 0 0/75,000 0/0
<FN>
- ---------------
(1) Options granted under the Great Bay Stock Option Plan.
(2) Based on the fair market value of the Great Bay Common Stock on December 31,
1995 ($8.00) less the option exercise price.
</TABLE>
Employment Agreements
Effective April 24, 1995, John A. Tillinghast, the President of Great Bay,
entered into an Employment Agreement with Great Bay (the "Tillinghast Employment
Agreement") pursuant to which Mr. Tillinghast agreed to serve, on a full-time
basis, as the President and Chief Executive Officer of Great Bay through
December 31, 1996. The Tillinghast Employment Agreement provides for an annual
salary of $95,000. In addition, pursuant to the Tillinghast Employment
Agreement, Mr. Tillinghast was granted an incentive stock option to purchase
200,000 shares of Great Bay Common Stock, at an exercise price of $8.00 per
share, under the Great Bay Stock Option Plan. The option vested with respect to
100,000 shares on April 16, 1996, the date of the Great Bay 1996 Annual Meeting
of Stockholders, and will vest with respect to the remaining 100,000 shares on
April 24, 1997. Following consummation of the Merger, Holding Company will
assume the Tillinghast Employment Agreement and Mr. Tillinghast will be granted
options to purchase shares of Holding Company Common Stock under the Holding
Company Stock Option Plan in substitution for the outstanding Great Bay Options
held by him. See "The Merger -- Employment Agreement to be Assumed by Holding
Company" and "-- Substitution of Great Bay Stock Options."
Effective the Getman Commencement Date, Frank W. Getman Jr. commenced
employment with Great Bay and entered into the Getman Employment Agreement
pursuant to which he agreed to serve as Vice President, General Counsel and
Secretary through August 1, 1998. The Getman Employment Agreement provides for
an annual salary of $100,000. In addition, Great Bay loaned Mr. Getman $75,000
at the time he commenced employment. The principal amount of the loan will be
forgiven in equal installments of $25,000 on each of the first, second and third
anniversaries of the Getman Commencement Date, so long as Mr. Getman remains
employed by Great Bay on such dates. In the event that Mr. Getman's employment
is terminated for cause (as defined in the Getman Employment Agreement) or by
Mr. Getman, he has agreed to repay to Great Bay the outstanding principal amount
of such loan at such time, less any amounts forgiven by Great Bay, plus interest
accrued on such adjusted principal amount from the Getman Commencement Date at
an interest rate of 6% per year. Following consummation of the Merger, Holding
Company will assume the Getman Employment Agreement. See "The Merger --
Employment Agreement to be Assumed by Holding Company."
Pursuant to the Getman Employment Agreement, Mr. Getman was also granted an
incentive stock option to purchase 75,000 shares of Common Stock, at an exercise
price of $8.50 per share, under the Great Bay Stock Option Plan. The option
vests with respect to 35,000 shares on the first anniversary of the Getman
Commencement Date and with respect to an additional 20,000 shares on each of the
second and third
37
<PAGE> 46
anniversaries of the Getman Commencement Date. Following consummation of the
Merger, all outstanding options held by Mr. Getman will be converted into an
equal number of options under the Holding Company Stock Option Plan. See "The
Merger -- Substitution of Great Bay Stock Options."
In the event that Mr. Getman's employment with Great Bay terminates in a
"Qualifying Termination" in connection with a "Change in Control" (each as
defined in the Getman Employment Agreement), (i) Mr. Getman is entitled to
receive in cash an amount equal to the greater of the sum of his annual salary
from the date of termination until the date of expiration of the Getman
Employment Agreement or twice his annual salary (excluding loan forgiveness) at
the date of such Change in Control; (ii) the outstanding loan amount, to the
extent not forgiven, will be immediately forgiven; and (iii) all outstanding
stock options will become immediately exercisable. A Qualifying Termination will
be treated as having occurred prior to the second anniversary of a Change in
Control upon (i) the termination of Mr. Getman's employment other than for cause
or (ii) the voluntary resignation by Mr. Getman following, generally, any
material impairment or material adverse change in his working conditions,
authority, position or compensation as compared with that in effect immediately
prior to the Change in Control.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF GREAT BAY
<TABLE>
The following table sets forth information, as of March 31, 1996, regarding
the ownership of Great Bay Common Stock by (i) the only persons known by Great
Bay to own more than five percent of the outstanding shares, (ii) all directors
and nominees of Great Bay, (iii) each of the Named Executive Officers and (iv)
all directors and executive officers of Great Bay as a group.
<CAPTION>
SHARES OF PERCENTAGE
GREAT BAY OF
COMMON STOCK GREAT BAY
NAME AND ADDRESS BENEFICIALLY COMMON STOCK
OF BENEFICIAL OWNER OWNED(1) OUTSTANDING(2)
- ---------------------------------------------------------- ------------------ ------------
<S> <C> <C>
5% Shareholders
Group consisting of:
Leon G. Cooperman, Omega Capital Partners, L.P., Omega
Institutional Partners, L.P. and Omega Advisors, Inc.
(the "Omega Group")..................................... 2,710,500(3) 33.9%
c/o Omega Advisors, Inc.
Wall Street Plaza
88 Pine Street
New York, NY 10005
Group consisting of:
Elliott Associates, L.P., Westgate International, L.P.,
Martley International, Inc. and Paul E. Singer (the
"Elliott Group")........................................ 1,987,458(4) 24.8%
c/o Elliott Associates, L.P.
712 Fifth Avenue 36th Floor
New York, NY 10019
Group consisting of:
SC Fundamental Fund, L.P., SC Fundamental Inc., SC
Fundamental Value BVI, Inc., Gary N. Siegler and Peter
M. Collery.............................................. 896,000(5) 11.2%
c/o Siegler, Collery & Co.
712 Fifth Avenue
New York, NY 10019
Directors and Executive Officers:
Kenneth A. Buckfire....................................... 41,000(6) *
Andrew J. Kurtz........................................... 40,000(6) *
Charles A. Leeds, Jr...................................... 2,710,500(7) 33.9%
John A. Tillinghast....................................... 101,000(8) 1.3%
Frank W. Getman Jr........................................ 0 0
All directors and executive officers as a group (5
individuals)............................................ 2,892,500(7)(9) 35.4%
<FN>
- ---------------
* Percentage is less than 1% of the total number of outstanding shares of
Great Bay Common Stock.
</TABLE>
38
<PAGE> 47
(1) The number of shares of Great Bay Common Stock beneficially owned by each
person or entity is determined under rules promulgated by the Commission.
Under such rules, beneficial ownership includes any shares as to which the
person or entity has sole or shared voting power or investment power, and
also includes any shares which the person or entity has the right to
acquire within 60 days after March 31, 1996. Unless otherwise indicated,
each person or entity referred to above has sole voting and investment
power with respect to the shares listed. The inclusion herein of any shares
deemed beneficially owned does not constitute an admission of beneficial
ownership of such shares.
(2) Number of shares deemed outstanding includes 7,999,948 shares outstanding as
of March 31, 1996, plus any shares subject to options held by the person or
entity in question that are currently exercisable or exercisable within 60
days after March 31, 1996.
(3) The information presented herein is as reported in, and based solely upon, a
Schedule 13D filed by the indicated shareholders with the Commission on
July 13, 1995. Leon C. Cooperman reported beneficial ownership of 2,710,500
shares, with sole voting and dispositive power with respect to 2,355,320 of
such shares and shared voting and dispositive power with respect to 355,180
of such shares. Omega Capital Partners, L.P. ("Omega Capital") reported
beneficial ownership of 1,031,760 shares, with sole voting and dispositive
power as to all such shares. Omega Institutional Partners, L.P. ("Omega
Institutional") reported beneficial ownership of 883,720 shares, with sole
voting and dispositive power as to such shares. Omega Advisors, Inc.
("Omega Advisors") reported beneficial ownership of 795,020 shares with
sole voting and dispositive power with respect to 439,840 of such shares
and shared voting and dispositive power with respect to 355,180 of such
shares. Mr. Cooperman is the managing partner of each of Omega Capital
Partners, L.P. and Omega Institutional Partners, L.P. and is the President
of Omega Advisors, Inc. These shareholders may be deemed to be a group for
purposes of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
(4) The information presented herein is as reported in, and based solely upon, a
Schedule 13D filed by the indicated shareholders with the Commission on
January 16, 1996. Elliott Associates, L.P., a Delaware limited partnership
("Elliott"), reported beneficial ownership of 1,267,812 shares, with sole
voting and dispositive power as to such shares. Westgate International,
L.P., a Cayman Islands limited partnership ("Westgate"), reported
beneficial ownership of 719,646 shares. Martley International, Inc., a
Delaware corporation and investment manager for Westgate ("Martley"), and
Westgate reported shared voting and dispositive power with respect to all
shares reported as beneficially owned by Westgate. Mr. Paul E. Singer is
the general partner of Elliott and the President of Martley. These
shareholders may be deemed to be a group for purposes of Rule 13d-3
promulgated under the Exchange Act.
(5) The information presented herein is as reported in, and based solely upon, a
Schedule 13D filed by the indicated shareholders with the Commission on
July 13, 1995. Gary N. Siegler ("Siegler") and Peter M. Collery ("Collery")
each reported beneficial ownership of all of such shares, with sole voting
and dispositive power with respect to 896,000 shares. The SC Fundamental
Fund, L.P. ("Fund") and its general partner, SC Fundamental Inc. ("SC"),
each reported beneficial ownership of 557,000 shares, with shared voting
and dispositive power as to all such shares. SC Fundamental Value BVI, Inc.
("BVI") reported beneficial ownership of 339,000 shares, with shared voting
and dispositive power as to all such shares. Mr. Siegler is a controlling
shareholder, president and a director of SC and BVI. Mr. Collery is a
controlling shareholder, vice president and a director of SC and BVI. These
shareholders may be deemed to be a group for purposes of Rule 13d-3
promulgated under the Exchange Act.
(6) Includes 40,000 shares of Great Bay Common Stock issuable upon exercise of
outstanding stock options, exercisable within 60 days after March 31, 1996,
granted under the Great Bay Stock Option Plan.
(7) Includes the 2,710,500 shares deemed beneficially owned by the Omega Group.
See footnote (3) above. Mr. Leeds is a general partner of Omega Capital and
Omega Institutional. Mr. Leeds disclaims beneficial ownership of all shares
deemed beneficially owned by the Omega Group.
(8) Includes 100,000 shares of Great Bay Common Stock issuable upon exercise of
outstanding stock options, exercisable within 60 days after March 31, 1996,
granted under the Great Bay Stock Option Plan.
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<PAGE> 48
(9) Includes 180,000 shares of Great Bay Common Stock issuable upon exercise of
outstanding stock options, exercisable within 60 days after March 31, 1996,
granted under the Great Bay Stock Option Plan.
RELATIONSHIP BETWEEN HOLDING COMPANY AND GREAT BAY
On the Effective Date, Holding Company and Great Bay will enter into a
Services Agreement pursuant to which Holding Company will provide to Great Bay a
full range of management services, including general management and
administration, accounting and bookkeeping, budgeting and regulatory compliance.
Great Bay will pay Holding Company a monthly fee of $120,000 in consideration of
such services. The Services Agreement will have a one-year term and will provide
for automatic one-year renewals. The monthly fee for subsequent renewal terms
will be determined by agreement of Great Bay and Holding Company.
40
<PAGE> 49
DESCRIPTION OF HOLDING COMPANY
Holding Company is a newly formed Delaware corporation and is currently a
wholly owned subsidiary of Great Bay and thus is controlled by Great Bay.
Holding Company Common Stock is not currently, and has never previously been,
traded in any established public market. Holding Company currently is engaged in
no business activities other than in connection with the proposed Merger
described herein. Upon the consummation of the Merger, Holding Company will be
the sole stockholder of Great Bay. Holding Company may enter new businesses or
acquire existing businesses, both in energy related fields and in unrelated
fields, through other subsidiaries. See "The Merger -- Reasons for the Merger."
DESCRIPTION OF HOLDING COMPANY CAPITAL STOCK
GENERAL
The authorized capital stock of Holding Company presently consists of
20,000,000 shares of common stock, par value $.01 per share, and 5,000,000
shares of preferred stock, par value $.01 per share ("Holding Company Preferred
Stock"). There are currently 1,000 shares of Holding Company Common Stock issued
and outstanding, all of which are held by Great Bay and all of which, pursuant
to the Merger Agreement, will cease to exist at the Effective Date.
In the future, the authorized but unissued and unreserved shares of Holding
Company Common Stock will be available for issuance for general corporate
purposes including, but not limited to, stock dividends or stock splits, in
connection with future mergers or acquisitions, or future private placement or
public offerings. Except as may be required in connection with a merger or other
transaction in which the additional authorized shares of Holding Company Common
Stock would be issued or as otherwise required by law or by any applicable
regulatory authority, no stockholder approval will be required for the issuance
of such shares. Other than the stock options described in "The Merger --
Substitution of Great Bay Options" and the PECO Warrant described in "The Merger
- -- Assumption of the PECO Warrant," there are no commitments or understandings
at this time for the issuance of such authorized but unissued shares of Holding
Company Common Stock or Holding Company Preferred Stock.
The following are summaries of the terms of the Holding Company Common
Stock and Holding Company Preferred Stock. Such summaries do not purport to be
complete. For a discussion on the significant differences between the Great Bay
Articles of Incorporation and Great Bay By-Laws and the Holding Company
Certificate of Incorporation and Holding Company By-Laws and additional
information concerning the Holding Company Certificate of Incorporation and
Holding Company By-Laws, see "Comparison of Stockholder Rights."
HOLDING COMPANY COMMON STOCK
The holders of Holding Company Common Stock are entitled to one vote for
each share held on all matters submitted to a vote of stockholders. The holders
of Holding Company Common Stock have no preemptive rights or rights to convert
their Holding Company Common Stock into any other securities. The Holding
Company Common Stock is not subject to redemption. The holders of Holding
Company Common Stock are entitled to receive ratably such dividends, if any, as
may be declared by the Board of Directors out of funds legally available
therefor, subject to any preferential dividend rights of outstanding Holding
Company Preferred Stock. Upon the liquidation, distribution or sale of assets,
dissolution or winding up of Holding Company, the holders of Holding Company
Common Stock are entitled to receive ratably the net assets of Holding Company
available for distribution after the payment of all debts and other liabilities
and subject to the preferential rights of any outstanding Holding Company
Preferred Stock. The outstanding shares of Holding Company Common Stock are
fully paid and nonassessable. The rights, preferences and privileges of holders
of Holding Company Common Stock are subject to, and may be adversely affected
by, the rights of the holders of shares of any series of Holding Company
Preferred Stock which Holding Company may designate and issue in the future.
41
<PAGE> 50
TRANSFER AGENT AND REGISTRAR
The transfer agent for Holding Company Common Stock is Boston Financial
Data Services, Inc., a wholly-owned subsidiary of State Street Bank and Trust
Company.
HOLDING COMPANY PREFERRED STOCK
Under the terms of the Holding Company Certificate, the Board of Directors
of Holding Company is authorized, subject to any limitations prescribed by law,
without further action of Holding Company's stockholders, to issue up to
5,000,000 shares of Preferred Stock in one or more series. Each such series of
Preferred Stock will have such rights, preferences, privileges and restrictions,
including voting rights, dividend rights, conversion rights, redemption
privileges and liquidation preferences, as will be determined by the Board of
Directors. Holding Company has no present plans to issue any shares of Preferred
Stock.
The purpose of authorizing the Board of Directors of Holding Company to
issue Preferred Stock and determine its rights and preferences is to eliminate
delays associated with a stockholder vote on specific issuances. The issuance of
Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring, a majority of the outstanding voting stock of
Holding Company.
REGISTRATION RIGHTS
On April 7, 1994, Great Bay entered into a registration rights agreement
(the "Registration Rights Agreement") with certain persons and entities (the
"Rightsholders"), including Omega Capital and its affiliates and Elliott. If the
Merger is consummated, Great Bay will assign to Holding Company and Holding
Company will assume the Registration Rights Agreement (which upon such
assignment and assumption will be applicable to Holding Company Common Stock
instead of Great Bay Common Stock). Pursuant to the Registration Rights
Agreement, the Rightsholders are entitled to require Great Bay to register,
under the Securities Act, up to a total of 5,820,530 shares of outstanding Great
Bay Common Stock (the "Registrable Shares"). The Registration Rights Agreement
provides that in the event that a single Rightsholder requests the registration
of a number of shares equal to or greater than 5% of the outstanding Great Bay
Common Stock at the time of the request, Great Bay is required to effect the
registration of such shares and the shares of other Rightsholders requesting
registration. The Registration Rights Agreement also provides that in the event
Great Bay proposes to register any of its securities under the Securities Act at
any time or times, the Rightsholders, subject to certain exceptions, shall be
entitled to include Registrable Shares in such registration.
Great Bay is generally required to bear all the expenses of the first three
registrations initiated at the request of the Rightsholders, excluding any
underwriting discounts, commissions or transfer taxes. Great Bay filed a
Registration Statement on Form S-1 covering the sale of 5,820,530 shares of
Great Bay Common Stock (the "S-1 Registration Statement"), at the request of
certain Rightsholders under the Registration Rights Agreement. The S-1
Registration Statement became effective on April 17, 1995. If the Merger is
consummated, Holding Company expects to file a registration statement shortly
thereafter covering the Holding Company Common Stock held by the Rightsholders.
The Registration Rights Agreement provides for liquidated damages in the
event that Great Bay fails to file a registration statement within 60 days of a
request pursuant to the Registration Rights Agreement or in the event that such
registration statement has not become effective within 180 days of such request.
Liquidated damages range between 1% and 2% of the value of the number of shares
requested to be registered.
In connection with the PECO Warrant Purchase Agreement (see page 23 of the
Registration Statement), Great Bay granted registration rights to holders of
shares of Great Bay Common Stock issued pursuant to the PECO Warrant (the "PECO
Registrable Shares"). If the Merger is consummated, Great Bay will assign to
Holding Company and Holding Company will assume the PECO Warrant Purchase
Agreement (which upon such assignment and assumption will be applicable to
Holding Company Common Stock instead of Great Bay Common Stock). If at any time
after the earlier of termination in accordance with the terms of the PECO
Services Agreement or September 30, 1998 the PECO Registrable Shares are not
eligible and
42
<PAGE> 51
continue to be ineligible for resale pursuant to Rule 144(k) under the
Securities Act, Great Bay is required to effect the registration of the PECO
Registrable Shares having an aggregate offering price of at least $500,000 owned
by a PECO rightsholder(s) (and the shares of other PECO rightsholders)
requesting registration. Great Bay is not required to effect more than one such
registration and is not required to effect any registration within six months
after the effective date of any other registration statement of Great Bay.
The Warrant Purchase Agreement also provides that, until November 3, 2005,
if Great Bay proposes to file a registration statement covering the sale of
Great Bay Common Stock, Great Bay will give written notice to all holders of
PECO Registrable Shares and Great Bay will use reasonable efforts to cause all
PECO Registrable Shares which Great Bay has been requested by its holders to
register to be registered. Great Bay is generally required to bear all the
expenses of registrations under the Warrant Purchase Agreement, excluding any
underwriting discounts, commissions or expenses of the PECO Rightholders' own
counsel.
COMPARISON OF STOCKHOLDER RIGHTS
The rights of the holders of Great Bay Common Stock are currently governed
by the New Hampshire Law, by public utility laws, and by the Great Bay Articles
and By-Laws. As a result of the Merger, shareholders of Great Bay not exercising
dissenters' rights will become stockholders of Holding Company, a Delaware
corporation but not a public utility, and as such their rights will be governed
by the Delaware Law (excluding public utility laws) and by the Holding Company
Certificate and By-Laws. Certain differences arise from this change in governing
law as well as from distinctions between the Great Bay Articles and By-Laws and
the Holding Company Certificate and By-Laws.
The following summary does not purport to be a complete description of the
rights of stockholders of Holding Company or the rights of shareholders of Great
Bay or a comprehensive comparison of such rights, and is qualified in its
entirety by reference to the New Hampshire Law and the Delaware Law, and the
Great Bay Articles and By-Laws and the Holding Company Certificate and By-Laws.
AUTHORIZED CAPITAL STOCK
Great Bay. Great Bay has, as of the date of this Proxy
Statement/Prospectus, 20,000,000 shares of authorized Common Stock, par value
$.01 per share, of which 7,999,948 shares are issued and outstanding and
5,000,000 shares of Preferred Stock, par value $.01 per share, of which no
shares are issued and outstanding.
Holding Company. The Holding Company Certificate authorizes the issuance
of 20,000,000 shares of Holding Company Common Stock, par value $.01 per share,
and 5,000,000 shares of Holding Company Preferred Stock, par value $.01 per
share. There are currently 1,000 shares of Holding Company Common Stock issued
and outstanding, all of which are held by Great Bay. Upon the consummation of
the Merger, Holding Company will have the same number of issued and outstanding
shares of Holding Company Common Stock (assuming no exercise of dissenters'
rights) as the number of shares of Great Bay Common Stock issued and outstanding
immediately before the Merger. See "Description of Holding Company Capital
Stock."
Under the Holding Company Certificate, the Board of Directors of the
Holding Company is authorized to issue preferred stock in series and to fix the
powers, designations, preferences, or other rights of the shares and the
qualifications, limitations, and restrictions of such shares. Holding Company
Preferred Stock issued by Holding Company after the Merger may rank
preferentially to the Holding Company Common Stock as to dividend rights,
liquidation preferences, or both, may have full or limited voting rights
(including multiple voting rights and voting rights as a class), and may be
convertible into shares of Holding Company Common Stock. Holding Company has no
present plans or understandings for the issuance of any preferred stock.
However, any such issuance in the future could adversely affect the rights of
holders of Holding Company Common Stock, particularly if the preferred stock is
given preferential dividend, liquidation or voting rights.
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PREEMPTIVE RIGHTS
Great Bay. Under the New Hampshire Law, security holders of a corporation
do not have a preemptive right to acquire the corporation's unissued shares,
except to the extent provided in the corporation's articles of incorporation.
The Great Bay Articles of Incorporation eliminate preemptive rights to security
holders.
Holding Company. Under the Delaware Law, security holders of a corporation
have only such preemptive rights to acquire the corporation's unissued shares as
may be provided in the corporation's certificate of incorporation. The Holding
Company Certificate of Incorporation does not grant any preemptive rights to
security holders.
VOTING RIGHTS
Great Bay. All voting rights in Great Bay are currently vested in the
holders of Great Bay Common Stock. The Great Bay Articles also authorize the
issuance of preferred stock. Each share of Great Bay Common Stock is entitled to
one vote on all matters, without any right to cumulative voting in the election
of directors.
Holding Company. All voting rights in Holding Company will be initially
vested in the holders of Holding Company Common Stock and are subject to the
authority contained in the Holding Company Certificate for the Holding Company
Board to issue Holding Company Preferred Stock with voting rights. Each share of
Holding Company Common Stock will be entitled to one vote on all matters
presented to the stockholders, without any right to cumulative voting in the
election of directors. See "Comparison of Stockholder Rights -- Holding Company
Preferred Stock."
ACTIONS BY STOCKHOLDERS WITHOUT A MEETING
Great Bay. The New Hampshire Law allows any action required to be taken,
or which may be taken, at the annual or special meeting of shareholders to be
taken without a meeting, without prior notice and without a vote if the written
consent of the holders of all shares entitled to vote thereon were present and
voted is delivered to the Corporation. The Great Bay Articles provide that
shareholders may not take any action by written consent in lieu of a meeting.
Holding Company. Unless a corporation's certificate of incorporation
provides otherwise, the Delaware Law allows any action required to be taken, or
which may be taken, at an annual or special meeting of stockholders to be taken
without a meeting, without prior notice and without a vote if the written
consent of not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted is delivered to the corporation. The Holding
Company By-Laws provide that stockholders may not take any action by written
consent in lieu of a meeting.
DIVIDENDS AND OTHER DISTRIBUTIONS
Great Bay. The New Hampshire Law permits a corporation to pay dividends to
its shareholders unless (i) the corporation would not be able to pay its debts
as they become due in the usual course of business or (ii) the corporation's
total assets would be less than the sum of its total liabilities plus the amount
that would be needed, if the corporation were to be dissolved at the time of
distribution, to satisfy the preferential rights of shareholders whose
preferential rights upon dissolution are superior to those receiving the
distribution. In addition, the New Hampshire Law generally provides that a
corporation may acquire its own shares as authorized but unissued shares.
Holding Company. The Delaware Law permits a corporation to declare and pay
dividends out of surplus (defined as net assets minus capital) or, if there is
no surplus, out of net profits for the fiscal year in which the dividend is
declared and/or for the preceding fiscal year as long as the amount of capital
of the corporation following the declaration and payment of the dividend is not
less than the aggregate amount of the capital represented by the issued and
outstanding stock of all classes having a preference upon the distribution of
assets. In addition, the Delaware Law generally provides that a corporation may
redeem or repurchase its shares only if such redemption or repurchase would not
impair the capital of the corporation.
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NUMBER AND QUALIFICATION OF DIRECTORS; SIZE OF BOARD
Great Bay. Under the New Hampshire Law, the minimum number of directors is
one, with the exact number of directors fixed in accordance with the articles of
incorporation or by-laws. The directors may increase or decrease the number of
directors by 30 percent or less than the number of directors last approved by
the shareholders. Only the shareholders may increase or decrease the number of
directors by more than 30 percent of the number of directors last approved by
the shareholders.
The Great Bay By-Laws provide that the number of directors which constitute
the Great Bay Board will be determined by resolution of shareholders or the
Great Bay Board, but in no event will be less than three or more than eight. The
size of the Great Bay Board is currently fixed at four. Only the shareholders
may change the range of the size of the Great Bay Board to be less than three or
more than eight.
Holding Company. Under the Delaware Law, the minimum number of directors
is also one. The number of directors constituting the board of directors of a
Delaware corporation may be specified in the by-laws or the certificate of
incorporation. Accordingly, unless the certificate of incorporation provides
otherwise, the directors may change the number of directors constituting the
board by amending the by-laws. If the number of directors is specified in the
certificate of incorporation, then any change in the number of directors must be
made pursuant to a certificate of amendment approved by the shareholders.
The Holding Company By-Laws provide that the number of directors which
constitute the Holding Company Board will be determined by resolution of the
directors. The directors will be elected by the vote of the holders of a
majority of the shares of stock present, in person or by proxy, at the annual
meeting of stockholders and entitled to vote. The number of directors may be
increased by the vote of a majority of the directors in office. The number of
directors may be decreased by the vote of a majority of the directors in office,
but only to eliminate vacancies caused by the death, resignation, removal or
expiration of the term of one or more of the directors.
CUMULATIVE VOTING
Under the New Hampshire Law and the Delaware Law, cumulative voting in the
election of directors is permissible, but not mandatory. Neither the Great Bay
Articles nor the Holding Company Certificate permits cumulative voting in the
election of directors.
REMOVAL OF DIRECTORS
Great Bay. The New Hampshire Law permits the shareholders to remove any
director or the entire board of directors with or without cause, by the vote of
the holders of a majority of the shares entitled to vote unless the
corporation's articles of incorporation provide that directors may be removed
only for cause or by a greater voting requirement. The Great Bay Articles
provide that directors may be removed from office only for cause by the
affirmative vote of the holders of at least two-thirds of the shares of capital
stock issued and outstanding and entitled to vote.
Holding Company. Unless a corporation's certificate of incorporation
provides otherwise, the Delaware Law allows directors of a corporation to be
removed with or without cause by the vote of the holders of a majority of the
shares entitled to vote in any election of directors. The Holding Company
Certificate provides that directors may be removed only for cause by the
affirmative vote of the holders of at least two-thirds of the shares of capital
stock issued and outstanding and entitled to vote. The affirmative vote of the
holders of 75% of the issued and outstanding shares of Holding Company capital
stock is required to amend or repeal, or adopt any provision inconsistent with,
this provision of the Holding Company Certificate.
SPECIAL MEETING OF STOCKHOLDERS
Great Bay. Under the New Hampshire Law, a special meeting of the
shareholders may be called by the board of directors, by the person or persons
authorized to do so by the articles of incorporation or by-laws, or by security
holders of at least ten percent of all the shares entitled to vote on any issue
to be considered at the special meeting. The Great Bay By-Laws provide that a
special meeting of shareholders may be called only by the president, the board
of directors or a holder or holders of at least ten percent of the capital stock
entitled to vote at the meeting.
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Holding Company. Under the Delaware Law, a special meeting of stockholders
may be called by the board of directors and by such other person or persons
authorized by the corporation's certificate of incorporation or by-laws. The
Holding Company Certificate provides that a special meeting of stockholders may
be called only by the Chairman of the Board of Directors, the Chief Executive
Officer (or if there is no Chief Executive Officer, the President) or the Board
of Directors. The affirmative vote of the holders of 75% of the issued and
outstanding shares of Holding Company capital stock is required to amend or
repeal, or adopt any provision inconsistent with, this provision of the Holding
Company Certificate.
AMENDMENT OF CERTIFICATE/ARTICLES OF INCORPORATION AND BY-LAWS
Great Bay. Under the New Hampshire Law, unless the articles of
incorporation provide otherwise, a corporation's board of directors has the
power to adopt certain amendments to the corporation's articles of incorporation
without shareholder action. Other amendments to the articles of incorporation
require the approval of the board of directors and the approval of the majority
of the outstanding stock entitled to vote thereon by every voting group with
respect to which the amendment would create dissenters' rights, and the approval
of a majority of the votes cast by any other voting group. Under the New
Hampshire Law, the holders of outstanding shares of a class are entitled to vote
as a separate voting group on certain proposed amendments that would, among
other things, cause an increase or decrease in the aggregate number of
authorized shares of such class, an exchange or reclassification of the shares
of such class into shares of another class or the alteration or change in the
powers, preferences or special rights of the shares of such class.
Under the New Hampshire Law, an amendment to a corporation's by-laws may be
made with the approval of the corporation's board of directors, unless the
articles of incorporation or the New Hampshire Law reserves this power
exclusively to the shareholders or the shareholders in amending or repealing a
particular by-law expressly so provide.
The Great Bay Articles expressly provide that the board of directors is
authorized to adopt, amend or repeal the by-laws of the corporation. In
addition, the Great Bay Articles provide that the affirmative vote of the
holders of at least seventy-five percent of the shares of the capital stock of
Great Bay issued and outstanding and entitled to vote is required to change any
provision inconsistent with certain provisions of the Great Bay By-Laws relating
to directors, the nomination of directors, notice of business at the annual
meeting, organization of the annual meeting or amendments of the Great Bay
By-Laws.
Holding Company. Under the Delaware Law, an amendment to a corporation's
certificate of incorporation requires the approval of the board of directors and
the approval of a majority of the outstanding stock entitled to vote thereon and
a majority of the outstanding stock of each class entitled to vote thereon.
Under the Delaware Law, the holders of the outstanding shares of a class
generally are entitled to vote as a separate class on a proposed amendment that
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such class or alter
or change the powers, preferences or special rights of the shares of such class
so as to affect them adversely. Under the Delaware Law, a provision in a
corporation's certificate of incorporation requiring a super-majority vote of
the board of directors or stockholders may be amended only by such
super-majority vote. The affirmative vote of the holders of 75% of the issued
and outstanding shares of Holding Company capital stock is required to amend or
repeal certain provisions, or adopt provisions inconsistent with existing
provisions. See "Removal of Directors" and "Special Meetings of Stockholders."
Under the Delaware Law, an amendment to a corporation's by-laws requires
the approval of the stockholders, unless the certificate of incorporation
confers the power to amend the by-laws upon the board of directors. The Holding
Company Certificate expressly provides that the board of directors or the
stockholders are authorized to adopt, amend or repeal the Holding Company
By-Laws. The Holding Company By-Laws require the affirmative vote of the holders
of at least seventy-five percent of the capital stock of Holding Company issued
and outstanding to amend or repeal any provisions inconsistent with certain
provisions of the Holding Company in the By-Laws relating to directors,
stockholder special meetings, organization at the annual meeting, or amendments
of the Holding Company By-Laws.
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DIRECTOR'S LIABILITY AND INDEMNIFICATION
Great Bay. Under the New Hampshire Law, a corporation may include in its
articles of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for any action, or any failure to take action, as a director, except
liability for: (i) the amount of a financial benefit received by a director to
which he or she is not entitled, (ii) an intentional infliction of harm on the
corporation or the shareholders, (iii) a violation of Section 293-A:8.33
(liability for unlawful distributions), or (iv) an intentional violation of
criminal law. The Great Bay Articles include this provision.
Holding Company. Under the Delaware Law, a corporation may include in its
certificate of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director under a broad range of
circumstances. The Holding Company Certificate includes a provision which
eliminates a director's liability for monetary damages for a breach of a
director's duty of care to Holding Company or its stockholders (the "Delaware
Duty of Care Provision"). Pursuant to the Delaware Duty of Care Provision, no
director of Holding Company will be liable for monetary damages for negligence
or gross negligence occurring after the Merger. Each director will remain
personally liable to Holding Company for failure to act in good faith or to
comply with his or her duty of loyalty to Holding Company. The directors will
continue to be subject to equitable remedies, although such remedies in some
circumstances may not be available as a practical matter. In addition, under the
Delaware Law, each director will remain liable for engaging in a transaction
from which such director derives an improper personal benefit, for paying
unlawful dividends or unlawful stock repurchases or redemptions or for engaging
in intentional misconduct or a knowing violation of law. Moreover, the Delaware
Duty of Care Provision also will not limit directors' liability for violations
of the federal securities laws. With regard to directors who are also officers
of Holding Company, these persons would be insulated from liability only with
respect to their conduct as directors and would not be insulated from liability
for acts or omissions in their capacity as officers.
The Delaware Law authorizes a corporation to indemnify any person who is a
party to any threatened, pending or completed action, suit or proceeding, other
than an action by or in the right of the corporation, by reason of the fact that
he or she is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation at a like position of
another corporation (the "Indemnitee") against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action if the Indemnitee acted in good faith, and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation (or, with respect to a criminal action, had no
reasonable cause to believe his or her conduct was unlawful). The Delaware Law
also authorizes a corporation to indemnify such person in connection with any
threatened, pending or completed action by or in the right of the corporation to
procure a judgment in its favor against expenses actually and reasonably
incurred by him or her in connection with the defense or settlement of such
action if he or she acted with the requisite conduct. The New Hampshire Law
contains similar provisions.
The Holding Company Certificate provides that Holding Company is required
to indemnify its officers and directors to the full extent permitted by law (i)
against all expenses, judgments, fines and amounts paid or incurred in
connection with any civil or criminal action, suit or proceeding and (ii)
against all expenses incurred in connection with the defense or settlement of
any action or suit, by or in the right of the corporation, or otherwise.
ANTI-TAKEOVER STATUTES
Great Bay. The New Hampshire Law does not contain a statutory provision
comparable to Section 203 (as defined below) of the Delaware Law.
Holding Company. Section 203 of the Delaware Law ("Section 203") is
applicable to publicly held corporations organized under the laws of Delaware,
including Holding Company. Subject to certain exceptions set forth therein,
Section 203 provides that a corporation will not engage in any business
combination with any "interested stockholder" for a three-year period following
the time that such stockholder becomes an interested stockholder unless (a)
prior to such time, the board of directors of the corporation approved either
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the business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, (b) upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding certain shares) or
(c) at or subsequent to such time, the business combination is approved by the
board of directors of the corporation and by the affirmative vote of a least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder. Except as specified therein, an interested stockholder is defined
to mean any person (other than the corporation and any direct or indirect
majority-owned subsidiary of the corporation) that (i) is the owner of 15% or
more of the outstanding voting stock of the corporation or (ii) is an affiliate
or associate of the corporation and was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder and the affiliates and
associates of such person referred to in (i) or (ii) of this sentence. Under
certain circumstances, Section 203 of the Delaware Law makes it more difficult
for an interested stockholder to effect various business combinations with a
corporation for a three-year period, although the stockholders may, by adopting
an amendment to the corporation's certificate of incorporation or by-laws, elect
not to be governed by this section, effective twelve months after adoption. It
is anticipated that the provisions of Section 203 of the Delaware Law may
encourage companies interested in acquiring Holding Company to negotiate in
advance with the Board of Directors of Holding Company. Holding Company will be
subject to Section 203.
SALE OF ASSETS
Great Bay. Under the New Hampshire Law, a sale or lease or exchange of all
or substantially all of the assets of a corporation in the regular course of its
business or to a subsidiary of the corporation need only be authorized by the
board of directors. However, in other circumstances, the approval of a majority
of the shares of stock entitled to vote on the action is also required. The
NHPUC also has jurisdiction over the sale of assets of a public utility company,
such as Great Bay. New Hampshire law does not require stockholder consent to a
mortgage or pledge of the property or assets of the corporation unless the
articles of incorporation state otherwise; the Great Bay Articles do not require
stockholder consent for these actions.
Holding Company. The Delaware Law provides that a sale of all or
substantially all of the assets of the corporation requires action by the board
of directors and the vote of a majority of the outstanding stock entitled to
vote thereon. Delaware Law does not require stockholder consent to a mortgage or
pledge of the property or assets of the corporation unless the certificate of
incorporation state otherwise; the Holding Company Certificate does not require
stockholder consent for these actions.
APPRAISAL RIGHTS
Great Bay. Shareholders of a New Hampshire corporation are provided with
the right to dissent in the cases of a merger, share exchange or sale or
exchange of substantially all of the property and assets of a corporation which
is not in the regular course of business. Shareholders of a New Hampshire
corporation also have the right to dissent in the event of certain materially
adverse changes with respect to the dissenting shares. Dissenting shareholders
have the right to obtain payment of the fair value of their shares if they make
a proper demand. See "Rights of Dissenting Shareholders."
Holding Company. The Delaware Law provides for appraisal rights for
dissenting stockholders only in the case of a merger or consolidation. However,
the Delaware Law denies such rights to holders of shares listed on a national
securities exchange or on the Nasdaq National Market System or held of record by
more than 2,000 stockholders, unless the plan of merger or consolidation
converts such shares into anything other than stock of the surviving corporation
or stock of another corporation which is either listed on a national securities
exchange or designated as a market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 stockholders. Furthermore, there are no appraisal rights in
the case of a sale of assets or charter amendment unless the certificate of
incorporation explicitly states otherwise; the Holding Company Certificate does
not state otherwise. Shares of Holding Company Common Stock will be listed on
the Nasdaq National Market System.
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-- PROPOSAL TWO --
THE HOLDING COMPANY STOCK OPTION PLAN
The Holding Company Board unanimously adopted, subject to stockholder
approval, the Holding Company Stock Option Plan at its meeting held on April 16,
1996. Under the terms of the Holding Company Stock Option Plan, Holding Company
is authorized to grant options to purchase up to 600,000 shares of Holding
Company Common Stock to employees, officers or directors of, and consultants and
advisors to, Holding Company and its subsidiaries. Holding Company may grant
options that are intended to qualify as incentive stock options within the
meaning of Section 422 of the Code or nonstatutory options not intended to
qualify as incentive stock options. The purpose of the Holding Company Stock
Option Plan is to ensure that Holding Company may continue to attract and retain
key employees, officers, directors, consultants and advisors who are expected to
continue to contribute to Holding Company's growth and success. The text of the
Holding Company Stock Option Plan is attached as Annex III to this Proxy
Statement/Prospectus. Set forth below is a summary of the material provisions of
the Holding Company Stock Option Plan.
If the Merger is consummated, at the Effective Date, each holder of Great
Bay Options under the Great Bay Option Plan will be granted substitute options
by Holding Company under the Holding Company Stock Option Plan to purchase an
equal number of shares of Holding Company Common Stock on the same terms and at
the same exercise price per share as presently provided for by the Great Bay
Options. The Holding Company Stock Option Plan is identical to the Great Bay
Stock Option Plan and the Great Bay Stock Option Plan will be terminated if the
Merger is consummated. If the Merger is not consummated, the Holding Company
Stock Option Plan will not be implemented.
ADMINISTRATION AND ELIGIBILITY
The Holding Company Stock Option Plan is administered by the Holding
Company Board, which may delegate any or all of its power to a committee
appointed by the Holding Company Board. Subject to the express provisions of the
Holding Company Stock Option Plan, the Holding Company Board shall have the
authority to construe the respective option agreements, to prescribe, amend and
rescind rules and regulations relating to the Holding Company Stock Option Plan
and to make all other determinations in the judgment of the Holding Company
Board necessary or desirable for the administration of the Holding Company Stock
Option Plan.
Options may be granted to persons who are, at the time of grant, employees,
officers or directors of, or consultants or advisors to, Holding Company,
provided that incentive stock options may be granted only to persons who are
eligible to receive such options under Section 422 of the Code. The granting of
options to directors and officers shall be determined either (a) by the Holding
Company Board of which all members shall be "disinterested persons" (as defined
in the Holding Company Stock Option Plan) or (b) by a committee of two or more
directors having full authority to act on the matter, of which all members shall
be "disinterested persons."
The Holding Company Stock Option Plan provides for certain formula grants
to non-employee directors. Every non-employee director who is first elected as a
director after the date that Great Bay becomes a wholly-owned subsidiary of
Holding Company will receive a grant of an option for 20,000 shares upon his or
her election. In addition, every non-employee director shall receive a grant of
an option for 20,000 shares upon such director's first re-election to the
Holding Company Board and an additional grant of an option for 20,000 shares
upon such director's second re-election to the Holding Company Board. If a
Change in Control of Holding Company (as defined below) occurs, there shall be
granted to each non-employee director then serving an option for a number of
shares equal to 60,000 reduced by the number of shares for which options were
previously granted to such director; the exercise price for such option shall be
the exercise price for the last option granted to the director prior to the
Change in Control of Holding Company. Except as otherwise provided in the event
of a Change in Control of Holding Company, the exercise price for an option
granted to a non-employee director shall be 100% of the fair market value of
such stock, as determined by the Holding Company Board, at the time of grant of
such option.
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NUMBER OF SHARES AND EXERCISE PRICE
Subject to adjustment as provided in the Holding Company Stock Option Plan,
the maximum number of shares of Common Stock of Holding Company that may be
issued and sold under the Holding Company Stock Option Plan is 600,000 shares.
Subject to adjustment as provided in the Holding Company Stock Option Plan, the
maximum number of shares with respect to which options may be granted to any
individual other than non-employee directors under the Holding Company Stock
Option Plan will not exceed 400,000 shares of Common Stock during the ten-year
term of the Holding Company Stock Option Plan.
The Holding Company Board selects the exercise price per share of stock,
provided the exercise price cannot be less than (a) 110% of the fair market
value for incentive stock options granted to a holder of more than 10% of
Holding Company's capital stock, (b) 100% of fair market value for incentive
stock options generally and (c) 50% of fair market value for nonstatutory
options. The option price may be paid in cash or shares of Holding Company
Common Stock owned by the optionee as provided in the Holding Company Stock
Option Plan. The Holding Company Board shall also determine the expiration of
the option period, provided that (i) in the case of incentive stock options, the
date shall not be later than 10 years after the date on which the option is
granted, (ii) in the case of incentive stock options granted to a holder of more
than 10% of Holding Company's capital stock, such date shall not be later than
five years after the date on which the option is granted, and (iii) in all
cases, options shall be subject to earlier termination as provided in the
Holding Company Stock Option Plan.
TERMS OF OPTIONS
All options are nontransferable other than by will or the laws of descent
and distribution; provided, however, that nonstatutory options may be
transferred by certain persons required to file reports under Section 16(a) of
the Exchange Act pursuant to a qualified domestic relations order (as defined in
Rule 16b-3 promulgated under the Exchange Act). Holders of incentive stock
options may generally exercise such options up to three months after termination
of employment; however, individual option agreements may designate a longer
exercise period. Any exercise of an incentive stock option after such
three-month period will be treated as the exercise of a non-statutory option
under the Holding Company Stock Option Plan. If termination of employment
results from death or disability, such options may be exercised up to one year
after termination. Holders of nonstatutory options may exercise such options
after termination of employment with Holding Company during the period specified
in the applicable option agreement.
The Holding Company Board (or its appointed committee) determines when
options granted under the Holding Company Stock Option Plan become exercisable
(generally in installments at the rate of 33% or 50% per year). The Holding
Company Board may accelerate the date on which any option granted may be
exercised or extend the period during which any particular option may be
exercised, provided that no such extension shall be permitted if it would cause
the Holding Company Stock Option Plan to fail to comply with Section 422 of the
Code, or with Rule 16b-3 promulgated under the Exchange Act.
In the event of a Change in Control of Holding Company, the exercise dates
of all options then outstanding shall be accelerated in full and any restriction
on exercising outstanding options issued pursuant to the Holding Company Stock
Option Plan prior to any given date shall terminate. For purposes of the Holding
Company Stock Option Plan, a "Change in Control of Holding Company" shall have
occurred if (i) any person becomes the beneficial owner of securities of Holding
Company representing 30% or more of the combined voting power of Holding
Company's then outstanding securities, (ii) during any period of two consecutive
years ending during the term of the Holding Company Stock Option Plan,
individuals who at the beginning of such period constitute the Holding Company
Board, and any new director whose election by the Holding Company Board or
nomination for election by Holding Company's stockholders was approved by a vote
of at least two-thirds of the Directors then still in office who were either
Directors at the beginning of the period or whose election or whose nomination
for election was previously so approved (collectively, the "Disinterested
Directors") cease for any reason to constitute a majority of the Holding Company
Board, (iii) the stockholders of Holding Company approve a merger or
consolidation of Holding Company with any other corporation (other than a merger
or consolidation in which the stockholders of Holding Company own more than 50%
of the combined voting power of the surviving entity, or a merger or
consolidation effected to
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implement a recapitalization of Holding Company, or a merger or consolidation
which has been approved by a majority of the Disinterested Directors), or (iv)
the stockholders of Holding Company approve a plan of complete liquidation or an
agreement for the sale or disposition by Holding Company of all or substantially
all of Holding Company's assets which, in either case, has not previously been
approved by a majority of the Disinterested Directors. Notwithstanding the
foregoing, the Holding Company Board may, by a resolution adopted by two-thirds
of the Disinterested Directors, declare that any such event will not constitute
a Change in Control of Holding Company.
The Holding Company Board shall have the authority, with the consent of the
affected optionee, to cancel or amend any outstanding options under the Holding
Company Stock Option Plan and to grant in substitution therefor new options
covering the same or a different number of shares of Common Stock and having an
exercise price per share which may be lower or higher than the exercise price
per share of the outstanding options.
Subject to the prior approval of the Holding Company Board, an optionee may
elect to satisfy any tax withholding obligations with respect to shares issued
upon exercise of options by causing Holding Company to withhold shares of Common
Stock otherwise issuable upon the exercise of an option or by delivering to
Holding Company shares of Common Stock then owned by such optionee. The shares
so delivered or withheld shall have a fair market value equal to such
withholding obligation.
AMENDMENT AND TERMINATION
The Holding Company Board may at any time modify or amend the Holding
Company Stock Option Plan in any respect, except that if at any time the
approval of the stockholders of Holding Company is required under Section 422 of
the Code or any successor provision with respect to incentive stock options or
under Rule 16b-3 promulgated under the Exchange Act with respect to options held
by persons who are required to file reports pursuant to Section 16(a) of the
Exchange Act, the Holding Company Board may not effect such modification or
amendment without such approval. The termination or any amendment of the Holding
Company Stock Option Plan shall not, without the consent of an optionee, affect
his or her rights under an option previously granted.
In the event of a consolidation or merger or sale of all or substantially
all of the assets of Holding Company in which outstanding shares of Holding
Company Common Stock are exchanged for securities, cash or other property of any
other corporation or business entity or in the event of a liquidation of Holding
Company, the Holding Company Board or the board of directors of any corporation
assuming the obligations of Holding Company may, in its discretion, take any one
or more of the following actions as to outstanding options: (a) provide that
such options shall be assumed, or equivalent options shall be substituted, by
the acquiring or succeeding corporation (or an affiliate thereof), (b) provide
that all unexercised options will terminate immediately prior to the
consummation of such transaction unless exercised by the optionee within a
specified period following the date of such notice, (c) if the event involves a
cash payment for each share surrendered in the merger, make or provide for a
cash payment to the optionholders equal to the difference between the merger
consideration per share and the exercise price per share for all then
outstanding options and (d) provide that all or any outstanding options shall
become exercisable in full immediately prior to such event.
The Holding Company Stock Option Plan shall terminate with respect to
incentive stock options upon the earlier of April 15, 2006, or the date on which
all shares available for issuance under the Holding Company Stock Option Plan
shall have been issued pursuant to the exercise or cancellation of options
granted thereunder. The Holding Company Stock Option Plan shall terminate with
respect to nonstatutory options on April 15, 2006.
The Holding Company Stock Option Plan became effective when adopted by the
Holding Company Board, but no incentive stock option granted under the Holding
Company Stock Option Plan shall become exercisable unless and until the Holding
Company Stock Option Plan has been approved by Holding Company's stockholders.
As option grants under the Holding Company Stock Option Plan are
discretionary, except for options granted to non-employee directors pursuant to
the formula set forth in the Holding Company Stock Option
51
<PAGE> 60
<TABLE>
Plan. Holding Company cannot now determine the number of options to be received
by any particular current executive officer, by all current executive officers
as a group or by non-executive officer employees as a group. The number of such
options will be determined by the Holding Company Board, or a committee thereof,
pursuant to the terms of the Holding Company Stock Option Plan. However, if the
Holding Company Stock Option Plan is approved and the Merger is consummated,
each executive officer and non-executive director of Great Bay will receive
Holding Company Options which will be granted in substitution for Great Bay
Options that are currently outstanding to purchase up to the number of shares of
Holding Company's Common Stock set forth opposite his name below:
NEW PLAN BENEFITS
BAYCORP HOLDINGS, LTD. 1996 STOCK OPTION PLAN
<CAPTION>
DOLLAR NUMBER
NAME AND POSITION VALUE($)(1) OF UNITS
- ----------------- ----------- --------
<S> <C> <C>
John A. Tillinghast.................................................. 0 200,000
President and Chief
Executive Officer
Frank W. Getman Jr................................................... 0 75,000
Vice President, Secretary
and General Counsel
Non-Executive Director Group (3 persons)............................. 0 100,000
<FN>
- ---------------
(1) The option exercise price for the options will be equal to the fair market
value per share of Great Bay's Common Stock on the date of grant of the
Great Bay Option in replacement of which Holding Company Options will be
granted. The Dollar Value presented above (i) is based on the fair market
value of the Great Bay Common Stock on May 23, 1996 ($7.875) less the option
exercise price multiplied by the number of options granted and (ii) assumes
that stockholder approval of the Holding Company Stock Option Plan has been
obtained.
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES
Options granted under the Holding Company Stock Option Plan may be either
"Incentive Stock Options," as defined in Section 422 of the Code, or
nonstatutory options.
Incentive Stock Options. If an option granted under the Holding Company
Stock Option Plan is an Incentive Stock Option, the optionee will recognize no
income upon grant or exercise of the incentive stock option, although the
optionee will recognize alternative minimum taxable income upon exercise as
described below. Holding Company will not be entitled to any expense deduction
for federal income tax purposes. Generally, if an optionee holds shares acquired
upon the exercise of incentive stock options until the later of (a) two years
from the grant of the option and (b) one year from the date of transfer of the
purchased shares to him or her (the "Statutory Holding Period"), any gain
recognized by the optionee on any subsequent sale of the shares will be treated
as long-term capital gain. The gain recognized upon the sale of the stock is the
difference between the option price and the sale price of the stock. The net
federal income tax effect on the holder of Incentive Stock Options is to defer,
until the stock is sold, taxation of any increase in the stock's value from the
time of grant to the time of exercise.
If the optionee sells the stock prior to the expiration of the Statutory
Holding Period (a "disqualifying disposition"), he or she will realize taxable
income at ordinary income tax rates in an amount equal to the lesser of (a) the
fair market value of the stock on the date of exercise less the option price, or
(b) the amount realized on sale less the option price, and Holding Company will
receive a corresponding business expense deduction. However, special rules may
apply if the optionee is an officer, director or 10% stockholder of Holding
Company. Any additional gain will be treated as long-term capital gain if the
shares are held for one year or more prior to the sale and as short-term capital
gain if the shares are held for a shorter period. If the optionee sells the
stock for less than the option price, he or she will recognize a capital loss
equal to the difference between the sale price and the option price. The loss
will be a long-term capital loss if the shares are held for one year or more
prior to the sale and a short-term capital loss if the shares are held for a
shorter period.
52
<PAGE> 61
For purposes of the "alternative minimum tax" applicable to individuals an
Incentive Stock Option is treated the same as a nonstatutory stock option. Thus,
in the year of option exercise an optionee must generally include in his or her
alternative minimum taxable income the difference between the exercise price and
the fair market value of the stock on the date of exercise. The alternative
minimum tax is imposed upon an individual's alternative minimum taxable income
at a rate of 26% to 28%, but only to the extent that such tax exceeds the
taxpayer's regular income tax liability for the taxable year.
Non-statutory Stock Options. All other options which do not qualify as
Incentive Stock Options are referred to as non-statutory options. No taxable
income is recognized by the optionee upon the grant of a non-statutory option.
The optionee must recognize as ordinary income in the year in which the option
is exercised the amount by which the fair market value of the purchased shares
on the date of exercise exceeds the option price. However, where the optionee is
an officer, director or 10% stockholder of Holding Company, the following
special rules apply. If such a person exercises the option within six months of
the date of grant, no income will be recognized by the optionee until six months
have expired from the date the option was granted, and the income then
recognized will include any appreciation in the value of the shares during the
period between the date of exercise and the date six months after the date of
grant, unless the optionee makes an election under Section 83(b) of the Code to
have the difference between the exercise price and fair market value at the time
of exercise recognized as ordinary income as of the time of exercise. Holding
Company will be entitled to a business expense deduction equal to the amount of
ordinary income recognized by the optionee. Any additional gain or any loss
recognized upon the subsequent disposition of the purchased shares will be a
capital gain or loss, and will be a long-term gain or loss if the shares are
held for one year or more.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAX UPON
THE OPTIONEE AND HOLDING COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF
OPTIONS UNDER THE HOLDING COMPANY STOCK OPTION PLAN, DOES NOT PURPORT TO BE
COMPLETE, AND DOES NOT DISCUSS THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR
FOREIGN COUNTRY IN WHICH AN OPTIONEE MAY RESIDE.
BOARD RECOMMENDATION
The Great Bay Board believes that the Holding Company Stock Option Plan is
in the best interests of Holding Company and its stockholders and recommends a
vote FOR the adoption of this proposal.
53
<PAGE> 62
STOCKHOLDER PROPOSALS
If the Merger is not consummated by April 16, 1997, Great Bay will hold a
1997 Annual Meeting of Stockholders. Any proposal that a Great Bay shareholder
intends to present at the 1997 Annual Meeting of Stockholders of Great Bay must
be submitted to the Secretary of Great Bay at its offices, Cocheco Falls
Millworks, 100 Main Street, Dover, New Hampshire 03820, no later than November
22, 1996 in order to be considered for inclusion in the Proxy Statement relating
to that meeting.
If the Merger is consummated, Holding Company will hold a 1997 Annual
Meeting of Stockholders. Any proposal that a Holding Company stockholder intends
to present at the 1997 Annual Meeting of Stockholders of Holding Company must be
submitted to the Secretary of Holding Company at its offices, Cocheco Falls
Millworks, 100 Main Street, Dover, New Hampshire 03820, no later than November
22, 1996 in order to be considered for inclusion in the Proxy Statement relating
to that meeting.
LEGAL MATTERS
The validity of the shares of Holding Company Common Stock to be offered in
connection with the Merger will be passed upon for Holding Company by Hale and
Dorr, Boston, Massachusetts. In addition, as a condition to the Merger, Hale and
Dorr will render the tax opinion described in "The Merger -- Certain Federal
Income Tax Consequences."
EXPERTS
The financial statements as of December 31, 1995 and as of December 31,
1994 and for the year ended December 31, 1995 and the periods from January 1,
1994 to November 23, 1994 and November 24, 1994 to December 31, 1994 included in
this Proxy Statement/Prospectus and elsewhere in the registration statement, to
the extent and for the periods indicated in their reports, have been audited by
Arthur Andersen LLP, independent public accountants, and are included herein in
reliance upon the authority of said firms as experts in giving said reports.
The audited balance sheet of Holding Company included in this Proxy
Statement/Prospectus, to the extent and for the periods indicated in their
reports, have been audited by Arthur Andersen LLP, independent public
accountants, and are included herein in reliance upon the authority of said
firms as experts in giving said reports.
The statements of loss, retained deficit and cash flow of Great Bay Power
Corporation (formerly EUA Power Corporation) for the year ended December 31,
1993, included in this Proxy Statement/Prospectus and the related registration
statement, have been included herein in reliance on the report of Coopers &
Lybrand L.L.P., independent accountants, given on the authority of that firm as
experts in accounting and auditing.
Coopers & Lybrand L.L.P., whose report for the year ended December 31,
1993, appears elsewhere in this Proxy Statement/Prospectus, were Great Bay's
independent accountants until November 23, 1994. In connection with Great Bay's
bankruptcy proceeding, the Bondholders' Committee determined to select a new
accounting firm to be engaged by Great Bay following Great Bay's emergence from
bankruptcy. Coopers & Lybrand L.L.P. did not resign and did not decline to stand
for reelection. During the period of Coopers & Lybrand L.L.P.'s engagement by
Great Bay, there were no disagreements between Coopers & Lybrand L.L.P. and
Great Bay on any matters of accounting principles or practices, financial
statement disclosure or auditing scope or procedure and no reportable events
relating to the relationship between Great Bay and Coopers & Lybrand L.L.P.
On November 26, 1993 the Bankruptcy Court approved Great Bay's selection of
Arthur Andersen LLP as Great Bay's independent accountant, to be effective only
upon Great Bay's emergence from bankruptcy. Prior to November 23, 1994 the
Predecessor Company had not consulted Arthur Andersen LLP regarding the
application of accounting principles to specified transactions or the type of
audit opinion that might be rendered on Great Bay's financial statements during
the periods from January 1, 1991 through December 31, 1993.
54
<PAGE> 63
GLOSSARY OF CERTAIN DEFINED TERMS
<TABLE>
<S> <C>
Amended Bankruptcy Plan....... Great Bay's Fifth Amended Plan of Reorganization dated
February 11, 1994, as amended by a First Amendment dated
September 9, 1994.
Articles of Merger............ The Articles of Merger with respect to the Merger of
Transitory Subsidiary with and into Great Bay.
Code.......................... Internal Revenue Code of 1986, as amended.
Effective Date................ The date of filing of Articles of Merger with the Secretary
of State of the State of New Hampshire relating to the
Merger.
Elliott Group................. Group consisting of Elliott Associates, L.P., Westgate
International, L.P., Martley International, Inc. and Paul E.
Singer.
EUA........................... Eastern Utilities Associates.
Exchange Act.................. Securities Exchange Act of 1934, as amended.
EWG........................... Exempt Energy Regulatory Generator.
FERC.......................... Federal Energy Regulatory Commission.
Great Bay..................... Great Bay Power Corporation, a New Hampshire corporation.
Great Bay Board............... The Board of Directors of Great Bay.
Great Bay Common Stock........ Common Stock, $.01 par value, of Great Bay.
Great Bay Options............. Outstanding options under the Great Bay Stock Option Plan to
purchase a total of 375,000 shares of Great Bay Common Stock,
of which 200,000 were exercisable as of the Record Date.
Great Bay Stock Option Plan... Great Bay's 1995 Stock Option Plan.
Holding Company............... BayCorp Holdings, Ltd., a Delaware corporation.
Holding Company Common
Stock....................... Common Stock, $.01 par value, of Holding Company.
Holding Company Stock Option
Plan........................ Holding Company's 1996 Stock Option Plan.
IPPs.......................... Independent Power Producers.
JOA........................... Agreement for Joint Ownership, Construction and Operation of
New Hampshire Nuclear Units dated May 1, 1973, as amended, by
and among Great Bay and the ten other utility companies who
are owners of the Seabrook Project.
LLW........................... Low-level waste.
Long-Term Market.............. An agreement for sale of power having a term a five years of
longer.
Merger........................ The merger of Transitory Subsidiary with and Great Bay
pursuant to the Merger Agreement.
Merger Agreement.............. The Agreement and Plan of Merger by and among Great Bay,
Holding Company and the Transitory Subsidiary.
Merger Regulatory Approvals... Approval by the NHPUC and FERC and consent by NRC.
MW............................ Megawatts.
NAESCO........................ North Atlantic Energy Service Corporation, the current
managing agent of Seabrook Project.
NDFC.......................... New Hampshire Nuclear Financing Committee.
NEPOOL........................ New England Power Pool.
NEPOOL Agreement.............. New England Power Pool Agreement.
NHPUC......................... New Hampshire Public Utilities Commission.
NRC........................... Nuclear Regulatory Commission.
</TABLE>
55
<PAGE> 64
<TABLE>
<S> <C>
OMEGA GROUP................... Group consisting of Leon G. Cooperman, Omega Capital
Partners, L.P., Omega Institutional Partners, L.P. and Omega
Advisors, Inc.
Participants.................. The owners of the Seabrook Project.
PECO.......................... PECO Energy Company.
PECO Services Agreement....... The Service Agreement, dated as of November 3, 1995, between
Great Bay and PECO.
PECO Warrant.................. A warrant to purchase 420,000 shares of Great Bay Common
Stock held by PECO.
PUHCA......................... Public Utility Holding Company Act of 1935, as amended.
QFs........................... Qualifying Facilities.
Record Date................... The close of business of May 3, 1996.
Registration Statement........ The Registration Statement filed by Holding Company with the
Commission on Form S-4 (together with any amendments or
supplements thereto).
Seabrook Project.............. The Seabrook Nuclear Power Project in Seabrook, New
Hampshire.
Securities Act................ The Securities Act of 1933, as amended.
Short-Term Market............. An agreement for sale of power having a term of one to six
months.
Special Meeting............... The Special Meeting of Great Bay shareholders to be held to
consider and vote upon the Merger Agreement and the Holding
Company Stock Option Plan.
TILTEC........................ Tillinghast Technology Interests, Inc.
Town of Seabrook.............. The Town of Seabrook, New Hampshire.
Transitory Subsidiary......... GB Transitory Subsidiary, Inc.
URI........................... UNITIL Resources, Inc.
</TABLE>
56
<PAGE> 65
<TABLE>
INDEX TO FINANCIAL STATEMENTS
<CAPTION>
PAGE
----
<S> <C>
GREAT BAY POWER CORPORATION
Report of Independent Public Accountants......................................... F-2
Balance Sheets as of March 31, 1996, December 31, 1995 and 1994.................. F-3
Statements of Income -- Three Months Ended March 31, 1996 and 1995, Year Ended
December 31, 1995 and Period from November 24 to December 31, 1994.............. F-4
Statements of Changes in Stockholders' Equity, Three Months Ended March 31, 1996,
Year Ended December 31, 1995 and Period from November 24 to December 31, 1994... F-5
Statements of Cash Flow -- Three Months Ended March 31, 1996 and 1995, Year Ended
December 31, 1995 and Period from November 24 to December 31, 1994.............. F-6
Notes to Financial Statements.................................................... F-7
GREAT BAY POWER CORPORATION (F.K.A. EUA Power Corporation) ("The Predecessor")
Statement of Income -- Period from January 1 to November 23, 1994................ F-4
Statement of Changes in Stockholders' Equity -- Period from January 1 to November
23, 1994........................................................................ F-5
Statement of Cash Flows -- Period from January 1 to November 23, 1994............ F-6
Report of Independent Accountants................................................ F-21
Statement of Loss and Retained (Deficit) Earnings for the year ended December 31,
1993............................................................................ F-22
Statement of Cash Flow for the year ended December 31, 1993...................... F-23
Notes to Financial Statements.................................................... F-24
BAYCORP HOLDINGS, LTD.
Report of Independent Public Accountants......................................... F-35
Balance Sheet as of March 31, 1996............................................... F-36
</TABLE>
F-1
<PAGE> 66
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Great Bay Power Corporation and
To the Director of
Great Bay Power Corporation (formerly EUA Power Corporation)
We have audited the accompanying balance sheets of Great Bay Power
Corporation (a New Hampshire corporation) as of December 31, 1995 and 1994 and
the related statements of income, changes in stockholders' equity and cash flows
for the year ended December 31, 1995 and the period from November 24, 1994 to
December 31, 1994. We have also audited the accompanying statements of income,
changes in stockholders' equity and cash flows of Great Bay Power Corporation
(formerly EUA Power Corporation, the "Predecessor") for the period from January
1, 1994 to November 23, 1994. 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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 about present fairly,
in all material respects, the financial position of Great Bay Power Corporation
as of December 31, 1995 and 1994, and the results of the operations and cash
flows of Great Bay Power Corporation and Great Bay Power Corporation (formerly
EUA Power Corporation, the "Predecessor") for the year ended December 31, 1995
and the periods from November 24, 1994 to December 31, 1994 and January 1, 1994
to November 23, 1994, respectively, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
January 26, 1996
F-2
<PAGE> 67
GREAT BAY POWER CORPORATION
BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------------
1996 1995 1994
--------- ------------ ------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS:
Current Assets:
Cash & Cash equivalents........................................ $ 11,984 $ 8,874 $ 18,533
Short-term Investments, at market.............................. 4,759 7,595 3,684
Accounts Receivable............................................ 2,543 1,535 2,598
Materials & Supplies........................................... 4,224 4,230 4,846
Prepayments & Other Assets..................................... 2,641 1,249 2,976
-------- -------- --------
Total Current Assets.................................... 26,151 23,483 32,637
-------- -------- --------
Property, Plant & Equipment:
Utility Plant.................................................. 104,432 104,696 101,308
Less: Accumulated Depreciation................................. (4,613) (4,165) (95)
-------- -------- --------
Net Utility Plant.............................................. 99,819 100,531 101,213
Nuclear Fuel................................................... 9,974 9,925 10,556
Less: Accumulated Amortization................................. (1,231) (304) (2,118)
-------- -------- --------
Net Nuclear Fuel............................................... 8,743 9,621 8,438
Net Property, Plant & Equipment......................... 108,562 110,152 109,651
Other Assets:
Decommissioning Trust Fund..................................... 5,363 5,108 3,290
Deferred Debits & Other........................................ 27 28 88
-------- -------- --------
Total Other Assets...................................... 5,390 5,136 3,378
-------- -------- --------
TOTAL ASSETS............................................ $140,103 $138,771 $145,666
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Accounts Payable and Accrued Expenses.......................... $ 164 $ 237 $ 303
Taxes Accrued.................................................. 2,210 1,293 1,166
Reorganization Expenses........................................ 0 0 2,653
Miscellaneous Current Liabilities.............................. 1,220 1,437 1,346
-------- -------- --------
Total Current Liabilities............................... 3,594 2,967 5,468
Operating Reserves:
Decommissioning Liability...................................... 50,789 50,228 48,530
Miscellaneous Other............................................ 671 671 719
-------- -------- --------
Total Operating Reserves................................ 51,460 50,899 49,249
Other Liabilities & Deferred Credits............................. 2,833 2,672 2,563
Accumulated Deferred Taxes....................................... 0 0 94
Commitments & Contingencies......................................
Stockholders' Equity:
Common stock, $.01 par value
Authorized -- 20,000,000 shares; issued and outstanding --
7,999,948 at March 31, 1996 and 8,000,000 shares at
December 31, 1995 and 1994.............................. 80 80 80
Common Stock Warrants.......................................... 1,000 0 0
Additional paid-in capital..................................... 88,030 88,030 88,030
Retained earnings.............................................. (6,894) (5,877) 182
-------- -------- --------
Total Stockholders' Equity.............................. 82,216 82,233 88,292
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.............. $140,103 $138,771 $145,666
======== ======== ========
</TABLE>
(The accompanying notes are an integral part of these statements.)
F-3
<PAGE> 68
GREAT BAY POWER CORPORATION
<TABLE>
STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
<CAPTION>
SUCCESSOR PREDECESSOR
--------------------------------------------------- -------------
(UNAUDITED)
THREE MONTHS ENDED JANUARY 1 TO NOVEMBER 24 TO JANUARY 1 TO
ENDED MARCH 31, DECEMBER 31, DECEMBER 31, NOVEMBER 23,
1996 1995 1995 1994 1994
------- ------ ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Operating Revenues.................. $ 6,891 $7,781 $24,524 $3,129 $ 13,989
Operating Expenses:
Production........................ 3,588 4,206 17,433 1,836 16,891
Transmission...................... 259 241 934 70 834
Administrative & General.......... 1,914 1,402 6,532 503 4,037
Depreciation & Amortization....... 874 736 3,339 240 8,027
Taxes other than Income........... 1,054 1,022 4,143 346 3,934
------- ------ ------- ------ ---------
Total Operating
Expenses................ 7,689 7,607 32,381 2,995 33,723
------- ------ ------- ------ ---------
Operating Income (Loss)............. (798) 174 (7,857) 134 (19,734)
------- ------ ------- ------ ---------
Other (Income) Deductions:
Write-down of Assets &
Liabilities.................... -- -- -- -- 137,908
Reorganization Expenses........... -- -- -- -- 4,038
Interest and Dividend (Income).... (271) (387) (1,346) (143) --
Interest Expense.................. -- -- -- -- 760
Decommissioning Cost Accretion.... 565 -- -- -- --
Decommissioning Trust Fund
Income......................... (79) -- -- -- --
Miscellaneous..................... 4 -- (198) 1 (102)
------- ------ ------- ------ ---------
Total Other (Income)
Deductions.............. 219 (387) (1,744) (142) 142,604
------- ------ ------- ------ ---------
Earnings (Loss) Before Income
Taxes............................. (1,017) 561 (6,113) 276 (162,338)
------- ------ ------- ------ ---------
Income Taxes:
Current........................... -- -- (54) -- --
Deferred.......................... -- 1 -- 94 --
------- ------ ------- ------ ---------
Total Income Taxes........ -- 1 (54) 94 --
------- ------ ------- ------ ---------
Income (Loss) Before Extraordinary
Item.............................. (1,017) 560 (6,059) 182 (162,338)
Extraordinary Income (Loss)
Forgiveness of Long-term Debt and
Accrued Interest.................. -- -- -- -- 293,723
------- ------ ------- ------ ---------
Net Income (Loss)................... $(1,017) $ 560 $(6,059) $ 182 $ 131,385
======= ====== ======= ====== =========
</TABLE>
(The accompanying notes are an integral part of these statements.)
F-4
<PAGE> 69
GREAT BAY POWER CORPORATION
<TABLE>
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<CAPTION>
COMMON STOCK, COMMON STOCK,
$.01 PAR VALUE $.01 PAR VALUE
--------------- ----------------
ISSUED AND LESS: ISSUED AND COMMON ADDITIONAL
OUTSTANDING TREASURY STOCK, PAID-IN CAPITAL TOTAL OUTSTANDING STOCK PAID-IN
10,000 SHARES 10,000 SHARES TREASURY STOCK COMMON STOCK 8,000,000 SHARES WARRANTS CAPITAL
--------------- --------------- --------------- ------------ ---------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PREDECESSOR
Balance at December
31, 1993............. $ 10 $(10) $ 10 $ 10 $-- -- $ --
Financial Results,
January 1 to
November 23, 1994.. -- -- -- -- -- --
Equity Infusion and
Fresh-Start Adj's.... (10) 10 (10) (10) 80 -- 88,030
- ----------------------------------------------------------------------------------------------------------------------------
SUCCESSOR
Balance at November
23, 1994............. -- -- -- 80 -- 88,030
Financial Results,
November 24 to
December 31,
1994............... -- -- -- -- -- --
Balance at December
31, 1994............. -- -- -- 80 -- 88,030
Financial Results,
January 1 to
December 31,
1995............... -- -- -- -- -- --
Balance at December
31, 1995............. -- -- -- $80 -- $88,030
Common Stock
Warrants............. -- -- -- -- 1,000 --
Financial Results,
January 1 to March
31, 1996............. -- -- -- -- -- --
Balance at March 31,
1996................. -- -- -- $80 1,000 88,030
</TABLE>
<TABLE>
<CAPTION>
REDEEMABLE TOTAL
PREFERRED RETAINED STOCKHOLDERS'
STOCK EARNINGS EQUITY
---------- --------- -------------
<S> <C> <C> <C>
PREDECESSOR
Balance at December
31, 1993............. $ 63,090 $(139,793) $(76,693)
Financial Results,
January 1 to
November 23,
1994............... -- 127,789 127,789
Equity Infusion and
Fresh-Start
Adj's................ (63,090) 12,004 37,014
- ------------------------------------------------------------------------
SUCCESSOR
Balance at November
23, 1994............. -- -- 88,110
Financial Results,
November 24 to
December 31,
1994............... -- 182 182
Balance at December
31, 1994............. -- 182 88,292
Financial Results,
January 1 to
December 31,
1995............... -- (6,059) (6,059)
Balance at December
31, 1995............. -- $ (5,877) $ 82,233
Common Stock
Warrants............. -- -- 1,000
Financial Results,
January 1 to March
31, 1996............. -- (1,017) (1,017)
Balance at March 31,
1996................. -- (6,894) $ 82,216
</TABLE>
(The accompanying notes are an integral part of these statements.)
F-5
<PAGE> 70
GREAT BAY POWER CORPORATION
<TABLE>
STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<CAPTION>
SUCCESSOR
--------------------------------------------------
PREDECESSOR
(UNAUDITED) ------------
THREE MONTHS ENDED JANUARY 1 TO NOVEMBER 24 TO JANUARY 1 TO
MARCH 31, DECEMBER 31, DECEMBER 31, NOVEMBER 23,
1996 1995 1995 1994 1994
------- ------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Net cash flow from operating
activities:
Net Income (Loss)................ $(1,017) $ 560 $ (6,059) $ 182 $ 131,385
Adjustments to reconcile net
earnings to net cash provided
by (used in) operating
activities:
Depreciation................ 874 736 3,339 240 4,456
Decommissioning Expense..... -- -- -- -- 636
Amortization of nuclear
fuel...................... 927 1,266 4,520 533 3,571
Decommissioning cost
accretion................. 565 -- -- --
Decommissioning trust
interest.................. (79) -- -- -- --
Deferred income taxes....... -- -- (94) 94 --
Writedown of assets, net.... -- -- 758 -- 137,908
Gain on forgiveness of
debt...................... -- -- -- -- (293,723)
Gain on transfer of
assets.................... -- -- (193) -- --
Provision for reorganization
expenses.................. -- -- -- -- 4,038
Payment of reorganization
expenses.................. -- -- (2,653) (1,518) --
(Increase) decrease in
accounts receivable....... (1,008) (147) 1,021 (635) 507
Decrease in materials &
supplies.................. (36) (5) 113 39 201
(Increase) decrease in
prepaids and other
assets.................... (1,392) 1,195 1,718 (520) 1,631
Increase (decrease) in
accounts payable.......... (73) (183) (66) 293 (81)
Increase in taxes accrued... 917 (283) 126 273 312
Increase in misc. current
liabilities............... (59) 273 400 946
Other....................... 183 261 717
------- ------- -------- ------- ---------
Net cash provided by (used in)
operating activities................ (381) 3,412 2,713 (358) (7,496)
------- ------- -------- ------- ---------
Net cash flows (used in) investing
activities:
Utility plant additions.......... (116) (213) (1,770) (260) (1,774)
Nuclear fuel additions........... (48) (610) (5,703) -- (361)
Payments to decommissioning
fund........................... (181) (161) (988) (98) (830)
Short term investments, net...... 2,836 (3,226) (3,911) (3,684) --
------- ------- -------- ------- ---------
Net cash used in investing
activities.......................... 2,491 (4,210) (12,372) (4,042) (2,965)
Net cash provided by financing
activities:
Sale of common stock............. -- -- -- -- 35,000
Common Stock Warrants............ 1,000 -- -- -- --
Borrowings under DIP financing... -- -- -- -- 8,823
Repayment of DIP financing....... -- -- -- -- (10,567)
------- ------- -------- ------- ---------
Net cash provided by financing
activities.......................... 1,000 -- -- -- 33,256
------- ------- -------- ------- ---------
Net (decrease) increase in cash and
cash equivalents.................... 3,110 (798) (9,659) (4,400) 22,795
Cash and cash equivalents, beginning
of period........................... 8,874 18,533 18,533 22,933 138
------- ------- -------- ------- ---------
Cash and cash equivalents, end of
period.............................. $11,984 $17,735 $ 8,874 $18,533 $ 22,933
======= ======= ======== ======= =========
</TABLE>
(The accompanying notes are an integral part of these statements.)
F-6
<PAGE> 71
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. THE COMPANY
The Company, Great Bay Power Corporation, is a New Hampshire corporation,
which emerged from bankruptcy on November 23, 1994. The Predecessor Company, EUA
Power Corporation ( "The Predecessor") was incorporated in 1986. The Company is
authorized by the New Hampshire Public Utilities Commission ("NHPUC") to engage
in business as a public utility for the purposes of participating as a joint
owner in the Seabrook Project, acquiring its 12.1% interest in the Seabrook
Project and selling its share of the output of Seabrook Unit 1 for resale. The
Seabrook Project is a nuclear-fueled, steam electricity, generating plant
located in Seabrook, New Hampshire, which was originally planned to have two
Westinghouse pressurized water reactors, Seabrook Unit 1 and Seabrook Unit 2
(each with a rated capacity of 1,150 megawatts), utilizing ocean water for
condenser cooling purposes. Seabrook Unit 1 entered commercial service on August
19, 1990. Seabrook Unit 2 has been canceled. The Company became a wholesale
generating company when Seabrook Unit 1 commenced commercial operation on August
19, 1990. In 1993, the Company became an Exempt Wholesale Generator ("EWG")
under the Energy Policy Act of 1992.
The Company is required to pay its share (i.e., the same percentage as the
percentage of its ownership and its entitlement to the output) of all of the
costs of the Seabrook Project, including fixed costs (whether or not Seabrook
Unit 1 is operating), operating costs, costs of additional construction or
modification, costs associated with condemnation, shutdown, retirement, or
decommissioning of the Seabrook Project, and certain transmission charges. The
Predecessor never reported an operating profit from the time of its
incorporation until it filed for bankruptcy in 1991. See Footnote 1B for further
discussion. The Company's current business strategy is to seek purchasers for
its share of the Seabrook Project electricity output at prices, either in the
short term market or pursuant to medium or long term contracts, in excess of the
prices currently available in the short term wholesale electricity market since
sales at current short term rates do not result in sufficient revenue to enable
the Company to meet its long term cash requirements for operations, maintenance
and capital related costs. The Company's ability to obtain such higher prices
will depend on regional, national and worldwide energy supply and demand
factors.
As of March 31, 1996, the Company had two employees, and substantially all
of the Company's power marketing and administrative functions for the first
quarter of 1996 were performed on the Company's behalf by third parties pursuant
to contractual agreements. As of May 1, 1996, the Company had five employees and
the Company has assumed responsibility for virtually all of its administrative
functions. Its power marketing functions continue to be provided by a third
party pursuant to a contractual agreement.
The unaudited financial statements included herein for the three month
periods ending March 31, 1996 and 1995 have been prepared on behalf of the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission and include, in the opinion of management, all
adjustments, consisting of normal recurring adjustments, necessary for a fair
presentation of interim period results. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted or condensed
pursuant to such rules and regulations. The Company believes, however, its
disclosures herein, when read in conjunction with the Company's audited
financial statements for the year ended December 31, 1995, are adequate to make
the information presented not misleading. Operating results for the three months
ended March 31, 1996 are not necessarily indicative of the results that may be
expected for the entire year ended December 31, 1996. The results for the
interim periods are not necessarily indicative of the results to be expected for
the full fiscal year.
B. BANKRUPTCY PROCEEDING AND REORGANIZATION
The Company filed a voluntary petition under Chapter 11 of the United
States Bankruptcy Code ("the Bankruptcy Code") in the United States Bankruptcy
Court for the District of New Hampshire ("the
F-7
<PAGE> 72
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
Bankruptcy Court") on February 28, 1991. It conducted its business as a Debtor
in Possession until November 23, 1994, at which time the Company's First
Amendment to the First Modified Plan dated September 9, 1994 ("the Amended
Plan") became effective and the Company emerged from Chapter 11.
The Bankruptcy Court confirmed the Bondholders' Committee's Fifth Amended
Plan of Reorganization on March 5, 1993. After confirmation, the Predecessor was
unable to obtain the $45 million of debt financing contemplated by the Fifth
Amended Plan of Reorganization. In February 1994, however, the Bondholders'
Committee obtained a commitment from Omega Advisers, Inc. ("Omega") or its
designees to provide $35 million of equity financing for the Company (the
"Financing").
On April 7, 1994, the Company and the Bondholders' Committee entered into a
definitive Stock and Subscription Agreement (the "Stock and Subscription
Agreement") with Omega and Elliott Associates, L.P. (Elliott) (collectively, the
Investors) with respect to the Omega Financing.
The Bondholders' Committee prepared a First Modification to the Fifth
Amended Plan of Reorganization to reflect the change from debt to equity
financing and submitted a Supplemental Disclosure Statement describing that
First Modification to the Bankruptcy Court for its approval. The Fifth Amended
Plan of Reorganization, as modified by the First Modification, is hereinafter
referred to as the "Plan." The Bankruptcy Court approved the Supplemental
Disclosure Statement at a hearing on March 11, 1994. The Plan was mailed to the
Company's creditors for their approval on April 7, 1994, and the creditors
approved the Plan by a significant margin.
On May 23, 1994, the Bankruptcy Court confirmed the Plan. The only
condition which remained to be satisfied for the occurrence of the Effective
Date of the Plan was the closing of the Stock and Subscription Agreement. The
Committee believed that all of the conditions to closing set forth in the Stock
and Subscription Agreement had been satisfied and was prepared to close the
Stock and Subscription Agreement. Before the closing could occur, however, the
operators of the Seabrook Project determined, during a regularly scheduled
refueling outage, that certain repairs to the Seabrook Project were required.
These repairs have been completed and the Seabrook Project is now operating. The
repairs, however, caused the Seabrook Project to be out of service for
approximately eight weeks longer than anticipated in connection with the
scheduled refueling outage.
Because of the unplanned extension of the outage, the repairs required, and
the related loss of revenue of the Company, Omega and Elliott asserted that a
material adverse event had occurred with respect to the Company and that,
therefore, they were not obligated to complete the Omega Financing. The Company
disagreed with those assertions, and informed Omega and Elliott that they were
in default under the Stock and Subscription Agreement and informed Omega and
Elliott that the Company would bring suit to enforce the obligations of Omega
and Elliott to close the Omega Financing. Notwithstanding its position on this
matter, the Company engaged in negotiations with Omega and Elliott to settle the
dispute and to complete the Omega Financing. On September 9, 1994, the Company,
Omega and Elliott resolved their disputes and entered into a Settlement
Agreement (the "Settlement Agreement").
The terms of the Settlement Agreement changed the terms of the Omega
Financing. As described above, under the Plan before its amendment, the
Investors were to receive 4.8 million shares, representing 60% of the common
stock of the Company, in exchange for their $35 million investment. The
Settlement Agreement changed the Plan to provide also that, on the Effective
Date of the Amended Plan, 480,000 shares of new common stock of the Company,
which would have otherwise been distributed to the creditors of the Company,
would be issued to the Disbursing Agent under the Plan (the "Escrow Shares").
The Escrow Shares represent 6% of the common stock of the Company. The Company's
creditors received the remaining 34% on the Effective Date of the amended Plan.
F-8
<PAGE> 73
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
On the first anniversary of the Effective Date of the Amended Plan, if the
Aggregate Value, as defined in the Settlement Agreement, of the Purchasers' 4.8
million shares of common stock was less than $38.5 million, the Company would be
obligated to pay to the Investors an amount (the "True-Up Amount") equal to the
lesser of (a) $38.5 million less the Aggregate Value, or (b) the total value of
all of the Escrow Shares, based on their per share value. The Settlement
Agreement permitted the Investors to elect to have their True-Up amounts, if
any, satisfied by the issuance of Escrow Shares or in cash. If the Aggregate
Value was equal to or greater than $38.5 million, the Escrow Shares would be
issued on a pro rata basis to the Company's creditors in accordance with the
Amended Plan. In no event, however, would the Investors be entitled to more than
the 480,000 Escrow Shares, or the cash proceeds from the sale of those shares.
On the anniversary date, November 23, 1995, the Aggregate Value of the
Purchaser's 4.8 million shares of common stock was $38,832,000. As this amount
was greater than $38.5 million, the escrow shares were issued to the creditors.
Pursuant to the Settlement Agreement, the Company amended the Plan and its
related Disclosure Statement, submitted the Amended Plan and the Amended
Disclosure Statement to the Bankruptcy Court for its approval and obtained that
approval, circulated the Amended Plan and the Amended Disclosure Statement to
the Company's creditors in order to give them the opportunity to change their
previous votes approving the Plan, and then applied to the Bankruptcy Court for
confirmation of the Amended Plan. The Bankruptcy Court confirmed the Amended
Plan on November 4, 1994. In addition, the Company obtained extensions of time
and, in some cases, reapprovals, from certain regulatory agencies which had
previously approved the Omega Financing. Closing of the Omega Financing occurred
on November 23, 1994, at which time the Company's First Amendment to the First
Modified Plan dated September 9, 1994 ("the Amended Plan") became effective and
the Company emerged from Chapter 11.
<TABLE>
In accordance with Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code", the historical amounts of
individual assets and liabilities have been adjusted to fair values and
Liabilities Subject to Compromise of $293,864,000 have been discharged as a
result of the Reorganization Plan. The amount of prior retained deficit
eliminated as a result of the reorganization was $159,659,000. The
reorganizational value has been determined based on the fair value of the
Company (See Note 1D). The adjustments to individual assets and liabilities are
as follows:
<CAPTION>
ADJUSTMENTS
--------------
(IN THOUSANDS)
<S> <C>
Writedown of Net Utility Plant and Nuclear Fuel........................ $ 193,635
Writedown of Deferred Debits........................................... 27,470
Recognition of Decommissioning Liability, net.......................... 45,193
Writedown of Deferred Taxes and ITC.................................... (73,927)
Writedown of Deferred Gains and Credits................................ (47,375)
Other, net............................................................. (7,088)
---------
Net Writedown of Assets...................................... 137,908
Forgiveness of Liabilities Subject to Compromise....................... (293,864)
Recognition of Reorganization Expenses................................. 4,038
---------
Net adjustment to assets and liabilities............................... $(151,918)
=========
</TABLE>
F-9
<PAGE> 74
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
The following unaudited proforma condensed statement of (loss) income is
presented to illustrate the estimated effect of the reorganization as if such
transaction had occurred as of January 1, 1994.
<CAPTION>
PROFORMA
YEAR ENDED YEAR ENDED
DECEMBER 31, PROFORMA DECEMBER 31,
1994 ADJUSTMENTS 1994
------------- ----------- -------------
<S> <C> <C> <C>
Operating Revenues................................ $ 17,118 $ 17,118
Operating Expenses:
Production & Transmission....................... 19,631 $ (2,830)(f) 16,801
Administrative & General........................ 4,540 700 (e) 5,240
Depreciation & Amortization..................... 8,267 (5,461)(d) 2,806
Taxes Other than Income......................... 4,280 4,280
--------- --------
Total Operating Expenses................ 36,718 29,127
Operating Income.................................. (19,600) (12,009)
Write down of Assets, net....................... 137,908 (137,908)(a) 0
Reorganization Expenses......................... 4,038 (4,038)(b) 0
Other Income.................................... (101) (101)
Interest Charges, net........................... 617 (706)(c) (89)
--------- --------
Net Loss Before Taxes............................. (162,062) (11,819)
Income Taxes.................................... 94 (4,096)(g) (4,002)
Net Loss before Extraordinary Item................ (162,156) (7,817)
Forgiveness of Debt............................. 293,723 (293,723)(c) 0
--------- --------
Net Income (Loss)................................. $ 131,567 $ (7,817)
========= ========
<FN>
- ---------------
(a) Elimination of Writedown of Assets, Net
(b) Elimination of Reorganization Expenses
(c) Elimination of Forgiveness of Debt and related interest
(d) Depreciation expense adjusted to reflect asset writedown
(e) Additional expenses associated with UNITIL and Tillinghast agreements
(f) Recognition of new outage accrual policy
(g) Tax impact of above entries assuming ability to fully benefit loss
</TABLE>
C. REGULATION
The Company is subject to the regulatory authority of the Federal Energy
Regulatory Commission ("FERC"), the Nuclear Regulatory Commission ("NRC") and
the New Hampshire Public Utilities Commission ("NHPUC") and other federal and
state agencies as to rates, operations and other matters. The Company's cost of
service is not regulated. As such, the Company's accounting policies are not
subject to the provisions of Statement of Financial Accounting Standards No. 71,
"Accounting for the Effects of Certain Types of Regulation."
D. USE OF MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles 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
F-10
<PAGE> 75
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
E. UTILITY PLANT
Utility plant at November 23, 1994 was revalued to its estimated fair value
based on the fair value of the Company. The reorganization value of the Company
at November 23, 1994 was determined based on discounted cash flow valuation. The
cost of additions to utility plant subsequent to November 23, 1994 are recorded
at original cost. During the period from January 1, 1994 to November 23, 1994,
the Predecessor capitalized $121,000 of interest related to plant additions.
F. DEPRECIATION AND MAINTENANCE
Electric plant is depreciated on the straight-line method at rates designed
to fully depreciate all depreciable properties over the lesser of estimated
useful lives or the Plant's remaining NRC license life, which extends to 2026.
Capital projects constituting retirement units are charged to electric
plant. Minor repairs are charged to maintenance expense. When properties are
retired, the original cost, plus cost of removal, less salvage, are charged to
the accumulated provision for depreciation.
G. AMORTIZATION OF NUCLEAR FUEL
The cost of nuclear fuel is amortized to expense based on the rate of
burn-up of the assemblies comprising the total core. The Company also provides
for the cost of disposing of spent nuclear fuel at rates specified by the United
States Department of Energy ("DOE") under a contract for disposal between the
Company and the DOE.
The Company amortizes to expense on a straight-line basis the estimated
cost of the final unspent nuclear fuel core, which is expected to be in place at
the expiration of the Plant's NRC operating license, in conformity with rates
authorized by the FERC.
H. AMORTIZATION OF MATERIALS AND SUPPLIES
The Company amortizes to expense an amount designed to fully amortize the
cost of the material and supplies inventory that is expected to be on hand at
the expiration of the Plant's NRC operating license.
I. DECOMMISSIONING
Based on the Financial Accounting Standards Board's ("FASB") tentative
conclusions, the Company has recognized as a liability its proportionate share
of the estimated Seabrook Project decommissioning. The initial recognition of
this liability was capitalized as part of the Fair Value of the Utility Plant at
November 23, 1994. The estimated cost to decommission the Seabrook Project,
based on a study performed for the lead owner of the Plant, is approximately
$414 million in 1995 dollars and $2.1 billion in 2026 dollars and assumes a 36
year life for the facility and a future escalation rate of 4.25%. Based on this
estimate, the Company's share in 1995 dollars is approximately $50.2 million,
which has been recorded as a liability in the December 31, 1995 balance sheet.
During the first quarter of 1996, the Company began to accrete its share of
the Seabrook Project's Decommissioning Liability. This accretion is a non-cash
charge and recognizes the Company's liability related to the closure and
decommissioning of its nuclear plant in current year dollars over the licensing
period of the
F-11
<PAGE> 76
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
plant. As a result of this accretion, the Company's share of the estimated
decommissioning cost increased from $50.2 million as of December 31, 1995 to
$50.8 million as of March 31, 1996.
The Seabrook Project's decommissioning estimate and funding schedule is
subject to review each year by the New Hampshire Nuclear Decommissioning Finance
Committee ("NDFC"). This estimate is based on a number of assumptions. Changes
in assumptions for such things as labor and material costs, technology,
inflation and timing of decommissioning could cause these estimates to change in
the near term. The review of the 1996 estimate and funding schedule by the NDFC
is currently scheduled for May.
The Staff of the SEC has questioned certain of the current accounting
practices of the electric utility industry regarding the recognition,
measurement and classification of decommissioning costs for nuclear generating
stations and joint owners in the financial statements of these entities. In
response to these questions, the FASB has agreed to review the accounting for
nuclear decommissioning costs. Although the Company's accounting for
decommissioning was based on the FASB's tentative conclusions, if the accounting
practices for nuclear power plant decommissioning are changed, the annual
provision for decommissioning could change relative to 1995. The Company is
uncertain as to the impact, if any, changes in the current accounting will have
on the Company's financial statements.
Funds collected by Seabrook for Decommissioning are deposited in an
external irrevocable trust pending their ultimate use. The earnings on the
external trusts also accumulate in the fund balance. The trust funds are
restricted for use in paying the decommissioning of Unit I. The investments in
the trust are available for sale. The Company has therefore reported its
investment in trust fund assets at market value.
Although the owners of Seabrook are accumulating funds in an external trust
to defray decommissioning costs, these costs could substantially exceed the
value of the trust fund, and the owners, including the Company, would remain
liable for the excess. The amount that is required to be deposited in the trust
fund is subject to periodic review and adjustment by the NDFC, which could
result in material increases in such amounts.
On November 15, 1992, the Company, the Bondholder's Committee and the
Predecessor's former parent, Eastern Utilities Associates (EUA) entered into a
settlement agreement which resolved certain proceedings against EUA brought by
the Bondholder's Committee. Under the settlement agreement EUA reaffirmed its
guarantee of up to $10 million of the Company's future decommissioning costs of
Seabrook Unit 1.
J. OPERATING REVENUES
Revenues are recorded on an accrual basis based on billing rates provided
for in contracts and approved by FERC. During the year ended December 31, 1995,
four customers accounted for 27%, 21%, 15% and 12% of total operating revenues.
For the period from November 24 to December 31, 1994, four customers accounted
for 50%, 15%, 12% and 12% of total operating revenues. For the period from
January 1, 1994 to November 23, 1994 four customers accounted for 28%, 17%, 15%
and 12% of total operating revenues.
K. TAXES ON INCOME
The Company accounts for taxes on income under the liability method
required by Statement of Financial Accounting Standards No. 109.
L. CASH EQUIVALENTS AND SHORT TERM INVESTMENTS
For purposes of the Statements of Cash Flows, the Company considers all
highly liquid short-term investments with an original maturity of three months
or less to be cash equivalents. The carrying amounts approximate fair value
because of the short-term maturity of the investments.
All other short term investments with a maturity of greater than three
months are classified as trading securities and reflected as a current asset at
market value.
F-12
<PAGE> 77
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
For the year ended December 31, 1995, the period from November 24 to
December 31, 1994 and the period from January 1 to November 23, 1994 the change
in the net unrealized holding gain (loss) on short term investments was $19,849,
$691 and $0, respectively.
M. SEABROOK UNIT 2
The Company also has a 12.1% ownership interest in Seabrook Unit 2 to which
it has assigned no value. On November 6, 1986, the joint owners of the Seabrook
Project, recognizing that Seabrook Unit 2 had been canceled, voted to dispose of
the Unit. Certain assets of Seabrook Unit 2 have been and are being sold from
time to time to third parties and or used in Seabrook Unit 1. Plans regarding
disposition of Seabrook Unit 2 are now under consideration, but have not been
finalized and approved. The Company is unable, therefore, to estimate the costs
for which it would be responsible in connection with the disposition of Seabrook
Unit 2. Monthly charges are required to be paid by the Company with respect to
Seabrook Unit 2 in order to preserve and protect its components and various
warranties. Any sales of Unit 2 property or inventory are reflected in other
income as gains on the sale of assets. Transfers of Unit 2 items to Unit 1 are
done at the historical basis of Unit II property or components ($0).
N. SEABROOK OUTAGE COSTS
The Company's operating results and the comparability of these results on
an interim and annual basis are directly impacted by the operations of the
Seabrook Project, including the cyclical refueling outages (generally 18-24
months apart) as well as unscheduled outages. During outage periods at the
Seabrook Project, the Company has no electricity for resale and consequently no
revenues. Therefore the impact of outages on the Company's results of operations
and financial position is materially adverse.
The Company accrues for the incremental costs of the Seabrook Project's
scheduled outages over the periods between those outages. However, the Company
continues to expense the normal Seabrook operating and maintenance expenses as
incurred. Therefore, the Company will incur losses during scheduled outage
periods as a result of the combination of the lack of revenue and the
recognition of normal recurring operation and maintenance costs as well as the
continuing depreciation of the Utility Plant. Based on expected fuel
consumption, the Seabrook plant management has scheduled the next refueling
outage for June 1997 at an estimated cost of $20 million. The Company's share is
approximately $2.4 million. The estimate is based on a number of assumptions.
Changes in assumptions for such things as labor and contractor costs, required
repairs and days to perform the outage and plant operations in the interim,
could cause this estimate to change in the near term.
O. RECLASSIFICATIONS
Certain amounts in prior year financial statements have been reclassified
to conform to the current year presentation.
2. NUCLEAR ISSUES
Like other nuclear generating facilities, the Seabrook Project is subject
to extensive regulation by the NRC. The NRC is empowered to authorize the
siting, construction and operation of nuclear reactors after consideration of
public health, safety, environmental and anti-trust matters.
The NRC has promulgated numerous requirements affecting safety systems,
fire protection, emergency response planning and notification systems, and other
aspects of nuclear plant construction, equipment and operation. The Company has
been, and may be, affected to the extent of its proportionate share by the cost
of any such modifications to Seabrook Unit 1.
F-13
<PAGE> 78
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
Nuclear units in the United States have been subject to widespread
criticism and opposition. Some nuclear projects have been canceled following
substantial construction delays and cost overruns as the result of licensing
problems, unanticipated construction defects and other difficulties. Various
groups have by litigation, legislation and participation in administrative
proceedings sought to prohibit the completion and operation of nuclear units and
the disposal of nuclear waste. In the event of a shutdown of any unit, NRC
regulations require that it be completely decontaminated of any residual
radioactivity. The cost of such decommissioning, depending on the circumstances,
could substantially exceed the owners' investment at the time of cancellation.
Public controversy concerning nuclear power could adversely affect the
operating license of Seabrook Unit 1. While the Company cannot predict the
ultimate effect of such controversy, it is possible that it could result in a
premature shutdown of the unit.
A. NUCLEAR FUEL
The Seabrook Project's joint owners have made, or expect to make, various
arrangements for the acquisition of uranium concentrate, the conversion,
enrichment, fabrication and utilization of nuclear fuel and the disposition of
that fuel after use. The owners and lead participants of each United States
nuclear unit have entered into contracts with the DOE for disposal of spent
nuclear fuel, in accordance with the NWPA. The NWPA requires (subject to various
contingencies) that the federal government design, license, construct and
operate a permanent repository for high level radioactive wastes and spent
nuclear fuel and establish prescribed fees for the disposal of such wastes and
fuel. The NWPA specifies that the DOE provide for the disposal of such wastes
and spent nuclear fuel starting in 1998.
Objections on environmental and other grounds have been asserted against
proposals for storage as well as disposal of spent fuel. The DOE anticipates
that a permanent disposal site for spent fuel will be ready to accept fuel for
storage on or before the year 2010. However, the NRC, which must license the
site, stated only that a permanent repository will become available by the year
2025. At the Seabrook Project, there is on-site storage capacity which, with
minimal capital expenditures, should be sufficient for twenty years or until the
year 2010. No near-term capital expenditures are anticipated to deal with any
increase in storage requirements after 2010.
B. FEDERAL DEPARTMENT OF ENERGY ("DOE") DECONTAMINATION AND DECOMMISSIONING
ASSESSMENT
Title XI of the Energy Policy Act of 1992 (the "Policy Act") provides for
decontaminating and decommissioning of the DOE's enrichment facilities to be
partially funded by a special assessment against domestic utilities. Each
utility's share of the assessment is to be based on its cumulative consumption
of DOE enrichment services. As of December 31, 1995, the Company had accrued its
pro rata estimated obligation of $738,000 related to the project's prior years'
usage to be paid over the 15-year period beginning October 1, 1992.
C. PRICE ANDERSON ACT
In accordance with the Price Anderson Act, the limit of liability for a
nuclear-related accident is approximately $8.9 billion, effective November 18,
1994. The primary layer of insurance for this liability is $200 million of
coverage provided by the commercial insurance market. The secondary coverage is
approximately $8.7 billion, based on the 110 currently licensed reactors in the
United States. The secondary layer is based on a retrospective premium
assessment of $79.3 million per nuclear accident per licensed reactor, payable
at a rate not exceeding $10 million per year per accident and a maximum of $20
million per year. In addition, the retrospective premium is subject to inflation
based indexing at five year intervals and, if the sum of all public liability
claims and legal costs arising from any nuclear accident exceeds the maximum
amount of financial protection available, then each licensee can be assessed an
additional 5% ($3.775 million) of the maximum retrospective assessment. With
respect to the Seabrook Project, the Company would be obligated to pay its
ownership share of any assessment resulting from a nuclear incident at any
United States nuclear generating facility. The Company estimates its maximum
liability per incident currently would be an
F-14
<PAGE> 79
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
aggregate amount of approximately $9.59 million per accident, with a maximum
annual assessment of about $1.21 million per incident, per year.
In addition to the insurance required by the Price Anderson Act, the NRC
regulations require licensees, including the Seabrook Project, to carry all risk
nuclear property damage insurance in the amount of at least $1.06 billion, which
amount must be dedicated, in the event of an accident at the reactor, to the
stabilization and decontamination of the reactor to prevent significant risk to
the public health and safety.
D. NUCLEAR INSURANCE
Insurance has been purchased by the Seabrook Project from Nuclear Electric
Insurance Limited ("NEIL") to cover the costs of property damage,
decontamination or premature decommissioning resulting from a nuclear incident
and American Nuclear Insurance/Mutual Atomic Energy Liability Underwriters
("ANI") to cover workers' claims. All companies insured with NEIL and ANI are
subject to retroactive assessments, if losses exceed the accumulated funds
available to NEIL and ANI, respectively. The maximum potential assessment
against the Seabrook Project with respect to losses arising during the current
policy years are $26.4 million. The Company's liability for the retrospective
premium adjustment for any policy year ceases six years after the end of that
policy year unless prior demand has been made.
The Company purchased additional business interruption insurance from NEIL
with the current policy in effect from December 22, 1995 until September 15,
1996. NEIL business interruption insurance is designed to pay a weekly indemnity
in the event of a prolonged outage at Seabrook resulting from property damage
occurring from a "sudden fortuitous event, which happens by chance, is
unexpected and unforeseeable." The Company is seeking $520,000 of weekly
indemnity with a limit of liability of $70.3 million. This policy has an annual
premium of $129,000 and for the three month period ending March 31, 1996 the
Company expensed $32,124 related to this policy. Under the terms of this policy,
the Company is subject to a potential retrospective premium adjustment of
$647,000 should NEIL's board of directors deem that additional funds are
necessary to preserve the financial integrity of NEIL. There has never been a
retrospective adjustment since NEIL was founded in 1980. The liability for this
retrospective premium adjustment ceases six years after the end of the policy
unless prior demand has been made.
3. TAXES ON INCOME
<TABLE>
The following is a summary of the (benefit) provision for income taxes for
the year ended December 31, 1995, the period from November 24 to December 31,
1994, and the period from January 1 to November 23, 1994:
<CAPTION>
SUCCESSOR PREDECESSOR
----------------- -----------
JANUARY 1
NOVEMBER 24 TO TO
DECEMBER 31, NOVEMBER
----------------- 23,
1995 1994 1994
------- ----- -----------
(000'S)
<S> <C> <C> <C>
Federal
Current......................................... $(8,065) $(353) $(11,253)
Deferred........................................ 8,011 447 11,253
------- ----- --------
(54) 94 --
State
Current......................................... (1,923) (84) (2,684)
Deferred........................................ 1,923 84 2,684
------- ----- --------
-- -- --
------- ----- --------
Total (benefit) provision.................... $ (54) $ 94 $ --
======= ===== ========
</TABLE>
F-15
<PAGE> 80
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
Accumulated deferred income taxes consisted of the following at December
31, 1995 and 1994:
<CAPTION>
1995 1994
-------- --------
(000'S)
<S> <C> <C>
Assets
Net operating loss carryforwards............................... $ 64,957 $ 54,472
Decommissioning expense........................................ 618 325
Utility plant.................................................. -- 1,009
Unfunded pension expense....................................... 225 102
Accrued outage expense......................................... 43 84
Inventory...................................................... 196 --
Liabilities
Utility plant.................................................. (7,250) --
-------- --------
Accumulated deferred income tax asset............................ 58,789 55,992
Valuation allowance.............................................. (58,789) (56,086)
-------- --------
Accumulated deferred income tax asset (liability) net............ $ -- $ (94)
======== ========
</TABLE>
<TABLE>
The total income tax provision set forth above represents 0% in the year
ended 1995, 34% in the period from November 24 to December 31, 1994 and 0% in
the period from January 1, 1994 to November 23, 1994 of income before such
taxes. The following table reconciles the statutory federal income tax rate to
those percentages:
<CAPTION>
SUCCESSOR PREDECESSOR
------------------ -----------
JANUARY 1
NOVEMBER 24 TO TO
DECEMBER 31, NOVEMBER
------------------ 23,
1995 1994 1994
------- ---- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
(Loss) Income before taxes....................... $(6,113) $276 $131,385
Federal statutory rate........................... 34% 34% 34%
Federal income tax (benefit) expense at statutory
levels......................................... (2,078) 94 44,671
Increase (Decrease) from statutory levels
State tax net of federal tax benefit........... (1,269) (55) (913)
Valuation allowance............................ 2,703 49 858
Income of decommissioning trust................ 305 6 55
Benefit from reorganization.................... -- -- (44,671)
Other.......................................... 285 -- --
------- ---- --------
Effective federal income tax expense............. $ (54) $ 94 $ --
======= ==== ========
</TABLE>
Valuation allowances have been provided against any deferred tax assets,
net due to the limitations on the use of carryforwards, discussed below, and the
uncertainty associated with future taxable income. The valuation allowance of
$56,086,000 as of December 31, 1994, if subsequently recognized will be
allocated directly to paid in capital.
As of December 31, 1995, the Company has an estimated $167 million in net
operating loss carryforwards ("NOL's") that expire between the years 2005 to
2010. However, because the Company has experienced one or more ownership
changes, within the meaning of Section 382 of the Internal Revenue Code of 1986,
as amended (the "Tax Code"), an annual limitation has been imposed on the
ability of the Company to use $136 million of these carryforwards. The Company's
best estimate at this time is that the annual limitation is approximately $5.5
million, and therefore, the ability to use $136 million in NOL's is restricted.
F-16
<PAGE> 81
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
4. COMMON STOCK RESTRICTIONS
The Company has never paid cash dividends on the Common Stock. The Company
currently expects that it will retain all of its future earnings and does not
anticipate paying a dividend in the foreseeable future.
5. CAPITAL EXPENDITURES
The Company's cash construction expenditures, including nuclear fuel, are
estimated to be approximately $2.7 million in 1996 and to aggregate
approximately $21.5 million for the years 1997 through 2000.
6. UNITIL POWER PURCHASE AGREEMENT AND POWER PURCHASE OPTION
The Company has entered into an agreement (the "Power Purchase Agreement"),
dated as of April 1, 1993 with UNITIL Power Corporation ("UNITIL Power"), a
wholly owned subsidiary of UNITIL Corporation ("UNITIL"), which provides for the
Company to sell to UNITIL Power approximately 10MW of power. The Power Purchase
Agreement commenced on May 1, 1993 and runs through October 31, 2010. During the
first year, the price of power under the Power Purchase Agreement was 5.0 cents
per kilowatt hour (kWh). Thereafter, the price is subject to increase in
accordance with a formula which provides for adjustments at less than the actual
rate of inflation. UNITIL Power has the option to extend the Power Purchase
Agreement for an additional twelve years to 2022.
The Power Purchase Agreement is front-end loaded whereby UNITIL Power pays
higher prices, on an inflation adjusted basis, in the early years of the
Agreement and lower prices in later years. The average price per kWh and the
contract formula rate in the contract are fixed over the life of the contract,
so that any excess cash received in the beginning of the contract will be
returned by the end of the contract, provided the contract does not terminate
early. The difference between revenue billed under each rate is recorded in a
"Balance Account" which increases annually to $4.1 million in 1998, then
decreases annually, reaching zero in 2001. Therefore, contract revenue is
recorded under Generally Accepted Accounting Principles and Emerging Issues Task
Force Ruling 91-6 based on the contract rates and no liability for the "Balance
Account" is recognized provided that it is not probable that the contract will
terminate early. Management believes it is not probable that either party will
terminate this contract prior to the end of its initial term. The balance in the
balance account as of March 31, 1996 is approximately $2.0 million.
To secure the obligation of the Company under the Power Purchase Agreement
and to repay to UNITIL Power the amounts in the balance account, if the contract
terminates early, the Power Purchase Agreement grants UNITIL Power a mortgage on
the Company's Seabrook Interest. This mortgage granted to UNITIL Power is junior
only to the existing mortgage on the Seabrook Interest granted pursuant to the
Third Stipulation and any successor first mortgage financing up to a maximum
amount of $80,000,000. The Power Purchase Agreement further provides that UNITIL
Power's second mortgage will rank pari passu with other mortgages that may
hereafter be granted to other purchasers of power from the Company to secure
similar obligations, provided that the maximum amount of indebtedness secured by
the first mortgage on the Seabrook Interest does not exceed $60,000,000, and
provided that the combined total of all second mortgages on the Seabrook
Interest does not exceed the sum of (a) $80,000,000 less the total amount of the
Company's debt then outstanding which is secured by a first mortgage plus (b)
$57,000,000.
In addition to the Power Purchase Agreement, the Company also has entered
into an agreement (the "Power Purchase Option Agreement") with UNITIL Power
under which the Company will grant UNITIL Power the option to purchase during
the period from November 1, 1998 through October 31, 2018, approximately 15MW of
electricity at 6.5 cents per kWh, subject to adjustment in accordance with a
formula. UNITIL Power will be required to exercise its option under the Power
Purchase Option Agreement on or before the earlier of (a) October 31, 1996, and
(b) 30 days after the first date on which the Company is
F-17
<PAGE> 82
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
prepared to commit to sell, for a minimum of 10 years, all or any part of the
last remaining 15 MW of electricity from Seabrook Unit 1 to which the Company is
entitled.
7. PECO SERVICES AGREEMENT AND WARRANT AGREEMENT
The Company and PECO Energy Company ("PECO") entered into a Services
Agreement dated as of November 3, 1995 (the "PECO Services Agreement"), pursuant
to which PECO was appointed as the Company's exclusive agent to market and sell
the Company's uncommitted portion of electricity generated by the Seabrook
Project. Proceeds from the sale of the Company's electricity together with
reservation fees payable by PECO to the Company will be shared between the
Company and PECO in accordance with formulas set forth in the PECO Services
Agreement.
The PECO Services Agreement became effective on December 31, 1995, and has
an initial term of two years. The term will be automatically extended for one
additional year (to December 31, 1998) if PECO exercises the PECO Warrant (as
defined below) to purchase the Warrant Shares (as defined below). At any time
prior to the Warrant Expiration Date (as defined below), the Company is entitled
to terminate the PECO Services Agreement; however, if the PECO Services
Agreement is so terminated, the Company will be required to refund to PECO the
$1,000,000 purchase price for the PECO Warrant plus interest.
At the time that the Company entered into the PECO Services Agreement, the
Company and PECO entered into a Warrant Purchase Agreement, dated November 3,
1995, pursuant to which on February 15, 1996, PECO purchased a warrant (the
"PECO Warrant") from the Company for $1,000,000. The PECO Warrant entitles PECO
to purchase 420,000 shares (the "Warrant Shares") of the Company's Common Stock,
$0.01 par value per share, (the "Common Stock") at an exercise price of the
higher of (1) $9.75 per share, or (2) the highest trading price per share of the
Company's Common Stock prior to the expiration date of the PECO Warrant. The
$1,000,000 purchase price for the PECO Warrant will be credited to the aggregate
exercise price of the PECO Warrant upon exercise. If PECO does not exercise the
PECO Warrant, the purchase price for the PECO Warrant is wholly or partially
refundable only if the Company terminates the PECO Services Agreement for
convenience prior to the Warrant Expiration Date or if PECO exercises certain of
its rights to terminate the PECO Services Agreement. The PECO Warrant expires on
September 30, 1996 (the "Warrant Expiration Date") unless extended because the
Seabrook Project fails to maintain a 60% capacity factor for the first nine
months of 1996, in which case the Warrant Expiration Date will be extended until
the earlier of such time as the Seabrook Project's rolling 12-month capacity
factor equals or exceeds 60% or December 31, 1997.
8. TRANSACTIONS WITH RELATED PARTIES
The Company entered into two other agreements with affiliates of UNITIL.
A Management and Administrative Services Agreement was in effect during
1995 between the Company and UNITIL Resources, Inc. ("UNITIL Resources"), a
wholly owned subsidiary of UNITIL until December 31, 1995. The Management and
Administrative Services Agreement went into effect on November 23, 1994 and
provided for UNITIL Resources to provide a full range of services to the
Company, including management, accounting and bookkeeping, budgeting and
regulatory compliance. Under the Management and Administrative Services
Agreement, the Company was paying UNITIL Resources $225,000 per year for senior
executive management services and was paying for day-to-day operational services
by paying an amount equal to the cost of providing those services plus 25% of
such cost. For the year ended December 31, 1995 and for the period from November
24, 1994 to December 31, 1994, the Company expensed $591,352 and $52,900,
respectively, related to this agreement. The Management and Administrative
Services Agreement had an automatically renewing one year term, except that
either the Company or
F-18
<PAGE> 83
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
UNITIL Resources may terminate without cause on 60 days prior written notice.
The Company gave notice and terminated this agreement on December 31, 1995.
The Company's marketing efforts were provided by UNITIL Resources until
December 31, 1995. Under the terms of this Marketing Agreement with UNITIL
Resources, the Company was paying UNITIL Resources all costs incurred by UNITIL
Resources to obtain new sales contracts plus a commission for sales of power.
The amount of the commission payable varied based on the length of the power
sale contracts and prices obtained. For the year ended December 31, 1995 and for
the period from November 24, 1994 to December 31, 1994, the Company expensed
$333,138 and $11,500, respectively, related to this agreement. This agreement
was also terminated as of December 31, 1995.
The Company leases its headquarters space under an expense sharing
agreement with TILTEC, a company owned by the Company's President. Under the
agreement, TILTEC provides the Company with furnished office space and
administrative support services for a total fee of $7,400 per month. The expense
sharing agreement has a one year term and provides for automatic one year
renewals. Either party may terminate the agreement on 60 days prior written
notice to the other party.
Prior to February 5, 1993, the Predecessor was a wholly-owned subsidiary of
EUA. EUA has interests in other retail and wholesale utility companies, a
service corporation, and other non-utility companies. Transactions between the
Predecessor and EUA affiliated companies prior to the reorganization include
accounting, engineering and other services rendered by EUA Service of
approximately $116,000 for the period from January 1, 1994 to November 23, 1994.
9. STOCK OPTION PLAN
On April 24, 1995, the Board of Directors of the Company established the
1995 Stock Option Plan (the "Plan"),which received shareholder approval at the
Company's annual meeting on April 16, 1996. The purpose of the Plan is to secure
for the Company and its shareholders the benefits arising from capital stock
ownership by employees, officers and directors of, and consultants or advisors
to, the Company who are expected to contribute to the Company's future growth
and success. Options granted pursuant to the Plan may be either incentive stock
options meeting the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet the requirements of Section
422. The maximum number of shares of Common Stock which may be issued and sold
under the Plan is 600,000 shares. The Plan will be administered by the Board of
Directors of the Company and may be modified or amended by the Board in any
respect, subject to shareholder approval in certain instances.
<TABLE>
To date, the following options have been granted under the Plan:
<CAPTION>
NUMBER OF AVERAGE OPTION
SHARES PRICE
--------- --------------
<S> <C> <C>
1995 Activity
Granted................................................... 335,000 8.17
Exercised................................................. -- --
Canceled.................................................. -- --
Outstanding at December 31, 1995............................ 335,000
</TABLE>
10. NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of", effective for fiscal years beginning after
December 15, 1995. SFAS No. 121 establishes accounting standards for the
impairment of long-lived assets and requires that assets which are no longer
probable of recovery be charged to
F-19
<PAGE> 84
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
earnings. The Company adopted SFAS No. 121 on January 1, 1996, and the adoption
did not have a material impact on the Company's financial position or results of
operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," effective for fiscal years beginning after December 15, 1995.
SFAS No. 123 requires that financial statements include certain disclosures
related to stock-based employee compensation arrangements regardless of the
method used to account for them. The Company does not plan to adopt the
accounting under this pronouncement but rather adopt the required audited pro
forma disclosure. Based on arrangements used by the pronouncement, the pro forma
effects on earnings and earnings per share are not expected to be material.
11. PROPERTY TAXES
In December 1995, the Town of Seabrook, New Hampshire (the "Town") issued a
bill for property taxes for the second half of 1995 to "North Atlantic Energy
Corp., et al." The Town informed the Company that it believed the Company's
share of this bill was equal to $1,293,000. The Company initially refused to pay
the bill because the Company believes that the Town's assessment of the
Company's interest in the Seabrook Project is overstated and because the bill
fails to recognize the Company as an independent taxpayer with a separately
assessed and valued parcel of real estate. As of March 31, 1996, the non-payment
of these taxes was reflected in the Company's financial statements as Taxes
Accrued. On April 30, 1996 the Company paid the December 1995 property tax bill
to avoid the Town placing a lien on the Seabrook Project. The Company has filed
a petition with the Town seeking a tax abatement of its 1995 property taxes.
Management is unable to express an opinion as to the likely outcome of this
matter.
12. SUBSEQUENT EVENTS
On January 18, 1996, the Company held a special meeting of stockholders. At
the special meeting, the stockholders approved the following amendments to the
Company's Restated Articles of Incorporation: (1) the number of authorized
shares of common stock was increased from 8,000,000 to 20,000,000 shares; (2)
5,000,000 shares of undesignated Preferred Stock were authorized, the terms and
rights of which may be designated from time to time by the Board of Directors;
(3) a provision requiring the affirmative vote of the holders of at least 75% of
the shares of capital stock issued and outstanding to amend, repeal or adopt any
provision inconsistent with the Articles of Incorporation was deleted; and (4) a
provision eliminating any preemptive rights of the Company's stockholders to
acquire shares issued by the Company was added.
F-20
<PAGE> 85
REPORT OF INDEPENDENT ACCOUNTANTS
To the Director of Great Bay Power Corporation:
We have audited the statements of loss and retained (deficit) earnings and
cash flows for the year ended December 31, 1993 of Great Bay Power Corporation
(formerly EUA Power Corporation; the "Company"). These financial statements are
the responsibility of the Company's management. Our responsibility is to express
our opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of the
Company for the year ended December 31, 1993 in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
April 7, 1994, except as to the
information presented in
Note H, for which the date is
November 23, 1994
F-21
<PAGE> 86
GREAT BAY POWER CORPORATION
(F.K.A. EUA POWER CORPORATION)
<TABLE>
STATEMENT OF LOSS
DECEMBER 31, 1993
(DEBTOR-IN-POSSESSION)(IN THOUSANDS)
<S> <C>
Operating Revenues............................................................... $24,620
-------
Operating Expenses:
Fuel........................................................................ 6,869
Other Operation............................................................. 13,052
Maintenance................................................................. 3,070
Depreciation and Decommissioning............................................ 9,020
Taxes Other Than Income..................................................... 3,878
Income Tax (Credit)......................................................... (630)
Deferred Taxes (Credit)..................................................... (3,421)
-------
Total Operating Expenses............................................... 31,838
-------
Operating (Loss)................................................................. (7,218)
Deferred Income Taxes............................................................ (459)
Other Income -- Net.............................................................. 226
Reorganization Expenses.......................................................... 1,867
-------
Income Before Interest Charges......................................... (9,318)
-------
Interest Charges:
Interest on Long-Term Debt (Contractual Interest Expense for 1993 was
$48,929,510)
Other Interest Expense (Contractual Interest Expense for 1993 was
$144,763).................................................................. 115
-------
Net Interest Charges (Deductions)...................................... 115
-------
Net Loss......................................................................... $(9,433)
=======
</TABLE>
GREAT BAY POWER CORPORATION
(F.K.A. EUA POWER CORPORATION)
<TABLE>
STATEMENT OF RETAINED (DEFICIT) EARNINGS
YEARS ENDED DECEMBER 31, 1993
(DEBTOR-IN-POSSESSION)(IN THOUSANDS)
<S> <C>
Retained (Deficit) Earnings -- Beginning of Year:.............................. $(130,360)
Net Loss....................................................................... (9,433)
---------
Retained (Deficit) Earnings -- End of Year..................................... $(139,793)
=========
<FN>
Note 1 -- Other than the changes to Retained Earnings resulting from the Net
Loss of $9,433,000, there was no change in the Equity of the Company
during the year ended December 31, 1993.
</TABLE>
(The accompanying notes are an integral part of these statements.)
F-22
<PAGE> 87
GREAT BAY POWER CORPORATION
(f.k.a. EUA POWER CORPORATION)
<TABLE>
STATEMENTS OF CASH FLOW
DECEMBER 31, 1993
(DEBTOR-IN-POSSESSION)(IN THOUSANDS)
<S> <C>
Cash Flow From Operating Activities:
Net Loss........................................................................... $(9,433)
-------
Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities:
Depreciation and Amortization................................................. 8,124
Amortization of Nuclear Fuel.................................................. 5,818
Deferred Taxes................................................................ (2,962)
Investment Tax Credit, Net.................................................... (630)
Other -- Net.................................................................. 1,026
Net Changes of Working Capital:
Accounts Receivable........................................................... (97)
Accounts Payable.............................................................. (122)
Accrued Taxes................................................................. 139
Other -- Net.................................................................. (1,401)
-------
Net Cash (Used In) Provided from Operating Activities.............................. 462
-------
Cash Flow From Investing Activities:
Construction Expenditures..................................................... (6,885)
-------
Net Cash (Used In) Provided From Investing Activities.............................. (6,885)
-------
Cash Flow From Financing Activities:
Issuances:
Debtor-in-Possession Financing........................................... 1,744
Settlement Proceeds
-------
Net Cash Provided from Financing Activities........................................ 1,744
-------
Net Increase (Decrease) in Cash.................................................... (4,679)
-------
Cash and Temporary Cash Investments at Beginning of Year........................... 4,817
-------
Cash and Temporary Cash Investments at End of Period............................... $ 138
=======
</TABLE>
(The accompanying notes are an integral part of these statements.)
F-23
<PAGE> 88
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993
NOTE A -- BUSINESS:
The Registrant, Great Bay Power Corporation (formerly known as EUA Power
Corporation), is a New Hampshire corporation, incorporated in 1986, authorized
by the NHPUC to engage in business as a public utility for the purposes of
participating as a joint owner in the Seabrook Project, acquiring its 12.1%
interest in the Seabrook Project and selling its share of the output of Seabrook
Unit 1 for resale. The Company, organized as a wholly-owned subsidiary of EUA,
became fully independent of EUA on February 5, 1993 in connection with the
bankruptcy proceeding described in Note B -- Bankruptcy Proceeding. The Company
became a wholesale generating company when Seabrook Unit 1 commenced commercial
operation on August 19, 1990.
On February 28, 1991, the Company filed a voluntary petition in the
Bankruptcy Court for the District of New Hampshire for protection under Chapter
11 of the Bankruptcy Code. The Bankruptcy Court confirmed the Bondholders
Committees' Fifth Amended Plan of Reorganization on March 5, 1993. After
confirmation, the Company was unable to obtain the $45 million of debt financing
contemplated by the Fifth Amended Plan of Reorganization. In February 1994,
however, the Bondholders Committee obtained a commitment from Omega Advisers,
Inc. ("Omega") or its designees to provide $35 million of equity financing for
the Company (the "Omega Financing"). The Bondholders Committee prepared a First
Modification to Fifth Amended Plan of Reorganization to reflect this change in
financing and submitted a Supplemental Disclosure Statement describing that
First Modification to the Bankruptcy Court for its approval. The Fifth Amended
Plan of Reorganization, as modified by the First Modification is hereinafter
referred to as the "Plan." The Bankruptcy Court approved the Supplemental
Disclosure Statement at a hearing on March 11, 1994. The Plan is scheduled to be
mailed to the Company's creditors for their approval on or before April 7, 1994.
If the Creditors approve the Plan, the Company expects the Bankruptcy Court to
confirm the plan in a hearing currently scheduled for May 13, 1994, although
such confirmation cannot be assured. The Omega Financing and the Plan are
subject to approval by certain regulatory authorities. On February 15, 1994 the
Nuclear Regulatory Commission issued an order approving a transfer of control of
the Company as contemplated by the Omega Financing and extending the deadline
for completion of such transfer to June 30, 1994. There can be no assurance that
other such approvals will be obtained. Moreover, the Omega Financing is not yet
reduced to a definitive agreement. The Plan will not be circulated to creditors
unless and until such a definitive agreement has been signed.
The Omega Financing provides for the Company to sell its common stock
representing a 60% ownership interest in the Company to Omega or its designees
for an aggregate purchase price of $35 million. The 40% balance of the Company's
common stock will be issued 34% to the Company's Bondholders in full payment and
satisfaction of their secured claims and 6% to the Company's unsecured creditors
with claims in excess of $25,000 in full payment and satisfaction of their
claims. These unsecured claims consist primarily of the unsecured deficiency
claims of the Bondholders under the Bonds. (See Note B -- Bankruptcy Proceeding
below for a discussion of the Company's bankruptcy proceeding and the Omega
Financing.)
F-24
<PAGE> 89
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993
<TABLE>
Seabrook Unit 1 is a 1,150 MW nuclear generating plant located in Seabrook,
New Hampshire. The Company acquired its joint ownership interest in the Seabrook
Project for approximately $174,000,000 in November 1986 from five New England
electric utilities in independently negotiated transactions. At that time,
construction of Seabrook Unit 1 was substantially completed. Because Seabrook
Unit 2 had been canceled, the Company assigned no value to it. On March 29,
1991, the Company announced that it had provided an impairment reserve in 1990
against its investment in Seabrook Unit I, which was recorded effective on
December 31, 1990. For financial statement reporting purposes, the Company
valued its investment in Seabrook Unit I, including nuclear fuel but net of the
related Series B and C Notes which it collateralizes as follows:
<CAPTION>
DECEMBER 31, 1990 DECEMBER 31, 1993
----------------- -----------------
(IN THOUSANDS)
<S> <C> <C>
Net Investment................................... $ 340,640 $ 311,932
Related Secured Debt............................. (300,597) (293,723)(1)
--------- ---------
Net Carrying Amount.............................. $ 40,043 $ 18,209
========= =========
<FN>
(1) includes accrued interest of $14,126
</TABLE>
The ultimate value of the investment and the related debt (which is a
liability subject to compromise) cannot be determined until the bankruptcy is
resolved.
The Company has no employees. John R. Stevens, president of EUA serves as
president and sole director of the Company at the request and subject to the
direction of the Bondholders Committee. Mr. Stevens expects to resign both
positions on the Effective Date. Since the Company's organization, EUA Service,
a wholly owned subsidiary of EUA, has provided, or arranged for, various
management and professional services. Pursuant to various Bankruptcy Court
orders, EUA Service continues to provide similar services to the Company. Under
the terms of the Settlement Agreement (as discussed below), EUA Service will
continue to provide, at cost, certain services to the Company at the request of
the Bondholders Committee for a period of not more than two years from the
effective date of the Settlement Agreement. However, such services specifically
exclude the marketing of the Company's entitlement in Seabrook Unit 1 on a
long-term basis. The Company has agreed with UNITIL that an affiliate of UNITIL
will replace EUA Service in providing various services on the Effective Date. In
addition, the Company has entered into a contract with an affiliate of UNITIL
pursuant to which that affiliate is marketing the Company's share of electricity
from Seabrook Unit 1.
NOTE B -- BANKRUPTCY PROCEEDING:
Background:
On February 28, 1991, the Company filed a voluntary petition in the
Bankruptcy Court for the District of New Hampshire for protection under Chapter
11 of the federal Bankruptcy Code and has been conducting its business as a
Debtor and Debtor-in-Possession under the provisions of the Bankruptcy Code. The
Company filed such petition because the cash generated by short-term sales of
electricity from its entitlement in Seabrook Unit 1 would have been insufficient
to pay interest on its outstanding Secured Notes when interest became due on May
15, 1991 and the prospects for signing long-term power sales contracts prior to
that date were minimal. The Company continues its efforts to market its
entitlement to Seabrook Unit 1 under the direction of the Bondholders Committee.
Settlement Agreement:
On November 18, 1992, the Company, the Bondholders Committee and EUA
entered into a Settlement Agreement which resolved certain adversary proceedings
against EUA, brought, or threatened to be brought,
F-25
<PAGE> 90
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993
by the Bondholders Committee including, (i) a claim for recovery of certain
alleged preferential transfers in the aggregate amount of $38.5 million, plus
interest; (ii) a threatened claim for the recovery of $100 million plus treble
damages arising from, among other things, certain alleged breaches of fiduciary
duties by EUA, EUA Service and the officers and directors of the Company; and,
(iii) certain matters arising out of tax sharing agreements between EUA, its
subsidiaries, and the Company. The Settlement Agreement also provided for the
payment of $20 million to the Company by EUA. The Settlement Agreement further
provided for the relinquishment by EUA of its equity interest in the Company and
all claims filed in Bankruptcy Court by EUA and its affiliates against the
Company. These claims related primarily to obligations of the Company guaranteed
and paid by EUA, including $21 million of Solid Waste Disposal Facility Revenue
Bonds, issued by the New Hampshire Industrial Development Authority on behalf of
the Company and other notes payable. The settlement of these claims was recorded
as a deferred credit on the Company's 1992 Balance Sheet, pending the ultimate
outcome of the Bankruptcy Proceeding. The Settlement Agreement became effective
on December 30, 1992 at which time EUA paid $20 million to the Company. The
Company used a substantial portion of the proceeds from the Settlement Agreement
to repay amounts outstanding under the First Stipulation (as described below)
and to pay reorganization expenses and other operating expenses. The Company
redeemed all of its outstanding equity securities which were held by EUA, at no
cost, on February 5, 1993. The redeemed shares have been classified as treasury
stock on the Company's financial statements as of December 31, 1993. As a result
of the redemption, the Company is no longer part of the EUA System.
Under the Settlement Agreement, EUA reaffirmed its guarantee of up to $10
million of the Company's share of future decommissioning costs of Seabrook Unit
1 and any costs of cancellation of Seabrook Unit 1 or Unit 2. EUA had guaranteed
this obligation in 1990 in order to secure the release to the Company of a $10
million fund established by the Company for the same purpose at the time the
Company acquired its Seabrook Interest. Further, under the Settlement Agreement,
all of the officers and directors of the Company (except Mr. Stevens) resigned
and the Company changed its name to Great Bay Power Corporation. EUA now has no
ownership interest in the Company.
Reorganization Plan:
The Bankruptcy Court confirmed the Bondholders Committees Fifth Amended
Plan of Reorganization on March 5, 1993. After confirmation, the Company was
unable to obtain the $45 million of debt financing contemplated by the Fifth
Amended Plan of Reorganization. In February 1994, however, the Bondholders
Committee obtained a commitment from Omega or its designees to provide $35
million of equity financing for the Company. The Bondholders Committee prepared
a First Modification to Fifth Amended Plan of Reorganization to reflect this
change in financing and submitted a Supplemental Disclosure Statement describing
that First Modification to the Bankruptcy Court for its approval. The Bankruptcy
Court approved the Supplemental Disclosure Statement at a hearing on March 11,
1994. The Plan is scheduled to be mailed to the Company's creditors for their
approval on or before April 7, 1994. If the Creditors approve the Plan, the
Company expects the Bankruptcy Court to confirm the Plan in a hearing currently
scheduled for May 13, 1994, although such confirmation cannot be assured. The
Omega Financing and the Plan are subject to approval by certain regulatory
authorities. On February 15, 1994 the Nuclear Regulatory Commission issued an
order approving a transfer of control of the Company as contemplated by the
Omega Financing and extending the deadline for completion of such transfer to
June 30, 1994. There can be no assurance that other such approvals will be
obtained. Moreover, the Omega Financing is not yet reduced to a definitive
agreement. The Plan will not be circulated to creditors unless and until such a
definitive agreement has been signed.
The Omega Financing provides for the Company to sell its common stock
representing a 60% ownership interest in the Company to Omega or its designees
for an aggregate purchase price of $35 million. The 40% balance of the Company's
common stock will be issued 34% to the Company's Bondholders in full payment
F-26
<PAGE> 91
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993
and satisfaction of their secured claims pursuant to the Bonds and 6% to the
Company's unsecured creditors with claims in excess of $25,000 in full payment
and satisfaction of their claims. These unsecured claims consist primarily of
the unsecured deficiency claims of the Bondholders under the Bonds. The holders
of unsecured claims of less than $25,000, other than those unsecured claims
resulting from the ownership of the Secured Notes, will be paid 50% of the
amounts of their claims allowed by the Bankruptcy Court in cash on the Effective
Date. The Plan requires that prior to the Effective Date the Bondholders
Committee obtain the Omega Financing.
Although a bar date for all claims has been entered and passed, claims
arising from the rejection of contracts or claims which the Bankruptcy Court
permits to be filed notwithstanding the bar date may dilute the percentage of
the unsecured claims held by the Secured Bondholders. All of the previously
issued and outstanding equity securities of the Company have been redeemed by
the Company. The CICs issued in connection with the Series B Notes or otherwise
will be extinguished on the Effective Date. After the Effective Date, the equity
of the Company will be represented by a single class of common stock. The
Company will use good faith efforts to list its shares of common stock so that
they will be tradeable on the American Stock Exchange or the NASDAQ National
Market System.
The Bondholders Committee has appointed or will appoint agents to manage
the Company's business and to market the Company's share of Seabrook
electricity. During the period between the Confirmation of the Plan and the
Effective Date, those agents are to report to the Bondholders Committee and, to
the extent actions are to be taken outside of the ordinary course of business,
such actions shall be subject to the approval of the Bankruptcy Court and
regulatory bodies with jurisdiction under applicable law. John R. Stevens,
president of EUA, expects to resign as president and director of the Company on
the Effective Date. The Bondholders Committee has disclosed the names of two
individuals proposed to serve on the Board of Directors (the New Board) of the
Company after the Effective Date. The proposed two members of the New Board are
John A. Tillinghast and Walter H. Goodenough. The Bondholders Committee is also
considering other candidates to serve as members of the New Board. The persons
who will serve on the New Board will be finally determined before the Effective
Date. The New Board will take office upon the Effective Date. The New Board will
serve until its members resign or are replaced in accordance with New Hampshire
corporate law and the requirements of the Company's charter and by-laws.
The effectiveness of the Plan is conditioned upon obtaining plan of
reorganization financing and approvals from various regulatory agencies
including the NRC. The Company has obtained the approval of the NRC, provided
the Company obtains plan of reorganization financing. The Company cannot predict
whether it will be able to obtain plan of reorganization financing or whether
the plan, or any other plan if filled, will be approved by the various
regulatory agencies having jurisdiction.
DIP Financing:
The Company is required under the JOA to pay its share of Seabrook Unit 1
and Seabrook Unit 2 expenses including, without limitation, operations and
maintenance expenses, construction and nuclear fuel expenditures and
decommissioning costs, regardless of Seabrook Unit 1's operations. Under certain
circumstances, a failure by the Company to make its monthly payments under the
JOA could adversely affect its entitlement in Unit 1. At current market prices,
the cash generated by such electricity sales continues to be less than the
Company's on-going cash requirements.
On August 29, 1991, the Bankruptcy Court approved a Stipulation and Consent
Order (the First Stipulation) with respect to DIP Financing to be provided by
certain joint owners of Seabrook for the benefit of the Company. The First
Stipulation was entered into by the Company and CL&P and UI (the Participating
Joint Owners), two of the other eleven joint owners of the Seabrook Project, as
well as the Bondholders Committee. The First Stipulation was also approved by
the NHPUC and the SEC under the 1935 Act.
F-27
<PAGE> 92
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993
On July 21, 1992, the Bankruptcy Court issued a procedural order permitting
an extension of the First Stipulation. For the period after September 30, 1992
until March 5, 1993, the procedural order permitted continued
debtor-in-possession financing on a month-to-month basis at the sole discretion
of the Participating Joint Owners terminable on 30 days notice. The Bankruptcy
Court issued a second procedural order on September 8, 1992 increasing to $22
million from $15 million the amount of advances outstanding at any one time
permitted under the First Stipulation. The Participating Joint Owners continued
to advance funds under the First Stipulation, as amended, until the amounts
advanced thereunder were repaid with the proceeds of the Company's Settlement
Agreement with EUA. The First Stipulation expired on March 5, 1993.
A second stipulation was entered into by the Company and the Participating
Joint Owners and was approved by the Bankruptcy Court and various regulatory
authorities. However, that stipulation did not become effective, and on March 5,
1993, the Company and the Participating Joint Owners entered into a third
stipulation (the Third Stipulation) which was approved by the Bankruptcy Court.
The Third Stipulation provides that the Participating Joint Owners shall
provide up to a maximum of $20 million in advances to the Company to enable the
Company to pay its pro rata share of the Seabrook Project's operating expenses,
expenses of the Company in connection with its Chapter 11 proceedings and
certain other costs of operation of the Company. Pursuant to the Third
Stipulation, the advances made by the Participating Joint Owners bear an
interest rate equal to the prime rate of The First National Bank of Boston plus
7% per annum. The Third Stipulation provides the Participating Joint Owners with
a priority lien on all the Company's assets, which lien has priority over the
Bondholders' mortgage. The Third Stipulation further provides that in the event
of a default thereunder, the Participating Joint Owners are entitled to purchase
the Company's Seabrook Interest for 75% of the lesser of fair market value or
book value and to apply all or part of the amounts owing under the Third
Stipulation against the purchase price. The Third Stipulation terminates on the
earliest to occur of (a) July 1, 1994, (b) the Effective Date or the closing of
a sale of all or substantially all of the Company's assets or business, and (c)
an event of default under the terms of the Third Stipulation. The Company is in
default of the Third Stipulation for, among other reasons, failure to obtain
financing for the Plan by the date required in the Third Stipulation. Although
the Company has been in default since November 1, 1993, the Participating Joint
Owners have continued to provide financing pursuant to the Third Stipulation.
There is, however, no assurance that they will continue to do so. As of March
25, 1994, outstanding advances under the Third Stipulation were approximately
$2.2 million in the aggregate.
Other Matters:
The Company's reorganization expenses are subject to approval by the
Bankruptcy Court. For the period March 1, 1991 through August 31, 1993,
professionals have submitted fees and expenses in the amount of approximately
$5.9 million to the Bankruptcy Court for its approval, and the Bankruptcy Court
has provisionally authorized, subject to its review at the conclusion of the
Chapter 11 proceeding, payments of approximately $4.5 million. The Company has
paid amounts provisionally authorized by the Bankruptcy Court, and those are
reflected on the Company's Statement of Loss during the period in which they
have been paid. Other submitted, but not provisionally authorized, expenses have
not been recorded.
Since August 31, 1993, no hearings on approval of reorganization expenses
have been held and no requests for allowance for such expenses have been made.
According to the Supplemental Disclosure Statement, the Bondholders Committee
has budgeted reorganization expenses payable on closing of the Omega Financing
and subject to Bankruptcy Court approval of $4.5 million.
Under Chapter 11, certain claims against the Company in existence prior to
the filing of the petition for relief under the Bankruptcy Code are stayed while
the Company continues business operations as debtor-in-possession. These claims
are reflected in the Company's Balance Sheet as of December 31, 1993 and
December 31, 1992 as "Liabilities Subject to Compromise." Additional claims
(Liabilities Subject to
F-28
<PAGE> 93
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993
Compromise) may arise subsequent to the filing date resulting from rejection of
executory contracts and from the determination by the Bankruptcy Court (or
agreed to by parties in interest) of allowed contingent and disputed claims.
Enforcement of claims secured by certain of the Company's assets (secured
claims) also are stayed, although the holders of such claims have the right to
move the court for relief from the stay. Secured claims, principally the Secured
Notes, are secured by an interest in certain Seabrook Project assets of the
Company, principally realty and personalty.
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
SYSTEM OF ACCOUNTS: The accounting policies and practices of the Company
are subject to regulation by FERC with respect to its rates and accounting. The
accounts of the Company are maintained in accordance with the uniform system of
accounts prescribed by FERC.
UTILITY PLANT AND DEPRECIATION: Utility plant is stated at original cost.
The cost of additions to utility plant includes contracted work, direct labor
and material, allocated overhead, allowance for funds used during construction
and indirect charges for engineering and supervision. For financial statement
purposes, depreciation is computed on the straight-line method based on the
estimated useful life of Seabrook Unit 1. Since the commencement of commercial
operation, the provision for depreciation for the Company has been calculated at
2.5%.
OPERATING REVENUES: Revenues are based on billing rates authorized by FERC
and are recognized when billed.
INCOME TAXES: The general policy of the Company with respect to accounting
for federal income taxes is to reflect in income the estimated amount of taxes
currently payable and to provide for deferred taxes on certain items subject to
temporary differences to the extent permitted by the various regulatory
commissions. It is the policy of the Company to defer the investment tax credits
and to amortize these credits over the productive lives of the related assets.
TRANSACTIONS WITH AFFILIATES: Prior to February 5, 1993, the Company was a
wholly-owned subsidiary of EUA. EUA has interests in other retail and wholesale
utility companies, a service corporation, and other non-utility companies.
Transactions between the Company and EUA affiliated companies include the
following: accounting, engineering and other services rendered by EUA Service of
approximately $209,000 in 1993. Transactions with other affiliated companies are
subject to review by applicable regulatory commissions (See Note D -- Income
Taxes).
CASH AND TEMPORARY CASH INVESTMENTS: The Company considers all highly
liquid investments with a maturity of three months or less when acquired to be
cash equivalents.
F-29
<PAGE> 94
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993
NOTE D -- INCOME TAXES:
<TABLE>
Components of income tax expense for the year 1993 is as follows:
<CAPTION>
1993
---------------
(IN THOUSANDS)
<S> <C>
Federal:
Current.......................................... $
Deferred......................................... (3,421)
Investment Tax Credit, Net....................... (630)
-------
Total Charge to Operations............................ (4,051)
-------
Charged to Other Income:
Current..........................................
Deferred......................................... 459
-------
Total charged to Other Income......................... 459
-------
Total................................................. $(3,592)
=======
</TABLE>
<TABLE>
Total income tax expense (credit) was different from the amounts computed
by applying federal income tax at statutory rates to book income subject to tax
for the following reasons:
<CAPTION>
1993
---------------
<S> <C>
(IN THOUSANDS)
Federal Income Tax (FIT) Computed at Statutory
Rates............................................... $(4,559)
Increases (Decreases) in Tax from:
Depreciation of Equity AFUDC..................... 548
Amortization of ITC.............................. (630)
FIT Net Operating Loss Carryforward.............. 926
Nuclear Decommissioning Costs.................... 313
Other............................................ (190)
-------
Total Income Tax Expense (Credit)..................... $(3,592)
=======
</TABLE>
<TABLE>
The provision for deferred taxes resulting from temporary differences is
comprised of the following:
<CAPTION>
1993
---------------
(IN THOUSANDS)
<S> <C>
Debt Component of AFUDC............................... $(1,458)
Capitalized Overheads................................. (59)
Excess Tax Depreciation............................... 7,181
Net Operating Loss Carryforward....................... (8,724)
Provision for Estimated Loss on Seabrook Investment... 459
Other................................................. (361)
-------
Total............................................ $(2,962)
=======
</TABLE>
The Company adopted FAS96 in 1990 which requires the use of the liability
method to record deferred income taxes for temporary differences that are
reported in different years for financial reporting and tax purposes. Under the
liability method adopted by FAS96, deferred tax liabilities or assets are
computed using the tax rates that will be in effect when the temporary
differences reverse. Generally, for regulated companies, the changes in tax
rates applied to accumulated deferred income taxes may not be immediately
recognized in operating results because of rate making treatment and provisions
in the Tax Reform Act of 1986.
The Company has filed consolidated income tax returns together with EUA and
other EUA affiliates. As a result of such consolidated filings, certain federal
income tax benefits available to the Company have reduced the federal income tax
obligations of EUA and such other EUA affiliates. Under a tax allocation
F-30
<PAGE> 95
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993
agreement between EUA and its subsidiaries, EUA and its subsidiaries compensate
each other for the use of the tax benefits.
As a result of the redemption of the Company's outstanding common stock,
the Company was deconsolidated from the EUA tax group effective February 5,
1993. Under the terms of the Settlement Agreement, EUA is entitled to utilize
the Company's tax credits to reduce EUA's 1993 consolidated tax liability
without compensation (see Note B - Bankruptcy Proceeding). The Company will be
included in EUA's consolidated tax return for the years 1992 and 1993. However,
the Company's net operating losses of approximately $25 million arising from its
post February 5, 1993 activities will not be included in the EUA consolidated
tax return for 1993, and have been treated as available to the Company.
To the extent that the Company's carryforwards of net operating losses,
investment tax credits, alternative minimum tax credits, and deductions
attributable to built in losses are available after the Company is no longer
part of the consolidated return, the Company's ability to utilize these
carryforwards will be significantly limited due to the impact of provisions of
the tax law relating to the treatment of debt forgiveness in bankruptcy and the
effect of changes in the ownership of the Company. The precise impact of these
limitations cannot be determined until the Bankruptcy proceeding has concluded.
In 1992, the Company reversed all accumulated tax benefits relating to
carryforwards of net operating losses and alternative minimum tax credits to
reflect the anticipated imposition of the limitations and the impact of the
Settlement Agreement.
NOTE E -- CAPITAL STOCK:
COMMON STOCK: On December 31, 1993, the Company had issued and
outstanding, no shares of its Common Stock, par value $.01.
PREFERRED STOCK: At December 31, 1993, the Company had outstanding no
shares of preferred stock.
Pursuant to the terms of the Settlement Agreements, on February 5, 1993 the
Company redeemed all of its outstanding common and preferred stock, which were
held by EUA, at no cost to the Company (See Note B -- Bankruptcy Proceeding).
The redemption has been classified as treasury stock on the Company's financial
statements as of December 31, 1993.
NOTE F -- LONG-TERM DEBT:
As a result of the Bankruptcy filing, the Company is in default under the
indenture pursuant to which the Secured Notes were issued. The current face
amount of principal, and accrued interest to February 28, 1991, on the Company's
Secured Notes is $279,597,200 and $14,126,174 respectively. The Secured Notes
are collateralized in part principally with a security interest in the Company's
12.1% ownership interest in the realty and personalty of the Seabrook Project.
As a result of the bankruptcy filing, the Company is in default under the
indenture pursuant to which the Secured Notes were issued and ceased accruing
interest expense as of February 28, 1991.
The contractual interest expense on the Secured Notes in 1993 was
approximately $49 million. In 1993, no interest was paid. The Company also had
outstanding 180,000 CICs evidencing the right to receive additional payments
contingent upon and measured by the Company's income in certain years following
the commercial operation of Seabrook Unit 1. Under the Plan, the CICs have been
extinguished. (See Note B -- Bankruptcy Proceeding)
The Secured Notes and CICs are solely the obligation of the Company and are
not guaranteed by EUA or any other person.
The Series B Secured Notes, which have a stated maturity date of May 15,
1993, are redeemable at 100.125% of principal amount. The Series C Secured Notes
have a stated maturity date of November 15, 1992.
F-31
<PAGE> 96
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993
NOTE G -- COMMITMENTS AND CONTINGENCIES:
Nuclear Power Issues
Like other nuclear generating facilities, the Seabrook Project is subject
to extensive regulation by the NRC. The NRC is empowered to authorize the
siting, construction and operation of nuclear reactors after consideration of
public health, safety, environmental and anti-trust matters. The NRC has
promulgated numerous requirements affecting safety systems, fire protection,
emergency response planning and notification systems, and other aspects of
nuclear plant construction, equipment and operation. The Company has been, and
may be, affected to the extent of its proportionate share by the cost of any
such modifications to Seabrook Unit 1.
Nuclear units in the United States have been subject to widespread
criticism and opposition. Some nuclear projects have been canceled following
substantial construction delays and cost overruns as the result of licensing
problems, unanticipated construction defects and other difficulties. Various
groups have by litigation, legislation and participation in administrative
proceedings sought to prohibit the completion and operation of nuclear units and
the disposal of nuclear waste. In the event of shutdown of any unit, NRC
regulations require that it be completely decontaminated of any residual
radioactivity. The cost of such decommissioning, depending on the circumstances,
could substantially exceed the owners' investment at the time of cancellation.
Public controversy concerning nuclear power could adversely affect the
operating license of Seabrook Unit 1. While the Company cannot predict the
ultimate effect of such controversy, it is possible that it could result in a
premature shutdown of the unit.
The Price-Anderson Act provides, among other things, that the liability for
damages resulting from a nuclear incident would not exceed an amount which at
present is about $9.2 billion. Under the Price-Anderson Act, prior to operation
of a nuclear reactor, the licensee is required to insure against this liability
by purchasing the maximum amount of insurance available from private sources
(currently $200 million) and to maintain the insurance available under a
mandatory industry-wide retrospective rating program. Should an individual
licensee's liability for an incident exceed $200 million, the difference between
such liability and the overall maximum liability, currently about $9.2 billion,
will be made up by the retrospective rating program. Under such a program, each
owner of an operating nuclear facility may be assessed a retrospective premium
of up to a limit of $79.3 million (which shall be adjusted for inflation at
least every five years) for each reactor owned in the event of any one nuclear
incident occurring at any reactor in the United States, with provision for
payment of such assessment to be made over time as necessary to limit the
payment in any one year to no more than $10 million per reactor owned. The
Company would be obligated to pay its proportionate share of any such
assessment.
Joint owners of nuclear projects are also subject to the risk that one of
their number may be unable or unwilling to finance its share of the project's
costs, thus jeopardizing continuation of the project. On May 6, 1991, New
Hampshire Electric Cooperative, Inc., a 2.2% owner of the Seabrook Project,
announced that it had filed for Chapter 11 bankruptcy protection. A
reorganization plan, filed by the New Hampshire Electric Cooperative with the
Bankruptcy Court in September, 1991 and revised in January, 1992 was approved by
the Bankruptcy Court in March 1992 and approved by the NHPUC on October 5, 1992.
All appeals of the NHPUC order approving the reorganization have been resolved
in NHEC's favor and the effective date of the plan occurred on December 1, 1993.
NUCLEAR FUEL AND NUCLEAR PLANT DECOMMISSIONING:
The Seabrook Project joint owners have made, or expect to make, various
arrangements for the acquisition of uranium concentrate, the conversion,
enrichment, fabrication and utilization of nuclear fuel and the disposition of
that fuel after use. The owners and lead participants of United States nuclear
units have
F-32
<PAGE> 97
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993
entered into contracts with the DOE for disposal of spent nuclear fuel in
accordance with the NWPA. The NWPA requires (subject to various contingencies)
that the federal government design, license, construct and operate a permanent
repository for high level radioactive wastes and spent nuclear fuel and
establish prescribed fees for the disposal of such wastes and fuel. The NWPA
specifies that the DOE provide for the disposal of such wastes and spent nuclear
fuel starting in 1998. Objections on environmental and other grounds have been
asserted against proposals for storage as well as disposal of spent fuel. The
DOE anticipates that a permanent disposal site for spent fuel will be ready to
accept fuel for storage on or before 2010. However, the NRC, which must license
the site, stated only that a permanent repository will become available by the
year 2025. At the Seabrook Project there is on-site storage capacity which, with
minimal capital expenditures, should be sufficient for twenty years or until the
year 2010. No near-term capital expenditures are anticipated to deal with any
increase in storage requirements after 2010.
The estimated cost to decommission Seabrook Unit 1, based on a study by the
New Hampshire Yankee Division of the Public Service Company of New Hampshire, is
approximately $351 million in 1993 dollars: The Company's share of that amount
is approximately $42.5 million, or 12.1%. In 1993, the Company paid
approximately $895,000 in decommissioning expenses.
The agreements of purchase and sale under which the Company purchased its
Seabrook interest required the Company to establish a fund of $10 million to
secure payment of part of its share of decommissioning costs of Seabrook Unit 1
and any costs of cancellation of Seabrook Unit 1 or Unit 2. In May 1990, EUA
guaranteed this obligation and the entire fund was released to EUA Power. Under
the Settlement Agreement, EUA reaffirmed this guaranty.
Seabrook Unit 2:
The Company also has a 12.1% ownership interest in Seabrook Unit 2 in which
it has assigned no value. On November 6, 1986, the joint owners of the Seabrook
Project, recognizing that Seabrook Unit 2 had been canceled, voted to dispose of
the Unit. Certain assets of Seabrook Unit 2 have been and are being sold from
time to time to third parties. Plans regarding disposition of Seabrook Unit 2
are now under consideration, but have not been finalized and approved. The
Company is unable, therefore, to estimate the costs for which it would be
responsible in connection with the disposition of Seabrook Unit 2. Monthly
charges are required to be paid by the Company with respect to Seabrook Unit 2
in order to preserve and protect its components and various warranties.
CONSTRUCTION EXPENDITURES
Great Bay Power's cash construction expenditures, including nuclear fuel,
are estimated to be approximately $4.3 million in 1994 and aggregate
approximately $23.4 million for the years 1995 through 1998.
OTHER PROCEEDINGS
In June 1991, the State of New Hampshire imposed a Nuclear Station Property
Tax applicable only to the Seabrook Project. The Company paid its share of the
tax, aggregating $4.2 million through December 31, 1992. In October 1991 the
Attorneys General of Connecticut, Massachusetts and Rhode Island petitioned the
United States Supreme Court in an original jurisdiction case for a determination
of the legality of the tax, and in January 1992 the Supreme Court agreed to take
the case. The parties to the litigation and other Joint Owners of Seabrook
entered into a Settlement Agreement on April 13, 1993. In general, the terms of
the Settlement Agreement are expected to result in a significant reduction in
annual state taxes paid by the Company. In addition, under the terms of the
Settlement Agreement, certain of the prior payments of the tax by the Company
will be permitted to be credited against future taxes due. The Bankruptcy Court
has approved the Settlement Agreement with respect to the Company.
F-33
<PAGE> 98
GREAT BAY POWER CORPORATION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1993
NOTE H -- SUBSEQUENT EVENT
On November 23, 1994, the Company emerged from Bankruptcy and adopted a new
basis of accounting as required by Statement of Position 90-7 "Financial
Reporting by Entities in Reorganization Under the Bankruptcy Code" issued by the
American Institute of Certified Public Accountants. Accordingly, the information
contained in these financial statements is not comparable to the financial
statements for periods beginning on or after November 23, 1994. The accompanying
financial statements are not indicative of the financial position or the
expected results of operations for periods beginning on or after November 23,
1994.
F-34
<PAGE> 99
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
BayCorp Holdings, Ltd.:
We have audited the accompanying balance sheet of BayCorp Holdings, Ltd. as
of March 31, 1996. This financial statement is the responsibility of BayCorp
Holdings, Ltd. management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. 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 audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
respects, the financial position of BayCorp Holdings, Ltd. as of March 31, 1996,
in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 8, 1996
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<PAGE> 100
BAYCORP HOLDINGS, LTD.
<TABLE>
BALANCE SHEET AS OF MARCH 31, 1996
<S> <C>
ASSETS
Cash................................................................................ $1,000
------
Total Assets.............................................................. $1,000
======
STOCKHOLDERS' EQUITY
Stockholders' Equity:
Common Stock, $.01 par value--
Authorized--20,000,000 shares
Issued and outstanding--1,000 shares......................................... $ 10
------
Preferred stock, $.01 par value--
Authorized--5,000,000 shares
Issued and outstanding--none
Additional paid-in capital..................................................... 990
------
Total stockholders' equity................................................ $1,000
======
</TABLE>
The accompanying notes are an integral part of this balance sheet.
NOTES TO BALANCE SHEET
MARCH 31, 1996
(1) ORGANIZATION
BayCorp Holdings, Ltd., formerly Great Bay Holdings Corp. ("Holding
Company"), is a newly formed Delaware corporation and currently is a wholly
owned subsidiary of Great Bay Power Corporation ("Great Bay"). Holding Company
is not engaged in any business activities other than in connection with a
proposed merger with Great Bay. If the merger is consummated, Holding Company
will be the sole shareholder of Great Bay.
The purpose of the merger is to restructure Great Bay as a subsidiary of
Holding Company in order to permit Holding Company to engage in business
activities, through subsidiaries other than Great Bay, which Great Bay is
currently prohibited from engaging in became of its status as an Exempt
Wholesale Generator ("EWG") under the Public Utility Holding Company Act of
1935, as amended (the "PUHCA"). As an EWG, Great Bay is limited to the
generation and sale of electricity from the Seabrook Project in the wholesale
electricity market and activities incidental thereto. Holding Company will be
able to engage in other business activities which may be related or unrelated to
those of Great Bay.
The approval of the Merger Agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of Great Bay common stock.
(2) ACCOUNTING POLICIES
The Holding Company expects to adopt the accounting policies of Great Bay
if and when the merger is approved.
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ANNEX I
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Merger Agreement") entered into as of
May 28, 1996 by and among Great Bay Power Corporation, a New Hampshire
corporation ("Great Bay" or the "Surviving Corporation"), BayCorp Holdings,
Ltd., a Delaware corporation and currently a wholly-owned subsidiary of Great
Bay ("Holding Company"), and GB Transitory Subsidiary, Inc., a New Hampshire
corporation and a wholly-owned subsidiary of Holding Company ("Transitory Sub").
Holding Company, Transitory Sub and Great Bay are referred to collectively
herein as the "Parties."
In consideration of the undertakings herein contained and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties agree as follows:
ARTICLE I
1.1 The Merger. At the Effective Date of the Merger (as hereinafter
defined), Transitory Sub shall be merged with and into Great Bay (with such
merger referred to herein as the "Merger") pursuant to Section 293-A:11.01 of
the New Hampshire Business Corporation Act ("NHBCA"). From and after the
Effective Date, the separate corporate existence of Transitory Sub shall cease
and Great Bay shall continue as the surviving corporation in the Merger.
1.2 Effective Date. The "Effective Date" shall be the time at which Great
Bay and Transitory Sub file the articles of merger or other appropriate
documents prepared and executed in accordance with the relevant provisions of
the NHBCA (the "Articles of Merger") with the Secretary of State of the State of
New Hampshire. The Merger shall have the effects set forth in Section
293-A:11.06 of the NHBCA.
1.3 Closing. The closing of the Merger (the "Closing") will take place at
10:00 a.m., Eastern Time, on a date to be specified by Great Bay (the "Closing
Date"), at the offices of Hale and Dorr, 60 State Street, Boston, Massachusetts,
unless another date or place is agreed upon by the Parties.
ARTICLE II
2.1 Conversion of Securities. At the Effective Date, by virtue of the
Merger and without any action on the part of any Party or the holder of any of
the following securities:
(a) Each share of Great Bay Common Stock issued and outstanding
immediately prior to the Effective Date, other than Dissenting Shares as
hereinafter defined, shall be converted into the right to receive one share
of common stock, $.01 par value per share, of Holding Company ("Holding
Company Common Stock").
(b) Each share of Great Bay Common Stock held in Great Bay's treasury
immediately prior to the Effective Date shall be cancelled and retired
without payment of any consideration therefor.
(c) Each share of common stock, $.01 par value per share, of
Transitory Sub issued and outstanding immediately prior to the Effective
Date shall be converted into one share of Great Bay Common Stock.
(d) Each share of common stock, $.01 par value per share, of Holding
Company issued and outstanding immediately prior to the Effective Date
shall cease to exist and all certificates representing such shares shall be
cancelled.
2.2 Options and Warrants.
(a) At the Effective Date, each holder of options to purchase shares
of Common Stock of Great Bay issued by Great Bay pursuant to its stock
option plans ("Options"), whether vested or unvested, shall be granted
substitute options to purchase shares of Holding Company Common Stock
pursuant to Holding Company's 1996 Stock Option Plan ("Substitute
Options"). Each Substitute Option shall be exercisable
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for the purchase of the number of shares of Holding Company Common Stock as
is equal to the number of shares of Great Bay Common Stock subject to the
unexercised portion of the Option in respect of which it is substituted.
The exercise price per share of each Substitute Option shall be equal to
the exercise price of the Option in respect of which it is substituted. The
term, exercisability, vesting schedule, status as an "incentive stock
option" under Section 422 of the Internal Revenue Code of 1986 (as amended,
the "Code"), if applicable, and all of the other terms of the Substitute
Option shall be identical to the those of the Option in respect of which it
is substituted.
(b) As soon as practicable after the Effective Date, Holding Company
or the Surviving Corporation shall deliver to the holders of Options
appropriate agreements evidencing Substitute Options as provided in this
Section 2.2.
(c) Great Bay's Common Stock Purchase Warrant dated as of February 14,
1996 held by PECO Energy Company exercisable for the purchase of 420,000
shares of Great Bay Common Stock shall be assumed by Holding Company and
shall be converted into a warrant to purchase the number of shares of
Holding Company Common Stock determined in accordance with the terms of
such warrant.
2.3 No Further Ownership Rights in Great Bay Common Stock. All shares of
Holding Company Common Stock issued upon the surrender for exchange of shares of
Great Bay Common Stock in accordance with the terms hereof shall be deemed to
have been issued in full satisfaction of all rights pertaining to such shares of
Great Bay Common Stock, subject, however, to Holding Company's obligation to pay
any dividends or make any other distributions with a record date prior to the
Effective Date which may have been declared or made by Great Bay on or prior to
such date hereof and which remain unpaid at the Effective Date, and there shall
be no further registration of transfers on the stock transfer books of Holding
Company of the shares of Great Bay Common Stock which were outstanding
immediately prior to the Effective Date. If, after the Effective Date,
Certificates (as defined in Section 2.5 below) are presented to Holding Company
for any reason, they shall be cancelled and exchanged as provided in Section
2.5.
2.4 Dissenting Shares. For purposes of this Merger Agreement, "Dissenting
Shares" means shares of Great Bay Common Stock held as of the Effective Date by
a shareholder of Great Bay who has not voted such shares in favor of the
approval of this Merger Agreement, has held such shares of record on the record
date after making a written demand for appraisal, continuously holds such shares
through the Effective Date and otherwise properly exercises his or her
dissenters' rights pursuant to Sections 293-A:13.01 - 293-A:13.31 of the NHBCA.
Dissenting Shares shall not be converted into or represent the right to receive
shares of Holding Company. Holders of Dissenting Shares shall only have such
rights as provided under Sections 293-A:13.01 - 293-A:13.31 of the NHBCA.
2.5 Exchange Procedures. As soon as reasonably practicable after the
Effective Date, Holding Company shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Date
represented outstanding shares of Great Bay Common Stock (each a "Certificate"
and collectively, the "Certificates") whose shares were converted pursuant to
this Merger Agreement into the right to receive shares of Holding Company Common
Stock: (i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to Holding Company and shall be in such form and
have such other provisions as Holding Company may reasonably specify); and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Holding Company Common Stock. Upon
surrender of a Certificate for cancellation to Holding Company or to such other
agent or agents as may be appointed by Holding Company, together with such
letter of transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate representing that number
of shares of Holding Company Common Stock which such holder has the right to
receive pursuant to the provisions of this Merger Agreement, and the Certificate
so surrendered shall immediately be cancelled.
2.6 Succession. At the Effective Date, Transitory Sub shall be merged
into Great Bay and Great Bay shall succeed to all of the rights, privileges,
debts, liabilities, powers and property of Great Bay and Transitory Sub in the
manner of and as more fully set forth in Section 293-A:11.06 of the NHBCA.
Without limiting the foregoing, at the Effective Date, all property, rights,
privileges, franchises, patents, trademarks, licenses,
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registrations, and other assets of every kind and description of Transitory Sub
shall be transferred to, vested in and devolved upon Great Bay without further
act or deed and all property, rights, and every other interest of Great Bay and
Transitory Sub shall be as effectively the property of Great Bay as they were of
Great Bay and Transitory Sub, respectively. All rights of creditors of
Transitory Sub and all liens upon any property of Transitory Sub shall be
preserved unimpaired, and all debts, liabilities and duties of Transitory Sub
shall attach to Great Bay and may be enforced against it to the same extent as
if said debts, liabilities and duties had been incurred or contracted by it.
ARTICLE III
3.1 Articles of Incorporation. The Articles of Incorporation of Great Bay
as the Surviving Corporation shall be the same as the Articles of Incorporation
of Great Bay immediately prior to the Effective Date.
3.2 By-Laws. The By-Laws of Great Bay as the Surviving Corporation shall
be the same as the By-Laws of Great Bay immediately prior to the Effective Date.
3.3 Directors and Officers. The directors of Great Bay shall be the
directors of the Surviving Corporation as of the Effective Date. The officers of
Great Bay shall be the officers of the Surviving Corporation after the Effective
Date, retaining their respective positions.
ARTICLE IV
The respective obligations of each Party to this Merger Agreement to effect
the Merger shall be subject to the satisfaction prior to the Closing Date of the
following conditions:
4.1 Great Bay Shareholder Approval. This Merger Agreement shall have been
approved by the vote of the holders of a majority of the outstanding shares of
Great Bay Common Stock.
4.2 Approvals. Other than the filing provided for by Section 1.2, all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any court, administrative
agency or commission, regulatory entity or other governmental authority or
instrumentality ("Governmental Entity") the failure of which to obtain would be
reasonably likely to have a material adverse effect on the business, assets,
financial condition or results of operations of Great Bay, Transitory Sub and
Holding Company taken as a whole shall have been filed, occurred or been
obtained.
4.3 Registration Statement. The Registration Statement on Form S-4
pursuant to which shares of Holding Company Common Stock issued in the Merger
will be registered with the Securities and Exchange Commission shall have become
effective under the Securities Act of 1933, as amended, and shall not be the
subject of a stop order or proceedings seeking a stop order.
4.4 No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint or prohibition
preventing the consummation of the Merger or limiting or restricting Holding
Company's or Great Bay's conduct or operation of the business of Holding Company
or Great Bay after the Merger shall have been issued, nor shall any proceeding
brought by a domestic administrative agency or commission or other domestic
Governmental Entity, seeking any of the foregoing be pending; nor shall there be
any action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger which makes the consummation of the
Merger illegal.
4.5 Nasdaq. The shares of Holding Company Common Stock to be issued in
the Merger shall have been approved for quotation on the Nasdaq National Market.
4.6 Dissenting Shares. Unless waived by Great Bay, the number of
Dissenting Shares shall not exceed 20,000 shares of Great Bay Common Stock as of
the Effective Date.
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ARTICLE V
5.1 Amendment and Termination. This Merger Agreement may be amended by
the Board of Directors of Great Bay at any time prior to the Effective Date,
provided that an amendment made subsequent to the approval of this Merger
Agreement by the shareholders of Great Bay shall not (1) alter or change the
amount or kind of shares, securities, cash, property and/or rights to be
received in exchange for or on conversion of all or any of the shares of any
class or series thereof of such corporation, (2) alter or change any term of the
Articles of Incorporation of Great Bay to be affected by the Merger or (3) alter
or change any of the terms and conditions of this Merger Agreement if such
alteration or change would adversely affect the holders of any class or series
of the stock of such corporation. This Merger Agreement may be terminated at any
time prior to the Effective Date by the vote of the Board of Directors of Great
Bay, notwithstanding shareholder approval of this Merger Agreement.
5.2 Counterparts. This Merger Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original.
5.3 Governing Law. This Merger Agreement shall be governed in all
respects, including, but not limited to, validity, interpretation, effect and
performance, by the internal laws of the State of New Hampshire without regard
to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Merger
Agreement to be executed and attested on its behalf by its officers thereunto
duly authorized, as of the date first above written.
BAYCORP HOLDINGS, LTD.
a Delaware corporation
------------------------------------
John A. Tillinghast
President
ATTEST:
- ------------------------------------------------------
Frank W. Getman Jr.
Secretary
GREAT BAY POWER CORPORATION,
a New Hampshire corporation
------------------------------------
John A. Tillinghast
President
ATTEST:
- ------------------------------------------------------
Frank W. Getman Jr.
Secretary
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GB TRANSITORY SUBSIDIARY, INC.,
a New Hampshire corporation
By:
----------------------------
John A. Tillinghast
President
ATTEST:
- ------------------------------------------------------
Frank W. Getman Jr.
Secretary
I, Frank W. Getman Jr., Secretary of BayCorp Holdings, Ltd., a corporation
organized and existing under the laws of the State of Delaware, hereby certify
that the Agreement and Plan of Merger to which this certificate is attached was
approved by the shareholders representing at least a majority of the outstanding
stock of said corporation entitled to vote thereon.
WITNESS my hand on this day of , 1996
------------------------------------
Frank W. Getman Jr.
Secretary
I, Frank W. Getman Jr., Secretary of Great Bay Power Corporation, a
corporation organized and existing under the laws of the State of New Hampshire,
hereby certify that the Agreement and Plan of Merger to which this certificate
is attached was approved by the stockholders representing at least a majority of
the outstanding stock of said corporation entitled to vote thereon.
WITNESS my hand on this day of , 1996
------------------------------------
Frank W. Getman Jr.
Secretary
I, Frank W. Getman Jr., Secretary of GB Transitory Subsidiary, Inc., a
corporation organized and existing under the laws of the State of New Hampshire,
hereby certify that the Agreement and Plan of Merger to which this certificate
is attached was approved by the stockholders representing at least a majority of
the outstanding stock of said corporation entitled to vote thereon.
WITNESS my hand on this day of , 1996
------------------------------------
Frank W. Getman Jr.
Secretary
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ANNEX II
DISSENTERS' RIGHTS
---------- ------
A. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
293-A:13.01 DEFINITIONS. In this subdivision:
(1) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger or
share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under RSA 293-A:13.02 and who exercises that right when and in
the manner required by RSA 293-A:13.20 through 293-A:13.28.
(3) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action, unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporate on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
293-A:13.02 RIGHT TO DISSENT.
(a) A shareholder is entitled to dissent from, and obtain payment of the
fair value of his shares in the event of, any of the following corporate
actions:
(1) Consummation of a plan of merger to which the corporation is a party:
(i) If shareholder approval is required for the merger by RSA
293-A:11.03 or the articles of incorporation and the shareholder is
entitled to vote on the merger; or
(ii) If the corporation is a subsidiary that is merged with its parent
under RSA 293-A:11.04.
(2) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan.
(3) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
year after the date of sale.
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(i) Alters or abolishes a preferential right of the shares.
(ii) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares.
(iii) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other
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securities.
(iv) Excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through issuance
of shares or other securities with similar voting rights.
(v) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be acquired
for cash under RSA 293-A:6.04.
(5) Any corporate action taken pursuant to a shareholder vote to the extent
the articles of incorporation, bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent and
obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this subdivision shall not challenge the corporate action creating his
entitlement, unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
293-A:13.03 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer than all
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if:
(1) He submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and
(2) He does so with respect to all shares of which he is the
beneficial shareholder or over which he has power to direct the vote.
B. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
293-A:13.20 NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under RSA
293-A:13.02 is submitted to a vote at a shareholders' meeting, the meeting
notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this subdivision and be accompanied by a copy of this
subdivision.
(b) If corporate action creating dissenters' rights under RSA 293-A:13.02
is taken without a vote of shareholders or by consent pursuant to RSA
293-A:7.04, the corporation shall notify in writing all shareholders entitled to
assert dissenters' rights that the action was taken and send them the
dissenters' notice described in RSA 293-A:13.22.
293-A:13.21 NOTICE OF INTENT FOR DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under RSA
293-A:13.02 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights:
(1) Shall deliver to the corporation before the vote is taken written
notice of his intent for demand payment for his shares if the proposed
action is effectuated; and
(2) Shall not vote his shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for his shares under this subdivision.
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293-A:13.22 DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under RSA 293-
A:13.02 is authorized at a shareholders' meeting, the corporation shall deliver
a written dissenters' notice to all shareholders who satisfied the requirements
of RSA 293-A:13.21.
(b) The dissenters' notice shall be sent no later than 10 days after
corporate action was taken, and shall:
(1) State where the payment demand shall be sent and where and when
certificates for certificated shares shall be deposited.
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received.
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial ownership
of the shares before that date.
(4) Set a date by which the corporation shall receive the payment
demand, which date shall not be fewer than 30 nor more than 60 days after
the date the notice is delivered.
(5) Be accompanied by a copy of this subdivision.
293-A:13.23 DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in RSA 293-A:13.22
shall demand payment, certify whether he acquired beneficial ownership of the
shares before the date required to be set forth, in the dissenters' notice
pursuant to RSA 293-A:13.22(b)(3), and deposit his certificates in accordance
with the terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificate where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this subdivision.
293-A:13.24 SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under RSA 293-A: 13.26.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
293-A:13.25 PAYMENT.
(a) Except as provided in RSA 293-A:13.27, as soon as the proposed
corporate action is taken, or upon receipt of a payment demand, the corporation
shall pay each dissenter who complied with RSA 293-A:13.23 the amount the
corporation estimates to be the fair value of his shares, plus accrued interest.
(b) The payment shall be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
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(4) A statement of the dissenter's right to demand payment under RSA
293-A:13.28; and
(5) A copy of this subdivision.
293-A:13.26 FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing shares certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under RSA 293-A:13.22 and repeat the payment demand
procedure.
293-A:13.27 AFTER-ACQUIRED SHARES.
(a) A corporation may elect to withhold payment required by RSA 293-A:
13.25 from a dissenter, unless he was the beneficial owner of the shares before
the date set forth in the dissenters' notice as the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a), after taking the proposed corporate action, it shall estimate
the fair value of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept it in full satisfaction of his demand.
The corporation shall send with its offer a statement of its estimate of the
fair value of the shares, an explanation of how the interest was calculated, and
a statement of the dissenter's right to demand payment under RSA 293-A:13.28.
293-A:13.28 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate, less any payment under RSA 293-A:13.25, or reject the
corporation's offer under RSA 293-A:13.27 and demand payment of the fair value
of his shares and interest due, if:
(1) The dissenter believes that the amount paid under RSA 293-A:13.25
or offered under RSA 293-A:13.27 is less than the fair value of his shares
or that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under RSA 293-A:13.25 within
60 days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (a)
within 30 days after the corporation made or offered payment for his shares.
C. JUDICIAL APPRAISAL OF SHARES
293-A:13.30 COURT ACTION.
(a) If a demand for payment under RSA 293-A:13.28 remains unsettled, the
corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the 60-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding in the superior court of
the county where a corporation's principal office, or, if none in this state,
its registered office, is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in
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this state where the registered office of the domestic corporation merged with
or whose shares were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties shall be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decisions on the
question of their value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment:
(1) For the amount, if any, by which the court finds the fair value of
his shares, plus interest, exceeds the amount paid by the corporation; or,
(2) For the fair value, plus accrued interest, of his after-acquired
shares for which the corporation elected to withhold payment under RSA
293-A:13.27.
293-A:13.31 COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under RSA 293-A:13.30
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under RSA 293-A:13.28.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of RSA 293- A:13.20 through RSA 293-A:13.28.
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this subdivision.
(c) If the court finds that the services of counsel for any dissenter
were of substantial benefit to the other dissenter similarly situated, and
that the fees for those services should not be assessed against the
corporation, the court may award to these counsel reasonable fees to be
paid out of the amounts awarded the dissenters who were benefited.
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ANNEX III
BAYCORP HOLDINGS, LTD.
1996 STOCK OPTION PLAN
APRIL 16, 1996
1. PURPOSE
The purpose of this plan (the "Plan") is to secure for BayCorp Holdings,
Ltd. (the "Company") and its shareholders the benefits arising from capital
stock ownership by employees, officers and directors of, and consultants or
advisors to, the Company and its parent and subsidiary corporations who are
expected to contribute to the Company's future growth and success. Except where
the context otherwise requires, the term "Company" shall include the parent and
all present and future subsidiaries of the Company as defined in Sections 424(e)
and 424(f) of the Internal Revenue Code of 1986, as amended or replaced from
time to time (the "Code"). Those provisions of the Plan which make express
reference to Section 422 shall apply only to Incentive Stock Options (as that
term is defined in the Plan).
2. TYPE OF OPTIONS AND ADMINISTRATION
(a) Types of Options. Options granted pursuant to the Plan may be either
incentive stock options ("Incentive Stock Options") meeting the requirements of
Section 422 of the Code or Non-Statutory Options which are not intended to meet
the requirements of Section 422 of the Code ("Non-Statutory Options").
(b) Administration.
(i) The Plan will be administered by the Board of Directors of the
Company, whose construction and interpretation of the terms and provisions
of the Plan shall be final and conclusive. The Board of Directors may in
its sole discretion grant options to purchase shares of the Company's
Common Stock ("Common Stock") and issue shares upon exercise of such
options as provided in the Plan. The Board shall have authority, subject to
the express provisions of the Plan, to construe the respective option
agreements and the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan, to determine the terms and provisions of
the respective option agreements, which need not be identical, and to make
all other determinations which are, in the judgment of the Board of
Directors, necessary or desirable for the administration of the Plan. The
Board of Directors may correct any defect, supply any omission or reconcile
any inconsistency in the Plan or in any option agreement in the manner and
to the extent it shall deem expedient to carry the Plan into effect and it
shall be the sole and final judge of such expediency. No director or person
acting pursuant to authority delegated by the Board of Directors shall be
liable for any action or determination under the Plan made in good faith.
(ii) The Board of Directors may, to the full extent permitted by or
consistent with applicable laws or regulations and Section 3(b) of this
Plan delegate any or all of its powers under the Plan to a committee (the
"Committee") appointed by the Board of Directors, and if the Committee is
so appointed all references to the Board of Directors in the Plan shall
mean and relate to such Committee.
(c) Applicability of Rule 16b-3. Those provisions of the Plan which make
express reference to Rule 16b-3 promulgated under the Securities Exchange Act of
1934 (the "Exchange Act"), or any successor rule ("Rule 16b-3"), or which are
required in order for certain option transactions to qualify for exemption under
Rule 16b-3, shall apply only to such persons as are required to file reports
under Section 16(a) of the Exchange Act (a "Reporting Person").
3. ELIGIBILITY
(a) General. Options may be granted to persons who are, at the time of
grant, employees, officers or directors of, or consultants or advisors to, the
Company; provided, that the class of employees to whom Incentive Stock Options
may be granted shall be limited to all employees of the Company and that options
to directors shall only be granted pursuant to Section 3(c), below. A person who
has been granted an option may, if he or she is otherwise eligible, be granted
additional options if the Board of Directors shall so determine.
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Subject to adjustment as provided in Section 15 below, the maximum number of
shares with respect to which options may be granted to any employee under the
Plan shall not exceed 400,000 shares of common stock during the ten-year term of
the Plan. For the purpose of calculating such maximum number, (a) an option
shall continue to be treated as outstanding notwithstanding its repricing,
cancellation or expiration and (b) the repricing of an outstanding option or the
issuance of a new option in substitution for a cancelled option shall be deemed
to constitute the grant of a new additional option separate from the original
grant of the option that is repriced or cancelled.
(b) Grant of Options to Officers. From and after the registration of the
Common Stock of the Company under the Exchange Act, the selection of an officer
(as the term "officer" is defined for purposes of Rule 16b-3) as a recipient of
an option, the timing of the option grant, the exercise price of the option and
the number of shares subject to the option shall be determined either (i) by the
Board of Directors, of which all members shall be "disinterested persons" (as
hereinafter defined), or (ii) by two or more directors having full authority to
act in the matter, each of whom shall be a "disinterested person." For the
purposes of the Plan, a director shall be deemed to be a "disinterested person"
only if such person qualifies as a "disinterested person" within the meaning of
Rule 16b-3, as such term is interpreted from time to time and also qualifies as
an "outside director" within the meaning of Section 162(m) of the Code, as such
term is interpreted from time to time.
(c) Grants of Options to Outside Directors. Every outside director (i.e.,
a director who is not employed by the Company) who is first elected as a
director after the date that Great Bay Power Corporation becomes a wholly-owned
subsidiary of the Company shall receive a grant of an option for 20,000 shares
upon his election. In addition, every outside director shall receive a grant of
an option for 20,000 shares upon such outside director's first reelection to the
Board and an additional grant of an option for 20,000 shares upon such outside
director's second reelection to the Board. If a Change in Control (as defined in
Section 12(d) below) occurs there shall be granted to each outside director then
serving an option for a number of shares equal to 60,000 reduced by the number
of shares for which options were previously granted to such director; the
exercise price for such option shall be the exercise price for the last option
granted to the director prior to the Change in Control. No other awards of any
kind shall be made to any outside director. Except as otherwise provided in the
event of a Change in Control, the exercise price for an option granted under
this Section 3(c) shall be 100% of the fair market value of such stock, as
determined by the Board of Directors, at the time of grant of such option.
4. STOCK SUBJECT TO PLAN
Subject to adjustment as provided in Section 15 below, the maximum number
of shares of Common Stock which may be issued and sold under the Plan is 600,000
shares. If an option granted under the Plan shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares subject to
such option shall again be available for subsequent option grants under the
Plan. If shares issued upon exercise of an option under the Plan are tendered to
the Company in payment of the exercise price of an option granted under the
Plan, such tendered shares shall again be available for subsequent option grants
under the Plan; provided, that in no event shall such shares be made available
for issuance pursuant to exercise of Incentive Stock Options.
5. FORMS OF OPTION AGREEMENTS
As a condition to the grant of an option under the Plan, each recipient of
an option shall execute an option agreement in such form not inconsistent with
the Plan as may be approved by the Board of Directors. Such option agreements
may differ among recipients.
6. PURCHASE PRICE
(a) General. Subject to Section 3(b) and 3(c), the purchase price per
share of stock deliverable upon the exercise of an option shall be determined by
the Board of Directors, provided, however, that in the case of an Incentive
Stock Option, the exercise price shall not be less than 100% of the fair market
value of such
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stock, as determined by the Board of Directors, at the time of grant of such
option, or less than 110% of such fair market value in the case of options
described in Section 11(b).
(b) Payment of Purchase Price. Options granted under the Plan may provide
for the payment of the exercise price by delivery of cash or a check to the
order of the Company in an amount equal to the exercise price of such options,
or, to the extent provided in the applicable option agreement, (i) by delivery
to the Company of shares of Common Stock of the Company already owned by the
optionee having a fair market value equal in amount to the exercise price of the
options being exercised or (ii) by any other means (including, without
limitation, by delivery of a promissory note of the optionee payable on such
terms as are specified by the Board of Directors) which the Board of Directors
determines are consistent with the purpose of the Plan and with applicable laws
and regulations (including, without limitation, the provisions of Regulation T
promulgated by the Federal Reserve Board). The fair market value of any shares
of the Company's Common Stock or other non-cash consideration which may be
delivered upon exercise of an option shall be determined by the Board of
Directors.
7. OPTION PERIOD
Each option and all rights thereunder shall expire on such date as shall be
set forth in the applicable option agreement, except that, in the case of an
Incentive Stock Option, such date shall not be later than ten years after the
date on which the option is granted and, in all cases, options shall be subject
to earlier termination as provided in the Plan.
8. EXERCISE OF OPTIONS
Each option granted under the Plan shall be exercisable either in full or
in installments at such time or times and during such period as shall be set
forth in the agreement evidencing such option, subject to the provisions of the
Plan.
9. NONTRANSFERABILITY OF OPTIONS
Options shall not be assignable or transferable by the person to whom they
are granted, either voluntarily or by operation of law, except by will or the
laws of descent and distribution, and, during the life of the optionee, shall be
exercisable only by the optionee; provided, however, that Non-Statutory Options
may be transferred pursuant to a qualified domestic relations order (as defined
in Rule 16b-3).
10. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP
Except as provided in Section 11(d) with respect to Incentive Stock
Options, and subject to the provisions of the Plan, the Board of Directors shall
determine the period of time during which an optionee may exercise an option
following (i) the termination of the optionee's employment or other relationship
with the Company or (ii) the death or disability of the optionee. Such periods
shall be set forth in the agreement evidencing such option.
11. INCENTIVE STOCK OPTIONS
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:
(a) Express Designation. All Incentive Stock Options granted under
the Plan shall, at the time of grant, be specifically designated as such in
the option agreement covering such Incentive Stock Options.
(b) 10% Shareholder. If any employee to whom an Incentive Stock
Option is to be granted under the Plan is, at the time of the grant of such
option, the owner of stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company (after taking into
account the
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attribution of stock ownership rules of Section 424(d) of the Code), then
the following special provisions shall be applicable to the Incentive Stock
Option granted to such individual:
(i) The purchase price per share of the Common Stock subject to
such Incentive Stock Option shall not be less than 110% of the fair
market value of one share of Common Stock at the time of grant; and
(ii) the option exercise period shall not exceed five years from
the date of grant.
(c) Dollar Limitation. For so long as the Code shall so provide,
options granted to any employee under the Plan (and any other incentive
stock option plans of the Company) which are intended to constitute
Incentive Stock Options shall not constitute Incentive Stock Options to the
extent that such options, in the aggregate, become exercisable for the
first time in any one calendar year for shares of Common Stock with an
aggregate fair market value (determined as of the respective date or dates
of grant) of more than $100,000.
(d) Termination of Employment, Death or Disability. No Incentive
Stock Option may be exercised unless, at the time of such exercise, the
optionee is, and has been continuously since the date of grant of his or
her option, employed by the Company, except that:
(i) an Incentive Stock Option may be exercised within the period of
three months after the date the optionee ceases to be an employee of the
Company (or within such lesser period as may be specified in the
applicable option agreement), provided, that the agreement with respect
to such option may designate a longer exercise period and that the
exercise after such three-month period shall be treated as the exercise
of a non-statutory option under the Plan;
(ii) if the optionee dies while in the employ of the Company, or
within three months after the optionee ceases to be such an employee,
the Incentive Stock Option may be exercised by the person to whom it is
transferred by will or the laws of descent and distribution within the
period of one year after the date of death (or within such lesser period
as may be specified in the applicable option agreement); and
(iii) if the optionee becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provision thereto) while
in the employ of the Company, the Incentive Stock Option may be
exercised within the period of one year after the date the optionee
ceases to be such an employee because of such disability (or within such
lesser period as may be specified in the applicable option agreement).
For all purposes of the Plan and any option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
12. ADDITIONAL PROVISIONS
(a) Additional Option Provisions. The Board of Directors may, in its sole
discretion, include additional provisions in option agreements covering options
granted under the Plan, including without limitation restrictions on transfer,
repurchase rights, commitments to pay cash bonuses, to make, arrange for or
guaranty loans or to transfer other property to optionees upon exercise of
options, or such other provisions as shall be determined by the Board of
Directors; provided that such additional provisions shall not be inconsistent
with any other term or condition of the Plan and such additional provisions
shall not cause any Incentive Stock Option granted under the Plan to fail to
qualify as an Incentive Stock Option within the meaning of Section 422 of the
Code.
(b) Acceleration, Extension, Etc. The Board of Directors may, in its sole
discretion, (i) accelerate the date or dates on which all or any particular
option or options granted under the Plan may be exercised or (ii) extend the
dates during which all, or any particular, option or options granted under the
Plan may be exercised.
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(c) Vesting Upon Disability or Death. Upon the death or disability (within
the meaning of Section 22(e)(3) of the Code) of an optionee, all unvested
options shall immediately vest.
(d) Change in Control. Notwithstanding any other provision of the Plan and
except as otherwise provided in the relevant option agreement, in the event of a
"Change in Control of the Company" (as defined below), the exercise dates of all
options then outstanding shall be accelerated in full and any restrictions on
exercising outstanding options issued pursuant to the Plan prior to any given
date shall terminate. For purposes of the Plan, a "Change in Control of the
Company" shall occur or be deemed to have occurred only if (i) any "person", as
such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than
the Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, or any corporation owned directly or indirectly by
the stockholders of the Company in substantially the same proportion as their
ownership of stock of the Company), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting power
of the Company's then outstanding securities; (ii) during any period of two
consecutive years ending during the term of the Plan (not including any period
prior to the adoption of the Plan), individuals who at the beginning of such
period constitute the Board of Directors of the Company, and any new director
(other than a director designated by a person who has entered into an agreement
with the Company to effect any transaction described in clause (i), (iii) or
(iv) of this Section 12(d) whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were either
directors at the beginning of the period or whose election or whose nomination
for election was previously so approved (collectively, the "Disinterested
Directors"), cease for any reason to constitute a majority of the Board of
Directors; (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquires more than 30% of the combined voting
power of the Company's then outstanding securities or (C) a merger or
consolidation which has been approved by a majority of the Disinterested
Directors; or (iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets which, in either
case, has not previously been approved by a majority of the Disinterested
Directors. Notwithstanding the foregoing, the Board of Directors of the Company
may, in its sole discretion, by a resolution adopted by two-thirds of the
Disinterested Directors prior to the occurrence of any of the events otherwise
constituting a Change in Control of the Company, declare that such event will
not constitute a Change in Control of the Company for the purposes of the Plan.
If such resolution is adopted, such event shall not constitute a Change in
Control of the Company for any purpose of the Plan.
13. GENERAL RESTRICTIONS
(a) Investment Representations. The Company may require any person to whom
an option is granted, as a condition of exercising such option, to give written
assurances in substance and form satisfactory to the Company to the effect that
such person is acquiring the Common Stock subject to the option for his or her
own account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws, or with covenants or representations made by the Company in
connection with any public offering of its Common Stock.
(b) Compliance With Securities Laws. Each option shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, or that the disclosure of
non-public information or the satisfaction of any other condition is necessary
as a condition of, or in connection with, the issuance or purchase of shares
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thereunder, such option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, or satisfaction of
such condition shall have been effected or obtained on conditions acceptable to
the Board of Directors. Nothing herein shall be deemed to require the Company to
apply for or to obtain such listing, registration or qualification, or to
satisfy such condition.
14. RIGHTS AS A SHAREHOLDER
The holder of an option shall have no rights as a shareholder with respect
to any shares covered by the option (including, without limitation, any rights
to receive dividends or non-cash distributions with respect to such shares)
until the date of issue of a stock certificate to him or her for such shares. No
adjustment shall be made for dividends or other rights for which the record date
is prior to the date such stock certificate is issued.
15. ADJUSTMENT PROVISIONS FOR RECAPITALIZATIONS AND RELATED TRANSACTIONS
(a) General. If, through or as a result of any merger, consolidation, sale
of all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, (i) the outstanding shares of Common Stock
are increased, decreased or exchanged for a different number or kind of shares
or other securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock or other securities, an
appropriate and proportionate adjustment may be made in (x) the maximum number
and kind of shares reserved for issuance under the Plan, (y) the number and kind
of shares or other securities subject to any then outstanding options under the
Plan, and (z) the price for each share subject to any then outstanding options
under the Plan, without changing the aggregate purchase price as to which such
options remain exercisable. Notwithstanding the foregoing, no adjustment shall
be made pursuant to this Section 15 if such adjustment would cause the Plan to
fail to comply with Section 422 of the Code.
(b) Board Authority to Make Adjustments. Any adjustments under this
Section 15 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.
16. MERGER, CONSOLIDATION, ASSET SALE, LIQUIDATION, ETC.
(a) General. In the event of a consolidation or merger or sale of all or
substantially all of the assets of the Company in which outstanding shares of
Common Stock are exchanged for securities, cash or other property of any other
corporation or business entity or in the event of a liquidation of the Company,
the Board of Directors of the Company, or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions, as to outstanding options: (i)
provide that such options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), provided that any such options substituted for Incentive Stock Options
shall meet the requirements of Section 424(a) of the Code, (ii) upon written
notice to the optionees, provide that all unexercised options will terminate
immediately prior to the consummation of such transaction unless exercised by
the optionee within a specified period following the date of such notice, (iii)
in the event of a merger under the terms of which holders of the Common Stock of
the Company will receive upon consummation thereof a cash payment for each share
surrendered in the merger (the "Merger Price"), make or provide for a cash
payment to the optionees equal to the difference between (A) the Merger Price
times the number of shares of Common Stock subject to such outstanding options
(to the extent then exercisable at prices not in excess of the Merger Price) and
(B) the aggregate exercise price of all such outstanding options in exchange for
the termination of such options, and (iv) provide that all or any outstanding
options shall become exercisable in full immediately prior to such event.
(b) Substitute Options. The Company may grant options under the Plan in
substitution for options held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of
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the Company, or as a result of the acquisition by the Company, or one of its
subsidiaries, of property or stock of the employing corporation. The Company may
direct that substitute options be granted on such terms and conditions as the
Board of Directors considers appropriate in the circumstances.
17. NO SPECIAL EMPLOYMENT RIGHTS
Nothing contained in the Plan or in any option shall confer upon any
optionee any right with respect to the continuation of his or her employment by
the Company or interfere in any way with the right of the Company at any time to
terminate such employment or to increase or decrease the compensation of the
optionee.
18. OTHER EMPLOYEE BENEFITS
Except as to plans which by their terms include such amounts as
compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option or the sale of shares received
upon such exercise will not constitute compensation with respect to which any
other employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
19. AMENDMENT OF THE PLAN
(a) The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect, except that if at any time the approval of the
shareholders of the Company is required under Section 422 of the Code or any
successor provision with respect to Incentive Stock Options, or under Rule
16b-3, the Board of Directors may not effect such modification or amendment
without such approval.
(b) The termination or any modification or amendment of the Plan shall not,
without the consent of an optionee, affect his or her rights under an option
previously granted to him or her. With the consent of the optionee affected, the
Board of Directors may amend outstanding option agreements in a manner not
inconsistent with the Plan. The Board of Directors shall have the right to amend
or modify (i) the terms and provisions of the Plan and of any outstanding
Incentive Stock Options granted under the Plan to the extent necessary to
qualify any or all such options for such favorable federal income tax treatment
(including deferral of taxation upon exercise) as may be afforded incentive
stock options under Section 422 of the Code and (ii) the terms and provisions of
the Plan and of any outstanding option to the extent necessary to ensure the
qualification of the Plan under Rule 16b-3. The provisions of Section 3(c),
above, which relate to formula grants to outside directors may not be amended
more than once every six months, other than to comport with changes in the Code,
the Employee Retirement Income Security Act of 1974, or the rules thereunder.
20. WITHHOLDING
(a) The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to any shares issued upon exercise
of options under the Plan. Subject to the prior approval of the Company, which
may be withheld by the Company in its sole discretion, the optionee may elect to
satisfy such obligations, in whole or in part, (i) by causing the Company to
withhold shares of Common Stock otherwise issuable pursuant to the exercise of
an option or (ii) by delivering to the Company shares of Common Stock already
owned by the optionee. The shares so delivered or withheld shall have a fair
market value equal to such withholding obligation. The fair market value of the
shares used to satisfy such withholding obligation shall be determined by the
Company as of the date that the amount of tax to be withheld is to be
determined. An optionee who has made an election pursuant to this Section 20(a)
may only satisfy his or her withholding obligation with shares of Common Stock
which are not subject to any repurchase, forfeiture, unfulfilled vesting or
other similar requirements.
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(b) Notwithstanding the foregoing, in the case of a Reporting Person, no
election to use shares for the payment of withholding taxes shall be effective
unless made in compliance with any applicable requirements of Rule 16b-3 (unless
it is intended that the transaction not qualify for exemption under Rule 16b-3).
21. CANCELLATION AND NEW GRANT OF OPTIONS, ETC.
The Board of Directors shall have the authority to effect, at any time and
from time to time, with the consent of the affected optionees, (i) the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or
different numbers of shares of Common Stock and having an option exercise price
per share which may be lower or higher than the exercise price per share of the
cancelled options or (ii) the amendment of the terms of any and all outstanding
options under the Plan to provide an option exercise price per share which is
higher or lower than the then-current exercise price per share of such
outstanding options.
22. EFFECTIVE DATE AND DURATION OF THE PLAN
(a) Effective Date. The Plan shall become effective when adopted by the
Board of Directors, but no option granted under the Plan shall become
exercisable unless and until the Plan shall have been approved by the Company's
shareholders. If such shareholder approval is not obtained within twelve months
after the date of the Board's adoption of the Plan, options previously granted
under the Plan shall not vest and shall terminate and no options shall be
granted thereafter. Amendments to the Plan not requiring shareholder approval
shall become effective when adopted by the Board of Directors; amendments
requiring shareholder approval (as provided in Section 19) shall become
effective when adopted by the Board of Directors, but no option granted after
the date of such amendment shall become exercisable (to the extent that such
amendment to the Plan was required to enable the Company to grant such option to
a particular person) unless and until such amendment shall have been approved by
the Company's shareholders. If such shareholder approval is not obtained within
twelve months of the Board's adoption of such amendment, any options granted on
or after the date of such amendment shall terminate to the extent that such
amendment was required to enable the Company to grant such option to a
particular optionee. Subject to this limitation, options may be granted under
the Plan at any time after the effective date and before the date fixed for
termination of the Plan.
(b) Termination. Unless sooner terminated in accordance with Section 16,
the Plan shall terminate upon the close of business on the day next preceding
the tenth anniversary of the date of its adoption by the Board of Directors.
Options outstanding on such date shall continue to have force and effect in
accordance with the provisions of the instruments evidencing such options.
23. PROVISION FOR FOREIGN PARTICIPANTS
The Board of Directors may, without amending the Plan, modify awards or
options granted to participants who are foreign nationals or employed outside
the United States to recognize differences in laws, rules, regulations or
customs of such foreign jurisdictions with respect to tax, securities, currency,
employee benefit or other matters.
Adopted by the Board of Directors on
April 16, 1996.
Approved by the Sole Stockholder on
April 16, 1996.
C-8
<PAGE> 119
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article EIGHTH of the Registrant's Certificate of Incorporation provides
that no director of the Registrant will be personally liable for any monetary
damages for any breach of fiduciary duty as a director, except to the extent
that the Delaware General Corporation law prohibits the elimination or
limitation of liability of directors for breach of fiduciary duty.
Article NINTH of the Registrant's Certificate of Incorporation provides
that a director or officer of the Registrant (a) will be indemnified by the
Registrant against all expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement incurred in connection with any litigation or
other legal proceeding (other than an action by or in the right of the
Registrant) brought against him or her by virtue of his or her position as a
director or officer of the Registrant if he acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the best interests of
the Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful and (b) will be
indemnified by the Registrant against all expenses (including attorneys' fees)
and amounts paid in settlement incurred in connection with any action by or in
the right of the Registrant brought against him or her by virtue of his or her
position as a director or officer of the Registrant if he or she acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed to,
the best interests of the Registrant, except that no indemnification will be
made with respect to any matter as to which such person will have been adjudged
to be liable to the Registrant, unless a court determines that, despite such
adjudication but in view of all of the circumstances, he is entitled to
indemnification of such expenses. Notwithstanding the foregoing, to the extent
that a director or officer has been successful, on the merits or otherwise,
including, without limitation, the dismissal of an action without prejudice, he
or she is required to be indemnified by the Registrant against all expenses
(including attorneys' fees) incurred in connection therewith. Expenses will be
advanced to a director or officer at his or her request, provided that he or she
undertakes to repay the amount advanced if it is ultimately determined that he
or she is not entitled to indemnification for such expenses.
Indemnification is required to be made unless the Registrant determines
that the applicable standard of conduct required for indemnification has not
been met. In the event of a determination by the Registrant that the director or
officer did not meet the applicable standard of conduct required for
indemnification, or if the Registrant fails to make an indemnification payment
within 60 days after such payment is claimed by such person, such person is
permitted to petition the court to make an independent determination as to
whether such person is entitled to indemnification. As a condition precedent to
the right of indemnification, the director or officer must give the Registrant
notice of the action for which indemnity is sought and the Registrant has the
right to participate in such action or assume the defense thereof.
Article NINTH of the Registrant's Certificate of Incorporation further
provides that the indemnification provided therein is not exclusive, and
provides that in the event that the Delaware General Corporation Law is amended
to expand the indemnification permitted to directors or officers the Registrant
must indemnify those persons to the full extent permitted by such law as so
amended.
Section 145 of the Delaware General Corporation Law, as amended, provides
that a corporation has the power to indemnify a director, officer, employee or
agent of the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person will have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification will be made with respect to any matter as to which such person
will have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.
II-1
<PAGE> 120
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- -------------------------------------------------------------------------------
<C> <S>
*2.1 --Agreement and Plan of Merger dated as of May 28, 1996 by and among Great Bay
Power Corporation, the Registrant and GB Transitory Subsidiary, Inc., a copy
of which appears as Annex I to the Prospectus contained as a part of this
Registration Statement.
*3.1 --Certificate of Incorporation of the Registrant.
*3.2 --By-Laws of the Registrant.
*5.1 --Opinion of Hale and Dorr, counsel to the Registrant, as to legality of the
securities being registered and consent.
8.1 --Opinion of Hale and Dorr, counsel to the Registrant, as to Tax Matters.
*10.1 --Holding Company 1996 Stock Option Plan.
*10.2 --Agreement Between Bangor Hydro-Electric Company, Central Maine Power Company,
Central Vermont Public Service Corporation, Fitchburg Gas and Electric Light
Company, Maine Public Service Company and EUA Power Corporation relating to
use of certain transmission facilities dated October 20, 1986.
*10.3 --Limited Guaranty by Eastern Utilities Associates of Decommissioning Costs in
favor of Joint Owners of the Seabrook Project dated May 5, 1990.
*10.4 --Composite Agreement for Joint Ownership, Construction and Operation of New
Hampshire Nuclear Units, as amended, dated November 1, 1990.
*10.5 --Seventh Amendment to and Restated Agreement for Seabrook Project Disbursing
Agent as amended through and including the Second Amendment, by and among
North Atlantic Energy Service Corporation, the Registrant and other Seabrook
Project owners dated November 1, 1990.
*10.6 --Seabrook Project Managing Agent Operating Agreement by and among the North
Atlantic Energy Service Corporation, Great Bay and parties to the Joint
Ownership Agreement, dated June 29, 1992.
*10.7 --Settlement Agreement by and among EUA Power Corporation, Eastern Utilities
Associates and the Official Bondholders' Committee dated November 18, 1992.
*10.8 --Purchased Power Agreement between UNITIL Power Corporation and Great Bay
dated April 26, 1993.
*10.9 --Power Purchase Option Agreement between UNITIL Power Corporation and Great
Bay dated April 26, 1993.
*10.10 --Second Mortgage and Security Agreement between UNITIL Power Corporation and
Great Bay dated December 22, 1993.
*10.11 --Third Mortgage and Security Agreement between UNITIL Power Corporation and
Great Bay dated December 22, 1993.
*10.12 --Registration Rights Agreement between Great Bay and the Selling Stockholders
dated April 7, 1994 (the "Registration Rights Agreement").
*10.13 --Amendment to Registration Rights Agreement between Great Bay and the Selling
Stockholders dated November 23, 1994.
*10.14 --Stock and Subscription Agreement among Great Bay and the Selling Stockholders
dated April 7, 1994.
*10.15 --Acknowledgment and Amendment to Stock and Subscription Agreement, dated
November 23, 1994.
*10.16 --Settlement Agreement by and among Great Bay, the Official Bondholders'
Committee and the Selling Stockholders dated September 9, 1994.
*10.17 --Purchased Power Agreement between Freedom Electric Power Company and Great
Bay dated March 2, 1995.
*10.18 --Letter Agreement, dated December 20, 1994, between Great Bay and the Selling
Stockholders amending Registration Rights Agreement, as previously amended on
November 23, 1994.
*10.19 --Letter Agreement, dated March 28, 1995, between Great Bay and the Selling
Stockholders amending Registration Rights Agreement, as previously amended on
November 23, 1994 and December 20, 1994.
</TABLE>
II-2
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- -------------------------------------------------------------------------------
<C> <S>
*10.20 --Employment Agreement between John A. Tillinghast and Great Bay dated April
24, 1995.
*10.21 --Incentive Stock Option Agreement, dated as of April 24, 1995, by and between
John A. Tillinghast and Great Bay.
*10.22 --Employment Agreement between Frank W. Getman Jr. and Great Bay dated August
1, 1995.
*10.23 --Incentive Stock Option Agreement, dated as of August 1, 1995, by and between
Frank W. Getman Jr. and Great Bay.
*+10.29 --Services Agreement between PECO Energy Company and Great Bay dated November
3, 1995.
*10.31 --Warrant, dated February 14, 1995, issued by Great Bay to PECO pursuant to the
provisions of a Warrant Purchase Agreement.
10.32 --Warrant Purchase Agreement, dated as of November 3, 1995, by and between
Great Bay and PECO Energy Company.
23.1 --Consent of Arthur Andersen LLP.
23.2 --Consent of Arthur Andersen LLP.
23.3 --Consent of Coopers & Lybrand L.L.P.
23.4 --Consent of Hale and Dorr (included in Exhibits 5.1 and 8.1).
*24.1 --Powers of Attorney.
99.1 --Form of Proxy.
<FN>
- ---------------
* Previously filed.
+ Confidential treatment requested as to certain portions, which portions are
omitted and filed separately with the Commission.
</TABLE>
(B) FINANCIAL STATEMENT SCHEDULES
Financial Statement Schedules as of December 31, 1995 and the Report of
Independent Public Accountants on such schedules are included in this
Registration Statement. All other schedules are omitted because they are not
applicable or are not required under Regulation S-X.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(b) The Registrant undertakes that every prospectus (1) that is filed
pursuant to paragraph (a) immediately preceding, or (2) that purports to meet
the requirements of section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment will be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time will be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Certificate of
Incorporation and by-laws of the Registrant and the laws of the State of
Delaware, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
II-3
<PAGE> 122
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(d) The undersigned Registrant hereby undertakes to respond to requests for
information that are incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(e) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 123
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Dover, State of New Hampshire this 29th day of May, 1996.
BAYCORP HOLDINGS, LTD.
By: /s/ JOHN A. TILLINGHAST
------------------------
JOHN A. TILLINGHAST
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<S> <C> <C>
/s/ JOHN A. TILLINGHAST President, Treasurer and May 29, 1996
- ------------------------------------------ Director (principal executive
JOHN A. TILLINGHAST officer, principal financial
officer and principal
accounting officer)
* Director May 29, 1996
- ------------------------------------------
ANDREW J. KURTZ
* Director May 29, 1996
- ------------------------------------------
KENNETH A. BUCKFIRE
* Director May 29, 1996
- ------------------------------------------
CHARLES A. LEEDS, JR.
*By: /s/ JOHN A. TILLINGHAST
- ---------------------------------
JOHN A. TILLINGHAST
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE> 1
Exhibit 8.1
-----------
HALE AND DORR
COUNSELLORS AT LAW
60 STATE STREET, BOSTON, MASSACHUSETTS 02109
617-526-6000 [Bullet] FAX 617-526-5000
May 28, 1996
Great Bay Power Corporation
Cocheco Falls Millworks
100 Main Street, Suite 201
Dover, NH 03820
Re: Merger among Great Bay Power Corporation, BayCorp
Holdings, Ltd., and GB Transitory Subsidiary, Inc.
--------------------------------------------------
Ladies and Gentlemen:
This opinion is being delivered to you in connection with the filing of a
registration statement (the "Registration Statement") on Form S-4, which
includes the Joint Proxy Statement/Prospectus relating to a certain Agreement
and Plan of Merger (the "Merger Agreement") by and among Great Bay Power
Corporation, a New Hampshire corporation ("Great Bay"), BayCorp Holdings, Ltd.,
a Delaware corporation that is currently a wholly owned subsidiary of Great Bay
("Holding Company"), and GB Transitory Subsidiary, Inc., a New Hampshire
corporation that is currently a wholly owned subsidiary of Holding Company
("Transitory Subsidiary"). Pursuant to the Merger Agreement, Transitory
Subsidiary will merge with and into Great Bay, and Great Bay will become a
wholly owned subsidiary of Holding Company (the "Merger"). Except as otherwise
provided, capitalized terms not defined herein have the meanings set forth in
the Merger Agreement or in the certificates delivered to Hale and Dorr by Great
Bay, Holding Company and certain Great Bay Shareholders containing certain
representations of Great Bay, Holding Company and certain Great Bay Shareholders
relevant to this opinion (the "Certificates of Representations"). All section
references, unless otherwise indicated, are to the United States Internal
Revenue Code of 1986, as amended (the "Code").
In our capacity as counsel to Great Bay in the Merger, and for purposes of
rendering this opinion, we have examined and relied upon the Registration
Statement, the Merger Agreement, the Certificates of Representations, and such
other documents as we considered relevant to our analysis. In our examination of
documents, we have assumed the authenticity of original documents,
WASHINGTON, DC BOSTON, MA MANCHESTER, NH
- -------------------------------------------------------------------------------
HALE AND DORR IS A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
<PAGE> 2
Great Bay Power Corporation
May 28, 1996
Page 2
the accuracy of copies, the genuineness of signatures, and the legal capacity of
signatories.
We have assumed that all parties to the Merger Agreement and to any
other documents examined by us have acted, and will act, in accordance with the
terms of such Merger Agreement and documents and that the Merger will be
consummated on the Effective Date pursuant to the terms and conditions set
forth in the Merger Agreement. Furthermore, we have assumed that all
representations contained in the Merger Agreement, as well as those
representations contained in the Certificates of Representations are, and on
the Effective Date will be, true and complete in all material respects, and
that any representation made in any of the documents referred to herein "to the
best of the knowledge" of any person or party is correct without such
qualification. We have not attempted to verify independently such
representations, but in the course of our representation, nothing has come to
our attention that would cause us to question the accuracy thereof.
The conclusions expressed herein represent our judgment of the proper
treatment of certain aspects of the Merger under the income tax laws of the
United States based upon the Code, Treasury Regulations, case law, and rulings
and other pronouncements of the Internal Revenue Service (the "IRS") as in
effect on the date of this opinion. No assurances can be given that such laws
will not be amended or otherwise changed prior to the Effective Date, or at any
other time, or that such changes will not affect the conclusions expressed
herein. Nevertheless, we undertake no responsibility to advise you of any
developments after the Effective Date in the application or interpretation of
the income tax laws of the United States. Our opinion relates solely to the tax
consequences of the Merger under the federal laws of the United States, and we
express no opinion (and no opinion should be inferred) regarding the tax
consequences of the Merger under the laws of any other jurisdiction.
Our opinion represents our best judgment of how a court would conclude if
presented with the issues addressed herein and is not binding upon either the
IRS or any court. Thus, no assurances can be given that a position taken in
reliance on our opinion will not be challenged by the IRS or rejected by a
court.
This opinion addresses only the specific tax consequences set forth below,
and does not address any other federal, state, local, or foreign income, estate,
gift, transfer, sales, or other tax consequences that may result from the Merger
or any other transaction (including any transaction undertaken in connection
with the Merger). We express no opinion regarding the tax consequences of the
Merger as applied to specific stockholders of Great Bay and/or holders of
options or warrants for Great Bay
<PAGE> 3
Great Bay Power Corporation
May 28, 1996
Page 3
Common Stock. We express no opinion with regard to the specific tax treatment in
the Merger of dealers in securities, tax-exempt organizations, life insurance
companies, financial institutions, partnerships and other pass-through entities,
regulated investment companies, foreign taxpayers, or holders of Great Bay
Common Stock acquired upon exercise of stock options or in other compensatory
options for Great Bay Common Stock with regard to the tax consequences of the
Merger and Holding Company's assumption of outstanding options for Great Bay
Common Stock.
No opinion is expressed as to any transaction other than the Merger as
described in the Merger Agreement or as to any transaction whatsoever, including
the Merger, if all the transactions described in the Merger Agreement are not
consummated in accordance with the terms of such Merger Agreement and without
waiver or breach of any material provision thereof, or if all of the
representation, warranties, statements, and assumptions upon which we relied are
not true and accurate at all relevant times. In the event that any one of the
statements, representations, warranties, or assumptions upon which we have
relied to issue this opinion is incorrect, our opinion might be adversely
affected and may not be relied upon.
On the basis of, and subject to the foregoing, and in reliance upon the
representations described above, we are of the opinion that:
1. The Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code;
2. No gain or loss will be recognized by Great Bay or Holding Company as
a result of the Merger;
3. No gain or loss will be recognized by shareholders of Great Bay upon
the conversion of their shares of Great Bay Common Stock solely into shares of
Holding Company Common Stock pursuant to the terms of the Merger;
4. The tax basis of the shares of Holding Company Common Stock into which
shares of Great Bay Common Stock are converted pursuant to the Merger will be
the same as the basis of such shares of Great Bay Common Stock; and
5. The holding period for shares of Holding Company Common Stock into
which shares of Great Bay Common Stock are converted pursuant to the Merger will
include the period that such shares of Great Bay Common Stock are held by the
holder, provided that such shares are held as capital assets on the Effective
Date.
<PAGE> 4
Great Bay Power Corporation
May 28, 1996
Page 4
No opinion is expressed as to any federal income tax consequence of the
Merger except as specifically set forth herein, and this opinion may not be
relied upon except with respect to the consequences specifically discussed
herein. This opinion is intended solely for the purpose of including this
opinion as an exhibit to the Registration Statement. It may not be relied upon
for any other purpose or by any other person or entity, and may not be available
to any other person or entity without prior written consent. We hereby consent
to the filing of this opinion as an exhibit to the Registration Statement and
further consent to the use of our name wherever appearing in the Registration
Statement.
Very truly yours,
/s/ Hale and Dorr
----------------------
HALE AND DORR
<PAGE> 1
EXHIBIT 10.32
WARRANT PURCHASE AGREEMENT
--------------------------
This Agreement dated as of November 3, 1995 is entered into by and
between Great Bay Power Corporation, a New Hampshire corporation (the
"Company"), and PECO Energy Company, a Pennsylvania corporation (the
"Purchaser").
In consideration of the mutual promises and covenants contained in
this Agreement, the parties hereto agree as follows:
1. Authorization and Sale of the Warrant.
--------------------------------------
1.1. AUTHORIZATION. The Company has, or on or before the
Closing (as defined in Section 2.2) will have, duly authorized the sale
and issuance of a Warrant (the "Warrant") to purchase four hundred
twenty thousand (420,000) shares of the Company's common stock, $.01
par value per share (the "Warrant Shares"), at a price per share equal
to the greater of (x) $9.75 per share and (y) the highest price at
which a share of the Company's common stock, $.01 par value per share
(the "Common Stock"), has traded on the National Association of
Securities Dealers National Market (the "National Market") from the
Approval Date, as defined in the Warrant, to the date on which the
Warrant is exercised (the "Exercise Price"), and on such other terms
and in the form attached hereto as EXHIBIT A.
As of the date of this Agreement, the Company does not have
sufficient authorized shares of Common Stock for issuance upon exercise
of the Warrant. The Company's board of directors has approved for
submission to the Company's shareholders, at its next shareholders
meeting, an amendment to the Company's certificate of incorporation to
increase the number of authorized shares of the Company's Common Stock
by an amount sufficient to permit the Company to reserve the Warrant
Shares for issuance pursuant to the Warrant in the event of exercise
thereof (the "Charter Amendment"). If the Charter Amendment is not
approved on or before May 31, 1996, as the Purchaser's sole and
exclusive remedy, the Company shall promptly repay to the Purchaser the
Purchase Price with interest thereon from the date hereof until paid in
full at a rate per annum equal to 110% of the prime rate announced by
The Chase Manhattan Bank (National Association) or its successor, from
time to time and this Agreement shall be of no further force and
effect.
1.2. SALE OF WARRANT. Subject to the terms and
conditions of this Agreement, at the Closing the Company will sell
and issue to the Purchaser, and the Purchaser will buy the Warrant
for a purchase price of one million dollars ($1,000,000) (the
"Purchase Price"). If the Warrant is exercised, the Purchase
Price shall be applied as a credit against the Exercise Price. If
<PAGE> 2
the Warrant is not exercised, the Company shall retain the Purchase
Price; provided however, if (a) Purchaser properly terminates the
Services Agreement, as defined in Section 5.7 below, pursuant to
Section 16(a)(iii) of the Services Agreement, (b) the Company
terminates the Services Agreement pursuant to Section 16(b), or (c) the
Approval Date, as defined in the Warrant does not occur on or before
May 31, 1996, the Company shall refund to Purchaser the Purchase Price,
together with interest accrued thereon at the rate set forth in Section
1.1 above; and PROVIDED FURTHER, if Purchaser terminates the Services
Agreement because the Company ordered the Purchaser to make a Great Bay
Directed Offer, as that term is defined in the Services Agreement, the
Company shall refund a portion of the Purchase Price to Purchaser in an
amount equal to the product of the Purchase Price and a fraction, the
numerator of which is the number of days from the date upon which
notice of termination is presented to the Company by Purchaser in
accordance with Section 16(b) of the Services Agreement through
September 30, 1996, and the denominator of which is the number of days
from the Service Commencement Date, as defined in the Services
Agreement, through September 30, 1996.
If the Company requires Purchaser to establish a separate
trust account to hold Gross Receipts pursuant to Section 4(e) of the
Services Agreement and there still is present a circumstance which
could entitle Purchaser to a refund of all or a portion of the Purchase
Price pursuant to this Section 1.2, the Company shall, at Purchaser's
request, deposit the Purchase Price into a separate trust account which
will be payable to Purchaser if Purchaser is so entitled under this
Section 1.2. Such account will be established on the same or similar
terms on which the trust account is established pursuant to the
Services Agreement. The cost of such account shall be paid by
Purchaser.
The Warrant Expiration Date shall mean the earliest to occur
of the following: (1) September 30, 1996, if the Seabrook Capacity
Factor for the period from the Service Commencement Date through
September 15, 1995 is equal to or greater than 60%; (2) December 31,
1996, if the Seabrook Capacity Factor for the period from the Service
Commencement Date through December 15, 1996 is equal to or greater than
60%; (3) two (2) business days following the first date after December
31, 1996 that the Seabrook Capacity Factor for the immediately
preceding twelve months is equal to or greater than 60%; or (4)
December 31, 1997. Service Commencement Date and Seabrook Capacity
Factor shall have the respective meanings ascribed to such terms in the
Services Agreement.
2. The Closing.
------------
2.1. IN GENERAL. The closing ("Closing") of the sale
and purchase of the Warrant under this Agreement shall take place
at the offices of Hale and Dorr, 60 State Street, Boston,
Massachusetts, at 10:00 a.m. on the second business day following
-2-
<PAGE> 3
delivery by the Company to Purchaser of notice that the conditions to
closing specified in Section 5 have been satisfied, or at such other
time and place as is mutually agreeable to the Company and the
Purchaser. At the Closing, the Company will deliver to the Purchaser
the Warrant to be registered in the name of the Purchaser, against
payment to the Company of the Purchase Price therefor, by wire transfer
or other method acceptable to the Company. The date of the Closing is
hereinafter referred to as the "Closing Date."
3. REPRESENTATIONS OF THE COMPANY. The Company hereby
represents and warrants to the Purchaser as of the date hereof as
follows:
3.1. ORGANIZATION AND STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of
the State of New Hampshire and has full corporate power and authority
to conduct its business as presently conducted and as proposed to be
conducted by it and except as otherwise disclosed in this Agreement, to
enter into and perform this Agreement and to carry out the transactions
contemplated by this Agreement.
3.2. CAPITALIZATION. The authorized capital stock of the
Company consists of 8,000,000 shares of Common Stock of which 7,999,998
shares are issued and outstanding. All of such issued and outstanding
shares of Common Stock have been duly authorized and validly issued and
are fully paid and nonassessable. Except as provided in this Agreement,
(i) no subscription, warrant, option (other than the options to
purchase 455,000 shares of Common Stock which are currently outstanding
and which were granted pursuant to the Company's 1995 Stock Option
Plan), convertible security or other right (contingent or otherwise) to
purchase or acquire any shares of capital stock of the Company is
authorized or outstanding, (ii) there is not any commitment of the
Company to issue any subscription, warrant, option, convertible
security or other such right or to issue or distribute to holders of
any shares of its capital stock any evidences of indebtedness or assets
of the Company, and (iii) the Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend or make
any other distribution in respect thereof. No person or entity is
entitled to (i) any preemptive or similar right with respect to the
issuance of any capital stock of the Company, or (ii) except as
provided in this Agreement and for rights granted to the parties listed
on Schedule 3.2 to register such persons' shares under the Securities
Act, any rights with respect to the registration of any capital stock
of the Company under the Securities Act.
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<PAGE> 4
3.3. SUBSIDIARIES. The Company has no subsidiaries and
does not own or control, directly or indirectly, any other corpo-
ration, association or business entity. The Company is not a
participant in any joint venture or partnership.
3.4. ISSUANCE OF WARRANT. The issuance, sale and delivery of
the Warrant in accordance with this Agreement has been, or will be on
or prior to the Closing, duly authorized by all necessary corporate
action on the part of the Company. Upon approval of the Charter
Amendment, the issuance of the Warrant Shares pursuant to the terms of
the Warrant will be duly authorized by all necessary corporate action
on the part of the Company and when issued and paid for in accordance
with the terms of the Warrant will be duly and validly issued, fully
paid and nonassessable.
3.5. AUTHORITY FOR AGREEMENT. Subject to shareholder approval
of the Charter Amendment, the execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action, and this Agreement has been duly executed
and delivered by the Company. This Agreement constitutes the valid and
binding obligation of the Company enforceable in accordance with its
terms. Subject to shareholder approval of the Charter Amendment, the
execution of and performance of the transactions contemplated by this
Agreement and compliance with its provisions by the Company will not
violate any provision of law and will not, with or without the passage
of time, conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute a default under, its
Restated Certificate of Incorporation, as amended (the "Restated
Certificate"), or its Amended and Restated By-Laws or any indenture,
lease, agreement or other instrument to which the Company is a party or
by which it or any of its properties is bound, or any decree, judgment,
order, statute, rule or regulation applicable to the Company.
3.6. GOVERNMENTAL CONSENTS. Except for approval of the New
Hampshire Public Utility Commission with respect to the issuance of the
Warrant and Warrant Shares, no consent, approval, order or
authorization of, or registration, qualification, designation,
declaration or filing with, any governmental authority is required on
the part of the Company in connection with the execution and delivery
of this Agreement, or the offer, issuance, sale and delivery of the
Warrant. Based on the representations made by the Purchaser in Section
4 of this Agreement, the offer, sale and issuance of the Warrant to the
Purchaser will be in compliance with applicable federal and state
securities laws.
3.7. COMMISSION FILINGS. Copies of all documents (including
exhibits, but excluding exhibits incorporated by
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<PAGE> 5
reference) filed by the Company with the Commission pursuant to the
Exchange Act since April 17, 1994 (the "Commission Filings"), have been
delivered to Purchaser. The Commission Filings, all of which were filed
on a timely basis, (i) were prepared, in all material respects, in
accordance with the requirements of the Exchange Act and the rules and
regulations thereunder, (ii) did not at the time they were filed
contain any untrue statement of material fact, and (iii) did not at the
time they were filed omit to state a material fact necessary to make
the statements therein, in light of the circumstances in which they
were made, not misleading. Each of the audited financial statements and
unaudited interim financial statements (including any related notes or
schedules) included in the Commission Filings was prepared in
accordance with generally accepted accounting principles applied on a
consistent basis, except as may be indicated therein or in the notes or
schedules thereto (any such schedules being prepared in accordance with
Regulation S-X), and fairly presented in all material respects the
financial position of the Company as at the dates thereof and the
results of its operations and cash flows for the periods then ended,
subject, in the case of the unaudited interim financial statements, to
normal year-end audit adjustments and the absence of complete notes.
3.8. LITIGATION. There are no action, suits, or proceedings
pending or, to its knowledge, threatened against, or affecting the
Company in any court or before any governmental commission, which seeks
to enjoin the Closing of this Agreement or which challenges the
validity of the Company's obligations hereunder.
4. REPRESENTATIONS OF THE PURCHASER. The Purchaser represents
and warrants to the Company as follows:
4.1. INVESTMENT. The Purchaser is acquiring the Warrant and
intends to acquire the Warrant Shares issuable upon exercise of the
Warrant for its own account for investment and not with a view to, or
for resale in connection with, any distribution or public offering
thereof (within the meaning of the Securities Act of 1933, as amended
(the "Securities Act"), nor with any present intention of distributing
or selling the same; and, the Purchaser has no present or contemplated
agreement, undertaking, arrangement, obligation, indebtedness or
commitment providing for the disposition thereof.
4.2. AUTHORITY. The Purchaser has full corporate power and
authority to enter into and to perform this Agreement in accordance
with its terms. The Purchaser has not been organized, reorganized or
recapitalized specifically for the purpose of investing in the Company.
4.3. EXPERIENCE. The Purchaser has carefully reviewed the
Commission Filings and the Joint Ownership Agreement among the
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<PAGE> 6
owners of Seabrook, as amended, and the representations concerning the
Company contained in this Agreement and the Services Agreement and has
made detailed inquiry concerning the Company, its business and its
personnel; the officers of the Company have made available to the
Purchaser the opportunity to ask questions and receive answers
concerning the terms and conditions of the offering of the Warrant made
hereby and to obtain any additional information that the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy of information provided by the Company
to Purchaser; in evaluating the suitability of an investment in the
Company, the Purchaser has not relied upon any representations or other
information (whether oral or written) other than as set forth in the
Commission Filings and the Joint Ownership Agreement among the Joint
Owners of Seabrook, as amended, or in this Agreement and the Services
Agreement.
4.4. ACCREDITED INVESTOR. The Purchaser is an Accredited
Investor within the definition set forth in Securities Act Rule 501(a).
5. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER. The obligation
of the Purchaser to purchase the Warrant at the Closing is subject to
the fulfillment, or the waiver by the Purchaser, of the following
conditions on or before the Closing Date:
5.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each
representation and warranty contained in Section 3 shall be true on and
as of such Closing Date with the same effect as though such
representation and warranty had been made on and as of that date.
5.2. PERFORMANCE. The Company shall have performed and
complied with all agreements and conditions contained in this
Agreement required to be performed or complied with by it prior to
or at the Closing.
5.3. OPINION OF COUNSEL. The Purchaser shall have received an
opinion from Hale and Dorr, counsel for the Company, dated the Closing
Date, addressed to the Purchaser at the Closing as to the corporate
good standing of the Company and, subject to shareholder approval of
the Charter Amendment, the due authorization of this Agreement and of
the Warrant, the lack of conflicts between this Agreement and other
agreements to which the Company is a party and applicable law, that New
Hampshire Public Utility Commission approval has been obtained for the
issuance of the Warrant and the Warrant Shares and the enforceability
of this Agreement and the Warrant.
5.4. CERTIFICATES AND DOCUMENTS. The Company shall have
delivered to the Purchaser:
(a) Certificates, as of the most recent practicable
dates, as to the corporate good standing of the
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<PAGE> 7
Company issued by the Secretary of State of the State of New Hampshire,
confirming such good standing within five business days of the Closing
Date;
(b) Amended and Restated By-laws of the Company,
certified by its Secretary or Assistant Secretary as of the
Closing Date; and
(c) Resolutions of the Board of Directors authorizing
and approving all matters in connection with this Agreement and the
transactions contemplated hereby, certified by the Secretary or
Assistant Secretary of the Company as of such Closing Date.
5.5. STOCKHOLDER APPROVAL. Purchaser shall have received from
the persons listed on Schedule 3.2 their respective undertaking to vote
those shares of the Company's Common Stock which each owns as of the
record date for the shareholders meeting at which the Charter Amendment
is submitted for approval in favor of the Charter Amendment.
5.6. COMPLIANCE CERTIFICATE. The Company shall have
delivered to the Purchaser a certificate, executed by the Chairman or
the President of the Company, dated the Closing Date, certifying to
the fulfillment of the conditions specified in subsections 5.1 and
5.2 this Agreement.
5.7. SERVICES AGREEMENT. The Company and the Purchaser shall
have entered into a service agreement (the "Services Agreement")
providing for Purchaser to act as the Company's marketing agent in the
form attached hereto as EXHIBIT C.
5.8. OTHER MATTERS. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchaser and the
Purchaser shall have received all such counterpart originals or
certified or other copies of such documents as it may reasonably
request.
5.9. REGULATORY APPROVAL. The Company shall have received a
final order of the New Hampshire Public Utilities Commission approving
and authorizing the sale of the Warrant and issuance of the Warrant
Shares and to the extent required, approval of the Charter Amendment.
6. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The obligations
of the Company to sell the Warrant to Purchaser on the Closing Date are
subject to fulfillment, on or before the Closing Date, of each of the
following conditions:
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<PAGE> 8
6.1. ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Purchaser contained in Section 4
shall be true on and as of such Closing Date with the same effect as
though such representations and warranties had been made on and as of
that date.
6.2. REGULATORY APPROVAL. The Company shall have received a
final order of the New Hampshire Public Utilities Commission approving
and authorizing the sale of the Warrant, issuance of the Warrant
Shares and the Charter Amendment.
7. Covenants of Purchaser and the Company.
---------------------------------------
7.1. RESTRICTION ON SALE OF WARRANT SHARES. If and for so
long as the Purchaser owns 5% or more of the Company's Voting
Securities and no person together with its Affiliates or Associates
owns 50% or more of the Voting Securities, the Purchaser shall not sell
(i) Voting Securities which represent 5% or more of the total of the
Voting Securities to any person or group; and (ii) Voting Securities to
any person or group which holds or would hold after giving effect to
the proposed sale 5% of the Voting Securities.
7.2. REPURCHASE OF WARRANT SHARES. If Purchaser purchases the
Warrant Shares and during the period following such purchase and prior
to Purchaser's right to demand registration of the Warrant Shares
pursuant to Section 8.3 below the Company engages in a transaction that
would result in the Purchaser owning 5% or more of the Company's issued
and outstanding Common Stock (and not as a result of Purchaser
purchasing additional shares of Common Stock) the Company agrees to
purchase from Purchaser, at Purchaser's request, sufficient shares (the
"Repurchased Shares") so that Purchaser will own no more than 4.99% of
the Company's issued and outstanding shares after giving effect to such
transaction. The Company will give Purchaser prior written notice of a
transaction that would result in Purchaser owning 5% or more of the
Company's issued and outstanding shares not less than 30 days prior to
the closing date for such transaction. Purchaser shall give the Company
written notice within 10 days of receipt of such notice whether it will
require the Company to purchase the Repurchased Shares. The Company
shall purchase the Repurchased Shares at the same time the transaction
giving rise to the Company's obligation hereunder is closed (the
"Purchase Date"). If the transaction giving rise to the Company's
obligation to purchase the Repurchased Shares has a fixed price at
which the Company's Common Stock is valued, the purchase price for the
Repurchased Shares shall be such price. If no such price is fixed, the
purchase price for the Repurchased Shares shall equal the average of
the closing prices for the Company's Common Stock on trades of such
Common Stock on the National Market for 20 business days prior to the
Purchase Date. Purchaser shall be required to tender good title to the
Repurchased Shares against
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<PAGE> 9
payment therefor. The Company's obligation hereunder shall cease and be
of no further force and effect if Purchaser purchases additional shares
of Common Stock which cause it to own 5% or more of the Company's
issued and outstanding shares of Common Stock.
8. Registration Rights.
--------------------
8.1. CERTAIN DEFINITIONS. As used in this Section 8 and
elsewhere in this Agreement, the following terms shall have the
following respective meanings:
"COMMISSION" means the Securities and Exchange
Commission, or any other Federal agency at the time administering the
Securities Act.
"EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended, or any similar Federal statute, and the rules and
regulations of the Commission issued under such Act, as they each may,
from time to time, be in effect.
"REGISTRATION STATEMENT" means a registration statement
filed by the Company with the Commission for a public offering and sale
of securities of the Company (other than a registration statement on
Form S-8 or Form S-4, or their successors, or any other form for a
limited purpose, or any registration statement covering only securities
proposed to be issued in exchange for securities or assets of another
corporation).
"REGISTRATION EXPENSES" means the expenses described in
Section 8.6.
"REGISTRABLE SHARES" means the Warrant Shares and shares
issued in respect thereof (because of stock splits, stock dividends,
reclassifications, recapitalizations or similar events); PROVIDED,
HOWEVER, the Warrant Shares shall cease to be Registrable Shares (i)
upon any sale pursuant to a Registration Statement, Section 4(1) of the
Securities Act or Rule 144 under the Securities Act, or any sale in any
manner to a person or entity which, by virtue of Section 9(b) of this
Agreement, is not entitled to the rights provided by this Section 8 and
(ii) at such time as they first become eligible for resale pursuant to
Rule 144(k) under the Securities Act. Whenever reference is made in
this Agreement to a request or consent of holders of a certain
percentage of Registrable Shares, the determination of such percentage
shall include Warrant Shares issuable upon exercise of the Warrant even
if the Warrant has not yet been exercised.
"SECURITIES ACT" means the Securities Act of 1933, as
amended, or any similar Federal statute, and the rules and regulations
of the Commission issued under such Act, as they each may, from time to
time, be in effect.
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<PAGE> 10
8.2. Sale or Transfer of the Warrant and Registrable Shares;
------------------------------------------------------
Legend.
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(a) The Warrant may only be transferred to the extent
permitted by Section 9(b) of the Warrant. The Registrable Shares shall
not be sold or transferred unless either (i) they first shall have been
registered under the Securities Act, or (ii) the Company first shall
have been furnished with an opinion, in form and substance satisfactory
to the Company, of legal counsel satisfactory to the Company to the
effect that such sale or transfer is exempt from the registration
requirements of the Securities Act.
(b) Each certificate representing Registrable
Shares shall bear the following legend:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such securities are registered
under such Act or an opinion, in form and substance
satisfactory to the Company, of counsel satisfactory to the
Company is obtained to the effect that such sale or transfer
is exempt from the registration requirements of the
Securities Act."
The foregoing legend shall be removed from the certificates
representing any of such securities, at the request of the holder
thereof, at such time as they become eligible for resale pursuant to
Rule 144(k) under the Securities Act or upon registration.
8.3. Required Registrations.
-----------------------
(a) If at any time after the earlier of termination in
accordance with its terms of the Services Agreement or September 30,
1998, the Registrable Shares are not eligible and continue to be
ineligible for resale pursuant to Rule 144(k) a holder or holders of an
aggregate of at least 51% of the Registrable Shares may request, in
writing, that the Company effect the registration on Form S-3 (or any
successor form) of Registrable Shares owned by such holder or holders
having an aggregate offering price of at least $500,000 (based on the
then current market price). If the holders initiating the registration
intend to distribute the Registrable Shares by means of an
underwriting, they shall so advise the Company in their request. In the
event such registration is underwritten, the right of other holders of
Registrable Shares to participate shall be conditioned on such holders'
participation in such underwriting. Upon receipt
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<PAGE> 11
of any such request, the Company shall promptly give written notice of
such proposed registration to all holders of Registrable Shares. Such
holders of Registrable Shares shall have the right, by giving written
notice to the Company within 20 days after the Company provides its
notice, to elect to have included in such registration such of their
Registrable Shares as such holders may request in such notice of
election, subject to the approval of the underwriter managing the
offering as provided below. Thereupon, the Company shall, as
expeditiously as possible, use reasonable commercial efforts to effect
the registration, on Form S-3 (or any successor form), of all
Registrable Shares which the Company has been requested to so register.
Notwithstanding any other provision of this Section
8.3, if the distribution of Registrable Shares is to be effected by
means of an underwriting and the managing underwriter advises the
holders of Registrable Shares initiating the registration in writing
that marketing factors require a limitation of the number of shares to
be underwritten, then the holders of Registrable Shares initiating the
registration shall so advise all holders of Registrable Shares which
would otherwise be included in the underwriting and the number of
Registrable Shares that may be included in the underwriting shall be
allocated among all such holders of Registrable Shares, including the
holders of Registrable Shares initiating the registration, in
proportion (as nearly as practicable) to the amount of Registrable
Shares owned by each such holder. If the distribution of Registrable
Shares is to be effected by means of an underwriting and the managing
underwriter does not limit the number of Registrable Shares to be
underwritten, the Company or other holders of securities of the Company
who have registration rights similar to those set forth in Section 8.4
hereof may include Common Stock for their respective accounts in such
registration if the managing underwriter states that such inclusion
would not adversely effect the offering of Registrable Shares and if
the number of Registrable Shares which would otherwise have been
included in such registration and underwriting will not thereby be
limited or reduced.
(b) The Company shall not be required to effect more
than one registration pursuant to paragraph (a) above. In addition, the
Company shall not be required to effect any registration within six
months after the effective date of any other Registration Statement of
the Company.
(c) If at the time of any request to register
Registrable Shares pursuant to this Section 8.3, the Company is engaged
or has fixed plans to engage within 30 days of the time of the request
in a registered public offering as to which the holders of Registrable
Shares may request to include Registrable Shares pursuant to Section
8.4 or is engaged in any other activity which, in the good faith
determination of the Company's Board of Directors, would be adversely
effected by the requested
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<PAGE> 12
registration to the material detriment of the Company, then the Company
may at its option direct that such request be delayed for a period not
in excess of six months from the effective date of such offering or the
date of commencement of such other material activity, as the case may
be.
8.4. Incidental Registration.
------------------------
(a) Until the tenth anniversary of the date of this
Agreement, if the Company proposes to file a Registration Statement
(other than pursuant to Section 8.3) covering the sale of shares of
Common Stock by the Company at any time or from time to time, it will,
prior to such filing, give written notice to all holders of Registrable
Shares of its intention to do so and, upon the written request of a
holder or holders of Registrable Shares given within 20 days after the
Company provides such notice (which request shall state the intended
method of disposition of such Registrable Shares), the Company shall
use reasonable commercial efforts to cause all Registrable Shares which
the Company has been requested by such holder or holders to register to
be registered under the Securities Act to the extent necessary to
permit their sale or other disposition in accordance with the intended
methods of distribution specified in the request of such holder or
holders; provided that the Company shall have the right to postpone or
withdraw any registration effected pursuant to this Section 8.4 without
obligation to any holder of Registrable Shares. Notwithstanding
anything in the foregoing to the contrary, the Company shall not be
required to provide such advance notice in connection with, nor include
any Registrable Shares in, any offering under this Section 8.4
involving an underwriting if the Company has been informed that in the
opinion of the managing underwriter, the registration of any
Registrable Shares would jeopardize the success of the offering by the
Company. In such event, the Company will provide written notice to all
holders of Registrable Shares of such managing underwriter's opinion.
Such notice need not be given prior to the filing of the applicable
Registration Statement.
(b) In connection with any offering under this Section
8.4 involving an underwriting, the Company shall not be required to
register any Registrable Shares or include any Registrable Shares in
such underwriting unless the holders thereof accept the terms of the
underwriting as agreed upon between the Company and the underwriters
selected by it, and then only in such quantity as will not, in the
opinion of the managing underwriter, adversely effect the offering of
shares to be included in the underwriting by the Company and by the
holders of registration rights pursuant to a Registration Rights
Agreement between the Company and certain shareholders of the Company
(the "Senior Shareholders") dated as of April 7, 1994, as amended on
November 23, 1994. If in the opinion of the managing underwriter, after
giving effect to the priority rights of the Company and the Senior
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<PAGE> 13
Shareholders as provided in the previous sentence, the registration of
all of the Registrable Shares which the holders have requested to be
included would adversely effect the offering by the Company and/or the
Senior Shareholders, then the Company shall be required to include in
the underwriting only that number of Registrable Shares, if any, which
the managing underwriter believes may be sold without causing such
adverse effect. If the number of Registrable Shares to be included in
the underwriting in accordance with the foregoing is less than the
total number of shares which the holders of Registrable Shares have
requested to be included, then the holders of Registrable Shares who
have requested registration and other holders of securities entitled to
be included in such registration (other than the Senior Shareholders,
who shall have the priority rights specified above) shall participate
in the underwriting: pro rata based upon their total ownership of
shares of Common Stock of the Company (giving effect to the conversion
into Common Stock of all securities convertible thereinto and the
exercise for Common Stock of all shares exercisable therefor). If any
holder of Registrable Shares would thus be entitled to include more
shares than such holder requested to be registered, the excess shall be
allocated among other requesting holders of Registrable Shares pro rata
in the manner described in the preceding sentence.
8.5. REGISTRATION PROCEDURES. If and whenever the Company
is required by the provisions of this Agreement to use reasonable
commercial efforts to effect the registration of any of the
Registrable Shares under the Securities Act, the Company shall:
(a) use reasonable commercial efforts to file with the
Commission a Registration Statement with respect to such Registrable
Shares and to cause that Registration Statement to become and remain
effective for a period of not less than 90 days or until all shares
covered by the registration statement have been sold;
(b) as expeditiously as possible prepare and file with
the Commission any amendments and supplements to the Registration
Statement and the prospectus included in the Registration Statement as
may be necessary to keep the Registration Statement effective for the
period described in Section 8.5(a);
(c) as expeditiously as possible furnish to each holder
of Registrable Shares who is selling shares pursuant to such
registration (a "Selling Holder") such reasonable numbers of copies of
the prospectus, including a preliminary prospectus, in conformity with
the requirements of the Securities Act, and such other documents as the
Selling Holder may reasonably request in order to facilitate the public
sale or other disposition of the Registrable Shares owned by the
Selling Holder; and
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<PAGE> 14
(d) as expeditiously as possible use reasonable
commercial efforts to register or qualify the Registrable Shares
covered by the Registration Statement under the securities or Blue Sky
laws of such states as the Selling Holders shall reasonably request,
and do any and all other acts and things that may be necessary or
desirable to enable the Selling Holders to consummate the public sale
or other disposition in such states of the Registrable Shares owned by
the Selling Holders; PROVIDED, HOWEVER, that the Company shall not be
required in connection with this paragraph (d) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction.
If the Company has delivered preliminary or final
prospectuses to the Selling Holders and after having done so the
prospectus is amended to comply with the requirements of the Securities
Act, the Company shall promptly notify the Selling Holders and, if
requested, the Selling Holders shall immediately cease making offers of
Registrable Shares and return all prospectuses to the Company. The
Company shall promptly provide the Selling Holders with revised
prospectuses and, following receipt of the revised prospectuses, the
Selling Holders shall be free to resume making offers of the
Registrable Shares with such revised prospectuses.
8.6. ALLOCATION OF EXPENSES. The Company will pay all
Registration Expenses of all registrations under this Agreement;
provided, however, that if a registration is withdrawn at the request
of the holders of Registrable Shares requesting such registration, the
requesting holders shall pay the Registration Expenses of such
registration pro rata in accordance with the number of their
Registrable Shares included in such registration. For purposes of this
Section, the term "Registration Expenses" shall mean all expenses
incurred by the Company in complying with a request to register
Registrable Shares pursuant to Section 8 of this Agreement including,
without limitation, all registration and filing fees, exchange listing
fees, printing expenses, fees and disbursements of counsel for the
Company and the fees and expenses of one counsel selected by the
Selling Holders to represent the Selling Holders, state Blue Sky fees
and expenses, and the expense of any special audits incident to or
required by any such registration, but excluding underwriting
discounts, selling commissions and the fees and expenses of the Selling
Holders' own counsel (other than the one counsel selected to represent
all of the Selling Holders).
8.7. INDEMNIFICATION. In the event of any registration of any
of the Registrable Shares under the Securities Act pursuant to Section
8 of this Agreement, the Company will indemnify and hold harmless the
seller of such Registrable Shares, each underwriter of such Registrable
Shares, and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act or the Exchange
Act against any losses, claims,
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<PAGE> 15
damages or liabilities, joint or several, to which such seller,
underwriter or controlling person may become subject under the
Securities Act, the Exchange Act, state securities or Blue Sky laws or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in
any Registration Statement under which such Registrable Shares were
registered under the Securities Act, any preliminary prospectus or
final prospectus contained in the Registration Statement, or any
amendment or supplement to such Registration Statement, or arise out of
or are based upon the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; and the Company will reimburse such seller,
underwriter and each such controlling person for any legal or any other
expenses reasonably incurred by such seller, underwriter or controlling
person in connection with investigating or defending any such loss,
claim, damage, liability or action; PROVIDED, HOWEVER, that the Company
will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue
statement or omission made in such Registration Statement, preliminary
prospectus or prospectus, or any such amendment or supplement, in
reliance upon and in conformity with information furnished to the
Company by or on behalf of such seller, underwriter or controlling
person specifically for use in the preparation thereof.
In the event of any registration of any of the Registrable
Shares under the Securities Act pursuant to Section 8 of this
Agreement, each seller of Registrable Shares, severally and not
jointly, will indemnify and hold harmless the Company, each of its
directors and officers and each underwriter (if any) and each person,
if any, who controls the Company or any such underwriter within the
meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages or liabilities, joint or several, to which the Company,
such directors and officers, underwriter or controlling person may
become subject under the Securities Act, Exchange Act, state securities
or Blue Sky laws or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement under which such
Registrable Shares were registered under the Securities Act, any
preliminary prospectus or final prospectus contained in the
Registration Statement, or any amendment or supplement to the
Registration Statement, or arise out of or are based upon any omission
or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, if
the statement or omission was made in reliance upon and in conformity
with information furnished to the Company by or on behalf of such
seller, specifically for use in connection with the preparation of such
Registration Statement, prospectus,
-15-
<PAGE> 16
amendment or supplement; PROVIDED, HOWEVER, that the obligations of
such seller of Registrable Shares hereunder shall be limited to an
amount equal to the proceeds to such seller of Registrable Shares from
the sale of Registrable Shares as contemplated herein.
Each party entitled to indemnification under this Section 8.7
(the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting
therefrom; PROVIDED, that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be approved by
the Indemnified Party (whose approval shall not be unreasonably
withheld). The Indemnified Party may participate in such defense at
such party's expense; PROVIDED, HOWEVER, that the Indemnifying Party
shall pay such expense if representation of such Indemnified Party by
the counsel retained by the Indemnifying Party would be inappropriate
due to actual or potential differing interests between the Indemnified
Party and any other party represented by such counsel in such
proceeding. No Indemnifying Party, in the defense of any such claim or
litigation shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of such claim or litigation, and no Indemnified
Party shall consent to entry of any judgment or settle such claim or
litigation without the prior written consent of the Indemnifying Party.
8.8. INDEMNIFICATION WITH RESPECT TO UNDERWRITTEN OFFERING.
In the event that Registrable Shares are sold pursuant to a
Registration Statement in an underwritten offering pursuant to Section
8.3(a), the Company agrees to enter into an underwriting agreement
containing customary representations and warranties with respect to the
business and operations of an issuer of the securities being registered
and customary covenants and agreements to be performed by such issuer,
including without limitation customary provisions with respect to
indemnification by the Company of the underwriters of such offering.
8.9. INFORMATION BY HOLDER. Each holder of Registrable Shares
included in any registration shall furnish to the Company such
information regarding such holder and the distribution proposed by such
holder as the Company may request in writing and as shall be required
in connection with any registration, qualification or compliance
referred to in this Agreement.
-16-
<PAGE> 17
9. Transfers of Certain Rights.
----------------------------
(a) The rights granted to the Purchaser pursuant to Section 8
of this Agreement may be transferred by such holder to another holder
of Registrable Shares, to any Affiliate, as defined in Section 7.1, of
such holder or to any person or entity acquiring at least one hundred
thousand (100,000) Registrable Shares (such number being subject to
adjustment for any stock dividend, stock split, subdivision,
combination or other recapitalization of the Common Stock of the
Company); PROVIDED, HOWEVER, that the Company is given written notice
by the transferee at the time of such transfer stating the name and
address of the transferee and identifying the securities with respect
to which such rights are being assigned.
(b) TRANSFEREES. Any transferee (other than the Purchaser) to
whom rights hereunder are transferred shall, as a condition to such
transfer, deliver to the Company a written instrument by which such
transferee agrees to be bound by the obligations imposed upon the
Purchaser and/or holders of Registrable Shares, as the case may be,
under this Agreement to the same extent as if such transferee were a
party hereto.
(c) SUBSEQUENT TRANSFEREES. A transferee to whom rights are
transferred pursuant to this Section 9 may not again transfer such
rights to any other person or entity, other than as provided in
Sections 9(a) and (b).
10. CONFIDENTIALITY. The Purchaser and each holder of Registrable
Shares agrees that he or it will keep confidential and will not
disclose or divulge any confidential, proprietary or secret information
which the Purchaser or such holder of Registrable Shares, as the case
may be, may obtain from the Company pursuant to financial statements,
reports and other materials submitted by the Company to such Purchaser
or holder of Registrable Shares, as the case may be, pursuant to this
Agreement, unless such information is known, or until such information
becomes known, to the public or except as required by law or judicial
or administrative proceeding.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All agreements,
representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the closing of the
transactions contemplated hereby.
12. NOTICES. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be
(i) delivered by hand, (ii) mailed by first-class United States mail,
certified or registered mail, return receipt requested, postage
prepaid, (iii) transmitted by telecopy with a hard copy mailed by first
class certified or registered mail as aforesaid; or (iv) delivered by
overnight courier service:
-17-
<PAGE> 18
If to the Company, at 20 Ladd Street, Portsmouth, New Hampshire
03801, telecopy number (603) 433-8645, Attention: President, or at such
other address or addresses as may have been furnished in writing by the
Company to the Purchaser, and/or holders of Registrable Shares, as the
case may be, with a copy to Mark N. Polebaum, Esq., Hale and Dorr, 60
State Street, Boston, Massachusetts 02109, telecopy number
617-526-5000; or
If to the Purchaser, at 2004 Renaissance Blvd., King of Prussia,
PA 19406, telecopy number (610) 292-6603, or at such other address or
addresses as may have been furnished to the Company in writing by such
Purchaser.
If to a holder of Registrable Shares other than a Purchaser, at
his or its address as it appears on the stock record books of the
Company, or at such other address or addresses as may have been
furnished to the Company in writing by such Stockholder or holder of
Registrable Shares.
Notices provided in accordance with this Section 12 shall be
deemed delivered upon personal delivery or (i) 72 hours after deposit
in the mail, (ii) noon on the second business day next following
deposit with an overnight express courier service and (iii) in the case
of notices provided by telecopy, upon completion of transmission to the
addressee's telecopier.
13. NO ASSIGNMENT. The Warrant may not be assigned except to the
extent permitted by Section 9(b) of the Warrant. The rights under
Section 8 hereof with respect to the Warrant Shares may only be
assigned to the extent permitted by Section 9 hereof. Except to the
extent permitted by the foregoing sentence, the rights granted pursuant
to this Agreement may not be transferred or assigned by the Purchaser
or any holder of Registrable Shares. Subject to the foregoing, the
provisions of this Agreement shall be binding upon, and inure to the
benefit of, the respective successors, assigns, heirs, executors and
administrators of the parties hereto.
14. ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding between the parties hereto with respect to
the subject matter hereof and supersedes all prior agreements and
understandings relating to such subject matter.
15. AMENDMENTS AND WAIVERS. Except as otherwise expressly set
forth in this Agreement, any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), with the written consent of the Company and Purchaser
and after the Closing the holders of at least a majority of the
Registrable Shares. No waivers of or exceptions to any term, condition
or provision of this Agreement, in any one or more instances, shall be
deemed to be, or construed
-18-
<PAGE> 19
as, a further or continuing waiver of any such term, condition or
provision.
16. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
17. HEADINGS. The headings of the sections, subsections, and
paragraphs of this Agreement have been added for convenience only and
shall not be deemed to be a part of this Agreement.
18. SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision.
19. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Hampshire,
without giving effect to conflict of laws provisions.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands
as of the day and year first above written.
GREAT BAY POWER CORPORATION
By: /s/ John A. Tillinghast
--------------------------------
Title: President
PECO ENERGY COMPANY
By: /s/ Nancy J. Zausner
---------------------------------
Title: Vice President
-19-
<PAGE> 20
EXHIBIT A
---------
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS WARRANT ARE SUBJECT TO THE RESTRICTIONS
(INCLUDING RESTRICTIONS IMPOSED UNDER APPLICABLE SECURITIES
LAWS) ON TRANSFER SET FORTH IN SECTIONS 4 AND 11 OF THIS
WARRANT. THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER APPLICABLE STATE
SECURITIES STATUTES.
Warrant No. 1 Number of Shares: 420,000
(subject to adjustment)
Date of Issuance: November __, 1995
GREAT BAY POWER CORPORATION
Common Stock Purchase Warrant
-----------------------------
(Void after September 30, 1996)
Great Bay Power Corporation, a New Hampshire corporation (the
"Company"), for value received, hereby certifies that PECO Energy
Company, a Pennsylania corporation (the "Registered Holder"), is
entitled, subject to the terms set forth below and the terms of the
Warrant Purchase Agreement, upon exercise of this Warrant to purchase
from the Company, at any time on or after the Approval Date, as
hereafter defined, and on or before the Warrant Expiration Date, as
hereafter defined, at not later than 5:00 p.m. (Boston, Massachusetts
time), 420,000 shares of the Company's Common Stock .01 par value (the
"Common Stock") at a purchase price per share equal to the greater of
(x) $9.75 (as adjusted pursuant to Section 2, the "Fixed Component")
and (y) the highest price at which a share of the Company's Common
Stock has traded on the National Association of Securities Dealers
National Market from the Approval Date to the date on which the Warrant
is exercised (as adjusted pursuant to Section 2, the "Variable
Component").
The shares purchasable upon exercise of this Warrant, and the
purchase price per share, each as adjusted from time to time pursuant
to the provisions of this Warrant, are hereinafter referred to as the
"Warrant Shares" and the "Purchase Price," respectively. This Warrant
shall be of no further force and effect, unless the Approval Date
occurs on or before May 31, 1996.
<PAGE> 21
Approval Date shall mean the date when an amendment to the Company's
Certificate of Incorporation is filed with the New Hampshire Secretary
of State increasing the number of the Company's authorized shares of
Common Stock to a number sufficient to permit the Company to reserve
the Warrant Shares for issuance pursuant to this Warrant in the event
of exercise by the Registered Holder.
For purposes of this Warrant, Warrant Expiration Date shall mean
the earliest to occur of the following: (1) September 30, 1996, if the
Seabrook Capacity Factor for the period from the Service Commencement
Date through September 15, 1995 is equal to or greater than 60%; (2)
December 31, 1996, if the Seabrook Capacity Factor for the period from
the Service Commencement Date through December 15, 1996 is equal to or
greater than 60%; (3) two (2) business days following the first date
after December 31, 1996 that the Seabrook Capacity Factor for the
immediately preceding twelve months is equal to or greater than 60%; or
(4) December 31, 1997. Service Commencement Date and Seabrook Capacity
Factor shall have the respective meanings ascribed to such terms in the
Services Agreement dated November __, 1995, between the Company and the
Registered Holder hereof.
1. Exercise.
---------
(a) This Warrant may be exercised by the Registered Holder,
in whole but not in part, by surrendering this Warrant, with the
purchase form appended hereto as EXHIBIT I duly executed by the
Registered Holder or by the Registered Holder's duly authorized
attorney, at the principal office of the Company, or at such other
office or agency as the Company may designate, accompanied by payment
in full, in lawful money of the United States, of the Purchase Price
payable in respect of the Warrant Shares, less $1,000,000.
(b) The exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the day on which
this Warrant shall have been surrendered to the Company as provided in
Section 1(a) above. At such time, the person or persons in whose name
or names any certificates for Warrant Shares shall be issuable upon
such exercise as provided in Section 1(c) below shall be deemed to have
become the holder or holders of record of the Warrant Shares
represented by such certificates.
(c) As soon as practicable after the exercise of this
Warrant, the Company, at its expense, will cause to be issued in the
name of, and delivered to, the Registered Holder, or as the
-2-
<PAGE> 22
Registered Holder (upon payment by the Registered Holder of any
applicable transfer taxes) may direct a certificate or certificates for
the number of full Warrant Shares to which the Registered Holder shall
be entitled upon such exercise plus, in lieu of any fractional share to
which the Registered Holder would otherwise be entitled, cash in an
amount determined pursuant to Section 3 hereof.
2. Adjustments.
-----------
(a) If outstanding shares of the Company's Common Stock shall
be subdivided into a greater number of shares or a dividend in Common
Stock shall be paid in respect of Common Stock, the Fixed Component of
the Purchase Price in effect immediately prior to such subdivision or
at the record date of such dividend shall, simultaneously with the
effectiveness of such subdivision or immediately after the record date
of such dividend, be proportionately reduced. If outstanding shares of
Common Stock shall be combined into a smaller number of shares, the
Fixed Component of the Purchase Price in effect immediately prior to
such combination shall, simultaneously with the effectiveness of such
combination, be proportionately increased. When any adjustment is
required to be made in the Fixed Component of the Purchase Price, the
number of Warrant Shares purchasable upon the exercise of this Warrant
shall be changed to the number determined by dividing (i) an amount
equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Fixed
Component of the Purchase Price in effect immediately prior to such
adjustment, by (ii) the Fixed Component of the Purchase Price in effect
immediately after such adjustment. At the time of exercise of the
Warrant, the Variable Component of the Purchase Price shall equal the
highest of the Period High Prices, as adjusted pursuant to the last
sentence of this paragraph. Period High Prices means the highest price
at which a share of the Company's Common Stock has traded on the
National Association of Securities Dealers National Market for each of
the following periods: (A) from the Approval Date to the first
adjustment of the Fixed Component; (B) each period from an adjustment
to the Fixed Component to the next such adjustment following the first
adjustment of the Fixed Component; and (C) the period from the last
adjustment to the Fixed Component immediately prior to the exercise of
the Warrant. Each Period High Price shall be adjusted in the same
proportion as the adjustment to the Fixed Component each time that the
Fixed Component was adjusted subsequent to the time that such Period
High Price was in effect.
-3-
<PAGE> 23
(b) If there shall occur any capital reorganization or
reclassification of the Company's Common Stock (other than a change in
par value or a subdivision or combination as provided for in Section
2(a) above), or any consolidation or merger of the Company with or into
another corporation, or a transfer of all or substantially all of the
assets of the Company, then, as part of any such reorganization,
reclassification, consolidation, merger or sale, as the case may be,
lawful provision shall be made so that the Registered Holder of this
Warrant shall have the right thereafter to receive upon the exercise
hereof the kind and amount of shares of stock or other securities or
property which the Registered Holder would have been entitled to
receive if, immediately prior to any such reorganization,
reclassification, consolidation, merger or sale, as the case may be,
the Registered Holder had held the number of shares of Common Stock
which were then purchasable upon the exercise of this Warrant. In any
such case, appropriate adjustment (as reasonably determined in good
faith by the Board of Directors of the Company) shall be made in the
application of the provisions set forth herein with respect to the
rights and interests thereafter of the Registered Holder of this
Warrant, such that the provisions set forth in this Section 2
(including provisions with respect to adjustment of the Purchase Price)
shall thereafter be applicable, as nearly as is reasonably practicable,
in relation to any shares of stock or other securities or property
thereafter deliverable upon the exercise of this Warrant.
(c) When any adjustment is required to be made in the
Purchase Price, the Company shall promptly mail to the Registered
Holder a certificate setting forth the Purchase Price after such
adjustment and setting forth a brief statement of the facts requiring
such adjustment. Such certificate shall also set forth the kind and
amount of stock or other securities or property into which this Warrant
shall be exercisable following the occurrence of any of the events
specified in Section 2(a) or (b) above.
3. FRACTIONAL SHARES. The Company shall not be required upon the
exercise of this Warrant to issue any fractional shares, but shall make
an adjustment therefor in cash on the basis of the mean between the low
bid and high asked prices of the Warrant Shares on the over-the-counter
market as reported by the National Association of Securities Dealers
Automated Quotations System or the closing market price of the Warrant
Shares on a national securities exchange or the last reported sales
price on the NASDAQ National Market on the trading day immediately
prior to the date of exercise, whichever is applicable, or if none is
applicable, then on the basis of the then market value of the Warrant
Shares
-4-
<PAGE> 24
as shall be reasonably determined in good faith by the Board of
Directors of the Company.
4. Requirements for Transfer.
--------------------------
(a) This Warrant may only be transferred to the extent
permitted by Section 9(b). The Warrant Shares shall not be sold or
transferred unless either (i) they first shall have been registered
under the Securities Act, or (ii) the Company first shall have been
furnished with an opinion, in form and substance satisfactory to the
Company, of legal counsel satisfactory to the Company to the effect
that such sale or transfer is exempt from the registration requirements
of the Securities Act.
(b) Each certificate representing Warrant Shares shall bear a
legend substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such securities are registered
under such Act or an opinion, in form and substance
satisfactory to the Company, of counsel satisfactory to the
Company is obtained to the effect that such sale or transfer
is exempt from the registration requirements of the
Securities Act."
The foregoing legend shall be removed from the certificates
representing any Warrant Shares, at the request of the Registered
Holder, at such time as they become eligible for resale pursuant to
Rule 144(k) under the Securities Act or upon registration.
5. NO IMPAIRMENT. The Company will not, by amendment of its
charter or through reorganization, consolidation, merger, dissolution,
sale of assets or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such
terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this
Warrant against impairment.
-5-
<PAGE> 25
6. Notices of Record Date, etc. In case:
----------------------------
(a) the Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time deliverable upon
the exercise of this Warrant) for the purpose of entitling or enabling
them to receive any dividend or other distribution, or to receive any
right to subscribe for or purchase any shares of stock of any class or
any other securities, or to receive any other right; or
(b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation
or merger of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the surviving entity),
or any transfer of all or substantially all of the assets of the
Company; or
(c) of the voluntary or involuntary dissolution,
liquidation or winding-up of the Company,
then, and in each such case, the Company will mail or cause to be
mailed to the Registered Holder of this Warrant a notice specifying, as
the case may be, (i) the date on which a record is to be taken for the
purpose of such dividend, distribution or right, and stating the amount
and character of such dividend, distribution or right, or (ii) the
effective date on which such reorganization, reclassification,
consolidation, merger, transfer, dissolution, liquidation or winding-up
is to take place, and the time, if any which is to be fixed, as of
which the holders of record of Common Stock (or such other stock or
securities at the time deliverable upon the exercise of this Warrant)
shall be entitled to exchange their shares of Common Stock (or such
other stock or securities) for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger,
transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least ten (10) days, or if such advance notice is not
practicable, then such shorter period as may be practicable, prior to
the record date or effective date for an event specified in Section
6(a), (b) or (c).
7. RESERVATION OF STOCK. On and after the Approval Date the
Company will at all times reserve and keep available, solely for
issuance and delivery upon the exercise of this Warrant, such number of
Warrant Shares and other stock, securities and property, as from time
to time shall be issuable upon the exercise of this Warrant.
-6-
<PAGE> 26
8. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and (in the case of loss, theft or
destruction) upon delivery of an indemnity agreement (with surety if
reasonably required) in an amount reasonably satisfactory to the
Company, or (in the case of mutilation) upon surrender and cancellation
of this Warrant, the Company will issue, in lieu thereof, a new Warrant
of like tenor.
9. Transfers, Etc.
---------------
(a) The Company will maintain a register containing the name
and address of the Registered Holder of this Warrant. The Registered
Holder may change its address as shown on the Warrant register by
written notice to the Company requesting such change.
(b) Subject to the provisions of Section 4 hereof, this
Warrant and all rights hereunder are transferable, in whole but not in
part, solely to an Affiliate, as such term is defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended, of the
Registered Holder upon surrender of this Warrant with a properly
executed assignment (in the form of EXHIBIT II hereto) at the principal
office of the Company.
(c) Until any transfer of this Warrant is made in the Warrant
register, the Company may treat the Registered Holder of this Warrant
as the absolute owner hereof for all purposes; provided, however, that
if and when this Warrant is properly assigned in blank, the Company may
(but shall not be obligated to) treat the bearer hereof as the absolute
owner hereof for all purposes, notwithstanding any notice to the
contrary.
10. GIVING OF NOTICES, ETC. All notices and other communications
from the Company to the Registered Holder of this Warrant shall be in
writing and shall be delivered and effective in accordance with the
terms of the Warrant Purchase Agreement between the Company and
Purchaser of even date.
11. NO RIGHTS AS STOCKHOLDER. Until the exercise of this
Warrant, the Registered Holder of this Warrant shall not have or
exercise any rights by virtue hereof as a stockholder of the Company.
12. CHANGE OR WAIVER. Any term of this Warrant may be changed
or waived only by an instrument in writing signed by the party against
which enforcement of the change or waiver is sought.
-7-
<PAGE> 27
13. HEADINGS. The headings in this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning of
any provision of this Warrant.
14. GOVERNING LAW. This Warrant will be governed by and
construed in accordance with the internal laws (and not the laws of
conflicts) of the State of New Hampshire.
15. NO THIRD PARTY BENEFICIARIES. This Warrant shall not confer
any rights or remedies upon any person other than the signatories
hereto and their respective successors and permitted assigns.
16. ENTIRE AGREEMENT. Except for the Warrant Purchase Agreement,
this Warrant constitutes the entire agreement among the signatories
hereto and supersedes any prior understandings, agreements or
representations by or among the signatories hereto, written or oral,
that may have related in any way to the subject matter hereof.
17. COUNTERPARTS. This Warrant may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
18. NOUNS AND PRONOUNS. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of names and pronouns
shall include the plural and vice-versa.
19. SEVERABILITY. Any provision of this Warrant that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
[Corporate Seal] GREAT BAY POWER CORPORATION
ATTEST: By:____________________________
Title: President
_______________________ Address: 20 Ladd Street
Portsmouth, NH
-8-
<PAGE> 28
AGREED AND ACCEPTED:
PECO ENERGY COMPANY
By:________________________
Title:_____________________
Address:
-9-
<PAGE> 29
EXHIBIT I
---------
PURCHASE FORM
-------------
To: Dated:
------------------ --------------
The undersigned, pursuant to the provisions set forth in the
attached Warrant (No. 1), hereby irrevocably elects to purchase ______
shares of the Common Stock covered by such Warrant and herewith makes
payment of $____________, representing the full purchase price for such
shares at the price per share provided for in such Warrant.
Signature:
--------------------------
Address:
----------------------------
----------------------------
<PAGE> 30
EXHIBIT II
----------
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, ________________________________________
hereby sells, assigns and transfers all of the rights of the
undersigned under the attached Warrant (No. 1) with respect to all of
the shares of Common Stock covered thereby to the following person(s):
Name of Assignee Address No. of Shares
---------------- ------- -------------
The undersigned represents and warrants to Great Bay Power Company
that this assignment of the Warrant is permitted by Section 9(b) of the
Warrant.
Dated:______________ Signature:_______________________________
Dated:______________ Witness:_________________________________
<PAGE> 31
EXHIBIT A
---------
SCHEDULE 3.2
------------
OMEGA CAPITAL PARTNERS L.P.
OMEGA INSTITUTIONAL PARTNERS L.P.
OMEGA OVERSEAS PARTNERS L.P.
COMMON FUND
OMEGA OVERSEAS PARTNERS II LTD.
GOLDMAN SACHS & CO. PROFIT SHARING
MASTER TRUST
GOLDMAN SACHS & CO., POOLED IRA 2
88 PINE STREET
ELLIOTT ASSOCIATES, L.P.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To BayCorp Holdings, Ltd.:
As independent public accountants, we hereby consent to the use of our
report dated April 8, 1996 on the financial statement of BayCorp Holdings, Ltd.
(and to all references to our Firm) included in or made a part of this
Registration Statement and related Prospectus of BayCorp Holdings, Ltd. for the
registration of 8,439,948 shares of its common stock).
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 28, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Great Bay Power Corporation:
As independent public accountants, we hereby consent to the use of our
report dated January 26, 1996 on the financial statements of Great Bay Power
Corporation (and to all references to our Firm) included in or made a part of
this Registration Statement and related Prospectus of BayCorp Holdings, Ltd. for
the registration of 8,439,948 shares of BayCorp Holdings, Ltd. common stock.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 28, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the inclusion in this Registration Statement of BayCorp
Holdings, Ltd. on Form S-4 of our report dated April 7, 1994 except as to the
information presented in Note H for which the date is November 23, 1994, on our
audit of the financial statements of Great Bay Power Company (formerly EUA Power
Corporation). We also consent to the references to our firm under the caption
"Experts."
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
May 28, 1996
<PAGE> 1
PROXY PROXY
EXHIBIT 99.1
GREAT BAY POWER CORPORATION
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [ ], 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF THE COMPANY AND SHOULD BE RETURNED AS
SOON AS POSSIBLE TO BOSTON FINANCIAL DATA SERVICES, INC.
The undersigned, having received notice of the Special Meeting of
Shareholders of Great Bay Power Corporation (the "Company") to be held on
[ ], 1996 at 10:00 a.m. at the offices of Hale and Dorr, 60 State
Street, Boston, Massachusetts, and revoking all prior proxies, hereby appoints
John A. Tillinghast and Frank W. Getman Jr., and each of them, attorneys or
attorney of the undersigned (with full power of substitution in them and each of
them) for and in the name(s) of the undersigned to attend the Special Meeting,
and any adjournments or postponements thereof, and there to vote and act upon
the following matters in respect of all shares of stock of the Company which the
undersigned will be entitled to vote or act upon, with all the powers the
undersigned would possess if personally present.
In their discretion, the proxies named herein are authorized to vote on
such other matters as may properly come before the Special Meeting.
This proxy, when properly executed, will be voted in the manner directed by
the undersigned shareholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1 AND PROPOSAL 2. Any proxy given pursuant to this solicitation may
be revoked by the person giving it at any time before the shares represented by
such proxy are voted at the Special Meeting by (i) filing with the Secretary of
Great Bay a written notice of such revocation bearing a later date than the
proxy, (ii) duly executing a proxy relating to the same shares bearing a later
date and delivering it to the Secretary of Great Bay before the taking of the
vote at the Special Meeting, or (iii) voting in person at the Special Meeting.
Attendance at the Special Meeting will not in and of itself constitute a
revocation of a proxy.
1. To approve the Agreement and Plan of Merger, dated as of
, 1996, by and among Great Bay Power Corporation, BayCorp
Holdings, Ltd. and GB Transitory Subsidiary, Inc., providing for the merger of
GB Transitory Subsidiary, Inc., a New Hampshire corporation and a wholly owned
subsidiary of Great Bay Holdings Corp., a Delaware corporation, with and into
the Company, pursuant to which, among other things, each outstanding share of
Great Bay Common Stock, $.01 par value per share, other than those shares held
by Great Bay shareholders who properly exercise their dissenters' rights under
New Hampshire law, will be converted into the right to receive one share of
common stock, $.01 par value per share, of Holding Company.
FOR / / AGAINST / / ABSTAIN / /
2. To approve Holding Company's 1996 Stock Option Plan.
FOR / / AGAINST / / ABSTAIN / /
Please sign exactly as name appears hereon. When shares are held by joint
owners, both should sign. When signing as an attorney, executor, administrator
or other fiduciary, please give your full title as such. If a corporation,
please sign in full corporate name by president or other authorized officer. If
a partnership, please sign in partnership name by authorized person.
Dated:
, 1996
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Signature(s)
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Print Name
<PAGE> 2
PROXY
GREAT BAY POWER CORPORATION
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON [ ], 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY AND SHOULD BE RETURNED AS
SOON AS POSSIBLE TO BOSTON FINANCIAL DATA SERVICES, INC.
The undersigned, having received notice of the Special Meeting of
Shareholders of Great Bay Power Corporation ("Great Bay") to be held on
[ ], 1996 at 10:00 a.m. at the offices of Hale and Dorr, 60 State
Street, Boston, Massachusetts, and revoking all prior proxies, hereby appoints
John A. Tillinghast and Frank W. Getman Jr., and each of them, attorneys or
attorney of the undersigned (with full power of substitution in them and each of
them) for and in the name(s) of the undersigned to attend the Special Meeting,
and any adjournments or postponements thereof, and there to vote and act upon
the following matters in respect of all shares of stock of the Company which the
undersigned will be entitled to vote or act upon, with all the powers the
undersigned would possess if personally present.
In their discretion, the proxies named herein are authorized to vote on such
other matters as may properly come before the Special Meeting.
This proxy, when properly executed, will be voted in the manner directed by
the undersigned shareholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1 AND PROPOSAL 2. Any proxy given pursuant to this solicitation may
be revoked by the person giving it at any time before the shares represented by
such proxy are voted at the Special Meeting by (i) filing with the Secretary of
Great Bay a written notice of such revocation bearing a later date than the
proxy, (ii) duly executing a proxy relating to the same shares bearing a later
date and delivering it to the Secretary of Great Bay before the taking of the
vote at the Special Meeting, or (iii) voting in person at the Special Meeting.
Attendance at the Special Meeting will not in and of itself constitute a
revocation of a proxy.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
1. To approve the Agreement and Plan of Merger, dated as of , 1996,
by and among Great Bay, BayCorp Holdings, Ltd. and GB Transitory Subsidiary,
Inc., providing for the merger of GB Transitory Subsidiary, Inc., a New
Hampshire corporation and a wholly owned subsidiary of Great Bay Holdings
Corp., a Delaware corporation, with and into Great Bay pursuant to which,
among other things, each outstanding share of Great Bay Common Stock, $.01
par value per share, other than those shares held by Great Bay shareholders
who properly exercise their dissenters' rights under New Hampshire law, will
be converted into the right to receive one share of common stock, $.01 par
value per share, of Holding Company.
FOR / / AGAINST / / ABSTAIN / /
2. To approve Holding Company's 1996 Stock Option Plan.
FOR / / AGAINST / / ABSTAIN / /
Please sign exactly as name appears hereon. When shares are held by joint
owners, both should sign. When signing as an attorney, executor, administrator
or other fiduciary, please give your full title as such. If a corporation,
please sign in full corporate name by president or other authorized officer. If
a partnership, please sign in partnership name by authorized person.
Dated:..............................., 1996
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Signature(s)
.....................................
Print Name
