<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- - --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 14a-11(c) or Rule 14a-2
BayCorp Holdings, Ltd.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11 (set forth the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- - --------------------------------------------------------------------------------
<PAGE> 2
BAYCORP HOLDINGS, LTD.
20 INTERNATIONAL DRIVE, SUITE 301
PORTSMOUTH, NEW HAMPSHIRE 03801-6809
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 25, 2000
To the Stockholders:
The Annual Meeting of Stockholders of BayCorp Holdings, Ltd. (the
"Company") will be held at the offices of the American Stock Exchange, 86
Trinity Place, New York, New York, on Thursday, May 25, 2000 at 1:00 p.m., local
time, to consider and act upon the following matters:
1. To elect a Board of Directors to serve until the next Annual Meeting of
Stockholders of the Company and until their successors are duly elected
and qualified.
2. To authorize an amendment to the 1996 Stock Option Plan increasing the
number of shares authorized for issuance pursuant to the plan from
600,000 shares to 900,000 shares.
3. To ratify the selection by the Board of Directors of Arthur Andersen LLP
as the Company's independent public accountants for the current fiscal
year.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on April 10, 2000 will be
entitled to notice of and to vote at the Meeting. The stock transfer books of
the Company will remain open for the purchase and sale of the Company's Common
Stock.
All stockholders are cordially invited to attend the Meeting.
By Order of the Board of Directors,
FRANK W. GETMAN JR.
President and Chief Executive Officer
Portsmouth, New Hampshire
April 27, 2000
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND PROMPTLY MAIL IT IN THE ENCLOSED ENVELOPE IN
ORDER TO ASSURE REPRESENTATION OF YOUR SHARES AT THE MEETING. NO POSTAGE NEED BE
AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
<PAGE> 3
BAYCORP HOLDINGS, LTD.
20 INTERNATIONAL DRIVE, SUITE 301
PORTSMOUTH, NEW HAMPSHIRE 03801-6809
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 25, 2000
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of BayCorp Holdings, Ltd. (the "Company") for
use at the Annual Meeting of Stockholders to be held on May 25, 2000 and at any
adjournment of that meeting (the "Meeting"). All proxies will be voted in
accordance with the instructions contained therein, and if no choice is
specified, the proxies will be voted in favor of the proposals set forth in the
Notice of Meeting. Any proxy may be revoked by a stockholder at any time before
it is exercised by giving written notice to that effect to the Secretary of the
Company.
The Company's Annual Report for the fiscal year ended December 31, 1999
(which consists in principal part of the Company's Annual Report on Form 10-K
for such year as filed with the Securities and Exchange Commission (the
"Commission")) is being mailed to stockholders with the mailing of this Notice
and Proxy Statement on or about April 27, 2000. A copy of the Exhibits to the
Company's Annual Report on Form 10-K for such year will be furnished to any
stockholder upon payment of an appropriate processing fee pursuant to a written
request sent to the Secretary, BayCorp Holdings, Ltd., 20 International Drive,
Suite 301, Portsmouth, New Hampshire 03801-6809.
VOTING SECURITIES AND VOTES REQUIRED
On April 10, 2000, the record date for the determination of stockholders
entitled to notice of and to vote at the Meeting, there were outstanding and
entitled to vote an aggregate of 8,273,500 shares of Common Stock of the
Company, $.01 par value per share ("Common Stock"). Stockholders are entitled to
one vote per share.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the meeting shall be
necessary to constitute a quorum for the transaction of business. Abstentions
and "broker non-votes" will be considered as present for quorum purposes but
will not be counted as votes cast. Accordingly, abstentions and broker non-votes
will have no effect on the voting on a matter that requires the affirmative vote
of a certain percentage or a plurality of the votes cast or shares voting on a
matter.
The affirmative vote of the holders of a plurality of the shares of Common
Stock present or represented at the meeting is required for the election of
directors. The affirmative vote of the holders of a majority of the shares of
Common Stock present or represented at the meeting is required for the
authorization of the amendment to the 1996 Stock Option Plan and the
ratification of the selection of Arthur Andersen LLP as the Company's
independent accountants for the current fiscal year.
BAYCORP HOLDINGS, LTD. AS SUCCESSOR TO GREAT BAY POWER CORPORATION
As a result of a corporate restructuring that was effective on January 24,
1997 (the "Restructuring Date"), the Company's principal asset is its 100%
equity interest in Great Bay Power Corporation ("Great Bay"). Unless the context
requires otherwise, references in this Proxy Statement to the Company for events
and time periods before the Restructuring Date reflect treatment of the Company
as the successor to Great Bay.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the ownership of the
Company's Common Stock as of March 1, 2000 and the ownership of the capital
stock of HoustonStreet Exchange, Inc., a subsidiary of the Company
("HoustonStreet" or "HSE"), as of March 21, 2000 by (i) the only persons known
by the Company to own more than five percent of the Company's outstanding
shares, (ii) all directors and nominees
<PAGE> 4
of the Company, (iii) each of the executive officers of the Company named in the
Summary Compensation Table (the "Named Executive Officers") and (iv) all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
BAYCORP PERCENTAGE OF HOUSTONSTREET PERCENTAGE OF
COMMON STOCK BAYCORP CAPITAL STOCK HOUSTONSTREET
BENEFICIALLY COMMON STOCK BENEFICIALLY CAPITAL STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OUTSTANDING(2) OWNED(1) OUTSTANDING
- - ------------------------------------ ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
5% Stockholders
Group consisting of:
Leon G. Cooperman,
Omega Capital Partners, L.P.,
Omega Institutional Partners, L.P.
and
Omega Advisors, Inc.
(the "Omega Group")............... 2,833,600(3) 33.4% 666,667 3.6%
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. and
Martley International, Inc.
(the "Elliott Group")............. 1,978,208(4) 23.3% 666,667 3.6%
c/o Elliott Associates, L.P.
712 Fifth Avenue
36th Floor
New York, NY 10019
Group consisting of:
CNA Financial Corp.,
Continental Insurance Company and
Loews Corporation................. 667,842(5) 7.9% -- --
c/o CNA Financial Corp.
CNA Plaza
Chicago, IL 60685
Directors, Director Nominee and
Executive Officers:
Kenneth A. Buckfire................. 82,400 * -- --
Alexander Ellis III................. 750 * -- --
Stanley I. Garnett, II.............. 46,667(6) * -- --
Frank W. Getman Jr.................. 96,750(7) 1.1% 180,000 *
Michael R. Latina................... 40,000(8) * -- --
Lawrence M. Robbins................. -- -- -- --
John A. Tillinghast................. 191,100(9) 2.2% -- --
All directors and executive officers
as a group (7 individuals)........ 457,667(8)(10) 5.2% 180,000 *
</TABLE>
- - ---------------
* Less than 1% of the total number of shares outstanding.
(1) The number of shares of 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 1, 2000 in the
2
<PAGE> 5
case of the Company, or within 60 days after March 21, 2000, in the case of
HoustonStreet. 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 8,273,500 shares outstanding
as of March 1, 2000, 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 1, 2000.
(3) The information presented herein is as reported in, and based upon, written
information provided by the indicated stockholders to the Company as of
March 1, 2000. Leon G. Cooperman reported beneficial ownership of 2,833,600
shares, with sole voting and dispositive power with respect to 2,132,820 of
such shares and shared voting and dispositive power with respect to 700,800
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 76,520 shares, with sole
voting and dispositive power as to such shares. Omega Advisors, Inc.
("Omega Advisors") reported beneficial ownership of 1,725,340 shares with
sole voting and dispositive power with respect to 1,024,540 of such shares
and shared voting and dispositive power with respect to 700,800 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 stockholders 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"). Collectively, these stockholders and
other affiliates of Mr. Cooperman and Omega Advisors, Inc. are referred to
as the "Omega Group" or "Omega Group entities."
(4) The information presented herein is as reported in, and based upon, two
Form 4s, the first filed with the Commission on February 5, 1998 by Elliott
Associates, L.P., a Delaware limited partnership ("Elliott"), and the
second filed with the Commission on March 10, 2000 by Westgate
International, L.P., a Cayman Islands limited partnership ("Westgate").
Elliott reported beneficial ownership of 894,209 shares and Westgate
reported beneficial ownership of 1,083,999 shares. In a Schedule 13D filed
by the indicated stockholders with the Commission on February 17, 1997,
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 and Braxton Associates, L.P., a New Jersey
limited partnership, which is controlled by Mr. Singer, are the general
partners of Elliott. Hambledon, Inc., a Cayman Islands corporation, is the
sole general partner of Westgate. Martley expressly disclaimed equitable
ownership of and pecuniary interest in any Common Stock. The stockholders
identified in this note may be deemed to be a group for purposes of Rule
13d-3 promulgated under the Exchange Act. Collectively, these stockholders
and other affiliates of Elliott Associates, L.P. are referred to as the
"Elliott Group."
(5) The information presented herein is as reported in, and based upon, written
information provided to the Company by Continental Casualty Company and
Continental Assurance Company on behalf of Continental Assurance Company
Pension Investment Fund as of March 10, 1999 and a Schedule 13G filed by
the indicated stockholders with the Commission on February 13, 1998. Each
of the indicated stockholders reported beneficial ownership of all of the
667,842 shares with shared voting and dispositive power with respect to all
of these shares. Loews Corporation holds in excess of 84% of the equity of
CNA Financial Corp., which in turn owns 100% of the equity of Continental
Casualty Company, an Illinois domiciled insurance company. Continental
Casualty Company is the direct owner of 147,569 shares and Continental
Assurance Company is the direct owner of 520,273 shares. The Schedule 13G
states that under Illinois Law, assets owned by Continental Casualty
Company are solely under the control of the board of directors of the
insurer. The characterization of shared dispositive power with the parent
holding company is made solely as a consequence of Commission
interpretations regarding control of the subsidiary. CNA Financial Corp.
and Loews Corporation disclaim beneficial ownership of all shares held by
Continental Casualty Company. The stockholders identified in this note may
be deemed to be a group for purposes of Rule 13d-3 promulgated under the
Exchange Act.
3
<PAGE> 6
(6) Consists of 46,667 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1996 Stock Option
Plan.
(7) Consists of 93,750 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1996 Stock Option
Plan.
(8) Consists of 40,000 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1996 Stock Option
Plan. Excludes the 1,978,208 shares deemed beneficially owned by the
Elliott Group. See footnote (4) above. Mr. Latina is a portfolio manager
for Elliott Associates, L.P. Mr. Latina disclaims beneficial ownership of
all shares deemed beneficially owned by the Elliott Group.
(9) Includes 185,000 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1996 Stock Option
Plan.
(10) Includes 510,667 shares of Common Stock issuable upon exercise of
outstanding stock options granted under the Company's 1996 Stock Option
Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's subsidiary, HoustonStreet Exchange, Inc. ("HoustonStreet"),
sold shares of HoustonStreet Series A Convertible Preferred Stock at $3.75 per
share to entities related to the Omega Group and the Elliott Group as follows:
<TABLE>
<CAPTION>
SALE DATE PURCHASER SHARES TOTAL PURCHASE PRICE
- - --------- --------- ------ --------------------
<S> <C> <C> <C>
2/2/2000 Omega Group entities 266,667 $1,000,001
2/2/2000 Elliott Associates, L.P. 266,667 1,000,001
3/6/2000 Omega Group entities 400,000 1,500,000
3/6/2000 Elliott Associates, L.P. 400,000 1,500,000
</TABLE>
As part of HoustonStreet's Series A financing, HoustonStreet sold 2,426,669
additional shares of its Series A Stock to third parties, also at $3.75 per
share. Each of these third parties, as well as HoustonStreet, Omega Group
entities and Elliott Advisors, L.P., entered into a (i) Series A Convertible
Preferred Stock Purchase Agreement, (ii) Stockholders' Voting Agreement, (iii)
Investor Rights Agreement and (iv) Right of First Refusal and Co-Sale Agreement.
Lawrence M. Robbins, a director of the Company, is a general partner of Omega
Advisors, Inc. Michael R. Latina, a director of the Company, is a portfolio
manager for an affiliate of Elliott Associates, L.P. The Company is also a party
to the Stockholders' Voting Agreement and the Investor Rights Agreement.
The Stockholders' Voting Agreement requires the parties to cause to be
elected to the board of directors of HoustonStreet one member designated by
Omega Advisors, Inc., one member designated by Elliott Associates, L.P., one
member designated by Equiva Trading Company, one member designated by Williams
Energy Marketing and Trading Company, one member who serves as the Company's
Chief Executive Officer and up to three additional directors as described in the
Agreement. The Investor Rights Agreement requires that HoustonStreet provide
certain registration rights and rights of first refusal to the holders of Series
A Stock. In addition, the Right of First Refusal and Co-Sale Agreement requires
that the purchasers of Series A Stock provide each other with certain rights of
first refusal and rights of co-sale in the event that a Series A stockholder
seeks to sell its shares of Series A Stock.
ELECTION OF DIRECTORS
The persons named in the enclosed proxy card (John A. Tillinghast and Frank
W. Getman Jr.) will vote to elect the six nominees named below as Directors of
the Company unless authority to vote for the election of any or all of the
nominees is withheld by marking the proxy card to that effect. Except for Mr.
Ellis, each nominee is presently serving as a director. Each nominee has
consented to being named in this Proxy Statement and to serve if elected.
4
<PAGE> 7
Each director will be elected to hold office until the next annual meeting
of stockholders or until his successor is elected and qualified. If for any
reason any nominee should become unavailable for election prior to the Meeting,
the person acting under the proxy may vote the proxy for the election of a
substitute. It is not presently expected that any of the nominees will be
unavailable.
Set forth below are the name and age of each person nominated to serve on
the Company's Board of Directors and the positions and offices held by him, his
principal occupation and business experience during the past five years, the
names of other publicly held companies of which he serves as a director and the
year of the commencement of his term as a director of the Company. Information
with respect to the number of shares of Common Stock beneficially owned by each
director and director nominee, directly or indirectly, as of March 1, 2000,
appears under "Security Ownership of Certain Beneficial Owners and Management."
ALEXANDER ELLIS, age 50, has been a merchant banker with RockPort Partners,
LLC, a merchant and investment banking firm serving the electric and energy
industries, since January 1999. Since May 1996, Mr. Ellis has been a member of
Acadia Bay Energy Co., LLC, a developer of electric power generating stations.
From May 1996 to June 1998, Mr. Ellis was a member of Casco Bay Energy Co., LLC,
the developer of a gas-fired electric generating station in Veazie, Maine. Since
its founding in July 1997, Mr. Ellis has served as a Vice President of Wattage
Monitor Inc., a web-based electric rate and service information provider. Mr.
Ellis is a director of Wattage Monitor Inc. and Brazilian Resources, Inc., a
mining and electric company. Mr. Ellis holds a B.A. in Political Science from
Colorado College and an M.B.A. from Yale School of Management.
STANLEY I. GARNETT, age 56, has served as a director of the Company since
June 1997. Mr. Garnett has been a senior advisor to PHB Hagler Bailly, an
economic and management consulting firm, since September 1998. Mr. Garnett was
an Executive Vice President of Florida Progress Corporation, an electric
utility, from April 1997 to August 1998. From March 1996 until March 1997, Mr.
Garnett was a senior advisor with Putnam, Hayes & Bartlett, an economic and
management consulting firm. From September 1981 until December 1995, he was a
senior executive at Allegheny Power System, Inc., an electric utility, serving
as the company's chief legal officer and CFO from 1990 until December 1995. Mr.
Garnett holds a B.A. in Business Administration from Colby College, an M.B.A.
from the Wharton Graduate School of Commerce and Finance and a J.D. from New
York University School of Law.
FRANK W. GETMAN JR., age 36, has served as President and Chief Executive
Office of the Company and Great Bay since May 1998. From September 1996 until
May 1998, Mr. Getman was Chief Operating Officer of the Company and Great Bay.
Mr. Getman served as Vice President, Secretary and General Counsel of Great Bay
from August 1995 to May 1998. From September 1991 to August 1995, Mr. Getman was
an attorney with the law firm of Hale and Dorr LLP, 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.
MICHAEL R. LATINA, age 27, has served as a director of the Company since
February 1999. Mr. Latina has been a portfolio manager for Stonington Management
Corporation, an affiliate of Elliott Associates, L.P., since March 1996. Mr.
Latina is a director of Prime Natural Resources, Inc., an independent oil and
gas exploration and production company, Odyssea Marine, Inc., a marine services
company, Intedyne LLC, a provider of drilling tools to the oil and gas and
utility industries, Horizon Offshore, Inc., an offshore construction company,
and Grant Geophysical, Inc., a seismic data acquisition company. He served as a
Director of Solid State Geophysical, Inc. from 1996 to 1997 and, from 1994 to
1996, worked as an investment banker with Bear, Stearns & Co., Inc. Mr. Latina
holds a B.S. in Finance from New York University's Stern School of Business.
LAWRENCE M. ROBBINS, age 30, has served as a director of the Company since
February 1999. Mr. Robbins is a general partner of Omega Advisors, Inc., where
he has been a portfolio manager since January 1995. From July 1992 to January
1995, Mr. Robbins was an analyst and associate at Gleacher & Co., an investment
bank specializing in merger and acquisition advisory services. Mr. Robbins is a
Certified Public Accountant and graduated from the University of Pennsylvania,
earning degrees from the Wharton School and the Moore School of Engineering.
5
<PAGE> 8
JOHN A. TILLINGHAST, age 72, has served as a director of the Company since
November 1994 and was the Chief Executive Officer of the Company from April 1995
until May 1998. Mr. Tillinghast, who served as the Company's Chief Engineer
since April 1995, informed the Company that he plans to retire in May 2000 and
therefore will not continue to serve as the Company's Chief Engineer after May
2000. Since 1987, Mr. Tillinghast has served as President and the sole
stockholder of Tillinghast Technology Interests, Inc. ("TILTEC"), 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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and holders of more than 10% of the Company's Common Stock to
file with the Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Such
persons are required by Commission regulations to furnish the Company with
copies of all Section 16(a) forms filed by such person with respect to the
Company.
Based solely on the Company's review of such forms furnished to the Company
and written representations from certain reporting persons, the Company believes
that during 1999, its directors, executive officers and holders of more than 10%
of the Company's Common Stock complied with all Section 16(a) filing
requirements.
BOARD AND COMMITTEE MEETINGS
The Board of Directors met six times (including by telephone conference and
by written consent) during 1999. All directors attended at least 75% of the
meetings of the Board of Directors and of the committees on which they served.
The Board of Directors has a Compensation Committee, which makes
recommendations concerning salaries and incentive compensation for employees of
and consultants to the Company and administers and grants stock options pursuant
to the Company's 1996 Stock Option Plan. The Compensation Committee met in
February 2000 to review and consider officer compensation for 1999 and establish
compensation policies for 2000. The current members of the Compensation
Committee are Messrs. Garnett, Latina, Robbins and Tillinghast. The Company
anticipates that Mr. Ellis, if elected to the Board of Directors, will serve on
the Compensation Committee.
The Board of Directors has an Audit Committee, which reviews the results
and scope of the audit and other services provided by the Company's independent
public accountants. The Audit Committee met in March 2000 to review the results
of the audit of fiscal year 1999. The current members of the Audit Committee are
Messrs. Buckfire, Garnett, Latina and Robbins. The Company anticipates that Mr.
Ellis, if elected to the Board of Directors, will serve on the Audit Committee.
The Company has no nominating committee of the Board of Directors.
COMPENSATION OF DIRECTORS
Employee directors do not receive any compensation for serving on the
Board. Non-employee directors receive $2,500 per quarter, plus reasonable
expenses. Non-employee directors are also eligible to receive stock option
grants in accordance with a formula specified in the 1996 Stock Option Plan.
6
<PAGE> 9
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth certain
information concerning the compensation of the Company's Chief Executive Officer
and the Company's former Chief Executive Officer.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------- ----------------------
SECURITIES UNDERLYING
OPTIONS/SARS
SALARY BONUS OTHER ANNUAL (NO. OF SHARES AND
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(1) COMPENSATION($) COMPANY)(#)(2)
- - --------------------------- ---- -------- ------- --------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Frank W. Getman Jr........ 1999 $156,609 $ 0 $12,504(3) 164,000(4) (MWH)
President and 720,000 (HSE)
Chief Executive Officer 1998 130,045 50,000 25,000(3) 93,750 (MWH)
1997 100,000 41,163 25,000(3) 0
John A. Tillinghast....... 1999 142,000 0 0 20,000 (MWH)
Former President and 1998 134,583 0 0 165,000 (MWH)
Chief Executive Officer 1997 130,000 0 0 0
</TABLE>
- - ---------------
(1) Amounts shown represent cash compensation earned by the Named Executive
Officers for the fiscal years presented. In February 2000, the Company paid
a bonus of $100,000 to Mr. Getman.
(2) The option exercise price is equal to the fair market value of the Common
Stock on the date of grant. In addition to receiving options to purchase
shares of Common Stock of the Company (designated in the table as MWH), Mr.
Getman received options in July 1999 to purchase shares of common stock of
HoustonStreet (designated in the table as HSE) as part of HoustonStreet's
stock option program.
(3) Amount shown represents compensation in the form of partial forgiveness of a
loan to Mr. Getman. See "Employment Agreements."
(4) Represents options granted to Mr. Getman in July 1999 that are subject to
the approval by the Company's stockholders of an amendment to the Company's
1996 Stock Option Plan. See "Authorization of Amendment to 1996 Stock Option
Plan."
Option/SAR Grant Table. The following table sets forth certain information
regarding options and SARs granted during 1999 by the Company to its executive
officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES PERCENT OF TOTAL RATES OF STOCK
UNDERLYING OPTIONS/ SARS PRICE APPRECIATION
OPTIONS/SARS GRANTED TO EXERCISE OR FOR OPTION TERM(2)
GRANTED AND EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME COMPANY (#) FISCAL YEAR ($/SH)(1) DATE 5%($) 10%($)
- - ---- -------------- ---------------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Frank W. Getman Jr......... 164,000 (MWH) 67.4% $6.875 7/30/2006 $459,006 $1,069,679
480,000 (HSE) 57.1 1.25 7/30/2006 244,260 569,230
240,000 (HSE) 28.6 .08 7/30/2006 804,276 1,129,246
John A. Tillinghast........ 20,000 (MWH) 8.2 2.875 4/28/2006 23,408 54,551
</TABLE>
- - ---------------
(1) The exercise price of the MWH options is equal to the fair market value of
the Company's Common Stock on the date of grant. The exercise price of the
HSE options equals or exceeds the fair market value of HoustonStreet's
Common Stock on the date of grant. The exercisability of these options is
accelerated upon the occurrence of a change in control (as defined in the
1996 Stock Option Plan for the MWH options and in HoustonStreet's 1999 Stock
Incentive Plan for the HSE options).
7
<PAGE> 10
(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 the Company's Common Stock, in the case
of the MWH options, the performance of HoustonStreet Common Stock, in the
case of the HSE options, the optionholder's continued employment through the
option period, and the date on which the options are exercised.
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, 1999 by each of the Company's executive officers and the
number and value of unexercised options held by each of the these executive
officers on December 31, 1999.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT FISCAL OPTIONS/SARS AT
YEAR-END (#)(1) FISCAL YEAR-END ($)(2)
SHARES ---------------------- ----------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME COMPANY EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- - ---- ------- ------------ ------------ ---------------------- ----------------------
<S> <C> <C> <C> <C> <C>
Frank W. Getman Jr. ... MWH 0 0 93,750/164,000 $448,828/$323,900
HSE 0 0 180,000/540,000 $340,002/$1,020,006
John A. Tillinghast.... MWH 0 0 185,000/0 $926,088/$0
</TABLE>
- - ---------------
(1) MWH options were granted under the Company's 1996 Stock Option Plan. HSE
options were granted under HoustonStreet's 1999 Stock Incentive Plan.
(2) For the MWH options, based on the fair market value of the Company's Common
Stock on December 31, 1999 ($9.6875). For the HSE options, based on the fair
market value of HSE Common Stock on December 31, 1999 ($2.75).
EMPLOYMENT AGREEMENTS
On May 5, 1998, the Company entered into an employment agreement with Frank
W. Getman Jr. (the "Getman Employment Agreement") pursuant to which Mr. Getman
agreed to serve as the Company's President and Chief Executive Officer through
July 31, 2000. The Getman Employment Agreement provides for an initial annual
salary of $150,000 with an increase to $160,000 after May 5, 1999. In addition,
the Company loaned Mr. Getman $25,000 on May 5, 1998 to purchase the Company's
Common Stock. The Company forgave $12,500 of the loan on May 5, 1999 and will
forgive $12,500 of the loan on May 5, 2000, so long as Mr. Getman remains
employed by the Company on May 5, 2000. If before May 5, 2000, 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 the Company $12,500, plus
interest accrued on that amount since May 5, 1998 at an interest rate of 6% per
year.
If Mr. Getman's employment with the Company 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, shall
be immediately forgiven; and (iii) all outstanding stock options shall become
immediately exercisable. Under certain circumstances identified in the Getman
Employment Agreement, the Company may be required to pay to Mr. Getman
additional compensation such that the total of the amounts payable under clause
(i) above and the value of Mr. Getman's options (as defined in the Getman
8
<PAGE> 11
Employment Agreement) is $500,000. A Qualifying Termination will be treated as
having occurred if, prior to the second anniversary of a Change in Control, (i)
Mr. Getman's employment is terminated other than for cause or (ii) Mr. Getman
voluntarily resigns 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.
On May 5, 1998, the Company entered into an employment agreement with John
A. Tillinghast (the "Tillinghast Employment Agreement") pursuant to which Mr.
Tillinghast agreed to serve as Chairman of the Company's Board of Directors and
Chief Engineer through May 5, 2000. Under the agreement, Mr. Tillinghast agreed
to work for approximately 400 hours per year at a rate of $250 per hour.
Additionally, the Tillinghast Employment Agreement contains a one year trailing
non-solicitation and noncompetition covenant. Mr. Tillinghast informed the
Company that he plans to retire in May 2000 and therefore will not continue to
serve as the Company's Chief Engineer after May 2000. Accordingly, the Company
does not anticipate that it will renew the Tillinghast Employment Agreement.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Company's Board of Directors is
responsible for establishing compensation policies with respect to the Company's
executive officers. Currently, the Company's only executive officer is its
President and Chief Executive Officer. The objectives of the Company's executive
compensation program are to establish compensation levels designed to enable the
Company to attract, retain and reward executive officers who contribute to the
long-term success of the Company so as to enhance stockholder value. Stock
options granted under the 1996 Stock Option Plan are a key component of the
executive compensation program and are intended to provide executives with an
equity interest in the Company so as to link a meaningful portion of the
compensation of the Company's executives with the performance of the Company's
Common Stock. In connection with the creation and launch in 1999 of
HoustonStreet, a subsidiary of the Company that developed and operates an
Internet-based trading platform and information portal for wholesale energy
traders, HoustonStreet granted to key HoustonStreet employees stock options to
acquire shares of HoustonStreet Common Stock.
In July 1999, the Company's Board of Directors approved a grant to Mr.
Getman of options to purchase 164,000 shares of the Company's Common Stock at a
price per share equal to the closing price of the Company's Common Stock on July
30, 1999 ($6.875). The options granted to Mr. Getman in July 1999 are subject to
the approval by the Company's stockholders of an amendment to the Company's 1996
Stock Option Plan. See "Authorization of Amendment to 1996 Stock Option Plan."
In July 1999, the Board of Directors of HoustonStreet approved a grant to
Mr. Getman of options to purchase 720,000 shares of HoustonStreet Common Stock
at a weighted average exercise price of $.875 per share. One sixth of these
options vested in January 2000 and the remaining five sixths vest in 30 equal
monthly increments beginning in February 2000 and ending in July 2002. All of
these HoustonStreet options expire in July 2006.
In May 1998, the Compensation Committee approved a new employment agreement
with Mr. Getman pursuant to which Mr. Getman agreed to serve as the President
and Chief Executive Officer of the Company at an annual salary of $150,000
through May 4, 1999 and $160,000 for the following year. See "Employment
Agreements." The Committee determined Mr. Getman's compensation based on their
judgment of Mr. Getman's historical and expected contributions to the Company
and the value of his experience and knowledge of the Company's industry.
Section 162(m) of the Internal Revenue Code (the "Code") generally
disallows a tax deduction to public companies for compensation in excess of
$1,000,000 paid to its chief executive officer and each of its four other most
highly compensated executive officers. Qualifying performance-based compensation
will not be subject to the deduction limit if certain requirements are met. The
Committee periodically reviews the potential consequences of Section 162(m) and
may structure the performance-based portion of its executive compensation to
comply with certain exemptions to Section 162(m). However, the Committee
reserves the right to use its judgment to authorize compensation payments that
do not comply with the exemptions to
9
<PAGE> 12
Section 162(m). In any event, there can be no assurance that compensation
attributable to stock options granted under the 1996 Stock Option Plan will be
exempt from Section 162(m).
COMPENSATION COMMITTEE
Stanley I. Garnett
Michael R. Latina
Lawrence M. Robbins
John A. Tillinghast
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's Compensation Committee are Messrs.
Garnett, Latina, Robbins and Tillinghast. No executive officer of the Company
has served as a director or member of the compensation committee (or other
committee serving an equivalent function) of any other entity, whose executive
officers served as a director of or member of the Compensation Committee of the
Company.
10
<PAGE> 13
STOCK PERFORMANCE GRAPH
The following graph compares cumulative total stockholder return on the
Company's Common Stock and in the case of periods before the Restructuring Date,
on the Common Stock of Great Bay Power Corporation, the Company's predecessor
and currently a wholly owned subsidiary of the Company, with the cumulative
total return for the S&P 500 Stock Index and the Philadelphia Stock Exchange
Utility Index. Great Bay's Common Stock was first registered under Section 12 of
the Exchange Act on April 17, 1995. This graph assumes the investment of $100 on
April 17, 1995 in Great Bay's Common Stock, the S&P 500 Stock Index and UTY
Philadelphia Stock Exchange Utility Index and assumes dividends are reinvested.
Measurement points are at April 17, 1995, December 29, 1995, December 31, 1996,
December 31, 1997, December 31, 1998 and December 31, 1999.
COMPARATIVE TOTAL RETURNS(1)
BAYCORP HOLDINGS, LTD.(2), S&P 500, UTY UTILITY INDEX
(PERFORMANCE RESULTS THROUGH DECEMBER 31, 1999)
[LINE GRAPH]
<TABLE>
<CAPTION>
BAYCORP HOLDINGS, LTD. S&P 500 UTY INDEX
---------------------- ------- ---------
<S> <C> <C> <C>
04/17/95 100.00 100.00 100.00
12/29/95 114.29 123.91 117.97
12/31/96 119.64 152.36 109.03
12/31/97 94.64 203.19 131.75
12/31/98 50.00 261.26 148.18
12/31/99 138.39 316.23 116.36
</TABLE>
- - ---------------
(1) Assumes $100 invested at the close of trading on April 17, 1995 in the
Common Stock of Great Bay Power Corporation (the Company's predecessor and
currently a wholly owned subsidiary of the Company), the S&P 500, and the
UTY Utility Index. Cumulative total return assumes reinvestment of
dividends.
(2) For purposes of this chart, BayCorp Holdings, Ltd. is treated as the
successor to Great Bay Power Corporation. Trading of BayCorp Holdings, Ltd.
Common Stock commenced on January 28, 1997.
11
<PAGE> 14
AUTHORIZATION OF AMENDMENT TO 1996 STOCK OPTION PLAN
On April 4, 2000, the Board of Directors adopted, subject to stockholder
approval, an amendment (the "Amendment") to the Company's 1996 Stock Option Plan
(the "1996 Plan"). Under the current terms of the 1996 Plan, the Company is
authorized to grant 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. The Amendment increases the number of shares of
Common Stock authorized for issuance pursuant to the 1996 Plan from 600,000 to
900,000. The purpose of the Amendment is to ensure that the number of shares of
Common Stock authorized for issuance pursuant to the 1996 Plan is large enough
for the Company to continue to attract and retain key employees, officers,
directors, consultants and advisors who are expected to continue to contribute
to the Company's growth and success. As of April 4, 2000, and except as
described in the following two paragraphs, the Company granted options to
purchase 576,917 shares of its Common Stock under the 1996 Plan, with options to
purchase 23,083 shares remaining authorized but unissued under the 1996 Plan. As
of April 4, 2000, options to purchase 81,500 shares had been exercised.
On July 30, 1999, the Company's Board of Directors approved a grant to
Frank W. Getman Jr., the Company's President and Chief Executive Officer, of
options to purchase 164,000 shares of the Company's Common Stock at a price per
share equal to the closing price of the Company's Common Stock on July 30, 1999
($6.875). The options granted to Mr. Getman on July 30, 1999 (the "Getman
Options") are subject to the approval by the Company's stockholders of an
increase in the number of authorized shares under the 1996 Plan from 600,000
shares to at least 764,000 shares. If the Company's stockholders do not approve
an increase in the number of authorized shares under the 1996 Plan from 600,000
shares to at least 764,000 shares at or before the Company's annual meeting of
the stockholders on May 25, 2000 (or any adjournment thereof but in no event
later than June 30, 2000 (the "Outside Date")), then the Company will pay to Mr.
Getman on the Outside Date an amount equal to the fair market value of the
Getman Options computed using Black-Scholes modeling with parameters to be fixed
as of July 30, 1999 and determined in good faith by the Company's Board of
Directors on or before the Outside Date.
The Company's Board of Directors believes that the approval of the
Amendment is in the best interests of the Company and its stockholders and
recommends a vote in favor of this proposal. If the stockholders do not vote in
favor of the Amendment, the Company will (i) incur the cash expense of paying
Mr. Getman in lieu of issuing the Getman Options (which expense cannot be
determined until the Outside Date and will largely be affected by the closing
price of the Company's Common Stock on that date) and (ii) be unable to grant
new options to its employees, officers, directors, consultants and advisors
exceeding the 23,083 shares of the Company's Common Stock authorized but
unissued under the 1996 Plan.
TERMS OF THE 1996 STOCK OPTION PLAN
Administration and Eligibility
The 1996 Plan is administered by the Company's Board of Directors. The
Board has the authority to prescribe, amend and rescind rules and regulations
relating to the 1996 Plan and to interpret the provisions of the 1996 Plan.
Pursuant to the terms of the 1996 Plan, the Board may delegate authority to one
or more committees appointed by the Board. The Board has authorized the
Compensation Committee to administer the 1996 Plan, including the grant of
options to executive officers. The Compensation Committee selects the recipients
of options and determines (i) the number of shares of Common Stock covered by
the options, (ii) the dates upon which such options become exercisable, (iii)
the exercise price of such options and (iv) the duration of such options.
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 incentive stock options may be granted only to persons who are eligible to
receive such options under Section 422 of the Code. As a condition to the grant
of an option under the 1996 Plan, option recipients execute option agreements
with such terms and provisions as decided by the Board in forms not inconsistent
with the 1996 Plan.
12
<PAGE> 15
The 1996 Plan provides for certain formula grants to non-employee
directors. Every non-employee director receives a grant of an option for 20,000
shares upon his or her election to the Board. In addition, every non-employee
director receives a grant of an option for 20,000 shares upon that director's
first re-election to the Board and an additional grant of an option for 20,000
shares upon that director's second re-election to the Board. If a Change in
Control of the Company (as defined below) occurs, each non-employee director
then serving on the Board receives a grant of 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 that option equals
the exercise price for the last option granted to the director prior to the
Change in Control of the Company. Except as otherwise provided in the event of a
Change in Control of the Company, the exercise price for an option granted to a
non-employee director equals 100% of the fair market value of such stock, as
determined by the Company's Board of Directors, at the time of grant of such
option.
Number of Shares and Exercise Price
Subject to adjustment as provided in the 1996 Plan, the maximum number of
shares of Common Stock of the Company that may be issued and sold under the 1996
Plan is 600,000 shares. The maximum number of shares with respect to which
options may be granted to any employee under the 1996 Plan is 400,000 shares.
The Compensation Committee 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 the
total combined voting power of the Company or any of its subsidiaries and (b)
100% of fair market value for incentive stock options generally. The option
exercise price may be paid in cash or shares of Common Stock owned by the
optionee as provided in the 1996 Plan and the optionee's option agreement. The
Compensation Committee also determines the expiration of the option period,
provided that (i) in the case of incentive stock options, the date may 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 the
total combined voting power of the Company or any of its subsidiaries, such date
may 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 1996 Plan and in each option agreement.
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 nonstatutory option
under the 1996 Plan. If termination of employment results from death or
disability, all unvested options shall immediately vest and such options may be
exercised up to one year after termination. Holders of nonstatutory options may
exercise such options after termination of employment with the Company during
the period specified in the applicable option agreement.
The Company's Board of Directors (or its appointed committee) determines
when options granted under the 1996 Plan become exercisable (generally in
installments at the rate of 25% or 33% per year, as set forth in each option
agreement). The 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 1996 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 the 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 1996 Plan prior to any
given date shall terminate. For purposes of the 1996 Plan, a "Change in Control
of the Company" shall have occurred if (i) any person becomes the beneficial
owner of securities of the Company representing 30% or more of the combined
voting power of the Company's then outstanding securities,
13
<PAGE> 16
(ii) during any period of two consecutive years ending during the term of the
1996 Plan, individuals who at the beginning of such period constitute the
Company's Board of Directors, and any new director whose election by the
Company's 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 Company's Board of Directors, (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation (other than a merger or consolidation in which the stockholders of
the Company own more than 50% of the combined voting power of the surviving
entity, or a merger or consolidation effected to implement a recapitalization of
the Company in which no person acquires more than 30% of the combined voting
power of the Company's then outstanding securities, or 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 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
Company's Board of Directors 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 the Company for purposes of the 1996 Plan.
The Company's Board of Directors shall have the authority, with the consent
of the affected optionee, to cancel any outstanding options or amend the terms
of any outstanding options under the 1996 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 Company's Board of Directors, an
optionee may elect to satisfy any tax withholding obligations with respect to
shares issued upon exercise of options by causing the Company to withhold shares
of Common Stock otherwise issuable upon the exercise of an option or by
delivering to the 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 Company's Board of Directors may at any time modify or amend the 1996
Plan in any respect, except that if at any time the approval of the stockholders
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
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
Company's Board of Directors may not effect such modification or amendment
without such approval. The termination or any amendment of the 1996 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 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 Company's
Board of Directors 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: (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 1996 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 1996 Plan shall have been issued pursuant to
14
<PAGE> 17
the exercise or cancellation of options granted thereunder. The 1996 Plan shall
terminate with respect to nonstatutory options on April 15, 2006.
All option grants under the 1996 Plan are discretionary, except for options
granted to non-employee directors pursuant to the formula set forth in the 1996
Plan. The 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 Company's Board of Directors, or a committee
thereof, pursuant to the terms of the 1996 Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to options granted under the
1996 Plan and with respect to the sale of Common Stock acquired under the 1996
Plan.
Incentive Stock Options
In general, a participant will not recognize taxable income upon the grant
or exercise of an incentive stock option. Instead, a participant will recognize
taxable income with respect to an incentive stock option only upon the sale of
Common Stock acquired through the exercise of the option ("ISO Stock"). The
exercise of an incentive stock option, however, may subject the participant to
the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the
length of time that the participant has owned the ISO Stock at the time it is
sold. If the participant sells ISO Stock after having owned it for at least two
years from the date the option was granted (the "Grant Date") and one year from
the date the option was exercised (the "Exercise Date"), then the participant
will recognize long-term capital gain in an amount equal to the excess of the
sale price of the ISO Stock over the exercise price.
If the participant sells ISO Stock for more than the exercise price prior
to having owned it for at least two years from the Grant Date and one year from
the Exercise Date (a "Disqualifying Disposition"), then all or a portion of the
gain recognized by the participant will be ordinary compensation income and the
remaining gain, if any, will be a capital gain. This capital gain will be a
long-term capital gain if the participant has held the ISO Stock for more than
one year prior to the date of sale.
If a participant sells ISO Stock for less than the exercise price, then the
participant will recognize capital loss in an amount equal to the excess of the
exercise price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the participant has held the ISO Stock for more than
one year prior to the date of sale.
Nonstatutory Stock Options
As in the case of an incentive stock option, a participant will not
recognize taxable income upon the grant of a nonstatutory stock option. Unlike
the case of an incentive stock option, however, a participant who exercises a
nonstatutory stock option generally will recognize ordinary compensation income
in an amount equal to the excess of the fair market value of the Common Stock
acquired through the exercise of the option ("NSO Stock") on the Exercise Date
over the exercise price.
With respect to any NSO Stock, a participant will have a tax basis equal to
the exercise price plus any income recognized upon the exercise of the option.
Upon selling NSO Stock, a participant generally will recognize capital gain or
loss in an amount equal to the difference between the sale price of the NSO
Stock and the participant's tax basis in the NSO Stock. This capital gain or
loss will be a long-term capital gain or loss if the participant has held the
NSO Stock for more than one year prior to the date of the sale.
Tax Consequences to the Company
The grant of an option under the 1996 Plan will have no tax consequences to
the Company. Moreover, in general, neither the exercise of an incentive stock
option nor the sale of any Common Stock acquired under
15
<PAGE> 18
the 1996 Plan will have any tax consequences to the Company. The Company
generally will be entitled to a business-expense deduction, however, with
respect to any ordinary compensation income recognized by a participant under
the 1996 Plan, including as a result of the exercise of a nonstatutory stock
option or a Disqualifying Disposition. Any such deduction will be subject to the
limitations of Section 162(m) of the Code.
BOARD RECOMMENDATION
The Board of Directors believes that the Amendment to the 1996 Plan is in
the best interests of the Company and its stockholders and recommends a vote FOR
the adoption of this proposal.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors, on the recommendation of its Audit Committee, has
selected the firm of Arthur Andersen LLP, independent public accountants, as
accountants of the Company for the fiscal year ending December 31, 2000.
Although stockholder approval of the Board of Directors' selection of Arthur
Andersen LLP is not required by law, the Board of Directors believes that it is
advisable to give stockholders an opportunity to ratify this selection. If this
proposal is not approved at the Meeting, the Board of Directors will reconsider
its selection of Arthur Andersen LLP.
A representative of Arthur Andersen LLP is expected to be present at the
Meeting. The representative will have the opportunity to make a statement if he
or she desires to do so and will also be available to respond to appropriate
questions from stockholders.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the meeting. However, if any other matters are properly presented to the
meeting, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise act, in accordance with their judgment on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph, facsimile and personal interviews. Brokers, custodians and
fiduciaries will be requested to forward proxy soliciting material to the owners
of stock held in their names. The Company will reimburse banks and brokers for
their reasonable out-of-pocket expenses incurred in connection with the
distribution of proxy materials.
16
<PAGE> 19
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2001 Annual
Meeting of Stockholders must be received by the Company at its principal office
in Portsmouth, New Hampshire not later than December 27, 2000 for inclusion in
the proxy statement for that meeting.
By Order of the Board of Directors,
FRANK W. GETMAN JR.,
President and Chief Executive Officer
April 27, 2000
THE MANAGEMENT HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. A PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS APPRECIATED.
STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY EVEN THOUGH
THEY HAVE SENT IN THEIR PROXIES.
17
<PAGE> 20
BAYCORP HOLDINGS, LTD.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 25, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY AND SHOULD BE RETURNED AS SOON AS POSSIBLE TO
AMERICAN STOCK TRANSFER & TRUST COMPANY
The undersigned, having received notice of the meeting and management's proxy
statement therefor, and revoking all prior proxies, hereby appoint(s) John A.
Tillinghast and Frank W. Getman Jr., 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 Annual Meeting of Stockholders
of BAYCORP HOLDINGS, LTD. (the "Company") to be held at the American Stock
Exchange, 86 Trinity Place, New York, New York on Thursday, May 25, 2000, at
1:00 p.m., Eastern Time, and any adjourned sessions 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 are authorized to vote upon such other matters
as may properly come before the meeting or any adjournment thereof.
The proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. The shares represented by this Proxy will be voted
as directed by the undersigned. If no direction is given with respect to any
proposal, this proxy will be voted for such proposal. Attendance of the
undersigned at the meeting or at any adjournment thereof will not be deemed to
revoke this proxy unless the undersigned shall revoke this proxy in writing.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO
COMPLETE, DATE, SIGN, AND RETURN THIS PROXY IN THE ACCOMPANYING ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
SEE REVERSE
SIDE
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
1. To elect the following Directors
FOR WITHHELD
[ ] [ ] NOMINEES: Alexander Ellis III
Stanley I. Garnett
Frank W. Getman Jr.
Michael R. Latina
Lawrence M. Robbins
- - ------------------------------------------------ John A. Tillinghast
2. To authorize an amendment to the 1996 Stock Option Plan increasing the number
of authorized shares under the Plan to 900,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To ratify the appointment of Arthur Andersen LLP as the Company's independent
public accountants for the current fiscal year.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Mark box at right if you plan to attend
the meeting. [ ]
Mark box at right if comments or address
change have been noted on the reverse
side of this card. [ ]
STOCKHOLDER DATE
----------------------------------- -------------
CO-HOLDER (IF ANY)
-----------------------------------------------------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
