THE NEW WORLD POWER CORPORATION
558 Lime Rock Road
Lime Rock, Connecticut 06039
September __, 1996
To the Stockholders of The New World Power Corporation:
You are cordially invited to attend the Annual Meeting of Stockholders
of The New World Power Corporation on Tuesday, October 15, 1996 at 10:00 a.m. at
The New World Power Corporation's new corporate headquarters at The Farmhouse,
558 Lime Rock Road, Lime Rock, Connecticut. A notice of the meeting, a proxy
card and a proxy statement containing information about matters to be acted upon
are enclosed. It is important that your shares be represented at the meeting.
Accordingly, we urge you to sign the date the enclosed proxy card and promptly
return it to us in the enclosed envelope, even if you are planning to attend the
meeting.
We look forward to the Annual Meeting of Stockholders and hope you will
attend the meeting or be represented by proxy.
Sincerely,
John D. Kuhns
Chairman of the Board
THE NEW WORLD POWER CORPORATION
558 LIME ROCK ROAD
LIME ROCK, CONNECTICUT 06039
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on October 15, 1996
----------------------------------------
To the Stockholders:
The Annual Meeting of Stockholders of The New World Power Corporation,
a Delaware corporation (the "Company"), will be held at The New World Power
Corporation's new corporate headquarters at The Farmhouse, 558 Lime Rock Road,
Lime Rock, Connecticut, for the following purposes:
1. To elect the Board of Directors;
2. To approve a one-for-five reverse stock split of the Company's
Common Stock, $.01 par value, whereby each outstanding share
of the Company's Common Stock will be reclassified into
one-fifth of a new share of the Company's Common Stock; and
3. To act upon such other matters as may properly be brought
before the meeting.
Only stockholders of record at the close of business on September 25,
1996 will be entitled to notice of and to vote at the meeting or any adjournment
thereof.
By Order of the Board of Directors
Secretary
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE DATE AND SIGN THE ENCLOSED
FORM OF PROXY AND RETURN IT IN THE ENVELOPE PROVIDED. ANY PERSON GIVING A PROXY
HAS THE POWER TO REVOKE IT AT ANY TIME PRIOR TO ITS EXERCISE AND, IF PRESENT AT
THE MEETING, MAY WITHDRAW IT AND VOTE IN PERSON. ATTENDANCE AT THE MEETING IS
LIMITED TO STOCKHOLDERS, THEIR PROXIES AND INVITED GUESTS OF THE COMPANY.
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THE NEW WORLD POWER CORPORATION
558 LIME ROCK ROAD
LIME ROCK, CONNECTICUT 06039
----------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
to be held on October 15, 1996
----------------------------------------
PROXY STATEMENT
----------------------------------------
This Proxy Statement is furnished to the stockholders of The New World
Power Corporation ("New World" or the "Company") in connection with the
solicitation of proxies on behalf of the Company's Board of Directors (the
"Board") to be voted at the Annual Meeting of Stockholders to be held on October
15, 1996, and at any adjournment thereof (the "Annual Meeting"), for the
purposes set forth in the accompanying Notice. Copies of this Proxy Statement,
the Notice, and the related proxy card and 1995 Form 10-K are being mailed to
stockholders on or about September __, 1996.
RECORD DATE
The Board has fixed the close of business on September 25, 1996, as the
record date for the Annual Meeting. Only stockholders of record on that date
will be entitled to vote at the meeting in person or by proxy.
PROXIES
The proxies named on the enclosed proxy card were appointed by the
Board to vote the shares represented by the proxy card. Upon receipt by the
Company of a properly signed and dated proxy card, the shares represented
thereby will be voted in accordance with the instructions on the proxy card.
Stockholders are urged to mark the boxes on the proxy card to show how their
shares are to be voted. If a stockholder returns a signed a proxy card without
marking the boxes, the shares represented by the proxy card will be voted as
recommended by the Board herein. The proxy card also confers discretionary
authority on the proxies to vote on any other matter not presently known to
management that may properly come before the meeting. Any proxy delivered
pursuant to this solicitation is revocable at the option of the person(s)
executing the same (i) upon receipt by the Company before the proxy is voted of
a duly executed proxy bearing a later date, (ii) by written notice of revocation
to the Assistant Secretary of the Company received before the proxy is voted, or
(iii) by such person(s) voting in person at the Annual Meeting.
VOTING SHARES
On the record date there were ________ shares of Common Stock, the
Company's only voting securities, outstanding and entitled to vote. Each share
of Common Stock is entitled to one vote. A majority of such shares, present in
person or represented by proxy, shall constitute a quorum at the Annual Meeting.
Votes will be tabulated at the Annual Meeting by one or more inspectors of
election appointed by the Board.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of July 31, 1996 by (i) each person
known by the Company to own beneficially more than five percent of the Common
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Stock of the Company; (ii) each director of the Company, (iii) each executive
officer named in the Summary Compensation Table on page __, and (iv) all
directors and executive officers of the Company as a group. Except as otherwise
indicated, all shares are owned directly. Except as indicated by footnote, and
subject to community property laws where applicable, the persons named in the
table have sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by them.
NAME AND ADDRESS PERCENTAGE OF
OF BENEFICIAL OWNER(1) SHARES BENEFICIALLY OWNED CLASS(2)
- - - ---------------------- ------------------------- --------
Foreign & Colonial Management Limited(3) 1,989,000 16.7%
Exchange House
Primrose Street
London EC2A 2NY, England
Sundial International Fund Limited 1,969,925 15.4
c/o Euro Canadian Trust Company Limited
P.O. Box 393750, Shirley Street
Nassau, Bahamas
Gartmore Investment Limited(5) 1,347,960 11.6
Gartmore House
P.O. Box 65, 16-18 Monument Street
London EC5R 8QQ, England
Westinghouse Electric Corporation(6) 790,794 6.8
11 Stanwix Street
Pittsburgh, Pennsylvania 15222
China Chang Jiang Energy Corp. 715,000 6.2
No 124 Guangshang YI Road
Hong Shang, District
Whuban Hubei Province
China
Herbert L. Oakes, Jr.(7) 1,642,013 11.0
John D. Kuhns(8) 942,408 7.9
Robert W. MacDonald(9) 302,997 2.5
Gerald R. Cummins(10) 9,984 *
Nazir Memon, M.D.(11) 13,364 *
Lucien Ruby(12) 323,416 2.8
Dwight C. Kuhns(13) 0 *
George P. Petrenko(14) 0 *
Anthony J. Baratta, Jr.(15) 0 *
Michael H. Best(16) 0 *
All Directors and Executive Officers as a Group 3,250,807 22.2%
(10 persons)(17)
* less than one percent.
(1) Each director and executive officer has sole voting power and sole
investment power with respect to all shares beneficially owned by him,
unless otherwise indicated.
(2) Based upon 11,606,835 shares of Common Stock outstanding on June 13,
1996.
(3) Based upon a Statement on Schedule 13D Amendment No. 1 filed with the
Securities and Exchange Commission ("SEC") on February 6, 1996 by
Foreign & Colonial Management Limited ("F&C"). Includes 272,000 shares
issuable upon exercise of currently exercisable warrants.
(4) Based upon a Statement on Schedule 13D Amendment No. 1 filed with the
SEC on February 21, 1995 by Sundial International Fund Limited
("Sundial"). Includes 989,918 shares issuable upon exercise of
currently exercisable warrants and 583,000 shares plus 200,000 warrants
issuable upon the exchange of a promissory note issued by a subsidiary
of the Company. Does not give effect to the Restructuring Agreement
discussed under Item 13 "Certain Relationships and Related
Transactions."
(5) Based upon a Statement on Schedule 13D Amendment No. 1 filed with the
SEC by Gartmore Investment Limited ("GIL") on November 14, 1994.
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(6) Based upon a Statement on Schedule 13D Amendment No. 1 filed with the
SEC on September 14, 1994 by Westinghouse Electric Corp.
("Westinghouse").
(7) Consists of: (i) 7,197 shares issuable upon exercise of currently
exercisable options; (ii) 17,500 shares held in and 41,847 shares
issuable upon exercise of currently exercisable options held in Oakes,
Fitzwilliams & Co. Executive Death Benefit & Retirement Scheme No.2
(HLO) Mr. Oakes' personal pension fund ("OFHLO"); (iii) 20,000 shares
owned by and 183,316 shares issuable upon exercise of currently
exercisable options held by H.L. Oakes & Co., Inc. ("HLO"); (iv) 14,000
shares owned by and 2,000 shares issuable upon exercise of currently
exercisable options held by Oakes, Fitzwilliams & Co. Limited ("OFL");
(v) 17,500 shares owned by and 1,046,953 shares issuable upon exercise
of currently exercisable options held by Oakes, Fitzwilliams & Co. S.A.
("OFLSA"); and (vi) 7,100 shares owned by and 44,600 shares issuable
upon exercise of currently exercisable options held by Purbrook
Corporation ("Purbrook"). Mr. Oakes is the Managing Director of, and
owns a controlling interest in, OFL and OFLSA. He is also President of
HLO, a company owned 100% by his wife. Purbrook is owned by HLO. Also
includes 240,000 shares of Common Stock issued to Oakes, Fitzwilliams &
Co. pursuant to that Financial Advisory Services Letter Agreement dated
June 11, 1996. Mr. Oakes disclaims any beneficial ownership in the
shares described in (ii) through (vi).
(8) Includes 284,400 shares issuable upon exercise of currently exercisable
options. Also includes 178,845 shares owned by third parties for which
he holds voting power pursuant to irrevocable proxies and certain
rights of first refusal, purchase options and come-along-rights of
which shares Mr. John Kuhns disclaims beneficial ownership. Does not
include 65,000 shares to be issued to Mr. Kuhns on January 31, 1997,
pursuant to Mr. Kuhns employment agreement.
(9) Consists of shares issuable upon exercise of currently exercisable
options. Does not include an option to purchase 61,611 shares of Common
Stock granted by Mr. John Kuhns to Mr. MacDonald pursuant to an
agreement between the two parties which shares are included in the
shares beneficially owned by Mr. John Kuhns.
(10) Includes 9,864 shares issuable upon exercise of currently exercisable
options.
(11) Consists of shares issuable upon exercise of currently exercisable
options and warrants.
(12) Includes 3,844 shares issuable upon exercise of currently exercisable
options. Also includes 189,220 shares of Common Stock owned by Quest
Ventures II and 129,332 shares of Common Stock owned by Quest Ventures
International, two investment partnerships of which Mr. Ruby is a
general partner, all of shares which Mr. Ruby disclaims beneficial
ownership.
(13) Mr. Dwight Kuhns resigned his position with the Company in December
1995.
(14) Mr. Petrenko was appointed interim Chief Executive Officer on April 11,
1996 and ceased to be employed effective August __, 1996.
(15) Mr. Baratta ceased to be employed by the Company on March 29, 1996.
(16) Mr. Best resigned his position with the Company in December 1995.
(17) Includes a total of 2,041,507 shares issuable upon the exercise of
currently exercisable warrants.
1. ELECTION OF DIRECTORS
The current Board consists of six members, and the Board has fixed at
six the number which will constitute the whole Board. The six present directors,
John D. Kuhns, Robert W. MacDonald, Gerald R. Cummins, Nazir Memon, M.D., Lucien
Ruby and Herbert L. Oakes, Jr., are the Board's nominees for election to the
Board at the Annual Meeting. Each director so elected will hold office until the
next annual meeting of the stockholder and until his successor is elected and
qualified or until his earlier resignation or removal. All of the nominees have
indicated their willingness to serve the entire term, if elected, but if for any
reason any nominee should be unavailable to serve as a director at the time of
the Annual Meeting, a contingency which the Board does not expect, a different
person designated by the Board may be nominated in his stead.
If a quorum is present at the Annual Meeting, election of directors
will require the affirmative vote of a plurality of the shares of Common Stock
present in person or represented by proxy and entitled to vote. Abstentions by
holders of such shares and broker non-votes with respect to the election of
directors will be included in determining the presence of such quorum, but will
not be included in determining whether nominees have received the vote of such
plurality.
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THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR SUCH NOMINEES.
The following sets forth the name and age of each nominee and the
positions and offices held by him, his principal occupation and business
experience during the past five years, and the year of the commencement of his
term as a director of the Company.
PRINCIPAL OCCUPATION FIRST YEAR
FOR THE PAST FIVE YEARS BECAME A
NAME AND CURRENT PUBLIC DIRECTORSHIPS AGE DIRECTOR
---- -------------------------------- --- --------
John D. Kuhns DIRECTOR AND CHAIRMAN OF THE 46 1989
BOARD. Mr. Kuhns was Chairman and
Chief Executive Officer of
Wolverine Power Corporation, now a
subsidiary of the Company, from
October 1986 through April 1989.
Mr. Kuhns was a founder of
Catalyst Energy Corporation
("Catalyst"), an independent power
and steam producer. He served as
the President, Chief Executive
Officer and a director of Catalyst
until 1988. Mr. Kuhns is also Co-
Chairman of East Rock Partners,
Inc. ("East Rock"), an investment
and management company, and in
connection therewith has been a
director or officer of several
privately-held companies. From
October 1986 through June 1988,
Mr. Kuhns was also Chairman of
Kuhns Brothers & Laidlaw, Inc., a
New York Stock Exchange member
firm. Mr. Kuhns had previously
been employed at Salomon Brothers,
Inc., where he specialized in
energy project financing. Mr.
Kuhns is also a director of
Photocomm, Inc. ("Photocomm"),
which is engaged in the
development, manufacture and
marketing of photovoltaic or solar
electric power systems and related
products. Mr. Kuhns received a
bachelor's degree from Georgetown
University, a Master of Fine Arts
from the University of Chicago and
an M.B.A. from Harvard University.
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PRINCIPAL OCCUPATION FIRST YEAR
FOR THE PAST FIVE YEARS BECAME A
NAME AND CURRENT PUBLIC DIRECTORSHIPS AGE DIRECTOR
---- -------------------------------- --- --------
Robert W. DIRECTOR AND VICE CHAIRMAN OF THE 48 1990
MacDonald BOARD. Mr. MacDonald was a
founder of Catalyst, and served as a director,
Executive Vice President and Chief Operating Officer
of Catalyst until 1988. He is currently a Managing
Director of William E. Simon & Sons, a merchant
banking firm located in Los Angeles, California. He
is also currently Chairman of WestFed Holdings, Inc.,
a holding company for Western Federal Savings and
Loan Association located in Marina Del Ray,
California, which made a general assignment for the
benefit of creditors in September 1993. Mr. MacDonald
is also a director of Southern California Savings and
Loan Association located in Beverly Hills,
California, a director of Laboratories located in El
Segundo, California and a director of Photocomm. Mr.
MacDonald was the Co-Chairman of East Rock from
January 1988 until September 1992. Mr. MacDonald had
previously been employed as a Vice President of
Salomon Brothers, Inc. where he was involved in
tax-exempt mortgage financing. Mr. MacDonald received
a bachelor's degree from Fairfield University.
Gerald R. DIRECTOR. Mr. Cummins has been a 69 1990
Cummins director since October 1990 and a
private investor and independent
business consultant for more than
five years. He is a political
strategist who has served as
chairman of The New York State
Thruway Authority. He was the
campaign manager for the Honorable
Hugh L. Carey, the former Governor
of New York. Mr. Cummins is also
a director of Photocomm. Mr.
Cummins received a bachelor's
degree from Manhattan College.
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PRINCIPAL OCCUPATION FIRST YEAR
FOR THE PAST FIVE YEARS BECAME A
NAME AND CURRENT PUBLIC DIRECTORSHIPS AGE DIRECTOR
---- -------------------------------- --- --------
Nazir Memon, DIRECTOR. Dr. Memon has been a 50 1992
M.D. practicing physician for more than
the last five years. He is a
pulmonologist on the medical staff
of Shore Memorial Hospital in
Somers Point, New Jersey; Bettry
Bacharach Rehabilitation Hospital,
Popmona, New Jersey; and Kessler
Memorial Hospital, Hammonton, New
Jersey. Dr. Memon is also the
President of the Atlantic
Pulmonary Critical Care
Association. Dr. Memon is a
graduate of Liaquat Medical
College in Pakistan and the
Government Science College,
Pakistan.
Herbert L. DIRECTOR. Mr. Oakes has served as 49 1993
Oakes, Jr. Managing Director of Oakes,
Fitzwilliams & Co. Limited, a
member of the Securities and
Future Authority Limited and the
London Stock Exchange, since 1988.
Mr. Oakes is also President of
H.L. Oakes & Co., Inc., a
corporate advisor and dealer in
securities which he founded in
1982. He also serves on the board
of directors of Shared
Technologies, Inc. and Harcor
Energy, Inc. Mr. Oakes received a
B.A. in Economics from the
University of the South.
Lucien Ruby DIRECTOR. Since 1985, Mr. Ruby 52 1990
has been the Managing General
Partner of Quest Ventures, a San
Francisco-based venture capital
firm. Currently, Mr. Ruby serves
on the board of directors of
various privately held
corporations including RESNA
Industries, an environmental
services company, and Aqua Air
Environmental, Inc., a
manufacturer of pollution control
systems. Mr. Ruby received a
B.S.C.E. from Duke University and
an M.B.A. from Harvard University.
The Company believes, based upon information reviewed by it, that
during fiscal 1995 each of its directors, officers and the beneficial owners of
more than ten percent of the Common Stock filed on a timely basis all reports
required by Section 16(a) of the Securities Act of 1934, except Michael H. Best
filed one late report and failed to timely report one transaction.
-8-
BOARD AND COMMITTEE MEETINGS
The Company has a standing Audit Committee of the Board, which was
formed in June 1992. The functions of the Audit Committee are to oversee the
Company's system of internal accounting controls, recommend to the Board and the
stockholders the appointment of a firm of certified public accountants to
conduct the annual audit of the Company's financial statements, review the scope
of the audit, review reports from the independent auditors, and make such
recommendations to the Board in connection with the annual audit as it deems
appropriate. The Audit Committee met twice during 1995. The current Audit
Committee consists of three non management directors: Lucien Ruby (Chairman),
Gerald Cummins and Nazir Memon.
In September 1994, the Company formed a Compensation Committee which
replaced the Stock Option Committee. The Compensation Committee reviews the
compensation of the management of the Company and the Company's compensation
policies and practices. The Compensation Committee also administers the
Company's 1993 Stock Incentive Plan, including the grant of options thereunder.
The Compensation Committee met twice during the 1995 fiscal year. The current
members of the Compensation Committee are Robert MacDonald (Chairman), Gerald
Cummins and Herbert L. Oakes, Jr.
The Company has a standing Executive Committee of the Board. During the
intervals between the meetings of the Board, the Executive Committee may
exercise all the powers of the Board in the management and direction of the
business of the Company, in such manner as such committee shall deem to be in
the interest of the Company, and in all cases in which specific directions shall
not have been given by the Board, subject to the limitations imposed by statute
or the Certificate of Incorporation. It also has the authority to approve
responses to bid requests and make unsolicited proposals for development or sale
of electric power. The Executive Committee met once during the 1995 fiscal year.
The current members of the Executive Committee are John Kuhns and Robert
MacDonald.
The Company does not have a Nominating Committee.
For the fiscal year ended December 31, 1995, the Board held eight
meetings. During fiscal 1995, each director attended at least 75 percent of the
total number of meetings of the Board held during the period for which he has
been a director.
DIRECTORS' COMPENSATION
Directors who are also full-time employees of the Company or any of its
subsidiaries do not receive additional compensation for their services as
directors. Each director who is not a full-time employee of the Company or any
of its subsidiaries is entitled to receive a non-qualified stock option on the
date of his or her election for the whole number of shares of Common Stock
having a fair market value on such date closest to, but not in excess of,
$20,000. The exercise price for each such option is the fair market value of the
Company's Common Stock on the date of grant and such options are exercisable for
a period of ten years. All directors are also entitled to reimbursement of their
expenses incurred to attend meetings of the Board.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table summarizes the compensation paid by the Company to
Mr. John D. Kuhns, the Company's chief executive officer, and each other
executive officer of the Company whose total annual salary exceeded $100,000,
for services rendered in all capacities to the Company for fiscal 1995, 1994,
and 1993.
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
--------------------------------------------- --------------
Securities
Underlying
Other Annual Options All other
Name and Principal Position Year Salary Bonus Compensation (#)(1) Compensation
- - - ----------------------------------- ----- ----------- ------ -------------- -------------- ---------------
John D. Kuhns 1995 $476,000(2) $0 $0 1,000,000 $ 0
Chairman of the Board(3) 1994 480,000(2) 0 0 0 0
1993 480,000(2) 0 0 0 0
Anthony J. Baratta, Jr.
Executive Vice President
and Chief Financial
Officer(7) 1995 116,440 0 0 0 110,000(6)
Dwight C. Kuhns 1995 172,809 0 0 125,000 0
Former President(4) 1994 175,000 0 0 0 0
1993 112,500 0 0 0 37,500(5)
Michael H. Best 1995 172,809 0 0 125,000 0
Former Executive 1994 175,000 0 0 0 0
Vice President(8) 1993 150,000 0 0 0 0
(1) The options listed expired unexercised upon the named individual's
termination of employment with the Company.
(2) All of Mr. John Kuhns' compensation from the Company was paid in the
form of management fees to a company controlled by Mr. John Kuhns. This
arrangement was established prior to the Company's first underwritten
public offering. Effective August 1, 1995, the Company terminated the
related management agreements and entered into an employment agreement
with Mr. Kuhns. See "John D. Kuhns Employment Agreement."
(3) Mr. John Kuhns resigned as Chief Executive Officer of the Company on
April 11, 1996.
(4) Mr. Dwight Kuhns resigned as President of the Company effective on
December 31, 1995.
(5) Represents consulting fees paid to Mr. Dwight Kuhns prior to this
employment by the Company which commenced in January 1993.
(6) Consists of a relocation expense.
(7) Mr. Baratta was appointed Executive Vice President and Chief Financial
Officer as of May 31, 1995. Mr. Baratta's ceased to be employed by the
Company on March 29, 1996.
(8) Mr. Best resigned his position with the Company in December 1995.
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OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth information concerning option holdings
as of December 31, 1995 with respect too the individuals named in the Summary
Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Option Grants Table. The following table sets forth certain information
regarding stock option grants made to each of the Named Executive Officers
during the fiscal year ended December 31, 1995.
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Individual Grants Realizable Value
---------------------------------------------------------- at Assumed
Annual Rates of
Number of % of Total Stock Price
Securities Options Appreciation for
Underlying Granted to Exercise Option Term
Options Employees Price Expiration -------------------
Name Granted (#) Fiscal Year ($/sh) Date 5%($) 10%($)
------------- ------------- ----------- ------------ ------ --------
John D. Kuhns 1,000,000 69% 12.00 6/22/05
Dwight C. Kuhns 125,000(1) 9% N/A N/A -- --
Anthony J. Baratta, Jr. 0 -- -- -- -- --
Michael H. Best(1) 125,000 -- N/A N/A -- --
(1) The options listed expired unexercised upon the named individual's
termination of employment with the Company.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
The following table sets forth certain information concerning
unexercised stock options held by the Named Executive Officers as of December
31, 1995.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at 1995 FY-End (#) at 1995 FY-End ($)(1)
-------------------------------- --------------------------------
Shares
Acquired On Value
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- - - --------------------------- -------------- -------------- -------------- ---------------- ------------- ----------------
John D. Kuhns -- -- 308,519 981,481
Dwight C. Kuhns -- -- 318,900 125,000
Anthony J. Baratta, Jr. -- --
Michael H. Best -- -- 250,000
(1) On December 29, 1995, the last reported sales price of the Company's
Common Stock as reported on the NASDAQ was $1.75
Long-Term Incentive and Pension Plans.
In April 1993, the Company adopted the 1993 Stock Incentive Plan (the
"1993 Plan") which was approved by the Company's stockholders in May 1993. The
1993 Plan replaced the Company's previous stock option plan, the 1989 Stock
Incentive Plan (the "1989 Plan"), except as to options outstanding under the
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1989 Plan. Under the 1993 Plan, the Company may reward to employees, directors
and consultants of the Company and its subsidiaries incentive and non-qualified
stock options, stock appreciation rights, restricted stock grants, performance
awards and any combination of any or all of such awards. The Board of Directors
has delegated its powers under the 1993 Plan to the Company's Compensation
Committee. Awards may not be granted under the 1993 Plan after December 31,
2003. An aggregate of 500,000 shares of Common Stock may be issued under the
1993 Plan, except that any shares as to which awards granted under the 1989 Plan
may lapse, expire or be canceled be available for issuance under the 1993 Plan.
If any awards expire or terminate for any reason, the shares subject to such
awards are again available for future awards under the 1993 Plan. Awards are not
transferable except by will or the laws of descent and distribution. Whether an
award may be exercised after termination of employment is determined by such
Committee, subject to certain limitations.
Employment Agreements.
Mr.John D. Kuhns was employed as Chief Executive Officer of the Company
and Chairman of the Board prior to April 11, 1996 and since then has served only
as Chairman of the Board.
Mr. Kuhns is compensated for his services as Chairman pursuant to an
employment agreement dated as of August 1, 1995 which has been amended on two
occasions. The initial Employment Agreement hired Mr. Kuhns to serve as Chief
Executive Officer for a five year term continuing through July 31, 2000, subject
to renewal unless terminated by either party. The Employment Agreement provided
Mr. Kuhns customary benefits and expense reimbursements and contained customary
confidentiality and noncompetition covenants. The initial Employment Agreement
further provided that as a "severance benefit" Mr. Kuhns might receive, upon
certain conditions, three years base salary and that, upon termination, Mr.
Kuhns had an option to purchase, and the Company had an option to sell to him,
the building and improvements that comprise its executive offices in Lime Rock,
Connecticut (the "Farmhouse Property") at a purchase price equal to the
Company's then depreciated cost basis. Effective March 1, 1996, Mr. Kuhns
entered into Amendment No. 1 to the Employment Agreement ("Amendment No. 1")
which provided that until such time as the Company paid in full its 8%
Convertible Subordinated Notes, his base salary would be at the annual rate of
$220,000 and that the Company would use its best efforts to sell shares of
common stock to provide additional compensation, not to exceed $12,000 per
month. Amendment No. 1 further provided that Mr. Kuhns would receive a bonus
based upon a percentage of value received from the Company from the sale of a
certain of its assets, provided that his annual compensation from all sources
shall not exceed $480,000. In this amendment Mr. Kuhns also agreed to accept in
lieu of any severance benefit or other unpaid compensation due upon termination,
the Farmhouse Property. The amendment further provided that the Company shall
set aside 16,250 shares of common stock per month for Mr. Kuhns, for twelve
months, commencing March 1, 1996, for delivery on January 31, 1997, or, for
shares accruing after that date, on January 31, 1998. Effective March 1, 1996
Mr. Kuhns entered into Amendment No. 2 to his Employment Agreement with the
Company ("Amendment No. 2"), which superseded and replaced Amendment No. 1.
Pursuant to Amendment No. 2, Mr. Kuhns resigned as Chief Executive Officer and
agreed to serve as Chairman of the Company through January 31, 1997. Mr. Kuhns'
base compensation under Amendment No. 2 is at the rate of $18,000 per month with
additional compensation at $12,000 per month and a bonus derived from the sale
of certain assets. The other compensation and severance benefits remain
substantially the same as in Amendment No. 1.
Compensation Committee Interlock and Insider Participation.
During fiscal 1995, John D. Kuhns, Chairman of the Board of the
Company, and Dwight C. Kuhns, former President of the Company, served on the
board of
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directors of Photocomm, whose President, Chief Executive Officer and director,
Robert R. Kauffman, was a director of the Company until November 8, 1995.
COMPENSATION REPORT ON EXECUTIVE COMPENSATION
This report, prepared by the Company's Board of Directors, addresses
the Company's compensation policies with respect to its executive officers for
fiscal year 1995.
Salary. The Compensation Committee is responsible for determining the
salaries of all executive officers of the Company. Salaries paid to executive
officers reflect their responsibilities, diligence and determination in working
toward the achievement of established corporate objectives. Management
compensation guidelines were established by the Compensation Committee in
consultation with independent advisors with experience in the field.
Stock Incentives. The Compensation Committee has full power, discretion
and authority in administering the Company's 1993 Stock Incentive Plan. The
Committee believes that stock ownership by employees, including officers, of the
Company, is important as a means of rewarding outstanding performance and
promoting the achievement of long-term corporate goals by giving those persons a
greater proprietary interest in the Company. 1,457,665 options were granted to
officers or employees of the Company in 1995.
BOARD OF DIRECTORS
John D. Kuhns Gerald R. Cummins
Robert W. MacDonald Nazir Memon, M.D.
Herbert L. Oakes, Jr. Lucien Ruby
COMPARATIVE STOCK PERFORMANCE GRAPH
The graph shown below sets forth the cumulative stockholder return of
the Company's Common Stock from October 23, 1992, through the last trading day
of 1995. Although the Company's Common Stock was first registered under Section
12 of the Securities Exchange Act of 1934, as amended, on January 25, 1990,
there was no established public trading market for the Common Stock prior to
October 23, 1992. This graph assumes an investment of $100 on October 23, 1992,
in (i) the Company's Common Stock, (ii) the Center for Research in Security
Prices ("CRSP") Total Return Index for the NASDAQ Stock Market (U.S.) and (iii)
a composite peer group composed of the following companies in the independent
power business: AES Corporation, Destec Energy, Inc., Magma Power Company
(acquired by California Energy Company March 20, 1995), O'Brien Environmental
Energy Inc., OESI Power Corporation, Ogden Projects, Inc. (acquired by Ogden
Corp. January 16, 1995), and Thermo Power Corporation (collectively, the "Peer
Group"). The graph assumes dividends, if any, were reinvested. The comparisons
in this graph are required by the Securities and Exchange Commission and
therefore are not intended to forecast or be indicative of possible future
performance of the Company's Common Stock.
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TOTAL SHAREHOLDER RETURNS - DIVIDENDS REINVESTED
[Graphic Deleted]
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following sets forth the transactions involving the Company and its
subsidiaries and its executive officers and/or directors from January 1, 1995.
Specific descriptions of these transactions are provided below.
In 1989, two subsidiaries of the Company, Arcadian Power Corporation
("Arcadian") and Wolverine Power Corporation ("Wolverine"), entered into
management agreements (collectively, the "Management Agreements") with East
Rock, an investment and management company which was providing management
services to a number of companies involved in financial restructurings. East
Rock is controlled by John D. Kuhns and Robert W. MacDonald, both of whom are
directors of the Company. Pursuant to the terms of the Management Agreements,
John D. Kuhns has agreed to fulfill the duties and responsibilities of the
offices of the Chairman of the Board and Chief Executive Officer of those
subsidiaries. Each of these subsidiaries paid East Rock fees of $20,000 per
month for management and administrative services. Under the terms of the
Management Agreements, East Rock is responsible for providing these subsidiaries
with management advice and strategic planning, negotiating and structuring the
refinancing of existing debts and leases, negotiating and settling lawsuits,
negotiating and structuring fixed asset sales, and other specific projects. In
each of the last three fiscal years, these subsidiaries paid East Rock annual
management fees of $480,000, which were primarily for the purpose of
compensating Mr. John D. Kuhns for his services to the subsidiaries on behalf of
East Rock. The management fees also cover the other salaries and business
expenses of East Rock. Mr. Kuhns' services on behalf of East Rock under the
Management Agreements are in addition to his responsibilities as the Chairman of
the Board of the Company and its other subsidiaries. The Company terminated the
Management Agreements and established a direct compensation arrangement with Mr.
Kuhns as of August 1, 1995.
In 1993, the Company contracted with White Hollow Construction, a
company wholly-owned by John D. Kuhns, to act as the construction manager for
leasehold improvements at cost (to effect a savings) to the Company's new
corporate headquarters at 558 Lime Rock Road, Lime Rock, Connecticut. Through
1994, $875,170 of construction payments were made under this agreement and were
applied to construction costs and the costs of the on-site supervision. None of
the funds were paid to Mr. Kuhns. The 1995 construction payments made under this
agreement were $467,371. The office is located on land owned by a corporation
controlled by Mr. Kuhns.
In March 1994, Sundial International Fund Limited ("Sundial"), a
beneficial owner of more than five percent of the Company's Common Stock,
purchased 135,000 units of the Company at $11.50 per unit in connection with the
sale of 1,500,000 units in an offering to offshore investors. Each unit consists
of one share of Common Stock and a warrant to purchase one share of Common Stock
at an initial exercise price of $15.00 per share. In August 1994, Sundial
purchased an additional 108,000 units of the Company at $11.00 per unit in
connection with the sale of 1,150,000 units in an offering to offshore
investors.
In December 1995, The New World Power Company Ltd. sold 0% Senior
Secured Note due March 31, 1996 in the original amount of $550,000 to Sundial
International Fund LTD., a significant stockholder in the Company. The proceeds
of the Note were used as working capital. Subsequent to December 31, 1995, the
due date of the Note was extended to December 31, 1996.
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On December 1, 1995, the Company transferred and endorsed to Sundial
International Fund Ltd. a First Mortgage Note in the principal amount of
$3,615,370 along with the Mortgage and Security Agreements in exchange for its
Class B Preferred Stock. The Note is payable together with interest at the
LIBOR+2% points in full on December 31, 1997. Principal and interest are due in
seven quarterly installments of principal (each equal to five percent of the
principal balance). The Note was restructured subsequent to December 31, 1995
and is now due in four payments due December 1, 1996, March 1, 1997, June 1,
1997 and July 31, 1997.
In June 1994, the Company entered into a 15-year business alliance
agreement with Westinghouse Electric Corporation ("Westinghouse"), a beneficial
owner of more than five percent of the Company's Common Stock, jointly to
develop, market, construct and own renewable power projects, such as
utility-scale wind farms, off-grid generating systems and wireless photovoltaic
systems. Under the agreement, the Company and Westinghouse will have the option
to participate with the Company in renewable power projects. In consideration of
Westinghouse's obligations under the agreement, the Company agreed to issue to
Westinghouse up to 459,770 shares of the Company's Common Stock, in
installments, over a four-year period (of which shares were to be but have not
been issued) and an Incentive Warrant which will enable Westinghouse to purchase
up to 819,778 shares of the Company's Common Stock, based upon certain operating
revenue targets for the Company. The Company and Westinghouse are currently
discussing the mutual cessation of the business relationship.
In October 1994, the Company and Robert R. Kauffman, then a director of
the Company, entered into a short-term voting agreement pursuant to which Mr.
Kauffman agreed to vote certain shares of Photocomm preferred stock owned by him
in the same manner as the Company votes its shares of Photocomm common stock.
The voting rights of Photocomm preferred stock subject to the agreement were
equivalent to the voting rights of 503,052 shares of Photocomm common stock and
represented approximately 3.8% of the total voting power of Photocomm's capital
stock. The voting agreement terminated by its terms in 1995.
In February 1995, the Company issued a warrant to purchase 150,000
units of the Company to Oakes, Fitzwilliams & Co. S.A. ("OFLSA"), a company
controlled by Herbert L. Oakes, Jr., in its capacity as the placement agent in
connection with the placement of 1,500,000 units in an offering to offshore
investors. Each unit consists of one share of Common Stock and two warrants,
each to purchase one share of Common Stock at an initial exercise price of $7.50
per share. The warrant entitles OFLSA to purchase the units at $7.20 per unit
and expires on January 14, 2000. The Company also paid to OFLSA a fee of
$720,000 in connection with the offering which was subsequently used by OFLSA to
purchase an additional 120,000 units from the Company.
In connection with this offering, certain entities affiliated with F&C
purchased an aggregate of 325,000 units at $6.00 per unit plus the surrender of
a prior warrant to purchase one share of Common Stock at an initial exercise
price of $15.00 per share. In addition, certain entities affiliated with GIL
purchased an aggregate of 255,000 units of $6.00 per unit plus the surrender of
a prior warrant to purchase one share of Common Stock at an initial exercise
price of $15.00 per share.
The directors of the Company entered into an agreement to vote the
shares issued to them by the Company for services rendered to the Company,
including shares purchased under options granted under the 1993 Stock Incentive
Plan. The agreement provides that the shares will be voted in the manner that
John D. Kuhns directs and have granted Mr. Kuhns an irrevocable proxy in
connection with such voting agreement. In addition, the agreement grants to the
Company a right of first refusal and a purchase option prior to
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any transfer of such shares and upon termination of employment or service on the
Board.
As previously discussed under Liquidity and Capital Resources, the
Company entered into an agreement (the "Fleming Agreement") to issue $15,750,000
of its 8% Convertible Subordinated Notes due July 31, 2000 and warrants to
purchase up to 787,500 shares of its common stock pursuant to the terms of the
Note and Warrant Purchase Agreement. In connection therewith, the Company
granted a security interest in all the shares of common stock (both owned
beneficially or of record) of New World China Company Limited and Photocomm. The
Company also granted certain demand and registration rights. Approximately
$2,622,000 of the 8% Convertible Subordinated Notes were issued to OFLSA.
On December 28, 1995, the Company repaid its obligations to Sundial
International under its 0% Exchangeable Senior Secured Guaranteed Notes due
December 28, 1995 in the original principal amount of $2.2 million. Upon
repayment of this note, Sundial International released from escrow 2.9 million
shares of pledged Photocomm common stock which shares were then pledged and
delivered to Robert Fleming & Co., Ltd. as agent for the Fleming Purchasers.
On May 31, 1996, the Company entered into a Forbearance, Warrant
Exchange, Note Conversion and Amendatory Agreement (the "Sundial Amendment
Agreement"), dated as of March 1, 1996, among the Sundial International Fund
Limited ("Sundial"), the Company, The New World Power Company Limited ("NWP
Ltd."), and Wolverine Power Corporation ("Wolverine") regarding the Company's 0%
Senior Secured Note in the amount of $550,000, dated December 20, 1995 and due
March 31, 1996 issued by NWP Ltd. to Sundial (the "Senior Secured Note") and the
Wolverine Power Corporation First Mortgage Note in the outstanding principal
amount as of March 1, 1996 of $3,434,692, dated December 31, 1992, issued by
Wolverine to the Company and assigned by the Company to Sundial (the "Wolverine
Note" and together with the Senior Secured Note, the "Notes"). Pursuant to the
terms of the Sundial Amendment Agreement, the maturity of the Senior Secured
Note was extended to December 1, 1996 and the maturities of certain installments
of the Wolverine Note were extended. Also pursuant to the Sundial Amendment
Agreement certain warrants of which Sundial is the owner or the agent for the
owners have been re-priced from exercise prices ranging from $7.50 to $15.00 per
share to an exercise of $1.75 per share. Also pursuant to the Sundial Amendment
Agreement, Sundial has been given an option to exchange the Notes for certain
Exchange Notes to be issued by the Company. The company is required also to
effect certain asset sales and offer to redeem the Notes with the proceeds from
such sales. Sundial also received additional security from the Company and the
right to nominate one member of the Board of Directors in connection with the
Sundial Amendment Agreement.
The Company also entered into Amendment No. 3 to Note and Warrant
Purchase Agreement, and Modification of Letter Agreement, dated as of March 1,
1996 by and between NWP Corp. and each of the Purchasers thereto whereby the
Company and the Purchasers agreed to modify certain of the terms of the Note and
Warrant Purchase Agreement, dated as August 15, 1995, amended by Amendment No. 1
to Note and Warrant Purchase Agreement dated as of October 13, 1995 by and
between the Company and the Purchasers and by Amendment No. 2 to Note and
Warrant Purchase Agreement ("Amendment No. 2") dated as February 29, 1996 by and
between the Company and the Purchasers.
On June 11, 1996, the Company and Oakes, Fitzwilliams & Co. S.A.
("OFLSA") executed a financial advisory services letter agreement ("Financial
Advisory Services Agreement") pursuant to which the Company agreed that for (1)
services rendered during 1995 and 1996 relating to the restructuring of the
Company's management and capitalization ("Restructuring Services") and (2)
services to be rendered in connection with the anticipated negotiations with
Cedar Group, Inc. ("Cedar") or other entity ("Financial Advisory Services")
-16-
that: (a) OFLSA is be issued 240,000 shares of the Company's Common Stock (in
lieu of $125,000 in cash), (b) OFLSA would be paid its expenses already
incurred, some of which have been submitted to the Company but not paid, in the
approximate amount of $85,000 and (c) the warrants to purchase shares of Common
Stock of the Company received in the past of OFLSA as compensation would be
exchanged for New Warrants, and (d) at the closing of a transaction with Cedar,
the Company will pay to OFLSA a cash fee in an amount equal to 2.5% of the value
of the total consideration of the Transaction and reimburse OFLSA its reasonable
out-of-pocket expenses not incurred in the normal course of business.
Effective as of February 29, 1996, the Company entered into Amendment
No. Two (the "Amendment") to the Fleming Agreement. Pursuant to the terms of the
Amendment, the maturity of the 8% Notes was accelerated to July 31, 1997, with
interest payments permitted in pay-in-kind securities prior to the interest
payment due January 31, 1997. Also pursuant to the Amendment the warrants
originally issued under the Fleming Agreement were repriced from an exercise
price of $7.50 per share to an exercise of $1.75 per share. Also pursuant to the
Amendment, the Company is required to effect certain asset sales and offer to
redeem the 8% Notes with the proceeds from such sales. The Noteholders also
received additional security from the Company in connection with the Amendment
in exchange for allowing the Company to access the $3.3 million held in escrow
as collateral, subject to certain restrictions.
Mr. George P. Petrenko served as Chief Executive Officer from April
through August 1996. Mr. Petrenko is an employee of Glass & Associates, Inc.
("Glass"). The Company has entered into a Consulting Agreement with Glass dated
February 7, 1996, pursuant to which Glass provides management consultation
services at an hourly rate for George Petrenko and one or more additional Glass
employees. The Consulting Agreement was amended effective April 15, 1996 to
provided for the services of Mr. Petrenko and another Glass employee at the rate
of $10,000 a week, plus out-of-pocket expenses. Under the revised agreement,
Glass may receive a bonus based upon the percentage of the net proceeds that the
Company receives from the sale of certain assets. This employment was terminated
in August 1996. The Company has paid Glass the sum of $_______ through August
31, 1996.
Effective January 1, 1996, the Company entered into a Consulting
Agreement with Condor Management Associates, Inc. ("Condor"), a corporation
owned by Dwight Kuhns, the brother of John D. Kuhns. The Consulting Agreement
provides for monthly compensation to Condor to supervise the shutdown and sale
of the Company's wind farms in California and Hawaii. The Consulting Agreement
further provides for commissions upon the sale of certain assets and upon the
favorable conclusion of negotiations with creditors of the Company's California
and Hawaii operations. Certain of these commissions may be paid in shares of the
Company's stock. The Company terminated the Consulting Agreement in July 1996.
The Company has paid Condor $______ through August 31, 1996.
-17-
II - REVERSE STOCK SPLIT
The Board unanimously has approved, and recommends to the
holders of the Common Stock that they approve, the Reverse Stock Split. If
approved by the stockholders, the Reverse Stock Split may be effected, as
described below.
The intent of the Reverse Stock Split is to reduce the number
of shares of Common Stock outstanding and thereby increase the trading price and
the marketability and liquidity of the Common Stock. As described below, the
Company has been advised by Nasdaq that the Common Stock could be delisted from
Nasdaq because, among other things, the Company's Common Stock currently fails
to meet the requirement that it have a minimum bid price of $1.00. If the
Reverse Stock Split is approved by the holders of the Common Stock at the
Meeting, the Reverse Stock Split will be effected by the filing of an amendment
of the Company's Third Restated Certificate of Incorporation, as set forth in
Exhibit A to this Proxy Statement.
The discussion of the Reverse Stock Split set forth below is
qualified in its entirety by reference to Exhibit A, which is incorporated
herein by reference.
PURPOSE OF THE REVERSE STOCK SPLIT
The principal purpose of the Reverse Stock Split is to reduce the
number of shares of Common Stock outstanding and thereby increase the trading
price and the marketability and liquidity of its Common Stock. The minimum bid
price of the Company's Common Stock is currently below $1.00 which is the
minimum required to maintain listing of the Common Stock on Nasdaq. [The Company
has been granted an exemption to continue the trading of its Common Stock on
Nasdaq if it meets certain requirements including stockholder approval by ______
__, 1996 of this proposal to effectuate the Reverse Stock Split].
The Board of Directors believes that a decrease in the number of
authorized and outstanding shares of Common Stock, without any material
alteration of the proportionate economic interest in the Company held by
individual shareholders, may increase the trading price of the outstanding
shares, although no assurance can be given that the market price of the Common
Stock will rise in proportion to the reduction in the number of outstanding
shares resulting from the Reverse Stock Split.
Additionally, the Board of Directors believes that the current per
share price of the Common Stock may limit the effective marketability of the
Common Stock because of the reluctance of many brokerage firms and institutional
investors to recommend lower-priced stocks to their clients or to hold them in
their own portfolios. Certain policies and practices of the securities industry
may tend to discourage individual brokers within those firms from dealing in
lower-priced stocks. Some of those policies and practices involve time consuming
procedures that make the handling of lower-priced stocks economically
unattractive. The brokerage commission on a sale of lower-priced stock may also
represent a higher percentage of the sale price than the brokerage commission on
a higher-priced issue. Any reduction in brokerage commissions resulting from the
Reverse Stock Split may be offset, however, in whole or in part, by increased
brokerage commissions required to be paid by stockholders selling "odd lots"
created by the Reverse Stock Split.
The Board believes that the decrease in the number of shares of Common
Stock outstanding as a consequence of the proposed Reverse Stock Split and the
resulting anticipated increase price level will hopefully enable the Common
Stock to continue to be listed on Nasdaq and encourage greater interest in the
Common Stock by the financial community and the investment public and possibly
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promote greater liquidity for the holders of the Common Stock. It is possible,
however, that liquidity could be affected adversely by the reduced number of
shares outstanding after the Reverse Stock Split. Although any increase in the
market price of the Common Stock resulting from the Reverse Stock Split may be
proportionately less than the decrease in the number of shares outstanding, the
proposed Reverse Stock Split could result in a market price for the shares that
would be high enough to overcome the reluctance, policies and practices of
brokerage houses and investors referred to above and to diminish the adverse
impact of correspondingly high trading commissions on the market for the shares.
There can be no assurance, however, that the foregoing effects will
occur or that the market price of the Common Stock immediately after
implementation of the proposed Reverse Stock Split will be maintained for any
period of time, or that such market price will approximate five times the market
price before the proposed Reverse Stock Split. Accordingly, even if the Reverse
Stock Split is approved by the stockholders there can be no assurance that the
Common Stock will continue to be traded on Nasdaq.
EFFECT OF THE REVERSE STOCK SPLIT
If the Reverse Stock Split is approved by the holders of Common Stock
at the Meeting, an amendment to Article IV(A) of the Restated Certificate, in
the form set forth in Exhibit A hereto, would be filed with the Secretary of
State of the State of Delaware immediately following stockholder approval (the
"Reverse Split Date"). The Reverse Stock Split would become effective as of 5:00
p.m. on the date of such filing. Without any further action on the part of the
Company or the holders of the Common Stock, the shares of Common Stock held by
stockholders of record as of the Reverse Split Date would be converted at 5:00
p.m. on the Reverse Split Date into the right to receive an amount of whole
shares of new Common Stock equal to the number of their shares divided by five.
The number of authorized shares of Common Stock will remain at 40,000,000.
No fractional shares would be issued, and no such factional share
interest would entitle the holder thereof to vote or to any rights of a
shareholder of the Company. In lieu of any such fractional shares, a certificate
or certificates evidencing the aggregate of all fractional shares otherwise
issuable (rounded, if necessary, to the next higher whole share) will be issued
to the Company's transfer agent, Continental Stock Transfer & Trust Company (the
"Exchange Agent"), or its nominee, as agent for the accounts of all holders of
shares of Common Stock otherwise entitled to have a fraction of a share issued
to them in connection with the Reverse Stock Split. Sales of fractional interest
will be effected by the Exchange Agent as soon as practicable on the basis of
prevailing market prices of the Common Stock on Nasdaq at the time of sale.
After the Reverse Split Date, the Exchange Agent will pay to such stockholders
their pro rata share of the net proceeds derived from the sale of their
fractional interests upon surrender of their stock certificates. The interest in
the Company of any holder of fewer than five shares of Common Stock prior to the
Reverse Split Date would thereby be terminated.
Approval of the Reverse Stock Split would not affect any continuing
shareholder's percentage ownership interest in the Company or proportional
voting power, except for minor differences resulting from the payment in cash of
fractional shares. The shares of Common Stock which would be issued upon
approval of the Reverse Stock Split would be fully paid and nonassessable. The
voting rights and other privileges of the continuing holders of Common Stock
would not be affected substantially by adoption of the Reverse Stock Split or
subsequent implementation thereof.
-19-
The par value of the Common Stock would remain at $0.01 per share
following the Reverse Stock Split, and the number of shares of Common Stock
outstanding would be reduced. As a consequence, the aggregate par value of the
outstanding Common Stock would be reduced, while the aggregate capital in excess
of par value attributable to the outstanding Common Stock for statutory and
accounting purposes would be correspondingly increased. Under Delaware law, the
Board would have the authority, subject to certain limitations, to transfer some
or all of such capital in excess of par value from capital to surplus. The
Company has no plans to reduce capital at this time.
The Common Stock is listed for trading on Nasdaq. The number of holders
of the Common Stock on the Record Date was approximately ___. The Company does
not currently anticipate that the Reverse Stock Split would result in a
reduction in the number of holders large enough to jeopardize continued listing
of the Common Stock on Nasdaq.
As of the Record Date, the number of issued and outstanding shares of
Common Stock was _________. As a result of the Reverse Stock Split, the
aggregate number of shares of Common Stock that would be issued and outstanding
would be _________, and approximately _________ shares would be authorized and
unissued upon the exercise of Stock Options and Warrants.
EXCHANGE OF STOCK CERTIFICATES
If the Reverse Stock Split is consummated, as soon as practicable after
the Reverse Split Date the Company will send a letter of transmittal to each
stockholder of record on the Reverse Split Date for use in transmitting
certificates representing shares of Common Stock ("Old Certificates") to the
Exchange Agent. The letter of transmittal will contain instructions for the
surrender of Old Certificates to the Exchange Agent in exchange for certificates
representing the appropriate number of whole shares of new Common Stock. No new
certificates will be issued to a stockholder until such stockholder has
surrendered all Old Certificates together with a properly completed and executed
letter of transmittal to the Exchange Agent.
Upon proper completion and execution of the letter of transmittal and
return thereof to the Exchange Agent, together with all Old Certificates,
stockholders will receive a new certificate or certificates representing the
number of whole shares of new Common Stock into which their shares of Common
Stock represented by the Old Certificates have been converted as a result of the
Reverse Stock Split. Until surrendered, outstanding Old Certificates held by
stockholders will be deemed for all purposes to represent the number of whole
shares of Common Stock to which such stockholders are entitled as a result of
the Reverse Stock Split. Stockholders should not send their Old Certificates to
the Exchange Agent until they have received the letter of transmittal. Shares
not presented for surrender as soon as practicable after the letter of
transmittal is sent shall be exchanged at the first time they are presented for
transfer.
No service charges will be payable by holders of shares of Common Stock
in connection with the exchange of certificates, all expenses of which will be
borne by the Company.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated Federal income
tax consequences of the Reverse Stock Split to shareholders of the Company. This
summary is based on the Federal income tax laws now in effect and as currently
interpreted. It does not take into account possible changes in such laws or
interpretations, including amendments to applicable statutes, regulations and
proposed regulations or changes in judicial or administrative rulings, some of
which may have retroactive effect. The summary is provided
-20-
for general information only and does not purport to address all aspects of the
possible Federal income tax consequences of the Reverse Stock Split and is not
intended as tax advise to any person. In particular, and without limiting the
foregoing, this summary does not consider the Federal income tax consequences to
shareholders of the Company in light of their individual investment
circumstances or to holders subject to special treatment under the Federal
income tax laws (for example, life insurance companies, regulated investment
companies and foreign taxpayers). The summary does not discuss any consequence
of the Reverse Stock Split under any state, local or foreign tax laws.
No ruling from the Internal Revenue Service or opinion of counsel will
be obtained regarding the Federal income tax consequences to the shareholders of
the Company as a result of the Reverse Stock Split. ACCORDINGLY, EACH
STOCKHOLDER IS ENCOURAGED TO CONSULT HIS OR HER TAX ADVISER REGARDING THE
SPECIFIC TAX CONSEQUENCES OF THE PROPOSED REVERSE STOCK SPLIT TO SUCH
STOCKHOLDER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN
INCOME AND OTHER TAX LAWS.
The Company believes that the Reverse Stock Split would be a tax-free
recapitalization to the Company and its shareholders. If the Reverse Stock Split
qualifies as a recapitalization described in Section 368(a)(1)(E) of the
Internal Revenue Code of 1986, as amended (the "Code"), (i) no gain or loss will
be recognized by holders of Common Stock who exchange their Common Stock for new
Common Stock, except that holders of Common Stock who receive cash proceeds from
the sale of fractional shares of Common Stock will recognize gain or loss equal
to the difference, if any, between such proceeds and the basis of their Common
Stock allocated to their fractional share interests, and such gain or loss, if
any, will constitute capital gain or loss if their fractional share interests
are held as capital assets at the time of their sale, (ii) the tax basis of the
new Common Stock received by holders of Common Stock will be the same as the tax
basis of the Common Stock exchanged therefor, less the tax basis allocated to
fractional share interests and (iii) the holding period of the new Common Stock
in the hands of holders of new Common Stock will include the holding period of
their Common Stock exchanged therefor, provided that such Common Stock was held
as a capital asset immediately prior to the exchange.
VOTE REQUIRED FOR APPROVAL
The approval of the Reverse Stock Split requires the affirmative vote
of a majority of the outstanding shares of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
APPROVAL OF THE AMENDMENT.
-21-
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
There have been no changes in or disagreements with accountants
required to be reported herein, except as set forth below:
On October 30, 1995, the Company notified the firm of KPMG Peat Marwick
LLP ("Peat Marwick") that they were being dismissed as the Company's independent
accountants. The Company engaged Price Waterhouse LLP ("Price Waterhouse") as
its new independent accountants as of October 30, 1995. The Company's Audit
Committee and its Board of Directors participated in and approved the decision
to change independent accountants.
The report of Peat Marwick on the Company's financial statements for
the fiscal years ended December 31, 1994 and September 30, 1993 and the three
month period ended December 31, 1993 and did not contain an adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principles. In connection with the audits of the Company's
financial statements for each of its two most recent fiscal years and in the
fiscal period subsequent to the Company's most recent fiscal year and through
November 3, 1995, there were no disagreements with Peat Marwick on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure which, if not resolved to the satisfaction of Peat Marwick,
would have caused Peat Marwick to make reference to the matter in their reports
with respect to such periods, other than the following:
During the fiscal year ended December 31, 1995, the Company discussed
with Peat Marwick an accounting matter which as of the date of Peat Marwick's
termination remained unresolved.
The particular matter discussed related to certain wind farm facilities
("Facilities") owned by the Company in the UK. These facilities are currently
operating under contract with the Non-Fossil Purchasing Agency, Limited, as
agent for and on behalf of the Public Electricity Suppliers of England and Wales
("PESs"), which purchases the power generated by the Facilities. The contractual
rate per Kwh through December 1998 is benefited by certain UK government
incentive payments, which promote the operation of renewable power projects in
the UK. Incentive payments are currently scheduled to expire in December of
1998. If the incentive payments are not renewed by the UK government, the
contracts will continue with the Public Electricity Suppliers at avoided cost
rates unless terminated at the option of either the Company or the PESs due to
the occurrence of certain specified events.
The Company consulted with Peat Marwick regarding the accounting for
the Facilities, and the related power purchase contracts. This consultation
concluded the Facilities should either use an "accelerated" method of
depreciation for the underlying wind farm assets or defer some portion of the
contractual revenues received during the portion of the contracts in which
incentive payments are received, with a related amortization of those deferred
revenues over the estimated useful life of the Facilities.
The Company agreed with the successor accountant as to the appropriate
accounting practices to be applied, which resulted in recording accelerated
depreciation for the Facilities. The Company had recorded an adjustment in its
financial statements at the quarter ended September 30, 1995.
During the Company's two most recent fiscal years and in the fiscal
period subsequent to the Company's most recent fiscal year end, there were no
"reportable events" as defined in subparagraph (a)(1)(v) of Item 304 of
Regulation S-K.
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During the Company's two most recent fiscal years and through October
30, 1995, the Company has not consulted with Price Waterhouse on items which (1)
were or should have been subject to SAS 50 or (2) concerned the subject matter
of a disagreement or reportable event with the former auditors, as described in
Regulation S-K, Item 304(a)(2).
Price Waterhouse audited the Company's financial statements for fiscal
year ended December 31, 1995. It is expected that a representative of Price
Waterhouse will attend the Annual Meeting, will have the opportunity to make a
statement if he or she desires to do so and will be available to respond to
appropriate questions.
The Audit Committee and the Board have not yet selected an independent
public accounting firm for fiscal 1996. The Audit Committee and the Board are
continuing to review the Company's audit service requirements for 1996 and may
decide to solicit proposals from Price Waterhouse and other accounting firms.
OTHER MATTERS
The Board does not know of any matters that will be presented for
action at the Annual Meeting other than those described above and matters
incident to the conduct of the meeting. If, however, any other matters not
presently known to management should come before the Annual Meeting, it is
intended that the shares represented by the accompanying proxy will be voted on
such matters in accordance with the discretion of the holders of such proxy.
COST OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. Proxies
may be solicited by directors, officers and regular employees of the Company in
person, by telephone or telegram. The Company will request brokers and nominees
to obtain voting instructions of beneficial owners of shares of Common Stock
registered in their names and will reimburse them for their expenses incurred in
connection therewith.
STOCKHOLDER PROPOSALS FOR 1996
The Company intends to conduct its 1997 annual meeting in May 1997,
consistent with prior years. Pursuant to Securities and Exchange Commission
regulations, stockholder proposals submitted for next year's proxy statement
must be received by the Company no later than the close of business on January
2, 1997, in order to be considered. Proposals should be addressed to Corporate
Secretary, The New World Power Corporation, The Farmhouse, 558 Lime Rock Road,
Lime Rock, Connecticut 06039.
By Order of the Board of Directors,
Secretary
September __, 1996
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EXHIBIT A
CERTIFICATE OF AMENDMENT
TO
THIRD RESTATED CERTIFICATE OF INCORPORATION
OF
THE NEW WORLD POWER CORPORATION
THE NEW WORLD POWER CORPORATION (the "Corporation"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware (the "General Corporation Law"), does
hereby certify:
FIRST: That the Certificate of Incorporation of the
Corporation was filed with the Secretary of State on June 27, 1989 under the
name Wolverine Holdings, Inc.; and
SECOND: That the Corporation filed a Third Restated
Certificate of Incorporation (the "Restated Certificate") with the Delaware
Secretary of State on July 14, 1994; and
THIRD: That, pursuant to the provisions of Section 242(b) of
the General Corporation Law, the Board of Directors of the Corporation duly
adopted resolutions setting forth a proposed amendment to the Restated
Certificate, declared said proposed amendment to be advisable and directed that
it be submitted to the stockholders of the Corporation for their approval; and
FOURTH: That thereafter, pursuant to the provisions of Section
242(b) of the General Corporation Law, the stockholders of the Corporation by
affirmative vote of the holders of a majority of the outstanding shares of the
Corporation's Common Stock entitled to vote thereon, such Common Stock being the
only class of the Corporation's stock entitled to vote thereon, duly adopted the
following resolution setting forth the proposed amendment:
RESOLVED, that the Third Restated Certificate of
Incorporation of the Corporation, be and it hereby is amended
by deleting existing Article IV(A) in its entirety and by
substituting the following new Article IV(A) in lieu thereof:
"(A) CLASS OF STOCK. The Corporation is authorized to issue
two classes of stock to be designated, respectively, "Common
Stock" and "Preferred Stock." The Corporation is authorized to
issue forty million (40,000,000) shares of Common Stock and
five million (5,000,000) shares of Preferred Stock. The Common
Stock shall have a par value of $.01 and the Preferred Stock
shall have a par value of $.01. Each five (5) shares of the
corporation's Common Stock issued and outstanding on the
effective date of this amendment shall be and hereby are
changed without further action into one (1) fully paid and
nonassessable shares of the corporation's Common Stock,
provided that no fractional shares shall be issued pursuant to
such change. Fractional shares will be rounded to the nearest
whole number."
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FIFTH: That said amendment was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be signed by its duly authorized officer this ___ day of ______,
1996.
THE NEW WORLD POWER CORPORATION
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE NEW WORLD POWER CORPORATION
PROXY -- ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 19, 1996
The undersigned, a stockholder of The New World Power Corporation, a
Delaware corporation (the "Company"), does hereby appoint ____________ and
________________, and each of them, the true and lawful attorneys and proxies
with full power of substitution, for and in the name, place and stead of the
undersigned, to vote all of the shares of Common Stock of the Company which the
undersigned would be entitled to vote if personally present at the 1996 Annual
Meeting of Stockholders of the Company to be held at the Company's new corporate
headquarters at the Farmhouse, 558 Lime Rock Road, Connecticut, on October 19,
1996, at 10:00 A.M., Local Time, or at any adjournment or adjournments thereof.
The undersigned hereby revokes any proxy or proxies heretofore given
and acknowledges receipt of a copy of the Notice of Annual Meeting and Proxy
Statement, both dated ______, 1996, and a copy of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH ANY DIRECTIONS HEREIN GIVEN. UNLESS
OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED TO ELECT THE DIRECTORS AND TO
APPROVE THE REVERSE STOCK SPLIT.
1. To elect the following directors: John D. Kuhns, Robert W.
MacDonald, Gerald R. Cummins, Nazir Memon, M.D., Lucien Ruby
and Herbert L. Oakes, Jr., to serve as directors until the
1997 annual meetings of stockholders of the Company and until
their successors shall be duly elected and qualified.
WITHHELD ________________________
FOR ALL FROM ALL ________________________
NOMINEES ___ NOMINEES ___ ________________________
TO WITHHOLD AUTHORITY TO
VOTE FOR ANY NOMINEE(S),
PRINT NAME ABOVE:
2. To approve a one-for-five reverse stock split of the Company's
Common Stock, $.01 par value, whereby each outstanding share
of the Company's Common Stock will be reclassified into
one-fifth of a new share of the Company's Common Stock.
FOR ___________ AGAINST ________ ABSTAIN ______
3. DISCRETIONARY AUTHORITY: To vote with discretionary authority
with respect to all other matters which may come before the
Meeting.
NOTE: Your signature should appear the same as your name appears hereon. In
signing as attorney, executor, administrator, trustee or guardian, please
indicate the capacity in which signing. When signing as joint tenants, all
parties in the joint tenancy must sign. When a proxy is given by a corporation,
it should be signed by an authorized officer and the corporate seal affixed. No
postage is required if mailed in the United States.
Signature: Date___________
Signature: Date___________
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW: _____________
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