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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
(AMENDMENT NO. 11)
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------------
MAGMA POWER COMPANY
(Name of Subject Company)
MAGMA POWER COMPANY
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.10 PER SHARE
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
(Title of Class of Securities)
0005591941
(CUSIP number of Class of Securities)
JON R. PEELE, ESQ.
Executive Vice President, Secretary and General Counsel
MAGMA POWER COMPANY
4365 EXECUTIVE DRIVE, SUITE 900
SAN DIEGO, CALIFORNIA 92121
(619) 622-7800
(Name, address and telephone number of person authorized to receive notice and
communications on behalf of the person(s) filing statement)
Copies to:
<TABLE>
<S> <C>
Michael J. Kennedy, Esq. David W. Heleniak, Esq.
SHEARMAN & STERLING SHEARMAN & STERLING
555 California Street 599 Lexington Avenue
San Francisco, California 94104 New York, New York 10022
(415) 616-1100 (212) 848-4000
</TABLE>
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This Amendment No. 11 amends and supplements the Solicitation/Recommendation
Statement on Schedule 14D-9, dated October 11, 1994, as amended (the "Schedule
14D-9"), filed by Magma Power Company, a Nevada corporation ("Magma" or the
"Company"), relating to the tender offer disclosed in a Tender Offer Statement
on Schedule 14D-1, dated October 6, 1994, as amended and supplemented through
the date hereof, of CE Acquisition Company, Inc., a Delaware corporation (the
"Purchaser") and a wholly owned subsidiary of California Energy Company, Inc.,
a Delaware corporation ("California Energy"), to purchase 12,400,000 Shares at
a price of $38.50 per Share net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated October 6,
1994, as supplemented on October 26, 1994, and as amended through the date
hereof, and the related Letter of Transmittal as amended and supplemented
through the date hereof (the "Revised Offer"). Capitalized terms used and not
defined herein shall have the meanings sets forth in the Schedule 14D-9.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Item 9 is hereby amended and supplemented by adding thereto the following:
Exhibit 32 -- Opposition Solicitation Statement to Stockholders, dated
November 21, 1994.
2
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
MAGMA POWER COMPANY
By: /s/ Jon R. Peele
___________________________________
Name: Jon R. Peele
Title: Executive Vice President,
Secretary and General
Counsel
Dated: November 21, 1994
3
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INDEX TO EXHIBITS
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SEQUENTIAL
PAGE
EXHIBITS DESCRIPTION NUMBER
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<C> <S> <C>
Exhibit 32 --Opposition Solicitation Statement to Stockholders,
dated November 21, 1994
</TABLE>
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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
[X] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Magma Power Company
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(Name of Registrant as Specified in Its Charter)
Magma Power Company
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[_] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rule 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
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[_] 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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE>
NOVEMBER 21, 1994
OPPOSITION SOLICITATION STATEMENT TO STOCKHOLDERS
OF
MAGMA POWER COMPANY
This solicitation (the "Opposition Solicitation") in opposition to the
solicitation (the "California Energy Request Solicitation") of requests of the
call of a special meeting (the "Special Meeting") of the stockholders of the
Company to consider and vote on the "Special Meeting Proposals" described in
the Request Solicitation Statement of California Energy Company, Inc.
("California Energy") and CE Acquisition Company, Inc., dated November 4, 1994
under the heading "THE SPECIAL MEETING PROPOSALS", and the request that the
record date for the Special Meeting and the date of the Special Meeting be
designated by California Energy. The Opposition Soliciation is being made by
the Board of Directors of Magma and is first being sent to Magma's shareholders
on or about November 21, 1994.
In the Request Solicitation Statement California Energy has described the
Special Meeting Proposals as follows: "(a) that the number of directors on the
Company's Board be increased from 11 to 15; (b) that the nominees of
[California Energy] identified in [California Energy]'s proxy materials to be
distributed in connection with the Special Meeting be elected as directors to
fill the four newly created directorships on the Company's Board; (c) that the
Bylaws be amended (the "First Bylaw Amendment") to require the affirmative vote
of at least 80% of the entire Board of Directors of the Company (irrespective
of vacancies) with respect to certain actions outside the ordinary course of
business taken or committed to be taken prior to the Company's 1995 Annual
Meeting of Stockholders, including issuances of securities, dispositions of
assets, taking certain compensation, benefit and employment action, entering
into material commitments or contracts, and certain incurrences of debt or
liens; and (d) that the Bylaws be amended (the "Second Bylaw Amendment") to
render the provisions of the "Control Share Statute, Sections 78.378 through
78.3793, inclusive, of the NGCL, inapplicable to the Offer." In the Request
Solicitation Statement California Energy reserved the right to include in the
special meeting notice "such other matters as [California Energy] may deem
necessary, advisable or appropriate in connection with facilitating
consummation of the Offer and the Proposed Merger."
YOUR BOARD UNANIMOUSLY URGES YOU NOT TO SIGN THE GREEN REQUEST CARD FOR A
SPECIAL MEETING SENT TO YOU BY CALIFORNIA ENERGY. WHETHER OR NOT YOU HAVE
PREVIOUSLY EXECUTED A GREEN REQUEST CARD, THE BOARD URGES YOU TO SIGN, DATE AND
RETURN THE ENCLOSED GOLD OPPOSITION CARD.
YOU HAVE THE RIGHT TO REVOKE ANY GREEN REQUEST CARD YOU MAY HAVE SENT TO
CALIFORNIA ENERGY BY SIGNING, DATING AND MAILING THE ENCLOSED GOLD OPPOSITION
CARD, WHICH IS RECOMMENDED BY YOUR BOARD OF DIRECTORS.
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If you have any questions, or need assistance in voting your shares, please
contact the firm assisting us in the solicitation of opposition cards:
GEORGESON & COMPANY INC.
WALL STREET PLAZA
NEW YORK, NEW YORK 10005
TOLL FREE: 1-800-223-2064
If your shares of Common Stock are held in the name of a bank or brokerage
firm, only that firm can execute a GOLD CARD on your behalf. Please contact the
person responsible for your account and give instructions for a GOLD CARD to be
voted for you.
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<PAGE>
BACKGROUND
On September 19, 1994, California Energy Company, Inc. delivered to the
Company and released publicly an unsolicited letter to Messrs. Pankratz and
Boeker in which California Energy made a proposal to acquire the Company for
$25 a share in cash and $10 a share in California Energy common stock (the
"Initial Proposal").
On September 19, 1994 Magma issued a press release stating that the Magma
Board would consider the Initial Proposal in due course.
On September 22, 1994, Magma announced its retention of Goldman, Sachs & Co.
("Goldman Sachs") and Shearman & Sterling as its independent financial and
legal advisors, respectively, in connection with the Initial Proposal.
Pursuant to the terms of an engagement letter dated September 26, 1994
entered into in connection with the Initial Proposal, the Company has agreed
to pay Goldman Sachs (a) an initial fee of $850,000, (b) a transaction fee in
the event of any transaction in which at least 50% of the outstanding shares
of Magma common stock are acquired, or all or substantially all of the assets
of the Company are transferred, equal to 0.4% of the aggregate value of such
transaction up to $35.00 per share, plus 1.666% of the aggregate value of such
transaction in excess of $35.00 per share up to $38.00 per share, plus 2.5% of
the aggregate value of such transaction in excess of $38.00 per share and (c)
a financial advisory fee to the extent no transaction of the type described in
clause (b) above has been consummated equal to 0.4% of the market value of the
Company's outstanding shares as determined on September 20, 1994, payable in
four equal installments due December 31, 1994, March 31, 1995, June 30, 1995
and September 30, 1995, so long as the Company is independent as of any date
such payment is due; provided, however, that such financial advisory fee shall
equal (i) $850,000 in the event that the Company rejects the California Energy
proposal by October 10, 1994, and California Energy subsequently withdraws
such proposal on or before the end of the fifth business day following the
date of such rejection or (ii) $1,700,000 in the event that the Company
rejects the California Energy proposal by October 10, 1994, and California
Energy subsequently withdraws such proposal after the fifth business day
following such rejection but on or before the end of the fifteenth business
day following such rejection. The fees paid pursuant to clauses (a) and (c)
above shall be creditable against any fees payable pursuant to clause (b)
above. The Company has also agreed to reimburse Goldman Sachs for its out-of-
pocket expenses, including all fees and disbursements of counsel, and to
indemnify Goldman Sachs and certain related persons against certain
liabilities in connection with their engagement, including certain liabilities
under the federal securities laws.
On September 26, 1994, Mr. Sokol sent a second letter to Messrs. Pankratz
and Boeker, which reiterated the terms of the Initial Proposal and the threat
to proceed with a hostile tender offer.
On the afternoon of Monday, September 26, 1994, Goldman Sachs contacted
Gleacher & Co. Inc. ("Gleacher"), financial advisor to California Energy.
Goldman Sachs advised Gleacher that the Magma Board would be meeting on
October 2 and 3, 1994 and agreed to a meeting in New York to allow Gleacher
and Mr. Sokol to clarify the Initial Proposal on the condition that California
Energy not commence a hostile tender offer prior to October 4.
Representatives of Goldman Sachs met with Mr. Sokol and representatives of
Gleacher on Wednesday, September 28, 1994. At this meeting Mr. Sokol and the
Gleacher representatives explained their views of the benefits of the Initial
Proposal. In addition, they delivered a third letter to Messrs. Pankratz and
Boeker, which stated that California Energy would commence a tender offer on
Tuesday, October 4, 1994 if the Magma Board did not authorize "meaningful"
merger negotiations by the close of business on October 3, 1994.
2
<PAGE>
At a meeting held on October 2 and 3, 1994, the Magma Board carefully
considered the Company's business, financial condition and prospects, the terms
and conditions of the Initial Proposal, California Energy's business, financial
condition and prospects and other matters, including presentations by the
Company's management and financial and legal advisors. The Company's management
made detailed presentations regarding, among other things, the Company's
business plan and the various strategic initiatives which the Company had
undertaken both in the United States and overseas.
On October 3, 1994, the Magma Board (i) authorized the adoption of a
stockholders' rights plan (the "Rights Plan") and an amendment to the Company's
Bylaws that eliminated the ability of the Company's stockholders to act by
written consent (the "Bylaw Amendment") and (ii) authorized the filing of an
action in Nevada state court seeking a declaratory judgment that the Nevada
business combination statute would be upheld as valid and that the Magma Board
had properly discharged its fiduciary duties in adopting the Rights Plan and
the Bylaw Amendment. The Magma Board also authorized Goldman Sachs to meet with
representative of Gleacher. This meeting was held on the morning of October 4,
1994. At this meeting Goldman Sachs informed Gleacher that Magma was not for
sale and that the value placed on Magma by the Initial Proposal did not
remotely reflect the intrinsic value of Magma. Later that day California Energy
issued a press release announcing its intention to commence a tender offer for
12,400,000 Shares at a price of $35 net to the seller per Share.
On October 5, 1994, Mr. Sokol sent another letter to Messrs. Pankratz and
Boeker and the other members of the Magma Board in which Mr. Sokol extolled the
putative benefits of California Energy's unsolicited tender offer and the
virtues of California Energy.
On October 6, 1994, California Energy commenced an unsolicited tender offer
(the "Offer") to purchase 12,400,000 shares of Magma's common stock, par value
$0.10 per share (the "Common Stock") at a price of $35.00 net to the seller per
share as the first step of a proposed transaction in which the Magma shares not
purchased in the Offer would each be converted pursuant to a back-end merger
(the "Merger") into the right to receive approximately $15 in cash and
California Energy common stock with a nominal value of approximately $20. The
Offer and the Merger are collectively referred to herein as the "CE Proposal".
California Energy has indicated that the proposed terms of the Merger would
include a collar provision providing that (i) if the value of California Energy
common stock (as measured during an unspecified period prior to consummation of
the Merger) were less than or equal to the lower end of an as yet unspecified
collar range, then the number of shares of California Energy common stock to be
received in the Merger would be based on the bottom of the range; (ii) if the
value of California Energy common stock were within the collar range, then the
number of shares of California Energy common stock would be based on such
value; and (iii) if the value of California Energy common stock were greater
than the top end of the collar range, then the number of shares of California
Energy common stock would be based on the top of the range. The effect of these
provisions would be to decrease the value of the stock consideration to be
received in the Merger if the value of California Energy common stock was below
the collar and to increase the value of such stock consideration if such value
were above the collar. California Energy has indicated that it intends to
establish the collar shortly prior to executing a merger agreement with Magma.
In its offer to purchase, California Energy also announced that it had taken
preliminary steps to commence a solicitation of requests for the calling of a
special meeting of the Company's stockholders at which, among other things, the
Magma stockholders would be asked to approve expanding the size of the
Company's Board of Directors from 11 to 15 and filling the four new
directorships created thereby with nominees of California Energy.
At a meeting of the Magma Board held on October 10, 1994, the Company's
management and Goldman Sachs each reviewed and updated the presentations they
had made to the Magma Board at the October 2 and 3, 1994 board meeting. In
addition, Goldman Sachs opined to the Magma Board that the consideration
provided for in the Offer was inadequate.
3
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On October 10, 1994, after careful consideration, the Magma Board unanimously
determined that the Offer was not in the best interests of Magma stockholders
and unanimously recommended that Magma's stockholders reject the Offer and not
tender their shares pursuant to the Offer. The Magma Board determined that,
based on, among other things, the presentations of the Company's management and
Goldman Sachs at the meeting and the Magma Board's knowledge of and familiarity
with the Company's businesses, financial condition and future prospects and
with California Energy and its management, it is in the best interest of the
Company and its stockholders that the Company remain independent and continue
to pursue its long-term business strategy.
In reaching its determinations and recommendations with respect to the Offer,
as indicated above, the Magma Board took into account numerous factors
discussed at its October 2 and 3, 1994 board meetings and its October 10, 1994
board meeting including, among other things, the following:
(i) The Magma Board's familiarity with the Company's businesses,
financial condition and future prospects and the opportunities that the
Company has to reap substantial benefits in the future from the various
strategic initiatives which the Company has implemented over the past
several years, which benefits should be for Magma and its stockholders, not
California Energy.
(ii) The fact that the Company has been successfully pursuing a carefully
structured long-term business plan, and the Board's belief that pursuit of
this plan will produce greater long-term value for stockholders than the
Offer.
(iii) California Energy's high degree of leverage, and the even higher
degree of leverage contemplated by the Offer for a combined
Magma/California Energy business.
(iv) The fact that the CE Proposal is a two-tiered, front-end loaded,
highly leveraged and coercive transaction, in that the CE Proposal is
intended to intimidate stockholders to tender their Shares to the Offer so
as to avoid receiving in the Merger primarily common stock of California
Energy, which would (A) be nominally valued at approximately $20 per share,
(B) be issued by an even more highly leveraged California Energy, and (C)
not provide any ongoing protections for holders of those shares.
(v) The Board's understanding of California Energy's business, financial
condition and prospects.
(vi) The highly conditional nature of the Offer, particularly the
conditions requiring (A) California Energy to obtain financing, given that
in the Offer to Purchase California Energy can provide no more comfort than
its financial advisor's "belief" that its financing will be available on a
timely basis, (B) California Energy stockholder approval, given that the
Offer to Purchase indicates such approval will not be obtained until mid-
November at the earliest, (C) the execution of a friendly merger agreement,
given the inadequate price offered, and (D) that no material contractual
right of the Company be impaired as a result of the CE Proposal.
(vii) The oral opinion of Goldman Sachs that the consideration provided
for in the Offer is inadequate.
(viii) The disruptive effect the Offer, and a subsequent merger, could
have on the Company and on the Company's employees, creditors, partners and
customers and the communities in which the Company operates.
The Board also resolved at its October 10, 1994 meeting that the Distribution
Date (as defined in the Rights Agreement) shall not occur until the earlier of
(i) such later date as the Board, in its sole discretion, shall fix by
resolution adopted prior to the Distribution Date and (ii) the date the
Purchaser becomes an Acquiring Person (as defined in the Rights Agreement).
On October 11, 1994, Magma filed a Solicitation/Recommendation Statement on
Schedule 14D-9 with the Securities and Exchange Commission (the "SEC"),
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
On October 13, 1994, California Energy filed a preliminary call solicitation
statement relating to the California Energy Request Solicitation (the "Request
Solicitation Statement").
4
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On October 21, 1994, California Energy announced that it had revised the
Offer (as so revised, the "Revised Offer") so as to offer $38.50 net to the
seller per share and the terms of the Merger, which indicated that the
remaining shares would each be converted in the Merger into approximately
$18.10 in cash and California Energy common stock with a nominal value of
approximately $20.40.
On October 21, 1994, Magma issued a press release urging stockholders to take
no action relating to the Revised Offer until the Board had reviewed and made a
recommendation with respect to the Revised Offer.
At a meeting of the Magma Board held on October 28, 1994, the Company's
management and Goldman Sachs each reviewed and updated the presentations they
had made to the Magma Board at the October 2 and 3, 1994 and October 10, 1994
board meetings. In addition, Goldman Sachs opined to the Magma Board that the
consideration provided in the Revised Offer was inadequate.
At the October 28, 1994 board meeting the Magma Board, after careful
consideration, unanimously voted to reject the Revised Offer and unanimously
recommended that the Company's stockholders reject the Revised Offer and not
tender their shares pursuant to the Revised Offer.
In reaching its determinations and recommendations with respect to the
Revised Offer, as indicated above, the Magma Board took into account numerous
factors discussed at its October 28, 1994 board meeting, including, among other
things, the following:
(i) The Magma Board's determination that the consideration reflected in
the Revised Offer is inadequate and does not reflect the intrinsic value of
Magma. In reaching this conclusion, the Magma Board relied on its
familiarity with the Company's business, financial condition, geothermal
resources, technologies and future prospects and the opportunities that the
Company has to reap substantial benefits in the future from the various
strategic initiatives which the Company has implemented over the past
several years.
(ii) Inquiries from various third parties expressing interest in pursuing
a possible business combination with the Company.
(iii) The fact that the CE Proposal, as revised, remains a two-tiered,
front-end loaded, highly leveraged and coercive transaction, in that the CE
Proposal is intended to intimidate stockholders to tender their shares to
the Revised Offer so as to avoid receiving in the Merger primarily common
stock of California Energy, which would (A) be nominally valued at
approximately $20 per share, (B) be issued by an even more highly leveraged
California Energy, and (C) not provide any ongoing protections for holders
of those shares.
(iv) The Board's understanding, based on publicly available information,
of California Energy's business, financial condition and prospects,
including, without limitation, the degree of California Energy's leverage,
California Energy's existing projects, California Energy's geothermal
resources and California Energy's announced future projects.
(v) The highly conditional nature of the Revised Offer, particularly the
conditions requiring (A) California Energy to obtain financing, given that,
according to the Offer to Purchase, the Credit Suisse financing commitment
that California Energy has received is subject to numerous conditions,
including execution of a merger agreement and Credit Suisse's satisfaction
with its due diligence review of both California Energy and Magma, (B)
California Energy stockholder approval, given that the Offer to Purchase
indicates such approval will not be obtained until mid-November at the
earliest, (C) the execution of a friendly merger agreement, given the
inadequate price offered, and (D) that no material contractual right of the
Company be impaired as a result of the CE Proposal.
(vi) The oral opinion of Goldman Sachs that the consideration provided
for in the Revised Offer is inadequate. In rendering its opinion on October
28, Goldman Sachs reviewed the following topics with the Magma Board: (A)
an overview of the Revised Offer; (B) a summary of certain financial
information regarding Magma; (C) trading histories of shares of Common
Stock as well as shares of California Energy common stock; (D) a comparison
of market trading prices as well as certain other financial statistics of
several companies within the independent power production industry (the
"Industry"); (E) a
5
<PAGE>
summary of recent acquisition transactions within the Industry; (F) a
summary of certain publicly available information concerning California
Energy and its business; (G) the application of certain valuation
methodologies and analyses, including a discounted cash flow analysis,
based upon certain assumptions stated therein, to Magma; (H) an analysis of
the pro forma impact of a possible transaction with California Energy; (I)
analyses of selected financial and strategic alternatives; and (J) analyses
of the pro forma impact of possible transactions with certain potential
acquirors.
(vii) The adverse effect the Revised Offer, and a subsequent merger, has
had, and could continue to have, on the Company and on the Company's
employees, creditors, partners and customers and the communities in which
the Company operates.
At its meeting held on October 28, 1994, the Magma Board considered a variety
of alternatives to the Revised Offer. After considerable discussion, the Magma
Board resolved that it was desirable and in the best interests of the Company
and its stockholders to direct the Company's management and financial advisor
to explore all available alternatives to further the best interests of Magma
stockholders, including remaining independent, conducting discussions with
interested parties, including California Energy, concerning possible business
combinations, strategic partnerships or equity investments, recapitalizing or
restructuring the Company and similar transactions.
At the Magma Board's October 28, 1994 meeting, the Magma Board determined
that if, and when, any discussions or negotiations of the type referred to
above (including, without limitation, the provision of confidential information
to interested third parties) are underway or undertaken, disclosure with
respect to any parties to, furnishing confidential information in connection
with, and the possible terms of, any such transactions or proposals might
jeopardize the continuation of any discussions or negotiations. Accordingly,
the Magma Board adopted a resolution instructing the members of the Magma Board
and management not to disclose the possible terms of any such transactions or
proposals, or the parties thereto, or the furnishing of confidential
information in connection therewith, unless and until a definitive agreement or
an agreement in principle relating thereto has been reached.
After the meeting of the Magma Board on Friday, October 28, 1994,
representatives of Magma's financial advisor called a representative of
California Energy's financial advisor to inform him that the Magma Board had
rejected the Revised Offer and that on the ensuing Monday Magma would actively
commence exploring all available alternatives to further the best interests of
Magma stockholders. Magma's representatives suggested that if California Energy
was inclined to meaningfully negotiate all aspects of the Revised Offer
(including a substantial increase in price), Magma would be available over the
weekend to meet with California Energy. California Energy's financial advisor
responded that it would be premature to meet at such time.
On October 31, 1994, the Magma Board announced that it had unanimously voted
to reject the Revised Offer and unanimously recommended that Magma's
stockholders reject the Revised Offer and not tender their shares pursuant to
the Revised Offer.
The Magma Board also announced that it had authorized Magma management and
Goldman Sachs to explore all available alternatives to further the best
interests of Magma stockholders, including remaining independent, conducting
discussions with interested parties, including California Energy, concerning
possible business combinations, strategic partnerships or equity investments,
recapitalizing or restructuring the company and similar transactions.
On November 1, 1994, California Energy filed a revised Request Solicitation
Statement and announced that it had extended the expiration date of the Revised
Offer until December 2, 1994 and that about 596,580 shares of Common Stock
(approximately 2.5% of the outstanding shares of Common Stock) were tendered as
of November 1. Mr. Sokol was quoted as follows: ". . . we [California Energy]
have put our best offer on the table and we intend to withdraw our acquisition
proposal if we have not signed a merger agreement with Magma or received
sufficient written requests to call a special meeting by December 2, 1994."
On or about November 5, 1994 California Energy sent a definitive Request
Solicitation Statement to Magma stockholders and filed such statement with the
SEC on November 7, 1994.
6
<PAGE>
On November 7, 1994, Magma issued a statement relating to the status of
meetings with interested parties in the following press release:
MAGMA POWER ISSUES STATEMENT ON STATUS OF MEETINGS WITH INTERESTED PARTIES
San Diego, California, November 7, 1994. . . In response to inquiries
regarding a Reuters interview with chief executive officer Ralph W. Boeker
about the current status of Magma Power Company's (Nasdaq NNM: MGMA)
exploration of alternatives to further the best interests of Magma
stockholders, Magma made the following statement:
At present, we are moving down a number of different paths. Since
California Energy announced its unsolicited bid, we and Goldman Sachs &
Co. have received a substantial number of inquiries regarding the company,
which we began to seriously explore this past week.
We are now meeting with interested parties and, subject to confidentiality
agreements which several parties have signed, are giving them access to
confidential information with which they can better analyze the long-term
potential of the company. Magma has not received proposals from any of
these parties as of this time.
While we obviously cannot disclose with whom we are meeting, the parties
include companies with financial resources greater than California Energy.
In addition, Goldman is actively soliciting other potential participants
and has also been instructed to explore possible value enhancing
transactions other than business combinations.
Our paramount objective is to achieve the best result for our
stockholders. We are not putting a time limit on this pursuit and will not
be influenced by artificial deadlines.
This is a complex effort. We believe that in order to recognize the true
value of Magma, a potential partner must sit down with management and
study the company from the inside. In addition, many of the interested
parties, although knowledgeable about power generation, are new to
geothermal. As a consequence, the education process will take some time.
It is impossible to determine at this time how long this process will
take. We also cannot say that ultimately the board of directors will not
conclude that independence is the best alternative for shareholders, nor
can we guarantee that a transaction will be completed.
Representatives of Magma provided California Energy with the same form of
confidentiality agreement provided to other third parties interested in
reviewing confidential information regarding Magma in connection with possible
alternative transactions. California Energy refused to sign this agreement and
instead provided a signed copy of an agreement that had been modified so as to,
among other things, remove the standstill provision. As of the date of this
Opposition Solicitation Statement, the Company has not begun to negotiate the
terms of any extraordinary transaction with interested third parties. At its
meeting on October 28, the Magma Board adopted a resolution instructing the
members of the Magma Board and management not to disclose the possible terms of
any extraordinary transactions or proposals therefor, or the parties thereto,
or the furnishing of confidential information in connection therewith, unless
and until a definitive agreement or agreement in principle relating thereto has
been reached.
In a letter dated November 7, 1994, counsel to Magma provided a signed
confidentiality agreement in favor of California Energy (including a three-year
standstill provision) and suggested a meeting between California Energy and
Magma to discuss California Energy during the week of November 21. In this
letter, it was reiterated that Magma would not provide confidential information
to California Energy on different terms than those pursuant to which such
information was being provided to other interested parties. In a letter dated
November 10, 1994 from Mr. Sokol to Mr. Pankratz, the proposed meeting was
rejected.
On November 14, 1994, Magma issued a press release expressing its
disappointment in the failure of California Energy to provide Magma access to
confidential information regarding California Energy, despite Magma's execution
of a confidentiality agreement in California Energy's favor.
7
<PAGE>
OPPOSITION PROCEDURE
In order to oppose the request for the call of the special meeting, a record
holder as of November 7, 1994 (the "Record Date") (a "Record Holder") of the
Common Stock, should (1) mark the "OPPOSE" box on the enclosed GOLD opposition
card, (2) sign and date the GOLD opposition card and (3) mail it to Magma Power
Company in the enclosed postage-prepaid envelope. To be effective, the GOLD
opposition card must bear the signature of the Record Holder. By executing the
GOLD opposition card enclosed herewith, stockholders will revoke any earlier
dated green request card solicited by California Energy which they may have
signed.
Only Record Holders are eligible to execute a GOLD opposition card. Persons
owning shares of Common Stock through a broker, bank or other financial
institution, should contact the person responsible for their account and
instruct such person to execute the GOLD opposition card on their behalf.
Broker non-votes and abstentions will have the effect of opposing the call of
the special meeting (assuming that no opposition or request card is executed).
IF A GOLD OPPOSITION CARD IS EXECUTED AND RETURNED BUT NO INDICATION IS MADE
AS TO WHAT ACTION IS TO BE TAKEN, IT WILL BE TREATED AS A VOTE IN OPPOSITION TO
THE CALLING OF A SPECIAL MEETING.
CALLING A SPECIAL MEETING
Pursuant to Article I, Section 2, of Magma's bylaws (the "Bylaws"), the
President or Secretary is required to call a special meeting of stockholders
upon the request in writing of stockholders owning a majority of the capital
stock of the Company issued and outstanding and entitled to vote. According to
the Bylaws, each stockholder is entitled to cast one vote for each share of
Common Stock held by such person.
As of October 1, 1994, there were 24,014,714 shares outstanding. Therefore,
assuming the number of shares outstanding does not change between October 1,
1994 and the Record Date, in order for California Energy to require the
President or Secretary of Magma to call a special meeting, Record Holders
owning at least 12,007,358 outstanding shares of Common Stock must request the
call of a special meeting.
In certain of its public statements, California Energy has indicated that it
intends to set the record date and meeting date for the special meeting if
Record-Holders of a sufficient number of shares request the call of a special
meeting. HOWEVER, IN SUCH EVENT, YOUR BOARD OF DIRECTORS WILL SET THE RECORD
DATE FOR SUCH SPECIAL MEETING PURSUANT TO ARTICLE IV, SECTION 5 OF THE BYLAWS,
AND THE PRESIDENT AND SECRETARY OF MAGMA WILL SET THE DATE FOR SUCH SPECIAL
MEETING PURSUANT TO ARTICLE I, SECTION 2 OF THE BYLAWS. Pursuant to the Bylaws,
the meeting date would be no more than 60 days and no fewer than 10 days after
the call of the meeting and the record date would be no more than 60 days and
no longer than 10 days prior to the meeting date.
RECORD DATE
If you acquired shares of Common Stock after the Record Date without a proxy,
you may not execute a opposition card. A Record Holder will retain the right to
execute a opposition card in connection with the California Energy Request
Solicitation even if such Record Holder sells such shares of Common Stock after
the Record Date or tenders such Common Stock pursuant to the California Energy
offer.
An opposition card shall not be valid for more than six months from the date
on which such opposition card was executed by the Record Holder.
REVOCATION OF OPPOSITION
An opposition card executed and delivered by a Record Holder may subsequently
be revoked by written notice of revocation to the Company. A revocation may be
in any written form validly signed and dated by the Record Holder as long as it
clearly states that such Record Holder's opposition card previously given is no
longer effective. Any valid revocation delivered to the Company shall supersede
any previously dated or undated opposition card.
Any revocation may be mailed in the enclosed postage paid envelope or
delivered to Magma Power Company, c/o Georgeson & Company Inc., Wall Street
Plaza, 88 Pine Street, New York, New York 10005.
8
<PAGE>
If a Record Holder signs, dates and delivers a GOLD opposition card to Magma
and thereafter, on one or more occasions, dates, signs and delivers a later-
dated GOLD opposition card, the latest dated GOLD opposition card will be
controlling as to the instructions indicated therein and supersede such
holder's prior opposition as embodied in any previously submitted GOLD
opposition cards; provided, however, that any such later-dated GOLD opposition
card will be inoperative and of no effect if it is delivered after the date, if
any, on which the California Energy Request Solicitation succeeds.
A Record Holder can revoke a previously executed green request card by
signing, dating and returning a GOLD opposition card in the postage paid
envelope provided or by delivering it to Magma Power Company, c/o Georgeson &
Company Inc., Wall Street Plaza, 88 Pine Street, New York, NY 10005.
CERTAIN LITIGATION
MAGMA LITIGATION
On October 3, 1994, Magma filed a complaint (the "Magma Complaint"), entitled
Magma Power Company v. California Energy Company, Inc., Case No CV94-06160, for
declaratory relief against California Energy in the Second Judicial District
Court for the State of Nevada in and for the County of Washoe. The Magma
Complaint seeks declaratory relief seeking to uphold (i) the constitutionality
and validity of the Nevada Business Combination Statute and (ii) the Rights
Plan and the Bylaw Amendment. On October 5, 1994, this action was removed as of
right to the United States District Court for the District of Nevada.
On October 17, 1994, California Energy filed an Answer and Counterclaims to
the Magma Complaint in the United States District Court for the District of
Nevada. In its Answer, California Energy denied the material allegations of the
Magma Complaint, and denied that Magma is entitled to declaratory relief. In
the Counterclaims, California Energy and CE Acquisition Company filed claims
for declaratory and injunctive relief against Magma and its board of directors,
alleging (1) breach of fiduciary duties by the directors in adopting the Rights
Plan, Bylaw Amendment, severance and indemnification agreements for certain
executives, and use of the Nevada Business Combination Statute; (2) the
unconstitutionality of the Nevada Business Combination Statute; and (3)
violations of the federal securities laws allegedly resulting from statements
made by Magma on its Schedule 14D-9 regarding the tender offer and proxy
solicitation.
On October 17, 1994, Magma filed an Amended Complaint for Declaratory and
Injunctive Relief (the "Amended Complaint") against California Energy. In
addition to restating its request for declaratory relief regarding the validity
of the Nevada Business Combination Statute and the propriety of its decision to
adopt the Rights Plan and Bylaw Amendment, the Amended Complaint alleges that
California Energy has violated the federal securities laws by making a host of
false and misleading statements in connection with its tender offer and proxy
solicitation. Magma further alleges that California Energy has violated the
federal securities laws by failing to identify and provide necessary
information concerning its co-bidders to acquire Magma. Magma seeks, among
other relief, a preliminary and permanent injunction prohibiting California
Energy and any and all persons acting on its behalf from proceeding further
with the tender offer and proxy solicitation unless and until it provides full,
forthright and corrective disclosures of all material facts and Magma's
shareholders have had sufficient time and opportunity to digest such
information.
On October 19, 1994, California Energy and CE Acquisition Company filed an
Answer to the Amended Complaint and Amended Counterclaims against Magma and its
board of its directors, in which they denied the material allegations of the
Amended Complaint, and denied that Magma is entitled to declaratory or
injunctive relief. In the Amended Counterclaims, California Energy and CE
Acquisition Company filed claims for declaratory and injunctive relief against
Magma and its board of directors, alleging (1) breach of fiduciary duties by
the directors in adopting the Rights Plan, Bylaw Amendment, severance and
indemnification agreements for certain executives, and use of the Nevada
Business Combination Statute; (2) the unconstitutionality of the Nevada
Business Combination Statute; and (3) violation of the federal securities laws
allegedly resulting from statements made by Magma on its Schedule 14D-9 and
amendments filed thereto regarding the tender offer and proxy solicitation.
9
<PAGE>
On October 25, 1994, California Energy and CE Acquisition Company filed their
Answer to Amended Complaint and Second Amended Counterclaims against Magma and
its board of directors, in which they (i) repeated their denials of the
material allegations of the Amended Complaint and their denials that Magma is
entitled to declaratory or injunctive relief, (ii) reasserted factual
allegations and claims for declaratory and injunctive relief set forth in their
earlier Amended Counterclaims, and (iii) added further allegations concerning
(A) the increase in consideration offered by California Energy to effect the
acquisition, to $38.50 per share (consisting of $28.50 per share in cash and
$10.00 per share of California Energy stock) and (B) violations of federal
securities laws and breaches of fiduciary duties allegedly arising from Magma's
October 21, 1994 announcement of the termination of an energy development
project in Indonesia caused by the pendency of California Energy's offer and
other alleged efforts by Magma to permit unidentified international joint
venture partners to withdraw from unidentified projects in the event that
California Energy's offer is successful.
On November 3, 1994, California Energy and CE Acquisition Company filed their
Answer to Amended Complaint and Third Amended Counterclaims against Magma and
its board of directors which, among other things, seeks a ruling that the
Control Share Statute does not apply to the Offer.
HOLT ACTION
On October 14, 1994, Ben Holt ("Mr. Holt"), a director of California Energy,
filed a Complaint and Motion for Preliminary Injunctive Relief against Magma in
the Second Judicial District Court for the State of Nevada, County of Washoe,
seeking to compel Magma to provide Mr. Holt with its shareholder list pursuant
to Nevada Revised Statute Section 78.105(3) ("the Holt Action").
On October 18, 1994, Magma filed its Opposition to the Holt Action ("Magma's
Opposition"), contending that: (1) Mr. Holt cannot demonstrate entitlement to
injunctive relief because Magma is complying with both the federal tender offer
and proxy rules by mailing to its shareholders all tender offer and proxy
materials furnished by Californian Energy; (2) Mr. Holt, as a director of
California Energy, is not entitled to inspect Magma's shareholder list under
Nevada law; (3) that California Energy is the real party in interest, thus
requiring the Holt Action to be brought as a compulsory counterclaim in the
action pending in the United States District Court for the District of Nevada
entitled Magma Power Co. v. California Energy Company, Inc., et al., No. CV-94-
00719-DWH.
On October 25, 1994, the court entered an Order Granting Motion for Access to
Shareholder Information.
OTHER STOCKHOLDER LITIGATION
On September 20, 1994, a purported class action complaint (the "California
Complaint") entitled William Steiner, et al. v. Paul M. Pankratz, et al., Case
No. 680986, was filed against the Company and its directors in the Superior
Court of the State of California in and for the County of San Diego, alleging,
among other things, that the Company's stockholders have been deprived of the
opportunity to fully realize the benefits of their investment in the Company as
a result of the directors' refusal to properly consider the Initial Proposal,
which actions are alleged to constitute unfair dealing and a breach of
fiduciary duty. As relief, the complaint seeks an order directing the Company's
directors to carry out their fiduciary duties to the Company's stockholders by
cooperating fully with California Energy or any other entity making a bona fide
offer for the Company, as well as damages and costs. Plaintiff's counsel has
agreed to dismiss or stay the California Complaint without prejudice.
On October 4, 1994, a purported class action complaint (the "Nevada
Complaint" and, together with the California Complaint, the "Complaints")
entitled Charles Miller, et al. v. Magma Power Company, et al., case No. CV94-
06187, was filed against the Company, its directors and Dow in the Second
Judicial District Court of the State of Nevada in and for the County of Washoe,
alleging, among other things, that
10
<PAGE>
the defendants' unwillingness to seriously consider California Energy's
proposal to acquire the Company and its adoption of the Rights Plan and Bylaw
Amendment, among other things, constitute breaches of the fiduciary duty owed
to the Company's stockholders. As relief, the complaint seeks a declaration
that defendants have breached their fiduciary duties, an order directing the
defendants to fairly evaluate alternatives designed to maximize value for the
Company's stockholders, and an injunction with respect to the implementation of
the Rights Plan or other defensive measures, as well as damages and costs. On
November 2, 1994, the Nevada Complaint may dismissed without prejudice.
On October 28, a purported class action complaint (the "Nevada Federal
Complaint") entitled William Steiner and Charles Miller, et al. v. Magma Power
Company, et al., Case No. CV-N-94-773, was filed against the Company, its
directors and Dow in the United States District Court for the District of
Nevada. On November 2, 1994, the Nevada Complaint was dismissed without
prejudice. The Nevada Federal Complaint alleges that the Company's directors
have breached, and are continuing to breach, their fiduciary duties to the
Company's shareholders by failing to take all reasonable steps in the face of
the Initial Proposal, the Offer and the Revised Offer. The Nevada Federal
Complaint also alleges that the Company has violated Section 14(d) and 14(e) of
the Exchange Act by making false and misleading statements and omissions in its
Schedule 14D-9 filed with the SEC in connection with the Offer and the Revised
Offer. The Nevada Federal Complaint seeks an order directing the Company's
directors to carry out their fiduciary duties to the Company's shareholders,
damages and costs, including attorneys and experts' fees, and other equitable
relief.
SOLICITATION EXPENSES AND PROCEDURES
The entire expense of preparing, assembling, printing and mailing the
Opposition Solicitation and the accompanying form of GOLD opposition card, and
the cost of soliciting GOLD opposition cards, will be borne by the Company.
Magma estimates that a total of $240,000 will be spent in connection with the
solicitation of stockholders, of which approximately $130,000 has been expended
to date.
In addition to the use of the mails, GOLD opposition cards may be solicited
by certain officers and directors of the Company by telephone, facsimile,
telegraph and personal interviews, for which no compensation will be paid to
such individuals. Banks, brokerage houses and other custodians, nominees and
fiduciaries will be requested to forward the solicitation material to the
customers for whom they hold shares of Common Stock, and the Company will
reimburse them for their reasonable out-of-pocket expenses.
The Company has retained Georgeson & Company Inc. ("Georgeson") for advisory
and Opposition Solicitation services, as well as its information agent, for
which Georgeson will be paid reasonable and customary compensation and will be
reimbursed for certain reasonable out-of-pocket expenses. The Company has also
agreed to indemnify Georgeson against certain liabilities and expenses in
connection with its engagement, including certain liabilities under the federal
securities laws. Georgeson, with the aid of approximately 25 of its employees,
will solicit GOLD opposition cards from individuals, brokers, bank nominees and
other institutional holders. The Company estimates that the total amount of
fees and expenses payable to Georgeson in connection with the Opposition
Solicitation will be approximately $150,000.
The Company will not pay any fees or commissions to any broker or dealer or
other person (other than Georgeson) for soliciting GOLD opposition cards
pursuant to the Opposition Solicitation. Brokers, dealers, commercial banks and
trust companies will be reimbursed by the Company for customary mailing and
handling expenses incurred by them in forwarding offering materials to their
customers.
STOCKHOLDER PROPOSALS
Any Magma stockholder who wishes to submit a proposal for presentation at the
1995 Annual Meeting of Stockholders must submit the proposal to Magma Power
Company, 4365 Executive Drive, Suite 900, San Diego, CA 92121, Attention:
Secretary, not later than January 11, 1995, for inclusion, if appropriate, in
the Company's proxy statement and the form of proxy relating to the 1995 Annual
Meeting.
11
<PAGE>
STOCKHOLDER NOMINATIONS
Stockholders of the Company may nominate candidates to be elected to the
Board of Directors at an annual or special meeting of stockholders provided
that any such stockholder (a) is a stockholder of record on the date of giving
notice of such nomination and on the record date for the determination of
stockholders entitled to vote at such meeting and (b) gives timely notice of
such nomination in proper written form to the Secretary of the Company.
To be timely, in the case of a special meeting of stockholders called for the
purpose of electing directors, a stockholder's notice to the Company's
Secretary must be delivered to or mailed and received at the principal
executive offices of the Company not later than the close of business on the
tenth day following the day on which notice of the date of the special meeting
was mailed or public disclosure of the date of the special meeting was made,
whichever first occurs. To be in proper written form, a stockholder's notice to
the Secretary must set forth (a) as to each person whom the stockholder
proposes to nominate for election as a director (i) the name, age, business
address and residence address of the person, (ii) the principal occupation or
employment of the person, (iii) the class or series and number of shares of
capital stock of the Company which are owned beneficially or of record by the
person and (iv) any other information relating to the person that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and the rules and regulations promulgated thereunder; and (b) as
to the stockholder giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock of
the Company which are owned beneficially or of record by such stockholder,
(iii) a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons
(including their names) pursuant to which the nominations are to be made by
such stockholder, (iv) a representation that such stockholder intends to appear
in person or by proxy at the meeting to nominate the persons named in its
notice and (v) any other information relating to such stockholder that would be
required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the 1934 Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a written consent of
each proposed nominee to being named as a nominee and to serve as a director if
elected.
12
<PAGE>
SCHEDULE I
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, MANAGEMENT AND PARTICIPANTS
The following table sets forth, as of October 1, 1994, the name and address,
the total number of shares (if any) of Common Stock beneficially owned (as
defined in Rule 13d-3 under the 1934 Act), and the percentage of the
outstanding shares of the Common Stock so owned (i) by each person who is known
to the Company to own beneficially 5% or more of the outstanding shares of the
Common Stock, (ii) by each director of the Board, (iii) by the Company's Chief
Executive Officer and each of its executive officers and (iv) by all directors
and executive officers as a group. All directors and executive officers of the
Company may be deemed to be "participants" (as defined in Instruction 3 to Item
4 of Rule 14a-101 of the Exchange Act) in this Opposition Solicitation.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNERS(1) OWNERSHIP(2) CLASS(3)
---------------------------------------- ------------ -------------
<S> <C> <C>
The Dow Chemical Company........................ 5,032,430(4) 21.0%
2030 Dow Center
Midland, Michigan 48674
B. C. McCabe Foundation......................... 2,752,641(5) 11.5%
7624 S. Painter Ave., Suite A
Whittier, CA 90602-2313
Firstar Investment Research & Management
Company........................................ 1,975,500 8.2%
777 E. Wisconsin Avenue
Milwaukee, WI 53202
James D. Shepard................................ 221,134(6) *
Paul M. Pankratz................................ 114,100(7) *
Ralph W. Boeker................................. 50,000(8) *
Jon R. Peele.................................... 32,000(9) *
Wallace C. Dieckmann............................ 19,859(10) *
Thomas C. Hinrichs.............................. 17,618(11) *
Kenneth J. Kerr................................. 16,000(12) *
Trond Aschehoug................................. 15,450(13) *
Louis A. Simpson................................ 10,819(14) *
John D. Roach................................... 2,250(15) *
Lester L. Coleman............................... 819(16) *
Roger L. Kesseler............................... 200 *
Directors and executive officers as a group
(15 persons)................................... 500,249(17) 2.1%(18)
</TABLE>
- --------
* Represents less than one percent.
(1) Except as otherwise indicated, the address of each of the person named
below is c/o Magma Power Company, 4365 Executive Drive, Suite 900, San
Diego, California 92121.
(2) For purposes of this table, a person is deemed to have "beneficial
ownership" of (i) any security which such person has the right to acquire
within 60 days after October 1, 1994, (ii) any security which is held by
such person's spouse or other immediate family member sharing such
person's household, (iii) securities held in certain trusts, partnerships
and other legal entities affiliated with such person, and (iv) individual
retirement accounts of such person. Beneficial ownership has been
disclaimed by certain of the named persons with respect to certain of such
shareholdings. The amounts set forth under this column exclude shares held
for the benefit of the named person in the Magma 401(k) Plan. All
information with respect to the beneficial ownership of the shares
referred to in this table is based upon filings made by the respective
beneficial owners with the Securities and Exchange Commission or
information provided to the Company by such beneficial owners.
13
<PAGE>
(3) Unless otherwise noted, the number of shares of Common Stock outstanding
for this purpose is 24,014,714.
(4) Includes 4,000,005 shares which were placed in escrow, pursuant to an
escrow agreement dated April 1, 1991 between The Dow Chemical Company, a
Delaware corporation ("Dow"), and Morgan Guaranty Trust Company of New
York, as Escrow Agent, for delivery upon exchanges of $150,000,000
aggregate principal amount of 5 3/4% Subordinated Exchangeable Notes Due
2001 of Dow (the "Notes"). The Notes are exchangeable at any time into
shares of Common Stock at an exchange rate of 26.6667 shares per $1,000
principal amount of Notes. Dow retains the right to vote the shares placed
in escrow.
(5) Does not include shares held by Mr. Shepard, a director of the Company,
who is a co-trustee of the B. C. McCabe Foundation.
(6) Does not include shares owned by the B. C. McCabe Foundation for which Mr.
Shepard is a co-trustee, and with regard to which beneficial ownership is
disclaimed.
(7) Includes Mr. Pankratz's options to purchase 114,000 shares of Common
Stock.
(8) Includes 3,000 shares of deferred stock which are subject to vesting
requirements based on continuing employment and are not entitled to vote
or receive dividends until vested. Also includes Mr. Boeker's options to
purchase 45,000 shares of Common Stock.
(9) Includes 4,500 shares of deferred stock subject to vesting requirements
based on continuing employment, and which the holder is not entitled to
vote or receive dividends on until vested. Also includes Mr. Peele's
options to purchase 27,500 shares of Common Stock.
(10) Includes 6,000 shares of deferred stock subject to vesting requirements
based on continuing employment, and which the holder is not entitled to
vote or receive dividends on until vested. Also includesMr. Dieckmann's
options to purchase 13,859 shares of Common Stock.
(11) Includes 6,000 shares of deferred stock subject to vesting requirements
based on continuing employment, and which the holder is not entitled to
vote or receive dividends or until vested. Also includesMr. Hinrichs'
options to purchase 5,750 shares of Common Stock.
(12) Includes 10,000 shares of deferred stock subject to vesting requirements
based on continuing employment. The holder of such deferred stock is not
entitled to vote such shares or receive dividends until vested. Also
includes Mr. Kerr's options to purchase 5,000 shares of Common Stock.
(13) Includes 8,600 shares of deferred stock subject to vesting requirements
based on continuing employment, and which the holder's not entitled to
vote or receive dividends on until vested. Also includesMr. Aschehoug's
options to purchase 6,000 shares of Common Stock.
(14) Includes Mr. Simpson's options to purchase 819 shares of Common Stock.
(15) Includes Mr. Roach's options to purchase 1,250 shares of Common Stock.
(16) Includes Mr. Coleman's options to purchase 819 shares of Common Stock.
(17) Includes 38,100 shares of deferred stock held by all directors and
officers as a group. Also includes options to purchase 219,998 shares of
Common Stock held by all directors and executive officers as a group. Does
not include shares held by Dow, which is the employer of directors Knee,
Kesseler and Reinhard.
(18) Includes the 38,100 shares of deferred stock and the options to purchase
219,998 shares of Common Stock referred to in Note 14 above. The number of
outstanding shares of Common Stock for this purpose is 24,272,812.
14
<PAGE>
OTHER INTERESTS OF PARTICIPANTS
Except as set forth above, no participant in the Opposition Solicitation has
any substantial interest, direct or indirect, in this Opposition Solicitation
or the Special Meeting Proposals. No participant is, or was within the past
year, a party to any contract, arrangements or understandings with any person
with respect to any securities of Magma. Except as disclosed in Schedules III
and IV, no participants or associates of the foregoing have any arrangement or
understanding with any person with respect to any future employment by the
Company or its affiliates, or with respect to any future transactions to which
the Company or its affiliates may be a party.
COMPLIANCE WITH SECTION 16(A) OF THE 1934 ACT
Section 16(a) of the 1934 Act requires the Company's directors and executive
officers, and any persons who are beneficial owners of more than 10 percent of
the Common Stock to report their initial ownership of Common Stock and any
subsequent changes in that ownership to the Securities and Exchange Commission.
Specific due dates for such reports have been established and the Company is
required to disclose in this Opposition Statement any failure to file such
reports by such dates during 1993. All of such filing requirements were
satisfied during such period.
PURCHASES AND SALES OF COMPANY SECURITIES
Set forth below is a summary of the securities of the Company purchased or
sold within the past two years by each of the participants (as defined by Rule
14a-101 of the 1934 Act) in the Opposition Solicitation.
<TABLE>
<CAPTION>
INDIVIDUAL SECURITIES ACTIVITY
---------- -------------------
<C> <S>
Trond Aschehoug...... Sold 150 shares of Common Stock on March 22, 1993.
Ralph W. Boeker...... *
Lester L. Coleman.... *
Wallace C. Dieckmann. Purchased and sold 5,000 shares of Common Stock on
January 31, 1994.
Purchased and sold 4,000 shares of Common Stock on
February 19, 1993.
Thomas C. Hinrichs... Purchased and sold 4,292 shares of Common Stock on March
17, 1993.
Roger L. Kesseler.... *
Kenneth J. Kerr...... *
William R. Knee...... *
Paul M. Pankratz..... Sold 5,500 shares of Common Stock on October 27, 1993.
Jon R. Peele......... Purchased 5,000 shares of Common Stock on March 24,
1994.
Purchased and sold 5,000 shares of Common Stock on
January 31, 1994.
Purchased and sold 5,000 shares of Common Stock on March
23, 1993.
Purchased and sold 15,000 shares of Common Stock on
March 17, 1993.
Purchased and sold 6,000 shares of Common Stock on
February 18, 1993.
Bent Petersen........ *
J. Pedro Reinhard.... *
John D. Roach........ Purchased 700 shares of Common Stock on February 24,
1994.
James D. Shepard..... Sold 20,000 shares of Common Stock on November 8, 1993.
Purchased 5,000 shares of Common Stock on August 9,
1993.
Sold 20,000 shares of Common Stock on February 17, 1993.
Louis A. Simpson..... Purchased 6,500 shares of Common Stock on April 4, 1994.
Purchased 3,500 shares of Common Stock on March 31,
1994.
</TABLE>
- --------
* No activity to report.
15
<PAGE>
SCHEDULE II
DIRECTORS AND EXECUTIVE OFFICERS
BOARD BIOGRAPHICAL INFORMATION
Set forth below are the ages (as of the Record Date) and biographical
information for each member of the Board.
Ralph W. Boeker, 60, was elected President and director of the Company
effective March 1, 1993. On January 11, 1994, Mr. Boeker was named CEO of the
Company. Mr. Boeker retired from Dow as ofMarch 1, 1993, where he had been
employed since 1959, most recently as Group Vice President for Chemicals,
Performance Products and Hydrocarbons and as a member of the Operating Board of
Dow Chemical U.S.A., an operating unit of Dow, and the Dow Management
Committee.
Lester L. Coleman, 51, was elected to the Board of the Company on March 30,
1994. Mr. Coleman is Executive Vice President and General Counsel for
Halliburton Company where he has worked in various capacities since 1983.
Halliburton Company is an oil field services company, located at 3600 Lincoln
Plaza, 500 North Akard Street, Dallas, TX 75201. Prior employment included Vice
President and General Counsel for Pickands Mather & Company, an iron ore and
coal mining and transport company formerly headquartered in Cleveland, Ohio
where he worked for five years, and 10 years of private law practice with Arter
& Hadden, Cleveland where he served as a partner.
Thomas C. Hinrichs, 60, has been a director of the Company since 1981. He has
been employed by the Company in various senior management positions since 1974,
and was named a Vice President of the Company in March 1987.
Roger L. Kesseler, 58, was elected a director of the Company on November 6,
1991. Mr. Kesseler has been employed by Dow since 1959. For more than the last
five years he has served as the Controller and a Vice President of Dow. Mr.
Kesseler is also a member of the Board of Directors of Univar Corporation, a
publicly traded, Kirkland, Washington-based chemical distribution company.
William R. Knee, 48, was elected a director of the Company on February 22,
1989. Mr. Knee has been employed by Dow in various management capacities since
1968, most recently as Director of Technology Centers for Dow.
Paul M. Pankratz, 62, was elected Chairman of the Board, President and Chief
Executive Officer effective February 1, 1992, and relinquished to Mr. Boeker
the titles of President in March 1993 and CEO inJanuary 1994. Mr. Pankratz
remains as Chairman of the Board. He joined Magma upon retirement from Dow,
where he had been employed in various capacities since 1957, most recently as
Vice President, Corporate Products Department. He has served as a director of
the Company since 1984.
Bent Petersen, 47, was elected a director of the Company in 1990. Prior to
1990 he was the managing partner of the San Diego office of the accounting firm
of Coopers & Lybrand. Coopers & Lybrand has acted as the Company's independent
public accountants since 1981. Since his retirement from Coopers & Lybrand in
1990, Mr. Petersen has been a private investor and independent businessman. In
1994, he established and currently acts as President of Petersen Enterprises,
Inc., a franchise development company, located at432 East Idaho No. 419,
Kalispell, MT 59901.
J. Pedro Reinhard, 49, was elected a director of the Company on June 18,
1992. Mr. Reinhard has been employed by Dow since 1970. For more than the last
five years he has served as Treasurer of Dow and was also named a Vice
President of Dow in October 1990.
16
<PAGE>
John D. Roach, 50, was elected a director of the Company on January 11, 1994.
Since 1991, Mr. Roach has been employed as Chairman, President and CEO of
Fibreboard Corporation, a publicly traded building products company, located at
2121 N. California Blvd., Suite 560, Walnut Creek, CA 94576. From 1987 to 1991
Mr. Roach was employed in a variety of capacities by Manville Corporation, a
leading industrial products company based in Walnut Creek, California, most
recently as Executive Vice President of Manville.
James D. Shepard, 56, has been a director of the Company since 1981. He was
Vice President--Finance and Treasurer of the Company from May 1981 until March
1987. Since 1988, he has been co-trustee of the B. C. McCabe Living Trust and
the B. C. McCabe Foundation. Mr. Shepard is a shareholder relations consultant
to the Company.
Louis A. Simpson, 57, was elected a director of the Company on March 30,
1994. Mr. Simpson is President and CEO of Capital Operations (investments),
GEICO Corporation where he has worked in various capacities since 1979. GEICO
Corporation is an insurance company located at GEICO Plaza, Washington DC
20076. Mr. Simpson also serves on the board of GEICO Corporation, Potomac
Electric Power Company and Salomon, Inc. Salomon Brothers Inc., a subsidiary of
Salomon Inc., provided financial advisory and underwriting services to Magma
for the financing of the Company's proposed 216 MW (net) geothermal electric
generating facility on the island of Leyte in the Republic of the Philippines.
BOARD COMMITTEES AND MEETINGS
As of the Record Date, the six regularly constituted committees of the Board
were: (1) the Audit Committee, which is comprised of Messrs. Kesseler, Petersen
and Roach; (2) the Compensation Committee which is comprised of Messrs.
Kesseler, Pankratz, Roach, and Shepard (with Messrs. Roach and Shepard
comprising an Option sub-Committee of the Compensation Committee); (3) the
Environmental, Health and Safety Committee, which is comprised of Messrs.
Hinrichs, Pankratz and Knee; (4) the Executive Committee, which is comprised of
Messrs. Boeker and Pankratz; (5) the Finance Committee, which is comprised of
Messrs. Boeker, Coleman, Reinhard and Simpson; and (6) the Nomination
Committee, which is comprised of Messrs. Boeker and Pankratz.
The Audit Committee monitors the Company's basic accounting policies, reviews
the Company's audit and management reports, reviews the Company's systems for
internal control, monitors compliance with the Company's code of conduct and
the Foreign Corrupt Practices Act, and makes recommendations regarding the
appointment of independent auditors. The Compensation Committee establishes
salaries and other compensation for directors, executive officers and
management level officers of the Company. The Compensation Committee also
reviews all employee compensation programs including approval of merit budgets,
establishment of short and long-term incentive plans, benefits, and compliance
with 1934 Act reporting of Executive Compensation in the Company's proxy. The
Option sub-committee of the Compensation Committee administers the stock
incentive programs of the Company with full power for all grants and awards
under the 1987 Stock Option Plan and under the 1994 Equity Participation Plan.
The Environmental, Health and Safety Committee oversees the environmental
compliance and other environmental, health and safety policies and programs of
the Company. The Executive Committee has broad discretionary authority to make
all executive decisions which are not expressly reserved to the Board by
resolution or otherwise. The Finance Committee, established in April 1994,
oversees the financial affairs of the Company and makes recommendations to the
Board as to financial policies formulated by management of the Company. The
Nomination Committee recommends nominees for election as directors, officers
and members of committees, and also from time to time makes recommendations
concerning enlarging or reducing the size of the Board.
As of December 31, 1993, the six regularly constituted committees of the
Board were: (1) the Audit Committee, which was comprised of Messrs. Kesseler
and Petersen; (2) the Compensation Committee, which was comprised of Messrs.
Kesseler, Petersen and Shepard; (3) the Environmental, Health and Safety
Committee, which was comprised of Messrs. Knee and Hinrichs; (4) the Executive
Committee, which was
17
<PAGE>
comprised of Messrs. Boeker and Pankratz; (5) the Nomination Committee which
was comprised of Messrs. Boeker and Pankratz; and (6) the Stock Option
Committee, which was comprised of Messrs. Petersen and Shepard.
During 1993 (a) the Board met nine times (including regularly scheduled,
special and telephonic meetings); (b) the Audit Committee met three times; (c)
the Compensation Committee met four times; (d) the Environmental, Health and
Safety Committee met three times; (e) the Executive Committee took action once
by unanimous written consent; (f) the Nomination Committee took action once by
unanimous written consent; (g) the Stock Option Committee met four times; and
(h) a Special Independent Committee met twice. Each incumbent director who was
a director during 1993 attended more than 75% of the Board meetings and
meetings of standing committees of which he was a member.
COMPENSATION OF DIRECTORS
Directors of the Company may be reimbursed for necessary expenses incurred in
connection with their attendance at Board and committee meetings. Each
"outside" director receives a $15,000 annual fee, $1,500 for each Board meeting
he attends, and $750 for each committee meeting he attends (if such committee
meeting is not held the same day as a Board meeting). The members of the Board
deemed to be "outside" directors for this purpose (since they are neither
employed by the Company nor affiliated with a major stockholder of the Company)
are currently Messrs. Coleman, Petersen, Roach and Simpson.
On December 3, 1993, concurrent with Mr. Arnold L. Johnson's resignation from
the Board, the Company accelerated the remaining payments he otherwise would
have received in 1994 under the agreement Mr. Johnson and the Company entered
into in connection with Mr. Johnson's resignation as an officer of the Company
in June 1991 (the "June 1991 Agreement"). Such accelerated payment to satisfy
the Company's obligations to Mr. Johnson under the June 1991 Agreement amounted
to approximately $1,164,000, which included a cash payment for Mr. Johnson's
supplemental benefit plan accounts. Mr. Shepard receives an annual payment of
$15,000 for serving as a shareholder relations consultant to the Company.
FAMILY RELATIONSHIPS
There are no family relationships between any director, executive officer or
person nominated or chosen to become a director or executive officer and any
other director, executive officer or person nominated or chosen to become a
director or executive officer of the Company.
18
<PAGE>
EXECUTIVE OFFICERS
Executive officers serve at the discretion of the Board. Each executive
officer serves until such officer's respective successor is elected and has
been qualified, or until such officer's earlier death, resignation or removal.
Executive officers are elected by the Board annually at its first meeting
following the Annual Meeting of Stockholders. Set forth below are the ages (as
of the Record Date) and biographical information for each executive officer of
the Company who is not a director.
Jon R. Peele, 51, joined the Company in March 1987 as Secretary and General
Counsel. He was also named a Vice President of the Company in February 1988, a
Senior Vice President in February 1990 and Executive Vice President in March
1993. He was Senior Staff Counsel in Dow's Legal Department from 1983 through
May 1988.
Wallace C. Dieckmann, 51, joined the Company in June 1988 as Vice President
and Controller, and was also named Treasurer and Assistant Secretary on June
15, 1990. Mr. Dieckmann relinquished the controller position and title when he
was named Chief Financial Officer in June 1993.
Trond Aschehoug, 51, became Director of Operations for the Company and
President of Magma Operating Company in May 1992 under an employment agreement
between the Company, Dow and Mr. Aschehoug, wherein the Company reimbursed Dow
for Mr. Aschehoug's direct and indirect compensation and paid certain
relocation expenses. On June 15, 1993, Mr. Aschehoug was named Vice President,
North American Operations, and on July 1, 1993 became an employee of the
Company. Prior to joining the Company, Mr. Aschehoug spent 25 years with Dow,
most recently as Section Manager having responsibility for multiple operating
units.
Kenneth J. Kerr, 50, joined Magma in June 1993 as Senior Vice President,
Commercial Development and became an executive officer of the Company in April
1994. Mr. Kerr is currently an employee of Dow. Mr. Kerr, the Company, and Dow
entered into an employment contract dated March 12, 1993 wherein the Company
reimburses Dow for direct and indirect compensation expenses until
approximately July 1, 1997, at which time Mr. Kerr will retire from Dow and
become an employee of the Company. Prior to June 1993, Mr. Kerr spent 28 years
with Dow, where he most recently was Commercial Vice President, Plastics for
Dow's Pacific Area, residing in Tokyo.
19
<PAGE>
SCHEDULE III
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table presents information about compensation awarded over the
Company's last three fiscal years to Mr. Pankratz and the Company's other four
most highly compensated executive officers as of December 31, 1993.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION LONG-TERM COMPENSATION AWARDS
----------------- ---------------------------------------
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS/SARS COMPENSATION
POSITION YEAR ($) ($)(1) ($)(2) ($)(3) (#)(4) ($)(5)
------------------ ---- -------- -------- ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul M. Pankratz(6)(7)............... 1993 $263,250 $389,688 -- -- 48,000 $ 69,226
Chairman of the Board of 1992 229,166 202,500 -- -- 66,000(8) 142,967(9)
Directors 1991 N/A N/A N/A N/A N/A N/A
Ralph W. Boeker(6)(10)............... 1993 206,731 289,688 -- $167,500(11) 65,000 453,309(12)
President and Chief Executive 1992 N/A N/A N/A N/A N/A N/A
Officer 1991 N/A N/A N/A N/A N/A N/A
Jon R. Peele......................... 1993 153,346 125,531 -- N/A 7,500 31,760
Executive Vice President, 1992 145,000 87,750 -- -- 30,000 26,305
Secretary, General Counsel 1991 138,439 90,000 -- -- 15,000 --
Trond Aschehoug (13)................. 1993 139,356 86,906 -- $65,625(14) 0 17,554
Vice President & Director of North 1992 N/A N/A N/A N/A N/A N/A
American Operations 1991 N/A N/A N/A N/A N/A N/A
Wallace C. Dieckmann................. 1993 119,563 67,594 -- N/A 0 24,153
Vice President & Chief 1992 108,500 40,500 -- -- 11,600 15,371
Financial Officer 1991 104,834 30,000 -- -- 3,500 --
</TABLE>
- --------
(1) Cash bonuses are paid to executive officers of the Company based upon
their individual contribution to the Company and the Company's overall
financial performance. A portion of the bonuses for 1993 were paid in the
fourth quarter of 1993, and the balance was paid in the first quarter of
1994.
(2) Excludes the value of perquisites and other personal benefits. The
incremental cost to the Company of providing such perquisites and other
personal benefits did not, during 1993, exceed the lesser of $50,000 or
10% of annual salary and bonus for the respective individuals named in the
Summary Compensation Table.
(3) Company Deferred Stock is subject to vesting based on continuing
employment, and the holder of such Deferred Stock is not entitled to vote
or receive dividends until such Deferred Stock is vested. The grant date
value shown may overstate the value of Deferred Stock because it does not
take into account the negative effect of the lack of transferability,
vesting restrictions and potential loss of the Deferred Stock upon
termination of employment. This table excludes shares of Company Deferred
Stock which were granted to Messrs. Peele, Aschehoug and Dieckmann under
the 1994 Equity Participation Plan.
(4) There are currently no SARs outstanding.
20
<PAGE>
(5) Represents amounts allocated by the Company for the accounts of the named
individuals to the Company Benefit Plans (as defined below) in 1993 as
follows:
<TABLE>
<CAPTION>
EMPLOYEE
RETIREMENT EMPLOYEES' EXECUTIVE
SAVINGS PENSION SUPPLEMENTAL
NAME PLAN PLAN PLAN
---- ---------- ---------- ------------
<S> <C> <C> <C>
Paul M. Pankratz....................... $6,855 $14,043 $48,328
Ralph W. Boeker........................ 4,400 14,150 29,901
Jon R. Peele........................... 6,855 14,043 10,862
Trond Aschehoug........................ 5,096 8,903 3,555
Wallace C. Dieckmann................... 6,716 13,311 4,126
</TABLE>
(6) Prior to January 11, 1994, Mr. Pankratz served as Chairman and CEO and Mr.
Boeker served in the capacity of President.
(7) Mr. Pankratz joined the Company as of February 1, 1992.
(8) Includes 30,000 options granted to Mr. Pankratz in conjunction with his
initial employment by the Company.
(9) Includes the fair market value on the grant date ($98,750) of 5,000 shares
of Company Common Stock awarded to Mr. Pankratz, without restrictions, in
conjunction with his initial employment by the Company.
(10) Mr. Boeker joined the Company on March 1, 1993.
(11) Represents the value on the grant date of 5,000 shares of Company Deferred
Stock granted in conjunction with Mr. Boeker's initial employment by the
Company on March 1, 1993.
(12) Includes $404,858 associated with Mr. Boeker's relocation to Southern
California from Midland, Michigan.
(13) Includes amounts paid to Dow for Mr. Aschehoug as a "leased employee" from
Dow. Mr. Aschehoug became an employee of the Company on July 1, 1993.
Excludes options granted to Mr. Aschehoug prior to his becoming an
employee of the Company.
(14) Represents the value on the grant date of 2,100 shares of Company Deferred
Stock granted to Mr. Aschehoug in conjunction with his employment on July
1, 1993.
21
<PAGE>
OPTION GRANT TABLE
The following table presents information about options granted to Mr.
Pankratz and to the Company's four other most highly compensated executive
officers as of December 31, 1993.
OPTION/SAR GRANTS IN LAST FISCAL YEAR(/1/)
<TABLE>
<CAPTION>
GRANT DATE
PRESENT
INDIVIDUAL GRANTS VALUE
- -------------------------------------------------------------------------------- ----------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS GRANT
OPTIONS/ GRANTED TO EXERCISE DATE
SARS ALL OR BASE MARKET GRANT DATE
GRANTED EMPLOYEES IN PRICE PRICE EXPIRATION PRESENT
NAME (#)(1) FISCAL YEAR ($/SHARE) ($/SHARE) DATE VALUE $(2)
- ------------------------ ---------- ------------ -------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Paul M. Pankratz........ 48,000(3) 17.4% $33.300 $37.000 11/15/03 $1,035,840
Ralph W. Boeker......... 30,000(4) 10.9% $28.130 $31.000 1/11/03 $ 540,000
35,000(3) 12.7% $33.300 $37.000 11/15/03 $ 755,300
Jon R. Peele............ 7,500(3) 2.7% $33.300 $37.000 11/15/03 $ 161,850
Trond Aschehoug......... 0 0% -- -- -- $ 0
Wallace C. Dieckmann.... 0 0% -- -- -- $ 0
</TABLE>
- --------
(1) There are currently no SARs outstanding.
(2) These potential values were calculated using the Black-Scholes Option
Valuation method. The Black-Scholes Option Valuation Method used does not
take into account the negative effect on value of the lack of
transferability, vesting restrictions and potential loss of the option upon
termination of employment and therefore overstates the value of an
executive's stock option. The assumptions used under the Black-Scholes
model include a volatility of 26.5 percent based on one-year historical
volatility of the Common Stock ending February 28, 1994; a risk-free rate
of 6.67 percent based on the ten-year zero coupon treasury bond and a
dividend yield of 0.0 percent based on the current dividend rate and an
option term equal to the full ten-year stated option term. These potential
values have not and may never be realized. The underlying options have not
been, and may never be, exercised. The actual value of these options (if
any) will depend upon the value of Common Stock on the date of exercise (if
any).
(3) The grant date is 10 years prior to the expiration date noted in the table.
The shares of Common Stock covered by each such option vests and becomes
exercisable on the first anniversary of the grant date.
(4) The grant date is 10 years prior to the expiration date noted in the table.
One-third of the shares of Common Stock covered by each such option vests
and becomes exercisable on the first, second and third anniversaries of the
grant date.
22
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table summarizes for each of the named executive officers the
number of shares of Common Stock received upon exercise of stock options, if
any, during 1993, the aggregate dollar value realized upon exercise, the total
number of shares of Common Stock with respect to which unexercised options were
held as of December 31, 1993, if any, and the aggregate dollar value of in-the-
money, unexercised options held as of December 31, 1993.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEARAND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED
OPTIONS/SARS
SHARES AT FY-END VALUE OF UNEXERCISED
ACQUIRED ON VALUE (#)(1) IN-THE-MONEY OPTIONS/SARS AT
EXERCISE REALIZED EXERCISABLE/ FY-END ($)(1)
NAME (#) ($) UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(2)
---- ----------- -------- ------------- ----------------------------
<S> <C> <C> <C> <C>
Paul M. Pankratz........ 0 $ 0 66,000/48,000 $1,093,680/$93,600
Ralph W. Boeker......... 0 $ 0 0/65,000 0/281,850
Jon R. Peele............ 26,000 $423,180 20,000/27,500 85,250/344,925
Trond Aschehoug......... 0 $ 0 3,000/6,000 51,390/102,780
Wallace C. Dieckmann.... 4,000 $ 73,520 13,242/10,358 101,887/152,803
</TABLE>
- --------
(1) There are currently no SARs outstanding.
(2) These potential values have not been and may never be, realized. The
underlying options have not been, and may never be, exercised; actual
gains, if any, on exercise will depend on the value of Common Stock on the
date of exercise, if any.
COMPANY BENEFIT PLANS
Employee Retirement Savings Plan. The Company provides a Retirement Savings
Plan (the "401(k) Plan") pursuant to Section 401(k) of the Internal Revenue
Code of 1986 (the "Code"). The 401(k) Plan became effective April 1, 1988, and
covers all of the Company's employees who have completed one year of service
with the Company. Under the 401(k) Plan, the Company is obligated to contribute
1% of each participating employee's eligible compensation and to match 50% of
the first 6% of the employee's contributions. In addition, the Company may also
make discretionary contributions. In fiscal year 1993, the Company made no such
discretionary contributions.
Employees' Pension Plan. The Magma Power Company Pension Plan (the "Pension
Plan") covers all of the Company's full-time regular employees who have
completed one year of service with the Company. The Pension Plan was effective
as of January 1, 1990. It is a qualified plan pursuant to Section 401(a) of the
Code. Under the Pension Plan, the Company is obligated to contribute an amount
equal to 6% of the eligible compensation of each of the participants in the
Pension Plan.
Executive Supplemental Plan. The Company maintains a Special Supplemental
Retirement Plan covering a select group of management and upper level
employees. The Supplemental Plan is an unfunded nonqualified plan under Section
401(a) of the Code. It is designed to receive certain allocations of funds that
could not be contributed to the participants' 401(k) Plan or Pension Plan
accounts under current tax law limitations. Additionally, under the
Supplemental Plan, participating employees may defer income, and the Company
may also allocate amounts such as discretionary contributions.
23
<PAGE>
1987 Stock Option Plan. The Magma Power Company 1987 Stock Option Plan (which
is a Rule 16b-3 Plan) provides that options to purchase an aggregate of
1,000,000 shares of the Company's Common Stock may be granted to salaried
employees and consultants of the Company and its subsidiaries, as selected by
the Option Sub-Committee of the Compensation Committee. The purchase price
which must be paid for stock on exercise of an option granted under the 1987
Stock Option Plan will be fixed by the Option Sub-Committee when the option is
granted, but such price may not be less than 90% of the fair market value of
the stock on the grant date and must be at least 100% of such fair market value
for any option intended to be an "incentive stock option" under federal tax
law. It is unlikely that additional grants will be made under the 1987 Plan due
to the approval of the 1994 Equity Participation Plan by the Company's
stockholders at the 1994 Annual Meeting.
1994 Equity Participation Plan. The Company adopted the 1994 Equity
Participation Plan for the benefit of key employees, consultants and directors.
Not more than 1,000,000 shares of Common Stock (or their equivalent in other
equity securities) are authorized for issuance upon exercise of options, stock
appreciation rights ("SARs") and other awards or upon vesting of restricted or
deferred stock awards at the discretion of the Compensation Committee of the
Board. Each grant or issuance will be set forth in a separate agreement with
the person receiving the award and will indicate the type, terms and conditions
of the award. The exercise or purchase price for all options, SARs, restricted
stock and other rights to acquire Company Common Stock, together with any
applicable tax required to be withheld, must be paid in full in cash at the
time of exercise or purchase or may, with the approval of the Committee, be
paid in whole or in part in Common Stock of the Company owned by the optionee
(or issuable upon exercise of the option) and having a fair market value on the
date of exercise equal to the aggregate exercise price of the shares so to be
purchased. The Committee may also provide, in the terms of an option or other
right, that the purchase price may be payable within thirty days after the date
of exercise. The Committee may also authorize other lawful consideration to be
applied to the exercise or purchase price of an award. This may also include
services rendered, or the difference between the exercise price of presently
exercisable options and the fair market value of the Common Stock covered by
such options on the date of exercise.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In November 1993 the Compensation Committee determined that, in order to
attract and retain key executives of the Company, from time to time it would be
in the Company's best interests to enter in to "change in control" agreements
with key executives. The Compensation Committee authorized the Company to enter
into agreements subject to the following parameters:
(i)provision for up to two times base and bonus salary;
(ii)accelerated vesting of options; and
(iii)continuation of health and insurance benefits.
Each of the items referred to in (i) through (iii) would be triggered by a
Change in Control (as defined below) of the Company followed by termination of
the relevant officer's employment by the Company within a specified period,
other than for cause, disability or retirement.
On September 15, 1994 the Company entered into change in control agreements
with each of its six current executive officers (Paul Pankratz, Chairman of the
Board, Ralph Boeker, President and Chief Executive Officer, Jon Peele,
Executive Vice President, General Counsel and Secretary, Ken Kerr, Senior Vice
President--Commercial Development, Trond Aschehoug, Vice President--North
American Operations, and Wallace Dieckmann, Vice President and Chief Financial
Officer) ("Agreement I") and with nine other officers (Tom Hinrichs, Vice
President--Government Affairs, David Olsen, Vice President--Marketing, Jim
Runchey, Vice President--Human Resources and Administration, Russ Tenney, Vice
President--Asian Operations, Steve Jaye, Vice President--Legal Affairs, Mark
Robinson, Vice President-- Business Development, Paul Zapf, Corporate
Controller, Joe Asiala, Director--Resource Development and Management, and Jim
Turner, Director--Engineering and Technology) ("Agreement II").
24
<PAGE>
The agreements provide for certain severance payments to those officers in
the event of the termination of their employment following a Change in Control
of the Company, consistent with the enabling resolutions passed by the
Compensation Committee in the fall of 1993. Each agreement has a term expiring
on December 31, 1997, renewable at the end of such term if mutually agreed to
by the officer and the Company.
Agreement I provides that if the officer's employment is terminated by the
Company for any reason other than for Cause, Disability or Retirement (as such
terms are defined in Agreement I) or by the officer for Good Reason (as such
term is defined in Agreement I) within two years following a Change in Control
(as such term is defined below), (i) the Company will pay the officer, within
30 days of the date of termination, a cash payment (the "Severance Payment")
equal to 200% of the sum (the "Sum") of (A) the officer's base salary for the
twelve months immediately preceding the Change in Control and (B) the officer's
entire targeted bonus payable under the Company's Management Incentive Bonus
Plan or other executive bonus plan then in effect and (ii) all Magma deferred
shares or similar Magma securities and all options to purchase Magma securities
then held by the officer shall immediately vest. The Company will continue to
provide the officer and his or her dependents group life and health insurance
benefits substantially the same as those in effect immediately prior to the
Change in Control, increased to the extent that such benefits are increased
following the Change in Control, for 24 months following the officer's date of
termination. In the event that any payments or benefits under the agreement
would not be deductible (in whole or in part) by the Company as a result of the
application of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), the Severance Payment will be reduced until no portion of the
Severance Payment and benefits is not deductible as a result of Section 280G of
the Code.
Agreement II provides the same level of payments and benefits as provided in
Agreement I except that the Severance Payment shall equal 100% of the
applicable Sum and that health insurance benefits shall be provided for 12
months following a Change in Control.
The aggregate severance payments that would be payable under these 15
agreements as of November 16, 1994 is approximately $4.6 million.
A "Change in Control" shall be deemed to have occurred (i) in the event of
the acquisition by any person, together with its affiliates, of beneficial
ownership of capital stock of the Company possessing 30% or more of the
combined voting power of the Company outstanding capital stock, (ii) if within
any two-year period, the majority of the members of the Board of Directors of
Magma (the "Magma Board") were to be comprised of individuals other than those
who were members at the beginning of such period, unless the members elected
during such period were approved by a majority of the Magma Board in office
immediately prior to the beginning of such period, (iii) if all or
substantially all of the Company's assets are sold as an entirety to any person
or related group of persons or (iv) if the Company is merged with or into
another corporation or another corporation is merged into the Company with the
effect that immediately after such transaction the shareholders of the Company
immediately prior to such transaction hold less than a majority in interest of
the total voting power entitled to vote in the election of directors, managers
or trustees of the entity surviving such transaction.
At a regularly scheduled Board of Directors meeting held on September 20,
1994, the Compensation Committee authorized a change to the definition of "Good
Reason" in these agreements, the effect of which would allow a covered
executive to resign for "Good Reason" if, after a Change in Control, the
executive were required to relocate more than 50 miles from his then current
place of employment.
The foregoing description is qualified in its entirety by reference to the
agreements, copies of which are available, without charge, upon written or oral
request, to Magma Power Company, 4365 Executive Drive, Suite 900, San Diego,
California 92121 (telephone number (619) 622-7800), Attn: Jon R. Peele.
25
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION*
As members of the Compensation Committee, it is our duty to oversee the
Company's overall compensation programs to ensure compliance with the Company's
compensation philosophy, to evaluate the performance of the Chief Executive
Officer (CEO), review the performance of the executive management group,
establish the compensation level of the CEO, review compensation levels for the
executive management group, and consider related matters.
The compensation programs of the Company are designed to align executive
officers' compensation with the strategic goals and performance of the Company.
The Compensation Committee strives to develop and administer programs that
will:
. Attract and retain key executive officers critical to the long-term
success of the Company;
. Provide salary and total compensation levels for executive officers which
are competitive with the median salary and compensation levels for the
Company's competitors;
. Motivate executive officers to enhance long-term stockholder value in the
Company; and
. Integrate the Company's compensation programs with its strategic planning
and measurement processes.
The compensation philosophy of the Company, which is endorsed by the
Compensation Committee, is to provide salary and total compensation levels
comparable to the median of the Company's compensation peer group,
specifically, those publicly traded independent power producers and growth
companies similar to the Company. This peer group includes substantially all of
the members of the Industry Peer Group reflected in the 1993 Proxy Performance
graph plus an additional group of publicly traded technology growth companies
with annual revenues, growth history, and other performance and business
characteristics similar to the Company but which may not directly compete with
the Company in its independent power business. The compensation philosophy also
calls for a substantial portion of the annual compensation of each executive
officer to relate to, and be contingent upon the performance of the Company and
the individual contribution of such executive officer to such performance. As a
result, much of an executive officer's compensation is "at risk" with annual
incentive bonus compensation amounting to a significant portion of total cash
compensation.
The Compensation Committee retained in 1993 the services of an outside
executive compensation consulting firm to assist in the performance of its
various duties. The results of the consulting firm's study disclosed that the
Company's executive compensation levels, base salary, annual and long-term
incentives, were below the median of its peer group. As such, the Committee
approved a program to bring compensation levels in line with its philosophy
over a two-year period. The Committee takes into account the Company's
performance as well as the competitiveness of the Company's compensation levels
to the comparable levels paid by the Company's compensation peer group.
The base salary and target bonus for the Company's newly appointed Chief
Executive Officer, Mr. Ralph W. Boeker, were based principally on his rights
under his offer of employment as President of the Company as detailed in the
letter dated January 20, 1993 (the "January 20, 1993 Letter"). On January 11,
1994, the Compensation Committee recommended to the Board of Directors, and the
Board of Directors approved, that Mr. Boeker's base annual salary be increased
to $300,000 concurrent with his appointment as the Company's Chief Executive
Officer. This increase was based on the compensation survey data provided by
the Company's executive compensation consulting firm and is in line with the
Company's compensation philosophy to compensate at the median level of its peer
group. The January 20, 1993 Letter also provided for (i) the grant by the Stock
Option Committee to Mr. Boeker of 30,000 options under the Company's 1987 Stock
Option Plan with an exercise price of 90% of the fair market value of the
Common Stock on the grant
- --------
* Neither this Report nor the Performance Graph set forth below shall be deemed
to be incorporated by reference into any filing by the Company under either
the Securities Act of 1933, as amended (the "1933 Act") or the 1934 Act,
except to the extent that the Company specifically incorporates the same by
reference.
26
<PAGE>
date and with three years vesting and (ii) the grant of 5,000 shares of
restricted Common Stock vesting 1,000 shares on date of hire and 1,000 shares
per year on the succeeding four anniversaries of the date of hire. The terms of
the January 20, 1993 Letter were designed to provide Mr. Boeker with total
compensation levels comparable to the median of the Company's compensation peer
group.
The base salary and target bonus for the Company's former Chief Executive
Officer and current Chairman of the Board of Directors, Mr. Paul M. Pankratz,
were unchanged from the levels reported last year.
Under the Company's annual management incentive bonus plan, bonuses are based
one-half on the individual's performance and one-half on the performance of the
Company, with target bonuses of approximately 35% to 50% of total cash
compensation, except in extraordinary circumstances. The Company's performance
for purposes of compensation decisions is measured under the annual incentive
bonus plan against goals established for a given fiscal year by the
Compensation Committee. The 1993 goals consisted of performance objectives for
both the individuals and the Company. Company performance was measured by
actual 1993 income before taxes (net income plus provision for taxes) compared
to targeted 1993 income before taxes ("IBT"). In 1993 the Company materially
exceeded the targeted IBT goal and in 1992, the Company substantially met the
targeted IBT objective. The Committee evaluated individual performance, so
that, on average, together with the over achievement on Company performance,
total 1993 annual incentive bonuses represented approximately 43% of total cash
compensation for the executive officers. In assessing the individual
performances of Messrs. Pankratz and Boeker, the Committee was influenced by
(a) the successful integration of the acquired geothermal assets from Union Oil
of California into the Company's operation, (b) the successful consummation of
an energy conversion agreement with the Philippine National Oil Company for a
231 MW (gross) geothermal generating facility on the island of Leyte, and (c)
the Company's record results in 1993 with net income up 51% and revenues 53%
greater than the previous year.
In addition to the annual incentive bonus plan, the Company's 1987 Stock
Option Plan is an integral part of the Company's long-term compensation
program. Such long-term compensation is designed to encourage and create
ownership and retention of the Company's stock by key employees and to provide
incentives to increase the profits and long-term profitable growth of the
Company. This program is designed to align the long range interests of key
employees with those of the stockholders. The 1987 Stock Option Plan is
administered by the Option Sub-Committee of the Compensation Committee. In
November of 1993, under the 1987 Stock Option Plan, Mr. Boeker was granted by
the Option Sub-Committee a performance award of 35,000 options, and Mr.
Pankratz was granted by the Option Sub-Committee a performance award of 48,000
options, all at an exercise price of 90% of the fair market value of the Common
Stock on the grant date. Such options were based on an evaluation of these
executives' performance and their contributions to the Company, their options
granted previously, and the long-term compensation and total compensation
levels provided at the Company's compensation peer group. Such options fully
vest one year after the grant date. In addition, Jon R. Peele received 7,500
options fully vested after one year from the date of grant. These option grants
were structured to provide these executive officers with total compensation
levels comparable to the median of the Company's compensation peer group.
Roger L. Kesseler, Chairman
Bent Petersen
James D. Shepard
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during 1993 were Mr. Kesseler, Mr.
Petersen and Mr. Shepard. As of the Record Date, the members of the
Compensation Committee are Messrs. Kesseler, Pankratz, Roach and Shepard, with
Messrs. Roach and Shepard serving as members of the Option Sub-Committee. Mr.
Shepard is a former Vice President and Treasurer of the Company.
27
<PAGE>
PERFORMANCE GRAPH
The Performance Graph below shows changes over the past five years in the
value of $100 invested in (a) the Common Stock of the Company; (b) an industry
peer group of publicly-traded, non-utility companies in the independent power
generation industry compiled by the Company; and (c) the Standard & Poor's
MidCap 400 Index. The Bridge Information Services Utilities & Electric Index
shown in 1992 is no longer available for the Performance Graph.
The year-end values of each of such investments are based on share price
appreciation plus dividends paid in cash, with such dividends reinvested on the
date they were paid. The calculations of such values exclude trading
commissions and taxes. The industry peer group calculations reflect weighted
average total returns for the entire group.
PERFORMANCE GRAPH APPEARS HERE
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
AMONG MAGMA POWER COMPANY, PEER GROUP INDEX, S&P
MIDCAP 400 AND ADJUSTED PEER GROUP
<TABLE>
<CAPTION>
Magma
Measurement Period Power S&P Adjusted
(Fiscal Year Covered) Company Peer Group Midcap 400 Peer Group
- ------------------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
12/30/88 $100 $100 $100 $100
12/29/89 $159 $132 $135 $132
12/31/90 $144 $100 $129 $100
12/31/91 $157 $129 $193 $129
12/31/92 $205 $113 $215 $113
12/31/93 $224 $118 $245 $122
</TABLE>
- --------
(1) Stock price performance shown is not necessarily indicative of future price
performance.
(2) Industry peer group includes: The AES Corporation; California Energy
Company, Inc.; Destec Energy, Inc.; O'Brien Environmental Energy, Inc.; and
Ogden Projects, Inc.
(3) Adjusted Industry peer group includes: The AES Corporation; California
Energy Company, Inc.; Destec Energy, Inc.; Kenetech Corp.; O'Brien
Environmental Energy, Inc.; Ogden Projects, Inc.; and Sithe Energies, Inc.
Both of the two companies added to this adjusted industry peer group
(Kenetech Corp. and Sithe Energies, Inc.) became publicly traded for the
first time in 1993.
28
<PAGE>
SCHEDULE IV
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dow Services. Under two technical services agreements between the Company and
Dow, Dow agreed to furnish certain technical and other services in connection
with the operation of the Company's geothermal power plants. The Company, in
turn, agreed to pay for such services in cash payments or through the issuance
of previously authorized but unissued shares of Common Stock. In 1993, the
Company entered into a new agreement with Dow (the "1993 Technical Services
Agreement") which amends, restates and supersedes the prior technical services
agreements. Under the 1993 Technical Services Agreement, Dow has agreed to
provide technical services for the Company's geothermal power plants until
January 1, 2000. The Company, in turn, has agreed to make payments for such
technical services in the amounts of $575,000 for 1993 and $550,000 for 1994
and thereafter in annual amounts reduced by $50,000 each year to $300,000 for
1999. Such annual payments entitle the Company each year to receive technical
services from Dow equivalent in value to such year's payment, invoiced at Dow's
internal interdepartmental charge rates. The Company may obtain additional
technical services from Dow (if available), invoiced and paid for by the
Company at such scheduled rates. The Company is also entitled to receive from
Dow technical services for additional power plants by increasing the annual
payments to Dow by $50,000 for each such plant, subject to certain limitations.
Payments under the 1993 Technical Services Agreement are to be made exclusively
in cash--there is no provision for payment in Company Stock. In 1993, the
Company paid Dow $575,000 under the 1993 Technical Services Agreement. In
addition, in March 1994 the Company signed a five-year agreement (the "1994
Engineering and Construction Management Services Agreement") with Dow
Engineering Company ("DEC"). Under the Agreement, DEC will provide engineering,
procurement and construction management services to Magma, including process
engineering, project design, procurement and construction management services
for Magma's existing and future geothermal power projects in North America. The
Company believes that the 1993 Technical Services Agreement and the 1994
Engineering and Construction Management Services Agreement are on terms at
least as favorable to the Company as would be available from an unaffiliated
third party.
Dow Options. In October 1993 the Company acquired at a discount Dow's option
to purchase for an exercise price of $21 per share two million shares of Magma
Common Stock. Magma purchased the options for 857,143 shares of newly issued
and unregistered shares of its stock (the "Dow Shares"). The closing price of
Magma's common stock on the date the acquisition was consummated was $38.50 per
share. J.P. Morgan Securities Inc. was retained by an independent committee of
the Company's Board of Directors to assist in valuing the option. Under the
Option Surrender Agreement, Dow agreed not to sell the newly issued shares
before September 30, 1994 (the "Lock-up"). The purposes for this acquisition
included lessening the magnitude of the overhang caused by the two million
shares subject to the option. The newly issued shares did not materially impact
the Company's 1993 earnings per share calculations since the option shares were
already reflected in the number of shares used in calculating primary earnings
per share.
On July 26, 1994, the Company agreed to release Dow from the Lock-up in
consideration of Dow's agreement to (i) sell the Dow Shares in a single block
transaction in a private placement outside of the Nasdaq National Market, (ii)
cause the purchaser of the Dow Shares to agree in writing to refrain from
reselling the Dow Shares until after September 29, 1994 and (iii) give the
Company the opportunity to review the final form of any Dow public disclosure
regarding this matter at least three business days prior to public release or
filing.
On September 12, 1994, Dow sold 857,143 shares of Common Stock to Garantia
Banking Limited, a Bahamian corporation ("Garantia"), for $24,214,289.75. On
September 12, 1994, Dow acquired an option (the "Option") to purchase 857,143
shares of Common Stock from Garantia for an exercise price of $24,214,289.75.
The Option was acquired in consideration of $150,000. According to a filing by
Dow with the SEC, the purpose of this transaction was to match Dow's book and
tax basis for the Dow Shares. On September 30, 1994, Dow exercised the Option
in full and reacquired the 857,143 shares from Garantia for $24,214,289.75.
29
<PAGE>
Following these transactions, Dow holds over 5 million shares of Magma Common
Stock, approximately 4 million of which are currently held in escrow for
exchangeable notes (see below). By virtue of such remaining percentage
ownership of the Common Stock, Dow may still be deemed to control the
management and policies of the Company. According to Dow's Schedule 13D
currently on file with the Commission, the Common Stock held by Dow is held for
investment purposes.
1993 Stock Offering. Pursuant to a registration rights agreement, Dow
requested that the Company facilitate a registered public offering by Dow of
certain of its shares of Magma Common Stock. Accordingly, the Company filed,
and in June 1993 the SEC declared effective, a registration statement covering
the sale by Dow of 3,635,000 shares of Company Common Stock and the sale by J.
P. Morgan & Co. Incorporated of 365,000 shares of Company Common Stock.
Pursuant to the registration rights agreement, the Company paid the first
$100,000 of its accounting, printing, legal and other expenses of the offering,
and the two selling shareholders paid the remainder of such expenses.
1991 Stock Offering. In April 1991, the Company registered 4,000,005 shares
(the "Registered Shares") of Common Stock owned by Dow. The Registered Shares
were placed in escrow by Dow for delivery upon exchange of the Notes. The Notes
are exchangeable at any time into shares of Common Stock at an exchange rate of
26.6667 shares per $1,000 principal amount of the Notes. Dow retains the right
to vote the shares placed in escrow. A registration statement covering the
Registered Shares (the "Registration Statement") was filed by the Company on
behalf of Dow pursuant to existing registration rights agreements between the
Company and Dow. The Company has agreed to keep the Registration Statement
current until the earlier of (i) the maturity of the Notes in 2001 or (ii) the
date on which all of the Notes have been exchanged or redeemed. The Company and
Dow have agreed to indemnify each other against certain liabilities, including
liabilities under the 1933 Act in connection with the Registration Statement
and another registration statement concurrently filed by Dow in connection with
its issuance of the Notes.
Aschehoug Home Purchase. In September 1994, the Company sold a residential
home to Mr. Aschehoug and his wife (the "Aschehougs") for $250,000. The
purchase price of $250,000 was determined by an independent appraisal of the
property. The Aschehougs financed the purchase with a 90-day note (the "Note")
from the Company in the amount of $200,000 bearing interest at a rate of 6.49%
per annum. In November 1994, the Aschehougs refinanced the Note and paid the
Company in full.
Kerr Relocation Loan. In July 1993, the Company made an interest-free
employee relocation loan (the "Loan") to Mr. Kerr and his wife (the "Kerrs") in
the amount of $100,000 for the purpose of financing the purchase of a new
residence. The Loan is secured by a deed of trust granted by the Kerrs to the
Company relating to their new residence. Mr. Kerr is obligated to make annual
reduction payments on the Loan in an amount equal to one-half the annual cash
bonus paid to him for services rendered in the preceding fiscal year, less any
taxable portion thereof. Currently, $77,000 remains outstanding under the Loan
and the final balance is due and payable in full on July 16, 1998.
Halliburton Services. Halliburton Energy Services ("Halliburton Energy")
provides Magma Operating Company, a subsidiary of the Company, with various
maintenance services for the Company's well fields. Mr. Coleman is the
Executive Vice President and General Counsel of Halliburton Company, the parent
of Halliburton Energy. While the terms by which Halliburton Energy provides
services are currently determined on a case-by-case basis, Magma Operating
Company is considering negotiating a long term maintenance service agreement
with Halliburton Energy. For the nine-month period ended September 30, 1994 and
for fiscal 1993, Magma Operating Company made payments to Halliburton Energy of
approximately $225,000 and $700,000, respectively.
30
<PAGE>
OPPOSITION SOLICITATION
MAGMA POWER COMPANY
THIS REVOCABLE OPPOSITION IS SOLICITED BY THE BOARD OF
DIRECTORS OF MAGMA POWER COMPANY
The undersigned, acting with regard to all shares of common stock, par value
$0.10 per share ("Shares"), of Magma Power Company, a Nevada corporation (the
"Company"), which the undersigned is entitled to vote as of November 7, 1994,
hereby OPPOSES the requesting of the call of a special meeting (the "Special
Meeting") of the stockholders of the Company to consider and vote on the
"Special Meeting Proposals" described in the Request Solicitation Statement of
California Energy Company, Inc. ("California Energy") and CE Acquisition
Company, Inc., dated November 4, 1994 under the heading "THE SPECIAL MEETING
PROPOSALS", and the request that the record date for the Special Meeting and
the date of the Special Meeting be designated by California Energy.
- --------------------------------------------------------------------------------
[_] OPPOSE [_] REQUEST [_] ABSTAIN
the the calling
requesting of the
of the call Special
of the Meeting, and
Special the
Meeting, and designation
the of the
designation record date
of the for, and the
record date date of, the
for, and the Special
date of, the Meeting by
Special California
Meeting by Energy
California
Energy
- --------------------------------------------------------------------------------
MAGMA POWER COMPANY STRONGLY RECOMMENDS THAT YOU OPPOSE THE REQUESTING OF THE
CALL OF THE SPECIAL MEETING, AND THE DESIGNATION OF THE RECORD DATE FOR, AND
THE DATE OF, THE SPECIAL MEETING BY CALIFORNIA ENERGY.
<PAGE>
IF A GOLD OPPOSITION CARD IS EXECUTED AND RETURNED BUT NO INDICATION IS MADE
AS TO WHAT ACTION IS TO BE TAKEN, IT WILL BE DEEMED TO CONSTITUTE A
DECLARATION OF OPPOSITION TO THE REQUESTING OF THE CALL OF THE SPECIAL
MEETING, AND THE DESIGNATION OF THE RECORD DATE FOR, AND THE DATE OF, THE
SPECIAL MEETING BY CALIFORNIA ENERGY.
Dated: __________________________________, 1994
-----------------------------------------------
Signature
-----------------------------------------------
Signature (if jointly held)
Title:_________________________________________
Please sign exactly as your name appears
hereon. When shares are held by joint ten-
ants, both should sign. When signing as
an attorney, executor, administrator,
trustee or guardian, give full title as
such. If a corporation, sign in full
corporate name by president or other
authorized officer. If a partnership,
sign in partnership name by authorized
person.
PLEASE SIGN, DATE AND MAIL PROMPTLY IN THE POSTAGE-PAID ENVELOPE INCLUDED.
